Transcripts For CNBC Squawk Box 20130806

Buying the Washington Post newspaper for 250 million. This deal ends the graham familys 80 years of ownership. He calls this acquisition a personal endeavor. Not amazon money hes using, this is his very own. And chairman and ceo don graham talking about this deal. Jeff reached out to me less than a month ago. We met at a Conference Face to face, twice, the second week in july. We spent an hour together. He asked for time to study the numbers, we then spent another two hours together. And at the end of it, he said he thought he wanted to go ahead, but he obviously, he and his team needed time to look over the business and understand it more thoroughly. And then we he did and we quickly reached a deal. Shares of Washington Post climbing to the highest level in almost five years. 588 and change. Almost up 20 on this news. And this is something that were really focused on just because of the journalism and everything. We have to. But the graham family. The graham family, giving it up after a long time. What does really want . 250 million not a lot of money to him. 1 of amazon stock. The stock on average has moved either up or down Something Like 249 million every day. This is day in the life for jeff bezos. Not that big a deal. What does he bring to the table . What does he really want to do . The grahams would not have given up this newspaper unless they thought they had the right owner. I believe he will do something interesting. Question is what is that . What is interesting . Does he keep the paper . Does it become all digital . How much more money of the 250 million hes putting in do you plow into the thinking. Does it become a national or global brand . Does he decide how this one of the things the grahams have always done is try to focus very locally. I dont know about that. To me it seemed like a National Newspaper since the pentagon papers and from watergate and all those days. I guess the question is, can you survive that type of a paper or do you need to be a local paper. I would argue they went from being from having this great brand that represented truth to power and all that and they still do, but that strategically the grahams have focused very locally. They never wanted to be a National Newspaper. The internet changes all that. What does bezos know that we dont . I thought his letter to the employees was fascinating. He suggested i dont know yet. It is going to be were going to be experimenting. Hes leaving the same people in power. Im not sure, by the way, thats something that is a longterm situation. It seemed to me that if youre going to buy a institution like this on day one and want to keep the talent in place, at least while transitioning to find out what is next stage of this thing is supposed to be. On day one, the last thing you do is say you are bringing in the cavalry. Becky mentioning watergate, reaction has been far and wide to this story. Carl bernstein, one half of the famed watergate duo with bob woodward said bezos seems to be the right kind of guy in the history of the post and what he can bring and meld old with new. Fascinating and ironic in some ways. If you talk to people in the Book Publishing business, on the creative side, they would tell you jeff bezos killed the business, not helped the business. Very strange thing to think and yet here is somebody who cares deeply i would argue, about journalism and about writing. His wife is a writer. Somebody who does, but he i think hes not an established book publisher, not necessarily the author. If youre struggling to get through, the book publisher controlled everything and held all the power and now thats opened up and changed. Depends where you are along the establishment curve. I agree with you. He has democratized the business at some level, but also in a walmart way in terms of slimming down margins taken profit from everybody. The problem, if youre the middle man, not necessarily if youre the some writers on the writing side had a tough time too. It is a hurting business. Revenues have been down at the post. Ad revenues down. The online side of the business has done all right. If youre a newspaper these days, most trade at three to four times profit, you need earnings. This is a company that lost Something Like 50 million in the First Six Months of this year, 33 million in the First Six Months of last year, just if youre apples to apples. It is not it is i think up to six or seven years of declining revenues every single year. I thought to me the most interesting thing hearing don graham speak, as the graham family, our job wasnt just to own it. We wanted to always do the best thing for the paper. I thought that was a very interesting thing to hear. Thats not what you always hear from owners. Not a lot of newspapers lif s l. It is few and far between at this point. 250 million deal which wouldnt normally garner this type of attention. The history of the entire issue, having bezos come in and take the stake and watching an industry that is really changing and hopefully there is future for it. In the same week were talking about the sale of the boston globe, right . A day or two before. I saw a funny tweet from someone yesterday who said, bezos knows how to run a business thats losing money. Yes. Amazon in its most recent Earnings Report reported a loss. Somebody who has patience for not necessarily looking for the immediate profit. Of course. Well see what happens. It is an interesting story. Well be coming back to it throughout the next couple of hours. This other corporate news, sony rejecting a proposal from activist shareholder dan loeb. You may have some views on this. Loeb wants the company to partially spin off its entertainment business. He vows to keep talking with sony and explore other options. Sony coming back saying, were not going to do it. There were two issues from what i understood, the rational that dan had put out was, one he claimed they needed capital and sony refuted that. The second piece, perhaps more important piece, the suggestion that if you can spin entertainment you can find a higher valuation for the unit. Sony, of course, saying this has been done for without much success and we need the entertainment unit to be part of this whole thing because thats how we get the synergism of all of stuff. Im most interested in what happens next. You can feel the tension sort of building over the last couple of weeks as, remember, loeb sent out that letter to his investors, comparing a couple of the most recent films to, you know, ishtar and Something Else i cant remember. But it had a little bit of a harsher tone to it. This was not harsh. I think really, i think the line that says intends to explore further options to create value, i dont think hes done. I dont think hes done, but im not sure hes going to i thought this was the new dan loeb version, meaning the old dan loeb was im not really pushing proxy fights. Im not sure hes going to continue. I dont know. I dont know. I dont know. I cant say. I dont have any insight into whether he will or wont. Can we just talk about George Clooney for a second . Did you see some did you talk about that on not really. What were the remarks . I didnt see them . George choon clooney he ripped dan loeb. Guys like this are given any weight because they bought stock and they suddenly feel like they can tell us how to do our business, one he knows nothing about, this does great damage, trickles down, the board of directors says what guarantees do you have the movie will make money . There is no guarantees but you average out the films of will smith and Channing Tatum have made, youll take that bet every time, even if it doesnt always work out. Hedge fund guys do not create jobs. We do. It was it got lost in the shuffle because i think that came out late on friday afternoon. So if was sort of, you know, glossed over. But with their money . Right. Basically. I mean, come on. Hollywood i dont know what percentage of wall street related money funds any kind of films, but i find it rather interesting that a guy like clooney, whom i dont know at all, never met, never have spoken to, who is a producer now and a director, needs money to make the films that he wants to make. And to take such a public and pretty harsh shot at loeb, i thought was kind of surprising. To lump him in and say a share holder to start calling the shots, can argue against activist shareholders who come and go and not longterm investors, but, look, the shareholders are the ones who are writing the checks in this stuff. Why is he buying stock like crazy if hes so down on things . Hes trying to manipulate the market. This is what clooney is saying. These people know what theyre doing. You look at the industry track record, blah, blah, blah, blah, to have this guy portraying that sony management is the bad stepchild and doesnt know what its doing, is he going to fix it . Thats like walmart saying let me fix your town. Now a walmart rant, put in the store, strangling the small shops and getting everyone to work in them to work at minimum wage with no anyway. I would like to look at some of the records for who makes what in hollywood. I also think that, what, the letter, the sony letter came out late or early evening here, yesterday, right . This is a three paragraph pretty hastily written thing, i think. So i think there will be more. Okay. Lovely. Who knows. In washington news, president obama travels to arizona today to talk housing. Hell propose overhauling the nations Mortgage Finance system by winding down fannie and freddie. The president will also renew a push to make it easier for home owners to refinance their loans at lower rates. Well talk to housing and urban Development Secretary Shaun Donovan at 7 30 a. M. Eastern time. Speaking of real estate, Credit Reporting Agency transunion says home owners were doing a better job of making timely mortgage payments. The National Late payment rate on home loans fell to the lowest level in five years in the Second Quarter at 4. 1 . New yorks financial regulator is joining an effort to crack down on a loophole that lets online lenders offer shortterm loans at Interest Rates that exceed 500 annually. New york times reporting the regulators sent letters to 35 online lenders instructing them to cease and desist from offering loans that violate local usury laws. In global news, Australias Central Bank cut its key Interest Rate by a quarter point today to a record low of 2. 5 . Policymakers are prying to prepare the economy for the life after the mining boom. The subpar growth and low inflation argued for an easing. Lets look at the markets this morning. Things are barely budging. Dow futures down by 12 points. Yesterday, the dow dropped 46 points and while that was a minor decline, still the biggest drop that the dow has seen since june 28th. That tells you about how people are kind of sitting on the fence and waiting to see what happens next. You can see the nasdaq again is down just slightly, but yesterday the nasdaq once again was up for the fifth consecutive day, endedment session at another 13year high. Look at oil prices this morning. Theyre up slightly, 54 cents a gain for wti, which brings it up to just over 107 a barrel. The tenyear note now is yielding 2. 66 . The dollar, this morning, take a look, youll see right now, it is down across the board. Euros trading at 132. 87. And gold prices barely clung to 1300 yesterday. They settled at 2 1 2 week low and down once again by another 8. 40 to 1,294 an ounce. Time for the Global Markets report. Ross westgate standing by in london. Good morning to you. Becky said investors sitting on the fence, sitting on the fence here. It is not a spiky uncomfortable fence. You get the sense it is a broad armchairlike. Little more weight to the downside. Nearly 5 to 4. Little more than that on the Dow Jones Stock 600. Pretty even stevens across the piece for some of the indices as well. The ftse was also down 40 odd points yesterday. Right now, pretty flat. But we had another piece of great data today. Manufacturing output coming in better than expected for the month of for the month of june. And, again, another bit of data to feed into the core inla inflationary report. Well wait and see. But plenty of expectation about that. And house prices as well, another sign theyre doing pretty well, up for the best annual price rises for three years. The xetra dax, quarter percent. And we had gdp today, on the one hand, not great. Italy is contracting to the eighth consecutive quarter. On the other hand, that quarter contraction point 2 , better than. 4. So clearly things coming off the bottom. Whether we can get anything approaching growth yet, well have to wait and see the annual contraction at the moment is around 2 for italy. Couple of individual stocks are looking at, both in the Banking Sector today. First of all, standard charter, stock up 3. 6 . Theyre talking about theyll fall short of their annual target for 10 growth. Profits met expectations. The pretax 3. 3 billion, but they did have to take a hit of 1 billion hit from the korean business. Apart from that, investors like what they heard. Credit agricole up 1. 5 today. Numbers got released slightly earlier than they should have. But investors liked what they heard. They pulled out of the greek business this and helped boost their income, 696 million, to 56 million a year go. Both banks performing fairly well. Thats where we stand at the moment. Aussie dollar, you mentioned the rba rate cut. They rebounded off three year lows against the dollar on the back of the basis there. The reserve bank didnt come out and say we could be cutting rates further again off this record low. Thats it for now. Back to you. All right, ross, thanks so much. We talk about jeff bezos and dan loeb and other billionaire news, carl icahn bought nor dell shares. He now holds more than 156 million shares or 8 excuse me, 8. 9 of the company. And david tepper is turning in some impressive returns according to appaloosa investor letter. 1 million invested in the firm in 1993 is now worth 149 million. As for longterm performance,an, 20 years, up 28 . Ten years, up 25 , five years, more than 30 . Year to date, up 23. 4 net of fees. So i dont know. He just killed it. He killed it. He told me yesterday hes still bullish on the market. If he was super bullish before, hes just bullish now. Taking something off the table when hes not as super bullish . I dont think so. Just bullish. Hes just, you know, cognizant of how far we have come. Well, anytime he makes a real call, he, you know, every time he makes a real call, the market actually moves. Maybe he doesnt want to i dont know. I dont know. The 1 million, 20 years ago, worth 149 million today in his fund. Thats insane. Right . Speechless . Ive rendered you speechless. Youve rendered me speechless. I wish i made that much money. Coming up, a hamburger with a 330,000 price tag. If youre headed to the airport this morning, flyers beware. Big delays. Well have more on this when squawk comes right back. Geoff im the kind of guy who doesnt like being sold to. The last thing i want is to feel like someone is giving me a sales pitch, especially when it comes to my investments. You want a broker you can trust. A lot of guys at the other firms seemed more focused on selling than their clients. Thats why i stopped working at my old brokerage and became a Financial Consultant with charles schwab. Avo what kind of Financial Consultant are you looking for . Talk to us today. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Welcome back. Time for the executive edge. A new segment were launching this week focused on giving Business Leaders a leg up. We highlight interesting store dwl ys that go beyond the top headlines. Mark zuckerberg launched a lobbying group this spring and has been working behind the scenes on this topic last month. Last night he spoke publicly on the issue for the first time. I was really heartened to see how easy it was to get so many of the leaders of a lot of the Great Companies out here to sign on to support not just the issues that would benefit their companies, but full comprehensive Immigration Reform. So thats why were here today on the stage representing, because this is something we believe is really important for the future of our country, and for us to do whats right. This is interesting because Business Leaders have definitely gotten behind the idea of making sure that some of those visas, especially for those people who sbrn tra have been trained here, computer skills and engineers, those are the people that Business Leaders want to keep here because they need them for jobs. Zuckerberg has taken this stance, this is about expensive reform and not just the people highly educated. This is a moral issue for him, even though the cynics say this is a business decision because facebook needs lots of engineers and need people from abroad, in part because the argument is we dont have enough of them here, one quick note and becky, you probably know about this as well, this group, this forward us. Forward us, has had a little bit of a setback in there that there are a number offlected fr. Musk left them after they came out in support of the pipeline. The xl pipeline. Earlier this year. There is an argument to be made hes trying to sort of kumbaya and hold hands with people they took the xl pipeline, one way to try to reach out to republicans and bring them into the fold on this. You end up with people who get left out on the outside and thats the tough thing. Making progress and saying something without offending somebody on some side. If it is getting more political, it would seem to me to be getting more credibility to his own argument, and that it goes beyond his own selfinterest and facebooks bottom line that he simply is taking on the issue itself rath twhae er than what it could mean for facebook, the company he runs. He spoke about this as something close to his heart. He teaches a class, has been teaching a class of High School Students and in that class, hes met some people who are undocumented immigrants as well. This is something he has firsthand knowledge of and seems sincere when he talks about it. An issue that will get a lot more attention. There is a story trending on cnbc. Com this morning, google cofounder sergi brynn is explaining why he paid 330,000 for a hamburger. This was created in a lab. Grown from the stem cells of cattle. Sounds appetizing, right . Brought out for first public tasting yesterday. Scientist behind the project kept the identity of the financial backer secret for years. But here is brin in his own words. People think this is science fiction. It is not real. It is somewhere out there. I actually think thats a good thing. If what youre doing is not seen by some people as science fiction, it is probably not transformative enough. It is really just the proof of concept right now. Were trying to create the first cultured beef hamburger. From there, im optimistic we can scale by leaps and bounds. Taste test, guys. What do you think . Im told it is gross. I kid you not. The reviews that came it sounds so appetizing. Those who ate the burger, described as a fried burger. I dont know what a fried burger is. Deep fry the burger. In a pan. Like a boca burger and mcdonalds. Thats how somebody in the story described it. Yes. Did not sound i like mcdonalds, im okay with that whole thing. I have to say, the idea of eating the first stem cell grown hamburger, yeah, not appealing. You would have to pay me to do Something Like that. I get his longterm concerns about this, hes right, i share some of the concerns with how meat is brought in, how cattle is brought up. I dont know. One day. One day. Well all be eating cows everywhere are fist bumping this morning. Right . Theyre happy. If you plan to fly today, you may want to call the airline perfect you head out. There were delays after an outage to the Computer System that airlines use for reservations, check ins and online bookings. The problem was resolved by 2 00 a. M. Eastern time but there could be residual delays. Impacted airlines, american, jetblue, alaskan airlines, frontier, virgin america, quantitious and british airways. And sabre is the system that does all those. You never know what happens behind the moving pieces. If you have something coming up today, make sure you call ahead and check the airport. Thats your executive edge. Now time to slip in a quick break. Well talk about opportunities in emerging markets and Investment Opportunities there. Plus, in squawk sports news, Alex Rodriguez returning to the field yesterday as he appeal his suspension by the mlb. The average ticket price increased by 17 in the last day. Right now, a look at yesterdays winners and losers. Oh, hes a fighter alright. Since aflac is helping with his expenses while he cant work, he can focus on his recovery. He doesnt have to worry so much about his mortgage, groceries, or even gas bills. Kick kick. Feel it feel it feel it nice work you got it you got it yes aflacs gonna help take care of his expenses. And us. Were gonna get him back in fighting shape. [ male announcer ] see whats happening behind the scenes at aflac. Com. Good morning, everybody. Welcome back to squawk box on cnbc. Im becky quick with Andrew Ross Sorkin and scott wapner in for joe kernen. Cars and truck on the road now average more than 11 years in terms of age. That is the oldest on record since research and Consulting Firm poke began keeping track of vehicle age in 1995. Among the reasons, the better quality of the car and trucks being made today and consumers who are nervous after the recession. Well talk to fords chief economist in the next hour. But i thought as things got bet, the life span of those cars was going to get shorter and shorter. Maybe were used to driving some older cars. Some investor s have gotten bearish on emerging markets. You were saying you got back from brazil. Yes. One of the countries we put in the emerging market sector, i dont know if it is emerging anybody. Seems to be on a downswing. Where do you place it . Longterm potential but real challenges in the near term. Regulatory environment in brazil is harder than other places to work. They got a big bump from consumer investment, from the growth in the underlying economy, from creating opportunities for consumers, but still it has real challenges that reignite the economy. If i was a ceo in the u. S. And said, you know, tell me the one country i should be doing a business in that im not doing business in today, for the sake of the hypothetical, lets assume im in the u. S. , probably not true. You would do business where . I would separate between the shortterm and longterm. Longterm, youve got to be in china, right, huge part of the Global Economy. Number two today, eventually will be the largest economy in the world. Youve got to figure out a path to win in china. In the near term, im pretty bullish on southeast asia. I think the economies are coming together. The free trade fwreagreement is starting to take hold. A lot of underlying growth, a good place to do business. Southeast asia is the place to focus shorter term. What is short term and long term . Starting from scratch, hard in any of these places. But i would say shortterm is the next two three years, you know, three years and beyond youve got to be in china. It will be a challenge in 18 months. Real imbalances, the new leadership has to work through in china now. And balances between investment and consumption, balances in consumer and balances with the environment. There is near term challenges, but longterm youre talking longterm and shortterm that are much longer than we may talk about. You talk shortterm, you talk about what do you do in the next three days, in the afternoon. Youre talking two to three years being the shortterm. If youre meeting a Global Economy and thinking about emerging market, youre saying where do i need to have my company in 2020. In 2020, to put it in context, the number of middle class consumers in china will double from 200 million to 400 million middle class consumers earning 10,000 a year or more. You look at how behavior evolves, if you go from earning 10,000 to 12 ,000 a month as a consumer, your spending on luxury goods doubles. There is a lot of underlying opportunity for growth. It is easy to get caught up in the shortterm challenges that theyll have, and the impact that will have to bring the growth down, but if you take a medium term view, a lot of upside. A lot of pessimism about what is happening in china now. Even what the real Growth Numbers are, you say were still seeing a huge amount of growth. Where . 7 growth is nothing to laugh at in the Global Economy. Thats what it really is. If it is off a point or two, we believe and the data we have from consumers and others suggest there is real underlying growth in the xheconomy. Were seeing growth in wages. It creates an opportunity. And im not minimizing the next 18 months it is easy to get caught up in the shortterm. Next 18 months likely going to be challenging. Thats not what youre investing in if youre running a global corporation. One other country out at you for a moment, in the news this morning, given that dan loeb has been back and forth to sony. Japan, which is not necessarily an emerging market anymore. There is a question about whether you think that country is really going to fundamentally restructure itself. Part of the loeb investment is that abe, the third piece of the stool, the third layer of the stool, is going to be structural reform from a business perspective. You think that happens . I think there is more willingness to take on change in japan and to have more alignment in the leadership to do that than in a long time. I think it will probably not be as fast as someone would like, but i believe there is a real potential to continue the drive, to really make some real change happen there and a higher level of Consumer Confidence and Business Confidence in japan than there has been in a long time. Well leave it there. Rich, thank you for coming in this morning. Get back on a plane to go some place right now. Thank you very much. Hes getting off the set now to go to the plane. Coming up, the profit, cnbcs new star is using his millions to save dying businesses. Marcus lemonis joins us on set with his latest adventure. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Mr. Goldman loved his family a lot, didnt he dad . He sure did. Thats why he had state farm Life Insurance. Like you. So his family never has to worry, right . Mr. Goldman didnt have Life Insurance. Why not . Well, hes just a goldfish. Ignore him. [ male announcer ] youve got questions. Your state farm agent has answers. Backed by the Life Insurance Company Millions of moms and dads already trust. We put the life back in Life Insurance. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Do you know where hank is . I dont know. I dont know if hes going home or not. I can not believe he left. Not only is it disrespectful to the employees, it is disrespectful to all the customers coming here today. He really left . Like, hes gone . As far as i know. He literally disappeared. Im pissed. Oh, hey, hank. Where did you go, buddy . We have a grand opening. Yeah. I dont understand why you left. This is [ bleep ] ridiculous. You need to [ bleep ] come back here. Ive been here for a week, ive been doing all this stuff. It is ridiculous that you left. Turn the car around. Get back here and be a leader right now. Wow. A little tough love. Thats just a preview of what youll see tonight on the profit at 10 00 p. M. Eastern and pacific time tonight. Marcus joins us on set tonight. Hes the star of the profit. That proves life is not a cakewalk. A little tension there. It is not a cakewalk. It was a good experience for the viewers to really see this isnt as perfect as everybody thinks it is. This isnt just about writing checks and making money. This one hurt. Back us up. What is this week all about . This is about a flower and gift shop. This week is about a high end flower and gift shop in pasadena, california, there since 1967. Really just a pillar of the community. This business is this particular episode is about Second Generation businesses. This gentleman that is running it today inherited it from his father, his father was a legacy in the town and i would say he may not be such a legacy to you what kind of problems did you run into . Finding out the owner isnt really engaged you find the owner that sit behind the desk, snit their office, not out with their customers, not out with the employees, dont have a process in place, zero asset management, youll find out quickly where the business is failing. That doesnt sound like a problem you can fix necessarily. We have seen you come in and really turn things around. Put things back together. How do you do something in a situation like this . In this one, it wasnt that difficult. The process was broken. We rallied. There is over 30 employees, we rallied them together, put an Inventory System in place, renovated the building, spent 1 150,000 in five days. In the end, he says to me, i dont need you, its fixed. How much harder do you think everybody works knowing youre showing up on the doorstep, with cameras . In theory, you would think a lot. I think this guy worked less. I think he thought ill let this other guy do the job. This seems to bring to light what im curious to know whether you find this in your experience often, the second and Third Generation businesses, maybe the next generation isnt as committed as the first one, even a business been in business since the 60s and pillar of the community can fail like that, if the people running it now arent as committed as they were then. I think it is really about a personal pride. This gentlemans father founded this business and well known in the community. His mother is still alive, visits the place often. What were finding in Second Generation businesses is they dont have the passion for the business. Almost stuck into the jobs, thrust into these, and we see these not only in small businesses, but big businesses today too. Can you turn around situations like that, generally . Is it more than just coming in and revamping, you got to put the management back in. Can they really take care of things . We talked before about the fact that this is a people process and product game and the people is the hardest thing to fix. This particular case, the business can survive, but it needs an outside manager who is vested. Youll see one tonight that is the how hard is it to find businesses that want to participate with you in all of this . For season one, it was hard to find the companies, because i have a high level of kind of, you know, is it a family oriented business or Good Standing in the community. It looks like and were casting for season two now that the inboxes i bet from people seeing what is happening. After watching first episode, this isnt a show about throwing pots and pans and yelling and screaming at people. This is about getting and making real investments, writing checks, fixing peoples businesses. Over the next couple of episodes, im not sure the inbox will flow as much. Your management style gets more aggressive. It doesnt get aggressive. My tolerance for people that dont is there bleeping going on . A little more bleeping in this episode. A little more bleeping. This is i always use my mother, my mother probably would smack me if i saw this one. A little more bleeping. We had bill rancic on the show last week. Hes the first winner of the apprentice with donald trump. Fellow chicagoan. Fellow chicagoan. We asked him, we had seen you on the show, things just launched, he said, yeah, i stayed at home and watched it. He was excited about the whole thing. He said this is really business at work. A little feedback from people through the watching it. I think the biggest difference for me is the that people were shocked. The promos were intense and things were being thrown around, but i think people really felt like they were going to get tips for their small business. When we decided to do this it was, like, how can we teach people how to run their business. Youre going to be getting people willing to work into this, the people reaching out and saying please come to our business. They know what youre all about. Or a job at camping world. Right. Un. One of the two. Well be watching tonigh ini. Tune into cnbc prime. The second episode is tonight. Tune in. When we come back, the latest craze, called wearable technology. You see me with this thing on my wrist, this is the device well talk about. You see me with this thing on my wrist every day. Well talk about this one probably as well. These are devices that track everything from how much you walk to how much you sleep. We have former apple ceo john scully, who will join us with his latest business venture, it comes on a wrist right after this. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Welcome back to squawk. Biometric wear is the latest craze hitting the market. A new fitness device, more than a fitness device, a life device, called the shine by misfis wearables hits the shelves at apple stores. John culley is the ceo and cofounder. Sunny vu is the ceo of misfit wearables. Im wearing one right now. You have one right there. I dont know if everybody can see the wrist. This is the device. It tracks my movement wherever i go. I go. Its like a pedometer. It tracks sleep and other things. It links up wirelessly or will, it doesnt do it yet to my iphone . Sunny is wearing one. Can you catch one, too . I have one on my wrist. Lets talk about what this does. I wear another one, you see me wearing it all the time. I might switch depending on how this all goes. This tracks my sleep. Last night i got five hours and the way minutes of sleep, three hours of deep sleep. My wife hates it. I use it on the weekend, i say im so tired now, i have to say, by the way, i only averaged two hours of deep sleep, so you got to help me here with the kids. The question i have about this device is how is it different . The fit bit is out there. Nike has a jewel band. How does this differentiate in the marketplace . You know, its, we always say it does very similar things to other products. It measures the same things, steps, calorie, distance that kind of thing. Its made of met am. It is beautiful. You can wear it anywhere. You wear it on the wrist, there is this little thing you can clip on to your jacket. You can wear it on any occasion. I wrote a piece, steve job, this is the device he would wear, it is that beautiful. I think the most important thing is it has this extended batry life. Its going to be a sixmonth battery life product. All these other things you have to charge them constantly. Every few days. So when you think about it. The story on wearables is not just the elegant devices in which were proud of, its the data science that will be going behind it that will be able to track lets say sleep, you will be able to track your sleep patterns, track your exercise patterns, then start to see, how do you compare to other people in the population and make predictions about things you didnt probably know about yourself because of those correlations. People that compare with other people in the population . Exactly. Or i know my friends . Can you do it a couple ways, set personal gels for yourself, measure calleric burn, so for people who are concerned about how they look and how they feel, thats the early adopters for all of these devices, but when i join the personal computer industry it was come, do atari. Those companies werent arent. They set the expectations. Were in the early days of wearable products. We will see a lot of very exciting things over the years. Lets talk big brother, with this device, i actually share some of the data with friends. They can see when i woke up in the middle of the night within i go to the bathroom. If i went to the gym in the early of the day, they say you can see the red line, it looks leak you are moving. Ultimately, i talked to peep who said, employers wear this thing. Maybe you will get a discount on your Health Insurance if you move enough and sleep enough, do you see that happening in the future . Sure. Think about this. The Affordable Care act goes into effect in 2014. We are already seeing a rush by employers who are moving to self insurance. As they do that, they suddenly care about their employers productivity in terms of the health care so they are putting incentives in. They are doing things that politicians wouldnt touch about overweight, smoking, things like that. Giving incentive itself, tracking things and getting people personal goals. This is all a part of the consumer era of health care, which we think will be pretty big. How far do you think we will push wearables in five or ten years . What is a fitness or a sleep tracking device now . A lifestyle device, what else is out there . I think it begins with the early adopters, people who want to be fit. But it also has implications for the large expense in health care, chronic care patients. At some point i think you will start to see these kind of wearable products, not just ones like were doing at this stage but other kind of wearable products. Were working on a whole roadman of products, which will have real value for chronic care patients. Theyre about 17 of the population. Did we stay cost of this yet . We havent said, its 119, right . Right. We constantly hear apple may be coming out with an iwatch of some sort, do you worry they will have technologies like that in here . Most certainly, smauch watchs will have acelero meters. They are not the aend end all, be all. Not Everyone Wants to wear things on their wrist. They dont want to have a tan line and a lot of times i dont want to get a clip. Let me see what i can do with this. Here we go. Go got it. So i can raer it like an earring . My wife wants to know something, this accelerometer, its measureing motion. I notice with this one i seem to be moving a lot less. These guys think im moving a lot more. What is the accuracy also on sleep . What do you think the accuracy is . I think we are limited by the technologies right now with accelerometers. We probably use the same thefts and what not. Measureing sleep is probably deficit done at the head with eegs and what not. But you can get some indication of sleep at the wrists with accelerometers. This is very much a 1. 0 type of thing. Is this a lodgeterm thing for you guys, a grow the business and sell it kind of adventure . What is it . This feels a lot, scott, like the early days of the microprocessor revolution when i showed up on Silicon Valley 30 years ago, morris law opened up this eruption at decades. We are at the beginning of something big. John chambers said there will be 30 million wireless device, most will be sensors connected to computers. There is another device out there called the basis, which measures temperature. Do you have another device in the works . Yeah. We didnt start this to make a pedometer company. We have a lot of products coming ut later this year, early next year. What we think about the wearables, theyre not that wearable. Theyre plastic and rubber. These are not things people normally like to wear. Thank you for coming by. Come back with the next one. Appreciate it. Coming up, another billionaire buying a newspaper. Squawk will be right back. Good morning, everybody. Im becky quick. Joe is on vacation this week. We have been watching the futures. Not a lot of movement. This is typical on what we have seen on wall street. The dow futures are down 25 points. They were both down yesterday. Nasdaq is down by just over 3 points. Nasdaq closed yesterday at another 13year high. Well continue to see what happens. In the meantime, lets get to your morning headlines, president obama will propose an overhaul of the mortgage system, including a shutdown of freddie mac and fannie mae. The idea of shutting down has bipartisan support on xichl we have more on this story with hud secretary sean donovan later this hour. Also, speaking of mortgages, americans are paying them on time more often these daysment Credit Reporting Agency transunion says the percentage of late payments fell from 5. 5 a year earlier, the lowest level in five years. General motors is cutting the price of the electric chevy volt. Thats a drop of about 12. 5 . Back if june, gm cut the price of the volt in hopes of spuring sales. One of our best friend is here to talk business the economy and washington a. Man who wears many hats, harold ford, are you a managing director nyu professor Public Policy, former congressman, nbc news political analyst. And your friend. Do i get that, too. We got a lot to talk about. Becky and scott, too. They are friend, too. We are going to talk newspapers. I never had a paper route, but extra, extra, read all about it, amazons jeff besos is dropping serious cash, probably not serious cash, 250 million is one days worth of work for him. You and me. Joining us now with a story that is fascinating the media world this morning. Fascinating, andrew, its such a big surprise to the industry and even reporters at the post, sources tell me yesterday the post reporters were relieved the boyar wasnt another publisher like news corp. Shares jumped yesterday on the news that the remaining company which will be Education App would shed the newspapers, which have struggled with declineing revenue. Now the big question is what bezos will do with the post. He says the papers duty will remain to its readers, not the private interest of its owners. He says there is a need to invent and experiment to keep up with technologys stranz formtive impact on fuse. The ceo of the Washington Post company have known each other for more than a decade. They had a annual conference if sun valley. He reached out to me less than a month ago at a Conference Facetoface, twice the second week in july. We spent an hour together. He asked for time to study the numbers. We ten spent another two hours towing. At the end of it, he said he thought he wanted to go ahead, but he obviously still needed time to really look over the business an understand it more thoroughly and then he did and we quickly reached a deal. Now the spotlight shifts to other papers up forsail sale, including the trib bound t. Boston globe went for 70 million. Owners are concerned about the declineing value of newspaper assets. Now, well be watching the fork times, the family that controlled it, well see what their next move is. Julia, stay with us. Harold ford is with us. How big of a deal is it for the grand family to be giving up and jeff bezos to be stepping in. It looks like a partnership. It will work well not only for the readers, the post is the richest content paper in washington. Its what the leaders in washington look to, business and political. If you are a member of congress or the senate, you want to have your views on Public Policy aired. You want it on the editorial page. Have you to be pleased to hear mr. Bezos is a commitment to the readers. He will provide that content. Hopefully, a liquidity and expandivity to expand the paper over the years. The reason i ask, i was saying earlier, they take a National Approach in the news, its a very local paper. The grand strategically spent a lot of time trying to own d. C. Yet they have politico and others who have tried to take part of that business. So what do you, to the extent you have seen the post having a Bright Future what does it look like as a d. C. Watcher . I think it probably looks brighter. You look at the creativity amazon could bring to this enterprise. You think about their growth and what they have been able do with their company and expan it. One can only believe and hope they will aploo i that same magic to the post. The thing the post do not know thegram grand family very well, the creativity and freedom will remain there. If it does, you combine that with amazons entrepreneurialship. Do you know what the politics are . I dont know what his politics are. Somebody said hes committed to watching and keeping the editorial. Hes been active, engaged, a supporter of marriage equality, a supporter of, the president spoke at his plant in tennessee about income and quality. You have to imagine there is a commitment to see wage levels grow and for that matter, job creation increase in ways that will help more americans afford and more americans invegs for the future. Lets continue this conversation with rick edmunds. Hes a Media Business analyst at planner institute. Rick, this is really a huge story about the state of change in the industry. It comes after the boston globe was sold by the new york times. What does it tell us about the future of print media . Those two are in planning development. Both instance, i wont say this is industrywide, but it marks a further movement of important papers from Public Company ownership into private hands, in this case, i think its wealthy individuals who are really going to be answering only to themselves. And just in terms of the digital revolution, i mean, this is something thats been heralded for close to 20 years at this point, probably 18 years in the Media Industry when it comes to newspapers. Where does it tell us the things stand for that right now . Well, as of right now, i think its in the case that both these papers have sort of taken the worst of it. Theyve had greater losses of cirq circulation. And the time tables just been too slow to really move these businesses forward to stable footing and its probably going to be in a print and didnt tal whilement id say on the upside, the Washington Post always liked the opportunity of the revolution because it could cultivate a National Audience and interNational Audience with its website and now its other digital products, which it couldnt reach, itself. So assuming this all works through eventually, tail be left with unof the most important web audiences. Julian. Rick. Jeff bezos talks about experimenting, everyone is really concerned, so forth of curious, not concerned, but sort of curious what that could actually mean and what that could translate to. Maybe that would mean cutting jobs. Curious what that would mean, what do you expect . I dont think cutting jobs. Honestly, i tracked this all pretty closely. I think he said in a statement, there is no sort of master game plan. I dont think he has a plan in his back pocket. I think its going to be a process of thinking things through, trying experiments that both those papers have been pretty good at experimenting with new products, a new launch business and but its going to take both patience and i think sort of a big overview of technologys possibility and time. Rick. Thank you very much. Rick edmonds and julia, thank you. Other corporate news, sony rejecting a proposal from activist share holder dan lobe, he vows to keep talking with sony and to explore other options. How about carl icahn, a security filings show he bought 4 million more shares of dell in an ongoing buyout. Icahn now holds close to 157 million shares about 9 of that company. Hes the second largest shareholder behind Founder Michael dell. Last week the company and mr. Dell along with private equity silver lake agreed to a pending buyout as the Investor Group boosted its bid. Coming up next the latest on the battle between cbs and time warner. Plus a preview of disney earnings, squawk is coming right backment. Welcome back to squawk box. We do have red arrows across the board t. Dow is off about 30 points, the s p 500 off about 3 points. The big news this morning, the pedia sector taking center stage. Not just today, all this week, from newspaper deals, Earnings Reports and the cable war between time warner and cbs. We get perspective on the overall landscape. David bank, broadcasting and media analyst at Rbc Capital Markets is joining us now. I dont know where you want to start, im fascinated by the jeff bezos deal frchl a numbers perspective, its probably tiny. In the overall landscape, what do you make of what jeff will do with all this . What i will say generally for an earnings woke, this is the least amount focus is the earnings side. So, look, i dont think with respect to the newspaper business, we dont really have a lot to say there. I this think there is so much going on, you know, on the tv side. Were in the middle of this sort of giant battle with time warner over retrans at a time when fox is about to launch, to serve the first real quasicompetitor to espn. There is a lot going on in media right now. Lets play tv for a second, the impact on cbs broadly speaking and the impact on Time Warner Cable broadly speaking, when does this end . How does it end . And what does it do to earnings at least in the short term. What i would say the impact to ybs we published, its probably a couple cents for each month, to be honest, i think time warner kaim cable got lucky in that it is the summer doldrums. There is not a lot of original prime time programing or sports people are focused on. Tiger woods blew away the field at the bridgestone, im sure people wanted to watch that. Im Time Warner Cable. Who am i supposed to be angry at, the Cable Provider or cbs in this case . What we have published on a relative value base its obvious ybs deserves something approaching the 2 its asking for. They probably inverse Something Like four to eight times as much into their content as their nearest comp in terms of subscription revenues per month. Their audience size is about five times that closest, getting a dollar, that typical top ten cable channels. So, look, frankly on a relative value basis, we think cbs is right. If i were a consumer, id probably be pretty mad. Is it a matter who you are blaming at this point . Lets talk about disney, their earnings, we will be getting that soon . Sure. Whats your expectation . Look, i think the background right now the irony the fundamentals are strong right now. We had two major players, the report last week cbs viacom, solidfriends trenso sol solid trends. The lone ranger, they need to take a write down on that movie and get detail on when that occurs. Do you believe ultimately cable, take comcast out of this, they own the pipes as well as the content at cnbc and everything else. You heard others talk about it, ultimately, they get rid of the tv business, they say, we are broadband, thats the business, its a higher margin business. Everybody can run their stuff over us, were just going to take that piece of the pie . You know, its a great question. Its relevant to a lot of things going on. What i would tell investors is, i look at the world at best from kind of a three to fiveyear time horizon, its really difficult to see whats going on beyond that in this evolving technological landscape. Do i see that happening in the next three to five years . Probably not. Beyond that. Flip it around. Do you think and case kerry, News Corporation on fox suggested maybe fox and others maybe at nbc and abc and others get off of the wires, not the wierks rather, over the air completely, do you believe that . Yeah. Well, i think there are reasons why the broadcasters might do that. There is a Company Called areo, a fairly Disruptive Technology the ecosystem. I think the short answer is, if the broadcasters cant monetize their content. You know, they made a lot of program commitment, things like nfl football or baseball. If you cant upon advertise those commitments over the air, then, yes, ultimately, they could become cable channels an i dont think it would be that difficult to do. It would be disruptive, but its doable. Let me throw out the last disruptive wild card. There has been some speculation that a company like google ultimately could bid on the right to the the nfl, for example. Yep. What that would ultimately do to reshape how we watch television in this new age. Do you guy it . Heres what i would say, im not the pretty biggest sports fan. So im pretty dispassionate about this. When i spoke to the leagues about the issue, they seemed to indicate their biggest interest is not extracting every last dollar of the system. Its maintaining the longterm passion of the fans, i dont think google could deliver that today. Again, we go out ten years from now in a ubiquetous broadband world, maybe its a different answer. Could i ask you one quick question, its related to sports, its related to what you mentioned at the top about there not being enough big sporting events. There is the pga championship on thursday the last of the big golf majors. Tiger woods is literally coming off a blowout win. Does that have any bearing on these negotiations . Does the deal get done before thursday or before saturday, lets say, when its on the network of cbs . I do think it has bearing. I think youve got preseason football and the u. S. Open coming up as well. But is it as powerful as regular season nfl kickoff . No way. Do you think there should be a different role for the fcc in all this . Maybe i will go to you on this here, harold, you are here. The fcc has said we want them to do something. It hasnt said you have to do anything. Do you think they may ultimately take a stronger hand in all this . No. I think theyll let the markets make that decision, let these participants make that decision. We probably would set an unusual precedent and probably a dangerous one if you allow it. Im hoping the pressure that scott mentioned tigers opportunity, the pga is something i want to watch on saturday. Who doesnt . We will leave it right there, david. Thank you for joining us. We appreciate it. Is that me . Thats you. Coming up, a. Rod gets a Welcome Back Party in chicago. President obama will be in arizona today to talk housing and the economy, housing and urban secretary shaun done o15 joins us in a bit. Still to come, jobs in the economy, we will speak to three pros cliffs Natural Resources and the National Association of manufacturers will be here to talk the economy and so much more. Aaa. Fffffff. Laclaclac. Hes an actor whos known for his voice. But his accident took that away. Thankfully, hes got aflac. Theyre gonna give him cash to help pay his bills so he can just focus on getting better. Were taking it one day at a time. One day at a time. [ male announcer ] see how the ducks lessons are going at aflac. Com to appreciate our powerful, easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. 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Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Yankees embattled 3rd baseman returns to action against the chicago walks. Heres what it sounded like. Number 13, Alex Rodriguez. Wow, although his 211 game suspension begins on thursday. Mlb Officials Say he can play while he is appealing that decision. Even amid all the booing. A. Rod sliced a single to left field, he ended up going one for four. Yankees lost. They jumped 17 for his first game back here in new york within the last decade. People want to come out, even if theyre boing. What do you think . Im sure you have an opinion on what this means. I know you are a sports fan. Two things, one, you must up big numbers, you get booed. He gets booed in a lot of places. Im sure hes used to it. You look at other players with shorter suspensions, i dont know all the details. Ive listened to the Major League Baseballs Commissioners Office, his number seems big. 211 games. There is a lot more there. The appeals process looks like it could be a nasty and ugly one, baseball is forced to go into a courtroom where a different set of rules apply, are they willing to lay all the information out . Are they willing to be challenged along a number of lines . As a fan of the game, i hope whatever steps they have to take to get ritd of these performanceenhancing drugs they do it. I hope young kids are not incentivized to do it. There are things to get a big contract and move on. I hope the Commissioners Office looks at being consistent. I hope whatever medicine no pun intended that a. Rod has to take, in, indeed, hes done this, he is willing to let the game move on. As a fan of the game, you think its a step in the right direction that theyve suspended so many people or do you think its further highlight of the big issues that exist within the game . Im with faye vincent i say kick them out. There are ruchlts i hear you. There is a due process. I think the setting is these other players who were suspended were not caught with anything. This is the league saying we believe circumstantial is enough here to suspend you. A. Rod says they feel there was some obstruction. On a. Rod. The primary reason is once all that information massively tried to obstruct the investigation. Once all that comes out, if that all comes out, fair enough. There seems to be some inconsistency. I dont have a problem with him playing in the meantime. I think hes done something, something bad, i dont know. Well continue this conversation, housing secretary Shaun Donovan will join us. Then we will get a view of the economy on squawk the chief fists forcliff ford, cliffs and talking jobs jo and much more right after the break. Were cracking down on medicare fraud. The healthcare law gives us powerful tools to fight it. To investigate it. Prosecute it. And stop criminals. Our senior medicare patrol volunteers. Are teaching seniors across the country. To stop, spot, and report fraud. You can help. Guard your medicare card. Dont give out your card number over the phone. Call to report any suspected fraud. Were cracking down on medicare fraud. Lets make medicare stronger for all of us. Welcome back to squawk box. We are about an hour you a way now from this mornings lone economic report. The government coming out with june trade deficit numbers at 8 30 eastern time. Economists expecting a 43. 6 billion shortfall. Compares with a 45 billion deficit back in may. Also, americans, theyre actually keeping tear cars longer than ever now. A new study says the average age of cars and trucks is 11. 4 years as of january. Its the highest on record and almost two years more back in 2007. Higher quality and the desire to avoid new Monthly Payments are seen as the primary reason. Finally, a report out in the wall street journal, the fbi saying they have uncovered holes in the government system from keeping Economic Data leaking prematurely. A journal reported it was possible to create workarounds for this system which prevented data embargoed. The fbi work stems from concerns of suspicious trading activity that occurs just before the release of embargoed data. Over to you, becky. It will make me think a little differently the next time we get that jobs report. Thank you. Here to talk economy and washington is our guest host this morning, harold ford. He is a managing director of morgan stanley, also, nyu professor of former policy right here on the saturday. I was hoping that issue would arise. We are so grateful you gave him to us. To say a home run is an understatement. You all are not surprised by it. Were delighted. Not only the firm but as a family to have him every which way. I asked if kaminsky was treating him all right. We have become buddies. Are you doing deals or what . You guys are running that firm. The management side has become the firm. It used to be an Investment Banking firm. We like to think of ourselves as a full service firm. We made a big investment on the Wealth Management side. Harold, washington has been something thats kind of fallen by the wayside through wall streets perspective over the last well three to six months at this point. Things have been a lot calmer. It hasnt been this upheave am where we look for the washington for every twist and turn, now were getting back into a situation where we could face a fiscal showdown once again. It seems like the problems havent been resolved. They havent gotten better. They probably have gotten worse, what will happen when Congress Comes back into session . First of all, your characterization is right. They seem to enjoy the byproducts of it, which is more uncertainty and confusion on the parts of a lot of people. I do think the experience last year into december, when we thought going off the proverbial cliff would create such chaos that we wouldnt be recovering. Sequestration as challenging as it is for certain constituencies hasnt harmed the economy in ways as damaging. Being said, im a little more optimism when they come back. You hear president obama talking about a plan around Corporate Taxes. Will is some griping from republicans that his Corporate Tax reform package isnt serious enough. He wants to raise more revenue. Cantor says we are willing to deal with taxes. Entitlements, i wonder if that is the fact they are even talking that way, remember in 2011, they were close to a deal. Had they been able to close two or three inches of disagreernlths we would be having a radical conversation about budget, we are where we are. The fact that both sides are talking is a sign they realize getting too close to a debt ceiling talk, the impact on the economy Going Forward is too much to take. If you remember, you have a fed chairman choice i think will take place before the 1st of october. You add all of that up. I think youve got a congress and a washington realizes that they cant walk us to the brink again. Im hoping the president will be in dealmaking mode when he comes back. He has to make that decision. Give the republicans tax, entitlements, get a big infrastructure deal which will be something most democrats want, the country needs and frankly with a job creation. It always makes me feel better when you talk about how we could find room for compromise and ways to get together. I think we are closer than we think. We will continue this conversation, in the meantime, president obama is traveling to arizona today, thats where he will be delivering a speech on housing. Then its off to california, he will take housing questions during an online interview hosted by real estate website zillow. Joining us is Shaun Donovan, the secretary of housing and urban development. Thank you for joining us this morning. Great to be with you. We already heard what to expect from the speech. There are some huge issues out there. Why dont you outline the biggest changes the president will be proposing. Well, hes got two big points here. One is that we have seen a real resurgence in the Housing Market, but there are key steps we can take in the short term to act sell rate that recovery. We can help more families refinance and save 3,000 a year on their mortgages. We can help the hardest hit communities continue to recover and we can simplify and streamline what it takes to get a mortgage today. We have too many qualified families that are getting locked out. So those are some of the key steps in the short run. The other thing he will say is, look, we cant ever go back to what made this crisis happen in this country. We have to build a Housing Finance system for the future that protects taxpayers, that puts private capital first. But we also have to make sure that we have a system that provides safe, simple, 30year mortgages so there is also access. As he has been saying. We need to have a Better Bargain for the middle class. Homeownership is one of the key Building Blocks to help families get in the middle class and stay in the middle class. No argument there seems to be some sort of reform. I dont think youd find anyone on either side of the aisle that will arc with you that. Once you get into the details it is more difficult. There is talk about getting rid of fannie mae and freddie mac. I gis wonder, what replaces that . How can you make sure people still get mortgages . The brought agrees we need to replace the system before, freddie mac and fan my mae have to be wind down. He will have more broadly four key principles that any system has to follow. Frankly, hes encouraged that there is bipartisan progress in the senate. A range of senators that have come together and are working on a system thats broadly consistent with these principles. The other thing he will say today is there are steps we can take before legislation to move us in that direction, limit the exposure of taxpayers, limit how much spending fannie and freddie mac are doing. Other things we can do in the short run to make sure we are moving towards that better system. He is encouraged on Immigration Reform and a range of other place, we seen bipartisan progress. He wants to work with congress to get this done. Fannie and freddie, though, when you combine the three of them, we are well north of 90 of the motherinlaw market. How does that change . Why have things gotten stuck . How do you get rid of them within they make up the huge bulk of what we are seeing today . Thats what the president lays out today. Weve got very specific steps that key can take. We can make sure that were limiting the portfolios of those companies more and more each year, dropping them by 15 . We can make sure that even with existing loans, were using ways to bring private capital in front of the taxpayers on new loans that theyre making today. We can alsoably down the loan limits Going Forward for fannie mae, freddie mac and fha to make sure we are limiting the exposure and really focusing their lending on the people they need the most. I understand limiting in that respect, but how do uconn vince banks they want to get in the practice of writing a lot of mortgages . Thats whats been missing. One of the things, an area the president focuses on, one of the areas we have to do is make sure first we are simplifying and streamlining all of the regulations around housing. Thats a big deal. You think that has kept the banks from wanting to be there at this point . Thats one of the things. We have to set clear, specific rules. Another thing we have to make sure of, we got millions of families that have been able to go back to work. 7. 3 million new private sector jobs over the last 41 months. We have to layout ways that homeowners that have gone back to work or families that have gone back to work can become homeowners through simple streamline rules and also through counselling that can help make sure theyre ready to become homeowners again, when theyve shown they have good credit. Mr. Secretary there is a big debate from washington to fannie and freddie should even be won down. An article from several days ago raises the issue of Mortgage Rates rising as a result of the demise of fannie and freddie. I want your reaction to. That even somebody like mark zandty, who i know you are familiar with, estimates that guaranteed fees in what could become a hybrid system could jump from 20 basis. To 60 basis points from the Current Agency level. What is your reaction to that . Look, i think its very clear the president will say this today the model that fannie and freddie followed didnt make sense, heads they win, tail taxpayers lose. We cant continue that modem. Second, we also recognize were not going to go back to a system that got us into this bubble in the first place, not everybody is going to be able to get a mortgage or buy a home. We need to recognize that as a country. We can also take specific steps that even while were ending fannie mae and freddie mac, make mortgage lending less, making sure there is a simple 3page form for every homeowner. Those are things we can do to simplify the process, make it safer and bring the costs down of mortgages. So those are steps the president wants to take and he will layout. I understand. But there is a guy who is said to be an offed mentioned candidate. Reading from the article here, from the federal housing czar who says that Mortgage Rates are going to rise as a result of the demise of fannie and freddie. There is no question, look, what we had before was a system where they took risks on the taxpayers dime and didnt pay for it. And we have to have a system where if were going to have guarantees and the taxpayers will be on the hook, we have to make sure we are charging that in a way that taxpayers are protected. Its no good compareing to a system that didnt work. Frankly, remember the real cost of what we had before was that trillions of dollars of housing wealth was lost by families across the country. So a little more to pay on a mortgage up front but a safe investment that builds equity for families. Thats something that is a good bargain, in fact, we have seen 2. 8 trillion of new housing wealth created in this country since the president came into office. We need to continue on that tren, thats what really matters to American Families in the end. Should you be able to put 3 or 5 down and put as little as that much down when you are getting a mortgage . We have seen that if we do lending right and this is really in fha, a part of hud under my department, weve seen that if we have safe, simple products, if we provide help to families to make sure they are making the right decision and we make sure that the loans are wrundz written in the right ways, we can make safe mortgages with 5 downpayments. So that is something we want to continue on a targeted basis to make sure that families can get access to the middle class. Thats really a part of what the president is talking about. Housing is a critical cornerstone of the middle class and its something that most families use. They use the savings in their homes to start small businesses, to send tear kids to college, to save for retirement. If we dont have a system that allows familys to get access to ownership, we wont grow the middle class the way it should. Are you worried a new housing dubl bubble the markets have seen a tremendous rebound as you had not only investor money from the occupation coming in, regular first time home buyers, but also International Money coming in, is there a new housing bubble building in america . Well, im somebody who studied housing for a long time. What you really have to look at to understand that is that what are housing prices relative to overall incomes . To what we expect in terms of new families that are going to become home buyers over the next few years, by all those historical measures, its hard to see there is a bubble in this Housing Market in the country. Frankly, thats exactly what the president wants to get away from, for too long, we had a bubble and bust mentality about not just housing, but our finance system and the speech today is really about laying a simple Rock Solid Foundation for Housing Finance that will get away from that and thats what the president is going to do. Mr. Secretary, probably not a surprise that this speech is taking place in phoenix, the sun belt was hit very hard by everything thats happened and in a word or two, could you describe what the state of the housing industry is right now . Look, phoenix a great example, four years ago, the president came into market, the Housing Market was in free fall, prices dropped 20 in one year, we were setting new foreclosures every month. He went to phoenix a few weeks after being inaugurated the first time and laid out his housing speech. Going back today, we see a community that is on the rebound. Millions of families there and across the country have gotten back up above water. We created 2 trillion of housing wealth, foreclose years are down by twothirds. So we have made real progress. The president s point, he will layout five specific points, we can do better. We can accelerate this recovery. We can put more construction workers back on the job and there are very specific things we can do that congress can do, also we can do with our own tort. Secretary done done no van, thank you for your time today. Later, we will speak to the chief economists, including fords chief economists. Then we got more coming up on jeff bezos buying the Washington Post newspaper. What it means for the struggling newspaper industry and the media landscape at large. We are coming right back. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Im bethand im michelle. And we own the paper cottage. Its a stationery and gifts store. Anything we purchase for the paper cottage goes on our ink card. So you can manage your business expenses and access them online instantly with the Game Changing app from ink. We didnt get into business to spend time managing receipts, thats why we have ink. We like being in business because we like being creative, we like interacting with people. So you have time to focus on the things you love. Ink from chase. So you can. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Well, good morning, we are looking at how companies are using datomake critical decisions. Our economists are joining us here on set. The state of manufacturing right now seems to be improving by the ism number which was characterized as a blowout. I think we have been impressed with the numbers for june and july, after a lot of weakness we had in the spring months, senly, weve had disappointing numbers on exports, manufactured goods have increased around 1 so far this year, production has been weak, employment has been weak. We had decent numbers recently. Im going out on a limb and say you have positive things to say about the economy, auto sales have been one of the brightest spots within the economy. Its interesting. Since the expansion started in the Second Quarter of 09, auto output has contributed over 15 to total gdp growth. Not too many people realize that look unemployment claims are down at about 340,000, theyre below the trend. We have also seen some really good improvements in capital goods orders, up 6. 1 in june over a year ago. You know, its even then theres cliffs. Its unfortunately having to deal with china, with i is slowing, Global Mining activity has been disappointing. Whats your read lou . I think we had four term cyclical issues. We have companies continuing to ship products. Overall, Economic Activity is still very strong in china, 7 , 7. 5 growth is still very good. We got a recovering market in the u. S. As alan mentioned, very good automotive sales and production, which is very good for steel. Poeng, was it the poke, research report, suggesting People Holding on to cars much longer than they expected . Its really amazing. We had a lot of replacement demands since the financial crisis. With average age of vehicles above 11 years, thats beyond what is optimal in terms of, you know, durability of the vehicle. So we should be seeing Additional Replacement demand. What should the durability of a vehicle be off the lot, ten years . Well, roughly ten years. It really depends on the modem. So depending on the model year. You have sort of different skwauld socalled survival rates of vehicles. On average, were really looking at an old vehicle stock out there on the road, especially truck, if you look at pickup trucks in particular. Thats still your number one seriesseries . Fseries is fantastic, if you watch the number, over 30 years top selling vehicle. So its just amazing. A former owner of one. Its a good vehicle. Its great. A manufacturing question,ry barnes, we are talking motox the motor rolly x device earlier this week or last week, its being designed but manufactured in the united states. It seems to be as march marketing play as it is anything else. When you look at whats driving real manufacturing in the electronics business, do you think were getting real manufacturing back or its a part of some other kind of move to Gain Customer or market share in the minds of americans . I think there are other trends that show we have seen increased competitiveness. Certainly, there are some unique factors in electronics. In general, lasting investments in the u. S. , especially in the chemicals and spaces which are taking advantage of shale, i think even beyond that, you are seeing increased labor competitive inside in the u. S. We didnt see before recession. Guys, well leave it there, ellen, steve, thank you. Sony rejecting dan loebs idea to spin off the business . Is it the right move for the country . Sony downgraded, the futures at this point are looking a little bit weaker. Squawk will be right back. This summer was definitely worth the wait. S. With qualifying net deposits. Tdd 18003452550 call 18882542600 today. Tdd 18003452550 so to come this morning, we have economic numbers that are out. The deposit is out with its june trade deficit at 8 30 eastern time, those numbers ahead, plus Technology Pioneers to media mogul. More on what this means for the struggling industry ahead. Sony says no to dan loeb. Story and much more when squawk box comes right back. E the day. E the day. But your erectile dysfunction it could be a question of blood flow. The top candidates to be the next fed chairman will have to wait for the decision. Sheila bear has already picked a favorite. She will tell us who she thinks is the right person for the job. I love gold well tell you how fed tapering could impact the price of the precious metal. Our cnbc disruptor series continues, the ceo will join us with ought products for the summer. The third hour of squawk box starts right now. Welcome back to squawk box, first in Business World wide, im Andrew Sorkin along with becky quick. Our guest show, harold ford, jr. , former congressman, senior client Relationship Manager and big boss man otherwise known at morgan stanley, also a political analyst for nbc news, more from harold still ahead, first the judge has your morning headlines. Thank you, jeff bezos is buying the Washington Post for 2 million. It ends the grahams family 80 years of ownership. Shares of Washington Post climbing to their highest level in almost five years in extended trade. In other corporate news, sony rejecting a proposal from activist shareholder dan loeb. He wants to spin off the entertainment business an vows to explore other options. Well talk to an analyst that covers sony in just a few moments. New data out from nielsen that links television viewership. They found a twoway casual viewership as expected, highly rated shows generated more tweets. The links that may help tv programmers generate higher ad revenue is this. The volume caused significant changes in live tv ratings in 29 of episodes in the study, nielsen didnt quantify the extent of the impact on ratings. Thats great. Let get a check on the markets. The u. S. Equity futures are indicated a little lower after both the dow and s p had minor pullbacks yesterday. While that is a modest decline, its the biggest drop the dow has had to june 28. It tells you a little about whether its complacency. See what the next leg is. This morning, you can see if you look at what happened overseas in asia, check out to see the nikkei was up 12 . Hang seng was down one and a third . In europe this morning, similar trading, barely budgeing for most of the major averages. Ben bernanke widely expected to step down from his term, leading fed watchers to wonder if we will have our first female chairman or care woman, joining us now on set, sheila bear, chairman and gee is here to call you chair bear, right . Charitable Senior Adviser shes also chair menl e men of the systemic council, haired formed, we want to have you weigh in on this issue as well. You wrote a piece in favor of miss yellen. Everyone has come out the past week, there has been a lot of campaigning and joking. Steve ratner came out on the other side saying Larry Summers was the right choice. Make your case. Shes the best qualified for the job period. Shes been a regulator, a vice chairman of the fed for monetary policy. She has a great public image. Shes not a part of the wall street club with all due respect, weve down a lot from that group in key financial positions, so why not her . Its for people that dont want to nominate her, why should she be passed over . Shes the best qualified. I think i got in trouble on twitter for mentioning it, suggesting we should have a woman in this world. I think becky says it almost demeans the qualifications. I would agree with that. This is only about gender to the extent i think gender would be one factor, to be honest with you. As i said in my column the fed the treasury, those are the four top jobs for wall street. The key, large bank regulators, those have the biggest impact in the financial markets, never have they been headed by a woman. I dont think thats, there is a correlation there, if she doesnt get it, my sense gender would be a factor. I would take a little issue with that. I think making it about german takes away from her kwauchgs u qualifications. Why if she doesnt get it would be be about gender . I think one of the reasons i wrote that column is there was this horrible whispering campaign in washington, all the stereotypes wouldnt be good in a crisis, im sorry, i think those people who were opposing or have made arguments with traditional sperster dwro types, i think it was already in play with people who were trying to block her being nominated, which everybody assumed its going to happen. From the president s perspective. He should go with the best qualified person. She is the best qualified person. He may feel more comfortable with Larry Summers, if he chooses Larry Summers, im not sure its because janet yell isnt a woman. It may or may not. I think it was hinged with sexist arguments. You quickly comment on the back story here. Never before, at least from what i have heard, has there been such Real Campaign going on. Its amazing, yeah. This is a Political Campaign and i just wonder, did you talk to yellen . Did she say, can you mention this . Do you think bob reuben is calling his friends . That may be going on. She had nothing to do with this. It seems as though the leading candidates have surrogates out there making their cases in public. You said some pretty harsh things publicly an written publicly about Larry Summers, saying he was a part of the deregulatory problem that led to the 28 crisis. He has qualifications that, you know, that are less than hers. There are positive things about him. Well, his regulatory record is not a good one. On derivatives, hes never been a regulator. Regulation is the key component of what the fed does. Hes never been a regulator. Do you think yellen has, i only say that she was at the fed while the fed missed the body the same way just about everybody else did. She was one i think the records have shown she was one of the people who had suggested that, you know, maybe we do have a problem here. She was a minority at that point. But i think over time her record has been a solid one. I worked with her, she has a cool head, very professional, very smart. She believes in regulation. One thing that bothers me about larry is hes never said he made any mistakes. As far as i know, ive never heard him say that, somebody like gary beginsler that was a part of that group. He said he was wrong. He worked at the head of the cftc to make it right i never seen larry show any thought he may have been wrong. Worries me. It does worry me. Are you a fan of bern bernanke . Yes, i am. You were not a fan of tim nightners. Its never about personalities. People try to make it, not you, people in general try to make things about personality. Sometimes it is, its about policy, its about approach, world view. I agree with ben an janet on monetary policy. I think theyre quality people trying to do the right thing for the country. Area, your point about how this dewitt has become public, it came when the president made this decision. I havent seen that in a long time. It removed his reappointment, if he wanted to do that, that was completely off the table. Launched this public debate who will be next. Its a part of the political lexicon for consumers of politics. Yes, it has. I dont have a candidate in sight. You have been critical of the dovish monetary policy, how do you reconcile that with the support for vice chair yellen . I think it should be about the people. Its the president s decision about appointing people who agree with his policies, i think he dwrees and i think, you know, her view, i dont know, her views and others at the fed may be moderating as the economy gets stronger. They got us into it. Maybe theyre the best equipped to get uttous of it. I think you need to make qualifications and the character of the person, their background, their record versus particular policies we may or may not agree with now. There are two vice chairman jobs that are going to be coming opened if janet is promoted and as i argued in my column, i think republicans in particular worried about a dovish monetary policy, looking at those viets chairman slots are more balanced. You think the president made a mistake when he made the comments he did about bern e ben bernanke, which larry meyers said on this network he essentially fired ben bernanke . I dont go that far. I think the president s language may have been a little column ski. If you rewatch that interview, he was essentially saying what was already Public Information that the chairman had served a great deal of time, there was great speculation he may step down. Were the words a little clumsy . Perhaps. I think some was blown a little out of proportion. I do think, ive never seen a Public Campaign like this for a job that should not, such an important job that requires an independence from the president , requires an independence from an administration. So its fascinating to watch and as much as i agree with some of your points, i think larry has a little of a bum wrap on this thing as this conversation has gone on. I got to tell you, a lot of people in the former congress, members of the senate excited about the prospect of the history making selection, it will be interesting to see what the president does. How quickly do you think this decision needs to be made . There is a sense this thing is drawn out. There is a sense qe may begin to be tapering in september if thats the plan and then you will be leaving basically all of this to your successor. If you were counseling the president , would you say you cant go on vacation until you make a decision . I think i will ask a different kwechl he says he wants to wait for the fall, maybe let things cool off and take a calmer view. Before you go. I think janet yellen is the best qualified. I think don is very solid. He does know monetary policy, he is loved by the fed staff. He is real respected on the hill. Hes a good quality guy, but janet should get the job, shes the best qualified. Shella bair. Thank you for coming in. When we come back, sony spinning off the entertainment business. Sony says no. We will talk it with an analyst, gold continuing its slide, we will talk to a Portfolio Manager who saw it coming. This morning down 16 to 12. 86 an ounce. Well be right back. Now get 200 free trades when you open an account. Welcome back to squawk this morning the spinoff on the entertainment business, sony says it strongly believes owning 100 is fundamental to sonys success, joining us to talk about it, the principal at hud zorn research. Is dan logan on the right . Where did it come down . We downgraded this stock from buy to hold on the news, we were in favor of the plan. Sony owned entertainment since the late 80s. They have been attempting to create synergy between content and hardware throughout that period. So i fail to see how spinning out a 15 or 20 Minority Stake in the business would prevent them to continue trying. Yet, raise cash and evaluations up about 186 over the last five years, so, you know, its probably not a bad time to take a little bit of money off the table. Yet, they can keep trying. Dan, let me try to channel the sony board here. They would say two things here, one they would say dan loeb suggested one of the reasons to do this was to raise capital. They would say, we dont need to raise capital, on the other issue of the spin, the question then becomes, we have seen this before. Its a financial engineering. All its doing is putting something out there. We saw fox entertainment ultimately get put back in, you are not creating new value, you are moving around the deck chairs. On the flipside, six years ago, sony, themselves, spun out a 40 stake in their Financial Services arm, raising capital and creating some transparency for that part of the bts and creating a lot of value, so i actually i kind of disagree with that point. Like i say, the real reason to have entertainment inside sony is to create great synergy. You want sony to look like what apple created in creating business that combines hardware and software, within p when you pick up an ipod, an ipad, all your content devices, we have yet to see sony execute that plan, also, the weather did not actually provide an alternative, say, okay, we will not spin it off, heres how we will create synergy. Im assuming if you downgrade the stock, you dont think dan loeb has a lot of moves in his chess game what do you think is next . Its not for me to comment on Institutional Investors plans, so for me the way i look at sit for our clients and for an investment in sony. Wait the whole premise of you liking the stock like you did was because of an institutional plan for the company . Thats not true. We have downgraded it, we had a buyout before the loe been came out. So we were actually, this is something thats been in the hopes and dreams of sony investors for years, that will will be some way to monetize the value that was somewhat hidden of entertainment inside the sony conglomerate, thats a classic problem is that you dont actually get a lot of utilization of the zhao, so removeing, their letter was absolute. Were not going to do this. So it removes their hope and dreams we had long before dan came in. You heard dan loebs letter suggesting he may pursue other alternatives, walk us through the options. I think its a little bit difficult. I think what sony really needs to do, to prove that entertainment ought to be inside, there is to show synergy, we ought to turn on sony tv. It shouldnt be apple tv doing it. It should be sony. They have the assets. They dont have to go out and license it. They already own a large part. Do you believe Sony Entertainment is being mismanaged, undermanaged . I think that was a little overstated point. Sony is primarily a studio business. If you compare the operating margin of Sony Pictures against the film divisions of viacom and disney, they actually look a lot closer. All those businesses have something relatively unique, which are our u. S. Networks, which in the last five years have gone through this massive transformation as everyones gone through dum double tim dips in content. As weve seen with the eruption between Time Warner Cable and cbs, that symbiotic relationship or content or prices for content can grow up, its starting to crack. Now is not a bad time to take the money off the table, value those assets an kooem keep working on the plan. Okay. Daniel, thank you for joining us. I believe, by the way, sony is connected to my favorite tv show starting up again on sunday breaking bad. There you have it, a Little Walter white action. I prefer the voice. Y, thats probably a better choice. You think loeb is going to buy more stock . I mean, hes got a 7 stake, shares are down. Do you know from when he bought them . I dont know. I think hes made a lot of money on them. Look, theyre down this morning. Hes got 7 . I dont know, i think the path to completion. As they say is a tough path. I dont know how you get there. I dont know, i just feel like its not over yet. Its not over, no. You think a guy like loeb is going to get in there for the proverbial ten minutes, take his ball, fold his tent up and go home . I doubt it. Tow we did get into herbal life, quick, came in cake out, the motives of that will be argued for a long time. Okay. We will see. Ill leave it at that. There you go. Coming up, International Trade data hits the tape at 8 30. Then we continue our disruptor series with manufacturerer quirky. The ceo will joan us with some hot s joan join us with some hot summer gadgets. Join us. Us s. Welcome back to squawk box, everybody. The Princeton Review is out with its annual list of party schools. Students voted the university of iowa as the top place to party even though iowa city has taken steps to limit underaged drinking in bars. Rounding out the top five, uc st. Barbara, university of illinois, urban is thatchampaign and West Virginia university and syracuse. Arizona state used to be on the list. I dont know what happened. Tulane used to be on that list. They dominated that list for a while. Now, would you market yourself on that . Probably. Do you fry hide that . Thats when you get involved and try to change things. You hide that from the parents, market to kids. Dont miss the profit, marcus mimonus is putting his money on the line to help businesses. For me, this is business and for my perspective, you are being demoted. You are for the longer the general manager. Why is that . I dont know if you are qualified. What makes you feel that way . Quite frankly, i dont think that the people that work here have any discipline or structure. Am i supposed to blame hank or you . You are the general manager. Who do you want me to blame . The blame will be on me. Thats why you are being demoted. I dont know where marcus is coming from. He doesnt know everything that i do in the store. I work hard everywhere that i have been. Thats how i have been taught. Thats how i have been raised. Hank just doesnt take action and that adds a lot of pressure. Remember, tune into cnbc prime at 10 00 p. M. Eastern and pacific for the profit. Coming up, International Treasures a few minutes away. Gold continuing its slide, down 23 so far this year. We will talk to a Portfolio Manager who predicted the selloff. Squawk box will be right back. [ 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 us. More for you. The healthcare law gives us powerful tools to fight it. To investigate it. Prosecute it. And stop criminals. Our senior medicare patrol volunteers. Are teaching seniors across the country. To stop, spot, and report fraud. You can help. Guard your medicare card. Dont give out your card number over the phone. Call to report any suspected fraud. Were cracking down on medicare fraud. Lets make medicare stronger for all of us. Welcome back to squawk box, everybody. We have been watching the u. S. Equity futures, they have been lower. The zou is down by 25 points. The s p is down just over 2. 5 points, remember nasdaq closed yesterday, once again at a 13year high, yesterday, the s p and the dow were lower. The dow was down 40some point. Its the lowest number back to late june. Tells you where this market has been. We get ready for those numbers, Rick Santelli is standing by at the cme in chicago. Rick, the numbers, please. Well, the june balance is going to be a deficit. Its going to be a lot smaller than you think it is. Minus 32. 4 billion. That is shrinking. It will be a while before i have to go back and find a lower number than 30. 2. Lets see, that brings me to act object of 09 since i can find a smaller trade deficit. So that is good fuse, maybe the energy variables are starting to shrink that number a bit. It could be a number of issues. I think we will cull through the intrinsics on this. A pretty good bit of news. Has it mattered in the landscape of interest rights . Good news is a positive meaning you see higher rates. At this point we see a basis pointandahalf highner a ten year note yield. We see the preopening equities becky talked about, still down 27 the one thing we dont see, we dont see on ozzie dollar under pressure. Maybe it was the last rate cut. With edo see the aussie performing better against the greenback at this point. Keep an eye on those commodity currencies, back to you. Thank you, rick. Other things you are watching in terms of the market . Well, im going to be watching supplies. We fwin the august refunding with threeyear notes today. Probably, i probably want to very much tune into the president today the speech being advertised. It sound like they want to tinker once again, ongoing tinkering with the gses. So, of course, i really think its my judicious effort to pay very close attention and bring any news on that front to the viewers listening. You know, we spoke with the secretary of housing a little bit earlier this morning, he laid out a few things. They are talking about fannie and freddie doing away with that. It was hard to get too many details out of that. He did make points like making sure they limit the number of people who can get access to some of these loans that will allow you to put a little money down. He says he does think there was a place for 5 down. He has to be very limited. What do you want to see, rick . I want to make sure i see small guarantees or no guarantees by the government. I dont think im going to get my wish. Everybody talks about privatizing on both sides of the yachlt i know mr. Corker has a plan with mr. Warner on the congressional side. I will tell you this, to have a boiler plate, whether implicit or explicit, because weve seen this movie before, i really do think its a big mistake. As a matter of fact, diana olick, i dont know e dont you think shes one of the best in the business . Sure. Yesterday, she was saying banks, private banks, are starting to accept a lower credit score to do loans because rates have gone up. But if you really listen to what shes saying, shes saying that the fed programs in many ways are inhibiting loan activity. So i think once the private sector blasts them, let them do it. The 2nd did say one of the things they think they need to do is make sure its a more focused regulation an pair back some of the crazy regulations he admitted have kept the banks from stepping in. When you look at fannie, fha, they have 90 origination at this point. We have to be careful the representing lator, they keep trying to put people in this spot that, you know, mr. Demarco was a tough cookie. We cant be giving away all the candy. Right. Listen, everybody wants a house, we ned to hold the lean. Rick, thank you, we will watch tore that later this afternoon, thank you. All right, lets talk about gold. The price in bear territory, down more than 10 in the last three months. Our next guest, correctly predicted gold kould would sell off in 2013. He is the chief investment officer, here on set. Its good to see you. You made some good calls. So make another one for folks. Where is it going from here . Right now at the end of june, it was clear gold was oversold and due for a rally. We used the last trading day to reallocate back to target. We havent had that shortterm rally, now, very key indicator we are watching is u. S. Longterm real Interest Rates, inflation adjusted Interest Rates. They spiked higher in june, very bad for gold, theyve stabilized since. If they continue to rise, thats bad news for gold, we continue in this bear market. If they stall back, kind of in the last decade, that could be the sign for the next rally in gold. Its been sort of hard for gold to compete simply with the stockmarket rally, right . Why go into gold when stocks are going up . You make a good point. Now, weve had a stockmarket rally in most peoples minds since march of 09. Thats relative to the u. S. Dollar. If you measure stocks relative to gold, stocks have been in the bear market from 2000 to the fall of 2011. Only two years have stocks begun to rally. So we do think that that makes some sense. Thats one of the reasons why behaviorally the shortterm speculators have given up on gold. Even with continued monetary stimulus. So i think thats part of the behavioral reason why people have given up hope. You think people are too negative . Should we read that as a play on gold at this point . No one likes it. Possibly. So gold often acts as turning points. We are seeing prebearishes. A lot of people feel justified. They see longterm rates decline, the idea is why would you be in gold . However, we had that in the 70s, but Inflation Expectations climbed even higher. We are watching expectations. If that starts out of the blue, starting to climb higher than longterm real Interest Rate there is a reason to get back into gold. Howard, are you a gold bug . What is Morgan Stanleys position on gold these days . Better people have come on to talk about it. I would ask your guest, fed chairman choice play any role in how you are thinking about the next 90 days . 120 days, six months . I think if yellen is the choice, thats considered most kin with the current policy, she is considered very consistent with the bernanke policy, anyone else would add some element of uncertainty. But i do think that this fed exit strategy can play big role. We have a certain insight as to a different way to think about that. If you think about the fed exit strategy instead as a bernanke exit strategy. Hes been very clear, ever since he wrote his College Thesis that the fed should be criticized in march, they raised rates too prematurely. The Japanese Central banks should be criticized to raising rates. Too early in march of 97. Aborted that recovery. So he will be the last one to be perceived as tightening policy. Thats why he is going through such Great Lengths to show that tapering is not tightening. Its expanding the balance sheet. Thank you. Good to have you in. Coming up, weve told you before about quirky, a Manufacturing Company that crowd sources the invention process. The ceo is back on squawk this time with popular summer products. Think beach, wine and summer grilling. Check this out when we return. 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. 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. Sa quarter million tweeters donis beare tweeting. Way. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. [ music playing ]. Well, vino anbar be coup, quirky has been working on that. Joining us is the 26yearold ceo and founder ben kauffman. Hes been here before. For those who missed the last time around, including me, ben, quirky is an amazing site. Are you an inventor. You realized it was too hard to bring stuff to market. Tell us what quirky does . We make three brand mu products. They come on our website. They pitch the idea. The world votes on the best idea every week. All the heavy lifting of manufacturing, design, engineering, packaging, we take on, on behalf of the creative person. They get a slice of the profits down the road . They do. Its a slice of revenue, its much better than a slice of the profit. Im not a finance person. During the commercial break. By the time my wife has an idea, we were saying, you didnt think it was as good an idea. Now your wife knows that i dont like her idea, its not school. Question is, you get 10 of revenue, does the initial american come up what happens if she comes up with the initial concept but somebody else on the site refines it, sort of the eureka moment. If people helped your wife make her idea into a better idea, they will share in some of that 10 . She has to give up some, she is getting diluted. For a reason, right . Otherwise, she can own 100 of nothing if she wants. Id be perfectly okay. I love you if you are watching right now. Be careful how you talkant her right now. I apologize. How many ideas come in every week, how many new, totally out there ideas . We get 3,000 on a weekly basis, they range from very amazing to not so amazing. We had an idea that impressed you this time around. Show us the stuff that has come to market. This is kind of fup. This is a a beachbag we launched for the beach season i guess, when you go to the beach, you need to take towels and stuff, when you come back, you wind up taking a bunch of stuff, namely sand, so this opens up from a famous chef invented this. Out comes all the sand. Is that the bottom . Its mesh . Its nice and simple. You brought some sand, yep. You will clean that up later. Well prepared. From pitch to actual product, how long does it take . Our fast set 29 days from stech sketch to store, i think a world record from submission to site out of beth bed, bath and beyond, its 100 days, no one works faster than quirky. You can find this on quirky. Com. You can buy at bed, bath, target. People want to have the wine not roll around in the fridge. Its a big problem. This goes over the stem of your wine bottle. It sits up nicely. You see that . You got that. It stand up right like that. Whats the process from getting an idea, you said you get 3,000 ideas, how do you disribution through that . I imagine you have teams . The world votes first, that brings us down from 3,000 to the top 200 or so. Then the internal staff, our expert Product Development team takes it from 200 to a couple of dozen. Every thursday night, we have a live broadcast, we discuss and debate the top ideas that week. By the end of that week, we crown three to five brandnew inventers. Those are the ones we end up producing. What do have you over there . All sorts of barbque products. We lost his microphone. I will come over to you, bring you my microphone, come on over here. I dont need a mic. Guy in chicago is awesome. He screams. So this is an amazing barbque tool, so its a tong. Then its a fork, as you pull it all the way back, its a spatula. Oh, thats cool. This is very professional. I love this. Full service. This is a shish kebaby thing. You can actually slide the meat off. Its called sliders. So you dont have to get in there with a fork. This is a product we have been handing out at Anthony Weiner events in the city. Its called cyclone the tag line slice your weiner, you take any hot dog, you can swirl it oornd in there, apparently the flavor is better if its sliced. Got it. Got it. Slice your weiner. Wow. Sometimes we make stuff because its funny. What do you got in the dishwasher . A big problem people cant put tear stemware in the dishwasher, this allows you to do that. It grabs onto the funs in your dishwasher and holds them in place, so everything is sort of good to go. Were probably standing a little too close. Im moving fun, this is great. We can go back to the table. How long has quirky been doing this, how many products, ill wait until you get back to the table when you get your mic, how many products have you rolled out over the time you have been doing this . We have been doing this for four. 5 years and we have rolled out a few hundred products. And of those. We used to do one a week, now were up to three a week. An of those products, i mean, theres got to be varying degrees of success. Whats like the most successful one you have ever rolled out . From a revenue standpoint, we have a pivot power, the reinvention of the power strip, tens of millions of dlafrs, our inventor is a millionaire. Thats continuing to grow like crazy, every product we wind up manufacturing is profitable to some degree. There is varying degrees of some success as you say. Thank you very much. We love the product. We love the whole idea for the site. Were submitting our products. We will submit it. Your wife dould could have the best idea ever, its up to the world. Thats great. Whats the average price of the products . Is there an app . Boil it down . That little thing . Ists about 30 bucks. We have stuff that still for a dollar at target. We have products in the design store. You think how much people can end up making off these things. You talk about the patent. Interesting stuff with patents, theyre taking patent portfolios reapplying them to consumer goods, thats a whole other conversation. Thank you for coming in. Sorry about the little mic. No, thats fine. Great. Coming up, more from our guest host harold ford, jr. , plus signs the real estate season mit be cooling off. We will get more from Home Listing Service truloa. Especially when it comes to my investments. You want a broker you can trust. Truli you. Selling than their clients. Thats why i stopped working at my old brokerage and became a Financial Consultant with charles schwab. Avo what kind of Financial Consultant are you looking for . Talk to us today. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Welcome, and good to see you here. Prices are down for the first time in many, many months, and we have seen asking prices slow down month over month, and they are down 0. 3 which is a big change from previous months and when we look at the quarter over quarter numbers which are less jumpy, this is starting to slowdown and this is what we are waiting for. Price prices are rising so fast that if they kept going at this rate, we would have found ourselves in bubble territory two to three years from now. And there are people right now saying that there is a tremendous rise that we have seen and there is already a bubble. Well, the prices have not risen at the same rate, and they are looking a little undervalued in terms of the long term rent, but with the price gain slowing down, we have a better chance of not going back into the bubble t territory. You have to look at the Mortgage Rates and push and pull and if things are looking to sell, as the Mortgage Rates are climbing up, it is going to impact how much people can pay a month. Yes, the Mortgage Rates and early may, Interest Rates up more than a 1. 0, and we had seen more inventory, and the reason that the prices were rising is because supply is tight, and now the inventory has increased in six months which has brought the houses on to the market, and helping them slow down. And with the higher prices in the last year, we have seen some fading investor interest, and they are not bidding up price either, so those three help us understand why prices are slowing down. There is a big issue with the lack of supply on the market. Isnt there . I mean, that is out there for a while. And i wonder what dropping hom prices are going to mean for the builders as we try to figure out how to get the imbalance of supply and demand back into workable levels. Right, even with the increase in territory, the number of inventory is lower than normally, but because the prices have gone up in the past year or year and after ha, it means that more people are thinking of selling and construction is increasing even though we had a bit of a ststumble in home Star Construction is up. So more construction and more sellers thinking of selling now that the prices are higher, we should see more homes in. Where the biggest slowdowns . The markets that are the hottest, vegas, sacramento, and other areas where the inventory had been tight, and there had been a lot of investors looking for where there is job growth, and that is where we vying first slowdowns. Interesting. I am trying to understand one piece of this, Little New York city. New york city is enormous market. Prices have been rising in manhattan and brooklyn for many, many months even though some otter parts of the region, parts of long island and energy nj have seen price declines until recently. One thing that new york and new jersey is struggling with is a slower foreclosure process. A big backlog of homes in the foreclosure process in new york and new jersey even though these are not states that are hardest hit in the housing crash. So that is going to hold back some of the price increases in the region here, and a different story from what is going on in the priceload out west. Yes, the most recent caseshiller the overall prices were up 12 or so, but to your point, new york and new jersey are among the slowest growing in price increases nationally. And the other thing is that we Hadley Gallagher on yesterday who wrote a book she wrote call and she is projecting out over the next 10 years that the mix is going to change significantly, and do you buy that . The prices are rising in the city, but the population growth is higher in the suburbs and the reason is that it is easier to build in the suburbs. In big cities, they are so built up and building restrictions that make it more difficult to build housing. So when people want to live in the cities, it is going to bid the price up than raise the population of cities. Interesting issue. Thank you, jed. Coming up, our guest this morning harold ford, jr. , and we will give him the last word when squawk box returns. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac ats for around 299 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. And you wouldnt have it any other way. E. But your erectile dysfunction you know, that could be a question of blood flow. 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Ask your doctor about cialis for daily use and a 30tablet free trial. Welcome back to squawk and back to our guest host harold ford, jr. , and for the last word, what is the last word . Im more optimistic about washingtons ability to avoid some of the calamity that we have found ourselves in. Am i too cynical . Well, you are hearing the president talk in a certain way, and i believe they want to be adults at least once. And why now . Well, the numbers and the market is roaring. You have seen some of the good stuff on the housing and little uneven, but it is happening in the country, and i dont believe that they want the government happening and many of them with primaries coming up, and they dont want to be blamed for something they can avoid. And the the president has to show a little bit more deal making side to him, and so i think that is going to happen. You believe they are talking constructive to each other. Well sh, you look at what corcoran others are doing in the senate, and so it may happen. And the senate is the place you see it happening . Well, the senate is the most maturity that you are seeing, and not, the house, you will get a good immigration bill and inaction in the senate. Do you think that the immigration bill will be passing . Well, slim. How can you be opt mimistic d yet not on this . Well, the premise is that you cant go to make and vote people who are illegally here, and make them legal. Im against that position, because we can find a way to do it, but that is why i say it. Harold ford, jr. , thank you for coming n. And judge, thank you for filling n. And thank you, becky. We could do it everyday. That does it for us evtoday. Time for squawk on the street. Time is now the seize the day answer the call and dont delay storms will be rising there to kick us off, good Tuesday Morning and welcome to squawk on the street. Im Carl Quintanilla with kelly evans and cramer and faber are off, and joining us is david berman, editor of the wall street journal, and another finance guy,