Transcripts For CNBC Squawk Box 20240714

Nasdaq up by 33. However the new york fed, bullard as you mentioned and others are pushing back on this idea that a bigger cut will be coming the new york fed itself putting out headlines saying that speech was not about potential policy actions at the upcoming fomc meeting, this was based on Academic Research done by John Williams i dont ever recall hearing the fed walking back what somebody was out there saying a lot of fed president s have spoken to us over the last 10, 12 years at this point pushing become a bit on that. Lets look at what happened overnight in asia. You will see the nikkei was up by 2 . Big swing back for it. Hang seng was up by 1 the shanghai up by 0. 8 . Again, the nikkei reversing course after the weakness we had seen the day before. European equities this morning, you will be seeing green arrows there. The dax is up by 0. 3 . The cac and ftse up by 0. 2 . Italy and spain weaker italy down by 0. 9 look at the treasury market. Right now on this friday were heading into the weekend with tenyear at this point yielding 2. 043 when im over there, i cant see you guys when i go home and i do it, sometimes i go to the top of the show, if its recorded i watch. I see you two guys talking but its so awkward to be on camera sitting here. But you guys are talking. Do you know i dont blame you for that theres times when hes over there, then i watch later on in the show, im not over here listening, but were right here. I dont blame you. I can listen and talk at the same time. I know you can. I cant. What did you say all right. Lets i cant ta talk about boeing its the story that keeps on giving boeing will take a 4 4. 9 billion aftertax charge related to the grounding of the 737 max the company is bracing for potential payments over several years to airlines for delayed deliveries and disruptions to schedules. Those carriers include american, united and southwest who have canceled thousands of flights since the max was grounded in march following two deadly crashes boeing says the charge will cut its pretax profit and revenue by 5. 6 billion thats a big hit it will produce the largest quarterly loss i boeings history when it reports results next week. The charge only focuses on the impact of the grounding and does not include estimates of boeings financial liability from the crashes boeing acknowledging mounting costs will make the 737 max less profitable the estimated cost to produce the plane will be 1. 7 billion in this quarter. Boeing expects the max to be recertifiedulators and return to service by the fourth quarter. With all that said, boeing is solely responsible for the gain in the dow i guess because theres a number on it now theres a number. Such a big company when its a onetime item, we saw the financials its facebook, 5 billion thats like a rounding error right theres already so Much Negative sentibili sentiment in the stock as you said, the airlines are not anticipating this will be back in service in the fourth quarter. And the new york fed is walking back comments from John Williams the comments in question were part of a speech given at the annual meeting of the Central Bank Research association. Williams said it is better to take preventive measures than to wait for disaster to unfold. Then came this, a spokesman for the new york fed walked back the comments calling it an academic speech based on 20 years of research and said it was not about potential policy actions at the upcoming fomc meeting unusual to see this. Williams as head of the new york fed has a powerful position. Easier to say some of these things when youre the San Francisco fed president , but as the new york fed president , that position holds a lot of weight people listen to him maybe the third person at the fed thinking this means something. That response made no sense to me. You know, we do these studies to try to anticipate realworld events but once we found this out, it doesnt mean anything for what we might actually do right it seems to indicate strongly that acting early would be the proper move. Its 20years of Academic Research but it was just an academic paper. Why do they have to say that its like saying you didnt really hear what you just heard. Its what williams thinks but may not be what why do the its not what they want with the market reaction. The fed already has so much pressure on them from the market anticipating a rate cut, and now the odds are we have given a 50 basis point cut. My initial reaction was great. More Academic Research liesman type stuff that will help so i was thinking, usually Academic Research in the real world is useless then i was thinking why you come to that conclusion, its strongly indicating that, now youll ignore it no. I think its what you first said, theyre trying to walk back Market Expectations i bet its exactly what John Williams thinks and how he will vote. Boston fed president Eric Rosengren will be on closing bell today at 4 30 p. M. Eastern, thats a cnbc exclusive interview. Other stocks to watch, carl icahn has filed a proxy statement seeking to replace four Board Members at occidental patrol yum petroleum skechers surging today as Second Quarter results topped forecasts. The company saw big sales gains in india, china, mexico, the middle east, and Strong Demand for its womens, mens, sports and street wear lines. Coming up, want to hit this up and see what the market cap is microsoft its the largest. Headed for 1. 1 with the t. I hope in my lifetime i see it begin with a q, quadrillion. That will be a long time. Maybe if you live to a really, really old age microsoft shares hitting new highs. Well break down the companys report next. And then blackrocks Ceo Larry Fink will join us to talk about the quarterly numbers, the markets and a lot more remember, he got some grief for saying i expect a meltup before a meltdown at 7 00 a. M. , well be joined by marc lasry who owns the milwaukee bucks, and baseball superstar Alex Rodriguez, who has so much money and a big investor in real estate loaded. Has some interesting things in his personal life, too. Married to j. Lo. Well get on his way. All right theyre engaged. Any way, its kind of hoping that she stops by to watch the show i wouldnt count on that any way, well get the thoughts on the sports business before we head to break, a look at the biggest winners and losers in the dow. This is the couple who wanted to get away who used expedia to book the Vacation Rental that led to the ride which took them to the place where they discovered that sometimes a little down time can lift you right up. Flights, hotels, cars, activities, Vacation Rentals. Expedia. Everything you need to go. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Microsoft cloud growth has increased. They have bundled office and other products with their Cloud Services here to break down the numbers is our next guest. Is there anything you saw that was not anticipated in the work you had done leading up to the release . We thought last week when the pc shipment data had come out that the oem numbers were stronger than we thought that outperformed, but we saw another Strong Quarter of cloud growth azure outperformed, office 365 outperformed total cloud revenues exceeded the forecast by a half billion the intelligent Cloud Business for the quarter was the largest by revenue and for income. Though not for the year. We would expect the azure momentum to continue strongly. We hear ibm trying to bolster its Cloud Business sometimes we attribute weakness in the results to not being quite as successful. Is microsoft a zerosum game is microsofts gain ibms loss theres competition who else . This is a growing market. This is a new phenomenon ive been following tech for over three decades now, this is a fascinating thing to observe not only the broad Market Growth but microsofts recovery in the last few years we were talking about that before so of course ibm cant win every contract microsoft cant win every contract clearly they have been the largest for two years in total cloud revenue. Very strong Margin Expansion the strategy overall and for cloud is working in terms of hybrid computing, addressing specific end markets the strategy, the technology, the investments they made are clearly working. I was blown away. They had double digit Earnings Growth for nine quarters consecutively. With more to come. With more to come what happened . What did satya do . Weve talked about this i think its the focus on where the growth was going to be its the scaling of the Cloud Business you will get Margin Expansion there. Theres been remarkable resiliency in older business something we typically wouldnt have seen, but weve seen the older Service Offer businesses and continue to do well and strongly outperformed our expectation for the quarter. Thats a profitable business so its all the pieces coming together, but particularly for new growth areas so the you see azure growth of 64 . You wonder how long that can continue especially when it was 89 a year earlier, and last quarter it was 73 its still such a Staggering Number does that stay above 50 for the time being. At least the next number of quarters when you think about it in absolute terms, we think by fiscal 2021, the azure revenues could be bigger than the entire cloud revenues of 18. And not be far behind the office 365 business, which to date has been larger. I expect this to be a much, much larger business with total cloud revenues clearly continuing to grow with improving margins. So 2014, satya has been there for five yeersars. How do we look at the previous tenure of balmer . Was it springloaded or was it i dont remember watershed moments in social media. He picked satya was it springloaded for this or it shows two things one that management does matter. Balmer gets an a or a b plus what does he get without giving him a letter grade, he set the stage. We talked about this clearly the pieces were there. Managements focused the company. They killed off the phone business the nokia acquisition, they killed that off. That was correct which is still amazing that he sought to do that sure. It was a decisive thing to do. The investment in sales and r d and focusing in on the right areas, reorganizing the company in certain ways, as we see now with the reporting segments, those are all the right things to do. And identifying and adhering to a very well articulated strategy since satya became ceo, theres been a phrase that ive liked that theyve used. They call it ubiquitous computing and Ambient Intelligence which means commuting everywhere hyper scale, multi scale they have almost unique capabilities in doing that if you put any type of if you think the stock will grow at a reasonable percentage per year, this will be a 2 trillio Company Maybe the next boeing tomorrow is the seventh anniversary of our wreck menning the stock. Way to go so you still like it, even though so much of it is baked inned with the markein with the market theres still more to go. We raised our price target two weeks ago to 150 blackrock out with earnings it looks like the company came in with earnings of 6. 41 a share versus the 6. 50 the street was expecting revenue shy of estimates at 3 35 billion. The firm says the decrease in revenue comes from lor s fros fd fees, lower performance fees blackrocks assets under management were 6 6. 8 trillion versus the 6 6. 3 trillion reported the quarter before. Also the earnings per share, they say the year over year earnings per share decrease and comes from a lower operating income number and a higher effective tax rate that was partially offset by a lower die lawsuluted share coun. We will talk with larry fink in a few minutes to talk about the earnings, talk about china, where the company is investing more than 6 trillion and just where he sees the markets now especially after those comments from John Williams yesterday. Up next, ipo rush. We have an update on one of the most anticipated ipos for the second half of the year and the first Earnings Report from an ipo last month squawk box will be right back. Were changing whats possible every single day. , and if you run a business, that means a lot. We create Financing Options for your customers. To help them get the things they love instantly. Our data provides insights into what your shoppers have already bought. So you can offer them what they might consider buying next. Our financial and Tech Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Welcome back were learning much more about the wework ipo reuters is saying they will host an analyst day on july 31st. This comes as the wall street journal reports weworks cofounder and ceo, adam newman cashed out of more than 700 million in the company that was through a mix of stock sales and debt typically startup founders wait for an ipo to monetize holdings. Newman reportedly sold some of his stake in the company over the past couple of years newman has been criticized for personally investing in commercial properties that he then turned around and leased to the companies. The company said he plans to transfer those Property Holdings to a fund occupied by wework usually a founder waits for an ipo and then theyre locked up and cant sell for a long time if you wanted a great ipo to invest our on a dog and pony show trying to make everybody feel great i sold everything so front and center weird. Coming up, good news for everyone who has been stuck in a middle seat on a plane a new design will make the middle slightly less awful that sounds like a lot less awful. Coming home, thats why i wasnt here on monday i was delayed for hours. Who did you put in the middle caylee. Matt had to sit on the other side i had to sit with caylee, my mom on one side, me and caylee matt was stuck in the middle seat with kyle because they split us up because we were on a flight we werent supposed to be on hes much thinner he has that going for him. He dealt with it. He lost a lot of weight looking good. He could fit in there and hes tall he has knees yeah. Good luck with that. Were minutes away from our big interview with blackrocks Ceo Larry Fink before we go to break, heres a look at yesterdays s p 500 winners and losers through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Pnc bank has technology to help a pnc business line of credit, because sometimes inner peace requires a little external soundproofing. Or pnc total auto. A place online to easily find and finance the right car for you. And your passengers. Or pnc home insight, to search for a new house within your budget. Hopefully with a grass yard. Pnc make today the day. What do advisors look for dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning equity futures, u. S. Equity futures are up a bit earlier up 44 points on the dow. The s p is indicated up 2. The nasdaq fairly strong, up about 30 we should point out boeing accounts for a large part of th gain in the dow jones. Some figures released on what it will cost them, all the circumstances surrounding the 737 max. That stock earlier up 6, 7 points forget about jockeying for the aisle seat airlines may finally have a solution to making the middle seat more comfortable. The faa approved a new staggered seat design. Middle seat passengers sit slightly behind the others, and the middle seat will be three inches wider than the window and aisle seats. Theres a twolevel armrest that ends the elbow fights, and aisle and window passengers use the front elevated part of the armrest, the middle seat passenger uses at lower armrest. This is such a great idea. Why did it take somebody so long to figure this out normally they never have interest in passenger comfort all i remember them doing is taking inches away from the seats for the last 20 years. A lot of the planes have the front section that theres might be 35, 40 seats that are vertical they figured out how to get these a lot of them in that area those pods are amazing if you can somehow find a way to one. I came from a crosscountry trip, we were in the back row. We were put all over the place thats tough. Im telling you, thank you finally for thinking about giving more space to passengers. Its difficult to upgrade theyre much more profitable the airlines now that means that they try to save as many of those seats, they try to get revenue for the first class. You dont get as much revenue from upgrade and Load Capacity is like 89 . They try to get people to pay up for an eblxpensive first clas seat yeah, you mooch im glad theyre doing well, i guess. We are. Thank you for additional space. When we come back, blackrock reporting earlier this morning well have blackrocks Ceo Larry Fink he will join us on set in a moment the stock up by 1. 86 stick around, youre watching squawk box on cnbc dear tech, lets talk. You blaze trails. But you have the power to do so much more. Lets not just develop apps, lets develop apps that help save lives. Lets make open Source Software the standard. Lets create new plastics that are highly recyclable. Its going to take input from everyone. So lets do it all, together. Lets expect more from technology. Lets put smart to work. [what about him . 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Com tv and never go to the post office again but were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. Welcome back blackrock results out this morning. The Worlds Largest asset manager posting a 6. 5 drop in quarterly profit among the reasons its investment and advisory revenue fell, costs rose and taxes were up joining us is blackrocks Ceo Larry Fink thanks for coming in hi, becky, hi, joe. You laid out in the release what happened. There was a 3 decrease in earnings per share year over year, lower operating income and higher taxes, that were far initially offset by what we had 1 151 billion of inflows, of which 87 billion was institutional, and 73 billion was active 6 6. 8 trillion with a t assets under management. Year to date, assets are up 6 688 billion why markets are higher especially in the United States versus elsewhere. One key thing about the quarter, the average assets for the quarter were 2 200 billion lower because of the market swoon in may. One of the more interesting points, ten years ago when we bought bgi, about 49 of our business was in the u. S. One would have thought ten years later as the world got healthier, bigger, broader, you would have thought that would have shifted downward a bit. And right now its about 66 u. S. Wow so that just tells you how much market beta has been in the United States versus the emerging world in the Second Quarter we saw that very large because we had emerging markets were down 7 for the quarter, yet s p was up approximately 7 . So we had a lot of die vevergen beta we had 26 billion increase of cash we saw people derisking i still believe that this will be a mistake, people are underinvested in equities. And i do believe with now the changes of the tone of central bank behavior and youre starting to see corporate earnings coming in well, you know, we still are constructive on the world we had great active flows. We had active flows in equities in the Second Quarter, which was unusual. We raised 1 1. 6 billion you could never be a sell side analyst because you said something you were on last time. You took a position and i mentioned it earlier right i bet you got some flack, too. The headline was larry fink predicting a melt up not a meltdown so many people are sure that this is all artificially fedinduced gains, and that the fundamentals dont much up with the equities for you to say that you put yourself out on a limb and stuck your neck out. A sell side analyst would be, oh, might go up, might go down they never say anything. I thought you probably got some flack for that but you were right now youre saying it again yes which is significant, even at these levels at these levels you think there could still be trending higher markets will trend higher i believe if you want to frame where the market will be for the next ten years i would be betting on the rest of the world will catch up somewhat to the u. S. When you see the big shifts so much of the market gains have been u. S. , for good reason we deserve it we deserve it we have Better Companies we deserve it. Also because we did more fiscal policy than other countries. Other countries were heavily reliant on just Monetary Policy. I think thats the issue i know that were all anticipating a change at the ecb. I hope Christine Lagarde pushes some of the governments to start focusing on more fiscal policy is it definitely her . I hope it is her. I think its probably highly likely im not optimistic about her. Some of her comments in the past were, i dont know shes shes like elitist, globalist. Just i know im globalist, too. But you appreciate the fiscal work weve done in this country. I dont think youre talking about it as stimulus just throwing money at something. Youre talking about deregulation, even tax reform and all these things thats what you mean by fiscal, right . I also believe fiscal policy is a better tool for more what kind of fiscal policy . Infrastructure let me finish fiscal policy does more for an economy than Monetary Policy Monetary Policy has limited tools, it monetizes Financial Assets what do you mean by fiscal policy let me just finish. Okay. I need to know. Im trying to help you. I know. Its hard. Monetary policy monetizes Financial Assets bonds and stocks the general population does not own bonds and stocks especially in europe and asia. This is one of the structural issues 82 of savings in europe is in a bank account china, almost all savings is in a bank account when you stimulate the economy through Monetary Policy, its not impacting the majority of people so fiscal policy through a tax reduction, some time type of redistribution of infrastructure by creating jobs that way, that will lift more people in the economy. I think this is one of the structural issues well have to live with. I think this is why europe has not been able to get out of its problems its been way too reliant on Monetary Policy. When 82 of savings is in a bank, they have negative return now. Do you think that will stimulate more consumption we have not done infrastructure here. So the fiscal policy were not going to any time soon the ones that paid off were the former of what you talked about, tax reductions and things right that is one of the reasons why income inequality here has gotten worse over the past 10, 15 years there are 401 k s here some people participate. What is our savings if europe is 82 , china is everything 82 of all their savings is in a bank account. We have much more europe does have Pension Funds that are much more state run we have a much stronger and better equity culture in america. Thats why u. S. Stocks trade at higher pes this means well have a stronger economy. You talk about the Central Bank Moves yesterday John Williams, the head of the new york fed, made some comments that made people think, made the markets think that a 50 basis point cut is much more likely this month than 25 basis points. New york fed came out and tried to talk that back. Yeah. I dont see the Federal Reserve changing behaviors that rapidly by going to 50 theyre incrementalists, 25, 25, 25 you believe 50 . I cant believe theyre doing it at all while we talk about the great economic numbers coming out time after time but the ecb is talking about another rate cut the yield curve is 55 we have to do this because we no longer control our own destiny and our dollar is too strong. Were controlled by them, not us true. But 55 of all european debt is negative yield man getting back to this 82 of people saving, its only going to hurt them more. I actually believe i will stick my foot out again. If the ecb is going to try to restimulate the economy in europe, they have to buy equities really . Just like the bank of japan has done i dont believe thats pretty you know, most would say thats terrible. I believe negative returns, negative yields harm the economy. They dont stimulate you are sticking your neck out again. I think when you stick your foot thats a mixed metaphor. I do love them youre sticking your neck out, if you stick your foot out, you are tripping someone or putting your foot in your mouth is not what you want to do he does walk in the cake. Dont you love it people do the best mixed metaphors. Ive been guilty of it. Theyre good. You did stick your neck out. Youre doing it again. I like knowing what you why would you know anything . Youre managing 6 6. 8 trillion. You can Say Something and do it. You can say what will happen, leave today and make it happen ive been saying this each time ive seen you, were at a unique position at blackrock, having passive and active Risk Management has given us a more holistic approach to our clients. Its evident by our flows. We had a 20 increase in our technology business. We are having conversations, more outcome conversations with more clients, and its showing up with these flows. The other thing is that your revenue numbers are down, thats partly because fees are down explain that you saw derisking in the quarter. We had a lot of money going into cash average assets were 2 200 billin less as you framed the original statement, security lending was down 18 thats reflective on the fears of the economy youre seeing hedge funds derisk, so the gross positions were down. So theyre not borrowing more importantly were seeing less and less m a activity we did have this big reduction in security lending. Those are some yirs we saw very quickly to emphasize this hedge funds are derisking, other clients are derisking, you think thats the wrong move, we should not be in cash right now no i would not be in cash if youre going to do anything, you know, put your money in a long dated mutual fund or etf. Or if youre still concerned, i would still be interested in buying a u. S. Tenyear even where it is. Bulgarian debt, the bulgarian tenyear is trading at 38 basis points ver versus ours at 2 . Joe, what would you like to own . I like our full faith in credit a bit more than bulgaria. Thats what people dont understand so so the foundation is we could see lower rates which will stimulate the economy more and it will create a positive for the mortgage market. Then i do believe Global Equities will continue to do better geopolitical concerns can disrupt everything in the short run. But i still believe the fundamentals over a long cycle is higher equity and i think people are wrong in derisking as much as they have youve been to bulgaria im sure you have. I havent thats like the only place on the map you havent been theres a few other countries. Has some nice spots i hear some parts are beautiful. Not trying to thats why you picked on them you havent been there no. I did a survey of rates, i said bulgaria at 30 i know. Okay we will have more with larry in a second dont go anywhere. What else is coming up well talk to larry fink about how the economy looks from where he sits. As we head to break, heres a quick check of whats happening in european markets right now. Mixed actually nothing is happening. Never mind well be right back. Lets get back to our conversation with blackrock Ceo Larry Fink we promised a quick discussion on the global economy. Its better here, i guess we can summit up, mostly. Its a lot better here. Except china, maybe. China grew at 6. 2 . Lets be clear, it is slow but were all envious of that type of growth. I do believe the trend in china continues to be downward were hearing from ceos that more and more supply chains are moving out of china right now. People are not waiting, companies are not waiting to see what the outcome is. So what does that do to china in terms of the trade negotiations i think long term china knows they need to find ways to stimulate more of their domestic economy. Our economy and most economies have 30 from domestic and other exports. China is flipped they know if theyre going to continue to grow, its going to be domestic. So the fundamental problems with china, we believe its just not growing as fast, is they have a huge retirement problem there. Larry, has your view on cryptos changed at all two years ago i think you called bitcoin an index of Money Laundering do you remember that i do. Another broad statement. So how now we have libra and bitcoin. Yesterday i got into a little discussion with treasury secreta secretary, i mean, if youre going to launder money, i mean, bitcoin is probably for total Money Laundering, its probably. 0005 so why pick on bitcoin for the Money Laundering al capone never had bitcoin. I dont think of libra as a cryptocurrency and Marc Zuckerberg is involved. Lets talk about the concept, though forget about who has created it and what its trying to do you know, i was in europe this past week. I had to buy a new briefcase because mine broke there. You were carrying cash . All jewels. And when i was going to sign the receipt or the electronic, it asked me do i want to pay in euro or dollar and i said, okay, dollar then i looked at it. Im still being charged at 3 , okay and when you think about all the people who send money they may work in one country, send money back home, they generally do that through organizations that charge 5 to 10 . There is a need, whether its a libra or something else, to democratize the exchange of foreign currencies today with computers and electronic market there shouldnt be that. It should be 10 basis points, 5 basis points so i actually believe the idea around lb libra, i dont think we need to create a new currency, but the technology to instantaneously calibrate all the currencies, that should be done who are the people making money on that . The banks. Thats progress to you, at least to get to the point where youre saying it about Libra Bitcoin is it has to be some form of its a basket of currencies. But the crypto is keeping track of it. If you had this mechanism in every transaction, you could minimize a transaction cost. Thats the whole idea, right . Thats what the whole idea is and thats what i loved about it i dont believe we need an International Currency like that theres no need. But there is a huge need to bring down the fees of the interchange. Need or not, its here. The banks have not wanted to eat their own but when you see pressure like libra, do they all get on board pretty quickly and say im not going to lose my Market Square . Theres going to be some mechanism of what i said you dont need a libra you have computers that can calibrate euro to dollar instantaneous for a couple of basis points or a yen. Next time come for the full hour. Ive got to go talk to my shareholders now. I see the evolution youre evolving and making progress thank you. Im not a ne yander thal. When we come back, our guest host, ceo marc lasry and ledgen tear baseball player Alex Rodriguez. Were going to get their thoughts on investing in space, sports, whats happening in hedge funds and much more. Well rhtacbeig bk. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Heavy hitters come to squawk box. Legendary baseball pro turned investor Alex Rodriguez is our special guest host and hes not alone, Hedge Fund Owner marc lasry will join us from the markets to ipos to the business of sports we will cover it all. Plus space, the final investment frontier. Thats one small step for man, one giant leap for mankind. A look at why startups are turning to the stars for profits on the 50th anniversary of the Apollo Mission the second hour of squawk box begins right now live from the beating heart of business, new york. This is squawk box. Welcome back to squawk box here on cnbc im joe kernen. Breaking news. Oh, its hot outside. How hot was it how does it go thats how cold it was the lawyers had their hands in other peoples pockets anyway, it is hot outside. U. S. Equity futures marc, youre not a lawyer, are you i actually went to law school. Youre a reformed lawyer. But i only practiced for a year. Charlie munger got mad because i called him a lawyer. Wait a second, you were. Theres a law firm founded with your name on it. One out of 14,000 people, over here its like two out of six. Blackrock out with results this morning, earnings of 6. 41 a share. That was a little short of the 5. 50 that the street was expecting. Revenue falling a little shy of estimates at 3. 5 billion. The firm said that the decrease in revenue reflects lower base fees driven in part by lending revenues blackrocks assets under management, 6. 8 trillion theres the 6. 3 trillion reported the quarter before. Larry fink was just with us and was talking about what he sees out there. He thinks that investors are being a little too cautious at this point he did talk about derisking hes seeing in his funds where people are putting more in cash he thinks thats the wrong move and that the markets are headed higher from here the stock is now indicated up about 1. 86. For more on the markets and investing, our guest host for the next two hours, co founder and chairman marc lasry and al arod, Alex Rodriguez, ceo of arod corp did you look at the post today, alex i did not. Let me show you i know whats coming. Mariano, great big section in the center. They said such great things about him getting into the hall of fame. Hes cool he was awesome and as a reds fan, i dont like the mets or the yankees, really, but i did look at the yankees have the best record in baseball. Theres no slowing them down. Theyre as good as advertised and theyre deep they have three or four guys that are hurt and theyre getting better. We gave some pointers to derrick and i dont see any improvement at this point. For derek, its going to take a little time. Heres a guy thats won five championships. Its going to take time. I think after three years the jury is going to come out and say has he done a good job and five years is even more fair. Its good for baseball. And you, how awesome was that . This is a great year for the mba and i dont know whats going to happen to you. Do you have any idea how im pretty sure i know whats going to happen. The bucks are going to do better. The bucks will do better. I think well win a championship this year. This is our year this year, next year i think next five years youll see us win pretty much every championship. Is that because youre now the governor of the team exactly no, i think its just because if you take a look at it, the nba has changed radically and you see that and i think its great for the fans and its great for the league i think were probably one of the only teams thats had consistency. Its the same team coming back hopefully that means a lot and i think youll see yanis, who is mvp, going to a whole nother level as well. My question is would you rather invest in an nba Basketball Team or a Major League Baseball team thats not hard a Basketball Team. Now, if you end up deciding you want to buy a baseball team, maybe ill invest in it. Well get joe to come in and well make him a yankee fan. I think i would rather you buy the bengals and get rid of this guy brown once and for all. Seriously. The reds im more hopeful for. Youre you love the reds. But if my team was that bad, i wouldnt talk about it that much when carlos comes on, well talk about everything. But for now can we talk about what youre seeing because you like the stress stuff. Is there anything distressed at this point theres less. I think theres more in asia theres more in europe u. S. , theres less but were all sort of waiting for the economy to slow down i think whether its this year or next year, youre seeing the slowdown thats why the fed keeps trying to lower rates so there is a nervousness out there. Whether the economy gross at 1 , well end up seeing that but i think for us, youre seeing a little bit more of special situations but you keep lowering rates, youre going to prolong the recovery. Larry fink was just here and he said that right now his clients and hedge funds are derisking and he thinks its the wrong move he thinks the markets are headed up what do you say to that . I understand why hes saying that what youre seeing is just a nervousness, right so when people are nervous, theyre going to slow down theyre not going to buy as much i think youre not going to have a recessionary environment, because i think the economy is fine so if youre not going to have a recessionary environment, you should have equities thats why i think ultimately hes correct but if youre an investor you cant take that risk youve got to be careful and youre seeing that more and more. I like it when you say you dont see as much to do here in the United States, just because of your proclivity towards distressed debt. China is slowing down and youre seeing asia slow down if china was growing at 6 or 7 and now its growing at 5 , thats a 20 reduction. For the region. For the region. So capital is tighter. So for firms like ours, were able to lend money out in asia around 15 to 20 . So were getting overpaid for that. Youre like a credit card company. Were trying to be. Its a different mentality in asia with the investors. Theyre willing to take on higher loan factors rather than trade away equity. You hit it on the head. Because i head your notes. Is that why thats really what it is at the end of the day, here in the u. S. You dont want to pay a lot for debt, so youre willing to sort of give up equity in asia, youre willing to pay for more for that debt because you think its worth two, three, four, five times so why would you pay somebody 15 or 20 the only reason youre going to do that is because you dont want to give up any equity. Also he talked about what sen natural banks are doing. He thinks its going to be a big boom for the market. Were seeing a lot of investors from new york come to our secondary markets and have become very aggressive in buying apartments but look, we think theres a great environment to buy them. Theyre buying cap rates and improving them weve been doing the same thing for over 20 years. And we keep it right in the middle of the fairway and dont try to complicate. We dont play in retailing or warehouse. Apartments is what we do and we love the environment now, there is a lot of excitement and when we find excitement, were sellers and when theres a lot of fear and theres a nice mix, were buyers. You do more than real estate, dont you . Marc and i are up to some fun things i do some fun things from my Family Offices and the market is so competitive theres so much liquidity, theres so much information out there and were involved in some great businesses that are very disruptive some in media, some in health and wellness and were up to some exciting things. If someone came to you and said ive got this cloud based whatever, social media with bells and whistles, would you say yeah, im going to throw some in there . Some of these guys are made bazillions of dollars in Silicon Valley. Weve made a handful of bets. Weve got saunders, which is kind of a richer mans airbnb. Fit form is a platform that has about 55,000 subscribers very interesting acorn is a company that helps families like i grew up with a single mother who had two jobs its helped the 99 investor money over time. So were very excited about that i think theres a space to bring acorn to actors and entertainers, because if you can save 10 of your money, you can kind of dive into players and athletes going bankrupt. You can do the same thing for entertainers the key is giving them an opportunity to invest 10 of the money. Do you want to catch lasry . Theres nothing going with him. There is in asia and europe hes charging 15 to 20 . How many years before you think you can look down on him hes my mentor. Ill never catch him he just keeps teaching me. Besides obviously being a great dad and investor and all of that, hes been a friend and a mentor in my darkest times marc lasry was always supportive and helpful. He was a tough friend, but always there for me and ill never forget that. Well, thank you thats great. Marc, when you hear Something Like this, just the idea of trying to get acorns in for athletes, would you do that for your team . You would i think alex is absolutely right. At the end of the day what youre trying to do is youre trying to teach people who havent had a back ground in finance what to do with all the money theyre getting. I mean, imagine if when you were 18 or 19 years old all of a sudden youre making millions of dollars. And youre out of high school and all of a sudden youre making millions of dollars it takes a while to understand what to do and one thing we always tell everybody is just leave your money in the bank. You dont need to invest right now. Just save that money because youve got a short career span. Alex had a great career. I mean, its 20 years. But most people who are playing sports or whether youre an entertainer, youll make a lot of money for a short period of time and then all of a sudden you go from making millions of dollars to very little money and youve got to get people used to that idea and youve got to save. And thats hard. And weve spoken to several dozen owners like marc lasry and others not one has said i dont like the idea if its a viable investment. Even if you take that 10 and you put it under your mattress and you dont touch it, two things, families and hangonners are not touch it were making a bet that youll make better decisions at 45 than 25 and if players are going bankrupt at 50 or 60 , we can cut that in half the biggest challenge is going to be having this conversation with the union but the owners, theyre all in. I remember at one of our delivering interviews, you saw a lot in oil and gas did you harvest those investments . Where does that stand . Did they pay off where are you on that . Are you out or are you still adding to positions . So we should have sold everything about a year ago. What happened is sort of prices came when we bought they were pretty low, went back up we made a little bit of money. And then that market is absolutely repriced right now. So if you take a look at whats happening in oil and gas, i think that market is down 20 plus so even with oil being where it is today, the market is saying i dont want im going to value your company at a much lower multiple today so i think today theres quite a bit to do there. But you now have to be patient and where i would tell you the biggest opportunities in distress, is really in two places in the u. S. Its really retail and its really oil and gas and those are just two industries that have gotten decimated because people have said i dont want to be there anymore. And youve just had a lot of capital move out so prices are come in quite a bit. Are you a billionaire working on an upgrade to capitalism 2. 0 for the current to fix all the broken things in capitalism that have caused inequality . Ive never heard you talk, though ive never heard you disparage the system we have necessarily i mean, obviously around the edges. I blame government in many cases for some of the ine quities that we see i think at the end of the day i still think this is the greatest country in the world. Look, we have issues we all have issues and i think weve got to figure out how to work on those issues. But i think the system that we have here has actually worked and has helped a lot of people it hasnt helped as many people as you would like. It never could. Right so the question is what do we do when we do have these discussions, i always try to get it away from talking about the capitalist system versus socialism and just try to get what do we need to do with taxes . What do we need to do with once we raise more taxes, what do we do to try to narrow the inequality is it education . Ill tell you, i actually think its pretty simple. Tell me how to do it. Whats the hardest thing everybody has . Its access to capital right . You need to be able to have capital to do something. You have access to capital, you have access, we all do but the hardest thing today, if you sort of think about it if you go to a bank to borrow money, what does a bank want it wants assets, but you dont have assets so you cant borrow. If today the federal government would end up saying were going to make a loan bank and half a trillion or a trillion dollars that people can go in and borrow, this economy is 60 Small Businesses imagine being able to go and you want to create a business. Give people the opportunity. Now, we may lose a bunch and people may not theres a reason for the Higher Standards banks would love to loan money to Small Businesses and get back a better return than theyre getting right now. I agree but at the end of the day youve got a lot of ideas and yes, theres going to be issues but if you want to get people out of where they are, youve got to let them follow that dream and be able to borrow money. And today you cant. That sounds so much better than the signaling of youre saying to jumpstart or even supersize capitalism, bring capitalism to the people that are being left behind. If you wanted to go buy a burger king or you want to do a mcdonalds or a subway and you need the capital to end up buying that business, you cant do it if you dont have any assets so its sort of every time you go to a bank you cant borrow money so imagine if you were able to do it, you would have all these Small Businesses that you would be able to do. Yes, a number of them would fail but weve got issues and theres a number of things that always fail but if you want to jumpstart the economy, do that lowering taxes or raising taxes on folks like me and being able to give people an extra 500 a month or 500 a year, i think its 500 a year, thats not going to have that much of an impact what has an impact is creating jobs. You know john is still on today, right hes going to love all of that is john still coming in today . Yes hes going to love that because thats kind of his idea, too. Its as old as thats the oldest expression around, you dont give a guy a fish, you give a guy a fishing rod a guy or a gal and instead of just redistribution, give them a way to earn it i think thats great anyway, thank you. Were going to have much more with marc and alex over the next two hours. Coming up, mission in space, well look at why startups and investors are turn to go places other than earth for future profits, as we celebrate the 50th anniversary of Neil Armstrongs first steps on the moon that story is coming up next here are the futures at this hour, indicated a little bit higher today boeing is up, dow is up 41, nasdaq 20, s p 1 and 1 3 youre wchating squawk box on cnbc or could it turn out differently . I wanted to help protect myself. My doctor recommended eliquis. Eliquis is proven to treat and help prevent another dvt or pe blood clot. Almost 98 percent of patients on eliquis didnt experience another. And eliquis has significantly less major bleeding than the standard treatment. Eliquis is fda approved and has both. Dont stop eliquis unless your doctor tells you to. Eliquis can cause serious and in rare cases fatal bleeding. Dont take eliquis if you have an artificial heart valve or abnormal bleeding. If you had a spinal injection while on eliquis call your doctor right away if you have tingling, numbness, or muscle weakness. While taking eliquis, you may bruise more easily. And it may take longer than usual for bleeding to stop. Seek immediate medical care for sudden signs of bleeding, like unusual bruising. Eliquis may increase your bleeding risk if you take certain medicines. Tell your doctor about all planned medical or dental procedures. Whats around the corner could be surprising. Ask your doctor about eliquis. I need your attention for a minute. What are you looking for . Is it inspiration . Because shes changing the world. Every post out there is like dream big but when it comes time to take action girl scouts are making a change. Were the risk takers. Athletes. Leaders. Im not saying you cant be part trendsetter, but i am saying you need to be all girl scout. Mno kidding. Rd. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Still to come this morning, much more from our special guest marc lasry and Alex Rodriguez, including the business of sports, the nike controversy and much more. Up next, though, space the final investment frontier. Morgan brennan has a preview morgan, good morning hey, good morning, becky. Well, in the 50 years since the Apollo Program was making history, back in the 1960s, nasas budget accounted for 3. 4 of the overall federal budget. Today its half a percent, and yet we are on the cusp of a new space age. Who is driving it, whats driving it, how were going to pay for it, thats whats coming up after the break time now for todays aflac trivia question. In what year was the first patent registered for a pencil with an attached eraser . Aner when cnbc squawk box continues home owners insurance. Slime in my motorcycle. No. Thats motorcycle insurance. Slime everywhere . Ughhh nooo, theres no insurance for that. Do they help when i have bills Health Insurance doesnt cover . Yeah thats it aflac gross guys. Get help with expenses Health Insurance doesnt cover. Get to know us at aflac. Com were changing whats possible every single day. , but what does changing whats possible mean anyway . Well. If you run a business, it means a lot. For starters, we provide you with Financing Options for your customers. That way, you can help them buy the things they love instantly and pay over time. And that turns them into serious fans. Hang on, theres more. Want Customer Insights . Weve got those, too. We use data to show you what your shoppers have already bought so we can tell you what they might consider buying next. And you can offer them the perfect products. That ceo gets it. From adding unique capabilities to your companys apps to bringing you loyalty programs, our financial and Tech Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Now the answer to todays aflac trivia question. In what year was the first patent registered for a pens well an attached eraser . The answer, 1858 this weekend marks 50 years since the apollo 11 moon landing when american astronaut Neil Armstrong took one small step for man and one giant leap for mankind. Morgan brennan joins us from where it all began i was talking about the building behind you its impossible to describe the size of that if you look at the birds flying around up at the top, they look literally like specs i think its like the biggest building in the world or something. I mean, the pentagon is, but its absolutely huge, that building its very cool very impressive. It is huge, it is vast, and it is mired in history so when apollo 11 blasted off from here, it was from here, Kennedy Space center 50 years ago. That mission cinched americas dominance in space in the 50 years since, thats still seen as the peak of american splace flight but chad anderson, the ceo of early Investment Firm space angels refers to as an entrepreneurial space age. Weve gone from a dozen privately funded companies in the world to 476 companies today. Theyve raised 22 billion of Equity Capital over that period of time. So we really have a robust market economy happening right now. Morgan stanley estimates that the space economy could top a trillion dollars by 2040 and there are estimates that go even higher than that e lan musk spacex has really led the way, powering rockets that are drastically dropping down launch costs jeff baize hes which has a rocket factory down the road right here is also poised to become a major player in this sector but overall here is the tee take away, the commercial space is really forging these new innovations, companies are in large part doing it along side the government and that is perhaps when you look at the Apollo Program 50 years ago versus where we are in space in the u. S. , that is perhaps the biggest change so whereas nasa historically laid out the vision, they paid contractors and then they owned the hardware outright, the agency is increasingly adopting a model in which it helps fund company spacecraft and then essentially be able to pay for the services or to lease out those spacecraft as and when it needs it but guys, that business model, that idea of a Public Private partnership, is really in focus right now because the Trump Administration is looking to being humans back to the moon, do so on a very aggressive timeline, and that work with commercial space is going to be key to seeing Something Like that actually transsfier were going to be talking about all of this a lot more as the day goes on. All right this is all useless info, but i really got some good stuff here, morgan number one, its a vab, vehicle sem blie building, but it used to be the vertical assembly building, because they actually assembled the saturn rockets vertically its got 3,660,000 cubic meters, which is one of the largest buildings in by volume it is the largest single Story Building in the world. And the tallest building outside of an urban area and when youre there, its just unbelievable to see the size and scope of that. It is. Its cool anyway, if you get a chance. You know, i went on that thing that you get in and it does all that and i was sick for the next three hours. Seriously. And i tried to because my kids did it and i said im going to stay on this thing for a while, like riding the bull. And i did it and i almost didnt recover. Anyway, thank you, morgan brennan. That was a nice dance. You saw were you able to see . Do you remember . I went there when i was a kid. Do you remember when neil walked on the moon yes i think were the only ones here that remember that. I thought it was cool. I can tell you it actually happened, in case anyone is wondering. Well, i saw it on tv, so i wasnt there. The thing didnt extend all the way. The pole. After all of that info, all you guys it wasnt really a dance. I dont know what it was what do we got im looking it up i like when they do that. Since when come on, work machine. Okay so the estimate was for we can put a man on the moon. American skplexpress coming with numbers that are better than expected. It looks like revenue came in in line 10. 8 billion, just running through the couple other things. Second quarter provision for losses, 861 million, Global Consumer services grew, came in with a net of 738 million global commercial services, and well take some time to dig through the rest of it it looks like stock is off by 1 even though it beat earnings expectations when we come back well dig deeper into the American Express results. Also weve got marc lasry and Alex Rodriguez, were going to be talking about sports frp contracts to controversy loofrod to cover squawk box will be right back. Prevagen is the number one pharmacist recommended memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Still to come, much more from our special guests, marc lasry and arod are both here. Programming note, will the fed make an even deeper cut than expected thats certainly what the market started thinking yesterday after the new york fed president John Williams made some comments and some people took off and ran the fed president eric rosen gren is going to be joining us today and well be grilling him about all of that. Sidewalk boks will be right ckba tree. Twentyfour people came together to sign an agreement that created the stock exchange. Just the right elements coming together. It started when scores more people came together, just down the street and traded bonds that helped pay for the revolution, and the nation it created. It started in an office on the corner where the right people witnessed the telegraph and brought information and humanity together forever. It started with the markets, bringing together steel and buildings and silicon and medicine and rockets. We believe the possibilities of life and investing are greater when we come together. Its why for eighty years weve connected ideas with technology, data with inspiration, investors with solutions. So that every day together, it all starts again. Lets get down to domm chu, who has been looking at some recent ipos. Which ones were watching a few of them. A couple of earnings to start off the day here, we are going to take a look, first of all, at shares of chewy, which are up around 3,000 shares of volume. It had its first report as an earnings company, as a Public Company yesterday after the close. The sales and its net loss were pretty much in line with expectations now, the online pets product retailer went public back on june 14. The price was 22 a share. Youll remember it went up as high as 41. 44 intraday on the first day. The post ipo was just around 31 bucks. You can see the 33. 72 the last trade there. Big move crowdstrike also, shares are surging here theyre up about 18 , 19 , over 50,000 shares premarket right now. This is the cloud based cybersecurity company. Better than expected results in its First Release as a Public Company. The stock went public back on june 12th. 34 a share. The post ipo was nearly 80 bucks, 86. 25 now. It will be a new record high and were going to end on a recently maybe made Public Company. Im not going to say initial public offering, because it was a direct listing this is i heart media. This is the Radio Station company. 16. 45 is where it opened up yesterday. It had been trading over the counteranywhere between 15 and 19 bucks a share its a pretty big move i heart media emerging from bankruptcy well see if the shares trade higher above the 17 price that we thought it was going to be at yesterday. Dom, thank you very much. Lets talk more about the ipo market with todays special guest, chairman and ceo marc lasry, and Alex Rodriguez, who is the founder and ceo of arod corp do either one of you ever play in ipos . I dont. I couldnt imagine you would. Alex, you havent been lured in by any of these things. Not for me. Whats been crazy about this is watching the market with so many of them trying to get to market now some people say thats an indication that they think is end the coming what do you say about that, marc well, if youre a private company, you want to go public right now. Why . Because the market keeps reaching new highs, so theres a huge amount of demand for equities so i understand why everybody wants to go public and that makes sense i think for somebody like us, really all were going to do is just wait and sooner or later things are going to go the other way. So were going to wait about another year or two years for whether these companies hopefully some of them have debt and we can buy that debt at a discount but i think for all these if youre buying that debt at a discount, its because its distressed debt. Exactly so youve got to wait. Alex, my guess is if youre looking at knit of this stuff, youre looking at it way before it comes to the ipo as an early investor yeah, i love the idea of buying Great Companies that are over a billion dollars in the fourth inning at first inning pricing. And we like to invest in things we understand, things that we bring in more than just our resources, but where our team and our expertise and perhaps some brand value we can be great Strategic Partners to young founders. What have you found along those lines . For one, we like fit plan its interesting, fit plan and saunders both founded by a pair of canadians both very smart. If you think about where airbnb is with about 4 billion of revenue. We looked at saurnder, we just think that has the potential to be a 5 or 10 billion company and if we miss, weve still got a triple and were good with that. Do you think thats a company that eventually gets bought up by one of the other players in the industry absolutely, and i think one of them could be airbnb. But theres so much disruption whatever worked five years ago probably doesnt work today and is not going to work in five years. Marc, in the meantime youre sitting back and waiting for tougher times to come along. Im a big believer that theres a lot of knuckle heads out that there and sooner or later people make mistakes. Is it part to be patient . It is thats why were focused more on sort of asia and europe where theres issues one of the things were doing here in the u. S. Is we buy tax liens. So ill buy the tax lien of where you live and its impossible to lose money but you can buy these because youre buying it the tax is 1 or 2 , well buy it at par from the town or the city and you get paid 9 until it gets paid off but youre only going to make 8 to 10 so youve got to wait. You mentioned retail is another area in the United States where you think its really interesting it probably is, there are great deals there, but theres a lot of risk. How do you sort through what you think survives and what doesnt . Its a great question, because what weve got to do is were buying based not on the potential of that Company Turning around, but what the value of that real estate is. Thats it just the land . Its whats the liquidation value. And if everything works, then youre going to make a bunch of money. If it doesnt work, then youll break even or make a little money. But its very, very different, where it was sort of five years ago you would say great, im buying this at a six multiple. Today you can buy it at a four multiple and you have no idea if its going to be around in five years. So what alex is talking about, the whole disruption thats happening, its huge so i think for us on the retail side, whatyouve god to do is look at the value of what the assets are and then say im happy to invest there. And if the company does well, thats how were going to make money. As a debt guy, a distressed debt guy, if you watch the global Interest Rate picture over the last 18 months and just go what is happening, is it confounding to you does it all make sense is it troubling to you youre so laid back about everything and then i was going to ask you, if you can respond to that, i was also going to ask you whether the u. S. Is a distressed debt situation at this point at 2 trillion. Its not. The u. S. Is fine you can borrow more money. The problem and larry spoke about it a little bit earlier in your show. The fact that youve got negative Interest Rates in europe so really what that means is if youve got no issues, you can borrow money at zero if youve got issues, you cant borrow money it sort of becomes this market of have and havenots. In europe were lending at 10 to 12 now, if somebody is borrowing when theyve got no issues at zero, the only reason theyre paying 10 is theyve got a situation and were coming in and were going to have all the collateral thats there, but youre getting massively overpaid for that. Youre doing the same thing that the banks here are doing, youre saying, where youre not going to loan to them either unless you get the collateral . Thats exactly it. So would it be a good short on office space in london and asia yeah, because the minute rates start moving up, real estate has to go down because your cost of capital is going up but i just dont know when thats going to happen you never want to fight governments. Or the feds. Or the fed. Youll lose. You may ultimately win ten years from now, but the cost of that is just too high so for us, really all were doing is were part of that shadow banking industry. Well lend money five years ago everything we did was on the public markets. Today 75 , 80 is all private. So thats how its changed ill give you a great example. In ireland today, you used to be able to borrow from the banks at sort of 5 , 6 if you had a Small Business or you had real estate the ecb comes in and says you cant do that anymore to the banks because its not a rated loan so we end up buying that business and now we loan in ireland and we make those same loans at 10 to 12 . Why in because were the only ones in that market. Its ridiculous, because who got hurt people got hurt. I want to go back to your idea of what you said you would do in this country to try to improve the inequality situation. We had a conversation afterwards but what youre talking about doing is actually something that would hurt you because it would take away the business that youre doing right now. Yes if you actually put a bank together i thought you were talking about having the government run the bank, which is what concerned me but you have a different idea, for anybody who wasnt here a few minutes ago. Yeah. My view is at the end of the day, if you force banks to lend or you end up saying to a bank, look, here, the federal government is going to give you 50 billion, banks usually leverage that ten times. So leverage it three times, four times and go lend that money, and the government will guarantee the looses then youve got the banks and the people who are making those loans, theyll make those loans to Small Businesses and those Small Businesses will now have an opportunity to create more and more jobs. And again, i just want to make a point youre talking against your own book. That would be negative to our business, but its beneficial to the u. S. Economy its beneficial to people. Just in summery, you dont think that central bankers have us on the presome huge money de ends badly you think that low inflation or whatever it is, that theres not a huge dislocation i dont think they have a choice, joe. Right now if you raise rates is it okay . Its fine its fine. You dont think the end of the world is coming . Theyre crazy its not its fine and were going to be fine its just its hard to have a lot of growth. What youre doing is youre stimulating that growth and every time you see a problem, you start lowering rates to try to keep that going and thats why you dont have this 3 to 5 gdp. All right marc and alex are sticking around in fact, when we return well be talking about business of sports from contracts to controversy. Our special guests will share their thoughts coming up at the top of the hour, kevin cramer will talk about the looming debt issue these folks dont have time to go to the post office they use stamps. Com all the services of the post office only cheaper get a 4week trial plus postage and a digital scale go to stamps. Com tv and never go to the post office again. Get a 4week trial plus pohere, hello starts a digitalwith hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Lets talk about the business of sports the National Baseball hall of fame induction ceremony is this wen. Alex rodriguez was a teammate of three of the four inductees and our next host also is dialed in, marc lasry is a co owner of the milwaukee bucks. And i know a lot about how that went off, because i know some of the other owners there, the good old west and i know the q didnt want to overpay and he said, marc, will you just do this, please and now how much is it worth its worth more than we paid for it. Would you sell it today for a billion dollars . No. There you go. It was more than just will you please do this we wouldnt have been able to buy the team but for west. I was a little bit cheaper and west explained to me that if we didnt do that, we wouldnt be able to own it so the position were in now is really because of him. Lets talk, alex and i dont know if you said i was allowed to bring this up or not. Lets bring it up a lot of home runs, dude, right . Verlander brought something up and its kind of an interesting dynamic that mlb owns rawlings is that true they make the baseball. They make the baseball, they make gloves and bats the commissioner is doing a great job in communicating that, look, we just dont have enough data and thats how i feel, too after three years, just like the derek jeter acquisition, you say is this an anomaly or the norm some players like verlander has given up 26 home runs. The most hes ever given up is 30 were at about the Halfway Point so i understand his frustration. Other players like david price have gone away from the cutter and gone to the changeup thats more of a swing and miss pitch you think the home run derby has people like they think theyre in a home run derby every day and they dont care with strikeouts . Our ceo of Major League Baseball actually made a nice adjustment on the home run derby and put a clock and the ratings have been good the last few years. But were in an environment just like business, that analytics have taken over our game, just like your game, basketball, and its hit or miss home runs are celebrated, strikeouts, people dont frown on them. When i came up, we were embarrassed if they struck out today you can be 15 with strikeouts, as long as you hit a home run or a double, thats considered good. The ball is harder now . Thats the consensus. Some way its harder and traveling further and further. I think if youre 02 as a young kid, you say choke up with the ball 02, they say lets swing harder so were trying to hit more home runs there is no recourse, if you strike out no big deal i strongly disagree with that. And then if the ball is a little harder, i think the commissioner in three or four years will make it a little more par. Rob is doing a good job, though and im not going to bring up the reds anymore, but we like our teams locally. And thats where a lot of the money comes from, right . Its from tv. And whats different from the nba, they have more parity so if the league makes 100 and the owners make 60 and 40 at the end of the year, it gets 50 50 and if the owners make more, they send you a check. Ours is more regional, so teams like the cubs, the red sox, the yankees, dodgers, theyre making big money. Its a totally different experience you watch guys running up and down its just nonstop. Watching good fielding, which can win games or watching i like the National League more because youve got to think about do i put a guy in a stu substitute runner and whats that going to mean for the next lineup, should we steal. Its so much strategy involved i think theyre starting to get it over in europe, too, rather than crappy cricket. They should try baseball and they are do you ever see Something Like that happening do you see the idea of moving a team parttime over the europe did you see that i think commissioner manford has ideas of growing our game to mexico city. You look at montreal and you look at potentially one day cuba and london was an enormous success. We had 120,000 people come watch over two days. I was kidding about cricket i dont know how it works anyway its like throw the ball anyway, thank you, marc. Youll be with us for another hour coming up, can a budget deal be reached . Were going to discuss that with Budget Committee member senator cramer these folks, they dont have time to go to the post office they have businesses to grow customers to care for lives to get home to they use stamps. Com print discounted postage for any letter any package any time right from your computer all the Amazing Services of the post office only cheaper get our special tv offer a 4week trial plus postage and a digital scale go to stamps. Com tv and never go to the post office again a wall street power player, why blackrock Ceo Larry Fink says people are underinvested in equities right now then food and mouth, the Central Bank Leader throws the markets a curve ball on Interest Rates. And the debt ceiling dual, a scramble in washington to reach an agreement before the government hits the point of no return the final hour of squawk box begins right now live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in time square im joe kernen along with becky quick. Marc lasry and former Major League Baseball superstar Alex Rodriguez. The futures are up 78 points and those are some of the better levels weve seen for the day. The nasdaq is up 18 or so. And the s p indicated up about 4. Well take a quick look at treasuries, which have been in this change between 2 and 2. 1. Maybe this person i apologize for my cricket i was kidding. I just dont know how it works theyre getting mad. The other day they said travel outside your zip code much do you know how cricket works . I tried to watch it for 20 minutes. The score was like 382 to 475. I tapped out i quit. When i was just in london, people go crazy for it so i just dont understand maybe someone can help me out. I didnt understand bitcoin and now i do maybe it will happen with cricket. Youll be enlightened you will no longer be what were you calling larry before . Here are some stories that investors are going to be talking about today. The head of the largest asset manager cease u. S. Stocks moving higher even from their near record levels. Blackrock larry fink joinld us earlier and said taking risk off the table is a mistake. People are underinvested in equities and i do believe with now the change of tone of the central bank behavior and youre starting to see corporate earnings are coming in pretty well, you know, we still are constructive on the world. Blackrock reported earnings today. Earnings per share came in a little weaker than expected, but assets under management for that company, 6. 8 trillion at this point. Blackrock shares right now are down by about 14 cents boeing, the do you component is going to be taking a 4. 9 billion related to the grounding of the 737 max that cuts the pretax profit and revenue by 5. 6 billion. This will produce the biggest quarterly loss in boeings history when it reports results next week. That charge focuses only on the impact of the grounding and does not include any estimate of boeings financial liability from the two recent 737 max crashes. Still putting a number on it for wall street seems to be offering a little bit of relief so much has already been baked into the stock this morning the do you component up with a gain of 8 to 69. 35. And American Express, another dow component beating expectations American Express says that it plans to raise its Quarterly Dividend to 43 kwents from 39 cents beginning next quarter the stock now down about 45 cents. Trez resecretary Steve Mnuchin appeared here on squawk box yesterday and tried to reassure investors that the debt ceiling in congress wouldnt threaten the governments fiscal health. I dont think the market should be concerned. I think that everybody is in agreement that we dont do anything that puts the u. S. Government at risk in terms of our issue of defaulting, and i think that nobody wants a shutdown in any scenario so i dont think the market should be concerned and were working hard well get there one way or another. Now a senior Trump Administration official tells our elon musk that the white house is asking for 1. 2 trillion in off sets as part of an offset the democratic says that the levels are a nonstarter for the party, that this is the white houses starting point for negotiations talks are going to continue. Joining us now with more on this latest capitol hill squirmish is dorgt dakota senator kevin cramer he serves on the Budget Committee. Can you give us the latest, senator . I see some flashes today that things are either nonstarters or maybe possibilities where are we sure. First of all, i hate the word nonstarters i think when you use the word, its hard to start a conversation that said, it is the beginning negotiating point. But i think if we take this in chunks, joe, 1. 1 trillion is a big chunk, but were looking for 1 150 billion in offsets for the current negotiation the next two years in raising the caps, thats a much more doable chunk. And my understanding is that the white house now late last night provided Speaker Pelosi with a number of options that add up to half a trillion dollars or so. And from those options, she can pick what might be doable within her caucus and the house of representatives and that seems like a reasonable approach. Is it far enough away from the election where youre not going to see some you wont see politics really come into this i think that maybe the Trump Administration has learned their lesson that, you know, you dont really want to mess with this most likely, especially when you want an economy strong going into the election. That makes me a little bit concerned about the other side, that maybe they wouldnt mind it a little bit if the economy slowed before the election because of the debt ceiling. Do you think theyre going to be more in tractable, the democrats, because of that first of all, ive been pretty impressed with the way Speaker Pelosi has negotiated with secretary in the last week or two good politics is good for all players and i think that the uncertainty that is created by chaos can splash back pretty hard on the majority in the house of representatives as much as it can the president. But we have to remember shes got a complicated job. When i was in the majority and i was a house member and john boehner was the speaker, these were complicated for us, too you always had to find a way to cobble together a majority and that majority may or may not be all your side. And i think this is where leaders step up and they look for that Common Ground and they come up with the art of the possible a victory for donald trump on this obviously would be good for his campaign, but it would also be very good for house democrats. I was wondering, because you said politics for both people. I said wow, this guy is new or something. But youve been around long enough to have seen some things. I hope that youre right about that and i think the American People hope that youre right this is a stupid thing to be playing politics with, and both sides are guilty of that is there going to be another we havent be using kick the can down the road for a while. We used it about the eu and trying to prevent things over there. But are we ever really going to do something that has some Lasting Impact so we dont do this every year or six months, whatever it is well, a couple of things ill say to that. First of all, having annual budgets or in this case a biannual budget, which i think would be a good reform i think it gives everybody more breathing room and more certainty. But some of those cuts are offsets that the white house has provided to the speaker to look at, include some reforms and when you hear reforms, that sometimes just simply means kicking the can down the road. In other words, you can defer, say, for example, the budget caps for a couple of years all that does is it helps balance the books today, but it just kicks the can down the road it means that the problem exists two years from now i dont think, joe, we ever really solve this bigger problem of debt and deficit until we deal with the mandatory side of the ledger were just talking about discretionary spending, which is about a third of the budget at a time when were trying to rebuild the military thats been devastated for the last decade prior to donald trump becoming the president. So its pretty impossible to deal with the big picture if were going to set aside twothirds of the budget and never deal with it im done thats happy to talk about it i think this is a situation where you dont say nonstarter. You put everything on the table, revenue, whatever you need to do changing the edge of eligibility for the entitlement programs but it all on the table, have an adult discussion, make a commitment that were going to get it done, and thats what i think has eluded us for a long time and i think business and markets would really welcome that kind of discussion right now. I think the president is still mad about the last time that he signed off on something and he thought he had some type of commitment for border legislation and it never came. He says hes not going to be fooled again if he decides hes not going to take whatever the democrats come up with, you said youll call him and suggest will you do that will he take your call oh, sure. I talk to him a fair bit i try to keep my calls to a minimum. I think Political Capital gets squandered too easily sometimes in washington, d. C but if its a reasonable deal, it doesnt need to be perfect. We need to find politics is the art of the doable. Ive told the president that quite recently politics is the art of the possible and so again, your viewers, wall street, businesses on main street, individuals that are paying their bills, we all need the kind of certainty that comes from both sides of the aisle, both sides of the capitol and all three branches of the government working together and pulling in the same direction. Thats what americans want to see and thats what investors want to see. I was going to ask you im crappy at geography. Are you near wimilwaukee . I feel bad for north dakota. Have you ever had a team do anything the timberwolves are our team were more football. Its right next to minnesota minneapolis is a threehour drive from fargo so were twins fans and vikings fans and of course were all eagles fans now that they have the highest paid quarter back in the history of the world. And you dont like the yankees, right the rest of the country just despises that. Arod is here. I understand that t. Im very honored to be on with him. I will tell you that as a fan, i always like dplens ex lens so even as a minnesota viking began its hard not to like the packers. The yankees, they come into town, wherever they go, the yankees are coming into town all right. Senator, and you said fargo just like heidi heitkamp. We grew up very close to one another, similar backgrounds rural north dakota, blue collar families we talk like were in the movie. I love that i practice that accent anyway, senator, hope to see you again. Thanks for being a guest today. Thanks for the opportunity. Im surprised youre not a yankees fan, just because you like to tick people off. You know when i liked the yankees . I liked the yankees in 1976. Do you remember that, alex i was born in 75, so the answer is no. The reds won backtoback do you remember the brew no. When we come back, whats an Opportunity Zone, and why a little known part of president trumps tax law is now the subject of a fierce debate and the biggest ideas in new york, leading artists and thinkers are descending on the big apple this weekend and weve got a preview of the main event. Stay tedun you are watching squawk box right here on cnbc welcome back, everybody. Thousands are expected to brave the heat and attend ozzie fest in new york citys central park this weekend the twoday festival features music, speakers and much more. Our guest host marc lasry and Alex Rodriguez will also be there. Cnbc is the media partier. Lets welcome carlos watson. Thank you for being here we played ozzie coming in. Why is it called ozzie fest. Ozzie is the name of our larger media company, but fun fact, our friend ozzie and sharon sued us briefly. Did they . And then we decided to be friends. Oh, theyre investors now theyre investors. How did ozy fest come about a lot of the readers of ozy. Com said we should get together and we started with a small festival and last year alex and marc were like this is good, it could be better lets think bigger and thankfully, the mayor and other good folks here in the city allowed us to move to the great lawn so this year its going to be five times bigger. Part of the deal is you match up people who i might not necessarily put together in my own head kind of putting these different flavors together. Ive heard people describe it as ted meets coachella, and i love the idea that were bringing in music and comedy and food and were marrying it people sometimes think theyre coming for john legend and they discover a young author or an up and coming singer or a young chef thats the best part. Why did you get involved in it. Carlos interviewed me last year and immediately afterwards i said this is a few miles from where i work every day in the bronx and this is very close to central park, maybe the most famous park in this country. Carlos is a fantastic guy. We both are from miami, single mothers. I just wanted to be involved sometimes theres so much out there and every once in a while you find something that youre like i want to be a part of this its also giving back to this community of new york and i said i want to be involved, but we have to do something for the students the 99 , were bringing a big majority of our audience is going to come in for free. Lets talk about that on the website it says were proud to be able to make available a limited number of Complimentary Tickets to those who may otherwise not be able to attend due to financial hardships. Who comes in students, teachers, veterans. Well have 10,000 plus who will be joining us from all around the new york metro area. A lot of students who are part of projects like project destiny and others were going to do a special brunch for them even before the festival starts. So the chef is going to make brunch for 10,000 students tomorrow morning and then rachel ray and megan rapinoe, the soccer star would be doing it on sunday morning marc, who are you speaking with what are you doing im going to be with jim cramer, so i get to interview him. Have you been working on your questions . Yeah, we chatted. I think he wants to be our new gm because he told me hes won his Fantasy League for the last couple of years. So you sort of find out a lot about different people, sort of their interests. So it actually will be a fun time. And you think about young people and our students, thats the prism that i want to focus on, because the next generation, our responsibility is to pay it forward. When you think about someone coming to ozy fest, they really dont know what they want to do with their lives you get to come to the great lawn and say i could be in politics, media, a hedge fund manager, a baseball player, i can have great food. And at the end of the day you have john legend with a great concert. So to me thats the greatest block party in new york city its going to be a great weekend. You picked a hot one. We did or we made it hotter. Seriously, when theyre talking about the real feel temperature of 100 degrees plus, what do you do one, kind of free water really important two, were literally importing fans in from arizona and keeping misting stations and lots of sunscreen and free hats and ban dan nas and now weve created three or four tentd areas that have ac. So there will be a big opportunity. In fact, weve got the guys from cash pad, joe joe and co star coming there, so theyre going to be inside our little cinema and it should be nice for people who are feeling hot. Its so hot, i saw a chicken lay an om let. Its so hot, i saw squirrels picking up nuts with pot holders. Its so hot, i saw two trees fighting over a dog. Youve got to think about that becky, i dont know what it says that you knew that right away. I read that, and i was like, oh you didnt get that immediately . Youre the guy who jokes about ppi. I do. Anyway, its something. Youre right, over 15 years its funny. For some reason today was a little bit better weatherwise than i thought so something tells me that we may get a little bit lucky, a little bit of irish luck and may get something in the 80s its not going to rain. I agree. The lineup looks amazing and i cant wait to see what all of you guys are doing and i especially cant wait to see this interview carlos, thanks for coming in well be watching this weekend thank you. Coming up, communication breakdown as the fed tries to strike a balance on Interest Rates, one of its most influential members is causing some confusion in the market about where rates are headed not where theyre headed, just how quickly theyre headed there. Well explain when squawk box returns. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. But youre not mad, because you have e trade which isnt complicated. Their tools make trading quicker and simpler. So you can take on the markets with confidence. Dont get mad. Get e trade and start trading today. Welcome back to squawk box. Futures are up billion 85 points now on the dow boeing one of the highlights this morning after outlining some of the reserves its setting aside to compensate airlines for the problems with the 737 max. I havent looked at it recent. Ill just look at it real quick. Last time i looked it was up 8. It is indicated 369 after closing at 361. Thats why the dow is up. When we return, the opportunity economy. Were going to bring you the story of an under the radar program. Its aimed at helping the poor but could turn out to be a give away to the rich when squawk box returns. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. Welcome back to squawk box here on cnbc we are live from the Nasdaq Market site in times square. Socalled Opportunity Zones were designed to steer investment into poor communities, but have they become a tax giveaway to the wealthy . Robert frank has been looking into that. Good morning, becky over 30 billion expected to pour into Opportunity Funds which have become a favorite investment of the welgty but rather than rescuing distressed neighborhoods, theyre often going to Luxury Hotels and projects in big cities that probably would have been funded anyway if an investor sells a company or stock or asset for a profit, they can put the proceeds into an Opportunity Fund without paying a Capital Gains tax the fund then invests in an Opportunity Zone, which are supposed to be in disvangd neighborhoods. Now the cape tal gains tax is deferred depending on how long the investor keeps their money in the fund. There are no reporting requirements, no dollar limits on how much you can put in, no transparency and no basic oversight. A study found that a quarter of the more an 8,000 Opportunity Zones in the u. S. Are in areas with already high investment like new york city, miami, l. A. , San Francisco, and boston. Opportunity Fund Projects currently include a luxury hyatt in one of l. A. s Fastest Growing neighborhoods, luxury apartments in downtown denver, a retail and restaurant complex in booming san jose, california, and lots of projects in manhattan and new york city, including the Long Island City development that would have housed amazons second headquarters. Look, there are a lot of good projects out there currently on the slate, but the reporting requirements that were in the original legislation were mysteriously taken out right before it passed so there will be no reporting requirements on whats being built, how its improving employment in these areas or whether its helping housing values or the lives of people in these distressed areas. Stay right here lets bring in two guests to talk about Opportunity Zones joining us is operation hopes founder, chairman and ceo john hope bryant. Hes also the founder of promise homes. And Heritage Foundation senior policy analyst joins us from washington john, youre here on set with us obviously you want to see a lot of this economic development, but are you concerned about the way its being monitored im always concerned about washington, d. C. But look, as long as first of all, the issue about some of these projects are in neighborhoods that are aspiring. If you hang around nine broke people, youll be the tenth. So you want some of the stuff to ride a wave. You dont just want it compressed in whats called poor neighborhoods. You have to have an aspirational lift the problem with this legislation is only one thing, lazy Public Policy in manhattan you have structured Everything Everything is structured and cure rated as long as the policy is cure rated, meaning youve lot literacy at the bottom and Financial Literacy in the middle Abe Abraham Lincoln created to teach slaves about money we just never got the memo so as long as we have the coaching and i met with the administration in in all fairness yesterday about this very topic so as long as they do coaching at the in the middle and Financial Literacy at the bottom and not just have capital at the top. Otherwise it will be a rocketship on a wagon wheel. It will explode. It will be what Heritage Foundation says, a disaster. If they do what im saying and others are saying, it could be the best Public Policy move for the socalled poor in 50 years in other words, you could have a little plan, a Community Reinvestment act thats flexible debt then youve got public capitalism, Opportunity Zone funds, and then youve got the grease in the gears, which is Financial Literacy, which we all got from our parents without even knowing it. You grew up with it, a memo attached to your baby bib because your family was teaching Financial Literacy we need that in these communities. Do that as a combination and you have a winning policy. Lets talk about that because when robert first laid out the report, this idea of investing in areas that maybe arent at the bottom of the barrel, they arent struggling the most, not a bad idea if you think about trying to build things up. But maybe the lack of oversight is the biggest concern here. I think we all can agree that we want americans across the country in every community to benefit from the Strong Economy we see today but Opportunity Zones arent the way to get there these zones were picked by wellconnected politician to say benefit wall street and theyre quite the opposite of the rest of the broad based reforms that were included in the 2017 tax reform its lower taxes broadly available to all americans that are fuelling some of the largest wage gains for the lowest income americans, keeping the Unemployment Rate at historic lows its doubling down on these types of policies, broad based reforms. This is the way to help the most americans and the americans that need it the most i respect his view and im glad hes pushing back thats the best part about america. But i actually grew up in the hood, california in South Central los angeles. Im telling you, done right, youre attracting capitol to neighborhoods that thats a great example because if im an investor and all of us in Silicon Valley had billions of dollars in stock that we dont want to sell or give up because theres a Capital Gains tax. If you have capital, are you going to put it into a luxury hotel in l. A. s Design District or in Affordable Housing in compton . Capital is going to go where it feels like its got the best chance of success. And maybe cometon is the right place for it to go, but from an investor point of view, what do you think the decision is going to be . I think the market is going to go where they see profit. You had 100 million americans that need to be rehabl gated the gdp is actually at the bottom of the pyramid. 25 years i did operation hope. Im still doing operation hope but i decide to eat my own formula. I was tired of telling capitalist who to do and im tired of joe ignoring me while im talking. Im listening im trying to figure out how to tie what marc lasry said earlier. Youre a cool guy ive got you so what i did was two years ago i went to two hard core capitalists who are nice guys, but it was about the ploft and i decided to eat my own formula and did a foprofit company. In these same neighborhoods, not in the major market, 28 counties, atlanta, florida, so on and so forth, and we applied the same formula in an underserved neighborhood, Affordable Housing, zero assets in 2017. That was 100 million in assets, double digit return, 2 delinquency rate, 95 occupancy, theyre getting an incredible return forproving you dont have to be a jerk to be a capitalist, and we first thing we did was contract or become a member of operation hope to provide financial coaching to these residents. So again, not lazy Public Policy leaned in, did it right. Same thing youre talking about, in an underserved market and its doing just like this. Im saying everything can do that and everybody should do that. Look, at the end of the day, and i would agree with you, because really what you want, money is going to go where they think theyre going to make money. So youre looking at it and saying should it be a hotel or housing. At the end of the day, all im going to do is look at where im going to make money. And if i think theres an opportunity, youre going to do it so i think it will have the effect, yes, youre going to end up having some people are going to go, look, i would rather end up being in an area where i think theres less risk. But youre going to have a lot of people that are going to look at it and say there may be more risk in cometon, but i think im going to get compensated for that, and im going to do that and i think youre going to have more need from what youre talking about, just because you dont need more hotels thats sort of ultimately how i would look at it. Whether the market does well or does not do well, people who are the postal workers, walmart managers, ups drivers, theyre still going to need some place to leave at 1,000, 1,500 a month. And theres not enough of that in this marketplace. And i cant tell you how many times joe and beckys friends come to me and say i want to do well and do good i want to be a good guy, too how do i make a solid investment, but still i want i want to have some compassion and i want to have a legacy of knowing that i helped society, too. This is an opportunity so i respectfully disagree with people saying Opportunity Zones is a bad idea. You dont turn away billions of dollars going into the hood. You figure out a way to make it work. Add many, what do you say programs like this have been tried at the state level and federal level, entinternational and every time theyve been tried they have not led to higher wages or more job opportunities. And often theyve led to worse outcomes for the people that youre trying to help. Yes, you can see investment move from one side of the line to the other, but what politicians arent telling you is that that investment would have happened on that other side of the street rather than on the new side of the street thats privileged by washington and they certainly arent telling you about the americans across the country that are funding the subsidy thats allowing washington to pick winning areas and losing areas the best way to support broadbased growth is with equally applied policies at the federal level and targeted local reforms at the state and local level where things like zoning reform can allow for more housing, where Education Choice can allow families to pick the best Educational Options for their children these are the local Institutional Reforms that help the most people. Alex . Look, we see a gap in the market where you can actually go to these neighborhoods were buying thousands of homes every year and doing major rehab on them and theres a Double Bottom line. Because not only are you buying these houses, youre making them better and youre giving families across the country a better life. Because they want a good life as well for 1,000 or 1,200. Youre making great returns and youre also making neighborhoods across america better. You shouldnt need a tax incentive or a tax break that costs the government 2 billion a year to do that. If there is a genuinely great return, why do you need to have a tax loop hool. Heres the thing. Yeah, you would love to have great Public Policy. You would love to have a lot of these things so whats the harm the harm is that theres a cost, its 2 billion or whatever the number is but at the end of the day theres going to be a number o people that are helped so if you end up saying that capitalism is going to solve every problem, i would love that to happen. It doesnt so ultimately why not give a push it may not be the best program out there, but it ends up helping people and then from there, you can see the mistakes youve made and you can say, look, were going to try to fix it capital coming in, you need capital. The fact of the federal government, youve said, look, theres this tax loophole and its costs us money. I can show you 1,000 things where you know, thats cost us money so theres going to be mistakes. Lets learn from them and then five years from now you can say heres how we should have done it the Ripple Effect of actually having jobs out there, creating stimulating the economy, creating better homes but if it costs you 2 billion and you have all this liquidity, you want to get the money from the sidelines into the u. S. Market and not to asia and thats why it was created there are all these investors like him locked up in places that are desperate for capital so lets close the gap. Thank you for joining us today. Marc and alex our guest hosts are going to be with us for the rest of the fram. Did the fed president just put his foot in his mouth when it comes to lowering Interest Rates . Well explain what happened and how some market moving comments that are being walked back much more with todays guest hosts, marc lasry d sellanbaba legend arod stay tuned well be back in just a moment thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Welcome back, everybody. President trump just tweeting, because of the faulty thought process, we have going for us at the Federal Reserve, we pay much higher Interest Rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries when they should be lower. Correct. Well, new york fed president John Williams causing some confusion over the next move on Interest Rates steve joins us right now with more do you want to comment on the tweet . You could do it either way. The reason why we have higher Interest Rates is because our economy is doing so much better than the other ones and that the Interest Rates reflect it. And whether or not they actually cause the growth to be higher or lower is another issue but i do want to talk about a communications ill call it a tripup and it happened in two acts yesterday it looks like another baut of perhaps tone deafness. Fed president John Williams takes to the podium yesterday, strongly hints the fed would cut 50 basis points at its next meeting at the end of july he says, quote, dont keep our powder dry, that is move more quickly to add monetary stimulus than you otherwise might he goes on to cite research and says the key lessons from this Research Hold today, and im emphasizing that today, and in the future take swift action when faced with adverse Economic Conditions markets heard the new york fed president winking, nodding and otherwise telling them that the fed would cut 50 basis points. Here are the probabilities a 100 chance of a rate cut in july which you can divide into two pieces right now its a 57 chance of a 45 but yesterday after these comments they shot up to 60 not too long after that, however, we get act two. The new york fed says in the comments that williams comments were academic and, quote, not about potential policy actions at the upcoming meeting. End quote. We need a frame for the face that becky just made when i made that when i saw that last night, ive never heard the fed come back and walk back comments. Alex is smiling mr. Lasry is smiling so let me just finish this off on the one hand, williams comments were in line with those by fed chairman jay pole who has said an ounce of prevention is worth a pound of cure. On the other hand, williams has been a fed Bank President in new york and San Francisco for eight years. And at the fed almost continuously since 1994. He had to know less than two weeks before the fed meets on the eve of the blackout by the fed, that the market is uncertain whether its a 25 or a 50 and this would all be interpreted as a 50. So williams continues to raise concerns about a certain tone deafness about the market. I thought maybe this was just a situation where when youre the San Francisco fed president people dont pay as much attention. When youre the new york fed president , they certainly do. Thats true, but john has been influential and important at the Federal Reserve for a very long time he did all the work upon which policy is based. So john was director of research in San Francisco, and became San Francisco fed president and ive been talking to him continuously i dont know at least a decade, maybe longer. And hes been on air continuously for a decade or maybe longer. Would you surprised to hear these comments initially before you heard the walk back. I was surprised that he would make explicit commentary ahead of this meeting if he didnt want to core fast 50. That may be what hes planning on voting. Thats true and i dont think we should let this twoact drama take is away from the focus, which is is the fed going 25 or 50, should it go at all we had a strong retail sales report and strong payroll reports. Weve seen the Second Quarter gdp number inch up, now its got a two handle and then the beige book on wednesday was very upbeat. The economy does not seem that bad. All of this would be preemptive. It feels a little political and now we can bring it back to the tweet that the president gave. Hes been ha ranging the fed for months now to cut Interest Rates. Maybe a little head line dependent, not data dependent. You think williams comments were political caving to the president . I feel like the whole board has drifted to the like water flowing downstream to the easiest possible route, which is cutting Interest Rates whereas, you know, one of the reasons why theres an independent fed is they can make these unpopular decisions. So heres my other question if thats the case, if thats the setup, did the again, shock than anything else, ive never seen a fed bank walk it back, did they get a call from somebody in washington that i think they probably got a call and i think it is worthwhile to explain why. You hinted at this earlier the new york fed president , because of the funky way that they created this Federal Reserve the most important of all of the Federal Reserve presidencies. Hes the vice chairman of the rate setting federal market committee. And always gets to vote. He always gets a vote he doesnt rotate in and out this was an attempt by wall street to maintain its power where as the 12 Federal Reserve Bank President was away of otherwise spreading power throughout the country, always gets a vote, part of a triumvirate, the chairman, the vice chairman of the board and the new york fed president those are the three. Him talking and saying this stuff is important. You know how many times we go back and forth about academic studies, me and you you and i. Yeah. Yeah you and i go back and forth. Just doing my literary english thing. You know how we do that i always needle you, oh, we cant do any policies. Now you just saw, we did 20 year study, we dont wave it. Has nothing to do with youre raising i see how you make these funny comments and i come back and say these are really germane ill tell you why. We should be at 50. Williams is the guy who did the research and now hes in the policymaking business and nobody should be more willing to take this idea. You think it is funny, they say, he didnt really mean it, it is just academics. Trying to come up with an answer that they can walk it back after they got a call from washington, the Federal Reserve. Let me ask a question, why would you why would you end up having a rate cut when the economy is growing at 2 because of inflation. I get that. Thats what Charlie Evans his big thing. I understand that the reason you end up having rate cuts is to get the economy going. And now if youre worried about inflation, if that is what youre worried about too low too low. Thats exactly youre sort of stuck in this loop, and at the end of the day you only have if you do a 50 bit rate cut, then you only have another 1. 5 to go. Why not put the pedal to the medal and grow like china . Grow at 6 can i answer the question, just because i can, alex, listen to all this, youre deep in the markets, tell me your reaction to this, we spend way too much time obsessing about this, ill take that. For me, im looking at kind of tenyear, 20year windows, so all the noise sometimes, you know, Warren Buffett tells me it is a benefit to live in omaha because i dont get 20 people whispering in my air if you worry about buying great assets for a fair price and hold them for 15 or 20 years, in the long run, thats how i think. In the long run, 25 or 50 basis points at the end of july doesnt amount, in the words of humphrey bogart, to a hill of beans. Dont think it is that big of a mistake. As a buyer, it doesnt matter what happens at the micro level, if i like the asset and paying a fair price, will that change one way or another that said, billions will be lost and gained because of what they do at the end of july. Steve, thank you. Great to see you lets get down to the new york stock exchange. Jim cramer is standing by. I know this weekend you are going to be grilled by marc lasry. Hes here. Hes going to be grilling you at the ozi fest what are you planning for jim . One thing jim and i talked about is should jim be our new gm because hes won his Fantasy League for the last couple of years . Yeah, look, im a champion and it is something i do better than stocks and i appreciate you mentioning that. Stocks are good, i think i have a unique perspective on sports and i cannot be i was telling my wife how excited i am to talk to you, i mean, she was saying, j jim, it is going to be 100 degrees. I said what does that have to do with talking to one of the most successful Business People on earth about what is going to happen next year if the democrats win . I know. Thats the other thing well talk about and joe will be upset about that when they win jim alex is such a sport. Youre such a sport, thank you. I have a question for you i have joe here whining about his cincinnati reds. How your phillies doing . We had a good game last night against the dodgers. We went with bryce harper. We gave bryce harper one of those lasrylike, you know, contracts, greek freak contract, and now we have no money for pitching i think that as you would tell me this, mark, a couple stars or one star is not enough to win the action, right . No, you need more. I cant believe im going to be talking to lasry. I cant believe it people will come out it is young people that will come out, alex, you are a dream. I got an interview by you for with portnoy and i cant wait. She said dont wear a shirt where you can see stains thats her advice. I dont give a darn. I cant wait to see you guys if they go 25 and 25 eventually, should they do 50 now or data dependent . I think 25 and 25 because that moves the stock market more just kidding it is not i dont want to get caught on that when Elizabeth Warren becomes president , what will be the rate, mark when Elizabeth Warren, two rates, a rich person rate and poor person rate well have issues were going to have tier rates. Well pay 7 interest. Well see you in a couple of minutes and well watch this weekend too. Dont miss an exclusive interview with the boston fed president Eric Rosengren 4 30 m. Asrnimp. Ete te. Stay tuned well be right back. Ched to geid saved hundreds. Thats a win. But its not the only reason i switched. Geicos a company i can trust, with over 75 years of great savings and service. Now thats a winwin. Switch to geico. Its a winwin. Content on their endless quest, to nowhere. S, run hopelessly in their cage. Switch to geico. But perhaps this year, a more exhilarating endeavor awaits. Defy the laws of human nature,at the summer of audi sales event. Get exceptional offers now. We have been spending the morning with marc lasry and Alex Rodriguez and cnbc viewers will get to see more of arod this fall the Series Premiere of his primetime show back in the game is coming to cnbc in november thats pretty exciting what are we going to do with that it is great baseball has given me so much, an opportunity to go back with former athletes that have gone from rags to riches, back to rags and, you know, it took a long time for me to learn how to hit home runs, practice, a lot of discipline investing is no different. And i get to deal with some great athletes, ryan lochte, world champion, evander holyfield, and i think it will be super entertaining. By the way, we should say you put just as much work into the business side as you did the sports side before everybody i ever talked to says you ask questions, youre persistent, still work hard, still working 80 to 100 hour weeks. I try to keep up with this guy. Gentlemen, thank you. Thank you, both. Thank you good to see you were going to turn it over now to squawk on the street. Just spoke to cramer hell be there squawk on the street coming up right now. Everybody move your feet good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the new york stock exchange. Futures look better than they have looked all week as microsoft comes through with Solid Earnings and hopes for a rate cut are back despite some confusion. Europe is mixed. Ten year, 205, the president resumes his criticism of the fed on twitter calling their thought process faulty road map, microsofts monster quarter. Cloud business u