Transcripts For CNBC Squawk Box 20240714

Nikkei up. European equities right now as well a bit of a mixed picture ftse up slightly the tenyear note is trading at 2. 053. Now to the big story of the morning. Details on the hack capital one disclosing a massive data breach that affects 100 million u. S. Customers and 6 million in canada. The company says 140,000 social numbers and 80,000 Bank Accounts and 1 million Canadian Social insurance numbers were compromised. It says the largest category of data that was exposed was from credit card applications including names, addresses, phone numbers, dates of birth and self reported income the hacker also accessed customer status status such as payment history, Credit Scores and credit limits. The breach occurred in late march. The hacker accessed information through a vulnerability of the servers in an unnamed cloud company. The fbi arrested a suspect, Paige Thompson shes a former engineer at Amazon Web Services. Authorities allege thompson posted some data on gethub and a private chat page. Capital one says the breach will cost it up to 150 million this year can we talk about this for a second theres multiple issues going on here the one company you mentioned it in passing, is aws in all of this yes amazon. You saw a statement come out from capital one where is amazon in this . What does this mean at a time when everybody is moving to the cloud. Capital one has been very aggressive moving to the cloud when we talk about a firewall that was misconfigured on whose end, assuming from from the reporting it suggests this information was sitting on an amazon server, on an aws server does this become a larger story about aws . I think thats an interesting question to pose she is a former aws employee shes a former aws employee the data was sitting on an aws server unless i lost my mind, i would say, okay, does she know something about the way these servers are configured with clients that others dont . It was on an aws server she they didnt look to see whether i had done this, i can tell you that much you need some serious expertise to be able to do this, right shes got years spent working at aws. Even though shes, you know, fatherly young fairly young, 33. I read they put up a flimsy firewall im trying to understand is that a flimsy firewall on the side of aws, capital one or aws just has the place where it is, right i dont know whether culpable is that correct . Were focused on the capital one stock. My larger question is on a day like today saws goi ashgshg is sending out notes to be cautious or everybody has access to using aws. Including the government. Once you have access to it, its your responsibility for security and hire one of our cnbc 50 disruptors dont all of our disrupters do this part of the entire argument of using a service like aws, google cloud or azure is that the security component for the most part is being taken care of by the Cloud Service the idea is for so many years people said we dont want to have our security guys she accessed through capital one, which is what the report seems to indicate. She had accessed the firewall maintained by Capital One Financial and not by Amazon Web Services he id like to see the actual dots connected between whats happened and someone who said my god, look whats happened to me. Did we ever at marriott see a person that said look what happened to me because of this do we ever hear that or is it just they have it, nothing happens what happens to the data may not happen forever but if it does happen, do you link it back whats in your wallet everybody is in the wallet. On the dark web you can buy Social Security numbers, you can buy fingerprints did you know about this . Yes are people selling fingerprints you can buy anything. Five years from now, if you could amass a database of finger prints, Social Security numbers, we had clear in here yesterday who did a deal with united, theyre taking biometric data. I know theyre kau shucautious y privacy is the issue, but if you collect enough of this stuff, but if its if you can triangulate and gather various points of data from various places on one person Andrew Ross Sorkin dont give anybody ideas. You can buy it with Digital Currency of course from. All anonymously we will talk about that all your buddies are on today. We will talk to them. People werent saying you dont have to pay taxes on bitcoin. Nobody thought that, did they . Why is that a big deal that the irs is has sent out these letters . For views who dont know, the irs septembnt out different lets based on customers of coinbase, and certain lerts were mosercer aggressive than others around tacks and taxing on bitcoin. A couple other things going on now stocks to watch. Beyond meat reported sales that nearly quadrupled in the Second Quarter. However the stock is sinking this morning because they announced plans to sell 3. 5 million more shares in a secondary offering the stock is still up more than 650 since the ipo in may if you were there at the begin, youre happy this has been the issue. People doing ipos, going for the secondary. Big issue in the direct listing world is whether those companies that had direct listings may need to do a secondary, too they didnt raise money for themselves in the first place. For beyond meat, the issue for investors is you think the lockup is going on until the fall then you have the Company Coming out selling 3. 5 million shares 3 million shares are being sold by insiders. A quarter million is being sold by the company to raise more funds beyond the ipo its a shock beyond the ipo and beyond meat well have azar on today, the secretary. The Trump Administration is proposing a rule that would require hospitals to publish the prices they negotiate with insurers it rule would apply to hospitals that accept medicarement tho mmt those that dont comply would get fined per day. Kidney dialysis reimbursements, all kinds of stuff at this point that are in this black box youre not sure what youre paying theyre trying to open that up in the hopes of keeping prices down well talk more about this proposal with alex azar. He joins us at 8 00 a. M. I think they should be listing all these prices but i thought there was a suite about it, not on this, but separately that the administration lost. This is different its medicare. I guess its the governments right to ask for this. I need pricing. Hospitals dont you want to know . I would want to know. But would i change where i get my care or where i have a procedure . Depending on that they might be embarrassed if they were charging 1,600 out of shame they would lower prices i told you about by mri experience i walked in, they said they wanted to charge 4,500. The woman told me when i walked in if i went down the street i would have gotten it for under 1,000 that was not a guy on the street, was it no, the 4,500 place is a bigtime place there are medical procedures that are 20,000 you can go to a country in south america and get the same surgery, but where are you going to do . I dont want to say an mri is not different than any others, because they are, reading the radiology and everything is a talent are you going down south for 1,400 or going somewhere up here for 15,000 south of 14th street or north of 14th street south of the rio down in central or south america would you do that . Depends im told theres certain surgeries that they do very well south of the border. Up in canada theres other ones. Okay. Coming up i might try to save up. I dont know well have a full breakdown of the big Market Drivers including the fed meeting that kicks off today. Plus well get you ready for some big corporate report cards. This still gives me the creeps as we head to break, a look at the biggest premarket winners and losers well talk specifically about the dow. Walgreens is in the dow . Well be right back. Driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. The fed expected to cut rates for the first time in more than a decade. Here to talk the markets and the fed iskevin divney and brian levitt interesting piece in the wall street journal today sort of questioning exactly what the fed is thinking here everything is so political, you cant help but think they got brow beat into this. But then again maybe the yield curve is doing the brow beating, right . The fed used to focus on employment and inflation, those two things, but to keep the employment numbers where they are, and were seeing a slowdown in manufacturing, the global slowdown, thats why i believe they believe they need to intervene. The other thing which i dont think people are focused on, if the fed cuts here, that has effects in other global markets. The u. S. Has the highest yields of all the markets i dont know if were behind the curve or ahead of the curve. The effects of our stimulative actions could be felt worldwide. I dont view it as being politically pressured into this, though it could appear that way from the outside looking in. The Federal Reserve raised Interest Rates multiple times last year in what is still a slow growth world. The Interest Rate hikes last year led to a tightening of financial conditions a flattening of the yield curve and Inflation Expectations which were doming down rapidly in the United States. I would say this rate cut is unwinding what we did at the end of last year rather than view it as this is Jerome Powell succumbing to pressure you dont think the december stock Market Reaction got these guys saying look what we did i think that was a byproduct of the tighter financial conditions its a 2 growth world its a 2 inflation world, at least in the United States every time policymakers try to tighten conditions we when youre doing qe and you are take rates to zero, the entire time you should be thinking about am i ever going to be able to get out of this . When i take the punch bowl away r people so used to this that theres a bad reaction this is playing out like the people who were worried. Normal numbers that we used to think would show a strong economy, like sub 4 Unemployment Rate or solid gdp or any of these things that are positive, suddenly were saying, no, those are not numbers this is different this is inflation. Youre calling it a cycle. Nine rate increases is a cycle thats like a mini cycle that doesnt even count as a tightening cycle that could be maybe theyre right, member theyre not. We have gone from zero Interest Rates to above 2 weve been unwinding the Balance Sheet. The fed is concerned about growth in the rest of the world is relatively weak they tightened into that that led to capital coming to the u. S. That led to a stronger dollar. That decreased Inflation Expectations, and now theyre unwinding that modestly. Are you 100 sure this is the right move and that the fed is not sort of succumbing to the wrong signals and almost sort of saying okay, crying uncle to the markets, to the politicians, to President Trump and Everything Else . Are you sure this is the right move i think its more to the markets. The other underlying thing here is the notion of full employment has been challenged. Powell said that himself or something. Are people working fewer hours . Theres people on the sidelines, coming back into the labor force. The notion of are we at full employment, thats the tension here maybe employment could go lower. Aside from the trade war, the number one comment from ceos is wages are going up, im having trouble competing for good labor in the companies that seems to then then we are at full employment if theyre having so much trouble getting people they have to youre making almost another execution like all of a sudden 3. 7 is not 3. 6 is that what youre saying yes i think we can go lower. I know. But that seems like a pretty solid backdrop for the u. S. Economy that just seems a little weird to be raising rates when you have only raised how many point cuts do you have for the next recession nine dont think of it in terms of nine rate hikes. If we kept going on the path we were go in 2018, we would head into a recession there was too much money flowing to the United States, the yield curve was inverting. The dollar was strong. So the fed is responding to that things were so good we would go into a recession . That doesnt make sense. You mean the strong dollar was going to choke things off . Yeah. The strong dollar would choke things off we were going into a recession in the beginning of 2016 when the fed raised rates once, tenyear went to 1. 35, dollar rallied 30 . We would have gone into a recession if janet yellen did not back off so we were arguing the end of last year and in may is that the fed needs to back off. All the fed did was communicate a rate decrease and financial conditions eased considerably and the markets continued their ascent i dont think the fed needs to be aggressive in easing, they just needed to back off the tightening stance. When youre in 2 growth world, do not harm. Youre the global strategist north america. Which is it . Global view for our north american clients this is invesco now . Yes did they say the board heardt go the beard has been gone this isnt the new york yankees or the Cincinnati Reds kevin you always looked clean cut and professional thanks. Thank you both. Coming up, a big funding round Just Announced for Real Estate Company compass now valued at 6 billion remember when this company was valued at next to nothing when he walked in here several years ago . The founder and ceo will join us next compass announced 3 370 million in new funding this morning bringing the total Capital Raise to 1 1. 5 billion with its valuation hitting more than 6 billion joining us now is the ceo of compass. Thanks for joining us. This latest capital comes from pension funds, from basically bigtime investors what does this allow you to do with this 3 307 million well accelerate growth in product engineering. We hired joseph srosh, we launched a seattle tech campus, a peck camptech campus in d. C and well double down on Core Products like Compass Concierge for sellers, where we frontload painting, roofing, staging, with no hidden fees what did you think when you heard of amazon entering a partnership with realigy and their Concierge Services were more focussed on a Value Creation play for advisers, sellers and buyers we want agents to come to compass, double their business buyers, we want them to find the best inventory i have one question which is when you first came in here, this is an amazing story i love a great startup story. He came in in 2018 and raised 8 million. When you came in here originally, this was a tech play this was being sold almost straight up as a tech story. Yes and i dont know if theres a pivot along the way, but almost at the same time that youve been investing in the tech side, theres been like a rollup strategy on the real estate side of all these small and large real estate companies. In terms of the growth and revenue growth, im assuming its come more on that end than the underlying tech platform yeah. Amazon are they a retailer or a tech company i think in the future you have to be both the future of this industry will be the first where theres a place where you can search and do the transaction on one platform amazon and uber you can do that there. In real estate there is no place where you can search and do the transaction in one platform. For all of white house are constantly looking for homes i dont know if we are really, but a lot of window dressing going on whats going on in the Real Estate Market here and across the country . It does feel like its softening. I think it is softening in certain markets. It is a good time to buy Interest Rates are low you have rising income across the country. Markets are still hot in san francisco, in seattle, nashville, in texas. And even in parts of new york, like queens. What markets are really soft . I would say markets that are soft are also great buying opportunities. Maybe greenwich, connecticut, as well as the hamptons in terms of the tristate area, are we seeing the impact yet of losing the deduction . I was talking to the governor of new jersey a couple weeks back and asked him if its showing up in the data. But it looks like homes are sticking around on the market for longer whether its the mansion tax, the transfer taxes, the greatest impacted is is on perceptions when buyers see things rising, they will pause. Keep us posted. Please keep us posted he will be here ringing the ipo one day. When will that happen whats the longterm strategy well likely have an ipo, but fortunately given our capital base, we have the flexibility and timing with our capital we may you might want to go public now. Theres some serious journalist envy going on here. Thats what were witnessing you see it every six months in the new york times. Theres no envy here. No envy for him im almost proud of him you are like writing down, 6 million back then, its 1 billion i have not done that math congratulations im happy for you. I dont care i like what i do i know ill never have you dont care that you make much less money. I dont care if my equity will never be what yours is. He has the envy eli lilly congratulations. Eli lilly reporting, the drugmaker earning 1. 50 a share for the Second Quarter revenue came in above estimates. Lilly raised its fullyear earnings forecast. The stock is just loving this number its up a penny. In the First Quarter they raised the fullyear guidance as well now theyre also raising it once again. Quarter on quarter raises in terms of the fullyear guidance. If they beat in the quarter, they should go up commensurate for the year if they dont, people say, well, you beat in the quarter, youre not raising your year guidance coming up, a lot more to come trade talks kicking off in china with billions of dollars in tariffs hanging in the balance we have the latest straight ahead. And would you give up control for your children to save money on College Tuition . Unusual question, but its what some wealthy parents are doing well explain next as we head to break, 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 using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning were walking on sunshine this morning. U. S. Equity futures not exactly walking on sunshine. Dow off by 51 points nasdaq off by 31 points. S p 500 off about 7. 5 points were still what does Warren Buffett like to say . Hes happen dancing to work. Interesting story about colleged a migs. It says wealthy parents in illinois are going to grade lengths to get Financial Aid for their children the Education Department is looking into a tactic where parents transfer the guardianship of their children to less wealthy friends or relatives. This is remarkable this allows the teens to access resources meant for middle and low income students. The scheme is technically legal but some universities in illinois say theyre looking into the practice to ensure fairness in their aid policies so youre willing to give up guardianship of your children in order for them to pay less to go to school. They figured this out because there were a spate of guardianship transfers in the chicago area and one woman was quoted address saying she transferred guardianship of her daughter to a business associate she had older children, sent them to college, had no more savings. A lot of patriotic millionaires, their kids are in this program i dont know that. I assume that. You assume that i do. Dont assume that and if you can suck up to the rowan coach, thats another way. Suck up to the rowan coach by paying the coach suck up, pay. Buy a home. That costs money thats not the cheaper method. What finally happened with william h. Macy its still going on that involved breaking of laws this is technically legal, though morally reprehensible, i would say. Okay. Dont you think yeah. I do trying to dodge the system. I do think that a lot of people that talk a good game about wanting to pay more do everything they cannot to pay more right yeah thats fine thats fine. If theyre fine with their hypocrisy. Coming up, the latest on trade negotiations in shanghai is a trade deal close to being reached . Well be joined by Chris Campbell who spoke to representative lighthizer ahead of this latest round of tas. Lk stay tuned, youre watching squawk box on cnbc were carvana, the company who invented car vending machines and buying a car 100 online. Now weve created a brand new way for you to sell your car. Whether its a year old or a few years old, we want to buy your car. So go to carvana and enter your license plate, answer a few questions, and our technowizardry calculates your cars value and gives you a real offer in seconds. When youre ready, well come to you, pay you on the spot, and pick up your car. Thats it. So ditch the old way of selling your car, and say hello to the new way at carvana. With china resuming trade talks today, want to get to washington for an update on where things stand and where things are going eamon javers joins us now. The South China Morning Post is saying that the preparations in shanghai are being kept low key. You can see some things moving on the ground, but its a low key set of negotiations taking place in shanghai as the Chinese Government and u. S. Negotiators keep the details under wraps we know that Steven Mnuchin and Robert Lighthizer is there we dont know what theyll be talking about during the course of the negotiations. This is the first time they met facetoface with the chinese side since talks broke down in may. There is optimism at the white house just that the talks are taking place they see that at the white house as a sign of things moving along well but the president expressed some skepticism that the chinese want to get to a deal at all suggesting they might want to wait until after the 2020 election and deal with a democrat who might win who the president says would be easier for the chinese side to negotiate with the other question here, we might get some indication of this during the course of the negotiations, is whether the chinese side wants to move forward with the deal and whether the president wants to move forward with the deal theres some argument out there that the president might want to keep the tariffs in place more or less indefinitely as a way to transform the economic relationship between the two countries over years back to you. For more on the latest round of u. S. Trade talks, we want to welcome Chris Campbell, focampbl consulted with u. S. Trade representative lighthizer before the latest round the guy works his entire career, hes a chief strategist. Tell us what you know, what youre allowed to tell us about where these talks stand right now. I think the administration is very excited that the chinese asked to come back to the table. Its a good sign from within the white house and from within the administration which is all fantastic asking them to go to a shanghai is a question mark as to why shanghai the optics, right beijing, shanghai theres a question there but look, its Good Progress when people say were making Good Progress what are we making progress on . Expectations are low for a deal coming out of this meeting. I know from our point, our administration, they want a robust deal. So something that will be small, i think, that will be something theyre not excited about. And theyre also, i think, upset now with the leakage of some Technology Talks around the talks. You think theres a way to delink the huawei situation from the talks i think thats the goal how do you do that . Careful negotiation you know, ambassador lighthizer has been a friend for a long time hes a skilled negotiator, good, skilled lawyer i know theyll do their best to make sure the talks its a harder thing to do after the Washington Post article linked huawei with helping the North Koreans to build out their infrastructure to make the case that they should be decoupled, you have to make the case its not economic. If you look it was the administrations move to make it linked to a National Security issue if all of a sudden they back off, that doesnt look good. You have to move it in a way to try to delink them, because theres a challenge there that may not be able to be overcome a deal on economics can be reached. Theres some optimism and some reason for optimism on a deal. I think it has to be beyond a small deal, like agricultural products, some issues like that, more robust on intellectual property and ways to keep them accountable to their commitments. The expectations are low for this week. If you were to sort of get a calendar out and try to make a timeline of when you think something could be reached, what would make sense how would you begin to map that out . My expectation and my experience with china over the past 17 years working in washington is they love to talk and not do a lot of followthrough so i think we have a challenge, they see the 2020 elections coming up. Theyll make a calculus on if theres going to be a change in the administration in 2020 i think, again, i worked for this president , i think hell get reelected i think the chinese are now making that calculus which is why they asked to come back and talk to the am boss did obassadr politically, if youre the president , do you want a deal before the election or after i think he wins either way. Its better for him to cut a deal on china but only a robust deal do you think the chinese say to themselves, we have this 2020 election, if we can hold off long enough, we will somehow gain more leverage, less leverage i think the leverage goes down after the reelection the president would have no reason to hold back, if you will on new expectations, new tariffs, new issues that will be could be more difficult for them domestically and internationally. If i wanted a deal, i would cut one now. Thank you good to see you. The dow is not responding yet. But merck looksgood. Just reported 1. 30 adjusted. 1. 30 versus 1. 16. The revenue number was quite a bit above expectations revenue was what did i see . 11. 76 yeah. Which is versus 10. 9 it was theyear revenue number at 44. 7 is where the street is theyre saying 45. 2 to 46. 2 and raising the adjusted number as well this quarter beat by 14 cents. 14 cents. Now the company sees 4. 8 t4 to 4. 94 the street is at 4. 75 up about 1. 6 . They break out, you know, if you watch tv past 6 00, you heard of all the drugs, theres songs to most of them a lot to of happy couples Walking Around because theyre taking xedia youve seen those, chris, right . I dont know what they do. The people are in nice places. Makes you want to take them theyre happy canyons, beautiful lakes they look at each other. Its almost like soma from brave new world. I dont know if they do things healthwise or just in terms of wellbeing thats why i dont know the placebo effect. I dont know about these pharmacy ads at night. They irritate me you know it okay. The songs the two big pharma names this is another irritating your coworker song. They used you a lot for that. Im irritated a lot you are it happens on fastball it does not as much as here. Coming up beyond meat taking a tumble after posting bigger than expected losses announcing a secondary Share Offering has the stock lost its steam well speak with an investor next 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 . Beyond meat reporting mixed Quarterly Results but they took a hit after announcing a secondary Share Offering bret thomas joining me, an early investor in beyond meat. Are you still in beyond meats . Yes, absolutely. Are you planning to sell your stake . No, were in a position where we made a longterm bet in this. It is not a trade or short term phenomenon people are not going to wake up and say, we want more processed meats in our diet. Were longterm holders and excited about the company. Walk me through what the thinking of an early investor might be in beyond meat. You have stated you believe in the longterm of this company and are you hold on. 3 million of the shares are sold by insiders and i understand there are a host of reason, needing liquidity, that it may become out sized because of the run up in stock, but if you are a longterm believer shouldnt you stay in the company . When you have a 12 billion market cap or whatever it is this morning, an unbelievable outcome and quick in time. No matter how much longterm conviction you have, you always have to take something off the table. I think the secondary is a good thing. I think it is 5 of the float. It increases the float in the company, makes it a bit more investable if you have a disparate view of the company you dont have to pay you are worried about processed meat this is 100 processed. You think maybe it is 100 fake theres nothing natural about it i dont see how the pc sort of signaling s signaling virtue works if you are worked about gmos which have done positive things for different food classes. Right. Why would something you construct from chemicals be more listen, it is plantbased i will give you it is a little higher in sodium than a traditional patty. Higher in fat and price. If you look at the new bun kin doughnuts launch, their sausage is it because of beyond meat or because theyre eating the cost it is a little of both. I think the biggest thing people miss in the beyond meat story and dont talk about is the social impact. If you look at the ipo and the small flow which created the move, a lot of the stock went to esg social impact holders. I dont want to be dismissive of the esg element and i think it is real, but i dont understand, to have a market cap of this magnitude you have to grow into that i think we all agree with that. Yes. The questionst no matter if you are an esg investor or you dont care about any of these issues, theres math behind this the question is when do you think that to the degree it has to grow into this kind of valuation, when do you think that happens listen, i think this is a tenyear story . No, listen, i think meat is the biggest category in food, 1. 4 trillion. If you use the same logic in plantbased dairy, captured about 15 of the dairy market, ebs put a note and think it is an 85 billion in the market im sorry can you back up on the numbers meat is what 1. 4 trillion category. And ebs 85 billion . Just in the u. S. By 2030. They are the first mover, and the advantage of being a first mover, their guidance they raised to 240 this year, probably goes higher, right . How do you think it occurs to impossible taste, quality, a lot of people think impossible is better. Impossible is not nongmo and beyond meat is tyson will be launching theirs soon. Thats my question. When do traditional guys jump in people have compared it to tesla. At some point the big Car Companies will be competing in electric cars with these guys. The tysons of the world, the other big Agriculture Companies jump in. I think tyson is launching one soon, nestle is out there with a product i think theirs are a hybrid, part plant thing look at dunkin donuts, 9,000 stars in the u. S if you are happy and samestore sales are growing, youre not taking it out. The other retailers will have to have an offering at some point. Bret, thank you. Thank you for having me. Appreciate it coming up, Proctor Gamble numbers are hitting. With the company ceo right after the break. Woman my reputation was trashed online. I felt completely helpless. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Live from the beating heart of business, new york, this is squawk box good morning, welcome to squawk box right here on cnbc. Im along with joe kernan and melissa lee in studio. Alliances chief economic adviser, soon to be Running College cambridge do you know about this . What his new job is . This is exciting. Head mucketymuck. And did you see theres a picture of him online with the queen . Now youre pals with the queen. I dont think anyone is pals with the queen exactly. It has to be a real come down to be with us here. He sort of did say grace did you take that as a fully serious comment, gracing us with your presence . I thought it was sort of i was not be sarcastic. I meant it genuinely. Okay, all right good to have you im serious, nice to have you. Thank you, joe, nice to see you again. Theres mohamed with the queen. They look kind of paly. She looks happy to see him. Lets shows u. S. Equity futures at this hour we have some red hours rather across the board 35 points off on the dow nasdaq looking like it would open down about 31 points and the s p 500 is looking to open off 7 1 2 points. Did you know what to do they . They tell you what to do. They do gentlemen. Were you afraid you would forget yes, you are afraid it is a big deal. What did they tell you . You are allowed to you can shake hands . Only if she puts her handfor hand forward, you bow, you call her your majesty the first time and call her maam after that. Now you know. I was near the royal box near will bl d wimbledon and we were checking out who was in the box. Did you see saw federer play, and had some strawberry and scream and himself. Thats great. Here is what is making headlines at this hour capital one says the personal information about 106 million credit card applicants has been exposed by a hacker. It is one of the largestever data breaches involving a big back the alleged hacker was arrested in seattle she is accused of breaking through a firewall to access data stored on an amazon cloud server under armour loss a penny less than expected, in line with information cost beyond meat saw better than expected sales, raised fullyear guidance but reported a wider than expected loss here is what sunk the stock. It announced it would raise money with a secondary Stock Offering, 3 1 4 million shares total. Proctor gamble, i think the stock is okay on this so far better than okay it is up about 2 or 3. It is reporting an adjusted number of 1. 10 a share, above expectations of 1. 05, and the revenue number also was a little above, 16. 85 was the estimate and the Company Posted sales of 17. 09. Now, there are some organic numbers we always talk about and well talk about that when we do speak to our next guest, john muller, p g. He is also a member of cnbcs cfo council, which is quite a feather in your cap, john, as you have pointed out. So i dont theres not a lot of explaining to do here this is all pretty much at least what you were expecting and maybe a little better. Talk about the organic number. What was because we always do that, right . Then we back out currency and figure out whether it is really good so 3 to 4 , you see that. What did you do this quarter we did over 7 . So it is the fourth consecutive quarter of volume sales consumption and share growth, four quarter sequentially 4, 4, 5 and 7. We grew core margins over 100 basis points with core aims per share up 26 on the current neutral basis, 122 Free Cash Flow productivity. Probably allaround one of the strongest quarters in the last decade, capping a very strong year it is an alltime high i think, isnt it . It is on your stock at 120. The turnaround that i dont know if i would call it a turnaround, but i cant imagine trying to run this thing i know you guys grapple with that all the time, something this size with the global reach, it is hard to move the needle at all, but you have been involved in a lot of efforts. Would you say this is beginning to show the fruits of those efforts . Very much so. I mean we significantly simplified our portfolio to focus on ten categories that are daily use in nature, where performance drives brand choice. And then we invested in delivery in that performance, funded by a significant Productivity Program. Were constructively disrupting the eco systems in which we operate to play to our advantage and on july 1st we put a new Organization Structure in place that builds on successful learning in the u. S. And china over the last couple of years. Thats all coming into place it is producing very strong results. Importantly, broadbased results. All ten categories grew sales in the quarter, all six geographic regions grew sales in the quarter and the volume abroad was each contributing to the top line. Know you are just showing off. Here is my question you look at some segments, up 10 in health care, home care segment up nearly 10 , beauty segment up about 8 , but then there are other markets that i want to try to understand. Grooming, up but 4 . Baby, feminine and family care, up, but 5 so half the kind of growth of some of the other really outstanding performances the question i had, is that because theres more competition in those spaces . Is that where there is more directtoconsumer efforts in the grooming spaces, a lot of folks are competing with you now. I imagine on the baby, feminine and family care theres a lot of directtoconsumer efforts taking place online. Generally markets in our categories on a general basis are growing over 3 . Obviously the numbers are slightly different by category, but it is success. We aim to grow markets and by doing that sustainably build market share and we are doing it broadly. Aggregate share is up, share is growing in eight of ten categories we will have challenges in different parts of the world in different categories, but as long as were growing above the rate of the market and influencing the rate of the Market Growth when you look at the ten categories and you say to yourself right now, the one or two categories that concern you or theres a lot of competition in this category and it is going to be a challenge to not to make it to the next quarter, but it will be a challenge to win the game there. All of our categories are challenging. We operate in a very Competitive Industry and we need to stay constantly on our toes, constantly improving the margin of advantage from a performance standpoint of our products, and i look at all of our categories that way im not trying to ignore the question, but theyre all challenging but theyre all categories we should be able to succeed in and are currently doing that. John, picking up on joes reference to your global reach, can you speak to how you see u. S. Demand versus the rest of the world including europe again, speaking to breadth of result that we see, in the u. S. To answer the first part of your question, organic sales were up 7 in the quarter and our second largest market, china, they were up 12 . Europe is one of our slowergrowing regions but it was up mid singles we dont have a region currently thats not growing at least at mid singles. The consumer generally of course, there are exceptions, but generally is very healthy around the world. Last quarter, jon, your compa company and it might have been the ceo described micro environment as difficult and competitive. Have you seen a change between last quarter and this quarter as all . It remains difficult and competitive. Speaking to the difficulty, in the year that we just completed we overcame 1. 4 billion worth of macro headwinds, a combination of foreign exchange, commodities, tariffs, transportation cost increases, through our significant Productivity Program we overcame all of that. But those dynamics continue to challenge us, and it is as i said several times during this interview, it is a very Competitive Industry we expect strong, competitive response, and thats why we need to continue increasing our marginal advantage, investing to do that, funding that investment with productivity and cost savings. You are right up against 300 billion now in market cap, and this is you know, more than it was ever worth before, and this is even after certain segments of the population, at least in this country, are more enamored with these small, again, esgtype, annie, mac, i dont know they have all of these private names. They dont necessarily run to tide anymore i am thinking about millennials and others thats something you still have to deal with, isnt it, the small 100 million in sales competitors. Are you overcoming that at this point, jon, are people coming back to Proctor Gamble products you are absolutely right, joe. We have to respond to the needs and demands of the Millennial Consumer as well as other graphics we are generally doing that. 17 of our top 20 brands in the u. S. Are either number one or number two with Millennial Consumers. We are expanding our range of naturals offerings, both under our current brand names and under newlycreated organic and acquired organic brand names to serve that consumer, and it is going very well. As i said, u. S. Organic sales up 7 pi 7 in the quarter. That wouldnt happen if we werent we always have, again, challenges and more work to do and we can always do better and we will strive to do that. Jon. When we do that, we have proven to be successful. Can you speak to the relationship that nelson peltz had with the company do you credit nelson peltz with some of the turnaround our board generally is a very positive force to be able to benefit from that experience set and their accomplishments to inform our thinking about the business is a wonderful asset to have. Having said that, and i think they would agree with this, if i look to assign responsibility for the recent success i would assign it first to the 90,000 men and women who i work shouldertoshoulder with everyday to the light consumers around the world. No, no, im going to say good by. Before you go i have an important question for you, jon, because you are a huge advertiser in this country and specifically on digital right now. As you know, one of the great debates happening in washington is around some of the big Digital Companies including facebook, google, apple and amazon my question for you is when the department of justice calls, and i know they will, and says are these companies doing anything untoward effectively to make your life more difficult and more expensive than it otherwise should be, youre going to tell them what . More than anything theyve provided us with another more effective, more efficient tool to reach consumers okay. There are challenges that need to be overcome working together in that ecosystem we have been very vocal about that, but net, i view it as a positive. So there will not be a critique, there will not be emails sent to the doj saying that you believe that theyre pricing you out of the market or that some of the marketplaces are unfair or that the advertising rates are somehow being jacked up artificially im sure im sure that the specificity of my comments would i would be asked to keep those confidential and it would be inappropriate to meant any further here. Okay. All right, jon. Mets have won four straight. The red, three straight. They have about the same record. Same record, yeah. But ten runs in the second inning yesterday, jon. Did you see that only 6 1 2 games back. I keep hearing it about the mets too, the killed card. Six, yes. And they have a new pitcher the mets and the red, were a bunch of losers here. We need the nationals to beat the braves in order all right and the poor pirates beating up on the pirates, i dont know. You have to take your chances. You do. You love when you get to play them anyway, thank you. That really i dont know why you cant do 7 organic growth every quarter. Now if you come in less than that, im going to say, whats wrong. Thats the problem good job. Well work on it. It is a good problem to have. It is. Jon, always great to see you. Thank you, sir when we come back a lot more on squawk box. How corporate consolidation playing into the 2020 election, we will talk about that story after the break. Then the ceo of eli lilly will join us to discuss drug prices and so much more that interview a couple of minutes ayaw stay tuned you are watching squawk box here on cnbc cnbc global cfo council is brought to you by ey here, it all starts with a simple. Hello hi 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. Senator cory booker has said whoever is president corporate consolidation needs to be in check. So ahead of the Second Democratic debate we are looking at what the merger boom has meant for the bige city in a key swing state. Leslie picking joins us with more on this reporter hey, melissa, we have seen some of the biggest takeovers here in years, an hice area bush, monsanto, express scrips, all billion dollar acquisitions of st. Louis headquarters studenties have not made a direct link between mergers and local economies, but in st. Louis this recent merger group has not helped the population growth over the last 18 years has come in 5 thats one quarter that of the National Growth rate income per capita is slowing relative to bigger cities like new york we spoke with john hull, who advices on mna regionally. He says one of the big reasons st. Louis has seen so Many Companies bought is because there are a lot of storied familyrun businesses here where the newer generation just decides to sell. But he says that can show up in the psyche of the city. People perceive some of the large mega mergers as being threatening, in which jobs are lost, jobs are relocated, and i think that that people want their politicians to understand that that economic duress and that economic stress is real and they feel it reporter wholesales says there are positives to corporate consolidation as well. Employees who are large shareholders can cash out their stake and reinvest it elsewhere, including back into the city of st. Louis. Also, he says that some people who have been laid off as a result of mergers have gone on to start new businesses here in st. Louis that they are hoping will be the next fortune 100 Companies Among the fortune 100 companies in the future. Guys. Leslie, how does it become a political issue unless there are antitrust issues involved with a proposed merger . If both boards approve the deal, how can the government step in as all reporter thats a good question oftentimes, at least in the most recent political cycle, weve seen so much antitrust scrutiny centered around the big tech companies, amazon, facebook, google, and what they want to do in terms of breaking up those companies. Now people are turning to more corporate consolidation in the weakening of the 1980s of antitrust laws that led to so much industry consolidation and are looking at the impact on the big cities i dont think theres much they can do looking backward at some of the big deals that have taken place here it would be more about looking at the laws again and potentially revising them moving forward. All right. Leslie, all of this is part of a much bigger phenomenon, which is if you look at the middle of distributions, whether it is institutional like tech or what you just reported on, whether it is income distribution, whether it is politics, the center is getting smaller and the two saitails ar getting bigger theres not much you can do, it is just the reality of the world we live in. Reporter right, exactly. I mean it is and thats one of the big challenges, especially as you listen to the debates tonight where candidates have been talking more and more about the issue of industry consolidation, corporate consolidation, breaking up the monopolies and so forth. It is really difficult to do that kind of trustbusting behavior like we saw, you know, 100, 150 years ago, in todays day and age. The laws dont really provide it their only recourse would be to change the law and i dont know if theres a political willingness to do that but what is interesting too is that usually people have a cause to breakup monopolies when they see prices rise, and a lot of these companies havent really been raising prices. The only place people have seen that is the airlines but it is just one case study. Leslie, thank you leslie picker in st. Louis coming up this morning, a lot more of morning movers for you plus eli lilly Ceo David Ricks will be joining us in a little bit with the companys quarterly result we return right after this 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. 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Eli lilly reporting results in the last hour, the drugmaker earning 1. 50 a share nor Second Quarters, 0. 05 above estimate lil lilly raised its full earning forecast joining us now ceo of eely lily, david ricks. In addition, the myriad regulatory and government issues, you also had to navigate through some of the loss of the bestknown drugs in the world in recent years in fact, you probably saw the pfizer and mylan news and i read the drugs pfizer lost exclusivity on and it is what do you do for you it is the same story, sembalta, all going off patent and you have to replace those. How is it going . It is going well. Thats part of our business, after a period of Time Products become very cheap in our industry what we need to do is invent new things at a faster rate than we lose the patents and that is what is happening at eli lilly right now. We launched nine new products in the last five years. Despite the fact in this quarter, q2, we are bearing the full force of cialis expiring, we grew it in the top line and in a quality way science is flowing and we are having Great Success in getting it to doctors to help treat serious disease. People were watching closely for the new migraine drug. What did the results show . Will they be pleased yes, imgality is our newest migraine drug. We launched it last fall and it is an area where theres been no new solutions for what are primarily workingage women who experience chronic migraines and episodic migraines, some as many as 7 to 16 a month in our studies. We have a study that showed about a reduction of 50 of those migraines. We launched third but already almost at the market leader, capturing 40 of the new patients coming into this market which is growing rapidly as patients are seeing this as a great solution to manage this serious condition. So good performance. Of course, it is early revenue is just about 30 million in the u. S. And growing rapidly. The key here is to get this new class to as many doctors as we can in primary care where the condition is treated, and thats what were investing in. Some analysts think that your cancer offerings after some recent acquisition is underappreciated did you speak to that in the Current Quarter . Perhaps so. We acquired a few companies in the last year, a Company Called armo last in 2018, and in january rocks oncology in particular this acquisition we are excited about first, the lead addresses an underlying driver of cancer growth in lung cancer and thyroid. That data will be coming out in the second half of the year, and we plan to submit in the fda in november it has a break through designation. It launched in 2020. It is a key to making that acquisition work for us. The other asset coming forward and advancing into phase one is very exciting, it is for lymphoma this acquisition for us which was a move for precision on oncology you are not so much concerned with where the tumor is happening in your body but why it is growing. This company has really defined this field by creating medicines that directly address the underlying cause of the cancer growth, really precision oncology we are becoming the leader in that space were excited about it. Stock has been down for the year, all of the drug stocks down for the year. Barbarians are at the gate in d. C. And President Trump, et cetera i think we will have second azar on later today you can youve got some suggested questions or if you have some concerns, ill voice them for you but most recently, do you read eli lillys blog, andrew it is called the lilly pad. Anyway, hr107 could make a difference you saw the need to actually respond to that proposed legislation. What would it mean if medicaid caps were changed and whether it was retroactive or not for part b . First of all, theres a lot of ideas in the field right now, maybe too many ideas we come back to the Core Principles of the key issue in the u. S. Is not the growing cost of medicines to the Health Care System in fact, this quarter we are reporting now our net price dropped 4 , again. We have had a series of quarters in a row where net prices are dropping we are growing volume through that by reaching more patients the real issue is the outofpocket costs at the pharmacy counter due to bad benefit design one idea we like quite a bit is the Senate Package that proposes to put a cap on part d, outofpocket expenses part d is the Senior Program for retail drugs it is one of the few insurances out there that doesnt have an out of pocket cap. Thats a good idea, but theres lots of bad ideas including the one you just mentioned which would propose to have Companies Whose drugs are used by states in some cases have to pay states to use their drugs so that the rebate we would be putting back into the system would exceed the current cap, which is 100 of our list price. That to me doesnt sound like something that would promote innovation in that sector and sounds punitive. So were for ideas that help patients when they go to the counter, particularly seniors, get relief on what is a growing problem in bad insurance design. Too much patient responsibility, not enough coverage by the insurance company. When you pay your premium and you get sick, you expect to be shielded from the cost actually the reverse is happening now. Many seniors and others are paying more into the system than those that are well are paying in and thats not fair thats our focus. David, joe mentioned barbarians at the gate hes not joking. How under attack do you feel your company is, your industry is it is not just hr107. It is this recent report that the president is considering an executive order that would cut virsually all vi virtually all of the prices of prescription drugs sold to medicaid, and you had Bernie Sanders over the weekend comparing pharma to murders. So what can you tell us about the relationship you have not just with this administration but some of the candidates have they knocked on your door are you reaching out what are you trying to do to help them understand your perspective . I think as an industry and personally i can say we spent a lot of time working on solutions to these problems. Theres a lot of rhetoric in the air and most of it nonproductive, including the comments you just alluded to here the issue in our country is not the cost of medications to the Health Care System 15 of the health care dollar goes to drugs. We could cap that forever and what we would get is less innovation and still have growing health care costs. What we need to do is work on outofpocket costs for those patients who need innovative medicines, and some of the proposals the ones were foukessfou focused on could, in fact, do that we agree it is time for change and we agree patients need relief in the cost of medications. We dont agree with the rhetoric and we certainly dont agree with a lot of the solutions, quote, unquote, being put out there. We have our own ideas and were trying to progress them. It is an important topic that all said, theres never been a better time in my 23year career in the industry to invent new things and advance science for patients with serious disease. We talked about a number of those products today we have this strange bipolar world of incredible breakthroughs, real challenge on the value side i think theres a way forward, im an optimist, but certainly theres bust eay times right no. Cialis, sales down 90 in the u. S. Those advertisements, those were my favorite. Theres his and her bathtubs on a hill overlooking but why not a bathtub for two . That happens later. If you remember, both bathtubs are empty at the end of so they stepped out of the bathtub presumably. They stepped out, but those are gone. Sadly, theyre retired, yes. Theyre retired. This is something in the loss rebate, the cost of cialis or generic s Generic Cialis is a singledigit fraction of what they were before they do go down. 95 35 million in a quarter you used to do ten times that in a quarter. Correct. This was a multibillion dollar sad so many people no, anyway, thats we will never see those ads again. You will not. You will not. Those were so much better than a lot of the ones. There could be even better ads to come. Well see well see. Anyway, david ricks, thank you. Thank you for having me on. Thanks a lot. Youre welcome. Hope to see you whenever you report earnings. It would be great to talk about these things. Thats good joe. Byebye. Coming up, guest host is going to sound off on the fed. Did you know you are going to sound off on the fed i did not, but i know now. And then later, health and Human Services secretary alex azar will be joining us as our special guest. Squawk ceo call is sponsored by 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. For your heart. Your joints. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally discovered in jellyfish, prevagen has been shown in Clinical Trials to improve shortterm memory. Prevagen. Healthier brain. Better life. You should be mad that this is your daily commute. You should be mad at people who forget theyre in public. And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. Welcome back to squawk. The fed meeting kicking off today with a decision expected tomorrow afternoon, but before that we have the results of the fed survey before mr. Liesman makes his way to washington, d. C. He is here with us. This is a controversial meeting with what people think the fed should be do and what they will be 98 in our survey, 41 economists and Fund Managers say theyre going to cut rates 95 say there will be a 25base point cut, 2 is the median number of cuts expect in 2019. 38 plurality saying the next rate come coming in september. But the street is split on whether the fed should cut rate. 48 say no, the fed should not come 50 say the fed should cut with 15 saying it should be a 50basis point cut why cut . 34 say if the fed cuts are primarily for low inflation, thats a third yield curve converted is third and stock market pressure is 16 , and 10 , one in ten of survey responders say pressure from the president is behind it. I want to remind you before we go further that there has been 100 basis points of easing about half of the feds actual easing is already done by the market how do i calculate that . In november, the height of november, the market was high, everything was high, we had an expected funds rate for the end of 2019 of 3 . The expected funds rate right now for the end of this year, 1. 9 , which is two cuts baked in so in terms of the expectations of the market. Right. Weve baked out, gotten rid of, otherwise removed and erased a full percentage point of expected tightening in the company. One question, which is to posit we were on the exchange yesterday. Uhoh. Yes, you and steve. Steve, and he made a provocative argument i would love you to repeat it and see what mohamed thinks about it. I said theres a critical aspect about the rate cut where i think the fed feels if it gets it wrong there are dangers to the institution. I think that the danger the fed sees is in getting it wrong and being too tight, and think the way the president has raised the stakes about the politics of the fed if you could imagine a scenario where the fed stays pat and the economy goes into a recession, you can imagine that there are going to be bigger problems for the institutional preservation of the Federal Reserve. Of the entire Federal Reserve. He is not just talking about jay powells job here, the entire institution. Because the credit because people will no longer believe in the feds ability to forecast and to it is not uhoh, too late. What happened nothing there could come a point where people no longer believe in the feds ability to forecast thats not exactly what im im thinking of the president at his rallies already i think it is fair to believe he will be sitting there railing against the fed and blaming the fed for the failure for the relative growth level that we have right now not being at 3 . If theres weaker growth, you can imagine more and more rallies. This country has had a very ambivalent attitude over the course of its history with a central bank i dont think one should take as a given the idea that we will have one. So the premise is that trump will go and bad mouth the fed, it will, you know, cause the populace out there to say, hey, look, we should take a look at the fed once again and maybe change the way it is chartered or the way it is governed. Or maybe bring it to the president s purview. Is it a danger in your view several things first. The fed politically is in a nowin situation if the economy slows it will be blamed if it doesnt slow it will be other policies that upset the fed. Why . Because most people believe that the fed overtightened last year. But i have a question for you, the thing thats not talked about is the fed coming out and saying were going to stop it in july. I think they may do that. Im leaning that way. You think i talked about it yesterday i talked about it two days ago it has emerged as a potential surprise here. That could be. I think that is critical because were not going to get 50, but that may be 25 and the end of Balance Sheet reduction. By the way, melissa, i am not alone. If you read the wall street journal today, there is a discussion about whether or not the fed is being seen as being political with this rate cut here because of the data being relatively upbeat, or at least growth being good. Bill dudley has written an opened saying he doesnt believe the fed should cut rates i dont want you to think im crazy and alone with this idea whether or not the fed is political, the context is one thats incredibly political and one we havent seen in a long time. Thats not the only point of the journals piece. The journals piece is that they have no idea what the fed is looking at because the what they seem to be making the decisions on keeps changing. Because compared to where we were back in december, were actually we were going fine this when they raised, but were actually doing better now and theyre still talking about cutting. So it makes no sense using thats the journals piece whether it is just political no, i agree that was a thing in there. But the idea is that they were on this normalization track and there was kind of support for that, that the fed needed to get out of the business of owning a lot of mortgages and a lot of bonds and maybe to bring rates to a point where it was no longer stimulating the economy support for that has gone from both sides of the aisle and a lot of fed folks do you support normalization i do over the long term remember the two things that went wrong in december one is the fourth hike which i think is unnecessary, but, two, they got the language completely wrong. They misunderstood the market technicals they need to pay more attention to the market technicals, otherwise the market is going to force them to outruns that are not good for the institution. If you support normalization and you take into the account we had 3. 1 growth in First Quarter and you take into the account that were only now growing at right what is estimated to be potential, the fourth hike was fine. No, conditions were tightening quickly because of Market Movement postand that was the problem with the fourth market hike. It is hard to disagree with that i think both of those things are true if you could have slipped it in and paused but the language, would you apply that language . I agree i think the idea of getting back to normal was a goal worth trying to achieve, getting to a reasonable Interest Rate for an economy that, by the way, i have been more optimistic about than even the people who supported so you and i will agree on the destination. What were disagreeing on is the journey. The journey there has been unnecessarily messy. I like to fly first class, but if i cant i will fly coach. You should fly with mohamad i was upgraded and he was in the back. Thats when shaw shank was new, thats last time you flew. When was that 1990 or something a long time ago. Totally wrong mohamad in the back of the plane. Coming up, you cant escape the irs. The agency look, if he still is, then you got a screw look. Just got to google you anyway, the Agency Looking to collect taxes on bitcoin gains that story and the debate over whether it is taxable. Something got the dow recently in a bad me. Pfizer. Pfizer. Morgan stanley downgraded it. Thank you well be right back. 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 i felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Your daily dashboard from fidelity. A visual snapshot of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. You need decision tech. Here, hello starts with 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. The irs announcing plans to go after some cryptocurrency investors for back taxes robert frank joins us now with more details i guess some are longterm games. Did you get not yet the irs sending letters to as many as 10,000 bitcoin holders over the coming weeks warning them of potential tax liabilities. The letters which the irs calls education, says the agency has information that you have one or more accounts containing Virtual Currency and failure to pay the proper amounts could result in civiland criminal enforcement. Coin base, the currency exchange, they notified about 13,000 customers it was releasing information to the irs after a court order. The irs launched last year what it calls a Virtual Currency Compliance Campaign to deal with nonpayment of taxes, the agency saying that Virtual Currency is an ongoing focus for irs criminal investigation the irs did publish rules on crypto in 2014, saying that crypto is not a currency but it is a property and therefore subject to Capital Gains tax but crypto holders saying the agency failed to release specific guidance for taxpayers. Irs saying rules are coming in june, but now saying theyre expected in fear future. A lot of questions about bitcoin holders about how you value the cost basis if you mine a coin, how you deal with if you take the coin and trade it for another coin and buy a good, so a lot of questions the irs saying you owe taxes but were not going to tell you what. Were going to continue the conversation we will bring two experts into the conversation good morning to both of you. My question is this. Less about the tax issue and more about the regulatory issue thats come up via libre, conversations with Steven Mnuchen who said he doesnt want to own bitcoin five years, forever, and there was a g7 meeting where crypto was a huge topic. Is there any anxiety you have the g7 were to come together and say, you know what, guys, this bitcoin thing and other cryptocurrency where it is harder to track, where some of the fundamentals behind it are actual about undoing the monopoly that fiat currency has, were going to make it very difficult in g7 countries to even get on a coin base or what have you and what that therefore does to the value of this . Well, lets be very clear i was in the house last week testifying in the libre hearing and one of the things i want to make clear is bitcoin has been regulated in the United States for the last six years the technology and the network itself are a public good much like the internet. All of the companies building on bitcoin are regulated based on the fact of what they do the way the irs got the information of all of these crypto holders is through a john doe summons it sent coin base three years ago. They asked information on about 20,000 coin olders they were able to go to court and minimize the scope of the request, but, again, people who live here in the United States as secretary mnuchen pointed out, you have to follow the rules and laws of the United States if you are a business that is in the business of holding customer funds, of enabling, exchanging, trading, buying and selling of assets you are responsible with providing customers 1099 the way any other customers would and anyone who owes bitcoin should. I had a credit card for a while and i did all of the transactions it is a taxable activity the rules dont change just because youre touching bitcoin. Mohamad and i have talked about this in terms of the monopoly governments have owe fiat currency, and the long term if this became a massive adoption that governments actually step in by the way, in the same way that for reasons that are almost inexplicable to me theres been such a focus on libre even though it doesnt exist yet. You have to remember you can pay your business taxes in the state of ohio with bitcoin countries have settled crossborder actions with bitcoin. I dont think that bitcoin is going to go away i think theres too many people, whether theyre regulated financial organizations, finra is approving, et cetera. I dont think it is going away i wonder whether as a protocol, you know, whether it is like torrent. Torrent we all thought would be a huge deal ten years ago and now it is one of many protocols and it is fine. But, look, it is like cash, right . Cash when you have a 20 bill and you get it out of the atm, nobody can track what you do with that 20 bill if you go down the corner and buy a hot dog, right joe and i had that debate the difference is you have to get a lot of briefcases, it gets very complicated to carry around lots and lots of cash. It is very, very easy obviously to move that cash have you seen ozark . Sure. You heard of this guy escobar . You finally got him but the cash argument to me is a specious argument given bitcoin and the transfer relevant to cash i get the argument on cash, but the important part is that the countries that embrace it first will have a significant advantage moving forward the game theory is some country is going to embrace it in a serious why, whether it is china, United States, or somewhere in europe. The advantage is what you cant stop it the second a country starts to adopt it, every other country will end up playing catchup the countries that say singapore is saying, look, bring it on. We will provide rules, we will give you clarity and we want these companies here, we want the innovation and the entrepreneurs to come in when you incentivize them, theres a way to create rules that are fair. I disagree. Theyre regulating it. What the United States issayin you can have bitcoin as long as you play by our rules. I agree with your point, andrew, one of the most important things for hard corbitt coiners is they have choice, they can choose who to interact with this whole movement is about eliminating our dependence on intermediaries yesterday another Financial Institution got hacked 100 million records that were compromised. We see largescale Systemic Risk coming from the large institutions the idea of doing away the intermediaries is a good one but we have become more dependent on enter immediate years. It is a great debate and a longer one i know we will continue to have it. Remember the palettlets that went to iran how do i get a pallet of cash you can do it right here. Coming up, health and Human Services second alex azar joining us we are looking at red across the board. The dow looking to lose 90 at the opening, s p 500 down 14 squawk box returns right after this slather it all over, dont hold back. Well, the squirrels followed me all the way out to california and theres a very strange badger staring at me. No, i cant believe how easy it was to save hundreds of dollars on my Car Insurance with geico. Uhhuh, wheres the camel . Mr. Big shots got his own trailer. Wheeeeeee believe it geico could save you 15 or more on Car Insurance. Another Financial Institution hacked shares of capital one sinking this morning after the Company Reveals a massive data breach. A intox news maker, health and Human Services secretary alex azar will be here we will talk about the Trump Administrations new Health Care Transparency proposal that could upend an industry. Beyond meat burned tumbling after announcing a new Stock Offering 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 times squarn. Becky is off today our guest host mohamed elerian, chief economic adviser at allianz. Who knows where we will end the day, 205 on the treasury on the ten year. Lets tell you about some of the big stories investors will be talking about today capital one says personal information about 106 million credit card customers and applicants has been exposed by a hacker not just exposed but effectively stolen the alleged hacker was arrested by federal agents in seattle she is accused of breaking through a firewall to access data stored on an amazon cloud server a lot of people are going to be watching capital one we had a conversation about aws and whether, you know, most of these firewalls from what i understand from when we had the conversation in the 6 00 hour are fully maintained by the client, not the Cloud Storage company. Which is what we said at the time. So how much people are going to focus on aws is a fundamental question, but given her history of having worked there, whether people will look there as well several quarterly result out this morning from apparel maker under armour it lost 0. 04 a share for the quarter, one cent less than expected however the share is under pressu pressure after the company cut north american forecast. You are looking at the stock trading down 12 right now separately, trade talks between the u. S. And china are picking up in shanghai today you are looking at images of the treasury secretary moving through downtown traffic there they will be talking about issues including intellectual property, forced transfer of technology and agriculture Steven Mnuchen, treasury secretary there, and u. S. Trade rep Robert Lighthizer are leading up negotiations for the u. S. President trump with some pretty hard core tweets about china this morning sort of in right before this is happening is kind of interesting. New tweets as weve been speaking not as weve been speaking but some of the ones that came out recently about how they better if they think a deal is tough now, wait until late. If you want to negotiate with me later it will be worse. This goes back to the conversation we had with chris in the last hour that we said President Trump thinks he has negotiating now ahead of a 2020 election, if he waits till after right. President trump moving the same President Trump moving a step closer to implementing his Health Care Agenda the centers for med aid and Medicare Services out with pricing proposals following up on an executive order last month. Here is health and Human Services secretary alex azar mr. Secretary, reading these, i will tell you i was struck with the notion that it just seems like it should have been this way all along. Some of the stuff is just it seems obvious about hospital pricing, for example it was totally we had no idea it was totally opaque up to this point. Why . Well, because the vested specialty interests dont want you to know the price of their products before you have to buy them for decades theyve been able to get away with this gig, and it has taken President Trump and his courage and willingness to just fight for the American People here to do this you know, he heard from the American People, which is we should know what something costs before we have to buy it we should end these surprise medical bills, and thats what were delivering on. The president said in his executive order he wanted full of transparency of pricing and i ordered our Medicare Agency jed to require hospitals to disclose their charges and disclose what their negotiated discounts are with the Insurance Plan so the patient will have the right to have this information before they pick where they will get their services delivered. It is kind of a commentary on how everyone feels in the hospital you tend to give your caregivers the benefit of the doubt when youre there and you want the absolute best care and you are in kind of a weakened position it is hard to believe that caregivers would take advantage, but these are big forprofit hospitals and i guess you just like anything else you need to know what youre buying or else youre going to get taken advantage of. Yes, it is all part of the president s vision for how we improve health in the United States, which is personalized, Affordable Health care that puts you, the patient, in control, treats you like a human being, not like a number. You cant be in the drivers seat in the hospital, in the doctors office, at the pharmacy counter if you arent empowered with information you need to know the price of the goods and services you are being asked to buy and quality information about them, and thats what President Trump is working to deliver. And medicare needs to you do hospitals, then, okay, we have to do surgical centers, then we have to do renal care and physicians you cant just do one. Thats why it gets very arcane i dont know if we want to go over all of this, but you need to specifically give guidelines to all of these different outlets. Yes so i have the authority to do this by statute for hospitals, to make sure hospitals post their standard charges and for broader acrosstheHealth Care System and all products, look, what the president s executive order calls for is a rule that would require the Insurance Companies also to provide this information. So whether a doctor, ambulatory surgical center, you would have to disclose the list price and what is the out of pocket. You get this information on the explanation of benefits, but it comes 30 days of a yafter you g service. What were going to tell the Insurance Companies is push the button sooner, send me the information so i can decide where im getting that cat scat done, that lab test, that hip replacement, and compete basted on pribasted based on price and quality. The drug industry, we have used the term barbarians at the gate we had the ceo of eli lilly on later and we talked about the overall system this is what he had to say and you can respond to this. The issue in our country is not the cost of medications to the Health Care System 15 of the health care dollar goes to drugs. We could cap that forever, and what we would get is less innovation and still have growing health care costs. What we need to do is work on outofpocket costs for those patients who need innovative medicines, and some of the proposals the ones were focused on, could in fact do that we agree it is time for change we agree that patients need relief in the cost of medications. We dont agree with the rhetoric and we certainly dont agree with a lot of the solutions, quote, unquote, being put out there. What do you think, mr. Secretary . I mean are you on different pages with drug ceos would you say or is everyone trying to get to the same place . Well, i think were on sometimes different pages, but i will tell you the page that President Trump and i are on, which is that we are fighting for the american patient what we have heard from the american patient is im paying too much for my drugs. The list prices are paying too much, and im sick and tired of europeans getting a better deal than i get on my drugs when we are the biggest and most powerful country on earth. Thats why President Trump is committed to having seniors stop over paying for their drugs to prop up socialist systems in europe thats why he is so committed, and i was just on the phone with him, working on a plan to import drugs safely and effectively from canada so American People get the benefit of deals that pharma themselves are striking with other countries they are giving the drugs to other countries at these discounts, theyre choosing to sell them at these lower prices, we want these benefits. Mr. Secretary, how is this going to be different, if you will, than the effort to change prices or to disclose prices on Television Ads os obviously a federal judge stopped that, not questioning the wisdom of the idea but the jurisdiction, if you will, of the administration to do it. Yes, so were going to keep working, using all of our Regulatory Authority the president s committed to using every power he has to try to make these changes. We are also working with congress we had a really Big Development last week. The Senate Finance committee put out a bipartisan piece of legislation that really tackles so many of these problems and is complementary to the Even Stronger efforts that President Trump is taking on drug pricing. That got out of committee 199 over the objections of pharma companies. Now we will work on a bipartisan basis to try to get it to the senate floor and get it passed out of congress. Mr. Secretary, i understand that you are fighting for the American Consumer, and i of course am one of them that wants to pay less for drug prices and less for hospital procedures and want to know the cost of the hospital procedures, but is it effectively a shot across the bow to Hospital Companies as well as Drug Companies, hey, you guys, were going to make things more transparent, prices will be, in fact, come down, and it is going to hit your bottom line whether it hits the bottom line or not is not so much relevant to us it is what is good for the american patient it is putting them at the center of the system and putting them in control of their own health and health care. We are trying to drive across three major domains in health care that allow us to protect what works in health care, protect medicare, protect private Health Insurance thats 240 million americans right there. Protect that, make it better, but fix what is broken in health care so Fix Health Care financing make sure there are affordable options available for people fix how we deliver health care so that we pay for outcomes, so we have price and quality transparency, and fix key Health Disease areas like kidney care, fix rural health care, maternal mortality, those domains impact 300 million americans. Thats the wholistic vick fsionr health that the president is working on. You and the president have an understanding of the cost that goes into developing some of the treatments, especially maybe more small patient populations, and the necessity to have a return on capital invested by these companies in the first place could result in drugs costing 20,000 a year, 50,000 a year, whatever it is, and, you know, i know a pill costs 1 to make but you cant just use that red herring constantly to talk don prices or else we wont have a drug industry left in the United States anymore. It is a fine line. You dont want to kill the goose that lays the golden egg. We completely understand that you have a president and a secretary who are both business leaders. We understand financials i understand that business in particular intimately. But that canard of if you take 1 out of our revenue or profitability you wont get drugs, it proves too much. It has been the why any protection then obviously there is a point where the system would break down and you get no more innovation. Well, we are vigorous defenders of the patent system, but it doesnt mean we have to pay whatever somebody says you pay. We can still negotiate we can still have create a competitive, transparent marketplace for drugs. Lets remember even the last proposal we put out on ending foreign free riding would have saved 3. 5 billion per year out of the pharmaceutical industrys revenue. They they invest about 70 billion per year in r d. They put about 20 of their revenue into r d, thats 700 million. So even, even the one theyre screaming hysterically about, the proposed change that weve made, would be a 1 change in r d investment frankly, if they cant find 1 in their op ex to maximize theyre not running their businesses very well. Mr. Secretary, i have one final question for you during your time at eli lilly clearly you helped push prices up that was one of the critiques in your role, that you pushed prices up, insulin and other things i want to get your sense in terms of your shift now. Is it a change in responsibilities that has put you in this new position of wanting to lower the prices . Is it responsibility that you think the executives have to do it themselves . Square the circle for those viewers who are asking the question. Listen, i would love it if drug company ceos would lower their prices and some have on some products. We have seen it in response to President Trumps leadership the fact is that the entire system is designed so everyone profits from drug prices increasing and rebates going up to the middle men. But the question is that you were part of the system that drove prices higher. Thats why i as secretary can lead the effort to change the rules of the road and change the system because i know how the system work. Thats why i have so much passion to fix it. It is a broken system. You know how much companies jacked up prices on the American Consumer and thats why you can undo it . I can change the rules of the record and im working with congress to change the rules of the road so they have the financial incentives to have prices go down you will not get altruistic behavior by Drug Companies or anybody else to say im going to leave profitable money by the sidelines and minimize shareholder value. The president and i are both doing the regulation as well as working on a bipartisan basis with congress to fix the system long term. I dont know about the logo, mr. Secretary. Kind of looks like the philadelphia eagles. What is that, the Seattle Seahawks look at that i think you need to refine that. You got the nose guard and everything is that the falcons . Are you concerned about the seal turning into a human being . Im distracted by it. Am i on espn in any way, anyway, it looks like a helmet. I just want to make it easier to get out of it. I will tell you why i like the answer you always say it is like the patriotic millionaires, if you want to give the money back, give it back yourself. Part is that you need to change the system, on taxes and this. It is a system wide change that needs to happen. Theres a nice system the irs has where you can write at the bottom, i would like this much more in my taxes and you can do it whenever you want to. Im saying you can ask people to do it individually but you never change it unless you change thats always a good answer for those people. Coming up, beyond meat has a bump in the road, the stock tumbles after announcing a mixed result in the second Share Offering we will ask where the stock goes from here now weve seen it is not invincible stay tuned you are watching squawk box on cnbc the United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes here, hello starts with 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. Welcome back to squawk box one of the most highflying stocks of the year coming back to skort aftearth after postingl results. Aditi roy. Reporter beyond meat results were mixed but it was subsequent announcement of a secondary offering that led to shares falling as much as 13 it is for 3 squar1 4 million shs whiek 250,000 offered by the company. Ceo ethan brown plans to sell more than 39,000 shares which could net him 8. 7 million beyond will use the proceeds from the offering towards expanding supply and marketing reaction to the offering is mixed. Some say the supply of additional shares could drive down borrow costs and could incentivize further Short Interest in the stock. Others say it could be a win for the company if longterm investors buy the stock. How the stock trades today in the regular session could be pivotal. Keep in mind at itscurrent price beyond shares are still up more than 660 since its ipo andrew. Thank you joining us is senior restaurant and retail analyst at morning star dan gluck, also a partner at powerpoint investors mike santoli is also with us i will start with r. J. What i dont know, there was already an overhang in terms of lockup, now there will be a new overhang in terms of the stock issuance are you happy about it i think if you look right now, thats exactly what is driving down the stock today we have talked about it in the past, the idea that right now theres a ton of people getting in the market. We are seeing the mixed response in terms of repeat rate from consumers right now. The company talked about 40 , firsttime buyers continuing to buy the product. That being said i think the takeaway from last nights earnings is that beyond meat has done a great job building on its brand. It has become the preferred brand for restaurants in terms of plantbased proteins right now. They are building out supply which is a key issue for a lot of the vendors, particularly as more restaurants and Food Service Vendors want to get in all together mixed results i think beyond meat is still the clear winner in the category. Dan, we had an early investor on the program in the last hour that basically made the case it is a huge going to be, what did he say, 85 billion industry what was his line. 85 billion total Addressable Market. So my question in terms of the valuation, in terms of growing into that valuation, how much of the market do they need to own to capture where we are even today yes, no, i agree. By our analysis we think it could be about 100 billion total Addressable Market, and we think beyond meat needs to take only a small of that to grow into its current valuation es i think thats what the market is currently underwriting right now . Are we talking a small if you are talking about 5 , you are talking about a 5 billion Sales Company off a base last year of less than 100 million in revenues we think theres meaningful room to run here. Mike, speak to the Short Interest in this stock. Yes, so very low flow, very few shares available out there before this offering thats coming and even after the offering Something Like 14 million shares freely trading, yesterday during the regular session 15 million shares traded. Theres too much interest in the plantbased meat running through the limited shares the majority of the shares are reflected in the Short Interest as well. It is very expensive to borrow it is a battleground of essentially not enough supply to meet the intensity of the hype and demand this will relieve it a little bit, but i think you have to step back for a second and say, if the stock went from 25 to 100 it would have been one of the greatest ipos in memory and would have fully reflected the longterm opportunity for beyond meat but it went to 230 because a crazy hot potato game was going on i think this relieves it a little bit the problem is that it brings back memories of go pro where they tried to allow insiders to get ahead of the planned lockup with an offering, and so, mike, these overshoot up and over shshoot on the way dow. Exactly. What do you see ahead it is a 13 billion company lets say they get to the 5 billion revenue whats the margin on that . Are they sitting there with an overstated that this company is going to attack . It is hard to know it is now 13 times operating earnings who knows. Thats the kind of market you have to do and i think you have to make leaps ahead they have to come down a lot from where they are right now in price to be competitive. Well, that 13 billion no, im talking about the price of beyond meat needs to come down a lot to be competitive. Absolutely. The margins will be less. Dan, im curious, in terms of reaching the 100 million billion dollar. Billion dollar, excuse me total Addressable Market there could be the hype and the interest but they have to get the production up to snuff and they also have to arrange their supply chain on the Conference Call they mentioned that the shortage of beef protein would be eliminated because dupont is upping pea protein output they are depending a lot of things to happen for them to reach full potential is it a concern . Yes, but theyre investing heavily in operational facilities on the call last night ethan mentioned they would be able to handle at least 400 million of demand next year ago lone. They are continuing to invest in technology and innovation and they will continue to meet the increasing demand. Fair enough dan, r. J. , mike. Tha thank you guys. The breaking economic numbers of the morning are a few minutes away and it is apple day we will be back. Welcome back to squawk box Rick Santelli here live. Breaking news, june personal income up exactly the expected amount of. 4 spending, up. 3. Spot on with expectations it subtle revixs sions in the reare mirror up. 4 , on spending the opposite we went from up. 4 to up. 5 . If i look at real personal spending, up. 2 deflat deflator up. 1 we also lost a tenth from 1. 5 last look to also 1. 4. Finally, if we look at the pce core deflator, it is up. 2 on a month over month, year over year it is up 1. 6 also. 1 cooler than expectations on any pricing issue we are a smidge on the cool side. In terms of incoming spending we delivered exact expectation. I personally like when it country clubs a bit higher than spending though both numbers are positive no real response in the interest complex going into this on the bottom end of the closing range over the next two days, between 202 and 208 for tenure the dollar index about a onefifth of a sent from fresh 26month highs andrew back to you. Thank you for that. Steve liesman has his laptop out, crunching the numbers, looking intensely at the screen. Im trying to see what im missing but the savings rate shot up to 8. 1 . I feel like it is either a misprint or my data is it used to be like 5 and they revised it up to 6 . Im trying to find out when the last time we had a savings rate like that. I actually was expecting a high savings rate, so i went back and looked to see if it was an indicator of like, can you have a recession, people have a lot of money in the bank and in general it supports ongoing growth but it is not like a green or red flashing light. But it is hard to see weakness in the consumer with these kinds of numbers you can extrapolate from that to how it is hard to see weakness in the economy if the consumer is not going to be now, maybe you spent a lot of taylor here which is not crazy, which you have the slowdown in kpofrpt profits and corporate spending which leads to falloff in hirings which we havent seen in either the jobless claims or bls numbers. I think rick has commentary on the savings number. Go ahead, rick. Have i got it wrong . It is not a comment on saefg savings, just a general comment. Your statement is completely perfect but in some ways we have a baseline that makes no sense you came from the vantage opponent it doesnt look recession like it just blows my mind. You know, the press or the media or business news, they bring up recession. We had a few bumps in the road but ultimately theres little our lying eyes have been seeing for past quarters or ongoing quarters that looks concessionary, am i wrong . To correct what i was saying. It is relatively high compared to where it was. We have to have a huge caveat or as terrific. Economists dont do a good job of predicting recessions. Then why do we give them the credence of going along with such a bizarre concept you know, we were 2 handle on by the first look at Second Quarter gdp i dont know, it would be like saying, well, i dont see a depression coming up i dont get it. I dont know. Make mohamad does, the state of our Early Warning system on recession relative to, for example, earthquakes or volcanos are we any better or worse than knowing . Look, on this show and joe has heard me say, it is virtually impossible to tip the country to recession without a major policy a series of major policy, not just one. Or a major market incident. This was driven by europe, it wasnt about us, and the consumer is in a good place and you cant stip this economy in a recession where they are now. How far can you tip the economy . You can slow it to 2 , 2. 5 . What is potentially growth, so why do you need help . Look gesturing hand signals to me. Im sorry, i am used to being on the fast money set and im used to rapping people on the hand move on. They told me it is a look. I could shoot you the look later but i want to bring in Julian Emmanuel who is chief equity strategist at bi 3. We are basically dead money here for the time being. And in the context of where we have come from and the fact that in our view the fed is likely to disappoint markets with a 25basis point cut tomorrow, it is not necessarily a bad thing at all. When did you get to i thought you did 3200 or 3300 if everything goes right. What welearned in the last hours either or you are now at 3,000 for end of the year it has been that way for the whole year we said if things went right, brexit, china we will come back and raise it three months from now were going to remember this. You have a longterm memory, i know that. What did we learn in the last hour what we learned in the last hour is basically the economy, the statistics dont necessarily matter all the time when the fed is prepared to act this is all about a flu shot, okay you know, a flu shot against the potential and about just as effective. But you want more than 32 . Yes. So 25 basis points may be a flu shot, but are you hinting you want 50 . No, no, no. When we made our call, actually you were on with us on april 1st when we made the call and people thought we were crazy for calling for fed rate cuts. The point is that, a, it does back stop Inflation Expectations the fact is Inflation Expectations have stabilized since then and thats part of what the fed is trying to achieve. But, again, you look at the data, you look where the st. Johns county where the stock market prices are. The markets are looking for more than that. You had 100 basis points of easing which is in expectations, right . If you go back to november 2018, we were looking for a 3 fed funds rate by end of this year that expectation is now down to below 2 so is that enough knock lags i mean obviously i guess rick is gone but what is clear now is the sort of catch22, and i mean it in the sense of the actual craziness of the book itself if the fed doesnt deliver the rate cut, it will require it will be a Market Reaction that will require the rate cut it did not deliver. I totally agree with that but on the other hand, you know, there are two things number one, rate cuts are only going to be so effective when you have got global trade you know, the rules of global trade are changing as rapidly as they are, and weve seen the disruption the trade war has proven to be disinflationary. Not inflationary as the fed might have expected last year. The other thing is that consumer rates is a longterm positive. The consumer is not waefrg. I would add one more thing. Keep an eye on the dollar. The assumption is as the fed goes dovish it would weaken the dollar what has happened is that the fed has opened a way for everyone to be more dovish. And brexit doesnt help in terms of movement of the pound. I have to ask mohamad this question because there was a great an interesting oped i think today or yesterday in the journal that said this rate cut is a riskfree option. Is it risk free . No, because of one concern i have had over and over again, which is we are putting in place the seeds and we are watering them for a future financial disruption i really worry about how thats a gardner. Whats happened on the the millennials dont get it at all. Not just millennials, i know. You know what else is going to come in the spring you like to watch. Whoa, thats profound. We dont think the green chutes for that financial disruption are emerging yet. We think it is still a ways in the future. So we should look at this in two years. It is like the vaccine but you can take it and it doesnt cost you anything if theres no vaccine. Thats the riskfree idea. Now we better go to break. Millennials, does there have to be an avengers movie for them to understand theres a sequel of something. Remake . A remake, a sequel. It is so sad. Steve liesman, julian, thank you. Stick around for the rest of the hour coming up, it is apples day. The quarters final set of faang results are do after the bell. We will talk to a top analyst when squawk box returns. Woman my reputation was trashed online. I felt completely helpless. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Coming up, what to watch when apple posts its Third Quarter results tonight, from the iphone shipment number to how executives are dealing with americas tech backlash. We will tell you what deserves your attention after the closing bell rings as we head to break, look at the shares of capital one, down this morning after exposing that huge data breach involving hundreds data breach involving hundreds of millions of you should be mad at leaf blowers. Wonder if samuel all rigl jacks breached dont know well be right back. 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 some squawk box less than an hour to the opening bell on wall street. Dom joins chu joins us good morning. Good morning. Roughly 275,000 shares premarket, the consumer giant behind everything from gillette razors to dawn dish soap and bounty towels. It also gave an upbeat outlook for 2020, and that fiscal year helped along by better beauty Product Sales and the ability to raise prices by the way, if the gains hold into regular trading it will be a record high for Proctor Gamble shares of merck on the rise. The drug giant came in with betterthanexpected profits and sales helped along by better sales of vaccine products and its keytruda cancer treatment. It topped analyst estimates as well but not all green on the screen this morning. Shares of under armour down big with class a voting shares down 10 or so on 220,000 shares premarket. They posted a slightly better than expected loss but slightly worse than expected sales and did temper expectations for full years sale growth with more heightened competition with the likes of nike and others that takes us by the way to a quick check on some of the big sheems developing about halfway through earnings season. According to data from fact sep s p 500 companies with global exposure, those companies that get 50 of their business from overseas are not faring very well on aggregate, those stocks that reported are down about 13. 6 in terms of Earnings Growth declines there for earnings. While companies that get most of their earnings from domestic u. S. Sources have seen their earnings grow by roughly 3. 2 . So we will see, andrew, if that theme continues. Globalized companys getting hit more because of the uncertainty around trade in the first place and the slowing economy. Back to you guys. Dom, great to see you in person and again this morning. Yes Third Quarter earnings on apple on the deck and it will happen after the closing bell. Tom forte is here. You just heard from dom. If you have an International Business you have a problem. Apple has an International Business but the good news for apple shares and why we like them heading into earnings is historically the things that gave investors anxiety were iphones sales. Though theyre negotiating in shanghai, theyre taking away the risk on iphones. We know the iphone sales will be down a quarter, so think because of that reason the lower expectations, the stock is well positioned here. How much will you focus on the phone sales themselves, as i pick up my own foam, which a lot of times apple would like you to stop focusing on and focus on the service piece. Today focusing on the noni pony portion today apple is telling us it is a less important data point and thats how theyre managing the business were looking for apple for progress on their way away from the 60 of sales that come from iphone think about their efforts in community advices, health care, automotive, arecare, automotive, are they going to make a self driving car or just the operating system for the self driving car thats we are focusing on rather than the iphone. What is next for apple . A 5g device but you may see return to positive unit growth in fall of 2020 on a 5g device from apple i think that further derisks the quarter because we are waiting for next year was a positive return for unit growth. That was a quote yesterday from a south korean analyst. His prems was the three new phones that apple would announce could all have 5g. People are talking about that Product Launch already how many free passes does apple get before that launch if you want to position yourself ahead of of that launch. 2020, not 2019. Yes, they are saying that will be the uphill cycle. Another five quarters, because we are focusing on the launch in fall of 2020 that means we are not focusing on the declining sales of iphones you are saying expect to see declines in smart phone sales, iphone sales. Absolutely, if you think about apple. And their services combine commensurately isnt there that if you have a greater install base and services grow, then if you take that installed base away they deteriorate. How do you handle that. They have been able to drive the fly wheel on the install base without having their core engine moving forward. News plus or apple tv plus premium content. They have enough new news, new i announcements and new services coming along to drive growth. It is a longer conversation but we will see the answer after the mark today i am sure we will have you back to talk more about it. Excellent. Lets get down to the new york stock exchange. Jim cramer wants to talk apple i am sure you heard the comments just now do you have some of your own. If we get service rev at 17 and 18 and the stock goes higher, you get that down to 12 your best days are behind apple and that imply as lot of weakness you have to go for the goal of 5g i spoke about it with melissa yesterday on half time i think investors will ride through it i think it is hard to get out and get in what are you going to get out at 202 and back in at 17 . I dont think the individual numbers are that good. The hedge fund is to pull it back in. The interview, every line is so much better i know andrea asks questions i thought were pertinent about what are you going to do now that nelson pelz plays a role. What i locked about proctor is that the grooming number which had been a problem is really good when you see that turn you have an explosion in gross margin it was a good quarter. Again we talked about that on half time. A lot of people got out of it because it was rich. But it is the best Consumer Product story of the quarter and deserves to be rich. You have been weighing in on beyond meat as well. Whats your thesis right now it is a good company but the stock is rich i think the fact that they are sell that they opened up the lock up early is a recognition of the fact that holy cow. Holy cow, jim, must you. You have got say dont take a profit but the fact is, it is a real company. It is a real company and i think people have to recognize it is more of an ethos, i hate to use a mindful world than nestle could come it. Tyson come in. I dont think tyson knew what it had when it had beyond meat. Apple you didnt even mention the fed. It is disi a pointing you are not playing along with news i didnt want to bore people the reds did come back they were awful at the beginning of the year. 500. They have been playing. 500 ball cant get above. 500 alarian they have got one more win, and he thinks the mets are he has been dragging about the mets all morning long and they have the same record as the reds. The mets are giving away good pitchers, to everyone. I know, they got a better pitcher. The giants have no receiver so there is no one for eli to mess up with. Rooting for the eagles. Golden tait, what is that suspension i thought he had a better reason then again, we have got to talk about the fed. Im sorry. We talk about pedestrians instead of fed cramer, we will see you in a few. Thank you. Dont miss a big hour on the Halftime Report today at noon. Famed instveor mario gobelli will join the team squawk box well be right back really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at td ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom mad skills. Education to take your trading to the next level. Only with td ameritrade. Welcome back to squawk box. Our guest host all morning has been the chief economic adviser to alie yanz whats going to happen in the next day and a half . I have three themes consistently, dont fade the equity rally two, dont fade the u. S. Versus the rest of the world. Three, dont fade Dollar Strength imconfident on two the and three. On first one as much as i like surfing the liquidity wave i am selling sell low quality stock that rallied enormously, go up in quality and have some cash we have come a really long way just on liquidity. On the other two, i am there dont fade the u. S. Versus the rest of the word and dont fade Dollar Strength. On other one you are lighting up. Is quality based on sector . Mainly on Balance Sheet and agility of Business Models hmm bullish, but not that bullish. Not as no, we have come a really long way on just liquidity. You are an owner of crypto. I am. I told you below 5,000. You almost sold at 13, right . I almost sold, but i didnt. Mohammad thank you for being here join us tomorrow squawk on the street begins right now. Good tuesday morning, welcome to squawk on the street on Carl Quintanilla with jim cramer at the new york stock exchange, david fabers that day off. Europe is having a rough morning. Dax on pace for the worst day since february the pounds bruising continues brent back above the 50 da