Transcripts For CNBC Squawk Box 20130815 : vimarsana.com

Looks like almost a half a percent drop for both the ftse and the dax in germany. In the u. S. , a packed Economic Calendar today. At 8 30, weekly jobless claims. July cpi and empire state survey. Then at 9 00, tick data. 15 minutes later, july industrial production. At 10 00, the philly fed survey and the National Association of Home Builders survey. And the consumer is in focus once again today. Walmart and kohls among the names to show results before the bell. Well be hearing from dell. This is a little bit of a surprise because the pc maker was originally scheduled to report results next week. No shortage of numbers to be running through. Lots to do today. In other economic news, u. S. Home foreclosures on track for a sixyear low. Foreclosure listing firm realty tracks shows 30,000 homes last month, thats down 31 from july last year. Though up 4 from june. Demand for physical gold soaring 53 in the Second Quarter. The World Gold Council reports the jump was led by opportunistic buyers in emerging markets at a time when the metal suffered record quarterly losses. India accounted for the biggest share, followed by china. Looking at gold this morning, up 5 bucks, 13. 38. A bit of Corporate News for you this morning. A u. S. Judge saying the California Attorney Generals Office can proceed with a lawsuit that accuses Standard Poors of misleading investors by inflating credit ratings. A Court Finally showing the judge rejected the rating agencys effort to dismiss that case. A little bit of other legal news this morning, the jpmorgan executives who supervised the traders at the center of the london whale scandal unlikely to face any charges. Yesterday, they brought criminal charges against two former traders. The complaints only make passing reference to the traders former bosses and neither former chief Investment Officer iona drew nor achilles mackris are mentioned by name. It refers to them by title only and says it puts pressure on subordinates to deal with the high degree of risk being taken on the portfolios, derivative trades that led to the losses. A little pressure but not this goes to the point you made the other day that we discussed, it is hard to charge the people above you with fraud if the people below you are also being charged with fraud because arguably the people above you were defrauded. Right. It is just interesting to see whether this was a firm wide situation that theyre looking at or whether these were rogue traders or someone who rogue traders are a rogue group that was acting in one way and trying to cover it up on the books in another. It now appears there is a criminal probe going on into the firm. So the fbi just looking at the firm, that thats not looking at a sort of system wide problem, thats looking at the statements and other things that were made publicly by people like jamie dimon, Doug Bronstein and others after some of the whale issues became public. Made to investors. To investors and they tried to tamp some of that down. The firm wide stuff would be civil. No. Thats the interesting part. Im confused by that. If it is criminal fbi and justice are looking more on a criminal basis at that. Unclear to me. At jpmorgan . At the firm. Not at individuals, not at jamie or Doug Bronstein or the individuals, it is at the firm. But they have not done this in the past, is that right . Right. What happens when if a firm, an institution like this were to be found criminally whatever in this case . Thats a good question. I have an idea on that. It is an awesome question. You could say does it turn into drexel and all of a sudden everything stops. They cant do business anymore. I find that astounding. Look at sac capital, the firm has been indicted. You can argue that firm maybe i would have thought if you thats a different thats a different regulatory regime, though. It is a it is not a bank h d holding company. You go back to what eric holder said, too big to jail. Arguably as a firm it is because if you think about all of the unintended consequences that Something Like that would create im still a little stunned to have things like that being tossed around by justice or fbi or anywhere else. It is hard for me to imagine that a company like jpmorgan is being considered in the same realm as some of the others. I want to just stress that im out of my league on this, in the sense of understanding this notion. I do know that banks have avoided criminal charges and gone out of their way to avoid that, because there is something to do with their ability to continue operating. I dont know enough about this. It makes me uncomfortable. I cant even believe this is the situation where you would be putting that in the same sentence. Being very tough. I think thats whats clear. That is. Thats a new regime out there. Thats a new regime. The question about whether youre too big to jail and also whether people actually stopped doing business with you is an interesting one. I would have thought, actually, with sac, for example, they have institutions, Goldman Sachs has come out, were still doing business with sac. But the idea that you would stop doing business with any of them just because there have been charges that have been made without anything without being indicted. Thats what happened. Arthur anderson, before they were convicted of anything, people said, we just cant have you as our auditor anymore because you are indicted. We cant, you know, were a fortune 25, 50, 500 company, we dont want to do witness with you. And thats what put them out of business. Maybe the world also changed. Lets you and i and andrew and becky do more work on this and figure out what these are. Ive come across this in my reporting career. And done some work on this. But the rules have changed dramatically. Right. And it is a different world right now. A post dodd frank world and there is a lot going on here we have to figure out. Lets get to whale watching of a different kind. Here are a few highlights. First up, bill Ackmans Pershing Square has a new stake in air products. We talked about this. The company is saying this, but we have talked about it here before. The firm is also dissolved its stake in mondelez. David einhorns Green Light Capital cut stakes in cigna, gm, Computer Sciences and marvel technology. It also took a stake in riteaid. It increases its stake in aetna and dissolves stakes in microsoft, hess, barrett gold, western digital, seagate and cvs. Dan lobes third point dissolve stakes in hess, spider gold, apple, delphi, and advi. What is that . I dont even know what that is. It cut its holdings in sprint, delphi, mylan labs and hartford. Took new stakes in thrm thermo, cooper tire. Trian had new stakes in dupont, gnc and sothebys. George soros added 2 million shares of his stake to jcpenney. Right now, lets get a check on the markets this morning. A quick note, Berkshire Hathaway coming out with its numbers now in terms of its stake, cut its stake in American Express. Wale go throu well go through it and give you some of the details as we peel away. Okay. Lets get a check on the markets. The futures are at this point indicating a little weaker. Dow futures down by 37 points. S p off by 5. You have oil in this morning and right now oil prices are up about 93 cents to 107. 78. The tenyear at this point is yielding 2. 735 . And the dollar right now, take a look, youre going to see, dollar is down against the euro at 132. 84. Also down with the yen at 98. 07. While were on the list, berkshire cutting the stake in wells fargo by 30 . By 30 . By 30 . Do you think thats a rebalancing . I dont know if thats a rebalancing. Look at the shares of wells. They have gone up and could be a rebalancing. Hard to say. There is that and then also the cutting of the stake in amex. Both things could be i would be stunned. Thats what it says. Were if there is a headline from reuters Berkshire Hathaway, cuts stakes in well do a little bit of work on this in the meantime. At 13 . On amex. On amex, right. Lets look at global news. We started bringing you this story yesterday when the numbers were smaller. Now the death toll in egypt climbing to 421. The Muslim Brotherhood pledging to fight back. Well check in with reporters on the ground in the next half hour. That difficult situation there. Time now for the Global Markets report. Carolin roth is standing by in london. How does your morning coming on to afternoon look today . Good morning to you, guys. We are seeing a little bit of a pullback in terms of core european markets. Having said that, it is nothing to be too worried about, because volumes are pretty low. It is a holiday across many markets in europe today. And we have had six weeks of stellar performance for the european markets, so, yeah, give the markets a chance to breathe a little bit and take some profits. The smi is a little bit of an underperformer today in relative terms. It is down by. 8 . Dragged down by earnings from zurich insurance, this is one of the Biggest Insurance Companies in switzerland. Stock is up by 3. 4 . It was hit by natural catastrophes, bad weather essentially, in north america. But also in europe. Net profit missing expectations for the Second Quarter, and companies also pretty cautious about its outlook. Last but not least, i want to show you what is happening in the currency space. Sterling dollar at a twomonth high, sitting at 155. 78. Getting closer and closer to that 156 level. This is on the back of better much stronger than expected retail sales for the month of july. Certainly benefitting from that heat wave we have been seeing in the uk. Euro dollar pretty resilient at 132. 82, back below the 133 level. And dollar yen seeing a little bit of softness at 98. 07. This is because the finance minister in japan pretty much quashed hopes of that cut in the Corporate Tax rate and this is what the markets had been hoping for. So we are seeing some yen strength. And on the back of that, we are seeing declines, pretty big ones, actually, in the nikkei 225. Back over to you guys. Thanks very much, carolin. Becky, are you still looking . Looking for some of these. Cisco shares, they are under pressure today. The tech giant giving weaker than expected revenue guidance for the Current Quarter. The company also plans to cut 4,000 jobs or about 5 of its workforce. Joining us right now is simon leopold, Raymond James Communications Equipment analyst and thank you very much for coming in today, simon. Thanks for having me. They made a lot of talk about different things, actually beat expectations slightly for the Current Quarter. That stock was down 10 in the after hours on some concerns about what is happening in the Current Quarter, particularly with asia. What was the big concern there . Yeah, so i think there are two elements to the concern. One was the lower guidance for the october quarter. But i think the bigger surprise was the comment about retuesddi head count, 5 , 4,000 people. They refer to it as a realignment, and anytime with cisco reports we look at the choice of words pretty carefully. And in what we think theyre doing is trying to control costs. It is not a situation of trying to reduce costs or cut costs. But i think this is going to make investors nervous today. Why is that . When you hear realignment, hear i hate to say it, but wall street at times, when they hear about layoffs, they cheer on the news because they think it is going to be improving the cost structure. Why is it such bad news when you look at cisco for this . Cisco is a tech bellwether, an indicator for it spending, tech spending overall and the other word that came up on the call that was interesting is inconsistent in terms of John Chambers discussion about the macro recovery. And so i think heading into call, all of us, myself included, were pretty optimistic that things were going to be sounding a little bit better. And this did not support the idea that, hey, the world is getting better. It is choppy. Choppy, particularly in asia . Yeah, so they did bring up asia. Cisco had issues in china for some time. Thats not new. But india sounded good, but that was probably the only bright spot in asia. Japan in particular was tough. A year ago cisco had very Good Business in japan. So theyre facing a tough year over Year Comparison there. That is an economy that certainly took a toll this quarter. Is this more concerns about cisco specifically or the health of it spending overall . I believe it is some of both. The aspects of cisco specific are share loss here and there, competitiveness, for example, set top boxes for cable tv. But it is also a reflection on the overall macro, cisco is so big, so diverse, it does reflect on what is going on in tech spending. The overall macro, does that mean in addition to being concerned about cisco, youre concerned about other companies today too . Somewhat. Somewhat. I dont think that the macro recovery is turning around. It is just a very slow painful recovery. And so i think heading into this, we thought things were going to sound a little bit better. And theyre not. But cisco is looking at, you know, flattish subsequential guidance, not calling for a decline. They talk about controlling expenses, not cutting expenses. So these are really, i think, issues of tone more than a sharp decline. Chambers made some comments yesterday where he was saying Something Like he sees cisco really returning to be the top it company out there. Would you agree with that, or no . I still dont quite understand what he means by that. And it has been discussed for some time. I think when he talks about being the top it company, hes talking about position and sentiment, not necessarily being the number one revenue generator in all it because there is some really big players in that space already. So what do you do with the stock today . I hate the phrase buy on weakness. But i remain a buyer of this stock. We maintained our price target at 30. To us, cisco is not an investment that is a growth story. It is very much about the earnings. And our earnings estimates really didnt change. So why should our price target change . And so we do think that trading oriented folks may sell off the stock. Were not surprised to see it weak today. But from an investment perspective, we continue to like it, and we continue to be buyers of the stock. All right, great. Thank you. Simon, thank you very much for joining us today. Programming note for you as well. We will have cisco ceo John Chambers, hell be joining the show later this morning at 8 40 eastern time. Make sure you join us again then. Want to talk about the other headlines before we go to break or go to im told were going to wait. Well wait. Well wait until we get back. Changes on Berkshire Holdings. Well come back after the break with those. Coming up, why an economist is changing his opinion on deflation after 20 years. But first, as we head to break, lets check on the National Forecast with the weather channels reynolds wolf. Good morning, reynolds. Hey, good morning, guys. Lets look at the forecast around the country, even in parts of the tropics, were watching this one area near the yucatan for potential development. Not named yet, but going to be five separate aircraft that are are going to fly into the system and take a peek at it. Meanwhile, the chance of more showers and thunderstorms across the southeast. More rainfall for parts of the upper midwest and cool and dry for you across the northeast. Life is beautiful there. No problems to really deal with there. But more rain in parts of the southeast could be a problem. Scattered thunderstorms in the Central Plains and plenty of sunshine out towards the west. In terms of travel today, look for potential backups in miami, also atlanta, los angeles, a mix of sun and clouds, maybe a little bit of a rain layer, otherwise, no major issues. Thats a look at the forecast. We have so much more coming up around the corner on squawk box. Welcome back, e everybody. We have a wiquick note for you. It looks like some headlines are wrong. Were redoing the math now, well get you an update on the latest filings from the s. E. C. Now it is time for the executive edge. This is a daily segment that focuses on biffi igiving busine leaders a leg up. David rosenberg, frequent guest here, says hes finally giving up on his 20yearold deflation call. In a note published by Business Insider, rosenberg argues the deflation camp is way too crowded at this point. He suggests the fed chairman bernanke will be successful in his antideflation drive. And you combine that with an economy with less and less capacity, hoonly time before prices rise again. If youre an issuer and the time for refinancing is now, not later. If youre an investor, dont spend too long debating whether hedging your portfolio before the prospect of longterm Rising Interest Rates and that environment. Even as Central Banks continue to keep shortterm policy yields at the floor. Gentlemen, this is a big call for rosenberg to make a transition like this, it is something we should probably set up and Pay Attention to. Im not an expert. Im a student of steve liesman. Let me say he and others have been calling for this moment to happen for a long time. So im not this does not feel like the call. I remember him i thought saying something similar about a year and a half ago. Many people making this call. The problem is you got to make it the right time. It will happen, just a matter of when. Steve . I think hes sort of set up a, what do you call it a White Elephant here. I dont think the deflation trade is that crowded. I dont see so many people on the fed over on that side. What about bullard . I think there is concern out there. I think there is a bit of a pause created by the inflation numbers, becky, but i dont think there is a whole lot of action and i dont think you want that line in the last fed minutes, though, put in because of bullard, i believe. Right. Because theyre watching it. There is a concern about it. The numbers have come down. It is something theyre watching, but it has not been a reason for action. I dont hear a whole lot of fed people saying this is something were going to act upon, something were going to watch, something that gives us pause. One of the interesting things about rosenbergs comments is the notion of capacity destruction. And thats another thing on the other side that is worth watching. One of the theories of the 1970s is that why fed policy was wrong was that capacity was being destroyed in a way we werent measuring at the time. It is an interesting idea that is out there, all of a sudden what we think is all of this excess capacity in the economy is much smaller and the way the policymakers arent really paying attention to. So thats something for i like to talk to david about and ask some other folks, something that at a time like this, you have weak economic demand, factories are shuttered. Watching capacity is a big part of the inflation. While were talking about the fed, lets stick with the thwait. An opinion piece out there today worth reading. Sheila bear criticizing the fed. She writes in part, thanking the fed for avoiding another Great Depression say little like thanking a doctor for successfully removing a malignant tumor after misdiagnosing it and letting it grow for many years. Wow. Bernanke has learned from the Great Depression, she writes, but has he learned from the feds more recent errors in deregulation . To be sure, the regulatory culture of the fed has changed under bernanke. It has supported stress testing to bolster big banks capital cushions, yet much is left undone. Wow. Thats tough talk. But bear also goes on to smack the fed for failing to finalize rules that were called for by dodd frank. Gentlemen . Ill defer to professor sorkin. I dont know where to start. I like sheila. We love having her on the show. Shes part of what might be described as antiwall street, antifed inc. She has made a sort of mini career over the past several years sort of throwing darts. Thats what she likes to do. I think shes right, there is still a lot to be done that has not been done. However, to suggest somehow ben bernanke, as i said a million times, i think bernankes history will look fondly upon what he did during the crisis and frankly i think might even look fondly about what hes doing now. I think thats obviously a b bigger the financial crisis. I find it odd shes taken this tact. I understand sort of where shes coming from. But sort of to me at this point a strange tact to take. Ill offer one bit of support for sheila here, which is this, i dont think that shes right now, but i believe shell be right in the future. And the reason is because the banks will fight these rules forever, but the people on the other side, which are a disparate group of people, sometimes theyre consumer folks and sometimes theyre other parts of the financial industry. They dont have the staying power to fight these things. What happens is, when i was a county Commission Reporter in sarasota, guy would show up to build a community and 700 people would show up to protest it. The commission would table it, and then six months later the developer would come back with no publicity and they would approve it. Thats not thats not happening now. I think there is a big light on it. But it is over time that the banks wear down the regulators and thats when we should be worried. I dont think sheila is right now. I think shes right to raise the red flag about this and shell be right in a couple of years. All right. Lets talk about an article in the financial times. It looks at u. S. Companies targeting europe to reduce taxes. The firms in focus relocated to the continent after completing takeovers there. Suggesting the companies are set to save hundreds of millions of dollars in taxes as a result. In one example, pharma group pergo said its acquisition of elan will lead to freedredomici in ireland. Wow, guys, with all this talk about what needs to happen with corporate rates, this puts the spotlight on where you stand to lose on this. Is the spotlight on the problem in my mind, which is to race to the bottom. And unfortunately we can lower our rates to whatever number you want, and i argue we should, however, it is not clear to me you win the game then. The economics of this are that you shouldnt really tax the company. The company ends up being just a tax on the consumer. That you can tax the shareholder who gets the dividend you can tax the executive who gets the salary and you can, you know, there is a good argument for zero and ireland and other places in europe are finding it is a good way to attract people, create salaries. The inefficiency of the Corporate Tax is manifest in this story. Yes, it is. Tells you a little bit about that were fighting and what were dealing with out there. When we come back, were going to talk more about Berkshire Hathaways latest filing on investment holdings. We have been running through these numbers. All those headline before from reuters were wrong. There is not a drop in the stake of wells fargo. There is an increase. Well bring you the full story right after this. First, awe he as we head to br at yesterdays winners and losers. If youre serious about taking your trading to a higher level, tdd 18003452550 then schwab is the place to trade. Tdd 18003452550 call 18882849410 or visit schwab. Com trading to tdd 18003452550 learn how you can earn up to 300 commissionfree online trades tdd 18003452550 for six months with qualifying net deposits. Tdd 18003452550 see how easy and intuitive it is to use tdd 18003452550 our most powerful platform, streetsmart edge. Tdd 18003452550 we put it in the cloud so you can use it on the web. Tdd 18003452550 and trade with our most advanced tools tdd 18003452550 on whatever computer youre on. 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[ static warbles ] good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick with Andrew Ross Sorkin and steve liesman, in for joe, who is still on vacation. But we are going to hear from joe in 20 minutes. We have been combing through berkshire eighthhathaways 13 f morning. What reuters had been reporting before was incorrect. Lets run through some of the numbers now. The Berkshire Hathaway stake in American Express is unchanged. Earlier reuters had reported that it was down by about 13 . Berkshire stake in wells fargo is actually up by 1. 1 , a headline that moved earlier on reuter said it was down by 30 . Thats not true. Cocacola is unchanged. The stake in cocacola, reuters headline earlier, suggested it was down 45 . As we talked about on the air, none of that made sense to us, wanted to go through and run the numbers. A time consuming process. You have to go through with a calculator and add them all up. This is the actual situation. American express unchanged at Berkshire Hathaway. Wells fargo up 1. 1 . Cocacola unchanged. Want to run through some of the other numbers, there are some issues, craft and mondelez looks like they have dropped their stake by 88 and kraft and monday louise probably not a surprise given the can i point out the most accurate thing this morning has been your intuition about what buffett is doing. When i read that headline and you said, that made no sense, and im looking at a headline, im, like, which do i believe, now i know which one to believe in the future. If you follow him, watch him over the years, you know you can change the stake like that. He did drop the stake in kraft and mondelez to 88 . Dropped shares in moodys. He made comments on the air before that wouldnt surprise you seeing some of the moves. Pretty transparent about that. He wouldnt Say Something now and the next quarter, when is the last time you talked to him, not too long go, right . The last time we had him on, we had him on in depth when we were out, when andrew and i were out at berkshire annual meeting. And still high on the financials was part of what he was saying. Particularly on wells fargo. Hes not allowed to buy more shares of American Express. When his stake goes up, it is because they buy back shares. My suggestion at the time, maybe he was rebalancing after a rise in the stock. That would be a reason. But thats obviously not what happened. Im interested i find the mondelez stake interesting. Only because it was in play. It is in play. And nelson peltz who is in there, trying to make the case that it needs to merge with pepsi. Pepsi is like, forget it. Theyre saying talk to the hand. There is interesting things going on there. I think overall it is fair to say, you tell me, youre the buffett watcher on this, that he was not particularly happy with that i dont think he was thrilled with the mondelez spinoff. And with some of the other purchases that were made. Hes talk ed about that on our air. I dont think were putting words in his mouth. You look at what he said, he wasnt thrilled about it. How does can we put buff net c et in contact with ackman. He doesnt say anything i want to see a side by side comparison. I will try to channel and becky can probably correct me, i think if i like the business, i buy the business. If i dont like the business, i sell the business. Im not trying to change the business. Right. Thats can i ask a question, though . With buffett, isnt there this 18 zone that he gets into. Hes either, like, in the smaller zone or owning the company, does he go in there and say 18 and then kind of press for change like that . Does he do that . I dont think so. I wouldnt call him an activist investor. No interest in changing. Hell buy the company, put in his own management or keep the management. He keeps the management. He buys companies with management teams. He only wants to buy if he likes the people. Thats the whole game. If he likes you, and he likes what youre doing, hell buy you. If he that doesnt make him right or wrong. Ackman has a different strategy, a different approach. Ackman believes hes going to create value by changing the company. Warren believes hes by publicly announcing hes going to change. Remember, thats the little twist there. I would also except for this, i think if you look for all of our talk about shorttermism among the activists, which i do think is a problem, overall by owning shares longer actually than most theyre not day traders. It is not literally go on tv, stock pops and settlement. Thats in the exactly what is happening. You have to affect some form of change. Has anybody usually by bringing in new manage. Thats usually the way to go about it. But buffett doesnt call up the guys and say, you know what, guys, youre sitting on all this cash, we would like some of it back. I dont think thats his style at all. If he likes what youre doing, hell buy your stock. If he doesnt, hes out. Thats what andrew said. We will have more information as we go through the document, but, again, it is a process where you have to go through and add up line by line to see how these changes have gone in. It would surprise us in many cases to see massive changes in any of these stakes. And thats the latest that we have. Steve . In global news, the death toll in egypt climbing to 421 million. The Muslim Brotherhood promising pledging to fight back. Do we have yousuf gamal eldin . Hes not available. Hes bringing us terrific reports about the horrific situation there. Im sure well have him on later and give us what is happening in that country. Yesterday, he started bringing to us just early in the morning our time, of course, and gave us the first inkling of what was happening there. We were reporting numbers like 2025 and thats become much, much worse. Were going to go to beijing for now and then try to come back to the egypt story at some point. Right now, china is known as the factory of the world, but consumers are becoming more savvy. Many are now questioning the safety of counterfeit goods. Eunice yoon joins us now with more on that story. Good morning. Good morning, guys. Counterfeiting as you know is a major problem pour American Companies like pfizer, time warner and apple. But now it looks as though there is a glimmer of hope that chinese consumers could force things to change for the better. Wang hai is a crusader for the chinese consumer. He shrouds his identity. One way this investigator can track counterfeiters. Fake crocs. After sniffing out fakes for nearly two decades, he finally feels consumers here are backing him up in the fight. People have a stronger sense to protect their rights against counterfeits, he says. China has long been the land of the fakes, famous for everything from bogus luxury handbags and watches to gadgets. But recent Health Scares involving food and iphone knockoffs are making consumers here think twice. Translator i dont think buying counterfeits should be the norm of our lives. We should boycott them. Translator i dont trust the quality and theyre harmful to the genuine products. Counterfeits have harmed International Businesses for decades, with hundreds of billions of dollars in estimated losses every year. Beijing says it is clamping down on violators, but to many companies, progress has been slow. This twice wine importer opened shops here more than two years ago. Shes already dealt with one copycat and is pursuing another. So they copied our store, twice, already, from the price concept, from the wine descriptions, from the wine, sometimes even the uniform of our staff, everything is copied. Investigator wang says the situation will only improve, if consumer are allowed to move from complaining to advocating the government enforce the law. Otherwise, china will only be known for cheap low quality and unreliable products, he says, a reputation china wants to change. And having to deal with so many fakes is really feeding into the culture of mistrust here in china. And thats one of the reasons why a lot of people believe chinese consumers gravitate towards foreign branded goods. Guys . Okay. Thank you, eunice. It is, you know, it is different than canal street. You can get all the same counterfeit goods. Better counterfeits though. Coming up, the state of the nations electric grid. Many warn it is more vulnerable than ever. That story and the investment implications next. Were on the anniversary of the big blackout, ten years ago. 50 Million People left in the dark as we had that blackout. Well talk about it when we come back. Hey, its me, progressive insurance. 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Cocacola reported the stake was down 45 . Cocacolas stake is unchanged for Berkshire Hathaway. Wells fargo, they said down 30 , this doesnt make sense to us either. Wells fargo is up 1. 1 . Berkshire hathaway stakes in wells fargo, American Express, reuters reporting it is down 13 , it is not, it is unchanged. There were some shifts if you look to kraft and mondelez, a drop. Also decrease the share or the stake that Berkshire Hathaway holds in moodys, not a huge surprise. Well look through some of the filings. We confirmed the dish thing yet . Is that something were still working on . I have not seen the dish numbers. Ive seen it, it is on the sheet. I dont believe it was on there before. This is right. Staff screaming across the newsroom. Says berkshire has taken a stake in dish, a new stake. Alex quip is looking through all the situations. Dish is something i think that todd and ted had potentially looked at in the past. What i was going to say, so interesting, now looking at the filings, compared to before, a dish or Technology Company you normally look and go, really . But now that you have todd and ted there, were working on this stuff, you can start to see theyre making investments in things that maybe warren wouldnt necessarily. There were changes in the Berkshire Holdings when lou simpson retired. They closed out his position so they could start fresh. You saw some big moves coming through on some of these. A name like American Express and cocacola, wells fargo, those are buffett positions, long, longterm held stocks. Thats not something you would expect to see any big changes in. We saw he sold kinect. Thats confirmed. 1. 7 million. Which appeared to be im nervous now. Im not saying anything until i get a thumbs up from alex. Thumbs up on gannett . Okay, that is accurate. Hes taking other stakes in other newspaper companies. Alex is the atlas upon the shoulders of who the entire network rests. Were going to talk about electricity now. Ten years ago, 50 Million People including myself were left in the dark, i dont know if you remember where you were, as a cas clading blackout crippled the northeast. And if you havent seen it, go online there is online. There is an amazing video of Carl Quintanilla who did the report for the today show ten years ago, katie couric and lester holt hosting it, no electricity, standing, looks like hes ten years old, standing in the middle of times square, and it is pretty cool. Anyway, so has the nation we have the greatest barbecue. On that day . What else could you do but take all the meat out of the freeze and cook it. We had 30 people over from our neighborhood who had nowhere else to go. We had the flashlights. Well talk about where we are today. The question, of course, as the nations power grid improved over the last decade and christie tezak, are we in any better of a position than we were ten years ago . I think we are. I think we have done a lot to change what were putting into the grid in terms of having a better awareness of the system overall. And we have taken care of a lot of the low hanging fruit and now were moving on to the high impact, low frequency events that keep people up at night, literally. When you say high frequency, low impact events, those are what, but what about the low the lhigh impact and low frequency events . Those growing to be things like cybersecurity attacks or someone going off a transformer with a rifle like we saw in california or even these very incredibly big storms like dr h derrachios or hurricane sandy. I dont know if were smart yet on the grid. How far are we away from that . And the security implications of a smart grid given cybersecurity. Of course, as you know, as we go to a more modern grid, it comes with more modern problems. More advanced technology is going to require different systems and Different Levels of protection. But, you know, look at the end states we can achieve. If were confident in mobile banking, i think it is realistic to expect at some point we can feel more confident about the digital protection that were giving to the grid. But it is not free. It does require investment and money. Talking about investment, why arent we burying cables. Why do we still have communities all across this country with cables in the air that seemed to be blown down by the wind and were surprised by that. Well, if you would like to pay ten times more for your electricity, we can underground absolutely everything. Is that what the story ten times more. What about the ultimate cost of having of not having the kind of blackouts we have when we have storms . Doesnt that save you money . Well, it might, but it is an awfully long payback period to consider. You look at the fact that the doe just this week, you know, forecasted, we might lose 18 to about 33 billion a year in service interruptions, are you really willing to spend hundreds and hundreds of billions of dollars to avoid that . All at one time, and all together up front . It is a very, very big investment challenge. Already utilities put about 55 billion into the grid over the next three years. This is a lot of money, and when you still feel the economy is not strong, when youre looking at a power system that is going to be changing where were getting our changing, where we get you power supply that, stuff adds up. Its hard for regulators to see rate increases. Im happy to know its august, its hot. Not that hot. Not that hot out east. It will be okay. It sound like we will be okay on that front. Anyway, thank you, christy. Coming up, im excited about this, joes postcard from vacation. Do you know where he is . I do. Undisclosed. Later, the news maker of the moin morning, im abouted about this cisco, ceo, John Chambers, job cuts. John has explaining to do. He will join us at 8 45 a. M. Eastern. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Always go the extra mile. To treat my low testosterone, i did my research. My doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. 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Golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Welcome back to squawk box, everybody. We have heard from the man, himself, via twitter. Joe kernens hair, that parody account was tweeting him, saying he loves his vacation. Well, joe wrote back. Heres what he sent in. The hair does love vacation. Heres a picture and, yeah, were not going to tell you where it is. An undisclosed location. There is a beach. And he sent another tweet that says hair magesty and pongo. Yeah, thats right. Trying to stay out of the sun. Not much surf there on that beach. Can we get the picture back up . I will see if i can do it. The second one, you can see his shadow. Okay. The picture of penelope . Thats pretty much noon. You cant tell. I was thinking, is that an east facing beach or a west facing beach . I know the answers. So ill zip it. I will say like gulf of mexico kind of thing. Is that your face . You know, there is a lot of stalkers out there. We got to protect the the hair . The hair, exactly. All right. Coming up, we will have more on Berkshire Hathaway filings. Oil prices are extending their gains. We are coming back with a big two hours in just a moment. Okay, listen up im reworkin the menu. Mayo . Corn dogs . You are so outta here aah [ female announcer ] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. But when it comes to investing, i just think its better to work with someone. Someone you feel you can really partner with. Unfortunately, ive found that some Brokerage Firms dont always encourage that kind of relationship. Thats why i stopped working at the old brokerage, and started working for charles schwab. Avo what kind of Financial Consultant are you looking for . Talk to us today. Good morning, welcome to squawk box. Were going to take a look at futures, see how markets are setting themselves up for the day t. Dow looks like it will open off right now t. Nasdaq off about 22 points. The s p 500 off about 7. 5 points. Lets get you caught up on the morning headlines. Before the open, we will be getting initial jobless claims the Producer Price index the empire state index and shortly after the opening bell, we will get the latest home Builder Sentiment numbers and the Philadelphia Fed index will be out. Lots to chew on. Also, talks between china mobile and apple. They are apparently progressing smoothly. Thats according to chairman, both sides said to be hopeful about reaching a deal, china mobile the largest carrier, doesnt yet actually offer apples iphones to its subdescribesu subscribers. Home possessions fell 31 in july. At that price the years foreclosures would together 490,000, down 27 from last year the lowest since 2007. Some of the world most powerful investors revealing their latest bets with filings. Berkshire hathaway relateing its latest moves. Berkshire increasing its Share Holdings by 1. 1 . This is something we have talked a lot about in the past. Wells fargo has been a favorite of his. He has continued to add to that stake. Berkshire hathaway sold most of its stakes in the two descend ants of the kraft foods, probably not a surprise that, stake dropped by about 88 . Again, that is something buffet has been clear when we asked until in the past what he thought about that spinoff and some of the other things that have been there. In the past, buffet has made critical comments about the management sometime of Irene Rosenfield the ceo of the old staff and mondolez. The company atco ka cola has taken a new stake at dish network. Berkshire raised its stake in gannett. Before this, it had 1. 7 million shares at gannett. Bill Ackmans Pershing Square, has a new stake. Thats something we reported on air as well t. Firm resolved its stake. Green horn capital cut its stake in christi in cigna. Also, dan loebs third point, dissolve stakes in hess, spider gold, delta automotive and abbvie. Okay. Real quick, check it out, by the way, walmart reporting g2 eps 1. 34. Theyre adding 2. 7 billion in net new sales. We can go through this. Becky. Why dont you take a quick look . I will give you a little j. P. Morgan news. The executives who supervised the traders at the london whale scan dan reportedly unlikely to face charges. Yesterday they brought criminal charges against two former traders. They make passing references to the former bosses. Chief Investment Officer, the top former executive, Achilles Macris are mentioned by name. They says they put pressure, though, on subordinates at one point to deal with the high degree risk taken on the portfolios of derivative trades that led to those losses. Again, we go back to this issue, if you will charge the underlings with fraud, its hard to charge the supervisors with fraud because os sensibly you have defrauded the supervisors. Thats whats going on in that story. We come back to walmart for a second. The earnings came in at 1. 24. A penny light of what the streeted a been expected. They talked about net sales, were up 2. 4 . If you take a look, im looking through right now, of revenue, it came in the at 116. 9 billion. The street was looking for 1 fifteen 18. 4. Becky, i think the headline here, let me read this right, updating forecast for net sales to grow between 2 and 3 for the fullier vs. A previous range of 5 to 6 . That will come down big. If i have that right. For the Current Quarter, 1. 25 is the excise number. If line. For the full 84, we are updating our Guidance Range between 5. 10 and 0. 30. Is lower than the previous range which was 5. 20 to 5. 40. If you look at the street, steve, are you right, it will be the number of the guidance for the full year the street is looking at. The street was at 5. 30 a share. The street was in the midpoint it is lowering. The next two quarters will be better than the first half. But a bit like praise perhaps. The big thing is the guidance. The guidance takes into account challenging sales and operating environment. They are talking about trouble they had with the entire environment. This is something we had heard from several retailsers. They say in the past, discreet tax items had a meaningful effect and the fiscal years, yeah, so theyre now looking at a wider range of between 31 and 33 , its possible for the full year, vs. The pleef range of 32 to 33 . Theyre getting perhaps an improvement on the tax rate, its a challengings sales and operating environment they are talking about that will be effective. They are echoing comments. I forget who we reported yesterday, macys saying of the calgarying consumer environment, saying the 2 continues to impact our customers. That has always been an issue out there and also i didnt see where that international, becky, did you see how they did on that . The tax issues. The companies, at lowest theyre claiming, its the new problem for why theyre having pro bs. Consumers in mature and emerging markets curb their spending. Thats from the Walmart International president and ceo. He is saying the international markets, growth and Consumer Spending is under pressure there. This is not a u. S. Story, its an International Story as well for walmart. It tells you about the current climate. Every time you think things are going strong, its similar to what we heard from cisco yesterday, we heard about the uncertain situations they have seen in terms of what to expect from asia. And the question is to the extent this is in the rear view my roar or yet ocome . It sounds like yet to come if they are talking about the full year. They met expectations per quarter. If you are lowering your guidance, you expect the 2nd half will be different as well. Andrew was saying, we expected this to have happened. The Second Quarter was the one with the biggest hit. Right. From a great of change standpoint. Very quickly at walmart shares, thats a dow component. Will affect the dow futures today. It closed at 76. 40, down by about 2 this morning. Take a look. Lets move from that story. Be i the way, we have an analyst on walmart in a bit. We will get to these details and physical out what is going on with the stock. More violence in egypt, protesters clash, the u. S. Condemning the crackdown, the Egyptian Health ministry saying this is a new number for me. 500 people are dead out there. Joining us, jan our man on the ground in cairo. Good afternoon. Reporter good to see you, steve. I can confirm that number from the ministry of health. 525 people have died in the last 36 hours or so since the Security Forces decided to disperse the two protest camps. Now, the injuries am to some close to 4,000 people were injured. The accounts from the Muslim Brotherhood claim the toll is much, much higher. We expect the number to generally rise as we get a proper sense of the scale of the violence that we saw in the last day. Now, the Muslim Brotherhood is not giving up. Theyre planning more march, standing by the president. They are calling on their supporters to march and battle the police, they crittize what happened they are calling a pass kerr, unpolice dented scale of violence on what they were claiming were maesful demonstrations, the Vice President has resigned in protest. Mohammed elbarradei, a well known physical. He said he could not stand by and watch owl of this happening. A state of emergency is in place. A curfew is happening every day from 7 00 p. M. To 6 00 a. M. That gives you a sense as well of how much the security acquisition i situation deteriorated. To take these unprecedented steps. Is what they are hoping will happen they will share with you a research note. They are saying that there are fears of civil war looming now in egypt, it will be extremely difficult for the government to find support after the scale of violence and you are eing this reflected in some of the credit, the five84 cost of insureing egyptian sovereign debt, that went up 30 basis points to 800 basis points and the International Condemnation adds pressure to the interim government. There is a lot of trepidation in the air here in downtown cairo. The scene behind me is a cairo that is very quiet. This is a city of some 25 Million People. Its usually jam packed and a lot of traffic jams. This is not the case now. It gives you also an idea of how worried people are of whats to come in the next few hours and in the next few days. Andrew. Okay. Thank you for that report. We will be coming back to you with continuing coverage. Joining us now to talk about egypt, the Global Economy animatet miller, ombc adviser and columnist for the washington post. Its great to have you to help us make sense of this. The question i have, maybe its just such a myoptic view of the United States, what is the president supposed to do with all this . Its a question, because we midwived the coup they had. We were basically in the ticking to pieces you saw at the time the military took over to restore democracy, we were involved. We helped usher in the change. We keen of legitimized it by not calling it a coup so military aid could continue to flow. We bankrupted the military billions of dollars. Is it kerry or mccain . I have seen some. Mccain may have. I dont think perry has. Official policy cant be its a coup or we have to cut off aid. So our hands arent really clean in this. Now we got this terrible mess. Im not saying its easy. Be you the idea, you know, in retrospect, could we have been patient and let the brotherhood folded out two years from now . Thats the history. What do we do now . Do we have a role . If we do, what is it supposed to be . I think we have no credibility now when it comes to the actual street. We have little credibility when it comes to honoring democrat ec processes, i wish i had a dictator answer to what to do here. Matt, i have to say, there was the thought if we get voted out in two years, but there were real concerns on the street that they were moving, mursi was moving to try to take away the position of ever having a legitimate vote again, of taking down structures. The idea of a one vote, one time, you vote once, then were never going to do this again. Look, its hard to know that in retrospect. We got nothing but bad options. But the idea that we were on the side of the military coup makes it hard for us to have credibility in the region. You took something out of the 1950s the cia backing, something in latin america. Americans dont understand why were not perceived as the benevolent force abroad, you know. I get that. I also dont foe what becky suggests what good options the administration has. I agree. Im not here with the miller plan for how we should move forward. Its a very difficult situation. Does the United States have to play a role in this. I think we have to somehow, you got israel and egyptian relations at stake. If egypt, which is the major power in the region with 70 Million People implodes into a civil war. Its another big mess on top of the steering mess. Is there any effect on that, whats happening next door with the peace talks between the israelis and the palestinians . Im sure well have some kind of ripple effect. You talk about violence in the sinai now. You have uncontrolled areas under egyptian control, sources of violence, essential terror, if they lose, if there is a full scale civil war that breaks out in egypt, we got a total mess. Tell me what that mess means. Best case, worst case scenario. The best case is somehow cooler heads prevail. Maybe john kerry, who seems to be, you know, on the world stage, having better luck than his predecessor, in getting people to the table, find some way to call off the extremists in both side. We come to some mod us mod usoperandi. Matt will be here. We will talk about the Global Economy. Stay with you are. This is a big news morning. Walmart miss, we have moves by Berkshire Hathaway, criminal charges against j. P. Morgan. Follow us on twitter at squawk cnbc is our hand him. At least good music. Up next the dow is suffering its first triple digit decline since june. It could be in the offing for september. The feds b jim bullard says there is a chance as we head to brake. Here are the futures right now. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Welcome back, eb, warren buffets Berkshire Hathaway releasing the filing in ten minutes or so. Wells fargo, we are going over this again, there are a lot of erroneous reports out there on the wire, it started at reuters. We mentioned some of the headlines before we corrected ourselves. We looked at it, they are reporting massive declines in buffets long standing stakes. They said he cut his wells fargo steak by 30 . Is not the case. Wells fargo remains bun u one of buffets investments. They increased their holdings. Is not a surprise, if you follow his investing style, he buys into companies, holds on to them for a long time, meaning forever. By the way, wells fargo says he has been increasing his stake in the latest filing. Berkshire hathaway selling most of its stakes in the two descend ants of kraft foods, monelez, they have made criticism about the management style of the ceo of the old kraft. So again the stake there developing by about 88 , probably not a surprise. If you havets stakes in cocacola and American Express, which earlier, there had been reports on reuters they were dropping by 13 on amex. Is not true. There was a report that his stake in cocacola was down by 45 . That is not true. Again, these comments havent been corrected on the other wires. They have corrected it following us, just for the record. Other things we should point out, there is a new stake in dish network t. Dish network stake, you might look at it and think that is a surprising investment for warren buffet. They made investments in direct tv if i remember historically. Historically. So thats probably not a surprise if you have been following what todd and ted have been doing to see these new stakes that have come out. Its interesting to see them go at the satellite providers, not the Cable Operators, though. Both dish. The distinction there, given that i believe the Cable Operators lately have outperformed the satellite providers, there is still a big question mark over what satellite ultimately looks like. Particularly at the cable companies, its been the internet connection. Whats your thinking . There is a cash flow, becky . Is there any sense . They told me the method behind it. Give us a call. Wed love to hear from you. Calm us. Berkshire, by the way, upped its stake by 60 . It sold its stake in gannett. They had shares at stake. Thats been sold, i think if you look through moodys, it stole additional shares, which they talked about before. He has been selling it for a while. Coming up, youve heard the phrase chicken of the sea, its making me think of jessica simpson, be i the way, remember that reality show . But have you heard of tur duncan of the sea. The image is unreal. Its right after the break. Then legalizes pot is one thing. Regulating it is another. 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Its a tiger shark swallowing a san shark. Nice. To the a turducken. Its a tiger, whatever. Anyway, you were hoping you dont make the daily show on that one, arent you . Thank you for remaining the writers will. The daily show could pick that up, they could, never mine. When we come back, we will have some reaction to walmart earnings. The company reporting a short time ago. We will find out what the nations retailer is saying about the state of the economy. Heres a hint. Its not good. We will find out what analysts are saying about this stock. Take a look at walmartment lit have an impact on the dow futures today. We are over an hour away from our special interview with cisco, ceo John Chambers at 8 40 a. M. Eastern time. Squawk box will be right back. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk box this morning. In the headlines, warren buffets Berkshire Hathaway upped its stake in wells fargo, that filing show agnew stake in dish network. A vastly increased state in General Motors and sales of most of berkshires holdings. They sold down kraft group and mondelez, well say it again, there are erroneous reports he cut his stake in wells fargo, cut his stake in American Express, those reports are not correct. Theyre correcting them now. We see our view, which is based on the numbers. Its correct. We are also an hour away from the latest Consumer Price index. Jobless claim reports. The cpi is seen increasing. 2 of july. Initial claims last week, theyre expected to remain unchanged. Dow component Cisco Systems cutting 4,000 jobs, it gives a revenue forecast this quarter, it was much weaker than wall street had expected. We will ask ceo John Chambers when he joins us as our special guest in the next hour right here on squawk box. The dow suffering its first triple digit decline since june yesterday. John lynch is regional chief Investment Officer. On set with us is the Asset Management, j. P. Morgan Asset Management Global Market strategist. Joe, thank you for being here with us. Guys, great to see both of you. I want to start out, joe, talking about where you think the parks are right now. Because we see a triple denl it decline, its suddenly big news, its not something we see very often. Look at whats happening on the markets over the past few months. You seen the rally moving higher and higher. Looking at valuation, it should seem clear we are hovering in line with our ten year average. You have to look at a 15year average to make the arguments that stocks are cheap. I would argue directionally, markets continue to move higher. If you look at any valuation metric out there, it doesnt hit average and all of a sudden capitulate. You have to ask yourself, what is that catalyst that pulls markets back or what might happen in Consumer Sentiment happens over the next few years. You looked a sentiment today with walmart. Its a stunner. Its the giant. It makes up 10 of retail sales in the United States. They say theyre having a tough operating environment and theyre concerned about the consumer, not only here, but around the globe. Does that make you rethink any of this and give you cause for concern . I think it gives me cause for concern. In particular, one thing you mentioned was exposure vs. The consumer abroad, for example. You have to think selectively how you allocate your capital in the u. S. They said things stink around the globe. I think we are muddleing through at the margin, if i say whats going on in the emerging markets, i would hold more conviction of things improving here. Cisco was the same. They said north america an Northern Europe were okay and asia was lousy and peripheral europe. A lot of what is going on in china. China is the big elephant. You are talking roughly onequarter of Global Economic growth. Given the focus right now on the quality of growth, rather than the quantity of growth. You have to consider the impact. The us consumer walmart was concerned about, too, there is not a strong consumer, necessarily, at least from what theyre saying. Lets be clear, were not jumping up and down things are perfect. Things are improving, theyre not fantastic. Things are improving, we still have a long ways to go. There is still 20 Million People who want fulltime work who cant find it. Thats a telling statistic. Thats a big deal. That tells you an awful lot of where things stand. John, how about you . Is it a fair valuation for whats going on . I think from a valuation standpoint, multiples are starting to get closer to averages. I encourage all investors to focus on valuation or p. E. S relative to earnings and Interest Rates. I think as long as you dont look at p. E. S myopically and look at the short curve, we will get another favorable indicator this morning it would appear, i still think upside over the next 12, 15 months, we got about 10 or 12 . What weve seen the last few days is there is some trepidation, i dont want its the devils workshop, right, when you consider low volume, lower confidence in the most recent few days. I think a lot of people are worried about debt ceiling debate, fiscal budget. We are starting to reassess. There was an article in the wall street journal. This was a column, he said that based on one valuation model that has a very impressive record, he looks at stocks and says they could be at their most overvalued since 2007, does that sit right with you, joen . No, it doesnt, i did see the report, again, i think the most important thing, can you look at so many valuation metric, fed model, things really change when the fed quadrupled its balance sheet, the government was spending a deficit of output. So thats really altered things. You can use the rule of 20, which would suggest we have an 18. 5 p. E. I wouldnt be comfortable with a p. E. Along that range. If you look at 16. 7 times number which were looking for calendar 2014, 113, 114 the streets may be 122. Were a little more conservative in the street, you can get to 18. 50, 1,900 relatively. 1850 to 1,900 over what period . Year end 2014. Okay. Question for you. We were talking about dave rosenberg, i dont know if you saw this in the 6 00 hour, a few report, hes a deflation guy, hes about to say were about to have run away inflation, thats where this is going, directionally. He recently emailed me during the show, i had suggested that he was in this camp earlier. He says this is a new move for him, if you want to correct that. Do you think hes right . Terms of heading down the road of deflation . Inflation. Inflation. No, hes saying this is the Tipping Point hes claiming the deflation camp was too crowded, now hes sort of switching camps. You know, i would agree, i dont think deflation is in the cards, at least not in the near term, why take a look at whats happening in the u. S. , we talked about things are improving. Its a great deal of slafk. Its hard to imagine sustainable pressure without a lot of wage pressure. Look. One day down the road as a result of what the fed has done, is it possible we end up with these inflationary pressures controlled. I think anything is possible. Can you make that argument. This is pressing monetary policy. As far as in the next few years, i have a hard time wrapping my hands around that. Can i talk mortgages . Its changing the outlook now. They are up about 80, 100 basis points, 3. 6 , where are they going . Whats the impact . Well, the mortgages all of a sudden, weve seen this 100 basis point move in the ten year, so you may say actually more people trying to get in. Its almost like people chasing a rising stockmarket, right . They dont want to be the last one in. From a housing standpoint, weve seen job growth, to joes point about inflation, i think its very important to the keep in mind, while we may have seen home prices up 12 year over year, sales 10 year over year, the jobs were creating are largely part time, so consequently, you are not going to see the sustainable intranslationary threat. Im fascinated that rosenberg has made the switch. To some degree, it can be argued that joe bullard made the switch. He was one of the few fed members talking about deflation. I think from a standpoint on the recent jump in housing, im not sure the demand will be there to push, to push it significantly higher. All right. John, joe, gentleman, thank you very much for joining us. Again, matt miller is with us. Why dont we talk a little more about walmart . The numbers out a few moments ago. Joining us with reaction is a retail analyst at j. P. Morgan. Chris irks its not the numbers for the corner concerning people on the street. Its the guidance for the full year. The company saying it is looking at earnings of 5. 30 for the full 84. That is below the earlier guidance the high end is right where the street is at 5. 30. Does the come as a big surprise to you . Were not surprised that they missed on sales and theyre guiding down. We alluded to that, there was risk to the comps. If you peel back that number, they actually lowered their tax rate for the year. So to really guiding the street down about 15 cents, about 3 overall, which for a company like walmart, who is almost twothirds consumables, that 3 is a significant number. Yeah, that 3 is a significant number. If you take look at what theyre saying about the consumer, that might be more concerning. Not only here in the United States but around the globe. Are we having a tougher recovery tan we expected . Can we read more into this than walmart specific . I think there are three key pressure points on their sales right now. Obviously, the 2 tax increase is only about 2 poeven 8 and that low enconsumer tends to spend in line. Is being mitigated with payroll tax increase. The second thing thats really pressureing their sales is inflation. They are about 55 growth rate and to the previous conversation, you are not seeing any inflation versus a year ago, you might have been seeing 100 basis points, thats pressuring their top lean as well and i think the final thing is, to the mid to high en, will is the shift of spending. Will is a share of wallet shift back to the durable goods, were seeing better home spending. Chris, i want to interrupt you, we had a bit of discussion about inflation. You are saying there is no food inflation. So wal part cant raise its prices and increase its margins in the food business, the food margins are coming down. Is that what are you saying . Essentially that, yeah. You are seeing, they cant raise their prices, so you are not eing it in total toppleing growth. Mitigates the leverage on the fixed cost structure. I was saying, somebody was saying something different. I dont remember what it was. I remember what it was. Somebody was saying something completely different. A guy at 78 30 . Im not saying what he was sayle. Lets move on. Chris, let me ask you again, though, what does this mean about walmart specifically . What do you do with the stock here and what do you think apt their competitors in this arena . Yeah, i think as you look at the stock, we have a 75 price tarpth for december. So essentially, were seeing its that fair value. We have downgraded the stock from overweight to neutral at 71 back in february on a number of these risks. It seems playing out. I think you have to look across the spectrum and think about a company like target. Targets average income is about 60,000. National average is about 50. They have a good swath, their Customer Base is going to be impacted by the taim same payroll tax precious and theyve invested in the grocery business, they have become more of a leveraged play as well. Chris, thank you so much. Good talking to you. Thank you. Coming up, real time mobile advertising. Thats the business of act savvy, the companys founder joins us to discuss how theyre disrupting the world of online ads. First the business of recreational pot. Why did i get this read . Cnbcs jane wells is joining us with a preview. Reporter stheev, this buds for you, as Washington State and colorado ran situation to selling recreational pot legally, its one thing to vote for. Its another thing to make it happen. The challenges if reaching for the pot of gold when we come back. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. My mantra . Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. You are listening to the grateful dead. Colorado wants to regulate pot. Each state is taking a different regulatory approach and theres only one person that can do this story for us. Cnbcs jane wells made it to broadsterdam, denvers pot center. Somewhere in there is jane wells. Is she kidding . Reporter steve, im not sure why you think i was the right person to do this. Welcome to the mile high city. This is a greenhouse. This is legal cannabis. Growing recreational pot is still illegal, but its coming. However, it has taken a while to physical out how to do that. In the meantime, can you smoke em if you got them. We have video for you. If you are over 21, only have as much as an ounce and theyre not using it in public spaces, but there are some differences, by the way, in colorado, can you grow some of your own in limited amounts. It turns out, though, nothing has been easy enacting these new laws. While colorado hospitals to take licenses to produce recreational pot in october, walk may not have rules ready until midnovember, while recreational pot could be sold in january in colorado, it could be next spring in washington. While colorado is gearing up for outsiders to come in and buy, washington is actually limiting recreational pot production to just what its own residents need to avoid creating an export economy. We have to determine what the production level needs to be in the state to meet the needs of those over 21 an from there, we have to create a model for how many producers do you need, how many processors and retailers to meet that production limit. Typically, you dont have to limit that marketplace to start it, which is what we are being asked to do here. Friday is one of our most popular days. I wonder why. A medical pot disspencery in seattle, he hopes to go into recreational sales. The biggest concern is whether they can be operated through bank account and not all cash which is dangerous. He had one bank account shut down. How else are we going to do sfwhs they want to make this tax money in colorado, they got to give us some banking. Colorado has got an jump in one area. You see it at river rock, they have established a system to track the property from seedtosale. This is very important to the make sure everyone along the way is licensed and keep the fed itself at bay. Although, who knows. There are some kinks that need to be worked out. The most discouraging thing about the new law is that we still dont know a couple of the things having to do with packageing. Its very hard to get ready for adult use which is nearly five months away from having all the data points of whats expected. Reporter okay. Now, everyone thinks eventually it will work out. Even though this all remains completely illegal on the federal level and the Justice Department has given neither state any clue on how theyre going to react. Later on squawk on the street, what are the different tax systems each state is use something how much do they hope to raise . What is the rick they tax it so much it defeats the purpose of legalizing, guys. Is there a product demo coming . Were a morning show. Usually that, i have cooking, they took the product, then they eat the product. Whats your plan . My plan is im a reporter and i into ed to keep all my faculties good to go here and i would send you some, but then i would get arrested. Jane what do the mexicans think about this . They dont like it one bit. One of the goals we have read, according to authorities is because the mexican drug cartel, i read they get as much as half of their profits from the pot business in the u. S. What they may try to do is sell a cheap product. Theyll be the illegal walmart of pot and that i probably shouldnt say, im not disparaging walmart in anyway. They will be this low price leader. But the argument for taxing it and regulating it is, you know what you got, its going to say on the packaging how much is in there. You know its been this is the walter white of we got to go. We make fun of this story, its a very Serious Business story. Its an international stoempl its a taxation story. And its a great business story about how these ents knew, which is what they are, deal with this new emerging regulation. You will hear from them later. Its a fascinating story. It is. And i didnt think id be around for this to happen. We got to go. Thanks, indiana. You never thought youd see the day is there that were talking about legal drugs on tv . It was the dumbest things we did in the 70s, these draconian drug law, people rot income jail for no reason. When we come back, they have been named the worst places in new york city. We will find out how abbvie is disrupting ads. Check out the futures this morning. After the news from walmart, the futures took a decidedly turn for the worse. S p futures off by about 10. By the way, jobless claims in july cpi, those numbers are just ahead. Stick around, squawk box will be right back. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Welcome back to squawk box. Today we have a disruptor who wants to define how we view advertisements. Chris cunningham is the cofounder and ceo of act savvy. Thank you for being here. Thank you for having me. Explain this him when i go online, for the most part, i dont really look at the ads that often. Within i do, i rarely click on them. Whats my problem . The perfect tf. Im trying to tf. That was the goal. It was a softball. Yes, thank you for this so early in the morning. Thats been the problem for the last 20 years in Digital Advertising. Weve seen purely no pure innovation in how and when ads get delivered. Generally, its a page litter impression. Ads get delivered, but will is no context to why you received that ad. Thats why there is a massive problem with Online Advertising, as far as the performance ic the rate, viewability. So the problem is that we havent actually understood how and what what do you guys do about it . We go to a publisher. We understand what people are doing. People are commenting on skwaux book. People are sharing their fate show that you guys produce here. Those are native activities on your show. We would then find the timing to deliver an ad for an American Express or cocacola at a logical time thats not prebut potentially mid or post. So we call them natural breaks. Is it all about the timing or the size and scale of what the ads look like. Now you see the page, the full ad, they go back up. Is that what are you doing . Good questions. Id say its more of the former. More about timing and context. Those are the two biggest elements that have been missing in Digital Advertising since the conception. Its when to deliver a message. Can you have all the data on a consumer that you wish. If you dont have the timing, you are missing the point. The if you dont make me read it before we go in, you are not catching. Its perfect in the sense, its still advertising, right . We have to understand there is always a form of brand advertising where we are. But if users are generally more receptive to advertising, you give them context to say, thank you for visiting us, squawk box, have a nice day, a word from our friends at American Express. So its on your way out. We call them natural breaks, its no different than finding a 30second spots on television. But its not going to work in an online experience when you put ads adjacent to your reading content here. You see ads to the top of the fold. It doesnt make any sense. Are you guys going to raise cpms over time with this . One of the big problems is Online Advertising is not as valuable as the print ads and the other stuff the washington post, all the things that goen, as they shift eyeballs, you cant get the value. 100 . So predominantly, there has been such a glut of supply created in our industry, the value of Online Advertising has sort of fallen, right . Outside of search, with i is about 42 of what spend is today, ecpms can raise assumeing 2 points, one that more people are actually performing or interacting with the ads and, number two, to earn your question, are they larger, buechel and more effective. From our standpoint, our network the publishers, advertisers we work with we have much higher cpms in industry. Ultimately to scale, we want to give our platform to larger publishers that can often use our technology. Chris, thank you for coming here. Thanks for having us. Before we go. We have a minute more. We had you a full hour. We havent gotten enough out of you. This one second, you did a piece the big mac statesmanship. It was awesome. I thought it was a fascinating issue. I dont know if i agree with you. Expla into the audience what that issue was about. I think its an interesting issue. You have all these fast food strikes, people are protesting, federal minimum wage 9 10 an hour, the hamburger flippers arent just teenagers, theyre people that lost their jobs. I think we need to make in Person Service sector work, a path to the middle class. These jobs, retail sales, home health care, fast food jobs cant be offshored. There is about 30 million of them. Realistically, what went wrong . Well, they used to be stepping stones. Mcdonalds used to be the training grounds for so many things. Theyre training grounds, theyre still, its a teeny fraction of folks who get upward mobility to get into management. Is that a new reality. We have to say, 130 million jobs out of 150 million jobs, as we try as a nation to say lets figure out how to make this more viable. Thats an important thing for the company. If we raise those salaries, how do you billion competitive . Its a big question. Thank you for coming back. Its a greater thatry, when we come back, we have key jobless claims, a first interview with the ceo of cisco John Chambers. The picture has gotten decidedly weaker than where we started this morning. Right now you see the dow futures down 86 points. S p futures up by 10. Squawk box will be right back. If youre serious about taking your trading to a higher level, tdd 18003452550 then schwab is the place to trade. Tdd 18003452550 call 18882849410 or visit schwab. Com trading to tdd 18003452550 learn how you can earn up to 300 commissionfree online trades tdd 18003452550 for six months with qualifying net deposits. 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Tdd 18003452550 time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Our guest host for the hour, president and ceo of the aspen institute. So where you headed . S. Aspen. Hmm, catch, beautiful. Ceo John Chambers is joining us first on cnbc. Inflation and employment, breaking economic data. July cpi and weekly jobless picks hitting the tape at 8 30 a. M. Eastern, the third hour of squawk box beginning right now. Welcome back. Good morning again, everybody, im becky quick, Andrew Ross Sorkin in for joe. Most powerful investors revealing their latest bets. Warren buffet, Berkshire Hathaway numbers in the last two hours or so. Wells fargo remains one of buffets favorite investments, we are making a big deal about the because there has been some confusion with alternate reports out there. These sec filings are not easy to go through. You can easily go through the wrong number, you literally have to go linebyline. There were reports he dropped his stake in wells peshmerga by 30 . That is not the stablg. It increased the stake by 1. 1 . The company also sold most of its stake in the two descend ants of the former kraft foods, mondelez international. Dropped 88 . Probably not a surprise if you have been watching what buffet had to say about them in the past. Buffet made critical comments of the irene rosen field, who was the ceo of the old krovt kraft and currently ceo at mondolez. We were talking about this, cocacola and American Express, berkshires stake is unchanged in both of those positions. There were headlines earlier about a decline there of 13 for American Express and 45 for cocacola. Not the case if you are a longtime buffet watcher you know these are stakes and stocks he buys, when he buy, he buys forever. Is certainly the case here t. Company, Berkshire Hathaway has taken a new stake in dish network. You might attribute this to ty combs and dick wechslor. I think it was todd and ted who had each taken stakes in that. Berkshire upping its stake in General Motors 60 and selling its stakes in gannett. I used to hold shares. Not so today. It went from a Newspaper Company to being a broadcaster in recent months. I want to underscore what im learning here, that buffet comes on, he talks to you. To all of zblus he tells us what he thinks. Then he goes and hes either acting on it. He doesnt come on and say one thing and do another with this portfolio. Thats why you flagged first thing when i read, andrew and i read these errant headlines from another source. You said that cant be true because of what he had told you in the past. Honestly, anybody, not just from us talking to him here. Anybody who read buffets annual report, hes not somebody who will turn around and sell 45 of cocaco cocacola. He is long term. These are stock, companies he loves and that he has continued to buy a stake in. American express, he cant buy any more shares. When his stake goes up in it. Its because they have been buying back stock t. Idea he would come in and sell a substantial stake in any of those companies, that doesnt compute. I whether get in trouble for saying this, i want to say this reuters reported this. You want to flag the you need experts to actually look through the information and as you all know, reuters and other news organizations over the past two or three years decided to outsource a lot of their business, theyre global enterprises. They do business in asia and elsewhere. This report came out from the data group in bangalor. You sure about that . They put the dateline at the bottom. Its not to suggest there is not good work being done in dangalor. It was a mistake. It was a mistake. By the way, it has. Its to move stock. I wish that when there is important marketmoving stuff leak this, they have the experts focused on it. People should be more detailed than they want. It usually comes out the evening before. Yes. There was a group of people forced to deal with a news report theyre not used to deal w. It requires a little math. I think there was a technical snafu at the sec last night, which is why it didnt come out. Thats a big story. We have notable misses by walmart. Walmart came in with inline. They lowered their guidance to 5. 10 to 5. 30 a share. That was below their earlier guidance t. Street was already at 5 pochlt 30. The other beg story this morning is more violence in egypt as protesters clash with Security Forces. The u. S. Is condemning the crackdown. The Egyptian Health men industry saying more than 500 people are dead, our man oaks a contirmd that number. The Muslim Brotherhood vowed to fight back. We will get an update from cairo in a few minutes. Lets look at market, which deteriorated unweakness. We came in, we were flattish to down 20. 86 points to be preciseen implied open there. S p would be down 10. The nasdaq down about 27. 5 points. Overseas in asia, hang seng down not much, not as much as you might expect, given how sometimes it trades in sympathy with the United States futures. Shanghai down a bit more. Over in europe, there is a bit more sympathy. Down on the footsie or 88 points. The frank kak down twmp. France kak down 28 points. Germany dax down 70, 0. 84 points andrew. The stock managed to get back to the 500 level a day after carl icahn announced he took a position in the brand. Icahn talking to ceo tim cook about a possible buyback. Joining us, the perfect person to talk about all this for the next hour. He is the as spin president ceo walter isaacson, author of the best book, steve jobs. I want to talk to you about united and the Airline Business as well and the washington post, bezos. Lets start with apple. Its great to have you here. Tim skook gets a call from carl icahn. You know tim cook. Right. He thinks what . You know, tim cook is a very measured, sensible guy. So hes not emotional. He probably thinks, let me do whats right. Let me figure out the shareholders. I think apples issue that tim cook is facing is whats the next big product . Every three years, steve jobs came along and kind of blew us away. We didnt know we needed 1,000 songs in our ipod. We didnt know we needed a new cell phone, our own cell phone was broken dead. Whats the time . Within i finished your book. There was a moment when he talked about revolutionizeing the tv business. I think anybody that finished the book thought the next big rell revolution at apple. The next industry disrupted was tv. Its probably been about two years since then. We havent seen that happen. What do you think has gone wrong . Was there something steve had planned that hasnt got him out the gate . Yeah, disrupting the Television Business is not just a hardware issue. Its not even just a software issue. Its like what happened when steve and apple had to disrupt the music industry. You had to get all the big music labels to play. Then you had to get the artists in. You had to be able to get the content on demand. Thats very hard with the cable bundleing system we have and it would mean disrupting i remember you said in your book, he thought he cracked the code on tv. Do you know what that was . He was talking about being able to get whatever you want on demand like you could with any song for 99 cents instantly in the original itunes store. And it was an easy interface. Its not that tough. How to get rid of two ridiculous Remote Control boxes you cant physical out when you go to a hotel room or something. That is something i think apple can crack. I think the harder nut to crack is how do you disaggregate content from this bundleing article. They wont want to go the way of the industry. Content. Exactly. Thats what digital disruption is all about. I think television is Great Hardware and software. Thats why there is trouble disrupting it. I think the idea of the remote, its like a better web interface than the web can provide. Thats why i think its hard to crack. I still want to ask you about this thing with icahn. Is icahn right, in your opinion, to push cook and apple to give away, more of that money, is there a rational reason for apple to sit on, what was the number yesterday, becky . 137. 145, instead of 137. 140 billion in cash. Is there any possible investment . You are if expert. If you buy back the stock that way, its because you do not have anything better to do with that money. You dont have something you want to launch, to buy, you dont have something you want to invest. Somebody sat in that same chair and said i do not see those as mutually exclusive. You can have a bunch of ideas. The trouble is andrew couldnt name a single investment that had double digits to it. Let alone triple digits, a lot of 2z, 7s and 8s. Its a social network business. Those are many digits. You might say that, you know, in mobile, we need some other things. Do you think theyre ready to make that type of transformation . The type of deals would transform people. Unsteve, they never did that. Is tim cook prepared . I have to admit, i dont know, steve jobs didnt do that sort of thing. He bought small companies. Wonderful technology. He never did a transforming deal. I dont know whether tim cook will want to do that. If charm was on the other line with steve what would steve say . We will take the call. Look. Take the call. I can just say one thing that i can predict. He would not have been quite as polite as tim cook would have been. Right. He apparently had a nice chat. We will slip in a quick brake. I want to point one thing out, andrew the wire service you mentioned has corrected a lot of mistakes, just to be clear. These mistakes happen. I just want to say. By the grace of god, it does happen. Its an honest mistake in terms of we were able recreate it. They were looking at the wrong column in terms of the math they were doing. These sec filings. Can somebody . Thats what people have wondered. I dont think thats the case from following it. No, not this time. But could it . If you got ahold of a wire service, potentially. There have been those fake reports. Remember when there was the fake tweet that came out . I can tweet out warren buffets holdings. This was on the wire, itself. It wasnt on the twitter service. This is what happens. What the sheet looks leak, you pick the wrong column. Thats what happens. Anyway, we will come back with a little bit more from walter is there when we come back, also, we will talk about shares of cisco. They dropped sharply after the Company Beat Expectations for earnings and revenue t. Forecast for the Current Quarter was disappointing. And they announced they will cut 4,000 jobs. Coming up, we will talk to cisco chairman John Chambers. Right now, as we head to a brake though, check out the skwaux box market indicator. There has been more weakness, dow futures down 81 points below fair value. S p futures off by 9. Squawk box will be right back. T and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Oh, hes a fighter alright. Since aflac is helping with his expenses while he cant work, he can focus on his recovery. He doesnt have to worry so much about his mortgage, groceries, or even gas bills. Kick kick. Feel it feel it feel it nice work you got it you got it yes aflacs gonna help take care of his expenses. And us. Were gonna get him back in fighting shape. [ male announcer ] see whats happening behind the scenes at aflac. Com. Golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Welcome book to squawk box a. Comment from yesterday, they say they need more data before making a tapering judgment, that echos comments by lockhart, they say tapering does not change the near zero Interest Rate commitment and that hes generally been too opt mick about the u. S. Physical growth. Guys, now, heres the bottom line, there are two fed officials sort of in the center that seem to be casting doubt on september. Thats the time when they do it. Not pause they dont want to do it. A couple reasons, one is they dont feel they have enough information. Lockharts point was the most interesting of all. He said if you start tapering, it is a process that gens to wind it down to zero. You dont begin that process until you have sure you can get to the end point. But thats, i mean, we had been of the understanding that maybe they could start and raise it back up again, is that not the case . Thats not the case. He is adding something interesting, he did yesterday, anyway, he thinks the fed cannot ask the market to differentiate between tapering and raising rates. He said. I thought that, too. You are talking about this idea that tapering is not tightening. Im not trying to be a jerk about this. When you are shrinking the amount you are putting out there, you are, in effect, tightenning. That may be true, bullards point is you cannot taper and expect the market not to bring forward when it believes it will raise rates. Thats the distinction that bernanke has tried to do. Its been a part of the thesis for how the feds move forward. You saw what the market did. It put 100 basis. In the market on the news of the tapering. Bullard is saying the market did what the market is going to do. The fed is wrong to expect the market to differentiate. My hats off, be i the way to simon hobs. Walter isaacson is our guest host today. He is obviously the president and ceo of the aspen institute. Its interesting the fed now has to unwine, his tori to you h historically. You have an economy that seems to be coming back. You dont have inflation worries. Maybe im not seeing it, but you also dont have great growth. So its a little bit hard to tell with employment being so stubborn, especially people being able to get to the middle class as you were talking in the earlier hour. The feds got to balance that employment issue versus inflation an monetary issues. I think its a trickier time to be doing it. It raises excess about what happens if things go wrong. Also, speaking of things going wrong, we used to be able to control our fiscal policy, we used to not be able to get budgets out totally, at least sequester and government shut down every september and so when you are doing that, it puts a lit more pressure on honus on the fed to keep the ship from sinking. Bullard said it yesterday, lockhart said it the day before. But specifically with those two guys said is they are reluctant to taper because they cant be sure there isnt going to be a debelltateing budget fight. And that has raised all these other potentials of what happens in september. Have you the president coming back from vacation. The idea that we may hear about hits nom napgs for the next head of the fed. Thats going to be happening at the same time when congress is stepping right back into the fray. Na raises all kind of potential problems. I mean, the fed chairs in the old days, you know, in the voelker on greenspan occasionally could say things that would Chain Congress into action. I do thought think it is possible this day to same congress into being sensible the way it used to be to be done. Because theyre shameless . They are paralyzed maybe is a better what toy say it. And go ahead. No, i was going to, i wanted to switch topics. I was desperate to get walters view on airlines. This is your favorite topic. I know we only have a couple minutes be every the break, are you on the bird of united. Do you think its crazy this deal isnt going lou . Well, leaving aside specifics of the deal, speaking only for ourselves, you can look at the Airline Industry and its been losing money for deck ka idz, right . Its been serial bankruptcy. Now the Airline Industry is in a position where it can invest in new product, new plane, new services, it can provide some security so its employees and workers. Thats happened. Thats a good thing for consumers, partly because of consolidation i think. There is a column in which Robert Crandall wrote, every finding of the doj, this will be worse for the consumer. It will mean higher price, less service. He says the merger has to go through, its only for them to be profitable. In the long run, its the only way for them to increase the service industry. You want to protect workers, you want to protect consumers. You cant just have a system that cant possibly work. Its an architect for a cartel or a monopoly. We decided that this industry cannot be profitable if its competitive. Thats not true. The u. S. Competitive. But he argues its a duopoly now. You have to have a third big one in order for it to be completely competitive. He was the ceo. I forgot when. He comes on, dissuade me, becky. Gordon has always made the argument, in airline, you are only as smart as your stupidest competitor. There are stupid competitors who have devastated things. I understand, especially from the perspective of an investor, Airlines Look like a better bet now. Consumers, for workers, for communities, you got to say, we have some stability in an industry is there thats not what i say. I say its terrible out there. I traveled two, three times a month. It is awful, walter. Can you just tell them that they need to do a better job out will . I think theyre doing a good job. What do you think . I go back and forth. As a consumer, i have been very frustrated. Part or it i admit of the troubles the airlines have been in the past. I think you are dealing with workers who are frustrated and rightly so, because theyve gotten jipd out of their pensions and things that were promised to them. I think those legacy issues are around and they impact consumer service. I do understand from the investors perspective, that you need airlines that can be profitable. We havent had that before. Where are you . Generally, im probably in the camp of the doj. You know me, im usually ready to block these things. Only because i think you ned some pressure on the other guys. I dont know creating this last. The duopoly argument makes sense. Except for the fact that the pricekey going up. We have much more from walter isaacson, our guest host for the program. We will get july cpi and jobless claims at 8 30 even e eastern time. Then a first on cnbc interview, John Chambers, ciscos ceo. He will join us and talk about the slow environment for growth. As we head to break, take a look at shares of walmart, earnings reported inline with expectation t. Important important is walmart cutting its full year forecast. Will be impacting the markets today. Today. Still co come, we are a few machine away from july cpi and weekly jobless claims, later, ciscos ceo John Chambers will join us to talk about his latest quarter. Stay right here, squawk box will be right back. Lecocacola is partneringg. With nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. A Community Wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. Welcome back to squawk box. Were second away from july cpi and jobless claims. We have Rick Santelli standing by in chicago. Steve weissman to stand by the numbers. Rick. The number, sir. All right. Lets start out the empire. Its august. 8. 24. A bit of a miss. We were looking for 10. Last look was 9. 46. Buckle up. A big down week. Last week argue nalley 333, revised to 335, then shaved 15,000 down to 320,000. Boy i wish the correlation for real job creation correlated 100 with this number. If we look at cpi, july number up. 2, headline as expected. Take out the all important energy, match, expectations up. 2. 84 over year look on headline,. 2 lan the last look of 2 . Exactly as expected. If you look at the all important, well, taking out the all important food energy the core year of year basis, its at 1. 7. Also matching expectations. I guess i would have to give a tip of the hat to the analyst, pretty much all these numbers hitting the mark. Remember, matching expectations gives you a flims of this moment in time. It really is the stand alone number you need to incorporate in your longer term strategy. In this dais case, i would think the empire index is offset by those who significantly pay much more attention to jobless the real issue is how that coral correlates. Its the day after the 4th of july 2. 74 has remained the high yield close going back to august, we are now touching into for the date levels on yield that comp to fresh, fresh high yields. Should they close in this range, going back to late july of 2011 and yields getting close to 190 even though the equities in europe, they had some gains yesterday on the fact that whether you look at it quarter over quarter or annualized, their gdp was much improved. Back to you. Rick, thank you for that. We have our number of other experts. Yeah, the first thing i did was check the story that is written by the wires, because they do not appear to be anything extraordinary in this number, which i initially would have looked for, a drop to 220. A number we have not seen. Rick is correct not 100 of the change in claims shows up in payrolls, its not a bad proxy for it. It would tend to suggest employment would be improving. Pardon me, the other thing thats happening, were through the period when this data is messed up by the auto plant shutdowns and the Labor Department is saying itted the not seem to be there is less volatility in this data this time. So some legitimate strengthening perhaps, in the employment data. I dont know what would normally correspond with. But we have been running 200k on employment with 350 on the claims. Now you might suggest thats going to be a little bit better. Would be one thing to look for. The inflation data, rick and i argued about yesterday, didnt come to any conclusions, well let that pass. We will go out to l. A. Its about 5 30 west coast time. Jeff, what do you make of this . Good morning. Steve pointed out the low level claims, now five, six year low on initial clachls i think the real disconnect for us is still between layoffs and actual hiring. Layoffs are low. Thats not the issue. Its that job option and the actual pace of hiring hasnt come back. Its not consistent with other cycles. So i still think were sort of in that 150 to 200,000 type window on nonfarm pay roms right now based on this data. I dont disagree at all, the idea that will is less firing, does not mean there is more hiring. The way we get to 100,000 jobs is 4 Million People leave their jobs and 4. 1 Million People are hired. Thats plus 100,000. Its that kind of churn. So its a necessary prerequisite, not necessarily enough to have less fire in the economy. Absolutely. Absolutely. Then i did enjoy the segment yesterday on inflation, steve. You know, i just wanted to say, i think this comes up a lot from clients on the real inflation story. I think whats missed is that inflation is the change in the purchasing power of money. Thats the key. Cpi is just one ganl. Its a gauge. Its not the inflation print i think thats where a lot of people find confusion because they focus on one particular one as the real inflation rate. Jeff, i thought a lot about that conversation we had yesterday and i think maybe rick and i are talking about different things. I dont disagree rick prices are going up. I concern myself the gauge that policy makers should set policy with, if there is a better gauge, i know they would want i. I know the shadow statistics ha has that gauge, that thaj i gauge is also declining. Okay. We will leave it there. You want to give rick a word on this . Is there a better gage . I think there is a better gage. Suffice it to say, lets leave on agreement the government is measureing something. It said something doesnt match up with the feelings that most consumers, especially middle class have, ill take it one step farther, i must add 40 different emails highlighting some of the shadow statistics using the original cpi xutations altered, that more than doubled the current cpi rate. Can you make these numbers what you want. Its a compeling incentive to keep it lower and well leave it will. All right. You guys agree on that point. Well take it. Thank you. When we return, the squawk box ceo call is in session. John chambers joins us to talk about his latest quarter and planned job cuts. Squawk box will be right back. So we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. The ones getting involved and staying engaged. Theyre not afraid to question the path theyre on. Because the one question they never want to ask is how did i end up here . I started schwab for those people. People who want to take ownership of their investments, like they do in every other aspect of their lives. To experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Welcome back to skwaux this morning. We have red arose after a couple stif different stocks t. Dow off about 115 points. Nasdaq opened 35 points t. S p 500 opens about 14 points. We have a takeover deal in the Semi Conductor industry. Maxim integrated buys volterra. Todays value, that values the transaction at 605 million. Cisco systems reporting fiscal 4th quarter profits above expectations. Revenue guidance for the Current Quarter, that has the stock under pressure this morning. Cisco is cutting its work force by 4,000. Lets talk more about whats ahead for cisco with chairman and ceo John Chambers. John, thank you very much for being here this morning. Becky, its a pleasure to be back with you and steve and wamter this morning. Its great. We have been trying to physical out what you said last night, john. We spoke with an analyst this morning. He said, look, when you look at cisco. He said heading into that conference calm, he was very optimistic about how tech spending was going. After he heard from you, he was a little less optimistic. Why dont you tell us about what you see and you think the current environment is right now. Sure, becky. If you look what we are seeing, we Just Announced our 10th quarter in a row record revenues. If we hit our expectations for the next quarter, you will continue to see that type of momentum. We also announced our 7th quarter in a row where profits grew faster than revenuesch delivering what we told the street we would do, Gross Margins in line. For the next quarter, actually the consensus is coming out, earnings per share, exactly where it was before the call. And the expectations on revenue is down like 110 million from 12 billion 461 down 110 million for that 1 , becky. Now, there are a lot of things in the quarter that went very well. Its a very small adjustment. We also in terms of a small adjustment in terms of stock is reacting a. Drop of 10 last night in the after hours. What do you think happened . What did wall street misunderstand . Well, i think, bake amy, we will always be transparent, becky. You can criticize me for. That i talked to a lot of analysts last night and shareholders. All expect honesty and trance parency from us. Secondly, i think the markets perhaps missed, were talking about expenses that will not be reduced this year. They will be flat up slightly. We are talking about realigning resource, a number we did on the Positive Side to look where our Growth Opportunities would be, you saw that at 43 . You saw it in wireless at 32 . You saw it in video growing at 23 . You saw it in switching goods at 5 . Public sector around the world i think people missed. It was the key slowdown if you looked a year ago, including in the u. S. It grou 6 globally. In europe, too early to call for a shorter turn. Europe in total grew 6 . Thats up from minus 13 four quarters ago. So a lot of positives. Inconsistencies, asia pacific, japan, weaker than we would expect. We saw for the first time some emerging markets weakness in our five top emerging markets. Emerging markets only grew 8 . The top five emerging markets only grew 1. John you sound like i feel, i was surprised to see the stock off so sharply. I was trying to figure out what people were seeing, so many things were so positive. Were you caught surprised by the stocks reaction . Well, i think there might have been a lot of fast, sure money into it. If you look, where is the stock two weeks from now, a quarter from now . Its so important to continue on our financial modem. We have delivered on everything we told the street we would do at the high end of expectations. Our intent is to continue to do so. We will always be transparent, becky. Will you 93 know where you feel good and whats occurring about the u. S. Momentum, u. S. Enterprise grew 9 . Thats good for the u. S. As we look out over a period of time. Europe recovering Public Sector recovering. A couple careers that are a little bit softer than we would like to see. So i think, becky the real issue is where is the stock, two weeks, four weeks, a quarter from now. I feel good about that by the way. Why layoffs of 4,000 . If things are looking pretty strong from your per sfekttive perspective, why lay off 4,000 people . Its ba us the market is moving so fast. If you watch historically the mistakes i made is when i moved too slow or too fast without process. The market in terms of these new areas of technology, the cloud where we became the number one player in cloud, people didnt think pede play in. Mobility, where we got the best architecture in the industry, you have to do acquisitions. You have to do internal development. Perhaps the key driver of our growth and key customers profitability over the next decade, youve got to move resources into those areas through acquisitions and others. By definition, you then got to move them out of your traditional business. If the market were growing at no more rates, the pace was slower, wed do it over a period of one to two years. In todays market, you got to do it quickly. One thing as a leader, i will be making to make the top decisions. Right for our ploy years and shareholders in the long run. Of the 4,000 employees losing their jobs, where do you think the job cuts come from . I know its middle management, im saying geographically. Andrew, i think its a fair question. You know our culture pretty well. We are meeting after this on a video capability. So what we will do is share with our employees what we lo do, share them the time frame, what we notify them by, et cetera. We will look at watching our control in layers. Think about it largely as more individual contributors speeding up how fast we move into these new markets across the organization as a whole. The reason im asking the question, a, we want to know what else it mean, in cisco when you talked about investing abroad, im sort of trying to get a gauge, to the extent that cisco will be hurting or helping the picture globally, what ultly thats going to look like . I want to be careful, i dont know the numbers exactly, andrew t. Question is, are we moving numbers abroad . The answer is no. We are still an american company. The majority of our employees here. One of the few large hightech companies that are. The real issue im signal having 23409 a longterm problem in this market. We are being cautious because of the inconsistencies walmart reported today, gdp growth, its been revised down again and again and again. The same thing is inconsistency in our business. We have a portfolio play that allows to us navigate through this perhaps smoother than others. Because when switching goes up, another sector may be weaker, mobile goes up, europe goes up, asia pacific balances the other way. Does this impact any of your Acquisition Strategy . Because the last time we talked, you talked about investing abroad in part because of the tax picture here in the United States and in part because of the Growth Opportunities. Andrew, if i can raise it one level up, are we going to continue in acquisitions . The answer is, absolutely, yes. Source fire is an example, a tremendous acquisition in security. Were going to be adding resources to that as they come on board to get approved. This is where you got to free up resources now for where your growth will be. Miraki grew 100 quarter over quarter. Thats the commercial marketplace. Its on fire, 250 million annual run rate already. When you combine that acquisition with great technology, with ciscos architectural play. We will be very careful how we do itch when you do acquisition, you must be willing to back them up with resources. Third issue involved, andrew, a lat of these acquisitions are deferred revenue or incurring revenue. You get all the expenses up front. So as that occurs, you got to free up resources to keep your profitability in line as well. So im very comfortable with where we are. I think you will continue to see us leading this industry and become the number one i. T. Player. In this corner, things we can control couldnt have gone better. John, i couldnt understand your response to beckys question why the 4,000 were laid off. You said because of a fast moving market. Did the business that these people were hired for not materialize . You talk about a relatively optimistic outlook, yet you are reducing your work force by 5 . Im having trouble skwark up those two concepts. Sure. Steve. If you watch what really occurs is as we do acquisitions and we have done a number of them or we move into new areas like our semi product which is going to be really hot and probably go for an architectural play. You will have to add resources to those. The resources have you in place arent necessarily the same ones you need to grow. We literally are investing for the future and have to balance that in terms of where those resources come from. Normally, steve, we do it slowly through attrition, looking at it in terms of Performance Management over a period of onetoyears. This is something that has to be done in a quarter or two. This is the pace of change that leadership will be required. Don, you have been talking about the internet of everything is the new push for cisco. Explain how thats going and we as a consumer might actually see any time soon. Well, what you are going to see, walter, you will see everything imaginable checked. You could go back to a short time ago, there was 100 million devices connected to the internet. Think of it like phone systems the power of the network is the number of phones squared. You got two phones. The power is 4, 10, 100, 10,000. Think about 500 billion devices checked. Everything will be connected. It will change your health care. It will change your education. It will drive profit opportunities for our customers to 14 trillion over this next decade. Thats profits. It will change everything from health care to education to business profitability. It is going very well, our smart plus connector communities is going extremely well. Our smart grid capability, we are the standard for moving electricity over the internet. Our connected industries, again, were the leadner this push of the internet of things. Speaks to our. Play you have to move resources now and you have to move them with the skill sets that you need now inclouding acquisitions. Okay. John, thank you very much for joining us this morning. Its a pleasure, becky, as always. Look forward to see i dont guess you next quarter. Coming up, we want to talk to jim krcramer to see what he s to say about cisco and walmart and others. If you have high cholesterol, heres some information that may be worth looking into. In a Clinical Trial versus lipitor, crestor got more highrisk patients bad cholesterol to a goal of under 100. Getting to goal is important, especially if you have high cholesterol plus any of these risk factors because you could be at increased risk for plaque buildup in your arteries over time. And thats why when diet and exercise alone arent enough to lower cholesterol i prescribe crestor. [ female announcer ] crestor is not right for everyone. Like people with Liver Disease or women who are nursing, pregnant or may become pregnant. Tell your doctor about other medicines youre taking. Call your doctor right away if you have muscle pain or weakness, feel unusually tired, have loss of appetite, upper belly pain, dark urine or yellowing of skin or eyes. These could be signs of rare but serious side effects. Is your cholesterol at goal . Ask your doctor about crestor. [ female announcer ] if you cant afford your medication, astrazeneca may be able to help. A lot can happen in a second. With fidelitys guaranteed onesecond 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. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box. Take a look at futures. I think its gotten worse since the data came out. It got worse and a little better. Im trying to see its down. Its down 115 now. The jobless claims coming in t better than expected at 320,000, a big drop from the prior week. The Earnings Data has not been good. Walmart cfo making comments on a Conference Call saying shoppers are showing, quote, reluctance to spend on discretionary items. Interesting, too. We heard a bit of that, that theyre more likely to buy big ticket items and not the smaller discretionary ones. Meanti meantime, the Retailers International says, quote, tough environment on the end of the year. That coming on the heels of disappointment from cisco. We heard this morning macys yesterday. There have been some concerns. We can also i didnt quite understand John Chambers. Lets get down to the New York Stock Exchange and hear what jim cramer heard from John Chambers this morning. What did you hear . I got to tell you, this was a very good Conference Call. I think people really got it wrong. Im with john. At times ive been against john. Hes taking the stock down to its outlook to the same price during the multiples, as microsoft, as oracle, as ibm, as intel. Secular decline. His business isnt secular upswing as my good friend and also, they are the internet of everything. That should have a higher multiple. The stock has to be bought 23, 24. Jim, what about the claims this morning andhe market reacted . That claims looks like to me to be legitimately good news but the markets seem to selloff dmt face of that. Is that just fear of the taper now . I think fear of taper and the fact that theres this kind of weird tenyear goes to 2. 8 at the same time that walmart is saying, listen, 100 million shoppers arent feel that well. At the same time, cisco is saying that the it wasnt John Chambers says, listen, how am i supposed to do well when walmart says things arent that good . Its all packaged. Rates going up. Earnings going down. All the different headwinds. Its not a great moment. Looking for leaders. Walmart should be selling discounted routers from cisco at walmart. Thanks, jim. Absolutely. Okay. Thanks. Were going to get the last word from our guest host when we return. Lecocacola is partneringg. With nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. A Community Wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. Shes always been able its just her way. Day. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. 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This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . Welcome back to squawk box. Lets get back to our guest host for the last word. We havent talked about media and some think that jeff bezos is the next steve jobs . I think jeff bezos is astounding by creative but hes not just an technologist or internet person. I remember in 1999 when they made him person of the year. As you know as they got near the end of 99 it looked like the bubble was starting to deplate flat, i went to don logan, wise president. Making a mistake, is the internet thing going to deflate . He said jeff bezos isnt in the internet business, hes in the Customer Service business. Hes deeply focused on customers and he will succeed. Succeed with tthe washingto pos post . Absolutely. Will it change newspapers . I think being customer focused would change newspapers. I think that would help. I also think that, you know well, its true. I mean, im in that trade. You know. I did it for 30 years. I think it would be good to have a relentless focus on what customers need and want and, secondly, to be able to disrupt the way jeff is and be local and mobile and everything that jeff knows how to do. Thats what newspapers know how to do. I think its really cool that everybody wants to buy newspapers. I kind of like this trend. Me, too. Yeah. Walter, thank you very much for joining us today. Its been a pleasure. Thank you so much, steve, for joining us. You, too. That does it for us today. See you tomorrow. Right now its time for squawk on the street. Good morning. Welcome to squawk on the street. Im david faber along with jim cramer and scott wapner. Of course, we are live from the New York Stock Exchange. Carl quintanilla has the day off. On this morning after the dows worst day since june, well, since late june, stocks poised to open lower yet again. Were talking about guidance from walmart and cisco that was not good and is being met with a negative reception as you might expect. Take a look at the futures