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Transcripts For BLOOMBERG Market Makers 20131218

the driver seat heads for a collision. this is market makers. it is a wednesday in new york city. i am erik schatzker. will be with us. she is on her way down to the new york stock exchange this morning. we will begin with a big shakeup in the sports and media industry. william morris and silver lake are buying img. you could call it the jewel in the crown. let's mix it up. let's start with ari emanuel. img --he co-ceo of excuse me, wme. what did he say? >> if you thought he was a big deal before, he is an even bigger deal today. he is very confident. ari has brought together two agencies in the past. he has taken on a bigger fish by buying william morris back in 2009. he feels very confident about his ability to combine these very people centered businesses. the issue with this one is that there are so many other competent infectors because he is buying a business that it's very different from his business. --is a media rights business a licensing business, a college sports business. that is something that is new for him. at the same time, he is bringing more leverage on to the business. he has to manage that site as well. >> there are about $2 billion of debt with the combined companies. img -- we are working for this guy? they don't know what the culture clash will be like. img is an international business. there was a certain way one conducts himself at the club when doing business. it is not exactly the hollywood, look at me way. it they wonder how that will play in the college business, in gainesville, in auburn, alabama. will william morris's culture play well with the clients that img has? >> what is the best approach for him to take? leave well enough alone? let those guys do their business? >> that would be the warren buffett way. there are the reason why. we like what you are doing, so let them do what they do. that is one approach. the problem is we don't know what the strategy is yet. even the people working the deal said it is bold, innovative, now let's see if they can carry through on the strategy. the answer from the folks working on the deal is, i don't think they forgot the strategy get. >> there was a stark lack of detail throughout the entire project. it is always going to be much more important for them to articulate that to their internal agents. you want to keep the guys around it to the college sports business. do they stick around? are they happy? >> here is the nugget. george pine built the college business. a handshakehad agreement to become the ceo of the combined company had cbc won the auction. --has no such arraignment arrangement with william morris. >> that is a big question. >> lookup people understand what we talk about. people think about roger federer when they think of img. an athlete who is a client. you alluded to the sports business. let's give people an idea -- what is img do? how does it make money in this business? what might wme bring to the table that makes it a better business? >> one of the things they have done very well is that they have managed to bring big sponsors to local sports. they have nationalized college sports. they have been able to bring big ,oney, by selling merchandise by selling radio rights, media rights -- these are big contracts and their long-term contracts. where, on the agency side of the business, the average sports contract is maybe 10 years. for img woods was nice and roger federer -- they don't make a lot of money. >> most people don't get that. >> it is nice, it is a gem, it doesn't really pay the bills. you have the college division, you have international. india, deals with cricket academies, basketball academies. >> they have the mercedes fashion week. brady. >> they are about creating content and licensing the content out. >> the truth of the matter is that there is something wrong with the sports business because it is not perform as well as anticipated and that is why they did not get as much for this business as some people might have hoped. it was a loss that they added back into their profit numbers that the buyers were very skeptical of. from the img standpoint, they said it is a one-time thing and that is why we added it back in. you are talking about sophisticated financial plers taking a look at your books. it was obvious from day one. >> i talk to somebody yesterday bought imghe guy who for $800 million a few years ago and was hoping to turn it into a huge business. he said that teddy would have taken it off the market and waited. >> that is what is so interested with aeg. the trustees of the estate wanted to unload. >> that is the most frustrating thing. there is a person running the processor did not own the business. that was a potential copycatting factor. >> thank you very much. talking about wme buying img to create the world's biggest talent agency and much more. tag.billion -- price ford says 2014 will be less profitable. why the balance sheet is being weighed down with the cost of bringing a record number of new cars and trucks to market. forecast is for $7 billion to $8 billion in pretax profit. 5.5% -- a bignged move for ford. jamie, let's up to put this into perspective. how bad is this news? the way forward is spitting it, it kind of wants to think it is good because it has to do with all of the rollout of these great cars. >> it is not that bad of news. when ford goes out to make an announcement and things have been going so well in the auto industry like they have, people's hopes get up. it put out a release yesterday that said they will update the street. it may be a big dividend increase. maybe they will raise their outlook for 2013 middecade. instead, they put up a sign that said there will be a lot of cost around launching these vehicles. ,ooling cost in the factory selling old models a low price , investmentrowth story. the earnings will not be there next year, as great as they are this year. he will have to wait a couple more years for things to keep growing further him to get close to that 8 million target for global annual sales. >> why didn't more people see this coming? aresell side analysts broadly speaking bullish on ford. there is only one person with a cell. it is not like the auto industry is rocket science. i guess what i am trying to say is do we believe the spin? >> there are two parts to it. having to do a little mind reading here. what is the street expecting and what are they receiving? two things to think about -- ford has had -- the industry is so taut right now that a lot of launches, beginning the manufacturing of these vehicles -- >> those are bars if you didn't recognize them. unfortunately, we just lost jamie butters. we will be back with more on the ford story. that is a big development. ford shares dropping. 5.5% is enough. especially if you are the ceo around whom there is so much speculation. let's take time out for the newsfeed. these are the top business stories from around the world. ben bernanke and other policymakers are wrapping up one ay meetings.st two-d will the fed start backing off its easy money policy? a news conference at 2:30 eastern time. government is selling off assets to help finance their bailout. paulson is not commenting. sold forng tickets -- the second biggest lottery jackpot in american history. they will split a prize of $636 million. tickets were sold in san jose, california and atlanta, georgia. if no winners were drawn last night, the jackpot could have had a billion dollars. we will be back in a couple of minutes talking about going public. with stephanie ruhle. ♪ >> amc makes its trading debut this morning. abouteater chain raised $330 million in its ipo. stephanie is down with the amc president on the floor of the new york stock exchange. take it away. >> big night at the movies, big day at the movies, erik schatzker. i am here with ceo, jerry lopez. >> thank you, stephanie. >> we have seen a bunch of ceos price at the top of their range. you took the lowlands of the range. why? betterhought it would be to allow the stock to come up based on demand. we are happy. at $18 -- it is trading above $19 at the moment. giving investors pretty quick return. we thought it would work out that way. it is better when it works out the way that you thought. >> what will you do with all the money? >> we will retire some debt. we will continue to invest in the business. --have been in a pretty and extensive capital investment plan for the last couple of years. invest inntinue to the customer experience in every one of our buildings. >> is that going to raise ticket prices? >> it depends a lot on where you are -- on what part of the country you live in. the inflation in ticket prices is less than the rate of inflation over any period of time you want to look at. good value to be a proposition for couples and families for entertainment. the idea is delivering value. some of the experiences are more expensive to deliver. they will be higher-priced. some are not. moderate according to experience and supply and demand in every market. it is still a pretty good value proposition to come to the movies versus just about anything else. infor the most part, you are new york and l.a.. do you plan to expand? >> we will expand in the markets we are in. we are also in chicago, kansas city -- our home base. we are all over the u.s.. three dozen states. we tend to be the number one or number two player in 20 of those 24 markets. >> do you feel the heat to need to expand more? regal has gotten a lot bigger than you have. >> and they do very well with their circuit. they have about a 20 share of the business. we have about an 18% share of the business. we like ours. we will execute against our ideas and our plan. >> how about your positioning against the movie studios? who has the upper hand? >> i don't think it is so much about the upper hand of lower hand. we only each other. i need their movies, clearly. it is the number one people come to the theater is to enjoy a movie. the work that we do also helps them. the ultimate value of any movie is driven by the theatrical exit -- success or lack thereof. it is an art form. it is exciting. we love being in the movie business. at the end of the day, we need to studios and the studios need us. >> who has more control? >> are to say. they control the movies. they have the production and marketing budgets. we control the exhibition experience. we control how you enjoy the movie. they are the producers and we are the retailers. it is no different than the retail and vendor experience in so many other industries. this not really about control, it is about how to we maximize the opportunity for both of us. >> would you like less big releases to give them more time in the theaters or cranking them out? >> i think the business is in great shape. we had a record-setting year in 2012. 2013 looks to be every bit as good. we want a steady supply of movies. we want the studios to put out any -- as many movies as they can. we have plenty of bandwidth. plenty of capacity. we have more of the 24 and 30 screen buildings than anybody. the more movies that come out, the better they are. >> how important is china? >> we are u.s.-based. your own by a chinese company that just took us public. our business is u.s.-based. >> you were the movie guy. what was your number one movie of 2013? >> personally, there were a lot of good ones. "gravity" was a special movie, i thought. it right story come a superbly , superblytight story filmed -- you had to enjoy it in 3-d. >> there you have it. i continue to stand alone with "despicable me 2." thanks. congratulations. >> stephanie, see you up here in midtown soon. , the boom inback farmland may be coming to an end. corn prices is down 40%. ♪ >> living off the fat of the land -- that was the reality for many farmers over the last couple of years. $800,000 combines. is in peril.on the biggest worker -- worry facing farmers in the coming year. >> the worry is what will the trickle-down be to the land. what will their land be worth? crop land value is up 13% this year. those two catalysts were really record high corn prices and low interest rates. >> real asset traits that has held up. >> you need the cropland to get a loan from the bank. it is your collateral. if that decreases in value, it is more difficult to get a loan. thatw certain can we be persistently low corn prices will translate into lower land value? >> there are two schools of thought. on the pessimistic side, it is possible that farmland values could fall as much as 30% over the next three years. i talked to one indiana farmer about what corn prices and land meant to him. >> regardless of what grain prices are, if you bought an acre of land for six or $7,000 per acre, the volatility of that comes back to the markets. >> meaning that this farmland is but the-term bet, volatility is still very difficult to deal with. weakening demand in china. will the ethanol mandate go away? farmers are feeling the pain. >> there are some old timers out there -- or people who have run family farms for generations -- to feel like they have seen this movie before, back in 1980. >> it was really painful back in 1982. use a crop value just completely deteriorate. >> why wouldn't the same thing happen again? >> the target rate is still very low. it doubled back in the 1980's. as long as it stays low, that might help the real estate value. i was speaking to capital economics and we were talking about what farmers and up doing with the land -- they're not very leveraged this time around. they were back then. not a lot of people bought farm at the top. their debt is somewhat protected if they do see a deterioration. owner,ou are a farmland you have to be concerned. >> especially if you are looking to sell. >> thank you very much. when we come back, want to be a crash test dummy? ♪ >> live from bloomberg thisuarters in new york, is "market makers" with erik schatzker and stephanie ruhle. >> if you have an enormous fortune to pass on to your heirs , 40% of it will go to the government in an estate tax. but the law happens to be full of loopholes. one particular loophole is so effective and popular that it has cost the government about $100 billion in taxes since the year 2000. it is your job to cover a growing industry -- tax avoidance -- isn't it? >> that's right. >> let's talk about this particular loophole. it is called a grat/ t. >> it stands for grant or retained annuity trust. a complicated tax maneuver. it was created by congress to close a loophole that had existed back in the 1980's. the way they created it created an even bigger loophole. >> let's explain to people how it works. we cooked up a piece of animation to explain how it works. >> you want to give a gift to your heirs. >> we are using sheldon adelson as an example. >> if you give it directly, you have to pay a tax. you give it to a trust and then you have the trust give all the money back to you. , ife it is in the trust your assets happen to go up in value, all that extra gets to go to your heirs. because there is no cost to doing these things, you can do it again and again until some of them go up and you can transfer it to your heirs. >> there are billions of dollars at stake here. >> his fortune is worth more than $30 billion. he has managed to pass half of it without paying taxes using these methods. >> how much is he saved? billion -- $2.8 those are conservative calculations. >> we make those calculations on the basis of what? i would assume they would like to shield as much of this from the public eye. >> tax returns are all private. you can see it because he did all these transactions whith as company stock. you can reconstruct how he did it by putting the money into these trusts and taking this out again. >> who else is involved? >> lloyd blankfein, the ceo of goldman sachs. >> availed himself of this provision. >> mark zuckerberg of facebook. >> charlie ergen from --. -- dish. >> ralph lauren. >> $100 billion. how did we come up with that? >> every year, the estate and gift tax system rates is about $14 billion. since 2000, the guy who set up this technique estimates his technique has cost the government more than 100 billion dollars. no one really knows for sure. that is about a third of all the estate and gift taxes collected during that time. >> he is a lawyer and an accountant? >> he invented the original loophole in the 1980's. he saw the error in what they had done and took them to court and proved that there was an even bigger loophole. >> here is what i want to know most. how does this guy feel about this frankenstein's monster that he helped create? >> he is a tax lawyer. [laughter] no one is doing anything illegal here. >> do tax lawyers feel good about the things that they design a tax avoidance scheme that is legal and which it would appear dozens of extraordinarily wealthy americans are availing themselves of? any morenot his fault than sheldon adelson possible. it is congress who created these rules. they are living by them. >> there are two kinds of people watching this. people who say, i got to get in on that action and people who feel outraged. let's talk about the outrage folk. >> president obama has proposed narrowing this loophole. that has gone nowhere in congress. frankly, obama has not done much to push it either. thehanks for bringing us story. the growing industry of tax avoidance. he is the man who covers it. when we come back, we will be talking about holiday shopping. it is almost over. one week before christmas. the numbers a suggest you have not done enough gift buying it. what can you expect this weekend when you hit the streets? our retailers going to have to discount merchandise in a big way come december 26? if you missed any of our interviews, you can watch them all on apple tv -- a brand-new experience. live on apple tv. ♪ >> you are watching "market makers." i am erik schatzker. stephanie is on her way back from the new york stock exchange. is last minute retail rush underway. there are just seven days until christmas. moreush might be a bit frantic this year than normal. according to research, you have been procrastinating. it less than half of all holiday shopping has been completed. n is back iran market makers. what is going on -- here on "market makers." what is going on? >> the real key this year is that nothing new and exciting. items people are coveting are things that have been on the market before. the consumer is saying that i don't need anything new because it isn't there at the consumer is saying, i don't know what to get people. the thing that amazed me more than anything is i ask people what are they getting? or what do they want for guests? they are asking me what they should be getting. >> you can put the blame on anybody you want there, but at the end of the day people have to find things that appeal to them and appeal to the people they are buying for. is there anything hot? >> there are the new consoles and in the videogame business. some new and innovative broody products -- beauty products. the hot items are the accessories for the electronics. >> basically because you can't think of anything else to buy. boring. you write a blog. had aght your latest post number of provocative points. i want to start with this one. look for deals to be e-mailed, texted, shared, and even on air with special hours and special savings. retailers will be looking to sell out before christmas, rather than sell off after christmas. started?already >> it is incredible to see how many e-mails consumers are getting with offers of two-day sales, loyalty packages. it is going to start today, where the retailer looks at the weekend, saw that they did not make the numbers they wanted to get -- they will start to put in the special sales. but for the deals to get even more aggressive than retailers planned on doing for the last seven days to the holidays. >> how did retailers miscalculate? coming out of the recession there was a lot of excess inventory and consumers got the -- used to the idea that there would be fantastic deals between black friday and christmas. there were supposed to be better inventory management so the retailers would not have to do that anymore. to recognize that this is not across the board. the excess inventory is either weather related -- cold-weather items weather weather was sluggish and getting cold -- now it is cold everywhere and so things are starting to kick into gear. their heavily inventoried in that. i do want to carry those items too far past the holidays because there is no place for them to get rid of them. they are going to try to promote them a read of the desk ahead of the holiday, rather than the back end of the holiday. retailers have also done -- with the new extended hours and the less holidays between things going and christmas -- it allowed the retailers to -- it is an excuse. how many more relatives or less relatives do you have to buy gifts for because there are more or less days? you don't. can you buy your gifts on sale? nervous andt very started to promote aggressively. the consumer is getting spoiled because they are starting to expect that. >> how much of the slowness can be contributed to the weather -- attributed to the weather? the canadian, i think that storms were not particularly bad. year, we have a snowstorm somewhere in the country. if you are a national retailer, it is a bad excuse. key is use it. the real that retailers are spoiling the consumer in this sense. just as rewarding them much by shopping them online and giving the consumer a good reason to stay home and shop. online will be the darling when we look back. and those that are selling in stores and online. here's another quote from your blog. it is hard to discount your way to growth and very easy to bore the consumer into maintaining mediocre holiday sales. who out there is being genuinely innovative? >> it is really hard to find. i have been trying to go around and say who is bringing new and exciting products to the marketplace? .etailers are very cautious you brought up the recession. the cautiousness that retailers have it is up to manufacturers and retailers to figure out what are we going to do to get the consumer excited in 2014? what some of the retailers and some of the manufacturers have done, they have gone from selling new product in the middle of the year two closer to the holiday season. it look at the cell phone business. they are not hot as a category by accident. it is because they keep bringing new product to market. ofwe started with the idea shoppers starting to panic. are the retailers panicking? manufacturers? levelsilers, inventory are pretty much in line. they are not panicking. they are managing their inventory. it was a difference between panic -- everything in the store is 75% off -- that is panic -- but when they say 50% off on select categories, that is inventory management. >> thank you so much. be busy between now and christmas and probably between christmas and new year's as well. when we come back, new crash tests for cars with a so-called crash avoidance system. one of my colleagues turned herself into a crash test dummy. ♪ >> top safety pick. the coveted title carmakers fight for every year. the new list will be released tomorrow. technology designed to prevent car crashes from happening. megan hughes went to the testing site to check it all out. this was a highly participatory thing that you got involved with. talk to us about how it all works. >> i did get to drive the car. it is a safety group. they are nonprofit, but sponsored by the insurance industry. they have a vested interest in this new technology. preventnology helps to crashes. we went to see how it all works. forhe insurance institute highway safety and moral virginia, engineers ready a mazda cx five. ready, set, crash. the dummy did well today. all of the injury measures were in the good zone. carse mazda and all of the are competing to be in the -- one of the top safety picks. of theselook at one cars that is mangled and say, that is not a top safety pick? >> you can look to see if where the driver is sitting is intact. see how the wheel is back where your legs would normally be, this is not good. [laughter] >> this year, the institute which is funded by auto insurers, has added a new tech. it trades in deming's for people -- dummies for people. >> should i warn the driver of the impending collision? should i fire the brakes because we are about to crash? we put the automatic breaks to the test. and proximity.d >> it is a warning. >> a warning. did you break? you did not break. >> then it is my turn. has that little car ever been dinged? drive 25 miles per hour straight into the back of the car. this is very counterintuitive. the brakes kick in just in time. the subaru passed. >> engineers are also testing avoid movingcan pedestrians. will have robots in our blind spot and see how the system does. limited modelsly are equipped with the technology. drivers have to pay. it could lessen the impact of a third of deadly crashes. that is bang for your buck. >> there are lots of great insights. not going to like the label, but i think you are the crash test dummy there. >> but i was driving. in my task was to not pay attention to the thing in front of me. >> so a real dummy in that case. [laughter] i'm just having fun with you. what was most surprising? you were sitting in the driver seat, the passenger seat. what was it like? >> it is counterintuitive. your goal in the test is to run straight into something. it slows down a little bit before it stops. you can see me kind of jolt forward there. it starts beeping. there are things to give you a heads up that you were about to run into something. i think it could be pretty useful, especially they are also working on some things in your blind spot. when you start veering into other lanes. to give you different kinds of indicators, different kinds of warnings. to slow down before necessarily hitting the brakes. different systems for different models. that was a subaru we were looking at. >> i happen to think you were appropriately test -- dressed to be a crash test dummy. what is it about lipstick, dresses on crash test dummies? >> the ones in the first part there, they put them in makeup. say they have read makeup on the left side of the dummy's face. after the crash, vacancy that the left side of the face at the airbag, did it hit the dashboard? it is all part of the science. for the pedestrian dummy, they said it was unusual that that dummy was not in clothes. sometimes they will dress the dummy in all black, and a flow we dress. just to see how the sensors react. whether it reacts differently when it is a piece of clothing that is moving. to see how it works in a real- world environment. it sounds funny, but it is all about the science. >> thanks very much. megan hughes with us from washington. in the spirit of "origin the new black-- orange is the new and 60 is the new 30, which echoed grade inflation. average atis the new harvard. it has become the trend across the nation with colleges and universities. teachers chart is with of college record. the average grade point average is steadily going up since 1930. you of college record. the average grade point average is steadily going up since 1930. you see the big leg up around 1960. that was during the vietnam war. if you failed, you would get drafted. it leveled off after that and then it started to head north again after the 1980's. according to researchers, it is approach tohe new education. getting kids into graduate school programs, student-based evaluations that kids had to fill out at the end of the semester. >> what about the whole psychological element? >> that everyone gets a trophy? that is part of it too. one teacher's assistant used to give out higher grades because she did not want to do with all of the complaining. people fall justified complaining about the grades. writing is a gem is very subjective. exam is very subjective. she didn't want to deal with that. >> are there pockets of guilty parties? >> private schools are much more guilty of delivering higher grades than students deserve. the grade inflation is much more -- you get what you pay for. in public schools to mow with a wider pool of applicants -- >> are actually fairer? >> there more fair. >> students at private schools would say they're that much better. >> they would argue that case. southern schools are much more stingy than those in the rest of the country. science and technology schools are much more harsher than arts schools. >> thank you. the story on grade inflation. we are coming back in a couple of minutes. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> fedex did not deliver. the largest cargo airlines misses estimates and customers find cheaper off since. powers of virtual currency. what happened to the man who created bitcoin? nobody is talking. trolls.n patent pitting the biggest names in tech against one another. city, i am new york erik schatzker. >> i am stephanie ruhle. back from the new york stock exchange. amc ipo day. i like going down there. >> it is not what it once was. it was once the headquarters of american capitalism. >> could not be a day on "market makers" without a grinch. i took the subway back. >> we have to sit on that. you took the subway? >> it was fantastic. i did not have a metro card. we made it. a big wiin. -- a big win. shares of the theater chain amc are up as much as 8% on the first day of trading. i just talked to the ceo, they race about $332 million in last night's ipo. the chain is controlled by the second-largest man and china. he told me he is going to use a lot of ipo proceeds to retire debt. contest forthe talent agency img worldwide. silver lake and the william morris endeavor agency have agreed to by img for about two point $4 billion. william morris represents actors like matt damon. include peyton manning. the fbi says a student at sovard e-mail bomb threats he could get out of taking a final exam. this led to the evacuation of four harvard buildings on monday during finals. the student faces up to five years in prison and a $0.25 million fine. worse than bombing a final. no pun intended. >> stephanie, look. you are just back from the nyse. abuse.ready taking you have been saving it for a whole hour. good reasons some to talk. his long goodbye is in full swing. today is his final news conference as chairman of the fed and possibly his last policy meeting. some big news could come out. the central bank may decide to the $85 million a month it has been buying and bonds. most economists think the fed will wait. that point, it will be janet yellen. taking a closer look at today's meeting. peter cook is with us. >> of course, this is a significant moment. ernankenanke's -- ben b is getting set to leave after nearly eight years. does he lead the pressure on janet yellen to begin tapering or does he get it started today? that is a big question going into the meeting. he said one thing -- one thing we know ever since he got there, it has not been boring. he has had one of the most controversial stints as a fed chairman, he will go out in the same way. all eyes on ben bernanke, par for the course of the last 7 years. >> let's talk about the pre- crisis ben bernanke and the post-crisis ben bernanke. people look at those individuals differently. >> why? >> i could tell you why. let's give peter a chance. >> this was a guy who got the baton from alan greenspan in 2005 and 2006 without any storm clouds. everyone thought this was smooth and he would be able to coast along on a goldilocks economy that was happening. it did not work out. students of the great depression, the expert on the great depression found himself confronted with much the same thing. he had to invent new rules and new tools for the federal reserve. that has been controversial. those decisions -- we do not know how the full legacy will be measured. we have not seen the wind down of the risk factors that everyone knows are out there. looking back, critics in washington as well as supporters who say they are thankful ben bernanke was in the job if for no other reason that he provided a cool hand. in terms of how he led the fed and made decisions, controversial as they may be, people in washington are thankful he was there. served to goe best out quietly? when i think about alan greenspan taking a victory lap, people said he looks like a full for doing it. should ben bernanke just go out quietly through the side door? >> i think ben bernanke is one of these guys -- every indication is he will look at the economic data that is out there. there is political pressure on him as well. we know what we are getting with janet yellen, very consistent in terms of policy. are they making the decision jointly, will she share the gavel today? hard to imagine, paul volcker did not do that, he deferred to the sitting chairman. the next time, he doubled interest rates at his first meeting. hard to imagine a big break that ben bernanke feels the need to do something dramatic. still chairman, even after, ben bernanke knows that he owns this. he is the guy who collectively thethe -- the fed ms. took crisis for a liquidity crisis. he was the right man at the right time to undertake these bold experiments to prevent a second great depression. now, he is the guy whose final chapter has not been written and may not be for years until we see how the fed comes out of this. >> erik, he knowledges that. he was acting with hundreds anniversary of the federal reserve the other day. greenspan, volcker, yellen were ther. -- were there. he said history will judge me over time, not right now. the recovery i hope to achieve has not happened and it will not happen on his watch by january 31. he knows the jury is out. legacy question on ben bernanke in times of crisis management has been answered, but the economic progress that he hoped to gain -- we do not have a grade. >> you will be at the press conference, what are you going to ask? >> i cannot give it away, i have money of questions. what do you want to ask? >> i want to know where he is going on vacation. he has had a stressful period. who would want a nice endorsement? >> this is someone who has earned time off after the last eight years. maybe he goes back to academia. rumors about him becoming a candidate to be the next commissioner of baseball. would that be the right job? maybe he will go back to the new jersey school board. >> he and mary jo white can sit around talking baseball. a huge yankees fan, peter knows this. mary jo white -- >> he is a big nationals fan. of my favorite memories of ben bernanke -- i have seen him at national scams. -- nationals games. nobody sitting around him knows who he is. only the bloomberg people know who he was. >> erik knows. kids were sitting with paul volcker at a lacrosse game, no idea who he was but a guy with a bag of popcorn. >> whether ben bernanke goes to disney world or not, no ride can top the ride he has been on. >> you are so right. peter, you will be back at 2:00 p.m. along with tom keene and michael mckee for live coverage of the fed policy statement and ben bernanke's final press conference. >> talking about fedex, they reported earnings this morning that fell short of expectations. where is the weakness, what is walk -- what is wrong with fedex? julie hyman is here. what went wrong? >> we should point out that net income rose by 14%, it was not as big an increase as had been estimated. there was the timing of the holiday season. we had a late thing skimming, cyber monday sale in december. it is fiscal third-quarter instead of second quarter. it is confusing why analysts would not have realized that. fedex gets a benefit from online shopping. it is -- the company set expenses were higher because it did a wrap up -- it did maintenance of vehicles in advance. the executive on the call said their business is peak-ier now. now it is even more concentrated because of online shopping and shopping habits on the part of consumers. >> even though there is so much online shopping, it is not fedex reaping benefits? >> fedex, ups, companies reap benefits. you have to point out the to pointe --you have out the perspective. it is still not the majority of the business. corporate business is a big part. in terms of the balance between ground business, people are choosing ground as a lower-cost option. people say we do not need that package overnight, we can pay less and wait. the is happening on individual and on the corporate level. in times of online shopping, fred smith making the prediction on the call that online shopping will not even get to 10% of overall shop until 2017. that represents a ramp up fedex will benefit from, but a small percentage of the overall shopping environment. >> thank you, julie hyman of bloomberg news. erik, i do a ton of online shopping but i never pay for fedex. go, your problem is right here. when we come back, we are going to be talking about the big deal in the media and sports businesses. ing acquired by william morris endeavor. with us is bob, he has been dealing with img. former president of madison square garden. putting it in perspective. >> coming back to the 12 days of bitcoin. the man who came up with bitcoin has disappeared. this is a "market makers." you can watch all our interviews on demand on apple tv. ♪ >> welcome back to "market makers." it is a mega deal in the sports and entertainment business. and williamver lake morris buying img worldwide. they represent stars like taylor swift. $2.4 billion. the former president of madison square garden and a consultant in the sports and entertainment industry. $2.4 billion, is that the right number? >> it is a fair number. their profits last year were $180, that isnd pretty fair for the entertainment business. the sailor came up a little short. >> to that point, some people think wme and silver lake got a good deal. it would have been taken off the after the college sports numbers came in weaker. the college sports business was down $20 million or $30 million and brought it down. that is way they did not get the number. >> why are college sports numbers down? maybe they overpaid for the product. it is a long-term deal. the market was not as strong. >> how many years have you know that img? >> 30 years. >> what do you know -- what do they do well, what does william morris one in img? >> img has a big international products they produce throughout the world. >> we were talking about this stop it is not about the stars like peyton manning. >> it is if you think you can get them into contact. look at the -- into contact. -- ionto content. business, william morris will be able to keep that revenue stream in-house. that is very exciting. >> what are the kinds of artists, you cannot turn any artist into a product? do you feel that some of these artists have a goal of being a brand and there is too much? >> it is a certain percentage and sports, entertainment, and fashion that you will be able to create content. now that img is a management company, you might be able to get them in and have some ownership, which william morris cannot do under california law. they can put talent in a product but cannot have equity in a product. that is interesting. >> what will he do for img's tv business? it has have moved away, been dormant. look at the reality shows that are on american television, img does not produce any. william morris is going to be able to get img back in the production business, put some of their talent in and create some equity for them and the productions which most -- which william morris could not do. but that is an opportunity -- >> that is an opportunity, what is a challenge? >> a cultural challenge. >> is there a huge cultural divide? >> one is hollywood and what is sports. >> there is crossover. >> but they have not been in that business, img has not been in talent representation. it will take time. >> is ari emanuel taking a page from jay-z's book? athe really takes a look this and sees there will be incredible opportunities for representation, sponsorship, and content. i would not be surprised to see img get back into the teen talent -- the team talent representation. forstmann move them out of that. >> how powerful does this make ari's endeavor? >> more challenges for caa. more impact to deal and more difficulty in the sports business. cao is still very powerful. there will be challenges on the television and if william morris can get img entertainment up and running and create content. >> between wma and silver lake, they are spending a fair amount of money. they will have to spend more to make this a success? >> that is usually the case. there can be incremental acquisitions they look at. i think there may be some content that they want to get into, they will have to write a check. there will be future checks coming as far as owning this product. as a powerful, global entertainment and sports: rick -- entertainment and sports conglomerate it has potential. if you were silver lake as a private equity firm, you are looking at realizing a return in 5 years to 7 years. >> img was sold x years ago for $750 million. didn't think they would get 3x back. >> and how many years? >> it can be done, it depends on how they can create content and get equity into contact -- into content. , partner atwski innovative sports and entertainment. yuskon we come back, mark of morgan creek capital management will be with us. finding out what smart people think is going to happen looking ahead to 2014. ♪ >> welcome back to "market makers," some people buy timeshares, the world's richest man bought a resort in mexico. cascade investments is buying the four seasons resort near puerto bayerische -- near puerto vallerta. gates and saudi arabia's prince waleed on a state and four seasons. the chief investment officer at gates' firm says cascade has a long-term positive view on mexico and its economy. that is the latin america report. beautiful place, bill gates could not do better than the four seasons. >> puerto vallarta. >> 26 minutes past the hour, time for "on the markets." bitcoin is tumbling. why? china's largest bitcoin exchange stopped accepting deposits. according to the bitcoin exchange in japan, it is as low as $4.55. just a few weeks ago, it was $1200. >> matt miller paid $800. taking a dive. -- what other markets does bitcoin get shut out of? that is what is happening in china. the chinese have strict currency controls, capital controls. the chinese perceive bitcoin as being a way to circumvent those controls and are clamping down. it happened in europe as well. we ares a good day, about to be joined mark yusko. don't miss it. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back to "market makers here i am erik schatzker. our next guest is bidding on gambling. he thinks fixed income -- watch out. capital, hen creek runs $7 billion in hedge funds and private equity. recently in the mutual fund. the jewel -- fixed income. why be concerned? were in ars, we treasury bull market and interest rates kept going down. it ended at zero. the only way is up. ade?not bet on that tr >> you can in a floating rate instruments. that is why floating-rate bond funds have been soaring. people putting money their -- >> unconstrained bond -- >> levered loan funds. you areby enclosing -- buying floating-rate interest. if you own a fixed-rate security and interest rates rise, u.k. capital losses. capital losses. the bond mutual funds saw a reduction. -- saw redemption. >> you are not locked into a bond fund, you can move capital to whatever you feel is most attractive. game at thee of the end of 2013 with a possibility the fed will make a decision to taper today. fixedetting against income securities, fixed rate securities look attractive for do you have to wait? has been very attractive the last part of this year to bet against treasuries. to of things that are short treasuries and make money while interest rates rose and bond prices went down. from here it is more mixed. part of our reason is, when we launched our mutual fund in august, we are allowed to have 30% or 40% in fixed income. but we chose to have no fixed income. why? we did not want to lose money in bonds if interest rates rose. >> what is fixed income mean to you? > there are treasury bonds, the there are corporate bonds, more risky. then there are high yield. >> no mortgages? can be interesting, commercial mortgage-backed securities, residential mortgage-backed securities, subprime bonds. they got really cheap and you are supposed to buy them. traditional fixed income is risky. traditional like treasuries. corporate bonds. jim grant was at our conference a couple weeks ago. he talked about going short corporate bonds. not just not buying them. >> people who have gotten short credit are getting carried out. not necessarily credit. this is not a bet on credit spreads. this is a bet on the fact that at low interest rates, companies have issued too much debt. patsy, $20mple of billion of additional debt to buy back stock. --pepsi. this could be dangerous for bond holders from this point forward. >> the secret to the guy who founded bridgewater's success. >> that is the secret of his success. >> one of the others was a levered bet on lower interest rates. why not reverse the trade and make a levered bet on higher treasury rate? >> a rising rates fund would be a great idea. we have been talking about it. i talked to john paulson about this exact idea a month and half ago. he said if you are going to onrt a new fund, started what i see to be the biggest trend in the next 10 years, normalization. it is not an explosion, it is a normalization. rates have been held down -- you had stan? miller -- you had stan druckenmiller. the fed has artificially held rates down, raising asset prices. trophy real estate, stocks. we saw that in the taper tantrum in may. pricesd of taper, asset fell. bond prices, equity prices commodity prices. >> why do you like casinos? >> organic growth. >> organic and casinos in the same sentence? >> fair point. growth -- if you are going to buy equity, you want growth. where is their growth today in a place like macau? world's population lives within a five-hour flight of macau, versus 10% to las vegas. people like to gamble. it is part of their nature. in asian cultures, it is a bigger thing. gaming in macau, it is a duly insulated trade. good, moreomy gets people game and you do not make as much on each individual gambler, but you make more because of growth. if the economy gets bad and china, the high end consumers want to get their money out of the country and they go to macau to move it out. they make more money than the average gambler. >> do you think it helps to like gambling to understand gambling? >> no. i do not think you have to like it. at the end of the day, i do not really understand it. i do not look like you are not a gambler -- i do not. >> you are not a gambler. >> that just means you know how much you lose. >> you gamble on stocks. is notated investment gambling. putting your money down on red or black where you have no control, that is gambling. if you buy general orders -- if you buy general motors. >> kyle bass love it. it, they cleaned up their balance sheet and bankruptcy, they got rid of the government stock overhang, the constant selling pressure. there is a recovery in the trucking business. go to north dakota and see how many pickup trucks are being sold. they have got a lot in -- a lock in the pickup truck market. for the first time in history i can remember, 50 years, gm and ford are coming out with really nice cars. you actually want to own them. >> you can make some of the same statements about the airline industry. why don't you like airlines? >> i said soar. that was a typo. sour. >> airlines turned out to be a trade. >> thank you, david tepper. >> i love harry, "the great boom ahead." harry dent is a seer. one of the crowd asked me your favorite idea. i said we do long-short hedge funds. up long-short hedge fund is 21% even though everyone thinks hedge funds are having a tough year. up 21%. my best idea -- i do not pick stocks at that time, we were not in mutual funds. i said airlines. everybody said, that is a terrible business, it is destroyed capital. it had. past tense. when you get consolidation, when the top 2 groups or 3 groups schedule 80 put -- control 80%, they get pricing power. %> what a one percent -- 21 up. investors are getting used to hedge fund returning 6%. will we see funds closing? investors have to be pulling out money if they are only giving back 3% or 4%. so, but the think hedge fund industry set a record for inflows in the third quarter. because of what sandra miller -- stan druckenmiller said. it is institutions putting money in because they hate fixed income. you want low volatility arbitrage strategies, those hedge funds are growing. people are getting frustrated with long-short guys, 30% net with 8% return. bias andt with a long the movement into mutual funds, that is where it is going. >> i think you meant to say he loves gm because he is excited about mary barra. >> i will retweet that. >> mark yusko, ceo at morgan creek cap it off. >> is the 12 days of bitcoin. where is the creator? more when we come back, you are watching "market makers" on bloomberg tv. ♪ >> welcome back to "market makers," the battle lines have been john in silicon valley. some of the biggest names in tech are on opposing sides. there is a fight over patent trolls. neil richardson -- nela r ichardson is a senior economist at bloomberg government. what exactly is a patent troll and why are they controversial? >> what they are are these companies that buy up patents and go after all kinds of different companies and businesses saying that they violated certain patent restrictions. this is a big problem that has taken off in the last 2 years. it affects all types of businesses, from startups to banks. the industry is in lockstep behind it. reforming patent trolls, reining them in. there is divide in the tech industry. because tech companies want control? they will get patents on anything. >> there is a divide between those who own a lot of patents and those who do not and want to innovate. a couple weeks ago, the house passed regulation to rein in patent trolls. it had widespread bipartisan support. that is crazy. in patentt in reining trolls. that was because a major provision was taken out. byt provision was opposed ibm and microsoft. that would allow companies to challenge the validity of this is a low- quality patents should be thrown out. that provision was taken away. the senate may put that provision back in there. that would divide the tech industry into the old established an young startups. h startups, what do they hope to get? >> this problem of patent trolls, anybody related to a software technology is at risk by a patent troll. these legal fees are enormous, it is better to settle than fight. what they would like is to get some help from the u.s. government to set boundaries. not just about setting boundaries, it is about not having unintended consequences. those boundaries are going to be pushed by ibm and microsoft to make sure your major revenue stream is not threatened by attempts to rein in patent trolls. >> protect disruptive innovators. nela richardson in d.c. is on a quest, 12 days of bitcoin. looking for the missing creator. ♪ >> it is the 12 days of bitcoin on bloomberg television. they -- day 8. matt miller has been finding ways to buy, spend, and trade the currency. one of the mysteries -- there are several mysteries. the biggest, who is behind it? the so-called founder, satoshi nakamoto. the ben bernanke of bitcoin. one of the most fascinating aspects of the story. i use that term loosely, it could have been a woman or a group. >> a figure. >> known as satoshi nakamoto. he wrote a paper published in 2008 about it. he then released the first version of bitcoin, 0.1 in 2009. by 2010, he had posted about 100 times on the boards about it. he handed the day to day business of developing it over to gavin andresen, who some people speculate maybe satoshi nakamoto. he said he will move on. he went off the grid. does the mystery and anonymity of all this give you pause in how valid bitcoin is. it does not make me feel good. >> it is a question i put to very sober -- to barry silbert the other day. thought,im what he he said hessen, has knows who the guy is? no, we don't have a clue. he said it does not bother me at all. >> let's talk about what happened to that point overnight. -- to bitcoin overnight. >> it got crushed, china is tightening controls. it is no longer allowing btc china, which has become the biggest bitcoin exchange in the world, to accept deposits. you can only sell them. it is not clear how long you will be able to. people are doing that as quickly as they can. >> i cannot wait for day 9. >> neither can i. bitcoin2 days of continues. thank you, matt miller. ♪ >> that is it for today's "market makers." tomorrow is really big, the day after ben bernanke's news conference. jim grant is joining us. he has been a big critic of ben bernanke. we will dissect everything that happens today. it is 56 past the hour, bloomberg television is taking you on the markets. back to the newsroom with garlic phil. take it away. >> time for our options inside, cracking down on derivatives. a cleanat herbalife, bill of health and a reality of books. the company says it is up to date on sec filing. joining me now is baycrest partners anshul agarwal. the backdrop is bill ackman's bet against the company, he caused it a paramedic scheme and says he is holding that this is a pyramid scheme. you have to factor that in. >> at the same time, if you look at it, the market has spoken. the auditors have spoken. stock has rallied back to pre- concerns of the parent scheme -- the pyramid scheme. the ackman trade is behind us. >> not a factor. >> i will not say nonfactor because he holds interest in the stock. although he covered part of it. what we are looking at is what somebody can do going forward and how to profit from that in a smart way. think about it this way, trying to get some fat profits from skinny shakes. >> looking at some modest gains for herbalife. littlestrategy is a complicated. looking at february options. the reason we wanted february is because it gives our earnings in february. we want to look to february 18 strike call, $6. we cheapen the call in half, sell for $3. the pricether cheapen of the call spread by selling another february $100 call for $1.50. is reduced from six dollars to $1.50. $8.50, arofit would be payout.nice 5.5-1 >> the risk is if the stock goes too high, you lose money. betweenx payout is stock from $90 to $100. 100 dollars is still 33% away. beyond $100, the trade loses one by one. we get to a second breakeven 8.50, we give back the entire game. the on that, we lose money. >> these options expire in february. our life reports today's before -- herbalife reports two days before these expire, would you look to sell before hand? >> if the stock starts to rally quickly right now between now and january expiration, there are some things you have to do because the $90 and $100 strike call will have value that we worry about, we would chip away at buying back $100 strike call. it is an actively managed position, we are selling to calls in buying one. with an extra call option potential unlimited risk to the upside. the reason i am bullish is because the company -- >> share buybacks. >> that was put on hold because the financial statements not being clean. there is a possibility of pe expansion. providingw skin is growth. >> would you expect an announcement on a buyback? >> no timeframe, it could be soon. >> anshul agarwal of baycrest partners with his recommendation on herbalife. on the market again in 30 minutes. "lunch money" is coming up next. ♪ money,"me to "lunch where we tied together the best stories, interviews, and businesses.in in bernanke preparing to give his final news conference. ofipo, we hear from the ceo ipo,.aising an create an agency in hollywood. women creating -- making their mark in hollywood. the only handmade chocolate here in london

Transcripts For CNBC Squawk On The Street 20131218

earnings from fedex, lennar, 2014 guidance as well. and then europe responding to the strongest german business confidence in 20 months. the biggest decline in u.k. unemployment in 13 years. our road map begins with anticipation waiting to see if today's fed announcement will include the "t" word, taper. >> quarterly results from fedex missed estimates but the company boosting full-year guidance. >> analyd going public, amc. >> after the fed wraps up its two-day meeting this afternoon, investors will learn whether policy makers will wind down on the economic data. complete coverage of the fed announcement and the chairman's news conference on cnbc this afternoon, begins at 2:00 p.m. eastern time. jim, are you ready? >> yeah. there is -- if you're the fed, you got to tough job. i am getting so many people sending me, jim, tell the fed -- i mean, tell the fed. okay, fed. what do you want me to tell them? it's the holiday time, don't ruin our year? that is not exactly what bernanke is focused on or yellen. there was a great discussion in the show before us basically rick coming out and people cheering about free markets. my take is that they have to say something about the strength of the economy no matter what. maybe not they're not going to buy fewer bonds but the strength. economy is kind of overwhelming here. >> others say they have to at least give some lip service to what's happened in congress over the past couple of weeks. >> david's looking askance at me. >> overwhelming. >> well, i'm looking at housing, autos, i'm looking at retail -- >> for months we've been talking about those. that doesn't translate to overwhelming. >> i think it's not as weak as it was six months ago. how about that? >> okay, i like that better. >> you thought i was giving the hyper-bowl, yes, the hyperbole. >> at certain points they have to say things are getting better. if there's going to be gridlock in washington, they could add a caveat, but they lost the caveat. >> though the debt ceiling remains. but aren't we at the point where whether it's the bond market or the stock market, given we've been talking about taper now for, oh, a very long time, everybody's ready? i know they may not be, i realize, but shouldn't they be ready at this point? aren't stocks reflective of -- >> do we go now 4% because they mentioned they're going to buy fewer bonds? i think that's ludicrous. maybe somebody blasted futures and people at home have to recognize there's always someone out there who doesn't get the member memo. >> you said yesterday you don't like the vix. people are expecting things to start to get a little jittery. >> it is thin. it is the holiday season. you know what, it doesn't feel like the holiday season at all. the news overload today is typical of what i would expect in the first week of january. >> you got that right. >> i got up really, really early to check whether i won the mega millions, that was very disappointing to start. the rest of the day general mills, fedex, did you go over the 3m, honeywell, did you see that yesterday? no, guys, give as yus a break! stop saying things. >> by the way, if you won that mega millions, you'd still be here. >> i put in that i bought a ticket, this is the problem with twitter, within ten minutes i had people saying i had no right to buy a ticket because if i win, someone else is going to lose, that i'm overpaid. people said you call yourself a capitalist, you know the lottery is regressive. in the end i was like i'm going to take the ticket back, i can't take it anymore! >> fedex reported second quarter earnings, 1.57 a share. they did miss wall street estimates saying express shipping revenue edged lower in the run-up to the holiday season but fedex also boosting full-year earnings guidance in part to account for share buybacks we've had recently. we call it a package delivery company. so who owns stock but are frustrated with it call it an airplane company. they don't lease them, they own them. when you compare them to ups for what they use planes for versus ground, there is some frustration amongst their shareholders they could be more efficient, though with capital they seem to be becoming more efficient. >> what makes people happy? a stock that goes from 85 to 138, that's not good enough for people? what do people want? do they want avon? merck? give me a break. this company is delivering. 7% to 13%, goes up to 8% to 14% and cyber monday is not included in these figures? >> they did point out the quarter was very tough to forecast, late holiday, contracts recently renewed that made this a tough number to estimate. >> can't they go after companies that are losers? >> nobody's really going after them. it's not like they have an activist in the ranks. there are some -- it's been -- we've talked about this. >> you ever hear a xanax? it's a franchise that could be unique to these head fund managers that are jittery about something like fedex. go take a xanax. >> i believe the stock prices reflect well, but you can always do more. >> you'd rather see up than down. >> yes, but we're a change company. the numbers for amazon -- by the way, you get free shipping today for a lot of guys. >> yes. >> there's the urgency is not as important given the fact that amazon has a warehouse next to your house. you don't need to do the expensive because amazon has put up -- >> it's still going to get there in two days. >> yes! i think that's important. the logistics of the country are now betting in your favor that you don't need to pay up. how about that? changed concept. >> you mentioned guidance from a giant like fedex and then we're getting guidance out of ford. the company forecasting next year to be a solid one but pretax profit expected to be lower than 2013. ford is lowering the premarket. let's go to phil lebeau for more color on these comments this morning. good morning, phil. >> reporter: the ceo is laying out the outlook for 2014 and beyond. three things weighing on ford stocks. you talk about the auto division, 2014 will be a solid year but not as strong. look for lower operating margins, pretax margins will be lower. how much lower they're not saying. they're bringing in about $8.5 billion this year. i expect it will be in the 8.2 to 8.3 range. that's conjecture at this point. but most importantly, their guidance beyond 2014, the company says that its global automotive operating target for operating margin of 8% to 9% is now at risk because of europe and because of latin america and that has a lot of people saying, okay, when can we expect those operating margins to get up there in that 8% to 9% range? if you're taking it off the table beyond 2014, will it come back on the table at later date? bob shane is briefing reporters but that's an indication of why people are a little down on the shares of ford this morning. back to you. >> thanks a lot. i know you went over this with the guys on squawk. what was your take? >> you got to hope this is underpromise and maybe overdeliver. i think ford has been the great conundrum of the stock, reported good news, good news, good news, can't get over 16 and it was over 18 in 2011. maybe we thought it was mull al going to microsoft. no. general motors is not going to say this. general motors got better numbers than ford. i think gm has a better story to tell than ford now. i did not expect that to be the case. >> bottom of the screen, we're getting official news based on reports out last night regarding william morris. >> yes, buying ing. that company has been on the block for some time. teddy force man having passed away some time ago and they've been selling all the underlying assets there. it's interesting for a couple of reasons. the purchase is far less than might have been anticipated when this auction began some time back. but it will create a very large company in all areas, including sports and sports management and sporting events, but again, img's numbers not quite as strong as many as it anticipated when this began. it ratcheted down the overall purchase price and there were a number of potential competing buyers here. you had cbc capital partners and a group aligned with peter ternman. and ari manuel and his partners making the play. >> and the time framing emanuel's career arc, one that is headed toward king eventually overtime. >> i think people know this business from entourage and people would think how is it possible that one business isn't as good as we thought? is it loss of clients? people of negotiating fees? >> it is all of those things and it's loss of clients, it's not big ticket guys. they were always known for sports. mark mccormick. >> show me the money. >> yeah. they lost traction in terms of sports clients and came in lower than expected in terms of ebidta with events they put together sporting-wise. it's been a harder road for them. >> i have to disclose i'm a client. >> ari manuel. how could you not mention that? it's an important relationship. these people play major roles. >> i am not a client but i'm not going to mess with him either so -- >> ari? >> yeah. >> calls me once a year. >> that's nice. >> ari's on the phone. >> and it's not lloyd doing the dialing, right? >> no. >> they have literally rolled out the red carpet on the trading floor. we're going to talk with the ceo about the business. and we'll talk with country pop star lee ann rhymes who shot her latest video entirely on an iphone. we'll ask her if she'll consider the beyonce way of selling recordings. take another look at future's big day with guidance out of fedex and ford. a lot more with "squawk on the street" in a moment. bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon. a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. big day for housing, of course. we got some mortgage apps at 7:00 a.m. and then here's lennar, beats by 70 cents. new orders up 13, jim. by unit. 34 by dollar amount. you're impressed. >> yeah. i thought toll was good and on the conference call they said some negative things and gave up some gains. not telling people to pile into lennar but what you're looking for from stewart miller is a lot and he gave you more. the home building business, people wrote it off with taper, taper, taper, but this is a business that is doing well. he said it's secular demand and it's household demand dictating these numbers. >> do you believe that rates truly don't have an impact? we've had zillow on the desk who says it's really about the price, the ask that drives buyers' decisions. it's not about the mortgage. >> our viewers have felt i consider the mortgage to be very important and i want to pause. the price of used homes has stopped going up. it looks like -- there's a kind of a stasis. maybe they care more about the velocity of the rates going up than they care about where they are because in the end rents are higher and in the end there is over and over again you hear about this household formation and we just have too many living -- the greatest number of people, frank blake comes on "mad money" and goes, look, jim, it's all about the inlaws. >> because people have an aspiration to leave the basement of the home they grew up in. >> especially because it's moldy because of various storms. >> it's a good thing. the economy gets better, more jobs are being created, rates got up but you have more people who can afford -- >> and it's about affordability. the numbers have plateaued so it's not getting more and more expensive and people catch up. i think what the fed hated was the instant jump. anything gradual that people could handle and it's reverberated from here to indonesia add malaysia and mongolia. >> what's up with mongolia? that's two days in a row? >> because mickey drexler is coming on the show tomorrow and they make cashmere in mongolia. >> did it hurt your feelings? >> desperately. mickey, not happy about that. not that we don't support our shows. we're very happy you're coming on but what happened to us? >> you are dead to me. >> could it be because sorkin claims he owns a suit he bought -- because i bought two suits there. >> and i raise him a documentary. >> a great documentary. not to say anything bad about the costco or -- or the walmart, age of aquarius. but when i saw that booking, i was distinctly jealous. >> i'm glad you brought that up. >> as was i. >> i was hurt. deeply hurt. >> it's my fault. i take full responsibility. >> also 'tis the season for ipos. amc, first time since '04, the movie theater chain pricing 18.4 million shares, $18 apiece, the low end of the range. amc will be listed under the ticker amc. ceo jerry lopez will join us after shares open for trading. they're serving popcorn and soda on the floor this morning and they have their new seating on the floor. >> how about some beer and food with the movie. it's become a more fun experience, allows them to raise prices. they didn't care when i said listen, popcorn, how about a danish? they didn't have any danish here this morning. they have a compelling story to tell and they gave that great thing where you can buy some shares at the movie theater. >> that got a lot of people at jimcramer @twitter, people said why is it so hot? >> have you been a fan of imax over the years? >> yes, i think imax has done a great job. this is another one -- there's a bit of an amazon effect. i want to own imax. it's much more of a chinese play than say a coach, not as much of a yum but i think this amc story is a strong one and it could have a good yield. movie theater companies have good yield. >> they can have some cash. there are questions about the sustainability anymore. >> the perception is cable has hurt the movies. but the movie -- >> the timeline between when it's in the movie theater and when it's available to you on demand. >> true. but the box office doesn't lie. >> i can more or less sit on my couch for 60 days and just wait. >> doesn't forget the amc cable channel with the amc movie company. two different businesses. >> and "homeland," i saw the last one. i'm giving the whole season a b minus. >> thanks. >> you're welcome. >> the judge has weighed in. >> that's it, i'm done. no more. >> you rest your case. the prosecution is not even going to call a witness here. i think amc is part of the excitement ipo. last week we had hilton. these are old names that come back. it's oldies but goody. it's throwback jersey time. you came with shrink to grow. you got to wear your throwback jersey on the floor of the exchange. >> later this hour -- >> hello and welcome to "squawk on the street." if you know the name of the anchor you'd like to see, press one for carl quintanilla. press two for david faber. press three for jim cramer. and for our first-on interview with the amc ceo, press nine as in post 9. that's later on "squawk on the street." ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ that's how ameriprise puts more (voseeker of the sublime.ro. you can separate runway ridiculousness... from fashion that flies off the shelves. 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. 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(vo) so do we, business pro. so do we. go national. go like a pro. ♪ tell me, tell me how to be tell me, tell me ♪ we got a "mad dash" here. it's hump day again. let's talk jabil. >> this was a first class disaster. you listen to the conference call and you say what happened to jabil? undercurrent is either cisco or apple must be doing badly because those are big clients. citigroup does the leap and says it's apple. there is an apple phone that is not doing that well, which is the c, the small class. but jpmorgan reaffirms apple and raised its price target saying next year is going to be great for apple. i don't want to sell apple in this. i want to sell cisco. >> it's kind of a quick conclusion to come to. what about high precision? >> jabil is not allowed to reveal who is the problem. so you can draw any conclusion you want but you shouldn't. >> right. >> and they're not going to tell you. but i think those who sell apple think they know something. i think tim cook when he got out of the white house yesterday someone should have said, hey, jabil -- i still think apple is going to have a very big 2014. i am worried about cisco. cisco and jabil have a long-term relationship. >> we have the ipo of amc coming here. s they're about to storm us! open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. you're watching cnbc "squawk on the street." it is fed day, awaiting the decision at 2:00 p.m. eastern time and bernanke's press conference at 2:30, likely the last one. i continue to await yellen's conference. >> a lot of people say come on, man, don't do anything! if he does anything, it will be like an espn press conference. [ opening bell ringing ] >> amc theaters celebrating its ipo today. over at the nasdaq, conatus pharmaceuticals, focusing on developing treatment for liver disease. >> i am blown away by how the group, more and more companies -- by the way, the big guys have stalled. regen regeneron peaked a year ago. i think in the next week it's going to be a good place to be but this group has been one of the groups that led the year and it stopped moving up as people went to more cyclical stocks because people think the economy is getting better. those aren't bad companies. >> one thing that stopped going up is general mills' earnings. 83 cents misses 87. flat volume globally. domestic volume down, too. they do reaffirm guidance but they say that it's going to be a greater headwind than they thought. >> when i was at whole foods, a big section of the supermarket that includes general mills is doing quite poorly. but isn't it interesting that the companies that sell similar to breakfast foods are doing fabulously. i think this a secular trend. i think that cereal is something that people say -- the next generation doesn't eat cereal the same way we do. worldwide there's this organic and natural is hurting general mills. ken, terrific ceo, may disagree. when i talk about whole foods about what people sell for breakfast, it's on fire there. >> it is citing ingredient costs. >> it's possible. john faraci was on squawk this morning and card board is a big part, the little bags, these are far more important than the actual stuff that's in the cereal and i think it's a sense overall that the millennials don't like processed foods. it's a big story for 2014. millennials don't like processed foods. >> jabil, ford, general mills, the losers we've covered. apple we have not covered. the journal suggested the 18th would be the day around the time china mobile will nons a deal. china mobil comes out and says there's no deal yet, we're still talking. >> i read that and i i was like is this one of those upon further reviews? it was a fumble? i thought this was a done deal. that is a better reason for apple to sell off than i think the jabil reason. can i come back and say i think 2014 is going to be a big year, they do have the right phones, they're going to have the new introduction of another phone and all the extrapolation of the problems of apple misses the point, which is that business is better there. >> we do have a deal on va valassis. trading above the price of the deal. have not been able to speak to others in terms of whether there was an auctioneer or whether there's expectations of a higher price and also talking about electing to conduct a tender for their 6 5/8 notes due in 2021. the buyer is harlen clark holdings. they are buying this total takeout price, including debt, $1.84 billion. they are going to take on perhaps some new debt in financing to complete the acquisition. a decent premium. interesting to note it's trading above bid price. not quite sure why. i haven't really had a chance to make call. >> milk carton have valassis. my first job was when i got my working papers was inserting the sunday inserts in the paper for -- >> this was before selling beer at ballparks. >> hey, ice cold. i got ice cream here, vanilla and chocolate. >> no, this was my first job. saturday night, you insert them -- this is a job nobody wants whatsoever. i always ask the bosses, does anyone really read these things? does anybody use the coupons? coupons are incredibly powerful. >> jcpenney realizes that. >> and bed bath and beyond realizes that. this is an industry people thought would go away with the groupons of the world, people love their coupons, except for the people behind the people with the coupons in line. >> there is some dividend being paid by valassis. there it is. hence 31 cents, hence not trading above bid price. missed that paragraph. >> ford is now down almost 5% on that color about 2014. let's get to phil lebeau see if he has any additional thoughts. >> ford will earn about $8.5 billion this year. we've dug into their forecast for next year. that are expecting to earn pretax profit for the entire company between $7 billion and $8 billion. you're looking at a hit of between $1 billion and $1.5 billion in one year for the pretext profit. a lot of people are saying what's happened? what has changed so dramatically? think about this -- they have been working on and planning to larch a new f series, which will have a fair amount of aluminum in the batter -- in the compartment as well as in the panels for that truck. they haven't been able to get it exactly right yet. they were going to unveil this at the detroit auto show. that's not happening. many are saying that's your bread and butter. if you have to push back that launch, that's your bottom line. that's why your shares are down 5%. guys, back to you. >> jim, really quickly on that, what's more worrisome, that or the margin news on 2014? >> gees, i thought raw costs coming down but they do hedge the raw costs. cost of labor not going up. gees, they have to make their cars in mexico? move a lot of their business to mexico? my jaw's dropping on this one. >> does coincide with conservative guidance out of johnson controls as well. >> i've gone over that, it's a charitable trust name. i think that the actual commentary for what i'm getting from stephanie link, cnbc partner and co-director of the charitable trust, the story is strong aer than the headlines. at ford the story is weaker than the headlines. johnson is going to have a great year in 2014. i would not sell jci. ford, i'm going to leave here and do work on ford because i'm surprised. i don't get that. >> let's get to pisani to see what's moving on the floor with the dow up 51. good morning, bob. >> good morning, guys. home builders doing well, aerospace doing well, energy stocks on the up side. we're waiting for amc entertainment. priced at $18. that was the low end of the price talk, 18 to 20. you must think that must be disappointing. sometimes it's better to do that because you get a better pop at the open. probably somewhere around $19 is a likely opening price. hilton priced right in the middle of the range. everyone said maybe that was a little disappointing but hilton had a terrific run on the first day. pricing at the low end doesn't necessarily mean some indication of a disappointing open overall. elsewhere, on terms of the market, look at what some of the bulls are arcing the last couple of days. their argument is forget about when the fed is going to taper. the fed put is still going to be very much alive. the economic news is improving. i want to show you that the bulls are arguing the fed is going to make it very clear if the data works if they're going to continue to aggressively taper. if it gets better, the lower the taper. if it gets worse, they can do it again. the argument is the fed putt, there's an underpinning to the market that the fed putt will still be there in 2014. i don't think that. i think taper will go in one way. their argument is they could go backward if things get worse. let me move on and talk about lennar. jim each made some very interesting observations on it. they did beat and orders were up 13%. from what i could see, that was a limb below consensus and a disappointment. average selling was up 18%. looks like they beat on lower costs, not on dramatically higher demand. i think this is part of the housing conundrum we've been seeing. look at these contradictions. single-family housiing starts fr november were terrific. housing sentiments yesterday were terrific. but mortgage applications did you look at them today? lowest levels of 2013. so we're getting some unusual numbers that are contradicting themselves in housing. look at some of these home builders, a is down, holton's done, polte is down. and on fedex, a lot of people asking me what happened. overnight, international priority volumes, looks down about 5%. that's a disappointment. ground shipment is up about 8%. that's good but lower than last quarter. my point here is fedex had a fantastic year. it's got to be up close on the year. it's one of the best performance in the transports. we're starting to see a little disappointment in the second half of the year. right now it looks like somewhere around $19 for them. back to you. >> thanks very much. let's head over to the bond pits now. rick santelli joins us from the cme group in chicago. rick. >> thanks, david. we're going to quickly go through the intra day charts and two-day charts of 2s, 5s, 10s, 30s. why? couple of reasons. first of all, the first chart, 2s, we're up three, four basis points overnight in a two-year note and now 35 basis points just dipping down to 34. why is that interesting? it's a cautionary word. very difficult to use percentages when you look at interest rate percent because that's over a 10% move and i don't think it accurately reflects the dynamics. but if you continue to look at the rest of the yield curve, it is very important that it seems to be -- we have to go, breaking news. >> i apologize. we do have looking over at post 5, looks like amc is now open for trade. $19.18 after pricing at 18. about 18 million shares. interesting. we'll talk to the ceo in a few moments about the business and the open. >> not expensive here. >> some of the opens lately, jim, as a trend have been modest, the kind of thing underwriters tend to like. >> hilton. i like these sales that don't go to a huge premium. it means people got in. >> and they're going to stay in. and that's probably better. you build a shareholder base from day one. you got all these flippers and you have to reassemble. >> i think the deals are good for people, the company get its money, individual feel they got a good price. you can argue twitter felt it didn't get enough but it worked. all these deals have been the kind of things if you're watching at home you say i like to stay at the hilton, go to the movies, you can be in it. >> hilton private in '07. what do you tell people who say, ah, everybody's coming back, this is their exit just as retail is being encouraged to get in? >> i think this is the end of the free money period from the fed. business is pretty good. there always is an exit strategy when you do these deals. i always come back to dollar general. when dollar general came public, people said it's the beginning of the end, this is it. what a great stock that's been. i've been saying -- i got a new book coming out, i don't want to promote the book but you need to be less cynical. these private equity firms is done a good job. >> in dollar general and hca -- dollar general the private completely out and hca mostly out. they have come back quickly and done well. the big argument of private equity is we do all these things to make them do better but do they really? >> when we come back, it's got all the excitement of a movie premiere and more. amc entertainment just began trade. we'll talk to the ceo larry lopez here in a moment. stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. 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(announcer) scottrade-proud to be ranked "best overall client experience." stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. amc entertainment just opened for trade. as you can see, 19.59 the latest check. gerry lopez is the president and ceo of amc entertainment, and he joins us this morning. with the red tie. you know how to decorate a room. >> thank you. we try. >> this is the collision between lee wood, kansas and china some would say? >> we've been private. the last 14 months or so under the chinese loan ownership alloo us take our ideas and accelerate them into the u.s. market. it's been helpful. we think the company is positioned just right. we're having a great year. the entire industry having a great year. >> congratulations. >> thank you. >> a lot of people talk the talk. tell people what you did for customers. >> we gave our amc stocks members, who are our most loyal of the loyals the opportunity to participate in the ipo at the same price an institutional investor had. . we thought it was the right thing to do for our customers. with the stock price last night at 18. we we thought it would have a good chance of opening the way that it did. we hope we earned the loyalty of our members. that's what it's all about. >> the other way to do that is to improve the experience to have the chairs that can lie back. >> you've been in one? >> my family has. you're spending a lot of money to do that, $375 million and another $245 million planned? >> $275 over the last 12 months. we think it's going to settle at around 245 on an annual basis going forward. not all of it is going to go into that but a vast majority of it. >> what are you thinking on the expected return? >> every location is a little different. we're seeing north of 30% in cash returns. depends on the location and depends on the specifics of what we do but very healthy. importantly we're driving the productivity of the existing asset base. not just adding more theaters but making the theaters already in the communities a little better. we find that resonates with our guest, people like it, they come more often and when they come, they spend more money. makes for a good business model. we think we got at least another four, five years left of executing against this plan. >> people wonder if dynamic prices is coming to the business the way spielberg suggests where you may pay $25 to see the new ironman, you may pay $7 to see the new art house film. >> we're already on the path there. today you can see a movie in 2-d, 3-d, imax. each one of those experiences will have a different pricing in the same building. the ultimate that spielberg and others have talked about with movies being priced differently, that's not here yet. it may happen in the future. our business is a revenue sure with the studios. it will have to be something we very carefully discuss and see how we best bring it about. it not the only idea in play, it's one of the ideas in play. >> at this price you have a 6.6, big discount to regal and cinemark. they're 7.9. will you have a similar dividend policy and yield to those partners? >> we will. we opened with a $75 million difficult depend flow, at the high end of dividend yield for comps. our story is not just about the better experience for the customer, it's about returning capital to the investors from day one. the business is very cash flow positive. we think we can do both things at the same time. >> you mentioned all the ways you can see a movie. another way is to wait 90 days and watch it from the couch on your big screen. i think that will only continue as a trend. i wonder how do you combat that as a industry over the long haul here, get people to come in continually when they know they don't have to wait very long to have a somewhat similar experience? >> the heavy user, the people who enjoy movies the most enjoy them in a theater, enjoy them at home, enjoy them in their ipad and enjoy them in their phone, which i don't understand because the screen is too small. the movie theater is part of the u.s. fabric. as long as the 17-year-olds want to date, i like our chances. >> as long as there's love. >> we do work on that. >> is there a limit, before we let you go, as to how many previews one can sit through before the feature begins? >> 15 minutes or so. six, seven is about right. a little less than that people will ask us, a little more than that people like it. >> we'll get "six in 60" with jim after a break. ♪ hollywood, hollywood swinging ♪ my mantra? family first. but with less energy, moodiness, and a low sex drive, i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron. the only underarm low t treatment that can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting and increase in psa. ask your doctor about axiron. let's get "six in 60" with jim. you've been talking cvs all morning. >> great company, great industry. >> red arrows from micron. >> the big story has been over and over again that there's no new fab, no new factories coming in. now we're hearing about a factory. >> this is a construction equipment story. it remains one of great plays on nonresidential construction in 2014. >> mark west. >> we see the articles on natural gas. these guys have the pipeline to the northeast but they keep doing equities guys, you need to stop it. >> merrill cuts numbers on amc. >> wow, this is the great day. >> and then merrill on avon. >> i felt this was a give up on sherry mccoy saying listen, wait till next year. this is the opposite of herbalife. >> what's coming up on "mad"? >> we have stocking stuffers. i think you should be able to buy your kid just one share, two shares. it's really resonating with people as i go around town. people say that's what i want to buy my kids. >> when we come back, we'll talk about obama care and talk about the fed decision at 2:00 when we come right back. my customers can shop around. but it doesn't usually work that way with health care. with unitedhealthcare, i get information on quality rated doctors, treatment options and cost estimates, so we can make better health decisions. that's health in numbers. unitedhealthcare. the ocean gets warmer. the peruvian anchovy harvest suffers. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world. bny mellon. stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. 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(vo) so do we, business pro. so do we. go national. go like a pro. ♪ no time left for you, on my way to better things ♪ >> welcome back to "squawk on the street." in just a few hours we'll find out if a taper is in the cards during bernanke's last meeting as chairman. we'll tell you what to expect. >> plus bitcoin tumbling overnight at china said it would stop taking deposits in the chinese currency. >> obamacare getting tech support from microsoft. the white house hiring the former head of microsoft office to oversee healthcare.gov. >> and the executive director of cigar aficionado will be here. >> the fed decision of course the last one for chairman ben bernanke. i think he has another one. i think he quits at the end of january. second to last one. at 2:00 p.m. eastern. what should we expect from the fed this afternoon? what will the fallout be for you as an investors? steve liesman is in washington. so we're finally there? >> reporter: we are. the penultimate meeting for bernanke but the last press conference he'll conduct. a robust debate is out there among fed watchers with many believing today is not the day for the taper but it's coming soon. there are some big investment houses that are on the not taper track. cnbc service shows just 20% of the market expect the taper today but 55 expect it in january, 52 expect it in february. it is the uncertainty that it itself offered as a reason for the fed not moving today. that is because wall street doesn't expect it today, the fed won't do it because the central bank does not want to surprise markets. here's the case against tapering, wall street not being ready, inflation too low and really not enough positive data. now on "squawk box" this morning, they said the street not being ready is not a good reason to hold off. >> why does the fed care about surprising the market? they told us back in september -- we didn't say we were going in september and the market was prime for it and ten-year yields are back where they were going into the meeting. the difference is this time the short end has the message that a taper doesn't mean a tightening is coming in a few weeks' time. >> that's going to be very important for the fed. here's the case in favor of the taper. there is confidence in the outlook, the three tests of the fed has been met. reduced fiscal uncertainty and less financial restraint. many officials called not tapering in september a close call and given the better economic data, a ing unemployment rate to 7%, what was a close call in september should be a slam dunk in december. so september many committee members also said they expect to begin reducing the program by year end. so there are reasons on both sides but maybe most important it s this -- if we don't get it today, we'll get it soon enough and the market seems to have more or less priced that in. what does the fed gain in economic terms by waiting? i'm not sure it's very much, guys. carl? >> steve, you've made your call that you think one is probably more likely than before and some people wonder whose whispering in liesman's ear? is he trying to get the market primed? >> they can wonder that. there's other more important this evenings. they should be looking at their portfolios. just doing my reporting. you look at the three tests. those were the ones bernanke gave us and there are others who have run the same call. >> busy day for you in washington, d.c., steve liesman. let get some insight from -- $300 billion in aum. do you think it would be a surprise? we've talked about this until we're blue in the face. >> i think the fed should taper, the economy is strong enough. and they've gone through the program of diminishing returns and i'd argue is now in minimum returns. people are rolling cds and bonds have less income than they would have done. to me that's a source of negativity coming out of the asset purchase program. we got enough monetary base so they don't need to do it anymore. i believe they should taper. i think it's about a 50/50 chance they will. >> mark, where are you? >> well, 50/50 is the easy call because they either will or they won't. in either case, it should not come as a surprise. the signals have been sent, the economy is picking up in a number of ways. it is still a slack economy but it shouldn't be a surprise. but it is important at some point relatively soon that it's the inflexion point that's key. it isn't even important how much of a taper it is, it's the inflexion point that's really key so that the market can adjust to that psychology. >> so where do you think the market will go from here? >> you guys are the market watchers. i'll defer that to you. but i think if that's the decision within the fed and i think the fed is much less concerned about what the market is going to do than it is with the impact on the overall economy. >> that is a very important point. jim, let me come back to you. i don't know if you agree with this goldman note that came out overnight. it said the fed has a problem, they want to offset the tapering note with something else but they can't work out with what to do. they are so bad at communicating with the market and getting the market to do what they want to do, that they may have to taper for far longer than is actually necessary. >> i agree with mark, though that, the fed will be much more worried about the real economy than it is about markets. and if the fed tapers at this point, the market reaction will depend on how much is tapered and -- >> i have to disagree. >> but don't you think the psychology is key? we haven't been to an inflexion point in five years and we need to get here soon. >> the point i want to make is they do care about the market, they care desperately. there's why they signalled there would be a taper in the summer and walked them back in september when they said actually, you're not understanding what we're saying here well enough. we'll leave it for now. >> the reason the fed should taper now is the economy is doing quite well. the private sector is growing 3.5% or a bit more. the underlying economy growing at 2.5%. that may not be outstanding but given the overhang of debt and inflation rate tendencies, that's a good result. it's well entrenched because of the well known, positive actions for the u.s. >> that's a very fundamental, academic view of the markets but that does not mean the markets could react very badly and therefore there is a put. >> that may be right. if they taper more than expected without throwing a bone to the market in positive terse, you might get 5% back in u.s. equities. if that happens, it's a buying opportunity. but if the fed is somewhat inseptember in their kicks, that's what could happen. >> you conduct monetary policy to impact the underlying economy. so the reaction of the market, if the reaction of the market is at that there as a bid of a prize -- do you think if e-the-don't move today, the next minutes we would be hawkish enough that the markets would be be spoobd, in any regard? >> i think what we will see, carl, if they don't move today, you'll see more forward guidance and i think there will be a greater discussion os to what the two sides are thinking about. >> jim, there may be a depreciation -- are we fulling understanding what cheap money has meant, for stock buybacks, for refinancings, for all the ways it's crept into the ability for stocks to move higher? >> i still believe that the key reason that stocks have moved higher is the improvement in the fundamentals of the private sector. it's cheap energy, improvement in housing, productivity. those factors have been driving a pretty good u.s. equity market this year. i think there is the capacity for taper and a strong equity market to co-exist next year but avoid the bonds. long duration bonds are really dangerous. >> you've phrased the question as if cheap money is over. as a matter of fact -- >> i didn't mean it was over. >> on the other hand it's when they're going to raise traits. and the fed has promised their rates are going to stay down through all of 2014. >> guys, have a good one. we'll see what happens at 2:00. >> thank you. >> let have a look at where we are on fedex shares now that we're substantially into trading. actually flat overall. a fascinating earning statement from federal express overnight. though it isn't all bad on the outlook, though that might be due to the share buybacks. we'll dig deep near fedex after the break. announcer: where can an investor be a name and not a number? 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[ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% 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. with investment information, risks, fees and expenses sleep traiends sunday! interest-free for 3 event it's your last chance to get 3 years interest-free financing on beautyrest black, stearns & foster, serta icomfort, even tempur-pedic. plus, get free delivery and sleep train's 100-day low price guarantee. but hurry, sleep train's interest-free for 3 event ends sunday! superior service, best selection, lowest price, guaranteed! ♪ sleep train ♪ your ticket to a better night's sleep ♪ welcome back to "squawk on the street." check out johnson controls, the largest maker of u.s. auto parts is losing ground after forecasting 2014 earnings that were below analyst forecasts. the company saying it aims to rebalance its businesses to earn higher valuations and reduce its dependence on the overall automotive sector. >> thank you very. fedex is holding firm after reporting second quarter results that felt short of estimates. donald bratton is managing director at avondale partners. he's has a $140 price target. good morning. >> good morning, simon, how are you? >> i'm concerned about the bulk of the business. >> what's interesting is they're blaming the timing of cyber monday, which indeed is a headwind but then last year we had superstorm sandy blow through as well. it's not always just apples to oranges, if you will. when you look at what's happening in the asian air freight, pacific air freight, european and transatlantic, we're seeing much stronger results than were shown by fedex in this period. >> but we expected that. didn't you expect margin improvement? and how much on the earnings per share front is affected by the stock buyback, which obviously improves the situation? >> it helps the guidance and that's one of the main reasons why we saw a one percentage point increase in their guidance. it really didn't help this quarter at all because of the weighted value of the shares. >> so for an investor at home, which is a better vet now. upo outperforming recently. which do you prefer, donald? >> i actually prefer the light asset plays right now, whether i'm going and looking at expediters. right now what i'm looking at -- look at what's happened with fedex. indeed the restructuring has helped. we saw a 12% reduction in maintenance cost and 8% reduction in fuel consumption. those are both really good numbers but they're only growing earnings at 10% and the stock is up 55% year to date. >> double the index average. donald, the pricing narrative that we've been through all year long, right, the move away from express and into ground, is that going to reverse or is that a secular change that's going to be with us no matter how much the economy improves? >> most everyone believes it's a long-term secular change. i'm outside the consensus on this. i think it's episodic. what happens is when you have something that you can't sell unless you can get it delivered quickly, you'll pay for the shipping. when you want something immediately, you'll pay for the shipping. i think we're seeing episodic so people have downshifted the next hot product, the next ipad, whatever it is, you'll see a return to that. we're actually if you look at the transpacific data, we're beginning to see a little bit of a return to it. >> a year from now do we think the express numbers are markedly better than this quarter's? >> they should be. and to their credit, they've said all along this a multi-year process. yes, we'll get $1.6 billion of costs out of their system but this is a two, three-plus year process in which this happens. you don't just flip a switch and completely renew your fleet, completely change the way you move things and completely change your workforce. >> donald broughton there, thank you. >> thank you. >> they're calling it a bitcoin bust. the price falling dramatically. what's behind the big drop? our mary thompson is back at hq with the answer. some have called it a crash this morning, mary. >> reporter: the digital currency taking another hit. reportedly third-party payment processors in the country say they've been told not to work with bitcoin exchanges. as a result, the largest bitcoin exchange says it can no longer accept deposits. now, the news shaking up the bitcoin community as the chinese exchange is the busiest in terms in volume. the value of the digital currency took another leg down, falling below $500, meaning it's just about 50% below its all-time high of brain plenty. with just over 12 million in circulation now, the supply will hit sits limit of 21 million by 2040. it drawn a big following here in the u.s. and big name tech investors while officials show it could show promise as a transmitter of funds. certainly the volatility that we're seeing today provides critics a reason to argue against it, from ever becoming a replacement for government-backed currencies like the dollar. >> well, you have to feel sorry for anybody who accepted payment in bitcoin this morning, haven't you? >> that's right. they're down quite a bit, unless they moved to convert it the moment they received the bitcoin. even if you talk about bitcoin advocates, they'll say this is a very early stage investment and if could take a while and it's a great deal of risk in buying the digital currency. >> thank you very much. >> sharis amc one you should bu? or are the other movie theaters a better bet moving into christmas? asional have constipation, diarrhea, gas, bloating? yes! one phillips' colon health probiotic cap each day helps defend against these digestive issues... with three strains of good bacteria. 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[ phillips' lady ] live the regular life. stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. the energy in one gallon of gas is also enough to keep your smartphone running for how long? 30 days? 300 days? 3,000 days? the answer is... 3,000 days. because of gasoline's high energy density, your car doesn't have to carry as much fuel compared to other energy sources. take the energy quiz. energy lives here. >> the nation's second largest movie theater chain amc entertainment has gone public again this morning. for the first time trading here since 2004. the buzz about films like "the wolf of wall street" and "anchorman 2" hitting theaters soon. is the newly public theater chain a hot ticket for you for your portfolio? chad bynum is with me here. >> thanks for having me. >> a lot of people thought china's richest man was crazy when he paid what he paid for this a year ago. has he made money out of this? >> he has made money so far. there's the notion that the movie industry is dying. he kind of took an opportunity to get in at fairly low valuation levels and what we're seeing today is really a result of his foresight and healthy industry -- >> more than restructuring the debt? >> yes. >> is that where i make money? if i look at regal up over 30%, some of these other chains have had a great year. as you look at the movies that are going to be released, "anchor man 2," justin bieber," and others -- >> more product is better. the studios are putting out more product. so companies like regal, cinemark and amc are benefiting from that. as long as you have a breadth of product out there, consumers will see what they want to see. >> do you cover the snores do you have a buy? >> i have a buy on cinemark. >> why? >> because of of the industry fundamentals. our favorite pick in the space is kind of a small cap place, ckec, carm. that was a stock that was a dollar per share 20 years ago. >> thank you so much. what a move for ford today. this is the worst day for ford in about two years. what's going on with the company this morning? phil lebeau is live in chicago with the answer. hey, phil. >> reporter: when you take a look at what ford is issuing as a profit warning, the stock expected to drop. they're making $8.5 billion this year, expected to make between $7 billion and 8 billion last year. that's the guidance that has spooked investors. a note from buckingham points out a couple of interesting things. when you look at their north american pretext profit imaginin, it's going to be lower than guide as opinion they're saying because of deer tear yags due to pressure and lower f-ear cease production in 2014. what you have is a stock that is getting whacked today. they out of force and gf. then when you look at the mid-decade profit margin or target operating profit margin for the ou devision. >> thank you for that. coming soon, a new sports and entertainment powerhouse. this morning silver lake capital and talent agency williams morris to b morris. >> it backed by its private equity partner silver lake, img worldwide creating a giant away from the slower than traditional movie business. this brings together martin scorsese, quentin tarantino, lady gaga, rihanna. they will look to leverage img's big names and relationships across its entertainment and advertising business. but perhaps even more important, img ook brings w me global reach, a major events business, including p and fashion week, a licensing provision but plus lucrative college and sports right. eand patrick witsel will be combined h combin combin combined -- the scale of the combined company should yield more negotiating leverage across its deals. one down side of the deal, sources tell me that img has more than $7 hoon million in debt. -- $700 million in debt. simon, over to you. >> big numbers and big personalities. thank you. >> healthcare.gov is calling for tech support. it's hiring the if you remembfo the microsoft office kurt delbene. what kind of pressure will he be under? we'll ask him in just a moment. 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[ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. . i'm sharon epperson with breaking news from the energy department about weekly oil supplies. they fell in the past week by 2.9 million barrels according to information from the energy administration. that's a little greater than numbers from the american petroleum institute. up 1.3 million barrels and distillate down 2.1 million barrels. of course there is a lot of wait and see from the fed. that is really what is driving the action in commodities, including oil in this session. we are at least seeing a little bit of relief at the gas pump, even though we have seen this increase in supply. that's a good thing because that means we'll see lower prices at the pump. $3.22 a gallon, down 4 cents in the past week, carl. a little bit of good news. back to you. >> exxon, a stock that had a heck of a week already has added to the gains, as well the housing names. when we got the incredible out since this morning. >> despite the gradual rise in the 30-year mortgage. >> lennar, by the way, 73 vents with an 11% beat. revenu revenues, but unit up 34% by dollar amount. there does appear to be pent-up demand for people who have been renting and are looking to get into their first home. >> it's not been a great summer with the rising rates. >> that's despite some of the downbeat guidance, like a ford and fedex. let's go over to dominic chu for a quick market flash. >> check out micron. it's getting whacked in very heavy trading on reports a south korean company plans to build a new factory in that country to make dram chips. it going to invest about $3.8 billion there. more competition leading to the micron share decline. back to you. >> we'll get more on a frontier communications deal when we come back. 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[ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% 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, a lots of stocks on the move today. like at cvs caremark. the company remains to disciplined capital allocation. $4 billion buyback in 2014. a new $6 billion buyback plan over an unspecified multi-year period. that takes it to $1.10 a share. it was inactive in the premarket. >> what's interesting is they say this comes from an understanding of obamacare. >> then take a look at apple. various headlines here today. china daily quoting the ceo of china mobile saying there is no deal, in fact, between china mobile and apple yet, even though the journal, jon fortt, when they wrote about that would-be deal a couple of weeks ago said an announcement would be coming about now. >> not only that but i see china mobile subsidiary has a change up that has to do with preorders. the page looks legit to me. i checked it out multiple different ways. i can get to it from china mobile's home page. so something fishy is going ton he -- on here. they have pages up and down indicating the 5s will be on sale soon. it's been up for several hours. >> you also have jabil with a negative forecast, which does some work for the 5c for the apple and people are saying traps they're getting less work from apple and apple's demand is less. we'll see whether that speculation proves founded. >> jpmorgan did raise their price targ the on that. cramer called the jabil thing an unmitigated disaster earlier this morning. >> what skills will kurt delbene bring to the government health care web site? welcome back. >> thanks for having me. >> if you need someone with experience guiding troubled software, this is one place to start, though others point to his wife who is a congresswoman from washington state. how well qualified is he? >> he's exceptionally qualified. bill gates made a comment in his announcement statement emphasizing his exceptional focus on execution and that's exactly what we need right now. >> it seems tailor made for a microsoft executive having to deal with legacy technology issues, tying disparate pieces of technology together. but really do, you have a sense of how fixable if really is, even for an executive with this kind of experience? >> the great news is it appears the fixing part is moving in the direction where we've made a great deal of progress. the announcement from the administration focused on where we go from here in the future. i think what we see in kurt is a manager that can help ensure the product is better moving forward. he's going to be clearly focused through the end of march for this enrollment cycle but he's going to expand the number of enrollment options to make sure everyone has a chance to get covered, not only for this psych bull to prepa -- cycle but to prepare for 2015. >> this is a transitional movement from the surge activity led by jeff to a leader who will make sure this carries forward through the remainder of the cycle. i'm confident this will yield a great deal of benefit to the public. >> i'm fascinated by the idea that one man can parachute in for a period of 18 months and turn around a massive public sector process like this. so we believe that the problems are all due to high-end strategy, not to do with the depth of ability perhaps within the public sector or deeper problems has to how that database is structured. we believe one man can come in and sort it all out, it's as easy as that? >> let me be clear about the problem we're trying to solve. the disparity between all the legacy systems, that level of complexity is called the data hub. and that's been working since day one. the part that isn't, that had all the trouble, really was the consumer facing e-commerce application, the buying a plan, finding the right pricing based on your conditions, if you will. that part is really the consumer facing application. thankfully under jeff's leadership thes leadership, they did what leaders do, identify the problem and moving them. >> actually, the real -- the real problem is with the back end and settlement of systems and insurers and hospitals and everybody knowing who is insured and whose got what? >> they're been reporting those error rates on the claims. in the last week they've been demonstrating a great deal of improvement in the quality of that information flowing to the health plan. but again, i still think of that as part of the e-commerce application, fulfilling that transaction, that connecting all the government databases that were never designed to talk together, that's the heavy lift. if that was broken, i'd have been a lot more concerned. that's been working since day one. here it's largely about fulfilling that e-commerce transaction from consumer signing up to getting enrolled in the insurance plans. thankfully it looks like the hard work is behind us on that front and now there's a relentless focus on maximizing options for folks to enroll. >> aneesh, appreciate your insight as always. >> my pleasure. thanks for having me. >> when we come back, lee ann rhymes shot her new music video completely on an iphone. she'll be here to talk about that. re a business pro. seeker of the sublime. you can separate runway ridiculousness... from fashion that flies off the shelves. 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. 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[man]lumbar button [woman]lumbar [announcer] tempur-pedic.the most highly recommended bed in america. now the fun begins! welcome back to "squawk on the street." mark olson said something today i found very fascinating. let's put it up on the screen, former fed official minneapolis, i believe. "i think the fed is much less concerned about what the market is going to do than it is with the impact on the overall economy." i know that might sound right but considering this taper going on, trying to get the mark ready, i'm not buying it! hey, inflation, there's been a lot of talk about inflation. on an austrian web site, an inflation, a good analogy is it's like sunburn. if you're looking at the sun and not paying attention you don't think my skin feels bad but all of a sudden without any type of prevention, without putting anything on, guess what, the damage is already done! so i think when it comes to inflation down the road, there are a lot of questions and uncertainties we're just papering over. i have the great mr. taylor coming up as my guest in about 40 minutes. we're going to talk to him about the sunburn of inflation. back to you. >> hmm, there's some things rick can use for that. >> rick, we know you're not averse to using tools or bringing on gallagher to smash some water mellons but what is on your face? >> well, i'm not sure. i just think that the bright light of the knowledge of central bankers, think just got me a bit burned, that's all. >> flew too close to the sun. rick santelli in chicago. entertaining as always. thanks. >> not a bad look for rick. >> shares of frontier communications getting a boost yesterday after the company announced it will acquire at&t's wire line operations in connecticut. the purchase price, $2 billion in cash. joining me is the company's ceo, maggie wilderotter. always good to you have, maggie. for those investors who look back on the acquisition you did a number of years ago, the mrjer, with all of those access lines with verizon and say, well that, didn't go as well as we had opened at the time why it was different? >> it was a lot more complicated and those properties were really fixer-upper properties. they only have broad band built out to about 60% of the marketplace and that was on average. and we also had a situation where we had to do three sets of conversions to get all of those markets on to our systems. with this at&t acquisition in connecticut, we're inheriting a very well-built and well-maintained network. it has 96% broadband reach, it's uverse to 3 % of the straight and will are no systems issues after we close the transaction. >> and you're taking in 900,000 voice connections. >> yes. >> we all know those seem to be going away, the question is how quickly. what are your expectations or how do you model how quickly you'll lose the voice connections or what you can do to upgrade them to get more average revenue out of the users? >> one of the nice things about at&t in connecticut is they have a lot of bundled offers in the marketplace, very similar to what we do in our markets. we've actually seen the decline in voice revenues and the decline in voice a lot of the customers we have have voice services combined with broadband and video, which also reduces churn. we see broadband outpacing the decline in voice revenues in our markets, as well. in addition, we see the opportunity to launch new products like our frontier secure bundles, which is identity theft protection, computer backup, computer security, and equipment insurance. and these are big-selling items for customers that have their lives and livelihoods tied to broadband. that's on average somewhere between $5 and $12 in revenue per customer lift. >> maggie, one of the reasons investors buy your stock, of course, is because you have a strong dividend yield. but that was put into question sometime ago, when you had to cut the dividend, in part because the free cash flow characteristics of the verizon deal were not meeting what you had helped for. you're levering up, what, 3.6 turns, if i'm right. what gives you the confidence that a dividend cut will not be necessary and that the free cash flow characteristics of this deal will, in fact, be met? >> well, the great thing about this deal is it's free cash flow and free cash flow per share accretive in the first year. and it actually lowers our dividend payout ratio by 5%. so we feel very good that this transaction supports and sustains our dividend. our board was adamant that whatever deal we would do from an acquisition perspective had to to make it safer and we feel good with the revenue we're getting and the free cash flow, which is very strong. it does support our dividend today. >> and so, what do you do from here, from an execution standpoint? you take in -- i mean, it's a large acquisition, $2 billion. we showed how many lines you're taking in. what has history shown as far as your ability to upsell, not just to keep the lines but to get more out of this? >> we have a sweet spot in our industry on our go 2 market. we look at local engagement in as being important. and people think of connecticut as north of new york, but 48% of the state is rural. that's a sweet spot for us. in addition to that, we run markets today where we have video assets just like uverse, so we have very good experience in being able to drive penetration and market share where we do business. the nice thing about this acquisition is this is our basic business. we're not buying any assets that we don't know about or know how to operate. and we know how to convert and integrate. we're very good at that. with the verizon acquisition, we exceeded the synergies by $150 million, or 30%. so we think the synergies coming out of this deal, $125 million, plus $75 million day one of costs go away based upon at&t allocations. it's a very good deal for our shareholders, and it's prime real estate in a market where we've been headquartered for over 70 years. >> right. no, you're a longtime connecticut resident, that being frontier. appreciate your time. maggie, chairman and ceo of frontier communications. >> thanks, david. when we come back, we'll step inside the squawk humidor, and we'll bring you the number-one cigar inside this big reveal. americans take care of business. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one. to help you retire your way... with confidence. that's what ameriprise financial does. that's what they can do with you. ameriprise financial. more within reach. where does the united states get most of its energy? is it africa? the middle east? canada? or the u.s.? the answer is... the u.s. ♪ most of america's energy comes from right here at home. take the energy quiz. energy lives here. >>. >> the moment you've been waiting for. more than 700 cigars rated this year in "cigar aficionado," and they're ready to reveal the number-one cigar of 2014. gordon mot is teditor at large. good morning. >> good morning. >> you brought the top three. and we'll go three, two, one. >> i have one here in my pocket. >> a davidoff nicaragua. >> that's right. a new line from davidoff, typically one of the iconic brands in the world, the white label. last year, they had the black, a nicaragua, meaning all of the tobacco is from nicaragua, even though they continue to roll it at the factory in dominican republic. >> speaking of which, that's number two. >> it is. the aging room. it's a long name. it's the f-55 concerto, i think i got most of it. it's a relatively new brand. came across the radar in 2011. making really great cigars. it's a real plus for the dominican republic to have a brand like this. >> all right. so of the 700, what do you have in the box that is number one? >> well, should i, like, take my time doing this? >> you have a flair for the dramatic, i'll say that. >> let's see if i can get it out of the bag. >> need some help? >> there we go. a monty christo, number 2, torpedo, one of the most iconic brands in the world. one of the oldest brands from havana. >> we'd know this box anywhere, right? >> pretty much. yeah. that logo is truly one of the great brands, trademarks in the world. and this sharp, the torpedo, is slightly tapered at the end. in is a cigar that kind of stores love. it ages well. it performed throughout all our blind tastings this year, perfectly. >> i might take a couple. they are blind tasting. they strip off the branding and 700. are you all smoking 700 cigars? >> we do divide them up. i'm probably testing between 400, 500 a year. >> how long does that take you? >> i try to do two, three a day, no more than that. there is a limit to beyond which your palate -- >> or your health -- >> i don't know about that. but -- >> you've done this 10 years, the rating, that is. only three of the years has a cuban taken number one. >> that's right. the premium hand-rolled cigar business has become a diverse industry. so nicaragua, the dominican republic. it's won the top time two times. and now cuba, third time. >> and you say it's a the golden age? >> it s a boom in the mid-'90s increased production three, four times before 1992. and what that did was they began to identify the places where tobacco grows the best around as the boom ended, they've produced better tobacco. >> there will be people around the world going, i don't understand it. why have they got cuban cigars? doesn't the united states have a trade embargo against cuba? >> we do. but we have a global audience, so we rate cigars that are available worldwide. so this is for your global audience. now, we also are going to reveal cigars 10 through 25 on cigaraficionado.com, so information about each one of the cigars is available on the website. i hope everybody goes to check them out. >> very nice. our stage manager getting too close to that box there, brad. gordon, thank you so much. >> carl, great to be here. thank you very much. >> with "cigar aficionado." if you're just joining us, here's what you missed earlier on. >> announcer: welcome to "squawk on the street." here's what's happened so far. >> the fed has been very cautious about tapering, and so, i think it's actually quite possible today that the taper that everybody expects doesn't happen, because they want to see one more month of good data before they go there. i'm delighted we got the budget discussions out of the way. the long-term debt ceiling, we cannot go through another debate over that. >> right. >> i think people just need -- so coming back to tapering, i'd rather hear some certainty. >> do we go now to 4% at 2.01, because they mentioned they'll buy fewer bonds, i think that's ludicrous. but maybe people at home have to recognize there's someone out there who doesn't get the memo. [ bell sounds ] >> there's the bell. >> the last 14 months or so, under the chinese ownership, really enabled us to take some ideas and initiatives and accelerate the deployment of them into the u.s. market. it's been helpful. and now we think the company's positioned just right. >> if they taper more than expected, without throwing a bone to the market in positive terms, you might get a 5% setback in u.s. equities. if that happens, it's a buying opportunity. >> announcer: the "squawk on the street" countdown to christmas is in full swing. ho ho ho! ♪ good morning, we're live here at post 9 of the new york stock exchange on fed day. we await the decision at 2:00 p.m. eastern time, and in the meantime, the dow is up about 45 points, the s&p will probably huddle into this range here ahead of a statement, as it normally does, up 1 1/2 points. a rough morning for shares of ford. it's the worst day in two years. automaker announcing it expects lower pretax profit in 2014. ford says its mid-decade target for global operating margin is now at risk due to a severe downturn in europe and conditions in south america. meantime, lennar leading the homebuilders higher. the company posting a 32% jump in profits helped by a rise in new home orders. will fed policymakers end the year with a taper? the answer just hours away. we'll explore how to position the portfolio ahead of the fed decision. and a window into microsoft's ceo's search. rick sherrland will tell us why he's less confident mulally will secede ballmer. >> and we'll talk with leann rhyme rimes. would she consider going the beyonce route to selling music? fed chairman ben bernanke and policymakers meeting. perhaps they should be considering the fedex numbers earnings today. the shipping giant widely regarded as one of the corporate economic bellwethers. sarah ison is back at hq with that. >> the story is not so hot when it comes to fed rex. fedex delivers in 220 countries, and employs 300,000 people and the total sales come from the united states according to oppenheimer. the read here is fedex disappointed, even though its profit rise 14%. analysts were looking for something higher. if bernanke want as picture of the consumer, which makes up 70% of the u.s. economy and their attitudes, here it s customers keep shifting to lower-cost shipping services. they want cheaper even if it means slower delivery. for a snap shot here, even internationally, a trend, priority international, the higher cost option, dropped 5%. the u.s. number dipped as well. it's been an ongoing trend for the shipping giants and it reflects a big shift in consumer behavior. here's the fedex statement itself, the ceo, fred shith, on the economy. he says he sees a tepid growth in environment, customers want less costly international shipping services, and near-term challenges remain, we're confident we're positioning for profitable long-term growth. and like the federal reserve, fedex does discuss its own economic forecast. it actually cut u.s. and global gdp predictions for next year by .1% each. that was from what it had previously expected from the economy. if you look at the stock, it's run up more than 50%. fedex, that is. the bullish story here, actually has little to do with a pickup in the overall economy. it's about cost-cutting, about returning cash to shareholders. so if you tie it all together, carl, about the taper, no taper question, from the fed, earnings reports suggest not back to the good ole day for the consumer both here in the united states and globally. analysts say there's nothing in this report that suggests an improved picture of the economy from the last report, three quarters ago. perhaps something for the fed to consider there. >> all right, sarah eisen, thank you so much. a confusing signal. you'd think at this day and age, people are doing the quick shipping, but not so much. let's bring in ethan harris, head of global economics with merrill lynch and michael richards with riverfront investment group. welcome. >> good morning. >> ethan, first to you. do they taper today? do they not? does it matter? >> i don't think they'll taper today. i think there's some chance that they taper. if they do taper, they're also going to send a very dovish message here. the last thing the fed wants to do is to disrupt better financial markets. so, yeah, probably don't taper today. >> at the same time, michael jones, you could argue the market's kind of tapering anyway, the same way we saw that happen this summer. they're clearly, for all of the talk we might hear out of the fed the way the data changes, the 10-year is at 2.8,.9%. >> yeah, and we think as they taper, the 10-year will pop up closer to the trading range it saw from 2008 to 2011, before they started buying the 10-year, the trading range was 2.5% to 4%. we will probably see the upper end of that range sometime in 2014. but i think the end of your question was the really important one -- which is, does it matter if they taper in december or january? and i would say, probably not. what's probably much more significant is, is it just the taper announcement, or do you pick up on some of the hints in the minutes from their last meeting, and do they accompany it with a cut in the interest rate paid on excess reserves. that would be credibly powerful and very bullish. >> although some say incredibly unlikely given some of the other options they have in terms of throwing a bone to the market, right, michael? >> well, you know, i would have said that prior to the minutes. it was interesting that it said a majority of the participants thought that a cut in the interest rate might be a good idea. now, you know, in fed-speak, that was a pretty powerful statement to put it in the minutes. so i agree with you, though. it is probably a long shot that they do it, but to me, that's probably the most important thing. if they add the -- a cut in interest on excess reserves, then you engage that other money-printing press, the u.s. banking system, and i think 2014 can be a really powerful year. if they simply taper, then we probably have to taper our expectations for what the stock market can do. >> ethan, how likely is a cut in the rate on reserves, do you think? what are some of the other tools -- will it be powerful enough if a fed with a yellen and fisher come out and say, we're going to keep rates super, super low until the unemployment rate hits 5%. would that do it? would that be a big -- >> yeah, i think that's the much more likely course of action. i think the fed's made it pretty clear they'd like to go the direction of forward guidance -- that is, telling the markets that we'll be low for longer in terms of interest rates. i also think regardless of what exactly they do here going forward, this is going to be a very slow, friendly fedex, that the fed is not worried about inflation. in fact, inflation is too low right now, and that means they really want to continue to provide stimulus into the economy. so if they're going to taper, it will be very slow, and they'll guide the markets forward for a longer period of low interest rates. >> finally -- >> -- makes a good point, which is another thing they can do, since they're starting the tapering a little later than expected, will they extend the date by which they conclude their quantitative easing purchases? will it no longer be midsummer? will they announce it will be later in the year, which would, to his point, be a much more gentle taper and more market-friendly. >> finally, ethan, "the journal" tries to take stock of bernanke's legacy, and that he might be shaking his head as how slow the recovery has been. but others say, look, his admission was, in the words of one, elongate the process of healing. how do you think that will be played out when history makes its judgment? >> oh, i think bernanke's been a great fed chairman. we have to judge him by what he faced. i mean, the u.s. had the biggest financial and economic crisis in modern history, left the economy in a deeply wounded state. lots of people were advising bernanke not to do qe, not to keep his foot on the accelerator, and he stayed the course, moved ahead, and created major healing. i mean, you look at balance sheets across the economy. banks are in better shape. corporations. households. this is the benefit of qe. it's healing balance sheets. the ultimate test, though, will we get better growth? in the next two years, it will cement his legacy -- >> although, ethan -- >> -- but i think he's done a great performance as a fed chairman. >> i wonder about this in the same way when greenspan was exiting and he was viewed so favorably at the time, and it turns out had handed bernanke a real mess, is history not going to repeat itself, or you look at ray dahlia, also quoted in the "journal" article that carl mentions, but he doesn't have anything here except to inflate prices, and what happens if that plays out again? >> if we go out in history, the mistake greenspan made is he ignored some very obvious signs of bubbles, and it wasn't just that they're bubbles in capital market, but created distorted behavior. you with way overbuilding in housing sector, overbuilding in the tech sector in the late 1990s. nothing like that is happening now. the money the fed is injecting into the economy is going to fix balance sheeting. -- balance sheets. that is improving the healing, healing the economy, not the kind of bubble that greenspan created. >> ethan harris, michael jones, appreciate your perspective this morning. we'll see what happens. >> thank you. >> good to be with you. let's move on to the search for microsoft's new ceo, as it drags on. rick sherland says he's more confident that mulally will be headed to microsoft. on the phone line, "first on cnbc" is rick. and good to talk to you, as always. good morning. >> good morning, carl. >> is this notion now history, the idea that he goes? >> no, it's not, but microsoft's been pursuing some so-called dark-horse candidates, some people from the silicon valley that have more of a technical background. so there was a blog posted by john thompson, the lead independent director and head of the search yesterday, and just reading between the lines, he had referenced bill gates' comments earlier that, you know, it's a technical company, and sort of to me implies that maybe the dynamics of the board are shifting from just a good general manager who can help enhance shareholder value and work with technical people, to try to fix the business. it seems to me that perhaps bill gates is digging in his heels here and saying, we want technical leadership. so they seem to be pursuing several dark-horse candidates, none of whom have connected yet. they don't seem to want the job. but it seems to me like there's developing more of a preference for somebody with technical background, and they may end up with mulally, but i just worry that ford's board's getting impatient, from what we read in the press, they're going to press him for a decision, and i kind of worry that we're going to lose him in the process, since this is taking so long. >> well, rick, i can't help but notice the news out of ford this morning, bad news sending that stock down. has alan mulally missed his chance to make the jump if that's what he wants to do? his reputation perhaps tarnished given the poor outlook. and then, if he abandons that and moves to microsoft, it looks bad on ford. >> what i'm interested in is someone a good general manager that will be focused on enhancing shareholder value. so you could trim some costs, you could focus the business, can you do some share repurchase. and then you leverage the technical skills in the company, or you try to bring in someone like paul moritz that they tried to bring in. i had breakfast with paul last week, who said he's not interested, so that's unfortunate. but you could leverage the internal people to try to fix the business. so the concern would be you get a good technical person that maybe isn't as focused on enhancing shareholder value. so a real tradeoff here. a lot of the technical people that you might appeal to in silicon valley haven't run a business with 130,000 employees, and executed a turnaround. so you kind of have this tradeoff of good general manager versus technical skills, and i think we felt comfortable, but mulally could accomplish both with the help of the good technology people in the company, or bring somebody in. i'm less confident the technical person can enhance shareholder value. >> yeah. >> i think it creates more uncertainty. >> so, i mean, rick, for a long time, you've had certain ideas about the stock, about the balance sheet, about what a new ceo would do, and would you argue you are net less bullish on microsoft now that it appears mulally is less likely to go? >> you know, i think that the stock's been a good stock this year. you're at the end of the year, and i think some investors will say, you know what, it sounds like there's more uncertainty here, why do i want to wait around and see what happens? you've got, you know, if mulally or someone at the street felt really good about, came in, the stock's up, probably, 10%, 15% pretty quickly. and, you know, why do you want to wait around and see what happens? so i think end of the year is awkward timing for the stock. >> how do you come into this company as the new ceo, with steve ballmer still owning more than 4% of the shares? bill gates, still on the board. how can you even come in and manage this company with any kind of leeway, given that type of situation? even if you are technical. you have the technical guy and the sales guy still there. >> well, look, i think you're -- i think you're going to replace a ballmer and want to make some change. i don't think that's a pleasant experience for ballmer to remain on the board when everyone's changing everything that you were doing. so i presume that steve will leave the board. bill, of course, will advocate for things he feels passionate about. so, you know, that's a good question. if you were mulally, you would have an understanding with the board before you came in that there were no sacred cows, that you would convince the board, here's the things we need to do, here's the straight strategy, and not have interference. it depends on who you bring in. if one of the internal candidates, like nadally, a bright guy, less experience in running a big company, would he be more likely to go against the board, or more likely to take direction from the board? i would like somebody to come in that would give direction to the board, so an outside candidate is like -- i think investors would like to see. >> yeah, rick, appreciate your guidance. always good to see you. thanks again. >> thank you. >> rick sherlund, talking microsoft. a week left to go before christmas, and it could be a make-or-break period for some retailers. find out which ones we're talking about. also ahead, rick santelli in chicago waiting on the fed. rick? >> yes! and waiting with the perfect guest for an important fed date! john b. taylor. professor at stanford of economics, and general all-around super smart fed guy. look at some of the articles he's written. "the hidden cost of monetary easing." "fed policy, a drag on the economy." we'll talk to him about all of the articles and maybe about inflation, all after an early five-year note option, bottom of the hour. we're here. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays. (announcer) at scottrade, our clto make their money do more.re (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. 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[ audio difficulties ] >> he's a lot better when the sound's on, i just have to say that. i'm a huge dom chu fan. he's good when you can hear him. [ laughter ] we'll get to him back in a little bit. according to shoppertrak, the week leading up to christmas is when consumers open their wallets wide. the saturday before the holiday, second to black friday, in terms of consumer spending. let's bring in barbara khan of the jay baker retailer, and good morning to both of you. good to have you. >> good morning. >> thank you. >> laura, i'll start with you. people are beginning to make lists of the kinds of things retailers are doing in the final week, right? doing a lot more social, appealing to last-minute shoppers, staying open for 87 hours in the case of toys "r" us. is it time to panic? >> of course, what we're focused on is the level of discounting, and it really is unique. especially for apparel retailers. we're seeing very deep discounts at the mall. the first week of december had awful traffic. it's a short calendar. we think some retailers are showing signs of panic. >> barbara, how about you? i mean, which -- from your standpoint, i wonder is it harder or easier to gauge how retailers are doing at the mall, because so much of it is happening online? >> well, that is difficult to tell. there's no question i agree that it's a promotional season, a lot of discounting is happening. but a lot of shopping is going online. and the use of a mobile phone is an interesting phenomena, also, it's the gateway to purchasing. not so much purchasing being done on the phone, but a lot of exploring, and that's an interesting thing, because the phone has a smaller screen. so it kind of changes the whole shopping scenario. >> laura, i'm curious about sort of, a game theory problem, or a sign of the times, but an interesting piece the other day about the extent to rescue financing and the chase for yield is helping to give retailers a lifeline who might otherwise have had to shut stores, gone bankrupt already, and that's weighing on the whole sector, putting pressure on margins, still too many stores in this country. how do we solve that, or is it something that needs to be solved? >> that's something that's been true for the entire 10 or 15 years i've been following this group. some weaker retailers are dipping into their revolver. it solves itself. if they have a very bad christmas, they will go away. i remember when bombay had 600 stores, no debt on the balance sheet, but went out of business a year later. >> hmm, wow. and that's actually kind of to the point about how crucial the next week or so is. you're saying there's some names here who may not be around in 2014 if they don't make it this holiday season? >> some of the small retailers, particularly in apparel, will likely cycle out. now, there are lots of new, exciting companies coming up, it's just the nature of the retail. >> laura, why is urban appearing to do so well? >> urban outfitters has much better fashion in its anthropology brand, and we think that is driving their results, but we think the diverse looks that they carry in their namesake brand help them take share against the logo, uniform-oriented companies like abercrombie, aeropostale, american eagle. >> and, barbara, they also have a strong online strategy, and i guess as you were just saying, that's so important in this environment. you have to get online, you have to get mobile right. >> yes, you've got to do it. and some of the new fashion brands that are doing well, like michael kors or torry burch or burberry, they have interesting media strategies, which is a change in the industry. >> and blue nile, we were showing, up another 2.5%. >> you know how many engagements happening this time of year? >> quite a few. >> only a week to go. it appears the apple china mobile deal has been changed. what's the holdup? we'll explore what's at stake and what's going on? speaking of the iphone, that's what multiplatinum selling and grammy award winning artist leann rimes used to tape her new video. tdd#: 1-800-345-2550 trading inspires your life. 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. yep. got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate. so i knit until it was full. you'd be crazy not to. is that nana? [ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. [ male announcer ] fedex one rate. stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. welcome back to "squawk on the street." general mills is falling cheerios and progresso soups, and as a result, it said the full-year profit could come in at the low end of the forecast. the company also said that sales in the u.s. fell 1% due to lower sales volume. carl, back over to you. >> all right, thanks a lot, dom. the bells are about to sound across europe. in just under two minutes, we'll get you the close and the impact here in the states with a busy afternoon ahead after the break. [ female announcer ] thanks for financing my first car. thanks for giving me your smile. thanks for inspiring me. thanks for showing me my potential. for teaching me not to take life so seriously. thanks for loving me and being my best friend. don't forget to thank those who helped you take charge of your future and got you where you are today. the boss of your life. the chief life officer. ♪ welcome back to the close, for europe. it's a lot of green. >> yes, it is. in advance of the fomc this afternoon. a lot of questions about what they'll say and the effect on the euro and the british pound. that said, u.k. unemployment seems to be actually falling quite rapidly, much more rapidly. and germany continues to barrel into the year end today with very good confidence figures. we may have be a problem within u.k. retail, ubs putting out a note saying in a peril, hitting the panic button, that they may be sacrificing a lot more margin. they're off the lows. we definitely have a problem within oil services in europe. today, technip over in france became the second oil services company to warn within just 48 hours. but the big news is in brussels, where e.u. finance ministers continue to meet to try and work out a deal for banking union. it would appear that the problem we have at the moment is what happens for the next 10 years. what they've said is after 2025, individual states recapitalizing their banks, can come back to the big $500 billion fund. that's not a problem. germany backing down there. but it's the more immediate decade that a lot of questions are still being asked about. and hopefully, kelly, a deal by tomorrow, because then you have the heads of state -- the 28 heads of state -- meeting to try and sign off on a deal. >> and very quickly, it's going to be the holiday. you know, the whole christmas period, where not much is going to get done for a couple of weeks. >> these are european diplomats. fits and starts in the best of times. >> that's true. [ laughter ] thank you very much, simon. >> pleasure. >> we want to bring you news about that whole foods may yank it over the use of the gmos. the yogurt company, the greek yogurt, we've spoken to that company here on "squawk on the street" many a time, and a big disappointment. we'll get you more details. >> let's bring in bob pisani, a check of what's moving on the big board. up 37. >> a modest upside. but a lot of volatility expected in the next couple of days. you can see this looking at the volatility futures. the front-month are higher priced than contracts further out, and that's an indication they're anticipating the markets will be volatile in the next several days. interestingly, they don't feel that way about markets further out ub r, generally a little calmer. in terms of the bulls, highlighting it the last couple of days, it doesn't matter whether it's now, february, march when they start tapering, the fact is, there will be an implicit fed put under the market. this is an interesting argument. i'm not sure i buy it. it's been made the last several days, noting that the fed's going to make it clear they're data dependent. if it worsens, potentially, they could adjust the taper up or down sometime next year, and the bottom line, their argument is the fed put, the implies ilt -- implicit underpinning will be there in 2014. i'm not sure i totally bring that, but they're making a strong argument. we've also got, the last ipo of the year. amc entertainment opened 19.18, and it's held up. we've had -- this was the last ipo, but a great year for ipos overall. numbers later in the day. but nyse had 30 ipos in the tech area. they never had that kind of margins before, business before. so they did very well. let's move on and talk about sectors. ford's not having a good day. the worst day in two years for ford. they guided down on their forecasts for 2014. j. build circuits and its customers are down after lowering guidance. micron tech report, rival hynx, planning a new factory. and, carl, back to you. >> bob pisani, thank you very much, sir. we want to keep an eye on the u.s. treasury, auctioning $35 billion in five-year notes. looks like it was a little weak. rick santelli, what can you tell us? >> a little bit weak? that's the understatement of the year, kelly! it's d for dog on the grade, the messy internals. the w.i. market started getting volatile at the end, but it looked like 157.50 was the trade. where did the yield come out, 1.60, higher yield price, about you that's not where the messiness ends. the bid to cover, the weakest since '09, the auction well above at 2.64, a very light indirect bidding percentage, a 10 auction average of 46, 11 point end is close, but dealers took 62-plus percent, when they have a pocketful, usually not good news. let's pivot and talk to professor john tailor from stanford. welcome, professor, and thank you for taking the time on this all-important fed day. >> thank you. thanks for having me. >> well, listen, i was going to talk about one of my favorite articles you wrote, i read about every couple of weeks, how the qe is a drag on the economy, but our own kelly evans, she's saying all of the sugar from the fed has caused some in the space to be zombies, to be able to find funding when they should have disappeared from the capitalist landscape, putting pressure on the whole sector. doesn't that really sum it up well, professor? your thoughts? >> it's a good way to put it. when you have these very unusual policies, or the government is involved in ways that they haven't been before, it does have these unintended consequences. i can't speak for that particular example. but that's one of the big worries of the quantitative easing, the markets aren't functioning as they're supposed to. that's one of the reasons why it has tended to be a drag on the economy. >> a couple of years ago, you wrote another great op-ed that i remember well, i think with mr. graham, talking about, listen, the exit. they say, well, we can hold this and let it run off in terms of our position, which is almost $4 trillion, and this thursday, tomorrow, it will probably touch that 4 trillion. but you talked about, you know, should velocity pick up and inflation pick up or the perception of inflation, they're going to have to start selling that position, and you brought up some consequences of that type of action. can you give us an idea of your thoughts? >> sure. well, i think those worries have proven to be really what's actually happened. just the discussion of taper last spring, may and june, but with bernanke letting the markets roll, that's exactly the kind of thing we were worried about, the exit itself caused the turbulence, that's what you're talking about here. who knows what they'll do. 50% say they'll be starting to taper, 50% say they won't. so that's the very exit problem we're talking about, and, you know, you have long rates higher now than they were when they started qe 3. >> all right. the final comment, we have about 50 seconds left, it really boils down to this. you and i and many others, several years ago, thought the evil eye of inflation would be closer upon us. but we did couch it in velocity. but all of that aside, if you had to update your argument, what would you tell people concerned about the possibility that the economies of the world dig in nicely, what do you think happens with pricing pressures? >> well, i think eventually, you'll get inflation, unless the fed corrects this. the reason why it's not there now -- and i've always emphasized this, it's a double-risk thing -- it's not there now because the economy is too weak. we've had risks to quantitative easing. the downside, that's what we've gotten and the upside, inflation could come unless the fed makes the corrections and starts to do it as soon as it can, in a sensible way. >> well, thank you. listen, we have five seconds left. your percentage, on whether they taper or not, no that it's important, but what's your percentage that they do? >> i think it's about 50/50 right now. and it's going to be more than that in january, february. >> thanks, professor. i wish i took your class when i was in college. >> thank you. >> have a wonderful holiday. back to carl, kelly, and the gang. >> you still did okay, rick. rick santelli in chicago. thanks a lot. award-winning singer leann rimes had an interesting idea for the new video, shoot it entirely on an iphone. she'll join us next, so we decided to shoot this tease on an iphone. >> okay, play. >> hi, everyone, i'm leann rimes, catch me on cnbc "squawk on the street" in just a bit. 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. coming up, hitters week continuing on the half with two big-time short sellers. bill flickenstein and john fichtorn, and leann rimes may have shot a whole video on a iphone, but we're talking with a tiger cub. it's straight ahead, carl, and we tried to give you the segue. >> very nice, scott. scott wapner, and the music video that scott is talking about, you're now looking at, features dancing toys, stop-motion spaceflight and animated fingers of english rock legend, and directed by a former employee of twitter turned vine expert, ian padgett, and shot completely on two iphones. it may be the most tech-forward music video of the year. joining us this morning from los angeles is country music star leann rimes, one of the artists behind the video. leann, great to have you. good morning. >> thank you, good morning. >> this is a fascinating story for us in the business community. you could have your pick of production values, of directors, why do this this way? >> i just thought it was interesting. my co-producer of the album, spitfire, that i just worked on, daryl brown, he found ian's work on vine, actually, stumbled upon him. and we're, like, wow, a video's never done this way, he does everything on an iphone, edit on an iphone, and we thought what a fun idea, way to create something that no one's done yet. it was definitely a different way to shoot a video for me, because usually it's days to shoot a video. this was 20, 30 minutes of my time. >> leann, one of the things that i find fascinating about you as an artist, you are sort of the last mega artist to launch kind of pre-internet era for music, back around '96, '97, came onto the scene in a huge way. tell me the new ways to create content, to distribute it, do you view this as really empowering you as an artist, or has it sort of disrupted the way you want to bring music to fans? >> wow. i think a little of both to be honest. but it's, you know, the world is changing constantly. and the tech world, especially. and there's so many more options and ways to bring music to fans, through social media, through apps, through, you know, just anything you can possibly dream up these days we have it. in a lot of ways, it's totally empowering. but when you started, like i did, 20 years ago, it's really kind of -- you have to wrap your head around it and thinking in completely different ways and that's exactly what this video was, let's think outside of the box and have some fun, and i'm so proud of it. >> what's your reaction to what beyonce did releasing her album? >> i think it's fantastic. as an artist, i love to see kind of what goes on inside people's -- inside artists' heads, you know, when it comes to, especially when they create the song from ground up, and the album from ground up. and i think it was genius promotion. what better promotion than you can get, midnight, releasing an album on itunes? no promotion is the best promotion there. so i found it really interesting. >> but, leann, it's so fascinating, because there are marketers -- all of madison avenue in new york is quivering to hear you say that, because to some extent, it sounds like now with social media and the way you can get access and stuff, you can basically just come out, you know, throw an album and have it serve as the big promotion. you don't need the big, fancy teams. >> it is somewhat true. it really s it is making our whole industry have to -- it does scare everyone. we do have to think everyone. you know, some people will -- some people will sink and some people will swim. you know, hopefully -- hopefully, you're on the swimming side. but, you know, i still think there's obviously going to be need for big promotion and -- with certain products and certain artists, but i think like beyonce, you already have a name, you have a name that the world knows. and it's much easier process, i think, when you have a name or you're on a show like something like "american idol" where you have a huge audience. that's when it becomes easier for an artist to kind of do something like that. >> all right. leann, you're already so active on twitter, active on vine. i have to imagine your presence on facebook, on instagram is pretty well entrenched. do you have a sense as to where the biggest payback is, which platform gives you the biggest bang for your buck when you're trying to engage with a fan? >> wow. well, for me, it's been twitter. i mean, definitely, i've been more active on that. i'm always answering my fans back. and i think a lot of fans don't kind of get that one on one engagement with a lot of artists or a lot of celebrities. so i've kind of always in a way prided myself that i do talk to them. i think they're all, you know -- i find that that's the best for me. i think -- i actually don't have an instagram, i've had mine private. i need to go get one. but i love the way you're able to share, you know, vine and on twitter and all of the things, they kind of all are connected. but for me, it's always been twitter that's been the easiest and most effective thing for me. >> you certainly have a lot of equity having been around -- even though you're so young, you've been around for a long time. and you have a lot of experience under your belt. appreciate it very much, thank you for coming on. >> thank you. take care. >> leann rimes, and the song "gasoline and matches" video is out there, shot on an iphone. >> easy marketing is the best marketing. the line of the day. china making iphones available on the network, but it appears the deal is delayed and what's going on between apple and china mobile? my customers can shop around-- see who does good work and compare costs. it doesn't usually work that way with health care. but with unitedhealthcare, i get information on quality rated doctors, treatment options and estimates for how much i'll pay. that helps me, and my guys, make better decisions. i don't like guesses with my business, and definitely not with our health. innovations that work for you. that's health in numbers. unitedhealthcare. welcome back to "squawk on the street." gilead science is on the move. the company says it will seek u.s. approval early next year for a once-daily tablet containing two new treatments for hepatitis c. this is based on new favorable trial data, so the gilliard shares are on the move to the upside. back to you. >> they certainly are. thank you very much, dom. courtney reports, china mobile and apple are supposed to make the relationship official today, but it hasn't materialized. there's no word on when the iphone will arrive with the wireless carrier. joining us is a tech analyst at ubs, and our own jon fortt. thank you for being here, guys. why does this always seem to be a bridesmaid but never a bride when it comes to this deal? >> the fundamental issue comes down to the fact that the negotiating around what sort of subsidies china mobile will give to apple, right? the communication last night, at least from china mobile chairman was they're still in talks with apple. it's really coming down what sort of subsidies will china mobile give, what apple wants, and our understanding is that's the holdup. >> a huge carrier, obviously, a lot of people view this as a catalyst. how much downside is there if apple doesn't have as much leverage as we think they do in this situation? >> yes, if you at least look at the numbers that me and the rest of the street have at 6%, 7% revenue growth, from a numbers basis, really no risk, because no one has this built into the models. we all have an expectation, if it happens, you could sell 10, 15 million, sat 3 eps run rate, and the recent run-up, 5-50 levels, it's driven by the hope that the china deal happens. we still think when it happens, not if it happens. the last 25, 30 bucks run-up is driven by an expectation that a deal would get done. >> so given the sentiment in apple, how it seems to be shifting, especially over the past couple of weeks, what do you attribute that to? is that the whole ipad christmas idea, the idea that christmas is holding onto the high end of the market, or what? >> yeah, absolutely. it's a couple of things. one is the ipad has been fairly strong seller throughout the holiday season so far. 5s is doing fairly well, along with it, and a growing expectation of the china mobile deal. so it's been a factor of those three events that have helped the stock rally recently. you know, the tweets by carl icahn for capital allocation doesn't help the story either. >> yeah, that's true. they're doing well on the high end. but jay build coming out, warning falling below street estimates because the casings they make for the 5c aren't selling the way they thought they would, the 5c isn't doing that great. i mean, how important is this for apple longer term if they -- do they have to get the product right? is it about the wrong price point? how important is it that this device, they're just not able to make it work? >> yeah, absolutely, so jay build, along with china mobile, the two negative factors, and they said the demand is lackluster on the plastic casings, i.e., 5c. i think the delta, the issue, having it for 100 differential, people are gravitate to the 5s, to maybe a bigger price delta to the 5c, to drive more demand, if you will. but i think that's a work in progress, and the answer may just be you need to have more than $100 price delta between the two product lines to drive the price of demand. >> finally, closer to the 50-day moving average than we have been since october. when do you -- when do the goals really need to defend the stock? are we anywhere near that point? >> yeah, i think in the low 500, 5 by 25, the 2014 story, especially if you get the deal behind you. >> all right. we'll leave it there. amit thank you so much for your perspective. >> today is ben bernanke's last press conference as fed chairman, and we wanted to mark that occasion with something special, a drinking game, of course. we'll explain in just a moment. 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[ male announcer ] fedex one rate. stick with innovation. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. today is the last press conference for fed chairman ben bernanke and our own jane wells wanted to give him a special kind of sendoff. jane is back at headquarters with more. jane, lay it on us. >> well, carl, it is a special day. so we've decided to mark the occasion with a -- well, a nondrinking/drinking game, which predicts words and phrases bernanke may use, some more likely than others. now, we know what he likes to say a lot. if you look at this word cloud by zero hedge from a few months ago, the bigger the word, the more often big ben uses it. inflation, unemployment, economic policy, blah, blah, blah. you know, stuff like this. >> in evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however, the committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. >> man, i am really going to miss that. now, what else might he say? i sought suggestions from cnbc colleagues and twitter. look for analogies to driving, like cruise control and foot off the gas, and also ultrasafe and vague phrases like in the long run, and cautiously optimistic, phrases that really don't tell you anything, and if we were really drinking, which we are not! here are words requiring a shot, if said. helicopter. bitcoin. paul giovanni, who played paul bernanke in "too big to fail." one shot, tim teebow, and an even longer shot, yellen is gellin'. if he says that, buying everyone in america a bitcoin. and we might celebrate if bernanke says froth or frothy, and perhaps the riskiest bet, the chairman will say taper and twerking in the same sentence. by the way, what's the over/under on how many times he will say taper, guys, i'm taking you over. >> just the idea of him saying the word twerking, that was my laugh of the day. can you do the end of our show every day from now on forever and ever? >> oh, i -- well -- you want me on tv? really? oh, please. >> great stuff. >> i think the answer is yes. >> jane wells, gotta wait for the press conference to see what he does says, in the meantime, kelly, 10-year getting close to 2.9, near a three-month high. >> after the five-year auction, didn't see the demand show up, the indirects at a multiyear low, and now stocks turning slightly negative. >> we have to see what happens. let's get back to hillary clintons and scott wapner and the "halftime." >> all right, guys, thank you so much. here's what we're following. get shorty. what stocks to sell in 2014, and why the markets will fall. the best in tech, tiger cub, glen on why now is the golden age of ecommerce, but we begin with a decision that could impact your money. will the fed taper or not, and what will the outcome mean to one of the biggest bull markets in all time. let's get right down to steve liesman who is outside where today's big meeting is happin

Transcripts For CNBC Squawk Box 20140603

the market chatter is building around economic releases that come later this year, adp tomorrow. there's a key ecb meeting on thursday and the big nonfarm payroll report on friday. there is new data suggesting the individual investor may not be actively participating in the markets. maybe they're not making a lot. e trade is reporting that its customered averaged 14% fewer trades than in april. pimco's total return fund suffered its 13th straight month of outflows. the world's largest bond fund posted $4.3 billion in net outflows in may. the fund was up by 1.25% in may and that beat 79% of its peers. andrew, i'll send it over to you. thank you, becky. corporate news this morning, pill pillgrims pride. last week tyson offered $50 a share for hillshire. we'll see where that all ends up. hillshire at $58, up a little over 8% in the premarket. apple says it will allow software developers to include virtual currency transactions in their applications. the announcement may pave the way for new forms of money to appear on iphones and 50i6789 pads. if you take a look at bitcoin, man is that spiking on that news. also speaking of apple, the company holding its worldwide developer's conference in california this week. new operating systems and a move into the health space and the home. apple revealing what's calling its health kit which lets various users use health apps share data. home kit is zuned to make the iphone a remote control for a connected home. this allows this to communicate with the scale, to communicate with all these different things coming into one device. i will tell you, i know you don't think the folks in cupertino care about what i have to say. i do want to thank tim cook. i watched this thing live, streaming. i'm satisfied. i thought whatever they came up with next is not going to be enou enough. >> what's going on. >> i can get rid of the keyboard. they have all these other keyboa keyboards. >> api? >> is that an oil indicator? >> so now you'll be able to -- i'll have a much better keyboard experience. some of the application stuff, some of the notification stuff, it's finally on its way to being 10,000 times better, comparable to all the stuff that's in the android that i like but with a better interface on iphone. this is a huge thing for me. i sat there with a smile on my face for two hours. >> you did not watch for two hours. >> i did. i was upset about how long it was. >> that's the intersection of what i know about android and apple. this is where you earn your -- you know this. that looks dirty. >> it does. i don't know what that is. >> i don't know what that is. >> i thought you were saying he listened to tim cook and he convinced you about the beats deal. >> no, he did convince me that i wanted the next iphone. as long as the screen is bigger he won the game yesterday. >> in cupertino, they're setting up -- there are balloons, confetti is coming down. >> i did have somebody going on a corporate board yell at me across the room, hey, guess what, i'm going on such and such board. but you already know all about that. you talk about it every day. >> we have a good audience, an audience anyone would envoy. french government weighing in now on this bnp story, that bank paying a $10 billion plus fine to the united states. france's foreign minister says this country will defend the interests of the bank, calling the penalty unreasonable. bnp has been investigating with authorities who are investigating whether the european bank evoded u.s. sanctions. this story is from a corporate comprehend sags p compensation perspective is good for me. >> let's say they pay him 1.5 million. he said no, please, don't do that stuff. would that have been worth saving the 10 billion or would it have still been the wrong move? 1.5, no one deserves to make that. do you know? >> if you had gotten a better ceo -- why is that ridiculous? >> because the point is it's illegal. they're transferring money to sudan. >> what if they had a ceo that was more in tune with what was happening and a better corporate -- >> ethically? you mean not ethically challenged? >> you don't think there's a ceo around who would have avoided this problem by not doing business with sudan. >> not because of how much they're being paid. that's a world compass thing. >> you don't think any ceo ever earns their pay. they make hundreds of decisions a day. >> your argument is that he was such a dope -- >> he's clever. >> he was an idiot because he wasn't paid enough. >> you're penny wise and pound foolish. you are over there wringing your hands about how much you're paying your ceo. you just lost $10 billion because you're dealing with countries that have sanctions. >> the government has gotten involved. >> that will help. >> they're making at pale saying why are you coming after them. >> you're suggested they couldn't find a talented ceo that would have caught this? >> my argument is that ceos can be really good and really good at managing risk and running a company, really good at protecting shareholder value and good at protecting customers of the institution. i think ceos can make a difference and make their way. >> can i say this? as everyone knows i am a huge fan of jamie dimon. >> everybody don't know that. >> i've said it on the set many, many, many times. >> you've written articles that are totally wrong about him. >> jamie dimon who i think is one of the greatest managers of a bank lost $23 billion. >> that was a shakedown. that's different. >> hold on. if you read the papers in france, they are calling this a shakedown. >> one man's shakedown is another man's legitimate fine. >> exactly. >> there are people in the u.s., i disagree with it because i thought some of this was a shakedown, too, in the u.s. >> you and your friends would be the first to argue. even though jamie dimon was paid a lot, he still couldn't avoid the 23 billion. >> i believe in this particular case -- >> the opposite isn't true. >> you are in the same position of arguing. you guys are -- >> exactly. pay your ceo. get a decent ceo in there and maybe you won't be paying $10 billion. >> it may not matter whether you have a good ceo. it may or may not. you can't say whether it would. >> it might have mattered if they had a guy in there more talented who was -- maybe this guy was, you know, he's french. maybe he was taking vacations in portugal. maybe he had no idea what was happening in the sudan. >> i'm making a million dollars a year. why shouldn't i go to portugal? next thing you know -- >> i don't think that was the case. >> i do know. this happened first of all in the new york office. i think there are no controls. >> exactly. >> there were other issues. >> what was the guy doing in paris with the people he hired here? not overseeing them at all? >> clearly he was an untalented dope. >> exactly. they couldn't get talent. >> they couldn't attract a better person because they couldn't afford one. >> you think that's impossible? >> i think this is about morality and ethics. >> bull shih tzu. >> wow. >> remember aig, people said there's no way for $400,000 a year i'm going to be able to keep people here? >> that's correct. >> don't you think if they would have paid more we would have recouped more than we recouped? >> you need the guys for lehman to be able to go back. >> the journalist envy people with corporate ceos. >> i have zero envy. >> oh, please. the entire "new york times." why every quarter do you out these guys in the top 50 for how much money they make? it's total journalism. >> as does every other newspaper in the country. >> no, they don't. you don't see that in "the wall street journal." >> you saw it on "squawk box." >> they stand up, tells us who made the most money. >> right. reading right from the "new york times." >> by the way, there was another story that they'll have us skip through. pay for senior bankers rising 10% to an average $13 million. u.s. banks they say handed out much more generous packages than anywhere counterparts in europe. >> we should not have just done that story, clearly. >> every quarter, you out each ceo. you don't even mention like it's up 30%. jamie dimon is up 30%. after he was down 8 million or whatever. you don't even mention it at that point. look, there is journalist envy. what i don't understand is, if you're so envious, go work in the gold room of goldman sachs. go do it, become a ceo. at least this is a country where you can still go do that. >> why would i want to do that? why are you asking many he to do that? >> you're making your money in other ways. you certainly do enjoy it and you certainly do enjoy the benefits of your highly paid compensation. let's go. a key primary in mississippi today with plenty of mudslinging. tea party candidate state senator chris mcdaniel in the middle of it all is john harwood. is john harwood, who i just heard an echo. who is joining us. is that a mississippi thing or -- you forgot the tie? what happened? >> hey, you know, we're out in the field here. it's casual. and by the way, joe, i'm happy to rescue guys -- you guys from that argument still going on. i guarantee you there was no viewer who could follow that back and forth between you guys. >> thanks, john, like one of your reports, i guess. >> notice he's on a delay. >> andrew is going to go to the mail room and make $20 million in five years? >> i look forward to that. >> there's journalist envy about ceo pay, john. most journalists do not think there's any way that a ceo can actually -- they have no problem with a lefty -- with a fastball, they have no problem with sandra bullock making $30 million a yer but they don't think there's a corporate manager with 100,000 employees, shareholders, all these responsibilities, they don't think there's a guy who can make 100 decisions a day where 90% of them turn out to be the right decision. andrew doesn't think there's a bnp paribas ceo -- >> which journalist, andrew and becky? >> no. i'm talking about gretchen morg morganson, the entire staff at "the new york times." >> oh, geez louise. is gretchen on the show this morning? >> no. no. she couldn't be here today. she's working on the next overpaid corporate ceo story. >> oh, man, please. save us. >> john, what are you here to talk about this morning? >> go ahead, john. >> i'm here to talk about mississippi and the republican attempt to try to retake the senate. i just want to take a little bit with the assistance of color coded maps, what the keys are to democrats holding or losing the senate. republicans need to pick six to go from 45 to 51 in the senate. they've got plenty of opportunities on the democratic side. if you look at these blue states where democrats now hold the seats, you've got incumbents in north carolina, in arkansas, in alaska, louisiana. democratic incumbents who are in changer. you have open seats in places like iowa and michigan where republicans have a chance. iowa also has a primary today. but it only work -- the math only works for republicans to make those gains if they get six of those seats if they hold their own home turf, that is to say seats they already hold in republican states. there are three of those where there is some question. one is in georgia. one is in kentucky. both of those have already had primaries and picked the most competitive candidates although in georgia there's still a runoff. in kentucky, mitch mcconnell survived, which is what the party establishment wanted. here in mississippi today is the last of those pieces to fall into place. you have a primary betweened that cochran, he was elected in 1978. he's he's an appropriator. he's being challenged by a young state senator in a nasty race who is arguing thatted that cochran works too much with democrats, too accommodating with the other side, too enmeshed with the culture in washington. he wants to change that. the race has been spiced by allegations that supporters of chris mcdaniel, the tea party challenger, broke into a nursing home and snapped pictures offed that cochran's wife who is ill, has been for some time. that has produced charges against some allies, felony charges, against allies of chris mcdaniel. there is worry among republicans that iffed that cochran is upset today, which could happen. it's a very close race, democrats could have a chance of carrying this state, mississippi, as conservative as it is, and that would make the path to republicans taking over the senate that much longer. >> all right. that was not one of the great moments in american -- it's not even politics, i guess. >> when you sneak into an old age home. >> $10 billion. do you know how many million that is? do you know how to do the math? >> 10 billion? >> yes. >> meaning 10,000 million? >> there you go. >> 10,000. you could have hired 10,000 ceos. and maybe found one good one that would have been able to maybe save you. >> although somebody points out a $10 billion fine, gm fined 35 million after admitting it intentionally failed to fix -- >> it doesn't seem -- >> joe? >> yes, john. >> do you know how much members of congress get paid. >> not much. >> 135. >> they get paid about $160,000. do you think we'd have better government if we paid them more money? >> that's compensation inflation there. that's way overpaid. you have a point there. every quarter they should do a piece on that. i do. how come these guys like harry reid have pretty nice houses and stuff, don't they? >> if we paid them, joe, if we paid them a million dollars apiece, would we get better government? >> not for just a million, no. >> who goes into politics, john? >> public service. >> people who want to do good. >> like at the end of -- whenever we have that final, the two cancers, it's like we always look at each other and go, aren't there like 300 million people in this country? this is really -- this is our choice and it's because people don't -- you have to have -- i don't know. i think you have to have a screw loose to want to do that. >> obviously you've got to pay them more. >> that might help. that might help. it's just market forces, john. if sandra bullock -- in "gravity" she didn't make 30 million. in "gravity" she made 70 million. >> don't forget a-rod? >> the list goes on and on and on. but they don't want to talk about that side of things. >> like i go to washington, get a rash. you go to mississippi, you get a rash down there. >> that's why there's no tie. >> john, thank you, good morning. when we come back, everybody, we'll talk about bitcoin a little bit more. you've heard about all the ways it could be used. plus, seattle decides to hike the minimum wage to $15 an hour but it won't happen overnight. we'll have those stories coming up in this morning's executive edge. more "squawk" in just a moment. welcome back, everybody. it's time for the executive edge. a business group immediately announced plans to sue to try to prevent the increase from going into effect. businesses with fewer than 500 workers have to raise wages to $15 over the next seven years, larger businesses have to meet that level within three or four years. gentlemen? >> businesses are suing. we'll see what happens. that's a long lead time to do that over seven years. they placated some of the people that are worried about it. when a city does it, i think it's kind of a petri dish, let's watch and see what has. the people that say it's going to cause people at the low end, jobs to dry up. the simple math you do for a company, let's say you're a small business and you are just barely making a certain amount of money. you can hire ten employs at $15 an hour or 20 employees at $8 an hour. it just seems -- if you're barely making it, if you do the math, it could hurt the number of jobs. >> my worry is whatever happens in seattle to the extent it's successful may not be applicable elsewhere. >> why would you think it will be successful. >> seattle is high cost of living there. i don't have a problem with municipalities doing something like this. >> they can try it. we'll see. >> if businesses don't like it, they can move fairly easy across city lines. >> seattle is a thriving city, though. >> i worry about the home health care workers, the people that need home health care if it suddenly is at a point where, you know, medicare can't -- it just -- you don't know what the effects are going to be as you're doing something that obviously is well intentioned. we heard about income inequality and everything else. you just hope you don't end up hurting the people you're trying to help. >> it will be an interesting -- >> 15 is a pretty big number. >> isn't is 15 at sea-tac, the seattle tacoma airport? >> in switzerland it was voted down. it was 25, i think. >> what you do in seattle, you can't do in detroit. >> or mississippi or something like that. >> if the huffington post is watching, they should write an article that a million is not enough. if a million is not enough for a ceo but 15 is too much. >> there you go. good tieing together the "a" block to the "b" block. >> if they are. >> in case you weren't paying attention, there's the line. let's talk about another sto story. bitcoin could be changing divorce proceedings. lawyers are warning that the electronic currency could be used by divorcing spouses to hide assets from estranged partners. bitcoin accounts are hard to link to an individual. spouses in a divorce fight could transfer currency quickly and almost anonymously between online wallets. >> you were talking about it this morning. why? >> on the new iphone -- >> the apple. >> you can use different virtual currencies. it's going to be a huge boone, probably i assume to bitcoin if not others. >> is it just an app. >> it's built into the the way the operating system is. they'll have different currencies and because you're going to are able to use your thumb print is actually another thing. before it was just on -- >> i have the new iphone 5. my thumb print never works. >> it doesn't work yet at least on my phone. >> now it will work for all sorts of purchases. if you're amazon and you can link to it, you don't have to do a password. >> it's something with women's fingers. i've talked to a lot of other women who have tried the same thing. once in a great while it will allow me in. >> she probably didn't set it up properly. >> it's cold fingers. >> she's been on the cold fingers thing for a while. >> i can hear you guys. >> i have a safe and it's never not worked. >> you have a safe? >> a fingerprint safe. >> you're hot blooded, no problems. >> i'll touch you with my fingers right now. they're cold. that's why it doesn't work. >> check it and see, i have a temperature of 103. come on baby don't you wanna dance with me, andrew? hot blooded. coming up, it's a busy week. >> did i get the shih tzu in quick enough when i said the -- >> i don't know. >> it was like a delay of like a second. >> enough for a youtube moment. >> it's a busy week for economic data, from factory records and auto sales to the big jobs report friday. we'll talk market expectations. next, tomorrow, check out this lineup of power house of overpaid ceos. top executives from merck, amc entertainment, lennar and autonation. they'll all join us live. before we take a break, let's look at today's winners and losers. the performance review. that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. 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. drivers want to go further with their electrical vehicles. but you can't take a trip from lisbon to stockholm if you can't plan and re-charge along the way. the european commission is using cloud to make this possible. creating a single charging and billing network across 28 countries. so drivers can travel as far as they want to go and when they want to go. ♪ "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. alright, that should just about do it. excuse me, what are you doing? uh, well we are fine tuning these small cells that improve coverage, capacity and quality of the network. it means you'll be able t post from the breakroom. great! did it hurt? when you fell from heaven (awkward laugh) ...a little.. (laughs) im sorry, i have to go. at&t is building you a better network. ♪ i'm hod blooded check it and see ♪ ♪ i got a fever of 103 good morning. welcome back to "squawk box" here on cnbc. that was on air, yes. >> the second one. >> i'm joe kernen along with becky quick and andrew ross sorkin. keep it together. in the headlines this morning, new developments this morning in the takeover battle. i was going to ask you earlier about this, hillshire brands. hillshire says it received an increase takeover bid from pilgrim's pride of $55 a share. that tops the original bid of $45 a share as well as a $50 per share bid from tyson foods. hillshire says it doesn't have the right to terminate its own agreement to buy pinnacle food which is started all this, hillshire says it's not changing its prior recommendation to approve the pinnacle deal and is making no recommendation with no respect to the pilgrim's pride and tyson offers. you found a deal book. i have a question. are you a links guy or patty guy for sausage. >> links. never patty. >> i go back and forth. >> ever buy the kind where you slice it and smash it? that's jimmy dean. good. >> i haven't had that in years. >> that's what occurred to me earlier. >> as a deal guy. >> but you were definitive. >> i like pancakes. >> plenty of economic data. we have a guest here going -- he's like looking around. i was supposed to be -- anyway. >> on a business network. >> including big employment numbers and an ecb rate decision, let's get more on the busine busy week ahead. russell price, senior economist. he's seen this act before. that gdp number, you write it off immediately? bonds went up that day. i'm sorry, the yield went up that day on the ten-year. it's a one off in everyone's mind. is there any way they're wrong, that it's just a one off? >> you can be wrong about it but probably not. there were two things that happened in the first quarter. i had terrible weather and i had a runoff in the rate of inventory investment. you know, last time i was outside it felt pretty good. we also, i think, are seeing from this report that we got yesterday, that businesses are probably stepping up their rate of inventory building this quarter. it was a one-0 of. i think we have a good quarter in front of us between 4% and 5% gdp growth. >> okay. my next question was going to be, do we need to get to three for the year or can we end up at 3 and satisfy people that have been depending on a better economy to justify valuation? if we average 2.25 but end up at 3 and 3.5, is that going to be enough for people? >> i think what's important is how the quarters themselves go quarter to quarter. let's say if you had a pattern of 4% to 5%, 3.5%, 3.5%, even though you had to couldn't the the first quarter, the year may not be that good. it would be back-loaded, doing good toward the end of the year. i think that's what will matter. >> what do you think? same place? >> in the first quarter, what was most important, the idea that we could write it off, we had strong employment growth. we had 875,000 net new jobs created. we started to see wages start to increase as addition slack is taken out of the labor force. the consumer still drives this bus and as consumer activity continues to improve and wages rise and we're getting more employment growth, i think the path ahead still looks pretty good. just like you said, i think for the full year we'll probably be shy of 3% for the full year. but by the end of the year we'll be coming out at a rate of 3.5%. >> i think maybe the consumer is really key there. we talked about this m&a activity, is it good or is it still more rationalizing? is it still guys trying to get more with less? if the consumer comes back, the corporate spending goes beyond corporate m&a. they might hire someone, build a plan the or something, right? >> absolutely. businesses have really been running, in my view, with tight labor force components. we've seen that in rising hours worked. as we continue to get that accelerational demand after the poor first quarter with be that will spur businesses too, higher. also, running into that whole mix is the idea that consumer confidence is at its high since the recession and business confidence is rising as well. >> even more when you look at the income inequality debate, we h had someone on yesterday. that environment might signal the pendulum swing went so far. as it comes back and wages start going up and people get more money and we get better growth, 3% and 4%, i don't remember having those debates about income inequality when we're growing more quickly and unemployment is down at 5% or 6%. we don't seem to have that debate. we haven't felt that. >> that's right. and i think a lot of this concern about what the inequality is doing to the economy simply isn't expressed as much once you start to see a better economy. that doesn't mean that you rid yourself of the inequality problem. it's not a problem in my mind that it's enough to hold you back from having a good year. you've essentially had a redistribution of income in this country, away from the very lowest income families. the people who were receiving money, they're also spending, too. maybe not as much as if it were earned by the low income families. they're still spending, for the low income families as jobs and wages pick up, they'll be in better shape to shop more at walmart. >> if we were creating jobs that weren't subject to minimum wages because they were well above where the minimum wage was, the whole debate goes away. that's the problem. the jobs we're creating are sometimes low paying that it would make a difference. thank you. russell. guys with red hair, russell is a good name. >> absolutely. >> did they know when you were born? did they look at you and say russell? >> i think it just fit. >> it did. >> rusty, russell, i thought about that immediately. i'm someone who is partial to red heads. >> as everyone should be. >> they're the best people. >> that's right. when we come back with millions of consumers at stake, it is not surprising that automakers are targeting china as a major growth market but what chinese buyers want in vehicles might surprise you. we have that story right after this. ♪ ♪fame, makes a man take things over♪ ♪fame, lets him loose, hard to swallow♪ ♪fame, puts you there where things are hollow♪ the evolution of luxury continues. the next generation 2015 escalade. ♪fame welcome back, everybody. right now it's time for the squawk planner. the major automakers are set to report monthly sales today. en alifts are expecting the strongest may since the recession began back in 2007. tesla isding its annual shareholder meeting. among the topics of most interest to investors, any hints from ceo elon musk on the location of the giga factory and the development of the so-called model e, the mass market, lower priced tesla due out in 2017. on the economic front there is one fed speech of note today. esther george will be delivering remarks this afternoon at the kansas city fed business leaders luncheon. we mentioned u.s. auto sales. china is becoming an increasingly important market for every major carmaker. eunice yoon joins us from beijing with a look at what chinese car buyers want. eunice? >> thanks, becky. chinese consumers are expected to buy 24 million cars this year. it's the world's biggest car market. and because everybody wants to be here, we decided to go shopping with a typical chinese car shopper. the man behind 9 wheel is just the person carmakers want in their dealership. sam jow. he's upgrading his car and we are going shopping with him. >> the car gave me the freedom. i do like the option of freedom the car gave to me. >> reporter: zhao goes online, unlike car buyers in the u.s. or europe, chinese people have little brand loyalty. purchasing a car requires extensive research. >> on the internet, somebody else's suggestions is based on real experience. that's the power of social network. >> reporter: car buyers here are influenced by word of mouth and most prefer big cars. as part of his three-week search, zhao is checking out the same subaru suv his friend has. >> suc, big room, can hold all my family members, my mother, father, my son and my wife, all five persons can get in one car. that's very important for me. >> reporter: zhao visited ten dealerships. he's narrowed his choice to six brands. none are chinese. are you finding yourself to foreign-branded cars versus chinese-branded cars or does it not really matter? >> sure i am chinese but i'd like to pay small price. for the brand so far, it's quality. >> reporter: like audi. he likes this extra long sedan. >> there's room size enough for me. it's for my son when he grows up. >> reporter: final price for his new a4l, $40,000, within his $50,000 budget. what do you think it says about where you are in your life and in your career? >> ten years ago, when i got my first job i don't imagine i can buy a luxury brand like audi. but after ten years, i buy it. oh, well, it's good. >> reporter: and most chinese are first-time car buyers and they have a lot to choose from. because everybody here wants to be here. china actually has twice as many car models as united states, so it's just a very hypercompetitive market. andrew? >> thank you for that report, eunice. we appreciate. talk to you soon. and why obamacare may be giving a boost to entrepreneurship. we have the ceo of paychex. it all builds up to friday's big government employee report and the jobs number. 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[ bottle ] ensure®. nutrition in charge™. ♪ [ bottle ] ensure®. no matter what kind of business you own, at&t business experts can help keep it running... seamlessly. so you can get back to what you love. when everyone and everything works together, business just sings. appreciate you being on. when you think of health in the digital age, i don't know if you saw what apple just announced yesterday, in terms of this new app and what they're going to be doing on their device. >> you know we're living in this moment of health care. where every aspect of health care is being reinvented, reimagined by entrepreneurs and the entire industry is going through a big shift. we have seen it from retail, travel, to commerce. it's finally happening in health care. with apple's announcement yesterday and samsung's announcement last week, we are seeing the largest companies in the world really invest in health care in new ways. >> explain this to me. you incubate start-ups like. and the disruptors. who are the big companies i imagine that have to lose for them to win? >> it is a global start-up platform. we are build an army of entrepreneurs and innovators to reinvent every aspect of health care. you are seeing a big shift where every hospital system today, every pharmaceutical company today is rethinking their business and where they go in the future. >> right. >> so it's a massive shift. >> i understand who can be the winners, the guys on your platform and others. my question, who are the losers? the incumbents? >> yeah. we have seen this creative destruction where the that sort of has been stagnating for a while gets overturned. this moment of innovators dilemma, if you will. you are seeing massive consolidation with hospital systems right now as an example. so there's a lot of shifting going on. and to be quite honest, there's a lot of uncertainty. that creates a lot of the opportunity of the next few years. >> will we see any in efficiencies in terms of the costs coming down. when they talk about more productivity. and we often think that is going to in the long term equal more productivity and less cost. in the short-term it's quite the opposite. >> well, it's one of the great things about the data revolution and the digital revolution that's coming to health care. with with all these mobile devices, sensors, new ehr platforms, we are able to collect data that even a few years ago we weren't able to collect. so we are using it to analyze and create efficiencies in the market. we invested 8.5 million dollars last week. they are looking at data in interesting ways to drive the costs down. >> give me a 30-second version of what you think all of this will do to my experience as a patient in the next five years. >> well, there is this wave of health care consumers. you as a patient are becoming empowering for the first time in the last 100 years to really own your health. for years we have been outsourcing to our employers. we have been outsourcing to the government. we have been outsourcing to your doctors. you will have price transparency. quite frankly, a lot of health care is going to be designed invisibly into the background of your life. so it will be an exciting time the next 10 years where things go as a patient. >> thank you for joining us this morning. >> thank you very much. >> i don't want any experience as a patient. over the next five years or ten years for that matter. >> experience may be you facetime with your doctor. >> southeast asia is when you pick things up. >> we have wonderful viewers over there. >> the last time you came back you had what, an ear infection? >> swimming in a pool. >> all i know is you were on pretty strong antibiotics. i'll just leave it at that. >> when we come back, apple is hosting its annual developers conference. we'll ask if tim cook delivered what investors want. 'tis the season for road trips. what they tell us about the state of the economy. you can check out any time the you would like but you can never leave. "squawk box" will be right back. she's still the one for you. and cialis for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. no apple watch. no apple tv. no new gadgets. but the company now wants to conquer your health and your home while ripping apart the competition. >> many of these customers were switchers were android. they had bought annan droid phone, by mistake. >> will apple's game plan work for investors. >> the quirky way to keep you cool. how about uber cool. ben kauffman tells us about air-conditioners are demand. the second hour of "squawk box" begins right now. ♪ >> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. another record day of closes. the the dow futures are indicated down 27 points. s&p off 4.5. nasdaq down by 11. the yield has picked up from some of the lower levels we had seen last week. in our headlines this morning, we'll be watching shares of hillshire brands. pilgrim's pride increased its over to $55 a share from $45. hillshire is planning to go ahead with his own acquisition of pinnacle foods. it says its agreement with pinnacle doesn't allow it to terminate on the paves of the bids for hillshire. also take a look. u.s. automakers will release may sales numbers. expected to be up 7.3% compared to a year ago. g.m. is seeing posting an increase of 6.7%. ford is expected to report 0.9. and chrysler is expected to see sales up 14.4%. seattle city council has improved an increase in minimum page to $15 an hour. however, a local business group immediately announced plans to try to prevent that from going into effect. >> a few global market stories. central bank hinting it would not raise rates further as long as inflationary pressures continued to rise. central bank kept cash rates steady for a ninth straight policy meeting. china services sector rose to a six-month high in may. a group of retailers want the supreme court to take up a case involving swipe fee rules. they allow banks to charge debit card fees that are too high. part of dodd/frank they limited it to 21 cents per transaction. retailers say the law intend the the cap to be even lower. now they want to lower it even more. >> was it durbin? >> it was durbin. >> there were connections -- i mean, there was more to it than just being -- and also -- >> and they argued they needed to do this to pass along savings to customers. and what happened instead, dividends to shareholders. >> right. >> but it was -- there was more there. like so many things. you have to look to connect the dots. >> follow the money. >> it's all about money. >> can we come together on that? >> that we can agree on. >> a new web domain will let companies change things up with a dot vegas domain. it will have a more distributive url, an option that might not be available in a crowded world of 100 million dotcom domains. is andrew ross sorkin.com available? >> i own it. >> how much are you paying for that? >> i would be interested in erin sorkin.com. and high demand names will be up for option. apple is holding its annual worldwide developers conference this week. did you buy your name? is it available? >> fortt.com has been mine for a decade. >> fortt.com, what will i see? >> cnbc search page with my latest hits and stories. >> no way. >> yeah. >> i see it. >> you're like a brand, a walking brand. >> i'm trying. take it away, mr. brand. >> i would say it was apple's most ambitious ever. even more than it first launched the iphone. there's so much to lose here. they are trying to move forward so quickly. they talked about new cloud features allowing developers to store their assets in the cloud if they build on apple platforms. the expansion of i cloud. it will allow people to use i cloud drive. more storage available for lower prices. and home kit and health kit. not exactly clear how ambitious these are. but ways for people to get all their health information from various apps together. there's an i watch coming. also home kit for home automation. not clear how aggressive apple will be with home kit, health kit. but with this cloud stuff, there's big risk. because it looks like they are going to roll all of this out within a series of days or weeks in the fall. it could be the biggest strain on one company's cloud ever. think about it. people are pulling down ios 8. millions of people all at once. and trying to push all the photos and videos and files to the cloud. and, by the way, trying to get text messages relayed through you their phone. if any of that gets screwed up and you're missing text messages, phone calls, people will be outraged. if they pull it off, it's an unprecedented advantage over android. overall, huge keynote for them. >> stay with us. more on apple's developers conference. with us now. and obviously this is your interview. they said, joe, his name is eric. that's the only -- it's gotten that -- i'm there just to introduce the guy. that's how each of us now. like in baseball there is a guy. >> synergy. >> not synergy. that was my role. now i'm just going to sit back. >> good morning. i was here just to say his name. this is your interview. >> let me ask a serious question about that. i would argue they're going to facebook. certain components that they seem to be strategically going after. the question, can they beat all of those players at their own game? >> i don't know that they necessarily have to. the wider appeal apple was trying to make, people describe it as a wall. it just got a heck of a lot bigger. if there's indeed a watch it will go along with that. a whole new realm. a lot of third party people -- it has a lot to do with appealing to the third parties. >> john talked about the potential for glitches in the fall. >> yes. >> and if we're all being honest, as much as i love apple, and i do love -- as i said before, it's fantastic what they produced as an apple guy who was thinking about switching. now i have no interest in switching. do they out-do a dropbox? will you put everything in the cloud instead of using a dropbox and does it matter? >> i think it does matter. apple hasn't been anywhere meaningful. i'm a happy apple user but i have been using dropbox for years. steve jobs famously thought dropbox. >> a feature. apple needed a strong play in the clouds. it has been confusing exempt for when you want to find your phone after you lost it or need to kill it after you lost it. they simplified it yesterday. they did the a lot of what they had to do. it's all about widening the universe. you saw them hitting android a lot. >> they are going to charge for the cloud. everybody here has pictures and movies. no way not to spend 399 a month. >> this is about revenue. longer term, it's about margin. the reason they can command a premium over android and other devices is because the user experience is arguably better. things work together seamlessly. they expanded it off things work better off your phone to things work better between your phone and your mac. the whole thing is just supposed to feel better. on the revenue line, this suspect going to be significant. but if it keeps people in the fold, makes people want to spend a little bit more for storage it will help out margins. >> 90% of the futures said they advanced yesterday. you can argue again on android. you can use swipe on your android. there's a lot of stuff you can do on android. and android, i imagine, google will come out with something new in the next three months. >> i don't think it matters. this is the case that tim made yesterday. when you look at android universe, there is a lack of consistency. maybe one small slice support the latest version of app droid. that's a heck of a lot of trouble to update. a lot of devices simply don't support it. apple makes very clear what device supports what. >> how much do you worry about malware and viruses? and the reason i ask, they are opening up in an eco system. they can transfer data from other apps. do they stay impermeable? >> they are not impermeable. they don't open themselves up to as much risk as android. one of the main ways malware happens, people put out a fake version of an app, download it and it steals your information that way. all of this is still pleased. yes, there may be additional avenues of attack. when you start from a secure point it's easier to stay more secure. where if you start insecure, securing it later is hard. >> thank you now to eric hesseldahl. everyone remembers when steve jobs tried to buy dropbox. what is dropbox exactly? lock locks is where al gore keeps all his millions from his investments. >> a $10 billion company that shares your files and syncs them. >> i have too much stuff in the cloud i don't know what to do. it can't be backed up. what do you need to do? >> you need to pay more. >> right now i'm not backed out. >> make sure they put out the new plan. don't pay too much now. >> i'm going to deal with that myself, my own backup problems. but my phone is not. we are very specialized now. thank you, eric. eric? last name. hesseldahn. squawk alley appears at 11:00 every day. and 8:00 pacific time. >> yeah. you can count on it. even more. >> good. >> when we come back this morning, more records from the dow and s&p 500 that were broken yesterday. will the next couple of days be a challenge for the bulls? we'll open that discussion after this. and traffic jam of news for the auto sector. tesla holding a shareholders meeting. we get behind the wheel later this hour. "squawk box" hrbg back. welcome back to "squawk box", everybody. futures are looking a little bit weaker after another day of record closes. weakness picked up this morning. dow futures looked like they opened up down 40 points. s&p down 5 points. trying to reach a settlement with the sec the at issue, regulators access to be audit documents. they have scolded the firms for fail to go share audit work with sec investigators. the investigator believe they could help them undercover accounting fraud. big economic reports. joining us right now is the newly appointed deputy chief investment officer. congratulations. joseph is global market strategist at jpmorgan asset manager. good to see both of you. let's talk a little bit about what's been happening with the market. joe, do you think this has been something that's been a good build? something that will continue to percolate? >> it's been painful. we haven't really seen any meaningful direction. volatility obviously has been down, but it's been a bit choppy. >> you had a gain of 30% last year. you're still up 4%. >> that's the crux behind the issue. you had a pretty amazing year last year. valuations are kind of hovering near the long-term average. the bond markets, everyone expects interest rates to go up. many are sitting on their hands waiting for the one catalyst. >> how much u of that catalyst -- we were concerned about the economy. we got the rug yanked out from under us the first quarter. what do you think happened? >> i don't think anybody would have expected the bond market to be up 4%, commodities markets to be up 4% by the end of may. it's very unusual. not many strategists were predicting that. we actually just went yesterday under weight bonds and shifted into international developed equities. >> why now? >> when you look at the bond market indexes they're up 4.8% in the first five months of the year. a whole rear's worth of return in five months. so we think it makes sense to make some of the profit at this point. >> did you think we would see gains of just -- the bet on bonds was, look -- >> the rates went higher. >> right. that was an unquestionable situation. >> we didn't think at the beginning of the year. we still think at the end of the year rates will end up 3 to 3.25. if you believe rates will be 3.25 by year end, the bond indexes will be flat or negative. >> 256. >> moved fast. >> i think it will move fast. when growth picks up in the second half of the year. international developed equities look appealing to us right now. in japan and the uk is 13 to 14 times earnings. it's still 19% to 20% all time highs. we think the doj and ecb need to ease and currencies need to come down as well. >> it doesn't move on inflation. it doesn't move on what the fed does. it moves on growth. >> the 10-year? >> i think the back half of the year. you look at the trade of the international markets. what happens relative to in tphraegz. >> i don't know whether it became clear the growth would come. >> well, the growth wasn't here. >> they need more here today than last week when it was 2.42. >> we see the second quarter strengthen. we're into june now. we have a pretty good read on growth. it makes sense. the back half of the year will be stronger. >> jobs coming out friday. is this something you think continues to build? >> we are looking at that. we are looking north of 200,000. i think it's going to reiterate the message that economic growth is bouncing the second half of this year. certainly the second quarter. but i think the real catalyst, what everyone will be focusing on is the eecb. a lot of expectation is building into the ecb. i'm curious to hear what exactly they're going to say as far as asset purchase. that's going to be the wild card. are they going to suggest -- >> i'm not sure they will launch or announce a qe program. but i do think you will get a little bit more verbal easing. more talking about the inflationary easing and how that would lead them to asset purchases. >> you see the ecb, followed by a strong jobs number, is that the type of catalyst that could push rates higher much more quickly, or do you think it takes higher than that? >> i think the ecb will move on the discount or refi rates. i don't think they will go as far as asset purchases. draghi has been trying to talk the market through that. the jobs number will be strong but nothing that's off the charts to scare the bond market. but it is building consecutively every month. it bodes well the second half of the year. >> end of year, where do you think we are? >> i think equity markets grind higher. a lot of high frequency data we have seen in the u.s. is in fact, confirming growth is picking up. you have the european central bank being more and more kaopld aeufb. they grind higher. but i think they move higher. interest rates will also go up. you have the largest buyer of treasuries. >> joe, thank you for coming in. darryl, thank you. >> have you ever been on with diane swank? >> yes, i have. one time. >> crank and swank. >> we should do it. >> i don't know why we don't. it's tv. >> we should put swank before crank. i think that's probably the right thing. >> tv does stuff. >> there's synergy there. >> we have a new segment. coming up, a hot and muggy oh, in the new york city area the next couple of days. but quirky work to go keep you cool. they teamed up with uber for on demand air-conditioning service you have to see this thing. that's right. it is on demand air-conditioning. we're going to find out how it works in the next hour of "squawk box". financial noise financial noise financial noise financial noise that's keeping you from the healthcare you deserve. at humana, we believe if healthcare changes, if it becomes simpler... if frustration and paperwork decrease... if grandparents get to live at home instead of in a home... the gap begins to close. so let's simplify things. let's close the gap between people and care. ♪ tdd#: 1-800-345-255050 tjust waiting to be found. ties let's close the gap between people and care. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 bring what inspires you tdd#: 1-800-345-2550 out there... in here. tdd#: 1-800-345-2550 out there, tdd#: 1-800-345-2550 there are stocks on the move. tdd#: 1-800-345-2550 in here, streetsmart edge has tdd#: 1-800-345-2550 chart pattern recognition tdd#: 1-800-345-2550 which shows you which ones are bullish or bearish. tdd#: 1-800-345-2550 now, earn 300 commission-free online trades. tdd#: 1-800-345-2550 call 1-888-648-6021 tdd#: 1-800-345-2550 or go to schwab.com/trading to learn how. tdd#: 1-800-345-2550 our trading specialists can tdd#: 1-800-345-2550 help you set up your platform. tdd#: 1-800-345-2550 because when your tools look the way you want tdd#: 1-800-345-2550 and work the way you think, you can trade at your best. tdd#: 1-800-345-2550 get it all with no trade minimum. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 open an account and earn 300 commission-free online trades. tdd#: 1-800-345-2550 call 1-888-648-6021 to learn more. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. welcome back to "squawk box". faa will allow drones to be used. they are in use from a wide range of tasks from farm to film making. that looks like a military drone. i think what we are talking about is almost like a toy helicopter. >> you could see why they would want to have that for tv and film. >> i recently saw a drone that was trying to cover a marathon. it fell on a woman. she was knocked to the ground and she was bleeding. >> oh, yeah. it's bad. coming up, the head of choice hotels will join us. this is ben kaufman, founder of quirky. also known as the world's least important ceo. which is precisely why we tied him to this high-speed train. at quirky, our products are invented by real people who submit their ideas to our website. so whether our ceo makes it or not, quirky will continue to invent incredible new things. products invented by real people like you. quirky. the numbers are impressive. over 400,000 new private sector jobs... making new york state number two in the nation in new private sector job creation... with 10 regional development strategies to fit your business needs. and now it's even better because they've introduced startup new york... with the state creating dozens of tax-free zones where businesses pay no taxes for ten years. become the next business to discover the new new york. [ male announcer ] see if your business qualifies. welcome back to "squawk box", everybody. in our headlines today, eurozone inflation sagging more than expected. it made half a possess. ecb decision is due thursday. we just talked about it with our guest. that is something we're watching for. dollar general's quarterly earnings missing by a penny. blaming a harsh winther weak consumer spending. sony will stop making the psp. it will have a device named vida. >> here to talk about summer travel trends is president and ceo of choice hotels. we have the brands up behind you. everyone knows a lot of these brands. have you been to comfort inn? sleep inn? >> i have been to most of those. >> they are all over the country. >> they are economy branded hotels. >> so when with we talk about a hotel capacity up 7% year over year, are they just your hotels? >> actually, we're doing a little bit better than that. our survey and bookings are up 11%. we did surveys with our customers. they are going to take at least two trips this year. they are doing it most there by car. like last year, they are looking for value. there is still a lot of value to be had. the american traveler is back on the road. >> what is the average cost per night of a room across your brands? >> it varies a little bit. but we represent the 99% of the traveling public. so we are month rat tier mostly. 5,000 hotels in this country. we're somewhere in between. as low as 55%. it can be as high as $85 on average. we have a new brand cambria suites, that is an urban location. it will obviously be here. >> he said the 99%. there's no way. these are for people who drive-through. they're in a car traveling. they're not on in a plane. they stop because it takes so long. >> there's no driver? >> no, no, no. but you said there's the 1%. but this is for the 99%. >> andrew has taken road trips. >> 88% drive themselves. >> going to the hamptons is not traveling. >> in terms of increase. in terms of the price per room, what does that look like if you were to look at price. >> it's about split between new travelers, more demand, and some rate increases. they ever still pretty modest. >> business travelers are back. even in the down turn. they are hitting the road this summer with the kids. >> some of them have pools. >> almost all of our hotels have pools. >> seems the last decade the huge trend has been the suite hotels, where you can have a bedroom for you and bedroom with kids. as a family, we look for those on the roads. >> we had a big celebration last night. we have a new rollout for our cambria hotels and inn. it is faux suites. a separate space with a barrier between it. it does not close a door. but it work really well for families. the kids can be on one side with the tv. and separate space for it. it works well for the traveling families. >> and what about the kitchen? >> one is suburban. one is called main industry. 100 some locations. sustained stay. you can stay a week. grocery shopping. >> is that for business travelers? >> a lot of them are doing projects. in our case, it's folks that may be working on a construction project. they may be doing some training. so they are there for an extended period of time. they want something that feels a little bit more like home. >> did you do "undercover boss"? >> i did. >> what disguise did you have? >> i had a mustache most of my 54 years. they dyed my hair. they shaved it off. >> where did you go? >> i was in florida and indianapolis. >> some of your properties are there? >> we did a lot of them. >> who did you go in as, the pay ron? >> the ruse i was in an unemployed restauranteur looking for a job in the hotel business. >> you have to explain the cameras. what did you find? >> it was a great experience. it was not fun. they keep you up 18 hours a day. they filmed 142 hour of film for 42 minutes of a show. >> wow. >> but we reached out to customers. we got an amazing response. our reservation volume went up 16%. >> what did you think of your hotels and your staff? >> this is the thing. i started out in the business i did these jobs. i did them lower on the tv show which lowered my credibility. but i did all the jobs but that was 30 some years ago. you forget how hard the jobs are and how special the peel are. except for a couple of breaks i would still be making beds. and the desire for those people to have a better life for themselves and their children. >> let's talk minimum wage debate. should we have a higher minimum wage? >> look, i am all for raising the standard of living in this country. but i go to basic economics. basic economics say if you force a wage rate that's not being driven by demand, your going to destroy jocks. that's what the cbo said. i don't understand how 500,000 jobs and having a million people lifted out of poverty makes sense. what i don't understand is why don't we take half the money on quantitative easing and get a tremendous infrastructure to rebuild the highways, bridges, and airports and that will create good-paying jobs. not force jobs. no one was ever supposed to support a family of four working in a fast food restaurant. >> what do you traditionally pay? >> whatever the prevailing wage. obviously in new york city it's a lot more than in minneapolis. but we're typically not paying minimum wage. we pay more than that. but the minimum wage sets a floor for what then the wages are based on. >> are the maids minimum wage? >> no. they are higher than that. they may take their first job at that. but very soon they are making more. a lot of general managers start out in hourly positions. >> we have one practical question for you. how much do we leave the maid? >> i'm generous because a lot of these people. $4 to $5 a night for the room. >> do you leave it at the end or per day? >> i leave it at the end. >> do they split it up? >> i think they share it for the most part. they pool it and share it. >> if you're dsk you leave more. thank you for joining us. >> we should tell you breaking news out from at&t. it is now saying it is raising its value. shares of at&t are up 41 cents. they say they expect to see continued growth that it it adds in the second quarter for wire line. 2014 free cash flow supposed to be in the 11 range. >> auto sales coming out all morning long. tesla owners holding a meeting today. models ex, g.m., ford and much more after the break. and quirky teaming up with uber to keep folks cool in new york city this summer. ceo ben kauffman will talk new products and the latest promotion. "squawk box" will be right back. beautiful day in baltimore where most people probably know that geico could save them money on car insurance, right? you see the thing is geico, well, could help them save on boat insurance too. hey! okay...i'm ready to come in now. hello? i'm trying my best. seriously, i'm...i'm serious. request to come ashore. geico. saving people money on more than just car insurance. welcome back. it is a big week for the autos. tesla has its annual shareholder meeting. joining us with more on all of this is our very own phil le poe and david shepherd son. phil, why not kick things off with us. these numbers we just got, what do you think of them? >> the numbers expected today for the auto industry in terms of may sales are strong. probably coming in 16.2, 16.3 range. there has been a little bit of chatter it might be 16.4 million. that's basically where we expect it to be for the summer months. chrysler's numbers coming any minute now. throughout the morning we're expecting all of the automakers to report a fairly solid numbers. >> and is that telling you something about the consumer in general? is this a bounce back from some of the weakness with we saw with the winter weather? >> most of that has been made up already. we saw it in march. we saw it in april. it's all made up by the end of may. look, the consumer, when you talk with dealers all saying the same thing, the upper consumer is strong. they have a desire to come up. maybe not pent up demand but a willingness to say, look, i got a five-year-old vehicle, six-year-old vehicle, it doesn't have the same content. certainly doesn't have the fuel economy. now is the time to come in. >> what is the mood? are they starting to get their swagger back? >> sales are up. this could be the best may since 2007. third straight, solid month since the winter doldrums. g.m. is certainly in a bit of defensive position since it is trying to get past the recall, the report this month. they are still putting a lot of overtime shifts to meet the demand. so the mood is pretty positive. >> then you have the whole problem with g.m. and that issue is weighing heavily. tell us what you are expect to go hear this week. >> the report from the former u.s. attorney in chicago looking into this 10-year period now tied to 13 deaths and crashes is going to be tough. it will put the company in for a lot of criticism. not sharing information between different departments and the first really detailed blow by blow as to what went wrong, who knew and how high up the food chain it went. >> phil, how long does this problem persist for g.m.? how quickly can they work on some of these things? what do you think? >> they are already working on some of then. jeff boyer is head of safety for all global vehicles. they have had a slew of them trying to stay more focused in terms of safety. not only with customers but the dealers and within the company. i think we're going the see g.m. on two tracks here, becky, the next six months. you have the recall scandal, if you will. that's going to play out on its own. and you have also get this company has continually had really strong sales. >> is it impacting sales? >> it's not. people are still coming in. traffic is still strong. a slight drop but not a huge one. and i think generally speaking a lot of public looks at this and says this is terrible. this is a bad situation. the bad models were in 2004, 2008. that's not what i'm seeing in the showroom right now. >> the two big issues, first of all, any news about the gigabyte factory, where it will be built. and secondly, the new models. how reasonable would those be? are they seen as a little cheaper models. is this something an average consumer can get into? >> well, you're talking about the mass market one, becky? >> yeah. >> that's coming in 2017. they can deliver better battery performance while also dropping the price. it will be something to see whether or not the public truly embraces an electric vehicle. the leaf and the volt had limited sales largely because a lot of people look at this and say why wouldn't i go out and buy a honda, toyota that can get me 40, 4 the 2 miles a gallon. >> the models they have really the s, e, and x? >> yes. . our producer put that together. i don't think they did it. x is for crossover. e -- they haven't officially said it's the the model e. people are saying it represents the every man car. >> they are considering changing the name of the newest model. even at mid $30,000 price point that's still potentially $10,000, $15,000 to a comparatively priced vehicle. testa, can they continue to sell vehicles in the cache now is people are willing to pay a lot more because of the brand. >> tesla. tesla. tesla. >> telsa. we got it. >> i'm going to ask about the models the next time up. >> when we come back. quirky is delivering smart air-conditioners and ice cream trucks. it is an easy way to cool down this summer. the details from ben kauffman and talk product development right after this. ♪ ♪ (man speaking chinese) welcome back to "squawk box". quirky has teamed up with uber new york city to deliver the world's smartest air conditioner on demand. we talked about this once before on the show. the world anticipates least important ceo campaign, founder and chief executive ben kauffman made a few deliveries himself this past weekend. joining us now is the man himself wearing -- i don't know what that is. >> this is a hawaiian shirt. >> we didn't have magnum p.i. music. we're going miami vice. we tried. >> what is going on here? >> i do whatever the tell me to do. he rocks the hawaiian shirt. i chose to pay homage to him. >> this uber thing, i saw it's on here. >> isn't it awesome? we went out in ice cream trucks. we turned it on 9:00 a.m. saturday. all of a sudden we got an order. we delivered. there another order came. we had over 2,000 requests on uber for air-conditioners just this weekend. >> did you deliver 2,000? >> no. we could only deliver 200 because we only have six trucks. >> what are you doing next weekend? >> we'll be out in full force again. >> is uber paying you? >> we entered a marketing arrangement with uber to get the promotion kicked off. >> if i ask for a car, then i ask for the air conditioner? >> no. you put it over to uber cool and then you hit the uber cool button. quirky ice cream truck pulls up. we will drop it off and keep you cool. >> do you think this will be the best-selling product you have? >> it's off to a great start. >> how much does it cost? >> $300 air companier. >> delivery? >> the whole thing, $300 bucks right to your door. >> and what is this most unimportant ceo about? >> it's the campaign. unlike most companies where ceo has power because at quirky, because we listen to your community, i have none. so i'm giving foot rubs, strapped to trains, doing things for our community. >> you will do a foot rub? >> do you need a foot rub? >> i do. >> really? oh, my gosh. here we go. >> the world's least important ceo. >> whatever you need. all for you. on national television. good old foot rub. how am i doing? everybody okay? >> i can't unsee this. >> hawaiian shirt live on cnbc. >> this is amazing. >> walk ard enough? >> totally awkward. >> you should see the e-mails by people saying i'm very disturbed by your commercials. >> the most unimportant ceo in america. >> is that why you didn't bring socks today? >> i saw you in makeup and i thought, oh, my god, he's not wearing socks. hard dress shoes. i don't even ask anymore. >> some people don't wear socks. it did occur to me. paris. remember the heat wave a couple of years ago. >> paris hilton? >> no, the city. they don't have much air-conditioning. you rent a couple hundred trucks over there and you could make millions. >> 20% of energy in new york city is window air-conditioning. ours is more efficient. >> but you don't go international? >> i don't know if they do foot rubs. actually, they probably originated over there. >> it starts with the feet. >> 6 million window air-conditioners. >> i would think most people have them by now. >> different shelf life. a lot of landlords don't provide them. a lot of the walk ups we drink them. kid that are just moving in and need to stay cool. >> you will draw the line somewhere with what you will do. >> the the world's least important ceo? i have given foot rubs live on cnbc. >> but there's some things you won't do? >> he won't rub your feet. >> will you rub my feet? >> if necessary. i'm in. let's go. >> i'm getting tweets that say i need to do something about my feet. >> compared to the feet i rubbed on national tv, they were pretty nice. they were pretty good. not bad. >> no, no, no. >> we have to go. thank you. we do appreciate that. always fun to see you. we have to go. we have to go. it's been a nice rebound. key jobs data. we'll talk about the prospects for u.s. and european markets after the break. apple making moves into digital health for your home. we'll talk about it. yesterday's announcement from tim cook. squawk box back in a moment. there's this couple in sydney. worked hard. raised two kids. they've never been to moscow. but they sent money there. rented an apartment. all because, they have this 19-year-old daughter who loves to dance. in over 700 cities worldwide, products and services that make a citi client anywhere a citi client everywhere. the numbers are impressive. over 400,000 new private sector jobs... making new york state number two in the nation in new private sector job creation... with 10 regional development strategies to fit your business needs. and now it's even better because they've introduced startup new york... with the state creating dozens of tax-free zones where businesses pay no taxes for ten years. become the next business to discover the new new york. [ male announcer ] see if your business qualifies. new closing highs for the dow and s&p as investors get ready for key data points. we turn our focus to the jobs front and speaks speak to the ceo of paychex. >> apple firing the first shot in a new app war. >> half of our customers in china in the past six months switched from android to iphone. this is incredible. >> what investors sho take away from big announce.s. >> and who pays the highest property taxes in new york as the final hour of "squawk box" begins right now. and welcome back here on cnbc. squawk on the feet. i'm joe kernen. "squawk on the street". today it is squawk on the feet. becky quick is here. >> and i agreed to that. >> i saw it on the things. i thought there was a chance. you know, there was a whole under belly of society if you google. really uncomfortable. because it seems like you enjoyed that. you were perfectly willing to go with that. let's look a feet exhibitionist. i don't know who is weirder, the the feet -- what's it called? >> no peeping tom is called a -- >> peeping tom. >> fetish. >> there is a term for it. >> voyeur. >> i don't know who is worse, the foot voyeur or the foot exhibitionist. >> i'm looking to become a foot model. >> like george. george was a hand model on seinfeld. >> i think that might work. except for a couple of those blemishes that the whole world knows about now. >> his feet aren't bad. >> let's talk about food. >> good idea. in our headlines, pilgrim's pride is increasing to $55 a share from $45. all that may be moot because hillshire says its own agreement to buy pinnacle foods does not allow it to terminate. that's a condition of the tyson and pilgrim's pride bids. we are watching shares of at&t. the company raised its full-year revenue guidance on strong wireless trends during the current quarter. at&t is expected to add 800,000 long-term wireless customers to this is quarter compared to 551,000 the same tool a year ago. edmonds.com is estimating industry wide it will be up 7.3%. edmunds.com is reporting general motors to report a 6.7% increase. toyota, 10.5%. chrysler, 14.4%. ford, 0.9%. >> let's get to one of the biggest buzz stories. dan marino among 15 former nfl players filing a concussion lawsuit. there are at least 300 other lawsuits claiming similar negligence. he doesn't have a significant history of documenting concussions but did have a neck injury late his career. so this is going to make a lot of news. people are going to talk about this a lot, what it means. >> new data suggests they may not actively be participating in the market. e trades 14% in may compared to april. trading has been declining on what a monthly basis. charles schwab and etrade. >> it's not that big from an investors perspective. they are just holding to some of these positions for longer, which is a fair point too. >> it's a big week for economic data. and someone is writing on twitter. quintin the tarantino. i thought of uma thurman. john travolta and samuel l. jackson, it doesn't mean zero when someone rubs another person's feet. >> you going with that? >> nowhere. i got thrown off a roof because he did that to marcellis wallace. he actually did something. you don't want to rub someone's feet who is married. i don't know whether pillar knows what happened. >> she hasn't said anything yet. >> no. she's watching the "today" show. >> adp private payrolls. hans olson just took his shoes off. that's a one-shot deal, hans. rebecca patterson, were you watching earlier? >> i grew up in florida. we never war shoes. >> true. i ain't seen my shoes all day long. what about the jobs report, hans? and then we'll get to rebecca. >> i'll still stuck. >> i can't un-see it either the the whole day is shot for me. >> maybe there's a new cottage industry in foot rubbing. >> you were just so comfortable, just whipping them out and putting them on the desk. >> 4:30 is usually when i get my foot massage every day from the butler. >> consensus is 215,000 for friday. i think it's going to come in for that. and the real question will be revisions for the higher numbers. and the trend is higher. >> as we accelerate does every quarter get better? >> look, i think we will be trending 2.5%, 3%. we'll get a number above 3%. >> we will? >> sure. >> will it get to 4? >> you know, that would be the surprise. if you look at that first quarter gdp number and you look at the components of it and revisions from the first print, what was revised higher? consumer spending. consumption. you will see a catchup in inventory rebuilding or restocking. it has been postponed or destroyed. pretty about story. >> what were you doing when hans was talking? did you have a problem with anything he said? >> i'm a big fan of hans. i am sitting here intensely listening to what he is saying. the data we have gotten out of china the last month is stabilizing. ecb question mark how they price in. it is certainly adding some support to europe's recovery. swra pan looks like it might be in the worst. i think it's good news all around. we are getting four times more firms up versus down. it is good news at the end of the day for corporate earnings. >> you heard the story we just talked about. where is the individual? there's no trades? there isn't much excitement for new highs every day. it is sort of just grinding at 20, 30 points a day. the next move, will it be 200 points up? will we hit 17,000 on the dow. 18,000, 19,000. >> there is more upside for equities. they tend to go hand in hand. with valuations in line with averages it's hard tore post the gain. it's still a grind. we're still holding on that position. we have taken our commodities up to neutral. still being attractive to us, common in the u.s. and china relatively speaking improving. really importantly in this friday's payroll number will be important to watch for this. the fact that u.s. inflation has turned the corner. still low. i'm not waving a yellow flag. but it is ticking higher in america, not lower so you want to start, just start taking first steps in a portfolio to think about that inflation risk. and going neutral in commodities is an easy one to do. >> i was watching a news piece last week. people actually went product byproduct where people are used to getting 10 juice boxes. you now get 8 for the same price. you used to get 24 cookies. every single thing. diapers. every single one in the last six months they have taken 10% out. >> isn't it because in a down turn, in a time you are trying to return from recovery, it is easier to cut what you are giving people rather than cut prices. >> you are right. if you look at the wage growth, hourly earnings. if you look at rent increases which factor into the cpi, which factor prominently. those things are -- the amount that people are paying of their income for rent is up above levels that we haven't seen in quite a while. in some areas it is crowding out other things. you would expect at some point it will manifest broad inflation numbers. we have certainly turned the corner on any talk of deflation in the united states. we have the the workings of a capitalist economy that is doing what it should be doing, right? >> uh-huh. all right. used to be 350 for dr. scholes. we're going to beat this to death. who does the athlete's feet. that poor kid. he went running. >> did he? >> he did, didn't he? >> did he go to wash his hands? >> i wanted to wash my hands afterwards. people are tweeting more corns than a july 4th barbecue. >> you don't have ugly feet. >> thanks. >> feet in general are just creepy in general. it's just feet. >> elbows, knees. >> elbows are kind of gross too. >> coming up, a lot more of my feet. plus, apple giving an update to a system and making new app announcements. pwup where is the tv? the talk, products, innovation and a lot more from the biggest tech company. as we head to break, check out the squawk market indicator. and the feet indicator later too. 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. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. welcome back to "squawk box", everybody. we have been talking auto sales all morning long. chrysler rose 17%, better than 14.4% they were expecting. phil lebeau joins us with more. >> what stands out about the chrysler number is not only they beat the street. jeep. sales, the best ever monthly sales in the history of jeep. chrysler is estimating that the auto sales pace for the month of may was 16.9 million vehicles. that is way above what other people have been estimating both on wall street as well as in detroit and the auto industry. most are saying 16.2, 16.3. chrysler is out saying may was so strong the saoeuls pace will be 16.9 million vehicles. so that's worth watching today as we get the other numbers from the other automakers. >> are there big sales over memorial day? >> strong memorial day. great weather. and five days after memorial day. remember, you get a lot of traffic coming into the showroom. you have five days afterwards to close those sales. we heard from a number of o dealers who said, hey, memorial day weekend was fantastic. i think that's what we are seeing here. if the $16.9 million number is true, that's huge and represents a big breakout in terms of the american consumer. >> do you think this is a sign that the american consumer is back, or do you think this is potentially between great weather that pulled sales forward? do you expect that to continue, jim? >> becky, they didn't pull sales forward. there were not huge incentives. they were a little bit richer. we were a long day from the 2003, 2004 when you go into a showroom and you automatically get $5,000, $6,000 off the price of a car. we are not seeing that now. it is a rather competitive market. sure, in certain segments, certain models, you can find a sweet deal. right now what you are seeing is you have a lot of consumers because of the economy and because of the job situation, a lot of people are saying, okay, now is the time to go out and buy. or more often than not, they are also leasing because those lease payments are so low. >> all right. phil, thank you. the best may sales since 2007. phil below, we will talk to you again soon stpwhrb apple announcing home automation and home tracking software. skroeupbg us is jonathan gellar, founder and editor-in-chief. you were pretty impressed by what you saw. >> i was. amazing event. we spoke a week before. no one knew what they were going to do. a lot of big surprise. >> it was a little in the weeds for people who aren't falling every day. >> it is. that's why you can see the reaction, down a couple of points. it's not taking effect. the reason why, there's no products. no new phones, devices, tv. but they have laid the foundation, the groundwork for things to come in the second half of the year. it's going to be a huge second half of the year for them. >> why is this so important? it's about opening up the system. >> it's about giving customers things they have kind of wanted. they have wanted other key boards, ways for apps to talk to each other. the system got a little old. they opened it up in a secure way. not undermining the safety and security of their platform. >> i'm a huge fan of the keyboard. this is something that does that. andrew has been excite build a bunch of other things. >> i'm psyched about so many things. but the the question i have is whether apple -- when you think about the i cloud and all the things they're trying to do, whether it will all actually work. meaning apple has struggled when it comes to services historically. not only will they have to do this all the time. but in the initial load factor it is going to be tremendous. and what happens during that pivotal three or four-week period where everybody is uploading and downloading images and video to the cloud? >> well, i think it's a great point. the only stumble we saw was mobile me. 2008 or 2009. ever since then, you don't hear a lot about itunes problems, app store problems. they have been really good. and i think they will be ready for it. apple is starting to get better at the things google does. what apple has done with their eco system and being able to leave off what you're working on multiple devices, switch and have phone calls. these are amazing, cohesive things. >> google will come out with its own android app in the next two or three months. >> sure. they will announce it this month. google has been great about the features. it's about refinement. people are on old android operating systems. only 14% are running the latest android version. so a lot of people are stuck in time with the features android announced. >> what do the phones look like? 4.7. rumored 5.5 for another one. it's possible they will go that big. i would expect two new phones and two ipads. they are like desktops. it will be an amazing second half. >> thank you. >> thank you. >> coming up, france to the rescue of b and p. and later, if the small business jobs index from paychex. how the engine of the economy is running. as we head to break, have a look at the footsie. e financial noise financial noise financial noise financial noise welcome back to "squawk box". the french government weighing on on pariba paying a $10 billion fine to the united states. they call such a penalty unreasonable. they have been negotiating with u.s. authorities who are investigating whether the european bank evaded u.s. sapbgszs. wha lot of market watchers waiting for this. then you think your property taxes are high? wait until you hear the numbers for the highest taxpayers in new york and how they stack up against the rest of the country. right now as we head to break, u.s. equity futures. still indicated lower. dow futures down by 35 points. we did see strong numbers from chrysler. ♪ ♪ ♪ ♪ [ male announcer ] great rates for great rides. geico motorcycle, see how much you could save. [ male announcer ] great rates for great rides. ♪ show 'em the curve. it's beautiful. it's more than that... ...it's perfect. introducing curved ultra high definition television from samsung. welcome back to "squawk box"ing everybody. pilgrim's pride raising its price to hillshire for $55 a share, topping the original $45 a share, as well as $50 a share for tyson foods. india's central bank loosen credit. australia central bank kept cash rates steady. big economic data coming up. the focus of course on friday's jobs report. we also have a key rate decision from the ecb on thursday. steve liesman joins us with a preview of what you need to watch. >> they have pwfpb saying next time for a while. i'm going to save on that. tomorrow morning we will have the cnbc fed survey -- -- -- fed aoe tkeulgz. quantitative the easing as well as additional long-term guy answer. >> would it be something they do thinking it was a big success he he here? is there anything that could scare them away of not being able to get out? >> i don't think that's their question. it is their rules and how they would get around with what and how they would buy it. that would be a key issue. >> let's talk about u.s. data. i don't expect to go on three times today to correct the ism reports like yesterday. you can see what happened when we corrected that data from the ism and their mistakes. watch this vehicle sales number. you were listening to phil in the last hour. >> way better. >> not only that, but chrysler is saying the whole country could do 16.9. >> right. >> that would be a massive number. it is the first time in seven years we have had that kind of average. this is right along with that spring bounce back. >> very important to check on the health of the consumer. >> that's one thing. the other thing we want to watch, becky, once they start to sell more cars, this is for their production schedules. it works into growth and gdp. wednesday, that's tomorrow. 210 on adp. international trade should be pretty much in line. watch for the services. 2:00 in the afternoon. thursday, jobless claims. friday, nonfarm payrolls. 210. 6.4%. here's two measures you can see right here. had been going along together the last several years. look at the error rate in the private sector. you can see it over there. >> you took it away from your pike. 38,000. 23,000 in the last month. so pretty close. rapid update. minus 0.8% in the first quarter. and 3.6% for the second quarter. there's the bounce back. do we continue at a 3% level or go back down to the 2% level? a lot of bets on the 3% growth. we will watch factory jobs as well as vehicle production. >> i didn't watch the ism. you had to correct it? >> they came out with a number 35.2. they were plugging the incomes in. he said this the doesn't make any sense. he thought what they did is used the prior months seasonal adjustments for the may data. which it was a big disappointment. the market sold off when that number came out. >> they messed up? >> they messed up. but then we called ism and talked to the ceo who told us that the number was 56. about 40 minutes or an hour they call and say no, it was 55.4. so we had to go on twice with that information from ism. the first number out of the chute was the first national number. i think i said on this program was six of the seven regional manufacturing were reporting to growth. so this showing that growth had decelerated was surprising the market. >> you had to fix it twice. >> big surprise. >> steve, thank you. >> my pleasure. >> iranian oil exports are running higher. cnbc's chief international correspondent michelle caruso-cabrera is here with the details. she spoke with members of the treasury department to find out what's going on. what is it? >> if you look at what iran exported from july 2012 to october 2013 that's the month before we started negotiating with the iranians in november. they were running 1.07 barrels a day. you can see what happened the subsequent months. november to april of 2014, 1.23 million barrels per day. q1, january, february, march, you have 1.36. we would be close to 1.5 million barrels per day. six or seven countries okayed by the u.s. government to be allowed to keep buying iranian oil. they had to find other sources. the biggest buyers were the chinese. there's a lot of volatility. it is a day by day number. what have the chinese done? they have dramatically increased. running $800,000 a day. that's a very, very high number for them. they give two different ones. well, the period of time where we said it would be a million barrels per day was six months. we are already out six months if you count november. if you go to january, which is when they signed everything, we're not there yet. boy, you have to see a huge reduction in the next couple of months. the other explanation is they are selling a type of oil product. >> did we count? >> we seemed to have accounted more. before they aoefd sanctions much. it was 800,000 barrels a day. somehow we have never gotten a clear explanation whether or not there was a legal decree. david cohen is the secretary of treasury in charge of administering the sanctions. cool title. terrorism and financial. is the administration looking the other way? >> we are not. what i would say, though, let the process run its course. we are in the beginning of june. we have more time on the joint plan of action. we will watch to see how things develop over the rest of time. >> i was at a big conference yesterday. they talk about natural security. that's the one bottom line is now sanctions are considered part of -- for a long time people thought they were a failure. now look look. >> and i guess no clarity where we are. this is working on the front with from the a nuclear perspective. >> well, i think what is absolutely clear we can say there was a middle to limp nate any nuclear power in iran. they have given up on that. now it is to what degree. iran will be a nuclear power. will they have arms or just be for energy? >> what about sanctions with putin and russia? >> i asked if he thought putin backing down recently was in response to sanctions? he said it has dramatically hurt their economy. he will leave it to the history books for them to back down for now. >> the glasses match. how many pairs of those do you have? >> i have six pairs of war by parker. it was total coincidence. >> really? >> this guy is loaded. all these glasses now. >> glasses for 100 bucks. >> you have the tie. everything is going. >> do you paint your toenails? >> did you see his toe nails? >> whose toenails? >> you didn't see it? >> you painted your toenails? >> no, i did not see it. >> don't the show people's feet on television. people with feet fetishes. >> he got a foot massage. >> a vision in orange. you're up. >> no, you are. >> i thought you were. the whole orange thing. >> which is the new blue. >> orange is the new black. ceo of paychex and the latest jobs index. and second biggest cost of home ownership is property taxes. if you live in new york, expect to pay five times the national average. that's according to zillow. what pays these outrageous numbers? find out after the break. i want to do something with this day. i want to build something. create something. i'm only one in seven billion, but i know i can make a difference. i'm just asking for someone who believes in me. for over 200 years, citi's job has been to believe in people and their ideas. wherever ideas come alive. wherever you are. the world's citi. new data out showing top property taxpayers in new york. robert frank is here with more. >> yeah. we didn't just do insure. we did new york, new jersey, connecticut. the top property taxpayers in the whole tri-state area. coming up in number three, charles wang. his mansion in long island has a market value of $36 million. his property tax over a half million dollars. number two is a name familiar to those in financial circles. brad jack. his ocean front mansion in fairfield, connecticut is on the market right now. it can be yours for a mere $62 million. the property tax bill is $579,000 a year. >> didn't he run into a problem? he was arrested about a year ago for buying some prescription -- forging prescription things at cbs. >> he's had some issues. and i think he helps pay for the local police with his property taxes. coming in at number one. the number one property taxpayer in the tri-state area is ira renner. this place has a market value of $247 million. it's on 63 acres. main house has 29 bedrooms, 39 bathrooms, an additional 30,000 square feet of out buildings. his property taxes are $649,281. but they're actually a bargain if you look at comparable properties in california. and the formula one heiress pays a million a year. gary winnick 979. you look at this. for the wealthy, they do pay a lion's share of the income taxes and also property taxes. >> but you look at it and it's like cry me a river. >> we are not feeling sorry for them but you look at your own tax bill and you think of paying a million dollars in property taxes a year. that is a big check to write. >> i thought in california it was set up so you -- at one point if you lived there for 10, 20 years you're not going to be paying property taxes. >> the three i just mentioned have recently purchased houses. >> so it's a new house. >> the northeast it takes a lot longer to catch up. now that values are coming back, property taxes will come back as well. >> you did a survey to find out where the most expensive were in the country? >> you look at the actual tax burden, the top two are westchester county where you grew up is number one in the country. >> thank you. >> number two is nassau county in long island. number three is right where we are now, bergen, new jersey. average of $8,000 a year. >> that's ridiculous. >> yeah. >> it not the market value. it is hard to compare these things. they look at how much people actually pay. those are the three counties where people pay the most in the country it's something we don't talk about. people go crazy over property taxes. we talk income taxes. we don't talk about these as much. >> it's tough for retirees. >> there's a lagging effect of two years. so we haven't seen yet the effect of these property value increases the last two years on property taxes. >> and they went down. >> that's correct. >> it was 30%, 40%. >> the wealthy were suing the towns saying you have to reassess this. >> you were immediatealarm bell head, right? like throwing out a fishing line for the weirdest people in the planet. >> we have an affluent, sophisticated audience. i know that. >> do you think there are some among them? >> i think there are. more on the web than tv. >> the dark, under world subculture. >> we'll have more foot rubbing. also jim cramer on the markets hitting highs. what you need to be watching in today's trading session. stick around. tomorrow the on "squawk box", guest host and auto nation ceo mike jackson on the state of the auto industry and the economy. plus, top business leaders from the yale ceo summit. merck's ken frazier, jerry lopez and steve miller. right here on "squawk box". profit from it. financial noise financial noise financial noise welcome back to this is andrew in slow mo getting a foot rub from ben kauffman, in honor of this momentous event. here's a look at some feet moving stocks. foot locker, deckers outdoor, dsw. >> in the box. >> nike and brown shoe. >> and folks he hasn't put his shoes back on because his feet are slimy and sweaty. >> still have the gross lotion on. >> so we're all better off because of that. >> yeah. >> let's get down to the new york stock exchange where we probably grossed out jim cramer. >> star of squawk on the feet. >> how are you? >> well, i loved your piece. i mean allergan is a drug company and they're about trying to solve problems and i think what's happening is a shame and i want to say it, i think more ceos should come out and say it because piatt developed the best drug company, not a poorly run company, the best run company. thank you for what you wrote. important people speak out. >> here's the question. do you think -- this is the piece i wrote in the "times" about valeant and allergan, do you think that allergan is really trying to push back on the transaction to say no we'll never merge with you or part of a negotiating dance for a higher prices. >> i think it's a negotiating dance. it's probably a foregone conclusion. it's look, i just kind of feel i wish that companies that don't have a great reputation about r&d wouldn't go after companies that do have a great reputation because i want drug companies to solve problems, not to be sales forces. >> right. >> how do you play the hillshire situation this morning? >> you got to stay long hillshire. obviously this is a company that is a proprietary company that are to commodity players. they want more aisles in the supermarket. i got to tell you, where does this leave pinnacle? pinnacle was the way hillshire was supposed to get away from being meat that was not natural and organic. pinnacle has bird's eye, but hile shire is amazing. this company was 32 bucks a couple weeks ago. >> the bed and breakfast links or patties? >> we do -- when we're in a jam, we go to summit diner for our bacon there, joe. you know, they've got pretty good rashers. >> all right. >> before you go, apple? quick opinion. >> hey -- >> what did you think of yesterday? >> you know what, since when did people feel that this developer conference is anything other than opening the commona to developer offers to do more stuff. i thought this was a shame that the stock ran in anticipation. this is actually a nuts and bolts meeting and i know that they said they're disappointed. disappointed in what? in the schematic of a machine? enough. the company is doing well. >> jim cramer, see you in a couple minutes. "squawk on the street." when we come back the ceo of paychecks, back in a moment. ♪ no matter what kind of business you own, at&t business experts can help keep it running... seamlessly. so you can get back to what you love. when everyone and everything works together, business just sings. 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. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. this morning we're getting a read on the climate for business with the may release of the paychecks small business index. joining us first on cnbc with the results marty musi, the ceo of paychecks. good morning. tell us about the survey? what did you find? >> we had a little moderation from the april survey, but it is our best three months combined, the last three months, since we've started tracking the survey really back in 2004 when the index started. >> so, what did the number, it was up by how much? >> it was down a little from april but the three months show the strongest growth in small business changing growth in jobs since we started tracking the index. we feel pretty good about it. slow, steady growth continues. >> when you look across the nation i'm sure some areas performed much better than others. where is the strongest part of the nation right now? >> yeah. the western regions are still growing stronger than the eastern regions. i think a lot is the high-tech jobs in the pacific northwest as well as the housing rebound and kind of the arizona markets and some of the areas of the california housing coming back a little faster than on the east coast. >> looks like in the northeast that's where you see the biggest problems. new jersey, pennsylvania, new york. any, new york, and new jersey have foreclosures that take a little longer through the regulatory process. we think some of the foreclosures are just getting done there in the east side where the west went faster and are recovering quicker. >> how do you actually compute this index? what components go into it? >> we look at 350,000 of our clients same-store sales. kind of year over year. and look at the number of jobs that they have this year, versus last year at the same time. so it's the same-store worker count, the growth, it's really the growth in employment in hiring year over year. >> when you talk about small business you're talking about 50 people or less. >> yes. under 50 employees, that's correct. >> and in terms of what these people tell you in the surveys you do and hear back from them, what are their biggest concerns and maybe how optimistic are they feeling overall? >> you see a lot of mixed results as you talk about today. consumer confidence, some numbers are up, some are kind of flattish. i think small businesses still looking to add slow and steady and being still cautious about the environment. but feeling, you know, it's good that it's continuing and it's sustainable growth, but it's still slow. >> i read somewhere today that, you know, this has been a pretty amazing year. washington finally seems to be kind of stepping back. you don't see these big pricing moments we've seen in the past where congress and the administration are kind of going head to head on issues. apparently, though, from what i've been reading today small businesses are still having a tougher time recovering from some of that. do you think that's true? >> yeah. i think small business has to be more cautious and so when they saw health care reform and number of other changes, they're cautious about how it's going to impact them. when they're just looking at health care reform it's changed a number of times. the dates have changed, how it impacts businesses over 50, under 50 employees. i think they're more cautious. they're always a little more on the edge when they're under 50 employees than the larger businesses who can sustain a little more change. >> we do have government jobs report coming out on friday. based on what you've seen with the surveys you've done with this index, do you expect that number is going to be a strong number? >> well, we don't -- this isn't really a predicative model but i would say based on who we've seen it would be around the same number or maybe down a little bit. it's not really a predictor of employment. it's more what's already happened. >> is it strange, though, to think that april was a slightly worse number because i had been thinking the first quarter was a bad number from the gdp numbers we got, from the weather, did it surprise you to see a dip in april? >> well, april was a little bit -- april was stronger and then may dropped a little bit. >> i'm sorry, may, dropped in may. >> dropped a little in may. i think april my mite have been some of the hiring coming out of the storm and a little more rebound there in april. but when you take the three months together, march, april, may, it is the strongest increase in rate of hiring that we've seen since the beginning of the index in 2004. >> all right. we'll take some good news on that. marty, want to thank you very much for joining us today. >> great to be here. >> again, marty mus snishgs thanks, everybody, for a fun morning filled with feet. join us tomorrow. "squawk on the street" begins right now. ♪ move up to your destination ♪ though you may find >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. stocks are cool to the touch this morning after the dow and the s&p seven of the eight past sessions. factory orders in about an hour. ten-year note around 2.55. the story around rates continues to be in europe ahead of the ecb on thursday. eurozone inflation at a

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