Saudi arabia online, the lowest cost facility on this planet. And on top of it, there are legacy issues like the one that we are removing this quarter, trying to remove this quarter, with a new initiations. We also have global news today. China consumer inflation picking up more than expected in june. But deflation remains for a 16th straight month. Countrys central bank is seen keeping policy largely neutral in the near term as a result of that. Here say look at the major asian markets today. The nikkei recouping all of the previous days decline, shy of a new sixweek high. There is a boj policy meeting there tomorrow. Two reports to note, at 7 30 eastern time, the nfi survey of Small Business sentiment, well get that. At 10 00, the Labor Department will release its survey of job openings and Labor Turnover in may. Joe . Andrew. Yes, sir. How are you . How do you solve a problem like alcoa . I guess it is maria, though. A 7 stock, 8 billion market cap. And i like kline felt. He acknowledges we cant do anything, nothing to do with us. Just aluminum prices. 7 youll take, right . Right. But, yeah, but it is a dow component. Do you keep it in there because it is you saw who is going in, not into the dow but the other index, oracle getting kicked out and tesla going in. Why is oracle getting kicked out . I dont know. Oracle is being kicked out. Oracle was ill do a little moving to the nyse. That makes sense. Tesla is coming in. Did you see that . Yeah, it is weird. The highest percentage of government involvement of any company, right . But i wonder, alcoa, how much we still get from that. They make planes out of composite thats true too. Like sellgene, 8 billion and cant control what happens, just control the cost. So it is just weird. It is the first who would you like to put in . I can think of a lot of different people. I would start with april. If you had apple, what would you i dont know. The market cap is 50 times the size. It seems more important to our economy. In corporate news, a number of headliners on the neverending dell story. Glass lewis and eagan jones are joining iss in recommending that dell shareholders vote for the proposed sale transaction. It is 13. 65 a share in cash. Dell shareholder what the heck is that, andrew . Pze pzena. Penza. Because pzena would be different. It would. It will vote against the buyout offer calling it unreasonable. Who is penza . Some guy . Yesterday it was yesterday. Southeastern and carl icahn, that could be anything, had urged led im sorry, dell stockholders to vote against the transaction. All things d reports that microsoft will announce a division restructure on thursday. Steve balmer also is said to want to alter the structure of microsoft segment reporting. And Barnes Nobles ceo resigned. News comes amid a slump in nook sales. The book sales. The bookstore chain failed to compete against the like of amazon, apple, google in the ereader and the tablet market. You have a nook. I have a kindle and an ipad. Thats different. You should be very worried about this situation as a book author. I dont know if you read the piece in the New York Times earlier this week about how amazon is starting to raise prices on books. Oh. Not good if youre trying to sell your book not trying to sell anything, not really. Not at this point. You still you still how often do you get a check . I think it is quarterly. Maybe quarterly or half every six months. Theyre small now, arent they . Still not bad. It is good for the family. Really . Not you use it for tips for the people that work for you or you can youre not going to say no, thats not mine. Thats a good book to buy, your teacher said what . You have my blake kernen, available on blog today about entrepreneurs. How much are they charging . In the huffington post. Let me try again. See if you can blake blogged today in the huffington po post about entrepreneurial ship where were you trying to go is this. Trying to sell her book. Were like two clock radios sometimes, talking to one another, both turned on loud and poor rebecca is sitting here going do i get you dont get paid enough. It is good. I get to wake up slowly while you banter and come into the news. I was supposed to i promised that you would be talking about markets today. Okay. Id like to. I know. When we do talk about that, if you had to pick one market since you looked at so many different ones and all unrelated, which ones would you look at today . I think the tenyear yield is driving everything now. Today i would stay focused on the bond market. If im taking a look over the next six months, oneyear, im going to be focused on emerging market equities. I think the love affair with bricks for now is over. Someone yesterday said it is not over j. Jim oneil. Jim oneil, the man who made the term bricks. Yeah. Hes written a few books. He has a book. A couple of books. Yeah. Im not saying that gold will find a floor eventually. People will always want to have something for the unknown unknowns, but with Rising Interest Rates that doesnt help me. The floor could be 700. I dont think well get that far. Not near term. It is hard to tell. Yesterday, whenever i see cnbc talking about it, the thing at the bottom said, has gold found a bottom . I would put at the bottom, how low can gold go. That would be my thing. And thats the way we look at things. On apple, on the way apple down from 800 to 390 it was, you know, 700, has it hit a bottom. Is this the bottom . Is the bottom . 500, every time we reported on it, it was is this a bottom instead of how low can it go. Let me tell you what im doing, thats rather than me pontificating, we have about 1 , under 1 allocation of gold in our clients portfolios, smallest we have had in years. We keep a residual there as part of the tail risk assets we own in aggregate. I dont think we take it to zero. Im not looking to add it at these price levels. At the margin, it could go down further. What are you locking at over there . Well talk about banking news . If you must. Regulators are expected to propose stricter rules for banks. Were going to be talking to mr. Buvet later. They want eight of the nations largest banks to meet a tougher measure of health to reduce the threat that they will pose to the financial system. Ca kate kelly reported yesterday, theyre expected to raise the ratio from 5 or 2. 5 to 3 . That could have a pretty interesting impact. Tony fratto and others pushing back as you would imagine, arguing this will take credit out of the system at a time when things are fragile already. I dont know if you agree or degr disagree. It would be a pity if thats the case. Thats one of the things we need to see to get the economy to have more traction, more breadth than just homes and autos and the consumer. So if thats an unintended consequence of them trying to rein in risk, that would be a shame. Do you buy it . Or do you think banks are saying, look, the only time we make money is when were leveraged. The more leverage you take out of the system, the less money we make . Thats the business. Right. The question is what is the ideal amount of leverage . 5 the magic number, 3 . I havent seen if you want a banking story, this is the british banking story is more interesting, dont you think . The wall street reporting on the front page there . You wanted to can you explain to the audience what is on the front page . Ill read it right now. Youve been wanting to do this for a while. Senior bankers who are reckless in taking risks could face prison terms in the uk under a plan how do they define risk . Thats a good question. Shakespeare kill the no, thats kill the lawyers. What about this . We have tlilawyers that watc this program. I know. And youre from a law family. I am too, when i think about it. Bankers, people have hated banks since the beginning of the country. But fdr was very outspoken about this. What is supposed to happen is the bank goes out of business and shareholders lose all their money and you lose your job. Are you supposed to go and get a big strapping cell mate as your punishment for risk . Taking up risk . Thats the big. He certain levels of risk taking, they go to jail already in the u. S. Not not all the time, but whats criminal and whats not and what intent is and whether youre if youre defrauding investors or customers, thats different. If this is just who decides . You give someone a Business Loan that doesnt work out it was risky. Lets say for solar energy. The biggest risk the banks take, which nobody likes to admit, is the loan book. Thats the mortgages, businesses, loans to businesses thats the real risk. All this other stuff, you know, is risky. It is a whole different level in terms of magnitude. What about risk of other types of companies, other sectors of the economy that are taking risk with investments or different expansion plans. Should the obama officials that lent the half a billion to should they go to jail . Is that risky or reckless . Michelle obama is now pushing greek yogurt. I eat it every day. She wants people to eat greek yogurt. Specifically . In the schools now, greek yogurt for everybody. Chibani, a big seller on this, still a private company. Garies agay genzler is layi proposals for swap rules. The new rules would require banks operating abroad to hold more capital. Some commissioners fear this would hurt the competitiveness of u. S. Banks. There has been a big debate going on inside the cftc including bart chilten who has come on about this. And Big Questions about the future of gary gensler and if hell remain the head of the firm. The dow closed at 15,224. Indicated higher this morning. Well check on the futures. So we have digested that move in the tenyear and were almost back to it is working. It is working. What . We always said the near term it would be rocky and then long term maybe when do we say ben bernanke, hes done this right, we have been complaining. Were not going to know years from now. Hasnt done any tapering yet. Just getting warmed up. 4 trillion were handling. It is working this week. It is going to be a bumpy summer. We have speeches, we have more meetings, we have to figure out who the next fed chairman is, thats what do you think, by the way, our friend mm, morning money, did you see the isnt cnbc more of an expert than split cpolitico on economi matters. What is ben saying today . That story we read yesterday which we did read about Larry Summers being a real possibility is actually a real possibility, meaning we sort of, i think, pew p poohpoohed it a little bit. You did a week ago, it was out last week, wasnt it . We talked about it more so last week, that Larry Summers how do you think his confirmation would go . I think it would be a tough one. I like him personally a lot, but i think it would be a tough, tough road. By the way. It was a tough road for ben bernanke the second round. Tim geithner would face the same thing. Hes making 400,000 for giving two speeches. Doing just fine. Yelin, i think she would have the easiest time in. Thats one factor. Dont you think the gop would try to block her nomination . Yelin for being too dovish . I dont think they could. I think larry would have a harder time. He height comight come on. He would come on squawk. We consider him a friend of the show. I dont know if it would be good for the country, but good for you. Am i doing this . Okay. It is good for me. Joe kernen. Oil board. It used to be that guys like fisher and others pointed to oil going up for no reason as one of the negative effects of qe. And now we dont talk about that anymore. Somehow were at 103. The economy isnt horrible, obviously. But europe, it is not like europe is going gangbusters, not like china looks great. And here we are stubbornly above 103 and you wonder what some of the markets i dont know how it ends. It doesnt have to be the train wreck with qe doesnt have to be inflation. The train wreck could be trying to unwind and Something Else happens. Im not sure what it would be or how it happened. People like krugman say everybody has been wrong, qe has been negative, no inflation, were not out of this yet and nobody knows how it will turn out. Im going to beat my dead horse with emerging markets. Think about a stronger dollar, think about rising yields in the u. S. And how people are taking money out of emerging market debt because the carry isnt as interesting. Growth is slow. Because their currencies are getting weaker, brazil will raise rates this week. Turkey tightens. We think about how big em is today. When clients ask me what keeps you up at night, this is one. What could make this go badly wrong . If you had enough growth and political problems combined in a number of big enough emerging Market Companies and aggregate that could half of them are dependent, mostly on china. How many are dependent mostly on china . All the commodity exporters and all the asian region. That hasnt gotten as big as some thought it could. I think china will get through this. They want to rebalance and slow down growth a little bit. Rising rates here . You get the stronger dollar with that too and lower commodities. That trifecta that together i think are creating some pain for emerging markets. If it got bad enough that could feed through back into the developed markets and certainly as something were going to hear a lot about during earnings season. Okay. Want to go west . Time for the Global Markets report where Ross Westgate is in london. Good morning, ross. Good a good name there. I like it. My middle one. I like yours, good morning to you. Similar gains to yesterday. Advancers outpaced decliners here by a ratio of 8 to 1. Not quite up at the session. Getting back down towards the session low. Ftse yesterday up about a percent. Earlier on we were repeating that gain. Little below at the moment. Just up. 9, the cac up twothirds. Ftse up about a third. Look at the sectors earlier on today, no sectors in negative resources. Basic resources leading the way. This is sectors. Resources still up this morning. Inflation data out of china stronger than expected for the month of june. 2. 7 . Looking for 2. 5. A lot of that coming through in food prices. Producer prices actually fell, so not quite the worry we might have thought previously. Just telecoms fairly flat at the moment. Lvmh one stock in focus today. The french luxury goods group, up 2. 2 . They announced theyre spending 2 billion to buy loro piana. Not often you get stock going up when it makes a buy. Silvio ferragamo up 1. 68 . Were getting a phrase that may be made in italy but not owned in italy as a lot of fashion houses coming under the spotlight as a result of that deal as well. Greece has got their money. Well have to see how they meet the conditions. That did help greek, lower today. Spanish yields, a little higher, yielding 4. 73 . But they have got their money and portuguese government is holding firm as well at the moment. Currency markets today fairly steady, posting nonfarm payrolls. Eyes on sterling. We had for the first time today weaker than expected data out of the uk. First time in a while coming in slightly less than we thought. Thats where we stand in europe. Do you want to spend your poor bankers to prison if they take too much risk . How do you measure reckless . I dont know. What is the difference between reckless and incompetent . I dont know. What is the answer . What is going to happen, ross . I dont think it is going to get into law because of that particular issue. Doesnt anyone ever think about these things before they start youre so you fly off half cocked over there in that country sometimes. I watch the way they like to float no, politicians like to float ideas, right, they like to float them out to see what the reception is and then make a decision. I watch those two houses you have and we have two also that are starkly different, but it is like a fight every day in the house of commons, isnt there . You need to get a little more civilized. It is an adversarial chamber, two sides facing each other and get joke and all that kind of stuff. On the bankers side, they have also talked about whether they should put the burden of proof on the banker to prove that he wasnt reckless. Not sure that will happen. That takes away the innocence until proven guilty. And they dont want to do this in any other industry, right . No, just in banking. The other question is, on the one side, if you are in danger of going to prison because youre reckless, what does that do to your Risk Strategy . What if you actually do something to do we save torture for, like, madoff . If you got reckless, they make the wrong move, they go to prison, what do you do for actual malfeasance and fraud . It is hardly going to encourage you to expand your loan book, which is funny enough, exactly what politicians bang on about all the time. Ross dude, you still i was just there. You still got that stuff in the tower of london. Not being used. People are milling by, looking at it. It is ready to go. Really. The iron maiden, there is a lot of things that are ready to go right in that place. Right . The tower has been underused for too long, joe. Right . You got the facilities sitting there idle. All right, were going to right in the city. Youre right. It is the perfect position. I thought that was crazy. Thank you. Thank him. And whats coming up. Thank you, ross. Coming up, could there be a market Storm Brewing in the form of Quarterly Results . Well get a forecast on that. A real storm developing in the caribbean and could be headed for florida. Say hello to chantel. Squawk box coming right back. We have a Tropical Storm developing, lets get the National Forecast from the weather channels alex wallace. It is it is july 9th or something. Is that where we are . Were on c. Is that normal . Slow . Where are sfwwe . Running maybe one or two storms above normal at this point. It is not unheard of, but certainly a quick start to things. Three named storms at this point. Well talk about chantel in a second. Update on the northeast, unsettled, a storm system hanging around that will keep us a little showery and stormy for the day. Best chances back across the interior areas of the northeast. But even up and down 95, the threat for storms in place there. Into the south, just a very muggy humid time and with all that moisture in the atmosphere, we get to the afternoons, those storms will begin to pop up. Nothing organized, but keep that umbrella handy. Made it in places like atlanta, back towards charlotte and even around birmingham. Then as we track our way to the middle of the country, heat the Story Building the ridge of High Pressure here. Triple digit numbers pretty widespread including down around dallas. As you mentioned, our Tropical Storm is getting close to the lesser antilles, to the east of barbados and moving to the west northwest at 26 miles per hour. Projected path as we head through time, moving to the caribbean, impacting the island of hispaniola and towards the end of the week, palbahamas and maybe by the weekend, parts of the southeast coast may have to deal with chantal. 2005 was really active. We were in es and fs and got to gs in july. But that was one of the most active i think in history. We were on dennis on july 5th already. Were on chantal. So how big what is the worst case snare yes fcenario for thi . The system hanging out here and slowing down and dumping a lot of rain. That would be the worst case. It already is very wet across florida and the northeast. Were not thinking this is going to blow up into a big, powerful wind maker, but rain. Last time it hit, like eight years or something. Do you know . Off the top of my head, cant quite recall. A while, though. Doesnt look just a Tropical Storm at this point. Right, right. Lets get a check on the markets. Joining us is surat seth. And our guest host, rebecca patterson. Youre called the principal. What is a higher or lower title than a principal . Principal means youre the owner of the company. If youre a partner cant call yourself a partner if youre an scorp. A little term we use. Principal is a interesting. I knew it was i didnt know if that meant you were founder and owner. Doesnt matter. Lets talk earnings. We had alcoa, some big ones coming up, yum later this week, jpmorgan, wells later this week and then the train truly leaves the station. Your expectation for what were going to see . I think well see earnings come down a bit. The expectations are flat, were not going to well be honest and say sandbags. I think the companies that going to sandbag are going to get hurt. The market is looking for growth. If youre not going to show top line growth, you have three years to really redo your Balance Sheets, Interest Rates have been low. You can invest in different areas. If you didnt do that and now still making excuses, Commodity Prices have come down. We know the dollar has gone up and youll get hurt and talking about emerging markets and international. If you cant show you have the products, the Revenue Growth and just financial reengineering, youll get hurt and your multiple will three weeks from now, if you came back on the program, to look back at whats just happen ed, will we be happy with the earnings picture . Will we say ben bernanke, boy, can he taper . The employment picture is better than what we thought . I think it will be uneven around sectors. Consumer staples, utilities get hurt because theyre already at much higher multiples than they should be. Commodity prices come down, but wont show Revenue Growth. Youll see cyclicals like autos and industrials showing the next two to three years will be much better. Semiconductors depending where you are, industrial sector, you have to pick your spots. And then you got say, these are the areas i want to be in. I dont want to be in areas that are not going to grow and those multiples which youve already seen are much higher than the market are going to come down. You would not buy an index right about now . I wouldnt, no. Were looking very bottom up. Our sector bets tend to be organically grown, if you will. But right now we are relatively more focused on u. S. Stocks. Taking harder looks at companies that are going to benefit from low input costs to your point Commodity Prices coming down that will benefit from the u. S. Doing better. I thought the alcoa comments were interesting in that despite their exposure to china, clearly slowing, theyre doing okay in part because of the Financial Engineering you mentioned and also in part because of autos. They wont get the multiple for the Financial Engineering. No. Theyll get a multiple expansion. You need aluminum prices, half their business. But the other part, the auto parts, the airlines, thats doing well. Thats a foreboding to say well, industrial sectors will do well and Certain Companies in those areas like the autos will do well. Emerging markets, it has been killed. It is going to keep getting killed for the reasons you mentioned before. The theme and i heard it from other people, you got to get in right now. It has been hit, its been hurt. If youre a longterm player do the yums or autos where they see growth and not get exposed to the brick and get hurt even more. Thank you for this. Well check back in a couple of weeks see how it turns out. Later, well turn to the big Financial Reports due to hit the streets later this week. Well talk to dick bove. Coming up, a live report from cairo. Video of the Army Shooting stoking so much anger there. The Washington Monument was lit last night. The 488 lamps turning on, a blue fabric wrapped around the monument as the building has been undergoing repairs it sustained during that 2011 earthquake. Officials hope the lighting of the monument will reduce disappointment by visitors still unable to go inside. Ive tried to go up in there and you not to wait in line to get tickets. The monument will be lit each night at dusk while the building is being repaired over the next year. How does that play with spending cuts . Right. I think a lot of it is privately funded. Oh. Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Every day were working to and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. Hooking up the country whelping business run build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . The ones getting involved and staying engaged. Theyre not afraid to question the path theyre on. Because the one question they never want to ask is how did i end up here . I started schwab for those people. People who want to take ownership of their investments, like they do in every other aspect of their lives. Because what you dont know can hurt you. Urance, what if you didnt know that its smart to replace washingmachine hoses every five years . What if you didnt know that you might need extra coverage for more expensive items . And what if you didnt know that teen drivers are four times more likely to get into an accident . sup the more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum welcome back. The Egyptian Military release video it says is proof that its troops were tacked. It claims to show supporters firing at Security Forces at the Republican Guard building in cairo. Yousef gamal eldin joins us live from cairo with more on this story. It is still not quite clear what exactly happened at the Republican Guard headquarters, conflicting stories and conflicting evidence as well because both videos, the ones that were presented by the pro morsi supporters and the videos outlined by the army show snipers and shooters from rooftops. Not clear who the people belong to or what group they are part of. So still a lot of mystery surrounding this shocking and very disturbing incident that killed 51 people. Also, of course, added fuel to the fire when it comes to the political impasse because the only islamist representation in the political transition, the islamist nor party has withdrawn in objection to the violence that happened on the streets. That is delaying the cabinet announcement. We have a decree from the new transitional government. Theyre now saying that they are hoping the spirit will take less than six months, going through parliamentary elections, president ial elections. That is a bit of a stretch, analysts say. The market is trading to the upside and shows that investors, despite the violence, are encouraged by the progress theyre seeing on the political front. Thank you for this. Appreciate it. Im sure well be talking over the next hours and days. Just, you know, so much chaos. How do you know . Im sure both sides have, you know, have firearms, right . And then you dont how do you go back and figure out who and six months until an election, a lot can happen in six months. Thats a long time to wait. Back to the markets. We had someone the other day state fair value for the tenyear is 230 to 280. I was saying to rebecca, one of the things our strategist has done is look at where real yields have been and based on gdp . Based on actually looking at where nominal yields are less. So looking at real yields and based on again, the core pc deflator, like 140 is an average level. If inflation now is running 11, lets assume it is 1 1 2, our guys put it closer to not far from where we are, thats why our strategists are thinking for the most part, the back upup in yield has run its course. Well look for tapering in september. This is going to just like the fed has guided us, this is going to be a slow wind down through the middle of the year. It seems like people are better positioned now for that scenario. Why did anyone think the fed would lose control of the situation if the yields were basically where they would be even without qe . Well, okay, i guess what i think the market was always kind of struggling with and this is the problem with open ended qe is we couldnt i dont think the market knew where yields should be. Why didnt they do that calculation . The open okay, you could come to that kind of level, but the open ended nature of qe kind of distorted, i think, the price section. If people knew we would get 600 billion, everyone would run their models and figure out this is where yields are, this is why, i think what happened was without being able to do that, it was hard to figure out maybe people were anticipating inflation and that would change your formula. Thats exactly right that could absolutely be the case. Also the truth is, i mean, we dont necessarily sit at fair value. If there is there are times where you run real yields are higher than that and lower. It isnt necessarily people looked at where we were on yields before we had qe and much higher levels. Did europe and china and the rest of the world help us minimize inflationary expectations by being so slow and being so problem ridden . I think that and just the fact that inflation has been so well contained here. Even myself who looked from the beginning at this very aggressive monetary policy, and was always quite worried about inflation, and every year the numbers are kind of stubbornly steady or lower, so you start to wonder if the calculus has changed. And the product of easy money is no longer report and Consumer Price inflation but asset values or things along those lines. If youre thinking the tenyear is basically baking in, tapering, and theyre not going to rise meaningfully for a long period of time, would that suggest that you think housing can keep slowly ticking along . Right. There is certainly a lot of concern, what will be the impact of the backup on the economy. I was saying, first of all, this recovery hasnt been the normal Interest Rate driven Interest Rates have sparked all of this activity. Most of the decline we have seen thus far in activity, i should say, is refi activity as the result of this bracket. Were on the purchase side. If im correct, or if our strategies are correct also, and most of the backup in yields has been seen, i dont think this is enough to derail the recovery. I think it would argue against an acceleration in the second half of the year, which a lot of people are looking for, this will work against that. But lets face it, people getting jobs and the economy, people growing more confident in the economy, not being worried about fiscal, you know, drag, perhaps, turning things slower, i think all of that every month somebody else gets a job, you have a potential home buyer that you didnt have perhaps the month before. I think in the end that ends up being somewhat of an offset. Thanks, michelle. Thanks. Coming up, the stories like lighting up the news wires including outflows at pimco. Check out the headliners for cnbcs delivering alpha conference on wednesday, july 17th. We have nelson peltz, carl icahn and john paulson. For more information, check out delivering alpha just deliveringalp deliveringalpha. Com. And this will be your premium right here. Sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. Love this guy. Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] bundle home and auto and you could save 760 bucks. Alright, mama, lets get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. State farm. [ male announcer ] get to a better state. Ever state farm. Ybody has differenter ] get to a better state. Ideas, goals, appetite for risk. You cant say one size fits all. It doesnt. Thats crazy. Were all totally different. Ishares core. Etf Building Blocks for your personalized portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Welcome back to squawk box. Pimco suffering record outflows across its u. S. Mutual outfunds in june to 14. 5 billion. We could whistle at that. The outflows were the first across pimcos u. S. Funds since december of 2011. And we should probably talk to Mohammad Larry about this. Coming up, while watching tv may never be the same again, youre about to meet some pretty interesting people. Check out some new technology that raises the bar on being interactive. Meet the disrupters, a touch cast, right after the break on squawk box. My mantra . Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. Welcome back to squawk box. Our next guest, if they get their way, we will all be searching the web. Touch cast cofounder and ceo. You goes were showing us stuff during the break. Can you give us a along at whats going on . Just explain what this new technology is. Its pretty mind blowing stuff that may revolutionize what we do every day. We dont do a lot of cutting. We will be, very soon. Ito, explain what this is . We expect the consumers will be dock a lot of touching. They are expecting to touch every screen, similar to this viral video of a little 2 i dont recall touching a magazine with her finger feeling like its broken because its not responding, the same will happen for broadcast, we believe. As people at home are watching this. They will be expect to touch every graphic an interact with it. When you talk about a story, pull up some video, they will be able to tap it, interact with it. We believe the future of the web which is currently based on a magazine metaphor, a premetaphor is going to shift into the metaphor of the cnbc, where the canvass of the web is the assumption, therefore, that everybody will be watching tv on an ipad, are people going to literally go up to the tv and start touching it . How is it going to work . 23 think the ipad is a precursor for what the tv will be in the future. We dont know when that is going to happen. Everyone has been expecting apple to come out with an apple tv. They have been expecting that for years. Hopefully, we have the ipad as a precurse roar, until that time, can you watch it on the icast and the web on a web browser. You can open up a web browser and stetd of having a magazinelike experience, can you have more of a broadcast tv experience. So if you are watching, lets say you are watching cnbc. Or go to the website. Or go to cnbc website. Ly have both of those things on the screen at the same time. Ly have the ability to pop up. When june says something about alcoa, i can click on it and find more. I have cnbcs website right here that i popped up. If you look at it, it looks lo like a magazine. So here we are. Why does cnbcs website look like a pittsburgh when it could look like a tv show . You dont want to give up all of the interactivity at the web touch cast, you can add elements of the web into the video. You dont have to give up that interactivity. Thats what people want on the web. They want tob able to control. To click on if they clicked on my little head there, what would happen . Would it fix his hair . You are not interactive. All the almosts you place into the video. If there is a chart of alcoa, can you touch the chart of alcoa and get data out of it . Yes. In fact, i set up a cart right here where i have dell stock. Check out this over here. Its after hours, not much is happening. If that was during trading hours, youd see apple trading stock. That would pop up on top of what were doing . And as a viewer, can you look. You have an image behind you of the desk of us . Right. And then you, i would place you. So here i am in the middle. So this is how you think we will all want. You will develop something that doesnt smudge . The screens are disgusting, some of them after a while. I dont want that on my tv screen. I dont want fingerprints. Cant you develop something . A hologram. Microsoft is working on that pretty aggressively. They are. Its gross. You use your hands, its like the knect. You can interact with it. In the future, you can interact with this information. You dont want to stand up and go to your tv. You want to be able to stay on your couch. This is all minority report. You should see what they do for professionals. Meaning tv broadcasters, we will have screens and playing with this stuff . Front of us. We started with an ipad, a consumer app. Its free. You can download it from the store. Anyone can produce a touchcap. Check this out. This is what were talking about here. Hes now moving around a professional screen. All right. Is this what were looking at . Media companies such as cnbc could use our rig or our pc version. Go down to the ipad. You can give the ipad to reporters in the field. They can have a tv truck in their hands. Right now, a lot of Media Companies are having reporters cheat obvious iphones with no graphics. Can we talk about the money . Where is the money to be made for you and the broadcaster in owl of this . Basically, our business is to support people like you and give you the tools to move into this new era of the new videowell web. We also have a model for consumers, whereby they get this free app, they can upgrade to functionality. Is it Nbc Universal will make more money ultimately bus we will be building alds . Is there going to be product placement, where all of a sudden you will see, if you like this tie, im going to click on andrews tie, im going to buy it from hugo boss . I think the key term thats relative is engagement. Whenever we get them to enga ij in a more indepth way, i think we will create new forms of advertising, we will engage in interesting ways. So whatever product the company you are interviewing will talk about, they will doiv in. Everybody is chasing video ads online today. Theyre plain vanilla sit back and watch. Theyre nonengaging. Thank you for coming in this morning. This is really interesting. Come on back. We should play with this stuff. Coming up, we will turn the focus on financials. Plus, how should investors play this earnings season . The strategist at bemo Capital Markets will join the conversation when squawk box continues Norfolk Southern whats your function . Hooking up the country helping business run trains they haul everything, safely and on time. Tracks they connect the factories built along the lines. And that means jobs, lots of people, making lots and lots of things. Lets get your business rolling now, everybody sing. Norfolk southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary Cloud Infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Good morning, welcome to squawk box. Take a look at the futures this morning. The dow looks like it will open 46 points higher t. S p up 6 points. The nasdaq a little over 9 points. Lets check markets around the globe. Asian stocks are rebounding overnight, nikkei leading gains with a 2. 6 move higher. European stocks are up. Alcoa got Second Quarter earnings off to a decent start. Take a look at where the european equities are. You have green arose. I dont want to say up a percent we round up, thats where we go. Gold is rising the most in seven secs after a breaking through a key tactical level inflation data out of china. Heres where gold stands right now. You can see it there. 1246. Lets talk about the other news, we talked about alcoa, reporting Second Quarter profit up 7 Cents Per Share. 1 cent above estimates. Alcoa is feeling the effects of lower aluminum prices. Also, wd40 earned 66 Cents Per Share for its Third Quarter 10 cents above stills with ref few beating consensus, the maker of the popular yearly forecast on stronger than expected sales. You are give egg me a funny look. Wd40, i learned yesterday an interesting fact that they hired a person to develop the smell of wd40, which is one of its secrets of success. A very specific manley but not overly manley clean car smell. Kind of a nasty smell. Really . I dont. You can fix anything with wd40 and a little duct tape. Thats in a song, actually. Wd406789 i was looking at it. I wouldnt have been surprised if it had a bigger market. Its only 800 million. But i love our, it works for us. We will stick wit. So is the dow. Microsoft had low revenues in an hour almost than alcoa as in a quarter. Microsoft expected to announce a major restructuring of the company on thursday. According to all things digital, an announcement is coming, the timing could change. Ceo Steve Ballmer signaled to shareholders last fall, he intended to reorganize the company. Its so divisive, i go es the stocks have been doing a little too well for ballmer, finally, it looks like its ready to break out, almost. Well take care of that. An announcement has been expected. Lost week, it was reported the revamp was a reason the xbox guy was interesting. Actually, a good guy. He left the company to become the ceo of zynga. Also, this morning, barnes and noble ceo resigning from his post effective immediately. No successor has been named of. For now, three Division Chiefs were named. They will report to the executive chaerm. The trio is michael huesby, mitchell clipper around barnes and Noble College ceo mat schriver. Theyre all pretty good guys. I hate to tell you, i dont know any of those guys. You dont know any of those guys . I heard of roberts and clipper. Roberts runs the College Division which is actually still a very possible business. Is that what you are trying to suggest . Eventually, everything will not be a big heavy return. Check out shares of barnes and noble in premarket trading. You can see there the stocks up, well call it marginally, after a tough day before. There you go. Our next guest says its hard to tell if the dramatic rise in yields is over. It looks like this great rotation is under way here now. Robert tipp, chief prudential strategist. Robert, tipps, seriously . I will not have a focus on tips today. We talked to a guy named dow about stocks and tipps about tips. I say bemo. Is it also a bank . Everybody needs a bemo. All right. But its bank of montreal, right . Rebecca pat terson is here from bessemer trust. Mr. Tipp, what are you telling me the dramatic rise in yields is overdone . Yeah, i think it is, i think we saw a mini stampede, that people have been fearing for some time that retail is going to sell their bond funds and stocks have been doing really well. The economy is recovering. People have that kneejerk reaction. Reusually find, though, when the economy is recovering, when are you waiting for the fed, people are getting anxious, you have a big selloff. Thats usually the buying opportunity. You cant wait until the economy crests. Usually the big yield happens in advance. It has to be then, we have to look at it then not on an absolute basis . Thats right. If are you characterizing a move from 2 to 2. 7 as a stam speed, what happens when we get back to normalized . We were at 2. 4, now 2. 7. It doubled. You remember bernanke in 2002 talked about the risk of deflation. Since then, the tenyear treasury averaged 3. 5 . Yet the average level of growth in this country and cpi inflation continue to come down. So given the overall backdrop of how high leverage is here the fiscal consolidation, we have been doing a 2 growth here. Thats where the sub 2 tenyear note. I dont think we can take a higher level of interest. Be i the way, the u. S. Economy is a bright spot. Im not suggesting 1. 5 for five year and a tenyear note is something thats attractive. You should buy, medium grade muns pals, high yield bonds, emerging markets, talking five plus Interest Rates out there that will be attractive for retail investors, either in traditional fixed income products or there is also the corporate community. You remember back in 2008, stock prices were depressed. Interest rates were down, Pension Funds were underfunded. They were saying, you know, when stock prices come back up, Interest Rates go up a bit, i will buy longer maturity corporate bonds. That commune is the out there as a potential buyer as well. What im sear e hearing is that both the Global Economic outlook and global inflation outlook neither one of those really disagree with what our bond are right now, what the ten year is. This is not an unusual place to be . No, its not. Does it matter where these investors purchase their bond funds . The majority of the inflows we have seen in the last five years happened in 2009, right, in the bond funds . Sample we had steady inflows. The majority at that level. You mentioned 1. 4 him how many people bottom ticked at 1. 4 . Then you have to think about demographic trends. Absolutely. Where is the pain threshold . Because from our viewpoint, investors will sell their bonn when they feel pain, right . That was the asset choice, it was the safety net. When they look at their statements and see losses, they will feel pain. So whats that pain threshold from your lens . You know, we have seen some volatility in bonds. You remember in, you know, the first half of 2009, it was up 200 basis points. At the end of the 2010, we sold off 150 basis points on the ten year. People have seen volatility in the market. I think its an underlying bid. Even last week, after the declines we have seen, the emerging markets and high yield, you see a number of categories go positive last week. I can tell you this is the high and yields. People are going to go back to sitting there in zero, in cash. They will see the volatility in the stockmarket. It will be a long time until you get the feds. Until you get an idea of where you think it is. Why dont you tell us where the pain is then, brian . Are you socrates . Where do you think the pain is . I think there is a huge dichotomy between the feelings of a bond bubble. Because there can with the a bond bubble, because you hold your bonds to maturity and you get your interest back. So where is it . 3 . I think it starts at 3 . Think of mom and pop in topeka, kansas, they bought a total bond fund at 1 . All of a sudden they open up the newspaper the New York Times, they see se 3 , i dont think so. Whatever. Kansas city star. Good bless them. Theyre the salt of the earth. Exactly. They see 3 . Is that enough pain . To your point, robert, we saw these huge flows in the Fourth Quarter of 2008. Out of equities into cash is the weigh station right . Then they went to bonds. I think there will be a similar type of transition. 3 , that i go into cash, eventually into stocks . Thats what you are saying . We see two kind of clients. We have clients that think about their bonds like some think about their gold or their home. Theyre not going to sell it no matter what. They will sit on it until it matures until we advise them. We have others that say, jesus, get me out of these bonds now, im scared. Their brokers name is jesus . Is that why you said it . I know that guy, in the business. Jesus, sell my in your view then, this is the calm before the storm in the equity rally . So that would be pa lot of money coming in equity. I think people have it completely wrong. We still have a chip on our shoulders about equities, its been 30 years our bonds have had a great run. We think we are headed. A 15 year growth market. Remember they kept talking about he had the worst ever. People will notice that on their statement eventually, right . Think about the Pension Funds, everybody had the risk parody strategies why they levered longterm bonds, that was bridgewaters key to success for the last several years, a hugely successful thing when rates are coming down, they posted pretty nasty numbers. Can we get you to recommend tips . Wouldnt it make sense . I like the long ones. But that is the sector that was the most. If there was a bubble, it was in the tips market. I they the pain train is going to be the zero yield factor. You know, our yields are up here 2. 5, in germany there is some 2 . There is some 1 . Its a big world out there. I dont know if i want to follow the tren in retail. I think we saw a mini stampede, the opportunities are good, for people that cant stomach the traditional fixed income space. So you might be buying a tip. If you had a 2. 8, youd buy . On tips . I think, i dont know if you want to go by treasuries here. I think you want to go into the spread product t. High yield corporates, immediate merging bonds, some of the international. You guys disagree, i think. I agree on stocks, thats true. I think the big migration is going to be out of the cash into longer term assets. You havent told me why you think we are going up above the 3, thats the thing. Well, the thing about Interest Rates and the bond market, we have no now reconnect with the fundamental also the economy continues to improve. Its not about inflation. Its about the economy chugging along, joe. Remember, whats the average tenyear treasury yield the last 100 years . 6, 5. Anyone . 100 years. Probably 3, right . 4. 84. Over 100 years. Thats really skewed by your 1960. That is the problem when everyone says normalized Interest Rates. You tell me where you got a normalized thing. Where was it in the United Kingdom in the 19th century . Under 4 . Those were real markets. So you know. Are you saying our market is not a real market . Hes saying if the banker i know you, i understand your point. I think the economy is chugging along, Unemployment Rate is higher than the peak level of the last recession. Thats one of the more favorable. All right. Gentleman, robert tipp. Robert tipp. Thats cool. What is that . A shortened slavic name. Just for today you didnt think andrew could pro noupt it. Trust me. That was a smart move. How about brean. Very good. Mine was shortened, too. Bellski. Your last im in. Okay. If you got comments, questions, about anything you see here on squawk including my own mispronounceation of names, shoot us an email. You can always follow us on twitter. Still to come this morning, wells fargo and j. Perform morgan this friday. Should investors wait for the numbers or by now . Dick bervais will join us when we return. Checking the futures right now, we have been in a pretty good place after that scary week, we were ahead that 400point move down. Weve gotten almost all of it back. Supermarket giant kroger, lets go kroger. Oh my word. Are you kidding me . I know Harris Teeter so well. Harris teeter. Its a great, great supermarket. Croaker is my hometown. Lets go krogering at the happy latest shop. Buying Harris Teeter supermarkets, croaker is either based in cincinnati or, you know, it was the supermarket of record growing up. Its going to pay, my uncle had his own, it was a dirty word in my house. It will pay 49. 38 a share. Harris teeter ahead announced in january it was considering strategic alternatives. Harris teeter has more than 200 stores primarily in the midatlantic and southeast. There you go. Look at you with your two market geography. Like sully. Its all coming back to me. Croaker says it should increase 6 to 9 cents a share following completion. Theyre going to bovay. Were going to florida. Fdic announcing new is he french . Bovay is very cosmopolitan. I dont know the answer. He is wearing a threepiece suit. The fdic announcing new requirements for the boompg. Lets get a preview on what to expect. Joining us from tampa capital Vice President of equity research. He is wearing a three piece and pin striepts. Is it italian . Italian. The suit or you . Both, programs. The word bovay means a bow in italy. That explains a lot. Same difference. Before we even talk about any of the earnings stuff, we were talking earlier on the front page of the wall street journal, i dont know if you saw it on whats going on in europe, in the u. K. Specifically, how they want to go after bankers who are reckless, put them in policen. Do you want to weigh in . Its obviously absurd. Its basically the story was sold to the populations of the United States and britain that the bank has caused the great financial crisis and now politicians are doing everything they can to ride the wave of popularism by saying, were going to get the bankers for this for that. What theyve forgot isnt not every country in the world is attempting to harm their bankers, bemo in canada has no restrictions on the ability to grow. Its growing in the United States t. Chinese banks have for the restrictions to grow. So these angelo countries that are attacking these banks are going to winds up with a lot of chinese banks and canadian banks all over the place. Let me segue from there then with this question, is the fdic attacking the banks by trying to raise the capital ratio at these banks from 3 to 5 . Well, its kind of a turf war. I think they they will go 3 to 6 ment its a turf war by the ted which believes in the basal 3, methodology allows banks to cheat in order to get high capital ratings. Soitative come up theyre cheating because they can do something called risk waiting of their ray sets. In other words, if they have 100 billion in treasuries, which a lot of the big ones do, thats weighted at zero. Allows your capital ratio to be much higher buus the denominator in the calculation is low. So the fdic says, look, you guys are allowing them to cheat. Theyve hit these high capital ratios because theyre cheating. So we want a different ratio. We want to use a leverage ratio. The Federal Reserve board comes back and says, well, we dont like the leverage ratio. If we use a leverage ratio, we have no way to gain owe the conclusion is lets use both of them. In the dick bovay, if you were the world, tow, what should be the right conclusion, both from the perspective of being a citizen of this country and wants our banks to be pros republican, then you can put your Investment Research on. I think the fdic approach is a better one. I think its straight common equity divided by assets the ratio should be between 6 and 7 . I think thats a simplistic method. Its one that worked the last 75 years. I think its the right way to go. However, no one in banking ever comes up with a simple solution to anything. Maybe you or i would understand what they are doing. Exactly. What are we going to understand on the earnings front . On friday as well as wells fargo, then we get into bigger action next week with Morgan Stanley group et cetera. This should be a sloppy quarter. I think its tough for them to do it for a 15th time. I think the reason is pretty simple, banks do pretty much what the economy does. We did not have a great Second Quarter from an economic stand point. So were not going to have a great Second Quarter in terms of Bank Earnings. I think that loan volume in the two big areas, commercial, industrial and Residential Mortgage have slowed down dramatically, price competition has picked up to push margins lower. You got this issue with longterm rates going up, creating issues of our capital. You got the fact that trading, you know, did pick up pretty good for a couple months in the quarter but wasnt great the whole quarter. So its just not going to be a great quarter. Dick at 55 per share for j. Pm morgan, a fair price shourld you sell out of these numbers . Well, i have been pretty messed up the last monthandahalf, because i have been expecting a 10 pullback in the market, which obviously did not occur. So now im chasing. I dont want to give up my holding of j. President mitterand morgan or bank or america or citigroup or Morgan Stanley or whomever, bake amy, i think the second half of the year is going to be pretty strong. Again, if banks are going to reflect the economy and the economy is going to be advantage in the second half, basically, i want to stay with these stocks. So if the numbers are lousy on friday, how much are we going to take away from that vs. What we will be hearing in terms of forecast . What are you actually listening for . Well, im looking for a buck 44 for 1. 91 cents for the other one, j. P. Morgan and wells with the 91 cents. I think if we miss those numbers, the stocks will come down a bit. I would buy them on the weakness, because i think that the second half theyre going to be quite strong. Okay. If you take a look at the various elements of the economy, it looks like Bank Earnings could be quite good. Dick, do you think, what we do for politicians . What if we sent them for jail for a crappy law or ineffective law or money that they lose, im looking at new york, do you know how many politicians were convicted in office . Have you ever looked this up in your home state . Have more bankers been to jail . More politicians gone to jail . How many football players. Like 25 were arrested since the super bowl or something, new york, i mean, bruno and monsurrat. I think theyre doing time right now, dick. I dont know, politician, now i see why they want to send so many people to jail, theyre used to it, right . I guess. I guess. If you put all the politicians in jail, washington would be a ghost town, that would hurt the economy. Then wed be doing 6 gdp growth, dick. Anyway, thank you. See you later. Italian. From my hometown. Tampa. Yes. Coming up, the state of Small Business, we will hear from the nfi chief economist in a couple minutes. We will ask him whether its clear sailing because of the employer mandate pushed back. We are striking up the band. The animal orchestra is back in town. Playing its greatest hits. Type out which names need to be on your watch list. Squawk box will return after a quick break. Oh, hes a fighter alright. Since aflac is helping with his expenses while he cant work, he can focus on his recovery. He doesnt have to worry so much about his mortgage, groceries, or even gas bills. Kick kick. Feel it feel it feel it nice work you got it you got it yes aflacs gonna help take care of his expenses. And us. Were gonna get him back in fighting shape. [ male announcer ] see whats happening behind the scenes at aflac. Com. [ hooking up the countryats hwhelping business run nes build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Welcome back to squawk box this morning. The headlines, kroger, joes supermarket of choice, buying rival supermarket operator Harris Teeter in a 2. 5 Million Dollar cash deal. Teert supermarket of choice. Kroger will be paying 49. 38 per share. They have announced back in january that it was considering strategic alternatives. Now, kroger is your supermarket of choice. They own Harris Teeter. The treasury is also going to be selling 32 billion in the threeyear set today with the results of that option available shortly after 1 00 p. M. Eastern time. These auctions have been watched as yields have been rising obviously to their highest in two years or more. Finally, pimco, morningstar reporting the bond fund giant saw outflows of 14. 5 billion last month. Keeping record 20 years ago. Joe. I looked at jersey, its much smaller politicians because they didnt name all of them. Thats why its smaller. 44 just in one bid rigging case. Remember that one . The fbi, anyway, we were talking about politicians in jail. Since in england. Give 93 nfl number. Its 25 arrests since the super bowl. An fbi sting operation invited 44 officials and several rabbis. Remember that, mainly for bribery, counterfeiting, money laundering, organ harvesting. I remember that. They dont mean, they mean kidney. Nice. All right, the National Federation of independent business out with its latest reading on the economy. Nfi Small Business optimism down in june. Joining us is the chief economist at the National Federation of independent business and you talk about whatever you want to, bill, have you been on since the employer mandate was, are you allowed to do that . Isnt it law . Are you allowed to say the law is not the law . Can we just say, well give an extra year . Do you know . Can we do that . You know, im not a lawyer, but it looks strange to me. Its kind of like having a lean item veto or a temporary veto. Its the law of the land thats supposed to start. Money is a little tight for me right now, bill. Would you mind if i pay my taxes in a year, would that bother you . Its just i got some other things going on. Give me a year, would you . Well, if the irs says you can do that, they wont come after you by default, you can get away with it. This irs isnt going to cut me any breaks, i can tell you this much. They watch cnbc occasionally. All right. Tell me about whether this mandate is at a positive, does it remove any uncertainty . Its something that business supposedly wanted. Now that theyve gotten it, will it help . Well, im not sure they wanted a delay per se other than that, everybody is not ready for this thing, including the government, the exchanges arent even in place, so in some sense, i feel its a relief because chaos would be a lot worse than, you know, than putting it off for a year, but still, the fact that the government had to put it off and say theyre not ready, all the confusion, its just, you know, thats just more your honor u uncertainty, when will it come in place . You know it will come in some form or other, you dont know what the form is. So you are just guessing. So as many as 40 of the Small Businesses say theyve put all their growth plans on hold, about 38 or so said, we just have a freeze on hiring until we find whats really happening in this market. Thats certainly not conducive to job growth. Bill, its rebecca. I saw the business sent i. S it was a little weaker than expected this month. In that report, it looks like the jobs expectations numbers is ticking along nicely, Small Business being about half of private sector jobs, are you still pretty optimistic Going Forward that we will see this part of the economy growing jobs . Well, becky, you picked up the one piece out of the ten components that did advance. We did see a 2point gain in the job creations plans. Thats good. But there are still some interesting issues going on out there. First of all, you saw that big swing in june, a lost of jobs, 240,000 and a gain of 360 parttimers. Thats positioning for what we thought it would be obamacare taking effect with a six month look back period. So that certainly happened out there. We are hiring some. We flattened out for this, for the last two months. We have been hiring. But nonetheless, its been weak, even though the job numbers that look pretty good, 200,000 is way below what it should be. The flipside of that question is we have been doing 200,000 a month for the lost few months, where is the gdp . These people must be making something, maybe it will show up in the Third Quarter, which would be nice if that happens. So were just not sure whats going on out there. We do know. Job growth, sorry, if its slow, if job growth is slow and the economy is disappointing, then how come Business Sentiment is still near a oneyear high, whats supporting the sentiment . Well, its a oneyear high, but its a 40year low, the problem is that the optimism index is 7 points below its average going into 2008. So 38year average, were 7 points below it. Were like 14 or 15 points below where you should be on a good expansion. So historically, if you look at where the numbers are, were not in very good shape. Were kind of high end recession numbers here. What question need is these people to get more optimistic in the future and hire, there are two sources of jobs here in the Small Business sector. One, of course, is new terms. It looks like we have new firms starting than losing. Thats good news. The other thing is the people that fired everybody in the 2008, 2009 recession need to hire them back. Thats whats not happening. So we stopped firing people, were not hiring them yet. The employment rate is at a threeyear high. Right. Its still a glass half empty. Its 7. 6 . Exactly. You cant seem to beat that down. Nobody is saying were at a new yearly high for a business conference. Its much lower than it was. All right. Usually they have enough confidence. Have you enough confidence to wear that outfit, which i know i dont. I know i dont. They look bad. So you will get everybodys attention, say, im going to shake things up a little what color is that shirt . Idz a red. Its the blood red. Yeah. Put it in. Its got a little fish on the tie, which im going to be using while i go fishing in jackson hole the next few days. Oh, are you going, thats nice. In the summer. Man, that place. We have Global Independence Center has a conference there friday. Is liesman going . I dont know. I know this place, thats where theres like 80 guys in 32 bunks. Its very strange. Anyway, whatever. Thats the coat top thing. He overbooks it, its like, whatever. Anyway, bill, if we had our normal audio guy. You know. Yes. No, no, no. Anyway. Before. Yeah. What a moment. Thanks, bill dunkelberg. That was from the collection at mens wearhouse. Comments, questions, email us at squawk cnbc. Com. You can follow us on twitter. Next we will talk earnings at the top of the hour, senator bob corker joins us to talk financials, the economy and the latest from the beltway. Squawk box will be right back. Thats me. I made you something. I made you something, too. See you next summer. [ male announcer ] get exceptional values on the highest quality cars at the summer of audi sales event. At the summer of audi sales event. When you do what i do, iyou think about risk. I dont like the ups and downs of the market, but i cant just sit on my cash. I want to be prepared for the long haul. Ishares minimum volatility etfs. Investments designed for a smoother ride. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Coming up, earlier, we spoke to dick bovay about financials. The banks have had 14 quarters in a row in which their earnings have been up year over year. I think its going to be tough for them to do it for a 15th time. J. P. Morgan will be the first to report. We want to hear from you about all this. Play armchair analyst. Visit our facebook page. Will they have a sloppy quarter . Will j. P. Morgan miss or beat expectation . We have have more right here on squawk box. We are coming back in just a moment. Who is healthier, you or your car . I would say my car. Welcome back. Investors are looking for signs of economic improvement. Could corporate earnings give stocks a leg up . The managing partner at edward jones, ill put it to you that way. Do you think when all is said and done, two, three weeks from now, we will see earnings that will not disappoint but surprise on the upside and stocks go higher . Oh, i think we are looking for earnings to improve and for the better managed companies, were not making a general market call and to say, you know, will you see weakness or a big surprise in the upside, not what were about. Its, you know, you are seeing a little improvement in the economy. You are seeing a little improvement in the employment numbers. Thats encouraging on a longerterm basis. We would expect this year probably two, 2. 5 growth on an overallawi in kind of basis. Do you think we can see real top line growth . Can revenue increase or to the extent we see good numbers, it will be the squeeze . I dont think you got an awful lot of squeeze left. You have Good Management teams taking a lot of expenses out of the operating results. You got the opportunity to fwroe the top line. Thats really where it has to come from. It will be gradual. There wont be a lot of huge increases, its going to have to come from increasing revenues. Jim, do you think the softness from oversees is priced in at this point . We seen so many negative preannouncements. We seen expectations coming down a lot. Do you think we will see that in the guidance still or its pretty much all out there . Its a good question. Im not an analyst or an economist to be sure. I certainly have opinions. I think the issue is internationally europe and otherwise, are driving some dollars and investors to the u. S. We are still the stability in terms of economic and political opportunities. So i think were benefitting from that and may continue to on a shortterm basis. You know, are all the issues on an international basis priced in . There will be some surprises, im sure, perhaps most of them are. Jim, we will leave it there. We will appreciate your perspective, great. Coming up, stocks to watch. We will talk to a potential candidate, also to replace mayor mike and there are some sort of similarities, both of them billionaires, both of them were kind of written off in the early part of their candidacy. John castanetes. I want to talk to you whether you had a good or bad, a small part. That was my home supermarket. Thats the guy. 100 . My friend bob steele there on the right. Hes leaving, unless he changes the law again for a fourth term, because the city couldnt possibly drink without him. Wed all be drinking with big sodas. I cant live out him. We will find out what he says about Eliot Spitzer getting back in politics . Squawk box is coming right back. Up next on squawk box, dont start your day without knowing the names that will make you money. Joe has your lest of stocks to watch right after the break wero be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Lets look at stocks to watch, start with sirius, xm radio. Funny, i was just thinking about playing that song the highway, is highway is channel 59 on my system. Anyway, raising its full year guidance, 1st subscriber editions from the prior 1. 4, also announced new net subscribers for the Second Quarter, putting it past the 25 million mark. But you need a car. So i would recommend it to you. You got spotify or something. I got spootfy and or fox. How are you doing . You are covered. Oh. Tesla will be added to the nasdaq. Not that there is anything wrong. Good friends on. Tesla will be added to the nasdaq 100 replacing oracle, which is moving to the New York Stock Exchange. Ibm downgraded by Goldman Sachs to neutral goldman saying it sees pressure on ibms growth marke market. Did they call warren before they did that . Higher strains, that would be positive. When did warren buy that stock . He gave us a great tease. Around 185. I think so. Where is it now, still above 200 . It was, can we go back to that chart . No, its not. Its 192. I think test around there. I thought it was in the fall. It might have been right in the october. I will go back and look. Its right around 185. Would make me right . Always, joe. I cant remember the story how that was discovered. I think it was it might have been for hair growth at one point or impotence. Remember minoxodyl. The successor hasnt been named. They are reviewing the overall strategy and intuitive surgical, i saw this, herb was tweeting about this yesterday, forecasting Second Quarter sales. A huge stock. Huge story stock certainly e Second Quarter sales cite sighting economic pressures to hold off on purchasing new equipment. The Company Points to a more conservative payment decisions. I want to tell you how right you are. November 2011, mr. Buffet purchased this. 185. He fight have gotten it lower. Thats when it happened. I think this is a one year. Were missing it. There you have it. I remember what it was. You, my friend, are correct. I was correct. About this i dont know about the impending tidal wave that will flood the entire coast. Coming up, senator. Oh, we are. We can only. I just hope theyre right. Gosh, i would be so disappointing if the world didnt end, wouldnt you . Keep our fingers crossed. I want to talk about spitzer. Let your mind go rhode island right there. I dont know what youd use that for. Look, im getting censored. What did they take you off of that . Stay off. The reason is its a business story here on squawk box is because you can actually get to this position as comptroller, he will be a huge shareholder in Companies Across the country. Hes clearly made it very clear what he wants to do as a shareholder. He says he wants to revolutionize the position and become an activist. Which position, mustang ranch, do you know . Is that a two year office or fouryear office . For one, i dont know the answer. Whats the trend . I think the chance are better than people are giving them. Yesterday, apparently, he was Walking Around union squarement he got only ten signatures. He was surrounded by the media. He is hoping students dont know who he is. People were going up to him heckling him. Others were going up, saying, everybody deserves redemption. He got redemption, didnt they . Far be it . I know there is ratings. He was opining, judging other people. He came on here, we said, are you sure you shouldnt have been maybe prosecuted because you would have prosecuted the person . He goes, oh, absolutely not, i shouldnt have been. This was a moral failing. Whats next for him . It will be interesting. The New York Times, you were saying the liberals were out to get them. The New York Times not so happy by this choice, their editorial this morning is about how they dont like him. This comes after sanford, they saw that happen in south carolina. Then they saw whats happening in the polls with weiner. Oh, there we go. With weiner. And weiner is doing well in the polls. Weiner is tied with, in some polls, weiner is tied with you continue do. Remember the other day with the weinereating contest. Ehas one weiner under his belt. Another weiner. Can i make a plea . If ken is watching in europe, calm into the show. We want to hear what are you up to. Only because some of the news reports were saying you were going to mount a campaign so to speak. Mount. Oh. Mounting a campaign. Do you think Eliot Spitzer, we want to know about it. You have our phone number. We look forward to hearing from yo you. They are black. You leave them on, do you . Coming up, senator bob corker will join us to talk about the loss. Heres the answer, im not wearing any. You wear english leather or nothing at all . Anyway, we will talk about the bailout terms of fannie and freddie. Health care, immigration reform. Plus the host of hgtvs property virgins. On the recovery in the housing mark. Senator corker, he will join us to talk housing, health care, a lot more. Now we will talk real skaet estate with egypt. I have my work cut out for me. The property virgins, she will bring us up to speed on the summer selling season. The new york city mayoral race is heating up. The ceo wants to be the mayor of the big apple. First of all, mr. Mayor, its a great pleasure to see you again. Wed like to say almost 50 of you voted for you in the last election. He will join us as the third hour of squawk box begins right now. Welcome back to squawk box. Becky quick is off today. Brian belski, ed bemo Capital Markets. More from rebecca and fine still ahead. First, though, andrew had your morning headline. My kids are watching. They will think its nemo. Lets take a look at the markets. The s p up a little over 7 points. The nasdaq up over 10 points. Asian stocks rebounded. The nikkei leading gains, moved higher, check out europe as we put that screen around. You will see green arrows as well the footsy up almost a percent. Joe has a new favorite supermarket, croaker is buying his favorite supermarket rival supermarket operator Harris Teeter in a 2. 5 billion dole. Kroger will be paying 49. 38 per share. Can you see. I like king stock going up. In a statement, kroger said Harris Teeter will continue koerpt operate its stores as a subsidiary. Are you going, why hasnt it jumped . It has jumped in part because they were looking. In tech news this morning, they are report, microsoft will announce its much anticipated division restructure on thursday. Steve ballmer will alter segment reporting. Also, we will be watching alcoa, they reported better than expected revenues and earnings after the bell. Marks the official start of earnings season. Analysts expect earnings to rise 2. 9 in the Second Quarter from a year ago. Thats down from the 5. 4 growth in the first quarter. On friday, we get quarterly reportsment we want you to play armchair analyst with us. So do you think j. P. Morgans report on friday will meet, beat, or miss wall street expectations of a 1. 43 per share. Can you vote on the squawk box facebook page. A quick hint. Dick bovay said he expected earnings to be quote sloppy. Okay. Hedge fund Perry Capital is suing the Treasury Department over the bailout of fannie mae and freddie mac. Bob corker wants to make them a thing of the past. He is taking on home finance reform in a new bill thats gained pi partisan support. Is our news hock to bring you on today, senator. We dont need a hook for bob corcoran. There are a million things we can talk about. Since thats what we brought you on for, lets talk about it. Some people look at the 700 whatever it is, whatever the deficit will be this year and think about fannie and freddiement we did okay there. At least recently, right . Look. Our bill issing a nostic on the lawsuit. More power to him. What is not agnostic son we dont ever again have a situation where you have private loss, i will say i feel a little better about the motive here. In summer of 2008, when these entities were taken over, everybody was jumping up saying, please, dont take my insolvent company that doesnt have a chance of ever making a dime. People have jumped into the fray. Again, you know, thats why we have a judicial branch. I think what most americans wholeheartedly agree with is we dont want to have another situation where you got the government backstopping an entity like this. This is the only way you guarantee their income and when things are good, they make money. Within they are bad, they are left with 180 become worth of funding. I dont know how we get out. With renowhere near extricating ourselves from the way it is right now. I dont know about that. I think there is a chance we do extricate ourselves. This suit actually has no bearing on what were doing. But i think there is some momentum around this. As you mentioned, there is bipartisan support. Hopefully the house will take something up. Hopefully, we will in september. I do think if we dont do this pretty soon the window is going to close, were not going to have an opportunity to do what every american knows what needs to be done. How important is housing right now, senator, for the small tepid growth were getting . Thats like getting rid of the mortgage deduction right now. No. No. Nochlt i i dont think you understand necessarily what this bill does. We understand that housing is important and thats why the bill is craft ed in the way tha it does. There is an express it guarantee. Its a very different way. If thesentties had 5 loss, that takes into account the importance of housing. I think its a good bill. It can be improved. Hopefully as we move through the process, it will be. Do you put in the bankers go to jail if they do anything risky . Oh, thats in england . Do you see that, senator . Does that make anything about that . You know, i just got back from afghanistan and pakistan. I may have missed that. But ill let you guys do. Andrew might want to return it. But what about im hearing there is no path for immigration. Where down that is . What do your colleagues in the house tell you . I hope what will happen is the house will take up a Border Security bill an pass it out. Hopefully, they can agree on that. One thing we did do in this bill is create a border surge. European one concerned about Border Security, hopefully with passage of the bill is not concerned about that. They may be concerned about other divisions, hopefully they will pass it. Well have a conference. Many divisions in the senate bill will make it back out of conference, i think its the right thing economically for our country. Its the right thing from the standpoint of deficit reduction. I think its a great thing for the nation to encourage this and change right now in our nation. I hope you will talk about the Health Care Bill and whats happening, its almost beyond belief. Wow, far be it for me to bring that up out of the blue, senator. You know, this is pretty fascinating. I start at the top. You know, every american can get behind the notion of hoping that americans will have Affordable Health care. I mean, honest telely. I think as we have gone beyond the romance of all of this, the makeup and lipstick are off, people are waking up to look at this bill. It is a serious thing. Lets face it. Think about it in the height of the greatest recession we create a piece of legislation that says, be city way, if you will move your fulltime employees down to part time, wink, wink, you dont have to cover them in health care, most recently, we have this provision which says that by the way, you just self declare how much you make. So you can decide whether you want a 1,000 subsidy or a 9,400 subsidy. Just think what people are going to be doing. So i think, look, we need to stop. We ned to put this on permanent hold. We need to fix it. Young americans are beginning to realize that because of the guaranteed issued piece, they dont have to actually boy healthcare until theyre sick. There is so many provisions in this bill that disincent people to do the things, that are rit for the our koun country. I think this is a great example of the flaws that are there that need to be fixed. Hopefully, we can slow this down and really start all over. I think it would be a better way for us to go. But there are serious flaws in this bill. Disincentive to employment. Moving back a year is not going to cause people to discontinue this effort of moving numbertime folks down to parttime employment. Senator, i got two other topics for you, one being the farm bill. There is a report out this morning that says that eric cantor was scolding several Republican Committee chairman who voted against that bill. What do you make of the house, does cantor have control of his own party there . Look, its sort of difficult for me to criticize. I voted against the farm bill. Im sorry. The subsidies that exist. 80 of it is food stamps. Im sorry. Its still not a serious attempt to reform our ag programs in this country nor the food stamp proms programs, so, its hard for me to criticize, im sorry, it just does not do the job. It doesnt generate near the sievings. So again, hard for me to criticize, apparently, they did have some kind of deal moving into this that fell apart. Im sure thats what hes upset about. Senator one other topic. Its not an issue. You mentioned a narrowing window for pieces of lenlslation going through now. One we think about with the Financial Markets is the continuing resolution and the debt ceiling, both of which come to a head sometime september, october. What can we expect this fall . Are we going to see more partisan fighting, more bipartisan agreement . Could this derail marks again . So there is an opportunity for something still pretty good to happen. Were having discussions with the white house. There isnt yet a process in place that will generate the kind of resolve we need as a nation. So im still hopeful. I think everybody understands the nexus of all of this is pro growth hatch reform. Link to entitlement reform. I still think that is where we need to be as a nation. I still think its one of the great imped ims to a more robust economic report. I stand willing and able as do numbers of our colleagues to work with the white house towards that answer. Senator corker. Finally, weigh in if you could on Eliot Spitzers reintroduction into politics. At least in new york. Well, i will say, ive enjoyed reading the editorials this morning. I stay out of local politics. I know right there in your hometown. Ill let you goes, you know, i dont really talk about things i dont know much about. Im sure, i knew thats why you come down on that. We just like to talk about it. I guess. Yeah. What, getting back to the debt ceiling, i dont think the democrats lock at the debt ceiling in the same way you are looking at it. They just want it raised. You seem to think its being framed in some type of tax reform entitlement reform context. Do you think there is any interest or appetite on that side of the aisle to address any of those . We got immigration, climate change. We got all this other stuff that, you know, in the backdrop of 7. 6 unemployment. If they cant get like a stimulus, an infrastructure stimulus, they dont see, they dont really know of any other tools to try to get job growth or the economy going. Theyre going to focus on other things if you dont cooperate with this other stuff. So, look, you know, i certainly wasnt born yesterday. I realize the intense city around this issue has diminished as the deficit has reduced somewhat. In there right. We all know it will hockey stick back up. I still think, joe, there is a glimmer of hope. I wouldnt put it over 50 or anything like that. But there is still a glimmer of hope that something happens. And i think as long as you realize that this bill is the Biggest Issue facing our nation today, you still have to put out effort to try to resolve it. To be candid, who would have thought during the last two weeks of the immigration bill what happened where you end up with an overwhelming passage in the United States senate. So look, im going to continue to work on it. I plan on calling the white house today to again push for some kind of process to be put in place that is meaningful, but, look, there is no question. Americans candidly are fatigued with this issue. They really are. You feel it around here. To me again, its still the most important issue. Thats why they sent me here. I will continue to push forward. Senator. Thank you, guys. Ewe have the wrong audio. I will ask for busy signals. Thats what you will get. Anyway, thank you. Keep trying. Number is down, not tied up. All circuits are busy. Go ahead. Ring ring. Coming up, we are counting on business an investing experience to convince voters to make him the next mayor, up next, he will tell us why hes the man for the job. Welcome back to squawk box this morning. The Interest Rate known as libor. You know it. They will have a new administrator. The New York Stock Exchange will be taking over the determination of libor from the british bank association. Libor of course was at the center of that rate rigging scandal. So for three banks have settled charges paying 3. 25 billion in penalties. The transfer is expected to be completed early next year. We will see whether things change. I tell you, you look at libor rates now and there are things about it that still dont make much sense because people are still submitting rates in an environment where you are not sure of whats going on here. By the way, we know now the shibor in china was manipulated as anything else too. So im not sure whether the administrator has anything to do with it so much as those that contribute to the ultimate numbers. Joe, we bought the the potential next mayor coming up. The shibor. In china. We will talk about this race. Its happened before in this city. Is a guy with no political experience who happened to be a millionaire. He became mayor. Oh, did he . I used to shop at the supermarket. To get the guy out of office has been difficult. Or next guest, real estate magnet. And red apple. Those are small parts of his empire. He is joining us now. John, people probably say how are you going to do this . You got no experience, number one, you got a lot of money if you decide to spend some of it like bloomberg did. Number two, can you look around . I look, nobody is saftd with anybody at this point. I look at christine quinn. People say, no, i cant do that and loda and antony weiner, when the guy is tied for the lead, its not as crazy as it sounds, john . Thank you, joe. I have run all kind of companies, airlines, Corporate Jet companies, ive run energy companies. Ive run banks. Ive run jewelry companies, real estate companies. I run almost every type of company there is and you know bloomberg has set a standard in the world about running a city and i want to be able to maintain that standard. Dont forget, i know mayor bloomberg, tens of millions of dollars have flowed into new york. Whats happened . Depression, went through a recession. New york, we went through a hiccup, with i is great. I think you set the standard. I want to maintain that standard. And as a visionary, of all the people running, im the only one whose created tens of thousands of jobs. Of all the people running, i am the most qualified to run it rajd to make common sense division i decisions. You know, our Operation Union operations in the xreet journal last week, one of the unions i do business with made a comment, said, yeah, john is tough. But hes fair. So im capable of dealing with both sides. Both republican, democrats. John, your. Is the a ceo is the right type of person not a politician. Is that start of the case you are making for running new york city . New york city is a 70 billion enterprise. Tell me which one of all the Democratic Candidates thats running would you turn over your company if you had to turn over your company for someone to run it . I asked that of a bunch of business people, Hedge Fund Guys a couple weeks ago. They laughed. That was the answer. Who is capable of running it . On the left, alec baldwin. They are saying the income disparity between the haves and have nots is soglarying, you need someone, not a ceo, you need someone that can level the Playing Field for all the new york city. Absolutely. I grew up in harlem, check me out. I grew up in harlem, i clawed my way out of there. And i go back to harlem all the time and we help the kids through the Police Athletic league and other functions and i never forgot where i came from. I am there running as pro safety in our streets. How am i a liberal . I believe we have to take care of the elderly. And we also have to take care of the kids in our poor neighborhoods and give them hope and opportunity. Thats because thats where im from. These kids have no hope. We have a 40 dropout rate. Who is . I am there to tell them i am going to give you a hand and help you pull you out. I made it. You can make it, too. And thats my message to those kids. Thats why im a republican and a liberal in new york city, which is the, thats the way bloomberg won. Thats the way mayor guiliani won. Thats the way oh john lindsay won. Thats the message im throwing out. One quick question, then, you sound like you want to extend what bloomberg has done. Can you tell us new yorkers, what would be the biggest change that you would institute in your administration relative to what have you seen and supported with respect to bloomberg in. I am more people friendly. I got my training being people friendly. Every, you know the out of borough other boroughs feel that manhattan, new york city is ignoring. I have made a commitment to them. I will put a deputy mayor in charge of everyboro to make sure the job is done and they have representation and they have the mayors ear in new york city. Ive gotten wide iplauz for that. Its like the corporate world. If you have five subsidiaries or five reasons, you put somebody in charge, if he doesnt do the job, he gets fired or she gets fired. Thats what we need, somebody to have the ear of the people around to feel the peoples pain notice thats what i do. Makes me different than bloomberg. Bloomberg is very, very tough. I feel peoples pain. If you feel peoples pain, tell us, there is going to be a number of Union Contracts there that will come up in your administration if you were to win, including police teachers, virtually all of it across the board. How are you going to handle that . We do have a bit of a budget crunch in the city. Ive had unions all my life and you sit down, you dont run away from them. You sit down, you eat spaiz at 5 00 in the morning. And you make a deal. And thats the most important part and Union Leaders respect that you will sit down with them. Are you going to hold the line on increases in salaries, for example . Im not going to negotiate the contract today. All i can tell you is the taxpayers, im going to be fair to the taxpayers brew im also going to be fair to the workers. You have to make a deal. Previously, you said you expend up to 20 million to do it. Im wondering what your game plan is, because you are not as well known now and as far as the polls go, it doesnt look like you are going to end up. We are within the margin of error right now. So whats the game plan . The became the intlan our budget was a Million Dollars a month for the primary. Were right on budget. We might be spending a little bit more. Then well spend whatever we have to spend for the november election. Yeah. Because if you got, i dont know the estimates are 3 billion. You can spend a million a month. Im not a math ma joe, but isnt that 3,000 million . Thats what it comes back to. I am a common sense guy. Dont forget, im cheap. I started as a grocer. Mike bloomberg said, you earn a floor a year. I said i started as a grocer. John, would you be happy if spitzer was your comptroller . I think spitzer is a smart guy. We need somebody in the controllers job capable of earning mohr 1. 67. I think that was the number earned in the pension fund. Youd take him . You know why, because anything less than 7. 5 , the city budget has to write a check for into that pension fund. All right. John, all right. I dont know whether youd take him or not. We got 20 seconds. He is a smart guy. He is smart we appreciate it. Good to see you. We will be watching. Were ready to follow this i guess. Thank you. See you later. Coming up, andrew is going to talk real estate with egypts host of hgtvs property virgins. I thought we were talking about real estate in egypt. Am i right . Prices are going down. The last thing i want is to feel like someone is giving me a sales pitch,. Welcome back to squawk box. Ibm has been downgraded at Goldman Sachs, they see pressure on the ibm growth markets. Inyou the it surgical is taking a hit this morning. The maker of the robotic system is forecasting Second Quarter sales below street estimates. Hospitals are delaying purchases of new equipment because of economic pressures. The Company Points to more conservative payment decisions by insurance companies. Tesla will be joining the nasdaq 100. S p earlier, which wouldnt have made any sense. It was 6 00 in the morning. 6 01 in the morning. If oracle was going, it wouldnt come out of the s p 100 . I didnt understand that. Now i understand. I should know better. Anyway, listen to me. Lets check on the markets. I wouldnt listen to me either. Rick santelli joins me from the cme. Thats okay. What are you seeing this morning . Well, we are seeing the dollar continue to hold some of its recent gains. Still hovering right at a threeyear high. We have supply today, threeyear note auction. This is going to be very interesting, especially considering tomorrow and thursday, we get the long end in the form of 10s and 30s. The long end had the most move him. Although an a sensitive basement, five year note yields have skyrocketed when you consider they were in the low 60s at the beginning of may. Last year, they were below 55. Here they now are at 150 about 13 a bakers dozen of basis points below where they were at this time yesterday morning. To see if investors step up to the plate, there is a lot of nervous inside that the chinese have laid off treasury, direct bidding in some of the options, which is a proxy for some foreign entities who have been on the soft side. So the debate is this. With the new yields, we get new buyers coming in. We get new people like bond funds talking about buying treasuries, the plate is spread, for example, between jgb yields, which are low. This will be handicapping the recent move. I think i walk away with one notion, guy, despite all the issues about rates and how they cant go a whole lot higher, we are hovering at 150 and 5s, were hovering at a 265 and 10s. These are lofty by any standards of the last several years. Okay. Rick santelli in chicago. Thank you for that, sir. We will see you soon. Coming up, a high profile trial being delayed. We will tell you why the captain of the ship wrecked costa accordia, rather, is in court this weekend. Then we will talk real estate of the host of hgtvs property virgins when squawk box returns. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. From td ameritrade. Ever from td ameritrade. Ybody has different ideas, goals, appetite for risk. You cant say one size fits all. It doesnt. Thats crazy. Were all totally different. Ishares core. Etf Building Blocks for your personalized portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. The trial has been postponed. The cap tony of the ship wrecked Costa Concordia is facing charges which killed 32 peoplement about 1,000 witnesses are expected to testify. The captain showed up if court this morning, protection were put back to next week because of a nationwide lawyers strike in italy goes to figure. You cant make that up. A lawyers strike. How does that work . All the lawyers are on strike. Theyre not union, are they . We will get to the bottom of that one. We are in the thick of real estate season, sales have jumped. Joining us about this. The real estate expert and host of hgtvs property virgins him good morning. Help us here through whats going on this summer. What are you seeing in terms of home prices going up or down amid what were seeing obviously on the mortgage side. Were seeing a lot of activity, the National Association of real stores released a report that home sales have increased nationally. So thats a great sign we are turning the corner. Where i am in the atlanta market. Where i have been working most recently, we are seeing bidding wars in every price point again, these are all signs were turning the corner. Were seeing refinancings are down. Are you worried Mortgage Rates will go up . Is that overblown . Thats been all the talk. In may, we saw historical lows. It was a 3. 31 . As of last week, rates jumped up 25 . That was acceleration on recreating an urgency. Rates went up to just about 4. 5 . Of course many people were saying that was a gross overreaction to our federal chairman making comments and thats what we seen this week. Right now, when i checked, rates were just over four and a quarter. Theyre predicting they will drop a little more. I say no reason for panic. Its still a great time to get in and buy. As a reasonsed real estate agent. I am behind homeownership. If people are sitting on the bench, waiting for the market to turn around, i dont know what were waiting for. A big sign that says go, press the button, you are missing it. Things are turning. Where are the markets quite soft . I think we are seeing most of the bidding wars and a lots of the action go on. Thats the biggest struggle right now. In new york, l. A. The hot beds, atlanta as i mentioned, there is so much action. I just bought a house, myself, in november. I got into three bidding wars. Im the propertys virgins lady. Nobody is exempt here. Can we buy . In atlanta. I moved to there years ago. Do you have time . I got a first call. I will stay focused. Egypt, you know what im hearing this about the bedroom community. Im hear, its the inventory. When something does come up, there is all kind of. We are seeing institution alibiing. Its very normal. Where you have firms like the Blackstone Group coming in, buying up properties, particularly in high foreclosure markets. Theyre turning around renting them. There is so much supply and demand issue, where you have more buyers and you have less inventory on the mark, its going to create a bidding war. The disparity ween the average rental rate today is the widest we have seen in 2025 years. Arent you going to see that shake out at some point . The incomes are growing. They will get the downpayment to buy the homestead of rent . I think things are balancing out as the economy gets more legs, people are getting confident about homeownership. You have many who were of course with the bubble busting many families displaced. They were homeowners at one point. Whether it was foreclosure or a short sale, they wound up becoming renters. As they get their credit back. They will get back into the homeownership market especially with rents rising so high. You will have people saying i can own a home when rates are relatively low for less. You are dealing with a specific subset of buyers. How have the characteristics financially changed versus 2012. Are your buyers working with putting down more money . How do they look financially . How are their Balance Sheets different this year than last year . I will be honest, i work with first time home buyers, people jumping in for the first time. So of course as you would guess, they dont necessarily have as much cash to put down so when you deal with the current market, what do you think will happen . Cash is king. We are seeing cash offers. Luckily state by state it depends on what market are you in. There are programs to help many of these new home buyers with a higher downpayment. What did you tell those people from the housewives of atlanta . V very funny. Did they call . Do you have an act . Put it this way, im not a housewife. Im a working woman. Im a hustler. Instead of letting the cameras leave, all you got to do is let the cameras follow you home. You would think a lot different of me. Caa. I will call ari. He might be getting a call. Hes at morris. You will call the agency ad. Now your name dropped. Egypt thauchgs for joining us this morning. We will see if you switch agents. Thank you so much. Coming up, were unveiling cnbcs list of the best states in the business scott cohn will join us. Where is he . North dakota. Georgia . Texas. Virginia. Why are you confusing me . We will count down on the big reveal. And check out these headliners. For cnbcs delivering alpha conference on wednesday july 17th. Nelson peltz, is that your guy . I am. Carl icon. John paulsen. Not hang, John Paul Glenn or pat paulsen. Who by the way, people want to hear from because i heard what you said, but if fabulous trial begins next week. For more action. I remember. What was it called . Some people search for alpha, think about alpha, not many deliver alpha. This is what we do. Announcer where can an investor be a name and not a number . Let the countdown begin, the 7th ranking of americas top states or business. We will score all 50 states for competitiveness. Correspondent scott cohn is live. Top states for business. See if it was an old oak with a bunch of spanish moss. With leaves behind them. Hold on, can you just go profile . We need to spree file. Whats find you there . I tell you what, this is seven years 23 have been doing this, this is probably the prettiest location weve had. This is nice. We will show it to you after we get through our countdown. Lets look at state number five. Its a tie. You talk. The bee hiefb state and virginia. The old dominion. Dead even at 1542 out of 2500 points. Utah finished second. The best category, Business Friendliness. Utah finished fourth. The Unemployment Rate 4. 6 . The state and local sales tax 5. 7 . Utahs largest private employer is inner Mountain Health care, a chain of hospitals and clinics. The largest industry is health care. Virginia a three time winner of americas top state for business did best in our work force and Business Friendliness categories, came in 6th. The state falls to 38 in our cost of doing business category which carries extra weight this year, unemployment in virginia stands at 5. 3 . The top individual income tax rate 5. 75 . Corporate rate 6 . The state and local sales tax 6 of the most populous areas of the state 5. 3 elsewhere. Virginias largest private employer is newport news ship yard the largest industry in agriculture. So there you go. Weve never had a tie in the top five before. Interesting bit of a come down for virginia which you know was the top state three years running and they fell down last year to 3rd place because the i situation and thats one of the reasons that the governor used to push through a 6 billion transportation bill. The state does improve a bit in infrastructure this year but probably too early to be the effects of that bill. So, we gave you the first hit yesterday as to where i am. That hint was big mouths and heres the next hint now as to whats americas top state for business. It is well anchored. Well anchored. What does that mean . Boating . Oh boy. On the coast. I dont know. Listen. We want to know your guesses. We want to know your thoughts. Follow me on twitter. And of course, go to our website stop states. Cnbc. Com. We unveil the number one state on the closing bell and see where all 50 states rate. You did some things different in terms of cost doing business. Youre weighting more. Right . Thats right. Thats right. And again, its because thats what the states are talking about. Thats what theyre marketing. Right. More that they market what about virginia costs more . So i figure out what states might not have those problems. Virginia has a lot of the costs of particularly northern virginia. We look at wage costs among the different factors and the different metrics in cost of doing business. We do look at the tax burden, gasoline taxes, rents, office space, industrial space, commercial space. So, you know, a state like virginia will have a little bit of a disadvantage on cost no matter what they try to do on cutting taxes. There are other costs that factor in and something that states look at. I dont know where you are. Big mouth. Alabama, georgia, mississippi are the big mouth bass states. I hope its georgia. Im going to build down there. Anyway, but i dont see if its a big oak with spanish moss, i would know. Other times you have been in trouble at a highway or something and someone recognized you. You smartened up now in front of some rocks. We did one year where we were in front of the texas state capital and somebody figured out one of the trees. It was amazing. But look. If we have botanists out there that can pan the camera. All right, scott. It works. I want to know. See you later. Thank you. How much would you pay for a 37yearold computer . Coming up, we have more on the auction of an original apple 1 when we return. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. A lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back. Futures looking up about 71 points higher. Lets call it 69 points right about now. Making headlines this morning, one of the few remaining apple 1 computers . It could be yours. Todays the last day for an online bid at christies. An hour left. The current hider bid, 320,000. Coming up, several stocks on the move this morning. Only one can be the stock of the day. Well unveil it. And to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . Hooking up the country whelping business run if you dont have something important to say . Trains they haul everything, safely and on time. Tracks they connect the factories built along the lines. And that means jobs, lots of people, making lots and lots of things. Lets get your business rolling now, everybody sing. Norfolk southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Always go the extra mile. To treat my low testosterone, i did my research. My doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. Stock of the day wd40. Raising the fullyear profit. Were not going to say what you came up with but i think bellski got the state. Analysts, joe, analyst. If you use those two clues anchored and big mouths. There you go. Yeah. Well anchored and big mouths. Im mad i didnt get it. Were not going to talk about it. I think of joe carney. Thats true. Thats true. There you go. We should thank our guest host this morning. Yes, yes. Its been good. Rebecca has. He wasnt. It just felt like he was here the whole time. Anyway, make sure you join us tomorrow. Squawk on the street begins right now. Good tuesday morning. Welcome to squawk on the street. At the New York Stock Exchange, cramer is off today. Finally got the first Earnings Report under our belt. Alcoa with a slight beat. Futures up after the highest close for stocks in about three weeks. Nikkei at the highest in six weeks as asia mostly higher. The yen back to 101 against the dollar. Theres a look at the 10year this