Transcripts For CNBC Closing Bell 20160714

For future Public Offerings. Plus, the infamous biotech ceo Martin Shkreli was back in court today. He now faces eight counts of fraud and conspiracy to commit fraud charges. He has a trial date has been set. Well have the latest developments from the courthouse in just a few minutes. And larry kudlow has bold plans in a Federal Reserve restructuring, the whole thing. He says janet yellin and everyone else should be thrown out. Find out who he thinks should and its not larry. He doesnt think himself should be at the helm here, but he has some ideas about who should be. Coming up. Lets start with Jpmorgan Chase earrings beat. Kayla tausche is standing by on the floor of the stock exchange. The stock has been up close to 2 all day and it is really boding well for the rest of the banks as well, having a halo effect, not only on the other big Money Centers that still have to report, but also on visa, after positive data on credit card spending from the bank. That was just one data point among a slew of positive data about the consumer, which was very resilient this quarter. Loan growth was strong, as rates are low, sfosts are up, and the banks are being slightly more cautious on credit. That was a very slight comment there. On the corporate side, not quite as rosy. Lower fees, fewer mergers, and not as many ipos, despite the fact we had a big one today. Trading was a bright spot. There was a spike around the time of that brexit vote at the end of the vote. Cfo marianne lake says that trading activity will return to normal. She and Ceo Jamie Dimon says the uncertainty around brexit isnt going anywhere anytime soon. Take a listen. We will continue in every single country to serve our clients day in, day out. Im not really worried about it. You know, i recently it would be nice if it doesnt create, you know, huge turmoil. So im hoping the eu, you know, is sensible, but were going to be prepared. As marian mentioned. You know, anyone will reach each one of them. But were not going to pull back from serving people in italy, germany, france, or spain. Certainly that range of outcomes will take time to figure out exactly what it looks like. But investors are breathing a sigh of relief that at least the impact immediately from brexit, guys, isnt noticeably negative on the financials. Yeah, an excuse that could have been used, i guess. What about overall revenues. You know, the larger trajectory of where the business is going to be able to increase that line going forward. Well, certainly q, kelly, th fact that rates have been pes peskily low is going to continue to hurt the banks. Jpmorgan did turn in much better than expected revenues overall, beating wall street estimates. In most of the units, revenues were up, if even slightly slow, but the margins were down about five basis points. The first time that margins contracted in about a year. So certainly, the fact that rates are staying low is going to continue hurting the amount of money that they can bring in from what their loans are yielding. But theyre managing to do pretty well despite that. Quick question. A lot of people probably noticed the quality of his voice, as he was speaking. Is he okay . Just laryngitis . What was that about . A spokesman from the bank said that hes been suffering from a summer cold throughout the week, that he is on the mend. But one of the reasons investors were concerned about is he did have throat cancer several years ago. He has made a full recovery from that. But you never want to hear a ceo as a company as large and important to the Global Economy as Jpmorgan Chase sounding like this, but we wish him a speedy recovery. Thanks, kayla. Larry fink joined squawk box earlier today and gave his thoughts on the equity market and the recent rally. Here we are, were seeing investors worldwide pausing. We have seen quite a large sum of money being pulled out of equities over the last year. And yet were at record highs. This rally, in my mind, is not i dont think we have enough evidence to justify these level in the equity market at this moment. Well, lets talk about that, shall we . Its a good jumping off point for our Closing Bell Exchange today. With us, jeffrey sod from Raymond James is sitting here at post mine, so is rob morgan of Citi Financial Group is out there in the ether somewhere. Jonathan is here at post nine. And Rick Santelli is in chicago. Jeff, youve been through enough bulls and bears markets. Larry fink probably is not alone in his feeling that we really dont belong at these levels, given all the head winds that the market faces right now. Yeah, weve been with bulls all week at goldman sachs, over at lord abbott and deutsche asset management. And even they dont believe the 134 estimate, bottomup operating earnings estimate that s p has. They think its more like 125. Even if its 125 at the low at 1995, youre trading at normalized 15. 2, 15. 3 times earnings. So you can rationalize these levels . Thats what youre saying request. Yeah. I think the stock market is going to go a lot higher. Jonathan, what about you . Were not seeing the rush of money coming back into this market just yet. There hasnt been this fear that youve missed this rally so far. We have seen opportunities recently where the market has pulled back 2 or 3 . I think investors are looking for that to happen one time again. The issues that have moved our markets in both ways are still here on the table. So the uncertainty about brexit will definitely play a major role in the near future. Rob, you agree with jeff that the rally is not over yet, but what do you i guess its a contrary indicator, when you have the number of dollars coming out of the market, the individuals took out, between january and june this year, and those reports from bank of america, merrill lynch, and ubs about the nearrecord cash levels that their customers are holding right now. You may take that as a comfort, as a bull. Is that the idea . Absolutely, bill. I think thats just the ammunition for the continued rally. I would agree with jeff that stocks really arent expensive here and the rally really is going to be continued with improved earnings. Facts says earnings will be down 5. 6 this quarter, but they should be breakeven next quarter and a slight pause in the quarter after that. And the uncertainty over brexit is just going to keep the fed on the sidelines, along with the president ial election. Theyre not going to raise rates until after the election at the earliest. So this just seems to be the perfect storm for a meltup in stocks. Rick santelli, the bank of england this morning decided not to cut, or to do more stimulus at this point. Maybe they still will. But is that an acknowledgement to you that things out there arent as bad as they were feared when britain voted to leave the eu . I dont think its that at all. I think its more a kin to a broken clock being right twice a day. The last thing we need is more easing. I dont understand the value of it i know that the bank of england and the uk may be a special case, so ill just leave it at, i think keeping his powder dry was a very, very good decision and im tired of hearing about brexit having this effect. The only effect it had was putting people in the wrong camp at the wrong time. And in terms of fate, welcome to the club. Of course the fundamentals dont match. Negative Interest Rates, its all going to be a positive for stocks. Whether its built on a Solid Foundation or not, and i dont know what other guest it was, maybe it was rob, there is a lot of cash on the sidelines. And human nature never changes. If this keeps continuing, that money will find its way back into stocks, fundamentals be damned. I cant wait to hear larry kudlow. Hopefully hes arrived at what weve all arrived at. Less micromanagement, more microprocessors in terms of the fed. You get my drift there, dont you . Yeah, we got that whole thing there. Jeff sad, to this point, this year, the leadership of this market has been very defensive. In other words, people are reaching for yield. Theyre not necessarily voting for growth in this economy. Is that the kind of leadership you want to see . Well, they came out with an acronym the other way, s. T. U. B. , staples, utility, and bonds. And when you hear an acronym like that, you should be rotating away from it. To what . I think tech is cheap. Rogers, years ago, when they asked him how he makes money, he said, he buys fear and sells greed. And he said, i wait until you see gap appearing in the chart price. Go look at the tlt chart. It gapped all the way to the upside. I think dougie cash has got it right. I think youre making generational lows and yields here. And if we are, jonathan, whats that mean for stocks . If people are forced out of fixed income, do they go into stocks, or if rates are moving higher, does that bring down equity valuations . I think we see that rotation from fixed incomes into equities. And there are plenty of stocks out there that are relatively undervalued. And investors have to get rid of this fear of the market trading at its alltime highs. Just because its at its alltime highs, doesnt mean theres not good values out there. What would you buy, rob morgan . Talking about what jeff just mentioned, i guess i would buy the stu part of that, the staples, technology, and utilities. And the reason there is an acronym is probably a bad thing, but im sticking with them for now. Youre sticking with stu, why . Why, rob . When you look at those sectors, not only do they have great yields, but visible earnings growth, the peu ratios are in line, technicals look great. Its not just the attraction of yields, theres certainly that, uh be its a lot of other factors, especially when compared to other sectors, as well. John, whats the catalyst youre watching right now . Is it just the earnings . Oil doesnt seem to be wagging the dog right now . It is. And oil has taken a few steps back in the major focus everyones looking at. But i think it is earnings season. Clearly, jpmorgan was a nice way to get started. But jpmorgan is really the strongest in that peer group there. Its going to be interesting to see if the next reports that we get, citi, wells, goldman next week, will they be table to keep their heads up with that jpmorgan report. And by the way, rick, we havent talked a lot about the dollar. I guess thats because the biggest moves in currency markets, again, were concentrated a couple of weeks ago. As things shake out here and the fed may be, i dont know, are they on the horizon or are they not . Wheres the dollar headed for all of these companies when theyre talking about their earnings . The dollar has so many implications. Of course, if we look at normalization, which we should be looking at, especially considering today, you have the highest headline ppi. To find a higher number, you would have to go to the fall of 2012, okay . I think the dollar is not a pillar of the fed, okay . And i think its about time we talk more about this. Youre going to have stronger dollar if some central bank breaks ranks and does the right thing. Thats just the physics of finding it. And in terms of the effects its going to have, it will be emerging market, dollar denominated, weve heard it all before and weve seen it all before. But theres no way to allude that in terms of being part of the fix. Its the collateral damage. And if it isnt a pillar, i dont know when the fed created or when the fed gave up being the babysitter of the dollar. And along those lines, jeff, do you sense any notion of inflation yet in the economy . We do have gold doing what its doing lately, but i dont know if thats an expectation for higher inflation or not, but do you see it at all right now . Youve got a tightening of the labor force. Youre getting a tick up in wage growth. I think inflation is coming. I dont think it will be anything strong, but you cant find an economy in the history of the world thats had this much cash thrown at it and not had inflation come out the other side. So eventually, but just not now. Yeah, but i dont think youll get back into the 80s or 80s type inflation thing. I think it will be very manageable. A nice goldilocks outcome for everybody. Nice to see you. About 45 minutes to go. Were looking at stock staging yet another effort to close at record highs here. The dow is up by 152 points today. The s p up 13. The nasdaq is up 30. Great. Up next, the initial Public Offering of the year in technology, making a huge splash here on wall street today. Well have the latest on the market debut of the messaging app company, line. And the man known as the bad boy of the pharmaceutical industry, Martin Shkreli, hes back in court. Were live at the courthouse. Well have more. Youre watching cnbc, first in business worldwide. My name is fred and i carve heads out of cheese. Its not easy. I was once working on a bust of Shaquille Oneill in swiss. I havent worked in swiss since. Everyone called me crazy. Things really took off when i got my domain name headsofcheese. Com from godaddy and now theyre selling like hot cakes. Made of cheese. Got a crazy idea you think you can turn into a success . We know you can and weve got a domain for you. Go you. Godaddy. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Welcome back. 45 minutes left in the trading session. Youre looking at all 30 of the dow components today. Goldman sachs, the leading stock, even though it was jpmorgan thats getting the glory for its earnings. Thats number three on the list of the best gainers. The three companies in the red today, among the dow components, exxonmobil, verizon, and united health. Financials, by the way, coming off a sevenday win streak. I mean, really just trying to participate as we move to new highs in these markets. How about line today making a huge splash on its market debut here in the stock exchange. The japanbased messaging app, this years biggest tech ipo, its right behind us, too. We can look at how its doing right now, over 27 trading at 40 bucks a share. Bob pisani has more. And were learning a lot more about this company here in this country. And getting quite an education. Im just happy to start saying the ipo is finally starting to open up. The storys getting a little old. Its been a few months, finally were getting some evidence that shes right. Heres line at 32. 84. That was the offering price. That was in tokyo priced that at monday. Price, at 42, opened at 32, theyre happy about that. Line itself, biggest ipo of the year. Biggest tech ipo since, you remember that, alibaba, yeah, thats a big one. And first dual listing with japan. I had to check that. Thats a fact. We havent seen many from japan in a long time. They do have competitors, and you know what they are, whats app, biggest one, facebook, and theres we chat, which is primarily over in china. Ka cao is another one. Over in south korea. Many people wanted it. Its a very popular brand over in japan. And most importantly, the important thing is, our markets have been doing very well recently. Thats the most important thing for an ipo market. This morning, we had nyse chief tom farley on and he told me theres finally some signs that the ipo market is opening up. Lets face it, the ipo market for the last year has been very, very slow. However, the machine is creeking back to life. We had a day in may where there were four ipos, including u. S. Foods, which was over a billion. We had an exciting tech ipo two weeks ago with twillio. Their stock is about 43 bucks a share, three times the midpoint of their range. The number of Technology Companies were talking is increasing. And its about time. Theyre running out of excuses. So remember, the most important determination of the ipo market is the stock market. The s p is at an historic high. If you dont have time to go public, if you dont want to go public now, youve got some real issues. So im not expecting a lot of the big unicorns to go, but we are going to see some names starting to open up, and well talk a little bit more about that tomorrow. Theres going to be some other interesting ones next week and a big food company. Its just interesting. As we emphasized, before some of the last two, the companies were actually doing better when they had priced at the lower end of the range over market uncertainty. So we can share the fact that lines up 27 and its good to here that twillio is still doing well, but is actually the risk that the better these markets get, the worst overtime in the performance of those that are having a great debut. The companies were seeing going are not moon shots, theyre companies that are generally making money or have clear paths to profitability. Maybe theyre not fading miss unicorns, but Companies Investors are interested in and i think can put a reasonable valuation. That was going to be my point. Its the quality of the companies that are making it through the ipo window right now. They are quality companies. Youre not seeing a lot of fluff. Yeah. So next week, for example, were going to have one of the big Biotech Companies in the world go public. Were going to see some other companies in the next few weeks, might be a couple of retailers that are out there. And tomorrow, big food company that will be going public. The bottom line is, were finally starting to see things that why theres ice cream on the floor . Good humor over here. Guys, look, were going to get the strawberry shortcake. Unilevers ringing the closing bell. I dont know about you, but i have some things to do. In a little while, guys. Thanks so much, bob. Take care. 40 minutes left in the trading session, while we watch bob eat his strawberry shortcake. We should leave the mike on for that, too. Pharmaceutical bad boy Martin Shkreli back in court. Meg terrell is on the scene for us and shell have the latest developments in the accused fraudsters case in just a moment. Also ahead, battle royal, our larry kudlow makes the case for replacing the top brass at the Federal Reserve with people who are more in touch with the economy, like farmers. And Steve Liesman takes the other side of that trade. You dont want to miss that, coming up on closing bell. That looks so good. Turns romantic why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. Welcome back. We have a news alert on United Airlines. Phil lebeau stepping in on that story. This is a resolution of an investigation by the u. S. Attorney Generals Office in new jersey, into United Airlines and its negotiations with the Port Authority. Remember, this investigation led to the removal of former united ceo, jeff smisic last september. At the time, it all focused on whether or not united added flights between new jersey and columbia, south carolina, which was near a Vacation Home for the former Port Authority director. Now this investigation has been wrapped up, with united agreeing to a nonprosecution agreement with the u. S. Attorney Generals Office. As part of that, they will fine a fine of 2. 25 million. So, again, this wraps up the investigation into that scandal that led to the removal of jeff smisic, the former ceo of united. Guys, back to you. They accepted responsibility for the conduct related to the establishment of that route. And they agreed to continue to enhance compliance and antibribery and anticorruption policies, but theyre not going to be prosecuted for any of that. Correct. And basically, theyre paying a fine for this. And they also point out that united has stepped up its efforts in terms of improving its efforts in reporting and doing things the way it should be done, as opposed to adding routes for effects in exchange for greater access. United shares up 4 today, by the way. Thank you, phil. Thank you, phil. Accused pharmaceutical industry fraudster Martin Shkreli is back in court. As a reminder, Martin Shkreli has been charged with eight counts of securities fraud and conspiracy to commit wire and securities fraud. This is in relation to his former Biotech Company and what the government calls a ponzi scheme, accusing him of using retrofin as his personal piggy bank in order to pay back investors in his hedge fund. This doesnt have anything to do with what hes become famous for, which is raising the price of a drug given to hiv patients. A trial date has been set for june 26th, 2017. His attorney saying thats because his attorney has a lot of other cases to handle between now and then. Shkreli is also on trial with codefendant, evan grooebl, who was the outside counsel to retrofin. Hes likely going to seek to sever those two cases, saying that, quote, this may be the most relevant reliance on counsel defense hes ever seen. So, this idea that potentially theyre going to blame attorney evan grooebl for the things that shkreli has been accused, that was something he was asked about outside the courthouse. Heres what he said. I dont think theres a finger of blame to point in this case, to the extent that both defendants may be innocent, but one is a lawyer and our client relied on his advice doesnt necessarily mean that either of them committed a crime. It may mean that they both cannot have a joint trial, however. Now, as brafman and shkreli were leaving the courthouse, we also caught an Interesting Exchange between them. Take a listen to this. Pokemon . Shkreli asking there, can i play my pokemon. So shkreli bringing a little bit of humor and levity to the situation today, even as hes facing all of these charges. Guys . Phil and kelly back to you. You cant be prosecuted for hubris, but hes still got it, doesnt he . Reporter it would seem that way. He was pretty silent today, but as our producer said, he was kind of smirking the entire time. So, a lot of facial expressions from shkreli, who is never silent, at least, in that way. The next kid you see running around looking at his phone, could be Martin Shkreli, chasing those pokemon. Thanks, meg. Time for a cnbc news update. Lets get to sharon epperson. Sharon . Heres whats happening at this hour. Closing arguments began today in the bench trial to have the fourth baltimore officer charged in the death of freddie gray. Lieutenant brian rice facing manslaughter and Reckless Endangerment charges. He is the highest ranking officer of the six who were charged in the case. Hundreds of migrants were rescued off the libyan coast and brought to sicily this morning, according to the International Organization for migration, more than 227,000 migrants and refugees have entered europe this year. Nearly 5. 5 million bottles of liquid plumber clog removing products are being recalled, because they fail to meet child resistant closure requirements. Clorox has received eight reports of the caps not working and more than 220 reports of the bottles leaking. And Phil Mickelson just completed one of the greatest rounds in major championship history, shooting a 63 in the first round of the british open. And he would have set the record if this has 15 slip birdie putt didnt lip out of the 18th hole. He described the putt as heartbreaking. Thats the cnbc news update at this hour. Back to you, bill. Feel that pain . I heard all about it, havent seen it yet, but now i have, i can feel his pain, thats for sure. Only eight golfers in major championship history have shot a 63. Thats the lowest score ever shot. His would have been a new record at 62 if that that putt would have gone in, but it didnt. I dont think hes high enough on the rankings to be able to represent the United States. If enough people dont go. He may make it there. Thank you, sharon. All righty. See you there. Here we go, the final half hour of trade. Looks like well have another record for the day. The good humor truck is in my way. The dow is up, the s p up. Both will be alltime highs if we close at those levels. Also ahead, should those in charge of the Federal Reserve be replaced by people more in touch with the economy, like farmers and Small Business owners . Thats what larry kudlow thinks. Hell make his case, coming up. Hi daddy gain the freedom to fumble with the new water and shatterresistant Samsung Galaxy s7 active. Buy one now and get the samsung gear s2 for free. Exclusively at at t. Welcome back. Another day and it could be another day of records here on the floor of the new york stock exchange. Ben willis is with us me from princeton securities. Dows up 156. S p looks higher here. So the Streak Continues . Come on its just another day. The markets not even going down again. I dont know if its ever going down again or if people believe it can never stay up here. Well, as a trader, everybodys looking for a pullback, the same way were looking for that move in the brexit drop, and we were a little too cautious, quite frankly, at least i was. Didnt get it enough on that break to the downside. But the fact of the matter is, the world economies and the central branankses are telling , you need to be in equities with sob you better be here. That said, the bank of england didnt come in as expect this morning. They stood pat. I guess they read it as, we dont need to be quite as proactive. They got the devaluation of their currency on the move out of brexit. They didnt want to put anymore pressure on it. Plenty of people would have liked that 10 drop, like japan. What do you make of the fact that bernanke was over there. Theres a lot of talk about what he was perhaps quite frankly, thats exactly what any investor and viewer needs to keep an eye on. The conversation about copper money. We thought it was put to sleep yesterday. It gave birth again today, with the markets and futures coming in. We softened a little on the brexit story, but came right back. The belief is the Central Banks are going to continue in this, whether you want to call it a currency war, a stimulation, theyre going to try to stimulate risk assets. And the easiest one is commodities and next is equities. The biggest risk to that story, the Producer Price index actually came in much stronger than expected this morning. Were going to get more inflation data. If that looks strong and the economy looks okay and people start to price out central bank support, what happens to the rally . I view Central Banks report as raising rates and letting them naturalize. And when the United States of america realizes thats their edict, to take care of the United States of america and lets our rates naturalize, it will cause a rally. Rising rates is an indication of the strength in the economy, which means stocks are going to improve. Well let you go. Get back to it and maybe an ice cream. What was the flavor you like . The toasted almond chocolate. Bill . Its got to have Peanut Butter involved. 25 minutes left as we head towards the close. The dow and s p in record territory. The nasdaq up a healthy 33 points right now, as well. And weve heard of pokemongo helping Small Businesses and retailers. Now some are saying it could help you sell your home. The impact squirld could have on your home value when we come back. But when we come back, larry kudlow says, throw them all out. Hes talking about the Federal Reserve officials. His radical plan to reshape the nations central bank, when we come back. Week. Our resident fed maven, Steve Liesman, have been tracking all that. Every speech this weekend. We are now, folks 10 13 through one of the heaviest fed speak weeks i can remember. The general pressure remains the fed not hurdling towards any rate increase, kind of chill laxing this summer and willing to work cautiously when it comes to rates. Even the hawks dont sound that hawk. Dennis is comfortable with a cautious approach to rate hikes. E Esther George says the current rate is too low relative to the economy, but shes working the potential impact of brexit on the dollar and u. S. Growth. Thats sort of a moderately dovish comment. Bob kaplan said the fed will remain calm as long as the mandates are met. And Neel Kashkari said they should remain patient in letting the economy heal. Kaplan speaks again tonight. Hell speak tomorrow along with a double dose of fed speak at an event headlined by cakashkari a bullard. You have the fed speaking on this side and the retail sales. They come out at 8 30 tomorrow and everyone from the fed and the street wants to know if the consumer will remain strong. And that along with the cpi data. Whats this i hear about a radical plan from kudlow. I thought he was conservative. Lets bring in o senior contributor, larry kudlow, who has some radical ideas about making changes to the fed. Larry . With pleasure thank you, steve. Thank you, kelly. Appreciate that. Just a quick comment on steves comments about all these fed speakers. One of the things that ought to be done is the fact that people should stop yapping. All they do is confuse folks. They themselves change their mind on a dime. I cant stand it. But larger than that, much larger than that. A, stop regulating interstates. Stop it. Only the market knows where the rates should be. B, stop paying banks not to loan money. Paying interest on excess reserves is a crazy idea. C, Federal Reserve should have steady rules and targets. We should have a stable dollar and stable prices. Another point. There are too many phds. Almost the entire Federal Reserve, members of the board, all the reserve banks. I may miss one or two. Theyre all phds. What i want, i want to see men and women who work in business, particularly Small Business, community bankers, people from agriculture, people from energy, people from tech. You know, when i started at the new york fed in 1973 it was a long time ago there used to be broad diversification, including the Federal Reserve board. We have lost that. Weve got phds with models that dont work and theres nobody inside the system of any stature who comes from business. Particularly smaller business. That should all be changed. Completely. Wipe it out and start over again. Very fitting that on bastille day, larry is advocating storming the ivory tower that is the Federal Reserve. Yes. Yes. Yes before we bring steve in on this, this sounds somewhat reminiscent of something donald trump has been saying lately, that he would replace janet yellin if he were elected. I know our selfproclaimed informal adviser, policy adviser, to donald trump. Is this something that you have been telling him . Is this where he got this from, do you think . Well, i never share private advice when its asked, but mr. Trump has said many times that he would like to, as an outsider, overturn the establishment. And my point here is, the Federal Reserve and all the phds inside the fed, with all their models, that has become an establishment that has done us a lot of damage insofar as as our economy is concerned. Look, trump is a businessman, okay . This is my view, not his, but hes a businessman. I want to see lots more men and women, from businesses, large businesses, Small Businesses, small banks, i dont care. Tech, energy, agriculture, we used to have a farm seat on the fed, community bankers. All of that is gone. Much to our detriment. They take these models way too seriously. The fed forecasting is always wrong. Its not personal, its institutional. I say, throw them out and start over again. Go get him, steve. First of all, i think larrys target is wrong. If larry wants a change in how the Federal Reserve regulates money, that comes from congress, that particular directive. Indeed. You feed to not blame the fed for that. The fed is trying to do what is done if you dont have a gold standard, which is you must determine the quantity or the price of money. I think, larry, you might have taught me that in 1952, if im not mistaken. Youve got to have some artificial regulation of it if youre not going to go to a standard. Let me leave that to one side. The second thing i would ask you, larry, is what problem would you fix by putting businessmen and business women and farmers and other folks on the fed . Is your conclusion that the fed policy right now is wrong and it needs to be you need higher Interest Rates right now . Because thats where they are. Thats what all the intelligence or the academics and the degrees have brought the two, to a place of very low rates. Which is the same conclusion reached in europe, japan, and every other single developed major bank around the world. Im confused why you would bring in a new cadre of people to come to your conclusion, i think, larry, that rates are appropriate low. No, i dont want the fed to cut rates at all, by the way. But thats congress fault. No, its not congress fault. It has evolved. Youre wrong about that, my friend. Ive been through when i worked at the fed, when i worked in the Budget Office for reagan, weve gone through so many different targets in my lifetime alone. Weve had money supply targets, weve had reserve targets, weve had Monetary Base targets. Lately, its been Interest Rate targets. Thats a fed thing. Look, what im going for is this. I want to change personnel. I want people who actually work in business and who actually work on main street why . Because they have a much better feel what policy would they give us that were not getting now . I would be interested to know if somebody would ask them well the beige book. Robert kaplan has just been brought on. The beige book doesnt i agree with you reserve Bank President s should be from the business sector or a small bank. I agree with you the Federal Reserve board should be changed. And again, my general target, Steve Liesman, is not the setting of rates, which i actually oppose, and particularly i oppose the setting of rate on reserves. But my target is, i want to see a steady as you go, with i want to see some price rules, some Monetary Policy rules, like paul volcker has suggested, some currency dollar stability like volcker and john taylor and many other sensible people have said. Right now the fed is rudderless. Theyre operating a ph. D standard with econometric models the that do not work. And i think thats got to change and i think individual men and women from business would have a better chance on it. Why would you bring businessmen on and business women on and other people from the Business Community if you want it run by a rule . Well, look they would just set it by the rule. What do we need them for . If you need rules you said dont regulate Interest Rates. How do you deregulate Interest Rates and still have rules in place then . I dont are you kidding . Listen. That doesnt mean the fed cant ever intervene, but it does mean the public would know with greater clarity what theyre aiming for. Thats one of the biggest problems. Look at Steve Liesman, he is a great reporter. My hat is off to him all these years. But he has to come on and interpret all this yapping, constant yapping by reserve bank the words of farmers just as well. It doesnt matter to me. Ill do literary analysis either way. If you ever talk to a Small Business woman or ever talk to a farmer, steve, particularly from the midwest or the far west, day dont talk that much. They dont talk as much as we do. We do it for a living, but i guarantee you what they would say would be pithier. And look, their hands are closer to whats really going on in the economy and again, i think you have this establishment in washington, fed, by the way, is not the only guilty culprit in this. I think its true for other areas, as well. We are giving too much advice based on esoteric, theoretical models that do not work. I would like to see some realworld involvement here. And i would like to see some rules. The only reason you want to do this, larry, is you would want rates to be higher. I dont say that. Thats not my position. Ive been against higher rates. What im really saying to you, steve, my friend is, what im saying to you is i dont want the fed to set rates. I want the market to set rates, including shortterm rates. Because nobody knows what the real rates should be. Let the market tell you and stop having this econometricical bonanza going on. I think thats true, but you have to have some form of figuring out the price or quantity of money. I would still allow parking spots at the board. Still would. Im okay with that. Really, really fascinating conversation, guys. I hope that video makes it to cnbc. Com so people can see that some more. Seriously, that was great stuff. Thank you. Thank you, larry. Great respect, mr. Kudlow. Thank you, steve. 12 minutes, a little less to go here. Could be another record day on wall street. The s p up 12 to 2164. The nasdaq well in the green for the year now, as its up 30 points. Much more ahead on these recordset markets. Wall street veteran david darst will tell us what investors ought to watch out for on this bastille day, coming up. Here at the Td Ameritrade trader group, they work all the time. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. Wont replace the full value of your totaled new car. The guy says you picked the wrong Insurance Plan. No, i picked the wrong insurance company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. They took every board away from me. What time is it . I dont know. 3 51. Thank you. Nine minutes left in the trading session here. Art cashin was just telling me the markets on close orders today show a very slight kbans imbalance to the buy side, to the tube of 150 million. Hes calling ate nonevent, anyway. Well see what that does with the dow. Independent investment consultant, youve heard from david darst here. Happy bastille day, my trend. Thank you very much, bill. 227 years ago, they stormed the bastille, which is a french word meaning to build. It was a fortress. That was july the 14th, 1789. January 21st, 1973, king louis xvi was beheaded, that was 14 years later and then the revolution got out of hand. But today we have an acronym for today, france, the financials. This week, u. S. Financials, up 2. 5 . This week, europe financials, up 5 , as Interest Rates have been rising. R is the restoration of order in the united kingdom. Theresa may is going to be phenomenal. Any daughter of an anglican minister, just like Angela Merkel is, is going to be great for them. F, r, a. Asia. There you have japan. Mr. Abe is going to put in a huge stimulus. 200 billion. Thats what people are looking for. F, r, a, n n is new highs for everything. Thats not good. One of the few things theres not new highs for is highend trophy apartments in manhattan. Theyre starting to come off the boil. Youve seen that. F, r, a, n, c currencies. The yen at 104. 5 is so much better than the yen at 100 or 96 going the other direction. E, earnings. Weve got to see the earnings start to come through for the second half and well hear about that during this Second Quarter earnings season thats going on right now. If anybody recognizes this tie and know who has the other one this tie is we can solve a great mystery. Bill and kelly, this tie is from a store on Beverly Hills r rodeo drive. I was invited to go in and i was given this time last week by bion. And kelly points out on National Ice Cream day, it is the color of cream sibling. But it is apparently one of two that exists in the world and were looking for the twin. I lost a bet, by the way. I was certain that you would be quoting Sidney Carten today on bastille day. Well can you give us the line . It was the best of times i want the end of the book. Tist a far, far better thing it was a far better rest ive gotten whatever the last line a tale of two cities, a beautiful book by charles dickens. Yes, it was. Thank you very much. Thank you, bill. Im just sitting here taking it all in. And davids going off to great applause here with the dow up 141 points. The closing countdown. And after the bell, more tough times for tesla. The electronic carmaker now under fire from wellrespected Consumer Reports to disable and rename its auto pilot system. What it means for elon musk and his company, just ahead. Youre watching cnbc, first in business worldwide. 2 1 2 minutes left as we head towards the close with the dow up about 143 point. Bob pisani joining me here. So weve been adding to our charts here this week. Now weve got four days to look at, for the s p with a record high each day this week, and it just continues to build, up another half a percent today for the week. The s p is up 1 5 8 . The yield on the tenarea continues to climb. It started the week around 138. Thereabouts. And now were up to 153. I think thats significant. Thats a lot. The market is not only not freaking out, were going up at this point. Well, this is the relationship you would expect at this point, dont you think . As you sell the bonds, youre buying the stocks here. But theres a substantial crowd that keeps insisting every time this goes up, the markets is going to have problems with it. And so far, its suggesting this particularly well. Two stocks weve been highlighting today. The biggest tech ipo of the year, line, which had a very good day today. And finally things are starting to open up. The whole first half of the year has gone away and finally were getting some movement. Tomorrow, to set the tone, weve got two more big earnings reports from citigroup and from pels fargo. Heres where it gets a little tricky. Jpmorgan kind of passed on the whole, brexit ate my homework thing. That was tremendous relief to the market. Citigroup is far and away the biggest global bank in the United States. They get more than 60 of their revenues outside the United States. Theyre going to be at slight risk of bringing up the brexit, because they get more overall. Well see if that happens. All right. Thats for another day. Right now, the dow is up 135, a record high. S p up 11 at a record high. Theyre celebrating National Ice Cream day. Unilever is, ringing the bell here at the big board. Stay tuned now for hour number two of the closing bell with kelly evans and company. See you tomorrow, kel. Thank you, bill. Welcome to the closing bell, everybody. Im kelly evans. Weve done it again. Another record day on wall street. The dow up 132 points. Its recordclosing high is now over 18,500. 18,504. Gains of three quarters of a percent. Jpmorgan beat this morning, and that was good enough to lead these higher. The s p up, adding 11 points for a record there. The nasdaq also up half a percent today. 5,007 is the level to watch this year. Were now up to 5,034. Coming up, line completing its first day of trading near the new york stock exchange. The stock did pop in its debut, closing higher by about 26 , according to one venture capitalist. That doesnt mean the tech ipo pipeline will speed up. Hell join us later to explain. Joining todays panel, we have cnbcs senior markets commentator and cnbc pro columnist, mark santoli. Also here from tia, stephanie link. And for more on todays market action, fast money trader, dan nathan is with us. Good to have everybody onboard. Mike, we just keep marching higher. Were tacking it on. Obviously, like a little bit of a slower pace than we had the first couple of days of this real burst through the alltime highs, but its really hard to quibble with too much thats going on. The only thing were looking for now, has this move gotten a little bit too extended, and i think youre only seeing the stirrings of that. If im pointing to anything today, its the fact that small caps didnt do a whole lot. Thats really in itself not too much of a concern. We did have a better cyclical tone. Reaction to the Bank Earnings of financials and some of the other more growthoriented sectors doing better. And yields higher again. And utilities at the bottom of the barrel, stephanie. Im sure theres a lot of people part of this whole stub phenomenon, wondering if theyre going to stub their toe now on staples and utilities and telecons and bonds. I think its about time you see a catchup to some of the cyclical stocks. I think today was really about earnings. Because so far, its very early, but so far, weve gotten some pretty good earnings. So far, so good. Against very low expectations. Alcoa, csx, delta. These are Big Companies that touch a lot of different parts to the economy. And jpmorgan certainly, it really was a thing of beauty in every which way. Well see if the other banks can do the same. I doubt it. But then you got a ppi number that was a little hot, so then you had yields back up. Well see if this happens. I think so yields are really going to be driving this market to see which direction they go to. The citigroup tomorrow reports, as well as wells fargo. Dan nathan, what are you going to be watching m its interesting what stephanie mentioned about the stocks that rt roed 19 last 24 hours, about low expectations for earnings and some of the results on the way out. You had delta and jpmorgan. Youve got to remember that jpmorgan is still down 10 from its 52week highs. Delta is down considerably from its 52week highs. Csx, the same thing. You had low expectations, you had not a disaster, and these stocks are up. So when you think about how this market can actually maintain those new highs, we really need to see this thing broaden out a little bit. Meaning, we need to see the fundamentals match the price action. And i would suspect well probably top out very soon in this early earnings season, but its not just not there. We just dont have the organic, you know, Revenue Growth that existed to kind of have this thing, you know, propel to 2250 in the s p in the near term. Revenue growth is going to be under a microscope, thats for sure. Lets get down to bob pisani. Hes on the floor to wrap up another historic day. Bob . And this was the first day, i can say, that earnings really didnt matter at all. Take a look at the bank stocks. Jpmorgan, i think, helped a lot of people by not emphasizing the brexit. They said it would take a while, but the whole bank sector up about 2 , as you can see here. And stephanies right about the earnings. Alcoa, yum, csx, delta, jpmorgan, every single one are trading up since their earnings report. Everythings up 2 . Excellent start. Its still very early, but the bottom line is were starting well for earnings season. Finally, i want to note that line ipo, because markets at new highs, you would think that we would get some upward pressure on ipos. We did that today with line. Remember, pricing e ining 32 a change, at 42, and closing at 41. Got a big food ipo tomorrow, as well. Lets flip up to the nasdaq and check on the names moving there today with our bertha coombs. Kelly, its really the sectors that are putting in some new highs here, include chip sarcast sector, the tech sector, some big cap names. Those etfs, new 52week highs and new alltime highs for the midcap stocks. I was talking to a strategist on looking at charts, chartist mark newton, newton advisers, and he says what he would like to see those, to see the nasdaq and the russell 2,000 catch up and put in new alltime highs. Theyre still a ways away, about 5 each. Nonetheless, today we did have some new highs in names like alta, once again, but also cisco continues to put in new 52week highs. Thats very constructive and helpful as far as the big cap names. The transports are another area where he would like to see some new highs. Today they were very strong on the back of those csx earnings. And the airlines moving up on the back of deltas results. But the other thing that really needs to happen here to get some big momentum is to see apple start to get some momentum to the upside. Did well today, but has a long way to go. Back to you. Worst performer since the highs last time around. Bertha, thank you. Lets bring in greg ip in and out from the wall street journal. Recently wrote a piece about the divergence between falling bond yields and this rally in stocks. Saying Bond Investors dont expect economic catastrophe. They simply assume that Central Banks will act as if catastrophe is around the corner. Greg joins us now more for. Good to have you on board, sir. Should we talk about japan . Because that seems to be a big impetus behind this rally. Yeah, the talk in japan right now is that theres going to be some kind of fiscal stimulus joined with monetary stimulus, to get the economy going, which is actually one of the risks i think in this bond market rally, kelly. After brexit, the unanimous vote of stock and bond markets is this was terrible for the economy. Stocks went down, so did bond yields. But stocks have come all the way back up and bond yields are still down. I think bond yields are basically telling you, we expect that Central Banks are just going to be so biased to pulling the trigger, to do more, no matter what the shock is, whether its soft payroll growth in the u. S. , whether its brexit in europe, whether its the strong yen in japan, and by the way, even if things arent as bad as we expect, theyre still not going to raise rates. Thats been a pretty good bet so far. My concern is that what if Central Banks a few months from now, decide that things postbrexit really arent that bad. Theyre behind the curve, and they have to actually start normalizing Interest Rates a little bit faster. I think youre going to see a lot of blood on the floor. Is this ill ask you guys kind of a Global Version of the rally from years back, where the point was, you know, if things are bad, the Central Banks will come in, if things are good yeah, an equation at work. To some degree. I guess the big question is, and greg said, maybe therell be some blood on the floor if Central Banks do decide that things arent so good. I wonder where the bloods going to come from. In other words, will it just be about market Interest Rates having to adjust higher and stock markets somehow got it correct, that things werent so bad. That would be kind of a first. And it goes back to you, you were saying, stephanie, earlier, you had the Producer Price index. Well get the Consumer Price index. It feels like all of that inflation data will be one of the most important things here. I think inflation is very important over the coming months. Clearly, we have all of this fiscal stimulus monetary stimulus going on around the world. Who knows if its going to work or not. But theres a good chance that you do see a gradual step up in inflation, especially here, too. Because of wages, because of rent. We are because of commodities. So there is a case to be made that inflation can move higher, Interest Rates could move higher, and then those people that are buying the bond market today will be the ones in the mud. If theres a scenario that could work out differently for the bond market. Larry fink was on squawk box earlier today. He was talking about where he sees the tenyear yield going and he meant to the downside. Take a listen. I am worried that Interest Rates are going lower, before they go higher. I have said internally, and to our clients, that i would not be surprised im not predicting it, but if somebody told me that tenyear treasuries at 55 basis points, i would not be surprised. All right. Greg, so, you know, is this a binary outcome or, you know, people have been arguing, its supply and demand. But it just feels like, you know, a world in which Central Banks are supporting things, fine. We go down to 75 basis points. But a world in which the inflation and growth data is doing better, seems like that should take that scenario off the table, right . Yeah, it casts in mind back to 2013, with the taper tantrum. Thats when we had yields last at around this level. And the premise in the market was qe infinity. Qe forever. The fed is going to keep on buying their 10 billion in bonds every month for the rest of eternity. And bernanke comes out with a few words, says, no, that is not going to happen. And there is this huge selloff in the bond market. Bernanke is looking around saying, wait a minute, i never said qe infinity. There is a possibility, i think, that there is kind of a miscommunication here. That said, i would say that perhaps the most key event in the last 24 hours is the bank of englands decision today not to cut Interest Rates. They had all but promised rate cuts in the immediate aftermath of the brexit vote. But the fact of the matter is, we have not seen any data yet that suggests theres been any collapse in growth. Very minor data, from like credit card spending, that suggests that things are okay. I think that should really prompt a bit of a rethink on this notion, that Central Banks will give you more and more stimulus. Which goes back, dan, to that point about where the tenyear is heading. If the tenyear treasury yield is at 75 basis points, anytime soon, i believe thats a disaster for u. S. Stocks. When you look at where sovereign yields have gone in europe and where theyve gone in japan, look at how equities have reacted. The nikkei is still down 22 from its 52week highs here. To me, i think you have a scenario where the real shocks have been down to the downside. And when you think about the last two tops in the s p 500 that have yielded a decline of o 500 . In 2007, at that high, the fed funds rate was at about 5 . Look where it is now. Its basically zero. And the lower the yield on the tenyear goes, the more distress, i believe, for at hrk assets like stocks. I understand you need to put money somewhere, but the lower it goes, the more problems well have in the nottoodistant future. Certainly doesnt signal well, mike. No, it would be alarming. I think the distinction i would make is if you look at global markets, equity markets are pretty good with very, very low yields. They really dont seem to like negative yields. So if you look at the yeartodate performance of all the world markets, those with negativeyielding bonds, negativeyielding official rates, as well, not been good for stocks. It kills the banking. Final word to you, greg . Yeah, the 75 basis point yield that larry fink talked about, that would be a yield consistent with a world that is really, really much worse than we see right now, like really much worse growth, maybe recession, maybe deflation. It is not at all consistent with the world that the fed sees ahead, which is moderate growth, inflation slowly coming back up, close to 2 . If the world unfolds the way the fed expects and you are counting on a 75basis point yield, theres going to be some hurt out there. I think that there is limited juice left in this bond market rally. Then should the fed i was going to just say, greg, do you think at some point the talk turns to, should the fed actually start selling or at least letting some of these maturities mature without reinvesting the proceeds. The focus has been on the fed funds rate, but if the world is scarce of safe government debt, should they give the world some . No, i dont think so. The fed would see this as sending a very bad signal to the market as the action of a central bank thats starting to panic about inflation. They dont want that to happen. But go back to the paper tantrum. It only took a few words to completely transform sentiment in the bond markets. If you look at what yields have done this year, you cannot explain the drop in yields just by an judgment and what the feds going to do. A lot of its a socalled turn premium. People are basically owning bonds as an insurance policy against catastrophe, against negative yields, against more qe by Central Banks. Maybe theyre right. Maybe the world will turn out to be a lot worse than i or the fed expect it to be. But if anything approaching normalcy comes about and the fed behaves as they have told us they would behave in such a world, it is almost impossible to justify yields at the levels theyve reached within recent days. With the canadian little there, too. About. Greg, thanks for joining us. Great stuff. Greg ip there. Dan nathan, appreciate you kicking stuff off with us as well, sir. Fast money has andrew left up. Hell defend his valeant short, thats next hour. Air b b, the latest target in senator Elizabeth Warrens crosshairs. Shes calling for a regulatory probe into whether homesharing websites take away housing from longterm renters and are pushing up prices. Well discuss that, coming up. And teslas auto pilot function is under scrutiny, not just by regulators, but also Morgan Stanley, Consumer Reports. Up next, which this all means for their companys bottom line. Youre watching cnbc, first in business worldwide. Youre here to my name is Valerie Decker and im a troubleman for pg e. I am a First Responder to emergencies 24 hours a day, everyday of the year. My children and my family are on my mind when im working all the time. My neighbors are here, my friends and family live here, so its important for me to respond as quickly as possible and get the power back on. Its an amazing feeling turning those lights back on. Be informed about outages in your area. Sign up for outage alerts at pge. Com outagealerts. Together, were building a better california. Welcome back. Consumer reports is now turning its sights on tesla. The magazine urging tesla to politic and overhaul the automatic steering part of its auto pilot system. Phil lebeau has more for us now. Kelly, well talk about Consumer Reports in just a bit. A few minutes ago, elon musk tweeting out that european regulators found no safety concerns with auto pilot, and we should clarify a little bit, basically, it has the netherlands saying it has those safety concerns with auto pilot, as long as its labeled a as a driver assistance feature. Not as autonomous driving. And thats really at the heart of the debate of what Consumer Reports was talking about this morning, in its call to tesla to stop using the name auto pilot. And heres what Consumer Reports is saying. Theres too much autonomy, too soon. They would like them to disable them, being tesla, disable the system, until its improved. It can be updated in some fashion, and until that happens, they also believe that tesla should drop the auto pilot name. In response to Consumer Reports, tesla said, while we appreciate wellmeaning advice from any individual or group, we make our decisions on the basis of realworld data, not speculation by the media. Also today, Morgan Stanley analyst, adam jones, who is really one of the most bullish analysts on wall street when it comes to tesla, raised a question in a note to investors, basically saying, is the auto pilot name giving drivers and consumers a sense that they are in a drivers license cless car. Hes simply raising the question whether or not this is a potential moral hazard that is going to be confronting tesla in the future, as it continues marketing this technology. Finally, when you look at whats going on with tesla and with all of the things happening with auto pilot, there was a change in how this company markets some of its newer vehicles that hasnt got a whole lot of attention. Starting on july 1st, tesla ended its resale value guarantee. Remember, back in 2013, elon musk said, hey, look, if i have to pay it out of my own pocket, i will. Guarantee at least 50 of the base price on your model ss. Well, tesla is no longer doing that. Basically, because its got to limit its potential payouts in the future. Not surprising as volumes increase, there was going to become a point where tesla was going to have to limit its potential financial liability by guaranteeing 50 base value. So that guarantee no longer exists for people who are buying new vehicles. Phil, what was musk also just tweeting about european, you know, points of view on this auto pilot . Yeah, we dont want to get too deep in the weeds here. Basically, he said, european regulators found no safety concerns with auto pilot. What were talking about at the end of the day is whether or not this term auto pilot in a beta version, which is what it is, basically gives people a sense that they are in a driverless car. Elon musk has said several times, since this controversy began, beta simply means that it is a system thats still being improved and it should not be taken as fullon autonomous driving. He has made that very clear. All of tesla executives have made that clear. What european regulators in the netherlands are saying, as long as they realize its driver assistance and not fully autonomous driving, they have no problem with the beta version of auto pilot thats being used over there. And thats for the netherlands, we should point out. Diver assisted. So, phil, why dont they just change the phrase . Its all about communication and making consumers feel comfortable, making the regulators feel comfortable. Its one word and its more accurate to what its doing versus auto pilot. I just dont see the big deal, and its getting so much press and so much attention, i just dont think it needs to have that kind of attention. The response that you will hear from tesla executives is, we have never told anybody that this is a selfdriving car. Sure, weve probably been hyperbolic in terms of talking about one you can drive from seattle to San Francisco without your hands on the wheel. Theres no doubt about that. On the other hand, they say that they have made it clear to people, you have to pay attention. You have to be engaged with the vehicle. Youre getting into this issue here about whether auto pilot gives people a false sense of security, which is what Consumer Reports claims. Tesla is saying, weve never told people, turn off your mind, take your hands off the wheel, start reading a magazine. Weve always said to people, you have to stay engaged. Thank you, phil. Well continue to follow everything. Tesla shares responding to a lot of different hits. You got auto pilot on the truck . We dont, know. Its you know, sometimes you can use your knees, you know z on the steering wheel. I can admit to some of that kind of behavior, too. Line wrapping up its first day of trading down here, finishing up by nearly 27 . Well hear from a venture capitalist who says todays pop doesnt necessarily mean the freeze in Public Offerings is over. And home buyers usually focus on prime locations in good neighborhoods, but thanks to pokemongo, they soon may be looking for socalled poke stop and training gyms. How the popular game could affect real estate, next. Messaging app line is officially this years biggest tech Public Offering. Its also the biggest tech one since alibaba in 2014. Shares surged at the open and ended up over 26 higher, about 41 a share and change. Does this success mean the ipo market is back from the dead . Lets ask billy chan. Hes ceo kubel capital. Did it all start with line . Its a great couple of days for line and twillio. It doesnt mean that the slowdown of ipos is over. We had yeartodate last year of about 160 ipos. Today were down about 60 to somewhere in the range of 43 companies to date. The really Great Companies like line will have a great chance for funding. An ipo is a funding event, not just a liquidity and branding event. And it will remain an opportunity for Great Companies, but were certainly at a slowdown relative to last year. So does kubel have companies you would like to take public and feel like its not the right time . Im not sure what venture capitalist would say no to that question. Of course, you would love to have an option on any liquidity events. But the private markets are very strong. We still have a very large number of unicorns with the benefits of having large amounts of cash. Uber sitting on close to 13 billion, the likes of air bnb with 2 billion each privately raised. Youve never had before in the private markets the availability to cash to institute for public funding. Right. Tony, you know, maybe not to generalize too much from two deals, but both twillio as well as line, obviously, in very different parts of the business, but both in the general messaging area or cloud communications, in the case of twillio. Why is there so much excitement over what seemed like relatively familiar ways of communicating . Im not sure they are familiar. Whats app, obviously, two years ago, facebook saw some of the writing on the wall, purchased that at close to 19 billion. If you look at enterprise valuation per Monthly Average user in line, theyre certainly trading at a premium. The value is really about having a network effect. In these types of platforms, you have a concept, the plight of the silver medalist, right . It really yeah. So, so, tony, when it comes weve talked about a couple of the tech banner offerings here. You know, is it going to extend to other parts of the market, too . Beyond tech . I mean, i know that we tend to assume most of these companies are in that space, anyway. Yeah, i think overall, the markets overall are moving from a focus that weve had over the past few years on just quantity of growth to a balance now of quantity of growth and quality of growth. Whats the top line growth plus the percentage there on the bottom line . A rule of thumb we tend to use is the percentage growth plus the percentage ebitda margin, anything at around 50 plus has a good chance of a variety of options for funding. But youre definitely seeing that balance shift towards having not just topline growth, but also bottom line real results. Cash is great. You mentioned air bnb, we want to get your view on whats happened today. Senator Elizabeth Warren calling for a probe of the company and other similar businesses. Shes claiming it takes awayren inflates prices. We reached out to airbnb for a statement and this is what they had to say. The vast majority of our hosts in massachusetts, california, hawaii, and across the country are middle class people who depend on home sharing as a way to address economic inequality. We welcome any opportunity to work with lawmakers and regulators who want to learn more about how home sharing helps the middle class address the issue of economic inequality. Which, of course, is Elizabeth Warrens kind of signature issue. So tony, what do you think. Does airbnb help or hurt . Hey, you know, with any great, innovative technology, Large Scale Company coming, youre always going to have some shortterm negative impacts, likely hurting some segment of the population. When we get you just talked about selfdriving cars. At some point, thats going to hurt multiple segments of the economy. But overall, the market is highly efficient. One thing were losing site of here, whilst it may substitute out some longterm rent opportunities, the overall pie has expanded. Airbnb has created more supplyside, more places for people to take accommodations. And i would argue its probably had a bigger impact on the Hotel Industry and that the overall supply side has suspended. Im a believer in the long run of efficiencies, when cell phones came out, people were worried about telephone booths. Were people who couldnt use a cell phone have access to 25cent telephone booths . We forget that now. Efficiency of the market with technology always wins out in the long run. Its interesting, stephanie, weve heard a lot of criticisms of airbnb, but not usually this one that warren raises. Perhaps theres a large movement out there that now has a much bigger face to it. Perhaps. But i actually think the hotel commentary is actually even more interesting from an investment point of view. I think thats kind of whatwear all wondering and worrying about. Does the Hotel Industry have a real competitive threat now . And its legit. Im actually more interested from that angle, versus this other one. And i think for the purchase market, it changes the equation, the economics of buying a home, an apartment, or whatever, if you can actually make lots of income off of it. So i think there are issues for housing turnover and just exactly what people are willing to pay. Its true, you dont have to decide whether im going to be a landlord for a longterm period or not. You can kind of dabble in it a little bit. Maybe decide whether its a good idea or not, tony, thanks for joining us. I was going to say, airbnb has actually been very compliant. It also limits who can actually rent out their place. So managed properties, they have limited the supply side. Theyve been a good company overall. Thank you, tony. Have a great weekend. Okay. Time for a cnbc news update. Lets get back to sharon epperson. Heres whats happening at this hour. The house passing a bill that will require most food packages to carry a label that says whether the food contains genetically modified ingredients. The bill heads to president obamas desk for his signature. David sampson, the former head of the agency that l kros new york citys airports faces up to two years in prison after pleading guilty to using his post to get United Airlines to provide direct service to his Vacation Home in columbia, south carolina. United was fined 2. 25 million for its role. Members of the males only westerly yacht club in rhode island have voted to allow women over the age of 21 to join. Previously, only wives of members could join. It had voted last month to remain allmale, but decided to vote again after negative publicity surfaced. And a bizarre finish in stage 12 of the tour de france. The crowds forcing a media motorbike to come to a stop, causing riders, including overall leader, chris prooum,feo crash behind it. They were all awarded the same time, allowing froome to obtain the lead and the yellow jersey. I always wonder about that with the crowds. I know, exactly. Crazy. Thank you, sharon. Take care. See you later. Microsoft winning a big privacy case against the u. S. And government. The companys top lawyer will join us, coming up. And pokemongo players got to catch them all. But Real Estate Investors may want to think about doing some collecting of their own to cash in on the games popularity. How pokemongo could boost home prices is next. When it comes to medicare, everyone talks about what happens when you turn sixtyfive. But, really, its what you do before that counts. See, medicare doesnt cover everything. Only about eighty percent of part b medical costs. The rest is on you. 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Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Back. It was another record day on wall street. The dow closed above 18,500. The nasdaq up 28. The only one not back if record territory yet. But it is at 5,034. Now the debate about privacy in the tech world, taking another step standard today. The u. S. Second court of appeals ruled in favor of microsofts case against the u. S. Government. The case challenged the governments search warrant that was searching access to customer emails, located in microsofts irish data sincere. For more on this ruling, lets bring in brad smith now. The chief legal officer for microsoft, along with our own jon fortt. John . All right, thank you, kelly, brad. Thanks for joining us this afternoon. I want to ask you, this is a really interesting case in that the person whose email records they wanted to access appears not to be a u. S. Citizen, not to reside in the u. S. , the data was in an irish data center, but the government wanted to access it, because, you know, youre in the u. S. , and you could theoretically access the information from here. Do you think this case is over at this point . Has it established, sort of, clarity around law in the cloud, the way you see it . Well, john, i think this case is very important for establishing that kind of clarity. What it does is it assures customers around the world that if theyre using services from a u. S. Tech company, they will be protected by their own privacy laws, and those will be governed by their own governments. As to whether this is the last step, its too early to say. What we hope is this. We could all spend another two years arguing in court. Lets, instead, focus on the future, come together, and write a 21st century privacy law and get it passed by congress. What should be in that law . Rivals of yours, including apple and amazon joined you in making your case in this instance, that the federal government should not have access to this overseas data. What sort of provisions do you want clarity on, in a law that comes out of congress, that addresses these 21st century concerns . I think fundamentally, the entire tech sector and the Media Community have come together, and what weve said is this. Lets focus on the nationality of people. If theres an american, then the u. S. Government should be able to use a search warrant to get at that persons email, even if that american is living outside the United States. But if its not an american and if its not somebody whos living here in the United States, then lets respect other countries laws. So, brad, and thank you for bringing us up to speed on some of the details of this case. This was not about a u. S. Citizen . Well, the actual nationality of the person is under seal, but i think that johns characterization of the case is more than adequate for the kind of conversations that we all need to have in public. You know, where we have europeans and their email is stored in europe, european governments expect to be the ones who govern their privacy rights. They dont expect the u. S. Government to reach into european territory. This reminds me a little bit of whats happening in terms of the of whos hosting the internet these days. You know, there are countries like china, that kind of want to be able to set their own rules, and theres countries like the u. S. , that dont want people to have to maybe fall into some of those rules that are being set. So, is there a comprehensive answer yet, or is this all being decided piecemeal in the courts . Well, i think the comprehensive answer is slowly emerging, but it is frankly, emerging on a piecemeal basis. There are a couple of overarching principles we see time and time again. Fundamentally, what people want, we believe, is the kind of protection theyve had when information was stored on paper, to remain in place when their information goes to the cloud. And fundamentally, people want to have their rights protected by their own laws and they want their laws to be interpreted by their own governments. We need a future that works for Law Enforcement and works for privacy, but is going to take people to come together and right new laws, not frankly argue over laws like this one, that were written 30 years ago. And finally, brad, as we look at this brexit situation and the uk, potentially having to renegotiate access to data and security issues, with the rest of the eu, is the world getting more complicated . This was a narcotics case, but there will be terrorism cases like it. Do people need to understand that these laws need to be written well and quickly, so that in a fracturing world, Law Enforcement gets the information it needs in critical cases. I do think that it is important to move forward quickly. That was important before brexit. Its important after brexit. The reality is, technology is moving forward, the law needs to catch up. The sooner we come together, the sooner the white house and the Justice Department sit down, so that we can hammer out a new law in congress, the sooner were going to reach a destination thats going to work here in the u. S. And around the world. All right, brad smith, jon fortt, thank you both for joining us, walking us through this verdict and what it means. Appreciate it. Now the Clinton Campaign is among those latching on to the pokemon craze. A saturday event listed on the clinton website says it will be registering voters near the pokestop in lakewood, ohio, park. It notes the kids are welcome, of course, along with their voting age parents. And pokemon could deliver big returns to your Real Estate Investment if you find the right buyers. Diana olick. Listen, this game has been out for a week. Its already affecting real estate . Reporter i know and im already having pokemon wii. Thats all because the real estate is about traffic, and pokemongo drives traffic. Right now, the targets for players are random, but you can bet the minute the company starts selling destinations, Real Estate Agents will be all in. Just a week in, as you said, theyre already using the game to advertise listings, jake laser put up a pokemon ad on facebook for his open house last night in manhattans greenwich village. He figured it could bring more potential buyers in. In the end, it didnt, but it was worth a shot and the seller was willing. Glazer warns, though, the gimmick might not fly with everyone. I think that sellers might be opposed to advertising pokemongo in their listings, ultimately, because, lets admit, it is a little bit childish. Its not necessarily highbrow. And if youre going for a certain look or aesthetic, a theme such as sophistication, its ultimately not going to fit in with that. While several listings on zillow already have pokemon twists, one florida listing is very clear, there are zero pokemongo features. Apparently they consider that a selling point. While some say its a fleeting fad, others think this is just the beginning. It could actually play a bigger role in the rental market, where clients are generally younger and more likely to be playing the game. But, kelly, it is happening. And even in commercial real estate, as well pop listen, real estate, we know, its all about marketing. You just want to stand out. I give them credit for jumping on the waves, but i i dont know. Its been a week i go back, its been a week has it even been a week . Barely a week. Are you playing the game, diana, by the way . Yep i do not play the game and i actually found about where all the poke gems are. There are four within my region, because my 14yearold son told me. Diana, do you think it has interest in the rental market . Im kind of interested in that, because its such a younger demographic. Absolutely it does. You have these younger people that are playing it. Lets say they hear there are some of these, forgive me, whatever things youre looking for on the game, they might go look at that particular apartment over another one on or if they know its a gem or one of the destination spots, they might want to rent. If theyre only going to play it for a year, why not. If this is real, the l. A. County Fire Department tweeting, please do not call 911 for pokemongo, its for emergencies only. Unless youre running into traffic. Diana, thank you. Its been a week mastercard is joining the ranks of paypal, venmo, and apple pay. Those details, coming up. But first, persian squares bill ackman weighing on valeant and former michael pearsons sale of millions of shares. What he had to say earlier today, next. Youre watching cnbc, first in business, worldwide. Hands . It like tod man, its like pure power at your finger tips. Like the power to earn allstate reward points, every time i drive. Want my number . And cash back for driving safe. And the power to automatically find your car. I see you car and i got the power to know whos coming and when if i break down. You must be gerry. Hey. In means getting more from your Car Insurance with the allpowerful drivewise app. Its good to be in, good hands. Activist investor bill ackman sounding off about valeant today, talking to our scott wapner about jay michael pearsons move to sell millions of his shares. Heres what ackman said about that and the future of the company. The stock still suffers a lot from uncertainty, obviously, theres been a pretty big overhang, big shareholders sold out their entire positions. Mikes sold a bunch of stock. And i think new investors, you know, theres still a lot to be clarified about the story. I think joe will be very prepared for that conference call. And valeant has a very diversitidiversity portfolio of asset. And there are 10 billion worth of stuff most shareholders dont even know exist, that i would certainly define as noncore. And i think joe will provide more clarity, but, you know, the company kind of, i think, very comfortably sells billions of dollars of assets, without affecting any of the core franchises of the company. Thats probably what a lot of the case comes down to at this point. How much can they sell, how much do they have to sell . It might have been andrew, someone who was reiterating his case. He thinks the stock is going to zero. Its trading around 23 today. 23. About a 7. 5 billion market cap right now. 30 billion in debt. Obviously, its kind of trading as if the market is not so sure, the Business Model is there. By the way, the formal consensus earnings estimates for this year are 6. 50 per share. Its trading under 12 times earnings, if you believed even remotely a fraction of the earnings power, you would buy this stock. And with joe papa coming in, even the journal was raising the question of, if this was a strategy, rising prices, they work for him, is he the right guy to now be trying to bring in perhaps a new, fresh, different strategy for valeant . Sure, thats the biggest question, right . The problem with this story, health care is so out of favor, the whole sector is down on the year. You could go out and buy a really boring Pharmaceutical Company for a pretty good valuation with a good dividend yield with no controversy. So, im not saying to hide away from this game, you may want to do some homework, but there are so many other names in this space, at this point, that as a p. M. , you would go to pifirst. Like a gilead. Would go to an alexion, a celgene, an eli lilly, or an allergan. I think those stories have better visibility at this point. I think youll have to wait to see what papa does. Everyones kind of put valeant in the too hard pile. The cliche, the too hard pile. But also at some level, 7. 5 billion, thats a small fraction of what the company itself paid for acquisitions in the last couple of years. So if that valuation gets down far enough, maybe the asset sales all of a sudden become material. Its kind of backward logic. That gets you somewhere close to your tyco analog from the early 2000s, where really it was considered a similar thing, but they were able to sell undisturbed businesses for eventually. Exactly. Thats the idea if they can get it right here. Mastercard jumping into the Digital Payment game. How the Credit Card Company is looking to help customers ditch their wallets and go cashless right after this. Its time to discover that in a lexus suv. Theres no such thing as adverse conditions. Come to the lexus golden opportunity sales event this is the pursuit of perfection. Mastercard announcing an all Digital Payment service. Today its called master pass, a digital wallet. Kind of like apple pay. It stores all user data including credit card numbers, billing and shipment information, and joining us for todays edition of the spark is mastercards head of emerging and only payments, james anderson. Thanks for joining us down here at the exchange. Thanks for the opportunity. Youre trying to keep us from having to type in all our information which i appreciate. Something i pull up on my phone and redeem or how does it work . The best way to think about master pass is a Digital Payment service so you can use it online or in an application, and the other thing were launching today and we announced today is you can use it in the real world using contact lists so on your phone you have an application. Weve had a lot of success getting contact terminals distributed. Here in the u. S. Half a million, around the world 5 million so you can have your master pass wallet application and it comes from your bank. You tap it on the terminal and you can make point of sale payments. So if i walk into my favorite coffee shop and they have a box going to be the terminal that you might usually use your card an contact symbol on it and you might see somebody else tapping as well. If you use apple pay, i might be using a mastercard. Why are you trying to pull them mouth . We support the apple pay program. Its a great opportunity for card holders loyal to apple. We use android and samsung pay but the difference with master pass it comes to you from your bank and our experience and Research Shows that consumers, theres a segment of consumers who have very strong appeal and attachment to the digital brands, but theres also a set of consumers who really want the reassurance that something comes to them from their bank, particularly when youre talking about payments, and so our whole strategy with master pass it comes to the consume earning the card holder from their bank with that trust, reassurance thats associated to that relationship. If just about marketing in terms of growing the merchants that you expect to grow going forward. Yeah. So weve done very well building the merchant base online and obviously contact list is already quite well established. I think they are looking for transactions and volume and so what were doing here today, here in new york, we announced some new partners on the issuing side so bank of america, capital one. Key bank. All came on board and citibank is continuing to invest and promote the program. A great stable of large banks which means a lot of consumers, weve got about 80 Million Consumers worldwide who are able to simply download the application no, registration and be able to use master pass. Thats what merchants want to hear is that their customers are going to come in with master pass and have a Great Customer experience and thats really what were delivering through this multiuse wallet. Is the idea ultimately that a consumer would need only one of these, in other words, it would be pretty much everything that they would require. We think show. We think, as i said, theres going to be some customer segments as to which one we prefer but consumers will end up with one and thats why weve put so many functionality into master pass and you can shapp online hand in the real world because thats what consumers want. Consumers just online people or real world people and very few people do everything in an application so you have to address all the customer situations. Ill be keeping my eyes open. James, thanks so much for joining us. James anderson from mastercard which i think has a new logo today. Did a new logo. Go check it out mastercard. Com. What to expect from wells fargo and citigroup tomorrow after theres a lot of money to be made. But first, investors must ask the right questions. I can. I can. Savvy investors check their financial pros background by visiting smartcheck. Gov welcome back. You go almost say today was all about jpmorgan. The shares were up 1. 5 , but it just managed to post results to encourage the street about one. Hardest hit sectors here. Tomorrow were going to get results from city and wells fargo so the question remains will they be the only one to do better than expected or will the whole sector benefit here . I think the question the difference is that both citi and welts rallied hard today into their numbers so basically everyone is saying, okay, maybe things are better. Last night we talked about how the trading line is one area you cant really estimate very well, a swing factor. Markets very good for jpmorgan. Is that replicable. No one for one for other banks. City bank, at the conference season, only ones to lower numbers. Everyone else was talking about trading and Capital Markets being okay. So maybe expectations are going with them probably being able to beat if the activity came back like jpmorgan said in the month of june. Coming off a win streak today for the win streak. Its a bit of a stretch, no matter what. Down double digits here to date. Thats why it will be the biggie tomorrow. See how it does with the markets. Continued in record territory. Stephanie and mike, thank you. Time for fast money now. That does it for us. Fast money start right now. Live from the Nasdaq Market site overlooking new york citys times square, the traders, tim seymour, dived sieberg, karen main fer and dan nathan. Think the rally has run out of steam in a top strategist says the rally has another 15 to go. Why hes so bullish and could happen at any moment. Donald trump expected to announce his vp candidate as hes surging in the polls. What that could mean for your money and Hedge Fund Investor bill ackman slamming short seller andrew left who is here with a Little Something for bill. Still, we start off with another record day for stocks. The dow and s p seemingly on an unstoppable