Transcripts For CNBC Squawk Box 20130723

Also sac is firing back at the u. S. Government. The wall street journal reports the firm sent a memo to all employees with a rebuttal to allegations that steven cohen failed to take proper steps to prevent Insider Trading. Sac says that evidence shows that cohen didnt read the email at the center of the allegations. That email in question is from august of 2008. The s. E. C. Says it reflected, quote, clear possibility that information about upcoming dell earnings was improperly obtained. The government says the email was forwarded to cohens office and home email addresses. In a report prepared by cohaens lawyer says that so many emails landed in his inboxes that he opened just 11 of them. Interesting. Dow component, dupont, if you saw the top of the hour, i dont know, i recorded something about it. We knew it was coming. Alan coleman will be on the show later today. At this point, it is either a there is some stuff in here. Some net numbers just one net number, 1. 11. The street 1. 27. The revenue estimate was okay, 10 billion, which is just below the 10. 009, which was expected. The company sees adjusted full year earnings of 3. 85, thats above where wall street is. I have a feeling okay, operating earnings is 1. 28. There is the number. Operating earnings 1. 28. If you include charges and items, down at 1. 11 or 1. 03 billion, but the apples to apples comparison, a penny ahead and the revenue number you have to call inline with expectations. Company says it is realigning its leadership team, naming some individuals to some different positions that you probably never heard of. James collins jr. Has been named Senior Vice President , some there are some individual numbers here in terms of what the company did in the u. S. And canada. Emea, thats a europe middle east and africa, 2. 08 billion. Volume up 1 . Probably should get a forex number here. Here is another one. Continuing operations earnings per share 1. 15. Im sure 1. 10, just corrected that. Stock at this point indicated open, looks like maybe a little higher, though the spread between it is interesting. The outlook, the Company Points out that they expect to see 60 of the second half of 2013 operations in the Fourth Quarter. A back end loaded outlook. The 3. 85 is above the 3. 80. Right, right. They also talk about that leadership change that you were mentioning, they mentioned that theyre doing this because theyre trying to transform the company to a higher growth less Cyclical Company that integrates its biology, chemistry, materials. Science execution. Yeah. And then, you know, we know that peltz bought something, thats what sorkin reported, but he said what do you know about it . I think he said one word, paint. Plastics. Paint. Key witness is scheduled to testify today in the s. E. C. s case against former Goldman Sachs trader fabrice tourre. I still think it ought to be tourre. Tourre. Why waste letters . If you use them, use them. You get more chicks. Tourre, of course, that is being used by someone, that one name guy on on msnbc. Is it on msnbc . Yeah. Got that going for us. Not that tourre, but this tourre is accused of misleading investors in the 2007 bond deal. The witness is laura schwartz, a former executive at a bond insurer. The s. E. C. Says shell testify that tourre told her that hedge fund paulson and company was backing the deal. The testimony is a key to the governments case, alleging that tourre hid from investors that paulson and company was betting against the deal. In other news, miller coors is calling on u. S. Lawmakers and regulators to boost oversight of the london metal exchange. And the banks ownership of ware housing firms, this has to do with the article in the New York Times over the weekend. They argue that inflated Aluminum Prices have cost buying millions of dollars and the Senate Banking committee is scheduled a hearing today on whether banks should be owning physical operations from metals to ware housing to power plants and responded yesterday. Said that another said that it represented a minute amount of the aluminum, but i think less than 5 was the Goldman Sachs response. All right. Lets talk about what . Im sorry i asked. Never mind. There is somebody on trial now. Lets talk about a few stocks to watch this morning after all the after the bell movers last night. Shares of netflix trading lower after the companys earnings beat forecasts. Revenue came in in line, but the new subscribers, thats what fell short of analyst expectations. Julia boorstin talked to Reed Hastings and will join us with the highlights in the next half hour. Texas instruments getting a boost in late trading. Earnings beat the street by a penny and ti offered an upbeat revenue forecast saying that customers seeing more confident about placing forwards for chips. The stock up by 16 cents. Shares of Zions Bancorp lower after the companys earning failed to impress investors. Now looks like trading higher this morning up 29 cents. But rentacenter shares surged after the bell. The companys earnings beat the street and raised its full year Profit Guidance and that stock, at least on the last trade we have on this board, is down 1. 73 . So well keep an eye on these things as we get closer to the opening bell. Check on the markets this morning. After another up day yesterday, but very small. Were basically in record territory for most of the averages. And all got to do with the bernanke and coulmpany, quiet wk for him. A week without any testimony in front of congress. Hes done with that, sntd is he . I guess. Without the release of fed minutes. There is 18 people that at any given time are speaking somewhere that might, you know, they say they dont say taper, they do say taper, inflation, dont say inflation. I think after you get through the worst, at least for now, before the next step comes along. I dont think the other players can sway the markets at this point. The put is on. In good shape. Put is in good shape. So, you know, if thats what determines market valuation, we should be okay. And well look at oil and people arent tieing this to the fed anymore. Though it is weird. People say there is demand and that you dont know about supply and apparently people drive in the summer, we realize that every year, but 107 is ugly and so are gas prices. I filled up again this morning. How much . Not bad here, but if youre on the road, i paid well over 4 a it depends where you pull in. If youre held hostage to a new york through way or something 106 or 107 and knew the prices were going higher. The shock number is now 5, not 4 anymore. 5 bucks. 5. People dont where does oil have to be to get to 5 bucks . Who knows . You know what it is dependent on. What . The. The crack spread. Right, the bigger the crack spread. The tenyear note, which is not been that exciting lately, which we like, 2. 51 . The dollar a couple of stories today about first time home buyers not being around, they were only Something Like made up 30 of the sales last time around, used to be 40 . 20 to 30yearolds. Buying for first time. Inside on the jump, there is a story about how there are 2. 4 Million People living at home or living with someone else. Not in italy, here. Yesterday the journal had a piece, talked to jim cramer before squawk box and i saw some of that. This is not a selfsustaining recovery and that earnings have been lousy and some of the latest economic numbers have in the been so great. I understand why they put that on the front page. It is contrarian and goes against the grain of what we have been hearing, the market is calming down. But i think jim is probably right. There are some better numbers than they might expect. My take is not dependent on any anecdotal evidence. Mine is that it is something that can go wrong, it usually does. The exit strategy for the fed depends on this nice steady upturn in the economy and this nice steady decline in the Unemployment Rate. I dont think it will be a soft landing. I dont think we have seen the last of it. Knowing they told us they wont get out until you get to the numbers, which are still a long way off. Knowing that theyre not going to get out and want to get out and everybody wants them out and knowing that they can change their mind at any point. They could. But if we dont if it is not a smooth move to those numbers, then theyre stuck. And then you see the problem where we told everyone we would stay and we would be there for the markets. I think you and jim and the journal and i can all be right. It is just degrees of how you look at that. Is anyone predicting a recession in the next two years . No. And hasnt it been five years since the last recession . Yes. Are you predicting one . Im not predicting one. Usually it comes from higher Interest Rates where the economy overheats and we dont necessarily we have we dont have all the overleverage we have been working through and europe seems to be getting better. No reason to think it can happen. Im just doing it from murphys law, because they need well, by mid2013 wile be at 6. 5 and then at 6. Nobody knows that. Nobody knows that. Hopefully we will. But got so many things i think the fed knows that. Bernanke does. It is data dependent. Hes not going to be happy with it because it is lower participation rates. They didnt realize the number was getting there. All right. Where were we . Dollar. Yeah. 1. 31. I dont know why the euro is as short again. Well see. Almost 1. 32. Gold, huge day, and some short coverings, down a little bit today, but up for the biggest one day gain in a while. I made the point yesterday that right near if you drew a line, a descending line on the highs there, and on the lows, it is like in a band. At this point, if it gets through that and heads higher, a good bottom there. If it didnt and turns back down, you can imagine it would go down. See it . See my band . I used to be able to draw those. I used to be able to do it on on the thing, yeah. You cant do that anymore, can you . No, i dont think i can. Does this work . It doesnt do it, does it, matt . A check on the Global Markets report now. Carolin roth is standing by in london. Are people watching the markets or just watching the royal baby at this point . You know what, there is all this excitement about the royal baby, yes, it is a boy, but we still dont know what his name is going to be. James i hear is one of the front runners as far as the bookies are concerned. Let me show you whats going on. We are higher. But only modestly so. A couple of things at play here, becky and joe. Encouraging comments about china from the chinese premier. We also got a lot of earnings which were better than expected. And a lot of m a activity in the telco space. Let me just show you where we are in terms of the individual markets, the xetra dax moving higher by 12 points. Ftse 100 up by a third of 1 . The ebicibex in spain up, a smo tbill auction, two of them with borrowing costs falling significantly. The psi in portugal up by 1 , continuing on from yesterdays very strong gains. Now, lets take a look at some of the individual stories which are making the headlines today. Vivendi and france up by 3. 3 . The company is in exclusive talks to sell a majority stakes in maroc telecom. Swatch group better than expected earnings, only st micro down by 7 after posting yet another disappointing set of numbers. Back over to you guys. Thank you. Yeah, james, george, alexander. I saw alexander. I cant imagine it would be alexander. I bet they surprise us. I bet it is none of them. Has to be something with a little history. Create your own history. Another king george. Maybe henry. We already have harry. I dont think youre doing henry. James is good. James is good. Joseph . No. King andrew. Kind of nice ring to it, doesnt it . It does. We have our own prince andrew, but hes not here. Hes got some time off. He does. Owns vacation. On vacation. It is july. Analyst reaction to the dupont results. First, celebrations around the world in honor of the royal babys birth. He was a strapping young buck. 8 pounds, 6 ounces. He was late. Niagara falls, they were illuminated in blue last night to mark the occasion. If you missed it. And youre in the area, the falls are going to be lit up in blue again tonight. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Welcome back, everybody. U. S. Equity futures are indicated higher. Dow futures up by 30 points. S p futures up by 3 points. It is slow, but it is slow and steady and thats whats been pushing the markets higher and higher to record levels. Well keep an eye on this as we are looking through earnings that are continuing to come in at a pretty rapid clip this morning. Headlines today, the judge overseeing detroits bankruptcy case will hold the first hearing tomorrow. He will be taking up the citys request to freeze any lawsuits challenging last weeks decision to file for bankruptcy protection. A state judge ordered the governor to withdraw the bankruptcy petition in response to a lawsuit by retired Public Workers who are trying to protect their pensions. Well be talking more about detroit in the next hour with the ceo of assured guarantee, but this is a huge debate, put on the fast track and well see what happened today. And new Study Suggests patie parents are picking up less of their childrens college costs. Scholarships have the top role in covering the bill. The report was released by sallie mae. Last year this was the average breakdown, grants and scholarships cover 30 of college costs. A parents income and savings, 27 . Student borrowing took care of 18 . That doesnt add up to 100. Interesting. I dont know. Just reminds me of the time we had remember, we had a former football great on who was managing money, and he said he had 100 return last year. And he said i had one fund that was up 60, another fund that was up 20 and another fund up 20. Well, i guess when you add them all up, thats up 100. He played with the helmet. He was serious . He was serious. You werent here. I wont tell me later. When we go to i cant. Hes a great guy. I love him, but if you add, you know, separate accounts, 60, 20, 20, no, it is not 100. If you add up the total return, i guess it is 100 on all the different thats a math, thats fuzzy math. Thats fuzzy math. Did you say anything . No, we all faber was there, thats great. Awesome. Well done. Lets get the National Forecast from the weather channels alex wallace. I cant believe you actually i did. I liked this guy. Well find out who this is. Alex, over to you. Hear a little bit more. A lot of storms this morning. Can we expect to see that . Yeah, unfortunately, pretty wet morning across the northeast. You see it showing up on the radar. We have seen quite a bit of heavy rain move through the philly area. Thats now exited around new york city, getting a bit of a break. Most of new england is covered now in the rain. As we head through the day, well watch for more showers and storms to develop. This is all out ahead of the cold front that is trying to march its way through the northeast. Showers and storms potentially impacting us throughout the rest of the afternoon. That cold front extends all the way back into theed middle of country. South of it, muggy, moist warm air masses in place. As front marches in, showers and storms develop. Thats where we think the severe storm maze try to develop for us. Kansas city, across portions of arkansas, into tennessee, and up into the ohio valley, Severe Threat with damaging winds and hail being one of the bigger threats we have to face for the day. And for those in the midwest, looking for things to cool off, going to happen as we get into this weekend. Another surge of cooler air in from canada and for this weekend, high temperatures will be anywhere from 10 to 15 degrees below average. In some cases, feeling like the middle of september. So refreshing air mass on the way for the midwest. Back to you. Thats good. Its been hot. That will be a little bit better. Great. All right. Alex, thank you. Dupont out with Quarterly Results a couple of minutes ago beating sximt ining estimates. Lets get reaction to the numbers. Joining us mark gully. Mark, overall, the company was able to at least be in line, a little better than expectations. Is that what is most important or is it the management realignment or the Strategic Alternatives for this unit . What are you looking at . I think well work back wards. Good morning. The Strategic Alternatives they have talked about. The toi 2 business has been an issue. Fact theyre looking to sell that business with other businesses related to it i think will be viewed as positive by the market. Which business is that . Toi 2, a pigment used in titanium. Thats the thats in the paint. Thats used in paints. It went from peek to troth in 12 months. The peek of the cycle was last years Second Quarter. And the company will try to maintain this morning, but the trough is this cycle. Does that play into what peltz has been talking about then . I think it does. It is a step in the right direction. He, i think, was going to propose the Company Separate into two pieces. But the ag, nutrition and bio business go the other way and the rest of the businesses go the other way. Im sure management will point out the sale of this business goes a long way to what he wants to achieve, so, yeah, i think were making progress. Looking at the numbers, globally, what can you extrapolate anything. There is forex to talk about. What is the state of the Global Economy from what you can tell from dupont . Looks like theyre in line with what, as you point out, the quarter is in line, the guidance maintained at 385. The year, this year, will be back end loaded. The guidance for the third quarter, the quarter were in right now, is 42 Cents Per Share. The consensus is at 52. Theyre saying theyre going to kick the last lap and do 60 cents in the Fourth Quarter. So while theyre going to maintain will i hit the number for the year, it is back end loaded. How do they with some companies it has to do with when they close business. How can dupont, do you trust the what would you call it, that being able to the visibility, thats the word im looking for. Is there visibility . Is it good there so we can trust them, are they just hoping . Well, certainly they have been hanging their hat on the macro top down numbers with respect to housing, autos and Industrial Production for the Fourth Quarter. Thats a consistent theme to the course of the year and seems like that is still the theme, but i think investors will be a little skeptical perhaps about, again, doing so well in this years Fourth Quarter to put it precisely. 60 cents a share, the current consensus for the Fourth Quarter is 45 cents a share. Though the stock is now called higher and may have traded a new high today. Looks that way. I think that they are being responsive to investor concerns with respect to the business. If they can get a decent price for that business, then i think that people will look to see what theyre going to do with the proceeds. We think that business could be worth free tax somewhere in the 7 billion to 8 billion area. That would be a sizable transaction. So colemans been there for a couple of years i guess now. And we just said the stock is at a new 52week high. How do you rank the performance so far . I think on the execution side, since she took over, during the recession, in 2008, i think the execution has been pretty good. They have cut costs, improved productivity, cut back on capbacks. I think the execution has been pretty good. Now, with the sale of the chemicals, that would be the sale of two mature businesses, Performance Coatings went to Carlisle Group about 2 years ago. But i think nelson peltz will say, good job, but this is one more thing i want you to do. And thats separate the company to two pieces. The companys announcement today about getting the paint section without going ahead and spinning off or selling that, would that be enough to silent peltz . Thats interesting. Were not exactly sure what his stake is. We dont know how big it is. We dont know what he has in mind. He has been somewhat reticent, unusually reticent in terms of what he said thus far. So i think that, yeah, it will certainly go a long way. It seems to me that if we had an ag, nutrition and bio company that would rank right up there with the likes of monsanto, as an ad tech, that would be an Interesting Company to be able to own. Higher multiple typically . Higher multiple, higher growth and higher returns. All right. See, i would sell the nonperformance. The performing chemical unit, foruming badly . Thats confusing. Wouldnt you . The performance chemical sounds like the ones you want to keep, mark, and sell the nonforum a nonperformance ones. Thank you. Good picture here. Youre an attractive man. Thank you. Woo. Okay. When we come back, we have youre not going to say it. Im not i dont need to. Im not uncomfortable with that. I know youre not. I know youre not. Should i be . Mark might be. When wie come back, exclusiv comments from netflix ceo Reed Hastings. New subscribers fell a little short of analyst expectations. Plus, squawk sports news, ryan braun is the first player to receive a suspension from the Major League Baseballs investigation into players reportedly linked to a florida clinic accused of distributing performance enhancing drugs. The outfielder has been suspended without pay for the remainder of the season. Baseballs commissioner bud selig cited braun for multiple violation of baseballs drug program and labor contract and the daily news this morning has a picture of arod saying youre next, arod. Well see. Ever ybody has different investment objectives, ever 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. Announcer where can an investor be a name and not a number . Scottrade. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer scottrade proud to be ranked best overall client experience. Good morning and welcome back to squawk box here on cnbc. Im joe concerni ikernen with b. Andrew ross sorkin is enjoying some time off. I guess. Hes probably reading his column. Thats right. It is out today. Out today. Hes probably up there, you know everybody. They do. He was out friday and then in yesterday, and now hes out. Hes out this week. Hes got some good time with the family. He did something on conan we which we sort of differed on that yesterday. Did you . I was eager to hear how the two of you came down. I said this is it, on a scale of one to ten, they get him for failure to supervise. He said, because there is no jury and you cant do anything it. And then frankel said it immediately goes to appeal and the Appeals Court if it is frivolous or not something that would stick, they need to exonerate they already paid more than 600 million. They thought this would go away. They got more client redemptions. But now saying didnt see any did sell after the call that went to his house, according to the governments s. E. C. Filing. Thats not failier to supure supervise. I told andrew this is not unusual for him to think that someone is guilty, because any businessman that send gauis eng guilty of something. If youre trying to gauge something and not do something i was more skeptical before i read the governments complaint. At first i thought this is kind of crazy. This is the government just deciding youre guilty and theyre going to go after you for everything and anything. If you read the complaint, they think they have something there. And the problem is that even just by sticking around, even if this is something that is appealed and Everything Else, you can damage their business and push clients to take money out. In general, the New York Times believes that capitalism is an offense that you can be that you should be prosecuted for. At least held to account for,to profits, make more than what you put in to accrue and then build up and then increase your wealth. Right . Anyway, making headlines, lg, like these companies, lg and samsung are going to start i bet you theyre selling curve tds for more than they cost to make. The tvs have concave screens where the middle bends away from the viewer. The company says the idea is to envelop the viewer. All around where youre getting like a 180 degrees, maybe you sit right in the middle of it. Ive got an idea where these might come in handy, these sets. Where . I dont know, in it wraps all the way around you, i guess it depends what youre watching yesterday it was 6 16. Youre a little slow today. The sets have a suggested price, seems cheap, that can be wait two years. It comes down to 2,000, right . Right. Just wait. Technology. Speaking of speaking of netflix earnings beat forecasts. Revenue came in inline. New subscribers fell short of expectations. Julia boorstin sat down with the ceo for an exclusive interview and she sits down with us this morning. Good morning. Good morning, becky. Reed hastings brushed off the stocks after hour declines yesterday and said hes thrilled at the fact that the stock has more than tripled over the past year. As for concerns that content costs continue to rise, he insisted that netflixs Business Model makes sense. Youre spending over 2 billion a year on content now around the world. It is really a big number and it is continuing to grow as we get more and more content and how we pay it off is we have, you know, nearly 38 million members paying about 8 a month. And thats enough money to pay for all the content. Does that mean you need to raise prices or shift strategy or have a secondary offering in order to pay it off . No, our model works great as is. At 7. 99 u. S. , our u. S. Market is growing great, slightly faster than last year, which is exciting. International is growing hugely. So we feel great about our current price point. And we just want to get more and more content. When it comes to netflixs original content, he says each of the companys five original shows so far have been hits. While the company refuses to quantify what exactly defines a hit, for them, including the recently day budde ebuted have picked up for the next season. So i asked hastings how he plans to maintain that track record. It is a very high bar and we probably shouldnt maintain it. We should problem i be more adventurous, so we should have some failures. Were not being adventurous enough. So well continue to build on that as long as most of them are great successes. The ceo saying they should have more failure. Well hear more from Reed Hastings on the growing competition and find more from Reed Hastings on cnbc. Com. People have been watching this closely, trying to figure out how the subscriber numbers are or arent based on how much theyre paying out. He looks at this as a much longer term game. They have been adding subscribers. They added more subscribers this past quarter than a year ago quarter, it seems like some of that is attributable to the original content. The question for the longterm is how much faster they can continue to grow subscribers in the u. S. And abroad as their content costs continue to escalate. Now there are more competitors than ever. You have hulu, amazon, they all want to get in the original content game where netflix is placing its bets. We have an analyst later this morning, it is how the content does and the original content. I didnt have a chance to dig into that. Did the company say how strong some of the original content . I push him to get answers on how many people actually tuned in to the original content and they gave these vague answers like saying like a tvsized audience, that doesnt mean anything. But they did say of all of the original shows that arrested development had a notable uptick and the day the show launched, they saw an unusual increase in people signing on. The reason they said is because that was a show with an established fan base. It will be interesting to see when you bring back a show, you know, like orange is the new black, already picked up for a second season, or a house of cards for a second season, if that will have an uptick then because people already know about it. When they say about the original content is a longterm game, about growing awareness of netflix and making people it is a destination for premium content. Well see you in the 8 00 hour. National hot dog day apparently. Did you smell this behind me . I did. It looks like i dont need curved tv screen. I need a multi you can turn your chair. I want a multisense tv. It is sonic. I thought i smelled the tater tots. Be aerospace, posting better than expected results earlier this morning. The companys ceo will join us to discuss the aerospace market. Wi drive a ford fusion. Who is healthier, you or your car . I would say my car. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah when we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Welcome back, everybody. Be aerospace is reporting Second Quarter profit of 89 cents a share, four cents better than expected. Also revenue coming in beating consensus. Joining us now with a breakdown on the quarter is amen cory, founder and chairman and ceo of be aerospace. Thank you for being with us this morning. Good morning, becky. Good morning, joe. Thank you for having me this morning. The numbers came in better than expected. What happened that the street didnt anticipate . Well, i think as recently demonstrated at the paris air show, the Airline Aerospace up cycle is in full swing with vigorous Global Passenger traffic growth, excellent profitability among the airlines and unprecedented fouryear period of profitability with this years earnings expected to be up about 70 compared to last year, according to the International Air transportation association. And all of this is leading to record deliveries, borders, and backlog for both boeing and for air bus. Robust wide body aircraft deliveries, those were particularly strong. Is that boeing . Thats both boeing and air s airbus. It is the 787, the 777, the 7478, the a380, and shortly the a350. The requirement for lift, especially in the emerging markets, pac rim, asia, middle east, is creating demand for more wide body aircraft and the expectation is that deliveries of wide bodies will grow at a 10 compounded rate for the next several years. And we have a lot of leverage to wide body aircraft, especially the premium cabins with our equipment, which therefore puts us in a good position to grow at a double digit rate for the next few years. You raised your full year guidance by five cents a share in this release as well. I guess there are all these questions about the Global Economy, a lot of ceos saying they dont have visibility. What makes your situation so different . I think it is the structural growth in passenger travel in the emerging markets of the world. Pac rim, asia, middle east. So there are middle classes emerging in many of those countries and people are able to afford to travel for first time. And the backlogs at boeing and airbus have reached a record. There are almost 10,000 airplanes now, so theyre producing at record rates, the highest rate they have ever produced, theyre trying to step up production, they have got backlogs which will last for many years into the future, and it is really basically all to accommodate this new demand for travel on a global basis. And the result, of course, is that the suppliers to the airlines, to boeing and to airbus, have healthy backlogs. Ours is at a record, about 8. 4 billion, and so it gives us pretty good visibility into the next several years. I made a point recently, i remember back when i was younger and how expense tiff wive it wa parents. It was 600, 700, for a round trip fare. People talk about computers and how cheap it has gotten, digital information, and no one ever talks about the airlines, you can still fly round trip for 300, and thats going to bring it, you know, if the middle class that youre talking about and all the other countries, it is still affordable, one of the best and now theyre making money now somehow, even with oil at 106 a barrel. It is quite staggering to me. Yeah, all really good points. And, in fact, oil at 106 or 107 a barrel is accelerating the production of new aircraft, which are more fuel efficient and which it enables the airlines to earn more money. These are leisure time and expendable dollars, what do you do with it . You travel. It goes across all cultures. Thats what you do. I cant imagine that it ever has a negative demographic trend. I couldnt agree more. I couldnt agree more. And as a matter of fact, the airfare cpi in the u. S. Is now up about 25 over the past few years, it had been it had really gone to too low a level and airlines were unable to make money. Now they had an unprecedented period of profitability over the last four years, and the combination of higher airfare cpi and ancillary revenues is enabling the airlines to book record profits and therefore to buy the aircraft which they need to handle all this new demand for lift. Wonderful. Mr. Cory, thank you very much for joining us. We look forward to having you guest host with us again soon. Thank you very much, have a good day. Do you know today well, yeah, i told you. It is National Hot Dog day. Sunday was National Ice Cream day. Friday, right . Yeah. Never too early for a juicy frank. I dont know him, but anyway, well welcome the ceo of sonic next. [ male announcer ] what . investors could lose tens of thousands of dollars in hidden fees on their 401 k s . go to etrade and roll over your old 401 k s to a new etrade retirement account. None of them charge annual fees and all of them offer low cost investments. Etrade. Less for. Today if you didnt know it was National Hot Dog day, sonic is celebrateing by offering 1 chili cheese and the Company Chairman and ceo is here. I have a friend, cliff, that actually has tried this hot dog. He was eating it under the desk. Is that bacon on this thing, too, my friend . Well, on the chili cheese dog, no. What is it . On the america dog, no. What is it . Theyre all beef dogs. Were offering for a dollar today. National hot dog day. For the dollar. There is bacon on this one. The may not be a dollar. On the other, the plet zell dog, there is grilled onions and bacon on the pretzel dog. Its a delicious dog. Its selling very well right now. Very popular. My friend says its even really good for breakfast. Is it offered for breakfast typically . Well, our entire menu is offered to customers all day. So they can get breakfast in the afternoon, a hot dog in the morning. People that have been working all night, theyre getting off the work shift, off a light dinner meal when they come in, in the morning. So we do sell dinner entries for folks getting off work. Cliff, im going to ask you something. Yesterday, mcdonalds had a rough report. We were trying to figure out what in the complicated whether it was specific to mcdonalds. Whether it was low end. The journal had a piece about some restaurant metrics are in terms of measuring the consumer are not going that well. Can you give us any insight into, you must know whats going on . Whats happening . Im happy to give you that insight. Its a challenging time, from the standpoint of an underemployed consumer, also afternoon overleveraged consumer. Tough die namics there. Mcdonalds is going through a multiyear run, food preparation process, promotional activities, media. All this got them good momentum for a number of years. Its difficult to sustain that permanently. On the other hand, weve gone through a period of time in terms of new media products. A whole series of neshtives to improve the costs coming in the back doctor t. Effect from our standpoint to our businesses is, weve had pretty good momentum, 2012, momentum and sales in profitability. 2013, same thing. Tough weather in the spring. We had momentum this year. Continued into the summer. So its a challenging time for the consumer on a bronze medal basis. Challenging so much for our industry as well. Our industry experienced real ice cream, half price decorate. So were having a very good summer. And obamacare . The challenge as it relates to obamacare, the Affordable Care act, from our standpoint, the way were approaching that, i dont know if it speaks for other companies. Were an 88 franchise company. Our approach is to give our franchise guidance, tell them what were doing in our own stores. Our focus is on customer service, not on decreasing hours of employees. Our focus is to make sure there is good service. We are not focusing on cutting hours. Were focusing on service. Its definitely over 16 ounces, heres to you, its really good. Its full of sugar. Thank you, cliff. When we come back, we have more earnings central. Up next, ewex expect quarterly components from dow and United Technologies, stick around. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Were earnings central, we heard from dupont. Transport giant us. And the guest host is circleing. Vulture investor wilbur ross is on the hunt for the best values in the global market. The second hour of squawk box begins right now. Welcome back, everybody. We have components out, travelers and United Technologies. It looks like that company came in with better than expected numbers for 2 per share. The street had been expecting. I believe the revenue is a little lighter than the street had anticipated. This is continuing something that weve seen over several quarters at this point. They did have lower catastrophic losses. The number of events i believe there were a greater number of events. They cost the company less in each of these situations. They also have been in a situation where they have higher underlying underwriting margins. Gives you a much higher margin. Maybe thats why you look at the revenue not being what the street had expected. Again, thats a dow component it is indicated higher by 2. 7 . Those favorable trends for this company have been continuing for some time. Do you remember buffet after the katrina year of hurricanes . He made money the next three or four years. You dont write silly insurance things that wash it all out. Regardless of what al gore or people say, you cannot take one year and exstrop late it, put its july year when we had a named storm. I guess we had one. Bite your tongue. I know. Well see. People think sandy, wilbur ross is here. They think sandy was the first time this ever happened. There were three in 1954. Three that hit the east coast that were twice as devastateing. Three in then 54. Thats what i dont like to hear. It makes me worry. In 1954. No, they all happened at the same time. People say its a 50year storm or a 100year storm, you wont see one for a long time. I mean, theyre going to start saying earthquakes. Thats the next thing t. Woman on cnn asked if the asteroid was due to global warming. Nothing is not due to global warming. Let look at united. Insurance claims are not. There is this idea that insurers are seeing it. If you look at it. Its exactly flat as well. United technologies report Second Quarter earnings of 1. 70. That including a 5 Cents Per Share one time gain. It says here. So maybe its 165. Then i see the company is calling that operating of 170, which would be well above the 1. 57 that people were looking for on sales of 16 billion. Is more or less in lean with the 16. 368 was the revenue number that people were looking for. Then youve got all the different parts of the business, oh, this elevator sales over 3 billion, Climate Controls and Security Sales 4. 5 billion. Secorcy 1. 57 billion. You got all the Different Things that dan must have followed closely. Knew what they were close to earn. You cant tell whether its going to trade. I got a 1. 01 bid now a 1. 07 ask on the bid. The company also is forecasting 6 to 6. 15, which compares to an estimate of 6. 11 t. Bracket is where it is, positive comments. Somebody says its well positioned for a return to or beenic growth in the second half. It doesnt look exactly like General Electric as far as a business mix goes. But g. E. Had a pretty god number last week and United Technologies looks like its got a pretty good number year as well. Sales of 64 billion vs. 64, 65 estimated. All right, lets look at the dow, the futures. The three dow components have reported. You see the futures up by 52 points. Thats stronger than before we started seeing these earnings, dupont came out with its earnings. Is higher as well after that company did betterer than expected. Let get to the morning headlines. Dupont reporting Second Quarter profit. That was one penny above what the street was expecting. Revenue was a little shy of consensus, dupont announced it is exploring Strategic Alternatives. Thats something that could have investors watching closely t. Analysts we woek spoke with says that is a move in the right direction t. Ceo will be joining us in an exclusive at 8 00 eastern time. Telecom stocks could bin plated. Vivendi is in talks to sell its stakes. Morroccan telecom for 5. 5. They are buying eplus for 6. 6 billion. The u. S. Government is out on home prices later this morning. The fhfa is expected to report its monthly home price index rose. 8 of a percent in may from april. Number comes out at 9 00 eastern time. In corporate news, there was an accident with southwest airlines. A jet at new york La Guardia Airport last fight. Phil lebeau is joining us. First report is there were no injuries. Eight is what we have at this point, becky. They appear to be minor injuries people suffered when the plane landing and the nose goer collapsed. The plane had to skid to the stop on the runway. By the way, that runway is closed. They are out there with cranes trying to begin removal of that plane. So perhaps we could see that runway open up a little later this morning. As we mentioned the plane, it skidded down the runway without the front nose landing goer. It was a flight from nashville. 150 passengers on board. Heres a description for the Port Authority about what they understand happened when the plane landed. The nose wheel collapsed and immediately Port Authority, police department, aircraft rescue and firefighting crews and our mutual partners responded immediately to take the passengers off the aircraft safely and transport them to the terminal. Reporter again, 150 passengers on board. Eight suffered minor injuries. Unfortunately, this was not worse than it could have been. There was amateur video that was shot. The nose goer collapsed. Southwest and boeing are looking into what exactly caused this hard landing. There frs no indication before the landing that the nose goer would collapse. You take a look at shares of southwest. Could ep in mind, these are the types of things that eventually theyll figure out what happened here. But at least initially, will is no indication that there was any problem ahead of time. We want to show you boeing over the last month. This is a stock that has gone through a lot as theyve gone through a lot of questions, not only with what happened with asiana 214 and the trip to san francisco, have you the dreamliner issues, despite all of that, guys, when boeing reports tomorrow, you have a stock a buckandahalf away from its all time high. Boeing is expected to deliver strong earnings tomorrow. Guys, thats the late e. Back to you. Phil, we spoke a little bit ago with the ceo of d. E. Aerospace. He pointed out how strong the backlog is. A lot of companies dont know whats happening. In his industry, at least, he says everything is full speed ahead because of both boeing and what its competitors are doing right now. There is a huge demand, particularly from a rising middle class and developing nations from people who want to fly. I dont think people fully appreciate how quickly commercial air traffic is growing when you look at asia. Take a look at china. Theyre building something on the order of 50 new major airports in that country. 50. You know, thats hard for poem to wrap their heads around. Thats just an indication of what were seeing. Not just in china, you look at asia, southeast asia, the rapid growth there, its going to stretch out several years because of that rising middle class. Phil, were all the same, right . And once you get your food, shelter, all these things squared away, you get some leisure time and expendable dollars, its nice to get a big screen tv, sooner or later, what do you do . You travel. You want to travel. If youve driven lately and you do, i know, but try driving an 800 mile trip with your kids in like an suv. See how that works versus an hourandahalf. We just did that. Versus an hourandahalf. Even with the lines and whatever you got to go through. Im still a big fan of the roadtrip. 800 miles . Well, a little less. Lets say 650. Every car, every semi that you pass that looks like its coming into your lane, every tense moment. You know the problem is if you are going somewhere, where its not a direct flight, its not that much better with kids. If you have a few times they have to go up, go down, you get caught in weather twice. I mean, it depends. The car is not going to unless its amphibious. Guy, one last thing as long as we talk about air travel. A quick update on la guardia, average delays, two hours, 13 minutes. If you are expecting somebody, be patient. If you are headed out for a business trip, double check. True. As well. Phil, thank you. You bet. Joining us now to weigh in on todays top stories, someone who hasnt been on a commercial flight in 38 years, ril wilbur ross, he has new investing opportunities around the world. He is chairman and ceo of w. L. Ross and company. We had people on, anywith unthat said, talked about private jets. They all say the same thing, you know, if you can have one, its definitely better. No question. Am i exaggerating . No, its nice to be in that position. Anyway. You have been all over the place since you were i guess you were at some conferences here and im not going to give anything up what people might have seen or might have been in the sun valley type environment. Becky and i were that was someone that looked like becky. I think she was out there. Andrew was definitely not there. I know where i was. I was here. Then you went to asia, isnt you . Went to asia, hong kong, beijing, tokyo. Unlike the people we were just talking about, this has nothing to do with leisure with you . No, this is work. All work and business. You go around the world looking for pleasure. Let go down in order if we just had elections in japan and actually, we had, i asked yesterday. You werent here, i asked a person whether she can actually feel a tangible difference and you know what weve heard, people havent, since there was deflation, they same, they are married, with kids. We seen these articles. She said it is different. The smood totally different. Id share the japan society. I am familiar with it. I have never seen a change in mood from preelection last november until last week. Theyre confident he is very quickly going to take on some of the challenges. Thats the thing. Because to me if it was just, you know, bernanke time, just monetary, id say i wish we werent watching that work, hes undertaken some of the structural things. He is. Whats interesting, theyve changed Inflation Expectation without talking a lot of money. Theyve talked quantitative easing. They havent done a lot. What he has to do, they have to deal with agriculture. Agriculture in japan is highly fragmented, very stiff rules about how much you can do. Corporations are not allowed to own land. It will change owl that. Get jap needs farming into the modern era so that japan can go into the transpacific partnership. He wrote about things beforehand, he was talking about getting women into the work force and changing all kind of things. The big symbol i think will be agriculture, this part of the lbt houses part of its power base the rural area. You had breakfast with him, right . Yes. Go ahead, sorry him. And the jap fozzie electtorial system, there are more seats allocated per person in the rural areas than in the urban areas. Ist gives disproportionate power. Thats why its such a challenge for him to deal with. If he does that, i think that japan will be off and running. Buy stocks . Buy the market . The market has been good. There i know, still . Because it hasnt been that expensive. Before the market run, most japanese stocks were trading barely. Its more multiples and yet theyre a good way to play the emerging market, because about a third of the earnings of the nikkei come from emerging countries and about a third of japans exports are merging. I didnt realize that. Japan is highly referaged to the merging market, plus the operations are loaded with cash. Is that how you are going in . Yes. With a variety. Of stock. I think japan has been a very undervalued market for quite some time. Now there is a catalyst for change. Theyre not buying farm land. Are you not doing things here people cant do . There are some of those things. I think japan, you should buy the Significant Companies that are involved with the developing companies. The other thing is the morale of the people is different. Good. Its a long slog. Fortunately, we have wilbur with us the next few hours. He can weigh in on just about every single story that crosses our desk. Wilbur will be with us. He is our guest host. When we come back, we have more of earnings central. We heard from three dow xaents. The dow, ups. You can see how those stocks are faring. Travelers up 3. 7 . Dupont 1. 7. Well continue to keep track of this. Coming up at 8 00 eastern, dupont ceo Ellen Coleman, squawk box will be right back. Business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. 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 . Welcome back, everybody. Joining us right now is the cia at compareitus. And gentleman, i think you have very different opinions of where the markets are going right now. Tim, you think that the market has nowhere to go but down . Good morning, becky. Well, again, we come at it from a credit perspective. Were credit people. I think the chips out there are low Interest Rates or cheap labor. Limited top line growth, it will be tough to keep pushing multiple tire. I hear your perspective on that. We continue to see some Companies Like dupont, like travelers, that come in with very strong numbers though, the dow component continues to push the index higher. What do you think the odds of companies that continue like that continue to outperform us . I think selectively youll see that, of course, you will continue to see people quote unquote make the numbers as it relates to, my favorite is the one time, you know, onetime expenses, the old joke remember back in the internet era ebe earnings before expense, these Companies Come out and tell you these are wontime charges. Thats not the story with travelers or dupont or b. E. Aerospace. Again as i said, you push the envelope and well see how far it can continue. Im not a believer. Tim, if the money wont be flowing in the south, where will it go . Wilbur, good morning. Lit go with you with japanese farm land. Or it should be coming up. Im coming from cavalry. Perhaps the oil and gas business is a place we should be going. Tim holland, what is your perspective of what the market does from here . We have here in the states, its slow and steady. Japans showing real signs of life. Potentially europe and here at home, multiples arent all that stretched. Companies have flushed with cash. You look at travelers, Interest Rate environment. Priceing is fan taft ec. You look at banks, theyre benefitting from better Credit Conditions and housing. Not everything is perfect. We think there is a lit more good fuse than bad. We think that will continue. You mentioned the bank of the ozarks, do you like Smaller Banks than the big cap ones . Its company by company for us at tamro. We like big and small size depending on the balance sheets. One of the thing thats great about the ozarks, they did a number of acquisitions in the downturn which built the franchise. Now even in an opec economic environment, theyre seeing double digit loan growth. I think that has been an overlooked point these Smaller Banks are showing pretty good loan growth. I hope that speaks to better Economic Conditions ahead. Lets hope for that. You like a Company Involved in the medical arena. Yes, dexco theyve got 60 market share, managing die inteets a very difficult prop session. Its a huge addressable market. Theyre the leader. Its best in class technology, dexcom is led by a visionary ceo and overall fantastic management team. We have High Expectations going forward. Tim, i know you look at these from the credit market perspective. You look at high yield bonds, what are you looking at now . Its kind of nirvana for us. Its limited gdp growth. I think were mid1s for 2013. So its sort of the sweet spot. You dont have management teams at this point in the seekle yet, anyway, leveraging up dramatically, playing games with bad use of proceeds, ie dividends and progressive buybacks. So we think that the last, you know, selloff here over the last five, six weeks, where everything got sold down is a wonderful entry point were finding yields out there somewhere between 8 and 9 . We were told there arent any yields, but, in fact, there are. The market is 1. 5 trillion. We find that to be an attractive place right now. Gentleman, thank you, both. Thank you,. Thanks, becky. Coming up, spike lee as a squawk disruptor. Why the filmmaker is teaming up with kickstart. In the next half hour the ceo of a major insurer of detroits bond. Thats me. I made you something. Welcome back, everybody, in our headline, spike lee is launching a Kickstarter Campaign to fund his next film. He wants to raise 1. 3 million in the next month. Lee is following in the footsteps of Veronica Mars and zach wrath whose film pulled in 3. 61 on kick starter. When we come back, in detroit the judge overseeing the bankruptcy case. The first hearing tomorrow. Unnext, the ceo of assured guaranty, squawk box will be right back. one size fits all. It doesnt. Thats crazy. Welcome back to squawk box, everybody, in our headlines, s. A. T. Capital is fighting back against measures against trading a. 46 page rebuttal from employees called the allegations baseless. Dupont is seeking alternatives for its all terntive chemicals. I includes executive realignments. And Second Quarter earnings, beat the streets expectation base penny. We will be talking with Ellen Coleman in the next hour, about a half an hour away. Taco bell is taking kids toys off the menu. They say the offerings are not worthwhile investment for them. It did have an insignificant impact on sales. However, individual items that had been included in kids meals will still be on the regular menu. A federal judge set the first hearing in the detroit bankruptcy case t. Court will determine whether lawsuits can progress while the company or the city is in bankruptcy or seeking bankruptcy protection. Joining us now is domenic frederico. He assured more than 1. 6 million in lawsuits and 1. 7 through the general obligations. Good morning, domenic. Good to see you. Good morning. One of your points is that this could royal the market for general obligation bonds. You want them to honor what a g. O. Is supposed to be at this point . I think you got to look at the specific pledge involved here. So most of our exposure on the g. O. Side is what they call the limited packs. Where the city, in the bond resolution pledges unequivocally and irrevokably full taxing authority and the resources of the city and the property payment. How do you get around that . It seems like a strong pledge. How about the gm bond . Its a different story when you look at the municipalities. In our case, we access around the municipalities, the ability to act says the market. To give them the credt it they advance for, in our case, mostly safety improvements. Infrastructure improvements. Therefore, its an aid to get you access. Its an aid to get you savings. So its a little different than a typical Corporate Bond holder that takes the risks relative to the return. You know how it will be paid . I know exactly how it is paid. Pension, people that were promised this money. Whats the way out here . You know, the fat cat, they dont care for their general bonds, bond holders, people trying to get tax tree income, you put them up versus pensioners. Its going to be tough to win. Its going to be tough to win. You think obama should, the administration should cover the pension because they arent covered by the pension benefit guarantee corps, right . Well, there sooedz needs to be some solution. Is that what you think will happen . Im not willing to if they bail out aeg and the general sector. They bailed out general motors. They put equity positions in those companies. You cant take an equity position in the city. You cant close down a city. The city has a lasting revenue source. What is the demand . In detroits case, you got a filing of get debt of which more than half is basically retirementrelated obligations for employees. Its right around 9. 9. 2 versus 18. Wilbur ross will come in and restructure this. What would you do . I think what is needed is for the unions and detroit, the management of the Big Companies and maybe other unions to get together with private sector development, buy a lot of assets from the city and really redevelop it. Because even if you fix the balance stooet sheet. What it needs is to start growing again a. City thats shrinking cant be very healthy. Detroit has lost a lot of its population. Many parts of the city are bombed out. You got to reverse that. How do you do that, though . Well, there is a lot of real estate the city owns. I think it could be done if people had the will and made a real master plan. Think about. This is an economic crisis. There is a balance of deficit here. How do you work the solution in the solution has to involve growth at some level. Growth takes investment. Investment takes access to the markets to in effect fund the investment and yet the proposal on the table is to basically turn your back on all the investors, all the stake holders. Which isnt a real incentive to allow further commitment to the city growth. Do you expect to be made whole . What kind of settlement would you take at this point . Thats obviously a little too conjecture. At the end of the day, we look at the pledge and say what is the meaning of the pledge . We think it is a secure position. Therefore, we look to be protected further than what is currently being offered on the table. Its not the same thing. Theyve said this is a constitutionally protected promise ma id to them, too. I dont know how you. Absolutely. Think of it in the context of every other case, looking at the corporate side of america, employees are always at the credit risk of their employer. No one looks back to say, wait a minute. The way they arrive the way they get their pensions, their negotiateing power with the people they elect into the positions. There is an applied conflict of interest. Anybody that cant see the conflict. What happens if to the g. O. Market into funding costs and all the other states if the g. O. Doesnt mean anything. Thats a really important question. Because, obviously, debt is basically priced based on risk. If you increase the risk of the debt. Therefore, you increase the cost of the debt. If you apply that across a market the pressure would be put only municipal financing becomes significant. First and foremost, this is a michigan problem. The rest of the country is watching. Not every state acts the same way. Whats that state . Some state, where is the president from . Hes back in chicago. Oh, yeah, that place. Hows that . Chicago, obviously, has similar pension issues that theyre going to have to address. What about the United States . Is this an allegory for overpromises weve made in every aspect of the safety net with pensions and medical and health care and Everything Else . Isnt it . I think it is, in that, you got to look back to this last few years, a lot of municipalities have affected pension reform. They recognize the problem. Its not universal. At least there is a beginning recognition. I think you are going to end up with all Pension Plans being defined contribution, not defined. But there is a lot of, just changing the new people that are on, that come in, isnt going to do it. We are already too deep. Its not enough and especially in this situation like detroit because they have 18,000 retirees and 10,000 active employees and in the enterprise, when have you more than 1andahalf. Its less, its like twoandahalf to one the exact numbers. 60 of the population. The government is the same size it was when it had, you know, double the population, same services are still in effect. Domenic, hasnt this changed business . Are you reconsidering before you buy any additional . You have to reconsider, right . So, at the first look of what has happened through the crisis, you said first thing that went was general fund obligations, theyre not secured. They say, okay, if you throw these things to bivgally the wolves, as in stockton and some other place, we as an insurer, who are providing you access and financing comforts, you have to think whether thats a business we can do. By and large its a business you cant do. Are you reinsured . Are you at risk . You have farmed all this out . No, in our case, as a matter of fact, to get the numbers right, we have 1. 8 billion of the sewer and water. So thats typically secured debt. You insured that . A very small piece. On the general obligation side, we have total exposure about 2. 1 billion. As a result, this was years in the making. We knew this bankruptcy was a clear possibility. Thats a good point. If you look at our exposure, though, the g. O. Aim in, the last bit 2008, most was 99 and 2003 on the water and sewer. The last insurance we did was 2006. So its not like we have been chasing the ambulance and walking up the doorsteps of the bankruptcy. This was a long time ago we entered into these obligations. As a result, its been difficult for the municipalities to get cover annual. It will get more difficult. If the court backs up general education bonds, they are not secure. I think that changed the dynamics of the business. It changes the dynamics of the Financing Options going forward. All right. Domenic, thanks, you got 85 million a month from bernanke. This is 18 billion total t. Obamacare delaying the employer mandate is 50 billion. This is 18 billion. Is this in the couch money at the white house, dont they . Consequences everything we do. Bail out aig. I want to start the raucus you will see on huffington post. Well, we think president obama has made clear he doesnt intend to help the fund. He likes helping the fat cat bankers. Yeah, all right, fine. Domenic. Thank you. Thank you very much. A pleasure being here. When we come back, ups results are expected out in the next few minutes, we will bring you the reactions from an analyst that covers the stock. At 8 00 a. M. Ellen coleman interview and more of cnbcs exclusive interview with netflix ceo reed hasteings. 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. 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Joining us is david anderson, oil services and equipment analyst at j. P. Morgan. David, a pullback, barely. We are talking about wti up at levels we havent seen in quite some time. Its got a lot of people wondering, are we above 100 now . What do you think . I think we are. I think the Oil Investors have taken a lot of people by surprise, there are some on the refining side, pipelines starting up. We think structural support is behind there. We think oil prices will go up from here. The argument we kaep hearing is there is nor oil and natural gas than we expected. The United States will be a net producer and it will come above more and more of this. So when you look at the supply picture, at least, you would think prices would come back down, what worries you . I think over the longer term, that is something to be thinking about. We think of the near term, its much more about the u. S. Economy is doing better. As the u. S. Economy does better, you will see support for oil prices. Natural gas is a different story. We think they stay in the 350 to 450 range until we talk about lng imports. I think commodities are in two different places at this point. How do you think of the spread between rent now. Its remarkable. It was on the screen. I thought we had the tickers wrong. I havent seen that in a long time. A lot of seasonal factors are happening in brent right now. Opposite things happen, one on brent. One on wti. As the spread widens out, you will see it in the 5 to 10 range. We think oil prices are around 110 in the Fourth Quarter. It could touch 120 at some point. We are averaging around 116. What are you basing . What itself the Economic Quarter look like to get to you those numbers . We did hear earlier today dupont is looking for a strong 4th quarter, too. The fed has been predicting Something Like that. What is your economic model . Well, generally, on the u. S. Side, as i mentioned, we think the u. S. Economy is picking up, on the global side, a lot has to do with the chinese soft landing. We are forecasting a soft landing there, in general, we see global capacity as fairly tight. You see the opec spread, its about 4 of global demand. Thats a pretty tight market. We think thats basically how things will continue to grow from here. All these hydro carbons we have, it is a story down the road . Its very real. We witnessed the shell revolution. It is very real. We dont get to turn the truck fleet. We have a lot to do. I think that issue on the natural gas is something that has barely been scratching the surface. Now you are starting to see the oil fields are starting to convert from natural gas the fields are all converting over. So this is going to be an Interesting Development over the next several years, longer term, oil prices are coming down. Exporting to lng, becky sitting right here, you werent afraid to say that . No, no, im surprised to see it in the first place. I dont want the bacon going to china. Id like to support the natural gas here. Thats what i mean. He obviously doesnt know how strong you feel about this. How optimistic are you the administration will grant the export license . I think you will see one or two being granted over the next couple years. You will see some volumes flow. I think everyone will be in a wait and see mode. Obviously, you have your dow chemicals and industrials are concerned. All of a sudden they have much lower input costs. Right. Thats on one side and also the consumer as well use natural gas. I think we got to keep a closer look at the prices. Wilbur, you have been involved with natural gas for what a year or two . Given the supplies we have natural gas and given the fact the people producing it arent really making money at todays prices, i think you need a little higher price to provide the feed stock, that dow and Everybody Needs and enough to replace coal for the electric generation. Coal is still 37 . Natural gas about a third. How are we going to replace coal with natural gas if there isnt a lot more production . I think very easily there can be more production. In fact, there has been a dramatic count in the last couple years. Took a lot of uspy surprise. There is a tremendous amount of gas behind pipe. Its basically sitting at 350. We will not be drilling any more. You can figure out why its where it is, in qe1 and qe2, we blame 90 oil on qe1 and some of the fed guys did, that it would be feds action. Now were 85 billion a month forever. I dont know if they ever cut back. The economy, why isnt anyone pointing to qe and 85 billion a month for where oil is . I think we see a little of that. You think its real . I think it is real, i do. Thats what were seeing. And in the tepid Global Economy, thats enough . Once again, if you look at opec right now, there is only four countries in the world growing production more than 100,000 barrels a day. None of them are opec. We think you will continue to see that new market. Do you think its speculation on the price of oil . Egypt, libya, the iran has diminished. I think the libyaegypt issues, there is a little on the supply side. Theyre not big producers. For the most part, we dont see that as the case. Becky, ups, if you look at the charter for ups, you will see that if we look at a chart what happened, right there. In july. It went from 92 to 85 when the company said we were going to earn a dollar, basically lowering expectations, people were trading down. They were doing cheaper stuff for whatever reason. So now the number is actually out. Its inline with lower expectations, right . It is, they are looking at basically a range of brackets. It was different than, fedex is doing a little better i think at this point. We will talk to an analyst that likes this stuff i think in just a second. Hey, david, thank you very much for joining us this morning, for coming in. We will keep an eye on oil prices and have you back soon. When we come back at 8 00 a. M. Eastern time the first cnbc interview with Ellen Coleman from dupont. This is an exclusive interview. Squawk box will be right back. With the spark cash card from capital one. Boris earns unlimited rewards for his Small Business. Can i get the smith contract, please . Thank you. Thats three new paper shredders. [ boris ] put em on my spark card. [ garth ] boris Small Business earns 2 cash back on every purchase every day. Great businesses deserve unlimited rewards. Read back the chickens testimony, please. Buk, buk, bukka [ male announcer ] get the spark Business Card from capital one and earn unlimited rewards. Choose 2 cash back or double miles on every purchase every day. Told you id get half. Whats in your wallet . Told you id get half. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but 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 now more than ever, the future belongs to those who challenge the present. Sac capital is fighting back to the u. S. Government. Kate, this is pretty interesting, a very long manifesto that came back. It really is, becky. In recent days i have been talking to people at the firm. A lot said there is a lot to be said here, well be following up. I can only assume this is what was referred to. Its a 45page rebuttal of almost every aspect of this recent sac filing charges against steve cohen for failure to supervise, they take apart the trades in question related to Dell Computer in 2008 as well as elan and wyatt pharmaceutical stocks. They get into granular positions telling you how his long island officer was set up to where essentially when a critical email came in resulting dell results in advance of the actual result, an email according to sec prompted cohen to personally sell off a small position in dell based on alleged Insider Information. Sac is saying he couldnt have possibly read that, he was on a telephone call. He had several monitors, he had preview mode on. There is no evidence to suggest he read it. A lot of deail about that. Elan and way autotalk about those stocks have seen a 40 runup before the time period in july of 08. In fact, the analyst who has been indicted for alleged Insider Trading for getting the results of a drug trial before they were public and presumably selling on that basis, it says here his view to sell those stocks because they had run up so high anyway was the consensus view and there is no evidence again to suggest cohen who had contact knew he had an illegal tip. So a variety of defenses here, guys, but if some, theyre saying that the charges are simply baseless and again theyll defend them vigorously. Can i ask . I have to admit, i dont know the answer off the top of my head, digging back through, they were saying he received an email on dell, but he had it and even though it showed it was read, he didnt read it because he was on the phone at the time . Didnt the government tell him he was charged with the same email . He was on the phone with the head of business development, hopefully quite separate. There was a discussion within sac, becky, whether or not to the sell dell, sort of on the merits. There was a consumer analyst who didnt like dell at that point t. Assertion here in this white paper is that cohen sold on that analysts recommendation os or along side him as opposed to the basis of this email Michael Steinberg who was also ziet i indicted for selling dell on Insider Information had forwarded to steve. Theyre trying to suggest. It seems they cant say definitively he didnt read it. Theyre saying the governments point is to try to prove he did . Exactly. Sac said he can see five lines of i. He was doing five Different Things, et cetera. Kate kelly. When we come back, dupont earnings beating estimates by a penny t. Company is exploring Strategic Alternatives for its performs chemicals unit. Stock is indicated up to today. Well talk to the chairman and ceo Ellen Coleman, squawk box will be right back. Ar. Word association with nelson peltz. You say dupont, what comes to mind . Remember i told you . I said paint. The chemical giant rolling out Quarterly Results, ceo Ellen Coleman speaks to us first. Shares fell on weaker than expected subscriber data. For more on the companys quarter, we will go to the source. Its not about real staechlt its all about location, location, location, closing you out of a source of higher property value. More ceo interview with reed hasteings. Apple set to report after the bell, an analyst says 2013 can go down in history as apples lost year, the third hour of squawk box begins right now. One, two, three, four, tell me that you love me more sweet lip, long night oh, i adore. Welcome back to squawk box. We are in different stations. Wildhood life. Im getting ready to go see the conjureing. Thats a ways off. Im joe kernen along with becky quick. Our guest is w. L. Ross. We will have more from wilbur in a second. First lets attack check the markets. We had dupont had good numbers and travelers which in recent quarters, that some of the numbers they report are so crazy you dont know whether to believe them. They were so far above expectation. Its a business. 213 versus the 160 the street was expecting in earnings per share. Its a business that only people like wilbur ross understand, actuarial stuff. Insurance accounting is very complicated. It is. We know one person. Mar jens have improved a lot for catastrophic. Priceing has think of how much he loves the business. He should. Did you see the article about a hospital in brooklyn unfortunately is funded by two people. It invested 25,000 a piece a man and a woman in 1961. In berkshire. 25,000 a piece, held onto it, hit 730 million. This hospital, that is in your lifetime. Extraordinary. Better than you. It is better than me. We have a lot of really great investors. Wilbur is at the top. Let talk about those three dow components that reported earlier this, mo. Travelers reported First Quarter profit of 2. 13 a share when you strip out certain items. That was well above the estimates of 1. 60. Revenue came if below consensus, they did see fewer catastrophe losses. Also, United Technologies, be i the way, travellers is up by 1. 4 . United technologies reported Second Quarter profit of 1. 70 a share. That was 13 cents better than expected. The revenue was a little shy of consensus as organic growth stalled. The company says that situation will improve in the second half of the year. And dupont reporting Second Quarter profit of 1. 28 a share. That was a penney better than expected. Revenue came in a little shy of consensus, dupont announced it is exploring Strategic Alternatives. Stock has been indicated higher this morning. Sharply higher. Joining us is Ellen Coleman, the chairman and ceo of dupont, ellen, thank you for being with us this morning. Its great to talk to you ageneral, becky. There is a quite a bit. It was the earnings, other announcements, lets talk first about the earnings. You did say there were some things you went through, Performance Materials had volume growth but it was some lower selling prices that affected things there. Is that why you are talking about selling the Performance Materials unit . Well the Performance Chemicals unit is the one we have under Strategic Review. Its volumes were about flat. Thats the eun that has our titanium jack size business and chemical and flora products business in it. Volumes in ti o2 were showing sequential improvement, showing that marketplace bottoming out per cycle as we talked about. The volumes were up both sequentially and year over year. The prices were well off last years mark. Its a cyclical and volatile segment for us. Its about gdp growth overall. Its undergoing review of Strategic Alternatives. You call it economically . Not just construction. I guess there is other things you paint i guess . Zblits not only paint, its floor polymers, floor chemicals, the chemical part. It is a cyclical indicate or of whats happening globally in the economy . These are strong businesses. They have strong positions, low growth. They are cyclical and volatile. Last week, Andrew Ross Sorkin was interviewing nelson peltz. He asked him whether he had been building a significant stake in dupont. Mr. Peltz did say when he looks at dupont, he has one word in mind. Word is paint. Was this Strategic Review spurred by what nelson peltz said last woo ec . You know, i heard those same rumors as well. We sold the paint business in february if you recall. We have been looking since 2009, we have been working on the transformation of dupont. It started with the acquisition of denisco. Then a divestiture of Performance Coatings. Now, we have been looking at the chemical segment for a few months. So now with all the noise in the marketplace and various chemical businesses we have in order to get the work done and in order to engage the way we need internally and externally in the company. We need to make this transparent. We need to get on with these alternatives and determine what the future of these businesses are. We spoke with an analyst that gave you props for the job you did and talked about how you have helped the company perform. Nelson peltz, however, have you spoken with him at all since the announcement he made last week . No, i have not. You know, its interesting. I did catch some of that segment earlier today. You know, when you take a look at integrated science, you take a look at the power of biotechnology and how its transformed Industries Like agriculture. Its transformed industries. Were seeing it in food. Materials is the next frontier there. We got a great new product in serona based on biotechnology. Its a material that did not exist before. 100 million in sales now t. Power of biotechnology and enzymes to change the face of modern materials is where we are going with this. Thats why we announce the changes, jim colins focused on extending the integration of that science across our materials business. Were also bringing back matt toratola to focus on execution. It is about our science. It is about our global reach and our execution i think we are gaining a lot of momentum in the marketplace. What can you say about the Global Economy right now . We hear Different Things from ceos of all different companies. You look at the airplane business. Its been really strong. But what happens in the businesses you see . You know, agriculture is still strong globally. We had a great first half with our sales up 11 and earnings up 8. We see a strong hemisphere season in the summer and the season in brazil. So we have a very strong outlook for agriculture. You know, automotive, it depends on what country you are in. China has had great volume growth. The United States has had great volume growth. With see contraction in japan, india, western europe. Construction, obviously, a bright spot for the United States. Even in china, we are seeing constructionrelated industries to be a little stronger. So what we discussed is still uncertainty out there. Its slow sequential improvement. But thats slow sequential improvement we do see playing out. If you look at our materials businesses, you know, 16tially, they improved 8 from the First Quarter to the Second Quarter and even if you seasonally at just because some of our businesses have seventeenality to them. You still get that sequential growth. But ellen in the guidance that you gave for the company, you are looking at 60 cents of every dollar that you are expecting an earnings per share to be coming in this 4th quarter. Joe asked the question earlier of an analyst, how confident are you in that visibility . Are you sure that things will pick up that dramatically in the 4th quarter . Well, one of the things driving the thirdFourth Quarter split is the Summer Season in brazil. Our outlooks are showing that there is going to be a more soy planted in the Summer Season coming up here in the third quarter. What that means is theyll plant corn in the season and theres a big switch there that is impacting our Revenue Growth in the Fourth Quarter. Interesting to note, the seasonality, we always lose money in the second half of the year. Well make money inning a cull kur in the Fourth Quarter with the absolute penetration were getting and our advancements were making in our Southern Hemisphere sales. So its a very exciting time. Ellen, do you have any idea how much that business is worth that you are looking at the Strategic Alternatives for . Yeah. Im sure there are a lot of people with a lot of different opinions on that. I think thats the work were doing with the Strategic Alternatives is to understand where the greatest shareholder value can be garnered. The analysts said you might get a higher multiple if you look at the other, monsanto. You could also get cash, i guess . Are there things you want to own to add to the business mix of dupont . Or would you return it to shareholders in some fashion . Well, i think thats a part of the analysis that were doing. Certainly, we have been clear when you look at our cash and how we distribute it, there are many different people at the table when those discussions take place. Yes, its the research and development. Its Capital Expenditures that build capacity. Its the shareholder. Whether its from a dividend or a Share Buyback standpoint. Thats all te anal sis that go in, well be sure to share that. Is it 20 of the profits, im trying to physical out if its a 52 billion company. Im trying to figure it out. What percentage of profits in the pigment the titanium stuff and the floro carbons, how often is that . The Performance Chemicals segment is about 7 billion in revenue and 1. 8 billion in operating profit. Ellen, i know you said you havent spoken with nelson pechlts are you aware, has he been purchasing a large stake or a sizable stake in your company . Well, ive heard the rumors, just like you. I think well understand more about that as time plays out. Thats why, you know, were focused on our strategy andics cushion could, really delivering our commitment to shareholders and geting after that next chapter in the transformation of dupont. I remember when ackman went into png. They said we love that ackman loves our stock. I guess you can say. That nelson peltz is a smart investor. Thats all you got to say i guess, right . Again, well but you welcome, i mean, i dont, if i get an 80yearold bern that says theyre a fan, i love blue haired. I love everybody, i love anybody that loves me. If someone buys my stock, i think that nelson peltz, what a savvy guy. We love all our investors here. Embrace. All good. Ellen, we want to thank you for coming on today and appreciate your dime on this business morning news, congratulations on the earnings. Thank you a lot. Thank you. You think im attractive . I would like you to think that . Do you . In some ways do you think im sort of attractive . Yes. Thank you. A long pause. Ill tell you which way. All right. I welcome. I want lovers, not haters. I would give her that advice, yeah, we loved it, nelson. Also you need love and average . Im needy, thats probably the one thing thats not so attractive about me, im needy. You dont have Strong Enough opinions. Thats true, too. I just dont like to share them. Thats my own business. Coming up, a good quarter from netflix, not falling enough. Bringing more of cnbcs exclusive interview with Reed Hastings. We want to break down the move on the stock. First, cisco is buying Cybersecurity Firm sourcefire. Man, i hope they keep the name. This one is 2. 7 billion. Still ahead, apple out with Quarterly Results after the bell. Well bring you everything you need to know ahead of the report. Analyst Daniel Earnst will join us. [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. Coal bam back, everybody. Taking a look at the futures, we have been watching gains throughout the morning. They im3r06d after several dow components reported earlier this morning, particularly dupont and travelers. Those boosted the Dow Jones Industrial argument. You can see now the dow futures are up above fair value. S p futures up by 3 points, which is where they have been all morning long. We are also watching shares of radioshack. The retailer reported a larger than expected loss. The revenues beat the streets expectations and announced the resignation of a chief Financial Officer dorvan lively, who has taken a position at planet fitness. The director is join a law firm ochl kirkland and emis. He joins in the government internal and regulatory practice group. He led the Enforcement Division for four years. Today netflix earnings fell on weaker than expected subscriber numbers, Video Streaming Service added 630,000 u. S. Customers analysts were looking for several hundred,000. Julian bostten joins us now. She spoke about competition and streenling video. Hello again, julia. Hello, again, joe. Netflix faces more competition than ever. Hulu put several million into the sfrls. Amazon scales on spending on content every year. Hastings told me hes not concerned about highs deep pocked competitors and has no plans to change course. We have content they dont have. They have content, frankly, that which dont have, theyre really like two different channels, abc and cbs. They compete a little for viewing and time. Its not direct competition. People watch shows from us and hulu and amazon, be i the way the one with the most content is cable and satellite. Theyre continuing to get watched. Why not offer a video on demand . Why not send people over to itunes or amazon if they want to buy something on demand . We have all our content is on demand. In terms of offering pay per view movies that they can offer, its because we dont do it any better. You know, itunes does a great job on it. Amazon, voodoo. Best buy has a service. Microsoft has a service. They all do a good job at it. We focus where we can do an even better job. Well have more from an interview with reed hasteings coming up from squawk on the street. Can you find more on cnbc. Com. Thanks, julia. Lets talk about the profits for netflix t. Investors is joining us. The director of research attal freed freed and company. Yes. You dont want to be a Company Called fried. Everybody says fried. I said freed. You did a good job. I tell you what, i like when Companies Beat expectations, then they have a metric that disappoint, the stock goes down a lot. Even if you beat, 260, so they make a buck 50 in year or so. The valuation is excessive. Was it 168 times earning, is my math messed up . Are you good at math, 168 times earnings. You better grow your subscribers in the way people want to you, shouldnt you . Priced to perfection. Is that what it is . You tell me. What about next year . Well, i mean, we dont go by the street estimates. Because we think the company face earnings as they change amortization under content expenses and its subscribers moderate as you saw this quarter. We think that compresses the margins and it may be going into an earnings depression or even negative earnings because theyre going to incur costs to the new diz fideal and the new dreamworks deal is so you dont see 3, 4, 5 a share . You see 4 in 2017. Thats not that bad. Especially with something that has this much potential . Thats 2017. Right. So its four years. But at least its not discounted into the hereafter. There are people that think the potential of this companys business is worth paying up for. Okay. You just saw reed hasteings talk about his business and kind of the big three network. Right . Yeah. Onlyson, him, hulu. We dont see the future that way. We see the future as tv, streaming tv, cloud tv, alling a gre gath on these big aggregation platforms, such as xfinity with your network such as tevo, perhaps with trotter. Cox tv is growing out of Cloud Network for 34. 99 in the l. A. Market. Thats everywhere, right . Its more than tv everywhere. Its linear tv and video on demand convernled on the same platform. Okay. And its really, really going to fractionalize netflix model. Right . Because netflix becomes an icon on the screen, rather a destination platform to go. So when you kind of look at it. You got to look at it like the Netflix Technology is at the same point as maybe blackberry was before the introduction of the iphone as maybe aol was before the introduction of google. So were going to have more and more and more people on the platform. Now, the rights that theyre buying are streaming rights. Those rights dont apply to comcast, to disney, to anybodies who got no known product. Will be on the aggregation platform. So why are they spending enough of Digital Rights than are not going to buy them exclusivity on an aggregation platform. All right. So decide whether to buy this stock or not. You have to think, have firm ideas on what your media is going. Based on what they said last night, we were looking 1. 5 million subskriesh ads because of the hype around arrested development. Its a big show. Right in the target market. Didnt happen. It came in at 600 and change. Thats a problem. All right. You can drive a banana stand through the guidance range. So they didnt say that the guidance was at the high end was the middle end was the go. We got to go. You understand how to invest in this. Well, given all these variables, how on earth do you make a 2017 forecast . You dont. Thats why we discount the held out of it. We got to go. Are you not investing in that. You are not mart enough . No. The smartest thing rich said. You said something about xfinity is the best thing. I i afree with that. I understand that, i have it. I use it. I think xfinity 2 will be even better. Amen. Thank you. Thanks, rich. When we come back, what does it take to be wealthy . Well, the amount may be more than you think. We will bring you the results of a new investor survey. In todays markets, 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. How rich do you have to be to consider yourself wealthy . It takes 5 million in investible assets. Only 31 of millionaires surveyed said that they actually considered themselves to be wealthy. But 60 of those with 25 million or more say they are wealthy. A large majority said the defining character irving is having no financial constraints on their activities. There is an elephant in the room. Are we going to read that story without do you consider yourself wealthy . Im a part of the 40 that didnt think. So you consider yourself well off, basically . Well off. Comfortable. Comfortable, yeah. Wow. Were screwed. Hes only comfortable. Brother, can you spare a dime . I got ten cents. We are all curious. 40 of the people with more than 5 million or above didnt think they were wealthy. What did they think of the take . I dont know. A good point. Its like anything, though. More, more, more. The extent to which a poor person feels poor, is it objectively or relative to somebody else . I mean, there are frightening numbers that 70 of people have, are living paycheck to paycheck, dont have really money saved, theyve lost their job. It is frightening. When we come back, we have much more from our guest hosts today, wilbur ross. Do you hate it when we call you a vulture . I do. Im sorry. Comfortable. Comfortable up advisor wilbur ross. We have much more with him today. Apple report after the closing bell today. We will talk to an analyst about the preview of the tech giant results. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk box. Cisco systems is buying Cyber Security firm source . Fire for 76 a share in xash for about 2. 7 billion this Company Offers firewall, Malware Protection and similar products. Its fascinating always has been to watch John Chambers in that company make acquisitions, because they think long and hard and theiateon of 200300 million. This is big for them. I cant remember the most recent one, they bought scientific atlanta. Hes one of the longest running tech ceos. And well see. Anyway, lexmark reported Second Quarter profits at 90 Cents Per Share, that was above expectation, revenue also beat in recent years the presenter maker significantly expanded its software offering. Its come all the way back. Lockheed martin 264 a share beating estimates of 220. The defense contractor also raised fullyear profit forecast. I dont see the sequesters effect in that stock either. All right. Let get a check on the markets this morning. Rick santelli joins us, Steve Liesman is here on set. We have been watching earnings. A number of these companies have had significant strong earnings reports. Im thinking about dupont coming out, talking about what its been doing. Im talking about travelers, and b. E. Aerospace, which the ceo told us, look, this is really a long sustained market for a middle class thats growing using airfare. I want to go back to the debate yesterday where i missed, jim cramer said they had it wrong. Steve what do you its a big question out there. Its a big part of the trade, which is interesting. Whats going on among economists, will the real number stand up . We have growth, which is going to be very weak. We have relatively strong job numbers. You can argue they are not strong for what they should b. I want to point you to the last three quarters. Look there from q4 to 2012. Look how the jobs numbers have held up on a regional basis t. Gdp numbers, so you know i got estimates, in general, the jobless numbers have held up, but the Growth Numbers have not and we dont know the reason for that. Bernanke alluded to us. Its a key part of policy where bernanke says, you know what, if the Growth Numbers dont come through, they get revised down, it will change our outlook. Wung one thing he did point to, which is we count the economy in two different ways. We count how much we produce, thats gdp. We also do gross domestic income. How much everybody pockets. You see the white line income has been running ahead of the production line, which creates some suggestion that next week, we could get an upward revision to Gross Domestic Product suggesting the jobs numbers are the real number. You got to make a call on this. Whether or not there is real growth in the economy or the jobs numbers are not telling the story is a key part of the trade. Rick, what do you think . I think the fact that we have the conversation at all is an ad mission there is something wrong, period. End of story. We can all scratch our heads, in the end, we live in a big world with a middle class that keep growing in many parts of the globe. There will be lots of companies, especially Multinational Companies that will make wonderful profits. We live in an environment where most of the developed economies are keeping it priced cheaply. The real issue that everybody seals to take in the a passe ignoring sort of way is that we have a structural issue of employment where skills a dont match, b, where many large corporations have now totally figured out they can ramp up corporate profits without hiring record amounts of people. I dont see the latter changing any time soon. I dont see the wall street journal is wrong. The fact of the matter is make any excuse you want, the gdp number we get on the 28th is going to be paltry, period. Lets bring in wilbur. You are an investor. Chicken or small . Poultry or paltry . He came back from japan or china, what do you think happened . I think irks first of all, not all jobs are created equal. A lot of the jobs created a low paid jobs and parttime jobsment so a guy who used to work at a high paid fulltime job now counts as employed even though its a lower paid job. So i think thats one problem. I think the other bigger issue is, i dont understand why the relative measure isnt how many people are employed as opposed to the unemployment statistic. Because that has two variables to it. Work force participation and as people drop out of the work force, they dont count as unemployed even though they are. So i think its a wrong way of looking at it. If you were to look at the number of people employed, what would that tell us, that people are still kind of being ignored by the system, theyll theyve fallen off thewayside, theyre not coming back . I think like 36 and a fraction percentage, theing force is not participating. Thats a huge percent annual. Not participating. A good number of those neither have a job nor want one, which raises a very big question about what kind of incentives our systems are applying to people. Some of them, 36 of the people neither have a job nor want one. Its not a healthy sight. Steve, rick, i want each of to you answer this question. Lets say that it doesnt go smoothly as the fed is hopeing that we just steadily trend down to 6. 5 unemployment lets say that that stalls and we get sort of mired above 7 . Does that mean, steve, that the 85 guess forever or do they at that point say, were going to change where were headed since its not reachable. We will taper for another reason . The right answer is the reason we stay above 7 . If the fed comes to the conclusion that structural or underlying unemployment in this country. Then theyll clang. It would back up. The record there is a belief, joe, they can affect the Unemployment Rate . We den know they can. Rick, do you think we get there in the end or will they clang the target or will they just stay in forever . I think its possible we could get close to that Unemployment Rate, but i completely agree with wilbur on this one, i certainly believe that one of the big dynamics of, right, its not a real rate. I think a lot of employed people is a nice way to look at i. I personally think the federal reconserve is going to fight the new normal and theyre going to do everybody they can to keep as ultraaccommodative as they can. I think the variables that will impact that are of some of the disruptions theyre causing the markets that theyre involved with, like emergency, a, and i think, b, at some point, whether its a new chairman or a new congress, i do think there is going to have to be some pushback against the fed because sustainability. You cant keep these programs going on forever if the issues that theyre trying to correct are not correctible in a tight time frame. And they dont seem to be. Correct. If the only thing keeping the economy together is 85 billion a month of bond purchases, wooer if bad shape. Thats not for him not doing it. Its a little bit crazy, isnt it . No offense, of course, but if it is the thing keeping the economy together at a time when the government is reducing its deficit. One of the things the fed is doing. You got to get out on the side. Sooner or later, you got to take your lumps. What would taking your lumps mean . You sa i the fed let the economy stand on its own. Clear the system. Why would that clear the system . In other words, what are you talking about . Because if its not, if its always ahead of you. Its been so long, they dont remember. What are they doing . Maybe it would hurt more later. What would hurt . When you sa i too long. Its the feds cureing the effects. Its not the problem. We talk about not cureing the problem. What would the fed withdrawing. It wasnt so much, but if we force the permanent solution and we know its not. Im the one that wants to do this forever. I know you do. We want to assume the economy runs on qe. Lets just do it the next 50 years. Start at 85 and go up and down from there. This is an idea out there. It is the prevalent criticism of the Central Banks around the world that hay should withdraw the force on the fiscal side to make changes, what the central bankers say in response to that, it is not our job to lecture the fiscal side. It is our job to use the tools we have in order to help the economy. We do not, it is not our place to treat the fiscal side like children. You are saying that bernanke should hold back and withdraw a stimulus. They are giving them an exit. They are doing things that keeps congress and many people from understanding the Current Issues of the day by pushing them forward in time. Right. They need to live in the moment and let congress and all their ineptitude be visible to more. Im happy to follow this line of reasoning with you. I need to understand, what would the central bank say in this situation . They would go, we are not going to provide stimulus to the economy, because let me finish. Why do we need a leader . It is not our judgment the fiscal side as done as much as it can do. So what you have a situation is having a princeton professor pull the levers, its counteramerican. These measures are off the charts. Theyre crazy. Theyre invisible hands. The invisible hand never pulls the levers here when it comes to shortterm rates. Its misalocated. The teslas of the world have no reason to exist without the current form they wouldnt. Hey, guys, you can keep arguing, were going to a commercial. Exus enform, including the es and rx. This is the pursuit of perfection. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Wow, apple reports after trading today, iphones, that sales arrow will be a key number to watch. Joining us now with a preview of apples reports is dan earnst in new york. What are we talking dan, many ipads, iphones the expensive iphones, cheap iphones here abroad, whats most important . Yeah, i mean, so actually, i dont think this quarter is all that important to apple. What really matters to apple is whats down the road. Thats something that apple never discloses. The way i look at it is at 10. 5 times earnings, the market is assuming apple never gross again. They never innovate again. So i cant prove to you that they will. From their hand, you cant prove to me they wont. I think a got a good track record. I dont think the quarter matters, expectations are very low. Its probably a good thing, but there are very tough things going on, right . Europe, were still in a rut. China is showing signs of swelling. Mr. Ross pointed out the economy and the consumer didnt doing all that well. Retail sales, auto and gas have disappointed. Closer to home, part is phone cells are calling every smart phone vendor, htc, blackberry, has shown us negative numbers. The growth is no longer what it used to be. So this is a pretty tough quarter. I think there is a couple of positive things. I think the ipad is growing. The tablets is relatively well. Because they introduced the mini, i think we will have ipad units up. I think revenues are down 5 . Thats also a lower margin products. Were modeling Gross Margins down 600 basis points year over year. So eps down 17 . So its hard to get excited about the stock when you are reporting 17 year over year earnings declines. The question is, what does the year out look like . What is threequarters out look like . How do max . People still buying those . Is it the same phenomenon you are seeing the pc sales . Yeah the ibc numbers, which they only disclose from the u. S. Showed a modest decline for ipad sales and roughly 12 decline for the pc overall, so apple continues to outperform what is a secular challenge, but no other pc vendor has a tablet. Apple is the only one. Would you be focusing on making the iphone more expensive with more features or trying to sell a cheaper iphone to all the people that dont have them yet . Yeah, im not as excited about a cheaper iphone. I mean, thats kind of like, you know, telling audi to go out and produce a kiapriced car. Audi is one of the Fast Growth Companies in the Auto Industry and they sell premium product. So i think that apple could do that. The other thing about the way that everyone is looking at the lower price phone is saying, well, that will be terrible for mar jens. No one is at the same time assuming, we will have an increase in volume. I think that would make people excited. The other thing that people bash apple for the screen is too small. The samsung, they have these big screens. Thats not a structural barrier, if apple wants to make a bigger screen phone, they will. If thats the one Thing Holding apple back, then you should be rooted out. Its not a structural barrier. Its the size of the screen. Thanks for all. That i liken it to me driving a ferrari vs. Becky with a model t with those thumbing things, thank you you text. I do. Where are you . Do you have a smart phone . No, i have a blackberry. Girl. For texting . You texting . You gossiping . Doing deals. Within we come back, reports from three dow components out early this morning. We debt jim cramers take on dupont, travelers and ups right after this. Tomorrow on squawk box, a flood of major earnings reports, boeing, ford, Delta Airlines all out before the opening bell. Plus, well get Quarterly Results from dow component caterpillar and a live interview with chairman and ceo doug oberhillman. Respects switchin. G t welcome back to squawk box box,. Jim kramer joins us here this morning. Three dow components are out and i am dying to hear your take on this. Traveler says come back from the strong gains. Dupont has been building. I like the combined. This is another one of the companies that has a big run. Reasons to take profits. I dont think there are any. Extraordinarily good quarter. Theyre raising premiums. She is getting out of low margin, going into high margin and going into secular and the market absolutely loves that. United technologies if that sells off, we have to refer to bea because it showed you this a aero space. Continuing your conversation from yesterday. I did read about it on twitter and other places, just this whole idea of whether wall street journal is right with that front page story. A lot of the numbers we have gotten today lineup on your side of the argument. When i look at what the journal quotes, it is very interesting. Hey, we mention ge being okay. No, the point is that the Large International companies that are based in the United States are putting on phenomenal numbers. The banks are putting on phenomenal numbers. You can nitpick and find some numbers that are important that didnt do that well. Journal story im tired of these stories. When business is good, you have to say its good because when business is bad, then you can be able to say, hey, listen, thats not a great quarter. These are great quarters. I just question homework. Honestly. I question the homework. Jim, what if they never hire anybody again . Thats a different story. Im talking about profits. Im talking about Revenue Growth. Im not talking about hiring. These companies are making their money by not hiring. The whole debate with the fed and whether the fed got it right or not. Good to stir up controversy and thats why it landed on the front page. When you have the large companies, they are destroying Small Business. Not that Small Business has no confidence, just that Small Business should have no confidence. Large companies coming in and getting the regulation that they want that actually hurts the little guy. You cant really get a lot of credits. Good article in journal today. But, you know what, to say that these earnings arent good. I mean, what kind of denial is that . Sometimes its okay. Sometimes you dont have to be gloomy. Sometimes things are good. Im with you, jim. Thank you. Thank you, sir. Well see you in a a few minutes. Yeah. Coming up, he doesnt, hes not a vulture investor. You know, were not describing you. You want to be a phoenix. The rise, rises. Is that a real bird . Its a real mythical bird. Dont miss squawk box tomorrow pepsi, caterpillar, ford all before the bell. Shes always been able to brighten your day. Its just her way. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. 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[ male announcer ] from broadband to web hosting to mobile apps, Small Business solutions from at t have the security you need to get you there. Call us. We can show you how at t solutions can help you do what you do. Even better. Lets get back to our guest host. We dont have a lot of time. But in a nut shell china has its problems but soft landing and no longterm reason not to be there. Absolutely agree with that. I think that getting control of the shadow banking system, they now put in a rule, you have to register with the chinese sec to sell that wealth project. Also set their own market rates now instead of government. Theyre getting more free market, were getting less. Beginning to get a convergence. Amazing. Wilbur, thank you very much for coming in. Always a pleasure having you. Thank you for having me. Again, keep an eye on everything that youve been watching with the futures this morning. Three dow components that came out, definitely moved the dow futures this morning. Continue to see that trend. Right now the dow futures up by about 46 points. But, yes, tomorrow it continues. Caterpillar and boeing tomorrow. Caterpillar, boeing, ford. 4. 6 . Pepsi, delta, ford. A lot happening. Make sure you join us tomorrow. That does it for us today. Right now its time for squawk on the street. Good tuesday morning, welcome to squawk on the street. We are awash in earnings from some of the Biggest Companies in the world. Utx, dupont, travelers, ups, all sharing the stage as we look at futures this morning. A lot more to come tonight with apple, panera and at t. Our road map begins with earning season in full force. Dupont, ups, travelers all on deck. Netflix getting hit. A bit short of what wall street was expecting and