Rise. Less concerned about as may have acquisition. Overpaying. A lot of the shareholders who own fox are shareholders in time warner. So while you want to high bid for time warner, you dont want fox to overpay if you own both of these stocks. People were expecting strong numbers out of time warner to so it could profits case. How is this for a good morning for you . Stocks down just before those earnings come out. And at the same time, rupert has a history of overpaying, right . When you look at the write down that he took on the wall street journal, but ultimately financially he paid a lot of money for it. So shareholders are going to go along with that. Theres a comment in the newspaper this morning which is the new and improved Rupert Murdoch that hes learned his lessons from prior battles. I doubt it. He had less power. He would love to do that. The shareholders couldnt call a meeting earlier, that this was going be something that would drag out over the course of the year. Into the spring. Into the spring coming out over this. And immediately announcing that theyre going to pay 6 billion potentially in the stock buybacks. Fox said that. Fox. Now, does time warner have to respond with something . Like i said, thats a good morning for you. So were going to see it lower today. But theres a key question as to whether rupert woke up everybody to the potential value of time warner and whether or not it holds a lot of the gains that it got simply because of his interest. And there was an excellent job of getting that company in prime 145i7, getting into a lot of things that have been dragging the stock. Theres important distinctions there to the wall street journal that make it more vulnerable. That stock, dow jones hadnt moved in 30 years . Yeah. The dow jones shareholder. They had worked there at the wall street journal, we know. I mean, so and 18 is the market we came up with. 76 now versus the 90. So that is the bar that time warner or the directors has to go over to show, you know what . My plan now is better than an 18 gain my plan for later is better than an 18 gain in your pocket right now. That is tough. Exactly. All right. Later this morning, we are going to be hearing from former time warner chief jerry levin. He will be our special guest starting at 7 00 a. M. Eastern time. Sprint is sprinting away from tmobile. Citing strong regulatory opposition. Sprint will appoint a new ceo to replace dan hest. And had made clear, if you want to stick around for the job very long. Check out shares of sprint, lower now by more than a dollar. Do you guys think the market sees individual deals and that its falling apart or is there a broader the possibility of mergers and acquisitions. I think each of these deals is a real reason for why it fell apart. Is this a sign at the top where things start to collapse . Some of these mega deals that weve been hearing is you can see how much is happening. When those start to collapse, what is that starting to tell you . Thats a very good point. At the same time, the regulatory hurdles on this mobile deal are going to be so, so tough. And they knew that. They knew that was what they were going to have to overcome. Certainly in the individual sectors where these deals happen, the other stocks in them trade with a premium based upon the idea that they could also be part of the takeover. So that would be individual specific to the sectors. But whether or not theres a broader cast over the market is something we have to watch. I do have a question about t thmobile and its strategy here. Part of its strategy has been to give away essentially the does the phone work. Its cheap. Its very, very cheap pricing. Some analysts have speculated the reason theyre able to do that is because they are egging somebody on to come buy us, because were making it so tough for anybody else to do business in this. You always heard gordon say youre only as smart as your dumbest competitor. Tmobile has been the dumbest competitor in terms of its pricing. Being a consumer of what is the higher end, sprint and at t. If you combine the four and have better infrastructure and better service, rather than having two at the low end and two at the high end. I wonder if regulators would have thought about that going through. Apparently not. Ill tell you what i do know as the father of teenagers, cheap, allinclusive plans are very attractive. And when it comes to the teenagers, you dont necessarily need the coverage. They dont chat all over the country. It was one of the things exactly. It works while theyre watching tv. You have three screen kids. Wireless in the house . Stwl we have wireless in the house, thats right. But basically, the idea, we always have these arguments with the kids, joe, you went over your data thing this month and we argue about it and think about charging them more. But i didnt have to have this discussion with my data. I didnt go over my data plan. I had an uncle who got into trouble when he was little because back then at t, the Long Distance calls. In my neighborhood, foop because half the high school was in a different we had to get charged for it. Dean agers and phones, it never changes. That was the whole thing that was attractive about some of these cheaper plans that were out there. Oh, yeah. Another view, walgreens is buying the rest of the European Alliance that it doesnt already own but is not planning a socalled tax inversion. The nations largest chain. Walgreens says the new company will be headquartered in the chicago area. It announced a 7. 1 Dividend Increase for shares of walgreens now on the board. Theyre up quite a bit, 1. 2 . You know about the political pressure that came to bear here. You heard from president obama, about how he was talking about inversion, how it was unpatriotic. President obama says he didnt think it was right, even if it was legal. This could have been the biggest reason you saw in there. This was chicago, his hometown. Interesting theory. There were people talking about how this was going to be a crying shame if in chicago, the president s hometown. Michelle and i might disagree on this, but i think theres a role in moral suasion. I think its okay for the president to get up and say, you know what . I need you to stay here. Thats part of his right, part of his job. The president can get up and say, dont do this. Its not rool right. Congress is being unpatriotic. One of the key roles of government is to foster government. Everything they do makes us less competitive. They are the ones to blame. You cant blame the companies. Ill be shocked if shareholders dont come back and say what . Youre going to do this deal and youre not going to invert . Are you kidding me . Yesterday when i first heard about this after hours, i think it was down by about 5 . That was a knee jerk reaction. Thats the clip there. It must have happened before the markets closed. Yosemite right there. I will kind of take both sides of this. The company could have stood up to investors who are pushing us to do this. But i come down with michelle, we need tax reform. I agree with that. But to michelles point, that drop is shareholders speaking. Thats their collective voice, what . What i find very frustrating, and you spoke to the president about this and jack lew, they seem to think that politicians can waef wave a magic wand and go to where the agreement should go. I know jack lew knows better. I dont know if we have this in one of our readerships, the announcement yesterday the treasury after saying it did not have the tools to stop this said its looking into things it can do to stop tax inversion. So thats a new thing thats out there. Even after walgreens say they wouldnt do it. Theyre looking into it. But hey, it just strikes me that the president has an ability to raise the cost to companies that are doing this. It wont stop it, but it will raise the cost in terms of investment. And when i did a background call with the senior treasury official, they said they were concern about was that something that has stopped this from happening before is reputational risk. People were afraid about the publicity around this. They were concerned if one company does it and another company and a third company, what held it back would go away and all of a sudden they would be an avalanche. What youre seeing now is a stalling tactic, an attempt to stop it while they do something to change that. That worked with walgreens. Part of the speculation, the reason they did this is they were worried about people boycotting their stores, not going into them. Thats a serious issue when youre talking about a retailer and a consumer brand. But do they, at the same time, steve, based on what you said, cause a flood gate of people saying, oh, my gosh, this could go away. We better do this while we can. That was the response of other folks i talked to who responded that you could have that kind of response. Lets check out the european markets at this hour. Theres some big news out this morning in europe, at well. Italys gdp report says the company unexpected fell back into recession in the Second Quarter. The italian market, down 2. 6 right now. Thats having an impact on the rest of the european markets, as well, with the dax and cac down 1. 4 . This is such bad news for italy. Its the United States, japan and italy when it comes to debt, right . If they dont grow, they will be forced to restructure or default on their debt at some point. Theyve passed the goal and they havent grown in, like, 20 years. A decline of 0. 2 for the gdp. But if you look longterm, theyve done nothing for decades. And their youth unemployment rivaled about 40 . Despite all the help from the ecb, cheap money doesnt stick. Its a bad economy. If youre uncompetitive, that doesnt help necessarily. Youve got to do things. The new Prime Minister has made a lot of advances that theyre in trouble. Lets take a look at how this is impacting futures here in the United States this morning. If you check things out right now, youll see there are some red air he ros. These are modest declines here. Dow futures down by 32 points. S p and nasdaq off 4 points. What you saw for the dow, the s p, both of them closing at their lowest levels since may. At this point, were on track for our third week in a row of declines for the markets. Should investors start repositioning their portfolios and brace for a correction . Joining us is j. J. Kennehan and dos kote. Let me start with mr. Kinnehan out there. Listen, you have this correction. If the correction is happening amid stronger earnings and stronger revenue growth. So my question, maybe if yogi berra were here he would say its too expensive. Steve, i would say this. We out 1920 last night on the s p 500. Which is good. It wouldnt surprised me to see us go down in 1900 today. We see the bonds up quite a bit today. One of the things we saw last night out of germany, becky mentioned the italian news. But out of germany, we saw the durable goods orders were down significantly, too. Theres a bit of bad overseas news. Taking everything back to the u. S. , though, as you said, we have had some pretty good earnings. And i think one of the nice things weve seen on changes, you listen to the ceos speak. The ceos are talking about growth for the first time in about eight or ten quarters, not hey, weve got enough expenses, we can get by on a small gdp. Theyre talking about actual growth in the economy. So i think thats very positive. And it has been a pretty good earnings season. A lot of the earnings have been lost despite the news that come off and usually have a 24 to 48 hour news flight. In russia, it looks pretty clear that the news out of russia, the idea, the question of an invasion sent the market even lower yesterday. No. I think you have to be clear on what the main driver is. I dont believe the main driver to russia or israel, the main driver, i believe, st updated market was good economic growth. We have strong nonmanufacturing numbers, really strong, and that raises the prospect of rising rates and the fed pulling back. I dont think its a geopolitical story. I think its a rising rates story and Financial Markets have to adjust to rising rates. But the other side, its good Economic Data and thats good for the fundamentals. Lets talk about what kind of rising rates people have to get used to here. The consensus out there, for what its worth, is a june july hike by the fed and a 1 funds rate by the end of next year. What are some possibilities here if the fed were to be tighter . No. I think ta that share is shes going earlier. Shes talking about qe is going to be done in october. I believe its going to be probably march time frame. And i dont think the market is expecting an earlier time frame. But the more we get good jobs number, manufacturing number, consumer data, that moves up the timetable. It could even be earlier than that. Pay attention to the language of fomc meetings because everyone has talked about janet yellen as the dove. She has been anything but dovish. Interesting. Joe, let me ask you, people out there, if theyre afraid, what ive been confused about is where can you run in this market if youre afraid . If you think stocks are overvalued, it could indicate go cash . I agree with him longer term. I dont think rates are headed that much higher and i think geopolitical risk takes states to begin with. We is saw the selloff accelerate yesterday on that news. With that, though, steve, one of the things that were seeing is people came for put protection in the spiders, particularly the etf pft there were 2. 25 puts purchased for every call. Which is unusual. So there are people coming forward. We saw volatility in the vix up 12 yesterday. So with that opening, people are starting to set up overall for that. One of the things that weve seen from the retail side is one of the things theyve been doing is buying stocks after they get beaten up. We saw last month people bought whole foods. So i think that, you know, retail and, you know, professional managers do it all the time. When stocks get overdol done or get beaten up, people are being very stock selective. You have to admit that it has been a winning play here, not that it will happen again in the future, but buying these dips has been a pretty good strategy. Doug . I think what you have to do is look at global diversification, you have to look at whats going on in emerging markets. Emerging markets have been up for the past month when large caps and u. S. Domestic equity are down. If you want a hedge, look at the loans floating, but broad global diversification, not cash. Okay, guys, doug, j. J. , thank you very much. Have a good day. Still to come this morning, it may be time to change your passwords. A russian gang has stolen more than a billion user names and passwords in one of the largest databases in history. And what magic does disney have to improve in a quarter . Were not letting it go. We have more squawk box right after this. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. E my mom works at ge. Financial noise financial noise financial noise financial noise more than 500 million email addresses, a discovery made by a wisconsin based firm called hold security. The Research Company is calling it the largest breach ever. This is a group of about a dozen people who just sat around and sent the Zombie Computers out to go gather all of these. What kills me is this target, we knew what the breach was. We dont know who the companies are, but you can basically assume if youre on the internet, it was you. I read this story this morning and i kept reading, which companies . Which companies . And theyre not revealing. Theres only 3 billion people on the internet and this is a billion passwords. That could be a lot of people who have multiple passwords. Maybe theyll only steal 1 from each password they stole. Thats 3 billion. Thats what i thought, they do it in a way you dont notice. Like office space and the pennies, they got caught. In the earnings, crushing estimates for the Third Quarter with its highest earnings per share. Here is what disneys ceo had to say on closing bell yesterday. We had Great Results. Tremendous story, Consumer Product and, of course, the studio, which has Great Results from movies like captain america, maleficent and the effects from frozen which is the highest grossing animated film of all time. Do you understand there wasnt a single flop this quarter when it come to the studios . Studio is fine. The biggest thing is theyre building new franchises. Guardians of the galaxy, that marvell franchise, youve got star wars, pixar. Let me ask you this, movie, you have have a great movie, great actor was b but the secret sauce is missing. Have they finally institutionalized the process or are they just lucky . Id like to say if everybody could make hits, they will. But the most important thing for disney isnt really what happens on the studio. Hits do they develop a franchise and does it go into a video game and theme parks. So i asked that question because i wonder, how do you put a multiple on those profits . If you look at wall street firms, the multiple on trading profits is one. They never know if you can replicate it quarter to quarter. What do you do with this . I think when you look at the stocks reaction to last night, what on the surface are really good numbers, you see the studio did drive a lot of that. But on the tv side of the business, which is still 60 of the value there, theres some choppiness. One of the things, for instance, to be neutral on the stock is the rising cost of sports. I was going to ask you about that. Lets talk about the costs of sports acquisitions. Espn was the one weakness. Weve all figured out between Rupert Murdoch and nbc and Everything Else that everybody wants sports because nobody will fast forward through the commercials. So comcast acquisitions has gotten very, very expensive. Have we seen their profitability hurt. Markets . I think the bigger issue is how do you transition into these new contract terms . The nfl kicks in the terms and theres about a 45 increase. Putting that into perspective, you could see costs going up 500 to 800 million, but you cant raise your fees to comcast and others by that commensurate amount right away. At the same time, the ad market isnt exactly healthy right now. So if they can have this incredible quarter and the stock is selling off in the premarket because of this issue at espn and the cost of sports . I think sports is an underappreciated near term risk, but longterm theyre set up well. Consolidation, theres more likely to be a buyer, i would think, no . Yes. Buying ins