Transcripts For CNBC Squawk Box 20240712

When you say a line, more than two people i think they have to be at work at 6 00 or something. I was upstairs getting my coffee everyone had a mask on but there were six or seven people out there waiting. Were you one of them . I was notone of them. Much better smelling. That would be from your standing and not max cutting the losses in half. Im willing to give that to him . I have to say, Brian Sullivan puts on a very good show i appreciate the lead in i listen because i do my hair and make up about five feet from here energetic at 5 00 a. M he brings it every day. You could be up or down up 2. 3 . S p was up 1. 5 . Both of those averages now on track for the Third Straight gains. This has been an impressive quarter. All the way back to the Fourth Quarter since 98 we have seen three months in a row that have been impressive. If things went south, you could see the s p 500 wipe that out. Those gains are in the green for the month of june. You can see dow futures are down only about 35 points s p futures up marginally and nasdaq up 35 points. Looking at the 10year note yielding 0. 635 . Andrew lets talk about why maybe those gains are happening. Fed chair powell and secretary mnuchin will be testifying this morning. Prepared remarks powell saying the economy has enter an point new stage sooner but says the path forward is extraordinarily uncertain and depends on large part to containing the virus and a full recovery is unlikely until people feel safe in returning to a broad range of activities in some parts of the country, it seems like they are and in other parts it seems theyll be engaging less. After that weekend. The news flow was not positive always confounding we talked about that on top of the show yesterday that i dont know where the reality check needs to be. Certainly like the market needs one. Breathlessly reporting the death rate continues to be pretty low dr. Scott gottlieb expects the death rate to slow well talk to scott about a report out that looked at the infection rate in new york and mortality rate is around. 7. That is not good pretty horrific. About seven times worse than a bad flu but it is not 5 either. Democratic president ial candidate joe biden tells potential donors hed roll back trump tax cuts raising at least 2 million. Biden said hed get rid of the bulk of president trumps tax cuts and close loopholes like Capital Gains and would raise Corporate Tax rate to 28 . Tru trump tax cuts reduced them to 21 . Telling you about how the wealthy are already preparing for those tax hikes. And went for 85. Did it really is. He said 80. At least i read that morning, it was expected to bring in 80 it got 85. This was done virtual. There is not the adrenaline of people going up in 100,000 can you imagine bidding on anything and going up in 100,000 increments no. I read a virtual fundraiser for joe biden, i was like, they wont really raise anything. It is what they would have raised it is a virtual fundraiser it is not what it is the actual funds being raised were real funds. Not virtual. This is like a virtual show we put on every day. Thats real. Ive heard that criticism it is. It is a real business. We should also tell you about wells fargo. Cutting its dividend after the latest round of fed stress test. It expects to announce the dividend when it reports quarterly results. They would maintain current dividend including Goldman Sachs, bank of america, morgan stanley, Jp Morgan Chase and citigroup. Take a look at those stocks this morning. Meantime, this one has been in the works sort of weve talked about a possibility of these Delivery Services getting together uber in talks to buy post mates. Price tag 2. 6 million after a failed effort. The tie would speed up consolidation making the loss. That is seen as a spike in demand during this pandemic. Big question about this transaction. If you remember at the time uber walked away from grubhub, the argument was that they were worried they were going to face antitrust regulators the question in this case is to somehow buy post mates which does have smaller market share that is allowed. Well see where that transaction goes well see meantime, other transactions for you. Talking a little about how it hasnt been profitable more people are willing to pay money to have things delivered to their house than ever before. I saw a tweet from someone that was irritated who said, i dont think uber eats would ever make money because why would i pay someone to have my food sit 15 to 20 minutes and have a messed up delivery. Thats a frustrated customer this brings the question of can this ever be profitable to make it profitable for any enterprise doing this and it comes back to the question of what happens to restaurants. Right now, restaurants are under pressure and it will make a cut of where they would be thats a bigger question than ever before. I think thats a real question if it is ever a profitable business. If you look at the uber lyft example and look at straight profits on the driving side, it can be a Good Business part of it is there are in the food business in particular, now great for customers. Terrible for the businesses, there really is too much competition. Too many back end systems that need to be supported too many Marketing Budgets and support for the restaurants. If you could consolidate that, arguably you could turn a profit the question is whether post mates is big enough. Grubhub was a much bigger player you could have seen how that could have worked. Does that mean the price has to go up ultimately maybe. Their hope is that if you can take out so much of those back end costs, which will are a lot of, with the discounting, maybe that could change the dynamic. Annoying for all the people it gums up the works when i go getting all the french fries at wendys. Thats all im getting i can see on the board who these guys are you can tell that they are guys delivering it. I watch them go out with shopping bags of this and that im waiting and waiting. Watching these things get fills. Im not a fan. Im willing to go myself dont need someone bringing it no wonder it is cold they are getting how many orders at a time, like the pizza guy. I think they are doing about three orders an hour, which is not a lot. Not two at the same time. They probably are because they are trying to hit three plus orders an hour on delivery. In a city, it works. If you get into the suburbs and farther out, it becomes more complicated because of the distances. You know a lot about this you are not moonlighting, are you . Just reporting. Not moonlighting those types of jobs people used to have in terms of all of the people who do need these jobs right now in this moment my hat is off there is an element to keeping us fed and healthy i do want to talk about lululemon. Another big transaction. Im wearing my abc pants today in honor of this transaction now we have to get you have you broken from your recent string. Every time i ask you, you are wearing them occasionally. You know me, i wear those ralph lauren suits and occasionally ag jeans. Those will good too much information. Go ahead. Abc pants is too much information, right there from the very beginning. It doesnt stand for the alphabet ill give you a minute, joe one you should know about. Rhone, they make amazing pants very much like this, i think youll like the way you look, as they say at mens warehouse let me tell but lululemon. The first ever acquisition it was announced yesterday, they are buying inhome fitness company. We got to get you one to sit next to your peloton 500 million mirror offers live classes through a wall mounted mirror device in addition to oneonone training sessions. Retails about 1,500 and paying 30 a more for streaming big question being in the apparel and content production business are the same and whether you can marry the two. Big question i dont know if youve seen it its a twoway mirror with a television behind it and a lot of programming you might see a little too much of yourself i see a lot of jiggling and moving i dont want to see. Not through the mirror. It is through the looking glass. Home fitness. Did you see what happened at that Planet Fitness in West Virginia 60 people are quarantin because they went to the gym i did see this. Now 60 of them are quarantined. I dont want to go right back there next to someone. Wrong place did you see the story that said, we basically know what this pandemic is most likely caused by, not necessarily surface but being close approximatity of people who are infected for 15 minutes or longer you think gyms, nail, hair salons all the places we are trying to reopen right now that would be the remain focus for many of these. I saw an electron micrograph show these pin calls going out from coronavirus attaching to other cells like a squid it was so frightening. Something i didnt need to see cant unsee. Well ask dr. Gottlieb to weigh in on the latest roll backs. Well tell you about new announcements from arizona, new jersey and new york. These are hopefully preemptive in new york. We havent seen a resurgence we are watching shares of boeing up yesterday. Early trading on words that Norwegian Air is canceling a deal to buy nearly 100 of the 787, a few of the 737 max jets surging yesterday after the company and the faa began certification test flights for the grounded plane well be right back. When the world gets complicated, a lot goes through your mind. With fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations. Thats the clarity you get with fidelity wealth management. And taiswithout even ontions. Yoleaving your house. Just keep your phone and switch to Xfinity Mobile. You can get it by ordering a free sim card online. Once you activate, youll only have to pay for the data you need starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. More u. S. Governors are walking back or delaying reopening plans. Arizona is shutting down bars, gyms and movie theaters. The governor says the state could resume reopening by the end of july but the state is also pushing off School Reopenings that is concerning too, pushing it back to august 17 due to happen august 1. In new jersey, they will delay the resuming of Indoor Dining saying some residents have not been adhering to guidelines and using facial coverings new york governor said large malls will not be able to reopen until they have installed highquality air filters saying hepa filters have been shown to reduce covid in the air. Broadway performances will remain shut for the remainder of the year los angeles beaches will be closed for july 4 weekend. After Los Angeles County hit 100,000 total cases. Joining us now is dr. Gottlieb, former fda commissioner, cnbc contributor and serves on the board of illumina and pfizer. Good to talk to you ever day talking about the numbers we didnt have yesterday morning in terms of total cases i saw it wasnt as many total cases as over the weekend, is that correct thats correct. The trend is very concerning you have to look week to week. You always get underreporting right after a weekend. Last monday, we reported 27,000 total, yesterday about 36,000. A little more as some cases came in towards the end of the day. The trend is still up and shows an increase week over week well see cases go up ads we get into later in the week peaking out thursday and friday and well go back up again really a saw tooth pattern how about deaths . Well, the death rate and total deaths are two Different Things the death rate should come down. We are treating covid more effectively and have more treatments from people who get hospitalized and intubated we need to differentiate the two. That will go up again because the infection rate is going up i would expect to see the total deaths start to ga back up 30,000 when you have this much new infection and this much hospitalized, there are more people being hospitalized and admitted to the icu. Some will unfortunately die from covid. So new york and new jersey took action not to go forward with plans for Indoor Dining in new jersey on thursday, is that just from looking at what is happening in the other states . Or was it something happening in new jersey that would cause governor murphy to make that decision i dont know exactly why they made the decision. I think it was a number of things we saw cases tick up a little bit in new jersey. A small increase had been declining and flattened out. There has been reporting of spread within restaurants. A number of credible reports where weve seenout breaks forged inside restaurants. Restaurants seem to be a spread. Those indoor venues where people werent adhering to all requirements thats what prompted the governs decision as opposed to what we are seeing in the south, which is reactive. It will be a slow process trying to get ahead of this in those states there was the study in new york and the mortality came out at. 7 and 20 total infections this was a good study done. We can start to believe this probably represents the result it shows by late april, april 19 about 20 . New yorkers infected with covid. Thats about 1. 7 million pretty consistent with the study done by new york state about two months ago it also shows the infection fatality rate about. 7 . The difference is how many people get coronavirus end up dying and the case rate is how many people get covid. We typically look at the case fatality rate. The case would be hire at 1. 1 or 1. 2 it is pretty consistent with what we thought consistent with other studies weve seen youll probably see the infection value rate is a little higher from april to now youll probably see the prevalence is higher my guess is probably 25 of new york has been feinfected with covid. Just to your point of how reactive this is in arizona, rolling back things for bars and gyms and other areas like that is one thing these restrictions dont apply to restaurants or to churches. They are in a position of having to delay the School Openings they are saying august 17 is the date they are shooting for do you think that will be likely scenario to open schools i think schools in the south will be delayed. They can take an interim step to delay those. They have to make those decisions early, the school years start earlier. I said before, i would be prioritizing opening schools i would do what it takes to try to get the infection rate down to open up the schools that is a gating factor to restarting the economy if you cant get children back to schools, you cant restart the economy. Then the implication for kids themselves it is very important for educational and social reasons to get kids back in school that should be prioritized im not sure they are doing that they are not attacking the epidemic in the south. This could have a gradual impact on the spread if they have an impact at all. They will have an impact it will be a slow process here scott, we saw you twice yesterday. That news broke about remdesivir and the pricing on remdesivir. I wanted to get your thoughts on whether you think the pricing was fair one of the things we didnt get to ask about gilead. Gilead was supported by u. S. Taxpayers in all of this in terms of the work that company has done and yet of course here in the United States, taxpayers will ultimately pay more for that drug. The price payment on the low end of the anticipated range was looking at some of the groups. It is hard to say what is a fair price. Feeling the price set sort of a low benchmark for this sector. You have antibbiotics like thee some relief that have set the price at the low end of the range of what people felt might be the low end of the range. The thing we keep in mind also from a clinical standpoint is we might not have enough of a supply most of that supply is going to the United States. We probably have enough supply to treat the labeled indication at current infection rates we know infections are probably going to go up and we would have wanted to use this earlier in the course of the disease. I think this should be equal focused and maybe we should have paid a little more along the way back a few months ago to get this ramped up to be more available. We are just not going to have it thank you great to have you on as usual. The dow actually turned positive down fractionally right now. Not saying you had anything to do with it, it was positive for a moment okay thanks coming up, we told you earlier that joe biden says his administration will roll back tax cuts how the wealthy are preparing for that scenario. Robert frank will join us with important details. Preparing for the final trading day of the quarter a look at the biggest winners and losers of q 2. 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. Welcome back wealthy americans trying to get ahead and already working on a strategy robert frank with more on what the wealthy are doing. Good morning, accountants are getting calls asking the same question, what can we do now to reduce the impact of higher taxes in coming years. First giving more money to family members current estate and gift tax, individuals can give up to 11. 58 million free of tax the exemption could fall, so families are giving up to that maximum right now. Also front loading income. Business owners are negotiating contracts to take more income this year and more expenses next year with partnerships they are shifting in 2020 in case those rates go up in 2021. And moving from high tax states already considering moves to low tax states all accelerated by working from home finance in new york and tech in california have started the process of changing tax residence den si for the 2021 filing of course, also discussions about taking a capital gain this year if you are lucky enough to have had one in case those rates go up whether biden is in the white house or not there has to be more revenue on the federal and state side by the way, just a total aside. Have you heard there is going to be a big fight between the towns and the hamptons in New York New York city over taxes yes, yes. Already a big discussion when talking about people that decamped to the hamptons in march or april and have not earned income from work done in new york city so they are going to claim new york city doesnt have a right to that tax which is a 4 tax to new york city residents. They are going to say the same thing. All debates. What p about salt for new jersey and new york maybe not the wealthy but what are the plans there in terms of what biden would do anybody who is not ultrawealthy got a huge tax increase with state tax. A lot of the wealthy are hoping and planning for a possible repeal of that production limit accountants are saying, look, dont pay your estimated income tax all in one year. Wait until the First Quarter of next year to pay the 2020 Fourth Quarter estimate if they do roll it back under biden or even trump, theyll save that money for Fourth Quarter 2020 some of the wealthy are preparing and hoping for that. So bacon was sizzling 85 million for that. We talked about that. Thanks when we come back, well talk strategy for the last day of the quarter futures this morning are mixed dow futures are down 15 points, nasdaq up by 25. Take a look at yesterdays s p 500 winners and losers the dow up 2. 35 s p up 1. 5 . Boeing leading the way well be right back. Youre first. First to respond. First to put others lives before your own. And in an emergency, you need a network that puts you first. That connects you to technology to each other and to other agencies. Built with and for first responders. Firstnet. The only officially authorized Wireless Network for first responders. Because putting you first is our job. Some Companies Still have hr stuck between employeesentering data. A. Changing data. More and more sensitive, personal data. And it doesnt just drag hr down. It drags the entire business down with inefficiency, errors and waste. Its ridiculous. So ridiculous. With paycom, employees enter and manage their own data in a single, easy to use software. Visit paycom. Com, and schedule your demo today. The last trading day in the Second Quarter and first part of the deal in the day from the peak that index plunged more than 11,000 recouping back more than 67 of losses so far. Could see the worst first half since 2008 for insight, we are joined by gabriella santos, global strategy dion raboan. You are going with raboan market editor at axios gabriella, let me start with you. It was a difficult first half of the year but this past quarter has been a strong one. Where do you think the momentum is as we head to the second half indeed. Worse First Quarter in a decade. Best Second Quarter in a decade as well. We are in a better plas from last quarter started the recovery from may and june, we have a lot of policy report on monetary and fiscal side. Taking a bit morris being. The bonds and sectors. Starting to think more about corporate kred irt on the bond side we want to avoid the scream of going to overweight risk the recovery has started but it is not the end of the covid story and will be plenty of potholes along the road also still want protection in the potholes ahead so avoiding extremes in the second half of the year. The policy reaction watched and taken careful note of hearing from fed chair powell speaking to congress about what they are seeing. You can bet they are saying it is not necessarily an easy road. Do you think theyll be here to back things up in the cases in case of the recent reopenings weve seen look, you look at some of the recent polling data. President trump is starting to trail right now in some of the betting markets. Plan in the senate are starting to look a little rough thats got to put a little fire in their pants the 600 extra unemployment benefit as well as extra benefits for unemployment assistance will expire at the end of july. Moratoriums on rent and mortgages that are starting to expire there is going to be a big fire lit under legislate yours to get new stimulus out the door whether more Unemployment Insurance or more for Small Business the fed has opened up the credit market so that the fed can go borrow in the market the largest amount we bought weve seen on record on the fiscal side, we are expecting to see more of a big fiscal package what are we seeing on the monetary side. What weve done so far has done for the assets you havent really seen that come through does the fed pause and say hey, does the desired asset have effect or will we need to double down the market seems to believe the fed will jump back in. Qe doubling down on Credit Facilities more expect that more is coming. Thank you both for your time today. Going with raboan i think dion said. They had a phonetic pronunciation. I got it caught in my head and im bouncing it round. Is it route or route. I think i have it now i like when they give us a pronouncing on a tough name and they dont show any capitalization that tells us nothing. University just showing me the phonetic spelling. Capital lies the sim ball you needed emphasis. Coming up, first glimpse in Small Business ahead of thursdays jobs report well talk to paychecks ceo and dont miss our interview with starwoocatal d pifor his thoughts on real estate and reopening the economy. Should be good stock slices. For as little as 5, now anyone can own companies in the s p 500, even if their shares cost more. At 5 a slice, you could own Ten Companies for 50 instead of paying thousands. All Commission Free online. Schwab stock slices an easy way to start investing or to give the gift of stock ownership. Schwab. Own your tomorrow. I was drowning in credit card debt. Sofi helped me pay off twentythree thousand dollars of credit card debt. They helped me consolidate all of that into one low monthly payment. They make you feel like its an honor for them to help you out. I went from sleepless nights to getting my money right. So thank you. Welcome back this morning, take a look at u. S. Equity futures. Dow off a bit by 36 points nasdaq now in the green. When we return, more on squawk well get the june jobs report and an early look at the jobs and an early look at the jobs picture next with an from pay dchex dont miss it. Talk to your doctor, and call 8442342424. Welcome back to squawk box this morning Small Business activity is an important indicator of the overall direction of the economy. The latest from paychex showing employment held steady in june and Weekly Earnings held steady. Here to talk about it is marty mucci. Ceo of paychex walk us through the numbers and to the extent you think theyre going to signal what well see thursday, what do you think it means . Andrew, a lot of interesting information. Flat to may, our index shows those who are employed, not necessarily paid when you look at the paid information for Small Businesses, its up 4 over may. Were also seeing that about 40 , almost 50 of businesses who suspended their operations have now come back and are paying again and are open, although theyre paying fewer employees, theyre definitely back open and youre seeing hours worked up 8 on an annualized basis, weekly hours worked definitely youre seeing more employment coming back also another interesting number we dont talk much about is new business starts. Three weeks ago they were down about 20 year over year if you look at it right now, theyre only down about 2 year to date, so new businesses are starting up as well as those who were suspended are beginning to open back up again even though with a little bit fewer employees. So if you had to bet about the kind of number and unemployment figure we may or may not see on thursday, what does it look like to you well, i think its going to be positive. The tough part is right now theres a lot of changing things right with the south the south has been the strongest in our index right along, and construction is really supporting the south now the south is going through more of a shutdown again in many parts of the south, right, florida, california, texas, east and west so its going to be hard to say. I think its going to be positive though there is more net new jobs, but its going to be tempered down by some of these shutdowns. To the extent that some investors and economists are worried about what happens after july, the reason i mention july is those ppp loans roll off, what do you think the impact is going to be . Well, i think youve got a couple ofthings happening, right . The loans have stopped as of june 30th. Even though there was money left on the table right. And you also have at the end of july the unemployment boost at least now coming down a little bit its going to be very interesting. I think overall were going to have to have some more stimulus to keep the businesses going our businesses, the feedback was the changes to the ppp process were excellent the fact that payroll only had to be 60 of the loan instead of 75 and that we went to 24 weeks of forgiveness instead of 8 weeks. I think well need more overall stimulus well see more people getting back to work this summer, i really do. Weve got to run but just so i understand, how much do you think the Unemployment Insurance thats out there, how much is too much of an incentive not to go to work is actually preventing some of these Companies Either from reopening or having the kind of employment numbers we want . Well, we are seeing in our surveys that smallbusinesses i particular are finding sometimes as they open back up its hard to find people to bring back to their businesses so i do think the unemployment is tampering that down a little bit. I do think when that runs out that will help people get back the jobs believe it or not i think it would be nice if the unemployment benefit was there, a boost, but not as much as right now. Its keeping some people out instead of coming back for their business right okay marty, always good to see you. Thank you for the insight. The data appreciate it. Well see what happens on thursday becky, over to you andrew, thank you. When we come back. We have the big market stories of the morning chris flowers is talking to state banks following the stress test later barry sternal libllicn us to talk about the dow names it is the last trading day of the first half and youre watching squawk box right rehe on cnbc. Microsoft the biggest gainer up 26 . When the world gets complicated, a lot goes through your mind. With fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations. Thats the clarity you get with fidelity wealth management. 2020 coming to an end. The take aways and what investors should expect from the rest of the year is straight ahead. Should amazon buy macys a new report from an mna expert suggests now may be the perfect time hes here to explain plus, star wickwoods Barry Sternlicht the second hour of squawk box begins right now. Good morning welcome back to squawk box right here on cnbc im Andrew Ross Sorkin along with becky quick and joe kernen. Take a look at u. S. Equity futures at this hour theyve been moving around a little bit now the dow has turned red down about 45 points. We have the s p 500 up you saw it move right there on the screen the nasdaq as well up in the green at this very moment. Joe . Wells fargo plans to cut the dividends for the first time in a decade the other big banks plan to hold their payout steady this is after the release of the feds annual stress test results in recall last week when they went back, four quarters of the dividend, how to maintain it the one bank that was cited as not being in that position was wells fargo. This is probably not a big surprise the yield right now on wells fargo is 7. 9 . It would be nice if it was hey, wilf. Sorry about that brief technical issue. None of the nations big technical banks will need to immediately raise capital though one as you said, wells fargo, will be reducing its dividend. As expected Goldman Sachs is currently sitting below their required cet one ratio they were at 12. 5 and said they were already up to 13 all Analysts Expect them to reach the desired level organically by the first of october deadline of the other big six banks, jpmorgan cut it close, 11. 3 the actual level at the end of q 1 was 11. 5 . Goldman sachs, jpmorgan, citi, bank of america were able to recommit to the dividends. The banks are limited to paying no more than 12 of trading. Multiple quarters of no or low trading would change the bargain. Jamie dimon said if theres significant deterioration the firm will consider recuse duesing dividends. Wells fargo said they would reduce their dividend. Tantalizingly close when they said they expect to increase allowance substantially more than they did in q1. That will be a theme to watch for earnings across all of the banks. That factor alone is what led to the large share price declines late last week and despite gains yesterday and a bit overnight, were still not recouping those losses from last week. I dont think ive seen that shot you have. Are you a hitchcock fan have you seen rear window . I hope you use the blinds. Do you pull those down at appropriate times . Of course when im walk squawk on the big screen i dont want any reflectio reflections. A lot going on behind you thats a great movie, by the way. Remember James Stewart talking to me i dont watch your movies have you ever heard of her, grace kelly, maybe raymond burr. Avengers, transformers . Forget it. Much better. Andrew. Im sorry, andrew. Wilf is hopeless the hopeless millennial. Hasnt seen any of these important movies andrew. I dont know, do you . Were going to talk about what wilf was just talking about, not the movies but the banks. For more on the banks and what it may look like post covid, j. C. Flowers, chris flowers. Good morning, chris. You lived through the financial crisis of 2008 and 9 youve been through the middle of this. You often talk about a crisis as an opportunity i want to talk about that to the extent we can. Is there an opportunity amid this crisis and pandemic that were living in when it comes to the banks . Sure there is there are going to be good opportunities where banks need extra capital and it will be profitable to put it into those banks. Tell us what that looks like. What banks and will there be funts for not firms like yours but investors to try to make this a positive outcome . The trick is which nobody knows, how long is this going to last and what are the Government Programs going to be which support borrowers and support the economy . And theres a goldilocks spot where, you know, its bad enough where ones going to have good entry prices for banks, both public investors and the kind of thing we do where its not so bad, you know, that its fatal and i think there probably will be some goldilocks shots in this over the coming year so give us your prognostication of what the year looks like i know a lot of that is prognosticating about the Health Outcome but in terms of how youre seeing it and how youre seeing whatever kind of recovery or not that we may have. Well, what were seeing is has surprised us so far the performance of borrowers, we have Many Companies that are lenders, has been really very good. Excellent even we find a consumer that has a lot of money on his or her hands from Government Programs theyre not spending as much theyre at home. Theyre easier to reach if you want to collect, et cetera the credit performance has been really good, but its a little bit like, you know, you jumped off the Empire State Building on the 50th floor so far everything is fine. Eventually losses are going to go up and the stress from unemployment, et cetera, and Smaller Companies is going to come through and youre going to see much bigger loan losses. So you are anticipating bigger loan losses obviously we were talking about wilf just brought us this report about the way the fed is thinking about the stress tests. Are you concerned about any of the big banks right now . Im not concerned about any of the big banks in the sense of their survival, no i think theyre all going to be fine if you look at the scenarios which seem perfectly reasonable and the loan losses which are projected, they are big. Those are big loan losses. If you take the worst scenario, youre looking at youre looking at loan losses that everyone is going to notice. We were talking about dividends and those banks that are going to cut the dividend and those banks that arent. Do you imagine the other banks being forced to do so . Its it just depends on how bad this Health Situation is for how long and what the government does to support it. Thats what its all about i could easily imagine let me put it this way. To me it is a pretty high class situation where youre limited to paying your current dividend and you hope it stays that way compared to the way the world looks out there, that sounds pretty good. Let me ask it a different way. Would you want to own the public equity of any of those big banks or small banks right now i think theyre fair, actually thats what i think. I think they are neither obviously too high but nor do they seem to me like a screaming bargain. They seem to me about right, frankly. So, i mean, yeah, i guess so in terms of Property Casualty insurers, another space that you spent a lot of time in, youre expecting another transformation to happen there. What does that look like well, the covidrelated losses are going to be the biggest insured loss ever by far and that plus, you know, issues on the asset side, et cetera, and also already before covid happened a backdrop of rising property and casualty rates. We have got dramatically increasing insurance costs for property and casualty and that is a huge opportunity for the next couple of years i think theres going to be really good profits to be made in writing new property and casualty business on the other hand, theres plenty to worry about from your existing book for property and casualty insurers so its a mixed bag. Same question then about the public equities that i asked about the banks. The public equities and the proper and casualty industry are there stocks youd want to own or stocks youd want to sell right now . That varies a lot by company, but in general in my opinion theyve moved down a lot and are quite interesting, actually. So i think the price levels are attractive in the pnc industry right now, yes, generally. And to take a 30 footstep back or look at this whole situation, if you were on the phone today with jay powell, what would you be telling him to do do you think hes doing too much too little i actually think hes doing a great job. You know, i think i already thought he was doing a good job, the fed was doing a good job i thought that report frankly was theres nothing i really would have complained about in the report the fed just put out on the big banks what do you think he could do in the future . People say is he going to be out of ammo. He says hes not out of ammo what does that look like, do you think . Well, i mean, negative Interest Rates come to my mind we operate around the world. Negative Interest Rates in japan a long time ago. Negative Interest Rates in europe for a couple of years the bank of england talking about maybe we should look at negative Interest Rates. I wouldnt do that i dont think thats really worked and i hope that the fed doesnt do that here, and i dont think theyve shoni sign that they might do it, but if this goes on long enough and bad enough, i could imagine that becoming a topic of discussion okay. Lets hope thats not the case chris flowers, always great to see you and get your insight, hopefully in person one of these days when we get out of this Virtual World of ours. Appreciate it. Thank you. You bet when we come back, why the decline in retailer macys could make a perfect buying opportunity for amazon or not speculation has been building that the retailer could be on the ecommerce giants list of possible acquisitions. We have some doubts about this but we will discuss this after the break. Before we head to the break, lets get a check of the markets. Right now it looks like the dow is indicated down by 26 points s p futures fractionally and the s p futures up by a upcole of points squawk box will be right back. I got an oriole here. Eh. Common bird. Ooh look over here something much better. There it is. Peacock, included with xfinity x1. Remarkable. Fascinating. Very. It streams tons of your favorite shows and movies, plus the latest in sports news and. Huh run the newest streaming app has landed on xfinity x1. Now thats. Simple. Easy. Awesome. Xfinity x1 just got even better with peacock premium included at no additional cost. No strings attached. Just say peacock into your voice remote to start watching today. And wouldnt that be a very easy plug and play for amazon to really showcase. Just to poke a couple of places around this if macys were to be bought by amazon, my guess is that a lot of those brands that you mentioned as one of your points why this might be good might give push back before they saw their brands sold directly on amazon some have not wanted to be sold on amazon. Theyve had problems in the past looking at why you might want to im not arguing they dont need to get into bricks and mortar but if they were to do it, might there be other places they could go . Theres been speculation of trying to purchase some of the real estate locations from jcpenney and obviously amazon is always looking for real estate i spoke with jan nknippen, if theyre going to buy somebody, why not kohls theyre in strip centers they have a deal with kohls where you can return your amazon merchandise back why not a deal with kohls versus macys. The first one on the brands, if youre nike and you have nikes brand, i agree with you, becky, certainly you have a lot of control over where you sell and how you sell your product. What i would say is most brands are not nike and they are in fact dependent on Distribution Channels like macys and like amazon ultimately to really penetrate their customer base. If amazon owned macys, that would give them substantial incremental power for many of these brands that are not positioned as well as nike is. On your second point around the locations, i think that you really have to almost reimagine what the store can be under amazons ownership yes, of course, they can still be brick and mortar customers coming in and shopping, but i think amazon could use those as almost local Distribution Centers to penetrate apparel and footwear in the same way they did with whole foods and create kind of a customer ecosystem, if you will, around apparel and footwear interestingly, if you really think about it, amazon at the end of the day wants to be close to the customer on multiple categories and i think this is a way to do that last point i would make is when they made a brick and mortar play in the food space, they bought a premium oriented player, whole foods, and macys i think is very analogous to that relative to more of a mid tier player. I think theres many reasons why macys in my estimation makes more sense for them. I know macys shares have come down pretty substantially this year, Something Like 70 . I think the stock is, what is it, 2. 7 billion at this point they still have a lot of debt that they have too maybe 5. 7 billion in debt that would make it an expensive acquisition, not just looking at the stock. That is true. But what i would say is amazon has incredible access to capital. First of all, they have a capped balance that was more than sufficient to do this acquisition and still leave them with plenty of power to do other acquisitions secondly they have a stock obviously that investors reward with a very high multiple and they have goods access to debt equity even if they have to raise capital they have access those sales are much more valuable than on macys stand alone. Dominic, have you heard any rumblings about this or are you hearing about the numbers and thinking it made sense. Im an mna banker that covers the retail space just looking at numbers and trends and thinking about where is retail heading and its very topical today i think all retailers are thinking about how do they accelerate their ecommerce presence and frankly all e. Commerce companies should be thinking about how do brick and mortar breaking into their strategies its still over 80 of sales so its 4 trillion of sales are going through brick and mortar locations. Ecommerce Companies Like amazon want to take a bite of that. Every brick and mortar retailer wants to be amazon and are looking over their shoulder. Id certainly agree with that i think amazon in my opinion again, its a thesis, will go out and on a categorybycategory basis determine one player that would make sense for them in the brick and mortar world and macys is the largest player in apparel in the country. It has a massive ecommerce business as well and i think combined they can utilize macys to achieve that goal in apparel and footwear can be an attractive strategy. Dominic, thank you for your time we appreciate it thank you very much andrew okay, guys. I want to tell you about some news other companies when they hear the news will consider this netflix announcing 2 of its Cash Holdings initially up to 100 million for major banks to Financial Institutions and organizations that directly support black communities. Wrote about this in dealbook this morning and the company saying it is in a blog post this is part of their commitment to racial equality theyre turning their understanding into action and believe that bringing more capital to these communities can make a meaningful difference for the people and businesses in them specifically though, this is the interesting part about it, netflix planning a whole 35 million of its cash in two vehicles 25 million moved to a newly established fund called the black Economic Fund and 2 10 million to Hope Credit Union well talk about this at 8 15. Thats it. The black communities. Theres no conversation weve had. Is Hope Credit Union related to John Hope Bryant . I dont believe it is i dont believe its related to him. Thats a different one. But the concept is John Hope Bryants been trying to help peoples Credit Scores especially in hard hit communities. Theyre getting into it. If you can get the money to t. There are a couple weeks ago we had melissa 863 ventures more Venture Capital going into these. She talked about scoring the possibility of getting a loan differently because its too tou tough. You dont have a lot i wonder if that would make sense in this case i wonder if that would make it tough for people to get. Maybe you can mention that coming up starwood capitol Barry Sternlicht talks about the reopening of america and spike in cases in the south. That interview is minutes away as we head to a break, theres a look at this mornings winners and losers in the s p 500. Squawk box coming right back this was an unexpected bill not covered by my health insurance. And this is the aflac duck who helped me cover it. Aflac. These are all the cab rides to my physical therapy. And aflac paid me directly to help. Aflac. What he said. And this unexpected bill is from. The twothousanddollar specialist. Thanks. Aflac. When youre sick or injured, aflac is there. We can help with Expenses Health insurance doesnt cover. Get to know us at aflac. Com that selling carsarvana, 100 online wouldnt work. We can help with Expenses Health insurance doesnt cover. But we went to work. Building an experience that lets you shop over 17,000 cars from home. Creating a coast to Coast Network to deliver your car as soon as tomorrow. Recruiting an army of customer advocates to make your experience incredible. And putting you in control of the whole thing with powerful technology. Thats why weve become the nations Fastest Growing retailer. Because our customers love it. See for yourself, at carvana. Com. Still to come on squawk box, commercial airlines trying to bolster Summer Travel a look at the sector and boeing after the break. Then Starwood Capitals Barry Sternlicht was a big advocate for reopening as soon as possible well see how hes feeling after the recent surge in his home state in florida well head to break. A look at futures. Right now theyve been looking around all morning lse are in the green. Wel e and hope it holds up well be back right after this welcome back it has been a rough first half for the Airlines Shares of most carriers, the major carriers have fallen sharply due to the pandemic. Now as they slowly add back flights theyre also preparing for layoffs. Phil lebeau joins us now with more on that phil andrew, interesting time for the airlines because they are adding flights they may have been on a slower rotation or no rotation at all to put them back into the rotation at the same time, a lot of those workers could be laid off come october first. All of this comes at a time where they have increased. Were not seeing the snap back averaging about 600 states o play, we do this survey on a number of topics around the country here at cnbc and the most recent one that was done, the results just came out. Look at this the number of people who feel it is safe to say or the percentage of people who answered the survey think its safe to fly. 56 say, no, its not safe to fly. Thats an increase from the states of play survey a week or two ago. 25 say it is safe to play 19 unsure the airlines are trying to push the message that you will be safe if you wear a mask and you follow their guidelines. Here is a beat put out by united ceo scott kirby. If you do not wear a mask we wont allow you to fly until the pandemic is over its about protecting others and their safety were serious about this you just have to do the right thing. While the airlines pushing hard to get more people on board, get more people flying, the fact of the matter is whether its pilots, flight attendants, whoever it might be, more notices are coming. These are required by federal law, airlines, any company, they have to notify their workers that a certain percentage may be laid off at least 60 days in the future delta has already sent out warn notices to about 2500 pilots saying, look, come october 31st we will have more pilots than we need as a result, maybe 2500, maybe more than 2500 could be laid off come october 31st. This is not just a delta problem, guys, this is all airlines they will have to do this come october 1st. They are not seeing the increase in passenger levels that they were hoping for when the payroll protection act went through. That was their hope. Then theyd have enough business come october 1st thats just not happening. You will see more types of notices over the next three, four weeks certainly by august 1st. Phil, separately, give us a little bit of an update. Yesterday we talked about boeing 737 max testing those flights. What happened with that recertification flight well, they had two of them yesterday, two recertification flights. One where they left boeing field south of seattle and then they went out an hour away to moses lake and they had another one at moses lake flight aware which tracks all flights, you can see the maneuvers that they were doing they are essentially going through a list of very specific scenarios that were laid out by the faa, the test pilot by the way is an faa test pilot, so the faa working with boeing said, look, we need to test x, y, z. A whole long list. There are very specific parameters they had two flights yesterday, andrew you will see more test flights, certification flights today and tomorrow by the way, this is the 737 max coming back from its second certification flight as it was preparing to land at boeing field just a little south of seattle. Hey, phil mnuchin, secretary mnuchin is going to be speaking to congress today. I think hes going to be talking about how additional stimulus packages are very likely going to focus on industries that have seen the worst trouble he could be pointing out to Tourism Industries and the Airline Industry in particular do you think additional funds coming from congress or coming in some way from the treasury would persuade any of these companies to not layoff some of those people that theyre planning on at this point . It would have to be direct again, becky it would have to be direct as it was last time. Look, they got more than 50 billion. I think it was 58, 59 billion for both the airlines as well as the cargo industry now half of that was in the form of grants that they did not have to repay the other half were in terms of loans that they are repaying the question becomes what are those terms going to be . Is there enough appetite on capitol hill to have another package structured specifically for the airlines thats what the first one was. Will there be another one . Im not sure theres the political appetite there for that in washington. Hey, phil, boeing was lower i think earlier. Fractionally lower now. Right. After a huge move yesterday yeah. Well, you had Norwegian Air. Do you expect more . Do you expect more of a pull back in boeing based on norwegian or not really . I think that the norwegian news is trumped by the fact that you had two recertification flights and youll have two more and you really start to see some momentum building that they will get this plane ungrounded potentially by the end be of the summer now, look, is it going to definitely happen by the end of the summer thats the target from boeing. It might get pushed back theres no indication that were seeing surprises pop up when it comes to the max i think that news trumps the news from the Norwegian Air. The Norwegian Air cancellation, make no mistake, you do not want be to see a cancellation, on the other hands, not a surprise. Look at whats happened to the business its amazing the recertification news you say it trumped that. Its trumping that theyre going to be flying a bunch of empty planes or making planes nobody needs because no one is flying its weird well, their order book has already come down substantially. Theres no doubt about that. Were not seeing them post positive orders. We get the latest numbers a week from tuesday thats when we will hear them next okay. Thank you, phil lebeau a check on some other movers besides boeing Barry Sternlicht on the reopening of america later, netflix cfo Spencer Neumann and Aaron Mitchell the company is allocating 2 of the Cash Holdings up to 200 million to Financial Institutions to those who support black communities directly squawk box is coming right back 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. The dow. Before the dow did now we have the dow. Check out the shares of innovember yeah. Theyve been volatile after the Company Reported ino 4800, a vaccine for covid19 quite a bit of details here, but the stock, as you can see, is down 8. 5 . 94 of phase one for all participants demonstrated an overall response at week 6 after two doses of this vaccine, this proposed vaccine in a trial with 40 healthy volunteers. And it was being safe and welltolerated with no serious adverse events theres protection trying to initiate phase efficacy studies getting regular concurrence. Theres a lot of other info here i guess maybe the devil is in the details as to why the stock is lower on this for what its worth, down about 7 up next, Starwood Capitals barry sternal licht, real ta, estethe reopening of america. That interview is next coming right back. Southern states have a surge in cases there are plans to reopen. Barry sternlicht is joining us from Starwood Capital group which has 60 billion under management hes also chairman and ceo of sh hotels and resorts barry, you were early in terms of saying, you know, this is america. Its not going to be the end of the world. Things are going to reopen were going to have an economy were now two, three months past that how would you say how would you summarize what youre seeing and feeling either in terms of feeling great, feeling bullish, saying, weve got some work to do. I feel good about my call in early march on your show about a threemonth world war iii and we had that that ended in mid june im not really surprise about the rise of cases right now and the good news is its decidedly younger people and the death rate is continuing to drop in averages and i think in a way the country is getting back to it young people decide to go back to bars, go back to gyms, go have their parties as you know, the data shows 99. 9 of them are going to be fine we actually had two people in our office call in, theyre both in their 30s, and they had covid for about 24 hours, maybe 36 there are exceptions for that. Im suggesting people who are at risk stay home and people should still wear masks, but i think we have to get back to it we dont really have a choice. The country wants to get back to work ive been impressed. The scare of the country is amazing and people are optimistic we want to get back to sports teams and doing the things we did before, including going back to the office, by the way. I think people talk about working from home but its snies to get a different going to the office is like changing your scenery also its a social event. Though youll be more distanced perhaps, i dont think its the end of office space as we know it not even close im optimistic im worried. Im worried about airlines you saw the data earlier that people dont think the airlines are safe should be worried about the Hotel Industry the destination cities, the gateway cities like new york, los angeles, San Francisco, boston and Convention Cities like new orleans and chicago, its going to be tough when are you going to have a convention in these towns . We as Hotel Operators have to learn a whole new operating model which is a much slimmer staff offering less services in order to survive one of the fascinating things about the cycle, which i think is really coming into focus for real estate owners of any asset class today, is that municipalities are broke and though our hotels were shut by the government, were still paying full taxes on these hotels as if the hotel is worth what it was the day it was closed and that can be a lot of money inplaces like new york and recently in tennessee, the town, city, state, as we know sometimes. We cant hire that having that back you know what the unemployment tax is. There are things that are not safe thats simply not true at that point, would you be buying new york office spaces. You under estimate the grit of new york it does have a huge issue, which isnt covid and probably not even related to the george floyd riots. You have an issue of safety and perception of safety i think it crime will drive people out of new york the movement to defund the police in new york city is scaring the day lights out of people and its not the tax rate the tax rate People Choose to pay that tax rate because of the joy of looking at manhattan, its the greatest city on earth. On the other hand, they can move between the tax rate and fears that seems to be pervading many of my friends, thats trouble. The Tech Companies wont continue to grow in new york and theyve been driving the new York Office Market new york has to survive because theyre the largest landlord in new york city. New york will see a pause. Yo you are seeing the same thing in San Francisco theres a massive amount of sublet space you havent seen that in new york to that extent and there is some leasing activity but its also very low. Probably the lowest leasing activity ive seen in ten years, maybe longer i think new york city, you have a double whammy. You have an issue on rents and you know youre going to be in pressure forex pens like real estate taxes as i continue to tell my team, you know, buildings dont vote, people do. Theyd rather do anything than increase home residential taxes but they will increase taxes on commercial assets and that squeezes your commercial margins and Interest Rates are at historic lows. Property is a yield instrument we provide attractive, very attractive stable yield to investors and we will come out of this okay and it will present really interesting Investment Opportunities for us it will be a lot of rescues. Rescue capital and were focused on doing that. We just did a deal with tpgs Mortgage Trust we provided 325 million for them for rescue financing if they need it and youll see a lot of that. Youll see a lot of hotels need to get capital to bridge from here to the vaccine. There are two big events, the vaccine will be here and then the election the shift in the election is going to be from covid to election is something were not dealing with biden is going to increase taxes. Hes telling you hes going to increase taxes if the democrats increase the house and senate, you have a whole other landscape for the market to deal with. Becky barry, youre absolutely right on the attractive yield you provide. Thats an under estimate Starwood Capital is yielding 12. 5 or more. Jim cramer pointed this out to me, they were surprised when you doubled down on the dividend which was a couple of weeks ago, june 16th. You reiterated that you would stick with the 48 cent dividend. Is there any reason to think that youre going to pull back on that dividend why not do it to preserve capital . Most of the Real Estate Investment trusts are . There are two Mortgage Trusts that i would say have better Balance Sheets than our peers. We have access to almost 800 million in cash and because we had this equity base, we own a ton of assets and we have embedded gains in those assets, we feel confident we could cover the dividend if we wanted to but the drag of keeping 800 million of liquidity is an earnings drag but its temporary if we put it to work, we will earn Additional Capital earnings on our stocks. So were kind of watching. Were not we didnt say were going to keep the dividend here forever. Were going to see what happens. Were being cautious almost going quarter to quarter. We feel like we can earn our dividend we dont know whats going to happen the length of the recovery what happens to the hotels what happens to some of the other assets, office when youre a lender, youre working with borrowers some say i cant pay you thats true for all lenders. Banks, too commercialbacked securities the hotel sector, i think the hotel sector, we and many people got loan forbearance for several months thats going to come up in a month or two and then were going to have to start paying interest expense again will the banks forebear . They dont want the assets back. Theyre not break even youre covering real estate insurance, health benefits, workers comp, i think the banks will be constructive and we will be the industry, the nonbank lending industry will be constructive youll see a long chapter and thats why we need to get people back out, on planes, back. Some in the Hotel Industry is fine high end industry is fine. Low end we have a chain of 24 keys. Barry, but dont you think theres an irony in the goal of reinstilling confidence that we might have rushed too much . Youre pushing for everything to reopen look, we all want everything to reopen you want it to reopen so theres enough confidence so people can reopen and continue to get back to business so were not having to flush more tax dollars into saving companies that cant be saved. My you misunderstood me. Andrew, you misunderstood me im not saying we should go back to 60,000 people in a stadium. I dont think we need to have bars open. I dont think we should have gatherings in stadiums for political purposes i mean, i think we should be smart about it, but i think we should get back to work. We get back to work. Most of our office in, we spaced our people out, they wore masks. In the bathroom, we had one or two people in the bathroom at a time im not saying dont be stupid about this, im just saying im hearing right now let me ask you a question the reason i asked you the question though is weve had a lot of Business People coming on saying we need to reopen the economy, not just push on doing it i would argue responsibly perhaps the way youre trying to approach it, bars, people want sports and theres a push and you hear it over and over and over again and you hear push, push, push by the way, governors in certain states are doing that and maybe its some great experiment but it will come at the cost of Peoples Health and long term it will come at the cost of our economy. I dont agree with that at all, andrew, because i think youre if we dont get people back to work and the enterprises back there will be extreme distress in the economy. Small businesses, hotels will go bankrupt the airlines will go bankrupt. So i dont agree with your thesis at all in that regard and incomes will start to fall if they start to fall, housing prices will drop, rents will drop and it will be a vicious cycle that you wont have enough money in washington to get out of i think the only way to get the economy going is to get people out. On the other hand, im not advocating irresponsible theres no reason for a store to be closed and the walmart to be open im not disagreeing with that im saying theres a line people have gone over. Yeah. Andrew do you want the hotels to the data is telling you that the youth are not going to die and theyre not even going to wind up in the hospital. So if you look at the data, thats what the data says. And the media keeps reporting the cases. They should actually be tracking the deaths and hospitalizations. Theres only one state thats 40 of the crisis level, thats arizona. Thats the only state in the country thats even close to the capacity for icu units and were kind of playing 1w50eden here. Sweden has less deaths per million than u. K. And it is a viable strategy because you can see what they did in sweden. They screwed up in sweden because they didnt protect the elder elderly. In my opinion, i think some responsible opening is a way to go there you go. Barry, theyre playing music. I know. Wed like to let you go on. We dont get this perspective. Not a lot of people will say what you just said controversial we appreciate your perspective. Thank you. Thank you take care. Okay a lot more coming up on squawk. Fed chair jay powell and Steve Mnuchin, theyll be testifying today before the House Financial Services Committee Ranking member of that committee, representative Patrick Mchenry will be joining us from North Carolina to talk about it later, dont miss our interview with the cfo of netflix and director of recruiting from the latest effort to help support black communities. Its a big idea and squawk returns with a big hour ahead. Quadrupled their money by 2012 . And even now, many experts predict the next gold rush is just beginning. So call us money reserve, the only Precious Metals Organization Led by a former director of the United States mint. As one of the largest us gold coin distributors in the country, us money reserve has proudly served hundreds of thousands of clients worldwide. There may have never been a better time to start diversifying your assets with physical gold and silver. And right now its easy to get started. Pick up the phone right now. 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And call to receive the complete guide to buying gold, which will provide you important, neverseenbefore facts and information you should know about making gold, silver and platinum purchases. Pick up the phone and call americas gold authority, us money reserve. With nearly two decades in business, over a billion dollars in transactions, and more than a half a million clients worldwide, us money reserve is one of the most dependable gold distributors in america. Good morning it is the final day of the Second Quarter and its been a wild one major indexes on pace for their best quarter in about 20 years is americas economic response to the virus measuring up. Fed chair jay powell and Steve Mnuchin are going to face the House Financial Services committee on just that question today. In just a few minutes weve got an interview with that committees ranking chair member and a new pledge from a Corporate Giant as america confronts its legacy of inequality netflix making a size abable investment the final hour of squawk box begins right now good morning and welcome to squawk box here on cnbc. Im joe kernen along with becky quick and Andrew Ross Sorkin im sure that futures arent going to change at all, neither will the market throughout the session. I have no idea where were headed today we are now positive. You can see that the fair value is negative so slight gains here that were seeing. The dow is up 40 or 50 points a couple of minutes ago. Down almost 200 early on this morning. Late yesterday watching it, thats my life now, i wait for 6 00 to see where the futures are going to be, especially after a day like yesterday where in the morning we had no idea it was going to be a 600 point gain or that we were going to actually close june perhaps in positive territory we talked about it quite a bit, becky, yesterday in fact, we quickly did the math on what 1. 5 would be not so kickly. It wasnt really so quickly i had already figured out june had 30 days and you asked me to come up with more info we did figure it out it is up now and one of the best quarters march was just march was the march for ages, was it not, that month . And then starting in april weve had backtoback april, may, june now june might be up like i said, we do put money were going to end in the green today . I have no today, no i wouldnt make a shortterm bet along those lines. Yesterday the dow needed 1. 5 , was it yes. Yesterday the dow was up 2. 3 . Yes. No, we would not have guessed that at this time yesterday. Anything could happen. Theres a lot of things that are happening on capitol hill today and that could very well impact where we see the markets head. I actually did know what 1. 5 i was kidding on 25,000 its 250. Plus 1. 5. My mind is like a steel trap. I was surprised, 600 points. You and every fourth grader out there. And it really did excel i was surprised it got to 580. It did pick up which it does some right. All right what have we got coming up we do have these issues coming up on capitol hill today. Federal reserve chairman jay powell calls the Economic Outlook extraordinarily uncertain. In prepared testimony hes going to be delivering today, powell says that what happens next depends on the countrys success in containing the virus. He plans to hit some of the recent economic highlights like reopening businesses he says while this bounce back in Economic Activity is welcome, it also presents new challenges, notably the need to keep the virus in check powell also plans to reit ter rate the feds plans to keep Interest Rates at ultra low levels until they have wet snerd the pandemic Patrick Mchenry is Ranking Member and hell be questioning the fed chairman and secretary mnuchin. Thank you for being here. Thank you, becky. Appreciate it. What do you want to hear from jay powell and Steven Mnuchin . Well, i want to hear that the fed is going to be predictable and transparent in their actions and when they say theyre going to take actions, they follow through with their actions thats what i want to hear from jay powell what i want to hear from Steven Mnuchin is that the administrations perspective and point of view on a potential next package for legislators here on capitol hill we need to hear clearly what the administrations approach is and what theyre asking congress to do at this point that is something thats lacking clarity from the administration and republicans and democrats alike on capitol hill want to at least hear their perspective on what needs to happen for this last package before the president ial election. I can understand why there may be some mixed signals and maybe a little bit of opaqueness when it comes to some of these plans. I think were all kind of watching what happens across the country. If not on a wooek by week basis maybe a day by day basis how some of these reopenings are going, how businesses are fairing, how consumers are feeling if the consumers are showing up to some of these places whats your feeling . It sounds like you are a little concerned about potentially putting a little more money on the table. Well, i want to know that were doing the right amount of spending, right . We in the c. A. R. E. S. Act, with the fed stimulus, weve chucked out trillions of dollars into the marketplace but the fact is we can push as much fiscal and fed stimulus out that doesnt change the fact that the American People want to be safe and healthy in how they reengage and until they feel and believe that they can safely reenga reengage, the economy doesnt return to the fullness of its capacity and we dont get things going again. So we need to get that Health Question right and how we can 15i68 safely reemerge. Until we get that right, look, i mean, congress and the fed are secondary in this economic question it sounds like you are advocating though that the money we do have be spent on things like testing and hospitals if you want to make sure that the public feels safe about this and goes about this the right way . Absolutely. The testing regime in the United States, weve obviously done more testing than any other country in the world, but we have to amp this up. So anyone who wants a test can immediately get one. I think that would change the nature of airlines i think that would change the nature of how we go back to work and how we send kids back to school or get College Students back on campus if we dont get that right, then nothing else really matters quite frankly because without that viewpoint that you can get a test, number one, and number two, if you show up sick, there is a regime that can get you well again and until you get those two things right, we can put as much cash in peoples pockets. Theyre not going to go out to bars and restaurants unless youre a 20 something, right, who thinks youre bullet proof youre not going to go back out and reemerge as you did in january a year ago would you push back on the administration then . Because it has suggested or has indicated that its going to be ending federal dollars for testing and push that back on states in municipalities it sounds like youd like to see the federal government continue to fund that. I think the federal government has a fundamental role here. I think we have a fundamental role as you heard from Scott Gottleib yesterday i think the federal government has a coordination role. I think the federal government has a funding role i think we should have every means of our government get testing out so that it becomes basically as ubiquitous as a smartphone if we have that, i think that will give people safety, not because the numbers are good maybe the numbers are horrible, but that actually will give us the metrics that are foundational for us to reemerge economically so i think you have to have that coordinated effort for us to have a turn here congressman, i know your home state, North Carolina, has seen an increase in cases what do you think of the moves weve seen from governors in arizona, texas, california, florida where they are rolling back some things even in new jersey, too, and new york where theyre talking about reining in some of the openings, whether thats closing bars, cutting back capacity in restaurants, whether thats saying restaurants cant reopen for Indoor Dining. Are you in favor of those moves . Do you want to see additional moves take place and your own home state and whats hatching there . My home state, the worst of all worlds we still have really strong lockdown the governor is requiring a compulsion to wear masks i think its in peoples best interests to wear masks but the state compelling people to wear masks. You dont have a reopening of much of anything in North Carolina we have a very poor testing regime and yet our numbers are horrible it is the worst of all worlds what were currently experienci experiencing but we also see other states where youre seeing a jump in numbers and the publics expectation is very different than what is being seen with these numbers. That is concerning that is concerning for younger people and the mortality rate isnt what it is with older people thankfully these folks will have a higher survival rate, thats whats believed, but when you reemerge and you have to pull back, i think that is a deeply disconcerting sign i would rather us have a measured reopening for people to social distance, to know whats safe, know how effective masks are because they are quite effective. I think there are a lot of fundamental things we should be about with this slow reemergence so we can get kids back in school you asked this yesterday, which is my question on a weekly basis, can my kids go back to school because i cant return, my wife cant return to normal life. Health is the basis. Fed facilities are secondary fiscal stimulus secondary. Until we get the Health Question right, nothing else matters. Agreed. Congressman mchenry, thank you for your time today. We will be watching with both jay powell and Steven Mnuchin later. Thank you. Coming up, netflix pledging new support for american black community. The streaming giant says its starting with up to 100 million. After a break well speak to the companys cfo and director of recruiting who originally pitched the idea to Ceo Reed Hastings first as we head to break, take a look at the shares of uber the wall street journal says its in discussion to buy food delivery post mates for 2. 6 billion even as reuters reports post mates is reviving plans to go public. Uber spoke to grubb hub about a combination, wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations. Thats the clarity you get with fidelity wealth management. And tailored recommendations. You say that customers maklets talk data. S. Only Xfinity Mobile lets you switch up your wireless data whenever. I accept 5g everybodys talking about it. How do i get it . Everyone gets 5g with our new data options at no extra cost. Thats good. Next item corner offices for everyone. Just have to make more corners in this building. Chad . Your wireless your rules. Only with Xfinity Mobile. Now thats simple easy awesome. Switch and save up to 400 a year on your wireless bill. Plus get 200 off a new Samsung Galaxy s20 ultra. Welcome back to squawk box. Up 20 to down 25 we are red again we were just talking about dow down 25 points the nasdaq and s p, nasdaq in positive territory, s p just barely check out the shares of some of the banks how theyre trading this morning, jpmorgan, citigroup, morgan stanley, Goldman Sachs said they performed well enough on the feds most recent stress test to maintain their current quarterly dividends. Wells fargo said it would likely cut its dividend in the third quarter. Okay. Coming up when we return, investor dan niles on his latest strategy for tech stocks including facebook which rose and clorox jumped on board the advertising boycott. After the break we will talk more about the new netflix project as well. Way fair, apache, et ceteray, twilio and spotify not moving much they all doubled in price in the Second Quarter which ends today. Stay tuned, youre watching squawk on cnbc welcome back to squawk box on this last day of june on the last day of the quarter, too weve beenwatching the markets the dow futures are down by 23 points s p futures up fractionally and the nasdaq is still indicated up by 19. Andrew thanks. Were going to turn now to a story that weve covered so much lately the surging movement for social justice in america in the world of business in helping achieve equality netflix is out with a very big announcement it is moving 2 of the Cash Holdings initially up to 100 million from the major banks to Financial Institutions and organizations that directly support black communities. Joining us is netflixs chief Financial Officer Spencer Neumann and Aaron Mitchell, director of recruiting at netflix who led this initiative. Lets talk about t. Its a big idea for netflix and hopefully other companies that may use what youre doing as a role model mp aaron, my understanding is you originally had this idea and talked to reed about it. How did it come about . Weve been doing work around diversity recruitment. We had a virtual dinner back in april. It was right around the time that the disproportionate impacts of covid to black and latino communities was becoming more public. Somebody said, hey, what if we get corporations to move their money into black banks i took the idea back to spence and i said, hey, spence, how could we get netflix to do this. His response was, i like it. Lets look into that lets figure it out. Do some more research. I read the color of money and right around the time a proposal was being put together george floyd was murdered that created internal sense of urgency that allowed us to turn this proposal in four weeks into a plan that were excited to announce today. Spencer, tell us about the details of it. This is not a charity. This is a commercial way to help solve or better the swaituation how did you decide to do this . And to those watching saying does it cost me anything, speak to that. First i should say, andrew, we know first and foremost were an Entertainment Company we know the best way to help is to tell Great Stories and build empathy and foster a better understanding in peoples lives. At the same time we understand racism creates unequal opportunities thats something i didnt understand until recently the dramatic isolation thats happening in the community as we understood it better, we wanted to turn that around and say what we did is we decided to deploy 2 of our Cash Holdings into Financial Institutions that support the blank banker community. We think that thats a way that we can do this in a way thats a sustainable activity we manage our Cash Holdings roughly 5 billion in the last quarter. If you can move 2 into black owned or black led Financial Institutions, we still manage our liquidity. We have 30 banks with relationships around the world and hopefully we learn from this and it continues to grow so we picked two institutions to start. Its an area we didnt know as well, but it is something we do think is sustainable as you say, we cant speak to how other folks manage their cash, but if every company in the s p 500 moves just roughly 1 of their Cash Holdings into these type of Financial Institutions, its more than 20 billion of capital its meaningful what were doing itself and if others from this spotlight perhaps emulate some of this, we think it could be really material. You think if an apple, which obviously if they took 1 of their cash, it would have a huge impact in terms though just so we understand the costs, are you getting different Interest Rates at these different institutions . Do you think the money is going to get out into the public into the communities . One of the issues, joe and i were talking about it in the last hour, i think, is whether effectively the rules and restrictions on lending need to change in some of these communities . Id say first in terms of, you know, the costs, the biggest cost was up front in us doing the diligence and understanding how to do this and what institutions to work with. There were some up front costs a little lower Interest Rate but relatively small and we think that is worth it in terms of getting to the communities, that has a lot to do with the institutions that were working with so, for example, Hope Credit Union which has relationships throughout the deep south in alabama, arkansas, mississippi, theyre providing that direct lending to new homeowners, Small Businesses and thats really what they do and thats their bread and butter and thats why were relying on them. Right certainly im sure there are regulations that can continue to improve and ease that lending but we think that they already have a great start with this capital. Hey, aaron, did you get any push back, spencer can answer this, too, from some of the big banks where i imagine you keep most of your money i imagine some of those banks would say they do serve the Africanamerican Community in certain parts of the country we did not. We worked with our banking partners have you guys talked to any other companies about this i mean, i know this is the first time its made public today, but are you getting any feedback from any of your colleagues, peers, and rivals . You know, aaron can speak to it as well, but we really focused on what we can do at this point we wanted to allocatethis firs 2 , we picked that number and size because its meaningful in and of itself, but also the 2 number was so that it could be hopefully something that could be modeled and folks could emulate. So well see hopefully, again, as i say, we cant speak for other companies but we think it would be great if others did find their own ways to aloe kalocate capital its a really unique and interesting idea before we let you go, spencer, because you have your pulse on the economy in a unique way given that you see subscriptions coming in and out and reopenin the economy, want to get a sense of where you think we are and from a production standpoint since thats so important, i think there was a thought production for the tvs would start in the fall. Were starting to see it ramp up in california, florida, elsewhere, are you worried about that creeping back and what does that mean on the other side when it comes to having new programming given you guys had probably the best pipeline of anybody out there at this moment well, in terms of the economy overall, you probably have better visibility than we do, andrew around the world economies are turning on it is a little bit different everywhere, right . This is uneven and im sure there will be some fits and starts but the economies are turning back on and in terms of more business, you know, you sort of have seen it, weve talked about it, we have productions around the world we had never actually fully shut down in much of asia, much of new york has been turning back on many of the United States have been turning back on theres going to be pockets where theres flareups. Until theres a vaccine or effective antivirals, were not fully at normal. For us what were most focused on is how do we continue to deliver a great value and a great product to our members we talked last quarter that most of our production for 2020 was already shot and so we were just pushing out through post production in our slate was intact its about ramping up our productions for 2021 and beyond. As the world has been turning on, weve been getting back to production, finding ways to do t it safely for our cast and crew. Youll see were continuing to ramp up and looking forward to a lot of great content for our members for a long time to come. Okay. Were going to leave it there. Spencer, we appreciate it. Aaron, thank you it is a very unique and great idea and we hope others think about it, consider it. Its pretty interesting. Thanks again, guys. Thanks very much. You bet. Coming up, market main Jeremy Siegel on a wild first half of the year for the markets and what investors need to get ready for in the second half i can only imagine and speaking of wrapups, heres a stat as we get ready to close out the Second Quarter wti crude is up more than 90 in the Second Quarter its best showing in 30 years, but its still down 35 since january 1st and on pace for its worst year since 2014. Best of times, worst of times. Ayun, quk xill be right back 300 miles an hour, thats where i feel normal. Having an annuity tells me my retirement is protected. Protected Lifetime Income from an annuity can help your Retirement Plan ride out turbulent times. Learn more at protectedincome. Org. Welcome back to squawk box right here on cnbc a couple stories that investors are going to be talking about today. Check out shares of conagra. They are higher in premarket trading. This after the Food Producer beating the top and bottom lines as well as giving an upbeat forecast like many Food Producers, its been seeing increased demand amid the coronavirus pandemic. Treasury did consider another deadline of the july 15th tax filing Norwegian Air has canceled orders for 97 boeing 737 max and theyre planning to seek compensation for delays due to the two jets it did not say how much it was seeking. Boeing says it was working with the airline to find a path forward. Okay. When we come back, investor dan niles tells us which of the feds most recent actions has him nervous. Its probably not what you think believe it or not. And a programming note for you, dont miss the cnbc documentary supermarket shock, crisis in americas food supply. It premiers at 10 p. M. Eastern time its a fascinating look at all of the links in the chain, how the food supply works and how it is coping during this pandemic stay tedun you are watching squawk box on cnbc welcome back to squawk box this morning futures have been moving around all morning. We are now in the red. Dow close to down triple digits. 100 points nasdaq off just about 2 points s p 500 looking to open off 5 points yeah today does mark the end of a wild first half of the year for all of us. Investors and for everyone on the planet covid pandemic triggered a steep selloff and sent the dow down 38 . Guess how much its up since then it says here 38 probably about right here to talk about what we should be watching in the second half of the year, Jeremy Siegel, professor of finance at the Wharton School its good to see you, professor. Joe. You were on, was it three weeks ago, a month ago because you were we havent gained a lot since then, but you were at that time saying that the market was way out over its skis and disconnected with reality. You thought that it was kind of moving in a way that you could justify. Do you still believe that . Nchs ye yeah. I point out the fact that the 31 increase in the money supply is the greatest weve ever seen since world war ii, far in excess of what we had during the financial crisis of 2008, 2009 and this liquidity is just waiting to burst onto the economy if we can get peoples confidence back. You know, we can see this latest wave in texas and florida. If we see that, you know, crest go down, the therapeutics. One thing people have to realize, even though daily death rates are up 30 from the peak in april cases, the death rates are down 75 and that is really dramatic in terms of confidence, we had Robert Redfield say last friday, theres probably ten times as many people have been exposed to the virus as the official statistics thats 27 million. That means the death rate is less than 1 2 of 1 . That is far lower than what we had feared in march and april and most of those deaths were before we knew how to treat these patients its realistically about 1 2 of that now these are important figures to try to instill confidence and really weve had only a couple of drugs and techniques to use out of the hundreds that are going to come onto the market over the next three or four months one thing that surprises me, you showed a data showing 25 of people think its safe to fly. Now why arent the airlines or the government doing a study weve had tens of thousands of people that have flown since march. Have there been any outbreaks . Have we seen any unusual activity not to my knowledge, but if the Airlines Want to instill confidence, why dont they follow through hey, weve been shown, it is safe to fly with a mask. We are not showing up. If we instill that confidence with the gains that weve already made and the money thats in that economy, wow. I cant wait for 2021. Jeremy, we look at what multiples are right now and i think implicit in accepting where stock prices are that the underlying e of the price to earnings multiple is going to hopefully snap back as we reopen and, therefore, we dont really consider that these are quite a stretch. What if there are more than just bumps in the road on reopening would there be a day of reckoning . Phrasing it another way, do you think that the easiest gains in the stock market have already been made and its going to be tougher to advance from here if we dont see Real Progress in the underlying economy there are two unknowns, first if the latest wave is going to subside. I think it will, but were going to have to see with the death rates continuing to be very moderate or continuing to go down lets face it, joe, Political Uncertainty is definitely there for november and thats very important, uncertainty in the markets the easy gains have been made. You know, if we get continued progress and lower virus figures for the u. S. , a resolution of the Political Uncertainty in november and i am more talking about the senate than the presidency at this particular point, in my opinion i think the market would welcome a republican maintained senate even if there is a biden presidency i think that would be favorable for the market but that is in question and, you know, you follow predict it. Org as well as i do, and that is now slightly against the odds so that uncertainty is a big one because taxes the tax cut, Corporate Tax cuts are a major reason for a lot of the bull markets since trump was elected. If theyre going to be reversed, thats a strong headwind now in my opinion, the liquidity thats been thrown at this economy is probably going to be enough to offset that head wind and, you know, if its a democratic sweep theres probably going to be more liquidity thrown at the economy. Im not bearish on stocks by any means, but clearly this is an uncertainty that faces the market. We always talked about, Jeremy Siegel, and 30,000. So we got close. Yeah. You figure thats not in the too distant future if things go as if the ill tell you, if the virus subsides, get some more therapeutics, get some more confidence in the economy and if the republicans can hold the senate, we will see, i believe, dow 30,000 by the end of the year. And when do we start working off some of the excesses in whether its the feds Balance Sheet or just in the federal deficit . Is that not something you worry about . No, i was im one of the very few people when i city said back in april that i think were going to have inflation in 2021 and 2022, not, you know, double digit, not hyper inflation at all, but i think were going to go way above fed target. Unemployment rate is going to stay high and theyre just not going to squeeze so were going to see 4, 5, 6 over the next couple of years, i think in that inflation rate with a pretty Strong Economy working out that unemployment and believe it or not, you know what, thats the way you get the debt ratio down. Professor, when you see some of the stuff thats hard to explain, whether its the buying of hertz or continued the rocket ship that some of these tech stocks are on, some of them are stay at home plays, others are dij talts agital and the faangs whatever you want to call it are those things that give you confidence that its animal spirits or are they things that make you question whether or not weve gotten too frothy because of all of the easy money theres a couple you know, the chesapeake, the hertz and that, those were frustrated sports betters who say, hey, i need to bet on something whats more significant is whats happened to tech. Listen, this pandemic is goings to change things forever i mean, the shift towards digital, the shift towards tech is permanent jim cramer, too much for these. Something like that. Its in line with how important theyve been theyve probably gone through and i think thats what the market is looking ahead for. But a reopening . A reopening would certainly those value stocks and those depressed stocks clearly, you know, successful reopening towards next year and would bring those stocks up relative to the tech stocks. Is this going to be the way you look in the fall semester at penn or are you going to be teaching in front of a class do you know at this point . Yeah, well, weve gotten the first email im actually on Research Sabbatical next year. You are thank goodness. So i dont have to deal with the zoom classroom there are so many uncertainties. I do think we have to try to, you know, get back to normal we have to instill confidence in people about what works and, you know, thats thats going to happen its happening in other countries around the world we see europe moving towards it and weve got to be able to resume that education. Its so important. Professor, thanks you brought up jim cramer. Were going to get to him in a second earlier they did something, these guys in the control room, they think theyre funny, but i dont know if you can see this, but they did this to me earlier and they asked me what that was and then they said thats flock of siegels anyway, badaboom thank you. Youre sitting there theres ten of you on the screen i dont know if you have a monitor. Oh, my goodness there have been people who have spelled my name seagu seagull. In the old days we would have immediately had the audio and did the most were not going to do that thank you, professor siegel. Thank you. Im personally interested. I know about your daughter. Absolutely. No one knows anything, lets just say that at this point. Fingers crossed. Thank you, sir. The afore mentioned jim cramers first take on the day the hottest stocks check out the shares of royal dutch shell. Theyre going to write down the value of the assets by up to 22 billion after revising down its longterm outlook for oil and gas prices shell said included a writedown of 8. 9 billion units integrated gas units, up assets and 3. 7 billion in oil products crude prices right now as you can see marked down a little bit less than 2 on wti. Coming right back. Dont forget to subscribe to our podcast. Youll get interviews, original content, and behindthescenes access look for us on apple podcasts or on your farivote podcast app and subscribe to squawk pod today. Welcome back, ever been. Lets get to cnbc headquarters jim cramer is standing by. Jim, i know youre always listening. I bond from you just heard the conversation with professor siegel and i really liked one of the questions joe asked him and i was hoping to get your take on it, too. Just this idea that do you think the easiest gains for the market have already come and how difficult will it be from here to try to see continued gains . Well, ive been a big devoe day from professor siegel from when my father lived in his building and he managed some money there for the building and he has been a remarkable professor, long runs are great, so i look at it as you could have a pause, but if you have what he described in the election, i think you will get it theres a lot of money around, i think that if you see some sort of gridlock it can continue. Is the easy money made i dont know i think the easy money comes on days like last friday where you just have to say, okay, listen, theyre giving you a sale and you have to go buy i do think as he said about my my arder for some of these covid stocks, they seem to have had the easy money and i think that there you have to start looking for other easy money, those stocks have had such big runs that i think they have to come down a bit before you can get back in them and, jim, i want to thank you, you pointed me in the direction when we had barry on earlier this morning just talking about the yield that that company is still paying out at this point, a yield of better than 12 its a yield they just doubled down on earlier this month and said that they were going to continue at the pace theyve been paying the annual dividend, but he did sound like its something thats up for debate, they will watch and see what happens. We are getting near probably a point of reckoning when it comes to the banks and Real Estate Investment trusts to find out who is going to get pinched when forbearance ends, when you see people really in a position of finding out who pays and how much rents potentially would have to come down, too. Look, that was amazing what he answered which was basically, look, im going to want to keep it, lets see who pays i think that this is that same problem. David sigh long, simon properties, he wants to pay it, but lets see who pays he did have to cut it last night. He is still a remarkable guy, has given away 33 billion in distributions, but i did not get confidence from barry about that dividend at all. Not one bit. We will see what happens. I think it was june 16th when they paid out their dividend, but he did make it sounds like it was something theyre seriously considering all the time despite how much they have on the Balance Sheet at this point. Shoe for asking thank you very much. We will see you in just a few minutes. Andrew okay. Thanks, beckers. Thanks, jim. Mean time, i want to talk a little tech this morning nasdaq is the only major average positive on the year, up around 10 since january 1st. Joining us what what he likes in the sector, dan niles is back, Founding Partner of alpha one Capital Partners you probably had a erred from jim said weve talked about the stay at home stocks, whats working or what do you think still works at this point yeah, i mean, i think, you know, you have to be very selective. The market has obviously had a tremendous run valuations for the market are at all time record highs by some measures, like market cap to gdp. So the names that we are sort of focused on are ones that still have interesting things in front of them, such as the gaming companies. Youve got first brandnew consoles from microsoft and sony out this year for the first time in seven years so we like activision, zinga, take two, things that have done well during this crisis as people stay at home and play video games. Ive got two teenagers back from college, thats what they like to do, but thats something thats going to continue to accelerate i think Going Forward. I think ecommerce was doing well before the virus, accelerated during the virus, i think thats still going to do well Going Forward as the viruses are kicking up again so were staying with those, but we have, you know, cut back a lot of our big winners and we have bought over the last several months names that we thought would recover and weve added some new names to the portfolio as well. Automotive is one area where sales auto sales in china, believe it or not, were up in may year offer year for the First Time Since june of 2018. So were adding sectors, things related to copper as well and so were kind of doing that, but were also reshorting a lot of the names that have doubled off the bottom, what we like to call the mock names so malls, airlines, cruise lines, hotels. Youre shorting those now yeah, we put some of those on over the last couple of weeks, with he didnt have any you know, hardly any of those short while the market was bouncing and we think that those are names that a lot of those names were structurally in trouble i think beforehand, like the malls related to, you know, retail stores, et cetera, and the airlines, you know, a lot of them were overlevered. We agree with the boeing ceo who said earlier that one of the Major Airlines might go bankrupt this year. You know, and Hotels Cruise lines, you know, you have a lot of companies that have high depth leverage with those companies. Right. To stop them from going under, because they solved the lick which isity crisis by extending loans to all companies, they didnt solve the solvency crisis, though, which means if we are shut down six months, nine months from now, these companies are still burning a lot of cash. So we use that and is that your bet . Dan dan, just so i understand, are you i mean, if you are shorting the airlines are you betting that six to nine months from now we are still shut down . What im better is that we have a second wave and that youve got companies that are still massively overleveraged. Were using those names to balance out other names we like. We bought some facebook, for example, yesterday, you know, we like the fact that the stock went on sale on friday and got hit again. This isnt the first ad crisis we balanced facebook long against a shortened lemox as we call them and we think thats a good place to be thats how were trying to run the portfolio, thats how weve done well so far this year. Right i see that youre long viacom. Whats your argument there yeah, thats another one of those names, andrew, that we bought on the way back up and its done obviously really well for us if you look at viacom it was clobbered by the virus, ads pulled way back, we tried to avoid all those related names, were actually short disney now as a hedge against that, but youre still short disney yeah. And so because, i mean, look at it. Disney has got their park openings pushed out again. If you look at viacom the Company Trades at about a 6 pe, their ad business got clobbered as well but they have a streaming business thats got 13. 5 million subs, its all over 50 year over year and, you know, they renegotiated a lot of their contracts with their distributors so its a name, again, we have the viacom long. Would we have it as the size we have it if it werent for the disney short of course not. But we have those things matched up disney is at a 50 times peak so i will take the 6 against the 50 disney numbers are still coming down we think viacom actually can make their numbers thats how we try to run the portfolio so we dont worry if the market is up or down okay. Dan niles, its always good to see you. Get your perspective on all of it we appreciate it very, very much and look forward to talking to you soon thank you. Lets take a quick check on the markets, things have moved around a little bit. Dow off about 68 points, we were in the green, we were in the red, we will see what this last day of the trading day looks like trade quarter looks like meantime, joe and becky, i will see you guys we will all see each other tomorrow. See you in july, i guess. See you in july exactly. See you in july. God willing god willing. Make sure you join us tomorrow and squawk on the street begins right now good tuesday morning, welcome to squawk on the street, im Carl Quintanilla with jim cramer, david faber live from separate locations we will say goodbye to q2 today. A flurry of news, powell on the hill at 2 30, more covid restrictions in florida, california, arizona, new jersey. Oil at 39 has neerld doubled for the quarter, jim, as have names like etsy, thor, way fair and spotify, truly a historic three months. Look, the stocks of companies that cater to home, that cater to ingenuity using