Transcripts For CNBC Squawk Alley 20160822

Were in one of the environments where you enjoy, the sun is shining, we enjoy the lovely market and the u. S. Economy is stronger than the rest of the World Economy and most of the u. S. Stock market depends on growth globally so that the weakness in europe and asia are challenging Going Forward that the market right now is tie jesting comfortably but also getting a lot of help because central bankers around the world have been sprinting money and without Corporate Investment in new plant equipment which remains relatively light it just goes straight into stock price which is is great news if youre a stock investor but its not something im counting on for a long, long time to come. It strikes me that for tech this is one of the interesting moments where even though people are waiting for the sky to fall, the stocks have been, you know, throughout the year, moving all over the place, the strong names in tech still seem strong. Nobody is saying like they were back, i guess, in 2006, 2007 and who knows when Silicon Valley will have its hayday again. People are bullish on facebook and bullish on google but nobody is saying that they have lost all of their power. Perhaps some momentum. Doesnt that Say Something about where they are in this market. I do think it does. Tech looks by far the best of all the sectors in the economy and part of the reason it looks good from a stock market point of view is that the pe multiple is in line with the s p 500 even though the underlying Earnings Growth is significantly better so tech is an area of relative value and when the head winds come i dont think tech is going to be able to avoid whatever happens to the market. Whats cool about the situation that we have is among the Largest Companies you have facebook. You have google. You have amazon. All with significantly above average fundamental outlook and yet the pe multiples with the exemption of facebook are in line with the s p 500 and facebook is pretty cheap based on the growth youre getting because the growth has been faster. The earnings have been growing faster than the multiples going up. The case for tech has been in the medium term that every business and sector invest in their own technology and they all out performed their nasdaq. A lot of these guys have become parts of the large cap world. And kayla, the way i look at this is there is established tech which right now is the part were talking about. The part thats driving the market. I think the outlook in emerging tech is what it always is. Theres room for optimism and today we happen to be between cycles. And so in the Venture Capital stage and in the small tech stocks, things are not as interesting as they are in the largest gap. You mention facebook roger. Were watching shares of that today. Out over the weekend saying that the stock could jump more than 20 and the bottom line is profits have been growing and ad sales are strong. They argue estimates up. Pe for next year has come down a touch. And its too pricey at 23. What do you think . I think they were right. So the issues on facebook are really very, very easy to understand. The core business, the original facebook platform is approaching what i would characterize as peak monetization. The loads of ads on the page are close to saturation but the beautiful thing is they have gigantic properties on marijuinm and to me the outlook for facebook is very, very bright and the market will decide is that the rate is larger than a year ago and facebook cant sustain that forever but i do think that if we go back just a few years the estimates were 2 a share. Its been so much greater than anyone expected that the earnings are huge. Its interesting that you say that the core might be maxed out. I wonder if youre factoring in video, live video along with that. The magic of facebook is not only their ability to do m a and pick up these others like whats app and instagram but their ability for the core product. Facebook light on the one hand. Facebook messenger and they seem to be doing the same thing with video. Doesnt that still have legs . It may well. From where i sit as an investor theres so many legs already. Were dealing with a stock that has legs anywhere you go and i dont think you need anymore to justify being an owner. The trick here is that if the market does poorly, for whatever reason we get a set back in expectations or if rates go up and the market takes a bad reaction to that, facebook is not going to be able to do that. What i like is the fundamental story is so good. If you like the market facebook is an obvious name to hold and in the tech sector its the one you hold if youre only going to hold one for high growth. Tensions rising between uber and lift after the reports that lyft tried unsuccessfully to shop itself around at gm, google, amazon and even uber. He told investors he wouldnt pay more than 2 billion for lyft. They responded saying they quoted a classic example of uber using unsavory taxes and lyft is not for sale. So we know about the bad blood between these two for years now. But what do you think of the idea that theyre trying to unload themselves and cant . Lyft has the challenge as the Smaller Player in the merging market. Everyone faces the serious uphill climb because it has been a lot harder to produce Profit Margins in the ride sharing world than i think investors initially hoped and given the amount of investor money that they have all been forced to spend, especially uber, i do think the real reason to be concerned as an investor about the outlook. Uber was really smart to bailout in china. And an experiment that was otherwise that and until these guys show much higher levels of profitability in their court businesses you have to look at the outlook for skepticism for both of them. Realistically what uber says, who cares what they think. They have a relationship with general motors. Who knows if they need to sell out or not. What they need to do is produce profit. If they do that, then theyll be fine. Its clear that travis is approaching this as he always has but the comment about not pursuing an acquisition because of a potential antitrust investigation. Do you think these two Companies Getting together would merit that . Because normally antitrust officials havent deemed two money losing businesses a threat to anybody. Well, precisely. I look at this and i go, i think in his dreams they would come together because maybe that would take some of the pressure off of margins. But at the end of the day, the strat swri which is grabbing as much territory as possible and spending investor money to do that is not a longterm strategy so they do need to find a way to relax the level of Competitive Pressure to raise prices to do a much better job for their drivers but if they stop competing head to head. Thanks as always. Roger joining us from out west. We are getting breaking news on ryan lochte. We want to get to dominic over at hq. So what we have is speedo which is one of ryan lochtes sponsorship agreements they have announced a decision to end their sponsorship of ryan lochte. Theyre going to donate about 50,000 worth of his fee to a save the Children Charity partner for children in brazil and also said in a statement we cannot condone behavior that is counter to the values this brand has long stood for. We appreciate his many achievements and hope he moves forward and learns from this experience. He has other sponsorships as well. Also polo, ralph laurenful among those names being talked about now but this is the first initial action taken by one of his sponsors. Back to you. Thank you very much. When we come back, why theyre keeping the distance from donald trump and stopping by earlier this morning. What the former mvp says about investing and how he wants to be remembered. Squawk alley continues. Americans are buying more and more of everything online. And so many businesses rely on the United States Postal Service to get it there. Because when you ship with us, your business becomes our business. Thats why we make more ecommerce deliveries to homes than anyone else in the country. The United States Postal Service. Priority you bacteria can hide in food and make you ill. Wow announcer but you can keep bacteria from ruining your day with 4 simple steps clean, separate, cook, and chill. The roadchip to food safety starts at foodsafety. Gov. Tnchts democratic Vice President ial candidate posted in a fundraising event held by our next guest. Joining us is paul holland. General partner at foundation capital. Its good to have you back. Good morning. Good morning. Thanks for having me on. A lot of discussion about the fundraisers that Hillary Clinton is going to go to out west in the coming days but it flies under the radar, especially as it relates to the valley. What is that relationship . We kind of like that. Thats one of the reasons we raised our hand and volunteered to do it. We have nine cohosts. A terrific set of friends that helped out. We had hosted tim kaine in 2009 and we are impressed with him as a person and an unusual politician. A much warmer more genuine kind of person. They looked like they wanted to connect and he and i both have a virginia background. His house is about 30 miles from the house i grew up in and a lot of people in common so it worked very naturally. I wonder if tim kaine connects to Silicon Valley in a way that maybe even Hillary Clinton cant in that. He has experience at least being a new her cal minority in some of the kmuns where he operates similar to a lot of folks in Silicon Valley experienced with the diversity there. He had education and a moderate background when it came to financial matters. In the conversations that folks out there are having with him in your event how much did his values impact the enthusiasm you saw out of that crowd. I dont know if you can contrast that. Its a very, very different experience. We were fortunate enough to sponsor an obama event back in that election cycle and he is such an extraordinary personality on top of Everything Else and obviously a historical candidate and so forth. And i will say the difference between those two as candidates is that tim has a lot more experience. A big factor in the selection is the fact that he was the councilman for a media size city but he had a lot of experience and that holds him in good stead and that came through and when you look at our event one of the things that london did very well there and they have two big threads to it. And allow people to others and literally had dozens of educators there and probably had close to 250 people. I think youre right and it flew under the radar but really appealed to the sensibilities and its a terrific fit. Part of what appeals to the voter about tim kaine is the squeaky clean image as far as politics go but the candidate he is running along side has Big Questions over her own personal ethics and how much do you think kaines reputation can cancel that out. Thats a very insightful question. I dont know that youre going to see is going to cancel anything out. And i do think its notable what has been an absolutely vicious mud slinging campaign has chronicled very well. And hes a very good guy. He has lived a good guy and has good family values in materials of his parents and family that he grew up with in the midwest and then of course as you know, his fatherinlaw was the governor of virginia when i was a little kid. He is one of the guys that lead the desegregation of schools. He has all the experience and we chatted about that yesterday and this is within my lifetime. My schools were desegregated. Can all of that go far enough to drown out the course of people saying she needs to shutdown the Clinton Foundation and as a president ial candidate she should not have short circuited in an interview about ethi ethics . I would parse those out as follows. The only thing tim kaine can be responsible for in that discussion is his selection as the Vice President. In the sense that youre judging Hillary Clinton on what sort of Decision Making does she have around these type of things, i think she is going to get an a plus for selecting tim kaine as a candidate and the indication of the direction that she wanted to be able to take things from that perspective. She is very strong in her own right and tim kaine has another set of strengths he brings to the campaign but he raises the quality and the level of the dialogue when it comes to talking about that ticket. How do you keep those supporters appearing to think that its over. I think thats a very good point. Im reading a lot more on politics and things like that around that and i think you guys are covering it. I think that theres just such a negative reaction to trump as a candidate. And its almost an indication that she is trickling down and the elements of people and thats Strong Enough motivation to get people out and focused in terms of looking at it. If i were running one of those campaigns which thankfully im not id be very focused on candidate, electoral turn out in the swing states and if theres a long turn out on the blue side theres going to be a tough run for the trump team. Were going to watch it until then. Good to see you. Thanks. Joining frus the foundation capital. Still to come five years in, how apple has changed under the leadership of ceo tim cook and how the next five years could be very different. Then talk about a big budge bust. How long were you a slave . 30 years. What is your name . Why the Box Office Bomb is perhaps another troubling sign for hollywoods summer slow down. Squawk alley will be right back. We asked him over the next 20 years whether he wants his legacy to be about basketball or investing. Take a listen. Investing. Playing basketball, you know, the focus is always on winning. Winning championships, winning championships, winning championships. Now championships come and go. Theres another team that wins another championship and another player that wins another mvp award put if you want to create something that lasts generations you have to help inspire the next generation, right . And then create something great and that generation will inspire the one behind them and thats when you create something incredible and thats the most beautiful. One thing about kobe bryant is investing is not new to him. He has been doing this for awhile. The point now is to formalize it and have impact on companies in which they see some promise. It will be very interesting to see what he does. His poise off the court. He is trilingual also speaking italian and spanish so he can go all over the world. We have to compare the portfoli portfolios. Magic johnson has done quite well in business as well. Larry bird. Theres a few success stories. My feel as good that kobe will be trying to outpace all of those that came before him. Shaq. He has to catch shaq. Our viewers will send us more we have forgotten here. Another Hollywood Box Office bust over the weekend. Julia joins us now from l. A. With that, julia. Hey, kayla. The 11 million u. S. Box office gross was even worse than the already low expectations. Another nail in the coffin for sequels and remakes. The bomb spent 100 million to produce also pushes viacoms paramount further into the loser category. The analyst is calling their problems truly shocking saying in a report that viacom studio may lose 350 million this year. A year with the biggest gap in studio leaders we have seen this century. And thats compared to 27 and while the Summer Box Office is tracking down, its actually up 5 year to date. So what is going on here . First blockbuster performance is less concentrated in the summer than it used to be with star wars the force awakens and Warner Brothers releasing batman have felt superman in march. Theres sequel and remake fatigue with 17 this summer compared to 11 last year and 13 the year before. Its higher than ever to get consumers to get the trip to theaters with growing competition from seemingly limitless original content and thanks to social media word spreads faster than ever if the film disappoints. So negative reviews like the 28 Rotten Tomatoes ratings can really sting, guys. Thanks. Suicide squad still hanging in there. Well see how it turns out. How apple has changed in five years under tim cooks leadership and what the next five years could bring. And then another edition of speak easy with john harang gwod gary johnson. Dont miss that. Youre here to buy a car. Former french president declaring he will run for president in a 2017 election. He lost the election in 2012 to a sky mark airlines jet making an Emergency Landing in japan this morning after a passengers phone charging battery filled the plane with smoke. Two flight attendants suffering minor burns while extinguishing it. And louisiana is getting ready for put obamas visit to the flood tajhed areas where at least 13 people have died. The states demeanor cattic governor defending the decision to delay his trip until tomorrow. President obama that was on a Summer Vacation had been waiting until the Recovery Efforts began to visit baton rouge. Thats the news update this hour. Back downtown to squawk alley. Carl, back to you. Thank you. Were counting down to the european close a couple of minutes ago. Seema is at hq with that. European stocks starting the week off in the red. Some of the indices clawing back here. An active discussion around the direction of the price of oil after the over 20 gain sibs august. Were looking at wti crude trading on 47 in todays trade and no surprise some of the biggest losers are in the energy space. Take a look at stat oil and rio tinto all trading in negative territory. Down 2. 7 . One bright spot is syngenta. They cleared the take over of the Worlds Largest pesticides maker. Were moving it to this deal that would be the largest foreign acquisition ever by a chinese company. This also follows the takeover of the italian tire maker for 8 billion last year. Up 11 in todays trade. Meantime in a show of european unity, leaders from france, germany and italy are meeting today following the u. K. s decision to leave the european union. Theyre all widely expected to formulate a game plan around how to respond to the fall out from the brexit and the recent slump. So look for that commentary to come out today as well as through the week. Of course one factor not helping european leaders is the upward swing in the wrur row now trading at 113. Morgan stanley sees the euro climbing to 118. Ubs calling for 116 against the u. S. Dollar. In january analysts were calling for the euro to trade in parody. Keep an eye on currency and the change in forecast. Its primarily due to the assumption that the fed will keep rates lower for longer. Perhaps well get some clarity later this week when janet yellen speaks at jackson hole. Thank you. This week tim cook marks five years as apple ceo. Josh joins us with more on that from san francisco. Josh. Well, john for investors the first question is this, how has apple stock performed under tim cook . So over the past five years its up some 100 and that does easily beat the performance of the s p 500 and the dow though it does trail the nasdaq. Credits cook with what he calls the ceos operational excellence. For the last five years he has done everything he needed to do and really stuck to a game plan that we think was in place before he took over. So that piece of it he has done an excellent job. Hell be judged by the success of the products apple sales and analysts say its a mixed record. Theres been home runs like the iphone 6 that drove big jumps in Revenue Growth from 7 in the fiscal year 2014 to 28 in 2015. As for the watch the verdict is still out. Apple has sold 14 million watches generating 5 million in sales. When i talk to cook hes confident about the potential of the ipad pro and the enterprise but now it only accounts for 12 of total revenues. Cook also expanded the companys business and in the past Year Services revenue jumped to some 23 billion. Thats more than facebooks total annual revenue. Whats on the radar looking ahead . They expect apple to leap into augmented reality expanding and enriching the iphone experience. That is a 3. 5 trillion market. Thanks and for more at the helm of apple could possibly play out, joining us is the founder of the collective and also a member of ypo and exclusive partner with 24,000 executives worldwide and joining her is a technology analyst. Thank you both for joining us. There is also a controversy because hes being compared to steve jobs. Maintaining its margins has been impressive. Could he have done any better . Tim is a great steward of the company. He has taken excellent and responsible care of the products, the people, the customers and the shareholders and also a great missionary but he hasnt been able to do revolutionary products in the last five years. The ipad arguably has not filled out the expectations that even steve jobs had for it. Apple watch hasnt panned out yet and neither has apple tv but theyre still in the early stages. Is it too soon to call that tim cook hasnt had the midas touch. Its sorry. Thanks. So he needs it. The stock has nearly doubled since he has been there. But most of that during the iphone 6 launch and in terms of coming up with a new product category, under his management time. We have not seen success. Its slowly getting it off by the smartphone. And many of the product versus done well outside of the iphones for apple. How long will we be asking the question what will steve jobs have done with regard to tim cook. Hes been at the helm for five years. For how long will that shadow follow him . That will always follow tim because theres nobody in the world like steve was and he was a real product and market visionary and its impossible to replace him. Its just not possible but he is doing a good job. He built a Great Company but hes not a visionary. By one thing that tim cook has done that critics over the years have said is establish partnerships with companies that have been foes of apple, sis coe, sap, even some in the health care space. And if we look at the entire space its where everybody is competing with each other but at the same time, its done well for apple in terms of the enterprise. And well severe the next few years they should pay off more dividends. I wonder, we looked at the chart of the stock. 114 gain since the first day, do you believe that a visionary put it would have elevated the stock to higher levels. Unfortunely and this is the curse that steve put on apple. People expect apple to come up with insanely great revolutionary products. So unfortunately for apple that expectation will always be there. So yes. It seems unfair to me when you look at the iphone today its so different from the iphone of five or six years ago. Its been reinvented with touch id. They took on maps themselves. Tim cook remade the team under really difficult circumstances. They had every incentive to leave. And Bob Mansfield keeps coming back. Cant we say a job for tim cook in terms of the letter grade . Isnt this an a . Its an a. Absolutely. Done a great job in executing and keeping the team together. Done a great job in coming up with new releases of iphone that kept up well and so execution front absolutely gets an a. Its just that being on the innovation front is where we think he needs to move himself. Its a task that hell be done with. And thanks so much for joining us discussing tim cook after five years. A little bit lonely. As he says. When we come back. Gary johnson sits down with john harwood and why the government may be picking up the tab for your next drive with uber when squawk alley continues in a moment. Coming up at high noon on the halftime port, Keith Meister joins us live and exclusively. Plus his take on several big name stocks in his portfolio. Shares of facebook around 44 in a year. Still has big upside. Were debating that story and steve wynn doubles down on macau. Thank you very much. Gary johnson has a tough road ahead. Number one on his to do list is getting into next months president ial debate. John is in our Nations Capital with more on that. Both halves of the Libertarian Party ticket are former republicans. The republican nominee donald trump doesnt represent most republicans. Just a base that believes things about immigration that arent true. 30 of republicans believe the scourge of the earth is mexican immigration. Whats the reason for why i dont have a job . Well, make mexican immigration a scapegoat for that. I understand that sentiment and theres a logic to the fact that theyre coming over and taking our jobs. Theyre living off our welfare system when the reality is anything but. Theyre not taking jobs that u. S. Citizens want. Theyre the cream of the crop when it comes to workers and contributing to the economy. Do you see trump as a freak event within the Republican Party or does his emergence Say Something about where the Republican Party has gravitated to. It is the key to really breaking out but in any case johnson says he thinks that the meaning of 2016 is going to be the demise of the Republican Party as we have known it and the rise of the Libertarian Party as a major force in american politics, carl. It sounded like he was in a way running as a republican. He seemed to be retaining some of that republican feel. Well, sure he is a former republican. They served as the governors of new mexico and massachusetts in the 1990s. And part of his opening is for republicans that cant stomach donald trump. He is also drawing democrats and if you look at the polls he draws evenly on both sides. He draws support for the lee fwal status of gay marriage and support for legalization of marijuana. All of that draws things on the left as well as his limited government. The third candidate from history serves to fracture an existing vote. Its dwindling as we get closer to the election and try to carve out a chunk of the Republican Party that they can turn as the new base of the libertarians. That full interview on speak easy. Always good stuff. We appreciate you bringing it to us. When we come back more local governments picking up the tab for your next ride with uber of lyft. Well discuss. In a first for california and part of a growing trend across the country a Public Transit agency plans to begin subsidizing fares for lyft and uber drivers. Joining us from one market in san francisco. Great to have you. Im curious about the origins of this project. To save costs . Eliminate traffic . What do you hope to get out of it . Its both. Traditionally in Public Transit we dont service low density suburban areas well. And so what ultimately happens is a reduction in service or no service at all from Public Transit, and a first and lastmile solution, really, evaporates for residents in that area, and these first and Lastmile Solutions are needed to access Public Transportation. The wheels on demand discount is a demonstration project were embarking on in which we provide a simple discount to Transportation Network companies, much like weve done in the past with taxicabs to provide that transportation solution. What do you know about the demographics of those areas, michael . Because on one hand you think it would be easier for a younger techsavvy commuter to benefit and take advantage of Something Like this, versus a boomer, might not have the downloaded app and not as dexterous at using it . These areas where were going to introduce this demonstration project, more than 50 of the population leaves the trivalley each day, and commutes. So theyre heavy into Public Transit usage. Michael, im wondering how much influence do you have over the way lyft and uber developed logistics in your area . Outside of this country in particular, over in china, actually running buses and vans along certain routes. I mean that would be more efficient, perhaps better for the environment along busy routes versus just having cars but im not sure theyll go in that direction on their own. How concerned are you about that . Not real concerned. I mean, my biggest concern is the holistic Transportation Network and we have good Public Transportation with our rap it bud line in the Wheels Network and we have the b. A. R. T. System, certainly in the bay area within these project areas. Our main concern is really just getting people to those services in areas where we can provide service effectively and efficiently. Michael, thinking of all the constituencies threatened by the advent of ridesharing. It was cab drivers in early days, increasingly about bus drivers, eventually auto dealers and parking garages. How are municipalities supposed to convince those parts of the city theyre not being left behind entirely . I think you need to take a holistic approach at viewing how we will use the discount with the Transportation Network companies. I mean, there will be three wins in involved. People get to where they need to go, and get on to good, quality Public Transit. Theyll about decrease in congestion as people use the ridesharing option, and then finally, Public Transit wins, because more people are using Public Transit. It is a oneyear test beginning in midseptember. So well have to have you back on, michael, to discuss the progress of this. Interesting stuff. Appreciate it. All right. When we come back this morning, siri is getting an update thanks to Barbra Streisand. Squawk alley will be right back. [announcer] is it force of nature . Or a sales event . 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Sixtyfive may get all the attention, but now is a good time to start thinking out how you want things to be. Go long™. For the rich and famous, tech support is apparently pretty easy. In an interview Barbra Streisand said she was frustrated with siri mispronouncing her name and called tim cook. He agreed with the change, a new update september 30th. Jon is working the phones and about to do a quick demo. Siri, who is the lead actress in funny girl. Funny girl stars brar b s streisand and walter pidgeon. Streisand with a softer s . Isnt that the point . I dont know. Siris going to tell us soon. Befuddled arrangers for years. And havent made her try quintanilla or tausche. Perhaps what we need to do. All easy to pronounce, jon fortt, easy to pronounce. Debating things like this on live tv. An interesting roundtrip into positive territory, middle of the session. Back down, oil overriding driver of action today on the stronger dollar. But we have a lot to look forward to during the course of the weeks. Housing data, revisedq 2, gdp, and, of course, leading to the main event. Workday as well and cloud names left to report. H pchlp inc. , intuit reporting,a big quarter. The taxes that matter the most. Interesting data on Small Business and how thats going in this country in particular. Could play into the way people think about the election. And luxury retailers reporting as well. The bulk of the big names a couple weeks ago. Tiffany and in other N International names, how the Global Consumer is doing and whether still spending on u. S. Stuff. Reeling over stuff the economy is closer to fed targets than some expect. Echoing what dudley said last week. A hawkish veneer to allfed speak trying to keep the market off balance. Traders said three on the fed whose commentary matters. Dudley, fisher, the one we get on friday. Her turn later in the week. So happy monday. Over to headquarters, melissa lee and the half. Welcome to the Halftime Report. Im melissa lee in today wore x for the hour. We start with a Halftime Report exclusive. Melissa, thanks. Thank you for joining us here at cnbc, at our studio for the first time. Get to topical stuff here. You were on the board of Williams Companies for almost two years but resigned earlier this summer saying perhaps ominously you could be more effective as a shareholder off the board than you could on. What did you mean by