Transcripts For CNBC Squawk Box 20130809

Industrial output numbers that rose a stronger than expected 9. 7 . Retail sales were in line with forecasts. Economists say the china Inflation Numbers are a bit of a concern. Consumer prices unchanged. Producer prices fell by 2. 3 . As for the rest of the markets in asia, the nikkei fell 6 for the week. Wow. Early trading in europe this morning wow. Those numbers add up over the course of the week. Saw big declines, like 3 in places. Dont rub it in, please. You know thats my prediction. Japan is number one this year. Now im still up how much . 34 . Ireland is up 23 . Im still ahead. Do you have a target . No, it would be the single best developed market this year. Made the prediction on december 2nd. Im still up bet getting nervous. Are you . Not really. I didnt think so anyway. Well check in with Ross Westgate to have more about whats been happening around the globe in a few minutes. Brian . In geopolitical news, the u. S. Ordered all nonessential staff to leave consulate in lepore, pakistan, due to a specific terror threat. Theyre also warning american citizens not to travel to pakistan. Meantime, president obama will hold a News Conference this afternoon at the white house before leaving for vacation on marthas vineyard. Andrew . We got a couple of corporate stories to talk about. Big one, the jpmorgan now reportedly close to reaching a settlement with security regulators over the socalled london whale trading losses. Bruno iksil, he was the whale in some ways, hes not expected to face charges related to the incident. Apparently, by the way, hes talking and made some kind of deal or may be making a deal with the s. E. C. The other component of this is that as part of whatever settlement the s. E. C. Reaches with jpmorgan, they might have to admit some form of wrongdoing or some form of admission why would the s. E. C. Cut a deal with that guy when he was the rogue trader doing things that the management at the bank unclear he was the rogue trader. It seems like what has happened is as the story developed that his boss and his boss boss may have been more rogue than he was. Not iona drew. A few layers a couple of layers in london and that may be where the problem is. The issue ofe iing jpmorgan to admitting guilt, but toss not just about admitting it or how much money you pay the s. E. C. , it is once you admit it, all the derivative lawsuits that come, and so there say lois a lot of looking at this decision. Also in an unrelated story, reuters reporting the department of justice has stepped up a probe into bear stearns. Get this, were back to 2008. Their mortgage dealings in the runup to the financial crisis. This could also add to jpmorgans legal problems because if you remember, of course, jpmorgan bought bear stearns with the governments encouragement in 2008. A mess. Yeah. Blackberry is said to be warming up to the possibility of going private. Reuters reporting that ceo Thorsten Heins and the board are increasingly coming around to the idea that taking the Company Private would give them breathing room to try to fix problems out of the public eye. No deal is imminent and sources tell reuters that blackberry has not launched any kind of a sale process, at least not at this point, but you can see the stock is up 8 , trading last at 10. The company being advised by jpmorgan. Speaking of Companies Going private, t. Rowe price, the firm has been one of the most influential opponents of michael dells offer to buy out the pcmaker. Michael dell writing an open letter to employees about the deal, he writes in part, i believe that the offer delivers full and fair value for stockholders and is best for the future of our company. Importantly, the revised transaction he says also enables us to enact the will of the majority of voting stock holders. Remember, those were the change in rules that he and carl icahn have been fighting over. A check on your mash ets on this friday morning here. As becky was noting, watch out, folks. It has been weak lately. We have seen a weaker trend for the last couple of days than we have seen pretty much all this year. And mark faber has dire warnings about im not giving away the future story, becky, but you want to listen, mark faber, who tends to be negative, thats why his report is called gloom boom and doom. This one is a doozy. It is a doozy and a doomy and hes got some really negative comments on the market youre going to want to hear. Thats why we call it a tease. Dow futures implying a drop of 46 points at the open. You care about oil because you probably drive around on summer vacation. And it trickles down to gasoline and things may get expensive Going Forward. Were seeing all the they call it hydro carbon going up this morning. Wti, brent, gasoline, wholesale gas and natural gas all higher by about half to 1 this morning. In the bond market, tenyear treasury note yielding 2. 594 . Mortgage rates remain flat, week over week. In the currency markets, which we got a guest on here, nick broke will discuss what is happening. Were seeing euro dollar at 133. 78. For gold bullion, gold, after a run the last couple of weeks, has been weaker this week, though were up about 1. 50 an ounce to 1311. 40. Gold has had a crummy year. Now time for the Market Report where we find Ross Westgate who is standing by across the pond in london this morning. Good morning to you, ross. Good morning to you. Pretty even stevens now for advancers versus decliners. If anything, slightly weighted to the downside, pretty much five to five right now. And really tracking to see where we finish the week on what happens this afternoon in the u. S. For the bounceback we got yesterday. Looking at where we stand with prices, see the ftse 100 is the standout right now, up 11 points. The rest of the mark, xetra dax, ftse down. 2 to a half. The reason the ftse is standing out is because of chinese data. Chinese industrial output up 9. 7 in july, a better than expected performance. Retail sales up 13. 2 . What that has done is boosted the resource stocks, resource stocks in london on the sectors breakdown, best performer today, followed by telecoms, real estate, household goods, food and beverages are down. Telecom outperforming, kpn, america movil, carlos slim, 9. 6 billion bid for the rest of kpn that it doesnt already own. Challenging a rival offer for kpns german business. Telefonica last month made an 11 billion bid for kpns crown jewel, which is the german business eplus. And that cast doubt over america movils expensive on paper currently lossmaking investments in kpn, which they made last year. So the stock of kpn up 16 , but really it is about carlos slim wanting to get his hands on germanys eplus. And some say it is also a sense here he could wait it out, you can get the stock cheap right now and wait three or four or five years and the macro environment in europe will turn around as well. Talking about macro environment, quick look for you where we stand with debt prices. Were going to start a major privatization plan later in the year. Yields pretty contained, still very low, 4. 2 , ecb doing its job. Thats where we stand in europe. Back to you. Have a great weekend, sir. Well see you next week. Thank you very much, becky. Were keeping an eye on currencies this morning. The indian rupee falling to a record low versus the dollar as the reserve bank of india struggles to tighten policy. The dollar is getting hit hard against the euro and the yen. Joining with us more on this now is nick beninbroke, the head of currency strategy at wells fargo. Nick, watching the dollar over the last week, ive been scratching my head trying to figure out what is going on, especially when you look at the dollar versus the yen. It is down 2 just over the last week. And you would think that with the fed signaling it is going to be tightening or at least tapering, that the dollar would have a little more strength, especially with some of the strong economic numbers we have gotten. What is going on here . Yes, ive been scratching my head a little bit too. I think there is a couple of issues that are important. Number one was that payrolls report we got last week which was a little subdued and the bond yields remaining relatively well behaved here in the u. S. Right now. So we have got a short holiday, short lull before we refocus on the Federal Reserve. I think thats probably weighing on the dollar a little bit. The other thing we have seen, i think, over the past month is if we remember back to early july, both the European Central bank and the bank of england were particularly concerned about rising yields and sounded super dovish and we didnt really get anything extra from them in august. So i think the contrast between what is happening in the u. S. On the one hand versus the rhetoric we get out from the europe is not quite as stark in contrast and thats another reason why were not seeing the dollar do very well, it is on the defensive. If you pull back, and look at a slightly higher level instead of every tick anding ing ttock a situation where the bank will be poised for tightening versus Central Banks in other places like europe and japan that are nowhere near getting to that point. I dont understand. What do you think is a fair valuation for the dollar versus the two currencies . The fair valuation is higher. We look at some of our targets for the euro dollar rate, were looking for that to move to 125 over the next 12 months. For the pound, not quite such a large move, maybe down 2 to 150 or so. I think it is a reflection of the very short, you know, extremely short time horizon and i agree with you, i dont think the state of affairs is going to last forever. I think as we move to september, despite the comments we have seen from the fed, for sure i believe theyre going to be reducing those bond purchases soon. Probably get a decent payrolls report at the start of september as well. I think come september well see the dollar recover. Do you think this is a buying opportunity for the dollar . The dollar index alone down 1. 6 over the last week. I think so. I think as we approach september 18th, and i think september 6th is the day that payrolls report, july, just about every figure was strong except for the payrolls report. That was an important exception but the outlier. We look for strength and dollar to strengthen as well. What is happening with the rupee in india . The rupee obviously is struggling and the reserve bank is in a difficult position because they have got an economy that is underperforming, not really attracting a lost foreign capital in terms of bond purchases or equity purchases. Usually the central bank might actually be lowering rates to try and boost growth and attract that capital into the country. Especially from an equity perspective. The issue they have, of course, is the currency is so weak, and possible inflation that they really are have their hands tied and cant reduce rates. Theyre on the defensive. What happens in the u. S. With rising bond yields of the Federal Reserve does go in and reduce purchases thats going to make things difficult as well. You think it is a story of a continuing weak case for the rupee, particularly against the dollar . I believe so. There is, you know, there is limits as to what the central bank can do itself. It certainly tried a few different things. It raised some of its liquidity rates. It also is trying to absorb some of the additional liquidity. But it is going to need some help globally and it doesnt look like it is going to get that right now. It looks like if we get some a little bit of volatility with respect to, you know what is happening with the Federal Reserve, i think the rupee is more vulnerable than most. We see that currency moving from around about 60 per dollar right now, just to 62. 50 to 63. We think the rupee is going to weaken. What is your favorite currency right now around the globe . I think the favorite currency is probably the u. S. Dollar is right up there in terms of the majors. You have to probably look a long way out in terms of thinking about currencies that could recover. But as i say, im still very focused on what could happen soon with the Federal Reserve. I think when that happens, well see higher bond yields and well see stronger dollar as well. This is entirely tied to the markets reaction by driving bond yields higher . I believe it is. It is not entirely, but in early july it certainly was. That whole theme moved to the one side for a little bit, but i do believe well see that theme come right back and, yes, it is very much focused on the thank you for joining us this morning. Thank you. A corporate fight that people are still buzzing about this morning, and this is really a story that came out yesterday and still has a little bit of confusion, at least for me. Well try to clear it up. Jcpenneys board responding to bill ackmans most recent letter in which he called for the retailer to speed up their ceo search. He also suggested former ceo Alan Questrom return as the new chairman. The board says the companys made significant progress since mike ullman returned to ceo four months ago. Ullman was the ceo, left and now came back. The board says the ceo has an overwhelming support. The chairman says the board was extremely disappointed. Ackmans letter released to the media at the same time it was sent to the board. You spoke with questrom, right . Everybody was screaming all over sort of the twitter sphere yesterday about what the story really was here. Ackman seems, in his letter, which i read you probably did too, seems to say that questrom has pretty much said im coming back. But questrom told you what . Questrom told me that he had told them told ackman he would consider coming back under the right circumstances. My knee jerk reaction is i look the up at the screen and saw Allen Questrom sourcing ackmans letter saying he was saying ackman that it was sourcing ackmans letter saying questrom was coming back to jcpenney. Ive known him for a long time, i used to cover retail. I picked up the phone and called questrom. I call his cell phone. Ive known him for over a decade. I said, youre going back to jcpenney, i said whats going on . He said, whoa, back it down a second. He said he would consider it under the right conditions but the right conditions include it not being a hostile situation. And questrom supported ullman going back as the ceo and part of this is ackman kind of knocking ullman, which now you have everybody from the board of jcpenney to Howard Howard schultz. Starbucks defending ullman. I dont want to trample on bill ackman. I dont know the guy. I think it is a hazy story. It seems like two i mean, let me know what you think, it seems like, a, ackman maybe jumped the gun in his letter suggesting that questrom all but agreed to come back. But questrom had talks with him. They started out about four or five months ago. But conditionally agreed to return was the verbatim. Thats stronger than what questrom told me. What he told you. And he was on the air, on cnbc. And isnt andrew, last point, isnt ackman also making an end to round around the board . Thats a hostile situation at that point and questrom laid that out as a condition he would not return under. I dont understand how you can be a board this goes back to either you want to be a board member an insider or outsider. If you want to be outside the tent, throw darts and arrows and whatever you want all day long. If youre inside the tent ackman is inside the tent. Thats my point. Hes throwing darts at the other people inside the tent. Yes. The board was furious that this letter came out and found out by watching it on cnbc. It is a bit of a mess. But in talking to questrom two pieces to this. One, he clearly it is clear whatever bill ackman is trying to do inside the board is not working. And therefore thens going to the media, and therefore whatever his relationship he had, if he had one at all with the board disintegrated even hes trying to knock out the ceo and the chairman of the board. But the last piece is that whatever you think of bill ackman, at least on jcpenney, he doesnt have that much credibility left given what happened the first time around. So ackman has a long track record, he has equity in other areas. I still think it is a very screwed up company, but on jcpenney alone and some of the other retail plays from a more fundamental basis, suddenly jcpenney because of ron johnson went to a sleepy retailer to one of the hottest corporate stories in the world, you look at jcpenney now and the problems they got, forget about ackman and all this stuff, the fact is we dont know who the ceo might be four months before christmas. It is three weeks in backtoschool season. This is incredibly important part in time. He was very surprised the board wasnt further along in finding who was going to be the permanent ceo. He said there is he thinks about the people who would be right for it, he thinks four to five people, could have conversations with those four to five people very quickly and figure it out. If im ackman, and my wife works in retail, we talk about this kind of stuff, wait until january to do this, get through the holidays, get through the incredible what is it, 40 of your sales come in the last three weeks of december. They have already taken all the merchandise. Everything they plan on having on the shelves in christmas, the orders have been put in, the merchandise is there. But the strategy may not be there, discounting and management and inventory and stuff. Seems look a slipup by ackman. Watching the stock yesterday, the stock was up 8 on the news on what, though . On the news that questrom was potentially coming back. It was up 8 . If you look this morning, it is down 3 . There is a lot of back and forth. This is complicate gld thed. There are times ive had situations like this. Times when Board Members have talked to journalists because theyre not getting their way on the board, theyre convinced if the rest of the board saw if if this news they were contemplating was out there at all, the stock was as high as it was and it would pressure the board to make the same decision. If youre mike ullman, the old ceo, the new ceo, we did a whole thing on street signs, we talked about jcpenney for a long time. A great guy. Yes. And now you got us basically we had guests on, former Department Executives who said they would like to see ken hicks who is the ceo of foot locker come in and if youre ullman and watching cnbc probably as most ceos do and seeing your name in a graphic and seeing who is going to replace ullman and ackman is saying how did i come back . In ullmans defense, he stabilized that company when he came back in. A lot of the suppliers minds at ease for some very difficult situations that were leading up to that point and look back at the stock when ullman came in. This is an up and down and crazy sort of story, question is who came in as an interim ceo. There had been some suggestion that potentially he would stay on longer. I think thats worth a really difficult job. He has to please the customer as every ceo does, but please the suppliers and creditors because you cannot have your credit risk look at this. 13. 24. What did ackman get in at . I dont know. I have to go back and look at that. Trading like a tech stock. 90s. Not a typical retail stock. Right. Thats because for a little bit of time, they were trying to turn it into a tech stock. Ron johnson. Montgomery ward still exists, by the way. Is that true . Yeah, go to montgomeryward. Com, colony brands which buys im not relating this to jcpenney at all, but a lot of these older retailers still have a very visible online presence. There was a Montgomery Ward in new york. Coming up, call him mr. Gloom, boom and doom, mark fabers latest call lives up to his title, a bearish call. You have to hear this right after the break. First, take a check at the National Forecast with the weather channels reynolds wolf. Reynolds . Hey, guys. Lets look at that forecast. Were going to see some rain in parts of the northeast today, but you get dryer weather ahead for the weekend. That to look forward to. Seeing rain and thunderstorms, we had some intense flooding in parts of tennessee over the last 24 hours. More rainfall in store for you today and more for the weekend. Im telling you, new york, it is going to be lovely up in parts of the northeast. Maybe not so much into saturday because it will be hot, but were looking at temperatures in the low 80s by the time we get to sunday. Again, looks like it will be fantastic. Travel may not be so fantastic for you in raleigh and new york where you could have some, possibly moderate delays in new york and all major airports. In san francisco, might deal with a little fog early, but for the rest of the day, no problems whatsoever. Stick around, we have more on squawk box coming up. Stay tuned. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. Welcome back, everybody. Time for the executive edge, a new segment were launching this week focused on giving Business Leaders a leg up. Our goal is to highlight interesting stories that go beyond the mornings top headlines. We start with an article on the front page of todays New York Times that has a lot of people buzzing suggesting that detroits neighbors are currently being hurt by the woes of motown. Cities, counties and other local governments in michigan are getting a Cold Shoulder in the Municipal Bond market. Just two weeks after detroit declared bankruptcy, borrowing costs are up around the state. The latest casualty, yesterdays saginaw county announced it was delaying a 60 million bond sale that was planned for today. Gentlemen, this is the concern that so many people have been wo worried about, this would have ripple effects through michigan and if a federal Court Approves this, throughout the rest of the country. The question for me at least is the answer that the state is supposed to get involved in a more meaningful way, the federal government . We talked about are you supposed to have a bailout . We know that there is going to be implications from doing this. But yes, but particular the flip side is a dangerous game too. But particular implications because the bond holders are being put at the back of the line with everybody else. Theyre being treated as unsecured creditors. That changes the game. This is something that the governors signed off on, the guy who is in charge of the city of michigan and the city of detroit now has signed off on and that has been the thing that investors have come to us again and again. If you want to more equally spread the pain so the pensioners arent the only ones suffering this is the way to do it but it has implications. If i was a federal judge, bankruptcy judge in the sixth circuit in cincinnati, ohio, who will probably end up seeing this case, i would retire right now. I dont want to make this is your decision. The hobsons choice. Im going to uphold current muni bond law, essentially, establish contract law and pay it back 100 on the dollar and screw the other people. Pensioniers that need money. Or im going to bust up muni bond law as we know it, right, make other people whole, the retirees that need the money, we agree with that, but possibly doom other municipalities because now there is no sanctity of contract law among america if you dont care about detroit, fine. This case is so important from a muni bond perspective, borrowing costs in your community could be impacted by this. I would retire. What decision would you make . I dont know. I dont know either. It get backs to your point to the federal government. The pension benefit guarantee corporation, which backs private pensions, companies, doesnt do munis and lets say you believe that chicago, becky, could be next. Im not saying it is. But lets say it is. Do you bail them how big does the moral hazard get. Steve ratman had an oped. Like in the last week or so. He made the argument that actually the role of the government is to pursue bailouts like this, it was a very controversial piece. That was in the last week or two. Ive been talking to some other people, just trying to figure out what some of the biggest guys in finance, what they would do with this. This is a really, really big problem, and, brian, you may be right, retire and run away. Retire now, flee. Thats right. Lets talk about some market news. Brian told you about the warning from mark faber. Hes the man behind the gloom, boom and doom report. He says that a 1987 style crash is coming. In 87, we had a very powerful rally, but also earnings were no longer rising substantially. And the market became very overbought and the final rally into august 25th occurred with diminishing number of stocks hitting 52year highs. 52week high. In other words, the new high list was contracting and we had several breaks in different stocks. The first half of the year shaped up a little bit like 1987. There was a massive gain, but in 1987, the gains were bigger for the market, gain of 30 . The second half of 1987, that was the scary part, i think the stocks were down about 36 in the second part. Becky, i like skeptics. As a journalist, were all professionals, but has he ever been optimistic. The clock always strikes midnight at some point. He will be right at some point. Mark makes me set up and take notice. I was concerned when i heard that this morning. It is so different from what we heard from other market strategists we talked to. The dow in 87 fell 509 points. That would be what is 20 of where we are now . A couple thousand points, but we have Circuit Breakers now. So i dont know if hes calling for a oneday drop, which we probably could even technically couldnt have because of the Safety Switches they put in. Only going to be a oneday drop, you would say fine, thats okay. Unless it didnt come back. A lot of people forget that in 87, the dow ended higher. For the year. For the year. We dont think we dont think that, it would be like, 87. You think 87 is an awful situation. But ultimately an awful couple of days. Hold on. Andrew is waiting for that dip to jump back in, to get everything in. Who knows. Becky knows me too well. We think about these things with our College Funds for the kids. Lets talk about a fun story. Researchers are hoping up a family tomb in europe in an attempt to identify the bones of a woman thought to be the model for leonardo da vincis portrait. The masterpiece is thought to be inspired by the wife of a merchant, one of his paterrons. Dna testing could confirm her remains. They want to figure out who she was and identify why the secret smile like that. There have been a lot of different theories out there, gentlemen, maybe bad teeth, maybe cerebral palsy. Bad teeth makes sense to me. Was toothbrushing a big deal back then. I dont know. The secret smile. I thought about this story and im interested, i guess, but also something to the mystery, like maybe let it be a mystery. You know what the mystery is to me, why people make such a big deal about the mona lisa. I saved up for a year or two, went to paris, tried to be fancy with a girlfriend when i was 25, first overseas trip, walked in, two feet by two feet, 6,000 tourists standing in front of it, and looked at it and said thats all right. That was my general reaction. Moved on to boat chellie and got a waffle. Maybe were not cultured enough, brian. I think them there may be right, becky. That was my worry. Thats why i never want to fess up. You dont want to admit you dont like something that everybody else respects, saying that movie stunk and it is, like, you know, i hated the artist. It won the oscar. It wasnt a good movie, but youre afraid to admit that because god forbid the hoi polloi tell you youre not sophisticated enough while you sip your cocktail. Brian, voice of honesty this morning. We have new data suggesting American Consumers are borrowing money between. Is this a sign the economy is back . Or does this just mean old habits are returning . We have that debate right after this. First, though, as we head to a break, a look at yesterdays winners and losers. 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. Good morning. Welcome back to squawk box here on cnbc. Im Andrew Ross Sorkin with becky quick and Brian Sullivan sitting in for the vacationing joe on a friday morning. It is august, and that means it is the key season for backtoschool shopping. Lets get a read, though, on the overall Consumer Credit landscape here in the United States with ezra becker. Hes Vice President of research and consulting, Transunion Financial Services business unit. Ezra, how is credit in this country . I know you think it is good, but there is a lot of people who still think were not there yet. Actually, were doing pretty well. Our data show the Consumer Credit markets are healthy and well functioning. I think that you can see it best manifested in the three major product groups. So when we look at credit cards, credit card lenders are issuing more credit, but in fact delinquency as low as we have seen in 20 years. And when you combine that with some decreases in revolving balances, what we see is that consumers generally are using their cards in moderation and not overextending themselves. Have we made it too hard to get credit in this country at this point . No i dont think so. I think that lenders generally are extending more credit, certainly, than they were last year and certainly more than the year before. So i think that there are some pockets of the population that it is hard for lenders to figure out how to make a viable Product Offering where youre giving utility to the consumer, but also having a reasonable return for the investors. But generally speaking, credit is widely available in this country. Ezra, Brian Sullivan, how have we gotten smarter since the credit bust of five years ago. Are we being smarter about the kinds of credit we take out. I hear about nine and tenyear car loans and that makes me nervous. Well, keep in mind the average age of an automobile is about 11 years. So the car itself is a much more viable collateral, so the loan can be amore tiesed over a longer period and have good backing. But we have seen a lot of consumers spending less or deleveraging, so i think that there is much better fiscal responsibility among consumers than perhaps we saw in 20052006. You think thats because consumers themselves are putting the constraints on themselves or because theyre worried or not making more money at work or you think it is a worrying factor or, look, were better about how we go about doing this . I think it is a twoway street. Consumers being more aware of their finances and looking at credit, specifically credit cards, not just as a convenience factor, but truly in the fundamental sense of credit to reconcile that disparity between income and expenses. I think there is that element and i think as well, lenders are being more cautious in how they extend credit under what terms and really try to build that relationship with consumers to maintain healthy positive payments whenever possible. Student debt, discuss. That is different from other formz of debt pri forms of debt because it is backed by the government it not underwritten in a traditional riskbased manner. The government made a policy decision that in fact an educated populace is important to the welfare of the country. So you have to be very careful in evaluating student debt to look at what is dangerous versus what is healthy. But, well, i understand the danger versus the healthy. Then when you look at how banks look at people who have student debt and then think about whether they should be offering them credit card debt, automobile debt, mortgages, et cetera, it changed the game, no . Not so much. Our i when you look at that any other form of debt in conjunction with an employment situation, so were fortunate that were in a decreasing Unemployment Rate environment. Thats good for everyone. But keep in mind that it is particularly important for recent graduates trying to enter the workforce, to be able to find jobs and pay off that student debt burden, that those of us or somewhat older or out of School Longer dont have as a consideration. That is the truth. Ezra, thank you for joining us this morning, an important conversation and hope to have you back and continue it again. Thanks for having me. Thanks. Coming up, shares of priceline. Com jumping again in premarket trading. The Company Reported Quarterly Results last night. Were going to speak with an analyst who covers the travel industry and ask him if priceline will be the first stock to the famed 1,000 per share club. Stick around. Welcome back to squawk box. Look at futures right now. We have red arrows as we head into friday. Dow jones looks like we open off 53 points. S p 500 off about 8 points. The nasdaq off about 8 points as well. Making headlines this morning, lets tell you about them, International Energy agency says that north america shale boom is insulating the world from steep oil price spikes. This as several members of opec struggle to maintain production due to unrest and infrastructure problems. Shares of priceline. Com trading at a 14year high this week, the Online Travel discount Company Reported Second Quarter results that beat on both the top and bottom lines thanks to a spike in bookings. Joining us with the numbers, scott kessler, senior equity analyst. Is priceline going to be the first thousand dollar a share stock . Well, we think so. At least the first one we have seen in quite some time. We raised our 12month target price last night to 1,125. And in premarket trading, as im sure you see, the shares are within 1 to 2 of 1,000 already this morning. So, yes. How is it going to get there . What is interesting about priceline is i think surprisingly to a lot of people this Company Continues to execute and it is not based on the domestic u. S. Economy or demand for travelrelated services, it is really predicated on international, with a preponderance of gross bookings activity in europe. Thats surprising to a lost people given the economic and fiscal condition of that continent over the last couple of years. You associate it with shatner, a domestic thing, but given the weakness in europe, do we get the story wrong because were thinking, oh, europes weak, so it has to be weak, but yet 16 million americans or whatever go to france every year, and i read that car bookings, rental car books on priceline were up 46 . Right. So, the reasons are actually kind of interesting for why priceline has done so well. If you look over the last decade, i would deposit that there are not a lot of large cap stocks out there that have done as well. I think i saw that the stock was up well over 2800 over the last ten years and thats really on the heels of the fact that this is a company that most people dont really understand. 85 of bookings in q2 took place outside the u. S. , for example. I understand this, scott, one knock im going put on priceline is it has a very low float. There is not a lot of stock outstanding for the company. Yeah, you know, there are a lot of things that one would question about priceline, the exposure to europe, the increase in competition in the u. S. Market, i would say an uncertain opportunity in asia. The multiple definitely is not low. And we have seen some companies have difficulties over the last couple of quarters in the travel category. We have a hold depending on the stock and largely reflects a lot of the good news being in the stock as you reflected. What are the catalysts Going Forward . A firming economy around the world, asia kind of continuing to gain traction, other economies like latin america starting to contribute, but the competitive environment is very, very dynamic for this particular who do you think is the other big winner these days in that in this space . I dont know if there are a lot of other big winners, andrew. You look at trip adviser, for example, that stock has done very, very well. They have executed well. But it is not a transaction model, like a priceline or expedia or orbitz. Orbitz was up. They raised its stock spiked after it raised its guidance earlier this month. Right, becky. We dont cover orbitz. But i twhink what is happening s frankly a lot of companies is benefitting from the fact that pricing has been pretty solid and in addition, demand notwithstanding the challenges in europe, has been consistent and strengthening as well. Is there any i use kayak, which i love. You know about kayak . Right, but you dont book through kayak. You get you do. It is owned by priceline. Priceline acquired kayak. Did it really . Is there any real implications for the business as a result of i think they spent 1. 8 billion a year ago. Yeah, andrew, what is interesting about that deal is that it literally just closed. Announced in november of last year, which seems like an eternity ago, but it closed in may. And, you know, there are a lot of opportunities there. If you think about kayak, you think about strength in the u. S. , think about mobile. And really those are areas that priceline is looking to get better at. Conversely priceline is very strong in europe, and kayak doesnt have as much of a footprint there. Do we know if William Shatner still has, you know, they gave him a bunch of stock at like a buck or two, two bucks a share when he started becoming their pitch man. I heard he sold most of it. But, scott, do you know . If William Shatner still owns that stake in priceline, hes easily a multibillionaire now. Yeah, you know, i dont know what his standing in terms of owning the stock is now. But suffice it to say that most people in this country, they think of priceline. Com, they think of William Shatner. He was on we got to go. Scott, we got to go. Shatner was on revolution, maybe hes a friend of cnbc. Call in, shatner, if youre watching. We want to know if youre a billionaire. According to Business Insider in 2010, sold enough shares to make about 600 million. So William Shatner is one of the greatest entrepreneurs in the history of the world. I dont know if he sold it all. That means hes worth William Shatner is going to be turned out to be one of the greatest internet entrepreneurs in the world. Potentially. I got read more about this. Well tell you more about it after the break. Is there anything he cant do . Exactly. Goe does very to give 10 to the agent . Thats the question. Dude, i dont know. I dont even have an agent. No one wants to hire me. You have a you have a nice deal with us. Were very happy to have you. I just show up, not jim cramer, cramer from seinfeld. Youre fired, i dont even work here. Scott, thank you very much. When we come back, we will talk issues of management. The morning of a fight with investor bill ackman, why they are embracing loans, we will talk to the ceooflendb club. Com will join us at 7 45 eastern. [ agent smith ] ive Found Software that intrigues me. It appears its an agent of good. [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] it guides you to a number that will change your it guides you to a number life your sleep number setting. It even knows you by name. Now its easier than ever to experience deep, restful sleep with the sleep number beds dualair technology. At the touch of a button, the sleep number bed adjusts to each persons ideal comfort and support. And youll only find it at a sleep number store. Where right now our newest innovations are available with 48month financing. Sleep number. Comfort individualized. 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. Welcome back, everybody, this is a program they do fairly regularly. We go through the papers, find ostory we like. I get to lead this segment. Cope it light on a friday, right . Yeah, im wearing jeans. The New York Post complaining on trip adviser that new york pizza was ranked fourth by trip adviser. San diego how can san diego have the best pizza . Thats what the post is argueling, i was born an raised in southern california, encinitas, california, san diego, a lot of new yorkers have moved to san diego. Thats what they understand, pizza places are being run by exnew yorkers. Wait a second, san diego, las vegas, boston, new york, seattle, chicago is not on the list. So san diego is number one on trip adviser for pizza, vegas, boston, incentsed the post, new york 4th, seattle 5th. San diego settled by germans. You have a favorite pizza place . In san diego . The world. Im a taco dude, you want to know about tacos. Im your guy. You have a favorite pizza place. Ginos east in chicago. One slice is a meal, though . Yeah, for a week, but thats okay. I would say grimaldis if brooklyn is fantastic. Amherst, massachusetts. Do you guys have stories . Let me tell you real quickly. If you havent heard already, i didnt hear until you picked up usa today, sunday and monday night will be the peak for the per soed meter showers. Check it out, if you can, heres my favorite quote on this, there will be a dozen oooh moments in the hour. Everyone will say, did you see it . I live in the Upper Peninsula of michigan you can see Aurora Borealis there. Maybe monday after the half moon sets. Ill be up. I have to run. Look up a couple other good stories in the papers we will talk about. In the meantime, still to come on squawk, the ceo of brookfield asset, he will be joining us when we come back. Golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. Bruce flat happy friday. Brian sullivan is in for joe kernen today. Take a look at futures. The dow looks like its off this friday at 46 points, s p would open off about six points lets call it. Well round up. The nasdaq is off about 5 points. Up with of the big headlines j. P. Morgan reportedly close to reaching a settlement with security regulators over the socalled london whale losses. Regulators now saying the bank may admit wrongdoing. This is a big push. The sec has been pushing around disclose years and controls would change the game, meanwhile, ixo, bruno ixo not expected to face charges, apparently, he has been cooperating. Will is a report blackberry is warming up to the possibility of going private. Sources say the chief executive and the board increasingly coming around to that area. Blackberry has not launched any sale process so far. We have to keep our eyes on that company. The Company Shares are all more than 19 this year, though theyre up on the news this morning. Membersical billionaire car loss slim makes a bid for kpn. Teleupon the ka offered for the german business eplus, people posted the matter saying mr. Slims 11 million bid is too low, forcing it to take control of the 7 of kpn it does not known e own or extract a higher price. We have earnings to tell you about. Travel website priceline. Com poftd earnings of 9. 70 per shamplt i spoke to an analyst who says pricing is a lot better. You can look at orbits and a few in the industry and priceline up better than 6 . Company defdreon, they expected a loss of 36 cents a share, in addition the Company Announced the cfo will lead the company at the end of the year. Shares plunged, trading down, wow, more than 20 and monster beverage, the maker of Energy Drinks reported earnings of 62 on revenue of 631 million. Missing forecast of the beverage hampered results, shares dropping in extended hours trading. Do you drink that stuff . No way, man. I got so much natural energy. I have a couple cups of coffee. If i drank that, my heart would explode. I drink decaf coffee. What about red bull . No. Zero . I read about water in red bull. Apparently, its like bone excell. Unless you go with the sugarless version. The major ingredient in torine is from red bull. Its not the good stuff from the bull. Its like bad stuff. Ive had it before. Look it up. A corporate fight people are buzzing about. J. P. Penney responding to bill ackmans most recent letter to speed up the search and the board says the company has quote made significant progress since mike olman returned. The chairman said they were disappointed it was accept to the cnbc at the same time it was sent to the board. This story dominated street signs. Look at this, front page, ft companies and markets, ackman ultimatum riles rest of j. C. Penney directors. Becky, you got them live on the phone on cnbc, apparently, as best i can understand, it seems like ackman in this letter that he conditionally was coming back. That was my understanding, too, i called alan because the way it was playing out was, wow, it sounded like it was a done deal. So i called them to say, you are going back, whats happening . Thats when there seems to be a disagreement, correct me if im wrong what ackman said in a letter and questrom told you . Thats my understanding of it. I was surprised when alan said no. I talked to him. He was live on the phone with scott afterwards. He was kind of pulling back a bit. Id go back under some conditions. In fact, he said i told them i would consider going back, one of those circumstances had to be it was not a hostile situation i situation. This is a hostile situation. Now the board is ticked at ackman more than they were. You have to imagine they were so ticked at him for him to decide to send a letter to release it publicly at the same time he is sending it to the board with i he is supposedly on, he loses leverage, doesnt gain leverage. That was my question, questron was the one to bring if ackman. She a friend of olmans. I cant believe he is pleased how this is painting olman. The former ceo of Texas Instruments on the chairman of the board of j. P. Penney said bill ackmans latest actions are disruptive and counterproductive in an important state of the recovery and leading a campaign to a point ron johnson under whose leadership performance deteriorated precipitously. Now the board is going after ackman, the largest shareholder. The new ceo was the older ceo. The former ceo may or may not come back. All of which is happening two a stock that had problems with suppliers and were four months ahead of the holiday situation. I wonder about the suppliers story. When that came out, that made the stock drop 12 . The company came out and said there is absolutely no truth to that, the stock popped back. There is a lot of people pushing to try to manipulate that stock. Heres my question. If are you the board of a company supposed to be beholden or at least consider the shareholders and your largest shareholder is somebody that you dislike immensely and you dont agree with what theyve done or what they are doing, do you actually listen to them or not . The biggest shareholder is screaming saying you need to do x, y, z, when x, y, z, historically hasnt worked. Do you listen to your shareholder . Good morning, by the way, charles. You didnt know you were going to step into the viper pit . Its no question thats tenuous. I think the release on the inventory stuff around end of loss was very curious. I think someone was trying to pressure short. Me too. And thankfully the company came back and responded to. Ackman was trying to press along yesterday by releasing the letter . People release the letter, its bill ackman releasing the newspaper. We have to act knowledge the letter. Bill ackman should be releasing the letter. The question is whether or not ackman has a deal with questrom, questrom tells becky, well, i dont know, im still thinking about it. You dont want to fight with your boards, you dont want to fight with them publicly. His advice despite his ownership interest has not proved that yet, but i think questroms involve him at j. C. Penney at any level if true and real is a clear, would be intrerptd as a clear, clear positive. Hes highly, highly regarded inside that company and would bring a ton of respectability to j. C. Penney, far larger than ackman has. Can i pose a question to you, if bill ackman announced tomorrow he was selling all of his shares at j. C. Penney, would that be a positive or a negative for this company . What the company has to get right, quite frankly, andrew is their Balance Sheet and everything they need to do right now is to give clarity to their suppliers that theyre strong and with over a billionandahalf dollars of cash, thats a clear indication that they are strong the activity around the real estate was an effort to protect their Balance Sheet and its about the bond holders right now. Its actually not about the equity holders. My guess is, i wouldnt speculate whether it would be a tive or a negative, so but heres the thing. Okay. Again, heres the thing, if questrom is brought in as chairman, these former ceo, hes highly regarded, everybody ive talked to says that, lets say he does come back as chairman, right . So now youve got olman as ceo. Those guys. No, no, kwetrom said hed come back with a ceo he could work with, not a hostile situation. So we could assume them then we know theyre searching for a ceo, we assume if questrom comes in, that means olman is out . No. Thats what i was trying to say, how can two former ceos Work Together . You want correct with your suppliers, egoes, alpha males. Really . The other thing i cant figure out about the by the way is prior to ron johnson turning the company, you know, in the direction it turned, people thought the company was going to hell in a hand basket to begin with, under, by the way, some of these individuals as nice and quality people they are. So life is relative. All of a sudden we want to go back to a world that we thought, we thought the company was being run into the ground anyway. You cant run a company this large into the ground that quickly. It has tremendous revenue t. Judgment would be slightly more operating margins, you have a ton more cash flow. Question of credibility with the suppliers, you need inventory and the right inventory to the store t. Question of ceo of j. C. Penney was highly regarded on the street as an astute retailing ceo. His guidance as a fatherly figure, thats his role as chairman, i think it would bring a ton of credibility, in fact, most investors would take questrom over ackman as a trade any day of the week, right here, right now. Charles lets ask more broadly about the markets t. Last time you were on with us, maybe not the last time, back in april, you were talking about how the market at that point you thought was as under sold as it was oversold back in the year 2000. Is that still the situation . I think i said it was as undervalued then as it was overvalued in the year 2000. I think, becky, yes, clearly the market is higher by 200 points since then, but there is nothing wrong with believing that buying high is the wrong thing to do. Its against the conditions of risks and weve had, you know, three or four months sense i made that comment and some of the clear positives are certainly the markets responded well to tapering. We havent even heard that word back in april, the equity markets higher, despite the fact that tenyear treasuries are higher. Earnings are clearly, you feel safer, you got a Second Quarter, you have at least 110 of s p earnings that you can bank on. Then you got to think about the look forward. For us, the look forward could, has the potential to actually better than people expect and well know soon, but we have a sense that Global Demand is picking up and there is an inventory stocking taking place, because if you orders have really held in while at low levels now for nine months. So the shelves and the sheds are empty. We think global pmi and ism data can surprise us to the upside, be i the way, we spent time talking about revenue growth. When the dust settles, revenues will be up 4 . So there is nothing on the margin, is it the margin of safety for equities has gotten smaller, from extremely wide levels. Charles cantor again, we didnt introduce him the first time around, she a managing director, hes our guest host, thank you. Thank you, becky. All right, up next the business of brookfield assets management, you may not be that familiar with the company, it is a nearly 200 billion portfolio in property, assets, infrastructures. They got their hands in everything. Were going to speak to the ceo about the housing mark the Global Economy, why he sees bright spots. As we head to break, heres todays updated yahoo logo. Every day they will change it. Guess what, they probably didnt like it either. If you are on the radio, its got a larger second o than a first o. So its kind of the yahoo or something, i dont know what that is. It looks leak all caps yelling. Yahoo, theyre selling the dog gone logo every day. Go to etrade and roll over your old 401 k s to a new etrade retirement account. Brookfield Asset Management out with Second Quarter results this morning. Joining us is the ceo. The alternative assets over 184 billion under management president s all over the world, all different kind, bruce, welcome to squawk box, thank you for joining us. Good morning. Thank you. I dont know where to start, you guys are not that known to our audience, when you go through the portfolio is spectacular. The amount of stuff have you your hands into is incredible. Give us your take on the Global Economy an Global Real Estate right now. First, were very bullish on america. We love that. And the economy is doing extremely well. We put a lot of money through 2009, 10, 11, housing is coming back, retail is coming back. Shale gas revolution is doing a lot of things, manufacturing is coming back. Were very bullish on everything american, you see it in our results today. The rest of the world is slowing, but that means there is big opportunity there and so were positive about putting money in those places, we are still putting money into america. It should be noted you are a canadabased company, its not a jinglistic american company, are you looking almost as an outsider into the occupation, where are you seeing the most opportunity, you have 100 million bucks to invest, which you do, you have more than that, where would you put it on america . We have over 100 billion assets in the states. I wouldnt call us an outsider. We look outside in. We are putting mine i money into every one of our business. Malls, infrastructures, dams . We bought a Large Business in general growth properties. Its a phenomenal Business Today and still growing. We continue to invest into the hydroelectric business and wind business, we are building a big texas transmission system. We are investing across the asset sector. These are operating business that every day just produce cash. We continue to do that and america is a good place to invest today. Bruce, what are you seeing in terms of institutional demand on real assets and how do you help us think through what real assets mean to you and your institutional investors. Charles, all we do is rent things to people. We help them Source Capital and provide money to corporations and institutions and on behalf of clients and we take money from clients and we put it to work and theres a lot of money being taken in portfolios. We think real assets for those type of investments will be a base of institutional client portfolios over the next ten years. So huge amounts of money are coming from institutional clients. I guess my question is why the demand . What is it about what you own that other people find so attractive . Interest rates are extremely low, 2 to 3 . We can earn 12 to 15 consistently over time, not if you buy right, you dont make too many mistakes. Therefore, thats a very attractive return for an institutional client. And do the far flows grow . There is a lot of income buyers out there. My sense is your cash flow has an ability to grow as inflation picks up. The most important thing is real assets are not fixed investments. Often, they are confused, these real assets, the cash flows will go up with inflation, theyll go up with business conditions. They go up as america gets better an every other country get better, therefore, these things grow, that is what attracts them to investment portfolios. You reported a strong set of results this morning, congratulations on that, do you do the highlight the contribution that your asset business is making to the overall brookfield Asset Management story. Is that level sustainable . Can we grow from year, for us as investors, it finally feels like thats becoming quite meaningful. You know, overnight in ten years, its actually become a meaningful part of the business and it continues to grow and its still in its infancy. There is enormous also of real assets. We think we are in the early stages of this transformation. Hey, bruce, are you looking at europe as a place you like. There is a lot of people who have suddenly switched as looking at europe for professional e potential great growth s. That an opportunity here in the United States . Becky, we are value investors. We take our money where we can. We are global. If europe, there is a great opportunity. Its a slow growth place. If you boy right, there are tremendous value opportunities. So were really looking at three areas in the world today. Europe, emerging markets, as money comes out of those markets and there is less capital there and things around commodities. So there is a lot of Commodity Companies who have infrastructure assets they need off the Balance Sheet or they need partners. You think these are value assets or value investments, not catching a falling knife . You know, you never hit the bottom. Weve always found that. We are trying to become a good partner to a Global Company and be there the next 25 or 50 years with them. You dont have to pick the bottom of the market. You need to earn a decent return over a long period of time. Do you know this xanadu project in new jersey . I do. For our viewers who are not familiar with it, Chris Christie called it the Ugliest Building in the world. The giant mall went bankrupt. Its a north ski slope. Its an eye so its awful. Apparently, another Canadian Company triple five worldwide, ive never heard of them have bought it. Did you guys look at it . We have over time looked at it. Why did you turn it down . You know, its just not in our sweet spot of investment. There is many, many things in the world to do, thats just not one of them for us. Why not . Its already built, are you getting a free asset. Good luck to the owners. Look how nice you are. Its a very big project. Requires more investment to make it work . Probably. Something out of that for the apache bronx movie, its sitting alone, weeds all over it. You actively turned it down . We have a big business. Everything comes to us. Sometimes you have picked the ones you like, sometimes you dont. Very diplomatic. Through the 08 period you were one of the once who had the opportunity to invest and bailed Much Bigger Company coming out of 08. Whats the magic source . What is the source of your magic source, so to speak . Charges we spent a long time assuring we have a stlaur is unpenetratable in design and because of that, we survived through 2008. We have better liquidity than weve ever had today bringing money in, its a great situation. Thank you for being here. Thank you. This has been great. Coming up, peertopeer lenning, why bypassing the banks could prove to be a healthy investment. We have the ceo of lending club joining us on squawk box when we return. Aaa. Fffffff. Laclaclac. Hes an actor whos known for his voice. 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Now its easier than ever to experience deep, restful sleep with the sleep number beds dualair technology. At the touch of a button, the sleep number bed adjusts to each persons ideal comfort and support. And youll only find it at a sleep number store. Where right now our newest innovations are available with 48month financing. Sleep number. Comfort individualized. [ 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. All right, heading into this morning the dow was not getting help this morning from futures. Right now if the markets were to open at this level, it looks like the dow is down 40 points. The s p down 5 points. It is on its pace for the worst week in seven weeks. When we come back, retail detail on backtoschool watch and court fireagan isnt out and about and doing a little shopping for us. This morning, shell join us right after this. And choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. 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. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk box, everything, 7 30 in the east. Your headlines, cisco upgraded to neutral at j. P. Morgan. Theerg target is now 26 bucks t. Shares are up about. 4 of 1 in premarket. Aereo to launch in three more cities. Connecticut based yogurt maker yocrunch, it is aimed to expand the companys presence in the u. S. Tomorrow is backtoschool saturday. Its a team vogue created national day of shopping. Its a day of deals and discounts. Courtney reagan is there. She joins us with a look at Digital Education tools. Courtney. Hi, good morning to you, becky. A little rain is not going to stop those backtoschool shoppers. Central valley, new york. There is always a lot of focus on retailers, big box retailers when it comes back to school. What about best boy in may not be top of mind. Maybe it should be. Digital tools in the classroom are mandatory. Best boy offering its promotion on laptops and tablets, apple products in early june. Microsoft is offering 100 off its surface, an additional 10 off if you got that email address, going after the students and Cisco Consulting Services John stein says because of what we are dealing with, how information is processed even to kids at a low level, these individual devices are all by mandatory. We dont have encyclocross pedia bring tanyas, we have the internet, goo google, you need digital device. So much for those number 2 pencil, stein says there will be a onetoone ratio for childtodevice in the classroom in the next threetofive years. The nrs says the largest shopping budgets are going towards these digital devices. Many apparel makers will not be left out in the cold. Many experts believe if they sell those pieces or the backpacks with the slots, specifically for the laptops, theyll do well. Piper jaffres team survey says they want a michael kors tablet case. I bet we will see a line outside the store today. I bet you are. The story yesterday with j. C. Penney and ackman and questrom and olman. Story get weirder and weirder as the day went along. Where does that leave us for j. C. Penney . It did. It all began to play out. We know many Board Members are initially mike olman board numbers he brought in before johnson. So look to his predecessor questrom. It seemed as if the company was blindsided, taking time to respond with that statement. We dont often hear from the chairman of the j. C. Penney board particularly in that way. It has to be a very divisive boardroom. I think there are still a lot of questions right now even among upper management and that has to make investors an analysts alike a little bit nervous about whats to come. I think lucky for j. C. Penney how retail works, backtoschool set the floor has been set there since july, much of holidays, obviously, have been order, marketing promotions, that could be a little change towards the end, but i think this story is far, far from over. But as ou of right now, it doesnt appear there are Major Management changes potentially pending. But as far as we know, mr. Olman is still acting as the ceo though the search has begun for his replacement. Courtney, thank you. Thank you. Coming up, need a loan for a new car . Maybe you want to do a house project but dont want to bother with a bank or think you wont qualify for a loan, well, meet the shadow banks of peer to peer lending. Check out the futures right now the dow looks like it is off about 40 points. Requires challr Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. 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Its time to do everything better than before. The new blackberry q10. Its time. Back to squawk. J. P. Morgan reaching an agreernlths bruno iksil is not expected to face charges. The department of justice stepped up a probe into bear sterns mortgage dealings. The could add to j. P. Morgans legal problems. Jpm, of course, bought bear sterns with government encouragement in 2008. And more and more consumers are in the market for peer to peer loans. If you think about peer to peer sharing. This is backed with money. They are passing banks to borrow money from other individuals and lending it, can it mean strong returns . One Company Thriving on this trend, lengd club. Com, founder and ceo, ren saudi leplanche zroins joins us this morning. Good morning. Good morning. Welcome. Walk us through peertopeer works. Lending is a online marketplace. We have borrowers on one side, investors on the other side. We underride the service loans. We let investors be on the portfolio of loans that institutes the thousands of small loans made throughout to the borrower. So the benefit to borrower eers and investors, we operate at a lower costs than the banks. We can pass on the savings to both sides to lower Interest Rates borrower es. So heres the question, if i am an investor and want to go on your site, can i look at all different sorts of opportunities to loan to individuals on the other side, is that the idea . Thats right. Some investors like to review every single loan application. Other investors have a more portfolio portion, we grade and price loans, so we have an investor during conservative and choosing a portfolio of a and b grade loans, some investors are having a more aggressive portfolio, but in every dais case, its diversified. Heres the question, there is a number of states that dont allow this. A kpixer in indiana, one of 26 states doesnt allow this, suggests that actually one of the big issues is investors arent getting enough information, its not regulated enough in terms of the data that theyre getting on those that theyd be making loans to. What do you say to that . I dont know if i would agree him i think we are actually, extremely transparent. You can get a lot more better from lending club than you would from the bank, for example. From other type of investments. We have a website that makes a lot of information available. We actually have the entire Loan Portfolio available for download on our website. You can see all the leans that have ever been issued by lending club since we started if 2007 and look at the performance of every single loan. There is a lot of data available. We also register, we are a registered securities insurer, these crimes, obviously, securities and includes all the risk factors that you see in a securities firm. We have a little breaking news. We thank you for joining us. Its a fascinating company. I should say mary meerk, the directors of this company, there is a lot of interest in wall street and the investor community. Thank you for joining us. All right. Coming up on squawk book, plus more on the ackman battle with j. C. Pen fis board. In the next hour, microron technologies is in town for an analyst meeting. Guess what, that stock has been soaring. If you havent been paying attention, you missed out. Now the market share is gaining against samsung. We will ask the ceo directly. Ly badge him to give me an answer. Thats coming up. Im beth. And im michelle. And we own the paper cottage. Its a stationery and gifts store. Lets get some help from charles cantor, you talked about your views for the market. Why we cant still have positive room to run. When you look at september, its a frightening month. You think about the fed potentially tapering. Potentially an announcement on who the next fed chairman will be. It could cause some chaos. Theres no question that one should expect some volatility, but volatility can work in both directions. I think one of the surprising things about this year has been how little there has been, the worst month was last month. The market was down just about a percent. I think there were only five federal governmenttive days in july. There is no question as we speak to clients, we try to condition them to understand that the challenge the fed faces is unprecedented. What they inher at the timed was unprecedented money supply. I think the market is going to debate for a very long time, the underlying asset values because of the fed or is it because of better earnings in cash flow . Those two are somewhat interchecked. There will be days the fed steps in, atrocious, there will be days they say the Global Economy is getting better, its the cash flows that are self sustaining. Make me feel better about what mark bothers said yesterday, he said 1987, were ready for a repeat of that. If thats the case, hes talking about a big crash that comes in the second half. That is not in our playbook. I cant speak to whether he will be right or wrong. Global deplanned is picking up. I would remind everyone, corporate Balance Sheets with a trillionandahalf dollars of cash. Itative extended the maturities. I think one of the opportunities as well as the risks as you think about that is to what level does that capital get deployed at attractive levels . If it gets deployed attractively, 110 to 120 s p dollars, all that cash provides you nothing on the earnings line with Interest Rates as low as they are. In 87, i was not in the market, you read history. It was hot money. We had a hot market. So do you worry about the comparison or is this year different because we can perfectly trace the markets rise with outflows from both bonds, well, i should say treasuries and also munibonds and gold, with i is sold off . I wouldnt interpret the mark as being euphoric at all. I think there is a good level of investor skepticism there. When you look at the professional Money Management levels, those cash levels have gone up 4 to 4. 5 . Investors with whom i communicate a lot with are still coming to terms with the actual losses that is seen in their safest asset treasuries, munis, asset bonds are down 1 to 3 yeartoday. I think the challenge is one to protect and grow your capital in real terms. You believe the fed is going to go late, not early. They got to create inflation, i think you got to think very carefully about Current Asset allocation towards fixed income. You got to embrace equities. The challenge, of course, is to embrace equities for the longer term and think about perspective terms that way. Not the monthtomonth gyration, which is as you all know a lot of noise. All right. Let continue the conversation we have been having around the buzz story of the morning. J. C. Penney and bill ackman, joining us on the squawk news line is jeff sonenfield, he joins us from the yale school of management. Jeff, this has been an amazing story to watch the back and forth. What do you think . Well, the other half of this is an angrigy going through his temper tantrums being, of course, bill ackman. We seen how he can inspire the ire of carl icahn and get into a mudthrowing spat, kind of a slapdown, akin to roiscy odonell and the donald, he is capable of the same kind of things on a board of directors. Its a a sort of frat boy antics. Its not the way. Heres the question, if you are on the board now, you are supposed to be responsive to your shareholders, bill ackman the biggest shareholder, you may disagree or the way hes going about it, what do you do . Its not the majority. Hes not the majority. Hes a large share holder. How do you hand him ha . Hes not the majority or legally the controlling interest. But she a large stake. What is a fundamental rule of western governance . We talk about china, it might be a little different. Ault all directors represent the full interests of the owners, the full ownership. You dont represent separate interest blocks. This is not like a Municipal City Council meeting. If he wants to leave the board, im sure thats fine or the entire company, thats fine. Can you kick a board member off for doing something . For example, if a board member were to leak information an it was clear as day they were the leaker, can the board decide to kick you off for some reason or sue you . They absolutely can. Its a violation of several critical duties that a board member has the loyalty and first and fundamentally is you dont all have to have group thinks, but you cant undermine each other publicly. You cant release information which subverts the confidentiality of this process. Its what happened at the old, old hp board when jay keyworth was leak and his friend tom perkins from the board went to cover him. They got in a huge board spat. It was completely dysfunctional. It really did worse damage to hp than any of their competitors could have done at this time. Its their own board battles this way. Billing a man is doing the same thing here. The stock was up 80 . Its down almost 4 now. Yes, of course. Because this is the shertterm blip. People think, maybe, he was speaking on the side, representing the full interest of the board. There is a major move coming hes indicated. People will be excited briefly, until they understand what he is doing is introducing such certainty, mike olman has done, its fantastic. Its not completely out of the woods. However what theyve done for us, reassuring factors, bringing back a middle age Customer Base that knew j. C. Penney was, all that is subverted with the kind of thing you are bringing in here, ackman is suggesting more leadership, you unwind all the progress in the last few months, of course, the confidence, of course the stock is going to take a hit as people digest it an look at it and talking about bringing in Alan Questrom. I like alan a lot. Hes not the right guy for this job. He was consistently, bill ackmans line ising light. Lord knows why. Alan questrom served 3. 5 years, almost four years, what did he do as ceo . He caused the wheel of retailing circles, he toned it up. He was going through almost the same thing as ron johnson, missing the Customer Base of jc penney. Jeff, its brian, hey, listen, everyone is kind of booil pileing on ackman, i guess i will defend the guy. Tell me what you think about this. What ackman did, you know, going around the board, fine, we get that, thats wrong that, will tick them off. Ill go after the board a little bit, too. This was an 80 stock in 2007. Its not like this was a magical company that defined american retail success. That i have nod had a good year in a number of years. Many of the Board Members presided over the slide from 2007. Maybe, what if we turned up a ackman actually is right and things need to change fundamentally . You know, you cant reinvent the history. Its between 87 and now as you are talking about it. We had mike olman lead a very successful turn around in this company. We had, obviously, a bad period in all retail in the late 90s as we had in all of our markets and things werent looking so, but hes done a great turn around as ceo and then, of course, the financial crisis hit. Then he brought it back. However, the board, you know, i think shove encouraged mike to stay on longer. They shoved a much more thoughtful succession here. If you talk to anybody below the surface at apple or frankly you talk to any am board member who is running the apple stores, who created the concept. Who turned the table over . The genius, it was all steve jobs. They wrongly brought in ron johnson and your boy bill ackman is the guy responsible for tanking this process. My boy, i was slamming him off just as much as anybody else. They are taking on his case, brian. Somebody had to take the other side, thats what its all about. Not really, sometimes you have right an wrong, truth is not always the middle course. Sometimes somebody is wrong. Ackman is wrong. We have other breaking news, thanks for coming in. We also have a developing story right now. Sac and prosecutors have reached a deal to keep the firm running. Kate kelly joins us with the details. Kate. Reporter hey, andrew, thanks so much. This much awaited protective order which would allow asc capital to keep on trading despite being under ziemt by the Southern District of manhattan has been apparently been in,ed. Im told it was filed overnight. And this is something that wall street has really been waiting for, for the last few weeks or so since the indictment two thursdays ago. As you guys know, no Financial Firm has survived a corporate die. And in this unusual case, its in everybodys interests for sac to keep going. At least until the case is resolved, obviously, for a thousand employees an for founder steve cohen, they wanted to keep going. Also the government wants to make sure there are assets there at the end of the day to be forfeited if they prevail in this case. So an odd sort of alignment of interest here that should give counterparts some comfort that the government is not going to go sacs 14 billion in assets, at least immediately while things are resolved. Thank you for that, kate, there is a lot more on that story as well. We appreciate you providing those details. We want to thanks, charles caner for spending the hoirts with us. Thank you. Coming up, a Flash Flood Warning is in effect on squawk box. Sea of micron, mike duncan will be talking flash memory and the the success over the years. And bacon the blt, its a story you cant afford, you can sauls u always see it right here on squawk box. [ male announcer ] these days, a Small Business can save by sharing. 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. 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Due to a world wide grain short annual in the next months, we will be experiencing what experts are calling a bacon shortage. Im calling what better way to end the week tan with bacon . Jane wells brings us a special report on the true cost of a blt. This little piggy. That will do it. The third hour of squawk box begins right now. Welcome back to first business. Im Andrew Sorkin along with becky quick. J. P. Morgan reportedly close to reaching a settle him over the trading losses, meantime, bruno iksils is not expected to face charges. Reuters reporting that ceo Thorsten Hines are coming around to the question of making it public will give them breathing room. Sources say blackberry has not launched any kind of sales process. If geopolitical news, the u. S. Ordering all staff to leave its consulate in pakistan due to a specific threat not to travel to pakistan, finally, president obama will be holding a News Conference this afternoon at the white house before leaving for a vacation if marthas vineyard, brian, over to you. Thank you the dow folks on track to turn in its first weekly drop in nearly two months. Thats how strong of a year it has been so far him we are not indicated down much, dow futures off about 30, which is less tan it was two hours ago. We have gained a little more strength. We have assembled a panel of strategists. Joining us, tom atleberry, annual list of First Pacific advisers. He walked here from los angeles. From new york, Senior Adviser and cnbc constrictor and from l. A. Bruce simon chief officer at city rockdale. Thanks to everybody, you are on set. I will go to you first, you are a pretty smart guy. Thank you. You have done very well. Buttering up the guests. Hes a friend of mine. Tom is my boy. He s. You invest all over the place, where are you finding the best opportunities right now . Were specifically in the bond market. We dont fine a lot of opportunities within the bond market, even though you had a significant selloff in the last couple of months. That said, you can find pockets of opportunity, whether you lend with a bond thats backed by shipping containers. What . Shiching containers. You are here on squawk box, the most watched program in the history of the world to recommend shipping bonds . Its a commodity needed by every shipper out there. Whether you put it on a truck, a train, a ship, it has to be the exact same size. How do bond like that match up against buying straight into the shipping companies themselves . One much better. You get a better loan to value, you may get less of a yield, its very easy to value. It costs about 3,000. You can tell them sze at the end of ten years for about 800. There is a whole aversion to bonds at this point, treasuries, because of what the fed is doing. Yes. How is that bleeding over to muns pals or other bond . Really when you look at Investment Grade corporate, it leads over strongly, if you look at triple b Corporate Bonds over the last couple months, they actually performed worse than if you looked at high yield bonds. Really . Yeah. One of the main reasons is the mutual Fund Community owns about 20 of the outstanding triple b thats out there according to the barclays advocate index. So as they had to sell for redemptions, for who are you going to sell to . You sort of owned them, you own the same thing. If you think back over the last several years the trade has been dont own treasuries, own korpts. Theyll be okay. Theyve all gone to the same place. That is interesting. All right. We will talk more about that in just a moment. Bruce, why dont we bring you in, you recently raised your targets i think with the markets. Why is that . Yes, good morning. We have been pretty optimistic about the stockmarket all year, particularly in the u. S. , we think there are really three main pill ars to the story. One is the continued growth in jobs. The second one is the strength in the auto market and the third is the housing industry which continues to look pretty good in our view. So weve raid our target to about 1750 on the s p. From what . From 1,700. Okay. So were only up about another 3 . We have been a little bit surprised that the strength of the markets so far this year. We still think there is more room to run as we move through the end of 2013. Allison, you do admit its a slower pace of growth, overall, do you think markets have tapped out here or is there more room for them as well . I think there is more room as well. People digest regardless of what the signal the fed gives every other month, Interest Rates are going to start trending upward. People are worried because were in a slow growth mode, will that impact the growth mode we are in. My sense is there is enough underlying Global Demand. You will have strong economic growth. I think a lot of that activity will make markets volatile, particularly being so strong earlier in the year. I think equities hold attractive values. We have Global Demand which people translate into continued improve him. With the Housing Market employing trends, that bodes well for the economy and the markets. Lets go around the horn on this am zorn, im start with you, is the fed kind of controlling the entire game for both bond and smashings . I feel as if they are. The fed has been controlling a lot of things since the rest of washington hasnt really been doing anything but sort of pointing fingers at each other. It impacted economic growth. Also the equity markets. I think the fed is the key thing to watch right now. John, would you agree with that . Its tom. The fed has attempted to control everything. Theyve attempted to get you to go do risky things with your money. You know its working . It is not working economically. Its worked for equity investors. Its worked to get the money to drive the access prices up. Whether its a house or a bond. Economically, the gdp rate is shorter than in november, 2010. Eths hard to argue the counterfactual, where we would be without it i guess. It is difficult. You run this grand experiment if fed thinks if i raise asset prices, then people will feel wealthier. They will go spend more money earnings will go up, people will have more wealth. Theyll spend money, well hire people. In that grand experiment to date hasnt worked. In you think further about it. Only about the wealthy top 25 have benefitted. If are you in the middle class, you tend not to own equities. You dont own lots of bond mutual funds, you have a house. Maybe you refinanced your mortgage. Interestingly, though, when you look at refinancing, someone with a 100,000, 200,000 loans, ma have not been able to take advantage of that. Its that top group. It hasnt filtered down to the restch thats where we look at it and go thats why your gdp isnt working. It explains the bifurcation at the top and low end. Its a pop. The policy is actually a benefit to a few, not to a many at this point. Quickly, has anybody else noticed the bond market is completely controlled by the west coast . Seriously . Pimco, trouble the lock, whamco, tcw, los angeles is the bond Market Capital of the world, what is your view as an outsider of the crazy new york sti stuff, no matter how long i will live in this god for sakeen place. Black rock. The whom mafia is running the show here. Pimco, thats orange county. You get up a lot earlier and stay out of trouble at night. Thats what this show is god for, by the way. You dont get a lot of, i dont say this in a negative sense, circular noise because you talk to the same people. Have you dinner with them, you go socially with them. You are sort of removed from that. Self justifying . Yeah. As an example, you know, bill gross is in orange county. Im in west l. A. Thats a twohow far hour drive. The chances of us rung across or six. So there is not as much of that interaction that you might find because black rock is around the corner from j. P. Morgan as an example. I think thats a little of that that you get to stand away from the circular noise that can happen. Bruce, are you out in l. A. , too. Why dont weigh in with your thoughts on the feds . Sure, pimco is obviously the 200 pound gorilla on the fed mark. Our view on the fed is theyve had a significant role in the markets rally so far this year. But you know, when we stand back and look at the economic fundamental also, whether the tapering starts in september or october, the great likelihood is that the fed is going to begin to cut back on bond buying. We dont know exactly when. We know it will happen soon, as a result, you know, Interest Rates are probably going to begin a gradual rides over the course of the next couple of years. Our view is on the economic fundamental also. We think the market is starting to, or the economy can grow in a self sustaining way, so, you know, there will be shortterm vol estimate as we go through this period of transition. We really think long term, the economic fundamental also are improving. Also, we are starting to see better news from europe an china, which could lift exports. We saw a great trade number earlier this week. We are not as concerned of what the fed might do over the next couple of months. Investors will be wary, i think the longer term fundamental also support continued improve him for the stockmarket. So thats the soft landing, you think that can be pulled of off . You look at what the fed is trying to accomplish. You realize thats a possibility. Blue when you look firdz and realize a central bank, whether a Foreign Central Bank or the u. S. Owns about 51 of the publicly traded treasuries that are out there. And we produce more every month because we still run a deficit, although, were producing an extra declining. You lock at that you realize, okay, if you are going to purchase less, somebody else has to purchase more. So that someone else, the other 49 you might call people who own a treshry for profit. Right. Theyre trying to get a return. Well, if the real return on that treasury, which is not very attractive today. Maybe its 1 . Maybe its a half a percent. Maybe its negative, if its a five year. Investor is not going to be very interested. They tend to want a real return over inflation. Sure. So as the fed will have to taper out. They got to figure out, i got to get somebody else to purchase this. Other person will probably want a much higher yield in order to get enticed to do it. We lock at this and go, this is possible, probably not a probable event. You look at this you go, this could be very lumpy like we seen the last couple of months. Sure. That wouldnt surprise us at all as we figure out how to get out of this situation we are in. Thaumpgs thank you for joining us. Making up early on the west coast as well. Anyway, coming up, Micron Technology had a stellar run, that stock up 100 . Ceo mark durkin will be joining us next on the squawk box ceo call. Still ahead, joe would scold me on this, we will talk about executive compensation. Find out what ceos really take home when squawk box returns. Powerful screening tools, and guaranteed 1second trades. 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The stock up 100 last year. Today the ceo will be sitting down with analysts, before he meets with them, he will sit down with us. The ceo joins us, good morning to you. Good morning to you, guys. You dont need to help us. Stock is up 100 . What can you do for an encore at this point . Well, our job is to keep it going, to really execute on the promise of the foundations laid. Were pretty excited about the asset itself put in place, the technology the fantastic work force around the globe and our customer support. Its an execution. Heres the question i have, you have invested a lot. You created a whole Product Offering, who are you worried about right now about nipping at your heels . Well, you know, our strongest competitor for a long time, many decades now has been samsung. So, obviously, theyre also a customer of ours, but our job in the memory business is to deliver more Innovative Solutions that add for value for our customers. To do that on a system level mode of operation Going Forward. Is there other technologies we should know about that are coming . There is a lot of Interesting Technology coming down the pike in memory. Its a very exciting time to be in the business. Micron has nor, ram, we have a lot of new emerging memory in the pipe lean i think that will change the face of system operation Going Forward. Mike. So your market share has gone up, where are you, 25 of the mobile dram market . We are sitting about 25 of the mobile d ram. We seen prices go up as well by how much . Well, it depends what time frame. The the year. It has been flat. D ram pricing in general has been a big uplift going into the computer area, maybe 70, 80 . But the point is you and samsung have huge pricing power, do you not . I this i the thing thats changed in the memory industry is its starting to decommodity advertise as we have less growth and supply from ongoing technology in migration. What were starting to see is an environment where we can deliver more innovative products. Theyre not competing with next years 40 cheaper commodity product. Thats where i want to go with this, hong can you hold on to a margin, in the age when every year everything seems to come down in price. How are you able then hold on for longer . Well, we really like the way this industry is setting up now. We had a lot of growth, a lot driven by moores law and the incredible productivity that comes with shrinking process geometry. We are entering a new phase, we will add value for our customers is with Innovative Memory Solutions but wrap software, firm ware, different types of memory in the system level solution for the customer and add value that way. Thats a different Market Dynamic into a much wider set of applications historically. What do you think about the computer business right about mou . You know the pc business has been soft. Pcs will be around. We really think actually in terms of the whole ecosystem now. There is conventional pcs, laptops, tablets, ultrathins. There is smartphones, which have as much memory content as pcs did a few years ago. So there is this whole trend of things attached to the network that continues to explode. We are just pretty excited about it. The pc business is flat but, you know, were starting to see pretty good enterprise refresh, so the business end of the business so to speak is starting to show some strength and generally speaking, were not overly concerned about whats going on in terms of the way people are using compute power and the way they are dealing with mobility. While we have you here, can you weigh in on the dell situation . Given your involve him . Do you look at a company like that and say to yourself, there is a chance for this to come out on the other side as a private company five years later or do you think its a challenged business . I cant predict how the shareholder vote is going to go. Dell is a great customer. I think they got a bright future. We are very eager to support their business Going Forward as they move beyond pcs into services and a stronger presence in the enterprise and supporting the crowds. I think dell has a very bright future. Sense you just alluded to the cloud, what does that men for you . We understand the storage element of moving this stuff, but thauz that help you ultimately or are there other players you worry will get into that space . I think it absolutely helps us. Every time somebody adds a new device to the network, there is a big infrastructure built up. We play in all those spaces, with eplay in the smartphones, in the personal devices, but we, you know, also have a strong presence in networking and enterprise and compute platforms that support the dloud. We are big in storage. We have a Good Relationship with the storage providers and delivering ssds to the marketplace today and probably more complicated systems in the future. So that whole ecosystem is where memory is pompt and where we play. We hope to talk to you again soon. You bet. We have a quick programming note. In about ten minutes, we will talk to a ceo technology, crossbar is a startup chip maker announced a new capacity of high capacity stores that could extend batteries exponentially. Battery life is the killer app, if you will, for everything. Make some iphones good costers once in a while, when you need a coaster, put it on the iphone, getting five or six hours out of mine. Its a disaster. Maybe i got a bum battery. No, i have an iphone, too. Its the one thing, if they can fix that. You got to walk around with a charger, they said get the external mofi. Its a good product. Its 2 pounds, like i got the original wall street motorolas. Every person that comes into our house, do you have an ipad, on p an icharger . God forbid, somebody has a 4 or 5, rpp, rich person problem, two out of five people live on less than a dollar a day, were moaning on this. We ask the council what is behind the shareholder activity. Still to come. Oh, yeah, thats good news in the morning. Can you almost smell it through the tv. The true cost of blt with the always great jane wells coming up. Lets say you pay your guy around 2 to manage your money. Thats not much, you think. Except its 2 every year. Welcome back to squawk box, new survey data on our cfo council, our keefe group from Financial Officers from private companies, here is the news, there has been a slight dip, ill repeat that, a dip in overall optimism about the economy sense our last survey. Just as everyone else is getting optimism, last month, 4 felt that things were strongly improving. This time, no one sees strong improvement but rather moderate to no change as we finish Second Quarter earnings season 30 of Council Members view earnings per share growth to be stronger than expected over last year, 70 found eps growth to be as expected. Statements earlier this week from fed president s indicate the fed could stale back its Bond Buying Program as early as this fall, could this continue to drive the recent rally . Nearly 40 of the Council Members cited fed action as the impetus for the dows record breaking levels an despite market highs, 66 majority of the group says that we are in a jobless recovery. Now, heres an interesting one in light of the recent shareholder activism, like icahn an ackman, nearly a third of the council feels a top reason for activity is due to softness in hedge fund and private equity performance. Thats interesting, a lot underperform the markets. The markets are up close to 20 . That puts pressure on them. A little desperation. For all the results, you have to check out cfo council doubt cnbc. Com. Its fascinating data. If you pick the wrong apple, shake the tree. If you are the tree, it doesnt go good. Hit them with the apples. When we come back with le check on the markets opening bell. Right now you see the dow futures down 40 points below fair value. We will also have a special report on ceos willie may, mary crunches the numbers. What ends up in a ceos portfolio, well have that story coming up after the break. Welcome back to squawk box, good morning out west. Lets get a check on the market, Rick Santelli joining us for the cme in chicago, another fine Great American city, rick. How are you doing, bud . Yeah, as long as your pension isnt lodged with the government. Good morning to you, sir. The white sox swept the yankees. I thought that would make you smile. Once again i have failed. What is on your mark radar on this friday . Any good news for us, rick . Any bad news . I dont look at good news or bad news, i leave it for the media to spin the news. You know, i see a 259 yield on tens today, i guess what i look at is we have been in a 5 basis point closing range, the entire week. 215 t. Low yield closed 2264. The high yield closed. I think thats pretty interesting to look at on the surface and the dollar index has had a nasty week as well. I was trying to figure out why the dow was unso much pressure. You would think of the Federal Reserve, getting into tapering, that the dollar would have an easier time with it. Down 2 over the yen the last week. I think, you know, that made sense, if we look at how debilitating many factions of qe1, the twist, an item, those were dollar busters. So it seems logical that we should see a dollar increase here. But i think there is a difference. Along the way, weve grabbed a lot more stimulus players like japan, all stimulus is fungible. That takes it back a bit. I think europe on a relative value trade, their shirt might have less of a stench than the other thirts shirts for a while. At least the spin going into the elections. I think it actually made sense. Everything isnt going to line up in a perfect order. These are the markets. Wed all like it to line up that way. I guess my thought for the day is, i had a huge debate on my train coming in this morning. It was unfortunate, it was before i had my co. We were like a ramping train ride, at the end of the day, i think the conclusion was, is that anyone who thinks that Interest Rates moving up isnt going to affect businesses large and small, the simple question is, if that isnt true, then why does the fed spend so much time trying to control them . Why do you think it was such a tight trading range this week for treasury . Thats kind of amazing. I guess there is no news from the fed this week. Its incredible where the tight economic numbers that came out . Yeah, i agree, i do think my feeling is that the mid to long maturities in the treasury market and Interest Rates in general i think are much more independent of maneuverability from the fed or from anybody at this point than i think the people trying to control the short rates would acknowledge. I think this is living proof. I mean, were bake amy 60 basis points higher than the kind of 2 home base that we had for a while. Really, nothing has changed except for i think this tapered debate has opened up other much larger much more important debates that they could only control the markets so long. I think thats daunting on the marketplace. Rick, i thought you were a little feistier than normal. Now i know why, you got screamed at on the train, why cant they leave you alone on the train, kind of nasty . No, im glad they dont. Its the midwest. First of all the only celebrity is somebody in a movie with a lot of explosion. Sylvester stallone gets on my train, hes a celebrity. They look at me like, you dont dig ditches for a living, so you are pretty lucky, thats the way they look at me. Ill buy you a beer. Rick santelli, thank you very much. Have a good weekend, sully. O for 4. The sping swing and a miss and a miss and a miss. When is joe coming back . He had his morning cup of coffee. Hell be back in a week. I love what he says about the midwest, interest. The salt of the earth. We will try to segue from the salt of the either. Because each 84, proxy season brings outrage and amazement over executive pay, a single year doesnt tell the story with incentives and stock gains an losses, ceos stand that make a lot or or less than whats exposed. Mary thompson joins us with new data on what the top ceos were granted and their last three years of pay was actually worth, not what was in the headlines. Interesting stuff, when it comes to executive pay, there can be a big difference between whats in the proxy and portfolio, stock grants worth more than a year or two down the road, in a first on cnbc, a firm reveals the 500 ceos making the most from a lot of money over the last three years, topping the list, ceo trying to bring the company back to the public market. His threeyear target bay pay of 100 million nearly tripleing to 6 million by the end of the firms fiscal year, this reflecting the increases in options and stock grants as well as the stocks performance where it soared since its 2011 ipo. Proxies say hes been paid 193 million. They say thats worth 326 million. Third on the list, david simon, target pay of 155 million now valued at 234 million. Via. Com. Disneys bob eiger coming in at number five with a threeyear sum worth 121 million. Realizable doesnt exceed or hit the target a. Weak stock or missed performance goals, some top ceos dont make as much as they could have. Oracles larry ellerson, a yam, hes number 11 on this one as oracles tepid stock performs means his option is worth a lot less, the realizable of 1 o1 million is 43 69. The shareholder returns means richard adkerrsons pay is 53 less than the target figure of 114 million. Guys, back to you. A couple things here, ridiculous numbers, in the media numbers . Listen, if you start your own company, pay yourself billions of dollars, you create millionaires, middle class families. The view of the world. He built it. It was nothing, it doesnt exist, take the spoils, people coming in, the american public, 150 million bucks for a guy running the company. Id run it for a million an do a close enough job. A little more than a million. If you flip around, larry ellerson, im not saying i feel bad for him at all. I imagine there has to be some sense of disappointment if you get 43 of what you think you are to get. Even though the numbers may seem ridiculous on the face to begin with. Im sure there could be disappointment. If are you a board member, if you see this you might be actually happy about it. Because it shows your pay is linked to performance if the company isnt performing well or if the stock isnt coming, performing well, which, of course, is typically the proxy for a companys performance, so you may be a little disappointed you are only getting 50 of what you were supposed to get. Even if its 100 million opposed to 200 million. It reflects less, that compensation practices are working, still the pay is to the average person, certainly, it could seem excessive. There you go, mary, thank you for this, this is the kind of stuff we should be doing all the time. We get the headlines, nobody goes back to see what they actually made. Thats true. If you look at the numbers prefinancial crisis and saw what happened after, those numbers were talking about 42 , they were off by 90 . I just dont think you need to, you know, make 1,100 times the pay of the average worker, whatever it is. You are talking the larger issue. Not to be whatever, im not some i believe if capitalism. Im just saying, you know. Do you . Of course. A mothers eyes will drop out. My dad was an 80s enlisted man. For me, you look at these numbers, you know why people are ticked offer. You were about to use another word. I have to calm down. Im headed west. There you go. Lovely. When we come back the ceo of crossbar be join us, this Company Announced a new high memory. You could soon be able store a quarter of a million songs on the chip the size of a postage stamp. We will talk more about that in just a minute. Golden opportunit to experience the precision handling of the lexus performance vehicles,. Welcome back to squawk box. Our next guest believes his companys product may one day eat into microns market share him joining us now is george menacian, he is crossbars coy menace menace manassian. You create a new product but take a lot less Battery Power and also create a lot more storage in a lot less space, is that right . Absolutely. Today, we introduce the technology that allows devices to have up to one terra byte capacity in the size of a postage stamp. Thats the equivalent of having 15 or more ipads in one sting single device. Talk about the battery issue. We were talking on the set here about our iphone, as much as i do love my iphone, there is one drawback, its constantly on my mind, i have to think how quickly do i have to plug it in . Will i get to lunch before that happens . What does your memory chip do . My understanding of what is sucking up all my memory wasnt the storage issue, i thought it was both the processor and the high speed lte service that was doing, no . Thats true t. Phone is composed of a lot of components and every component takes some amount of power. If they all take less, then, of course the battery lasts in the component, the whole entire device will go off. There are a lot of consumer applications that battery life is important, wearable computing. In those cases, we have such a large capacity. We dont take away from the battery life. It gives you the information you want in the variable, all your applications, including the phones, it extends the life of the device because of the low battery usage. George, how close is this product to reality in terms of production and distribution . Let me say there are critics out there that say this is too good to be true, crossbar overpromising, they will underdeliver, there are so many empty promises like this one floeth around, its hard not to become a little jaded. Ill believe it when they actually start shipping. I can understand that. We have been studying technologies for a long time. This one is very simple. The structure of technology is simple. The physics of it is simple. In less than three years, we were able bring it to a stage we were able engage with Manufacturing Companies to engage in this technology there, all customers can go there an use the benefits of this, the simplicity of the structure and the physics allows this to deliver on the promise. It was simple structures, High Performance and tease implement, which is why 23 are where we are. Whats going to prevent a micron, a samsung or somebody else from coming in and creating something identical if not similar . Uniqueness is the simplicity patented. Our plan is to license all of this Manufacturing Companies and that enables them to without spending the same amount of energy, enables them to get into mark and use the benefits we are offering and enables manufacturers to produce this. I think their technologies is running to a point that they need something new an everyone talks ab it and is simplicity, from what we have implemented today, can you use that, we are planning to license that to them. Would you be better off selling your company to one of those manufacturers or would you be better off licensing your product to a couple of them . You know, for now, we focused on producing this tech following and making it stable and providing it to a hot industry. What we are focusing on is enabling this manufacturing partners an licensing so they can produce products that have the capacity and this whole new mark technique. We would be licensing that to them. I think thats where we are focusing on. Where are your conversations, thus far . Who is on the list . Who signed up so far . Well, i know its a little premature to talk about the conversation we are having with our customers. They are amazed with the performance we provide and the plan is to give them the architect cure that will revolutionize how we do these products. There is a lot we are having right now. George, thank you, it sounds like a promising and fascinating adventure, we wish you well with it. Thank you for the opportunity. Nice life, thank you. Thank you. All right, when we return, one of the most popular topics on squawk box, bacon. Jane wells gives us the real cost of a blt. Looks phenomenal. Also, friday means the latest edition of the talking squawk blog is live. What makes squawk box tick. Go to squawk. Cnbc. Com. Well be right back. Did you realize the blt is at risk . Jane wells is live in burbank today breaking down ingredient by ingredient what is happening with american icon. Jane, the idea that this fantastic sandwich would be at risk. That enough to scare all of us because one youre showing is delicious. Its a national tragedy. Im at the coral cafe where they make a blt 24 7. Theres really only one ingredient in the blt that matters and thats with the b. This is the risk of costing more bacon. Why . The take. There is a deadly pig virus spreading around the globe. It showed up in the u. S. Last fall. Its now spread to 16 states. It does not affect humans but it has pretty much 100 mortality rate in very young pigs. Often due to the diarrhea it causes. At the same time . Silicon valley of all places, a tech startup started by entrepreneurs, there has released the first commercial treatment gald grazix. It can fix a pigs gut in two hours. It is an antibiotic. It is based on its a plant material based on a plants immune system. The ceo at next started out trying to market this as a water purifier, a natural water purifier. Found it it had much bigger potential when he tested it at chinese pig farms. They called us back, hey, it works. But it did you know that it stops diarrhea really well . How do you know that . Well, it worked so well on our pigs, we gave it to our kids. I said, youre kidding. What did you think of this coming out of Silicon Valley . When youre in indiana and youre thinking what . I know. Thats exactly what i said. All right. They have long been searching for better, healthier solutions for intest ninal tracks of pigs which i guess is a mess. They now look to broaden the market. I would like to see the application of this across the board to different animal species that needs it and that will help with their health. All right. Theres even now a human form that theyre starting to market. Doctors are using this in developing countries to help fight dysentery. Theyre starting to get Distribution Partners and licensing partners. Next on squawk on the street, notice this as were going to talk the l word, this is an iceberg because iceberg is through the roof. Were going to talk about whats happening with lettuce prices, guys. Jane, this product is something that what you just showed for human use. It sounds amazing but what kind of testing has been done on it . Does it have to go through fda approval . Oh, boy. Excuse me. Thats what i get for eating on tv. Spitting out my bacon, its so exciting. You have to fda has a whole series of labeling. What you can call this is a supplement until the testing is done, all the clinical trials. Then you can put fda approved to fight diarrhea wra. They use it all the time. They swear by it. Who is they . I havent tried it. Doctors are using it in the developing world. The people in the company. The veterinarians, the owners. What they use, i said, what plant material do you use because its a plant extract. They use pomegranate and green tea, among other things. Its all natural, Pretty Healthy sounding things. All natural. Nonantibiotic. For hog farmers to be able to have a solution that doesnt have antibiotics in it is important. Huge. Very briefly. They use it to keep the animal alive through this virus so that it can survive the virus and then it will go it may be a little lighter weight when it comes to market but the quality of the meat will not be impact and there were no antibiotics use. Thats the pitch. How has smithfield planned this and the potential for that company being sold . Does anybody think thats going to have a big impact on prices, too . Oh, well, what theyre hoping of course, they would love for smithfield to start using this. Youre going to see we have to see. We dont know yet whats going to happen with pork prices. They came down a little bit. Thats a good thing. We have to see once the chinese actually own smithfield. By the way, in china, they have a whole lot more hogs than we do in the u. S. The u. S. Is the number two market. China is much larger. Thats why they were starting to test this product in china. Now rt staying to get it distributed here. Hubbard is selling grazix to hog farmers in the u. S. As a feed supplement. Thank you. Were all envious of your blt. Eating again. Not fair that we dont have any. Thank you. Well see you coming up soon to talk more about the lettuce, too. Youre welcome. Coming up, the stock of the day. Is it in your portfolio . Will you have any idea what its going to be . No. How would i know . Look ahead in the run down. Oh. Coming up next, we will tell you what that stock is. You got to be are you suffering from market fatigue . Do you feel confused and out of touch with todays markets . You may be suffering from a serious condition known as information deficit disorder. And it may be related to an imbalance of natural chemicals between the nerve cells in the brain. Theres a cure. Tune in to squawk box for instant relief. Squawk boxs premier interviews attack market fatigue at the source. Flooding your knowledge receptors with the information your body needs. Side effects of squawk box include mental clarity, upward career mobility, abnormal portfolio growth, and sud inability to change the channel. Take three hours of squawk box and be ready for your morning. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. 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. Welcome back to squawk. The stock of the day. I thought it was going to be jcp but its not. Its dendreon. Announcing cfos resignation. Cutting price targets this morning. Thanks for being with us. That does it for us today. Have a great weekend. Right now its time for squawk on the street. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with kelly evans at the new york stock exchange. Shes right here. Cramer and faber are off again today. Joining us at post flin, michael, Senior Editor at Yahoo Finance and financial reporter at the washington post. Guys, good morning to both of you. Good morning. Markets leaning red this morning after avoiding the first fourday losing streak of the year. We have a