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Transcripts For CNBC Squawk Box 20140702

check out the stock market in the early going. right now, the dow futures are up by about 19 points above fair value. s&p futures are up by 1.5 and the nasdaq is up by 3.5. if you were watching oil prices, you'll see right now they're down by half a percent. 104.85 for the wti. the ten-year note at this point is yielding 2.556%. take a look at what the dollar is doing this morning. you'll see right now the dollar is up against the euro. euro is at 1.366. the dollar is down both against the pound and the yen. the yen is 101.44. gold prices look like they are up barely, $1,327.80 an ounce. among our market newsmakers, we have jim grant, jim paulson and andrew i'll send it over to you. >> thank you, becky. our top corporate story this morning, jpmorgan chairman and ceo jamie dimon announced late yesterday has been diagnosed with what he's calling curable throat cancer. kayla tousche joins us now with more on the story. a lot of people on wall street and washington are talking about this situation. >> all up and down the quarter. it was a surprise to shareholders after they got this memo yesterday after the market close where jamie dimon disclosed the diagnosis which came earlier this week. the most important part we've been mentioning is that the cancer is curable and and it is localized in one area. dimon said he'll begin treatment shortly, roughly eight weeks of chemo and radiation here at new york's memorial sloan kettering hospital. in the meantime, he will continue to run jpmorgan. in the memo, he says the treatment will, quote, curtail his travel and during this period i have been advised that i will continue to be actively involved in our business and we will continue to run the company as normal. our board has been fully briefed and is totally supportive. his prognosis is for a full recovery. that prognosis is good, but it brings the issue of a successor. given the fact that at this point we don't know how the treatment will affect him over the next couple of months. here you're looking at a graphic that i know joe will enjoy talking about as he has criticized our coverage of some of the -- >> thanks for sharing that. you've got the successors all ready to go. let's talk about them, go ahead. >> gordon smith is the chief of the consumer unit. he joined just a few years ago and he will be the principal candidate at least in the near term. there are others, including the head of the investment bank in mary erdes, as well for several years at this point, too. that is something that the board, andrew, will be thinking about. he is a galvanizing figure, but a unifying one. certainly there's a lot of support for him to make a full recovery and a lot of people. >> and we send our well wishes, as well been stay with us. we want to continue this conversation. i want to bring in our cnbc contributor. we've seen a number of people with companies who have had health scares over the years who have gone through this and been fine on the other end. warren buffett -- looking -- becky is probably -- but at his own problems, prostate cancer just two years ago. this is curable. because it's curable, how does that change or not change the way you think a board is supposed to think about this? >> well, i think that's a very important question. even though we have worked over the succession issues, it is not exploitive to take a look and make sure that this board does have a deep entry .they do. for all kinds of reasons. jamie is 58. he tells us he wants to stay on for another five years. with this prognosis, i think there's a very good likelihood that he will. but you still have to take the hat off and salute the board for disclosing this early. yeah, warren buffett was a good example, andrew. you mentioned bouchet, would is another good example. plenty of others, mike walsh at teneco, joe might remember that one. >> we never heard from steve jobs. >> apple is a terrible example. we were given misinformation that many reporters believed and swallowed. >> we were following apple jets around to see where he was. and found out he had a transplant in tennessee or something, right? >> we didn't find that out until late afterwards. he didn't officially step down until just before he sadly passed away. we had william black chock-full of -- flat on his bed for two years. you find less dramatic examples. we talk about pinnacle foods on that near deal that went through last month with tyson. as the ceo there had been the ceo of kraft, he disappeared for weeks. nobody knew where he was. so they're a company that had a large stake in them, philip morris, altria, ceo stepped in in a custodial way. but the information wasn't out there. steven ross, time warnerer, we see a lot of bad examples that have come in where people haven't shared the information. and i think this board, being so quick, jamie surrendering health privacy, ceos have to surrender their privacy rights in this kind of matter, succession plans, they've offered some names. they're excellent names out there and i think that's quite encouraging. but strength is continually very strong. we had this discussion, i know you feel we have it a lot. i remember the -- did you just -- i remember the three people. weren't they the same ones you did three months ago? >> they were. three months ago. >> when mike stepped down, there were different names. we see with these names, we learn more about them, that they have a tremendous strength, that, you know, matt zames, he stepped in as the cio to take over at a time of distress. people have been battle tested in a lot of different ways. and i think that that is pretty exciting. >> do you believe that -- >> and battle test sg a good word, too, because even though he will continue to run the company day-to-day, this will give an opportunity to some of these deputies to actually take on more responsibility should they need the to and prove their worth in some way. >> but there has been a view that this is a firm that can only be run by jamie dimon to some degree. when we had the debate about chairman and ceo, there is an argument to be made that there is a jamie dimon premium in terms of how investors think about this firm. is the firm so battle test and had so bench ready that it is just a toll booth and can operate irrespective of who is running it? >> there are firms and, of course, in recent crazy headlines we've talked about all these grotesque founders who have been overplaying their hands in so many ways. we see the boards felt they were kind of wrapped around the charisma of a creative founder. that's not the case in this situation. there are a group of ceos that don't exit unless it's a feet first exit. they're call monarchs. jamie, we have lots of examples, has just done the opposite. and the people who have left, they are net producers of talent for other companies. there aren't a lot of banks that do that any more. you take a look at where mike cav noo gnaw has gone, the increase in salary to go to carlisle as president and jess elliott at blue mountain. >> this board is not to be rifled with. you have the former ceo of kpmg on this. you have this -- a guy who lives, the head of the audit committee, he lives that job full time. he's belting around the country all the time. he's not flamboyant, he's not grandios. a lot of people don't know his name. jim crown i think that's done a very good job in the risk policy committee. there is significant depth on the board. >> even though we always think of these big institutions as institutions, i think of them to some degree as sxeem to the degree that clients are loyal to people and not institutions, you know, a lot of e-mails i got last night were from clients, people who are jamie dimon people. there are some people who are jamie lead people, some people who are -- but people. and the question i would just ask to you is how many of those people do you think are institutionalized? >> jamie dimon has proven himself many times over. he's a come back superstar in his personal career and brought a 48% return to stock price in this company and despite the crazy pounding of some of those approximatelies he had, they still turned to record profits. so that's a hard act to follow. however, the loyalty is now to the constitutionalzation of who jamie is. you can find companies where it is the individual. here, jamie does a good job of bringing forth these other names. they get a lot of prominence. they're well battle tested and experienced again elsewhere. the head of consumer banking there was a very big start at american express for a quarter of a century. steve jobs, people worried if there was a good team back there. >> kayla, thank you and john, thank you. i'm sure we're going to continue talking about the topic throughout the broadcast. when we come back, will the july 4th weekend be a washout? we get a forecast after this. i didn't even know this storm was coming until yesterday, but look out. it's going up the east coast, i think. there's also something smoldering at hookup and dataing app tinder and not in a good way. >> crazy, crazy story. >> more "squawk box" right after this. what if my abdominal pain and cramps come back? what if the plane gets delayed? what if i can't hide my symptoms? what if? but what if the most important question is the one you're not asking? what if the underlying cause of your symptoms is damaging inflammation? for help getting the answers you need, talk to your doctor and visit crohnsandcolitisinfo.com to get your complimentary q&a book, with information from experts on your condition. welcome back to "squawk box." if you don't know by now, the u.s. has been knocked out of the world cup after losing to belgium 2-1 in extra play. u.s. goalie tim howard was amazing. he set a world cup record with 16 saves. now the u.s. team will need to qualify again on the road to russia if you're watching in 2018. and -- >> such a heart-breaking game. they were so great. >> he was great. the ball seemed to be -- >> i'm not going with heartbreaking because it looked like they were not going to -- >> you have to be -- >> oh, i watched the whole thing. it was so close. it was a heartbreak because they came back. in the last memberships, the u.s. had a chance to put it away. >> to the far side, it looked like we needed to practice a lot more for the next four years. >> yeah, but tim howard was so amazing. i did see a graphic where it showed the shots on goal. >> did you see how crisp the passes were on belgium? with us, we got the ball and said we have the ball. >> to me, it locks like the way it's reflective of american personality. >> and i'm a fair weather fan. i don't know anything about the sport or anything, but we watched and it looks like maybe different -- >> look, even the announcers, the american announcers were admitting that they were getting completely dominated in terms of play time. but -- >> the parts that i saw -- >> but it's the way the americans play, right? they'll take a shot at it. they're like, no, entrepreneurs are crazy and they'll shoot for anything, they go and they written. they're not as -- >> more shots than any goalie in u.s. -- in world cup history. >> and they had all these chances. it looked like it could have been 16-30. it isn't quite as much of a thriller. we all got caught up. that very first goal out of ghana that we scored right out of the box got us rolling. but then the portugal game when we were up, 2-1, that was the highlight for me. >> we came back in the last minute of regulation play. >> germany. it was -- >> there are conservative websites that point out that it's a really -- the people who are watching are all liberals. and that it's only -- >> you're not. >> but they're saying the argument for that is because it's the only place that america can ex either its dominance and crush everyone. >> right. that's for sure. because we essential did not do that. i thought you said you were into it. >> i saw it, but it wasn't a poll. it was a -- >> it said 30% of the country is watching. that's a poll, isn't it? >> 30% of the country watching anything, that was amazing. >> only 30% of the country wag following it. >> i can't believe you've changed your mind. >> i haven't changed my mind. i haven't changed my mind and we should be proud. >> i am proud. >> they went a long way. but they need -- they definitely need to practice a little bit compared to -- belgium looked like they were going to win the world world cup yesterday. >> you know eight of the guys on the belgium team play in the english premier league. it was basically -- we were playing manchester united. >> i know. i know. >> they did an amazing job. >> just watching it, i just didn't feel real confident through the whole game like we were really going to just kick their butts. >> but it had a lot of drama, kept me at the edge of my seat the whole time. for a game that was 0 will have 0 for the first 90 minutes, amazing. >> but the times that even we did have a chance to score, it didn't look like -- i mean, they were setting up play after play. i told andy, it looked like on the first period -- >> it looked like we were playing with broken noses. >> and we were hurt. it looks like it was a half-court field in the first half and then a half-court field in the second half and not on -- >> that's what i mean. tim howard was amazing. >> because the ball was there the entire time. we would get it and we would be so happy to get it. >> it reminded me of lundqvist, only worse for the rangers. >> it was exciting, though. could the fourth of july weekend be a washout along the east coast? we're going to get the forecast from the weather channel's alex wallace. >> it's going to be a wait and see situation as we get to the fourth. clearly, the potential is there for some of you on the east coast to deal with an impact. all thanks to our first named storm of the season. tropical storm arthur, here is the latest advisory. sustained winds at 60 miles per hour. right now, 90 miles east of cape canaveral. the bigger impacts here in florida will be felt well offshore. here is the radar showing you what some of the rain is. mostly to the south and east of the system down towards the bahamas. seeing some of the downpours and the gustier wind. as you look at the winds on the east coast, ranging about 5 to 10 miles per hour. you'll head offshore, 43-mile-per-hour winds being measured by a buoy. severe impacts will be felt offshore. we have tropical storm watches up from the melbourne area, up towards daytona beep. there will be spots we have to keen an eye on. that extends farther north now. myrtle beach up towards wilmington. now a hurricane watch includes the outer banks of north carolina. that will be an area that we watch the potential for hurricane conditions here within the next 36 to 48 hours. arthur, here we are. where is it going to be heed? off to the north and curving to the north and the east. notice here those winds are increasing. we could be talking about a category one hurricane potentially impacting us here in the eastern parts of carolinas and noticing as we head towards the weekend, generally remaining offshore. we're still impacted, at least potentially could be impacted here along the southeast coast of massachusetts abdomen we get into the early part of the weekend. we'll be watching this very, very closely. a jog to the west could mean bigger impacts for parts of the east coast. we'll send it back to you guys. >> thank you for that. i'm hoping the weekend is going to be okay. in the meantime, we have a crazy story. did you guys see this? this is like pure wonderful business tabloidness. dating start up tinder -- do you know about tinder? >> i know what tinder is. i've never used it. it's a crazy hookup app, right? >> it's a hookup app. >> you say is there anybody around here who wants to hook up? >> you're asking me -- >> you get pictures and pick the ones that -- >> this is a hot or not hot. >> and they choose you and you choose them, then -- >> we've talked about that other one that was like this. >> magic can happen. >> what was the other one? work with me. >> oh, the one we thought it was a fake one at first? >> yeah. where you had to put your name in if you were interested. >> and it worked through facebook, right? >> right. it was the same concept where you both had to say you're interested and you don't know whether the person is interested. >> until they tell you afterwards. >> tinder, though, is like -- that's something to start a fire. >> start a fire. >> not familiar with it. my kids are 14 and 12 and i'm 58 and totally, you know, married. so no, i don't know about it. >> let me tell but the other side of tinder. >> tell us what you know about it. >> this is -- >> do you know her? >> i don't know her. >> would you like to? >> we should have her on the program. we should because i believe, if that's who i think it is, tinder is now the target of a sexual harassment lawsuit. a former executive whitney wolf, i believe that's the picture i just saw, i could be wrong, suing the company owner saying tinder's ceo dejected her to a barrage of horrendously sexist, racist and inappropriate e-mails and text messages. check out the new york post. paper saying now the tintder ceo sean rad has allegedly described boss barry diller using some colorful language, words not exactly appropriate for tv. we're not going to explain what that means, but you can go check it out probably in the new york post. but if you look at the text messages, i felt horrible for her. this guy, who -- they were dating, apparently. and then she must have broken up with him or something and he then -- she then saved all the text messages and this guy treated her horrifically. how you could actually hang out or work in an office place with somebody saying the things that he seemed to be saying to her quite difficult. this is always -- >> break-ups are never good. >> the challenge with break-ups and break-ups inside the office are even more complicated. >> what were -- you can't give us any did he say details? >> do you want redetail? i think i can't, actually. >> really? a little too much? >> there's a lot of colorful language, a lot of descriptive language. >> like red, purple, green and -- >> things we probably shouldn't talk about. but, you know, our audience does have google and now a lot of people have multiple screens in their home while they're watching so they can go check it out. okay. microsoft, meanwhile, is teaming up with qualcomm and other tech companies. they want to establish standard ways for household devices, light bulbs and thermostat toes talk with each other. >> remember wink? >> it was just yesterday, wasn't it? >> just yesterday. >> this is important because many smart home products being launched are incompatible with each other and analysts compare the current environment in silicone valley to the rivalry between beta mac and vhs. that video format was three decades, already. i guess it was. if there's anyone that still has a beta mac, those were big clunky looking things, weren't they? >> i like the vhs. >> i don't know if we have a vcr to play any of those any more. >> yeah. those big -- >> a special vhs rewinder. if you didn't want to cue the vhs machine to rewind it because it could break it. >> usually you're in trouble. >> be kind rewind. >> remember when the first dvd came out? it was like, that can't work. >> do you remember -- before the dvd, there were big disks and very expensive. >> they were very modern. >> if you knew somebody who had one of those disks, that was something. let me tell you about another story. i want to get your view owes this one, as well. the uk data regulator is now reportedly probing facebook over the social network psychological experiment. you probably saw this news over the weekend. facebook wanted to alter the emotional state of its users and leave them to either look positive or negative content. now the uk agency wants to know whether the company broke data protection laws conducting that experiment. so when you go on, they would show you different types of things, guys, in your news feed. and it was an experiment to see how you would react. of course, the user on the other end didn't know that they were being a participant. they were an unknowing participant in the experiment. >> okay. yeah, i know that that got -- like i said, i'm -- you know nothing about me. >> you're not hanging out on facebook? >> no, no. >> how would you feel if it happened on twitter? >> if they were watching what i tweet? people do watch what i tweet, like four of them. >> i don't follow anybody. how many people do you follow? you use it as a news feed. >> i use it as a news feed. and i need to learn how to do lists. do you guys now how to do lists? >> no. >> i don't know what that number sign indicates and why you would use it. >> #joe kernen is aawesome. >> is there one of those? i like joe kernen fan. she has tens of dozens of followers. she's like me. when we return, the possible catalyst that could move stocks to the next level after the dow just missed the 17,000 milestone. plus, at&t's chairman and ceo randle stephenson will join us at 7:00 a.m. eastern. it will be his first interview since striking a nearly $50 billion deal to acquire directv. >> and as we head to break, a look at yesterday's winders and losers. ...for the year. hi. sorry. just want to say, i bundled home and auto with state farm, saved 760 bucks. love this guy. so sorry. okay, does it bother anybody else that the mime is talking? 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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ good morning. and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. let the jobs countdown begin. the june adp report is set for 8:15 eastern. the dow jones consensus calls for a headline number of 208,000 private payrolls today. they're just guessing, though. and everybody saying for the thursday jobs number, which you don't hear that often. the release comes ahead of tomorrow's preholiday government reports payroll thursday. ahead of the data, u.s. equity futures this morning, after a great day yesterday, which was cool, because no one thought there was any reason for the market to go up. >> best day in a month. >> and nothing po positive. everyone that comes on here talks about it's too expensive. >> even people who do do it for a living. >> most of those people are -- if you sell side, you don't really do it for a living. basically, everything you say is to try to cover your butt. because we constantly ask them for what it's going to do over the next week. how could they be right, anyway, with what we want them to do? >> set up for failure. >> that's right. >> guys, get ready. >> yeah, right. it was the first day of the half, right? >> yep. >> and the first day of the quarter. so people need to -- if it's going to keep going up, you need to have it on your books at the beginning. the ten-year note, did you see these irish treasuries? they go out to 2023. and it's at 2.095%. >> wow. that explains why the yield. >> ireland. it's a great place and they've gotten their act together. >> but that's why the yield on the ten-year is still 275%. >> more on the markets from dominic who will be here -- who is actually already here. >> yes. we're not going to let you talk. >> you're here, but you're not really here. >> i'm not going to let you talk for another minute, please, please. >> i'm holding my tongue. >> we've got corporate news to tell but this morning. the big news this morning, jpmorgan boss jamie dimon told employees and investors that he's been diagnosed with throat cancer. he does say it is curable. in a letter released yesterday dimon writes while the treatment will curtail any travel during this period, i have been advised that i will be able to continue to be actively involved in our business and we will continue to run the company as normal. our board has been fully briefed and is totally supportive. i do know he's supposed to take a vacation this summer, as well. it's about an eight-week treatment. it's a day-to-day thing. there are going to be some tough days in all that. >> absolutely, yeah.. >> the regimen is draining. but from what we can tell, if it's just confined to the lymph nodes in the immediate area, then the prognosis is did. and we wish him well and his feel. the dow at the doorstep of the s&p 500. the s&p 500 closing in on 2,000. the nasdaq is at a 14-year high. it still has not ever seen where it was when we built this $160 million headquarters. >> no. we're inching back. >> we are. we're getting there, finally. >> dominic now joins us with -- now you can -- now. >> now i can talk? now i'm here. >> you were 12 14 years ago. >> no. 14 years ago i was 23. >> oh, my god, really? >> i was just getting out of college. >> just a baby. >> just a baby. >> were you a sell side guy? >> i was. and at one point i was a buy side guy. >> dom, where do -- >> the argument people are making for why markets are moving up to where they are, we got within like 1 much 7 points or we'll call it two points at 17,000. it was two big stocks yesterday that drove things and that was visa and ibm. what was interesting about those two stocks is they are still the lagger to date. these are two stocks that both have an extremely big weight. visa is a 215 billion company right now. it's a price thing. goldman sachs, the visas, the ones with triple digit prices are going to move the most of the dow. it may be one of the reasons why we see the dow try to touch 15 those. it's been interesting to see where the leadership has come from. number one, it's caterpillared. disney, intel, merck, cisco, two tech companies, a consumer discretionary company in disney and in some of these stocks, caterpillar had a rough year last year. but it could be this row taking. if you look at the lagger during 16,000, you can see pfizer, walmart, boeing, horizon. the question becomes whether or not they will look avenue these leaders coming up. take the profits from the winners, reinvest in the losers. what it comes down to for a lot of investors is whether or not the dow can really get there. and the dow has been a laggered among the major u.s. indices, right? >> it's only up 1% for this year. >> but since dow 16,000, it's up 6 of%. match that to the nasdaq, which is double that performance. even the s&p is up 10% and the russell is up 8%. so the if the dow had just gotten a 10% gain, like the s&p did, since dow 16,000, we would be far gone of having this conversation with 17. it would be 17-6 right now. that's where the dow should be if it matched the s&p. the question then becomes why is it lagging and whether or not those stocks that are holding it down, like the visas and ibm so far this year, then assume a leadership role. >> the catalyst next week, the financials vnl been participating, as well. >> there is time again for that? >> i am off next week. >> wait, both of you guys are here. >> i'll be here for monday. >> seven, but five work days. >> you know, people watch the dow theory a lot, where the transports and whether everything confirms new highs. but when they keep changing what's in the -- i don't even believe in the dow any more. now it's just what you pointed out. they changed it. so the dow theory doesn't mean anything? >> there's so many components to it. >> he was in yesterday, so how about the guy from the s&p -- >> over at s&p, right. so if you look at the dow, the transports is one component of it. but transports are at an all-time high? they change and it put visa in and a couple other things, who knows -- >> somebody made an editorial decision that these types of stock res now indicative of the u.s. economy. right now, let's look ahead to the adp employment report that comes ought at 8:15 eastern time. joining us now is michelle mierts from bank of america merrill lynch and guys, thanks for coming in today. >> thank you. >> so the jobs report, are you looking for what we've been talking about, just over 200,000? >> well, a little bit above consensus. we're at the da,000, but it's not coming in at 34. the six-month just below 2000. we're saying the continued gradual hearing in the market, it's not a shift in terms of real momentum building, though. and that i think is a critical question. when do you start to see an economy where we can be convinced that the recovery has built speed, that it will prove to be sustainable and that it filters through to the average consumer, business investment picks up. and i think there's been some missing links in that. i don't think tomorrow's report is going to tell us very much different than what we've seen so far. >> serat, i know you've been very bearish. we haven't seen the breakout, but we haven't fallen back into a big recession, either. >> no, we haven't. we're looking for some indication that we're going to get some positive numbers out of the economy. you've got auto sales that were pretty good, manufacturing that is pretty good. we're still fully invested and we think going forward, you want to be invested over the next three to five years. whether the shoe drops drops -- >> it is a long-term call. >> it is. and we've been bullish for the last couple of years. been big. there's no other alternative right now, so you have to find your spots within the equity markets and what's going to do well. some of the old school companies might not be doing well, so you really have to see where you want to be. >> how do you judge? how do you gauge that? what should we be looking at? >> i think you want to look at companies that grow. at this point, we've gone through the cycle of everybody taking their balance sheets, paying down their debt. who is going to have top line growth, who is going to do not financial engineering, but have real cost increases where they're going to pass through. maybe the autos are going to do some of that. we like those. but i think where you're going to get hurt are more of the companies that can't grow any more. >> michelle, just in terms of what we're measuring with the economy, is this the year where cap ex starts to pick up? it's waiting for -- over the last several years. >> it really has. and i think what we've seen so far from the economic data has been mildly discouraging relative to expectations. so we head into the year beyond the first quarter gdp? >> not beyond the first quarter, because the balance from q1 hasn't been that impressive yet. we've seen other data. given how much we contracted in the first quarter in terms of gdp growth, we should be seeing a 4% or 5% economy in q2 andite not quite there. it's looking like maybe 3.5% growth. so i think it's built a healing in the economy. we're growing. we're not pulling back into recession. but i don't know that this is the year where we break through and we start to build much strong momentum when we can realize 3% plus growth for the full year. i think it's going to be challenging. >> and s is erat, if you were looking at the u.s. stocks is the one place, is there a second place that you would say for aetss? is it a foreign market? is it bonds? >> i think what you want to do is look at u.s. companies, maybe their domicile here but they're growing in emerging markets. that's a much better way to play it than play the volatility right now given the oil and new government there or even in china. focus on companies that can allocate capital and can grow not just here, but overseas and take advantage of growing middle class that's over 3 billion now. >> okay. serat, michelle, thank you both for coming in today. we'll talk to you again soon. >> thank you. coming up, more americans looking for cheaper prescription drugs online. the medicine res shipped from overseas and now big pharma is taking action. that story and more coming up here on southbound spb southbound. 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>> it took an interesting twist, put it that way. basically, we went under cover to a number of these facilitators, got some product, had it tested and went with some assumptions that were not necessarily right. >> that's a good tease. i want to see this. can they put canadian, what was the name? >> they typically say things like canadian meds. >> they try to make it look like they are going across the border instead of ordering them online? >> people think the canadian drugs will be the same trucks for cheap, in fact, we found that canada has almost nothing to do with this. there are drugs coming from overseas, it was water in the drugs. >> what are the top five states for importing drugs? do you know? >> it rests with the top states. >> you know, wherever there is a crime, we send you you, you are there. can you do the top five states for american greed perpetrators? >> wow. >> have you thought about that? >>ly do that on the top of my head. >> new york, connecticut, jersey, florida and. >> look at you. >> california. >> massachusetts, i'll bet. california, maybe. >> in california. >> dodge, chrysler. >> you didn't think about this? top five states for white collar criminals? >> that's a good one. we thought of all different kwiendz of spin-offs. >> you got to do illinois. >> that's for crooked politicians, as we now know. is there not a governor if jail from chicago, from illinois at this point? >> current governor is not in jail. >> well -- >> arizona also has some shady things going on. >> how many, he stands for five. any other state. >> it's impressive. >> great hair there. coming up, the "squawk" news-maker, at&t chairman, ceo, randall stephenson so in the studio. >> great. >> this is his first tv interview since striking the deal and the competition, and the future of internet speechltd "squawk" returns in a moment. at humana, we believe if healthcare changes, if frustration and paperwork decrease... the gap begins to close. so let's simplify things. let's close the gap between people and care. . good morning, everybody, welcome back to "squawk box" on cnbc. i'm becky quick. our top story this morning is the markets and jobs. we have been waiting for the adp employment report. it's set to be released at 8:15 eastern time. they are looking for private payrolls. we will see where we get. the futures have been higher this morning. this is coming off a big day of market gains yesterday, the dow futures are up. s&p futures are up by close to a point s&p closed at another record yesterday. nasdaq closed at a 14-year record. the dow at one point was within two points of 17,000 for the first time. take a look at the ten year note, it's at 2.556%. we will have more in the next half hour. jim grant of grant's interest rate observer will be joining us. >> j.p. morgan chairman and ceo jamey wright dunn has been announced he is diagnosed with what he is calling curable throat cancer. in a note yesterday, he said, in part, while the treatment will curtail my travel this period, i have been advised i will be able to actively be involved in our business and we will continue to run the board as normal. he will begin roughly eight weeks of chemo and sloane kettering. we wish him our best. it is tough treatment. it is kurable within they catch it this early. >> we made great strides in different areas in recent years. now to our news-maker of the morning. about six weeks ago, at&t and directtv announce plans to merge their businesses under a deal they say will be more competitively and beneficial to consumers. both companies took to the hill to make the case for the proposed merger. here with us now with his first interview since announcing his deal with directtv is random stephenson, chairman and chief executive officer of at&t and it's great to have you in studio and -- >> our best to jamey wright, too. he's an executive committee at the business round table. all our thoughts and prayers are with jamey wright. >> you definitely have your work cut out here with sorkin here on this deal. you know what the classic thing is. i think he's okay with your deal. he decided to be against the comcast deal. who do you work for? which is, you got to think about these things before, you are wrong. >> am i setting up another strong man? >> i am another strong man. >> the son of a lot of things. >> yes, that's true. >> these two deals i happen to actually like. >> okay. good. >> for lots of reasons. >> i didn't foe if you were for the at&t but against the comcast. >> i think with that, i think i probably ought to leave. >> you should leave. we'll talk about directtv in just a second. but we do, i told you my anecdote that we're in a temporary house because we had to move, selling my house, i have for the land line and i don't miss it. you need as a company to focus on mobile. >> it's a good idea. we will get back to dallas. >> have you talked to your other employees? >> i would go invest in mobile. >> what is your consulting fee? >> i have a finder's fee. >> joe is always out front. >> even when i was in the house, i had these verizon land lines, they have the crappiest land lines, i don't know what's with that company, you won't say that. >> they're a formidable competitor. >> we talked a little about soccer. i don't know about soccer, you are from texas, i don't know, it's a big sport down there, but live sports as you know, probably had a lot to do with looking at direct tv. do you for sure will you get that package? is that a part of the deal for the nfl package in. >> i thought you were talking about the world cup. >> look, it's no secret the nfl sunday ticket was a big part of how we valued the directv business. so getting that deal signed is important. we feel very good they're on a path to getting that done, yeah, we will get it done. >> you will get it done. the deal, itself, how were those guys up on the hill? did you find any that you could talk to where it wasn't a glaze over their eyes or? >> no, actually i thought the hearings were, they were reasonable. the questions were reasonable him some of the questions were less reasonable than others. but we left the hill and there wasn't anybody crying out, this is a deal that shouldn't be done, obviously, there were concerns about the consumer benefits. i guess what i would suggest. we believe the consumer benefits on this are palpable, they're significant. the idea of the transaction with what it does to the tv profitability for us changes, the economic equation for building broadband. so you do this deal, you expand your broadband footprint to 15 additional homes. that's a big deal, considering 13 million are rural. thely on share is one broad bandz or no brondband alternative. i think people get it, they understand it. it's a much more strong competitor against our cable competitors. so all of that factors in. >> at the time people talk about latin america, too, with this deal, in terms of growth for at&t. >> it's significant. >> tell us about it. >> directv has built a very nice business down in latin america. they cover all but two countries in latin america. they've built up a customer base of 17 million tv viewers for latin america. it is the premium tv service throughout latin america. it's growing very nicely. we think it has a lot of runway, brazil. >> was that a big part of, was that 30% of the reason of the ration? how much of it do you think? >> the rationale for doing the deal, it was a u.s. centric deal. if you look at the u.s., you said it's all about video, right, it's not about video as we traditionally think about video. i think when i was on here in january, i talked about how we are architecting and designing our networks to be video delivery networks. so when have you 100 million mobile customers, you are looking for the ability to deliver video content. so there is a lot of video contentt the directv brings to bear. >> you mentioned that was probably what i would call the premier golf event of the year, at&t pebble beach. i can remember i think two or three years ago where you, i thought something happened where you were going to be there and then you weren't, the congestion was directv it was three years ago it was going to be a directv deeshlg how long is this going to be in the works? >> i think that was your conjecture. >> but this is something that people have at least rumored. >> it's no secret. mike and i have talked about this on several occasions. they filed, they talked about when directv was sold the predecessor, sbc was looking at it. >> i think there has been spec london attacks about the five year for many years. we talked on the phone right after the deal happened, you know, i think you can probably speak to it. they have been looking at this for at least a couple years. we talked about the airline deal, how that slowed things down in terms of the regulatory environment. how things shifted. i want to get your views on where it is right now. >> i think the regulatory situation looks good. we, obviously, did a lot of work on this from a regulatory standpoint before we entered into the transaction. the beauty of the transaction is it tends to be complimentary assets. all right. there is some overlap of video, but 75% of the u.s., we don't even compete. directv sales stand alone video product. what we sell is a broadband tv bundle. we're in the tv business only because our customers want tv to go with broadband. so we don't even make money on tv. >> you said something very interesting. i hope you can explain to the viewers. i didn't fully appreciate it. now i'm starting to understand. i said to you something to the effect people think of satellite as an old technology, ten years from now, it's not clear to me if people will be using this type of technology, because they want to have the two-way broadband technology brought to the home. you said you will be able to use the satellites to actually put a lot more of the video over that and be able to utes the other stuff more efficiently. how does that work? >> there is no more elegant and efficient technology for distributeing video than satellite. now, it's one way in nature. right. it doesn't have the two-way characteristics, there is no more efficient way to deliver it than slight? you think where does it go next? you think of ultrahigh definition video. that's major band width consumtive. you need something that can deliver in big quantities, satellite we think will be positioned for ultrahigh definition video distribution. so the satellite has a lot of room to run. i'm not really that concerned about it. as you pointed out, to the extent you are distributeing video over satellite, are you using less of your band width in the fiber. >> you don't have to parry both systems together? >> i really believe you go out two or three years from now, you integrate these capabilities, the customer isn't going to know, i don't think they will care how it gets on to their smartphone or laptop. our job is to make that seamless, how you officially get it to the customer is going to be the gearheads in the background, we'll worry about that, but the customer isn't going to care. >> oh, sorry. >> can we go back to the regulatory environment, when you looked at this, the timing on it, did it not arise, this is when comcast warner is happening, you have to look at those issues, if they approve that, they have to approve this, too. >> obviously, a lot of factors come into the evaluation, when comcast and time warner announced they are coming together, just from a pure competitive standpoint, i made the comment at the time that this was a game changer of a deal. and it created a new competitive animal we were going to have to compete against. so we began to think we need, if we are going to do something, we ought to do it soon. we feed to compete at the broadband front, video scale, video programing costs. so that deal gave us a little more impetus to move ahead, purely from a competitive standpoint. >> that makes sense, joe, i'm sorry. >> that's rare. because when it was conjectured it was going to happen, you remember how many times we said, well, this will happen in response to the com -- and the chance that. >> right. >> what was our argument the chance of both going through was better with at&t? >> better together than you want to put both on the table at the same time as opposed to let one go through and then potentially have the regulator say, ah, well, we let that go through, there will be too much consolidation afterwards that, forces the issue. >> we disagreed with the deal at the time. i think that was overreach if terms of our stated intention in the obama administration stated intention to get 99% covered, it would have helped with that. i don't know if you really ever understood the rationale for not allowing it. >> i know what the complaint said. it was a very mechanical complaint and the doj, the department of justice believed the right industry structure phosphor nationwide competitors. >> the idea of having a mav rec competitor. >> sprint, t-mobile makes more. also a couple rams get together, i'm sorry to those two companies. >> it makes it -- >> look, that's a deal that makes intense. i get why they would want to do that. but i think the problem that they're going to have is the doj has been abundantly clear. i didn't walk away with any misconceptions of what their intent was for nationwide competitors. so i think they got an uphill battle. >> we interviewed mark weeks a couple weeks ago, he says he wished or hopes there are five traditional line, he thinks google fiber, u-verse, com karst, lots of leans, that way you'd have real competition. directv to some extent does that, that go over the top without having to use the line. one of the complaints or one of the worries from a regulatory perspective when you look at some of the cable deals and broadbands transactions is the effect they have on monopoly in each locality and as a result, i don't know, if you have been involved in this, but there have been situations where when a new entrant wants to come into the market, they try block them from coming to market saying we put these poles up, we don't you to get an easement. do you think the regulators will look at any of these transactions and say, can you do this, but you will not be able to block the federal government guy that wants to walk into town. >> actually, i think your question is interesting, google has changed the game on this somewhat. because they went into kansas city. they built out under a very different business model. they went in, talked to the city, said, look, with yx, y, z concessions, we will build fibariened if irs to where there is demand. not everywhere, only where there is demand. they went in, they had impressive success. they came to austin. we were looking at a similar modem. goggle announced they had a deal in austin. what happened? he said, their city, we'll take the same deal. few give us the same deal, we will build fiber to the home as well wind chill that same platform, that mechanism, we are going to 100 other communities around the united states and say, if you a gree to those arrangements, we will deal five -- >> what are the arrangementes? >> to your point, pole attachments, getting on pole, getting right of way permitting, you need permitting to go faster. most importantly, we will build first where there is demand for the services. so few have to go in and build a 1 million city foot print, it's hard to make a business model out of that. >> that's different than providing to every rural outpost along the way. >> that's exactly right. are you seeing more capital come into it. the capital is allowed to be focused where there is market demand first. >> i ask you a question, if consumers paid to get a premium server to get net flicks, why shouldn't net fleck versus to pay for premium services? >> net neutrality. >> if the consumer already pays for that, the high end service where they get it quickly, then you charge netanyahu flic-- net, too. >> the chairman of the sec said we will look into this. i think what's important to understand is the word internet means interwork, networks, there are lot of networks out there interworked, okay. if are you a customer of verizon, at&t or comcast, you want content. >> that content is being held somewhere that's not on the at&t or verizon network. it has to traverse two, three, sometimes even more networks. your speed is only as good as that slowest link in that process. so if one of the content providers is choosing a network deliverer to get it to our backbone that is slower or not as good, will you have a slower experience. so i love the idea the chairman of the sec said let's look at this, bring transparency, where is this slowing down. >> does that help for you? >> it does help t. question i have is by interlinking wage with you or wage with comcast, you are paying some kind of interchange fee, or there is an additional cost to connect wage as opposed to going through a middleman? >> the industry has grown up in a peculiar fashion. all these different networks are out there. we say, we will hand traffic off back and forth. we say we won't charge each other for that, water happening, though, traffic is getting asymmetric am. in some places, it's like 7-to-1 traffic from her tos to our, we say, if you want to driver that network on our, you have to pay. >> now flip it around. this enthe question becomes as the consumer, you sell different types of internet access? >> super fast. fast, basic. whatever. and if you are paying for super fast, ostensibly the reason -- >> i'm just asking. >> i know. now we got into this other place where he's explained on the other side he's charging the provider in order to get through. >> we're not chargeing the provider, whoever that new yorker operator is that's handling the traffic. >> because of the amount of the traffic. >> it's an asim pet trekkal level of traffic. >> i can't understand the whole argument. if i own the pipes. i've spent billions of dollars building the pipes and someone wants to use 90% of my pipes, they're going to pay more, in a free market. that not even makes sense to you, you came up with this other thing. >> the argument becomes one of the reasons i would argue to some degree that high speed internet has been as successful as it has is people want to get netflix at home. >> i pay for high speed internet access. i don't have netflix, i'm tired of subsidizing the rest of you guys. >> she's sick and tired of it. >> this really is an eso teric argument. >> really? >> it's stuff that's happening in the guts of the networks, you exchange traffic. they get out of whack. >> it's funny idea logically the political divide here is you have the progressives on the far left saying you will kill the innovation of the internet if it's not totally free all the time. as if the economy works with like it's all charitable non-profit organizations that are running things. you have to for innovation, you into ed to make money and reward shareholders and build capital, don't you? >> the question i ask is exactly what's broken? because there is more capital flowing into this industry in the united states of america than any other industry. the number one investor in the united states in the last five years has been at&t, number two verizon. this industry is investing in an unbelievable pace t. ecosystem around the industry, silicon valley is attracting millions. >> there is jobs involved in all this. >> whatever it is we want to change, define the problems carefully t. problems start out as fast lanes and slow lanes. we have said the chairman has spoken at sec. if he he's e says it's a investigation. >> you pay tacks. >> until you do a vote-a-phone, you will pay taxes. we should change the corporate tax. >> corporate tax, there are so many ways we are handicaping the u.s. in terms of its competitiveness internationally and our corporate tax is an abomination. i got to tell you the first quarter negative 3% growth t. same quarter whenever corporation in america, our taxes went up, especially capital intensive industries went up. january. it's not a coincidence economic growth went down. we need to fix -- >> the counterargument is these are companies that aren't paying 35% anyway. at&t pays a high tax rate, doesn't it? >> effective paid? we did a lot of pension funding last year and we took advantage of bonus depreciation. it kept our taxes pay rate low last year. our statutory rate is 35%. >> i didn't think about the inversion on vote-a-phone. >> the list? >> do you accept bitcoin on your bill? >> no, we do not. >> i bet he couldn't do it. >> you couldn't. >> so for in the graduate of plastics, i have one word to lead with you. mobile. >> mobile. >> thank you. >> focus on mobile. >> all right. >> focus. >> what about leading here with something? >> do you want to talk about those new tablet things? >> you only had a smartphone for a year? >> we got our fee apps. >> our thanks to randall stephenson, chairman and ceo of at&t. great to have you in the studio. >> when we come back, we will check out gopro's performance, jim grant of grant's interest rate observer, "squawk box" will be right back. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. welcome back to "squawk box," everybody, we have been watching shares of gopro, they are lower in the pre-market trading down about 3%. of course, that stock went public last thursday. it's been rising every trading day since then, trading at 4732 right now. when we come back, who is making the most money during this rally? the players seeing their personal wealth higher and higher along with the markets. more "squawk box" after this quick break. welcome back. coming up next the count june to the adp employment result. dow's 17,000, plus, more details on j.p. morgan chief jamey wright diamond, "squawk" returns with that and more in just a moment. of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. welcome back to "squawk box," shares of rack space is getting a boost on a report that says the cloud based provider may take itself private. the company is in talks to fund that deal. rackspace says they hired morgan stanley to evaluate quote strategic options. mortgage average 30-year mortgage rates fell five basis points to 4.28% t. news of the morning, j.p. morgan chairman and ceo telling employees and investors he has been diagnosed with throat cancer. he says it's curable. he will continue to run the company, an eight-week regimen. joining us paul miller, good morning to you, jeff sonenfeld is back with us from the yale school of manage. . paul, first of all, we send our best to jamey wright diamond and the diamond family, of course, you think about the if i recall and the conversation invarably turns to succession, what are your thoughts this morning in terms of how this could impact the bank? >> you know, he does say it's kurable. i don't think it's that big a point right now. at some point jamey wright will step down. i think that bench is very deep. they have lost people over the last year or two to different other entities. i think what they got right now is more than ample to take care of that company him i'm not too concerned about it. you could maybe see the stock trade down. i don't think it will have much of an impact in the immediate future right now. >> is there a jamey wright diamond premium on this stock? >> you know, i definitely think there is a jamey wright diamond premium. a lot of people like to put the logo, superman logo on anybody. jamey wright did put it together. he did take it through the crisis, pretty much unscathed, probably stronger tan when it went into the crisis, if he ever does step down, does that premium go away? i think it steps down a little bit. people are people, the entity is the entity. i think j.p. morgan will be fine. >> jeff, you gave credit to the firm in the 6:00 hour for disclosing this, we were talking steve jobs and that situation, which is the opposite. have you looked at a number of sixes historically, where there have been health scares and how firms tried to disclose them or not. >> definitely. the classic one, of course, steve jobs at apple, several misstarts, false starts at 2003 and then again, of course, around 2010, 2011, there are all these reasons why he is not going to mackerel. people said he didn't look well. then we heard he had a chemically hormone imbalance. we needed to know these things. there is an original ceo in a coma for months. people didn't know, it was only announced, he died. >> is there any argument that this is personal news and we don't have a right from a public perspective or shareholder perspective to know something leak this at this early stage? >> apple's former cult of secrecy was a part of their issue as they took everything to be a secret, including the privacy of steve jobs' live. the late jerry york has said he felt he was disgusted with the board was his term for it. didn't reveal steve jobs' promptly. there was adverse information about the leadership of the firm and there was a steve jobs' premium out there as we saw. he said he wished he had quit over it. so i think it matters. you can find a number of them. andy grove stayed on for another five, six years, very successfully. of course, many people do beat cancer on this and that's why we're cheering jamey wright on. i think there were a lot of this ipgs to diminish lance armstrong about. one of the things we do support lance armstrong about still he said the pain of the treatment is temporary, but to quit is permanent. it's forever. jamey wright, we know, is not a quitter. >> that fighting spirit reenforces the t-cells, there is search that there is t-cell production that matches the spirit people put behind their attitude towards recovery. i think this is a very promising story. >> paul, we hope there is no succession planning needed. but to the extent the firm is going to be thinking more about this if they weren't already, sort of take us through the line-up of how you think the firm should be thinking about this and what are the names that mean a lot to you? >> you can look in the press, i this i the board mentioned board smith and mary some of those teams that will step up. those guys are very capable t. street likes those individuals i think given those two names alone. it will give comfort. jamey wright will have to step down. when does that come? who knows? these companies have to go on without them. they do go on. apple is stick around. i know a lot of people want to put the premiums on. others come along with as good as a job. >> look at mcdonald's, they did the horrible tragedy of four ceos. the institution is doing quite well, jim skinner took over after all that human sadness, took them to the heights they never achieved historically. >> we will leave the conversation there. jeff, thank you for helping us through this, of course, as we said before, we will say again, we issue the best. >> when we come back this morning, he says the fed is pouring fire on glowing embers of inflation. jim grant is the founder and editor. he joins us next to talk to us about why we could be headed to financial tur turmoil. [ girl ] my mom, she makes underwater fans . welcome back to "squawk box." you can see green arrows, the dow opening up 21 points higher the nasdaq up 3 points higher the s&p round it up to two points higher. a single bidder won the $17.7 million auction of bitcoins, that i did not disclose the name of the successful bidder. i'm not going to admit whether i won or not. i'm not getting a laugh out of that, anyway. let's talk about the markets hitting another all time high. joining us is jim grant the founder and editor of grant's business observers. i know you have been concerned about what the fed is doing, what the end effect ask on this, in the meantime, with see markets hitting new highs. is that almost near fiddleing with burns? >> there are a couple kind of inflation, one is the ma lined kind at the supermarket counter. that's called inflation. the other is the bull market kind which on wall street we approve of and cheer on. >> acid inflation? >> acid inflation. it's, you know, the world collectively is very, very sang wi sanguine. so you are at least paid from the point of view of handicaping odds, you are paid to imagine an outcome different than that, especially with the near end visible yields. and you have to go to the republic of iraq to get something like 7% over 15 years. >> forget about ireland, forget about italy and greece. >> spain begins with a two number, so does the state of new jersey. >> all right. are you suggesting new jersey should be much higher, too, because of its problem in. >> this is a program of interest rate suppression, interest rates are prices, price control is futile, therefore, the policy of suppressing and manipulating interest rates ought to be we think seen as a policy of few tilt. just because few tilt for definition is for not. >> that doesn't mean it's without consequences? by approaching the market, it's one ought to be mindful, especially with prices, one ought to be mindful of the consequences, certain consequences, the failure of these demonstrations is price control. >> certainly. >> we don't foe what it will be. you can't tell us how it will manifest itself in hurting all of us some day? >> we can observe now the credit spreads have collapsed. the interest rates have been crushed. the volatility is crushed. >> that's true. it hurt, it's goldman sachs. >> for a time it's great. it was great in 2004. i think it was getting into the professional wall street, it's interesting the captions and the tutor jones and the match the global hedge fund people have been not making one.com over the several years the "wall street journal" wrote their collective obituary wears. >> all niece things seem positive. >> what the global macram need is the end of a financial repression, so it seems to me that their day is coming and for this they can thank the -- >> you just admitted to me there were some positive things. >> yes. >> my favorite thing tim says is that the fed can make things appear to be better, but they really can't make anything better, i think you are saying you can prop up asset price, people feel richer, the wealth effect feels better. >> that does engender some investment in mortgages. >> it does, halfway around the world, something is happening in india. >> yeah, a structural thing. >> people went to the polls in massive numbers voted for enterprise. >> we might vote for that, we have another election coming up. >> we do. >> in india, you are look at the emergence of the next growth story. this could be a ten-year story. it's very exciting, indeed. >> it is exciting. >> in china, the opportunity is visible and the problems are more or less hidden. in india, the problems are visible. in india, you are appalled be i the sight of things, it's very exciting, to me as an investor, it's very appealing. >> the argument against what you are saying is that, sure the fed has some impact on what's been happening and they may have inflated assets somewhat, we have a lot of people that come on and say, look, company stocks are fairly fresh, you have seen strong earnings growth over this period. >> you have. but profit par gins are at all time all time highs and no small component of these very high profit margins is the interest expense that is not born when rates are suppressed. so if rates were normalized, suddenly the profit margins would dwindle. >> the other point people will make is you don't have wage inflation, that generally kicks off concern. >> i don't think wage inflation, it seems it is not a monetary phenomenon, it is everywhere a psychological phenomenon. it has to do with people's confidence in the currency. so right now the world is enthralled to our ph.d. central bankers. it's amazing they can see in the future, improve the future before it comes to pass, astonishingly, how do they do it? they won't do it. it seems to me inflation is out there lurking and it will come for us as it always does in the after math of these great monetary debaughs. it will come at or central bank. >> in terms of sentiment, we're ripe, too, there was a time when we were hyper-worried about inflation five years ago and now we think it's never coming. so sentiment-wise. >> it contributed to it five years ago. >> right. no one is worried about it now. >> you can see the price of debt securities, if you are around as i know you were not around for late '70s and early ''80s, people. >> i wasn't. >> you weren't. >> i was. >> so. >> my parents would tell me. >> you played soccer in oklahoma. >> i, what actually. >> if your 8th grades civics class, i'm sure they told you about it. >> i remember ronald reagan become president when i was in the work force. i remember it in a fond way. >> so in reform school, i remember them telling us was that 15% was the yield. nobody wanted in 1981 because, because the great and the goods said interest rates were going to 20 on account of uncontrollable upontary growth in america. >> they did go. >> and the what they call it the structural, yes, the structural nature of inflation, that was then. you see the argument's exactly a mirror image shape. >> right. which means you definitely got to, when you least expect it, right? all of these things are a part of murphy's law. they are ancillary effects of the way things that happen. >> there is a grant. >> who is buried in grant's tomb? >> grant. >> still. >> jim is our guest host. we have a lot more to talk about with him. >> coming up with the first half of the year in the books, we will look at which corporate executives and investors made out from the google guys and the warren buffets. j.p. morgan ceo jamey wright diamond says he is staying at the helm of the bank while undergoing treatment for throat cancer. we will have more on that story at the top of the hour. you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. 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(soothing sound of a shower) with millions of reviews, tripadvisor makes any destination better. . welcome back, everybody, we have been talking about the market, their year-to-date performance, they have been up sharply, who has made the most? robert frank joins us with details. >> good morning. it turns out the secret is to hold a concentrated position, preferably energy and tech. some of the people had the biggest dollar gain, we start with john bill marriott up $460 million. now his fortune is 1.8 billion at no. 5 is kevin plank by under armour. his fortune now at $2.3. theing gole guys have done well up 1.1 billion. steve ballmer up $1.47. people talk about the money he has paid for the clippers. he has paid for it with his paper wealth gains close to now $14 billion. this was amazing to me, haroldham is up by $5.68 billion in year in paper wealth. mark sumer berg in at in one, he is up by $5.8 become. this one is amazing. we looked at the past gains, nick woodman is up by a billion dollars in the past five, three trading days now worth $2.5 billion. that's $8 billion per hour since gopro. >> we all know what the market did. if we can take it away quickly, gopro is showing down. >> but, you know, again, these concentrated, particularly energy the leaders in what's done well, this year, energy and tech, tech, these are the spaces where you have the big founders that own a large percentage the stockmarket is the biggest welest creator? >> continental resource, haroldham? >> he got divorced at a very precipitous time it turns out before the big run-up in the stock. >> they settled before? >> the judge ruled that basically his controlling interests, pro picous not precipitous. reed hastings has been disciplined about selling throughout that stock run up and down. i don't know about these other guys. >> i like those. i liked that you always just tell it like it is and you are not like a lot of others. >> judging? >> yes. >> you know, you foe who i'm talking about, which newspapers i'm talking about. >> i have no idea. i used to work at the "wall street journal," it was down the middle. >> they're not necessarily horrible terrible people because of this, are they, villains, all of them? >> no. >> they actually agree, it's good to have capital right now invested in the market. >> i think the thing pickety wouldn't agree with, we should engineer a lot more capitalists that come up, only assets, you wouldn't, instead of bringing all the capitalists down to. >> he would not agree with the self-made element of today's wealth. >> they don't have any concept of that in france. >> they are all unified, this has been a good time for assets. >> not great for savers, that's for sure. >> it's never bad to have money. >> it beats the alternative. >> it doesn't buy happiness. >> more comfortable misery. >> it doesn't buy happiness, it does buy you a yacht where you can poor right next to happiness. right. coming up, j.p. morgan chief jamey wright dime revealing he has kurable throat cancer. we break down what it means for the firm and its future and the adp private payroll data will be released. we have the number and the reaction at 8:15 eastern. 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. introducing at&t mobile share value plans... ...with our best-ever pricing for business. chocwhite chocolate loversal. don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow customers to customize their preferred chocolate. we needed a scalable cloud solution allowing them to select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. . welcome back to "squawk box," i'm joe concerner along with becky quick and andrew ross sorkin. if studio, lots to discuss including jim's reaction, his prediction for the adp jobs numbers which comes out on jobs thursday him when we can say it. we have to say it. and we're really happy the government is doing it on a thursday. there are times they drag us in here. the markets are closed. we come in and wait around for 8:30. >> usually on good friday. >> we come in, there is no stockmarket trading or anything going on, here we are, waiting for this number, the number, please. >> it came in just as expected, guys. >> okay. not that we celebrate july 4th. >> we are. with the fans. >> there will be fireworks, too. >> upload fireworks on the show. let's get to the headlines, rackspace is considering taking itself private t. company hired morgan stanley a upical months ago to evaluate strategic options and help them store and access data in the cloud. shaers you see it right there rising in the premarket almost 10% up. constellation in the quarterly results, beating the street on higher beer sales, constellation raising the four-year outlook. randall stephenson says his company will get that directv deal done and commented on the timing of the tie-up. >> when comcast and time warner announced they were coming toke, just from a pure competitive standpoint, i made the comment at the time that was a game changer of a deal and it created a new competitive animal we were going to have to compete against. so we began to think, we need, if we're going to do something, we need to compete at the broad band front and with video, video scale, video programing costs. so that deal gave us a little more impe the us to push ahead. >> shares of at&t roughly flat so far this year up about 1%. in other news this morning, goggle is buying songza, it plans to use nit its streaming service, do you use songza? >> this one i do not know. do you use snit. >> i do. >> what it is, it's basically a context-based music sharing service or music streaming systems. you lock into the app. it says it's wednesday morning, i am driving, i'm working out, i am relaxing. i'm cleaning the house, it basically has kur rated song lists to listen to. the other day it said i am, it's monday night, i am single, watching abc's "the bachelor ret." i am eating tostitos. >> if you don't foe by now the u.s. has been knocked out of the world cup after losing to belgium 2-to-1. u.s. goalie tim howard was great. he set a world cup record with 16 saves. no you they need to qualify on the road to russia if 2018 and attention gambleers, a business pencer story this morning, reports that microsoft's score is 16-6. the predictions comes from bengals's prediction engine, every favorite has won, i don't know why we are talking about that. >> it's like they are series. >> if you pick the favorites, it's like picking the number one seed in the march madness tournament. it's not that hard. >> but for march madness can i use scorecana? >> belgium will win. >> watching yesterday in the history of soccer. >> tim howard was the greatest in the history of all goalies. >> there is a reason he had 16 saves. they had 16 good shots at goal. >> somebody said that last night. >> you were watching that. when the u.s. got a chance at the -- all they the most they could do is check it back. let kick it back there quebec. they never really -- >> even so, they could have won in the last minute. there was a very close call. >> i didn't see the swim meet. >> the last 15 minutes. >> it was amazing within they scored and there was real momentum. there was another shot. there were a couple close calls, it was that close. all right, let's tell you about another story, jamey wright diamond telling staff he has kurable throat cancer. he will continue on his responsibilities as head of the firm, he will curtail his travel. kayla joins us rice now. >> becky, the answer is not that much will change in the near term for the company, in his memo to shareholders, he said he will be going through intensive treatment. he will continue to run the company, though, earnings expected to be business as usual. he said he will cut back on his travel. >> that includes a trip this week he was supposed to take to europe to meet with heads of state to meet with j.p. morgan sentiment overthere. he told staff in that memo, i feel very good now and we'll let all of you foe if my health situation changes. importantly, there is no evidence of cancer elsewhere in my body. the cancer has not spread beyond his throat, beyond the lymph nodes, i am told diamond was not a smoker, he did start feeling somewhat sick, somewhat ill and decided to go have it checked out. this was all quickly the way it was identified, diagnosed. the board has full faith in diamond to run the company at this time. it will look to certain executives to step up to the plate, consumers coo matt zains the company has gone to great lengths this year to make sure the market knows how deep a bench they have and how much responsibility they are giving these executives, because, god forbids, something like this happens, you need those people to be well-groomed and well trained to take over those responsibilities. andrew, you said this is a day-to-day treatment. you don't know how it will roll out. we certainly wish diamond and his family the best of luck. >> we want to bring jeff sonenfeld back into the conversation to make more sense of this. a year ago there was a debate whether to split the chairman and ceo role. not to say this will speed up a succession plan to play, it might speed up faults of succession. could you see a day where he becomes the chairman as they try to put a new coo into that spot or given the position the firm took a year ago, which was, we want to have the chairman coo be the same person, it becomes more difficult to do that. >> it's a great question. i think this could be a possible scenario. both jamey wright and j.p. morgan and most ceos who hold to the combined chairman and ceo roles, doesn't say that's necessarily the only way to do it, for their company at that time. at a time when you go through transitions where there could be a mentor or protege situation, we saw it at dupont, intel, ups, many great companies go that in a quiet way they have a bit of an ambassadorial role. david rockefeller did that and that was regularly done that way. what you didn't used to see that's different here, kayla, i think it's great you mentioned those names that you bring out as sort of the bench squad is that they get along with each other. many times in banking, they are set up in warfare the succession, for example, the one in charge of the new age investment banking, john reed, of course, running the commercial bank and there is a guy theobold running the consumer, commercial lending. they hated each other and vivs warfare. here you got layers and layers. if you ask recently departed people, they would rain about these people. >> let me ask you a related question. is there effectively irrespective of jamey wright's health? is there a bakeoff going on right now. >> is this the equipment of a public bakeoff, ultimately, these people get the rest of the job? >> you know, kathy graham, she was thrilled the washington post was seen as a net producer of talent and journalism. she didn't care that people left, as long as they landed well. j.p. morgan will be a great talent. ge produced talent elsewhere. probably some of the folks we talked about went to dprit new places. you know, it gets pretty narrow at the top. at ge, they always would lease weirdly enough, strangely at ups no one would ever leave. it depends on the culture. the actualure of finance, i think they probably would look for. >> i think you lease you never come back or is there a shot? >> you look at john mack. he got fired and came back after being fired, so there are sometimes rebounds possible. i think it's unlikely that would happen here at coke, they had a guy who left, got passed over, came back. >> but these people have all come from different organizations. there are only a couple j.p. morgan died in the wool. they have all had different career paths. none was necessarily promised this job. i think everyone expected mike cavanaugh was the shoe-in up until several months ago. so i do think that sense he has left, there is some question hanging over the fact that a lot of these people are so to speak back at mack for this job. i don't think that issing in the board is necessarily worried about. >> i think everybody has views on this, which is over the next several weeks and months, i imagine there will be lots of reporting about this. is that fair or unpair? >> i don't think so. i think we had the conversation. >> whether it's fair or not, i don't think there will be a lot of reporting on. you don't think there will be a focus? >> i think he deserves some privacy. it shouldn't be a ticking to moment by moment. >> you have to think about when larry page had larn joits and the company did not necessarily come forth with a lot of details about that, investors were left wondering. journalists were left speculating when he would miss conference tallahassee u calls and had no voice. >> aside from that, they have been forth right. >> i think they have revealed, we don't need minute by minute update. i think when we had a ceo of kraft who is now the chairman of pinnacle foods disappeared for weeks, nobody knew what happened to him? >> did which monitor lachey's treatment? >> he was straight forward. >> i know he was. >> he stayed on four years later, longer than he intend, by the way, until they named his successor. >> we will very well leave the conversation there. thank you for helping us through this. we appreciate it. up next, private payroll's data the number the market reaction and our special guest standing by with reaction. as we head to a break, check out the "squawk box" indicator, this morning the gains from yesterday, we continue to see green arrows, s&p futures up by two points, dow futures up by 17. "squawk box" will be right back. , but we're not in the business of naming names. the fact is, it comes standard with an engine . >> this is consolidating new highs in the s&p at least and the dow, not quite 17,000. we might get there, we might get there today if we were to open up 40 or 50 points higher. let's check out the tenure, we had jim graham here to talk about whether that's real or memorex. check out oil, quickly that can throw a wrench in all the works. it's 104. >> it's coming down. >> our gdp took a wrong turn. >> a 180. >> a little of a detour. check out the dollar, which i mean, who, the euro continues to be as easy over here as they are at the ecb. >> tim, are you surprised the you're is at 1 lix? >> you have to consider the competition. >> you know what we do in this is like a jobs football, adp. we count down like it's breaking news. a lot of people already know what it is, probably. >> oh, no. from they know what it is. >> he knows. >> the public doesn't know. >> speaking of, let's tell you about this adp number. the number for adp private sector payrolls 281,000 in june. they were looking for just 208,000. may revised came in unchanged at 179. you looked at goed there, it was up 51,000, and, by the way the non-farm payroll estimates right now, before we got this stronger than expected adpt. non-farm payrolls number beginning tomorrow is 215,000. >> i'm sure futures are probably, i didn't see it. that's a great number. >> it is much stronger than expected. joining us is mark zandy. did any of this catch you by a surprise or were you looking for a better number? >> last month was a disappointment, this was on the high side, reality is somewhere in between. i think it's pretty good, by the way, there is only six people on the planet that know that number. >> we had it written in the teleprommers, andy. >> oh, several people. >> eight people, nine people. >> so, mark again the construction u construction showed real strength for the month, where else did we see these gains? >> it was everywhere, the gains were broad-based. every single industry added payrolls, every company size added the payroll. it was uniformly strong and, you know, just looking at the underlying adp data, it looks really good. so the economy is improving everywhere but in the gdp data. anywhere else you look at vehicle sales for the month of june. that's a really good number. housing seems to be coming back. the economy is improving. the only place you don't see it is in the gdp number. >> i'm sure. i would joke, we treat it like a government number. in other words, in the past adp, before you got there, it wasn't necessarily, it was fine, but it's obviously can be totally different tan the actual number that comes when the government releases the actual data. so it's valuable information, undoubtedly. we have the nifb guy. obviously, we don't treat that, john challenger. we get reports there. it's different than a release of government data. it's very good, mark. i was making the analogy we treat it like it's the official number coming on a jobs friday. >> it's a great number. >> you are right. and i do appreciate it. it is a, it covers a large number of companies and a big chunk of the labor market. >> it's important. >> we see it move, mark. we see the markets react to it, but i'm sure that it's kept very close to invest. >> you are right. the average miss, the average miss month to month is about 40k. on average. >> before we get real pros in there, what was it, mark, you? >> it was closer to 60 to 65, basically we are got it down to 40. we will take another crack at it get it lower than that. there is a lot of moving parts here. >> one of the things we heard from a guest yesterday is that small businesses are probably where you are seeing some of the biggest improvement. your numbers showed small gains for businesses, too. from yeah, in the last 18 to 24 monthss, the small business sectors come on. i think a lot is reamed to the fact that small businesses are tied into the real estate cycle, the construction activity. so we've seen housing come back. that's with lots of small businesses, so i think that's a big part of it. credit is more available. you go back, a couple, three years ago, credit was tight for small businesses, now it's flowing quite lice e nicely, commercial leaning is growing double digits. a lot of things aren't and we are seeing that part of the economy begin to lift. >> mark, thank you very much for joining us. by the way, you will be back for the government jobs number, too? >> i'll be there. >> and the real number. >> and are you guaranteeing it won't be off by more than 40,000 tomorrow? >> well, no germany tees, but this is a really good number. >> you say it's down to 20? >> well, we're talking about the bls. how can i guarantee the bls? >> did you use this number or not? >> i think he has a line into the white house. >> you should count on -- look, this number suggests the job market is strong. >> it is strong. >> good. we like it. >> he's got another. he's got the line. >> i don't know. >> another trader reaction to the adp report. the big government number. rick santelli will join us and watch the buzz from the beltway and what matters moest to your money. we are back if just a moment. . >> let's get to rick santelli. i'm sure you love gym i jim grant's stuff. >> reporter: jim grant is the best. when it comes to an entertaining piece of journalism and analytics regarding the credit markets, i don't think anybody can do it better. >> thank you, riblg. >> thank you, you are welcome. but guarn teed number, actually he didn't. we may have a better number tomorrow than what we were thinking. maybe it's a catch up from that horrible down 3% quarter. maybe there is a little pent-up demand for something somewhere. >> reporter: i can't speak to that, there are people that want to create numbers and ultimately be the same numbers from bls. earlier, there is people in the purchasing manager business that want to recreate numbers. so, yeah, we're seeing rep plex /* /- replication. i can tell you it was worth 2.5 basis points the dow futures prompt up 18 to about 25. they're back down a bit. but, yes, are you right. whether it's the irs, the dog ate their homework or this number and everybody copies everybody else's homework, you are sure to see a significant run-up on what is expected for thursday's number. i don't know, it's obviously better fuse than creating less jobs, that's for sure. no doubt about. all right. we'll see, rick. you probably are working, jim grant. was saying fascinating stuff along the same lines of what you say, that is in a world where you are not sure what the market prices of all debt would be, it's hard to make any determinations ability any markets based on footballs that, you know, are you not really sure what the supply and demand dynamics would dictate. they're totally my opinion mani. >> i would love where stocks are, where all the markets align, if central banks and most of their programs and their balance sheets were i dream of juneny, bing, they were gone. i would say the land scape looks excellent but that isn't the world we live in. even though most people on our show, smart people. they talk as though they've assimilate wad central banks do, that's not normal and it isn't. >> especially recently, yes, jim. >> i once had the opportunity, rick, to ask a question in a public forum to a central bank governor, i said, governor so-and-so, purely on the basis of economic, not the law, please explain the dwimps between the manipulation of libor in the private sector on the one hand and the manipulation, suppression and jempbl mon kig around from the central bank. >> reporter: you can't refine it, that's the difference. >> that's an interesting point. >> all right, rick, in the control room, they're asking whether are you a soccer guy. did you watch world cup or? >> reporter: listen, not that there is anything wrong with soccer the rule in my house is if you have to use the head to hit the ball, its nothing the santellis are watching. >> thank you, rick. there is something to that report, andrew, about who is watching. >> that explains a lot. it does. coming up when we return. >> god did give us arms, you no ewhat i mean, think how much easier that game would be. >> the goalie uses his arms. >> i know, there would be a lot more scoring. a heck of a lot easier. >> it wouldn't be such a great testament of your athletic abilities if you could use your arms. >> my kids three-and-a-half. that i know they are supposed to kick the ball. they still want to pick it up. it's a failure thing to do. >> such fair weather fans. coming up, market outlook, plus could the market rain on your 4th of july parade? the latest forecast in a couple minutes. as we head to break, take a look at futures. dow looks like it will open 26 points higher. we are back in just a moment. . welcome back to "squawk box." let's take a look at stocks to watch in the news. online photo service shutterfly on the move, plume berg saying shutterfly has hired an investment bank with the deal's value estimated about about $2 billion. i use that service. >> shutterfly, we coup our photos. >> oh, someone in my house knows how to do that. we have a supermarket giant kroger making an act acquisition. it is buying vitacost, an online buyer they are paying about $8 per share a. total after about $280 million and tyson foods finalized its deal to buy hillhire brands for about $63 per share t. two shiedz i sides agreed on that action. >> i'm going to go with vitacost. >> vita -- vitamins. >> sounds right. >> vita would be from the latin, i think. >> living la vida lo ka? >> velveeta. we are headed into the 4th of july weekend. there are questions about arthur. is that going to be dampening the festivities on the east coast mike seidel joins us for the latest forecast. mike, are you if florida right now? >> reporter: ai am, becky. we have storm winds that passed us. we pay get tropical rain bands. you can see the surf is not extremely agitated. we are talking wave heights as high as two or three feet. we have folks doing surfing if we can go over that way and show the surfers, we'll talk about what's going on here, there is a surfer out there. there we go. we got a couple surfers out there t. waves off the coast, they're running six to seven feet. >> that i have backed off. we got a little sun schein, let me show you the current satellite radar, get an idea of what's going on, it's off the coast about 100 miles east-northeast of cape canaveral. it's a 60-mile-an-hour tropical storm. it's only moving north at six miles an hour. tonight and tomorrow, we start to act sell rate. it will strengthen by thursday afternoon, the official forecast in the national hurricane center brings it up to a hurricane south, wilmington, wrightsville beach t. main impacts will be eastern north carolina. the outer banks, now under a hurricane watch. after that, it is expected to shoot out to sea. it will be close enough there could be showers, new york city, up in lieshlgd even cape cod late friday night early saturday morning t. main impacts were if beaches for the rest of the holiday weekend. saturday and sunday will be surf and rip current. if you go out to the beaches, obey what the lifeguards tell you to do. becky, andrew, joe, back to you in melbourne. >> mike, it's clear to me, are you not actually in the atlantic. you are standing next to the atlantic, aren't you? >> oh, joe, joe, are you in the atlantic? what are your feet in the atlantic? >> no, it's in the atlantic beach, joe. this is what happens when you know about cellural biography. >> i have to come down and give you a big kiss, are you watching the show. if you have kids, mike, every time you say arthur is going to do this or that, i see this little aardvark with class ifs because of watch sock many times i've seen arthur, he has movies, arthur's big adventure. >> a long time ago. >> does it make you think this can be a scary storm? that's what you got to look out. >> exactly. >> mike, let many eask you real quickly before we let you go, i'm sorry to put you on the pot, if water up here has been really warm him we have been able to swim. what's going on? is that a weird current thing? >> reporter: it's also a function of the winds off shore or on shore. when you get upwelling, if you have an an shore wind, that will keep the surface water, with i is warmer, right here on the coast. that's always something you look at. sometimes in july, i remember about four or five years ago, we had all this offshore wind and from the virginia beach area, all the way up to jersey, water temperatures in late july were in the upper 50s and low 60s. we shifted and the water temps jump out way out to the beach. back at home in maryland and delaware, why isn't anybody in the water? i had noticed it dropped from 75 to 58. be happy. >> exactly and be happy because after that winter we had been in the northeast in new england, i don't think anybody is complaining. if anybody is complaining about the heat. >> no, no, 'we love it. >> no, no, no. >> mike, thank you. we'll talk to you again soon. >> okay. thanks, becky, bye-bye. >> i love him. >> i do, too. >> he's great t. dow and s&p 500 kicked off the record year, despite the potentials, they will be vulnerable in the 94 term. he joins us now, also with sus a guest host jim grant of grant's interest rate observer. jim on the first day of a lot of quarters in this case the sec half of the year, sometimes it's technical to see you guys that need things in their portfolio, they need them in at the beginning of quarters and stuff, there can be buying, radio right? >> i think that was a part of yesterday, a little reverse window dressing, if you will, putting things on the box, i really think there is probably a growing sense of goldilocks here a little bit, which is maybe what you need to get a market top. i think there is a sense that we're growing 3%-plus. it looks like we might the rest of the year quote/unquote. that's not too cold anymore. it's also not overly hot. there is not a sense of run away inflation or imminent fed tightening. i think the combo package does give you a sense of goldilocks and a straight methodical upward move in the market. i think what's what's drawing more and more capital in slowly. i don't know. i still think we're probably pretty close to the highs for the year. i think today's adp reports is a signal of what's to come, where good news has been good for the market up until now. it might start to be interpreted as bad news if we embroil higher bond yield itself. maybe that's what we will deal with through the rest of this year. >> you got more in your own thinking, double, triple, qued dominican republicle negatives, contrarian things going on. you want interest rates to go up. >> that would be good for the market. if we did get better jobs numbers and inflation fears, interest rates would go up. you don't know what ness, right? but anyone that looks at, if there is so many different things, ways of looking at it, you do the opposite of what you would expect half the time. >> yeah, you are right, joe, i think there is no doubt that better economic reports look good longer term. i think the market has a lot to go, some economic recovery of the next few years. but often you are right, when the market was going up, when there was nothing but bad news and now we finally start to get a set of good news, sometimes the market takes broert. that's all i'm really talking about. one way to approach this is to ignore it, who will care if we have a 10% correction, if the market goes from 2,000 to 1,800 to 2800 over the next several years, it's not going to matter. i do think it's getting vulnerable here short-term. i can see where our mindset changes from looking for evidence of better crest to looking for evidence it's getting too good, there are inflationary outcomes. i think that's where we might head next. >> jim, good morning for jim grant. >> good morning, jim. >> what can you make of a two-and-a-half percent ten-year yield in improving the economy and slightly hotter than we have been seeing inflation data, does that fit? >> i think, i know i look back historically, jim. you certainly know this, as well, you look historically, the ten-year yield trades in equilibrium 2-to-4% above inflation, a minimum 4% if we were checked to the economic recovery. i think what happened here, we totally disconnected the pricing of bonds from the economic cycle with fear and we are now starting to re-connect it to the economic cycle. we did part of that last 84, moving it from one-and-a-half to 3-ish. i think we have another piece to go. we pay see some this year where we get maybe north of 3.5% when the year is out. ultimately, i think we are up above 4%. in the longer term, as joe pointed out, that would be a healthy development, that would be a bond pashlth priced for the economic cycle making it, once again, a competitive asset class rather than something you know is grossly overpriced. >> all right. we will end it there, jim. did you ever watch that series "fargo?" they talk leak you. >> oh, yeah, you bet. >> a good series, talking act t about the tv show. still to come the kraft brew craze stirring up pop prices leaving bore-makers scrambling for supplies and many ber makers not hoppy. that story is just a hit. "squawk box" will be right back. . we wonder what this means for the jobs report tomorrow. joining us is tony frato the former white house press secretary and managing director and former vermont governor and cnbc contributor howard dean, guys, welcome to both of you. i wonder if you can tell us how you think things are going on at this point. why don't we start with you? >> a lot of people don't realize it comes as a surprise to most americans, this week we are starting the sixth year of an expansion, this hasn't felt much like an expansion. it's been a long, slow slog, we have been seeing growth at around 2%, though the first quarter numbers spooked a lot of people. i think we are seeing a lot more organic growth and outlook for the rest of the year. we see that reflected in some of the jobs numbers and other indicators, some confidence numbers, so i think there is reason to be pretty optimistic ability where the rest of the year is going as we finally climb out of what has been a really difficult period for the u.s. economy. >> howard, how about you? how do you think things are coming along? >> i agree with that. i was listening to the previous section on the bond prices, i think bonds are not priced competitively t. reason they're priced the way they are, the rest of the world is in trouble. where do you go when you are in trouble? you buy the american bonds, it keeps the yields low. i think that's why the market is low, dividend stocks are great, most dow pay good dividends. people will buy the dow. i think the economy is getting better. this is a safe pla is to contrast, like russia. certainly what's going on in the middle east is not a place you want to run in emerging markets. i think foreign investment is good for the economy. i think that's what's happening. >> i think you are right. this is a comparison game. we also have jim grant here. your point is central banks everywhere are manipulating things. >> they are. one must not look at safety in the absolute sense, safety and valuesh r, russia is not the world's destination for many things. it's not the world's favorite implement or a foreign policy, the russian market five times earnings was a screaming buy. >> that's true. >> it is one of the best performing markets in the year this half of the year. >> but is it on a risk adjusted basis, though, jim? >> i'm sorry. >> is it on a risk adjusted basis? >> the gains you get are unadjusted. that's 23% or that's a fact. >> hey, howard, where have you been? >> your buddy. >> i actually just got back from mass daevenia and kosovo. >> no kidding. >> speaking of emerging, two of those three places are doing well, albania got a candidate status. >> i haven't seen you in a while. i was just thinking about this, because, you know, the president, it's a tough job and he's been able to get flack from the right and the left somehow, so, you know, he gets it coming and going, then i was thinking about you. you've criticized obamacare. it's not single payer. you've had other criticism formed, have you ever criticized him because he's too progressive on some issue? are you from vermont? i bet you've never criticized him from anywhere but from even left of where he is? can you think of any instance where you criticized him from being too liberal or too progressive? >> i cannot. i cannot. joe, you got me. >> think about what the average republican thinks of this president and then think about what you think and how far left you really must be. i mean it's vermont. i get that, wow, tony, am i right? am i right. >> you indicator to the job creators and the rest of the country. you hit bed and breakfasts, other than that, you got maple syrup and cheese. >> however you get it, i'll take it. howard is the fiscal responsible government? he is. >> that is true. >> that's the -- but, in general, tony, really, i was thinking ability that, would there be any policy move where, i mean, you are huff post died in the wolf, howard? >> i'm guessing tone is right. within i was up here as the governor, i was very, very concerned about money and i still am. >> i think you might just be cheap. >> i suppose, i am just cheap. that's a part of the vermont genes, that's why the unemployment is 3.3%. with recareful about our money. i think some restriction on spending wouldn't be a bad thing. i think the president is right about the infrastructure bill. i can't imagine these guys not getting out if roadville. it's going to put tons of people out of work. so i don't find myself in all that much disagreement with the president. >> howard, do you have a solution for this inversion phenomenon going on with all these u.s. companies? >> yeah, we talked about this on the show when larry kudlow had his show. i believe we should, in fact, that we should, in fact, change the taxes on the money abroad. i think we ought to lower the corporate tags rate and get rid of loopholes to pay for it and repatriate that money. >> do you agree with president obama trying to block them from leaving in the short term? >>. in the long look, it's popular, in the long run, exam goes where capital goes. they will figure out a way to do it. >> howard, there you go right there. >> there you go. >> you know i have a fis cam. >> if you can do it, facts are facts. >> the reason you are long, you ignore a lot of the facts. i don't ignore facts t. facts are capital goes where capital goes. sowhy. >> protect capital and take care of capital, and it'll take care of you. >> i didn't say take care of capital, but i said be realistic about the facts. capital goes where it goes. if you want capital in the country, you have to make it tax advantageous to invest in the country. >> it's bad when people make up facts and tell me i'm wrong. >> that we can agree on. >> tony would never do that. >> no. i don't like to argue on facts. >> all right, gentlemen, thank you. >> that is somewhat true. which is why you're not in the right wing of your party. >> true. coming up, jim cramer live from the new york stock exchange and jane wells hopping it up in oregon. we'll explain. 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 e-trade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. call or click to open your fidelity account today. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. let us now visit with jim cramer, and one thing about this job, back after a day, ready for another vacation. always great, aren't they? never build up to needing time off. >> summer is a fabulous time. market's doing fine, can take a couple days off because we know a lot of people, unfortunately, watching world cup are going to the beach, but if you're going to take time off, this is the time. >> yeah, this is the time. the number was good -- jim paulson thinks it won't be long until good numbers start causing some trepidation, and the markets will be at a new high probably when that finally occurs. >> look, i thought we got amazing numbers yesterday. i don't know if you saw ms. thompson's number about the retail investor, and they are leaving. they left in may. i thought those were devastating showing you the retail investor just wants no part. look, i don't know who is going to panic. it's not going to be retail. they already did. >> yeah. all right, jim, i don't know where we go, phillies, maybe? reds? we have to find something. world cup's over. i did my synopsis, the u.s. -- we need to practice after watching yesterday. we got to keep practicing to get better. >> every four year stuff means the greatest goalie in our history will be 39. i don't know if he could pull that off. >> i was hoping he could hang in there. >> thank you. coming up, jane wells is with us to talk about bitter beers in just a moment. you do a lot of things great. but parallel parking isn't one of them. you're either too far from the curb. or too close to other cars... it's just a matter of time until you rip some guy's bumper off. so, here are your choices: take the bus. or get liberty mutual insurance. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. see car insurance in a whole new light. call liberty mutual insurance. take them on the way you always have. live healthy and take one a day men's 50+. a complete multivitamin with 7 antioxidants to support cell health. age? who cares. i take prilosec otc each morning for my frequent heartburn. because it gives me zero heartburn... annc: prilosec otc the number one doctor recommend frequent heartburn medicine for nine straight years. one pill each morning 24 hours zero heartburn. but we're not in the business of naming names. the fact is, it comes standard with an engine that's been called the benchmark of its class. really, guys, i thought... it also has more rear legroom than other midsize sedans. and the volkswagen passat has a lower starting price than... much better. the... vo: hurry in and you can get a $1,000 turbocharged reward card when you lease a new 2014 passat s for $219 a month. heading into the 4th of july weekend, hops prices are up to $7 to $10 a pound thanks to the ipa craze sweeping the nation, and jane wells, our vice reporter. she should be our vice reporter, bacon, pot, and hops. happy 4th of july, jane. >> the three basic food groups. these are centennial hops going into the hottest ipas in craft brewing. at hops farms, they used to farm 150 acres and sold hops for $4 a pound, and now twice as many acres selling for twice as much. >> but if you pick one like this and rub it together, you're going to get that -- something that that's a grassy smell. >> reporter: wow. blake crosby, a fifth generation hops grower saying it's gone from traditional giants in american beer he services to 600 mostly craft brewers, quote, we're busting at the seems. could you sell more if you could plant more? >> yeah, and we are planting more, but we are consistently selling out of varieties, and we have more orders than supply right now. if i wanted to buy hops now, i'll pay $15 a pound for a hop i'm looking for whereas buying them on contact, i buy $7 for the same hop. >> reporter: a customer, brew master at bridgeport, the oldest brewery in oregon, using 20 varieties of hops, but there's so many new players, making h hoppy beers, and now every farmer wants to grow hops. what if there's a craft beer bubble brewing and this market pops? it's done it before. >> we tend to somehow ruin our market, and i think farmers are pra really good at that. right now, we're in an expansion phase of the industry where there's enough profit around to justify expanding for the demands, which is great, but with that brings on all this new overhead and capacity, and that capacity, when it's there, tends to be used at break even or at a loss. farmers just want to keep things turning. >> reporter: all right, back to you. back later. >> thank you very much. that's all for us right now, right now, it's time for "squawk on the street." good wednesday morning, welcome to "squawk on the street, i'm carl quintanilla and futures suggest we'll make another run at dow 17,000

Transcripts For CNBC Squawk Box 20140820

security advisers sandy berger. that's going to happen at 7:30 a.m. >> did they put any more? that's why you don't do it the first time. >> there is an ongoing debate about how you deal with terrorists. i -- he's referring to what happened earlier this year. >> sheerl, i know. work with me. >> i am. >> he d-- came back, still hasnt met with his parents. we don't deal with her any more. i wanted you to make it a complete sentence. >> we're going to continue this conversation and i imagine this debate. >> i know you weren't thinking any more, but -- >> what do you mean not thinking any more? >> you should have been. you're a news man now. >> in some instances, we have traded or done things -- we have negotiated with terrorists. for me, there's at least one side or maybe a certain thought that maybe that wasn't handled very well. >> i'm curious in this situation whether the government knew about foley's whereabouts having been kidnapped two years ago and haven't heard from him since. >> any journalist in that part of the world now might as well be signed up for the -- you have to be brave. >> yeah. we also -- >> think about what we do every day. >> it makes us feel very -- >> do you ever think that? >> no. >> that's the point i'm making. >> right. >> that's the point i'm making. >> i'm a new jersey man. all right. i worry about going into the city for you, the only city in the country that we now know that you classify as -- >> well, for you that is dangerous. >> corporate news. >> there is a lot going on in the corporate world today. hertz is withdrawing its full year financial forecast. the rental car company warns it now expects results to be what it calls, quote, well below its previous guidance. the company blames businesses challenges and costs related to a review of the past three years results. i've left herds with a limited vehicle availability. shares being punished on the news they were down. its competitor was down as a result, but andrew, if you remember, the company had to go back and restate some of this financial reports from prior years. then they were looking into the accounting for other years. so it seems there are a few more issues than just the macro environment for car sales and investors have been shorting this stock for quite some time, anticipating that bad news out of the company. >> right. >> joe is looking at lowe's, right now? >> remember, we really wanted to see this. because we were wondering -- >> home depot. did better than anyone else. we were wondering, is lowe's going to do as well? these numbers are going to -- 2 cents ahead of ennings on expectations. full year is seen at 2.63. that's okay. it was at 2.61 before. but they are talking about same-store sales. sales up 3.5%. so this is not a -- in home depot's case -- >> everything was positive. >> exactly. home improvements continuing to progress in tandem with the strengthening economy. i guess a word that fell off the end of my screen here. that's probably what we're talking about. sees total sales off for the year. that is in line. >> when i look at their earnings, does it say something about them? meaning the operations of these companies? but lowe's -- >> sometimes it's more friendly because you go on to home depot and it's just big. >> yep. >> stocks everywhere, high up where you have to get a crane that gets down. home depot is different. home depot is different. >> there's a lot of pricing pressure, too. i think the companies have said loud and clear that the house market recovery was strongest last year. and while we're still seeing some recommend ever remnants in that, it will continue to taper off. >> it was so good yesterday. >> it was. there were some saying expectations might have been too low for home depot. that has been guiding too low and maybe lowe's is on the other end of that scale. >> things have been -- all systems go since they came on. we bring up the picture of him because i mentioned him and then -- i don't know. not that. >> no. we need the picture with the apron because we got our own. >> yes. >> friends at low's, they're just blue. >> but they're not orange like this. and they don't look like frank. have you seen frank? hey, come on in. he looks very friendly, and he is. he's a nice man. we're going to talk a little bit more about the home retailers in a few minutes. we also want to talk about shares of am which in the last day they've been getting some attention. the tech giant trading above $100 a share yesterday for the first time since its stock split 7/1 earlier this year. among the catalyst, excitement about the next iphone. not the only tech name getting some love from investors. on its strongest five-day winning streak in four months, closing degreed at its highest level since march 2000. 45.27. it's been near a 14 1/2 year high. all of that value and more. >> can you explain do me why all of a sudden everybody is so excited even though they haven't come out out with a new product yet? i can't understand the math. >> this has always been a stock where buy the rumor and sell the news has been applicable. not only are you going to get the iphone six, but it's coming in tandem with the rollout of health kit and some of these new software platforms for developers that apple is now basically building an ecosystem that will be interior to some of its competitors that might be lagging on this software side. so i think that they expect this new device to be fully compliant with some of these news technologies and they really want to see what it looks like. >> thank you, miss squall alley. >> well, you know, i'm just telling you what they say in that apple. former microsoft ceo is looking to spend more time on his pet projects. ballr has become the biggest individual shareholders in microsoft with a 4% stake. that's $15 billion. it was always said that once nadella took the reigns after that transition was complete that perhaps it would make the most sense for ballmer to get out of his hair. but then again, he's the largist individual shareholder, so we'll still be hearing from him, i think. >> my question may be different. now that he's off the board, does this mean he's a net seller of microsoft stock? >> in likelihood. >> so we're going to see a sell down of significant stakes. is that what's really going on here? if you're on the board, you're going to have to disclose every time you want to sell. >> maybe he'll put in place some sort of -- you know, prescribed selling plan where you sell a number of shares every quarter. how long does that last? >> six months, eight months, i don't think it can go much longer than that. >> so we'll see. in other corporate news, citigroup is reportedly claiming to sell its japanese retail banking ventures. another stock to watch this morning, now i have $3. i have a hamster, a beta fish, i have other -- the company announcing it's going to explore a potential sale. you go in thereabout, you can't believe the bill. the pets flyer retailers is great where you have, you know, z 400 million -- >> i also have no pets. >> from activist investors janet partner. but you go -- seriously, you don't ever get out of there for less than $30. if you buy some fish food and a couple of filters. then if it's dog related, then you're really -- >> i had a turtle as a child. i love when we do this. the last time we went into it, you got to michael jackson changed your life and you used to wear one glove. on the air. >> i'm sorry i missed that day. >> you didn't read about it? >> let's see what's on today's agen agenda. let's tell you what's happening. while you were asking us that, quarterly results coming up for target and lowes. staples, american eagle outfitters, all of that is happening before the bell. coming up this afternoon, we'll hear from hewlett packard. on the economic front, we'll get minutes from the latest fomc meeting. the notes coming, of course, before the annual fed gathering in jackson hole and that gets started all tomorrow. sglt meantime. quick check on the markets. right now, looking at the nasdaq. in the world of energy and oil, right there, wti crude, the number to beat 95.57. we'll tell you about the ten-year. i don't -- you know, the yields at 2.4% or 0.5%, is that what is -- is that what's really impacted the markets over the past week? i'm just telling you, if you're the fed and if you're a central bank around the world and you are staying where we are, the gop program to move up and that's what they wanted. that was the idea in the first place, right? to have fair wealth. i don't know whether it has or not. but what are you going to do? >> under the mattress. >> i was going to say, that's one of the reasons why the u.s. treasury market is benefiting. because the comparative yield again is obviously about buying a u.s. security. >> it loses and like a play where you can just -- the person in the play can turn, right? >> michelle is -- >> chime in. exactly. we'll be here. >> who is supposed to read this? you are. >> i am? >> you are, ser. give us an economic pulse check. michelle gerard and michael hanson are joining us now. you're not that handsome, are you? >> no. >> ", okay. there was a different one. >> one of the reasons people look at what's fueling the command for treasure yields. too buy a ten ever yield treasury number and people are doing that. relative to many other yields aclose the loss so that's one thing to coop in mine for termy. >> i think even though the u.s. might look good on a relative basis, that is still boosting you a little bit when you think about growth globally. >> certainly. but i think a lot of that in the end benefits the u.s. treasury market and reip forces the idea that we've got a slow global environment, we've got central banks likely to keep rates low for an extended period of time. the u.s. maybe after the u.s. may be moving eventually in the other direction. we'll continue to see easing monetary policy for an extented period of time. >> wait a second. i think in the bond market right now is a bit scary. just how strong bull growth is going to be. they've fumbling along. practice the deflationary environment, sounds like it might move. 0.4% is far enough, just below 2% that it's not going to get the -- >> what you mean or less. >> they're scared about how weak economic growth is. >> generally speaking, he hear a lot about stagnation and this has impacted the bond market globally. it looks like the fed is not going to be exiting very soon. >> hasn't the bond market always been like that? the bond market usually tends to get the general story right. now with this new fed policy of forward guidance let alone qe, the policies may be more -- one of the things we're seeing reflected is this continued guidance with the fete that they are going to be different when it comes to raising rates and the paints -- this has to be wrong. but every time you do, you get punished. and i think to some extent, there are people who are just going to have to wait and see when that time comes. >> late 16, early 17? >> someone said that. nonpossible, right? you worked people relatively terrible about in here 37 still stopping in a different wlas. the committee as a whole is drifting. but we know with all due respect with plosser and fisher, you have obviously very strongly held views. we're at a different place than the rest of the committee is. >> obviously, you did get a hawkis dissent. you've had a couple of fed officials suggesting that the fed should be moving more quickly to the exit. and the minutes always get a platform. you air their grievances because everyone talks, not just the guides who vote. but i think that the underlying message is the one that came up in the july statement which is now they've reoriented themselves. and i think that new lk is going to be with us for a while. >> i think to this fade we're to get to get a more aggressive pack of rate hikes that has been decided. so when you get some of these signs that they're more competent, that they're moving towards the object i haves, which might suggest at some point to raze rates, you're going to have the counter of we've seen a lot of justification for moving slowly when the rate hikes do come and keeping policy more accommoda accommodating fop a long period of time. so it's going to be kind of a balance of information that we can see. >> is you guarantee we would have no recession in the next five years? >> oh, no. >> there are people that come in here that are sure of that. they think they have it all figured out. and none of those things are anywhere near the hut. the reason i ask, we have no power. this is not a bad economy. we're throwing everything we've got at it. >> and what worries me, the fundamentals are pretty down. there isn't necessarily a risk i would say about a huge inventory risk. >> it will ultimately create some sort of asset bubble. that we haven't identified, even though we're trying to thirg about it. when that replaces, it triggers an event that end d up kissing the scales. it would be something along those lines that i would say i can't do it -- >> and too big to fail, too. there's only so many asset classes, aren't there? >> what are we missing? >> it always ends up getting us. it wasn't necessarily the subprime market. it was the interconnectedness of the financial markets and it's very difficult to discuss. i don't think there's a high probability. >> how long before you're 99% sure you don't have it? two years? >> who knows. >> it's not on the horizon. >> we have to get out of this recession. >> the fed is not going to hike rates. >> is it when you look at what's happening, the people that plan for the future and with companies, the whole wash thing, it's a balance sheet recovery. it's all based on assets. >> either households or a corporation. one of the benefits of low interest rate environments has been a quick deleveraging with relative pain. we don't know where it will be. so you -- splat. >> that's longer term. >> sitting here commenting and laughing? >> you have stuff to do. >> they have to go to work. >> thanks, guys. when we come back, why the nfl is pushing pay to play. you're not going to believe this story. at the europe bowl laugh time show, we think everyone is taking notice. plus, peta buying shares of sea world. you heard that right. the details on what it all means when "squawk box" returns. activist investor this week, animal rights group peta said yesterday it's buying shares of sea world. peta said the has scooped up more shares in the company in order to retain the minimum investment it needs to propose shareholder resolutions and submit formal shareholder questions. any shareholders must hold 2dz,000 of stock in the company in order to submit one of those shareholder proposals. peta is not a big shareholder, there's about 135 shares in the company. the organization needed to buy more shares to meet the minimum because shares of sea world have tanked of late. now, sea world and peta have been going at it for years over the treatment of its orca whales. sea world made this statement, peta already holds sea world shares. despite their claim to the contrary, sea world animals are well cared for and their health and well being is a responsibility we take extremely seriously. we are proud of our world class standards of care. >> this isn't the first time pita has tried to influence that company. it holds shares in dupont, pfizer, amgen. something unlike many people have ever seen. >> well, they did have a little -- a big issue with the documentary that happened. blackstone, you weren't shocked? >> no, not really. >> it's one thing for a company to come out and say this has had no effect on it. in fact, it has actually increased attendance and then to completely do a 180 at the next quarter. >> how about people on twitser, joe? >> i think that's a little bit different. >> i don't know. when you're a private company, you can. you can choose who gets your shares and you can choose who your employees sell their shares to. but anyone can buy the shares. so we will see how that battle turns out. meanwhile, the nfl has a new idea to generate revenue. "the wall street journal" reports the league is asking artists who want to play next year's halftime show to pay to play. rihanna, katy perry and cold play are being looked at. but the pay to pay reception is not going over well, as you can imagine. normally you get paid to play. >> apparently what happened over the past two or three years is the nfl has watched. these performers have done the halftime show and immediately that night or the next day clipped their concerts sales. tickets go on sale immediately and they've seen them, beyonce had this huge record breaking concert tour. so they now think to themselves, we should get a piece of this. that doesn't -- i don't understand how -- i just find the whole thing shocking. >> do you think roger goodell was thinking? >> i just heard the cold play and i didn't realize we were doing a story on it. i just thought you were starting to get involved with the musical selections. >> i don't macrame my jean shorts during the commercial break. >> should i be thankful? >> it's an old carl book, actually. >> not exactly. >> from the movie. >> who has the most say over commercial break music? >> me. >> you? >> yep. >> how do you choose? >> i don't really think about it. stuff i hear. it just depends on what strikes me. >> all right. >> who chooses -- the framed poster of asia that you still have, the one-hit wonder? remember? that was another one. who picks it on squawk alley? >> carl is a music buff, so -- >> i know. >> there is a lot of stuff that i've never even heard. >> carl noens alternatives and -- >> he's a big fan of morris is ey. >> so am i. a genius. but it's crazy. >> i had -- >> mo orrisey is a guy -- >> a little bit more country, maybe, being from georgia. that's more up my alley, but -- >> current country. >> current country. >> like lee brice or something, right? who? >> ed aldridge, dixie chicks, all that. >> dixie chicks? politically in line with them. snapchat meanwhile is becoming a popular app for people who don't want their messages or photos to hang around. now they're talking about advertisers or companies talking about discovery. it would show content or ads to users. the launch is in development mode right now. discovery is set to launch in november. oftentimes, they look to see what people say about it or whether users would respond favorably for it. i'm not sure that i would want news to disappear after reading it. maybe it's for people who have limited space or storage on their phones so you don't have to save and download. >> i would think if you're an advertiser, you would not want your advertisement to disappear. how often do you think of something, you see the ad and then you want to get find it and you forget how to get there? knows it's the same thing. >> you can skip the ad. then poof, it's gone. >> i've never done anything based on an ad. that's why i wonder how the whole business model works. do you see ads and go -- you know, just while we're talking about this, there is what i would have talked about if someone gave me an opportunity to pick what we're going to talk about here. private sector -- >> uber. >> yeah. anti-private sector, every possible obstacle he could talk the president into in terms of making it more difficult for companies to operate here, so how much do you think he's getting paid at uber as he cashes in the corporate world? mega bucks. >> a couple million. >> but what about stock? >> that will be interesting. >> oh, my god. are you kidding me? these guys all -- it is classic. he's one of the worst. i get -- someone gave men to me or -- >> someone gave you money? >> gave money to the obama administration -- >> it's all making sense now. >> someone gave money to the obama administration. >> on behalf of -- >> on behalf of an ex swap. so i get all the -- the president is always asking me to do things. it's like hopefully from barack or from commercial. but i see proof. someone probably writes this stuff for them. but it is -- they don't worry about the propaganda that they give me, but i'm reading it totally with appear eye because other people read it and agree with it. and i answer. i go you're kidding, right? but they never answer back to me at this point. don't you get them? because you do give money. >> i don't give money. i don't do anything. i'm ride down the middle. >> oh, yeah. coming up next, new fears about ebola in america. the breaking details right after this break. plus, lowe's shares making a hidden remark. we're going to go inside some of this is numbers. as we head to a break, take a look add yesterday's winners and losers. "squawk box" is back in just a moment. [ woman ] the cadillac summer collection is here. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this all-new 2014 cts for around $459 a month or purchase with 0% apr. hurry in -- this exceptional offer ends soon. or purchase with 0% apr. so what ya got on deck? skyfall. lean in, then some pinterest, you? twitter. minecraft and then some hunger games. boom. wow, you guys are all set, huh? oh yeah, new amazon fire phone. it comes with amazon prime - tons of cool stuff for no extra charge. really? it comes with amazon prime? yeah, there's so much to watch. i've been on this earth nine years, i've never seen anything like it. the new amazon fire phone, with a full year of prime included. exclusively on at&t. good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and kayla tousche. you see, now your name has me messing his name up. >> the orca whale. >> sorca? >> the sorca whale. >> barack obama is off -- >> there's the sorca whale. a developing story, a hospital in northern california is treat ago patient who might have been exposed to ebola. the patient is at south sacramento medical center. the cdc is going to test blood samples. the patient is in isolation. why would he have been exposed to it? isn't that an important part of the story? did you see that? >> i did see the story. we're just going to tell you that he's in sacramento and he may have been exposed to ebola. >> this is true. >> i need more. in the meantime, let's tell you was going on with lowe's. following that big home depot number, rival lowe's beat estimates with its quarterly numbers. however, trimmed its same-store sales growth outlook numbers. here with us is brian eggel. he did join us yesterday. you were a big fan of what happens at home depot. it was hard not to be. i asked you whether home depot was a bellwether for the whole industry. we had lowe's and they can't seem to keep up. >> it seems like it's the case every time. if we look at this lowe's report in and of itself, it looks pretty good. it's just not quite as good.. >> when you look at what happened to lowe's stock yesterday, you're looking at the premarket right now. lowe's is off about 4%. is that a function of the fact that people looked at the home depot numbers and thought, wow, lowe's may beat in a big way, too, and now they're looking at what's happened this morning saying -- that actually -- was it the expectation that was raised in the past 24 hours that's putting the pressure on the stock this morning? >> most likely. and i think this pretty market action is very early here. but i think it's more of a knee jerk reaction in the marketplace. >> especially if you've been looking through the release my team and i have. look at them lowering the sales guidance. the way it's worded in their press release, it's reflective of weaker sales earlier in the year. they're not changing their outlook, which i think is more a positive. >> what is that a function of? now is it back to to the weather question again? >> it's probably a lot of the weather. it's a short release. but they made the comment something to the effect of they got most of the weather. related problems back in q2. so they probably didn't capture everything that was lost in q1 and as a result they're adjusting full year guidance. >> they say home price appreciation is the most important thing for these companies. if you feel like your house is an investment, you're going to buy things like appliances to spruce it up. there's the expectation that growth in home prices is going to slow it down. how much do you think that is going to have an effect on the rest of the full year for lowe's? >> i think so long as home prices continue to rise, it's a positive. i can argue that if we see some tapering at the rate of home price appreciation, that's a positive, as well. what we could have happen then is housing turns, sales begin to improve. so in any view, as long as we have home prices climbing, it's a positive for this home improvement sector. >> brian, thank you for joining us this morning. >> thank you. appreciate it. when we come back, "squawk box" gets political. a live report from iowa where one race will determine whether republicans or democrats control the senate for the last two years in the obama administration. as we head to break, let's check out the dollar and see where it's trading right now with the rest of the market futures in the red, takes a look at the dollar, "squawk box" will be back in two. ♪ ♪ developers are all about speeds and feeds. it's all about latency. it's all about how fast does it run. i often sit with enterprises who ask me about how mission critical and how's the performance of the cloud. and i tell them, if you can make gamers happy, you can make anybody happy. speed is made with the ibm cloud. the ibm cloud is the cloud for business. it's 2 1/2 months away from the elections, which is why we find our own john harwood. it's the heartland. there are people in new york, i've read in the "new york times," certain open he hads that say that iowa should get the ball rolling in the political process with the primaries, that those people are the ones dictating things that to them, it's sort of an -- but thank you for going there and, you know, not complaining too much. >> joe, i can tell you that this morning, the harltland has a dark heart. we had a complete pitch black power failure in our 28-story hotel, which i marched down the steps through the stairwell to make this hit so i could talk to you today about the export/import bank. and the -- >> okay. >> he is. >> yes, i am. we had a little crazy weather. >> i want you to go back up there, all right? >> that will help. >> that's what i'm going to do after this hit. but we've got a did want debate raging in washington about the future of the export/import bank that's gotten caught up in the midterm election because eric canton, the house majority leader defended the bank which many businesses support was defeated in this primary by someone who opposed the bank and kevin mccarthy who replaced eric cantor came out and said he was opposed to it, too. so i'm out here looking at the senate race for an open seat, tom harkins retiring. you've got business wanting to see how this debate is going to come out. we went yesterday to vermeer, which is a company that makes industrial equipment, construction equipment, and talked to their executive about the export/import financing that they have pending right now. it's actually a loan guarantee for a $10 million sale to saudi arabia. i asked darrel buchamp who is the executive who does international deals for vermeer whether he considers himself as the tea party has said a crony capitalist. here is what he said. >> i don't view myself as one and neither to other iowa companies using the resources of the bank. we think that is a misnomer, a myth, and this is crony capitalism. it's non-exclusive. the bank is available for every u.s. exporter regardless of size. >> when you hear the public arguments against xm, do you think that's a bunch of demagoguery? >> i do. i think there's some words and some populist rhetoric that is being flown around that is just not appropriate, that is used politically. we're a company that is conservative fiscally and socially, but in this case -- and we're all for profit based or government and government in its proper role to support the private sector to enable us to do its thing. but in this case, we really see that bank enables the private sector to do its thing. >> now, we got some good news afterwards for vermeer and other companies who depend on the bank from joni ernsten, republican can the candidate. press accounts said she had not taken a stand on xm. and when i talked to her, bruce bailey had supported, like most democrats in congress, has supported this continuation of the bank. he's the democratic candidate. but joni ernst had not been quoted, at least in the news accounts, as taking a stand. when i asked her, she indicated that she was going to support the bank. here is joni. >> i would want to look at it carefully. but iowa's economy, we have many spin-off industries, like vermeer, we have john deere and they rely on the bank to do that. and as long as other countries offer that opportunity to their exporters, i think that is something that we need to offer to our industry, also. >> so, joe, regardless of this outcome of the race in the fall, which will be critical to whether democrats or republicans control the senate, you have a sign in the air there of where the debate might be headed, including overnight, you had some more controversy. darrel isi is i is doing an investigation and trying to force him to give up some records of some allegations of kickbacks. but it does appear to me from the conversations that i had here that there's a good chance that they're going to survive. >> john, i think we need three parts. we need the democrats, the republican parties and there's a tea party. and thing like common core or xm, i mean, it's like a rand paul thing, isn't it? sort of an isolationist pp -- there are really three parties. but the tea party has not fared well recently, so i don't know, democrats love the dissension in the ranks of the republican party. i just wonder how it finally plays itself out. we're seeing it, you know, case by case, john, and you know to the different states where it's playing itself out, the tea party hasn't really had a win recently, have they? >> well, they've certainly forced the republican party to move in their direction. they have had some wins, they've had a lot of defeats in some high profile races -- >> eric cantor -- >> how about the win -- >> i don't know if anyone is leans are drawn? >> yes we care about thisp troic. the there are people in business who care about this topic. does this topic resonate with the general american voter? >> not at all. my point was that it is a pence debate if washington that will get settled in walk. if you got somebody like joni ernst, she came out of nowhere. she's a state senator in iowa. people had been watching that republican primary, is she tea party? she doesn't identify herself as tea party. although, she has a considerable amount of tea party support. if she as a few senator would come to town and say, you know what, i think we need in the interest -- >> we got to go. >> where the debate is going. >> the libertarians and the left on a lot of issues are suddenly arguing the same thing. it's weird a. lot of young people are libertarians, they're not social conservatives. crony capitalism is libertarians and the left don't like. you might -- >> call paul ryan to talk about all this. >> decide where you really are on some of this stuff. >> you better look pence your soul. >> my soul is settled. coming up next, thank you, john, a former nfl coach chimeing in on the washington redskins nickname controversy find out what mike ditka had to say right after the break. to your rheumatologistg about a biologic... this is humira. this is humira helping to relieve my pain. this is humira helping me lay the groundwork. this is humira helping to protect my joints from further damage. doctors have been prescribing humira for ten years. humira works by targeting and helping to block that contributes to r.a. symptoms. humira is proven to help relieve pain and stop further joint damage in many adults. 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[ woman ] take the next step. talk to your doctor and visit humira.com. this is humira at work. . >> in an interview, ditka made it clear as far as he's concerned he had no plans to refrain from using a nickname as some nfl announcers have said they are considering. ditka says in his words, what's all the stink over the redskin name, it's so much expletive, so much crap that it's incredible. this is so stupid it's appalling. i hope the owners keep fighting for it and never change it. later in the interview, ditka says it's all the political correct idiots in america, which would be a lot. i don't know how many that would be. but you need scientific notation. that's all it is. it's got nothing to do with anything else. we're going to change something because we can. this is something that i mean to get you guys to weigh in. i'm not going to weigh in on it either. here's what i'll say. he says it's actually a tribute to native america and that that's what it always was. then we haven't ten -- we can get into it. >> saved be i the bell. >> he's not native american. so he doesn't know, a lot of politically correct redskins fans. >> it will be interesting to see how the nfl comes down on this. the discovery of a lifetime. one family's baseball card collection t. romantic road show is here to tell us all about it. 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[ whistling ] with millions of reviews, tripadvisor makes any destination better. . >> good morning. u.s. stock futures points to a negative open on wall street. this as stocks are quietly rallying to end the summer. the nasdaq hits its highest level since the height of dotcom boom. rental companies are starting to feel the pane. shares are getting punished. plus, america's fastest growing companies, "heat" magazine taking the latest rap off the rankings. all as is second hour of "squawk box" begins right now. >> good morning. welcome to "squawk box." i'm here with andrew joe sore ken. the crisis in the middle east, every paper shocked to see it. islamist militants released this photo along with horrific other photos and graphic video of another one of those, remember a couple years ago the beheading of daniel pearl. now we got another american journalist james foley who disappeared a couple years ago in syria on thanksgiving. isis is now threatening to kill another kidnapped newsman unless president obama stops airstrikes in iraq. the u.s. again as we talked about earlier says it will never give in to terrorist demands. we talk more about the role of the u.s. in the middle east. but a former national security adviser sandy berger at 7:30 eastern. >> let's check the markets at this hour. the futures have been negative all morning right now the dow opened by 17 points, fax down by 5. the s&p down by 3. we should note those are off the lows earlier in the morning after parents from europe and asia did roughly the same thing. meanwhile the ten-year note 2.40, prices continue to rally in the treasury market as global interest rates are low. so that's quite chart, andrew, people have been saying 235 is the absolute lowest. on friday we saw 232. >> we have mark grant claiming hopefully it's going under two, soon. watch for that. in the meantime, let's get you caught up with headline, retailer lowes is under a lot of pressure. it bo et the street estimates. earnings and same store sales, its full year outlook for same store sales growth off. that's what's hitting that stock this morning, off about 3% in the pre-market. u.s. homeowners are doing better at paying their emergency on time. transunion reporting the percentage of homeowners were at left two months behind on payments fell to a sex-year low. >> that number has been steadily declining. we are watching slayers of office supplies, retailer staple's this morning. >> that company reported a second quarter profit up 12 cents per share. that was above estimates. however, its profit was 20% below a year ago. joe. >> among the morning stocks to watch is hertz, the company is withdrawing its full year financial forecast. a large number of recalls by car manufacturers have left hertz with limited vehicle availability and hertz rntal car revenue phil lebeau joins us from chicago with the story. things should be going for hertz, you would think. that's why it's a little of a surprise, right? >> well, they've got some intern am issues that are a part of this as well, joe. there is no doubt the recalls, which are a record level this year for the auto industry is hitting hertz and the out rental companies, in fact, i've seen this myself when i have gone on trips, increasingly at the hertz counter, hold on a second, we have to lower the full-year guidance, they've actually pulled their guidance altogether. >> that i have said, look, what we're expecting will be well below the hoest previous estimates in full earnings gains, they are also reviewing their 2011 to 2013 financials. they've already said in the last couple of months, they've already found about 46.3 million in accounting errors when they go back and look at financials the lead independent director announced he is leaving the board. what is getting attention is hertz is blaming the massive auto recalls with them having to lower their earnings. keep in mind, they are pulling thousands of vehicles out of their fleet. they can't put them back in until there are parts to fix those vehicles. many of them being general motors' vehicles under recall and as a result they've got a tight, you know, supply there and it's not enough to meet the demand that is out there. they're also facing some operational challenges. here's the two q rental revenue hertz announced yesterday. in the u.s. up 4% international 7% and equipment business up 1% as you take a look at shares of hertz, don't be surprised if we see this kind of lingering for a quarter or two as hertz and the other auto makers deal with this wave of recalls out there they are trying to work their way through. when you just don't have ten or 12,000 vehicles that you are supposed to have. that's just an estimate i heard from people. that's not just from hertz. when you are dealing with that much of a drop in terms of supply, it's going to hurt the bottom line. people eventually say, wait, i need a vehicle from somewhere. if i can't get it from you, i have to find it somewhere else. >> phil, in a totally different subject, i just happen to look over at regular gas today $3.20. when is the last time we were that cheap? do you remember? >> i want to say it's about two years ago, that's just off the top of my head. >> what's happening is i don't get that and we have been arguing with oil people about they say oh, well, we should be much higher given the geopolitical news, but we're not. but we're still high and is the crack spread going -- >> we came through the refinery season. when they bring them down in the spring and early summer. that's usually when you see gas prices moving higher. we can do that season in better shape 457b than in the past. typically they have a tendency to drag on. you see refineries on for an extended period of time. that was not the case this year. as a result, you are looking at a supply at least on the gasoline side in robust shape. that's one reason you are seeing gas prices down in that 320 range. >> not all different forms are fungible. i'm waiting for the day when the natural gas boom that will be so beneficial to the country, when it just has expressed in btus, when we actually see things not wage replaceable. not natural gas, you can't utes electricity, but you would think that that's going to be, exert some downward move. >> absolutely. i'm wondering if we are seeing it all right. why is gas, i don't know, i'm hopeful. >> that would help the economy a lot. it's like a tax break. >> i think a lot of people would like that, joe. >> all right. 320. well, has jeevs brought that up with you? >> raised the issue. >> what about, i have another, is helicopter fuel, is that the high, where is that? have you noticed when you are at the pump? >> i don't know. what does the helicopter run off? >> you don't even ask, right, you want to make sewer there is two pilots and two engines. >> that's the first question. two pilot, two engines. >> a quiet summer rally continues. the nasdaq closing at its highest level in over 14 years. the s&p 500 is within shouting distance of it's all time high. joining us is o'shaughnessy asset management and paul hickey, co-founder of the you spoke investment group. you know. >> i butchered the name before. >> that's on purpose. >> that's a classic thing on "samberg central," the guy talked about o'shaughnessy. >> the nasdaq is the thing that's hitting the new highs. do you have nasdaq stocks? >> in our aggressive growth. we have a lot of nasdaqs. >> you have been pitching the other stuff more? >> if you take in $10,000 bucks into u.s. treasuries in december of 2008, right now, you are 11.5% under water after inflation. so your 10,000 is now about 88,850. so the fed is really giving investors no place to look except risk assets. >> but you haven't moved as far out as maybe some people think you should have on the risk curve, right? >> well, we have some very aggressive stuff. for example, we have a microcap portfolio. that is very risky. i have been talking dividend because that's what i have been getting feedback on. you know, lots of middle aged people saying, you know, we're in the worst environment for income in 160 years. what can you the to help us out will? >> now me, middle age now is 55 to 75. i don't know about you guys, is that your parameters? >> yeah, that's about right. >> what we're finding is baby bombers are basically, you know, getting to retirement age, right. and they're looking around saying, well, the bond is going to give me under 2%. that's not the kind of income they can live off of. so we've developed a portfolio called a dividend which looks for stocks that are very cheap, financially strong, have good earnings quality. so they're not monkeying with the numbers and then high dividends. and so. >> that will serve you well through a lot of different markets? where are you, paul? >> well, i think to jim's point, too, the nasdaq has been loading the way. you have microsoft, some of the largest companies in the nasdaq are high dividend payers. but overall, what we're looking at, we're focusing more on a u.s. centric approach. so we're looking at domestic companies and one sector to watch is the consumer discretionary sector. it had a great 2013 and has been consolidating all year. what you were talking about joe before the lower gas prices, people haven't been talking about that gas prices are usually at their highs of the year. right now we're near the lows of the year. >> that will be a dig big tax break. have you employment which has only improved this year. have you housing which is improving and the manufacturing is improving. most of the stuff we buy comes from overseas. so i think on the consumer discretionary sector. >> that sector is finally starting to get some legs to it now. i think you could see strength going forward for the sec half. >> when you have interest lates as low as they are. gas as low as it is, why isn't consumer confidence as it was in june? >> well, you look at the geopolitical headlines, they're scary, at the same time -- >> do you reallily the in all honesty people read the headlines of what's happening in the middle east and say i'm not going on vacation, not going to home depot, to look for shoes for back-to-school, whatever, for the kids. to me, it's like some weird disconnect between that to me that's like an excuse for something else i can't put my finger on. >> when we talk to clients, clients will call us. they're referencing the headlines, so it definitely affects people's impacts. what i was going to say the geopolitical headlines cause worries. when the market sells off on it. it's an excuse to sell off on it. we've had problems in the middle east for decades. >> i imagine your clients call and i say want to buy or sell based on the head leans, i'm not saying they want to buy or sell their sneakers or whatever they're doing in real life head leans. >> i think it's all at the margin in the market and with the consumer. when you see these, people are negative on things. we had a slow recovery. but we are recovering, nonetheless. >> jim, final word before we head to break. >> i think this is sort of as my friend josh brown put it the age of net. we got all this good news in the market place and people are feeling very despondent to your point. >> such a pleasant place to leave us on this wednesday morning. we got to go, thanks for joining us this morning. >> thank you. >> when we come back, "ink" magazine, the man behind the rankings and check in with the ceo of one high flying tech company 345ik making the list for the very first time. then later or news maker of the morning, paul ryan the powerful house republican is out with a new book today. he's not holding back any punches, find out if he's paving the way for a 2016 presidential run. hemojoin us at 8:00 a.m. eastern on "squawk box." welcome back to "squawk box," a live shot, time's square in august here, "ink" magazine is unveiling its 33rd annual list, the list highlighting the 45u6789 fastest growing private companies and small businessings in the u.s., here to talk more about entrepreneurs hip and growth what it takes to make the cut. the president and ceo of acasia communication, he took the number five spot and eric schumberg the president and editor-in-chief of "ink." eric, what is the criteria for this list? how do you make the list before we get to a winner if you will. >> it's simple. it's three-year revenue growth from 2010 to 2013 how you grew revenues. the amazing thing about this year in particular is that this is the highest year the number one company has the highest return of any company ever in the 33-year history. the number one company fuhu. 159,000 growth. >> most of the company is technology related? >> a lot of the companies are technology related. it's a reflection of where the growth is in the economy. >> technology, internet related. >> i.t. service, software, high-tech media. >> in the top ten, raj is new to this. how much movement has there been? >> there is a lot of movement. this is the first time we had a lot owe repeat. usually there is a lot of junks, it's ha ready to maintain that kind of growth. >> help us just understand your business a little bit better. i was talking with eric in the commercial break little about the business, trying to explain how it's the inners of the internet when it comes to fiber optic. tell us for a moment what it is. >> okay. so traffic is exploding. you have video coming on the internet. you have lots of data, audio, cloud computing. these are all driving the demands for the internet traffic. our device increases the traffic of these pipes 10 to 15100 times more than what it is today in a cost effective fashion. so that's the level of economics we bring to it. so we are taking all the optical functions that exist in complex materials and bringing them into a silicon chip, just like one of these silicon microprocessors that we all know and love. >> that brings in the scale of economics, cost effectiveness and intelligence to the network. that's what we do. >> so as a business owner who has gone through this explosive growth, 20,000 percent of your growth apparently over the past three years. you look at your business, i imagine everybody and your brother in your industry wants to buy you. how do you think about that? >> so we are causing a lot of disruption in the business and because this is ought optical business as we know it. we take it into a silicon space and add a lot of innovation and digital processing and silicon pla on theics. so, of course, others want to buy it. we've exploded in growth. quite honestly, we are becoming much more valuable than some of the competitors who may want to buy us. >> eric, a lot of the companies on this list are not brand-new. they have been around some time. i'm looking at spanx and sarah blakely has been on before. dan premack was arguing the fact that these companies aren't going public is cheating main street from a lot of value. for instance, uber, 3.5 valuation last year. imagine if mane street were able to get a piece of that value. instead, it's with a small group of investors. do you see you look at a list of 500 companies, ret i.cense on the table? >> remember the responsibility of the entrepreneurs is to their investors and friends and family. most of these companies did it through friends and family of their own savings and not to companies. so there has been a real shift in the past few years to get away from ipos and not go public until you really have a lot of momentum behind you. >> that means a lot of the value is captured by those initial investors. >> do you think that should clang? >> it speaks on behalf of entrepreneurs. we think they ought to do what's right for them. if they capture a lot of the value, that's all right with me. >> raj, i have one question for you. it's a selfless technology question, we talk often around internet speeds and cable versus wireless. do you see a day where the output of broad band speeds, wirelessly, will ever match what can be done on a cable? >> i think it is going to always be distancing. because spectrum only takes a certain amount of traffic and fiber optics is what we talked about, we increase the speed up to 100 times what it is today. so i think the fiber optic evolution is going to be faster. however the wireless speed is going to go faster and in turn a lot of the wireless traffic goes through fiber optics in the back end of it. so they have to keep pace with each other for us to bring all these services on the internet to you. >> okay. raj, claulgs congratulations on making the list. we love to continue this conversation. eric, thank you for coming in, congratulations on the magazine this month. >> absolutely. >> coming up, a wildfire threatening yosemite at the height of vacation season. plus, live, right here in our studio one of this most influential republicans in congress, representative paul ryan, even in iowa. there are people talking about ryan right in the same breath. he's like a front runner. i think i'm going to get him out here early. it says 50678:00 there. if we can come on at 7:30 we will do it. he will give us his plan to jump start the economy when we return. ♪ ♪ developers are all about speeds and feeds. it's all about latency. it's all about how fast does it run. i often sit with enterprises who ask me about how mission critical and how's the performance of the cloud. and i tell them, if you can make gamers happy, you can make anybody happy. speed is made with the ibm cloud. the ibm cloud is the cloud for business. i make a lot of purchases foand i get ass. lot in return with ink plus from chase. like 50,000 bonus points when i spent $5,000 in the first 3 months after i opened my account. and i earn 5 times the rewards on internet, phone services and at office supply stores. with ink plus i can choose how to redeem my points. travel, gift cards, even cash back. and my rewards points won't expire. so you can make owning a business even more rewarding. ink from chase. so you can. we're changing the way we do business, with startup ny. we've created tax free zones throughout the state. and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov . >> check out this video. >> that is a shark biting down on a submarine cable. that's that thick rope right there. yikes! this happens a lot apparently. so often, in fact, google is coating its under sea cables in a kevlar-like material to protect it from sharks. google mentioned this topic last week within it announced it is investing $300 million in an under sea fiber optic cable system him some of the those cables go to japan him speaking of fiber optic cables. >> that's how the shark died in "jaws 2," he had the cannister in there. "jaws 2" they put a cable in his mouth. it was something electrical. >> sadly i missed "jaws 2". >> three and four, too? >> yeah t. first time scared the -- out of me. >> he gets into seaworld. they didn't think that was a stretch, he takes over, i'm not kiding. >> am i sadly disappointed when i sit down this weekend? >> at that point schneider wanted to check the cash. coming up, we will welcome our news maker of the morning. powerful in all ways, buff. the house republican and chairman of ways and means, leading from iwest virginia he's here, joining us early. i will be standing. andrew has to stay. i'm sorry, i tried to honor your wishes. ♪ [ male announcer ] during the cadillac summer's best event, lease this 2014 ats for around $299 a month. hurry in -- this exceptional offer ends soon. ♪ hurry in -- this exceptional offer ends soon. dovisit tripadvisor new york. with millions of reviews, tripadvisor makes any destination better. e financial noise financial noise financial noise financial noise traffic, not as bad as expected this morning. congressman paul ryan got here a little early. instead of having him sit around with our viewers waiting. you were in the green room. we didn't have much food. we had to get you out early. >> he doesn't eat danishs. >> obviously, he does not. >> all the good things out here. let's get to it. >> welcome, congressman paul ryan, chairman of the budget summitt is author of the new book the way forward and we don't need to structure this and can it with an intro because just without even talking to you, you said, yeah, we were talking other stuff. you said, that's why i wrote a book. i couldn't trailer around the country complaining about how things are, offer some solutions. >> clearly people know my politics. obviously, i don't like the direction is country is headed the way the obama administration is going. on economics, on foreign policy, water your solution? that's what this book is about. how would i do things different, is it more prudent governing philosophy, how do you renew the american idea, which is help the economy with opportunity, upwaertd mobility. the condition of your birth doesn't determine the outcome of your life in this country. it's a phenomenal story. it's under duress. a lot of people don't think it's there for them anymore. i would argue we are prime and due for a great comeback. we make the right diss, that comeback would be structured. i'd discuss lou to do that. >> what really happened, reality shows are popular. when things are off camera, i share them with you. i was looking for him. he wasn't in the green room. i went right into the men's room. >> he was watching his hands. what i immediately said to him. i said to you is i remember the late 70s and i remember what happened. i remember how disconflict the country was feeling. it's very similar to me now. it's such a country with so much potential and the people in it have so much potential. >> right. >> we are theoretically set up for the most incredible rebound. someone's got to be there to lead it. >> that's exactly how much i feel. it's not just a person but ideas, it's the reason you want to read this book. the reason i wrote this book is what is a plan? i look at it. let's take it to the country. threat country decide, what kind of america do you want to have in the 21st century? >> i will push back. i told you guys earlier. >> that's andrew's job. >> i get all the e-mails from the obama administration, they send it to me. i got something, i don't know who this was from, necessarily, but there is a concerted campaign to stop you. and it talked about what we need to do to make sure paul ryan can never become president they will rerun throw grandma from the cliff commercial. they started it yesterday. so you talk about bringing america back. others say you will throw grandma out in the snow by what is it because of the kouch vouchers for medical. >> the supreme court. >> it's an idea i worked on with alice gruber and ron weiden, it's an idea that makes sense and saves money for taxpayers and medical beneficiaries. it gives seniors choices on how it will be delivered to them vs. the ipad, president obama's 15-person panel that will make all of these decisions. so i can go on and on about all this. the point is, if you don't like the direction is country is going, few don't like federal policy, how would you grow the economy, how would you make us a stronger nation from a foreign policy? how would you get people out of poverty more effectively? >> it's so interesting. romney is on the cover today talking about obama, there are people that he is almost greeted like a rockstar, again, you have, i won't say you are tainted, but the 47% thing the fat cat, the job exporter, all that stuff will rear its ugly head every election center for romney. will he need to be rehabl stated? it's a way to say he was right about things. >> i would love to see him run again, he's emphatic in saying he won't. he obviously does well in the polls today i think because the things we said in the campaign. we were shadow boxing against big government in theory, against the president's rhetoric. remember, the president passed most of his program in the first half of his term, they delayed the implementation of these big laws like obamacare, dodd-frank until 2013, so it's our word against their word as to what was going to tran spire, then came twleent, they got reelected in 2012. now we have big government from pennsylvania the results look nothing like the rhetoric used to sell the program. so i do believe there is a little regret. i do believe that people say, oh, gosh, this doesn't look anything like they told me it would. few like your doctor, can you keep it. it will help my health care costs, blah, blah, blah. >> you learned from the mistakes, i saw an op ed where you wrote about the makers and the takers, people have shown you, some of the takers are vets, or people that are truly in need. >> my mom on medicare me on social security after my dad died. >> it's a bad, it's a ten year to talk about it. >> i think we need to learn from our own personal% takes in life. i think that's an important thing for any human being. i have made mistakes in my career and my life. i think you need to own up to those things so you are better going forward, but the argument i make is we did predict a lot of these problems were going to happen, but that's not enough to say "i told you so." it's more important to say" here's what we should do differently to get the country back on track." >> we have sandy berger, we brought him on early. so we threw this show into all this flux. if you play, if you have questions for sandy and things like that. >> sure. >> you are a true guest host now. >> i am a true guest host. i have done this before. >> now you can question people. >> i'll be easy on them. >> there is you seen newspapers this morning, a zwush disturbing development, islamist militants released there photo along with a graphic video that is the apparent beheading of an american journalist james foley, isis is threatening to kill another newsman. joining us now, sandy berger, chairman of the albright stonebridge group and a former national security adviser under president clinton and, you know, sandy, earlier, i probably, you know, we're a show and we talk whatever is on our mind, again i saw we never negotiate with terrorists. i said, well, usually never. didn't we just do something recently that would cause these guys to think they could be successful lear? >> i don't think these guys are thinking at all about negotiations, this is a fanatic group of sunni militants. you've seen what they did with the zetis last week. they're brutal. they're fanatics and they have to be dealt with from a serious an sustained way. this is gruesome, but it's not an isolated act. and it's a serious threat. this is now an islamic state. this is the best funded, best armed terror group in the world. we have to have a strategy to deal with it. >> does that include, do we need to work until, is it an existential threat? is the president being tough enough to get the dam back or do we need to act to get rid of this group. >>. >> well, as the serious threat. i think the president is doing the right thing. i think he handled his, he played his card right but not going after them immediately so long as malachi was from him of iraq, who was hated by the s sunnis, had we used our air power, we would have been seen by the sunnis as malachi's air force. any bombing would have driven the sunnis into the hand of the islamic state. we pushed malachi out. that's a very good step. now we can work with the new prime minister and with other countries in the region to organize and with the sunnis on the ground, to try to push these guys out t. sunnis through these people outs six years ago and unfortunately malachi then ran the country in a brutal way so that they actually hated malachi more than they feared these guys. we now need a long-term strategy here. >> sandy, i know we say we don't negotiate with terrorists, but behind the scenes we often do back channel with people and try to do things, what should we be doing? >> we are set to this, the idea of negotiating with these guys is absurd. it's like you can't negotiate with a mad man, these people are crazy. so you can't even contemplate negotiating with them. you have to destroy them. but we have to do that over a serious and sustained way. i feel badly for the families here the horrible, horrible gruesome act. but the very act of negotiating with these people is mortifying. this is a very large group. they now control territory in iraq and syria the size of maryland. they have designs on jordan and lebanon and ultimately the arabian peninsula. so we have to have a long-term systemattic not panic strategy here, using our allies and we're not the only people affected. they're coming after the gulf countries and others. so let's form a good strong coalition here. let's get the energy of the sunnis in iraq. sunnis are going to drive out crazy sunnis from iraq, not americans. let's have a concerted positive strategy over time to destroy these people because they are over time a serious threat. i say one point to our existential threat. today they are not. they don't have the capability today to launch the kind of attack that al qaeda did against us. but there are thousands foreigners in this group with western pass force, there are about 100 americans with task force. and they're recruiting extremists from around the world with foreign passports. the greatest threat right now that they pose to russ these foreign jihadists. >> sure. >> who go there and get their training and can't come back to strike this. >> sandy, we have congressman paul ryan here at the table with us. i know he'd like to join the conversation as well. >> a quick question, on would it not have been in our interest to have instead of an enforcement agreement with iraq. behindset is 20-20. football two, what should we be doing differently in syria knowing now what we know. >> in iraq, i'm not sure if we had 10,000 soldiers in iraq, it would have made much difference. >> here's the reason i ask that question. the day after we left, malachi basically purged sunnis from his government. then we had no logistical support for the iraqi army. the iraqis couldn't even get supplies up to mosul to their troops, had we had the 10,000 or whatever the number would have been of enablers of people helping with logistics with the air support. wouldn't we have had a better chance of keeping the iraqi coalition together the army together to prevent isis from taking over the northern part of the country in the first place? >> paul, you can replay this story a lot of different ways. you can say had we not invaded iraq, which many people tend to think. >> a more contained question. >> let me finish. isis was formed in response to our invasion of iraq. but the head of isis was nurtured in a prison, in an american prison in iraq. so we can spend a long time on the blame game. i do agree with you on syria, though, paul. i think that question should have supported the modern opposition in sir why before syria became radicalized and regionalized and before groups like isis had the ability to grow and develop. i think that i certainly agree with you on that one. >> the reason i ask that is not to play the blame game, going forward in afghanistan if we have this hard pull out dead lean in two years, are we not planning the same kind of seeds planted in iraq and should we not think about some holdover force with you know vso, village to village operations or something to that effect for an indefinite period that we don't sister to have a hard dead lean on from afghanistan or are we going to have the same problem in afghanistan in the future. >> i think we should leave some troops in afghanistan. we invested a lot in afghanistan. a lot of americans have not him some have died there. i think if we simply pull out of yavrlg lit have reverb celebrations. >> sandy, as dangerous as these hot beds are journalists as they cover these areas with bulletproof vests, oftentimes the ensurgents the open session want their story told, too. i'm wondering if what we've seen with foley has marked a c clang for journalists to go into these areas and cover them? >> you know, i have such great admiration for people leak mr. foley, who cover these situations around the world and i think i read something, last night, that he was quoted as saying about how important his work was and how important he thought what his doing was, so the american people could see for themselves, what was going on in these session and he's right the worst thing that could happen is we could lose our eyes and ears not not see the kind of turmoil and the kind of blood thirsty conduct that's going on. so i do think it's a danger. i have tremendous respect and admiration for the men and women who beck up their pad and their pen and go into these situations. >> all right. thank you. we appreciate it. thanks, former surt adviser. we will be talking about these things in a much more detailed way. >> yes, it's good to have you here early for that. when we come back, two weeks ago, the retailer warned of slowing sales, find out if investors now have a bulls eye on the stock. plus,ty you are doing a good thing by not taking your vacation? think again. details on that story right after this brake. . welcome back to "squawk box" a. new survey by research firm harris interactive shows americans use 51% of their eligible paid vacation time and paid time off. here's something even worse. 61% who take their vacation wind up working while they're away from the office. so why won't people work at work? simple. fear of falling behind. of course, there is also the fear of being fired. what many don't understand is that paid vacation is often built into their compensation package. as we get this story in some form or fashion every single year in the summer about how little vacation americans take with respect to the rest of the world, how much they take relative to what they're supposed to take. but this isn't going to change any time soon. >> you got to take vacation. you only have two days. >> we have a lot more to talk about in a moment. >> it has been a lot of fun. >> coming up, antique road show, a treasure trove of baseball memorabilia found not too long ago, includes a collection of cars and other items appraised at a million dollars, auctioneer and antique road show host philip weiss. do you have honus wagner with you? >> no,io i don't. >> i wish i did. >> they will join us right after the break. . welcome back to "squawk box." i know those baseball cards you collect as kids, hold on to them. a family in boston was offered $5,000 for their collectioned a it appraised for $1 million. joining us now to tell us about the collection why it's worth a million bucks, phil weiss an appraiser for pbs' "antique road show," you brought memorabilia. >> this is baseball memorabilia. the particular appraisal we are talking about was an astounding thing. it came to the show in new york city two weeks ago. i think that appraisal kind of encompasses everything the road show is about because, you know, at any given venue, you have a room filled with arguably the best appraiseers in the world. in comes somebody who had this group of things. >> did you know it immediately? >> i was five or six seats away from leo dunbar. >> you could tell? >> i was a little to the left. i was dumb founded when i saw what she was holding in her lands, it was amazing. it was a group of material the woman's great, great grandmother accumulated. she owner owned the boarding house, this was the original 1873 boston red sox stayed. >> wow! >> it was astounding. there was a letter in there they were writing and/or describing how they miss her cooking. it was a showing of how sick those players were being on the road and not being home. >> what do you bring us today? >> we bring a couple things. this is an actual bat by babe ruth. >> how much is that worth? >> conservatively, probably 12 to $18,000, if it was a graham used bat it would be far, far more valuable. >> and how much did the person who sold that sell it for? >> it hasn't been sold yet. but this was actually won back in the 1930s by a youngster who road rod away and was awarded this bat. >> do you see a lot of fakes? >> there is an enormous amount of fakes. that's one of the tripping points of the industry i think you do wind up with a lot of people with fake stuff. >> you flow we said at the beginning of this segment. if you have baseball cards, keep them. i have cards from the ''80s and '90s. are they ever going to be worth anything? >> those were boy band cards. western they? you had baseball cards? i had garbage pal kids with cars. >> you had baseball. >> i have a michael jordan 19 ex-. >> it's a good card. >> in mint condition. >> basketball card, too, don mattingly, mooky wilson? >> i'm still hanging on to my beanie babys. i also have desert storm cards by the way. >> really? >> my mother found in the '70s. >> people would save tell and buy cases as investments. so you can on any given notice make phone calls and get open cases of these cards. >> aren't they going to throw them away right now? >> it was wishful thinking. i don't think it will happen. >> thank you for coming. >> when we return, another, are you not a member of a boy band? paul ryan and mitt romney getting back together again. the former vice presidential candidate is with us for the next hour. a price tag! danger! price tag alert! oh. hey, guys. . >> the owner. >> they're killing the reds. anyway, welcome back to "squawk box" here on cnbc first in business world wide. our special guest host this morning congressman paul ryan. we have a lot to discuss with him. first, kayla, i guess target is out. you got some headlines as well? >> yeah, first, let's take a look at target. 17.41 billion in second quarter sales. >> that 234 million. just the eps is 78 cents. es at fawn adjusted is 37 cents. let's take a look at how that compares to estimates analysts have been looking for 17 cents. when you look at that 78 x number you can see that is slightly below. it will be interesting to see what target says about the consumer t. company said that data breach over the holidays is more expensive than it expected and that sales had taken a hit as a result. you can see target shares are down pre-market 3% on this move. so we'll get a little bit more on target. >> what was the revenue number you said? >> 17.4. 17.38 was selected. it is a slight beat on revenue. >> here's what john mull began said. >> cut their profit outlook as well. so where does the genes go? they cut the 2014 view from 3 1230 330. they're at 349 that's not good. >> i think it's a reset. while the results didn't meade meet you are expectations, we see early signs of progress as we work to improve results in canada, he goes on to say the coming weeks and months, this is not a man that sounds confident. we focus on listening and learning with the team to develop focus for strategic plans for long term. so he knows. >> they have been working on the canadian strategy, same store sales down 11.4%. joe, you mentioned they took their full-year outlook down, that's quite a bit. >> it was 360 to 390. >> you take that down by 48 cents, that's a big adjustment. >> it is, there are only two quarters left. they were supposed to earn 65 cents from a fiscal third and a $1.28. so it's taking the 48 cents off the next two quarters for the whole year, you know, so yeah, on 390 on 360 it's big. on what is 65. >> on half that, exactly. >> $1.93, taking down 48 cents, that's huge. >> that hacking breach. >> $146 million that ended up costing. we will get on target. sales have rebounded slightly 1.6% is the move to the downside. it had been down as much as 3%. we are watching shares of lowes earnings it beat the street, the home improvement retailer is cutting its full year forecast as well. >> that stock down 3% premarket. investors had worried it would need to do that. we are watching office supplies retailer staples, reporting second quarter earnings as well a. profit of 12 sents cents per share, one cent above estimates. revenue beat forecast. meanwhile, the staples is up 2.4%. it looks like this i don't think is better than expected. finally, mortgage activity increasing, the pain reason, a drop in average rates. we have been talking about that all morning at what point is the low interest rate environment going to keep consumer spending. it looks like more consumers are getting back in with makes up slightly in the latest week. andrew. >> the crisis in the middle east. taking a deadly turn. islamic militants we leased this photo with the beheading of american journalist james foley. joining us on the phone, bill neely of nbc news, bill, what can you tell us? >> yes. good morning. here now that the u.s. airstrikes that i have been witnessing here in northern iraq over the last few days have been followed a horrifying act of revenge. obviously, we're not going to show that you gruesome five minutes long. it's called message to america. it begins with president obama launching the airstrike and then the unfortunate jim foley is loan is an orange robe on his knees besides him, a pan dressed in black who eventually wields a knife, but intelligence agencies on both sides of the atlantic are now looking at this grotesquely t. killer clearly has an english almost a london accent. intelligence agency in the u.k. are probably using voice recognition software to try to find out if they know who this man is, if he's on their books. the issue is that of foreign fighters. it's not just european foreign fighters. it's foreign fighters as well. intelligence actions estimate that there may be as many as 500 british jihandis operating in iraq and syria, multiple numbers of germans, french, australians, canadians, up to 100 americans who have come to this part of the world on behalf of the islamic state. now, that is a very worrying thing for the west. prime minister cameron of the u.k. is meeting today to discuss it. president obama will be talking to his security team later in the day. >> hey, bill, before we let you go, what itself the reaction been in the ground and in iraq. obviously, this is making headlines here in the united states as well as europe and asia. what's the reaction been where you are? >> reporter: well iraqis would have two reaction, tens of thousands iraqis have died over recent years. they wonder why one westerner is the cause of so much upset in the west all they they do understand that. the other aspect is this brings back the memory of the terrorist group of isis if you like a. man called al zakawi who many years ago was executing people dressed in orange jump suits the islamist organization, we had understood from intelligence actions learned from him and was not going to be quite brutal, sadistic and gruesome. that proved to be false. because the execution of foley is just as disgusting and brutal as anything al zakawi did. so iraqis, this is the place that's filled with fear. >> all right. bill, thank you for joining us this, mo. we appreciate it very, very much. >> congressman paul ryan spending the morning with us. hoo es the chairman of the house budget committee author of the book "the new way forward. you ran for vice president? a couple years ago. >> good memory. >> yeah. >> not that long ago. a lot has happened. the unemployment rate has come down a little. it seems like the world has gotten a little dicier. maybe it's just me. we'll show the book again. then i want to talk about your meeting tomorrow with -- >> governor romney. >> tomorrow. at the union club in chicago. union league club in chicago tomorrow evening. >> he will help you with the -- >> obviously, i talk about mitt quite a bit in the book. i talk about the election and what the republican party needs to do to win electoral college and national elections. i talk about the agenda we need to present to the country to have affirming elections we need to have to get the mandate from the country to fix our problems. >> you said you'd love to see mitt run again. >> absolutely. >> so there are people that think you might run. >> i will make that decision in 2013. >> do you have any of those signs left? >> i think there are a few around. >> would we have to palestinian it to ryan romney? >> i would drive mitt's campaign bus if he felt that would be the most effective way to help him. >> does that mean you have to wait to see what he does? >> no, look, this isn't one of those deals him i would love to see mitt run again, he's emfatic. he's not going to. i think people now know. >> that's why you are able to say that? >> no, seriously, i would love to see him run again. >> to get in the mix. >> is he the right guy for the party to run? >> absolutely. knowing him like i know him, you couldn't pick a better person with the intelligence, the integrity the knowledge to step in at this kind of a moment for our country. i really believe that and you know i think people got to know him a little after the campaign. did you see on netflix? >> it was a great documentary. >> i wish people would have seen. >> he can resonate with the voter the gop needed. for the elect, do you think he would change that in 2016? >> no, look, i think there were some structural disadvantages he had coming out of the primary. first of all, he had 2003 debates. he exhausted the money. he couldn't get his money until august. >> he did the work to trash the p.e. industry before le had to run against the president. >> but the point i'm trying to make is, we had structural disadvantages, i'm not saying that's why we didn't win the election. when you come out of the primary cash starved in may, you don't get your general election funds until august you run the battleground states for three months. that was a part of the -- they are saying not as many debates and you got eight guys they're all throwing grenades at each other trying to keep it moving further and further right. then if you move back to the center, are you a flip-flopper. is ryan going to be able to make it a less. >> not only the body of knowledge. he has struck in the primary process. >> is the book the part of a campaign for president? the reason i ask? no, that's where i'm going. >> i would be doing a bus tour in iowa, new hampshire, south carolina. i don't want to cloud this with presidential politics. what i want to do as a policy leader, as an elected leader say i don't like the direction the company is going. here's what's wrong. >> is hillary's book different? >> i haven't read her book so i can't answer your question. >> the public relations effort around that book, do you think this was fair or unfair to say that was the beginning of the campaign? >> i think hillary is one foot into this race already. as far as i'm concerned. >> she ran for senate in new york. >> as far as i'm concerned. i'm focused on the here and now, what do we need to talk about, what are the agenda items, also i want to work on the 2014 elections. i want skywalker to get elected. i want the senate to stop packing regulatory bodies. i want to improve our majority in the house. we got some 350 bills collecting dust in the senate going nowhere. it's really frustrating. >> we need to talk about the productivity of that congress. an interesting wrinkle about your book is you are represented by hesheet, currently in a battle with am son. can you speak to that? >> as a congressman i have as to watch what i say for ethical reasons, it's a frustrating thing. clear lirk amazon is making a power play in my opinion. >> it's very hard to boy your book. >> i know. >> do they have monopoly power? >> i don't know the answer to that question. you can go to barnes and noble. >> are you not a fan of regulators of regulation generally. is this a situation, an environment, where you say, i've now lived through it. >> if i were just a private citizen, i would voice one, score an opinion. since i'm a member of congress in a policy. i'm going to withhold from making comments. >> we talked earlier, there could be three parties the democrats, maybe four, because you look at certain parts of the democratic parties so far out of main stream, but on the other side, you got the rand pauls and the ted cruz and the christies and the jeb bushes. how is that going to get reconciled? the tea party has not fared at well in some of the recent primaries. in the primaries, who, but then, there are people that say, oh, great, run another moderate. then we can have, how did president mccain do with president deal and romney? >> i don't think you can put mitt in that category. here's what i would say. we need to articulate. i don't know the answer to that. we need to articulate what i describe as full spectrum conservatism. >> social? >> i don't think we should -- i think we should be an inclusive points of view and not purge anyone's particular point of view. if you agree on the tallest poll in our party on economic liberty, free enterprise, upper mobility. we want you in our party. we will agree to disagree in a civil way on these divisive issues, we will have a majority party that goes for everybody's vote, that opens up the electoral playing field and brings to the country a meaningful choice, so the people in this country can decide what kind of marc they want to have going forward. i would argue now we have big government in practice, people were hungry for a new set of ideas, hungry for a set of solutions, our hard working taxpayers in this country are not getting the government they deserve, people struggling to have good lives. >> you remember the other side, especially with the cooperative media, the other side can dictate the issues, do you remember the war in women in the last election? what happened in the war on woman. it was entered quickly. >> it will come back. >> so you say, we're going to talk about these great things that conservatives stand for, then all these social issues that republicans may or may not be behind, they're going to rear their head again and they're going to be used by the other side to once again back you guys into a corner where young people that are libertarian that want small government, that want low taxes. >> the best defense is an offensech we need a constructive agenda. by the way. >> that are against gay marriage. we're trying to help scott brown get elected to the senate in new hampshire. >> where is he? >> scott brown is pro marriage and pro choice. he is a good republican in good standing. >> it's hard to walk that line when you are talking to young people very sure about where they are. >> i think they'd like -- >> they can join the republican party. they think it's the party and the old people that, i know -- >> read the book. >> invade your bedroom. >> we will continue this conversation. paul ryan will stay here. we will get the take on the consumer. but up next, a new report out minutes ago showing a bubble may be brewing in the auto loan space. consumers are struggling to make payments, so should lenders start hitting the brakes? as we head to a break, check out the futures ahead of the market open t. dow looks like it's off close to 29 points right now. we'll be right back in a moment. with all the opinions about stocks out there, how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this 2014 ats for around $299 a month. hurry in -- this exceptional offer ends soon. ♪ what would help is simply being able to recognize a fair price. hurry in -- this exceptional offer ends soon. that's never really been possible. but along comes a radically new way to buy a car, called truecar. now it is. truecar has pricing data on every make and model, so all you have to do is search for the car you want, there it is. now you're an expert in less than a minute. this is how car buying was always meant to be. this is truecar. ♪ . >> a new study out this morning shows americans are starting to struggle with their auto loans, phil le beau joins us from chicago with details, it's still a relatively small market, right? >> it is a small market. the markets are increasing. these come from experian which every quarter is monitoring. they are indeed troubling. specifically when you look at the number of repossessions, the auto repoe rate up in the second quarter, delivering whency rates are rising. the average amount of a bad loan or loan charged off, it's up $932 to $8,114. now that increase will get attention. overall, look at where the bad loans are relative to where they were at the height of the recession or at the worst of the recession. back in 2010, the average writeoff was over $11,000. now experian says auto loan balances are at an all time high in the united states coming in at $839 billion. that jump in auto loan balances in the second quarter, that's an increase of 11.7%. focusing again on the subprime and the deep subprime borrowers out there. those people that have the credit scores experiences, they make up 19.6% of all auto loans written. deep subprime loans, however, jumped 12.7% in the second quarter. a lot of people will sit there and say, well, lock, this is what's fueling auto sales right now. it's the auto dealers and makers. they're targeting the dope subprime borrowers. those that can barely make the payment. that's a part of it. there is a deeper issue. it's a question of what happens with the deep subprime loans, they are written off and packaged and securitized. >> that itself concern on wall street in terms of what happened with these bad loans and whether or not somebody needs to nip that in the bud. interesting numbers from experian in terms of american auto buyers clearly starting the struggal bit when it comes to making monthly payments. >> okay. thank you for that, phil. we will come back and continue talking about the economy with paul ryan. palm, you said you are unhappy with where the country lies right now. >> yeah. >> arguably, we're better on unemployment than we were before and arguably, when you look at the stockmarket, i don't know what you think that's an indication of and whether we should think anything of that. it's not so bad. >> the fed is pumping the prime with qe forever. >> pumping the prime. >> they might be able to do that with the prime rate. >> that's a different technique. >> so you've got loose money from the fed. talk about nick equality and trickle down economics, that's obama-nomics. this is not going to mane street. you have a hyperregulatory all over the place, whether it's fisk regulation from dodd-frank, health care, more the point, this is the worst recovery in the post-war period. you got labor force participation rates the lowest we seen in decades, the highest poverty rate in a generation. usually, we should are pulled out of it by now with far, far more jobs being created, more take-home pay. >> you got to decide, is the american dream dead like you usually say? >> i always arc you to you, there are two american dreams, one is very challenged and that's the one he's talking about and the mark zuckerberg shoot the moon. >> depending on the conversation, things are going swimmingly when most of the time you are very despondent about income inequality and the american dream. >> trying to be a provacateur this morning. >> so am i. >> loose money from the feds and a lot of tax uncertainty and government uncertainties, particularly in the middle class. it's not getting to them. bus of our borrowed fed policy -- >> we will talk about this when we come back. >> i want to talk about syria, would romney have armed the rebels early on? how about hillary with all the criticism? anyway, steve liesman is out there. he loves fishing. this is a good big. we'll be right back. . >> coming up. when we return, janet yellin will be speaking friday from jackson hole, perhaps dropping clues for the path for interest rates. her thoughts on labor markets. we will speak to congressman paul ryan about the state of jobs when we return. as we head to break, take a look at u.s. equities futures. we have red arrows, opening off about 20 points right now. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase. . >> welcome back to "squawk box" on this wednesday morning. take a look at retail stocks on the move. a big earnings day for the sector with target reporting quarterly profit that fell short of estimates. the company cutting its four-year outlook. that data breach is costly for the company. however, it is seeing signs of improvement in the economy as it tries to reverse customer traffic. in premarket trading that stock is down 1%. retailer staples fell sharply from a year ago. quarterly earnings did beat estimates by a penny. they are making moves to increase online sales as well that stock up three.75%. we are watching shares of american eagle. they did post a better-than-expected profit, even though same store sales fell 7% a. tough slog, american eagle shares pre-market up 10%. polythe world's central banker is meeting in jackson hole for an annual federal reserve gathering. steve liesman as always is there hey, kayla, good morning, here if jackson hole, ultimately, the market wants to know about is rates. that's what we asked in a special jackson hole cnbc survey. for the first time, we asked our panelists to project out how far will the rate hikes go, how long will it take to get there? you might be so surprised how dovish the market thinks the federal rev is going to be. let me show you what all the other rate hikes sense 1983 look like and how this estimate of wall street compares to. that what you see this will be a longer cycle and it will go up to 3.16 percent. they say it will start in july 2015. that's a month earlier than the prior survey you can see all the other rate hikes here, 3% go go up as normal. the 30 months it will take to get there is nine months longer than average you can see ending at .16 and .4 moving on to one first half by june ending 2015, 2%. finally getting up to that number 3%, 3.16. it's above the fed forecast. how dovish will yellin be here? not too much. people think relative to her position it will be neutral. 31% think yellin will be more dovish than she was before i think yellin defending her sense there is labor slack out there. allen krueger suggests maybe not as much labor streak as suggested. guys. >> okay. steve. . >> it's beautiful. >> i think it does. >> that's a green scene. isn't it? is that real? turn around, let me see that. is that real? >> yeah. i do have a shot, you know. >> the green screen. >> i don't know. tee times back there. >> that's a green screen. >> it's also nice to zoom out. >> look at. that that is amazing. >> if i come back here, you can see. >> all right. so you got some really good computer graphics you got going there we've seen. we had guys in a disruptor series that enable you. have you caught anything yet? i don't mean stds. >> i got a couple. joe, i understand yours is bicker than mine. >> oh, god. >> reporter: you got a big short, didn't you? >> not me, my caught. shovel note. >> shovel head. i got a 20-inch cut throat it's about as big as your short. >> is paul a fisherman? >> nice. >> let's get back. >> did you have a nice hook jaw on that cut throat? >> yes, i did. chairman of the budget committee also the new book the way forward, so many things to tell you. wow, do you believe that? you guys were two of the young guys, you and eric, did you talk to him? >> actually, two days ago was his last day. he left congress. >> he was here in new york in the hamptons, up here. >> so we talked a little about issue i guess. a lot of viewers writing in. he kind of was laughed off stage, romney? >> i think president obama had this little zinger, the 1980s called, they want their foreign policy back. guess what, reset has been a fundamental failure. you crane, i can go on and on and on. i would arc you the president's foreign policy and his defense budget plans are giving the impression that we're withdrawing from the world. we have weakened our position on the world stage and what happens when you do that is a vacuum occurs, there is china russia seas, russian, ukraine, it's a possible aislamic fate which is dangerous for a national security sopy entire argument, mitt's as well is we need a strong foreign policy and military to protect our security and prosperity. >> it doesn't mean going around. >> being smart. the devil is realistic about our threats, which i argue our administration has not been. >> so we need a strong foreign policy. i heard what you said, the devil is in the details. so what should we have done two years ago in syria? if romney had been elected? >> we would have partnered with iran. >> you would have? >> yes. >> what would you have done when crimea was -- >> i would not have sent a budget the week that he said i would take the army level down to a level since we seen if preworld war ii and the avenue since preworld war i. >> that is what they did the week vladmir putin invited russia. i would not, the czech republican, poland. i can go on and on. >> the country as the president i mean it was like 70% of the country wanted him to end the war in iraq. it happens. is the country allowed to say, why did we do it? >> are they determining our foreign policy? the president, his own policy was they wanted to have a forces agreement. the president you know was supposed to negotiate that. they didn't, i can go into why they didn't get it. the point is they didn't get one. >> now you are in this jam. what do you do? >> now we are in this jam, we have a status enforcement with iraq because we put 3,000 advisers in the country. basically now you do air striengs. you need to talk to your military planners, what is it we need to do in syria and iraq to deny this terrorist group? it's far more organized than your garden variety al qaeda from getting, look at the foreign fighters we're talking about coming in, this is something we saw coming. this is something our intelligence community was warning us about. this is something i do believe the administration owes some responsibility for not having seen this coming and preparing for it. look, the iraqis couldn't even get food, water, ammunition up to mosul because they didn't have the ability to pursue logistics, if we had people there, we could have helped with that, i can go on and on and on. the point is, instead of looking back, looking forward, should we be hacking our military down to a small size in a modern area? . should we be taking missile defense off the table? >>. i think there are a lot of tlngs we should do that our administration is not doing. >> let me ask you about a domestic issue. corporate taxes. taxes relate to paying for all of this. >> sure. >> to some degree. when you think about the issue of corporate taxes, we constantly talk about corporate tax reform. you've talked about it. the president has talked about i. we are now suffering through this whole inversion craze. i'd love to get your thoughts on what you think of that. how do we actually get something fixed? is there any chance we do over the next two years before -- >> i would like to think so. it won't be for my or our lack of trying. the answer to the inversion craze is fundamental corporate tax reform, itself, which is lower our tax rates, get off the crazy world wide taxsome that is basically shooting ourselves in the foot. here's the issue and the problem and the concern i have. >> why can't we fix the larger issue? >> go ahead. let me just finish. the problem is, the president will tell us that he's for corporate tax reform. he says a 28% rate. we sa a 25% rate. then we have action base, territorial vs. world wide t. upon is, c corps, two out of ten businesses in earthquake many, eight of of ten businesses are pass throughs, subchapter s, partnerships, llcs, their effect is 14.6 that's a huge problem. >> inversions will only cost the governments in the tens of billions of dollars t. house just bassed a bonus appreciation, something that can cost nearly $300 billion in the next ten years. >> i can go into the score ogen that, the point is, should we be focused on economic growth in the answer is yes. in the global economy we are in, when we tax our employers at much higher tax rates than our foreign competitors are taxing theirs, it's slowing down our economys. it helps create jobs and growth, we will have more revenues. it's not a fantasy, it's pretty well documented. >> the effectsive tax rate is ten, 12%. >> they're getting hosed. i'm not disagreeing with you on. that on the big companies. >> sore ffr general electric out there, a good example there, there are plenty of big, small, medium businesses littering the hollywood line rates. >> the year that you are using is what i -- >> 2010 is the last fliem the gao hit. >> no kidding. you will leave out all the writeoffs from the financial crisis that lowered it? >> you will get a score. >> exactly. >> 12 months. i will bet you money on this set that it will go up by 3, 4, 5% maximum. >> andrew laz a point. >> thank you, sir. >> there are a lot of loopholes in the close that needs to close. let's lower rates across the board. >> i'm with you. i hope you can get will. >> the effective rate in other countries is not the nominal rate either. they start at 35. >> effective rate in other countries is much closer. >> because they don't move all the their facilities off shore. >> others have pass throughs like we do. >> others tax the basss all the same. >> we will continue this conversation with congressman paul o'ryan in a bit. up next the ice bucket calgary can be a game changer when it comes to philanthropy among the rich and jim cramer who finished his ice bucket challenge with this morning's stock stories, including target results. we'll be right back. back of the bust the kid e might have a song that he has in his head welcome back to the popularity of the ice bucket challenge for a.l.s. has changed the gym for charities looking for funding. robert frank joins us with more. how can you replicate the craze? >> it's a slip on the banana peel challenge. this thing has just become the biggest, by far the biggest charity sensation if years. now it's raised over $22 million. that's over the past three weeks alone, that compares with the 1.9 million they raised last year. this attracted 450,000 donors, they tell me this is a quote break through that can change the $300 billion a year business of philanthropy. it ushers in social media giving, people using face boong and twitter to attract mass donors. it replaces charities and walkathons and shows non-profits can support and benefit from the company without controlling every detail. on the flipside this has sparked something of a buck backlash in the charity world, non-profits tell me the bucket stunt has actually overshadowed the disease. the more serious major here this money could be a one shot media verse not repeated and it's better they say to have big do nors, wealthy donors committed to giving over a long term. they put to charity water.org which has been a better model they say of using social media videos and celebrities to tell a story. i have a question for congressman ryan, during the campaign romney said they were going to limit deductions in exchange for a lower tax rate t. charity world was in an uproar, do you support that still? deduction, including charity and should the wealthy be able to deduct their charity at a higher rate? >> it depends on the tax bracket. i believe as a conservator of civil society has been one of the most important aspects of our society. if you take a look at the camp draft of tax reform t. one tax expenditure left open endedly was this sector. i was a part of that deliberative process. i do believe. left alone, we can reform it. all the people going into april 15 accounts. there are a lot of things you can do to pour more money into the charitable sector. the one thing i make this for on charities is that this ought to be a tax expenditure that should be preserved because civil societies is one of the most important components of getting people involved in our communities and philanthropies, that's pretty much as a supply side or a low tax rate guy, one of the basic few exceptions i make. >> have you done the ice bucket challenge? >> i have. >> there you go. >> i send it on to patty murray, kevin mccarthy. at a.l.s. >> have they all? >> i don't know the answer, susan isman her dad tragically lost his life to a.l.s. recently. i haven't checked in with patty yet. >> we will keep the pressure on them. >> robert. thanks. coming up, investors will be focusing on target other than e earnings. jim cramer will share his thoughts when we return. the show is over. back in a moment. . . welcome back to "squawk box," futures at this hour still in the red. the dow would open down 26, the s&p down 4, nasdaq down 7 if they were to open right now, so we're certainly seeing red across the board, no doubt, earnings from lowe's and target can't be helping the overall picture today. >> let's get mr. cramer's vies on lowe's and target. cramer joining us now. mr. cramer, target, did you think it would be this bad? >> well, look, you got to do through the first of the least. july, they said plus 1%. a better back to school season. a new guy coming in, and the candidate is not a disaster. value trap? perhaps. i just think and it's a hope springs eternal situation. there's other retailers shooting the lights out. why be involve the with target? >> you wouldn't touch it? >> no. lowe's, frank blake delivered app amazing compare, it's not bad for lowe's. they just had the unfortunate situation where they go against the best, maybe the best retailer in america right now. >> if you have a dollar, invest in lowe's, home depot, or both? >> you can't buy a stock up $4.65. that's not prudent. that's where you buy home depot. that's too big a run. let it pull in. in the end, if fed comes out, and ukraine, no consensus for russia, why pay for home depot? the answer is you were inpatient or missed it, and you need to circle back to others. don't chase depot or go into lowe's. >> because it's mad dash this morning, give us views on apple. the stock is now at a tie all over again. do you buy it again? >> it's an inexpensive stock that's a transitional quarter waiting for the iphone 6 and wait for the wearable. it's competition, samsung, fell to the wayside. there's the big ibm deal next year. this is a stock with a low s&p up 500 multiple. >> sell the rumor, buy the news. say come september when the product comes out, the stock never seems to perform as well as all the speculation ahead of it. is that right this time, or is that wrong this time? >> you get a chance to buy, but i look at the tech, we have hp tonight, and i say, well, which do you want to own? i think apple is a very inexpensive stock, and i would buy it on any weakness. i'd buy it right here. it's just good. it's like google, another one, just good. >> okay. leaving the conversation there. i'm excited about the next apple products. see you in a bit. >> me too, thank you. >> all morning, we p congressman paul ryan at the table. when we come back, talking immigration and possibility of repealing obamacare. that after this short break when "squawk box" comes back. and if necessary, it will even brake all by itself. it is a luxury suv engineered to get you there and back safely. for tomorrow is another fight. the 2015 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. we're changing the way we do business, with startup ny. we've created tax free zones throughout the state. and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov it's monday. 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. centurylink your link to what's next. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. final here with congressman ryan. here's how i wanted to phrase the immigration question. nobody knows what happened to leader cantor. some say he spent too much time away from his base and was in, you know, the hamptons or d.c. too much, but there was the idea that maybe he was out of the mainstream political thinking with the republican party on immigration. you have been fairly, you know, if you're hard core about immigration, you may have gone too far in being conciliatory. if you move further right on immigration since then? was there a message sent? >> i am who i am, and you know what i stand for. i've been explicit and clear how i think immigration reform ought to occur, and i think we should have immigration reform. it goes without saying. i really don't believe that eric's loss was due to this. i'm pretty convinced of that. >> you listen to the conservatives on the radio shows on the right? do you hear them immediately say all it is? >> sure, sure. there are a multitude of factors, but one is what you said, spent most of the time helping other members of congress traveling around the country away from home, trying to help our colleagues, and i think that also was part of it. >> instead of what you think, to win in 2014 and 2016, what should the gop stance be on immigration? >> i specifically say it in the book, it's not a tease, but i go into detail about what our position on immigration ought to be, how to solve this problem, and how we ought to be able to have a party that is inclusive and brings people in to our big ten party to win the electoral college and win elections. we have to discuss this issue. we don't have the time. >> again, satisfying the republican base, you know, cuts out of the his panic votes. >> it's not a mutually exclusive thing. look, we have -- immigration's is good thing for america. it is necessary for our economy. it is what our country's built on. we want to have it legal, that it's working well, but we have the rule of law, and that we, in this day in age of trafficking, terrorism, and human trafficking, we control the borders and know who is coming and going. 10 thousand a people a day for ten years, we need immigration to keep the economy growing and labor force supplied. that's important. >> okay. >>ed g ee egood news, we have w people coming, we need a system that works. >> it was not about repealing obamacare, it's rather that statement is still something that the republicans should run on in 2014. >> we should repeal obamacare? >> that's still something? >> you bet. it's a terrible law that will implode under its own weight. it puts providers out of bids. i don't think americans sit contently with the notion of price controls in the federal government. i'll have more to say in september. >> you need gop control in the senate, you think that happens? >> we have a good chamgs of getting the majority, but with this man obama in office, we will not repeal it while he's there. >> you will, again, say, you don't want to throw grim off the cliff. >> yes. we have to say what if for, and that's why i'm doing this. >> okay. thank you for the time. great two hours. join us tomorrow, and "squawk on the street" starts right now. >> good morning, and welcome to "squawk on the street," i'm david faber with jim cramer, live from the new york stock exchange, and carl has the day off. let's get to the road map, and it starts with, well, markets coming off another rally yesterday. futures, though, off this mornin morning. the s&p within half a percent of the all-time high, the fed minutes this afternoon and jaxson hole begins tomorrow. another bump for retailers. target, lowe's,

Transcripts For CNBC Squawk Box 20140828

attacks on u.s. banks have been struck in a series of coordinated attack these mop details at the moment, unclear. but the attackers are believed to have stolen large quantities of data, including information on checking and savings accounts. they're looking into the possibility that russian hackers are behind those attacks. there were other reports that suggested they had gotten employee information, joe. one of the things i wonder more than anything else about this, beyond my own security, i'm a customer, by the way, of chats. i don't know what banks you frequent, but these are reports coming from sources that are close to this investigation, whether they be government sources or bank sources. the banks themselves have not publicly disclosed this. and the question i always wonder is we talked about this on the air before. when if you are a company are you supposed to disclose that there has been a hacking attack? clearly this has happened at least over the past several weeks and we heard nothing from the banks. >> that distracted me when i was trying to read the bank story this morning. >> the bank story is on the right, there's the lead story. >> i guess that's life in gaza on the border there. yeah, so it's worth talking about, for sure, because of -- >> well, you have the russian issue. >> what do they do it for? what's finally happening? will you ever check your account and go, wow, i have no money? will that ever -- >> that's what i worry about. >> you don't worry about that? >> no, not really. the more i read about it, i guess i should. but i figure someone would owe me, wouldn't they? i can talk to -- i wasn't going to say who i was, but i'm a brian moynihan and i see your heat. >> i know of him. didn't you get a christmas card and all that? >> i did not get that. >> well, i'll tell you what, we'll talk about it more, but it's a significant breach. where is the beach? ain't nothing happening. >> all of these attacks, in the medium term, there's no impact. >> the user name and password -- >> you know, my worry is that each time, somehow -- i don't know if you're the same way. i have one or two or three passwords at the most. so if you figure out one or two or them, you can kind of own me pretty quickly. and so to the extent that they're able to get pieces like that, and it's unclear from these media reports about what they have. >> i have dozens. in fact, that little thing we use for remote access that changes every minute, my password -- i've got that hooked up to that. so i have to look at that to get into my -- so don't even attempt to try to do anything to my account. >> thoses of passwords. >> joekernen1 is not your password. >> no. >> do you think they could find out my birthday? >> yes, they could. >> so i should change that at this point, right? i didn't think anyone could ever -- no? microsoft ceo nadella is reportedly planning a visit to china next month. the chinese government recently opened an anti-trust investigation into microsoft focusing on the -- of microsoft's webb browser and media player. they don't like fumbling. microsoft is widely pirated in china. former ceo steve ballmer said microsoft got more revenue in the netherlands than china because of the theft. in other tech news, ibm is launching a system that could quickly identify patterns in data that can -- >> i'm sorry, dave, i'm afraid i can't do that. >> lead to breakthroughs in science and medical research. the service would be available, naturally, through the cloud. private compieand trial outcomes published in different journals all at once. you can sort of colate that information and help speed up drug phase. andy is verery resistant to the idea of the singulairty. but all i can tell you is that when machines start being able to teach machines and start being able to design -- they already are computer aided design, computer aided manufacturing has been going on for years. but when the total sum knowledge of machine knowledge is something where you need sciescientific notation to desc how much more than humans, all human knowledge that they know, things like this would become more and more common. the other thing that's here, and i've seen recent articles that machines might decide, a, that we're not very good to work with, that we get in the way at times and we slow down progress. they might decide that they like it better. they might like us, they might think that we're ben negative lent, but they're going to be smarter than us and look at us and talk amongst themselves saying these humans are -- you need to feed them. you need to take them out to go to the bathroom. it's not a hundred years off. you can -- do you understand math? if you look at -- you can draw a straight line through all that's things and you can see each thing happening. and it's -- the amount of time between these huge -- why would it take longer with the speed you're seeing? you can do it on this, look at the giga byte on a daily basis, just plot it out. you'll see by 2035, we're going to be vastly different. yesterday we talked about all the children, all of our children walking around in a line, looking at their smartphone. there was nothing like that 25 years ago, nothing. >> let me tell you a little bit about -- >> how long did you used to stare at your pager? >> i never had a pager. >> no one did. you couldn't stare at it now. you probably run into people when you walk in new york city, don't you? >> totally. forget about texting and driving, texting and walking. what's related, though, to some degree, apple once again failing in its attempt to get a samsung smartphone ban opinion earlier this year, apple won a $120 million jury verdict against its rival in three patents. a u.s. district judge yesterday rejected apple's request to stop samsung from selling infringing features on its devices related to those. do you see the word? >> what? >> patents. >> i was trying to see if i -- if i put an apost fee in, what if it was like that? how would you say -- patents? >> that's better. >> it will be a tool. >> it's hooked on phonics right here on "squawk box." samsung unveiling a smart watch that can make phone calls without a mobile phone nearby. it's hoping illustrate can off set slower earnings. it's called the gears. it has a bigger 2 inch curve display, offers wi-fi, connectivity, pedestrian navigation. can you believe it? perfect navigation. and a build in gps. apple is expected to launch a similar watch. lg electronics, also. >> the last one that we had here with great fanfare, you needed your phone right there. >> next to you. >> right. to do that. this one, apparently people said, well, what good is that? then they said they've been working on getting just a watch to do it. >> i don't get it. >> is that the bottom -- oh, no, that's how big it is. >> it's a big, big thing. >> this is like the jerry seinfeld phone. he's walking up and -- >> he looks ridiculous. >> or gordon gecko walking along the beach. >> '80s style. >> why wait? it won't take long. we were just talking about coming in quicker. wait, don't buy that. stocks say off breather, but not much of one. one day after the s&p's historic finish, jim dunnigan of pic wealth management and john wilson. principal of rev ly letter.com and you, of course, probably remember him. he's famous, former director of equity strategy and chief technical strategist at morgan keegan. you've been coming on for 20 years probably, right, john? >> it's ban while. >> so i just sold your experience in all these matters. does this stock market look different than anything you've seen before? >> it does if you go back in history. if you go back and look at what happened, you had a massive pendulum swing back. you know, there wasn't an outlier in there. it happened twice in the 19th century and it happened twice in the 20th century, 1920 and 1974. we both know what happened subsequent to those lows. certainly in 1974, we went on to have a bull market. it didn't end until 2000. if you just kind of lay out those parameters, the high returns, we're close to 16. the low returns over that ten-year period whether those things happened were around 12 1/2. the markets have pretty well traced out over the last five years. little have maybe of where it should be. but that's easily cured by a correction of some sideways action. >> there's no reason not to be bullish. >> as simple as when you basically get a whole generation of investors so pet phied of ever going to the stock market again, it takes that long to get them back in. >> there's no question. we had two bear markets in the first decade of the century that were just hideous. and, you know, about the time somebody could take a deep breath, lucy pulled the football right out again and, you know, carly fell on his back. so it takes a while to get over that and it's kind of like the baby duck syndrome. it's new every morning, you wake up and you're affected by what happened to you most recently. >> yeah. >> and what happened most recently was, you know, gloom, doom and despair in the market in the first decade. >> jim, sometimes it gets frustrating to not just be able to talk about corporate earnings and gdp and then just immediately know what the stock markets do. but a lot of times, it's as simple as this. it's human nature and if you look at the attitude or the sentiment of people in the market right now, everybody that talks to me asks me, you know, when is this going down? this can't continue, it's too high. it just sort of is a reflection of the experience that they've had that june was just talking about. is it that simple that as long as people don't embrace the market, it's going higher? >> i think it is, joe. i think the scars from the turm moit moil we saw in the financial crisis run deep. behavior financial would say you look to those. so i think there is a certain amount of nervousness here. everybody is sort of watching the exit making sure they're not the last one out the door. so i think in this environment, equities can go higher. and the trend seems to be positive as you look at the economic backdrop supporting that. >> jim, what will the best early sign be of a total complacency by everyone that, wow, i finally believe in this? or will it be something that -- you know, some geopolitical event? what is it that -- i'd like -- everybody would like to get out, have one foot out the door. and the problem is, everyone does it at the same time and everybody gets -- you know, by the time it opens, you're getting out 30% lower. what would it be, do you think? >> well, i think certainly, you know, that there were only one headline away from anything around the geopolitical tensions that are out there that would cause some turmoil in the markets on the short-term. but we haven't seen the euphoria that typically marks the top of a bull market. so i think we have a ways to go. valuations are reasonable here. i think we can get a stretch out of p/e ratio necessary this environment on continuing improving corporate earnings. so i think at this point, i'd watch euphoria. i'd see that sort of -- that real extreme bullishness in the marketplace and a market that's much higher levels than we have where we see -- >> john, with your experience, is there one thing that -- in my experience, and i'm obviously not you, but it's always been easier to call bottoms than tying -- i never know when we're at a top. i've never been able to have a decent feel for that. is there one thing that works best, john? >> no. and you make a very good point. it is easier to call bottoms. indicators work much better at bottoms, i think, than are virtually useless at tops. but the fact is, most investors aren't well served trying to time corrections. if you look at how stocks have done historically, we clearly have an upward bias. you know, when we have a 100 or 200 point down day and i see a parade across your screen of, you know, sue sayers and strategists trying to make the big call, i just don't think it serves investors very well. and i wonder sometimes if there are any real long-term investors left. i certainly hope there are and i think this is a great time to be taking that approach. >> that's a good point. you can make a name for yourself. and don't pay that much attention until after the fact, so people that are bearish, i've seen guys try to call a crash or a pullback. i've seen them try to do it like ten times. and we forget that they did the first nine times. they finally get something close to a correct. >> the lead in, joe, on your website this morning is, you know, two experts call for 60% correction. >> i know. i saw. >> you need to put it back out. both of them have done that before. so, you know, change that to, you know, two experts call for, you know, onward and upward. >> oh, yeah, great, john. so the house is not burning we're going to lead with. no, no, we're a new service. we can't lead with a slow steady drift higher. >> you can't lead with stay the course? >> the judge picked up on that, too. they love stuff like that. >> 60%. i know. i saw it. >> gentlemen, thank you. it's all about psychology more than any of this other stuff. that's what you finally learned. the market tries to go higher. >> let's get to the next story. a little bit of international news, which could impact the market. russia has now reportly opened up a third front in ukraine and what western military officials are calling a stealth invasion. avena kojova joins us from moscow with more. good morning to you. >> good morning. so we have ukrainian president pet ra poroshenko has called a russian invasion of ukraine this morning. that's at the same time as kiev authorities are calling for europe to have an emergency u.n. meeting. at the same time, the osb are having an emergency meeting in switzerland this morning. and just to explain, we are talking about a new front that's opened up in eastern ukraine. previously, the fighting between pro russian rebels and ukrainian forces have been in the city of downtsk, a city of about a million people, and a city of mugansk. about 400,000 people were living there before the fighting started. now, the last couple of days reached a movement across from the russian border of what ukraine and journalists on the ground are saying are heavy russian weaponry. they're not the same kind of rebels that we've been seeing in donetsk. today, interestingly, one of the rebel leaders has said that they're up to 4000 russian volunteers fighting in east ukraine. at the same time, there is russian military presence. so we taught no conirmatifirmat yet, but it is a crisis. >> one more question for you. what is going on here? these russian courts apparently upholing -- there were three mcdonald's proposed in moscow and the courts are saying that's okay. what happened here? >> this is not the only incident. in fact, there are a number of mcdonald's across the country that have suddenly been checked for sanitary conditions and they're being suspended for a 90-day period. critics say that this has to do with the atmosphere against the west in general. russia has sanctions in russian eu, and this is part of a trend here. and the russian population, if you believe the polls, are not that worried. in fact, many favor russia's opportunities to harvest and people here think bad things will be all right. >> the other news in the morning here in the u.s. is the story and the alleged that there were russian bank hackers involved. what is the relationship at this point like between the russian government and the u.s. government when it comes to hacking and trying to stamp some of this out? >> unfortunately, these days, the relationships between russia and the u.s. is not as low since the cold war. so i am really not sure what kind of cooperation at the moment there may be. officials say in washington that cooperation are russia is almost at a stand still, including top international issues such as terrorism. so we'll have to wait and see what the cooperation could be like in this situation. back to you. >> thank you for that report. we appreciate it very much. coming up when we return, a record number of chinese trying to get out of the country. they're willing to pay top dollars as it gets to the united states. and the surfers are enjoying the waves in california and the speculators are coming out to see. it gets more dangerous heading into labor day weekend. we'll talk about it in just a moment. ♪ [ male announcer ] during the cadillac summer's best event, lease this 2014 ats for around $299 a month. hurry in -- this exceptional offer ends soon. ♪ hurry in -- this exceptional offer ends soon. you just have to win 70% of your points at net. and keep unforced errors under 10%. on the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. data can help show you how to win, no matter what business you're in. today there's a new way to work. and it's made with ibm. both coasts dealing with rough waves from both marie and cristobal. in california, big surf pounding catalina causing major damage to a boat yard. boats scattered. also last night, a structure slid down a hill. it partially entered the water. let's get the forecast for this and other things. it's a big labor day weekend coming up, too, alex. i know the other stuff is -- certainly the pictures are more interesting. if you can, will you just touch on what we're looking at for the east coast here. >> basically, the east coast, that rip current risk is going to be main pretty high just about from florida all the way into new england. so still want to be careful getting into the waters even as we head into the labor day weekend. same across southern california, through the weekend, conditions will be improving but we have to be careful getting out of the waters. meanwhile, we've got the threat for storms in the middle of the country. some of those could be strong to severe. a couple of areas we're watching from iowa into missouri, just north of kansas city, and another area here down through the central and southern plains that we'll watch for damaging winds and hail. that could away threat out there for us, as well. as we head into the weekend, quite a bit of moisture working northward. low pressure developing and hanging out and keeping that for storms across the midwest over the next few days. you're always seeing quite a bit of heavy rain in some of these areas. already over the past several days, some of the yaerts areas, 35 to 8 inches of rain from parts of illinois into indiana. over the next few, the heaviest rains will be farther west here across des moines. that's where we think we'll see the heaviest 3 to 5 inches of rain. that's coming in just over a couple of days. so very short order and that could lead to flooding problems. while we've got all this wet weather in the middle of the country, some nice weather to enjoy here in the northeast. 83 today. some 70s, as well, tomorrow should be looking at full sunshine as we get into our friday. and then on saturday, for you here across new england, look at that in boston, 78 degrees. new york city, also enjoying those upper 70s. so not too bad. guys, we'll send it back to you. >> hopefully the weekend pans out. >> is it too far to look out to sunday and monday, alex? you don't have a high degree of confidence? tell us about labor day. are you going to be able to cook outside? >> that mess in the middle of the country, that's going to be making its way east. >> no, no, no, we would prefer if that didn't happen, alex. >> you and me both. but yeah, it looks like it will be more unsettled sunday than monday. >> so if you just change your report to say it's not coming, that doesn't mean that it won't? so it's really not you? >> yeah. i have no control. >> all right. try it. i mean, it's -- you know, a lot of weather forecast. who knows, right? give us what we want to hear. >> i wish i could. >> all right. thank you. let's talk china for a bit. that would be nice. >> it better be nice here for this week, right? >> plame him if it's not. >> the open, are you going to go? >> i'm not going this weekend. but you're going to go. >> i'm going to try to go next weekend. that's another sorkin, right? >> what's that? >> being recognized, tennis, there's celebrities everywhere. alex baldwin, they're all sitting around there, right, watching tennis? >> i think the open is one of the coolest things in the world. >> that's what i mean. i know you. >> but not for that reason. i actually watch the tennis and the people. i'm up in the bleachers. >> oh, man. i look for you every time. a record of number of chinese are looking to get into the united states and they are willing to pay big money to make i happen. eunice yoon joins us now. she has that story live from beijing this morning. eunice. >> hey, andrew. they're doing it through an investor immigrant visa program called the eb5 program. basically, the way it works is if you're a foreign investor and you have about $500,000 or $1 million to put into some place, you can put it into a u.s. project and create or preserve ten american jobs. if you do that, you will have the right and the ability to get a green card or a permanent residency, possibly within one to two years. now, there are about 10,000 of these types of visas. and the interesting part is that already this week, the u.s. decided to stop taking applications from chinese because chinese people have already filled up 4/5 of the slots for this year. now, why is all this happening? well, one of the main trends that we are seeing here is that despite all the talk of growth here as well as economic opportunity for a lot of people, there's still people who have sizable wealth in the country who are starting to move that financial -- their financial assets overseas as well as themselves. now, one of the main reasons for this is that they want to have an insurance policy. there are a lot of people here who feel uncomfortable or at least not confident in the rule of law. and they're concerned about the preservation of their wealth. also another important reason is a healthier lifestyle. there are a lot of people tired of the polluted skies. another important reason people are talking about here is the fact that they like the u.s. education system. they're trying to get their own children into american colleges. and finally, the one reason that i thought was pretty interesting talking to people was that despite all of the talk about the u.s.'s perceived problems, such as a deadlocked government or a talk about how it's struggling with its competitiveness, there are a lot of people here who still believe that the u.s. is a good place to invest. so at the very least, a safe place to invest. in the u.s., of course, there's a lot of discussion and debate about this particular program. there are people who say that it's a good thing because it attracts a lot of foreign capitals to the country. but on the other hand, there's people who said yeah, it allows a lot of wealthy people to jump the line and they think that's not very fair. fair or not, there are a lot of chinese people who are eyeballing october 1st because october 1st is the day when the fiscal year resets and they will be able to start applying again for these visas. guys. >> thank you, yooun eunice. if you really understand what's going on in the united states and how these guys are trying to use this to get the visas, there's a larger story that's behind the scenes. anyway, eunice, thank you for that and we will see where that all goes. in the meantime, joe. >> coming up, get pumped up over gas taxes. and this has been an idea that from reasonable people, mike jackson, for example, should the states torts to get the revenue directly or should the cash flow keep coming to uncle sam? and what do we do with a gas tax? build roads with the money we raise? as we head to break, a look at yesterday's winners & losers. ♪ we needed 30 new hires for our call center. i'm spending too much time hiring and not enough time in my kitchen. 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[ 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; dovisit tripadvisor new york. with millions of reviews, tripadvisor makes any destination better. good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin. we have things to ourselves. >> we do. >> becky is off today. u.s. equity futures under pressure at this hour. down 735. it's been the first pullback early in the morning that we've seen in a couple of weeks since we had that week in late july where we had that 300 point sell-off on i believe the finding. it's been pretty good since then, back about 700 new highs, the s&p closing above 2000. today looks a little ragged. we can't really point a finger at anything specific. on august 28th, i don't think -- you know, unless, you know, someone is not cooperating geopolitically, and even those guys, putin knows -- >> i'm just wondering what happens when everybody gets back to work. >> it's always something. >> you know what? my performance is less than my peers, it need to find some of these stocks that are moving higher. we don't know whether people end up coming back and buying or is it saying, you know, maybe -- >> but i think it moves -- i don't want to say dramatically, but i think it moves one way or the other, more in a meaningful way. >> because normally it moves a lot of times because there is no liquidity. and then in the after, spreads are even greater. making headlines, business at nonbank mortgage lenders is doing really well. "the wall street journal" reports the specialized companies made a quarter of the loans in the first half. the mortgage business at many of the major banks has declined because of all these legal settlements and cash payments and tougher regulations. quicken loans is the largest lender outside of traditional banks. okay. we see an end to the federal government's control over taxes on gas? michigan's candidate is now proposing taking control of the gas tax away from uncle sam and griffith to individual states. but is that a good idea? joining us now to talk about it, john hofmeister, founder and ceo of citizens for affordable energy. john, where do you come down on this idea? >> well, i think the federal government has basically absc d absconded on the whole issue of tax on fuel for the last, what, nearly 20 years? it was 1994 the last time that the clinton/gore administration tried to raise fuel taxes. they wanted 6 cents, they got 33. since then, no one has touched it, republicans or democrats. >> are you suggesting that we raise taxes? >> no, no, not at all. no, that's the last time it was touched. i'm in favor of reducing fuel prices because we've got to get a whole -- we've got to get a grip on how the fuel price affects the larger economy and particularly middle and lower income families in america. i've been on that crusade, really, since i departed shell nearly five, six years ago. >> jan, where do you come out on this idea, though, of taking what would have been federal money and giving it to the states? >> i'm all in favor of that. the federal government, really, has given up the business of running highways. in 1956, when the -- when they start today whole process with the interstate highway, the highway trust fund, they were building for national security purposes an interstate highway system. since then, it's largely the states. let the states take it over. there's no reason for the federal government to be involved. it has multiple financing needs, whether it's issuing bonds, whether it's raising taxes, whether it's increasing user fees. let's keep it local because that's where people travel, they travel locally. >> the question then becomes does the rate stay the same, meaning right now we're talking about federal money and moving it to the states. once it gets into the state's hands, if you will, is that rate in each state change and then you are going to have people literally trying to arbitrage the different states, i'm in new york going across the bridge in new jersey, people doing that in terms of fuel prices itself, but adding on the tax issue, as well? >> well, i think you have tax differentials between states. so california, illinois, had very high state taxes on fuel. other states have much lower taxes. and so i think you've already got that differentiation. and i think in terms of leading the federal tax as it is or eliminating it. eliminating it might be a good idea and let the states pick it up in terms of what do they need to run their state highway systems. >> john, you're a person that if someone were to try to dispassenger you and say oh, he's a fossil fuels guy, you will probably take that as a compliment. but in general, you don't think we need to get off all fossil fuels immediately. assuming that this natural gal gas boom is sustainable and that there's not some -- i don't know. i don't know what could cause us to get off this great track that we're on right now that is making this perhaps the leading energy supplier in the world, you know, some horrible fracking accident, i don't know what it could be, but let's say it goes on as it's been happening. how can we convert the natural gas to -- so that that takes up more of what we use oil for? we can't do it for jets. should we do it for trucks? how do we take advantage of something you've probably watched for the last five years. you love what you're seeing, right? it's the greatest thing that's happened to the country. how do we make sure we don't squander this stunt? >> we're not going through a transformation, joe. we're going through a revolution in my opinion when it comes to the future of domestic energy production. it doesn't just influence fos l fossils, but it includes renewables, as well. let's come back to transportation fuels which touches everyone's pocketbook. we could get rid of 6 million barrels of oil by using natural gas. we could convert natural gas into five different fuels. gas to liquids, liquified natural gas, compressed natural gas, but most importantly for the consumer, make ethanol and methanol out of natural gas and eliminate 5 million to 6 million barrels of oil by producing 30 billion cubic feet more a day of natural gas, getting us to about 100 billion cubic feet better day. that would further increase energy penetration, domestic, energy pen fraigz in the u.s. with canada and mexico, we would be north american independent, and if you start using natural gas as a transportation fuel, say 20%, 25% of our fuels, you'll drop the gasoline price to somewhere between $2 and $3. it would be a boom to the economy, jobs, the middle class, those who worry about the fume price. all its takes is a couple of changes in federal regulations. it takes no taxpayer money. we have a movie coming out, it's called "pump" and it talks about competition for fuels between oil, natural gas, ethanol/methanol and how we can lower the fuel price while we clean up the environment because natural gas is so much cleaner than oil. it doesn't put the oil companies out of business. it doesn't attack fossil fuels. it really gives time for the electric solutions, batteries, hydrogen fuel cells to incident kramentally enter into the fuel process, as well, over the next 10, 20, 30, 40 years. >> so we don'tny to throw money -- the federal government doesn't need to throw money at this infrastructure if they just get out of the way, you think the private sector will build the infrastructure necessary to let this happen? >> absolutely. if you have a natural gas pipeline, let's say, coming into little rock, arkansas, and you have entrepreneurs in little rock, arkansas, bhok make methanol or ethanol from that natural gas with a few hundred million dollar investment which is all it's going to take, knoll billions, hundreds of millions, not billions, you have a new entrepreneur who is on the scene making fuel for the domestic region around little rock. and that could be duplicated all over the country where new entrepreneurs come into it. >> why isn't it happening? does the federal government have to -- does something need to be done? >> yes. two things. one, the federal government, the e.p.a. has to make methanol a legal fuel. it's currently not a legal fuel. secondly -- >> you need to do -- you need the e.p.a. to do anything with fossil fuels, they're not going to do it. nicks that. >> there's some of us talking to the e.p.a. regularly about this that haven't given up. you can't give up. we have to keep pounding on the rock. we'll keep doing it. as long as we draw a breath -- >> what's the second thing? we need more fossil fuels. get your ability to adjust your fueling system which will handle methanol or ethanol to much higher percentages if you change the software in the fuel system. >> i didn't know any of this. >> that's all it takes. >> what is it, john, a fifth of what it calls for wind or solar? >> yeah. >> a fifth as much for cpus. >> that's right. as well as a fifth of the gasoline price, too. >> i know you think you're -- you're still going to be riding in a car to cnbc. you're still going to need that, right? we have to do this. >> it can be the tester. >> okay. you see, john, this is what we're dealing with. thank you. >> you've got to charge it with something with -- this is true. >> airplanes. airplane fuel, they're never going to be wind operated or solar. what if there's clouds and you were on an airplane that sold operative? it has to get up there. coming up, they've been gusting ghosts for 30 years. now they're back, sort of. that's next. welcome back. today, august 28th is national ghost busters day. the holiday pegged with the new release of the film starring bill murray, dan aykroyd. ghost busters back on the big screen for a limited engagement starting tomorrow on a u.s. classic. sygorney weaver. there was a rip off. i forget what they called it. was that in your neighborhood? did you see what when they flipped it? >> i don't think i was -- >> you remember it, though? you saw it? >> of course i did. >> okay. when we return, coming up, why students are showing up for college football games. plus, a guinness world record for the longest dirt to dirt mountain bike back flip. cam zync hit speeds up to 45 miles per hour launched off a 15-foot high kicker soared 100 feet in the air and landing on a 25 foot so-called run out. that is a very cool image. back in a moment [ 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. college football kicking off another season this week. and a story in "the wall street journal" today notes that many student sections are likely to have empty seats now. average student attendance down more than 7% since 2009. among the reasons, soaring ticket prices, and fewer face-offs between old rivals, as everybody switches divisions. also, more televised games, and you know, sometimes i do, you know, sort of think it -- when you think about what it takes to go to an event. >> yep. >> you think about your big screen tv with hd. >> it's a great thing. >> and golf especially. you don't watch golf but to try to get hole to hole or -- >> you're never going to see it as well as you do on tv. >> no. >> okay. this, as far as reality shows, there are certain days where there's nothing on with my kids where we'll put on the network that just carries cops one after another. >> the best and first real reality show on television. >> cops. and unfortunately, i've always wondered if they really got some bad actors, you know, that are intent on on resisting the police. what about the camera crews? and it finally did happen. a sound supervisor for "cops" killed while covering a shoot-out. this was in omaha. he was inside a wendy's restaurant, as three police officers opened fire on an armed robbery suspect. it's really sad. he was wearing a vest, too, but it went -- that doesn't guarantee you can't get hurt. it went under the arm. a first time a crew member for "cops" had been killed in the 25-year history. and we send out our condolences. but, amazing that it's hasn't happened more than that. >> it is one of those -- i think it might have been the first reality tv show. i mean in terms of how we -- it's not the real housewives of jersey. >> and i'm trying to understand the appeal. it's not, most of the time it's nothing as serious as this. it's -- i don't know. just to see some of the -- you know -- >> the car chases. >> but it's the car chases at some of the places where they go where maybe, you've never, you know, down south or something in the rural areas, you know. you'd be like a fish out of water anyway. but you know just to see that. see what's going on. see that the -- >> let me tell you about another story. >> go ahead. >> you have a dog -- >> three dogs. >> you have multiple dogs. >> and they do get depressed. >> and you have two children and there is a new study that says when your kids go back to school, the dogs, it's not just the kids that get depressed it's the dogs that get depressed. >> i have no doubt that that is the case. >> and they haul and they cry. have you seen this? >> separation anxiety. i've seen all kinds of interesting phenomenon. and also, since we have three dogs, two kids, and two adults, it's kind of a pack. and it's a pack mentality. there's alpha males, there's people -- you can watch all the dynamics that go on. and the dogs i don't think know that we're not dogs. and they do get sad when people leave. they don't like being left alone. there's a pecking order. >> when you go on vacation do they get sad? >> they do. they do. and our little maltepoo crumbles in the car on the way to -- it's okay. trembles. do they know we're coming back? we always wonder whether they know we're coming back. >> have they watched enough disney movies? >> we're not going to talk about couples that smoke pot. >> and why they don't fight. >> and we get along. >> no we don't smoke pot. >> coming up -- oh my god! look. you need to see this. show 'em the curve. ♪ do you know what this means? the greater the curvature, the bigger the difference. [sci-fi tractor beam sound] ...sucked me right in... it's beautiful. gotta admit one thing... ...can't beat the view. ♪ introducing the world's first curved ultra high definition television from samsung. that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. hack attack. the fbi and secret service investigating reports of a massive cyber attack on jpmorgan and other banks that could have been orchestrated by russian gangsters. latest on how data may have been exposed straight ahead. one of the most iconic cars in history, celebrating a milestone. the ford mustang turning 50. ford's chief of north america set to tell us where in the world the pony is set to ride. plus, summer's last wild weekend. we're going to hop the squawk roller coaster of love with the ceo of amusement park operator cedar fair. buckle up, the second hour of "squawk box" begins right now. good morning and welcome to "squawk box" on cnbc, i'm joe kernen, along with andrew ross sorkin. we didn't get to finish our thought over there. maybe we just -- becky's off today, another interesting moment at the u.s. open, not an upset, but a tennis player who was follically challenged. and steve liesman interestingly has joined us on set today. danish tennis star caroline wozniacki, you know her from rory mcilroy, moving along in her match until her ponytail got tangled up in her racket. she lost that point but managed anyway to advance by winning 6-3, 6-4. she told reporters when she tried to swing it almost took her head off. you could like wrench your neck that way. she also said that this has happened to her before. >> got to do something different, maybe a bob. >> who is watching again last night? sharapova lost her first set but then she is -- i think she won that. lost the first, won the second. and i think she won the third 6-0 or something. she turns it on, she can turn it on. that can't happen. or can it. is that what happened the first time? >> i believe i could grow a ponytail if i wanted to. >> i've seen guys like that. >> doesn't najarian have a -- >> yeah, yeah, yeah. both of them do, don't they? >> yeah. >> the guy who founded ebay -- >> you know there's two of them. >> there's two of them. >> okay. i've never seen them both in the same -- >> i was hoping you didn't think that that was just -- >> the same guy every time. one of them is better than the other. i see the other and i think he's better looking than the other guy. it's a good problem to have, andrew. right? pretty nice to say >> i could grow a ponytail, too. we have important news this morning and i got more on this by the way talking to some sources during the 6:00 hour. the fbi now looking into reports of cyber attacks in major u.s. banks. officials would not name which banks were involved but reports say that jpmorgan chase was among the victims. according to the "new york times" jpmorgan and at least four other banks were the targets of coordinated attacks with large quantities of data stolen including checking and savings account information. now joe in the last hour i said to you is there a disclosure issue. these are reports coming from it looks like law enforcement for the most part. maybe some banks. but there has not been a public disclosure by any of the banks. and the reason that the banks felt that they did not have to disclose was exactly what you said. >> no fraud. >> which is no fraud yet. and therefore, they did not see a problem. now, what i don't know is in the example of like target or some of these other situations, had there been fraud on those accounts and is that why they disclosed? at what point are you supposed to disclose? i mean this is sort of an interesting both a shareholder issue, a customer issue, and i think we're going to see how these things play out more and more. >> at this point didn't things happen to certain target customers? or we still don't know that to this day. >> i'm not sure we know how far it went. what happened in that instance was a lot of banks started seeing, i think that the banks started seeing fraud on other people's accounts. and then -- >> so it was -- and someone had to make someone whole somehow. >> i assume it's the fraud issue. at some point you have to make a determination were these accounts compromised and to what extent were they compromised? not just was there a hacking attack. and i think in this instance, firms like jpmorgan and others are saying this happens to us, actually probably more often than we even know and the headlines even suggest base some of the times -- >> who are these russians andrew? just private citizens? >> are you suggesting that these -- >> i don't -- >> part of the -- >> certainly -- >> i mean i don't know. we have our russian expert right here. and look what's happening with mcdonald's. that's purely retribution. >> the health ministry as an instrument of the state. >> yes. >> is what has been out there for a long time. when i was there, they banned american chicken parts, and they're doing some of that now. >> i mean if you start attacking -- you're attacking me and you're attacking the united states. >> what's interesting, joe, is whether or not the russian people feel like they're being deprived of something new. >> well, i think that's obviously -- >> was a big deal. >> obviously. >> a very big deal. they lined up two blocks around the corner. >> are they not being deprived of mcdonald's fries? you need to ask the question whether they're being deprived of something -- >> you're being sarcastic. >> i'm not being sarcastic at all. >> but now they're calling them french fries not american fries. >> not american fries. >> freedom fries. every report out of ukraine seems to be moving the global markets lately. here's the newest head line this morning. ukrainian president poroshenko -- >> good. >> -- that's good. i was going to let andrew. says russian forces invaded ukraine. he's calling a meeting of ukraine security and defense council to decide the next steps to take. futures move lower on the report. the 2e7b-year, there's the futures, that's probably why, that's what knocked us for a loop three weeks ago on that friday. the ten-year are now 2:33. look at that. i'm just laughing that, you know, we're nowhere near 3, 3.5% >> 2:31 we had this morning a couple seconds ago. >> japan's 0.4%. >> and under what is the ten-year bund, it was 0.8 something? >> yeah. >> and spain going to drop under two. >> italy's same with the united states. r equal to the united states. >> something else i was going to mention. just with this situation hasn't the dynamics been -- there's a convoy supposedly carrying aid. you don't know what it is -- and then they do this. the other guys that they had plastered on every paper said we got lost. we were in a field. the way that this is happening is like putin is doing all this, isn't he? isn't he really like sort of stealth invading ukraine? >> he is. but my whole context in putin has been to think about putin not vladimir the great. but vladimir the loser. if you think about what he has lost, as president of russia. 80%, joe, of gdp of the former soviet bloc is now in nato. is now in nato. he lost seven countries in '02. and what did he do? people talk about him trying are reform the soviet union. >> you think he lost it in the first place? >> he lost it. and he's trying to -- retain the status quo. i had this a little bit more sympathetic opinion, which is -- >> of him? >> not of him. of what western policy should be. i'm not quite sure how to execute this. but in the '90s we were very careful about expanding nato for fear of undermining the russian leader who we supported at the time. >> in a reset phase -- >> right. but what we needed to do and what we did back then was help russia manage its loss. putin's losing. there is no idea that putin has that's selling overseas. the only way he can maintain his sphere of influence is by force. >> we've got to move on. >> we have to move on. >> steve pines for the days of the soviet union. when you were there. and you want to put the whole thing -- >> we have -- did i say anything pine for -- >> you want to put the whole thing back -- you lived there. you don't look russian. >> i did live there. >> you're not pining for russian -- >> i'm not pining. >> you don't want to put humpty-dumpty back together. >> i did like the georgian food. >> let me bring it back home. in terms of the economy here, there's a new poll that finds americans are still pessimistic about the economy, even more so than they were after the great recession. 71% of people surveyed by researchers at rutgers university say the recession put a permanent drag on the economy. so becky quick's university. also here to react to this new poll and get set for the latest read on the economy in next week's all-important jobs report, drew matous is here, the deputy chief u.s. economist for ubs. also mr. liesman cnbc's senior economics reporter. what do you make of this study? >> you know, look. every time you ask consumer their opinion of the u.s. economy i'm not saying you have to leave it in the hand of experts. but 71% of americans couldn't tell you what gdp was last year plus or minus five percentage points. >> you don't think this is relevant? >> i don't think it's relevant. we've seen this in the data, there's a bifurcation of the labor market. people out of work are finding it very difficult to find work. and people in the labor market are beginning to see the light at the end of the tunnel but haven't gotten there yet. and so, you -- >> but you're looking at it as the glass half full. that the consumer is just not -- has not come back and may not come back to the extent -- >> except for the fact they've been on a car buying spree the last few months. people say one thing and they do another. and one of the great examples is, if you look at consumer confidence and try to relate it in any way to spending, you never find -- you'd never find a relationship. one of the reasons is you spend money when you're happy or when you're sad. right? when do you go and splurge on somethi something. when you're sad to make yourself feel better. >> after 9/11 americans found themselves wandering in the parking lots of car dealers. it was an amazing -- drew is absolutely right. >> i don't buy things when i'm happy -- i mean when i'm sad. >> you don't buy things when you're happy either. >> right. i'm cheap that's my problem. that's a separate issue. >> i think the poll is meaningful. i think there is a permanent scar -- not permanent. a lasting scar from the recession. and i think it means, drew what do you think, a slightly higher savings. maybe it's a couple points in terms of what people will spend out off their total disposable income. >> if that's true -- >> i'm not sure that's the worst thing in the world. >> also bearing in mind the savings rate is on a structural decline because we have all these baby boomers retiring. negative savings -- it could also mean that the question is phrased very broadly. but it could be like do you think the economy is damaged in some way? or do you think there's changes afoot? and the answer is yes, you know. there aren't going to be as many people owning a home. right? >> but explain this -- >> here's the other thing. you can look at cars on one side but then look at just general retail. take luxury out of it. there's a disconnect. >> cold summer. >> now it's the weather between? >> very cold. >> too k08d of a winter to go shopping for winter clothing and too cold of a summer to buy summer clothing. global warming. >> well -- >> don't get me started please. if you're cold it's just weather. if it's hot, it's climate change. you've got to learn how to -- >> but here's the calling. we've gotten this question from a lot of clients. is good weather boosting the economy? it's like well no because look if you're 35 degrees, and you drop it 10 degrees for two months, right, then you have frozen lakes, frozen rivers, you can't do things. >> right. >> if you're at 80, and you go to 70 for two months, how's that really make a big difference to most of -- >> we're in for a really cold winter? didn't you tell me -- >> farmer's almanac, they have -- >> also have a nasty hurricane hitting new york in like end of september i think. >> don't even say that. >> that was the farmer's almanac last year. >> there are some people that think that a huge solar suber cycle that lasted 100 years ended 30 years of cooling temperatures. >> we're still in the middle of an ice age. the middle ice age. >> can i get back to the poll. >> we've got to run. >> we're not going to put the soviet union back together again, liesman. >> wrapping it up but the question becomes -- >> 90% of american -- >> americans believe that the growth rate of the economy is now -- is not going to get back to that ap and i think that affects optimism, may effect entrepreneurialism. i think the sense of optimism in the country i think is a significant factor. maybe -- >> it's affecting the fed and investors because the -- a lot of investors have bought into this idea that there is this new permanent lower level. what i think you know the so-called i forget what people call it -- >> secular -- >> stagnation. >> it makes no sense. like we have an expanding manufacturing sector. most productivity comes from manufacturing. even if you get decline in the population growth rate. the productivity boost from the higher manufacturing component to the u.s. economy should be enough to offset it. >> we're going to leave the conversation there. thank you, drew. >> thank you. >> appreciate it. >> we'll take it. >> no -- >> iconic -- >> putin's approval rating 90%. >> in russia. >> don't care what we think of it. an iconic car -- although our president cared what his approval rating was in europe. that was -- you know, i don't think putin cars. an iconic car the mustang turns 50, which is really 40. take ten years off every age now. ford is getting drs if 50 is the new 40, then 50 is the new 30 we're talking about the mustang. in the show room. when we return. [ woman ] the cadillac summer collection is here. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this all-new 2014 cts for around $459 a month or purchase with 0% apr. hurry in -- this exceptional offer ends soon. the mustang is turning 50 this year, and it's going global for the first time. will the original pony car continue to be an automotive icon. here with us first on cnbc is ford's executive vice president and president of the americas. joe, i owned one, unfortunately i got in the wrong time. it was one of those horrible mustangs -- there was only one time when they were horrible and that was after the late '70s because they weren't muscle cars. i had a four cylinder mustang which isn't a mustang. these are real mustangs, aren't they? >> mustangs are such a great part of our history. they're such an american iconic vehicle. over 3,000 tv and movie credits. and we're just so proud to be building the 50th anniversary version now here at the assembly plant and continuing on the legacy that mustang is for ford motor company. >> you had another really successful launch recently, as if the -- the grill reminded me, it's really a nice car when they come up on me, i see them and i know what it is. it's not a focus, what is it. it's the other one with the grill. >> fusion. >> yeah, we had the fusion. we do the fusion here as well as the mustang. the fusion here last year removed that production, incremental production from mexico. now we have the mustang alongside it and we're slowly ramping up with the new model. >> so can i get this as a six -- can i get a standard transmission still, joe? >> well we'll get you anything you want, joe. we get you a mustang or fusion. we'll get you a gt. a 50-year anniversary. we'll get you anything you want, because mustang is such a great car for us. >> what's the biggest engine i can get. things have changed. and -- hopefully you can still get a real mustang -- they come up, i hear them. so it sounds like there's still v-8s with -- can you get up to 400 cubic centimeters still? >> well, the new gt, the v-8 verse, the five liter, historic engine that we put in the mustang has over 400 horse power. 435 horse power. we can get you that. or now going global with mustang we have the 2.3 liter i-4 boost which has over 300 horsepower as well. a lot of different options for the different customers around the world. >> where are your biggest markets? where do you think people really want these? i know they like buicks in some places. like not here but apparently they like them over there. where are mustangs going to be big sellers? >> well of course our biggest market will the u.s. and canada. but we're very excited about taking it to europe and also asia. the data we've seen around the world is that when you look at ford, you do customer research, the top five name plates customers bring up about their memories and love of ford, mustang usually shows up even if we don't sell the vehicle in australia, brazil, other parts of the world. we're looking to china to be a big part of our business and europe, as well. >> really? so, so the you do see v-8s being sold in china and driving around with the like a muscle car. >> well, you know, the iconic story that is mustang and the freedom it represents in the west of america resonates everywhere. but we think actually the 2.3 liter i-4 gtdi ecoboost engine will be the engine of choist for most of the markets around the world. but the v-8 is loved here in america. >> what percentage of -- break down what ford is really selling now the product lineup? is it go trucks, and then go, you know, sedans, and then cars like the mustang? how does it break down? >> well, about 30% of our business here in north america, are f-series. so it's our number one selling vehicle. number one selling vehicle in the u.s. for over 32 years. that's clearly important to us. we have very strong lineup in suvs and crossovers. we have a very strong brand there. we've been growing our car business with the fusion, and also the fiesta and focus and of course the mustang which will be coming out. we refreshed that lineup. the focus later this year gets flesh so we're seeing the growth in our car business but the strength of our business continues to be in trucks and suvs. but we're working really hard to balance that portfolio. >> are you ready for -- what do you think the industry does this year in the u.s.? 17 or so, or 16 and change, and is that going to continue and are you a company now that could you be fine at 15 or 14 million again? >> well with the restructuring that we did years ago we have a cost base now that can be profitable, much lower volumes than we were historically able to do. we still see the market this year about 16.3, to 16.8 that includes the heavies. august is going to be another good month high 16s, it could even such 17 depending what happens over labor day weekend a lot of activity going on in the marketplace right now. the market continues to be strong, and there's very strong demand for suvs right now. it's actually being pulled by consumers. >> let's explore the -- i have a navigator. but the explorer is the main one still, or is it the -- there's another one the edge is a little bit smaller right? is that an suv or that's on a car frame? >> the edge is an suv. some people call them crossovers because they're on car platforms. the edge will get a new one next year. and the navigator we're freshening this fall. i actually am driving one of the new ones right now. great new product with an ecoboost engine. a lot of new products. we have the expedition of navigator being freshened right now. the new mustang. the f-150 later this year fresh and focus and then we're in a big cycle right now of new products. >> send andrew some info, joe. he doesn't have -- he doesn't even have a car. he might be in the market some day. and why not a ford is what i figure. but we're going to -- >> i'd like a big ford expedition. >> why don't you get one? the navigator is like an expedition. i got -- anyway, joe. thank you. we appreciate it. good luck. and you're right about the mustang. it is -- it's like well there's a camaro, too, but synonymous with america. i think, to some extent. all right. see you later. >> it is. we love it. >> the back seats -- i think je jeeves would prefer to drive -- >> coming up we are coming up on the end of the holiday road, so how is the summer for amusement park operator cedar fair? the ceo is going to get on the "squawk" coaster in the next half hour. cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. having a perfectly nice day, when out of nowhere a pick-up truck slams into your brand new car. one second it wasn't there and the next second... boom! you've had your first accident. now you have to make your first claim. so you talk to your insurance company and... boom! you're blindsided for a second time. they won't give you enough money to replace your brand new car. don't those people know you're already shaken up? liberty mutual's new car replacement will pay for the entire value of your car plus depreciation. call and for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch to liberty mutual insurance and you could save up to $423 dollars. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance. when i'm working, things can get so hectic. so sometimes i need to find an easy way to express what's most portant to me. like, with my crew, i use shorthand to talk to them and tell them what i need... and when i need to talk directly to my fans... but the most meaningful shorthand of all is the one i use when i'm about to drive: "#x." it's an easy way to tell everyone that i'm about to drive. and i do it every time before i get behind the wheel. use #x to pause the conversation before you drive. because no text is worth a life welcome back to "squawk box." actress katherine hagel and dwayne veed have come to an agreement to end a lawsuit. she accused the pharmacy of posting a paparazzi photo of her leaving one of their stores. i don't know what the settlement was like. they agreed to end it. get free gum or something from duane reade for life? >> happy. >> you would be happy if someone took a picture of you? >> i would, you know. see that big of a star, really? she on any nbc things? she's great. love her. she had every right to do this. >> next we're going to unveil three stocks that have had quite a run. i sat next to her and her husband is a musician. and discount retailer dollar general. there's no reason we can't manufacture in the united states. here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. we knew we needed to grow internationally, we also knew that it was much more complicated to deal with. i can't imagine having executed what we've executed without having citi side by side with us. their global expertise was critical to our international expansion into asia, into europe and into canada. so today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that american made bag within a few days in singapore. citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. if it can be done here in san francisco, it can be done anywhere in america. so i get invited to quite a few family gatherings. heck, i saved judith here a fortune with discounts like safe driver, multi-car, paperless. you make a mighty fine missus, m'lady. i'm not saying mark's thrifty. let's just say, i saved him $519, and it certainly didn't go toward that ring. am i right? [ laughs ] [ dance music playing ] so visit progressive.com today. i call this one "the robox." welcome back to "squawk box" this morning. making headlines the first human trials of a new ebola vaccine are soon going to be under way. nbc news reporting that the government and drugmaker glaxosmithkline will announce the trials later today. this particular vaccine is one of several that are being developed. the world health organization says the number of ebola cases could eventually reach 20,000. that's about six times the number currently identified. also, had a busy morning ahead for economic reports. the labor department out with its weekly jobless report on initial jobless claims. that's coming at 8:30 a.m. eastern time. the same time we're going to be getting the latest estimate of second quarter economic growth. that's expected to come in at 3.9% annual rate. and the first talking robot in space has phoned home, joe. we want to return to earth saying, he's tired of spending more than a year at the international space station. 13 inch humanoid was sent to space last august to test communication with a japanese astronaut. >> pretty cute, isn't he? >> cute little guy. >> he is cute. like wall-e or something. >> they just talk to him for a whole year? >> i don't know what -- that's -- >> that's -- >> and you say that i'm not going to download my brain in 30 years and you're seeing this. and you still don't think that's possible. >> and they're hanging out with him. >> yeah. >> all year. >> wonder what it means when his eyes flash like that. let's get to stocks. stocks setting record highs. some investors have been making big money buying on the most recent dips. we screen stocks in the muscle 1000 since the index recently hit a low on august 7th, and dominic aclu joins us now. he's been tracking these buy the dip stocks, and tough to do, dominic. but i guess it pays off if you can do it. >> it can. and a lot of times people use different kinds of triggers, if you will. so if you're a stock junkie you remember that day back on august 7th. i'm going to take you through this chart. this is the dow's chart, all right? but it's an indicator for overall sentiment in the marketplace. and that green line is the 200 day moving average. the long-term trend line for the overall market. you can see the orange circle with the last time that we hit the 200 day moving average. that was a buy signal for a lot of traders out there. so if you had a shopping list, those stocks that you wanted to buy, but you were waiting for some catalyst, if you will, to go and do it, this was the one here. let's take you through some of the stocks that were interesting in terms of stories overall. first of all, if you put these stocks on your shopping list and bought them on that dip in the overall indices back on august 7th, you've been doing pretty well first of all there's salix pharmaceuticals. they specialize in treatments for digestive problems like ulcerative colitis. a week and a half ago salix was reportedly the target of takeover talks in allergan in a possible move to fend off a takeover of its salve by valeant. since that time point august 7th, salix is up 19%. how about a retailer given up for dead by many retailers, jcpenney turning a few heads which could be a positive momentum for its turnaround plan. this stock gained 20% since august 7th. kudos if that was on your shopping list. then there's the best performing stock in the russell 1000 index since august 742. i'm going to tell you this is going to be interesting because i want you to kind of guess who this is. it's a mystery right now. but it's up 34% just in the past three weeks. it's, andrew, joe, a consumer staple company based in corona, california. it specializes in nonalcoholic beverages. and it used to be known as hanson's natural corporation. remember hanson's natural soda? >> i do. >> so it changed its name in 2012 to be this company. one of the best performing stocks -- >> must be because hanson i remember watching that it seems like last week. hanson's was a big winner in a lot of -- who was it that was short? herb greenberg and it kept going higher and hider. used to needle about it. >> it's still going. but it's under a different name thank you it makes energy drinks. >> what is the name? >> monster beverage. >> no way. >> taet hanson's? >> that's hanson's natural. >> so all of these -- >> so salix and monster had two -- had news events. >> correct. because monster got the big investment from coca-cola. >> right. >> and the salix, allergan. >> right. >> jcpenney slightly different. what do you -- what do you ascribe that to? >> those two the first two that you said salix and allergan had news items. so if you look at the charts for these guys you see this kind of like maybe steady uptrend and all of a sudden a shot higher because coca-cola made an investment or allergan wants to make a takeover of the stock. but with jcpenney this has been one that's been given up for dead. it's been dead money for awhile. but all of a sudden in the last couple of months, you've seen this thing slightly trend higher. look at the chart here. and then all of a sudden, you can say, hey, maybe this is the beginning of a bottoming process for some investors. it's taken a long time to develop but you don't get that same one catalyst event -- >> for ten years with jcpenney you were catching a falling knife every time you bought it. finally it gets to five -- >> was there a news event? >> yeah, there's not -- >> sold out. just was sold out. you can't call it a dead cat bounce, people get mad. dead roach bounce they got mad at me. people like roaches. dead rock -- >> no. what is the lesson? >> so the lesson here is, since 2009, we know that every single dip has been bought. specifically since 2009 the average depth, if you will, of one of these pullbacks is around 6%. so every time the market dips by 4%, 5%, 6%, people have bought it and they're done pretty well. but if you can pick the right ones from a fundamental standpoint have a basis then you're doing all right. >> thank you, dom. >> sure. >> appreciate it. >> dollar general out with second quarter results, matching estimates with its earnings. falling short on both revenue and same-store sales. it also said it remained committed to its bid to buy rival family dollar. even though family dollar rejected that bid. joining us now is the bb&t managing director and senior research analyst. talk to me about these earnings but perhaps more importantly talk to me about them in the context of this transaction and what happens next. >> sure. so i would characterize these earnings as okay, decent, certainly not great. as you said, top line was a little weaker than we expected. comp store sales were up a little over 2%. we were expecting 3%. and in addition to that the operating margin declined for the sixth consecutive quarter year over year. now, how this relates to family dollar, quite simple. the -- you know, dollar general was a very, very successful multiyear turnaround plan. but at this point that turnaround has petered out. operating margin improvements, productivity improvements are becoming more and more hard to come by. that's why i think that family dollar, buying family dollar is a must-have for dollar general. particularly to keep it out of the hands of dollar tree. we think that dollar general having to compete with family dollar, run by dollar tree's much, much more talented management team is a nightmare scenario for dollar general. i think that these results underscore that. >> okay. but how hard do these results make it for them to raise their bid which i imagine has to happen for some -- for a transaction to actually take place? >> it doesn't make it more difficult at all, quite frankly. they've got financing committed, you know, we've run the numbers. they can certainly bid significantly more, and still have the deal be accretive to earnings per share. >> when you say significantly, what's the number? >> you know -- >> play banker. >> sure. i mean i think that at the end of the day, if dollar general comes in with a bid with an eight handle so over $80 a share with stronger antitrust protections, i think that that that that's something that family dollar's going to have to respond to. the issue with family dollar wasn't the bid. the bid was $4 a share higher than dollar tree's bid. it was the fact that there was not a lot of protection for family dollar's shareholders from an antitrust perspective. >> but -- and that's the question, though. they made this argument about antitrust. how is the number, the price tag going to overcome what the company's already said which they think is the problem? >> well i think you have to do both quite frankly. i think that a higher bid would be more compelling but i think that that has to include stronger, like i said, antitrust protection for family dollar shareholders. >> okay. anthony, thank you for joining us this morning. >> thanks for having me. >> coming up, as summer winds down we're going to ride the roller coaster one more time with the ceo of cedar fair. this thoughts on the economy, the state of the consumer, and his interesting ice bucket challenge later. two very different stories coming from two market pros. cramer says the bull will run, abigail doolittle says a direction of 60% or more could happen. we're going to try to set the record straight. don't just visit new york. visit tripadvisor new york. with millions of reviews, tripadvisor makes any destination better. 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." welcome back to "squawk box" this morning. take a look at futures. see how the market is setting itself up for the morning ahead of this open. opening down at the moment. dow looks like it would open down about 48 points off. s&p 500 about 5.5 points and the nasdaq would open down about 8 points. let's tell you about some headlines this morning. there is a new study out, joe, naming the most american city and the report from personal website finance website wallethub says that nashville, tennessee, is the winner, and second place, joe, goes to your home of cincinnati. and what makes a city the most american in this study? apparently demographics that mirror the u.s. average as a whole. so, you can feel average, joe. >> yeah and you know what was -- next was indianapolis. in fact all the cities that won are places where you said are not cities, really. >> nope, those are wonderful cities. >> you learned your lesson. >> i love -- i love all of america. >> you learned your lesson. it's good to see that if you head your head against a wall enough times sooner or later you're not going -- is even denver a city now? >> yes, denver is a city -- >> what was interesting, they had the places that were the most not representative of the demos of the united states and boulder, where i went to school, was actually on that list. so i've been to both places. it is a final weekend of the summertime. and it's time now to take a ride at cedar fair one of the country's largest amusement park chains. this was pretty amazing. we're going to talk about these -- i didn't realize this. 69 degrees was the average temperature in ohio. 69 degrees. anyway, cool july temperatures affected attendance but the stock is up nearly 18% over the past 12 months. got a great symbol, fun. are investors still searching for a thrill, with us now is matt -- i was going to ask you to pronounce it. matt ouimet, president and ceo of cedar fair. matt, do you know if you're related to francis? >> you know, joe, you always ask me if you saw my golf swing you wouldn't ask me again. so, no, not related to francis. but it's a great story. >> like one of the great -- i would just say yes from now on. say, yes, i am related. two percent decrease in attendance. i didn't realize so only two days greater than 85 degrees in august in ohio. >> yeah. and only four since june. so, it's been a little bit unusual from a weather standpoint. but, fortunately we'll get hopefully have that weather continue at exactly that temperature for the fall season. >> yeah so bad for summer but good for fall. what can we take from amusement like down 2%? that's more based on weather? we can't really extrapolate that to the entire economy and weather consumers are not feeling as flush as they have in prior years? >> no. i don't think you can extend it to the consumer economy. we actually see that improving here in the midwest. and certainly improving at places like santa clara where we have a park near the silicon valley. you know, 2% in attendance, you know, we don't like to talk about weather. we're careful, though, it becomes an explanation and not an excuse. but as you pointed out, it's been a particularly cool summer here in northern ohio. and it's affected our water parks a little bit. but we expect it to be very strong attendance here in the fall and we've got our fingers crossed. >> the one time -- it reminds me of sharks. you got a better chance of getting hit by sputnik, i think, than sharks. but the minute something happens with a roller coaster, everybody always talks about whether roller coasters are safe and they do point out, i think about ed markey who never found a regulation that he didn't love but he said a baby stroller is subject to tougher federal regulations than a roller coaster. is there enough oversight and regulations or roller coasters that are traveling at such high speeds and flipping and going upside down? >> you know, certainly i will say there is. you know, we have the strongest economic incentive to make sure that our park's as safe as possible. the same thing is true for the industry. and if you chub the industry's record it's really good. the number one priority is to make sure our parks are safe. we have a good record of that. >> when you say there's enough regulation. my understand is federal regulation of roller coaster safety ended back in 1981. is there any? >> no, no, we have oversight in every state we operate in. so i think that is a gross overstatement. and we have very good working -- >> so it's a state basis? it's not on a federal basis? >> it's on a state basis. and quite honestly, it works effectively. and we're happy to cooperate with the state authorities. >> hmm. is there, matt, would you say, a sort of a race, no pun intended, to get even scarier and faster, and people trying to outdo each other? is that something to worry about? does there come a certain point where they shouldn't get any scarier or any more, you know, take any more risk? >> yeah, i don't think it's a risk issue, joe. i think it's an innovation issue. and certainly, the roller coasters we create like the one behind us is designed for the general public to ride. and quite honestly there's a point in time where the general public, it becomes too scary for the general public. so it's a balance but it's more about innovation than risks, certainly. and the number one new coaster next year will be in charlotte, north carolina, in our carawinds park. the vast majority of people that visit that park will ride that coaster. >> i know. i still have to. because someone has to go with the kids. and for me now it's not that i get scared it's for the next hour i think i'm going to hurl at any moment. i feel like an astronaut that's been in one of those g-force machines. you did an ice bucket challenge and i hear it's pretty good. and you've given some money to als, too, matt. we want to take a look at that. >> yeah. so you can take a look at that. and joe i understand you haven't accepted the challenge yet. so we're happy to repeat that event at our parks for you. >> oh, yeah. i actually accepted a challenge, and then the person i accepted it from is stuck in a foreign country, and it would be neat if we were all able to do this. i'm saving myself. although i appreciate it. >> i under -- >> did we see this yet? >> i understand it. >> here we go. >> dump the water and then they began the roller coaster ride. >> and then to dry off you do the roller coaster ride. that's awesome. but you wore a hat. >> well, i wore a hat because it's boston college and the als challenge has a relationship back to costen college. my son graduated from there. so it was a little gratuitous. it wasn't to protect me from the cold. >> see he got the boston connection. i think you are related -- it was the brookline country club where francis won. go with it now, matt, from now on. you are related. bc screaming eagle. great school. i need some connections there, too. all right, matt, thank you. i'm going to remember that i asked you about ouimet. but it's such a unique name and such a great story, andrew. you should look into that sometime that this guy actually won with a 10-year-old caddie and everything else. the u.s. open. matt, we'll see you later. thanks. >> okay. coming up, the head of the world's largest commercial real estate services company, the ceo of cbre is going to talk stock success, commercial leasing recovery and a lot more when "squawk box" returns in just a bit. take a look at some stocks to watch. earnings at abercrombie & fitch beat estimates. revenue shy so the stock is now down almost three points. retailer says it is making progress in its words evolving the fashion component of its offerings. home furnishing retailer williams-sonoma shares trading sharply lower. earnings and revenues match wall street estimates but current quarter guidance fell short. and guess falling short of consensus in the apparel retailer is lowering its full-year forecast. traffic drops and promotions continue to cut into profit margins. and work day posting better than expected results, the company seeing growth in demand for subscriptions to its human resources and financial management software. workday also raising its full-year revenue forecast. >> i was going to say i love workday. >> i don't think that i've actually shopped for something in like 20 years. and i did yesterday. >> what do you mean? >> i don't think i've actually bought clothes. >> what did you buy? >> i bought some jeans. tight fitting jeans. >> tight fitting jeans? what brand? >> i had some. >> skinny jeans? >> i had some already. but we moved out in a rental and they're all packed. so all i have are big, baggy obama grandpa jeans and i needed something better. >> so, what brand did you endorse? >> i mean i don't know why i set myself up for this but i actually went to bloomingdale's and looked around and i made some mistakes initially. >> did you listen to coldplay on the way in? >> i bought something called a seven. >> seven? >> yeah, polyester in them. >> seven -- >> oh -- >> stretch? >> oh, no. >> is that seven from mankind? >> i don't know it's called a seven. but they look pretty good. i was told i did a good job. >> and you got -- by your wife? >> by my wife. >> or by the sales person? the salesperson told you a great job. >> not the salesperson. but i was very worried bringing them home, and putting them on and modeling them and everything. >> so you modeled them. >> they look good. >> and they stretch? there's a little stretch in them? >> they do. do you -- >> i don't own any jeans that stretch. no, no stretch. >> you know, when we have socialized, your spouse thought i looked a lot better than you. >> she liked your shirt. >> my shirt. yes, she did. and said why can't you get one of those? so now it's going to be why can't you get jeans like that? >> little stretch jeans? >> yeah. >> okay. >> i sacrifice a lot for this show. >> i know you do. >> to sad mitt things like this. but i was thinking -- >> did you need the stretch band is that what the issue was? >> kind of. no, but i hant -- sometimes i do let out my breath. but i hadn't -- it's been 20 years since i bought a pair of jeans. bought anything. in a store. because we get our clothes here, you know -- >> at cnbc? but you don't get jeans. >> yes, sometimes you do. i have. >> oh, really? >> mary has gotten me jeans. >> coming up, on that note, who are the investors to believe? the fear mongering bears calling for a slide of 50%, or the bulls, who say nothing to see here? we're going to follow the money with the man at the helm of trim tabs investment research right after the break. we're going to talk more about joe's stretch j jeans, and then later golf's decline has been a boom for tennis. tennis coach and analyst brad gilbert is going to join us to talk about the sport's growing popularity. and what the greens can take away from the courts. "squawk box" returns right after this. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data. watson turns big data into new ideas. and not just for food. watson is working with doctors and bankers to help transform their industries. today there's a new way to work. and it's made with ibm. is caused by people looking for parking. in a city that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. it's the comeback versus the correction. can the bulls hold onto gains this fall season? or will the bears move in to feast? >> building success one investor at a time. the ceo of high end commercial real estate broker company cbre joins us to talk about their current investments. where they see the commercial market headed. >> courting golfers. the popularity of tennis is booming, while the greens grow weeds from ratings to tickets to dollars, what golf can learn from the success of tennis. as the final hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide i'm joe kernen along with andrew ross sorkin. becky is off today. check this out. this is a viral video that's picking up some steam. pun intended. put out by the bissell corporation for a new vacuum cleaner. he's cleaning the floor in a toronto subway station, freeze that video, you're not going to believe what this man does next, we'll roll the tape later in the show. and i haven't seen it, but i do know what a bissell is. >> i think another video that could -- tonight, your wife could just -- if you could do a little modeling of the stretchy -- >> i did model it, too. >> if you could do it with your iphone. >> it would be good if they have -- sometimes they have surveillance in the dressing room, too, actually trying -- >> i think you should tweet it out and we'll see. >> no, no, please don't. please don't. >> save everybody's eyesight. tell you about some serious headlines. dollar general says it remains acquitted to acquiring rival family dollar. they've rejected the $9 billion buyout offer saying it could run into antitrust issues. opting instead for a smaller bit from dollar tree. if dollar general comes back with a higher bid whether they can even accept it given they've already made the antitrust claim. dollar general reported nearly 8% rise in quarterly sales but that falls short of estimates the company citing a keltive environment and a cautious consumer. in global news this morning we're following the rhetoric out of ukraine. the president there saying today that the russian forces entered his country. he warns military conflict is worsening after russian-backed separatists got to a key town in the east. joe? >> all right. andrew, let's check on the markets, and what we're expecting this morning with some of the news from ukraine. once again the futures were under pressure and they are, now. they've been down 75. they've been down 45. now they're down 63. over in asia, take a quick look. a lot of times that gives us an indication of what we could expect. there are red arrows there, also in europe, probably with the ukraine situation, losses there anywhere from a little over a point to a little less than half a point. and as we sit here record levels we are hearing the smart minds on the street call for everything from smooth sailing ahead, to the apocalypse. >> there's not much to fear here. and like the rest of the market, there's a ton to embrace. >> as scary as it is, i think that we could see possibly a 50% or 60% correction. >> with us to try and make sense of this market charles biedermann is in studio, founder and chairman of trim tabs research and founder of biedermann's practice -- were you ever on fnn, charles? >> yes, 1990. >> i was going to say, going all the way back to fnn. >> yeah. >> on bollinger. >> that's exactly right. ron. so, you've been following us a long time and i've always watched the way you try to figure things out because it's not necessarily something that everyone else looks at. and again, i'm seeing the same thing from you today. i didn't even know any of this stuff but it might be really helpful in trying to determine where we are. the one thing that you say is you're still bullish and you plan to remain bullish even though you know it's kind of dicey, isn't it? so many people holding their nose but staying bullish. why are you staying bullish and what are some of the warning signs you see? >> i use the science of ontology to track markets. shares of transactions, shares of stock being bought for cash. supply and demand right now shares are shrinking by $70 billion, $80 billion a month between actual buybacks and cash takeovers of public companies. $70 billion to $80 billion a month we have 25 billion on average of new offerings, so the float shrinks about $45 billion a month. as long as 45 billion more shares are withdrawn, meaning owners of stock have more money to chase fewer shares, the market's up at the end of 12, it was 17 trillion in market cap of all u.s. stocks. it's now 26.5 trillion dollars. in a year and eight months. >> do you see the -- all of the central bank easing around the world, as the supply is shrinking? are the amount of dollars growing from that? or you don't really even factor in all the printing presses? >> zero interest rate policy means if you have cash on the balance sheet, you're not going to earn anything. so companies are taking some of that cash and reducing the amount of shares outstanding. >> why not? >> and we've heard from some people that attribute the tepid recovery to the notion that instead of investing for the future, and making it an income statement recovery, it's a balance sheet recovery that we're seeing and that's why the corporate america hasn't invested as much as it should. >> i think that's nonsense. the real problem is wages and salaries are growing less than 3% a year for the last four years. so you have stocks growing 25% plus a year. wages and salaries are only growing 3% a year. how do you -- that doesn't -- one doesn't justify the other. >> and let's get to your next metric is which you've looked at past market peaks. looking at -- i didn't even know this metric. you should explain what it is. looking at the stock market compared to wages and salaries. >> everybody looks at gdp. why? i don't know. nobody understands what gdp really is and it doesn't count income. it counts spending. so if you look at wages and salaries of everybody with a job subject to withholding which is what the bureau of labor statistics report is, it's been -- it was 7 trillion at the end of '12 annual rate. 7.5 trillion now. the market company at the end of 12 was 17 trillion -- >> and now it's 26. >> and a half. so right now if you look at the relationship between wages and salaries and market cap it's like 3.5 times. the last two times it was close to this was in march of two,000 and october of 2007. >> and it got to 3.7 to 3.8? the market cap versus wages. >> it's depressing -- >> so it's now 3.5 so the last two peaks were at 3.7 to 3.8. >> yeah. >> so that's still enough for you to stay in now? >> well, it could go to four. i don't know. you know you have this market in essence rigged. >> so what are you supposed to do about it, though? >> you ride the tide and hope you can get out before the game ends? >> you think the game is going to end but you don't know when it's going to end. we always know the game is going to end -- >> yes. >> but based on what you're looking at when do you think the game ends? >> the first key point is the alibaba offering. if new offerings expand by $30 billion to $40 billion a month and eat up the cash generated by buybacks that could end it. if buybacks slow or interest rates rise, if, as and when. i don't think interest rates can really government can't let interest rates rise because without the wealth effect we're not going to have the 2% to 3% gain in salaries. this is not a huge economic recovery we're talking about -- >> we're like in a box almost then. what we need is, what we need to keep doing is part of the problem of why we're not doing better. >> well, what we need to keep doing is create where it's cheaper for business and people to start new things, to expand, to grow, instead of making it more expensive to do anything. >> you don't think keeping it that cheap and allowing companies just to abuse it to buyback stock to boost earnings you don't think that's part of the problem? >> i think it's symptomatic of the problem. >> we don't have an economic underpinning that we used to have. it's much too expensive to do anything now. legal fees are so enormous for doing anything in business it's like why bother? so much paperwork. >> okay so worried about 3.7 or 3.8 times wages. but is there any way that you can forecast how ugly it would -- we could say 10% to 15% to 20%. there are people talking about 20%. have we built up a big enough imbalance to where we're -- way ahead of our means and need a 50% pullback? >> we've been around a few years. >> the stock before it goes too far on the downside. always goes too far. always goes too far on the upside. you know, you can't -- it goes the way it goes. >> you want to mention you're a nonprofit success and you can get something free, what on curious.com. >> yes. >> that's the website? >> it's an ontological based course which you just talked about. >> in the practice of successes, if you're fully -- the key practice is being fully present, totally engaged in the areas of life important to you, particularly when you don't want to be. we all know when we're fully present life works better, we're successful. if we're not present, we're unhappy, things are bad, we have a cloud we're walking in. under. the results aren't the same as when we're smiling, happy, things are great. so it's how to be present in life, and on curious.com it's a course. >> okay, good. all right, charles. someone asked me yesterday what time do you get up every day, right? and they say that must be hard. it is hard for him. but how true is early to rise and early to bed -- ben franklin quote. makes a man healthy, wealthy and wise. right? it's good. >> but you live in new york. and it still kills you to go to bed at 9:00, doesn't it? >> still tough to go to bed. >> because you've got things to do, places to go, things to see. stars to meet, right? >> tough. >> i was in bed last night at 8:37. >> that's what you've got to do and get up is the 4:00. >> i do it on the west coast. so i'm up at 4:00 to watch you guys anyway. >> 4:00 a.m. -- andrew, life is better. embrace it. good job anyways. >> but don't get stretch jeans. >> wait a minute. >> thank you. >> skinny -- >> okay. we've got to get to some serious news this morning. because the fbi and the secret service are investigating reports of cyber attacks on u.s. banks. media reports say five banks including jpmorgan have been struck, in a series of coordinated attacks this month. cnbc's eamon jafrers joins us now with more on this developing story. where is it eamon? >> andrew, right now jpmorgan is confirming that it's been the victim of some kind of cyber intrusion here. exactly what kind though they're not saying. take a look at a couple of bullet points. that we have that jpmorgan provided for us. they say as of so far they're not seeing any unusual fraud activity and they're working closely with law enforcement to determine the scope of this attack. they say they're taking additional steps to safeguard sensitive or confidential information that might have been available for these attackers. and then as russ they say customers should contact them if they have any suspicious activity on their accounts, and they'll not be held liable for fraud. they say our cards all have zero liability protection. so a little bit of peace of mind there if you're a jpmorgan customer. this morning, worried about this potential cyber attack. the fbi says it's working with the secret service on investigating what might have happened here. they say they're looking at attacks against a number of banks. the fbi not saying exactly what number of banks might be involved here. and the question here is, who did this, we've seen some media reports saying that there mite be a russian connection here. i talked to a cyber expert last night, a former fbi cyber expert who said basically when you're looking at this kind of attack the reports are there's an exfiltration of data which means they stole data. might not be the russian government. you might be looking at russian organized crime. >> the question we have this morning is the disclosure issue. you have jpmorgan confirming. they didn't come out publicly and say it earlier. you still have four other banks that have been hacked that have not been disclosed. what do you think the rules and requirements are around the disclosure and how we should think about that? >> we've seen this a lot. companies are often wary to disclose anything. they don't want to admit anything that could cause panic or fear among their customers. they don't want to be embarrassed in the marketplace. at the same time they're dealing with a very complicated intrusion. a lot of companies don't want to say anything before they know exactly what's going on. >> if there's no fraud on these accounts do they have a requirement to do so? >> it depends whether they make a determination it's a material event. the definition of material is a little bit gray when it comes to cyber attacks. exactly how much damage, how much potential damage, what the exposure is, all that goes into the calculation of whether they disclose or not but you see a lot of cyber attacks that are never dischoiced by the companies that have been hit. >> thank you for that. >> you just got with biderman here i don't think it cooked for you. but you just got empirical data showing that no wage growth and income inequality actually does eventually empirically come back and start hurting asset management and stocks. >> can't go too far. >> just the people the owners keep doing better. you just got it. you should tell "the new york times" that. they can write a bunch of stuff in their editorial page about you finally can -- you proved it. >> they watch the show. coming up next, your chance to win taco bell for life. you want that? taco bell for life? >> are you kidding? yes. >> plus commercial real estate may not be the most exciting investment but some of the biggest fund managers have taken stakes in one company that has brought them some big-time returns. we got the ceo of cbre joining us next. thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this 2014 ats for around $299 a month. hurry in -- this exceptional offer ends soon. ♪ hurry in -- this exceptional offer ends soon. could help your business didavoid hours of delaynd test caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. 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 box." taco bell is giving eleven lucky customers a lifetime of free food. in honor of its new dollar menu, the company's releasing 11 unique dollars in 11 cities. wow. this sounds like willy wonka kind of. one each day. the contest started tuesday in los angeles. yesterday it was chicago. the serial numbers for the dollars are being revealed on the company's promotional website, ever lasting dollars dotcom. it's like the everlasting gobstopper. potential winners have a month to find the bills. the golden ticket. we've seen that, right? >> i have. i have. >> yeah, but this is for -- >> and i'd rather have mexican food than -- >> would you like chipotle for life? >> i've said it the worst mexican food is great. >> let's talk about commercial real estate this morning because that market making a huge comeback posting its strongest quarter of performance in seven years. our next guest runs cbre group the world's largest real estate -- servicing company by revenue. it's ranked number seven on the barron's 500 list. the stock now up over 20% year-to-date. congratulations for that. joining us now is bob sulentic, president and ceo of cbre group. here's the question. we keep talking about how we can't really figure out what's going on with the consumer. the economy is not really growing. and yet not only is your stock growing, but there's actually real growth in the commercial real estate. what is happening? what's the disconnect? why are we seeing that? >> well, there's a few things going on. what you're talking about when you reference growth in our sector there is i think rental rates are going up. >> right. >> occupancies are going up. there's not a lot of new development going on in the commercial sector so offices, industrial retail, so what you're seeing is a good environment for investing in real estate. and investors are doing well. developers are doing well. >> one of the things i notice, big boxes are doing well. i thought the big box was over? >> no. big boxes are doing very well. and that's tied to the whole e-commerce situation we're seeing now. they're situating these big boxes near hospital areas where people are buying through e-commerce so you have same-day or next-day delivery and there's been 16 straight quarters of increase in occupancy in big industrial boxes. rents are going up. >> we talk about real estate. we're talking about it on a national level but real estate is always local. where is it working, and particularly where is it not working? >> well, commercial real estate isn't necessarily local. i would say today it's actually international. you see a lot of capital coming in from around the world in commercial real estate. it's generally working well. for the last two or three years you heard a lot of capital flowing into the main markets like new york and san francisco, the gateway markets. what you're seeing now is a lot of capital flowing into the secondary and tertiary markets. there's been more capital flowing into those markets. >> give me an example, a couple of surprises market. >> capital flowing into pittsburgh. capital flowing into denver. atlanta. smaller cities even than that. absolutely. >> and that's -- and on a industry bray sis, that's a function of what? >> it's a function of the fact that there's a lot of capital around the world. >> right. >> wants to come to the united states. they like the dynamics associated with commercial real estate. the fundamentals are improving. it's a hard asset so there's an inflation hedge there. and there's not a lot of new development going on and the interest rates are relatively low so you have an environment where it appears that's going to be stable for a long time. cbre did over $200 billion worth of transactions last year and moved a lot of cap around the world and into the united states. >> okay. bob, thank you for coming in this morning. >> good to see you, andrew. >> appreciate it very much. >> coming up after the break you won't believe what one business executive did to prove that his product is the real deal. and, the video's gone viral. and later we've been telling you about golf's troubles lately. can the game actually learn a thing or two from what's happening in tennis? ace analyst former top coach brad gilbert, my 20-year friend, also coming up to tell us why his sport is serving winners right now. searching for trade ideas that spark your curiosity tdd#: 1-800-345-2550 can take you in many directions. tdd#: 1-800-345-2550 you read this. watch that. tdd#: 1-800-345-2550 you look for what's next. tdd#: 1-800-345-2550 at schwab, we can help turn inspiration into action tdd#: 1-800-345-2550 boost your trading iq with the help of tdd#: 1-800-345-2550 our live online workshops tdd#: 1-800-345-2550 like identifying market trends. tdd#: 1-800-345-2550 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to schwab.com/trading to learn how. tdd#: 1-800-345-2550 sharpen your instincts with market insight from schwab tdd#: 1-800-345-2550 experts like liz ann sonders and randy frederick. tdd#: 1-800-345-2550 get support and talk through your ideas with our tdd#: 1-800-345-2550 trading specialists. tdd#: 1-800-345-2550 all with no trade minimum. and only $8.95 a trade. tdd#: 1-800-345-2550 open an account and earn 300 commission-free online trades. call 1-888-628-2419 to learn more. tdd#: 1-800-345-2550 so you can take charge of your trading. but parallel parking isn't one you do a lof them.ings great. you're either too far from the curb. or too close to other cars... it's just a matter of time until you rip some guy's bumper off. so, here are your choices: take the bus. or get liberty mutual insurance. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. see car insurance in a whole new light. call liberty mutual insurance. i'm spending too much time hiring and not enough time in my kitchen. 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[ 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. is now time for the bissell commercial that will make you cringe. a bissell canada executive standing behind the company's new vacuum, and eating off a subway floor to prove it. in the commercial, he carries the vacuum into a subway station in toronto, then he cleans off an area of the floor, and eats some italian food while commuters watch in horror. the company wants to prove how well it thinks its new product sanitizes. one big caveat, and it's a big one. the commercial was shot on a subway platform that has been closed for a year and is basically a filming location for movies and tv spots. >> if that makes you feel any better. got to do this story again next week when becky gets back. for me i'm not a huge germ phone. and it's i five second rule andrew. >> but it's like he willous. what is -- >> that's pasta. >> just head that. >> it looks like -- oh, oh! >> that is something, though. wow. great reactions from the people there. coming up breaking economic data. jobless claims, and gdp is next. you know the five second rule, right? >> i know. we have it. >> then later the success of tennis and what golf might be able to learn from its growing popularity. i guess we keep selling it that way. but the u.s. open is happening ten miles from here. speaking of tennis last night at the open, i told you this maria sharapova moving to the third round with a win after she lost the first set. her boyfriend and seventh seed grigor dimitrov won his match beating ryan harrison. and he will move on to the second round on the men's side as we head to break, take a look at u.s. equity futures. 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." 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[ bird chirping ] with millions of reviews, tripadvisor makes any destination better. welcome back to "squawk box." more trouble in the world of retail home furnishing retailer williams-sonoma shares trading sharply lower this morning. >> wow. >> earnings and revenue matching wall street estimates but the current quarter guidance fell short. must be -- >> explain that. >> really short. because we're talking about premarket that stock is off 11%. almost 12%. >> they sell housing related stuff. >> pottery barn, too, everything. sure. >> what's going on there? >> this is the retail story. and that -- i would even argue that's a little bit of a luxury story, too. maybe it's an operations issue. >> and then shocking news. this morning on a billion dollar icon, and it's blowing up on social media. hello kitty is not a cat. >> what? >> no! >> what do you mean it's not a kwat? >> in an interview with the "l.a. times" the curator of an upcoming exhibit on hello kitty in california said that the icon is, in fact, a human girl. >> no. >> hello kitty -- >> with whiskers? >> hello kitty's official biocalls her, the biodoes, as tall as five apples, and as heavy as three. a bright little girl with a heart of gold. see, i -- >> with whiskers and cat ears. >> i still think you could say a bright little gear in an endearing way about your little cat, couldn't you? >> it's a kitty cat. >> are we sure that means -- is this official or is this your guy's interpretation. >> it's called a kitty. hello kitty! >> did you just make this up, greco? where did you see it? >> is this made up news? >> i'm not sure. you know -- >> it's probably in the "los angeles times." >> that it's not a kitty. >> all right. >> we are just seconds away from jobless claims. and second quarter gdp. it is an icon. there are people that share shirts -- >> they're crazy about hello kitty. >> almost like the bronys. >> if you're in cool -- >> santelli is standing by at the cme and liesman is here. rick the numbers, please. >> the numbers, please. 298,000 on initial claims. so let's see, it was 298. so that would be lateral. but they added 1,000. so down 1,000 from 299. continuing 2.52. let's get to the biggie. actually, an improvement. 4.2 gdp. 4.2 on our second time around the block on second quarter gdp. and that is an improvement. and it was getting a little dicey there. you had the trade deficit. you had inventories. all adding or minusing. give you a little historical perspective. how many 4% handles have we had recently? the most recent outside of this one was the third quarter of 2013, at 4.5, two quarters later minus 2.1. we go back to december of '11 the last quarter of course 20114.6 that was followed by 2.3 and 1.6. so listen this is good news that we clung to that handle. better news would be if we have some type of very tight averaging process that keeps us close to those numbers. let's look at gdp sales, it pops at 2.8 versus 2.3 corporate profits for q2 really improved from minus 16 in change to up 8.3 so you know maybe it's better to look at things like debt versus taxation. then debt versus gdp. a lot of new metrics in this day and age we live in. no matter how you slice it. no matter how much you believe in all the granular observations this number is definitely an improvement and we all hope we see many more quarters like that. i'd like to see debt go away. i'd like to see japan have a decade that isn't lost and of course, europe, you know, the more they talk about qe, and the more they talk about deflation, and then you look at their interest rates. i don't know. i think that the process of how they're trying to cure their ills is probably the process that brings them dropping prices. back to you. >> okay, thank you for that, rick. for more on the numbers we're going to get steve liesman who is back at the stable. what do you make of this? >> i think it's hard to figure out what the trend is. rick was kind of alluding to that. you did a minus 2.1. now you did a 4.2. you know, is the average three? or is it back down to a positive two. and i think that's really the question that consumes the market right now. if you're going to three which is where the fed has their forecast right now, it's an upward shift. you can expect better growth. you can expect all kinds of good things to happen from that. i'm interested in the corporate profits number turning around. it's a separate number from the s&p 500 number to all economy profits number. everything's a turnaround from the first quarter and honestly, i've spent a lot of time in jackson hole trying to figure out what happened in the first quarter. i don't have -- weather doesn't explain it. >> weather is not it. >> definitely piece of it. it was a piece of it. but it was just too much. >> steve yesterday we had someone on who we he told me historically what where does the ten-year what is it supposed where is it supposed to trade the yield based on gdp? nominal gdp, what's it supposed to be? >> right around it actually. nominal rate. >> we decided it was trading based on european gdp. >> it could be. i mean, if you do -- what do you want to do? real gdp is going to be like six? >> because around -- wouldn't that -- >> that way you could give the fed cover, and not say that they were too low because it's not -- we could be growing at 3% or 4% here and still have historically low rates because of the distortion of what's happening over there because it's a global economy now. >> so, it's -- draghi is going to help you along in a couple of ways. first of all as they withdraw the liquidity -- the excess liquidity created by qe-3 he's going to be adding it to the syst system. right now there are two programs on the table the targeted ltro and the asset-backed security which doesn't exist. they're going to create a program and basically subsidize it. then there's the question about quantitative easing and the big, big debate as to whether or not they ought to be doing qe. and that has to do with will it have any effect. when you think about where the german yields are or the italian yields. here's something someone told me the other day, a former european central banker i spoke to, if they do qe on a proportional basis, right, based upon size of market, size of economy. >> right. >> what percentage of qe will be german bonds? >> you're asking -- >> i'm asking you a question. >> i assume a huge percentage. >> 30%. >> so if you want to think about the politics of that, let's say -- let's say the fed bought state bonds, they'd have to buy 20% of new york bonds. how would like arkansas and california -- >> on a proportional basis. >> how else would you do it? >> is santelli -- >> is it going to be a fair program -- >> how else would you do it? how could you be unfair about it if you're the european central bank? >> rick has gone. i was going to try and get him -- i could get you started, though. you know, i made the point the other day -- >> you're wearing that pink tie today? >> still kinder gentler. guys like david len hart they can have no idea about anything and still write a column. >> pretty good. >> sawed story the other day. they can take a cheap shot and no one can do anything about it. the other day he was saying things really have changed in the sampling of employment numbers so that they are skewed a little bit weird, not for the reasons that were said before the election. but in the first paragraph, he took a -- made it a point to take a shot at welch saying the whackiest idea ever put forth was prior to the election by jack welch. number one, welch put i think there was a question mark about it. and he was just talking about in total, participation rate. part time. all the different things that skew these numbers now. and my point, you see what i'm saying -- >> i don't because i think jack welch was off base. i think jack was way off base. i have high regard for jack -- >> here's my point. this person -- >> wrong, wrong, wrong. >> the same way that if you accuse the irs of having a conspiracy by targeting certain organizations for additional scrutiny, it would be the same way to say that that's a wacky idea. as if it could never happen. we now know it can happen, steve. it absolutely can happen. >> i see what you're saying it can happen. >> just to be a smug journalist to all of a sudden say in hindsight that there was no truth to it -- >> but there was no truth to it. >> really? >> there was a gao report on it. >> what about the guys that decided not to go to work that day to actually get the sampling. they were just writing down fake numbers about whether they actually asked people -- >> you want me to go through why? >> no, i don't. i'm just saying that they are government employees. lois lerner was a government employee and you can't assume there's not individual bias in a lot of these numbers. does it feel flush to you right now, this economy? does it feel like 6%? >> it does not. >> 71% say the country's going in the wrong direction. everyone's working part-pmi. >> you're saying they're still cooking the books? >> i'm just saying to be able to write in print that this guy's wacky and dismiss it as a ridiculous idea, it's as relevant as anything this guy's -- >> eight days trying to run down that story that came from "the new york post" -- >> why don't you spend about eight days trying to run down what happened to that blackberry she had -- >> the irs? that's not my beat. i'm trying to figure out because it happened to the irs it happened -- >> it's no reporter's beat in mainstream media, unfortunately. why don't you do it? >> it's been proven that there was no conspiracy. >> let's be clear -- >> oh, okay, so -- >> oh, it says rick -- he had the message the im here. i wanted to get him involved. he's already gone. trying to stir things up, steve. >> for what? >> up next. >> for what? >> up next -- >> i'm going to get an e-mail from jack now. jack i think you're great i just think you're wrong -- >> he doesn't, jack. >> -- a conspiracy. >> there's no conspiracy. >> they're all government employees. why wouldn't there be a conspiracy? what can golf learn from tennis when it comes to slumping participation? speaking of participation rate. oh, don't show my swing. from ratings to attendance, to dollars spent it's been a scratch for golf, and nothing but aces for tennis. that story is next. oh, good writing. check out this video. the coast guard plucking two men from the brink of niagara falls. the two were less than half a mile from the edge. their 19 foot motor boat was disabled and anchored but they couldn't get to shore. okay. let's check out the futures. back to business news. we're down about 60 points, now 57 points is what the indicated opening is. what if there was a credit card where the reward was that new car smell and the freedom of the open road? 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(clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. what can the golf industry learn from tennis when it comes to try to get exciting again. this is what robert frank has been trying to figure out. he caught up with some of golf's biggest names. everything ebbs and flows, robert. i'm not worried. anyway. what can you tell us? >> well, joe, it's another amazing day here at the u.s. open in fleshing, queens. over 700,000 people expected to come to watch two weeks of tennis here. ticket sales expected to top over $100 million. tennis is in a bit of an upswing after the big slump in the mid to late 1990. so we asked what can tennis teach the game of golf, which is you guys have been covering is in a bit of a slump, and we got some answers from the great roger federer, who is one of the favorites to win this tournament. >> long time ago we decided to go global. which was a risky thing to do. golf is still very much america based in terms of the big tours, the three of the four majors are still played in america. where in tennis we play them in australia, in france, in england and then here in new york. >> guys some other things that golf can learn from tennis, starting early tennis like golf is kind of hard to learn how to play. a new program called quick start uses lower tennis nets, smaller rackets. the usta building thousands of mini courts for kids. also affordability. there's a new website playtennis.com which lists clubs offering free tennis. and of course, most importantly, it's about great players. and thins dynasty that we're seeing in tennis with federer, rafa, djokovic and murray, these four guys alone, 36 of the past 38 major titles. have come from those four. >> the product needs to be good. we have good characters, good players, i think it's really, really interesting times right now in tennis. >> yeah, and talk about interesting times. today we're going to see the 15-year-old phenom from san francisco, bellis play. that stadium -- that court is going to be packed once again. you've got 12 american women actually into the second round. and a number of american men. you still got isner you've got sam querrey. u.s. tennis not dead at the u.s. open, guys. >> all right. robert, but, we're going to talk to b.g., my friend brad gilbert about u.s. tennis and i can draw some parallels, b.g., brad gilbert, tennis analyst for espn, former professional player and coach, 20-year friend. look at you. i wish you were in studio. you probably couldn't get out there in time if you were to come out to engelwood. but next time. >> next time, buddy. i was at the courts last night until 1:00 in the morning. got back to city 1:30. but to be on with super joe i'm not missing it, and you had the human brain there, as steve you had him a little bit flustered, i liked where you were going. >> i know we are simpatico in a lot of our thinking b.g., but you know, i was shocked, but i was also i thought it was kind of cool the last grand slam by an american, you were coaching him, and i was sitting next to you, and it -- >> right there. >> andy roddick. it's been 13 years which might say -- i mean i would think that would hurt tennis. but maybe roger's right. it's international so we love djokovic, we love nadal. we don't care that they're not american. >> it's only been 11 years. but it will be 13 soon. >> is it? i saw 13. >> 2003 you were sitting next to me when roddick beat nalbandian and beat ferer in the final. but to me the four guys you're talking about, the big four, nadal, murray, federer and djokovic, they're so global. obviously as an american we wish that we had an american superstar. but i think that people don't even really care that nadal and federer, where they're from, they just love the way they play -- they're great feeder, they're great athletes and they just transcend the sport, and what the guy is talking about is so true between tennis and golf at the moment the quick start program for getting kids involved, and it's about having fun. keeping the cost a little lower. and the big thing i'm sure golf will try to address is that it takes too long. kids now it's the bada bing bad abum generation, everything they want to do is faster. and golf does take quite a long time. >> is there any young american phenom that you think is on the court -- >> brad that's the three-name guy that you always message me about -- >> are you andrew, are you ross -- >> i'm b.g. friends -- >> just became friends. >> to me, we have a few young players that are 17 and under. and i think that's our big hope, there's a young fellow he lost the other day in the first round of the open, he just turned pro from rhode island named jared donaldson. there's a kid from maryland from college park, maryland, a great story. his dad was a janitor at this tennis facility in college park. they let his son start playing at three years old, francis tiafo he's now the best american junior at 16, and i believe this guy that's a huge, huge hedge fund guy is behind his success, helping him out a little bit, so we have a lot of good players 17 and under, whether or not they will take that next step kozlov another young american 16 is the second ranked american junior in the world. where we've had a little bit of trouble is making that transition from being that good junior, to that good pro. that's a whole other level. that's like being kind of like a stock to being a great stock. >> you and -- i say you and andre, but obviously andre won the grand slams but you were there for six of those, right, and a gold medal? you were coaching him. and then you even coached andy murray, who's not american, but he won finally won maybe what's missing, are you going to coach again? >> well, you know, the older i get the better i used to be. i always say you know, never say never. tv is great. you know. can't lose any matches. can only make a couple of goofy calls sometimes. but i'm really enjoying, you know, the opportunity that i've had in this sport since 1980. i say about everything, joe, never say never. but i'm really happy doing -- >> i like what you're doing now. i remember -- i mean i was nervous enough but i remember your leg moving watching andre or watching andy. it wasn't pretty to watch -- >> no, always wearing black. i was keeping it together. keeping it cool. >> it's hard. you're dying inside a lot of the times when things are happening. it's hard. it's hard to be a coach and watch. who are you long right now? who would you buy if they are stocks right now. >> the 17-year-old super joe you would love this young fella, he is an unbelievable athlete. and if i'm putting a rating on him, i'm putting a strong buy you're going to get great value, this kid i think in four years could potentially be winning slams. >> djokovic, i mean i've seen him where i thought he was going to lose. and he digs so deep sometimes. you're long. you got to be long him. he's the best player in the world, isn't he? >> at 27 years old i still think there's value in djokovic because i think that potentially, he's going to play very strong into his early 30s. i'm putting a strong buy on djokovic. even though it's a high-priced stock. >> federer is too old but you still like him. >> no way is he too old. it's like saying apple stock is too high. any time you say a stock is too high it can go higher. a lot of times when a stock is at its low and it's bottom low you don't think it can always go lower. thing with the fed now you're going to get an unbelievable dividend. you're going to get your double your average. he is on your big 30s, and he's going up. >> all right. and then this is a growth stock an emerging market, frontier market, cc bellis. >> this one would have started the other day, joe, as a penny stock. it's now, we're into the dollar signs. her dad runs a huge hedge fund in san francisco. she lives in the most expensive zip code in america,@erton. this girl's got a bright future playing out on court 17 today, for a small girl. i saw her play the first time at 12. put a strong buy there. get out there. support the young american today. it's a fun thing to see. first american 15-year-old to win a match in the open since 1986. i had the fro back then, short shorts, high socks. nour it's the long shorts, no socks. >> that was so much fun. you do -- you are good at tv, my word. you can do business news too. what's the big mats today? >> williams, djokovic, murray's on, and the big news is the young american, cc bellis, all over espn today. we make the storys happen, but you backed your boy steve in the corner, didn't get santelli on for the yelling match today. >> you do watch. i love you, man. maybe we need you again before it's over this year. >> i can talk stocks any time, buddy. >> see you. >> take care, buddy. >> walk the walk. >> he can. >> talks the talk. >> coming up, surf's up in california, epic waves hit the golden state fueled by hurricane marie. dangerous for swimmers, a dream for surfers. that story and more when we return. you want to cut through the noise of an overwhelming amount of analysis. [ all talking ] you want the insights that will help you decide which ideas to execute and which to leave behind. you want your trades executed in one second or less, guaranteed, and routed with institutional-quality technology. look no further. open an account and find more of the expertise you need to be a better investor. welcome back to "squawk box," shares of williams-sonoma trading sharply. joining us, the retailer for sun trust. what do you think? what is the company mainly tied to? housing? is it luxury? what is it? i thought it was high end kitchen stuff. what happened, david? >> yeah, hi, good morning. well, it's a combination of higher end kitchen, pottery barn, home accessories, furniture, things like that. >> what happened? >> it was a good quarter, the stock got ahead of itself, up 10 % in recent weeks, so they actually, you know, hit the number, would have beat the number if not for a higher tax rate, but they kept the change for the year, not exciting enough for folks. >> so expectation they were going to raise guidance? >> you know, there was expectation they would beat and raise, and, you're not seeing that right now in retail, but that was the expectation. >> i still don't think that would do that, higher tax rate would not cause eight points. >> the other aspect to this in addition to the stock ahead of itself, there were optics with the growth margin. the company over time can adjust its pricing and/or catalog circulation depending on the environment they are in. this quarter they took pricing down a bit to show on the growth margin line causing concern. we've seen it in the past, and it's not a permanent condition, but causes volatility in the stock. >> i guess if we try to extrapolate to the consumer, this still makes it looks like things are just in the flush now. macy's and a lot of other retailers, and now this one is thrown in. tiffany was good, but rich people are doing well, is that it, david? >> well, definitet tt tt tt tty state, and things will get better with back to school. >> back to the long term trend. thank you, appreciate the quick notice you came on. >> thank you. >> breaking news, the talk of the morning, a hot hollywood couple with a money merger. think "tomb rider" meets "billy bean" in france. i take prilosec otc each morning for my frequent heartburn. because it gives me zero heartburn... annc: prilosec otc the number one doctor recommend frequent heartburn medicine for nine straight years. one pill each morning 24 hours zero heartburn. 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'cause she's your baby girl. and now you're proud. a bundle of nerves proud. but proud. get a discount when you add a newly-licensed teen to your liberty mutual insurance policy. call to learn about our whole range of life event discounts. newlywed discount. new college graduate and retiree discounts. you could even get a discount when you add a car. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance. a little bit of -- calling it breaking news this morning, i guess. joelie and pit secretly married in france, a notary public denominational civil ceremony, a marriage license from a local california judge who conducted the ceremony in france, and just to make it a business story, reports out they have a pre-nump. dualing hurricanes on each side of the u.s., warnings of rough surf for beach goers on both coasts. the storms digging up massive waves, marie has spectators and surfers flocking to the beach to see some of the biggest waves to hit the area in some 25 years. join us tomorrow, and "squawk on the street" starts right now. good thursday morning, i'm carl quintanilla, and jim and david off again today. stocks look to sell off at the open despite a nice revision to the 4% gdp number in q2. europe is struggling as reports come in that russian troops move into eastern ukraine wiping out optimism of a deal between putin. a road map goes like this,

Transcripts For CNBC Squawk Box 20140714

consumer relief. and the story in "the times" are both talking about benghazi and that sort of led to a different settlement. did you see this? >> no, i saw jon voight talking about this. can we build some roads with this? >> i don't know, how are we going to build roads? >> both parties believe we need to raise the party on gas leap. didn't we collect like $50 billion? >> we are collecting a lot of money. where is all the money going, do we know? >> that's what i'm asking. get some bridges -- >> the tax thing. it's the whole tax thing on whether we should lower taxes or higher taxes for the roads. >> why wcan't we use the $50 billion that we just collected? >> i don't know how it works. >> what is the department of justice going to do with it? >> i think they are going to give some of it back or something. >> maybe a new computer system at the i.r.s. would be good. that might help. >> maybe the cloud. >> tell me about what does benghazi have to do with citigroup? >> so they were about to settle at a different price. >> yeah. >> and then benghazi happened and the justice department said -- we can't even talk to you right now. we are in the middle of this thing. >> we are in the middle of the talking point for benghazi about the movie. >> that's how they came to the $7 billion. anyway, a flood of quarter results are said to hit the tape in the coming days including a number of major tech companies. of the ten s&p sector, the tech sector has the highest projected growth earnings rate at 12.3%. meantime, financials have the worst earnings forecast with a decline of 3.5% from a year ago. from earnings to the economy, fed chairman janet yellen is delivering the humphrey hawkins testimony. they will listen for hints on when the central bank will begin to tighten. they released last week the buys. and also we are talking about what is in the papers. get a copy of "the new yorker" today with monday morning in a minute. but there's the first real long interview with janet yellen in a long time and we'll take little pieces away from that. >> the humphrey haw kkins tuesd and wednesday is delivering -- i don't know if jack lew -- that's what you're going to hang on? he may not say that much. >> stan druckenmiller will be on, chris christie. carl icahn will be on. and we have a mystery guest. >> right. >> toward the end of the day at 5:15. you're not that excited about this one. >> no, i'm not. >> do you know who mr. guest is? >> i do. >> he's not a mystery to you. >> it's not. >> it's a mystery to me. and whiting company is buying kodiak to become the largest producer in north dakota's shell. and aecom company is acquiring urs for $56.31 a share in cash totaling $4 billion. a report on friday that urs had talked with rivals and buyout firms about a potential sale. the company is under pressure from activist jana partners to op enhance shareholders. it's a german company. anyway, another -- more tax dollars are headed there. and more tax dollars are headed to germany to build a soccer team. >> they don't need the money, apparently. >> who is the sub, by the way? and shire is ready to recommend a new $53 billion takeover from abbvie. the two are in detailed talks. and chocolate maker lindt is buying russell stover. the price is not disclosed but this will make lindt the number three manufacturer in north america. you know, i just took my pen and i barely -- i touched it -- ow, the tip, oh! oh! oh! soccer, i've seen too much soccer. i've seen too much. >> i'm giving you a yellow card on that. there's a lot of flopping, there's no question. it's still a beautiful sport. >> it somehow started sometime where you were rewarded for faking an injury. and it got to the point where everybody -- if you don't fake, you will never have anything happen. so no matter what, i'm watching and they do it in the replay. and seriously, i see the toe of one guy's foot barely touch the toe of another guy's foot and he falls down. and they are in agony. they show up for about three our four minutes and go to something else. and then i see the same guy, they never show him get up but the same guy tears by going by like nothing is wrong. this is one of the things, where did i read it? this is it now, the glow of it and it is finally going to come here and be just as popular. >> you will read that every four years. >> as long as they stay with the faking -- think of football. >> they have to score a few more goals. >> do you remember when joe thiseman and his leg split in two? and he moaned and groaned and had less agony than your average soccer guy. i mean -- >> he was a true hero. >> it is beautiful, i watched all of it. okay, all right. it takes a village, i know you think that. >> but this is part of the europeanization of america that you're afraid of? >> no, but i'm just saying i watch how excited the crowds are and everything. and if they could visit and see some real sports, see some college ncaa hoops and watch a couple of those games -- >> hold on. that's like acting central. >> more in the nba, though. >> i'm talking about the excitement of march madness. >> i know, but in terms of the s.a.g. awards these guys get for their dramatic acting. >> faking is not unique to soccer. >> oh, please. if there's anything soccer does great it's that. but really, i waited three hours. i watched the previous game, too, where argentina beat -- it is all mush now, but i watched a lot of 0-0 games toward the end. so we finally did get a goal. and everybody's really excited. you watch the crowds. it's like they wait a long time for that. i think if they were exposed to a sport where there was stuff happening. it happened the entire time -- i think that -- >> when i took the kids to the pool -- >> i went running and came back and didn't mess a thing. >> i went and did some yard work and didn't miss a thing. >> i saw all three of the great goals. the australian goal with a 90-yard pass. and i saw the columbia goal. they are good. >> germany got seven of them against brazil. >> if you can watch soccer, you can watch the first month of major league baseball and not be bored. >> and all of janet yellen's testimony to the house and senate and not get bored. >> you are here. you look like a soccer player now. >> thank you. >> the one thing they have going for them is the demos. those guys are all handsome and happening, are they not? across the board. all of them. and they are very fashion forward, too. >> they look good. >> are we okay with the germans winning? they are whipping everything now. they have been borrowing money. they have low employment. they are kicking our spies out and still making great automobiles. >> i thought they imposed the argentinians most of the game and then they kicked them -- >> germany is not purely socialist but we are not wanting a purely socialist economy to win anyway. you should be able to pay off some of your foreign debts if you are going to win a soccer game. what a beautiful country brazil is, isn't it? >> beautiful. >> they have some of the sets for espn -- >> that was not a hardship assignment if you are an espn anchor. >> should we officially talk about him? we are joined now with more from ben after his sports analysis. >> i'm happy to keep talking sports. >> we can talk sports but you put together your money morning this morning leading with two things. first of all the yellen piece in "the new yorker" that i mentioned earlier. is there anything valuable? >> there's insights into how she views financial regulation. she obviously takes the view that for a long time we have trusted banks to regulate more than we should. she wants more regulation. >> but there's nothing r revelatory. >> you get to know her. >> did you get your subscription to "the new yorker"? >> i have a subscription to something called "the next issue" which is like the netflix magazine. >> i get "guns and gardens." >> that's an odd mix. >> not really. not in the south it's not. and have you seen that article over the -- >> what was that article about? >> just about having to do with summer barbecuing and things. i just -- i saw that article, you saw -- >> she sat down for a series of interviews. and this is her first opening up to a journalist. i personally wish that would have been me. >> what do you think of the qe? >> they are still slapping the labor market and believes there's more room for the fed to run with easing monetary policies. >> let's move on to another issue. xm bank, what is going to happen here? >> i think it will get extended and will probably get extended in a continuing revolution. the government has to get funding past september 30th and it will come down to the last minute for that. democrats said they will tack on xm to that and dare democrats to knock it down. >> xm doesn't cost anything? >> it turned a profit of a billion last year for treasury. >> joe, are you on board with xn. >> the journal has a piece that you need to listen to. the journal now has a piece that says boeing does not need the xm bank to survive. >> they would argue that airbus gets all that support from -- >> from the far right field. >> and that's the koch brothers who feel that way and spend a lot of money with republicans. >> we have a big xm guy and i don't follow him on twitter but saw in re-tweets just captivating this. >> whether it will get extended or not, i think it will. it does lay bear to the division between the republican party establishment and the roundtable chamber folks who want it to be extended and the tea party. i don't think it is crony capitalism anymore than other nations that support their capitalism. take it away from boeing and airbus has a huge -- >> i think i want to be supportive of the xm bank, don't think. >> liberals are supportive of it. >> but what about you? where are you? it is like you're pro-business and you should be supportive of it. >> unless you are pro-free market. >> i'm pro-capitalism. >> i am interested on your views, joe. >> i don't have a far right on why it is crony capitalism. if airbus has -- how many countries are represented? like three of them? and they are also -- their individual manufacturer's in all three of the countries are going to get support. >> the fact of the matter is $37 billion or whatever in lope guarantees and loans it made last year, a lot of it goes to small business. a lot goes to boeing but these are mom and pops. >> they say it goes to rich -- i think they are worried about the dubai airlines. >> they buy it at a discount. we were talking about the treasury, this settlement that they will have with the benghazi thing and all this, where does the money really going? >> it's going to the justice department, a lot of it. >> what does the justice department actually do? >> i would hope that they would somehow get it back to the victims who bought these securities. >> jp momorganjpmorgan's settle lot of money now. >> it's a great piece to work on throughout the course of the day. how much of the $7 billion goes directly to the justice? it's in the piece that tells you a number. >> $4 billion is not in cash. so the rest is in cash. >> right. so $3 billion in cash. >> there's $3 billion in cash. >> that's a lot of cash. >> and he wants to do highways with it. >> the highway trust fund is another big issue in washington. that's about to go bust. take that money and then you don't have to do the ridiculous pension smoothing. >> this whole xm thing almost reminds me of -- >> let's all sit and read the papers. >> that's what we are doing this morning. >> it just reminds me of the defeat of cantor and the s&p 500, that was a big setback for every company in the s&p 500 because he was pro-business. the far right libertarian wing of the republican party wasn't enamered with cap nada. the journal says in other words the private economy is ready, willing and able to provide trade financing for foreign customers to buy boeing jets. that boeing would be just fine without it. >> that may be true. i don't know if that's true. that's an assertion. >> the republicans should start -- if they are truly free marketers, they should start embracing the free market in this case, too. that's the argument. >> okay. but say you were in north carolina with a business where you make pickles and want to sell them to consumers -- >> you heard about my costco jar of pickles? >> yeah. but you want to sell them to somebody in germany. >> now you are referencing germany again. >> or anywhere in europe. the customer on the end, are they getting the market to support share imports of u.s. exports supported by the xm bank? you can make the case from boeing that there will be free market solution to support that. i'm not sure you can make that case for small to mid-sized businesses in the u.s. >> if you are pro-business, you have to be supportive of the xm bank. >> why would you want to unilaterally disarm? >> i'm with the chamber. >> the question i have on it is it does seem like unilateral disarmament if the u.s. would get out of the export finance business. other nations are not going to follow suit. >> they want us to unilaterally set examples for the world and other respects. you do that here yup laterally. and just because the euro socialists are supporting air s airbus, i don't know if that will hurt jobs -- >> of course it will hurt jobs. >> because i don't know it would. any time you see or hear that the government action is needed to support the jobs, i don't believe that's the case. >> if you are for taking all the money from the settlement. that never does support you. >> building roads and bridges makes perfect sense. but if the government spends the money on roads and bridges, that's employment that will follow from that. so the idea the government doesn't support or create jobs is not true because it does. you may not like the jobs or think these are great jobs but they are jobs nonetheless. >> i guess that the new york state other than illinois and the top states for business and the public to see. kansas had some tax cuts and they found something a problem in kansas but said it is clear that all states need to use every tool of government to nurture growth. and that these tools require money. so that was the conclusion. >> the problem is the kansas cap is where they were to the point where they didn't have enough money yet. and there were a few things the economy needed to do. seven is a good number, not 50. are you leaving? >> i guess i am. >> you can hang out if you want. >> i feel sort of odd sitting in becky's seat over here. i'm more used toll -- >> it's okay. you may do whatever you want. you have the darker shirt and the lighter stripes. >> it was dark. i don't like to wake my wife getting ready for the show. as much as i want to look my best, it is early. >> so she didn't cook you anything this morning? >> no. >> you haven't gotten things quite squared away in the white household yet. >> we have a separation of church and state. and authorities. >> the morning is also -- a lot of people think that at night -- >> it's a good time for good conversation and catching up on -- >> that's what i was talking about. >> at 3:30 a.m. you are very aware in the morning, ready and raring to go. i have read these things but never experienced it, clearly. ben white, thank you. the former air show is taking off. i'm telling you. phil la brebeau is there with ae of guests. join us at 6:30 a.m. eastern time as i'm going to press the right buttons. and earnings season is kicking off with citigroup today and tomorrow jpmorgan and gold man sa goldman sachs. and on wednesday we'll have stan druckenmiller, one of the greatest investors live. we'll have more "squawk" in just a moment. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. all right. we are taking a look at what exactly is happening in the northeast today. we have quite a lot of moisture in place. new york city, you could be seeing some thunderstorms. let's break down exactly what is happening in these severe ingredients because that's going to be a big concern for us. lots of moisture just trucking out of the south. this cold front, this is the one bringing that polar plunge. all that cool air to the midwest. and eventually into the northeast. but first we need to keep an eye on the front because that's where we'll be watching for the potential of severe weather today. in fact, new york city, the capitol, you have a risk of seeing damaging winds, hail or even an isolated tornado as we go throughout the day today, especially through the evening. lexington through paducah and memphis, we have the risk as well carrying on through arkansas. so we have a large swath of storms here. let's break down the timing of exactly what to and 'tis pate. this morning most of the rain is through kentucky and west virginia. but look what happens getting into your afternoon. whenever you're headed home from the commute, watch the storm approach philadelphia and d.c. where we could see again the very gusty winds that could be damaging. and there's that potential for an isolated tornado. it's a small one but it is at least in the forecast. here's what we are looking at overnight. look at new york city up next as we go throughout the evening hours with dinner plans tonight. make sure to stay on top of the forecast so you're prepared for the storms that we could potentially see. and we're going to be watching this through tomorrow as well, joe. great. kate, thank you. we appreciate that. have you been on "squawk" before, kate? >> i don't think i have been on "squawk" before. i'm a newbie. >> a life-long dream, basically? >> clearly. yes, a lifelong dream established. i was not here working at the weather channel as a meteorologist. i wanted to be on "squawk." >> run with the bulls, appear on "squawk box." >> i got it. >> thank you. >> it's downhill from here, folks. downhill. >> great to see you again. you can't go back to the farm now. a big wave of quarterly results this week. what should investors expect? joining us is the director and head of the global market. financial, citigroup, what to expect? goldman sachs, a tough environment, huh? >> it's a tough environment. >> no trade and volatility. >> that's part of it. you'll have some of the settlement issues impact the earnings. >> what do they do in interest -- what do they do with the bond division? >> it's tough. it's tough. that's absolutely right. we just put out a piece about that. if you take a look at, for example, the cycle right now where people should be investing, you have the largest demographic in history. the boomers are trying to find yield and are forced to stay in equities because they can't live off of what they get in fixed income markets. and i think you have to look -- there's a series effect but you do have to look at what the fed has done over the last several years. you have over $4 trillion in the balance sheet and basically the market doesn't dictate interest rates anymore. the market is out of -- the federal reserve dictates interest rates. we don't live in a world where -- >> for price discovery, you are not sure what weird things are happening because of that. >> and that's interesting because the genesis of this is you were basically taking and solving the real estate problem and keeping people afloat. and, you know, but the other side of it, now you're still kind of punitive to people who need to have a more normalized yield curve to try and basically make ends meet. but it's like the 70-year-old person that still has to be allocated into equities which helps support equity evaluations. you have a lot of misappropriations because there's a better risk of return in relationships. >> that's good stuff in your case. here we finally have the s&p to earn $117.90. so we can get an exact multiple for where we are because some say the multiple won't be going up anymore. so it will be all earnings. what is earnings? we'll start with the bottom line, what is that supposed to be? >> we are looking for 6.5% from the analysts but you'll probably get close to 9. >> 9%. what about incoming quarters, do they continue to do that? >> you have to because the expectation for the year is double-digit quarter at 10%. >> we don't have to. you say we have to to support the market where it is today. >> that's right. that's where the market mentality is. >> and revenue is going to be up 4%. you actually think that's good. >> well, it's certainly -- >> better than before with the long-term average of 6%. >> it's moving in the right direction. we've had negative, anemic top growth. we are moving up. we are halfway to where we should be. we have gone from 2 to 4 and hopefully we can continue to see it. now the problem is a lot of that comes from the consumer. the consumer, the downside of that is consumer prices on things going up. if you look, consumer discretionary is a large contributor to the earnings growth. >> the materials and energy growing 38, 12 and 11 respectively. so that's telecom, materials and energy, right? >> that's right. >> the only one we have talked about is financials declining 1.1. >> that's important. >> that is important. still a big component but not as big as it used to be. so far 22 companies reported 64% of the expectation. >> that's correct. >> and you expect 64 to be the number for tho the quarter? >> it's early, but there's something going on here. >> the revenue is even better at 72. >> i don't think there was a lot of sandbagging last quarter. so when i say there's a boom coming, probably not but it supports the view that you have a general economic, you know, progress forward and so people who are worried about, you know, the weaker gdp numbers, this is kind of going back and favors the unemployment number. >> but you -- but this is and important earnings season. >> i think it is. >> for the bull market. >> i think it is. if it doesn't, we have a problem. >> thank you. >> you're welcome. >> if i were you, honestly, i would take the p out. >> yeah, but i don't work for those guys anymore. there's a price for everything. >> it looked like it had been your company and now you went on to another company. now thompson without the p is just another name, right? >> but it is s&p capital like you. >> i'm a guy like you. >> me, too. >> for one of the best services in the history -- do you not use them? >> no. >> it is mind-blowing. >> it blows your find? >> yes. >> you need a life. >> i do need a life. coming up, e-bay could soon be partnering up. and town and country travel is going to join us with the hottest luxury trends. is that you or me? and phil lebeau is going to join us from the air show. the highlights from boeing's ceo. and heading to the break, we'll look at last week's winners and losers. be back after the break. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours. good morning. welcome back to "squawk box" here on cnbc. i'm joe kernan along with andrew ross sorkin. becky will be back tomorrow. futures indicate a nice jump this morning where we could conceivably be back above 17,000 on the dow which we tried to hold last week. it could have been worse, but it was a down week and we ended below 17,000. still below 2,000 for the s&p. a deal has been struck for a portfolio of drugs. mylan will get a few drugs from abbott labs. >> one thing about this, i'm looking through this and they don't seem to be referring to anything here that would suggest that this is a possible aversion. >> from mylan? >> potentially because these are your products. there was talk prior to this announcement that this would be structured as an aversion. they are not suggesting in a statement that is a structured version. they don't talk about that but i just want to put that out there that people were talking about this over the weekend. >> i don't understand. by buying the drugs they would -- >> the drugs were over there. reuters reported over the weekend that these guys were in talks and one of the issues was about restructuring as an aversion. they don't seem to be indicating that they are doing the aversion, but there's a call later today. pfizer never came out about the aversion piece until they got two conference calls in. >> they didn't mention a thing and now they are like, sorkin -- >> we could be wrong on that. and maybe the reason it doesn't say anything about the aversion is -- >> they are like, shh. and here you are. >> i e-mailed a source and they have not admitted to it in a statement, but i have been e-mailing somebody that is involved in this transaction. >> you are trying to reign on their parade today. no one would have known. >> the ceo of mylan, heather, i love. she's terrific. however, it is less terrific she's up veinverting the compan. >> you are judging and assuming. >> i say it makes it harder for her to compete. she's an advocate of tax reform. as a good citizen, we need to figure out a system. we need to figure out -- >> you just want to -- >> what i would like to do is get real tax reform. that's all i want. you want it, too. we both do. >> you have come around. we can hold hands together. >> no. but i wouldn't hold my breath for that. in the meantime, what if -- what if they have more money to develop more drugs instead of -- >> these are generics. >> i know, but even that, generics is helping with the overall cost containment efforts for health care. it's a place for generics and -- in general, companies would probably spend the money better themselves, right? reuters would avoid shareholders. >> i don't disadpree with the intent of what you're saying but i'm also saying we have to hit the roads and pay for schools. somebody has to pay for the stuff. >> citizens do. but instead of -- as long as you're watching carefully the way it's spent, because every dollar should be spent as if it was your own. >> and the government misspends money atrociously. >> i'm not going to blame heather. >> i love -- >> you said you liked herless. >> i didn't say that. i love heather. she's a remarkable ceo. i'm frustrated that she would feel compelled given the situation to have to go abroad and structure an aversion. >> you are tip-toeing there. >> okay. we'll talk about other stuff this morning. business leaders at the farnborough air show in hampshire, england, is where billion-dollar deals are being made and relationships are starting. phil lebeau is joining with us the latest. good morning to you, phil. >> reporter: good morning. there's always a big announcement at the very beginning and this year it goes to airbus. as expected airbus announcing lit launch the a-330 neo to compete in the wide body segment. you're talking about planes between 250 to 350 passengers. they are going after the 787 dreamliner. earlier we had a chance to talk the to the airbus ceo about how much demand there is in that segment given the fact that the dreamliner racked soup many orders. and you have the 835 there and he says they would not have launched this if they didn't have strong demand and an indication of strong orders already. >> this is very typical but after ten days or two weeks of active marketing of this product, we get all of the big names of the company to select this aircraft it will really be a big success for us. >> reporter: the news was not lost on boeing which today will be flying the 787-9 dreamliner here at the farnborough international show. boeing says it has more than 1,000 orders that it racked up since the plane was first announced for the dreamliner and it believes there's not only enough demand the dreamliner market but overall the ceo does not believe we are looking at a bubble in commercial airplanes. >> the numbers say we are not. i mean, you look at our -- we track deferrals and cancellations below historical averages right now. there have been some other deferrals and cancellations in the industry. i think others would have to answer to those trends, but we see ongoing strong demand. and we're going to produce to it. >> reporter: one other story getting a lot of attention, the f-35 from lockheed martin was supposed to make its public debut here at the farn borough international show. it will thought be flying today, not flying today. and there's questions as to whether it will fly earlier this week. earlier in an exclusive we talked to the lockheed ceo after the engine fire in late june, there's questions on when the f-35 will fly. she says it will fly at the end of this week. >> i'm certainly confident they are going to go through a discipline process. they always do. this is normal for any aircraft development program. they will go through a discipline process and get to the root cause and we are hopeful it's in time for the aircraft to be here. >> reporter: so those are some of the stories that are getting a lot of attention here. one other thing, andrew and joe, our audience is interested in the export/import bank and whether or not it will be extended. we talked to jim mcnerney about this and he said if it is not extended boeing could lose orders. if export very import is not extended, there's a chance customers around the world will say they go to airbus because they can get financing through that. back to you. >> phil, thank you for that. appreciate it very much. joe, one little thing. i just got the first take of the press release on this mylan deal off dow jones. we didn't get the rest of it. and you said in the structure they are setting it up this way, but think about this after the break. these guys get huge amounts of revenue from medicaid and medicare. us taxpayers are paying this company. this company is a beneficiary of you and me and everybody else and now they are leaving the country. think about that one. >> i'm not that interesting in that but i'm more interested in if they are buying a couple more specialty drugs that allows them to -- >> this is -- >> they are based in europe, the drugs are based in europe. what about the drugs they get from here? >> they will pay taxes on those here in the u.s. >> but only on the drugs where the revenue -- >> no. what ends up happening in these aversions is, we'll talk about it after the break, people move where the debt load is so they can basically take a deduction in it. technically, yes, mylan is -- there it is. >> talk to your democrat friends act tax reform. >> talk to your friends about tax reform. why don't we go to 20? >> we'll get to something reasonable and do it. >> fat chance. coming up, the hottest trends in travel. if you are super rich, where would you go? and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. when we come back, the hottest trends in travel. some of the hot spots where money is no object. and coming up on wednesday, we have delivering alpha. many big guests at the conference this year including nelson peltz. that's wednesday, the 16th. joe will be interviewing stan. we are back in just a moment. "squawk box" returns. ♪ ♪ ♪ [ 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. share your summer moments in your mercedes-benz with us. habeing able to pay as we goo rawas crucial for a start up.s. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud for business. welcome back. >> with the travel season now in full swing what are the years hottest trends in luxury getaways for the uber elite? on your set this morning is talent and country travel editor at large. she's also overseeing the revival of town and country travel this magazine, travel the best magazine this fall. they're going to do it twice a year now. it's terrific to see you. we've got to go through some of the things folks do and the super elite wealthy supposedly are doing. >> you love the name town and country. >> they've had a huge resurgence. >> and a disnantz new yorker. >> i will get you a subscription to guns and garden. >> what about guns and ammo. >> don't go there. >> i do want to go with something called give and go. this is a new sort of travel trend apparently, joe, when you sort of do philanthropy while you're on the 1% vacation. >> well, so let me just give you some background. first of all, travel is really booming and even some of the merely affluent are spending an average of about $10,000 on a trip and they're doing this several times a year. >> is that two people? >> two people. >> or a family. >> i think it varies. i can't speak in such detail to it. and then the truly affluent are absolutely pushing the envelope on, you know, they're really setting the demand for truly specific experiences. >> what kind of price tag is that? >> the sky's the limit. >> right. >> and your 10,000 is not flying private. >> no, it is not flying private. that's more normal travel. but you asked about the give and go. >> yeah. >> so one big trend is nonprofit travel. people want to feel good about their luxury. they want to spend the money -- >> this is like guilt vacation. >> no, this is incredible experiences some of them. but for instance some of the money might go towards a charitable foundation or here in africa, in a very luxe safari camp. some of the money could go to educating children about the importance of conservation in the local villages so they don't grow up to be poachers. so you can feel really good about this. >> is this about giving money, i thought -- i know people who have gone on these vacations. they go on the vacation and do some kind of public service while they're there. >> there are various ways to look at it. that's volunteerism. one has to be very careful about companies one chooses because there's a lot of green washing involved. but sometimes it's just choosing a hotel company that you know does the right thing. >> when we teased this segment we talked about the brando. what is that. >> oh, my god. that's where i want to go next. so, it is a new resort. >> yeah. >> marlon brando's private island. there's now been turned into a very sustainable resort. 35 villas. it's about 16 miles from tahiti. you have to take a charter plane to get there. it's essentially the dream of the south pacific. >> what's the -- what's the nightly cost? >> it is about $2500 per person to $74 pund per person. depending -- >> per night. >> how many rooms you have in your villa. they're from one bedroom to three bedroom. >> can it be too remote and too quiet? >> never. i think that is actually -- >> wait a minute, i think the tom hanks when he was castaway might say there's a little bit too little here for me. have to take his tooth out. >> so there are the luxury -- >> i mean, that looks too small for me. you ever heard of island fever. that might be the place you get it. >> two or three nights never. >> do we know what the staff to guest ratio? >> i don't know exactly. it's usually very high. like four per person. >> walking on the beach with a sherpa next to you. >> i know what you're looking for. who greeted marlon brando in mutiny on the bounty. you'd like about 800 on your staff, right? >> thank you. i just like -- >> the ratio is ski. we had two issues, glamping. >> we have glamping. >> you know about glamping, joe? >> like gloaming? >> it's a terrible word for a wonderful experience. luxurious camping. glamour camping. and then finally you need to weigh in on my favorite issue. >> what's that? >> first class travel or business class travel, should children be allowed -- >> babies, toddlers. >> babies be allowed on the plane. that's all i need to know. >> yes. >> they should be? >> yes, because increasingly people travel with their families even on business trips. >> it inconveniences andrew. they're loud. they might throw up. >> well you just have to go into first class or fly emirates where you have a pod essentially where a door that closes and you can be in your pjs. >> i agree with the door i think that's a nice way to go. >> the malaysian airlines doesn't allow toddlers. >> right. >> malaysian airlines -- >> they also say people be hung upside down and feet beaten. >> there's -- >> can they survive in steerage with the animals. >> i don't think so. >> i think that's the wrong attitude. >> this was klara's premiere on "squawk" and on tv. you did fabulous. >> thank you. just call me when you travel tips, i'm the girl. >> all right. stocks that performed better after quarterly results. them. so when my moderate to severe chronic plaque psoriasis was also on display, i'd had it. i finally had a serious talk with my dermatologist. this time, he prescribed humira-adalimumab. humira helps to clear the surface of my skin by actually working inside my body. in clinical trials, most adults with moderate to severe plaque psoriasis saw 75% skin clearance. and the majority of people were clear or almost clear in just 4 months. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer have happened. blood, liver and nervous system problems, serious allergic reactions, and new or worsening heart failure have occurred. before starting humira, your doctor should test you for tb. ask your doctor if you live in or have been to a region where certain fungal infections are common. tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. make the most of every moment. ask your dermatologist about humira, today. clearer skin is possible. ♪ "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. could help your business didavoid hours of delaynd test caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business. built for business. welcome back to "squawk box." the dawn of a new week on wall street. earnings about to shine bright upon the markets. which stocks are ready to win this season. the game of global risk. hot spots. shock waves. and tests of economic strength. how worried should investors be right now? and kaiser permanente is the largest nonprofit health provider in the country. a first on cnbc interview with ceo bernard tyson about the future of health care. the second hour of "squawk box" begins right now. good morning. and welcome to "squawk box" on cnbc i'm joe kernen along with andrew ross sorkin. becky is off today. she'll be back tomorrow. we have results -- the set ment. >> the citigroup settlement, $7 billion. that's official. >> we're also expecting some results, as well. attorney general holder in calling a mortgage conduct egregious said citigroup knew about, concealed serious and widespread defects in its precrisis mortgage business. the justice department and citi announcing a $7 billion settlement today, and we're seeing it right now. it will be a total of $4.5 billion in cash. and $2.5 in consumer relief as a result. it's going to take a second quarter charge of $3.8 billion pretax, pretax, and the cash portion consists of $4 billion civil monetary payment to the doj and the consumer relief it agrees to provide it by the end of 2018 which is actually the smaller part of -- now citigroup has resolved substantially all of the legacy issues regarding the rnbc and cbo investigation the company's been under. we're waiting for results from citigroup. the stock is up 20 cents on this news on the bid. 4720 out of 47.40. i like that chart. i like that chart because if you think it's at 47, you need to see that chart to remember it's actually at $4.70 is really where it is. >> did you see there was a piece in the f.t. at lunch with vikram pandit. >> when was that? >> over the weekend. friday maybe? >> friday? >> friday -- >> friday i did get an f.t. but no i had to leave right after the show. >> sorry. >> let's tell the viewers about some takeover deals. we should just call them inversions. like another day, another inversion. british drugmaker shire says it's will to recommend abbvie's latest takeover bid to shareholders. the improved bid worth about $53 billion and coming just four days after the talks between the two companies. the company that spawned abbvie also in the news this morning. here it is. just happened about a half hour ago abbott labs selling a portfolio of non-u.s. drugs to mylan for $5.3 billion in stock. there's been a lot of speculation this could eventually turn into another inversion deal. it's not even speculation, it is what it is where mylan would move its tax home out of the united states. as you know i have problems with this. and the other piece of it is all of us taxpayers, medicare, medicaid we're paying this company and now they're deciding to leave us. and they will ultimately figure out ways to pay less taxes. they will pay taxes in the united states, but on the stuff they sell here but clearly not nearly the same amount, and then all the shenanigans that people use back and forth about how to move that money. so, i don't know. i know you're fine with it. i don't know why you're fine with it. >> i'm fine with it because it's all legal and under the law. and if they want to prevent this from happening, obama, instead of -- >> the government needs to do something about it. >> -- grandstanding on all these issues that seem to me of lesser importance. >> i agree. we need tax reform. >> i would be using the bully pulpit to load on corporate tax reform. >> i'd have done it five years ago before i did obamacare. >> i probably would have led on corporate tax reform. >> the economy would be better off. if i can get you the rate down to let's say 25%. i don't even think he wants to go -- he's not going -- you want to go to zero. there are republicans who want to go to zero. >> larry wants to go to zero. i would go to 20 pop >> would you take 25 at this point? get rid of all the loopholes? >> 25 puts us in a better position. we're one of the highest in the world. >> i'm not sure 25 would stop myran and that's sort of the rub on all of this. you've got to go much lower and figure out how you're going to pay for the roads and everything else. >> back to earnings season. dominic chu has been getting up early and coming on the show and running the numbers and he's ready to talk expectations. dominic. >> you know how much i love you guys, right? >> we love you. >> that's the reason why i do the earnings reports for you guys early. let's start off with the top five. we scanned the s&p 500. look for over the past four quarters and the companies that perform the best on average the day after earnings. these are the ones that give out big earnings pop right after the earnings report comes out. so number five on our list is chipotle mexican grill. it's up on average about 8% over the last four quarters. now remember, a lot of these have one or two big earnings reports that skew things. chipotle last fall reported revenue was up 18% from the same time last year. it opened 37 new restaurants in that quarter alone. so a growth story helping to drive one or two earnings reports there. helping to really push those numbers. number four on our list here is electronic arts, the video gamemaker. it's up on average about 9% the day after earnings. back in may, electronic arts last may surged more than 20% in one day on investor confidence, and at least a turnaround for this particular company. those shares up big over the past four quarters. now facebook, this stock soared after earnings last summer posting strong results, investors got more ambitious, and more optimistic about their mobile ad business that means on average over the last four quarters it's up 11% the day after earnings. number two on our list, pitney bowes, old world industrial type services company, in january, pitney bowes said that revenue was driven by strong performances, digital commerce solutions and enterprise sector. that stock on average up almost 12% the day after earnings just in the last four quarters. and our number one s&p 500 earnings standout the day after earnings is green mountain coffee. now known as keurig green mountain. it was up 26% in february. remember that was the time that coca-cola said it was buying a stake in the company. it reports earnings so this stock green mountain coffee on average, andrew, joe, the best performing s&p 500 one the day after earnings at least over the past four quarters. >> thank you, dominic. we also got to talk this morning about bardier just announcing a new customer for its highly anticipated and delayed c series. it is chinese airline boom places letter of intent for 20 c-100 aircrafts. phil lebeau joins us with more. good morning to you. >> good morning, andrew. and loom placing that letter of intent, if you will, for 20 c-series aircraft with bombardier means that they're up to almost 500 orders and commitments, letters of intent for the new c-series. bring in the coo of bombardier, and you said you were going to get up to 20 customers hopefully by the end of this year at you're at 19 how. how optimistic are you as continue to slowly but surely bring in these orders? >> phil, we're very, very excited with the announcement we made this morning. as we said we're looking to have about 20 customers by entering service and about 300 firm orders. as you just mentioned we have 495 commitments now. 203 firm orders. 19 customers. so, we're very confident that we're going to achieve our goal. >> you've heard the criticism that there have been a lot of issues with the c-series. the most recent of which is the pratt & whitney engine, and the issues with the c-series engine. >> what exactly went wrong there and how confident are you you found the problem behind that engine failure? >> first of all we have found the problem. we've been able to determine the root cause. working with pratt in collaboration right now. we put in some modifications in the engine and we're testing as we speak. the engines are in testing right now and we're validating the solution to make sure that everything is okay. >> of course safety is our primary concern so we want to make sure that we found the correct solution to the problem. >> still on target for the first delivery in the second half of next year? >> absolutely. our entering service is targeted for the second half of next year and we feel confident we'll be able to get there. >> obviously airbus and boeing get the lion's share of the attention here. what you're doing with the c-series is trying to go into the lower end of the market in terms of size and passengers. are you finding robust demand there? you have a lot of letters of intent but do you believe that market can grow as quickly as some of the larger areas? >> absolutely. our market forecast says there will be about 7,000 airplanes sold in this segment over the next 20 years. we feel it's an underserved segment, and that's why you optimize an aircraft for this segment. we absolutely feel confident it will be there for us. >> guy hachey, the coo of bombardier on a day they get another relatively large letter of intent commitment from a customer out of china. guys, back to you. >> okay, thank you, phil. phil's going to be back with us live from the air show in the next hour. coming up at 8:00 a.m. eastern he's got an exclusive interview with the coo of united technologies. bringing high tech to the hospital experience. kaiser permanente the country's largest nonprofit health plan just opened its new oakland medical center and the coo is going to be making his cnbc debut after the break. delivering alpha is this wednesday. "squawk box" will be doing the show from the conference live. many special guests, including lee cooperman. ♪ ♪ ♪ [ 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. share your summer moments in your mercedes-benz with us. offers end july 31st. in a we believe outshining the competition tomorrow quires 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. that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. welcome back to "squawk box." making head lines, ebay reportedly plan to announce a partnership today. "the new york times" says under the deal, sotheby's will be broadcast live on a new section of ebay's website. the partnership is expected to expand to eventually include things such as online-only sales, and teamed auctions from other sotheby's houses. can you say it? >> lock your jaw -- i can't do it. i can't do it. >> lock your teeth and say sotheby's. >> s.a.t.bies. >> to me sotheby's doesn't go with ebay for some reason. it does because it's an auction. >> not really. seems downmarket. >> if this is the auction spectrum it seems like ebay is over here and sotheby's -- >> does this raise ebay or lower sotheby's? >> i think it lowers sotheby's. >> okay. >> we got filings -- i can't do it. regulatory filing shows a group of 27 top executives investors in alibaba can appoint another two directors to the company's board once it goes public on the new york stock exchange. the group includes co-founder jack mau. it would expand the board from 11 members to 9 to help the group strengthen investor control of the board. so best control for the shareholders. more control for the board. i don't know what we want to make of that. let's talk about health care, kaiser permanente is the country's largest nonprofit health plan and just opened its new oakland medical center which integrates high tech into the hospital experience. with us now first on cnbc is bernard tyson the chairman and coo of kaiser permanente. you spent a billion bucks on this thing. >> yep. >> the question i have is actually less about oakland itself, and more about what you guys are doing with technology. i see you're wearing the jawbone on your wrist. >> absolutely. >> you have electronic health records that are shared. >> yeah. >> can what you're doing actually be integrated across the country? meaning it works in a closed system but the holy grail for health care is to get this to work everywhere. >> good morning. absolutely we believe that it can for the entire country. we have almost 10 million members on the electronic medical records that's all integrated across the country. we're able to aggregate data up to look at how we're performing against health outcomes. we've demonstrated that you can improve quality of care with good information in front of our providers. and we're also working on lowering the costs. and so, we're a big believer -- >> what is the capital cost to make that work, though, initially? i mean you put a huge investment in. >> it was a couple of billion dollars. but, it's worth the investment. what we are seeing now in terms of the returns are higher quality care, and we're lowering costs. we can look at outcomes. we can deal with the individual and with the population. so absolutely, it's worth the investment. >> what's holding us back from your system being integrated with a cleveland clinic and the mayo clinic and mount sinai here in new york and nyu? >> well, unfortunately, most of the health care industry is still in stovepipe type of arrangement. what was unique about kaiser permanente is that we integrate all parts of the health care delivery system inside of the four walls of kaiser permanente. so we're able to bring everything to the. >> we could have done kaiser and skipped the aca if we could have somehow instituted that nationwide. i like what you say here bernard, i'm not sure what you mean. we asked you about obamacare and you go we are a law-abiding company. therefore you're working to implement it. what if you weren't law abiding you wouldn't want to implement this thing? >> we've been a long-term supporter of access to care for everyone. >> that's not necessarily obamacare. >> well millions more are covered today. >> i understand. >> because of the affordable care act. >> as you pointed out we needed to transform -- >> absolutely. >> and it's doing it on its own. it's not doing it because of obamacare. >> but in fairness we're talking about the first year of the implementation. so we think it is headed down the right path. there's a lot of work to do. for this thing to get -- >> there's some things that can -- there are still some things that pay very careful attention to, in the future here. and we'll see, obviously, where we got our fingers crossed for how it's going so far. but -- >> but i think we're demonstrating at kaiser permanente that in the 21st century you need a 21st century health system. and that's what we're building. and, to the extent that people now have access to care, to get inside of systems like kaiser permanente, through the front door, we think that's a good thing. >> tell us though just about the cost. i'm looking at there's a report in colorado you have a big business in colorado. you've had double the sign-ups that you planned. >> yeah. >> means there's -- "a," there's a lot more hands on deck to do this. but, what does the cost look like for you? >> well, you know, we still have work to do to better understand the costs, obviously. because in most cases this is a new population, in which they haven't had coverage before. now, in the kaiser permanente system, it doesn't take us long to start really gathering the information, because of the technology that we use. and so it will probably take us a couple of years to really understand the risk profile and the cost of -- >> that's what i'm talking about. when you think about the risk profile and the cost for you and the cost for the system and i think what joe's referring to is how much are we ultimately going to be paying as taxpayers? >> what's scary is how are we going to tell -- >> for much of it you're paying already. if someone gets sick, they get care. but unfortunately it's in the most expensive part of the health care system, the emergency department. >> as we found out because of one of the unintended consequences of obamacare, it's caused a shortage of doctors, which has caused more people to utilize the emergency now than even before. so, what was supposed to bring people away from the emergency room is actually caused more visits to the emergency room, where it's more expensive. all these things can happen, right? they're unintended. how are we going to tell people that they can't have certain drugs in the fight your or procedures because not everyone can get the best care available because there's no way to afford it? how are we going to tell people that? >> well, i'm not sure we're at the point where we're saying we're going to tell people you can't do that. i think that we have to look at how do we deal with all these issues in a very integrated way? we're right now having these kind of debates, as you know, with specialty drugs. on one hand it's a wonderful thing. because we have the opportunity -- on the other hand it costs too much. >> how are we going to get -- you saw the situation at the v.a., and those aren't bad people and no one wants to treat our veterans like that. but you know there aren't enough doctors and the reason there aren't enough doctors is because the demand has far outstripped the supply available at the v.a. how do we keep the entire system from going down the same road? how do we get doctors to come in and -- >> well, in the 20th century, the doctor was the centerpiece of everything. we're demonstrating at kaiser permanente in the 21st century, is that there are other wonderful health professionals who can actually help to provide care as needed. second thing is, we're demonstrating at kaiser permanente that the venues of care can be very different. last year we had over 14 million doctor office visits virtually. it was done through the computer. these are members who have voluntarily said i prefer to talk to my doctor through the secure messaging system. that's made available because of the electronic medical reports. and the ability to have the information. >> be nice to finally find one of these things that can transmit, you know, pacemaker data and all kinds of stuff. >> oh, that's coming. it is coming. we have a center in oakland, california, we're experimenting with that. that is coming. >> you need to invest in sensor companies. >> you do. the question is how far behind -- these guys lead by a square mile are the leaders relative to everybody else. the question is how do you get everybody else to the same place that you are with the capital that you've spent? >> well, i think if this -- if the citizens in this country continue to keep the conversation in front of us, the health care is unaffordable, and we, kaiser permanente, can demonstrate change, we will bring the rest of the industry along. >> but back to joe's earlier question though about all these specialty drugs and the cost, who is supposed to make the final decision? >> well, right now, it's in the hands of the american people, and all of us. >> but what's the right answer? >> the right answer is that we have to solve, too. we cannot leave populations out because they cannot afford $85,000 worth of drugs so we have to solve it together. >> right. >> and that's what we're working on. >> bernard we got to run but just because it's in the news 'tis morning, talking about tax inversions, all these medical companies leaving the country to get lower taxes. do you have a view on all of this? >> i stay away from that. i do have a view that specialty drugs are too expensive and hopefully we'll continue to work with pharmacy industry to lower the price. because there is a price challenge. >> and should there will be price controls? >> i don't know what the right answer is yet but i know that it's priced too expensive. >> a politically correct man, bernard. thank you for joining us this morning. appreciate it very, very much. >> coming up, comedian and tv star tracy morgan recovering from a deadly accident involving a walmart truck. now he is taking legal action against walmart. that story is next. and wicked weather expected from the midwest all the way to the east coast. a closer look at the this so-called people ar invasion. going to be so cold, you know why, because it's so warm, wreaking havoc on the summer. "squawk box" will return in just a moment. being able to pay as we go was crucial for a start up. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud 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. ♪ welcome back to "squawk box." comedian tracy morgan has been released from a rehab center following a critical motor vehicle, a crash involving a walmart truck and his lumpo bus left him critically injured. now he's suing walmart saying the retailer knew or should have known its truck driver was not in compliance with regulations designed to avoid driver fatigue. shifting gears, you a mets or yankee guy? >> mookie wilson was playing for the mets, i was a mets fan. >> the mets have won eight out of ten. >> i nope. >> have you seen the reds? >> not seen the reds. but they've been doing okay. >> you know what's happening on wednesday? right? >> the all-star game. >> so we're at the break. the reds have now cut their margin, where they're between milwaukee 1.5 games. they enter the all-star game 1.5 games out. and you know who -- what they're doing friday, saturday and sunday? >> they're playing who? >> the yankees. >> friday, saturday and sunday? >> this week. i'm going to go. >> you're going? are we going to the? are you not inviting me to come with you? >> do you suggest that i root for the reds and wear- >> absolutely. only so you get heckled. >> i'm afraid. >> more "squawk" in just a moment. looks like we're about to board. mm-hmm. i'm just comparing car insurance rates at progressive.com. is that where they show the other guys' rates, too? mm-hmm. cool. yeah. hi. final boarding call for flight 294. [ bells ring on sign ] [ vehicle beeping ] who's ready for the garlic festival? this guy! bringing our competitors' rates to you -- now, that's progressive. good morning. welcome back to "squawk box." it is official. citigroup agreeing to pay $7 billion to settle u.s. government investigation into mortgage-backed securities. that bank, they're going to take a related pretax charge of about $3.8 billion in the second quarter. citi set to post quarterly results before the bell this morning. also, we got a bit of deal news. acom technologies will buy urs corporation for $4 billion in cash and stock. urs stock holders will get $33 per share in cash and about three quarters of aecom shares for each share that they now hold. another deal would create the largest oil producer in north dakota's shale region, whiting petroleum will buy kodiak oil and gas for $3.8 billion in stock. that deal will lift it past the current production leader continental resources, which of course is controlled by billionaire harold hamm. and we didn't talk about all the inversions going on this morning but this mylan deal with abbott labs is something else. also the violence escalating in gaza. eamon modine joins us with more. >> good morning, guys. as it has been for the past several days overnight tends to be the most intense time of the day for that israeli shelling of gaza. yesterday some serious developments are having humanitarian implications on the ground. the israeli military began warning thousands of residents that live on the northern part of the gaza strip that they needed to leave their homes or risk facing injury. israel is stepping up its campaign to stop palestinian rocket fire out of gaza into israel. and so that sent people very much running for their lives. 17,000 palestinians have now taken up shelters at u.n. schools that are being converted into these types of refugee camps or makeshift shelters. u.n. officials say they don't have enough resources to cope with as many as 300,000 people in terms of what they expect to be displaced as a result of a ground invasion. this morning some significant military developments. hamas' military wing claim to have launched three drones into israel, over israeli airspace before the israeli military shot it down. and on the northern border between israel and lebanon, lebanese sources there say that two rockets were fired deep into israel before the israeli military responded. so it gives you a sense that as this conflict drags on there could be the concern that tensions spill over across borders elsewhere. here the death toll continues to mount. 170 palestinians killed in the days of fighting and there have been a few that are able to get out as a result of the u.n. evacuating foreign nationals. guys, back to you. >> ayman, thank you. let's get more on the situation in israel. plus the challenges ahead for china, brazil, portugal, and more joining us now is vice chairman at kissinger associates and former goldman sachs international vice chairman. also a former state department undersecretary for economic growth energy and the environment. also with us, michelle caruso-cabrera our chief international correspondent. both of these people love hillary like -- who do you think loves hillary more you or -- >> he does. >> probably you. >> i'm a great admirer. >> and you are -- >> i admire her, as well. >> you do? >> i have different issues on policy. >> if she is elected, where am i going to be sending my postmark date? where will you end up being ambassador? what's your job? >> i have no idea. >> what do you want? >> i'm not lobbying. i'm not asking. i just want her to be elected. good for the country and good for the world. >> and good for hormats, you're not going to say anything. you like to go to malta? >> you and i will consult when the time arrives. >> the "journal's" piece, an arc of instability, unseen since the '70s. it was like david lenhart's piece last week, andrew. the president unfortunately, through no fault of his own, has got this economy that's not cooperating. and, through no fault of his own, has got this arc of instability. he got in at the wrong time, and a lot of things just started going wrong through no fault of his own michelle. >> can that head line in the "journal" today really struck me as well. an arc of instability unseen since the '70s. ouch. >> what else happened -- how come both things are happening, it's weird, isn't it? >> coincidental? >> it's very unfortunately. >> ayman gave us a heads up on what happened in israel and gaza over the weekend. let me show you in general foreign policywise it wasn't a great weekend for the united states. the deal with iran looks like it's on the verge of failure when it comes to their nuclear program. the israel gaza situation continues to be very, very hot. it looks like iraq is still getting ever closer to disintegration at this point because it looks like the kurds are trying to pull out as we long suspected they would. maliki won't leave despite everybody telling him to do so. finally what i was struck by, putten in the western hemisphere. russia going to visit cuba? argentina striking deals with christina concernner, something that 20 years ago was of course, inconceivable. i think he feels so emboldened he can come into our backyard and do this and thumb his nose at us. >> that's one of the interesting parts of this that he now feels confident enough in his own area that he's going out and trying to develop these ties. and of course he took advantage of the opportunity to have a talk with chancellor merkel, and our relations with the germans, as you know, particularly with the chancellor, have not been very good. so putin is now feeling a much stronger position. on the other hand he still has a lot of issues in ukraine. >> sure. >> and he doesn't want to push further in ukraine, in part because he probably doesn't feel he has to. and in part because he doesn't want tougher sanctions. because their own economy, the russian economy, is in poor shape. but he is very pro-active. and we shouldn't forget the fact that they've put military planes into iraq. america pulled out. they have now these su-25 planes that are going there to help the iraqis in dealing with isis. >> what do you make of this head line? an arc of instability unseen since the '70s. >> i think it is true. >> why is it true? >> i think it's true because first of all, for different reasons you have different types of problems. the south china sea issues. korea. >> you know the spirit of my question, is it a failure on the part of the united states to not take a more leading role in the world? >> i think there are certain areas, for instance syria, where the united states did make some major mistakes in the way we dealt with the issue early on. >> ah-ha. so that's where hillary wanted to be much more activist. >> and i think -- >> whenever it goes off topic -- >> i think it also goes to credibility. that's the second point. the other is a lot of these things, iraq at some point was going to have a problem. the united states had to pull out. and the kurds wanted to establish a much stronger entity there which they're going to do. there's this radical movement isis that's billing up. and then you get the bombing of israel by hamas. why are they doing this? in part because believe it or not the iranians have cut hamas off -- >> tom friedman had a commentary. is it beyond our control? meaning, we keep saying are we to blame? so, you know, are we to blame? or are there so many extraneous and sort of exogenous factors that we -- >> i think it would be a great mistake to assume that we're to blame for all this. i think there's specific mistakes that are made. but i think -- >> no one's really saying that. they're just talking about there's a vacuum in the world -- >> but the question is, what role are we supposed to play? >> not every single one. you don't think we could have had a positive effect on any of these situations if we had a more -- >> possibly. no, no, possibly. but we have this sort of ego maniacal view that everything that happens over there -- >> the american competitionalism thing -- >> -- has to do with us. >> thank god we learned we're not exceptional. >> iraq, no one wanted to stay in there. iraq had its own internal forces that were at play and when we left, that gave strength to those forces. you have isis. i don't think there's much that we could have done -- >> it's not just that we left though, right? president obama from the beginning when he makes the big speech in the middle east and says we're a different country and basically says we're taking the gloves off, everything -- it emboldened anybody who had been suppressed for decades. >> he always says -- >> times when we're going to be out and they have to wait it out and they know exactly when -- >> setting deadlines was, i think, insisted upon by the american people but of course when you do set the deadlines some of these other groups figure we have an opportunity -- >> did you like our 5 for 1 swap? >> i was very surprised at that. very surprised. >> does that mean you liked it or you didn't like it? >> i wasn't -- no i didn't particularly like it at all. >> so there are some -- >> i didn't think the timing was good, either. it gave a very bad -- we wanted to get this guy back. it gave a very bad signal. >> finally you would say there are -- you may have made a few mistakes. >> not may, did. but i don't think you can blame this whole series of events on that. i think there are a lot of internal forces in the middle east. countries have tried to steer that area in the direction they want for decades. the problem is the united states needs to remain involved to a degree, but it really doesn't have as much influence, and in the past we haven't had a great deal of influence, either, over a lot of foergss. there are internal forces that are bigger than us and bigger than other countries that try to influence them and we're seeing isis is one of them. and you're seeing also it makes strange bed fellows but there are opportunities here. >> totally strange. >> we don't know what to do. >> these terrorist groups are a problem for china. they're a problem for russia. they're a problem for iran. they're a problem -- >> if we had helped the syrian rebels, we'd be now hearing that those are the guys that are isis anyway. so -- >> that's what happened in afghanistan. we helped rebels, and what happened to them. >> can we -- >> real quick, can you explain why stocks, i mean, are as immune as they have been? >> no, he actually can't. >> no but i'm just curious -- you might have a take on this. >> the fact is the interesting thing is, if stocks were to be affected largely because the impact of all this on energy, and it's had so far very little impact on energy, living in production, believe it or not -- >> but it's remarkable that the market has not cared about any of this. all of this instability, and nobody seems to -- >> i think because collectively the market can look back and say we've got through the '70s, the '80s, we've seen israel over and over again. >> if it does hit energy, the market will not be so immune. >> the fed is still in emergency comization mode with the economy -- >> you've got the fed moving in the right direction. energy, because most of the oil in iraq is in the southern part of iraq not yet affected by this. and libyan production is up a little bit. so if this spreads, i think it will have an effect. but so far, remarkably little. as bad as it is, and it's not going to get any better. >> someone, andrew, tweeted in a video. >> yep. >> of if in the office if it was a soccer game. and there's like normal office workers and they're walking by and one guy just barely brushes a person's arm and they go down, and they're in agony. and they're screaming. can you imagine in normal life if there was soccer flopping. like i was reading, i got a paper cut earlier, i would have had to leave. i would have had to leave the set. you would be all -- >> we do this every day. >> and the paper would have been given a yellow card. >> a yellow card. >> or a red card. >> this is hilarious. it's about a six-minute video that someone sent in. other people have noticed. i think they need to -- >> acting? >> yes, the flopping. it hurts the game. it's constant. it's -- >> are you suggesting while bob hard mats has been telling us all this interesting information you've been -- >> you're outing me on not listening to everything a guest says andrew? you think that works? >> i know you pay rapt attention. >> i am. >> so he can do two things at once. >> i can. >> and i've been e-mailing. i actually paid all my bills. >> okay, bob, thank you for being here. >> thanks for having me. >> i can't -- >> practice pronunciation. >> you know me, a polar invasion is on the way in the heart of summer. it's a bit unusual, yes. and we are going to talk go the science behind the weather event that apparently is going to grip the nation over the next couple of days. tomorrow on "squawk box," pimco chief economist paul mcculley is our guest host. plus earnings from goldman sachs and jpmorgan. the cadillac summer collection is here. ♪ ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style. in a we believe outshining the competition tomorrow quires 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. welcome back to "squawk box" this morning. see how the market is setting itself up. we had a couple of earnings reports plus some merger deals this morning. dow looks like it will open up higher about 75 points. s&p 500 up closer to 8.5 points. the nasdaq looking up, as well. >> we're going to be getting -- getting citi but we also had a number of mergers already so the analyst spirits are out including some inversions. making head lines 2 1/2 years after it crashed off an italian island the cruiseliner "costa concordia" is being refloated today. removing the 112,000 ship has already cost nearly a billion dollars. air being pumped into large metal boxes attached around the hull of the ship to slowly bring it to the surface. that process will take about a week. the wreckage will then be towed very slowly to genoa where it will then be scrapped. a major cold snap making its way over to the east coast this week right at the height of the summer. let's get more on the science behind from a industry expert. joining us is william happer a physics professor. so many different things to talk about. a polar vortex has to be really cold. i don't even know what -- i never heard the term polar vortex until this year just sort of to explain how a cold winter can fit into the overall notion of a planet that's warming. it almost seems made up to me. but what's happening right now with this cold weather? >> well, this is a very normal outbreak of cold air. it doesn't happen every year, but it's by no means unprecedented. there have been many years in the past with summers just like this. >> well, we haven't -- there hasn't been anything that's been unprecedented, professor. and i was reading some of your comments about now that we have satellite data we have a lot more knowledge in the last, i don't know, 30 or 40 years of weather events than we ever did which makes it seem like they're all more frequent or unprecedented when we're able to notice them. one thing that i noticed was in the typhoon that was over in hainan, remember that, we called that the strongest storm ever because satellite data showed that it was 200 miles per hour but none of the ground stations in the philippines that had monitored that typhoon, and all the previous ones, none of them got above about 150 or 160 miles an hour. so the satellite data caused all the major news services to call it the strongest ever when, in fact, on the ground it was no more than a garden variety typhoon. >> yes, that's one of the problems we're facing. is that we've only had satellite data since about 1980. and so we're making all sorts of generalizations on the basis of data that's not correlated with anything that we've had in the past. >> let me get right to the crux of the matter, because, you are a physicist. you were one of the physicists early on that described the greenhouse effect of carbon dioxide. and that eventually it could cause an overall warming in the climate. but the models that were designed at this point have not really accurately predicted what was going to happen. do you still -- have you changed your hypothesis on co2s, and i do always stress that it's carbon dioxide. because they constantly call it carbon to conjure up that picture there, of black smoke. but how do you explain that if co2 is at 400 parts per million that we're not seeing the same type of inyees in global temperatures? >> well, i think that people have grossly overestimated the ability of co2 itself to cause warming. of course it will cause some warming but if you look at the models they have all sorts of positive feedback built into th them. they don't take into account clouds very well. so a slight change in cloudiness can completely compensate for anything that co2 can do. >> so the models themselves, what were the feedback? because they've heard that they use the water vapor as a feedback. that's the biggest greenhouse gas, and they use that to try to forecast -- do they have a vested interest in the models having, you know, higher warming prediction? >> yes, of course, they have a vested interest. because, if there's not very much warming, co2 is very clearly a benefit. if you look at the past history of the earth over most of the time since the higher life there's been much higher co2 levels than now. >> they point out -- you constantly hear since man has been around co2 levels have never been that high. although man's only been around for 11 seconds out of a 24-hour day if you date the length of the earth. the models at this point have not accurately predicted the last 18 years. is that safe to say? >> oh, yes. they've been terrible. i mean they've overpredicted warming by factors of five to ten. >> five to ten. so how much confidence at this point do you have in models that show a 2% increase in celsius over the next 100 years? i don't think anyone has any confidence in them. i certainly don't have confidence in them. >> i'm immediately going to get mail that you're funded by exxon or by the hydrocarbon industry. do you have any vested interest, any conflicts that cause you to have these views that many people would say anti-science or at least against the scientific community? >> well, you know, i consider myself part of the scientifenie community. >> you must get a lot of flak, don't you professor? don't you get a lot of flak? >> yeah, of course. so what, you know. that's been true forever. you know when galileo had his tiff with the church he got a lot of flak, too. >> go ahead, andrew. >> professor, i have some issues with all of this, obviously, because you don't believe in climate change, at all. you made a comment -- >> just a minute. just a minute. just a minute. i believe in climate change. shut up. >> sir, i'm open to all ideas. you made a comment back in 2009 comparing climate change to the holocaust. and my question is, are you suggesting, when you made that comment, that climatologists and climate scientists are the equivalent of hitler and nazis? i mean that's what seems like you were trying to say. >> you know, you know, i get called a denier, and anyone who objects to all of the hype gets called a denier. that's supposed to make me a holocaust denier. you know, i'm getting tired of that. and the comment i made was the demonization of carbon dioxide is just like the demonization of the poor jews under hitler. carbon dioxide is actually a benefit to the world, and so were the jews. >> how much money did you take from exxon over the years in the offs -- >> i haven't taken a dime from exxon. i have not taken one dime from exxon. >> the foundation that you worked for didn't take money from exxon? you weren't paid by them? >> i don't work for the foundation. i'm a trustee of the marshall ins tight and i'm proud of it. the marshall institute for example stood for missile defense, which have saved a lot of lives in israel over the last two weeks. >> i mean i get -- >> no thanks to many of its opponents. >> all right, professor. we appreciate your time today. i get accused of -- i have no -- i put gasoline in my car. therefore, i -- that's my vested interest in i do use gasoline. i do use -- >> i'm open to all these views. >> do you think that any of the alarmists have a vested interest in this working out? >> i think a lot of people have a lot of vested interest in a lot of things. but i wanted to make clear he has a vested interest in this as well. a big week on wall street. lots of economic news to digest. plus earnings from major dow components. plus farm from the farnborough air show including an exclusive interview with the ceo of united technologies. ♪ ♪ [ 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. share your summer moments in your mercedes-benz with us. white chocolate loversividual. don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their chocolate. we needed a scalable cloud solution allowing them to select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. the ibm cloud is the cloud for business. take a look at some stocks to watch this morning. apple is upgraded from overweight to equal weight at barclays. the firm says the ceo has solidified a strategy and regained the confidence of shareholders, presumably with that excellent buy of beast which everyone seems to like now, even the people that didn't at first. and what now you like it? and tripadvisor downgraded to neutral from buy -- have you seen tim lately? >> i might have seen tim. >> the analysts citing valuation noting that the 30% year to date gain in the stock right now. >> right. >> that's about the most you can say. exclusive interview with the ceo of united technologies and the ceo of alcoa klaus kleinfeld is going to join us live from farnborough. kid: hey dad, who was that man? dad: he's our broker. he helps looks after all our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back? dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab we're changing the way we do business, with startup ny. we've created tax free zones throughout the state. and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov we do? 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[ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan to go the distance with you. go long. citigroup, the big bank that we wait for every quarter, is reporting results. and the company's better than expectations and the stock is immediately trading sharply higher on the news. up about $1.25. the company reported $1.24. the estimate as you can see was $1.05. the revenue estimate was about 19.366. and it looks like the company beat the revenue estimate as you can see. 19.34 billion versus the 18.92 billion estimates of 300, 400 million ahead of that. the sources of the revenue beat the markets in trading wasn't as bad as the company had expected. consumer banking, though, was flat. cost of credit was a little better than expected. and for the first time recently, citi holdings was actually profitable. no comment anywhere at this point. i haven't seen anything on the settlement on the mortgage settlement that the company talked about. assets now at $111 billion. the second quarter net number includes a pretax charge of $3. billion which we talked about based on that legal settlement. post-tax probably isn't one of the thing people sometimes argue about. they get some tax benefits when they make these settlements. legal charge related to the cbo and the rnbs settles all claims. the loan loss reserve $641 million the results. now we've got it at up $1.55 right now. up 3.5%. >> still want to know where all the money goes. >> for the settlement? >> yeah. $4 billion goes back to >> $3.5 billion goes to people, $4 billion goes to the justice department. salaries, expenses. hard drive destruction at theers. irs. >> we've got some other stuff to talk about including a flurry of monday morning deals. if it's a monday it's an inversion is what's going on really. mylan labs buying a portfolio of drugs from abbott labs for about $5.3 billion in stock. company says this further allows it to diversify its assets outside the u.s. the ceo of mylan will be on closing bell at 3:30 eastern time this afternoon. the important part of this transaction, heather leaving the shores of the united states to go find a lower tax rate elsewhere. white petroleum buying kodiak oil and gas for 13.9 a share in stock or $3.8 billion. that creating the largest producer of north dakota's gas and shale. and aecom technology acquiring urs for 56.31 a share in cash and stock total price tag about $4 billion. ura has been under pressure from activist investor partners to enhance shareholder value. the other inversion, shire saying it's ready to recommend a new $53 billion takeover offer from abbvie. the company entering talks after abbvie made a fifth bid. again taking the headquarters, and everything else, the two are now in detailed talks. also let's talk about swiss chocolatemaker lindt is buying russell stover. price not disclosed. that would make it the number three chocolate manufacturer in north america. earnings season is in full swing. joining us is charles biedermann founder and chairman of trim tabs investment research, the trim tabs float shrink has beaten the s&p by 15 percentage points since inception in 2011. charles, do the underlying fundamentals, whether it's gdp, or earnings that you're seeing, does that explain to you, does that justify where the market is right now? or do you just point to yellen andco? >> it has nothing to do with the market. people think earnings are important. but prove it. earnings have academically prices. knowing future earnings. all there is in the stock market are shares of stock and money. and since ten companies have been reducing the number of shares outstanding institutions own 80% of the s&p 500. so when institutions get cash in exchange for shares they have to replace their holdings. more money chases few ear shares. let's see, what will happen then? >> so it's as simple as that. >> the government really believes in free money. your good buddy paul krugman says so. >> you're talking andrew now charles. >> yes. i was being facetious. >> oh, it's me. >> we haven't talked in a long time. so i could -- you know. >> exactly yeah my good buddy. so does this mean though, charles, without question that there's a day of reckoning coming or is this okay? >> well, supposedly this bridge created by free money to boost the wealth of americans who own assets and also to give free money to the poor people to bring up their level, so that, you know, the poor are doing better now and the rich are doing better now with all this free money. hopefully all this was done to at some point u.s. economy would start greing more rapidly and the government wouldn't need to do this. unfortunately we're seeing income after inflation, wage and salaries of 139 million americans with jobs subject to withholding is growing under 3% the last few months. we're seeing another slowdown in growth. it was 4%, slowing to under 3 so we're going to have another second half economic slowdown. the market doesn't know this. but the market doesn't care as long as companies keep shrinking the float. >> what does this say about the individual investor? i'm looking at some numbers, $100 billion added to equity mutual funds and etfs in the past year, ten times more than the previous twelve months? >> 100 billion. oh, etfs. >> yep. >> well, etfs are there's no knowing how much money is going into etfs is from individuals and from institutions. you should know that after inflation earnings are below 3%, individuals are not make iing enough money to generate money for investment. no real money has been going into the market over the past few years from individuals. if you look at your ratings, if you look at individual flows into the market, it's not there. >> our ratings are tied to volume and volatility. you're right there's a lot of different ways to measure this. did you -- you probably saw that piece that kevin warsh piece, former fed guy about this is a balance sheet recovery that's been orchestrated by the fed au. >> joe, do you -- do you believe the government numbers? >> i don't believe the -- i think that -- >> it's a survey. it's a survey of 15,000 manufacturers, once a month. it's a survey of 125,000 manufactures, you know, not manufactures, employers, once a month, with lots of locations but there's realtime data available, bureau of labor statistics doesn't want to look at. that's income tax payments. they don't want to analyze that. and determine how many people are working, how much they're making in realtime. that would be like why do we need to know that? >> we need you it's been too long. we're going to have you back, charles, because -- >> well, i appreciate it. you're one of the few f and n people that i remember way back in the day. >> i know all the way back. i know. we don't want to talk about that too much because that was like -- it was in the '80s. anyway, thank you. charles biedermann, we appreciate it. i got there in 1990. >> 1990. >> when we return, reaction to citi's earnings out just moments ago. we're going to find out what one analyst is saying about the stock after the numbers. check out the "squawk box" market indicator. up next united technologies, showcasing a number of new aircraft systems today in farnborough from commercial aviation to high-tech defense, the company's ceo joins us to talk business. the global economy, and the future of flight. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. could help your business didavoid hours of delaynd test caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business. built for business. welcome back to "squawk box" this morning. take a look at futures right now. we did have that earnings report from citi. >> 92. >> dow looks like up 92 points. s&p close to 10 points. nasdaq up close to 20 points. also we should say that citigroup shares getting that boost this morning. earnings of $1.24. beating the street by 19 cents a share. revenue topping expectations. the company taking a $3.9 billion pretax charge in the second quarter for the mart settlement we talked about with the government. we're going to talk to a banking analyst in the next half hour to run through some of those numbers. you're seeing the stock up 4%. >> maybe our guy's got a running now. maybe it's happening. it's tough to turn that -- that's like turning around -- >> look at that chart. >> maybe this is a time. united technologies, major supplier for two of the biggest stories coming out of the farnborough air show. this morning the high price tag f-35 and the much delayed c-series. phil lebeau joins us with an exclusive interview of the ceo of united technologies. hello again, phil. >> hey, jaw i want to bring in louis chenevert the chairman and ceo of united technologies. you guys have a big role to play here and a couple of big story lines. let's start with one that gets a lot of attention alcoa announcing a $1.1 billion deal with you guys. when you're looking at the aircraft engine market right now, you believe that there's no slowing down at this point, correct? >> phil, first of all, thank you very much for the opportunity to be here with you. again this afternoon. if you go back a year ago, we had 3500 engine orders for the gear turbo fan that goes on different platforms. we show up starting 500 engine orders. by the time the show gets done we'll probably have 6,000 orders. the supply chain and strategic deals that go announced today with alcoa are very important to support the ramp-up of the production that we're going to have in the next couple years. >> yet two of your engines are at the center of questions people have. let's start first off with the c-series. you had a very public c-series engine failure. a pratt & whitney engine, you believe that you guys have found the root cause there and you're close to getting it certified again. where do things stand there? >> well, first of all, in development program it happens that you have a few things that these three address and the c-series engine is certified. we have basically an issue that we have done root cause on, and i think with the customer bombardier, we're very comfortable that there we're now developing the testing. finalizing the testing so they could return to flight very quickly. >> within a couple of weeks potentially? >> within a couple of weeks absolutely. and bombardier, i think, shares our passion to make sure we sell these airplanes that have 20% better fuel burn. lower emission. >> meanwhile you've got the f-35 which also has a pratt & whitney engine. you had the fire in florida in late june. it was supposed to fly today. it's not flying today. may not fly at this show. what happened there and when will you feel that the dod is confident it's ready to fly again? >> first of all the dod is one of our large e customer. we always work very closely with them. the f-35, you know, i'm still hoping that it shows up at this show. i think there's still a chance. bit you got to look at it from the macro level. it's going to be a very successful platform. you got eight countries part of the program. all services have agreed to buy the f-35. it builds on a core. the pratt/whitney core comes from an airplane that has over half a million hours. it's a very mature core. when you design such pushing the envelope with the pro-pugs and aircraft sometimes you encounter things, and you want to find those things now, and we have and i'm very comfortable working with the customer, return those issues, return the aircraft to flight shortly. >> louis, joe's got a question for you. go ahead. >> thank you, phil. louis, two things we talk about a lot is corporate tax reform and inversions. we had a couple today. i'm thinking, if utx ever tried and inversion, i think congress would probably -- i think something would happen if we were going to lose something like a utx that you would domicile somewhere else. even though we pretend to allow the flow of capital, and assets, freely in this country. i think that might raise enough eyebrows where we'd actually do something. do you agree with that that you couldn't do it. would you be motivated to try? is you nighted technologies at a competitive disadvantage because of the tax rate and the territorial system we have here? well, joe, first of all, i'm the chairman of the business roundtable tax committee and that's the reason why i took that responsibility is to make sure that we're at the forefront working with congress, working with senate to try to get tax reform which is really needed in the u.s. i think we have very good alignment amongst key leaders of the global businesses in america to do tax reform. and in my view, you know, all these speculation on inversions, et cetera, there's this false impression when you do an inversion also you go from things, the current tax rate to not paying any taxes. it is not true. in some cases the benefit is low single digit and rather i mean i think what americans need is true tax reform and that's why i'm sheerheading the whole effort on behalf of the business roundtable. >> louis, what do you make of the debate over the xm bank, and some of the people on the right who suggest that this is crony capitalism at its worst? joe, again, a very important point the exem bank discussion what the industry needs is a level playing field. every country has different formula to support exporting their own product in the case of america it's done through exem bank and i think they help create the level playing field and i know there's a strong coalition with several players to make sure that we have the reapproval of some of the regulations that support the aircraft for sales on exporting our products. >> louis we talked with jim mcnerney this morning and he said if we don't get exem reauthorized boeing potentially loses orders. you talked with all of players in the aviation industry. what is the likelihood an airline in asia, europe or the middle east would not go with boeing and instead go with airbus or somebody else if they don't have exem, the exem bank there? >> i think this is why getting the approval for exem bank is critical and as you mentioned perhaps by jim mcnerney the manufacturers of aerospace product benefit from the financing that's offered through its customer by exim and i think customers have come to also expect that this is kind of what's normalizes, equalizes the sales of aircraft around the world. >> so they could go else where? >> they effective could go elsewhere but if the same support is not available from other countries. >> louis chenevert the chairman and ceo of united technologies. you're the man in the middle of a lot of action at the farnborough air show. >> thank you. >> great, phil. >> good start to the show. >> awesome, great. thanks for bringing us mr. chenevert who we wish -- we always seem to talk to him at farnborough. i wish he'd come in. >> it would be great. he's welcome any time. coming up, great. coming up, my impersonation of flopping. soccer flopping at the office. i was reading the paper and i got a paper cut and i'm still here. i just want you to know that. that i'm still here. unlike -- actually that one guy got hit in the face and was bleeding all over the place. he got a stitch he came right back in. you didn't watch the game. >> i was on an airplane. >> with a screaming toddler. >> actually with two screaming toddlers. my own. >> so that's okay? >> in coach. sitting in coach. >> okay. >> plus citi's -- i don't want you sitting in coach. it makes us look bad at the show. you are -- >> man of the people. man of the people. >> plus, citi stock isn't flopping after quarterly results. we'll hear from an analyst in just a bit. still to come, alcoa ceo klaus kleinfeld on the company's recent deal with airbus. and how the company's aerospace business is taking off. he joins us live from the farnborough air show right after the break. ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening. they don't want to just see what's happening, they want to know and understand why it's happening. anybody can just put data up, but we want to get a reaction, make it far more interactive. we rely on the cloud to provide that immersive digital capability. give fans more then just the game with the ibm cloud. the ibm cloud is the cloud for business. in a we believe outshining the competition tomorrow quires 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. ♪ don't cry for me argentina the truth is ♪ >> welcome back to "squawk box" world cup's finally over. germany beating argentina 1-0 in extra time. celebrations in berlin and some rioting in buenos aires. that was a really good goal. i got to take off -- i went and ran and came back, but the games i watched toward the end, i am a soccer fan. i'm kind of sold now, and i'm looking forward to watching it. but i do think that the sport has to do -- what can we do about the guys when they look like it's a very minor, like they barely get touched by someone, and it just -- >> they get an oscar for this. >> what is this? >> aaah! >> are you -- >> hold on. >> come here. come here. i got a yellow card right here. here you go. >> and you're getting a yellow card for just bad drama. >> yeah, i can't read. i mean, he -- -- you got to take us out. they got to do something with that. don't you -- yeah, that's nice. >> coming up, this was the yellow card. this is the best we can do. it's a business yellow card. >> did my slow motion work or -- there was -- >> you think there's a sag award in this for you? >> their acting is bad. i deliberately acted bad, because per game someone should count the number of times the game is stopped. that's why they have to add minutes at the end. the number of times that the game is stopped for a totally faux injury, right? and they have to do it because it's the outcome of the game can be dependent on whether you get a yellow card or a red card or something happens. so they all have to do it. the level keeps going higher and higher and higher. >> we've got to give you acting lessons and them, too. anyhow when we come back a ceo -- does he know how to act? alcoa. at the farnborough air show. >> i tried to act and my instrument is clogged. >> the largest supplier of aluminum, the planemaker giving us his assessment of the industry and the overall economy. as we head to a break take a look at u.s. equity futures. can get a $1,000 rsou turbocharged reward card with a new volkswagen turbo. so why are we so obsessed with turbo? because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. vo: hurry in and you can get a $1,000 turbocharged reward card when you lease a new 2014 passat s for $219 a month. [b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. welcome back to "squawk box" this morning. in the news, citigroup hosting better than expected earnings and revenue earlier this hour. the company's ceo said the firms businesses were resilient in the face of an uneven economy. also we should tell you about apple this morning. it's been upgraded to overweight from equal weight at barclays. firm says ceo tim cook has solidified his strategy and regained the confidence of shareholders. also, intercept pharmaceuticals is rising in premarket trading. isi group names intercept as one of several potential takeover targets for gill at-sciences which it says has an abundance of cash to make deals. that however would probably not be an inversion and allergan just filed a new investor presentation. check it out if you're paying attention to this transaction. which it continues to rebuff buyout over valeant's pharmaceutical. future business prospects are unsupported and that its own businesses would be at risk under valeant ownership. we saw the ceo of that company on with jim cramer on mad money just last week defending its decision to try to block that takeover. and then we got sotheby's. >> lock your back teeth. lock your back jaw. >> sotheby's. >> and ebay. >> yeah. >> you want me to read that? >> it says your name next to it. >> i was trying to figure out what exactly that chart was weird and we didn't explain it. sotheby's and ebay reportedly plan to announce a partnership today. "the new york times" says under the deal sotheby's new york auctions will be broadcast live on a new section of ebay's website. it's kind of interesting. they are auctions, right, and ebay you figure online. you'd farm that out to them instead of trying to do it yourself. partnership expected to expand to eventually include things like online only sales and streamed auctions from other sotheby's houses. i wouldn't just try to sell the $40 million stuff. i'd want to be in the auction business if i were sotheby's if i were running that company. wouldn't you? >> i thought you said it was going to make it seem downscale. >> what was what i said at 6:00. >> you changing your view at 8:00? >> i have a lot of different views. depends. a regulatory filing shows a group of 27 top executives and investors in alibaba can appoint another two directors to the company's board once it goes public on the nyse. the move would expand the chinese ee commercial company board to 11 members from nine. it will help them strengthen control of that board. >> okay. up next, i'm looking at this by the way, i'm looking at the mylan deal. i want to talk about that when we come back. we had a lot to do. oh, we should also tell you about citigroup. citigroup reporting second quarter results just a short while ago. let's get a little more reaction to the numbers. join us is david helder, banking analyst at drexel hamilton. good morning to you, david. >> good morning. >> give us sort of your quick head line view on what you see here. >> well, of course, the big news is the settlement. and i think it's very important for citi that they get that out of the way before going in to the capital and the fed's approval process next year. in terms of earnings they were a little bit better than expected if you exclude the settlement. investment banking was strong up 3% year over year. equities more than fixed income. and they're still in a very good capital position. their common ratio is over 10%. >> in terms of the settlement, though, much worse than you expected? better than expected? there's a back story in "the new york times" and the "journal" about how benghazi may have affected it? >> i think the $7 billion number had been pretty widely reported by the "journal" and "the new york times" and bloomberg over the past couple of weeks. so i don't think the $7 billion number was a surprise. and i think the $3.8 billion pretax charge was probably a little bit less than some had expected. i was thinking that the inkreemtal charge for the settlement might be as much as $5 billion so $3.8 is fine. >> what is your target price on the stock now? >> target price is $58. >> how are we going to get there? what has to happen? because it seems like a lot has to happen to get you there. >> one thing -- citi is the only major bank trading below tangible book value, about 15% or 16% discount to tangible book value. i think as we see the losses in citi holdings, which the mortgage and other related assets that are being run off, as we see that turn from losing a billion dollars per quarter to making $244 million ex the settlement i think that's very important. i think over time citi stock will trade more toward tangible book value and like other banks eventually trade at a premium to tangible book value. it's mostly about getting the roe up and having the ability to distribute say $6 billion, $7 billion in excess capital next year. >> can you give me a grade on michael corbatt's performance so far? >> i'd say "b plus." he was belt a very difficult hand and i think his current focus on getting through the capital planning process will be a success. and i think at that point we could move him up to an "a." >> should we care about what's happened in mexico? is that over? the losses are what they are. it's kind of extraordinary to lose that much money in a secured lending business. but clearly citi was the victim of fraud. and it looks like it was not only one or more citi employees, but fraud at one of the borrowers, as well. so the investigation will take awhile. but i think the economic consequences of that are done. >> okay david we're going to leave the conversation there. you're watching that stock up in the premarket this morning. coming up next, alcoa striking a deal with united tech earlier this morning at the farnborough air show. ceo klaus clean field is going to join us after the big. delivering alpha conference will be taking place on wednesday. interviews and live look-ins all day. we're going to kick things off right here on "squawk box" with leon cooperman, former white house chief of staff bill daly. 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[ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan to go the distance with you. go long. ability. alcoa's courting customers at the farnborough air show outside london this morning. the steel giant announcing it is -- the aluminum giant announcing it signed hey $1.1 billion deal to provide engine parts to united technologies. did i say steel? did they really right that? >> i think they did but we meant aluminum. >> phil lebeau joins us now. is he talking about the world cup, phil? he must be -- they're probably unbearable, isn't he? has he mentioned it at all? has he brought it up or do i need to do that? klaus kleinfeld, chairman and ceo of alcoa. has he mentioned it? does he play soccer? >> we'll talk about germany and the world cup in just a little bit. believe me everybody over here in london has been talking about it. we'll ask about that in just a little bit. let me bring in klaus kleinfeld, chairman and ceo of alcoa. very happy not wearing german colors. let's talk about this $1.1 billion deal between you guys and united technologies, pratt & whitney, when you look at the aircraft engines, and the drive for fuel efficiency, where are we on that scale in terms of being able to wring out more mileage fuel efficiency from the aircraft engines? >> i think we're still going to have a lot to go forward. the a380 is just starting and we've got a little bit of dust here. so, the deal we sign today has a whole group of things. we're now moving into the fan blades with aluminum. with very modern aluminum. a new version of aluminum. we are going with our metallurgical solutions where no man has gone before and it helps directly in the efficiency because it's going to be less weight, 36% less weight than a titanium blade and on top of it it's going to be cheaper. that's one part of the answer. our acquisition that we announced about three weeks ago, that's another one where we go straight into the engine, where we go straight into the hot part of the engine, right? we is going to >> see our producer cleaning you up. people don't believe we're at an air show until they hear it and see it. >> exactly, yeah. >> all of that fuel efficiency. it is coming through not only in the demand for new aircraft but in the demand for new engines. >> nine years of auto backlog at 77% growth in the next probably ten years, tell me any industry has numbers like that. right in the center of innovation, leaders in engine technology components you know. we're bringing it to the next level. i'm very, very excited. >> how much aluminum still remains in the fuselage of let's say your average wide body plane out there? i know there's a number of varieties. >> right. because the viewers don't know. the engine there is really almost no aluminum other than what we just talked about on the fan blade which is a new thing, right? most of it is nickel alloys. right. so, the fuselage when we came out with aluminum allies you saw when boeing and airbus made the decision for their work horse planes, they decided to go for all-aluminum planes again and that was two years ago. so i think we're pretty competitive. >> you're competitive but in terms of there has been so much focus on composite aircraft, and composites being the future for lightweight and more fuel efficient aircraft. but the aluminum's not going away. >> no. and on top of it when you look at the amount of material that we have on a 787, the composite plane is actually twice the size on what we have on the chip set of the 737. it's also because we are material agnostic. when you put composites to the with other materials you need to make sure you keep this things to the. lightning strike. to have a fastener that leads lightning strike through it. it is unique. we came up with that solution and it's solving a big problem. >> we were just talking to louis chenevert and i said how much longer does this boom cycle, if you will, or this upcycle for the aircraft industry, go, and he says at least the nextive to ten years. do you agree or do you think it goes beyond that? >> i do agree. one of the growth of middle class in the emerging countries and people once they have basically the ability to feed themselves, get a house, they want to travel. second one is the efficiency you mentioned. also in the west people are going for new planes that are more fuel efficient. the engine had 50% better fuel efficiency. and the components that we are making are directly fitting into this. klaus kleinfeld, chairman and ceo of alcoa. real quick what did you do last night to celebrate germany's win? >> i got on a plane to come here. but i saw the game until the very last point -- >> did you see the goal? >> i saw the goal. and i have to say that i thought it was a great championship. we saw more fantastic teams. it was a great competition and it brings the world together like almost no other event. you know, i was very proud, and also the speed and a guy like messi, you can't keep up with him. >> best piece of advice? our photographer's from britain he doesn't want to talk about the world couple. guys, that's the latest from farnborough. we'll send it back to you. >> you've got to start thinking the way i think, phil. not immediately start talking to klaus about that. i mean i guess you're just all about, i don't know, substance or something. that's the first thing i thought of. i knew he would be -- >> joe we're trying to keep the dust out of our eyes. >> i knew -- >> it's an air show. it's busy. >> tell him i just knew -- you know the germans are on a roll. and i don't like it, actually. everything's going so well. they got no debt in their country. they got low unemployment. they got all these great things happening. now they conquered the americas, north and south in the world cup. and you know, just don't get too cocky, klaus, all right? just -- >> wait a second. the americans are on a roll, too. if you look at where we are investing. we're investing. we've invested in just the last 18 months in virginia. we've invested in indiana. we've invested in ohio. and all of these investments are around aerospace. and aerospace has a net export, exported in the last year $71 billion from the u.s. this place rocks. i can talk about advance manufacturing where there's no other country that leads more than the u.s. does. you know, so there's a lot of great things to say about what the u.s. does and alcoa is helping on that. that's what counts. >> okay that's nice. that was nice. you're lulling me -- you convinced me. all right. thank you. thanks, klaus. >> that team. really was -- you know, he was just talking about messi. messi had a couple of points, you didn't see it. there were a couple of times where he did get a chance to show how fast he was. and how he could handle it. he was amazing. anyway coming up, jim cramer live from the new york stock exchange. as we get ready for a big week on wall street. "squawk box" will be back right after a break. tomorrow on "squawk box," pimco chief economist paul mcculley is our guest host. plus earnings from goldman sachs and jpmorgan. "squawk box" starting at 6:00 a.m. eastern only on cnbc. ♪ ♪ ♪ [ 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. share your summer moments in your mercedes-benz with us. offers end july 31st. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. ♪ don't cry for me argentina the truth is i never left you ♪ ♪ all through my wild days my mad existence ♪ >> let's get -- i crack myself up. mac bumped into me. jim, let's get the new york stock exchange. mac bumped into me when he was handing me the script, and that was the -- if i was doing a soccer flop, that's what i -- don't you think they need to clean that up a little? you know in the nba you can get fined if they do a -- they, you know, look in slow motion after the game if they see that you're just totally full of it you can get fined. soccer needs that, don't you think? >> i think the yellow card has to go to the guy who is acting not to the guy who did the hitting. because we all see the -- when we see the rewind, we know that the guy was definitely not nearly bumped as much as you were. >> exactly. >> clearly you're in a lot of pain. >> i got a paper cut earlier reading the newspaper. yet i'm still here. am ihere. >> did it bring -- did they bring out that red gurney? >> how many guys -- the nfl, i mean -- one thing, jim, when both guys going for a header and they -- they really do crack their heads, i worry about that stuff and i'm wondering, concussions and stuff like that, they hit heads so hard that make me worry, they need equipment -- they do the ridiculous stuff on their ankles and put them right back in after they get totally like a couple of coconuts. >> didn't you sense a lot of the guys who had concussions were walking to the wrong side of the field after they got up? >> yeah. one guy, they put him back in he was leaving later he was like -- what's my name? where am i. >> how many fingers. no, when you hold them up, i'm ready. germany, argentine na i don't know, which side? which side am i playing for? manchester united. i forget who i am. >> citigroup, corbat, give extra credit give eman "a." >> i look at, $10 billion increase in equity for basil. one of the things i like, out of nowhere the citi holding swings from negative to profit? i mean i'm -- this thing has been a drag for the company and now it's positive. a lot to like here, book value, true book value $7 under. i can see the stock going higher. amazing wells fargo get downgrading and citi acts great. major turnaround for bankerser. >> we've got to put that 10% correction on hold again, at least for today, jim. not sure it's starting here. we got a lot of people say it's got to happen. but the market doesn't listen to anyone, does it? >> listen to klaus kleinfeld, a mixed security deal on friday. he does this thing, i'm united states guy and united states looking good. my tribute to klaus, he seems to understand exactly how well the world's doing. it makes it hard to look for 10% correction when he's doing the talking. >> jim, how upset am i supposed to be about the mylan deal, this inversion? >> i thought abbott did well. i'm tired of inversions. obviously inversions are the way to go. i'll be talking to jack lew, delivering alpha, they say in the treasury it's the republicans' fault. look, we're losing jobs. we're becoming uncompetitive. it's a natural to fix. who would be against this? it's ridiculous! >> i want to fix it. >> it has to be fixed now. i mean you know -- >> it's got to be fixed now and it's not going to be fixed. >> it's a major loophole. now if i'm in any other company competing, we talked about this with joe last week, you've got to do a deal, too. it's like you've got to call -- >> the problem -- jim, if you think everything's so deadlocked in washington, the question becomes, do you do a carl levin and block it, temporarily or not? >> yes. >> i mean -- >> i think that jack lew will go along with that. >> i'm sure. >> i've got tell you, sometimes you have the irs make a rule and sue the irs, good luck. >> i know. tell me about it. jim, thanks. see you in a couple of minutes. >> coming up on "squawk on the street" later today, reid hoffman, on squawk alley, preview of the major league all-star game. cal ripken jr., special guest. preview of the big delivering alpha events. "squawk box" live look-ins and interviews, guests including leon cooperman, bruce richards and former white house chief of staff, bill ldaily and more. ou , but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. white chocolate loversividual. don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their chocolate. we needed a scalable cloud solution allowing them to select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. the ibm cloud is the cloud for business. 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. introducing at&t mobile share value plans... ...with our best-ever pricing for business. investors delivering alpha confres, taking place wednesday. the biggest names in business and politics on hand. kate kelly. >> we're two days away from the annual hedge fund confab and should be plenty to talk about end of quantitative easing, trouble making money with global macro, and where to look for rushes in the stock market. keynote speech business jack lew, having the treasury secretary kick off the day's proceedings. carl icahn, hopefully will shed light on his latest plans for family dollar, among other investments and governor chris christie, speaks to us after a tumultuous year, accused of settling political scores by closing lanes on the george washington bridge. looking forward to talking with ken griffin, always news maker, in addition to managing $19 billion in hedge funds and running a major market making business, griffin has strongly held views about the banking business including a desire to see them broken up, that he shared with andrew at last year's deal book conference. >> glass-steagall actually makes a tremendous amount of sense. it's not appropriate for the securities trading operations in our country to enjoy the taxpayer support implicit in fdic insured companies. so the first thing i do is i pull the securities businesses out of the banking system. i would, in a sense, debank goldman sachs and morgan stanley. >> that notion becomes interesting in an environment where the credit suisse is considering spinning off a piece of its business and banks across the board, including citi, are seeing flagging revenue amid higher capital requirements. citi, by the way, a major holding of citadels for some time, citadel trades in and out frequently, they're always in the market for compelling, longer-term investments. >> we don't try to profit from calling the direction of the stock market. we troy to profit from picking individual companies that are going to outperform expectations of success. so we're really in the single stock story. which companies are going to have winning products, winning value propositions, that are going to create wealth for their shareholders that the rest of the market's not anticipating. >> hope to hear more how they're doing in the environment on wednesday. >> we should also -- joe's talking to the one and only stan druckenmiller. >> you don't need to tease me. >> stan, i don't need to give a last name, it's like madonna. >> you picked icahn. >> i thought it was druck. >> stan. the greatest investor alive today. >> he's got a fantastic track record. he basically opted out, exhausted by the draw down, but never had a losing year, not running public money at duquesne. >> he was soros, really, when soros was great. join us tomorrow, "squawk on the street" is next. ♪ i'm on top of the world eye i'm on top of the world♪ >> on top of the world, right. congratulations to germany on its world cup victory. angela merkel in rio. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. what a week, first full week of earning, 55 s&p companies on the deck, yellen on the hill. boatload of news. ten-year yields around 2.53. housing starts, industrial production, and more this week. and as for your mostly in the green and, yes, that includes

Transcripts For CNBC Worldwide Exchange 20130304

hell lowe. welcome to today's edition to "worldwide exchange." i'm ross westgate. >> and i'm kelly evans. >> hesitate are your headlines around the world. >> china's mainland markets knocked off balance by beijing's latest property curb, hitting shares of real estate developers there and around the world. the battle lines are drawn in d.c. after the sequester goes into effect. but for now, the white house and republicans aren't giving any ground. plus, executive pay is in focus across europe with voters overwhelmingly backed plans giving voters more say. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. welcome to today's program. >> and you're headed to italy. >> i am. >> it's supposed to be about emerging markets and global growth and all those sort of issues, but it happens to be in italy where we don't have a government. >> speaking of italy, can we go ahead and show my favorite chart. if you look at what's been happening on market action, we've seen the back up at 4.9%. you have to wonder, oh, look at that. beautiful chart. you just have to wonder if we're heading that toward inversion. usually it's a gauge fof eu crisis risk. promise, plenty more on that on the show later. >> gilt yields down at two-month lows, on the other hand, post the moody's downgrade. >> exactly. so lots of market chatter to get through. >> and lots to get on today's show. besides that, president obama and congress failed to reach a deal to avert $85 million in automatic spending cuts as the sequester kicks in. we'll be in washington, d.c. as we look ahead to what's next in the budget battle and the potential impact. >> swiss voters overwhelmingly backed voters to get a cap or executive pay. and the bonus battle launched into london's property sector. the talk of capping bank bonuses as a possibility to end central london status as a real estate safe haven. >> clearly not the case in china this morning as real estate developers suffer their worst. how much lower can the index go? we'll ask at 10:30 cet. first, hsbc posted full year earnings just below expectations. coming in at $20.3 billion. that compared to an average analyst forecast around 23 billion. the bank has pledged to raise its dividend next year's growth and its core asian markets are predicted to boost its capital. shares have had a pretty volatile start to the day, down 2.6%. julius, managing director for uk banking, thanks so much indeed for joining us. what are your thoughts on what we've heard this morning? >> it is a little bit below the forecast, but a robust performance and reflects the fact that hsbc are to some extent ahead of the curb in terms of doing some of the real global restructuring that these groups have to do. >> it's interesting because we're seeing so much strength in the businesses. uk and europe down significantly. where does hsbc go from here? >> well, there is a, you know, too big to grow question mark over any of these groups. hsbc has proved that quite early coming out of the insurance business in china and pang an. completely out of general insurance worldwide, reducing its japanese food print. what you see is they make clear choices around emerging asian and material markets. they put that into the future. i think the risk for all groups, the sun charts, the city, the global groups with asian aspirations are going to make the right betts in emerging markets. not all emerging markets are going to come up with a tie this time. >> what is the right emerging market, do we know? >> i probably wouldn't have to sit here if i knew the answer to that. indonesia has the right kind of demographics and basics. >> i wonder how much more the uk might shrink and is whether the latest back and forth or the bonus caps that are being discussed out of brussels will have anything to do with that. >> i don't think you make decisions about the structure of your business based on those factors alone. really, it's fundamentally around demographics. demographics, trade flows, growth potential, and whether the regulatory environment in the round is particularly ba nine on the line. but on one of those issues, we're not going to make a ten-year decision. >> but on the fundamentals which have clearly deteriorated, we get a fresh numbers today with the spanish unemployment. they did not do well in these markets. does that call into question their future operations here? >> well, the whole of legacy european banking, let's call it that, has a return on equity which is currently below cost of equity. so you could say the whole of legacy european banking at the moment doesn't have a future. that could find a way back. >> are you talking about across the sector or just -- >> the whole sector. >> for the whole sector. >> and how much is the uncertain nature of future regulations also going to be a cause to weigh in on sentiment? >> it's a very big factor. every time we get a set of results out, we get a big restructuring chart from one factor or another. penalties on ppi in the uk, penalties on money laundering. the suv on the horizon looks crazy and uncertain. the icb review for the uk could have an impact of $1 billion to $4 billion per annum. we're halfway through the ppi. we have 12 billion and we may have another 12 billion to go sterling. that's before we get into some of these other issues. >> and stewart grover future? >> he's been restructuring hsbc for two or three years. i don't know what his personal plans are, but i would say he's safe at the helm. hsbc has been a business growing sense 1865 and it shouldn't underestimate the amount of pain you have to go through to restructure that into some businesses. >> i think there's a job in italy that may be open for someone who could restructure a couple dozen units, cut costs, perhaps you can have a chat down on -- where are you going? ambrosetti? just a thought. julius, good to see you. china's stocks have plunged overnight to their lowest level since 2008, leaving a drop across markets as tightening measures have kicked in to ease home prices. you can see the shanghai composite down there 3.6% today. the government is stepping up its three-year campaign to cool the property market. did i edra joins us for more. what measures are they that are going into effect here and do you expect more? >> well, kelly, the government talks a lot about these measures, a lot of talk about the clampdown on the property sector. it's really confusing because sometimes they say they've never gone to place. but in this case, investors stir. today was the eve of the national people's congress. that is the biggest most important political event in the country all year and this is the damage. policymakers were probably hoping for stability. they got this, volatility. the shanghai composite was down 1.4% at one point, ending with lows nearly 11.7%. the shanghai composite down 3.7%. beijing has been on a campaign to cool the property sector for the last three years. but we've seen increasing prices as well as sales. there has been rhetoric trt government saying they would clamp down on this sector. higher down payments, higher mortgage rates, that got investors spooked. we saw them limit down. it affected shares in hong kong and affected sentiment all across the region as far as australia and certainly in europe, as well. it will play into your trading day over there. now, all this, as i said, on the eve of the npc where property is certainly to be in focus as well as pollution, corruption, economic reforms. now, the new set of leaders coming in not exactly known for their political reform agenda. but they are known for their economic reform being a little bit more aggressive on that side. so we are going to be looking ahead and, of course, kelly and ross, as you saw, it had a big effect on the stock markets here. so investors are certainly going to be looking. and you know what? honestly, i wouldn't be surprised the if property shares saw a big rebound yesterday because that's the nature of this market, guys. it is momentum driven. you can see limit down one day and limit up the next. >> deidre, thank you so much. >> let's bring you up to speed with where the implications are for equity. an hour and ten minutes in the trade, weight is to the down side seven to three. we can look at hsbc stock in london and the ftse 11100 off firmly above 6300. the xetra dax off 0.6%. we see the ftse mib down another 1.4% this morning. what is the china affect? weaker sectors, basic resources down 2%. then we've got banks being dragged by hsbc. defensive and health care utilities up and telecom tt best performers. we talked about the spread between italy and spain narrowing. we're not far away, around 30 basis points. narrow spreads. ten-year gilt yields, now below 1.9%, 111.8%. we're down at fresh two-month lows, as well. on the currency markets, the aussie/dollar taking something of on a hit, 1101.32 is where we stand at the moment. so the aussie get to go an eight-month low. investors spooked by beijing's decision to hit. the property sector, dollar/yen, 93.60. euro/dollar, flat 1.30 mark, as well. sterling is hemmed down at those lows of 1.5042. let's check in on the rest of the market action, go back to singapore. this time we're joined by sixuan. hi, sixuan. >> thank you, ross. what a day for the china rs bos. the stock market, indeed, not celebrating the two sections of the npc and pccc. the shanghai composite lost nearly 4%, seeing its steepest decline in months. property stocks took the main fall with a subindex slipping over 9%. we also saw broad based losses in property related sectors such as cement and steelermakers, home appliances. so from upstream to downstream took a beating today. the property sector dragging the hang seng lower by 1.5%. shine na's came under pressure. but the nikkei endinging higher by 0.4%. property developers, on the other hand, got a nice boost on the thought the boj wasn't continue to pursue aggressive reflationary policy. elsewhere, south korea's xosty lost 0.7%. china related stocks such as chemical and steelmakers weighed on the markets. australia's asx 200 fell 11.5% on profit taking ahead of the rba meeting and more economic data later this week. resources lost ground on fears of a china slowdown. india's sensex les than ann an hour from its market close currently trading lower by a modest 0.2%. >> sixuan, thanks very much on that. news on our website, a couple of stories you might want to follow. the italian election and u.s. budget cuts may provide uncertainty. head over to cnbc.com and find out what he has to say about the wave of new money that's actually the driving force behind recent gains. but watch out for the falling oil price. u.s. oil consumption in to 12 hit its lowest annual level since 199637 and despite potential protection from the upcoming jobs report, others predicting u.s. crude futures could drop below $95 a barrel. might be good news for consumers. tom smith explains how his company is overcoming the challenges of the shipping container industry, often seen as a global gauge of demand and some weakness ahead of what he sees for 2013. ross. >> yep. meanwhile, the battle lines between brussels and the uk on big bonuses have been drawn, but could splashing compensation affect the boosted property markets? according to our next guest, it already has. find out how when we come back. [ 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 ] what?! investors could lose tens of thousands of dollars in hidden fees on their 401(k)s?! go to e-trade and roll over your old 401(k)s to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments. e-trade.less for u. welcome back to the program. swiss voters overwhelmingly backed a plan to give shareholders overwhelming authority over beanus pay. and it requires greater disclosure on loans and retirement packages. the proposals now go to the swiss parliament where lawmakers will draw the new legislation and the rules could come into law as soon as next year. carolin roth is in zurich. are the swiss shooting themselves in the head here? >> well, that's hard to say. a lot of people say it could impact switzerland's competitiveness negatively, though other experts have told me this morning that the fundamental res still in place because switzerland has a very low corporate tax rate, still has the right business environment. now, also, we're going to have to wait and see. to what extent these strict pay laws are actually going to be xwlekted because some people say they could be watered down quite significantly. but what it does ensure, of course, is this, you know, lower extent of short-termism in the swiss labor market. so it ensures that no corporate executive from overseas is coming to switzerland just to get that big signing bonus. but i just want to show you what the reaction has been in the newspapers. the french daily says this is a triumph. and you see his corner office as being smashed here. now, another paper says this is the historic coop. of course, they're referencing to the person who is behind this idea. the initiator. his name is thomas menda, and he's a politician who has been slobbying for this referendum to take place for more than four years. and he is now being called the new robin hood of switzerland. ross. >> does he run around in green? carolin, thanks indeed very much for that. it's a very big man called little something or other. over the weekend, british politicians described proposals as a moronic piece of economic policy. the prime minister david cameron called for the initiatives to be more flectble. but politician might find support within europe. german and french finance ministers recommending that the eu business finance plan be watered down. this as we've heard from hsbc this morning. highest paid banker is not a director. he's paid 7 million pounds for 2012, as well. so the highest paid employees were paid 27.8 and that's five of them. >> and that includes 21.5 million in bonuses. so there's basically 20 million in bonuses. that's a -- that's more than one to one. >> yeah. or two to one, which would be -- it is more two to one. meanwhile, british politicians may have an impact on the economy. is it too late for central london's red hot property market? according to a new report, cash sales fell by a quarter last year. there has already been an impact on the bonus culture received. good to see you. is it cash bonuses having an impact? and how do you separate cash bonuses out from also that duty level, as well smp. >> i think it's a complex situation, really. what we've seen is that last year 75% of properties and prime central london were bought in cash. this year, it's 50%. and that is in the prime central london. so we're talking about the core area. >> how many of those buyers are overseas? >> that's a good question. it's a mix. i think it was overstated because is a banker working in this country here an overseas buyer or -- >> no. i think purely of money that has come -- >> a lot of that is there is caution, but a lot of the overseas money is going to the new build property as well as the other locations. so there is a proportion of that. but i think it's a complex story, really, because, one, there is a little less lump of cash around. but also, prices have gone up over the last year. prices have gone up over 6% in central london. therefore, if you're buying a 1 million pound property, which that doesn't buy much in that area, sadly, that is on top of that, that is quite a lot of extra money. it's over 50,000 pounds. >> 7% now over 2 million and that has to be paid for in cash. >> absolutely. so we're seeing people buying with mortgages because they need the extra because there's less cash. so they're having to pay more. also, because of property, because of the extra costs, we're are deciding i want to buy for the longer trm. i want to reduce those costs further down the line. so i'll buy slightly more now, therefore mortgage, and there are more mortgages around now. >> they're actually a pretty good value. if you're putting in quite a chunk of deposit, no doubt these people still will. you get some extraordinary five-year record low rates on the five-year money. >> that's right. light the rest of the money. but some of the high street banks are getting back into that market. >> is this not a lucrative place for them to look now, they're probably a relatively high credit quality. >> yeah. i think the difficulty is, though, we don't quite now how the remuneration structure is going to work in the future. and a lot of banks, particularly high street bank, want something quite simple and -- >> well, the good news is, these guys are going to have much higher based incomes. >> we think. there we go, yeah. if that's how it works out, then everything is fine, yes. i suspect it could be more complicated than that. >> okay. they're going to get higher based income? >> no. it's a great point it's hard for them when you have such a variable income to convince the bank to give thaw -- >> that's why if you wait for the bonus, you -- >> do it all at once. >> if you were earning a hundred thousand and is then you were getting a 900,000 bonus, it's hard for a bank to work that and that is so variable every year. and then they'll give you a 300,000 pound salary or whatever. a 300,000 pound bonus. >> has it resulted in the changes clients are looking for? >> i think there isn't much property around. so the fact that we've seen less people buying with bonuses hasn't affected the market. we're still seeing prices rise. >> what's the supply like? >> people are not selling, partly possibly because they're being cautious and staying in the market. people are staying put because they can't find somewhere else to go to. >> is it also because there has been an influx of investor buyers or long-term -- i mean, if long -- central london has become a safe haven for int international money, those people presumably stick it there and walk away, right? >> yes, i would agree with that. but lots of that money has got into property and the flats. let's say they're sort of working finance family looking for. they're looking for family homes and, you know, in these areas and where are they going to find themselves having to move out of villages or further out and further out or we certainly are after town. and given how prices are going to go, by the end of the year, they'll probably be about 10% ahead of the peak in prime central london. and it becomes harder and harder. for a family home that is a good commutable distance. >> and that's if you're a working finance family, not to mention just a typical working family. thanks very much for coming by. >> that's good news. thanks very much for that. yep. let's recap where we are with hsbc share prices. >> we're down almost now 3%. >> 3%. 2.98%. >> and we'll see which one is -- this one is slightly delayed. hsbc shares not responding well to that news. >> it's an overlay of news, isn't it? they're supposed a bit to what happens to china and china's property, as well. so we have that overlay, as well. meanwhile, has arsenal football club -- have you gone to an arsenal football game? >> i should because i'm in the neighborhood. >> it has become the latest middle east takeover target. there's a 1.5 billion pound target for the team and it's requested a meeting. but the sporting franchise includes the nfl's lui rand has no intention in selling his stake in the club. and don't know your shanghai shenuous from your beijing yuan? that might be all about to change as the chinese football association has named david beckham his first global ambassador for football. beckham said he was honored. the chinese super league co comprises 16 teams across asia. he's now topped out. >> take your word for it on this one. >> do you know who dennis rodman is? >> i do know who dennis rodman is. former nba basketball star, he's been speaking out about his friendship with king jong un. he was asked about pun yang's right to destroy america. the u.s. state department has criticized north korea for wining and dining rodman while its people go hungry. meanwhile, rodman had his own message. >> i think he's going to change something. it is a different view. i sat with him for two days and the one thing he asked me to give obama something to say and do one thing. he wants obama to do one thing. call him. >> call him. on that, we want to know, are athletes helping or hurting the cause? are they better diplomates than politicians or do they just interfere? >> i don't know. get in touch with us. e-mail us, worldwide@cnbc.com, tweet, @cnbcwex. still to come -- >> property markets are sent stocks tumbling. what's on the agenda this week? >> more when we come back. hsbc stocks are down after recording a profit of $20 billion. it has lifted its yearly dividend. shares of real estate developers in china are tumbling. the budget battle lines are drawn in washington after a sequester goes into effect this weekend. but for now, the white house and republicans aren't giving any ground. and executive pay is in focus in europe. swiss voters have opted to give shareholders a greater say. >> we've got data out. february construction pmi 46.8%, 48.7% in january. the poll was ready to tick up to 49. it's the lowest since 2009. >> that follows the disappoint we just saw in manufacturing. >> and we got the latest on the bank of england's lending scheme. net lending to lending scheme, sure, i have to work this out, kelly. >> negative. >> since june 30th, negative 1.5 billion. >> lenders have drawn down 13.8 billion in the sls since launch. >> and i suppose it's still waiting for that to leak through. >> lloyds has lending of 3.11 billion. minus 3.1 billion. barclay's fourth quarter net lending, 1.49 billion. right. not helpful. >> we're going to take a walk through those numbers and follow up on this. sterling/dollar, about 0.1 is% weaker. it did bridge the 49 level. not just personally, but jaus just because it's been such a fast move to the down side over the last couple of weeks here. the question is, again, with the latest set of data, we saturday to sit below -- >> 1.50 is not any technical level, but it is deeply psychological. people have extra additionally looked at sterling/dollar trading on a -- >> cable. >> cable, yeah, trading on a purchasing parity between, you know, 1.50 to 1 is.65 is about right, somewhere in that spread. so anything meaningful below 1.50. >> like you said, i does have an impact on psychology and beyond trade beyond whatever the latest chart level might be. >> take a look at the bond space. here is a broader look at what's happening. look at that, sitting below that 1.30 level. a lot of key levels here today that we're watching. the aussie/dollar is 101 to the u.s. dollar. i think this is a story, if i can point, how about that? look at that. does that work? anyway, the ten-year in spain is falling. the 10-year in italy is 4.8%. i think that spread itself could be used as european crisis stage. the last time we saw spain above italy was a year ago. this time around, will it be different? >> yeah. but then both sets are coming together. here we have spain coming down. meanwhile, the shanghai composite has suffered its -- do you want to look at -- what do you want to look at? european markets. let's take a look at those. >> and now the shanghai. this is the story, anyway. we might as well just look at it, down 3.6% on the latest move to curb property markets there in china. it's amazing how quickly we started talking about tightening as opposed to last year when concern about hard landing was all the rage. the shanghai composite has suffered its biggest loss in months. limit down today on the back of fresh tightening measures on beijing. for more, joining us from singapore is andrew leon. andrew, there was some suggestion that this was spurred, as well, by a media story in the u.s. last night. "60 minutes" did a story on the chinese property market. the question is whether today is an overreaction to some of these headlines. >> well, i don't think it's an overreaction, really, because we were seeing china with this national people's congress ordered to meetings. it's after it's going to be a kind of equitable change in china's policies. this is because the policies is an existential threat to its stability. so they'll probably change the economy, they'll probably change the society in order to maintain the stability. economy, as far as the economy is concerned, there's is a huge kind of bubble developing in the property market. and, of course, premier wen jiabao wants to leave a legacy of some sort of credibility policies to maintain the stability in the market. as far as the society is concerned, there's huge inequalities. we're seeing policies which would put more emphasis, more investment in health care, education, infrastructure, to balance the society and balance the economy towards more local consumption. >> if that is an incurving development, why are stocks getting hit so hard? >> well, it's because of the clamp down on the property market and with the clamp down in the property market, there's going to be tightening of lending. there is going to be a ministry of controls against speculative in flows and speculative investments. and is, of course, these investment res huge. is and so people are looking for other opportunities, for example, they would like to invest more in the stock market. but unfortunately, china's stock market is also policy led. and then with the new leadership coming, although there are some positive signs, still people would like to adopt a wait and see attitude. and all this translates into a more cautious appropriate to investment. >> if we saw this hit to the property sector today and the shanghai xotsit was rallying because people were going to rotates funds out of property and into stocks or because we saw strength in the consumer names, then, perhaps, you could tell a more encouraging story. today they would suggest whatever process spengts for investment, investors broadly would hinge on what's happening in the property market and absent that market going gang busters, they're not interested. >> well, apart from the property market, though, call for china's economy is driven by something more fundamental. and look at the urbanization story that is going to define the development over the next five years and more in the new cities and also the growing middle class, the policies askew to internal consumption. so you're talking about retail sales, registering were a healthy sign and the building of cities and roads and high speed rail translates into investment in infrastructure. together with transport and all the basic commodities which goes into building of cities. so all these also present investment opportunities. but at the end of the day, there's no -- it's a no-brainer, sort of putting your money locked up in banks, paying very, very low interest rates. but while there was an asset valuation increase. so money is going to chase after, you know, higher returns. but unfortunately, there are lots of other uncertainties a and -- in the market at the moment. >> andrew, liquidity is one thing you don't want to reduce, liquidity is probably one thing you don't want to do in the property market because it will drive up prices. >> well, of course, the government wants more liquidity to help with the small and medium size enterprises. but as far as the enterprises are concerned, they have too much liquidity and they have a very close relationship with the big banks. so it's the balance this kind of dichotomy. on the run hand, the china's leadership would like to clamp down on a lot of speculative investments. and in the fact going towards reform of the prices, they want to provide more liquidity to the small and medium size enterprises. >> andrew lung, thank you for that. a ruling in its favorite with the ongoing apple, samsung got a boost. the smartphone will continue and the new trial is being set to determine damages. and joining us from seoul, chery has more on the story. >> hi, ross. the $1 billion victory that a u.s. jury gave apple over samsung last summer was cut by more than 40%, that is for now. a judge said that the jury, the damage payment was incorrect and is that she needs a new trial to determine the final dollar amount of damage payment that samsung needs to pay apple. samsung was happy about this ruling saying it was pleased about the cuts. but did ask that it's seeking further review as to the remaining award, which means it's looking to further cut the damage payment if possible. this case is not over. we still need to continue watching how the new trial goes, recalculate the damage payment on 14 samsung products and that recalculation of the damage payment in the new trial doesn't necessarily mean a smaller damage payment down the road. plus, we also are eyeing the international trade ruling due out in august on whether they will face an import ban. basically, we can say whether this is a partial and temporary defense for samsung and that we still have a very long way to go to see the end of this story. ross, back to you. >> chery, thanks for that. sony wants to be number three in the smartphone business after apple and samsung. that pits the japanese company against chinese phonemakers, as well. according to abc, sony came in fourth place last year after wahwei. shares have outperformed the broader markets today. we have the story live from tokyo. >> yes, kelly, the bank of japan's newly nominated governor has told parliament he will take whatever measures necessary to bring an end to more than a decade of the world's third largest economy. this morning, the current head of the asia development bank says he will work on bold monetary easing in order to achieve bog's 2% inflation target. the time frame in his head is around two years, pointing out that the boj's effort buying scheme had not seen enough in terms of scale and scope. can you roda says he plans increases giving government bonds as an example. the boj currently buys jgb set in sterling one to three years. he also will consider bringing forward boj's plan to introduce unlimited monetary easing which is currently set to start in 2014. now, the tokyo market welcomed the pledge for the aggressive easing and the nikkei 225 even touched the full year end price month high. the foreign exchange market reacted and the yen started 93 again against the dollar which was a one-week low. the leading party hopes to pass that before the new governor sits down. now, china is to be mum on its military spending plans for now. beijing typically reveals the budget a day before the national congress. but today they declined. the official did say china's defense spending is not a threat to any other country. last year, the official military budget rose 11%. analysts say the actual figure is likely much higher while they've increased spending on the nuclear ars mall. i love that. it's not a threat. >> no, clearly. the world's biggest aluminum produces is feeling the effect of less prices due to tough market conditions. the result wasn't as bad as some analysts have been forecast b. but sales still underperformed the broader hong kong market down near 3.5%. and let's take a look at what's on the agenda in asia tomorrow. the npc continues. the 12th national people's congress officially begins where the decade transition will take approximately two weeks. australia is expected to hold rates steady at 3%. we have key earnings due from property developer vanke and haitong international. after hsbc's results, you can bet there will be a focus on standard chartered. looks like they're down. but, in fact, everyone else is weakening further. still to come on the show, italian politician beppe grillo is calling for an online referendum and the latest on attempts to form a government when we come back. [ male announcer ] here's a word you should keep in mind. unbiased. some brokerage firms are. but way too many aren't. why? because selling their funds makes them more money. which makes you wonder -- isn't that a conflict? search "proprietary mutual funds." yikes! then go to e-trade. we've got over 8,000 mutual funds, and not one of them has our name on it. we're in the business of finding the right investments for you. e-trade. less for us. more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses, and other important information and should be read and considered carefully before investing. for a current prospectus, visit etrade.cotualfunds. italy's president has made comments and is largely pushing towards a technocrat government. meanwhile, five-star leading beppe grillo has been quoted in a german publication asking for an online referendum of the euro. he says he is a fan of europe, but it is the italian people who should have a say on membership. good to see you. the italian yield is spiking up. how much closer is that going to get, do you think? >> we think the italian yields will continue to rise. there is potentially some feel-good effect here if a coalition is announced. during the weekend, there were talking about a coalition between the democrats, pd and grillo. i don't think that a coalition will last longer. because the parties defer a lot on key issues like tax he, accurating the debt. we have situation short. we took our short off a few days ago. >> grillo is not really a party, is it? i mean, you know, let's look at the people who have been late. aren't they there? they'll vote on issue by issue law by law. >> i agree with you. on the run hand, this could be taken positively by the market. but it will not last long. my view is there will be elections in the next six to 12 months. you first need to elect a new president. you need to wait until may until the new president is elected. and after that, you can call for -- >> what happens between now and may? >> there is a lingering of two to three months. >> all of the markets push italy's hand during this period of time. do you think they're going to look through it and say, well, we just have to wait a little while for this process to move forward or do they choose this market to attack? >> the markets will test anything that is not a stable majority. during these two or three months, firms won higher. you have a status in the economy. everything is stock. and this makes growth deteriorate even more. >> all right. let's get a couple of other stories, as well. italy's antiausterity vote established a prime minister over a proven techocrat, but could this be germany's fault? find out why that might be the case if indeed it is on cnbc.com. jobless claims up 11.2% in february according to the latest figures out of the labor ministry. that means almost 1 million people were out of work at the end of 2012. stephane pedrazzi has more out of madrid. not a very encouraging report. >> no. but it was expected. more than 5 misdemeanor people are looking for a job in spain. that being said, it's not the most accurate report. we have to look at the other ones from the national statistics institute, which takes into equity logistics and people looking for german -- nearly 6 million people are actually out of work, which means 26% of the population in spain. the youth unemployment rate is at 5517%, that's a record level, of course, and the situation is unlikely to improve in the next months coming, despite all the reforms on the labor market. we are not expecting any improvement because the spanish economy remains in recession. it's unlikely to get out of a recession until the next year, according to most economists. the spanish gdp shrunk by 1.2% last year. that was the worst year since the country returned to democracy. on the grown, plenty of countries are planning for job cuts. in order to restore profitability. angry workers today, another week of strikes which is going across siberia. 1 million euros today. back to you. >> stephane, thanks for that. we're seeing the spanish ten-year continue to fall. what gives? >> there's a bit of complacent. everyone that the that the ecb would do what it takes everywhere. when a government does what it's required to do, the ecb austerity is there. in spain, there is good leadership and the deficit and the regions have done -- >> but even that leadership which is stable and pushing forward, has very fragmenting public support. we've seen a series of scandals, but that has had no market impacts the. >> and spain has a lot of improvement on the fiscal side. but growth continues to deteriorate. if you look at exports, there's been some recovery. people are talking about a revival in exports and the declining labor costs. but on the other hand, internal demand is basically collapsing at a much faster pace which means the growth continues to decline. and despite the effort to cut the deficit, this continues to pose a risk for the next two years. >> are you guys short spain? do you think the market is missing something here? >> we're still cautious on spain. one of the things we are concerned about is that the central government has been giving help to regions, to banks, local authorities, to everyone, really, and burdening its balance sheets. so we may have seen the worst. probably we are out of the cliff affect. but we still have a lot of mountains to climb in the next few years. >> what happens to the ecb if things in italy get a little bit worse and we don't get any growth going in spain? any spot on the ecb or not? >> well, i think the major worry at the ecb is despite theirest, it will probably a back stop. governments don't respond and don't do anything back, which is potentially the case if you don't have a stable government. now, in italy, we had electiones and they're inconclusive. in spain, we had a government with a majority but there is potential risk at the regional level as well as the scandals could destabilize the current majority. we start from a better starting point politically. but a worse one economically compared to italy. >> so are investors questioning the validity? will they be questioning the validity if the politics get worse in italy? >> i think they are rethinking about how much and how quickly it is applicable if there's no political consensus. as you know, with austerity social unrest rises, we have social unrest in sport tu begg l portugal, spain and italy. the greek economy has been a world concern since 2009. the reclassification from developing market status comes after investments failed key macro risk caps. this comes as officials are trying to determine whether to release the next tranche of aid. >> we're not too worried. they are already in a program and as long as there is a majority government which is pro euro, they are effectively bound to some extent to do what they're required to do. >> does that include cypress inspect. >> in cypress, we're probably looking at an agreement this month, as announced. >> and that's why we haven't seen the late nest greece and cypress do more to upset the apple cart? >> yeah. i mean, the view remains that there is an agreement without a lot of systemic impact, so without dmofters seeing haircuts. we're much more worried about the two bigger countries, spain and italy, where social unrest derail the trajectory of the austerity and worry the ecb. >> and too big to fail, to some extent. >> we'll see. >> alberto, thank you, credit research at rbs. now, with all the athletes making business headlines this morning, we want to know are athletes -- politicians? join the conversation on "worldwide exchange." e-mail us, or tweet us, @cnbcwex. >> we've had dennis rodman over in north korea and making a talk show rounds in the u.s. this weekend saying that kim jong unwants president obama to call him. you have to wonder whether all this helps or hurts the diplomatic cause. >> yes. or does it just get lost in the wash? still to come on the show, plenty more in the second hour. >> the battle is on in europe over banker bonus caps. boris johnson is calling them more onic. and we'll bring you the latest overpay when we come back. welcome to "worldwide exchange." i'm kelly evans been. >> and i'm ross westgate. here are your headlines from around the world. >> hsbc shares are lower after the banking giant misses full year expectations of $20 billion. it does, though, lift its yearly dividend. china's mainland markets knock off balance. real estate stocks tumbling. and the battle line res drawn in washington after the sequester goes into effect this weekend. for now, the white house and republicans are capitol hill aren't giving any ground. executive pay is in focus across europe. swiss voters overwhelmingly back plans to give mra shareholders control over bonuses. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. so is this the week the dow jones industrial average will finally reclaim its nominal 2007 highs? this is, of course, the question. maybe we can ask warren about it. becky quick will be speaking to him coming up in just about an hour's time on cnbc. the dow jones industrial average this morning is going to make that a harder hill to climb. this comes after china in particular saw a sharp sell-off on concerns about the property market, measures to further cool it there, europe not doing much to help turn sentiment around. the nasdaq and the s&p 500 are looking to turn profits around. take a look at what's been happening across europe. also we're seeing indexes reach multi year highs before falling back into the latest couple of weeks. the ftse 100 down 0.5%. we just learned construction joins manufacturing as the sector of surprising weakness in february. manufacturing contracted for the first time in several months last month. the construction activity is at its lowest level in 2 1/2 years. gilt taking a hit of that. potentially going to retest that level below 1.50. the xetra dax do you know 0.5%. the ibex is adding 0.1%. spain's ten-year is outperforming today, as well. we've had some lending data out of the bank of england. elsewhe elsewhere, no new net lending from it. they re-check the balance and cheaper funding coming through. as far as upon markets were concerned, we're focused here on this spread between spain and italy this morning. now around 27 basis points between italian debt and spain. spanish yields going down. also in the uk, gilt yield, 1.87%. now down at a two-month low. clearly its weaker growth helping to drive bond yields down. it was weaker growth that moody's cited for the downgrade, but the downgrade knot having any impact on the yield level. we talked about the chinese property curve. they brought in new curves to try capital games. we're down here at 101.34.. aussie/dollar against the u.s. dollar this morning. down to an eight-month low on that basis. euro/dollar at the moment, 1.2990 is where we sand. swish win has the update in singapore on the asian trading day. >> thank you, ross. a big sell-off on chinese stocks aus mentioned. the hang high composite saw its biggest falling 19-month, dow 3.7% today. blame it on the property counters as we just talked about. chinese property stocks trade at limit down today by about 10% on the back of fresh tightening measures from beijing. we also saw broad based losses and property related sectors such as cementmakers, heavy machinery and home appliances. from upstream to downstream all took a beating today. meanwhile, property shares were dragging the hang seng lower by 1.5%. chinese banks came under pressure after a ubs downgrade. the nikkei managed to buck the downward trend ending higher by 0.4%. property developers in japan on the other hand got a nice boost. this on expectations that the boj will continue to pursue aggressive reflationary policies. elsewhere, south korea's kospi lost 0.7%. some of the china related stocks such as chemicals and fuelmakers weighed on the markets. australia's asx 200 fell 1.5% on profit taking ahead of the rba meeting and more economic data due out later this week. ru source stocks lost profit on fears of a shine na slowdown. india's sensex ended down by 0.14%. back to you. >> hsbc posting full year earnings today below expectations. it came in at $23.3 billion. that compares to average analyst forecasts around 23. the bank pledged to raise its dividend next year as growth in the market is due to boost its capital. shares have been dipping around 3% during the session. that's exactly where we are at the moment. thanks for joining us. what's your own reaction? >> well, these results followed a well worn path that we're seeing in the larger universal banks in particular. it's a big number, but it's still short of expectations. but it's obviated by many different large one-off charges and profits. some sales in there sold 47 different operations in the past couple of years. >> we were joking he should go run italy. he has done a remarkable job of slimming this company down. >> hsbc five years ago had sort of lost its way. you could almost imagine that it had a giant atlas and it was just trying to put as many pins into the atlas as possible at any cost just to build this global brand. now, since 1987 they've been refocused on this strategy of this is what we do well, international trade finance and that's what we're going to do. a lot of banks have done that, focusing on what they can make money at. >> are we going to get through the exceptioners? whether it's ppi, other scandals, continuous trading in regulation, are he we going to get through the exceptional costs? >> it's an interesting overlap. on the run hand, we're seeing the results of the new strategy since 2011. that's proved to be very good. they're ahead of their annual cost reduction. they've done that. that was the old strategy or the old problems or concerns of the market. now the new concerns of the market is how big is ppi going to be? how long is it going to continue? what are the kind of scandals that are going to come out? the more regulation, the more attention you have on banks and how they operate, the more problems we might potentially uncover. >> and the ceo was just coming out and saying the bank was loss making in both britain and the united states? >> yes. well, the united states was an epic episode for hsbc. i believe that the first profit warning in 2007 came from the united states and they distinguished themselves as not being subprime lenders, although they premuch coined that phrase. >> they've identified some portfolios that he would like to sell when conditions improve the accelerate that runoff. >> they're really sort of refocusing. they point out that over half of the revenue drivers in these results come from the growing emerging markets or the growing markets on record. >> and tell us about what happens with the legacy stuff at home. will they ever be able to achieve its double digit return on capital here? >> well, a lot of people are stuck on this mind-set that after this crisis is over, how many we're going to return to the old levels of profitabilities that we saw on banks. by the fact that regulations demand so much more equity, not capital, but equity capital, that unless you dramatically krez your returns, obviously your roi will be completely diminished and in a completely new range. >> what you think is the most they can achieve at this point? >> hsbc is doing fairly well. the revenues are up in all the main businesses including markets. which is always a bit of a question mark for hsbc. yes, we know asia is a great driver of the business. yes, we know they're sort of moving to develop their core skills, which is joining us business across the world, providing international trade finance. but, of course, it's not going to turn its back on the bread and butter in the uk and in europe. >> ollie, more to come with you after the break. first, head over to our website and read why one analyst says stewart gull ver's results aren't working. >> comments on the bonus plan salary caps. we'll get into that, as well, in just a second. president obama has reached out to congress seek ago resolution to across the board government spending cuts that went into effect over the weekend. republican leaders are adding little hope to an end to the sequester. the president spoke with a select group of lawmaker toes try to find a bipartisan compromise. house speaker john boehner, he met with president obama on friday. says that spending cuts will stay and republicans won't raise taxes. >> this is not the smartest way to cut money. the smarter way would be to move a bill that deals with the long-term spending problem. you can't continue to spend money that you don't have. >> we're only going to get the kind of agreement that gets rid of the harmful sequester, that takes away from the credit shutdown and defaults if both sides are willing to compromise. >> congress bases a march 27th deadline to continue funding the u.s. government or face a potential shutdown. yes, another one, a different one. both boehner and senate majority leader mitch mcconnell says it won't happen. the national business of economics is weighing in on the sequester saying a plan is needed to cut the deficit but spending cuts aren't the way to do it. we'll have plenty more to walk you through what's happening with the sequester, and the continuing resolution at 10:30 cet or about 5:30 for the early birds there eastern time. ahead of that, here is a reminder of what's on the agenda stateside. investors are gearing up for the friday jobs report. janet yellen will be speaking at 8:00 a.m. eastern followed by fed governor jerome powing at 1:15 p.m. the jobs report friday is going to be the main thing people are watching for. lots of central banks meeting this week, as well. u.s. budget cuts may provide uncertainty. one analyst says the stock market will ride it out. head to cnbc.com so often out who and what is the cause of new money. despite some potential protections from the upcoming jobs report, there is worry that u.s. crude futures could drop below $90 a barrel if those fundamentals continue to change inspect. in your corporate news, meanwhile, north asia's ceo tom smith is explaining how the company is overcoming the challenges of the shipping industry. and they are legion at this point. ross. >> yeah. so what do fat cats and morons have in common? that's a question for you. we'll tell you if you don't know when we come back. welcome back to "worldwide exchange." hsbc disappoints ininvestors with its full year earnings. shares are down. beijing wraps up efforts to call the chinese property market. and uk leaders speaking out against eu bonus plans. yes, swiss voters have overwhelmingly backed a plan giving shareholders sweeping authority over executive pay as well as giving investors power overpayout. but the plan pays golden handshakes and separation agreements. it involves greater exposure to loans and retirement packages. likely the rules will come into law at some point next year. carolin roth is in zurich with more. carolin, how much of a setback potentially is this for the big banking industry there in switzerland? >> well, it remains to be seen. we don't know when that law will go into effect right thou. they were talking about 2014. it could be watered down, it could be delayed. we may be looking at an entry date of around 2014. apart from that, spoken to a number of experts this morning and they say no, it's not going to be hitting switzerland's competitiveness. the fundamentals are still in play. you're talking a low tax rate and is stage policy. >> it's too early to say what the effect will be, but what surprised people is just how clear the vote oak really was. 68% of the swit voters voting in favor of that proposal and keep in mind that these are going to be some of the strictest rules on executive pay in the world. and if they're not being adhered to, some of the managers responsible could be facing up to three years in prison. so i think in large part, this is also down to what we saw happening over at novartis. remember that scandal happening two or three weeks ago when the outgoing chairman was awarded a golden handshake worth $78 million. there was a lot on r of public backlash, a lot of public outcry over that. but it was later canceled. this is in part why we saw a decisive positive outcome for this proposal. >> carolin, thanks for that. over the weekend, british shareholders -- london mayor boris johnson described it as a moronic piece of legislative policy. the sunday times suggest both german and french finance ministers will reconsider -- or consider recommending that the bonus caps be watered down. we just heard from the hsbc ceo, as well. he said the bonus cap proposed doesn't put moving headquarters to hong kong back on the agenda. they're still assessing the impact of the new rules. that is one of the fears, ollie, is if you can't -- anybody in europe can't pay their guys, it's not even in europe. can't pay their guys in new york or hong kong or singapore, what american banks, local banks be paying their guys? how much of a disadvantage does that put them at? >> i think actually the question is how will it be implemented and how far ranging will it be? this sort of mirrors what we've seen the ongoing debate since i think september 2011 which is the discussion of the financial transaction tax across europe. and what you see there is that all transactions, both parties to the transaction will have to pay a small fee to the government that they represent within the e you. but it doesn't matter where that is traded. you could be a u.s. bank trading in french shares and you would have to pay the tax, for example. so bringing this back to the discussion of bonuses, which i can't believe i'm talking about with you on air, but, you know, it's still very early, you'd have to see exactly how it would be carved out. you're talking about something that apply toes banks with shareholders, what about banks that don't have shareholders. >> you work in the city, you have friend in the city. are people worried about this or are they saying there's no way? >> well, again, this is one of many pieces of legislation or regulation that's coming in to change the face of banking, which a lot of people can't really get their heads around. the knee jerk reaction to this sort of legislation is it will never happen. it can't happen. it will kill the industry, etcetera, etcetera. take a step back and think, why are they doing this? i haven't read anything to do with the eu in the past couple of years that hasn't had to do with remuneration in general. look at what we've been talking about in general on ppi or the interest rate hedging products in the uk banks. how is that linked to ferrari scale banking bonuses? >> that is for our next time. >> by 20 to us pounds, you know, and having -- >> on performance and selling products, you could argue that that drives them to more oriented volume activity. as i say, we need to pick up on this. ollie bank, senior bank analyst at rabo bank. china property stocks have a domino effect on asian markets today. what can we expect during the national people's congress as it kicks off this week? 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[ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose 2% cash back or double miles on every purchase every day. told you i'd get half. what's in your wallet? aw this is tragic man, investors just like you could lose tens of thousands of dollars on their 401(k) to hidden fees. thankfully e-trade has low cost investments and no hidden fees. but, you know, if you're still bent on blowing this fat stack of cash, there's a couple of ways you could do it. ♪ ♪ or just go to e-trade and save it. boom. ♪ major story markets today. china's property stocks plunged to their lowest is levels since 2008. shanghai composite down about 3.6% today. the government is stepping up its three-year campaign to cool the property market. deidre has more from singapore. >> today was the eve of the national people's congress. that is the biggest, most important political event in the country all year. this is the damage. policymakers were probably hoping for a little bit of stability. they got this volatility. thou, the shanghai composite was down more than 4% at one point adding losses of nearly 3.7%. the shenzhen composite down at 3.5%. beijing has been on a campaign to cool this sector for the last three years, but we have seen a revival over the last six months or so. we've seen increasing prices as well as sales. so there has been rhetoric from the government saying they would clamp down on this sector. the recent news, higher down payments, higher mortgage rates, that got investors spooked. it affected shares in hong kong and affected sentiment all across the region as far as australia and certainly in europe, as well. it will play into your trading day over there. now, all this, as i said, on the eve of the npc where property is certainly to be in focus as well as pollution, corruption, economic reforms. the new set of leaders coming in not exactly known for their political reform agenda. but they are known for their economic reform being a little bit more aggressive on that side. so we are going to be looking ahead and, of course, kelly and ross, as you saw, it had a big effect on the stock market here. so investers are certainly going to be looking. and you know what? honestly, i wouldn't be surprised if property shares saw a big rebound yesterday because that's the nature of this market, guys. it is momentum driven. you can see limit down one day and limited up the next day. back over to you. now, in other asian news, former nba basketball star dennis rodman has been speaking out about his visit with kim jong un. he was asked about pyongyang's threat to destroy america and its human rights record. while rodman said he couldn't condone it, kim is a human being. meanwhile, rodman had his own message from the north korean leader for president obama. >> it is a different view. he asked me to give obama something to say and do one thing. he want obama to do one thing, call him. >> so are athletes better diplomates than politicians? they might be in d.c. at the moment. we want you to join this conversation here. >> it's not a very high bar, is it? >> no. that's the point, isn't it? it's not a high bar. everybody's approval ratings are all down. >> public approval ratings and bilateral discussions with other are two very different things. i feel like the presence of celebriti celebrities, whether or not dennis rodman realizes what they're doing, it cannot be seen as anything other than interference. >> mild irritation. do they think it's worse than that? >> i don't know. but i'm sure there's the potential for these kind of trip toes cause greater problems. >> ve working for langley? >> you never know. still to come on the show, the see zester standout continues as the white house and republicans stake out their positions. both sides are convinced they'll be able to avoid the government shtdown at the end of the month. ♪ [ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. welcome back to "worldwide exchange." >> here are your headlines from around the world. >> battle line res drawn in washington. for now, white house and republicans on capitol hill aren't giving any ground. hsbc stocks are lower. the banking giant is above annual dividend. shares of real estate developers in china leading the tumble. and executive pay in focus in europe. swiss voters vote overwhelmingly to back plan toes give shareholders greater say against a planned eu wide bonus cap for bankers. you're watching "worldwide exchange," bringing you business news from around the globe. lots of speculation as to whether this will be the woke the dow jones industrial average can take out its nominal 2007 highs. today suggests it's going to be an uphill climb. we are seeing the start to the week lower. looking to shed about 35 points or so for the open. we have come off the lower levels this morning just a little bit. nasdaq s&p 500 also after hitting multi year highs are looking for a catalyst now just for further gains. the cnbc ftse global 300 overnight shows you gave up about 0.2%. we were down, as i said, a little weaker the last time we checked in, about 30 minutes ago. the nikkei helping to bolster sentiment and here in europe, markets have been digesting news flow, negative news on the uk in terms of construction and lending data. nevertheless, markets are trying to stay afloat here. we can take a look at what's happening across the major bourses. the ftse 100 is down about 0.4%. the xetra dax roughly the same thing. the cac 40 is weaker. the ibex 35 is adding about 0.3% approximated we're seeing a rally in its debt levels. >> how should you play what's going on this week? hue are our guest views on the top trades. >> we'll be watching. you know, that 1.50 has provided support, but how long can that last? if we see easing on thursday, we can be in the high 40s pretty quickly. >> property is a very frustrating market whereby easing of monetary policy, ininvestor cash sitting on the sidelines underpins equity markets. but are we going to have the repeat of january when global equity markets are going to be up 5%? probably not. it's going to be one of these stops. >> it goes back into emerging market, mainly into asia, japan and back into america. took a bit of profit on the mostly defensive sectors and our biggest exposure at this stage is in consumer discretionaries. >> now, prs president obama has reached out to congress seeking a resolution to the across the board government spending cuts that went into effect over the weekend. but republicans leaders are adding little hope to an economic end. the president spoke with a select group of lawmakers to try to find a bipartisan compromise. house speaker john boehner who met with president obama says the spend cuts will stay and republicans won't raise taxes. >> this is not the smartest way to cut money. the smarter way would be to actually move a bill that deals with their long-term spending problem. you can't continue to spend money that you don't have. >> we're only going to get the kind of agreement that gets rid of the harmful sequester, that takes away from the private shutdown and defaults and all the things holding back economic growth and job creation in our country if both sides are willing to compromise. >> joining us now from washington is jonathan allen, senior washington correspondent at politico. jonathan, good morning. thanks very much for your time. we wake up here on monday morning. are the lights on there in washington? >> the lights are on here in washington. this isn't an issue of the federal government, though. i think you can see behind me it's still dark across most of the city here, 5:30 in the morning. most people get up, they will go to work, they will have jobs. certainly there is some projection of furloughs in some of the government agencies. but this is actually not as bad as a government shutdown, which you often hear talk of is and is often on the table. a federal shutdown would be a lot worse. >> and jonathan, that's what we're now turning our attention to. today, futures are pointed down. it has something to do with news out of asia and is europe. but there's the sense, too, that just as it looks like the u.s. is going to bolster its recovery, in fact it's weakness at home that is looking at the point. are remembers feeling as though perhaps their bargaining power has improved given that people are shrugging about the see kweter? >> i think there's a consensus here in washington that the government won't shut down. march 27th is the date. you have about three weeks left to continue government funding through the end of the fiscal year. i think there's a belief on all sides that's going to happen. basically, all sides have been bucking for some sort of meltdown for a couple of years now, and the safest way to do it walls oversee quest ragz. they don't really want to shut down the government or reach the debt ceiling. there will be a few adjustments made to the current course of spending which is a continuing resolution of previously levels and i think what will happen is you'll see more spending for the defense department's operations and maybe some of the domestic agencies will be able to shift the cuts around a little bit. but i expect that by march 27th, you'll actually see an extension of government spending through the end of september. >> where is this leaving -- is anybody gaping from this in terms of support, jonathan? or is everybody being dragged down? >> to some extent in artisan warfare on the united states, it's a zero sum gain. one side loses a little bit, the other side gains. frankly, i think the whole city has egg on its face right now and the dysfunction is somewhat deleterious for the country itself, but also for america standsing in the world and certainly for markets that want to believe that people can get things done, that they can resolve their differences. >> jonathan, we mentioned off the top about long-term deficit reform, long-term deficit reduction, something to cap ratios at levels that aren't significantly higher than what we're seeing now. are we actually getting that? where is simpson bowles in all of this and bill passing issues, how much really has fundamentally changed other than some near term hits to growth? >> i suspect simpleson & bowles are somewhat near cameras right now. the dynamics of this haven't changed at all. the white house believes there should be some mix of tax increases and maybe spending cuts to try to get rid of the across the board cuts. the republicans don't believe in increasing taxes to do that. they just want spending cuts. and the truth of the matter is, whether it's done one way or the other way, ultimately, you're trying to achieve the same amount of deficit reduction. i think it's important to remember with sequestration, that that really just sets the levels of spending. and so when they talk about some of these other things, the continuing resolution, appropriations for the year, that's really the question or the details within those spending cuts. so it really is, as you sgd, an effort to kind of cap the spending as a function of -- well, actually, in real dollars, but then also as a function of gdp. >> i just wonder what john boehner, too, is trying to accomplish here in terms of his legacy as speaker. how does he want -- what does he want the headlines to be? what does he want ultimately at the end of the day to have won from this entire process? >> he wants the headline to be that john boehner was the adult in the room and finally got washington to stop spending well beyond its means. now, the truth is, there's still a huge gap, even with this sequestration between wa washington spends and what it takes in in revenue. but i think he wants to be able to say, look, i turned that ship around. spending -- certainly deficits and debt had been announcing for years and years and i think his view is he'd like to be known as the person who reigned all that in. >> all right. we will see if history will be so kind. jonathan allen, senior washington correspondent at politico. still to come, anheuser-busch, michelob and other brewers, are they what they're cracked up to be? i'm serious, we compare our direct rates side by side to find you a great deal, even if it's not with us. [ ding ] oh, that's helpful! well, our company does that, too. actually, we invented that. it's like a sauna in here. helping you save, even if it's not with us -- now, that's progressive! call or click today. no mas pantalones! welcome back to the program. hsbc's pretax profits fell. the bank has pledged to raise its dividend next year, citing growth in its core asian markets saying its predicted to boost capital. ross, it still doesn't account for some of the weakness it's seeing in its traditional markets at home. >> this is a company, of course, that's been hit by record fines for what's happening on money laundering sites. the stock at the moment, as you can see, down nearly 3%. down 2.6% at the moment, down 2.8% on the week as well. and as far as the sort of six-month time frame is worth, just worth looking at, it's up 28% in the last six weeks wsh as well. 21 billion profit underperforming is what ininvestors are saying. i think analysts will probably take the view that, look, it can absorb losses better -- not losses, but absorb hits better than any other bankers out there because of where it is positioned globally, as well. if you need more on those hsbc numbers, find out why cost cutting measures aren't working and the results call strategies into question. it's all on cnbc.com as a varied opinion around it. kelly. that the. and hsbc dis appoiappoints inve with its full year earnings selling shares lower. and the sequester kicks in, but the white house and lawmakers making no headway on a deal despite ongoing meetings. and president obama is rallying out his second term cabinet. it's expected to announce sylvia matthews-burwell to be the next white house budget director. she's currently head of the walmart foundation. she's a veteran of the clinton white house, having served as omb director and dprut deputy white house chief of staff. now, in corporate news, the nasdaq is reportedly executing u.s. stock trades at a loss. the financial times has been using the strategy since last month, betting the move about boost its overall market traction. both nasdaq and the new york stock exchange have been losing market shared competing exchanges, alternative trading platforms and the industrywide downturn in trading. it's interesting the amazon strategies that you might hope to pick up on volume what you might lose on individual possibility. >> absolutely. and, you know, it just shows you how badly they were hit by their own -- >> exactly. they have the industry generally moving against them, volumes goggles where regionally and in terms of products and some of the concern on the facebook ip last year. > . >> pratt & whitney uncovered fraudulent engine testing scheme. it could affect thousands of engine parts used on business jets and turbo part planes. the parts in question don't pose any safety hazards, but the faa has opened its own investigation. stocks pretty flat. an heightser bush is fighting back. the world's largest brewery has taken out full page ads defending itself against claims it's watering down its beer. consumers have filed a class action lawsuit alleging the company is mislabelling budweiser, bud light, michelob and other brands. anheuser busch doe naets water to the american red cross and other relief organizations. i just have to wonder about this strategy. why if you're trying to fight this image would you reinforce the image about taking out a national campaign about it and drawing attention to the issue? but i don't run their marketing strategy, so -- >> well, they're meeting it straight on. straight ahead, the dow sets its sights on an all-time high? we'll head to the cme to preview the trading week ahead. e your financial advisor should focus on your long-term goals, not their short-term agenda. [ male announcer ] join the nearly 7 million investors who think like you do. face time and think time make a difference. at edward jones, it's how we make sense of investing. 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? ♪ ahead of the u.s. open, european stocks a little mixed. we see spanish yields continuing to fall in the spreads between italy and others narrow. italy down 0.5%. the german market cac 40 down about 5 points, just about. fed chairman ben bernanke is defending the central bank's low interest rates policies. he says the fed's policy are mirroring what others are doing. >> inflation is low and stable and given expectations of weak growth, expected real short rates are also low. premature rate increases would carry a high risk of short circuiting the recovery, possibly leading, ironically enough, to an even longer period of low long-term rates. >> bernanke says the interest rates struggle gradually over the next several years, although i wouldn't necessarily take fed forecasts to the bank as we were in recent years. and the economist forecast, really. even the markets, you can't trust anyone. >> no. warren buffett, you might be able to trust warren buffett. do you think? >> maybe. >> he's called 2012 a subpar year for profits. that's because berkshire's book value were up, both the s&p 500 at 16% growth. in his annual shareholders level, buffett sounded optimistic on the economy urging other investors to invest. he also says berkshire lant done searching for acquisitions. he says, we still have plenty of cash and are generating more as a good clip, so it's back to work. charlie and i have doned our safari outfites and resumed our search for elephants. >> he's been making this met for for a couple of years now. this analogy, i should say. they are searching for elephants and they just got a big one with heinz. >> they did. it's not the elephant in the room, though. >> elephants that will boost the bottom line. >> buffett will be on "squawk box" today from 6:00 to 9:00 taking your questions. it's a once in a quarter -- once in a year -- he's on a bit. anyway, not that much. e-mail them to askwarren@cnbc.com or tweet them with #askwarren. >> how many times would you actually have an e-mail that's responded to? there you go. >> that's very view. here is a look at what else is on the agenda today. no major economic -- investors are gearing -- are you suggesting he's a first up on cnbc? investors are gearing up for friday's jobs report. janet yellen speaks in washington at 8:00 a.m. eastern and she'll be followed this afternoon by fete governor jerome powell. u.s. futures are down about 40 points. are we going to climb to 141164? ben lichtenstein from tradersaudio.com joins us now. is this going to be the week, ben? >> quite possibly. if you go for what behavior the market has been exhibiting over the last couple of weeks, certainly, it's been resilient. as we saw last week, a couple tests of lower extremes, key area of support. most recently was friday. the market tested that psychological level on the s&ps, cut a nice bid, basically traded throughout the morning session higher and is side weighs throughout the day and closed them out strong. we've been unable to get up above major levels of resistance. again, unable to get below these major levels of support. recently over the last week or so, while we've been seeing increased ranges, we haven't really gone anywhere for the most part. >> ben, what would you ask warren? >> oh, good question. i wasn't really prepared for that. i would have sk to ask him how much longer he thinks this low interest rate environment will continue. even amid the activity or the speech we saw from bernanke or the testimony we saw, there was very little talk about continued quantitative easing. so what we're starting to see is investors and traders are starting to feel like we're going to see the next move in the interest rate arena or spectrum, if you will, will be to the upside. that was something that you just mentioned bernanke talking about again on friday, is that in the longer term we are going to see the slow continued increase rate hike but, again, it's going to be slow and the dollar really picked up on that, in my opinion. the dollar had a nice spike, up above 82 even last week. we saw the low currency come back off the 1.30 level. again, i'd like to know and i think a lot of traders out there would like to know when we're going to start to see that speculative type trade come back into the market, resolving and associated with interest rate increase or cut, but, again, for the most part, there hasn't been that component associated with the trade over the last years. >> i think. the dollar, not a bad week last week. do you think it can still build from here? >> i do. i do, ross. i think with the concerns of the euro is currency, there's been talk of easing there. and i think the dollar right now is seeing continued strength. notable is amid the dollar strength we're seeing, again, still holding up the levels in the stock. we're so used to seeing that dollar rally stock sell-off, there was a bit of that component in the market last week. but for the most part, the market continued to make higher highs and is higher lows, and so did the dollar. we're seeing a lot of strength in the currencies. all the traders talking about gold and the weakness there. but as long as we're about 1500, we're still in bullish type activity. >> ben lichtenstein, president of tradersaudio.com. >> thank you. >> ben, thanks very much. the question i guess becomes we're seen more people speculate about this, can markets move beyond a knee jerk reaction to europe to sort of comments out of the fed, etcetera, to something more fundamentally sustainable? >> meaningful. >> yes. earnings driven, etcetera. >> it's more imminent this week. the long-term rate, short markets. >> it will be interesting to see what buffett has to say about all of that. >> mr. buffett on "squawk box." it's all starting in just a few moments. get your e-mails in. becky, andrew, joe, they're all there. we hope you have a good day. >> and join us back here tomorrow on "worldwide exchange." have a good one.

Transcripts For CNBC Squawk Box 20130220

a judge says david einhorn's hedge fund may succeed in its legal attack against apple. and you've been hacked. major financial institutions, fast food joints, tech giants, and now car companies. corporate america facing a flurry of attacks. it's wednesday, february 20, 2013. new five-year high yesterday. "squawk box" begins right now. good morning, everybody. and welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. our guest host is business insider ceo henry blogett. from corporate hacking attacks to questions about dell's corporate buyout, this is a great day to have him on set. welcome. coming up next hour, a "squawk" ceo summit. we're tackling a question on everyone's mind -- how do we get the economy to grow from here? no one knows better than the leaders of corporate america. joining on set this morning, 32 adviser ceo robert wolfe. we'll have hanes celestial ceo irwin simon. and the kraft group president, jonathan kraft. on the lighter side of things, spring is around the corner. that must meantime for baseball. white sox vice president ken williams will join us to talk business on and off the diamond coming up at 8:40 eastern time. an interesting mix of topics in rotation today. first, let's get over to andrew with the top headlines. >> thanks. boeing reportedly found a way to fix battery problems with its grounded 787. here's what's happening. involves increasing the space between cells in the battery. a source tells reuters the gaps between the cells were why there was overheating. we'll talk about that in a bit. in other news on boeing, the company's engineers are split on a contract. the largest professional group approved the planemaker's latest contract offer. but members of a smaller technical union are rejecting it. both groups authorized the union to call a strike. the groups negotiate together. but the contracts are separate. so talks are set now to resume. and no work stoppage is expected. at least in the near term. also in the news, the fbi says it's now looking into alleged insider trading in the options of heinz for its acquisition by berkshire hathaway and 3g capital. the sec filed suit against unknown traders who is said used an account in switzerland to trade on per ported -- purported inside knowledge of the transaction. and negotiators breaking down between res cap and allied financial. creditors pushing for a larger settle chmt is why the company is resisting. this makes it likely that the company will face litigation. also, toyota motors reportedly ramping up japanese output by 10% in april. the nikkei reporting that the automaker's planning an increase due to higher than expected sales and a weaker yen. joe? would you -- if you knew about a deal, is there any way that you would do anything? >> no, no. >> with the e-mail trail -- >> i don't understand. i don't understand why anybody would try anymore. >> they have -- >> i can follow you in ten seconds. what i find actually crazier about the situation is that the sec is looking into this, the fbi is looking into it. but goldman sachs which is where the trades went through hasn't released the names, and i'm not sure has to. and why that would be. there's a whole secondary -- >> they don't have to? >> i don't believe -- we can talk about it. my sung they haven't been subpoenaed so they don't have to do it voluntary. >> maybe it's a death wish or prison wish. i'm not going to go into what that could involve. i mean, you have to want to go -- you're going, right? it's afternoon -- if you know about the deal and you buy something to benefit from when the deal is announced, you're doing to jail, right? >> what if you hear about it? the scuttle butt, trading -- >> is it -- >> you know, here's -- we'll talk to him in a second. in other news this morning, bank of america ceo brian moynihan was awarded a 73% pay increase in 2012 to $12.1 million. and if you do the math, i don't know how you'd do. you have to do algebra. that would be $7 million last year. so add 71% on to that and get the 12. bigger stock grant is how it happened. his base salary for 2013 is also due to rise by more than 55% which is a good number for any of us. >> great. >> isn't it? >> it is. >> if you could get 55%, you'd set for that, wouldn't you? >> absolutely. >> okay. an $11 billion-plus sale of life technologies is reporting -- reportedly looking less likely this morning. potential buyer, thermal fisher scientific. said to be skeptical about a deal due to a gap in the price expectations with the company. meantime, buyout vaufrs come up short. and a u.s. judge says that bp recovered 810,000 of barrels of oil from its 2010 gulf of mexico spill site. the judge ruled that this amount should be excluded from certain penalties that the company may face, cutting its maximum fine by as much as $3.5 billion. a spill-related civil trial as we've been reporting this week is due to start next week in new orleans. at the top of the show, you said something that made me think of ground hog day. you said markets at a new five--year high. >> i said new -- i don't like to say fresh. and you really don't need to say new five-year high -- >> five-year high -- >> but i see it every. where i saw -- >> we say it every day, too. seems like we've been in this position. five-year high. five-year high. ♪ >> we're not that far from a new high. >> a real new high. >> hopefully. how many people -- remember yesterday, how many people said, no, this can't go much -- we've got to have a correction. and you know, a lot of times that's a lonesome cry after a while about the correction and they capitulate. we'll see. so far, so good. >> it has been stubborn. 12-year high for the nasdaq, too. we'll take you through the stocks to watch, some big movers. first up, shares of netspend rising after hours. this is the prepaid debit card provider. it's being acquired by payment processor total systems services for $16 a share or about $1.4 billion. it was actually up after hours yesterday. a different foyer for millennia -- story for millennia media. the revenue missed the market and guns looked weak. all of these starts are wrong. i'm not sure why we haven't fixed them yet. this stock was down after hours, as well. and demand media shares getting a pop after better than expected earnings in revenues. the company says that it's exploring splitting its media and domain businesses. la-z-boy beating the street and shares rose after hours on the news. right here you see 15.46. and acena earnings beating the street. that stock was up in the after hours. not down 4.5% as this chart says. and rambis announcing it's signed a patent license agreement with lsi corporation. rambis offering upbeat revenue guidance. and we'll get the charts fixed. we've let the tech people know, and it hasn't been fixed yet. back to you. the price on the left and the price on the right on the chart were both wrong. they were much higher or lower -- >> we told the i.t. people about this last week. didn't get fixed. >> takes time. we'll get. it. let's check on the markets. as we said, another good day yesterday. this morning we'll see whether we can consolidate gains or head higher. we don't know yet. those are all treading water moves today between now and 9:30. we'll see whether we get more definitive look at where we're headed. oil, to me, it just -- you add everything up, you have oil this high and other economic numbers which -- >> gold? >> in gold and -- >> down another $10 this morning. >> it doesn't -- i don't know. it makes -- >> already at a low. >> we're not that far from 8% unemployment. you've got the payroll tax -- >> and sequester coming. >> and i know rich people only put the money in the bank and don't spend it, but there are significant tax increases, not just the payroll tax, but people at 400 and above, they're part of the economy. they're getting whacked with the obama care and the deal that was arrived at. all of these things -- >> austerity is ugly. getting there. >> so is oil -- oil's not supposed to go up when the economy's slowing. >> you have the central banks that are printing money. >> you do. >> it's got to go up. >> think about what would happen if they weren't. and in -- all bets off on what happens with the ten year now, too. if we're in a slowing environment. gold suddenliy -- we're immediately going back to 2.75 or 3%. and the dollar's been something to behold in terms of the yen. you don't see that often. and especially when it's telegraphed by --not the guy with the hair, the guy named after lincoln, right? abe. >> abe? >> is it abe? >> or abe. >> i know it. lincoln is hot. >> abe to me. >> lincoln is hot. >> you think it's going to win? >> there's a movie every day. there's that and the o'reillys killing lincoln and "lincoln: the vampire hunter." >> i read the book. >> but? >> i did. >> you had that much time? >> i office a plane. i tried on a plane. >> that's okay. did they have bathrooms on the plane or bottles? [ flushing ] >> funny. he knows what you're talking about. >> i know he. does memorialized for all time. >> i don't think the -- >> i blame him. we don't need to tell the audience at this point. look up "business insider." you were talking about your brothers. >> only the boys. >> it was only the boys -- of course. >> little boys. trying to drive 12 hours across -- >> little boys with little wee-wees. it would be easy in the bottle. let's look -- >> this squawk-ward moment has been brought to you by joe kerner. >> ha, ha, you're it. the gold board -- it was her yesterday that blurted that out. where is gold? down again. >> it's down another $10 -- >> under 1,600 now. hit a boump that -- >> yesterday was already at its weakest level. >> the charts, lower lows, lower highs. a bumpy ride on the way to the guaranteed 2,000 which every single gold bug talked about. >> a death cross. >> it is! >> new technical chart where people are freaking about. you got me. where could it go? it could go anywhere. yellow metal. >> it was 200. buffett points out you could fit all the gold in the world on a football field. >> 40 by 40 square. >> then what do you do? nothing. give me cattle. give me pigs. give me broilers. give me anything. give me guns, the -- to steal the gold. whatever. >> pretty much. >> all right. okay. it's also time for the global markets report. we'll fly over to kelly evans. she may be able to save us a little bit. standing by in london. miss evans, good morning to you. >> andrew, good morning. it's the bank of england that's moving markets today. the federal reserve minutes later today are sure to be the focus of the u.s. session. over here, the action's started. the sterling/dollar behind me, down .8%. we did fall below the 154 level. guys, we've been flirting with 153, below 153 in the last couple of minutes, as well. the first time we've been at these levels since last july. more significantly it comes as the bank of england saw governor king who's leaving outvoted with others on wanting to increase the size of the quantitative easing program. don't expect that they're sort of shedding any tears over the strong market reaction today when those minutes pass. the bank of england saying the weaker sterling is good for growth. a lot of britains tonight agree as they look at a continuing rob of their discretionary purchasing power. that story is something not just britain is dealing with for the time being. what it is doing, if we can flip over to the market reaction for stocks, is helping bolster the ftse. so after hitting the five-year highs, now punching above the 6,400 level for the first time since 2008. so adding about .4% today. five-year high is similar story to what we're seeing with the s&p 500. it's mixed trade for the rest of the markets. but as we head back over to you guys, it's going to be an something question now for the federal reserve in the u.s. as the bank of england now comes out, weakens the -- sterling by -- by almost 1% today, we've got new zealand talking currency down, we've got korea talking its currency down. you mentioned what's been happening in japan. suddenly the u.s. dollar starts to look like one of the stronger men by comparison. on that note of currency wars around, what, 25 at this point, back to you. >> thank you. in other news, a judge says david einhorn's hedge fund has shown "a likelihood of success" if his legal attack against apple goes forward. the judge made no immediate ruling to block a shareholder vote on a proxy -- i need to apologize to becky quick. we were talking about this last night -- on the show yesterday and by e-mail. >> i should have read. i didn't -- >> no, you were right. in the complaint, the suggestion is not that apple can never issue a preferred share. it's just that it would require a shareholder vote. what does that mean? >> that strikes me as odd. you would think more shareholder say -- >> would be a better thing. then there's some other -- some think it's a bad thing because it means the board can't unilateral dee it and therefore can't make the decision. >> and other chershareholders w never vote for a better deal? >> we can talk to our guest host about it. we've introduced -- you've been talking. i don't know if you need an introduction. henry blodgett, business insider ceo and editor-in-chief. do you have -- >> i think his idea is financial engineering. we had had a back and forth. he's much more sophisticated about this than most people. he persuasively argues that one plus one might equal a little more than two if you get a big block of referred in there. in terms of complexity, everything else. >> the thing with the case, though? >> in terms of what he's asking for? >> yeah. i think basically what's going on here is he wants a pulpit. he want to bag his finger at apple management and say, look, you've got $140 billion on the balance sheet. start giving it to me. i own you. do something with it. >> do you think he's going to could? >> i think he's going succeed in forcing apple to do something with the cash. i think issuing a preferred -- i don't think it makes sense. i think there are plenty of other ways to get the cash back to shareholders. you could use debt if you wanted to, you could increase the dividend. he could exploit the difference where a prefer sudden trading and common is trading. the idea you that could create security and stick it in there without disadvantaging the common stock shareholders doesn't make sense. >> right. >> you're putting yourself ahead of everybody -- >> if the shareholders will vote, they're never going to vote somebody else having a better position than they have themselves. >> that's -- that's right. a lot of shareholders, they say increase the dividend. >> right. give back -- although i did read something that the judge in this case had already said. he thinks einhorn might be in a position to win. i don't understand the legal -- >> i think that's the technicality of this particular lawsuit which is all around can apple outlaw the issuance of a preferred. it doesn't force them to do that -- >> i'm making it more -- it's not just about whether they can outlaw it. it's whether they can put it as part of -- >> the proxy? >> the proxy. they've combined it into a vote that includes other issues. so what he's fighting for is for it to be separated out. so that shareholders would vote for it separately. we're -- it's down -- >> we've got to put it in another bill. >> right. >> let's -- joe was joking, and you -- i don't know if you were joking or not, insider trading. >> i understand what he's saying. >> on this issue of heinz, we have what appears to be some form of trading ahead of the situation with these options. >> which by the way there almost always. is somebody knows -- >> why does it happen in this day and age? we're inundated every day with reports of somebody going to jail, getting arrested, doing something for the exact same thing. is there no deterrent effect? >> first of all, it's good that the sec is acting this quickly. and it just happened in the merger last week that was announced. >> why don't they know who they are, by the way? >> they will. >> why shouldn't -- >> why shouldn't you know who they are is what you're asking? >> yes. >> it will come out, no question. look, so it's very good. that will deter it. if it happens the next morning, as it's happening. pictures -- it's become obvious to people. something happens on the trader floor, what's going on, rumor. wow. there's this big deal going down. i'll take a play on that. >> it's different when you hear someone has to light the match to begin -- >> no, you can play it. if the rumor's going around and you think you got tellery -- >> no, the question is how did the rumor emerge? >> any trader on the trading floor hears scuttlebutt. people hear things all the time. there are lots of companies out there that are prime acquisition targets. everybody's got on the screen, somebody must know something. a rumor starts. >> i hear stuff usually from some form of insider. >> maybe somebody heard something with regard to a banker, some banker was going that city. putting two and two together. making a good bet. not based on actual knowledge but a bet that a lot of people follow that. they cash in, suddenly there's the huge action in the options. sec's right to look at it. they can put people other oath. people want to testify -- here's what i saw, what i did. the evidence that people are trading ahead of the deal is not evidence that they knew it was going happen. they figured it out. >> let me throw one other piece of news -- >> the -- at the monsanto -- >> i used to track plans. you can't do it anymore. very hard to track plans. >> get out on a moped and follow sir larns wiwrence wildman -- >> i believe that's legal as long as you're not tapping lines. >> it eerie. >> dell, they had earnings. i don't think new england care good the earnings, they --in cared about the earnings, they cared about the buyout. >> i think it's sad and public shareholders take a longer term view is the only reason this company is going private is because michael dell and silverlake think that they can create a huge amount of value by doing that. there's going to be a big dividend where they pay themselves a huge mont off the top. what's sad is why can't they do it now with public share orlando. >> are public shareholders willing to suffer through whatever the transition period is, does it allow activists and others to try to kick people out from the board? i mean, there is a legitimate argument to be made, doing it in private. some people would say a legitimate argument, doing private makes it easier. you're not having to deal with the stock falling when something bad happens. activists trying to come in to ruin your plan. >> it makes it easier. there's no question. but michael dell needs cohones to say this is the right plan for the company. i am going to execute it, it's going to take three years. if you want, you don't disagree, sell the stock or try to get me fired. this is what we are going to do. jeff bethesdas on did that at -- jeff bezos did that at amazon. people were screaming for seven years, you'll never make money, it won't work. you shouldn't be investing so much. look where it is. >> we've got to take a break. will michael dell be successful three years from now is. >> i think the deal will be very successful. they will come out very much ahead. i think they will refloat it at the top -- >> shareholders will feel bad they let it happen to begin with. >> yes. >> there you go. >> you know that is a vulgar word -- >> crude? >> cajones. it's vulgar in spanish. like testicles here is not vulgar, it's -- cajones is not -- >> this squawk-ward moment is brought to you by joe kernen. >> like guts? >> no. bertha's mother here sings, you know -- spanish, you know, it's -- if you speak spanish, you would be better to say testicles. >> okay. >> all right. >> from here on out. coming up, if you have the caj cajones to do it. . before the bell, housing starts and the producer price index. this afternoon, minutes from the last rfmc meeting. we'll talk expectations and more for the bull market run. >> every time i move i'm in your shot. sorry. trying to get out. >> people like that better probably. for when the bull market run, we'll see how long it continues. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs. there's no going back. welcome back. u.s. equities futures. we'll look at how things are setting up the day. there you have. a mixed picture. almost across the board -- i think that's probably the best way to say it. let's talk about the headlines taking place this morning. stanford university has set a new record in college fundraising. it's the first school to collect more than $1 billion in a single year. a new survey finds 3,500 u.s. colleges and universities raised $31 billion in fiscal 2012. that's 2.2% mrnt previous year. becky? let's get the national weather forecast from the weather channel's eric fisher. eric, good morning. >> good morning to everybody there. cold weather back on the minds of many here into the northeast. feels very much like the dead of winter. windchill of four here in buffalo. in the city, 20 degrees the windchill. boston, 27. the winds howling, temperatures dropping. yes, more snow falling out there, especially around the lakes today. south of buffalo, that's where it will be focused and into northern maine. good news for the skiers. most of this last storm stayed mostly snow. the slopes are still in good shape. totals today mostly north of syracuse toward the tughill plateau, 94 staying breezy and dry. most of the concern over the next couple of days will be the latest winter storm. moving into the west today, snow overspreading the four corners area. colorado into new mexico, arizona, utah, all picking up significant snow. this really cranks into the day tomorrow. we'll have heavy snow across nebraska, kansas, missouri, into iowa. big area of sleet and freezing rain here across southern missouri and northern arkansas. travel is going to be really rough. for some folks with enough freezing rain, we could be talking power outages for several days. especially in northern arkansas. that's something to watch. and then on friday, the snow moves up toward the great lakes. the icy mix heads toward pittsburgh, and cleveland could be looking at some of that, as well. winter storm warnings, bull's eye in the middle of the country. most of the state of kansas and missouri under warnings. then you see the ice storm just off toward the south. storm totals could see two feet here in kansas, foot and a half west of omaha. the ice further to the south. winter not done yet. >> no, it's not. >> good. it's february. i'm a fan. i see the band's extending into colorado there, eric, my buddy, right? >> yeah. i would pick the san juans. if you're a skier, head toward durango, telluride. that will be the spot. >> all right. it's all okay now. they've been getting snow almost every night. a lot of the places. you know, the base still isn't what it could be, but much better than last year. anybody that's -- >> yeah, about 80% of snow pack. we're just a little on the short end. but this should definitely help the situation. >> okay. great. all right. thanks. we did see the market yesterday after, remember, the three-day weekend. people wondering what happens. and it opened higher. and the stocks hit multi-year highs. joining us now, mark activivitn managing director and center economist at wells fargo. and then david joy, chief market strategist at ameriprize financial. we kept hearing that it's a stretch, we've heard it for months. that is that the complicate backdrop doesn't -- the economic backdrop doesn't justify the changes. maybe it's the fed, maybe it's discounting good news into the future. at this point, the market seems to be ahead of itself. do you believe that or not? >> i think on a valuation basis, i would say no. i think stocks are okay where they are, sort of fair value. i think it's driven primarily by the fed. in other words, if the fed wasn't there doing what they're doing, stocks would be nowhere near where they are in my opinion. >> does it matter why? >> does it matter why? not for the next couple of years. i expect them to continue to do what they've been doing. so whether it's sort of an artificially inflated environment, to me that's okay. you can still make money. so watch what the fed does. and what they say. those minutes are going to be important today. i do think at the same time we're still likely to get a correction in the weeks, maybe the months ahead. i think as you point out, the economic fundamentals matter on some level. and the economy's going to be slowing down. the cumulative impact of the payroll tax increase, the income tax increase, higher gasoline prices and sequester cuts is all going to converge and result in a very weak print, i think, for maybe the second quarter gdp. i think the market pulls back a little and maybe once we get beyond some of the political uncertainty, the second half looks better. >> housing's better. the fur or five things you mentioned, do they more than offset the improvement we've seen in the economy? that we have finally seen, that we've waited center. >> i think they will in the short run. i think they will trump them. and we'll pull back. but i think the move in housing is sustainable. i mean, just -- in terms -- >> that's a lot. it covers a -- people feel much better about their job, about everything when they feel like, you know, they're -- what is that? >> you are correct. i'm saying, yes. >> you don't worry -- you're not -- that house you got, and by the way, folks, you can find it on -- >> what is going on? >> remember, it's beautiful, though. >> it is. >> incredible. you know, it -- put two together, right, knocking out walls -- >> didn't knock out walls. we'll get to mark vittner. you're an engine of the economy. we need it. mark, you just heard all that stuff. do we get above 8% again in unemployment? >> i think that we're probably headed lower in the unemployment rate. it's a bit of a mystery because did t depends on if people come -- it depends on if people come back in the labor force in large numbers. i'm not sure that's going to happen. i think that given how much -- how much support payments we have, the big rise in disability payments and food stamps, we have a higher reservation wage. a required wage that we need to -- that jobs need to be producing in order to bring people back in the work force. we're just not there. we'll see modest growth. i think we'll be in the neighborhood of 2%. i'm not as worried about the sequester. i think the economy's actually on firmer footing than -- than is widely thought. and that the day when the fed begins to wind down q.e. is probably closer than people think. >> mark, you just said that you think we need a higher wage because people won't work for the wage that's there now, you think. is that an argument for coming up with higher minimum wage because otherwise people won't go back to work? >> no. i don't think it justifies the minimum wage. the minimum wage affects people at the least skilled level. and they really -- the problem with raising the minimum wage is you make it much harder for low skilled workers to gets the first job. that's where they get the skills to earn a higher income. so we've been preventing a lot of young people from getting jobs. that's where we've seen the biggest drop in labor force participation has been among the 16 to 24-year-old. i think the -- the increase in the minimum wage we did back in 2008 did a lot of damage to the economy. and i think that we're still paying for that. that's one of the reasons that so many young people are having trouble finding jobs today. >> but what -- what but say? i misunderstood that -- >> i think in terms of labor force participation and other parts of the economy, there's just not a -- not a high enough wage being offered in the economy today. we're not creating enough high-wage jobs to bring in -- to bring women back into the work force who said, you know what, it's -- it doesn't make as much sense for me to take a job now when i factor in the cost of childcare. >> right. >> or someone who lost their job and has unemployment. >> what you're saying, too, is that, you know, with disability and unemployment insurance and everything else, you can make about $29,000 or $30,000. can't you? >> yeah. it -- it varies by state. and you look at a state like california and the labor force participation right which had been in line with the nation has dropped more than a percentage point below it because california's a high-cost state. it takes a lot to entice people back into the work force in california. >> right. >> there the number may number the high 30s. we're just not creating enough of those high-paving jobs to bring people back in the labor force. >> i think the question joe's asking, if i'm wrong, are we talking about trying to find those jobs and raise -- and raise incomes, or are we trying to take away -- >> the benefits -- >> whatever those benefits are. >> unemployment has to end. >> the unemployment -- some unemployment issues, unemployment benefits which are potentially creating a disincentive to work. >> well, we really don't have as much control over creating the jobs. that happens in the private sector. but we dpreebl ne-- we probablyo need to roll back the assistance programs. we're doing that in north carolina. there's been a big reform to the unemployment insurance program that the governor signed that reduces the number of weeks that people can collect unemployment and the maximum manhunt that you can receive. >> what scares -- maximum amount that you can receive. >> what scares subcommittee -- we've run four, five straight years of a trillion. and we're afraid to tax cut $85 billion which -- we're afraid to cut $85 billion which means we're at trillion. for the future if we don't get better growth and tax revenues from the structure we have, we're stuck -- we're at $915 billion even with the sequester. that's all we can cut? >> yeah. and particularly when we just spent 60 or -- >> on sandy -- >> $60 billion for sandy. so on net basis, we're not having this huge cut in government spending. >> you don't want to. >> no, no, neither of you mentioned it, sequester. week and a half we're going to start shopping the -- >> that's out of a trillion that they're chopping -- >> the white house came out yesterday and said it's going to be disastrous. >> i know. >> i think it slows the economy down. i also think that there was this mindset out there that if this is the only way we'll get cuts -- >> right, $85 billion. >> so continue. and in the long run that might be good for investor settlement. >> is it a too ugly way to do it? boehner called it in the "wall street journal" this morning, he says it's an ugly way to do it. >> it is. it is. if that's the only way you get it done, do it. >> you're okay with that? you would prefer to see it? >> i'm okay because i don't work in the defense industry. i don't work in some of the places that are going to be affected. but i think as a shareholder -- >> as somebody watching the markets -- >> yeah. i think it's a good thing for the markets in the long run. >> another big date at the end of march. government appropriations run out. they could shut the government down. >> the continuing resolution kicks in. >> right. >> what happens then? >> my worst case scenario is that the sequester languishes into the middle of the summer and then they couple it again with the debt ceiling debate. and we see a repeat of what happened in august of 11. another -- you know, traumatic experience for the markets. >> david joy, thank you, mark vittner, thank you, as well. when we come back, the white house plans to strike back against china's cyber-attacks today. a number of companies discovering that their twitter accounts have been hacked. we'll have the details after this. first, as we head to a break, take a look at yesterday's winners and losers. 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[ male announcer ] in a clinical study, over 80% of treated men had their t levels restored to normal. talk to your doctor about all your symptoms. get the blood tests. change your number. turn it up. androgel 1.62%. get the blood tests. change your number. turn it up. 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. welcome back. today the obama administration is planning trade actions against countries caught at cyberespionage. today's announcement comes after a u.s. cybersecurity firm released details yesterday tying a secret chinese military unit to years of cyber-attacks against u.s. companies. other major u.s. corporations have reported being the target of hackers. chrysler said some hacked into the company saying the move was similar to an incident involving burger king on the same day. meantime, apple says a small number of macs at its offices were infected by malicious software. that attack was apparently similar to one that facebook acknowledged last week. so this is becoming an issue. we talked about "the new york times" was hacked about a month ago or two months ago. i don't -- i hope my -- >> the twitter stuff to me seems like it's not as much of a big deal. our guest shoeft henry blodgett is business insider ceo and editor-in-chief. the china stuff seems like a big deal. >> very serious. very serious. it's basically an act of war. >> yeah. >> especially if it is tied to the army and government, it's an act of war. countries and corporations, the assets are now in data bases. they used to be in the ground, on land and so forth. this is the new way to wage war. and the white house responds. our government response is going to be very important. >> the white house already president obama i think has tried to appeal directly to the president of china and has gotten nowhere with it. i don't understand how we continue to have normal relations while this is going on in the back. >> that's right. and there's still some question as to whether this is in fact happened, some cybersecurity experts saying you can't con cloud that yet. we have to look at other thing. that's part of the process. i think there has to be a strong stand taken. we can't have this happen to our companies. >> what would be a strong stand in what's -- >> i don't know. trade is interesting. >> i don't either. >> the economies are incredibly entwined. you can't bring military into it. >> right. >> you know, one of the things we haven't heard yet is that e-mail being hacked on like a gmail kind of service or hotmail kind of service or yahoo! service. do you believe at that hack vs. happened and we're not being told? one of the things i wonder is if -- if there was an announcement that some massive e-mail service was actually hacked, would everybody leave? what would happen? >> they've been hacked through the front end. in other words, duping you into giving up your password. then they go in through your account, change the password, take control. that's the way some of the famous hacks have happened. on the back end, not that we know. that would scare people. no question if you got into the entire gmail data base. >> where do you go? you have a "new york times" account. you've already been hacked. >> i wonder -- i assume between gmail, aol, yahoo!, they probably own 50, 60, 70% of the e-mail world. where you do go? i don't know. >> the same for corporations, though. the data lives a server somewhere. there's no foolproof way of blocking access to it. it's not like you're protected if you say, i'm not going to use one of those cloud things. >> right. >> interesting. >> and if you want to know more about this and kind of a lighthearted way, see identify brought to you --eey thief" brought you to by universal studios. great movie -- >> a universal film? >> i didn't know it was a universal film did. you see it? >> i did not see it. if you have an interest, visit your -- check your local listings. >> by the parent company of comcast. >> i didn't put two and two together there. it's -- >> i was trying to -- more disclosure than anything. >> all right. coming up, victor -- it's not hard to do this, is it? not hard to be a family. >> synergistic. coming up, a visitor blows in from the windy city. michael gerka joins us on set with a look at what is most likely to drive today's action. 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[ male announcer ] hold packages at any fedex office location. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. welcome back, michael gerka joins us, managing director at chicago-based spectrum asset management. and periods, michael, in the past where, say, you're not interested in the -- say you want to diversify. commodities are always interesting. so at this point, you mention -- i didn't know this. both wheat and corn, i remember the historic rallies we saw last year. they've pulled back by $2. >> through the levels that we rallied -- >> wheat and corn both. >> yes. we've retraced back from the levels. a lot of people don't look at drought conditions in the winter. but especially in chicago scenarios where we didn't get any snow, over an inch, for 3 0 days. you're -- 360 days. you're looking at the midwest that hurting on the winter wheat scenario. if you look at the forward contracts being july where the anticipation of where the summer crops are going to be, they're getting ridiculously cheap in the market in a lot of options players looking at upside calls because they think because of those fundamental reasons you'll start seeing the grain markets rally back. >> why the pullback, though? >> that's just it. why is crude rallying in the face of fundamental reasons that the economy looks like it's really slowing down? that's a real misnomer. for the same reasons that crude makes no sense to be rallying other than a squeeze, we're seeing the same scenario. the anticipation was that we started getting precipitation, and it was coming into the market and didn't happen. and more and more of a squeeze started happening. >> you can either buy futures on wheat and corn or could be fancier and buy, what, july calls? >> if you like the options markets, those are getting cheaper by the day. wheat, corn, soybeans have been trading. wheat's been the focus in the market from liquidity reasons -- >> is there reason to think that yields aren't going to be what people expect this year? >> exactly. exactly. if you kind of go a little step further into the softs market, you started seeing like orange juice and coffee having drought conditions or harvesting problems. those are much more volatile and less liquid markets. that's why we like talking about them. >> okay. the other thing that is on people's radar in commodities is gold's down under 1,600. what, platinum hitting new highs? >> going the opposite way. >> that's never happened -- >> a minor strike in south africa. the demand has been -- >> major strike with the miners. not a minor, a big strike with miners. >> yes, in south africa. then you had the implementation of car and emissions from europe which is now obviously adding to more -- >> supply strapped and demand is up. >> yes. platinum almost ready to test 1,700 as gold goes up. gold was always trading above platinum. now they're almost $100 premium to the other. and actual diverging even further as that spread widens. no one trades that as a cross, but it's a very good reference that you see sometimes like with the brent versus the wti. >> you can buy gold and short platinum, you could do a spread or -- >> that's been a successful trade to be short one and the other. the problem is, they're not industrial versus precious metals. they're kind of in the same basket. you normally would never see this. so from historic per specktivities, this is some -- perspectives, this is something new and different. >> what about gold? >> two months ago everyone was sure gold was going to 2,000, then 3,000, 5,000, you couldn't lose. now it's breaking down. does it go back to 500? >> no. it's never going to lose that partisanship because of where we sit with -- that purpose because wherever we sit with low rates. the idea was that we would have an inflation scenario and everyone would need more of gold as a hedge. look at the ten-year yield as an example. i mean, inflation's not rearing its head. the aspects of maybe it showing up is going to move interest rates. but the inflation scenario has gone out the window. for those reasons, gold is probably still overpriced. >> watch silver. >> silver's always been the, you know, for me, the precursor. we watched silver first because it's -- it's just as liquid, but it's got more of a -- an industrial -- >> where is silver? down under 30? >> it's below 30. there's a correction a lot of people targeted around 27 where you see value come in and players start -- right now at least let's say there's more fundamental reasons to get long silver on the dip than gold. >> all than there is gold. michael, thank you. i want to diversify. >> you can see i'm interested in that. comment, you can't have your eggs all-in-one basket. eggs are a commodity. >> yes, they are. and they trade. so does milk. when we come back, we get henry blodgett, the last story of the hour. then a "squawk" summit, three corporate leaders with a message to washington and wall street, time to get the economy growing. 32 advisors. at farmers, we make you smarter about insurance. because what you don't know can hurt you. what if you didn't know that weeping willows have invasive roots? 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(announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." welcome back everybody. our guest host this hour is henry blodgett. we're trying to figure out the one big story everyone needs to pay attention to. sequester is just around the corner and yet the markets keep touching high levels. >> the next three months the government has the chance to screw everything up. the first is the sequester. the next is end of march, they have to vote for something for the government to operate again. in may, we get the debt ceiling again. >> does the market not think the debt ceiling is going to happen or not care. >> i think the consensus now is it will happen. then there will be a scramble in the middle of march to look like heroes, increase spend ac little bit, come to a deal and get us through it. >> guys say don't fear the sequester. ceo market soothsayers say don't fear the sequester. >> i heard other ceos said you should fear it and cuts defense and other ripples. >> we had others. >> i guess when you're talking long term versus short term, there's the difference. >> it will reduce spending in the near term. the economy is weak, won't help. we need a long plan. keep everything going this year, a couple more out-years things are better, unemployment down, then we start to scale back. >> we've been hearing that. >> what are we going to scale back on. you look at furloughing employees at the faa who will be at the airports, that's nerve racking. >> same in defense. >> probably cuts no matter where they come. >> they will happen any way. >> you have the fringe on both sides. howard dean thinks it's the right way because you will never get defense if you don't do it this way. >> then we have to come to some sort of agreement to fund the government. >> i think they backed off on it at this point. >> so everything's great? >> not everything is great but i think businesses are like -- so used to this, i'm not even -- >> that is true. the mood definitely is improving. new optimism. >> do whatever you have to do. coming up, we have an executive who says he has a solution for keeping america great, follow the money. the president's favorite banker, robert wolf. opportunity knocking. the dow s&p at nearly 5 1/2 year highs while the nasdaq closes at a 12 year high. we'll talk market optimism and where to make money with former c br cbs ceo robert wolf. >> good things come in small packages. >> why names like car technologies may be worth a look. we kick into high gear. >> a look at the emy close look at what will drive growth this year and companies taking advantage. as our second hour of "squawk" starts right now. >> good morning. welcome back to "squawk box," everybody. i'm becky quick along with joe kernen and andrew ross sorkin. keep a look at futures. they're barely bulging. the dow and s&p 500 both near 5 1/2 year highs. nasdaq another 12 year high. keeping a close eye at what's happening. let's look at headlines. the dow component is close to a fix for the battery problem that has grounded its 787 dreamliner. reuters says the solution involves expanding space between battery cells overheating. and the air in the pond airways, 787 recovered an improperly wired battery. you would think it would help the stock but so far trading slowly. >> david einhorn might be close to winning his battle with apple. a judge has not issued an immediate ruling and he has a proposal to make it more difficult for apple to issue preferred shares. new jersey's newest casino will file for bankruptcy less than a year after it opened. the rebel casino plans to do a pre-packaged bankruptcy next month that will cut its debt by two-thirds. it has been short of expectations and posted its second worst month in january. >> thanks. sony expected to showcase a new playstation console today in a preemptive strike against microsoft and xbox. the event in new york comes against industry speculation microsoft is set to unveil the successor to the xbox 360. sony purchased a cloud-based gaming company last summer and experts say that's a hint it will pursue a streaming strategy similar to microsoft. i think that's what you have to do to compete. sony may offer an expanded offer of free games to counter a threat of what they're calling casual gaming. i don't know. >> online stuff that you -- >> like zynga? >> words with friends. >> alec baldwin. he is a hot head. >> yesterday, he quit twitter again. >> he's like -- i think they would be out of business if they didn't have an alec baldwin story every week. and this home builder down as stocks down for toll brothers. net income was $4.4 million or three cents a share reversing a loss of $2.8 million or 2 cents a share earlier. the revenue this year rose 31%. our next guest host for the next two hours is banking on america as source of growth, robert wolf, ceo of 32 advisors and former ceo of ubs america. we want to talk about the business of your new entity, your new company and how it's going. now, you've got clients and you need to tell them what to do. >> i hear you. >> so where are we? what do we do? where's the economy? what's likely to happen and what about markets? >> let me give the 32nd 32 advisors. we are looking at gaps in this country, exports percent of gdp is 15% and all industrialized countries are north of 25 and 30% and germany at 50. we will help international trade finance. we brought on kevin barney who was at the export import bank. the second is inbound investment, very similar. before 2001, foreign voechlt into this country it was 30% of gdp for foreign investment. it is 15% because of investment, l labor -- >> when was it? >> before sep 11. now we hired barry jones, select usa don't select other companies, select us. we will help other countries come build, buy and invest. the third stream is austan goolsbee's economic intelligence stream where we think the economists today know cpi inflation but don't know the interrogation between public policy and economics. we think austin knows that better than any. we actually started his first call last week. >> can you talk about his call? >> sure. happy to. >> i can tell you. before 32 advisors, we never really paid him or hired him but he gave us a lot of insight over the last two years. >> and now doing it on private conference calls. >> he was gloomy when other people weren't and he was always right. >> two more an i'm done. we have our restructuring stream by floyd taylor part of the algron group, everything is being restructured today. and communications, helping firms foreign and domestics on press branding and those times of things. now to austin. >> he's gloomier. >> for a guy who's very peppy and funny, he was awfully gloomy. this was a 90 minute call. you know it went well because not one client got off the call. it's a weekly call we have and like a membership only. >> you don't wear one of those jackets? >> no. i used to wear one, had a white one. >> you wore it when it was cool. in the '70s. >> any who wears one now isn't anything except a nerd. >> i can't even wear my football jacket municipal. nothing fits. the premise was sequestration is bad. continue i continuing resolution, bad. >> sequestration, all these things are happening and bad. >> he thinks continuing resolution. >> the thinks there will be a government shutdown, north of 50% unless something happens in the next 30 days no one's been talking about. even the minimum wage, he was debating how that can impact employment for the low end. >> he said it could hurt employment, right? andrew, if paul krugman tells you a dog is a cat and keeps saying it, no, it's a dog and you hear it meowing, do we have to believe him because of his nobel prize? is that where we are? >> saying what? >> there's a cat meowing. >> on anything -- >> on minimum raise, raise it to $50 an hour, a great thing. >> paul krugman believes we can take on more debt -- >> says raising the minimum wage does not hurt. >> paul is on the consumer side. he's saying 70% of the country is consumer driven. >> raise the minimum wage, comes back to the economy. >> on the employment side, austin will say for those people making minimum wage, a d disproportionate amount of our employees in the country, there'll be less hiring. >> there'll be less hiring. >> in europe, he only spoke the last five minutes, that will be our next call. >> you're from new york? >> from boston. >> from boston. i will say forget about it, huh? >> and europe was -- we have nick on today, i saw him yesterday. he was pretty negative on europe as well. it seems like there's a lot going on. >> add it all up then. >> you know what, it feels to me -- >> sub 2%? >> i think it will be very strange here. i think you will see very strong housing. housing will drive employment. because 25% of unemployment was construction driven. i think you will see good employment, unemployment better than we expect because of housing. i think the market will continue to be buoyant because the fed is forcing your hand to get into the market. the other thing that is a little strange because companies aren't seeing real organic growth and need it and made their efficiency gains over the five years, they will continue doing acquisitions. you will continue to see a good market. >> not encumbereded by a big bank. just say id. do these deals make sense to you? >> they make sense because the organic growth isn't there. when people have all this cash on hand, you have to do something with it. generally speaking over the last two decades, share buybacks are not a good thing for the stock. >> yesterday, saying 99% of all deals are lousy. >> he's looking at details. >> he was saying like home depot, when they put on the supp supplier business, they had to get rid of it and doing much better when they got rid of things -- >> bankers make their money proposing deals and investing deals. >> we have a restructuring group, don't we? >> we talked about earlier, a nice housing market can counteract a multitude of since and you have the wealthy effect from the stock market of the fed. >> cramer called it the great gots gatsby market because the rich people are doing well. are we going to exacerbate the rich economy of the two differences again? >> it feels that way. it feels that bipartisan stuff we all want to happen is not going anywhere. >> also that people that the haves are going to continue to do well. austin didn't mention the obama-care tax or payroll tax or any of that. those are all headwinds, too. >> listen, i think the impasse in washington is just crazy right now. i am absolutely for not having the sequestration. it's just too blunt of an object. >> but the two sides have not been able to -- >> zero. >> no common room -- common ground. >> if you could cut 85 you wanted to cut? >> in a nanosecond. >> do you have 85 you want to cut? >> do i know it off the top of my head. i think you need to still hit the revenue side. you need revenues and spending to be that fly% differential, you have to get there. you need revenues up by 18%. >> do you get that growing or additional taxes? >> i don't want to use the word taxes and i'm not trying to -- i don't think we're talking about tax rates here. there are certainly revenue loopholes we could be closing. >> we're supposed to close those to lower marginal rates. >> but we didn't. >> simpson-bowles we were lowering marginal rates and closing loopholes. now, we raise annual rates and you close loopholes. >> it's important we don't have these blunt objects because we will never get to tax reform. >> simpson-bowles said 2.4 trillion, their new plan. >> i don't know the specifics on it. i need to go back through and take a look at it. >> they're less relevant now than probably -- >> i don't know. if they keep coming back, they could pick up traction. >> they had a chance to be relevant. >> let's take a break and we have you for the next two hours. our special stock summit continues and how executives are planning to keep their businesses successful. up next, small and mid-cap stocks. why you might want to kick the tires of carmax, speed up investment investments of technology. look for updates on twitter from andrew, joe and the "squawk" staff #squawkcnbc. a to, but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime. tdd#: 1-800-345-2550 until i choose to focus on something else. 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 open an account with a $50,000 deposit, tdd#: 1-800-345-2550 and get 6 months commission-free trades. tdd#: 1-800-345-2550 call 1-800-836-8799. welcome back, everybody. futures are basically flat lining after the markets closed at new highs yesterday. near half year highs for the s&p 500 and dow. and near 12 year highs for the dow and we will see how things move today. take a look at shares of garmin. the fourth quarter profit came in at 63 cents a share short of 73 cents and expectations came in short as the forecast for 2013. it is working to off-set a decline in the personal device industry when you have cell phones that can give you gps all over the place. the stock is down 5.7%. also, the famed oracle of omaha telling "squawk," there is still no better place to invest than in the u.s. >> america really is doing better than the rest of the world, which is everybody thinks we're lagging. i think from what i see, the u.s. is the strongest part of the world. >> along that vein, let's take a look at some domestic small and mid cap names in the tech space that could provide pockets of opportunity. joining us the portfolio manager of a growth fund and of the needham aggressive growth fund up nearly 3% the past few years. good morning. >> good morning. >> let's go through a couple of your picks you think now have a little bit of opportunity. >> sure. al k al -- a key company for technology, akamai. they move data to consumers and enterprises. these same servers are used for security, a key element relevant to eastern european and chinese hacking of websites. >> where are you? i know apple is on your list of top 10 holdings. where are you on apple and more specifically on this i hoeihorn issue in the news? >> we've been a long term holder of apple, seven years or so. we added to the position over time. we think it's a very inexpensive stock at six times enterprise value to earnings. on the eihorn issue, one of the main things we like at this point is their generation of cash and opportunity to return capital to shareholders. whether it is through david einhorn's initiative or other means, we think they can pay a higher dividend and buyback more stock and a recipe for success. >> i gather you think they can but will they? the ultimate issue on the table? >> we think they will. >> and car max is o list. >> car max, we think they're pockets of strength and a specialist retailer selling quality used cars in a great setting, revolutionizing the way cars are sold. trades at a single digit multiple earnings of enterprise value to ebitda. they have hundreds of stores around the country and opportunity for growth with a share of that small market. >> what else do we have? integra. >> they are also pockets of strong spending. one is semiconductor manufacturing. and they are a maker of integration and control systems used in those next generation semiconductor plants, entegris. and double digit growth and traced at multiple digit to ebitda. >> we've been talking more broadly about the economy. i'm curious how you're viewing the idea of cap x and cap x spending given we have an up market yet the underlying economy doesn't seem to be mo moving. >> our view is moderate low single digit of general petradp pockets of strength for semiconductor manufacturing and the other enables mobile and e-commerce. >> we will leave it there. john barr, thank you for joining us this morning. >> thank you. coming up, apple reporting something it hardly ever reports, a detail after the break and our exclusive stock summit. with jonathan craft and david wolf. and business expectations will all be covered. "squawk" will be right back. time now for today's aflac trivia question. which u.s. president was known for his early morning skinny dipping sessions in the potomac? the answer when cnbc "squawk box" continues. um, i see a duck. be more specific. i see the aflac duck. i see the aflac duck out of work and not making any money. i see him moving in with his parents and selling bootleg dvds out of the back of a van. dude, that's your life. remember, aflac will give him cash to help cover his rent, car payments and keep everything as normal as possible. i see lunch. [ monitor beeping ] let's move on. 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[ male announcer ] staples makes it easier to get everything your business needs. even custom banners. and now get 50% off banners and posters. staples. that was easy. now the answer to today's aflac trivia question. which u.s. president was known for his early morning skinny dipping sessions in the potomac? the answer, john quincy adams. >> welcome back to "squawk." apple says a small number of its employees computers were hacked but no data exposed. the breach occurred when some employees visited a developer website and exploited a vulnerability in the java browser plug-in. it did not specify when the hack occurred. the company released a patch for its oxs users that can be installed from a security update. it appears to mirror a similar hack that occurred at facebook. it was very strange. they said some facebook employees had gone to see a developer and brought a couple computers with them and somehow during that meeting it happened. i don't know, you have a meeting, maybe there's people installing stuff on your computers. >> kind of creepy. >> kind of creepy. >> if you a commencemet on quess on anything you see on the show, e-mail us. the futures have been barely bulging but coming after big gains yesterday. the dow was up about 53 points. the dow and subpoena subpoe&p 5 year highs. "squawk box" will be right back. when "squawk" returns, a special summit with business leaders who move markets. the ceo of haines celestial and kraft ceo jonathan kraft join guest host robert wolf to talk economy, business and prospects for the country. a special "squawk" summit only here on cnbc. profit from it. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. we're about an hour away. following a december decline. we're looking for housing starts to drop to annual rate of 925,000 units for january after 954,000 in december. credit reporting agency transunion says late credit card payments up 9% in the fourth quarter compared to a year earlier. the average amount of debt for cardholders was down 1.6% from a year earlier to just over $5,000. right now, time for our special "squawk" summit talking about the growth of the economy from three different industries and where these guests see opportunity. our guest host is robert wolf of 32 advisors and the ceo of haines celestial and president of the kraft group and president of the new england patriots. welcome to the set. great to have you here along with our guest host. >> good morning. >> why don't we start out broadly and talk about where you see things right now. irwin, tell us what you're seeing in the economy and where things are shaping up. >> our sales are up 25%. i guess eating healthy not a trend, a way of life. you are what you eat. and i was asked about the increase in fuel prices, how that affects you. listen, consumers will stay home. we're seeing good consumption. i looked at my walmart numbers yesterday from last week. we're still seeing good numbers at walmart. i love cold weather, love when it snows, they drink more tea, love flu season. love when you guys all had babies and talk about the baby rate being down 7% but still consumption of baby food. let's talk about walmart numbers. you get your numbers every week. there's been a huge scare thinking walmart had a terrible month of january or february kicking off, too. >> i saw numbers last week and our numbers looked good. the consumers are buying food. we saw tea numbers being very strong. we had a lot of storms around, consumers buying products loading up. it's helpful. >> let me jump in for a second in the retail world. office max and office depot, 15.$15.30 a share and issuing common stock for each outstanding share of officemax. we can see how the stocks are transcending ahead of the news. we can say it's official. interesting they completed the deal yesterday and haven't put out a press release, put out an earnings release. odd there. >> buried in the earnings release? >> buried in the earnings release. a strange way to announce a transactions. >> is it like 2500 stores? >> 900 plus 1500. how many are left when it's all said and done out of 2,000? >> you give me a minute, i'll get back to you. >> no. we don't know the answer. i'm saying, i figure half. >> debt consolidation. >> half. then who noknows, amazon and staples.com, i don't know. >> you guys sell anything to those guys. >> actually, we do. >> i was thinking, you might. >> we sell corrugated boxes to one of those guys as well as staples. we're staples guys. ron sergeant is the best. staples is a boston based company. >> good or bad for you or doesn't matter? >> probably doesn't matter in the scheme of things. i like it because it's good for staples and staples is where my heart is in that game. good from that perspective. >> jonathan, how is business overall? >> i'd say it's pretty mixed right now. in our industry of corrugated paper, you see a trend and 85% of the guys are up or going down. this is as mixed as we have ever seen it. really hard to draw specific conclusions other than some guys are hurting and others doing okay. >> any way to distinguish who is and is not? different industries? >> i was looking yesterday. it is as bvaried as you can believe. we have a lot of food customers and the ones creating new products are growing share in a market i don't think is growing very much. but they're stealing share and their business is up and other guys are down. manufacturing, which is something that always moves together is as varied and mixed as we've ever seen it. we have a cutting tool company, they make saw blades basically for the consumer and industry. they're taking business back from china. they're closing factories and moving back here. their business is strong. we have a snow plow company that usually is incredibly busy this time of the year and running three days a week. they tell our guys their medium and small contractors, customers usually buying replacement parts are trying to figure out how to spend the capital because they're not confident about the future. >> is that weather related because we haven't seen snow in many places? >> it really is. last year had less snow, business through the roof. small guys, my taxes going up, too much uncertainty, not going to invest capital dollars. >> guys bringing the blades back, why are they doing it? >> a combination of things. they have figured out -- first, energy in general, people like this country. they figured out how from a human capital perspective to mix human capital and hard capital goods to do it more effectively here especially when you take out the transportation costs. asia here with lower priced goods is now starting to make things less cost competitive over there and that's the reason. >> that's a big shift. >> it is. >> gentlemen, wry don't we try and throw our best ideas out. if you were looking at ways to try and spur growth and get ways for help for business around the country, what do you think is the best things? this is a jump ball for anybody who wants to jump in first. >> like jonathan said, there's no such thing as the norm out there anymore. next week, there's a natural organic food show. we'll introduce 70 new products. innovation is key. to sit back today and say, hey, how do i get my business growing? we need more distribution. you see so much going on in the retail consolidation. you asked about amazon. three or four years ago, we did no business with amazon, they're my top five customers because you sit home and order diapers and baby food. >> all his stuff shows up in front of my house. >> and innovation, key customers, how do i gain distribution. we have just gone into europe and we subsequent half a billion dollars going into the uk. how many people told me i was crazy going into the uk, why aren't you staying here, carl icahn being a big investor, we wanted to make sure we did the right thing for carl. we have taken those chances. >> has it paid off? >> it has paid off right for carl and we have a great relationship. >> and was it good when you went to the uk? >> absolutely. there's a lot of legroom and growth. from a. you can sit back and what i've done from the company starting it from scratch, half our sales are in the u.s., the other half outside the u.s. that's been the whole thing for myself, how i do 50/50. you will see a lot of consolidation in retail. there's 33,000 supermarkets out there. will see costco and whole foods go to 1,000 stores and trader joe's and amazon. you have to get behind the players that will grow. >> do you compete with herbal life? >> i do not competed with herbal li li life. >> there is crazy stuff in here now to get that economy -- >> joe, i have to tell you, this is one of the hottest -- becky asked about -- >> that looks like it already -- >> the whole thing about drinking juices today, you go back about innovation. >> what is it? >> a juice product a cold press. >> 1, 2, 3 -- >> so people see what's going on here. >> what happened? >> a lot of consumers are going on a cleanse, which means you want a three, four day cleans, don't eat, zrirng juidrink juic pasteurized, contains kale spinach. this one contains six pounds of fruits and vegetables. you will feel great. >> you drink six of these a day. >> i feel like i'm on "pric "bridesmaid "bridesmaids." >> before you came on we were chatting and the economy stalling. you selling organic foods you called say in some ways the fda may be benefitting your type of company. >> that has the great. herbal life and -- >> for real? whose side are you on there? >> let me come back and answer robert's question. every product we sell has a label. it's on the uda or fda controll controlled. in this country we had so many food recalls and we really have to. from a regulation standpoint, it's tough to do business in this country, it really is. being a public company, it is tough as a $2 billion company today, what we spend on being a public company, we could hire a lot of people. >> not pasteurized stuff, how do you make sure it doesn't make you sick? >> it goes through a new type of pasturization you're killing bugs and important to us. one thing about pasturization it kills all the nutrients in the juice. >> are you going to do this? 1, 2, 3. >> andrew, it's a lot better than her to thing behind that can i won't mention you're drinking, and drinking that. you should not be drinking soda, andrew. >> i have to tell you. >> stick with the green stuff. >> it tastes good. i tasted some in back. it looks a little scary. >> it tastes great. a lot of sugar in it. >> a good sugar. >> good sugar. since when is there bad sugar. >> it's leaving your body, andrew, i promise you. >> it bothers me, robert, when you talk about regulation. >> we have to take a break. >> i love this guy but the affordable care act is doing more to kill small and medium sized business in this country than anything else. i think virtually everybody agreed health care needed to be reformed but virtually everybody would agree that congress was not the place to write that bill. and to have congressman -- >> do you agree, irwin? >> by the way, irwin would like to have less regulation, too. becky asked where growth is coming from. we've been trying to buy small and 3450e7medium sized competitr years. in '09 and '10 they were shell-shocked, they're coming to us today saying, buy my company. we cabinet deal with this. >> we will take a break and continue after the break. yahoo! chief melissa meyer on nbc's "today" show talking about her ni website and competing for talent. details of that interview are just ahead. don't forget you can find "squawk box" online and on mobile, too. follow us on twitter at "squawk" cnbc. like us on facebook. visit our show page, "squawk box."cnb box."cnbc.com. ♪ ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold new styling, unsurpassed luxury and nearly 1,000 improvements. introducing the redesigned 2013 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. welcome back, everybody. take a look. futures indicated slower. dow futures down about 6 1/2 points and s&p 500 down 1 1/2 points. the deal is official. office depot is buying officemax in an all stock deal and each company will have directors on the deal. news was put into the fourth page of office depot's earnings release under the title "other matters." this slipped by. we were looking for other matters but they put it in earnings news. each of the stocks are up better than 10%. boeing has now found a way to fix battery problems on the boeing 787, increasing the space between the battery cells. they're telling reuters that the gaps weren't wide enough. >> and there was criticism they were too close and the cells would overheat. >> it's only being reported by reuters at the moment and only citing one source. as people consider this news and think about what that means for the stock. >> it's been a muted reaction by the stock but indicated higher. >> understand what's going on there. in other news on boeing, the engineers are split on a contract. the latest professional proof, now members of a small technical union rejected it. both sides authorized the union to call a strike and they negotiated together but contracts are separate. talks are set to resume and no walk stoppage expected in the near term. looking into insider trading in the options of heinz. they had already filed a suit against an unknown trader who used an account in switzerland to trade off purported inside knowledge. why is it possible it's an unknown trader to them? you would think the fdc could figure it out quickly. negotiations breaking down between alley financial and rescap. and makes it likely the company will have litigation. and toyota motors ramping up 10% in april. they are planning an increased due to higher than expected sales. when we come back, we will get additional thoughts from our special panel on growth. jonathan kraft, irwin simon, robert wolf. also an interview you can't afford to miss. meet the billionaire who sold and apartment in new york and house on a private island in miami opts for the simple life. he specialized buy iing trouble companies and fixing them up. nicholas bergeron when "squawk box" comes right back. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. we are meeting with president of the kraft group and president of the new england patriots as well, next year, jonathan. >> definitely. >> and ceo of hains, ceo robert wolf is here and irwin simon. i don't know if i should take comment comments. >> eating healthy is not a fad. there are a lot of opportunities for weight loss and obesity in third world countries and mexico being one of the biggest markets right now, i think there's big opportunity for herbal life. >> i don't want to get too bogged down. >> as a ceo, i know you don't. i want to cut you slack. jonathan seemed to be saying regulation is an issue and obama-care is an issue but you're producing along with your company? you said innovation more important. you're no longer at a big bank making a payroll as ceo. suddenly you're worried more about regulation than you seem to be? >> i'm trying to keep under 15 employees somehow. >> can innovation do it? companies need to deal with what the reality is. that's the reality. >> we now have more than 5,000 employees around the world. i remember when i said i want to keep under 15, it is what it is. it's a cost we have to deal with. we have done a great job managing our employee health plans and it will change a lot. as i sit back next year and see almonds and corn prices and commodities going up. i look at natural organic foods should only be 10, 15% higher than conventional foods. you're not going to pay more, becky is not going to pay more for products. andrew will, though, for baby food. >> i like preservatives. >> one of the big things is how we're taking more costs out. in the green room, jonathan and i were talking about, if you did all my boxes for me, how do i make a better box, cheaper and recyclable. a big thing in business, how are we taking costs out of our business. every year we start on white pages how are we getting 30, $40 million of productivity out of packaging. every retailer are calling us, how are you shipping more efficiently and taking your conferences off. >> the thing bob is doing as a client. is he a client already? >> he is a client. >> you're helping with exports, imports, regulation and what was -- there was a fourth one. >> hopefully he doesn't see the fourth one, restructuring. he doesn't see that one. >> irwin is lucky, when you're in a consumer product business, you can innovate, you do it. we spend a lot of our time with basic manufacturing where historically in this country you have people that spent their whole life building companies that are today 10, 20, 30, 40, 50, $60 million, small medium sized companies like that, they are so discouraged. i was starting to say before we went to the break. when '09 and '10 happened we thought it was a chance to buy some and they were holding out all hope and those people across all manufacturing industries, they're getting very discourage and very depressed. aside from things like the affordable care act that kills you in terms of costs and administrative time and regulation, they don't see growth, real growth in the economy the only way in the future they could grow their businesses. now they look at tax rates going up, they say, i have to invest money in capital to stay competitive, i'm going to get out. we now have people calling us who wouldn't even take our calls before. it's bad for america because when guys in their 50s, 60s, early 70s who were the heart of what we're about are getting discouraged and throwing in the towel we have a real problem. it won't discourage the kids in the dorm room, harvard, mit, andrew was just talking about, will go out and employ entrepreneurs but it will discourage guys and bad for america. >> talking about the sequestration and resolution, it really puts tax reform off the table. one of the plans i think the whole business community wants if we get corporate tax reform a good chance for manufacturing goes to 25%, regular taxes go to 28%. it is really important we get through these ridiculous hurdles over the next 30 days so we can get corporate tax reform back on the table. manufacturing would start what we call it as in-sourcing, bring a lot back. >> it gets even more difficult the more you talk about closing additional loopholes, doing things one off piecemeal instead of overhaul of the entire system. >> idealistically speaking it would be great to say we're at 27% and up and down vote on every damn loophole but that's never happening and you have to break up this pieces because corporate tax reform has to be done. >> it's called a ground game, not a -- ground game not a passing game? >> i don't see any grand bargain that will take this wholistically. >> as jonathan said before, one of the things we're seeing, here's a company started by two women grew to $25 million. hit the wall. couldn't take it to the next level. from a standpoint, you know, could i start an hains celestial group again where i created 5,000 jobs. a lot of small entrepreneurial companies -- >> getting bought up. >> as jonathan said before, we're seeing companies come to us in the organic industries in big multiples in valuations, there's an opportunity for us to buy them out saying i'm hitting the 30, 40, $50 million ceiling and there will be a lot of consolidation out there. the same with hain, if we don't become a 4 or $5 billion company we will hit that ceiling, too. health care cost, how many jobs i can take out. >> you have to grow. >> i have to grow because of my costs. >> no disrespect to langone, we're talking acquisitions as a way of growth. >> i love ken langone and robert. ken langone is brilliant. joe, i'm sorry, i will let you ask your question. to me, unless robert's friend, mr. obama, decides that he really wants to see job creation in this country, which is going to come from doing the things we talked about, improving the government, it's not going to happen. >> are you glad the ravens won everything and gronkowski, i think you could have beat them. next year, we have to go. >> a great guy. >> when we come back. breaking economic news, read on the housing market and latest consumer price index. "squawk" will be right back. he doesn't own a home or car, lives out of hotels and carries only a smartphone. he owns billions. we will talk markets and life on the road when "squawk box" returns. [ male announcer ] this is not my home. there. i said it. they don't have pictures of my kids. they don't have my yoga mat. and still, i feel at home. could it be the flat screen tv? the not so mini fridge? ♪ the different free dinner almost every weeknight? or maybe, it's all of the above. and all the rest. am i home? nope. but it almost feels that way. homewood suites by hilton. be at home. 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? ♪ [ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪ to hold over 80,000... well that would make you... the creators of the 2013 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. see your authorized mercedes-benz dealer for exceptional offers financial services. the homeless billion aaire moves from hotel to hotel in his gulf stream meeting with celebrities and big thinkers. he will join us on an cliff interview on the "squawk" set. breaking news that could move the markets. housing starts for january at 8:30 p.m. eastern. "squawk box" spring training. less than 40 days remaining for opening night and we talk to the executive vice president of the chicago white sox. a third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick. i thought andrew would be the empty seat after drinking that juice. how are you? >> i'm doing just fine. becky is in the newsroom. >> she's in the newsroom. i thought you were. he's here after drinking that. our guest host, robert wolf, ceo of 32 advisors, former chairman of ubs americas. more to come, but first - first -- becky! >> thank you, joe! >> i don't know where you are. >> i'm over here. have some juice, too. boeing is reportedly close to finding a solution to the dreamliner's battery problems, a source telling reuters the fix involves increasing the space between battery cells to fry and prevent overheating. and ceo brian moynihan was awarded a 72% pay increase to $12.2 million from $7 million. his base salary from 2013 is due to rise by over 55%. we've been talking about this, this morning, major indices to rise at five year highs. everything is about flat lining, after big gains yesterday and a lot of questions about whether the market has really run too fast too far or whether stocks are fairly valued here. overseas in asia, you did see gains. the hang seng was up about .7 and nikkei up by .8 of a percent. you will see early tradeshows things going kind of like they are here. not too much movement. the biggest mover this is ftse up 25 points. >> thanks. among other stories we're following, the deal is official between office depoet a poepoep officemax. each company will have an equal number of directors on the new board. we should note it was put on the fourth page of office depot's earnings release today under "other matters." we struggled to see if the news was crossing the tape this morning. so far, no separate news release. i don't know what to make of that. yahoo! ceo melissa meyer announcing a new look for the home page. in an exclusive interview with the "today" show, they will take advantage of personal habits of news feeds and we will take a look at the new design in a minute with cnbc jon fortt and cnbc has a partisanshnership wi yahoo!. dubbed the homeless billi billionaire, our next guest is an investor and philanthropist and focuses how to make the world's nations work better, young is now is nicholas, and author for the 21st century. "intelligent governance for the 21st century." tell us, what is the underlying premise of the book? >> the idea that governance really counts besides culture, probably the biggest determinant in our lives this is way we are governed, one of those things that has america so successful they had high principles and the question is in a competitive world today, can it continue to adapt and reform. that's really the question. other places around the world have similar challenges and some rising, thanks to changes in governance. you look at china, they've made enormous progress the last 30 years, frankly thanks to a certain mode of governance and the question is the premise of the book, can we in the west learn from practices in the east and vice-versa. >> are we failing now? >> well, it looks like we have become very partisan and that makes change harder. and change is needed. so we are not, let's say, ada adaptiadap adapting the way we should. >> i know that you remember another frenchman that loved the government here that wrote about it. are you headed that way or are you headed more towards a more activist government? >> well, the government is there to govern. once you elected any party or leadership, the leadership and the government should be at least for a period of time -- >> less can be more, if both sides agree less is more. what unleashed those 200 years of exceptionlism, the government was there to let things happen, right, not to orchestrate the happening of those things. i'm just wondering where does your book take us? >> does it take us to more activist government or more activist people? >> i think a balance, in the sense that you need -- the will of the people has to be the determinant at the end. government is elected. once they're elected, let them do their job. let them do their job while in office instead of questioning and blocking it every time because if you do, then, you know, you don't have progress and you don't have decisiveness in a world that's become much much more competitive. >> nicholas, you travel around the world making investments. we talk about you as a homeless billionaire because you sold your apartment and don't have a place you live i found fascinating to itself. how much these days does the role of government play in your investments? how much do all these issues we talked about whether debt ceiling or sequester or things going on in tax rates affect your decisions making investments these days? >> i invest very long term. in my mind, i have luckily a different view than short term view. there's no question that places that encourage investments in long term thinking will, you know, be friendlier to investors than -- if you look at china or india. >> have you made investments in china or india? >> i have. they're both very exciting places. india is a democracy, very vibrant but very difficult to get things done. china is not a democracy, quite opaque. so in that sense, quite scary. on the other hand, you can make long term investment s and the environment is much more friendly in terms of being effectiv effective. >> go ahead. >> i had the great time yesterday with nicholas. we were just chatting for a while in his apartment and we aligned on a bunch of things. i thought it was interesting when he was looking at thei u.s he also thought there was a need for revenues and itemized deductions to be changed. >> rented apartment. >> rented apartment. sounds like you had an apartment. it's a rented apartment. he doesn't own the apartment. he's a homeless billionaire. >> actually, i'm in a hotel. >> it's an apartment. you're ruining our whole -- that it's like an apartment. >> like the size of my house. >> he also is quite negative on europe. was interesting when we were speaking today how it seems like the global growth is just so slow. part of getting the deficits down is leaning on taxes. >> my own feeling is that the u.s., again, a question of balance. the u.s. share of gdp actually pays the lowest taxes of any advanced country but the u.s. has also big deficits. i think it's a question of meeting somewhere in the middle. tax rates for a modern economy in the u.s. will probably have to rise. on the other hand, the entit entitlements will probably have to be restructured and some what lower and you have to meet somewhere in the middle. ideologically today there's great resistance. in europe, you have a different issue. a system that has felt rated in the form of currency but doesn't have a financing mechanism to finance the currency. politically, europe is in a position where they can help the whole and therefore can't help the individual economies. until that gets resolved, meaning there is more federalization of certain common goods like financing mec imis mechanism, until something like this gets done or breakup, i think europe will continue to -- >> which is a trickier problem? makes for better investing environment, problems with entitlements and revenue or problems with financing of the euro? >> the good news is that america historically has been more dynamic. you have positive immigration. you have one government. so at least if you need to make decisions, you have two parties. if you need to make decisions, the two parties come to some consensus, you can make it. in europe, it's that multiplied by the number of countries considered. much harder in europe. >> chicken and egg. you look at gdp growth rates in the u.s. versus europe the last 30 years and we've grown probably 40% faster so our citizens have accrued 40% more wealthy. at the same time, our taxes were a lower percentage of our gdp. does that mean that the gdp growth was able to grow faster because our taxes were lower as a percentage of gdp or does it mean we need to come up to the same tasks as a percentage of gdp as europe, which has grown typically much slower than us? you see what i'm saying? is it good to aspire to higher taxes as a percentage of gdp? >> i think it's a question of social model at the end and societal model. more growth here but more inequality. in europe, i have the opposite. you have an comparitively generous welfare system, so the average actually- >> but they grew 40% slower every year for 30 years. >> same in japan, lower growth but very high quality standard of living for the average. so in one case you sacrifice standards of living. >> the whole key. >> goes back to what you were saying. >> you talk about inequality. what is your take on that? you spent a lot of time. not only have you done very well but spent a lot of time with eric schmidt and other hedge fund managers have done very well. what is the ultimate answer for figuring that out or fixed if that is a problem you think is supposed to be addressed in all of this? >> you have to give opportunities to -- as many as possib possible -- especially if you're a rich society, like the u.s. or countries in europe, it's a question of giving the opportunities. opportunities aren't there, you're going to have continued inequality. a rich society should be able to afford to have much less inequality and be able to -- this is the difficulty, should be able to adapt and o offer sort of modern jobs, which means very important investments in education and investments in things that are long term. that's harder in a very politicized environment. >> they need to invest in education and make sure we get our money's worth, that's the other thing, too. we need all kinds of -- we spend a lot and get nothing for it. >> what was interesting was your advocacy work, folks in california, you can get things done. i thought that was interesting why you thought california was different from most other states. >> california has the best and maybe the worst in the u.s. together. incredible. california is number one in technology, media, actually agricultural, at the same time, has a pretty high unemployment rate. so there's a lot going and a lot not going. the question is why the areas that are not going, how can you help them? california, as a political system, is quite unique, whatever government cannot do, can be reformed by referendums. that's perverse, but that's one of the reasons why our institute has focused on bipartisan reforms in that state. >> nicholas, we have to leave it there. thank you for coming in. >> come back. the book called "the intelligent governance for the 21st century." we talked about it when i finished it. melissa meyer and yahoo!'s new home page. housing starts and producer price index for january. and spring training and deal making with the executive vice president of the chicago white sox. 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[ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose 2% cash back or double miles on every purchase every day. told you i'd get half. what's in your wallet? welcome back to "squawk box." we are about a minute away from housing starts and producer price index numbers for january. rick santelli is standing by at the cme in chicago. economist jeffrey cleveland is joining us -- wow -- that's interesting, live all the way from los angeles. jeff, welcome. >> good morning. >> how are you? > steve liesman is in the studio and, steve, we were just talking to robert about housing. what should we look for? >> stepdown in housing starts. we had a pretty good month in december and we give it up in january and the question is whether or not it is seen as a trend with the numbers disappointing as well taking a one month drop when reported earlier this week. the other thing is ppi. that quill tick up in the headline with -- that will tick up in the headline with a lot of economists talking about ticking up of january in the index. >> here we go. housing starts 890,000. that is down 8 1/2% because last month was 954, upgraded to 973, shifted down to 890. if we look at the permit side, last week upgraded and did improve to 925,000 to a neighborhood slightly less than 2%. producer price index for january up 1 -- sorry, teasing you, up .2 of 1%, strip out the all important food and energy, which has horsepower these days, also u up.2. some subtle revisions from last month's headlines, down.3. let's take a big view year-over-year, up 1.4, a bit light from last month. we look at core food and energy on year-over-year basis, up 1.8, higher than expecting but .2 cooler than our last look. let's summarize. inflation, these numbers never make inflation look like a problem. you could be at the top of the mountain. if you have a reprieve, month over month but close to expectations. starts, will make some nervous after the national association of home builders market sentiment index yesterday, a couple points less than we were expecting. of course we will continue to monitor this. topic, housing, you guys were talking about it. that's all they talk about on this trading floor. i will tell you, when interest comes to housing, it's location location location. chicago isn't one of those cities that's burn burning in the housing market at the moment. very quickly, we're at a 2.03 yield. we haven't settled at that level, so this could be a new high going back to april. we link up to positives or negatives of equities and seem to recalibrate every couple of days and some what stuck in the zone. back to you guys. >> let's get back to steve liesman and jeffrey, economist. do you have anything about what rick said before we go? >> big decline in northeast and midwest, perhaps weather related declines but cooling off from december. the ppi not much inflation going up the chain, in terms of less processed goods but some of that will change in february because the big decline was energy prices, specifically gasoline. i don't think you can make a case from ppi numbers that inflation is a problem. it's pretty good when it comes to profitability and input prices. >> you saw the housing numbers. just overall, where are we? where oil is? we're seeing mixed signals on exactly how strong we're going to be this quarter. >> i think in terms of housing, you have to keep in mind the recovery will progress in a see-saw type manner. especially winter months, could be volatile, starts are down but doesn't mean renewed weakness, more of a weather related issue. i noticed the permits are up. permits should tend to lead starts. that's forward-looking as a forward-looking measure, better starting activity as we go into the new year. we're still at pretty depressed levels, in the scheme of things. if we're sub 100,000, 1 million at starts at annualized rate. still more of depressed environment. but if we do see this as a couple months of up and down seesaw type action and we move higher, i hope all my bullish friends get really excited. housing tends to, at least historically a great long leading indicator and should point toward better growth opportunities ahead. >> i have a long term chart of housing in the back. it shows if you go back to 1950, average annual housing starts 1.4 million. that's with the population we had throughout that entire period. obviously, the population has grown. that's our housing rebound, that little dogleg on the far rate there. that's what consider to be a housing rebound really quite anemic by itself. we're still below a million. it's a little bit hard to call it a real rebound. there's a lot of upside, wouldn't there be? i don't know what the right level is. it can't possibly be given the population growth we had in this country, can't possibly be where we are now. >> i would say it's the new normal. over the last five years, we were running at 300,000 for a period of time. we're now talking about a m million starts. we have come up from the lows progressively and pretty quickly. i think with respect to getting back to 2 million, that's assuming we will have almost 70% of this country own homes again. most people thought that was a very high number. the question is what is the right number? is the mid 60s the right number? low 60s? i think right around a million permits, if you talk to home builders, they would be excited. >> do we have the balance sheet in this country given what happened to dodd-frank and qrm, do we have the balance sheet to provide loans to create the mortgages needed to make a million or million and a half new homes in this country. >> that's the missing ingredient. in the last cycle when we ran up, it was the credit impulse. as far as i can tell from looking at credit metrics, it's just not there. i think that's once in a generational type credit boom we saw. i don't anticipate that coming back. i do agree markets work, we just stop building houses and eventually, we'll need to build more, i don't think that's a boom situation that we get ourselves in, a question how long that takes timewise to get back to that 1.5 million level on starts. >> there are three things hurting t hurting the consumer these days. the payroll tax increase, higher gas prices -- >> wait a minute, steve, wait a unit? . for the last three days. how do you know cause and effect. how do you know it's only the 2% payroll increases. maybe it's the tax increases on upper bracket and hiccup after the holidays. why is that the assumption for everything going wrong. >> i didn't finish what i was going to say. three things out there. payroll tax increases, income tax increases, higher gasoline prices. what i wanted to ask jeff about a fourth thing out there, ubs and the report said the real thing hurting consumers are late refunds. i wonder if you want to weigh in on the walmart memo that has everybody spooked and what's really happening with the consumer right now? >> i think you could make an argument the payroll taxes is taking a bite. at the end of the day, i think it's going to be job growth. you look at employment, the population ratio, you don't see a recovery on that. you see a little bit of recovery on housing starts and building permits, but in terms of who is out there that wants and needs a job, that still remains not quite in recovery mode yet. that's a bigger driver of all sorts of other things we see, spending activity revenues into the federal government. that's a big movement. we need growth and employment growth. >> i'm reminded, jeff, i'm hearing from kevin, did you rent being there after your last appearance finally, and watch it and listen to chauncey gardner you were channeling about growth? andrew did not. did you do that, like you were assigned to do that and realize how funny that sound? >> professor joe, i did my homework, i found a ve very -- found it very funny. >> how great was it? peter sellers? >> it's great movie. great movie, great actor. i even watched the out-takes. >> you tell raul -- do you remember that? >> joe, it's funny t, your particular humor requires the audience to have seen a given number of movies. what are other ones? >> "unforgiven." >> herbie herman's adventure. none of the new ones. >> must see. none of the new ones. >> joe, what was my key message that day? the u.s. economy. >> growth- >> gardening -- you need strong roots. >> what about the slap shot, joe? isn't "slap shot" on the list? >> "slap shot." >> good old-fashioned governmen government. >> rick, you had your anniversary yesterday. you're ready for a new one, i think, right? >> you know what, we're still fighting the old one. it's four years. in another four years, i have a feeling we're still discussing the same issues. >> we'll see. you heard from a lot of people about affordable care before. when we see what i see -- i don't want to go back above 8% i really don't. i'm hoping that's not in the cards. who knows. >> it depends how you deal with people only working 30 hours a week. the market adjusts factor than the government can implement bonehead programs. >> thank you for playing along. andrew did not do it. thank you, rick and steve. >> i just saw the "shawshank redemption. >> that, i have seen. coming up, it is time for "squawk"'s spring training. we catch up with chicago white sox executive vice president ken williams as he helps his team get ready for the season. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. we create easy to use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! strategies, chains, positions. we put 'em all on one screen! could we make placing a trade any easier? mmmm...could we? open an account today and get a free 13-month e ibd™ subscription when you call 1-888-280-0149 now. optionsxpress by charles schwab. spring training has begun. there are many deals to be made ahead of the baseball season. joining us is ken williams on "t "the -- on the list of the 100 top black leaders. first, gm, you brought a world series to the white sox in 2005. you were a good center field, too, right? >> you know, defensively, yes. the people that ah me play would probably agree with that. then, you'd have to get into the discussion about the offensive side of the game. we will pass that. >> nobody wants to be offensive. a double star at stanford. you could have been a defensive back. your son is, any way? >> no. there is an interesting back story with that. i actually signed a professional baseball contract outigh school but then went to stanford and played football at stanford. i played wide receiver, returned kicks and punts. but interestingly enough, before one of my last college football game, a guy by the name of jack harbaugh, jim harbaugh andon to harbaugh's father- >> the dad. >> exactly. came over to me and says, kenny, they're not using you enough on offense, you're playing defense. the next game. as a matter of fact, you're going to start. i thought he was nuts. by the time he got done talking with me, i not only believed that i could play the cornerback in that game, i believed i was going to make all pac-10 and go into the nfl as cornerback. he had that kind of enthusiasm. when i talked to my son, kyle, and asked him how jim -- what type of personality jim had, he said, dad, the way you're describing the father is the same as the son. it's not hard to see why that team did as well as they did. >> brothers. so we need to sequence that genome and maybe we can find a gene for that. amazing. last year, i saw what the sox's record was supposed to be and you almost did it in detroit. how will you do it this year? >> it's too bad. we had a season last year and hired a new manager in robin ventura, a new coaching staff. they did a bang-up job motivating the players and getting them to play fundamentally sound baseball. for 118 games during the season, we were in first place. unfortunately, we couldn't -- we didn't match up well and didn't play well against some of the teams that ended in the bottom of the standings. that's where we lost to the division. we don't believe it was someone else won it as much as we lost it towards the end of the season. we hear a lot about the pr prognosticators out there and projections this year, where we'll finish. we have a tendency to grind it out and focus who we are and where we will be. usually, we're in a competitive situation and not conceding anything. we have good young players we brought up last year that hopefully take that next step and make the whole summer exciting for chicago. >> with ticket sales and everything else, how do you gauge the economy right now? better than last year? tough? where are we? >> i think in different markets, you know, you will get a different answer depending where you are. it's hard for me to cry. we have a little bit over $100 million payroll. of course, you have to have the revenues to support that. in oakland and san diego and kansas city, you're looking at revenues half as much. that's another issue with regards to parity and all of that. i'm not going to complain too much. we don't draw as much as i'd like us to draw, obviously. we've got a fan base you need to prove that you're going to be an exciting team, you will be in contention and you have world series chance. otherwise, they're not going to spend their discretionary dollar. on the other side of the town with the cubs, it's a little bit different. we have a fan base, we have to earn it. we start the season with that thought in mind. we work from there. we are aggressively trying to do as much for the fan experience. i think that's the key in sports these days, in any kind of entertainment these days, how are you going enhance the fan experience. once you start to do that, people will take notice and hopefully attend more games. >> hoping for an all midwest world series. the reds -- and some other team, i guess it could be the white sox. >> the reds -- yeah -- the reds are one of those teams that, you know, they -- the manageme management -- you can't say enough about teams that have little resources but their management team exceeds those resources, you know, and whatever the sport, exceeds those resources and produces a quality product and the reds with dusty baker are one of those teams. i'd like to see an all chicago world series. >> okay. sure. right. that would 3450emean the cubs a the world series. what are the chances -- >> that's all right. >> appreciate it. hope to see you again. i love spring training. it means summer, boys of summer, all that stuff. appreciate it. don't forget to check out the rest of the grio 100 list at grio.com. when we come back, we will talk about stocks to watch ahead of the opening bell. jim cramer will join us for the new york stock exchange. are you ready for the stock of the day? it's coming up, right here on "squawk box." with fidelity's new 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. all stations come over to mission a for a final go. this 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. welcome back to "squawk box" this morning. let's get down to the new york stock exchange where jim cramer joins us this morning. good morning. jim. >> good morning. >> we could talk about the office -- office depot and max care. suggesting they may have a fix for the battery. >> i think boeing has been underestimated. this is a great american manufacturer. repeatedly we've heard it will take months and months. boeing's got one of the best engineering staff in the world and they'll come up with a fix. and it wouldn't shock me if this thing is back in the air in 90 days, maybe less than that. i think that's why boeing's not gotten hit. as far as the office depot, office max, i regard it as positive. the two companies getting together. when the staples deal was nixed in 1997, this might be a real player versus costco. >> we've had a couple of people on today, that, you know, robert is the president's favorite banker and everything. but he's saying we need to close these loopholes and do it not necessarily -- i guess you want to cut spending, too. you made a point in the past that we haven't done enough. >> there was a piece yesterday by speaker boehner, and i found myself saying, yeah, like no kidding. i mean, how much more can we get? how much more progressive can the tax rates get? i would love to see the carried interest go away. those people are turning ordinary income into capital gains. you know, it's the spending side. how much do people think that we can afford? and i know we all realize that there's fat, in the military there's fat. i see they're going to cut the lowest end people. we've got too many generals. but honestly, this is a spending issue. >> just for clarity, i am absolutely not for rates going higher. okay? >> no, no. you want to do the loopholes. how about the mortgage deduction? >> i would not get rid of the mortgage deduction. >> housing is still -- >> no, i would not get rid of mortgage or charitable. i also would absolutely work on entitlement reform. there's no question that -- >> bingo. making payroll nowadays. he's more or less now kind of -- he doesn't like regulations. >> i've always said we have to close the gap at about 3%. i liked it when it was 21 and 18, not 24 and 14. >> look, yesterday we had -- could those guys be more rational? yeah, you're really rational, but you're way out of whack with what we're doing. rationality is one of the lessons. you had the guy from the white sox, he should be running the country. he's got the payroll down, a chance at the world series. he played for stanford. you should be president. >> i've got to break in for one sec, jim, back to office depot and office max. this is crazy. they've now taken the press release down, according to people close to the transaction, it was not supposed to go up. the deal has not been reached. >> what? what? are you kidding me? >> call up these stocks. they were both up more than 10%. >> it says the deal negotiations are ongoing, according to two people with knowledge of the matter. they were still attempting to finalize the agreement. several news organizations, including us obviously, quickly reported the terms. >> they were in the stupid press release. >> apparently this press release was put out prematurely, and now we're going to be waiting on word whether this transaction has been reached or not. >> as you're reporting this. >> remember when google issued arly and it turned out to be a great buying opportunity? >> are you worried about the boeing reports still, too, andrew? that was only a -- >> that was one source from reuters. >> boeing has a parking problem. the papers are incredible. >> anyway, we'll -- i'll try to figure out more during the commercial break. >> you can't put the genie back in the bottle. robert wolf has been our guest host this morning. we'll give robert the last word when "squawk" comes right back. tomorrow on "squawk box," boone pickens. he'll join us for an hour to talk about the recent burst of m & a activity and the future for his natural gas plan. "squawk box" starts tomorrow at 6:00 a.m. eastern. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and you...rent from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. 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