Transcripts For CNBC Squawk Box 20130816

Both sides in this conflict are criticizing the United States. Yousuf gamal eldin joins us from cairo with the latest. We have been hearing about the escalating numbers of those who have been injured and killed in the situation. It sounds like it is getting much more tense. Absolutely, becky. A lot of tension this morning here in downtown cairo as the Muslim Brotherhood calls for a million man march, basically, for their supporters to take up arms, to step up against Security Forces. Now, we have seen military activity as well in the morning, even though the curfew is over. Tanks have taken up position right below us. Four of them at least. And theyre blocking basically access road to Tahrir Square. The epicenter of the political changes we have seen in egypt over the last two or three years or so. Very symbolic part of the city, which they are now cordoning off, basically in anticipation of these large protests. We are currently hearing the preparations for friday prayers. Theyre about to start. And after that, we expect these gatherings to take place, not just in downtown cairo, but across the country. Overnight, the violence continued. We are getting reports of further skirmishes between supporters of ousted president mohamed morsi, and Security Forces. Now, as the security level is stepped up, the Egyptian Ministry of interior has been authorized to use deadly force to protect state institutions. And on that note, the state newspaper reporting that the ministry of finance was set on fire, that has been extinguished. In the inferno, the office of the minister himself where i was just two weeks ago, speaking to the minister, that has been destroyed. Well keep a close eye on the situation and perhaps next time i can tell you a bit more about the diplomatic activity and the ramifications for the egyptian u. S. Relationship. Yousuf, it sounds incredibly perilous at this point. If you had to look out and see what is happening, what is the thing that concerns you most, just about how the two sides are shaping up. Well, what is distressing are the precautions that the military is taking ahead of the protests, that theyre cordoning off one of the largest squares in egypt in anticipation of the protests. Also disturbing, becky, the fact that you had attacks on churches, on banks, on government buildings that have been torched and it is not again just here in cairo, across the country, alexandria, attacks on checkpoints in the suez that killed several soldiers. There is a deteriorating state of National Security, which is why the government has instigated the state of emergency and the curfew. Theyre hoping to get this back under control, but the concern is that there will be more violence, the Muslim Brotherhood will resort to more desperate methods to get their message across. If you look at the spokesperson for the Muslim Brotherhood, since we will not cower, we will rise again and the fight is just the beginning, really, of what is to come. So there is no talk of any political reconciliation. About a week ago, we were still trying to find the diplomatic way out of this. Now the talk is only of how can we prevent the violence from escalating, which is why we had the statements from u. S. President barack obama, but the response from the Egyptian Government to what the president was saying has been a terse one. Basically saying it is not based on fact, and it is actually encouraging armed groups. You imagine that kind of response from the Egyptian Presidency to what the u. S. Presidency is saying. That shows you as well that there are a lot of tensions internationally as well about what is happening here on the ground. Incredibly concerning situation. Yousuf, please be careful and we will check back in with you later this morning. Yousuf gamal eldin. Oil prices have been moving on the situation over in egypt. Traders fear the unrest could filter over to crude producing nations or affect the suez canal which carries a large portion of the worlds oil. Analysts say worries the fed could soon trim the commodity friendly stimulus are curbing gains. Gold extending gains today hitting twomonth highs. Among the catalysts, strong buy from china and short recovering after the precious metal broke through key technical levels. Meantime, silver trading near a threemonth high, after that metal spiked 5 yesterday. Silver is on its strongest sixday winning streak since april of 1987. China and japan led an exodus from u. S. Treasuries in june, the selling came after the first signals the fed was preparing a wide back on its stimulus. Data released yesterday showed they accounted for almost all of a record 40. 8 billion of net foreign selling of treasuries. As for currencies, this morning, lets look at how were shaping up there across the globe. Dollar yen, 97. 38. Euro has been remarkably resilient, really. 133 versus the u. S. Dollar. Pound dollar as well. As for euro, the market tests, check out the economic calendar. Here is what we got. At 8 30 eastern time, Housing Starts. Then q2 productivity. Then at 9 55, august consumer sentiment. We have a little Corporate News to bring you this morning. Dells quarterly profit plummeted 72 in the last quarter, but earnings still beating the street by a penny. Pc sales extended their downward spiral at the company, embroiled in the takeover battle between founder and investor carl icahn. Your friends, i dont know if theyre your friends, but youve been covering this, Southeastern Asset Management came out with a statement saying that even though these earnings werent so great, they were still better and showed more positive signs, suggesting there should be a higher price for the transaction. At this point, that ship has sailed. It will be spun so many different ways that people look at the earnings and say, see, i told you the earnings, the underlying earnings are bad. Thats why michael dell needs to take the company private. It is going to be spun over the next 24 hours if not longer in any which way as this court ruling looms. Right. We also have a little bit of after the bell movers to talk about. Chip gearmaker Applied Materials expects customers to hold back spending in the Current Quarter as the company switches to making smaller chips. They had weak guidance and that sent shares lower. You can see that down about 2. 5 . In retail news, nordstrom missed estimates as comp sales at its Department Stores slipped. The Luxury Department store chain is lowering its full year sales and profit forecasts as a result. And joseph a. Banks, do you wear joseph a. Banks . No. Josb. Maybe youre the problem. Theyre eawarning their earning will fall. Shares tumbling on that news. It was a volatile session in china overnight. Morning price surge was likely rooted in a fault in a brokerage trading system. Gains were erased in the afternoon. The shanghai composite finished down by. 6 after briefly soa i soaring in late morning trade. As for the other major averages, you can take a look and see where things closed overnight. Youre going to take a look at shanghai, you see there, down by 13 points. And in india, the rupee hit an all time low to the dollar. Thats a story we have been continuing to follow and, again, more news today. Right now, carolin roth is standing by in london. Good morning. Good morning to you, becky. We saw positive start to the trading day, but then things turned a little choppy and now were down just marginally off by around. 1 . Yes, we are seeing some stabilization in the markets after yesterdays big selloff that we saw here in europe as well. And many are wondering what the reason for that selloff was. Really a plethora of reasons in the market. Could have been egypt, could have been profit taking. But many also point to the fact that the rising bond yields are choking off those rallies in the equity markets. I want to show you where yields for the main bonds are standing right now. The tenyear gilt yield at 2. 67 , off the highs we saw earlier on. The yields off the 2. 81 levels that we saw in yesterdays trading session after the initially positive data. So still, though, at a twoyear high. And bund yields have been quite elevated. We did get some positive earnings reports this morning from Moeller Maersk, a danish shipping company. One of the biggest in the world. And numbers really surprised the markets better than expected. The company also lifting its guidance for the full year and you can see shares are rallying up by 6. 25 . Now, guys, lets be cautious about the set of numbers. It was mainly down to cost cutting. And keep in mind that the Company Still is not seeing any major stabilization in the world shipping markets. So this is not necessarily a read across for rest of the industry. But Moeller Maersk doing a good job at cost cutting. Back over to you. Thank you, carolin, for that. Bankruptcy judge decided to hold off approval of a Restructuring Plan for american airlines. The judge is citing the doj challenge this week to the airlines proposed merger with us airways. Amr worked out the 11 billion merger with us airways as part of the plan to exit bankruptcy and now all of that, of course, is in turmoil. What happens next . Ill tell you what happens next, when we come back, well have more information leaked from Edward Snowden. And the epa considering new gas mileage rules. But first, as we head to break, a check on the National Forecast with the weather channels reynolds wolf. It felt like fall around here. Is that going to continue . It should. Through a good part of the weekend, we could see a warmup by next week. Enjoy it while you possibly can. High pressure is the reason why, dominating feature over the atmosphere in the northeast. Opposite in the southeast. Scattered showers, possible storms there. More rainfall through the weekend in the southeast. Exactly where we dont need t very warm for you in the Desert Southwest and texas. Warm as can be. Delays, probably a few of those today, namely orlando and atlanta due to some chance of thunderstorms and maybe some showers. Chicago, though, your major airports, no issues whatsoever. Got more coming up right around the corner right here on squawk box. [ male announcer ] at optionsxpress, our clients really appreciate our powerful, easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18882800149 now. Optionsxpress by charles schwab. Time now for the executive enl, this is a daily segment focused on giving Business Leaders a leg up. The Washington Post reports an audit found the National Security agency has broken privacy rules thousands of times each year since Congress Granted the agency broad new news for 2008. Most of the incidents involve unauthorized surveillance of americans or foreign intelligence targets in the United States. Both are restricted by law and executive order. The post received the documents from former nsa contractor Edward Snowden earlier this summer. This is the i have to say, this is one of the first articles i read which has changed my view again on this whole thing. I dont know if you remember, i went from thinking hero with snowden originally. And then when i thought the preside p. R. I. S. M. Program was overstated, i was less enamored with what we were hearing, because i thought it had become overstated. And now im anxious all over again. If this is all really true, i say hero again. I dont know i go to hero on that position with this. I still think this is a position where in this case he is putting americans at risk. But if you look at some of the issues that are behind this, in one case they confused the 202 area code in washington, the 20 that is the country calling code for egypt. So they ended up picking accidentally a lot of things. The point is it is a human agency and there will be mistakes from time to time. I would be interested to hear if some of these were more than just a typo or someone accidentally typing in the wrong information. And the other thing that one important piece, it is on a percentage basis, a relative basis, this is quite small. Absolute were listening millions of times a year and only thousands of those mistakes. Thats what they say. Look at the number in absolute terms, it looks big. In relative terms, it looks different. Youre going the patriot route. A thousand times a year there is an accident and relatively speaking thats really small. Thats more than i realized they were picking up some of the programs. Patriot hero may be going too far. He raised an important issue. If this is true and there is lots of things going on behind the scenes that we dont know and it is not being overstated, i think it is important that we have the conversation. Raises all kinds of issues, but we dont know everything and thats why it is hard to judge where to come down on this. To our next story, the epa is looking to revise gas mileage rules. The agency wants to change the way that it allows automakers to Group Similar vehicles into families for gas mileage ratings. And they plan to increase vehicle testing. The goal of the changes is to make ratings more accurate. This is potentially playing off what we heard yesterday from ford where they were changing the mileage on one of their vehicles. You cant claim it is 47 miles to the gallon and it is only 43. Thats what is going on. Because they were grouped into a different type of vehicle. I think Consumer Reports found the problem. When they tested fords claims on one of its vehicles, they found there was a big differentiation between what was advertised and what they were coming up with. Ford didnt do anything wrong. It was following governments guidelines but it put consumers in a precarious position when you think youre buying something and you think hell get it back in gas mileage. What is cost for the government for us as taxpayers to have to measure every were going to be measuring 40 extra employees. 40. Thats an increase of, i dont know, 30 or 40 big increase in the number of people they had there before. Are you okay with that . I dont know. Hadnt thought that much about it. 40 extra Government Employees isnt something im going to lose a whole lot of sleep over. I think there is an issue in terms of regulation and cracking down a little bit too hard on things. I might look at dodd frank or other areas before i get too worried about this. I dont know. I feel like half the time my food is labeled with a certain number of calories and fat and protein and im sure it is off a little bit here and there. Yeah, probably right. They put it into a blender, and send it off to the lab. Find out what it really is. And your vitamix. And my vitamix, yes. The bentley of it is the bentley of blenders. Speaking of food, this isnt exactly breakfast food, but pepsi flavored cheetos . Thats how they sound, nasty. The snack is being sold in japan for a limited time. One review says the cheetos actually fizz in your mouth. There are no plans to bring the chips to the United States now, but Industry Analysts say this is an example of Food Companies recognizing an important trend. Consumers enjoy flavor mashing and if you like eating cheetos with your pepsi, maybe it makes perfect sense. Like pop rocks meets cheetos. Remember they made chips. I think we did this story a couple of years back, becky, there were i remember the story like ten years back. Caffeinated chips. You could get caffeinated potato chips. You were talking about different markets, i think in south korea, seafood flavored ones, but i still dont know if thats an urban legend or if that is out there. Ive actually had some seafood flavored chips. Wow. Theyre good. Like shrimp. Shrimp flavored chips. I think the pepsi cheetos shrimp chips are killer. Are you kidding me . Were together on this one. Ill take the cheetos and pepsi. Ill bring in shrimp chips sometime. Yummy. First thing i want to eat in the morning. Were following the futures this morning after yesterdays big selloff on wall street. At this point, it doesnt look like things are budging much at all. If youre hoping for a big bounceback after the dow fell by more than 200 points, youre not going to get it, at least not yet. The dow futures up by less than five points above fair value. When we come back, well preview the trading day ahead. But, first, as we head to break, look at yesterdays winners and losers. Right now, 7 years of music is being streamed. A quarter million tweeters are 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. 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Com comingtogether we were trying Different Things we were smoking funny things making love out by the lake it our Favorite Song good morning, welcome back to squawk box here on cnbc on a friday morning, coming up on 6 23 eastern time. Im Andrew Ross Sorkin with becky quick. Scott wapner in for joe kernen. Joe back on monday after a nice little vacation. Was there any more tweeting yesterday going on . I didnt see any pictures. He was tweeting . He was tweeting from his the hair was sweeting. Okay, i got you. The hair was tweeting and he responded with a picture of the hair on the beach. With a little pick. Take a look at the futures this morning. See how things are the hair looking big . No haircut in a couple of weeks. I did notice it looked a little fuller. It may be the humidity too. Might be a little humidity. Deadly combination, right . But, anyway, dow looks like it would open up about 4 points higher. S p 500 and nasdaq looking up as well. Were go to be talking to a strategist and economyist in a few minutes and talk about that. First, to some of the morning headlines. One of the big ones is this. A federal bankruptcy judge rejecting a bid by Eastman Kodak shareholders to set up a committee to represent their interests. Now, the judge fears that the loss of financing of shareholders get their say. Thats the big issue. The company won the backing of creditors for its reorganization plan. It is preparing to seek Court Approval next tuesday to emerge from chapter 11. One of the companies you saw the death spiral for so long, see if they can come back. Loreal offering to buy chinese facial mask maker magic holdings. I dont i havent used this. Havent used the magic mask. I might need to. It would put the Worlds Largest Cosmetics Group in the lead of chinas 15 billion skin care market. And china, skin care say big thing. Nobody goes out in the sun. Umbrellas sometimes too. Have you seen what people do at beach in china . No. Sometimes even wear masks over their face, these things you can wear, just how people now wear shirts at the beach, you know, these you wear a sun shirt. Sometimes i do. Avoiding the spf shirts. And can wear a spf mask at the beach. It is very that seems a little extreme. Ive seen pictures. I wish i could say ive been at the beach in china. Where would the beach be . By the ocean. Dalian. Should we move on now . Save me from myself, thank you. Appreciate it. Bhp billiton says u. S. Authorities are laid out grounds for possible enforcement action against the global miner for corrupt practices. This is part of a fouryear probe linked partly to bhps 2008 olympic sponsorship. The company has been under investigation by the s. E. C. And doj since 2009. At issue, exploration activities that have been terminated and bhps hospitality at the beijing olympic games. The s. E. C. Has banned former press baron conrad black as director of the company. The regulator says black must pay 4. 1 million in restitution, settlement ends a longstanding lawsuit over blacks dealings as the head of hollinger media empire. I should say we have an important start. Joe did tweet a new picture. He apparently caught a fish that looks look a shark or Something Like that. Anyway, in egypt, the Muslim Brotherhood called for millions to take to the streets. Both sides in the conflict are criticizing the United States. General motors has closed its operation in egypt indefinitely because of violence in the country. Gm has around 1400 workers in egypt. In 1983, it became the first private automakers to establish operations in the country. Lets look at the markets this morning. As we mentioned yesterday was a big down day. The dow was down by over 200 points. You can take a look and see that at this point the market hasnt decided which direction it wants to go. Basically flat lining for the futures across the board. Yesterday, the dow and s p closed at the lowest levels in a month. Nasdaq at a twoweek low. And this was the worst day the biggest oneday and twoday drops for the major indices in two months. Look at whats been happening in europe. You can see at this hour, things are a little bit mixed. We wanted to talk to carolin earlier and she said things were looking higher in the morning. At this point, looks like things are flat lining there as well. And if you look at what happened in asia overnight, youll see the nikkei was down by. 75. Shanghai closed down by. 6 . Oil prices this morning are indicated just slightly higher, up by three cents to 107. 32. The tenyear note is the big story. This was dominating yesterday. As we got jobless claims that were a little better than had been expected, you saw the yields start to pick up on the tenyear. The yield is at 2. 774 . But yesterday the tenyear treasury actually topped 2. 82 for the first time in two years. Youre looking at yields starting to climb back higher again. If it is a gradual situation, they say thats not a problem. But you see some concerns in the stock market. Thats how things played out in yesterdays trading. Look now at the dollar, youll see that at least at this point the dollar is indicated higher against both the yen and the euro. Euro at 133. 43. Gold prices, they broke above 13. 50 yesterday. Rallied 2 to a twomonth high. You can see now that theyre up another 1. 20 to 1,362. 10 an ounce. The dow and s p 500 closing at their lowest level in a month as Interest Rates rattled stocks. Question is, should we expect more of this in the coming weeks . David bursen, Senior Vice President for nationwide and their chief economist. And kevin geddes, head of fixed income at raymond james. Hell join us in a moment. Lets start things off with david. David, we saw the jobless claims number yesterday. Did that was that the signal to you that the fed is certainly going to begin tapering in september . Well, becky there is no certainty about it. The fed isnt sure at this point, i dont think. Theyre going to wait and see the employment numbers that we get early in september. Theyre going to look at the other data before the fomc meeting. But the evidence is that the economy is picking up at least a little bit of steam and that suggests whether it is in september or october, the fed is going to announce it is going to start to taper. Why do you think we saw the market reacting in such a way yesterday, it sounded like there was some concern. We know that tapering is on the horizon, probably this year. But the markets still reacted with a little bit of surprise. I was surprised by how rapidly rates went up yesterday. On the other hand, rates went up rapidly in june as well and calmed down in july and early part of august. If we get even a couple of weaker numbers in the next few weeks, then i wouldnt be surprised to see rates come down a little bit again. David, what are the biggest numbers youll be watching. What are the ones that matter the most to the fed . The big one is employment. So well get the jobs numbers early in september, and most people are looking, given the declines in unemployment claims, most people are looking for increases of around 200,000 when we get the numbers. That would be a pretty good gain. I think one of the real key things is going to be what happens with the revisions to previous months. They have been revised up except for last month. I expect them to be revised up again. If we do get strong numbers, it certainly increases the chances that the fed is going to announce a taper in september. Some Inflation Numbers have been the things that bullard and others pointed to to say wait a second, if we still see inflation well below our target levels, that might push us or keep us from doing tapering earlier. Doing tapering in september, maybe make it wait a little bit longer. Do you think that is the view of the overall fed or just one or two people there . Inflation is one of their targets, but if you just look at inflation, inflation is a backward looking indicator. What is happening with inflation now is being determined by what happened with the economy and money growth months ago. So the fed just looks at current inflation, it is doing Monetary Policy by looking in the rear view mirror. It certainly is something they look at. I think theyll look more at what is happening with growth today, and what they think will happen with growth over the next six months in determining what theyll do with Monetary Policy. Why does the market keep having a fit . Over this . Is it simply a fact that everybody says, well, maybe it is priced in, it is only going to be a change of perhaps 20 billion, from 85 to 65 a month. Is it the fact that a start means that there is going to be an end . And we cant yet accept the fact that the fed is going to eventually get out of the way . You know, i think thats right, scott. I think the market is looking much further ahead, that, you know, the fed may start to announce tapering in the next month or two and maybe just 10 billion a month, maybe 20 billion a month and wont even start to raise the federal funds rate probably until 2015. It is the beginning of an inexorable upward movement in Interest Rates. Rates are well below where they need to be for a healthy economy over the long run, where we probably see the tenyear at somewhere between 4 and 5 , not between 2. 75 or 3 where we see the federal funds rate at 3 or 4 and not zero. This has the same feeling almost as what we went through the last time, right . We had the five to six percent pullba pullback, ever got overly concerned this was the start of some bigger correction. The markets reset for a moment and went they went back up. Here we find ourselves again, is this different this time or is this going to be, you know, a buy opportunity again . Im not sure it is different at all this time. The economy is, we think, will continue to grow. That will give good profit signals to the buyers in the market and even if the fed does start to announce tapering, theyre only buying 80 or 75 billion a month, thats still pretty expansionary Monetary Policy. So theyre still going to be plenty of liquidity in the market. If the economy is growing, profitability will be reasonably good. And those sound, you know, maybe not day to day basis, but over a longer term, like pretty good market opportunity. I guess the question becomes, david, are is the economy growing at that clip . We have been hearing from companies this week and it has been a little concerning. Walmart was out with some concerning news about the consumer. Macys piled on with some of that too. And there are some questions out there about whether the overall economy is really as strong as we thought. Youre right. I dont think there are many economists that are looking for very strong economic growth. The question is whether growth is Strong Enough to get the fed to start to taper. We dont know what that growth rate is. 2 , 2. 5 , 3 . Were probably not going to see 3 . So 3 is really what the fed is looking for before they start to taper Monetary Policy. Well, we may not see tapering in the near term. If it is 2 to 2. 5 , we might. Where is the growth going to come from . Thats a legitimate concern now in the market, as an economist, where is it going to come from . If were starting to worry about the consumer and the health of the consumer based on some retail numbers that have come out, corporate Earnings Growth is slowing, and slowing somewhat dramatically, where will it come from . I would point to several things. Number one, we have seen up employment claims come down dramatically. You cant just say it is the closing of auto plants and the timing of that. It is something more fundamental. So were certainly seeing strengthening of the job market, at least with the unemployment claims. Second, we have seen with the ism numbers and orders for core durable goods some pretty good increases in that part of the economy. That led the economy in first three years of the expansion. If it is picking up again, thats a pretty good signal for growth. Third, we have seen a pause in the Housing Market, but, again, as long as the job numbers are picking up and we know that household formations are strong, the Housing Market is going to continue to move upward as well. Those three things together will at least give us the basis for modest economic growth. Lets bring in kevin geddes, sorry for the technical problems we had trying to get the shot up and running. About what happened yesterday, a violent reaction if youre looking at it on a oneterm base nice the tenyear after we got better than expected jobless claims. What was the market thinking . It has been almost a twoday setup because we saw on tuesday was a little bit of an uptrade and then wednesday a little bit more. And, of course, thursdays jobless claims is the one indicator that drove everybody over the wall. So a lot of selling in the tenyear area, and i expect that to continue as long as the numbers are good. Well get Housing Starts today. If that continues, thats one of the key indicators for the fed. I expect rates to continue to move higher. You expect rates to move higher, is it going to, you think, surprise the stock market in the way it did yesterday . For a while we have been able to have higher rates without the stock market being much concerned. Moving higher in the face of it. Almost validates the september taper. So if you look at where the equity market is and what has been gauging itself on, it has been all the money from the fed. So as it starts to taper down or stop, it is going to affect the same way it affects bonds. So higher rates are going to be negative forward borrowing and negative for mortgages and negative for the equity market as well. Kind of going in tandem now. Can it be a smooth transition as the fed tries to get through the tapering process . I think it can. I think were in a bit of a shock factor. Were getting used to what may happen. Once this happens in september, or later in the year here, the fed decides not to do it now, but i think the markets will adjust. It is only i said yesterday, 20 billion doesnt necessarily mean 20 basis points in the tenyear or, you know, 200 points in the equity market. I think if it does happen in september, markets will settle down, theyll understand there still is stimulus coming in from the fed. And the markets have a chance to actually trade higher. All right. Kevin, david, gentlemen, thank you both and have a great weekend. Thank you. You too. Coming up, were following the situation in egypt closely today. The Muslim Brotherhood has called for millions to take to streets and now analysis from former u. S. Ambassador to egypt is next. My mantra . Always go the extra mile. To treat my low testosterone, i did my research. My doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. 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This is the pursuit of perfection. Welcome back. U. S. Equity futures at this hour, lets look at how were shaping up after a couple of down days, especially yesterdays nasty day. Open slightly higher, but yesterday was that 200 point down day, pretty nasty on the street. Well see what this friday holds for us in the markets. Making headlines this morning, facebook plans to test a mobile Payment Service that will let users make purchases using Payment Information they added to their account on the social network. They said there is no set schedule for making the Service Available to users. The company says it has a great relationship with pay pal. Yeah right. And the service wont involve moving Payment Processing away from an apps current payments provider. Like carl icahn had a nice conversation with tim cook. Lets try to make it was fun. Looking forward to the next one. Were going to try to make sense of the situation in egypt this morning. More than 600 people have died and thousands have been injured in violent clashes in egypt. Joining us now former u. S. Ambassador to egypt, frank wasner, the Foreign Affairs adviser. Thank you for joining us this morning. Good morning. Pleased to be with you. What i always ask this question and maybe it sounds wrong, but what should the role of the u. S. Be in all of this as we watch what is happening . Well, the United States has an extraordinary relationship egypt that is lasted nearly three decades. And thats a strategic relationship. And one we have got to be very careful with. And remember that while we have great equities at stake in the peace and quiet of egypt, we also have Strategic Interests in egypt in the region. What the United States needs to do now is make it clear that we are on the side of a rapid transition to the installation of democracy, the completion of a constitution, the writing of proper electoral rules and getting on with an election that restores legitimate government. Thats where our political message should be, and we need to be able to communicate with all aspects of egyptian society. And emphasize the importance of egyptians resuming dialogue among themselves, overcoming the present bitterness and violence. It is one thing, and tell me how you fix this, it is one thing to push for a democracy. Another to actually install an infrastructure that works. Thats absolutely right. And, of course, we are we as the United States can only be bit players in such a process. But we can encourage, our word does count. Were much criticized in egypt by both sides, but people listen to the United States. Our word matters. Ambassador this seems like humpty dumpty, though. We were in favor of democracy, morsi came in. We were in favor of morsi being taken out after his regime did some things that moved against democracy. What do we do at this point . Whose side are we on . I dont think the United States needs to be on a side politically. We need to be on egypts side. It is with egypt that we have Strategic Interests, the Biggest Country in the region, a country with which we have moved strategically to maintain peace with israel, to keep supply lines open to our forces in the persian gulf and afghanistan. The ally of ours during the iraq war, split with the soviet union, all of these are hugely important equities the United States has got to protect. I understand all of that, when it comes to reality, what do we do in the situation . Are we on the side of the Muslim Brotherhood or are we on the side of the military and the president currently in place . We are on the side of seeing egypt find stability, politically, move back to a democratic path, and then begin to address the huge problems of the egyptian economy. Can we do it with parties in place now . We can do it with the parties in place. We have to. Thats reality. If youre the president of the United States right now what are you supposed to do, exactly in on a practical sort of day it day basis . I think the president spoke yesterday, he made it clear this countrys disapproval of the recent violence, but he left open the door to cooperation. And that means rebuilding our political ties and getting on with addressing the core issues of the egyptian economy. If you could go back in history over the last, say, two or three years, and change the way we approached this whole situation, what would have you done . I think first i want to start out and remember that we are a friend of egypt, but were not egypt. The president made a very good point a couple of weeks ago when he said, we dont pick Egyptian Governments. As long as we remember that, we can only be a friend of change in egypt. And remembering that and being very careful and husbanding our influence, keeping our eye on the central ball, the transition to democracy, thats the right way to play our cards. Okay. Were going to leave it there, ambassador. Thank you for joining us. When we come back, another vacation post card from joe ahead of his monday return. And coming up at the top of the hour, will the summer selloff continue this morning . We have assembled an allstar panel of market watchers to talk about this. Again, not seeing much activity in the futures right now. Relatively flat lining. Dow futures up by less than ten points above fair value. S p futures up by about 2. Squawk box will be right back. help the gulf recover and learn from what happened so we could be a better, safer energy company. 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I think we have that music playing in the back because we have a photo to show you. This is a photo of joe on vacation. Check this out. He caught a shark. You will need a bigger boat. Is it late on shark week, though . Every week is discovery week when you are down at the beach. Looking good. Its nice he caught that thing. Now the question is, did he throw it back you think . Yeah, definitely. Definitely . Not eating. No. We got a couple different stories here. In usa today. A story i have been paying attention to this morning, though. Its a tv story. Sony and viacom reached tentative deals. A deal with sony and their play station so you will actually be able stream live, they will start streaming live programing, nickelodeon, mtv, straight to your play station. Straight to your play station. Over broadband. This is the beginning, maybe the beginning of the end, ala carte pricing. The beginning of the cable box. How do you get it . I dont understand. Its exactly like netflix. You have the channels streamed through the box. I mean, you are effectively, a lot of these game consoles have become the equivalent of an apple tv or the box. You have to pay the Cable Company . You have to pay the Cable Company, only for broadband. If you take it over the internet. If you have netflix, you could have, you could get still mtv and nickelodeon, the question is other companies, viocom will start to do this. Will is a number of you can only get viacom. And only play station, nickelodeon, mtv. Those are the channels that people that have a play station will want. And cnbc for gamers. We havent done this yet. The big issue is number of people have contracts, the content providers have contracts that discourage this type of thing because, of course the cable guys dont you off, viacom has had such different problems, you see whats happening with cbs with the cable providers, theyre basically saying, screw you, were going to try this on our own. Wait a second, who is paying the fee to viocom . The Cable Company. Sony. So sony is paying a similar fee . You may ultimately be paying a fee to sony through some kind of you probably would be. You are switching out who i pay my check to, now you make me pay a check of 1. 50 to these guys a and the cable guys for the rest of the channel . Thats stupid. Yes and no, ultimately you may decide, this is the whole cord cutting situation. You need the cord into the house t. Question is whether you need the bundle. I dont just want viacom. Right. But whats happening over time, you havetime people. You have a lot of young people who are taking netflix right now or other services locate that, they have the internet. They have itunes. Theyre watching tv over itunes. And then theyre saying, you know, i want some Live Programming him im going to take this. You happen to consolidate all this stuff myself ap pay a check of 1 point 50 to them. 4 to them. Just let me have it all in one place, one check. Thats the argument for comcast. Right. Honestly, i cant imagine having to write a couple stupid. I think you are ultimately writing one check through a sony, its all through your credit card or vis sars, its not going to be that hard. Keeping track of automatic accounts, i do Online Banking and stuff. Do you have a fet flicks account now . I did. Do you have a cable account . A check . How many wek websites have your credit card . Too many. A lot. Amazon prime, i wanted to watch movies through. That itunes probably has your credit card. There is a lot of bills coming in already. This is, but in tv land, a big move. I know tv is changing and a big evolution is coming. I dont know this is the solution yet. It may be a precurse roar of things to come. Viacoms may be introduced to am. Then do other Contact Companies come on board. Another 20 content places come on board, if i am ever going to consider it. Understood. Another interesting story, with the star of duck dynasty, Jace Robertson apparently was kicked out of a new York City Hotel yesterday because he says he was mistaken for a homeless person. He calls this i started watching duck dynasty. I get it. He calls this facial profileing. I have only seen duck dynasty a couple times recently. I understand. He was asking for the bathroom and then maybe shown the door. Well, we can get to your story, coming up, the mornings top stories, including the Global Markets following yesterdays selloff on wall street. We will talk to a couple of our favorite people when we return. Right now, 7 years of music is being streamed. Hp moonshot. Its time ild a better enterprise. Together. Ive been doing a few things for a while that i really love tdd 18003452550 playing this and trading. Tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. 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Tdd 18003452550 open a schwab account and learn how you can earn up to 300 tdd 18003452550 commissionfree online trades for 6 months tdd 18003452550 with qualifying net deposits. Tdd 18003452550 call 18882542600 today. Tdd 18003452550 good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick. The futures this morning are barely budging after a big decline yesterday. The dow was down by over 200 points yesterday, this morning it is rebounding by less than 4 points. S p futures are also slightly higher. Theyre up by one and a quarter point. In our morning headline, ford will be paying buyers 550 a piece. Follows complaints that the vehicles didnt get the advertised mileage. Ford has now lowered the mileage estimate on the cars sticker and blames it on testing afamilies. Industry sales fell by phone in july. They report customers continue to hold back on spending in anticipation of new game consols that wont be released until later this 84. Eastman kodak shareholders wont have a vote in determining whether a bankruptcy exit plan should by a proved. The judge has turned back a bid to set up a Shareholder Committee to present their interests. Predators are already backing the exit plan and kodak hopes to leave bankruptcy by the end of next month. We did have a summer selloff for the market t. Dow was down 225 points and is now down 3. 5 from its all time high. The number it hit back on august 2nd. Joining us to talk markets is jason trenner and mark okata, chief Investment Officer at highland capital. Gentleman, well to him to both of you. Good morning. What we saw yesterday, is this a precursor of things to come or jitters as we get through the summer . What do you think, mark . August and september are tough months. For the last 20 years, you have been down on them, some a little worse tan august. When you dont have a lot of participant, you will see vol, maybe the next couple months or quarter. We are kind of in this inflexion point. I know jason is a little bullish on this situation. We are a little more cautious as we see things evolving. There is a lot of money that needs to get repriced, move into different places. And scary things coming up. Potentially, yeah. The next meeting in september. You got potentially the head of the fed who will be announced. Long term, i think i would agree, we like what we are seeing in the economy. There is recovery happening. However, how you practice is that recovery, how Interest Rates move through this whole system is going to be a differently thing to do smoothly. But this whole fairy tale about exiting quietly as the markets go off into this grand reflation is a fairy tale. We dont see that. I think sticking the landing on this process is going to be pretty tough. The fed has quadrupled the size of the blown sheets since bear sterns famed. But by the same token, i would say some focus on to the backup on Interest Rates thus far id say doesnt concern us as much mainly because its a backup on real Interest Rates, which is to say inflationary expectations remain anchored. It will be efemural, Interest Rates come back down or its telling you about something about real growth in the future. My best guess is telling you, you have best growth in the future, which means as an Equity Investor you will get some back. If you are an Equity Investor right now and you either have cash on the sideline, you are thinking, should i put it in, take my money out, watch this thing, whatever this thing is, with a plan to get back no the market. Nobody wants to be a market timer, but at some point, you know. I would be seeing this as opportunity to put more money to work. I still think the other alternatives arent particularly attractive, if, especially, if i have, you know, somewhat longer term time rising. Are people keeping money in cash . Listen, there has been a lot of talk of the great rotation the whole year. The odd thing about it is that there has been no evidence that its happened until the last month or two. You know, mike tyson, one of his favorite quotes is everyone has a plan until they get hit in the face. Right. This is one of those things, a lot of people just got hit in the face, theyre saying, gee, water my plan now . Do you think the great rotation begins with it . I think it just started. You are in the early innings, the umpire called playball. I think as mark is pointing out, will is going to be some volatility surrounding this rotation. You think people are worried about the fed making a policy mistake . This isnt so much, im not sure about sticking the landing as a full fledged policy mistake is the economy ready for the fed to pull away even a little bit . I mean, if you look at walmarts earnings, ciscos concerning, retail looks ugly. I agree with you. I think there is a lot of uncertainty around what they are doing, why do it now . Are we going to see something thats much less aggressive in september or nothing in september . So, let me flip it around. If you see nothing in september, how does the market take that . Does the market say, then were really in pad shape . Exactly. So thats going to be a very volatile situation. Thats what i think we will see. You say there is no alternatives per se. I think within we think about alternatives, longterm equity is working great. If you think about what has been the problem with longterm equity, the correlation has been high, risk on, rick off, single comes down. You have been able to, involved in correlations are down. You have been making good money on bets. You look at this earnings season in Second Quarter. They punish losers, theyre down 3. 9 versus a 2. 5 average. You can make money on the short book now which is hard. March is modest here. It, long short it hasnt been great for everyone. You got to be good. If you are good, its worked out. A lot of hedge funds. A lot of alternative investments are lagging the broader indices by a wide margin. So again, if are you good at it, its a good environment. Its not so easy. On the policy, if i can harp on that a second, as becky alluded to before, i think one of the things thats making this more difficult is the cloud over the successor to bernanke. I think if people knew bernanke was going to be there i think the discounting or the chance of having a policy the perception among the market would be much less. Now you are saying, theres a lot of other things going on here. I do think part of what chairman bernanke is doing candidly is trying to signal for his successor who is going to have an extremely important part of his legacy, i think he knows that, right. His legacy is tied to whoever his successor is. I think some of the comments have been designed to signal to the successor what he wants to happen. So, its a very flutd situation. I think to andrews question that if the fed came out today and said, september is off the table, right. December at the earliest. Yes, things are getting betterment we still have concerns about housing, rates, the velocity of this move is a little bit alarming. We dont want to mess this up while were just getting it going. The market would be up 200 points instead of down 200 points. Im not sure. It would. It would. Its the same thing. The fed has been in the game the whole time. Were not fixated on the fact we did a lousy print on gdp. Last money has been easy to make in the market, knowing the feds have the backstop. Is that the entire reason . We have guests that come on and argue its all about because the feds, other guests come on and say it doesnt matter the economy is turning. Things are looking better, what do you think the. You look at the unemployment physicals we have in jobs data, the thing we were looking at, were showing up in the walmart numbers is the number got better because its temporary jobs, part time jobs. And actually, full time jobs went down. So were not adding the type of strength to the economy that i think people are seeing in pricing in the stockmarket. But like said, this is a difficult situation to call. Im not going to come on the show and say, hey, were going to go straight up from here, but we could see a situation just like yesterday where we were up 200 points. Thats certainly the case. Volatility, let me ask you, if were looking six months from now, even the end of this year, are we closing at a higher level than this . Is that anybodys guess at this point too . Im not touching that one. Id say the entire and i do, again, i think first of all, were forecasting higher earnings for next year. I think its all been about multiple expansion. You will get multiple expansion and Earnings Growth. Even though Earnings Growth is slowing. Quarter by quarter. Its coming down. The bottom line is people are looking at what the other rick adjusted alternatives are and theyre saying, gee, im taking an awful lot of risk to lend the government money to even at 280 for ten years. You know, lets be careful here. Okay. Gentleman, we will have more with this conversation. We will have more with both mark and jason when we come back. All right, comments, questions about anything you see here on squawk. Send us an email. You can, of course, follow us on 26th. Up next, the future of dell. A shareholder vote on michael dems plan to take it private looms and the companys latest results underscore ongoing problems in the pc business. More on the future of dell is next. Lets take a look at the futures after yesterdays triple digit selloff and a 200 point one at that t. Dell opened slightly higher across the board. Not much, though, on this friday. We are back in a moment. Welcome back to squawk box, profits at dell falling, they topped Analysts Expectations. Square that circle. Anyways, joining us to have reaction, carl, good morning to you. Goomp. Thanks for having us. Lets call a spade a paid. I dont know if people will get upset for me saying this. Is dell sandbagging whatever is going on there with their numbers because they know theyre about to take themselves private . They want to get every bad news piece out of the way and also not only get it out of the way to make the numbers look better when they actually start as a private company, but to make shareholders vote in favor of this deal . You know, i think thats a great question. Clearly, you can see that sales are flat, market is decreased on materially. You also have to recognize that dell is going through a leadership tug of war in a public setting right now. Thats not something that will lead to customers necessarily buying more when they want to see and it it partner that they know is going to be around over the long term. So they kind of alay those concerns. Is dell going to be private, public . In litigation. Are you going to spin off the segments that were looking to be a partner with you, you know, what are we going to do here . Dell is going to have to come down on price, which will compress margins as it did across the board with the exception of services. The question, therefore, becomes, you look at the numbers, maybe 13. 75 with the dividend and Everything Else, you say, this is a great deal t. Company looks like its going to fall apart. Except for the fact once they do get private, they have some certainty, they have a plan that maybe theyd actually get on tear feet again. Yeah. Thats a good point. Theyre pursuing a steel chair strategy when it comes to pcs, which still makes up about 60 of their overall sales. You saw margins drop precipitously in that segment. If they were to not pursue that, margins wouldnt get hit that hard t. Question is, is that the best longterm strategy for the company. Carl icahn will say, of course, its not. This is just as you said, a sandbagging technique and michael dell is going to say, well, we need to have more material presence here. This is in the best interest of our longterm future. So walk us through what happens next. So we have this vote coming. We have outstanding shareholder lawsuits. Do they get blocked . Just go through the motions so we understand the next permtation. Right. Im not necessarily a legal expert. From what i can understand, carl icahn will be filing and going through his lawsuit today, hell have his hearing. Then michael dell is still planning to have his Shareholder Meeting where theyre voting now in october. So its a question of, you know, does that get delayed what the judge really finds from here that will determine whether or not that Shareholder Meeting occurs. You say take the money and run . Yeah. I think that at this point, you know, this is a material improved offer. I think that litigation in the long term to decide whether theyre the longterm leadership of the company is, isnt in the best interest of shareholders or the company. What is intrinsic with this company right now . Say again . What is the Intrinsic Value on a shared basis . Meaning if there was no takeover premium involved here, what do you think these shares would really trade at . Well, thats a good question. Because last year, dell reported its huge reearnings it was 13, im sorry, 14. 1, 49. 7 in sales an 27 in earnings and so, then you saw shares fall to 9. Michael dell will say, listen, now we have 14. 1 and 12 cents in earnings. Obviously if it fell to 9 last year, it should be well below that. We would say it would probably be closer oabout 14. Well, i are not getting 14. You are getting close. We will lif leave it there. Thank you for helping us get through this, this morning thank you very much. Up next, escalateing tensions in egypt, we will get an update next. More on yesterdays triple digit selloff. The dell below its 50day moving average. What you should do about it. Squawk is back after a quick break. Aaa. Fffffff. Laclaclac. Hes an actor whos known for his voice. But his accident took that away. Thankfully, hes got aflac. Theyre gonna give him cash to help pay his bills so he can just focus on getting better. Were taking it one day at a time. One day at a time. [ male announcer ] see how the ducks lessons are going at aflac. Com if then schwab is the placeing your trato trade. Higher level, tdd 18003452550 one day at a time. Call 18882849410 or visit schwab. 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Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. Welcome back to squawk. The Muslim Brotherhood calling for a march on a crackdown on islamists that were killed. Good morning. Reporter good morning, an extremely tense few hours. You can hear an ambulance by me as well. Overall, the atmosphere very, very quiet in this corner of town. Again, the entire vicinity and the rest of the country for that matter is, of course, filled with an Army Presence a military presence overall thats much, much higher than we seen in the past few days. Right below us since the morning, theyve cordoned off these Access Points in Tahrir Square. Heres whats worrying andrew about all of this, i have covered this several years now in and out of egypt frequently to cover these protests. The distance between the size is immense. You have the fact that the Security Forces and the interim government are taking a very clear stand they have issued a state of emergency and on the other hand, a Muslim Brotherhood group and supporters of the ousted president Mohamed Mursi who are not going to back down, they remain define. They will fight until the very end. Friday prayers just ended. We are getting video feeds from various parts of the country that are showing larger groups of the xaen country coming together. This is a problem for the military. This happens as they would march towards any instalation or institution, that could lead to a lot more violence. Is the key concern here, also developing in the last hour or so, state television reporting an ied explosion in the alexandria train track. No casualties but that already gives you an indicator of perhaps new methods of oursed president morsis followers. We cannot say for sure who is behind that. That is something to keep in mind. Also, of course the sper fascial pressure on the Egyptian Government not to use violence, to refrain from those methods, barak barak made it very clear the first step they will be doing is can selling biannual military exercises. These they have been doing quite a few years now. It is seen as a directed response if rebuke, perhaps a puntive measure against the Egyptian Military specifically. Now, it stopped short, though, of the methods many would have perhaps preferred, a clearer stance cutting off Financial Assistance to egypts military to the tune of 1. 3 billion, which mostly goes back to buying weaponry of the United States, okay, everybody is watching this closely. We have to see how the military will hand him these larger protests, which they have effectively banned and whether they can risk another wave of violence. Most people staying home. Businesses yesterday are reconsidered their presence here, their operations for the moment, general motors, a good example. They have a Large Manufacturing plant just outside 1,400 lie years that manufacture the smaller cars. They are halting that production. Electrolux that bought into this market of 400 billion two years ago, they have halted their operations for the moment. Its a wait and see approach. There is a lot at stake here. Before i hasnt it back to you, the fact that the suez canal remains operation am. For the reports of disruption, keep a close eye on this story. Can you check the updates as well on my twitter feed lets take it from there. We hope to come back to you throughout the day as news develo develops. If have you comments or questions, you can follow us on twitter. Up next, wrap up your wreak with a profit. We have stock picks and market museings with eugene profit, thats coming up after the brake. Also, take a look at futures now. We do have green arrow, the dowing looing up about 14 points if it happens, it will happen. Squawk box will be right back. Were cracking down on medicare fraud. The healthcare law gives us powerful tools to fight it. To investigate it. Prosecute it. And stop criminals. Our senior medicare patrol volunteers. Are teaching seniors across the country. To stop, spot, and report fraud. You can help. Guard your medicare card. Dont give out your card number over the phone. Call to report any suspected fraud. Were cracking down on medicare fraud. Lets make medicare stronger for all of us. Welcome back to squawk box. We are in the flood of economic numbers. Lets get you through them. At 8 30 eastern time, we get Housing Starts and Building Permits for july as well as Second Quarter productivity and unit labor costs. We will have all those numbers as soon as they hit. Also the nasdaq 100 index is getting a new member. Green mountain Coffee Roasters will join the index before the open next thursday. Its replacing Biotech Company life technologies, i wonder what david icahn thinks about that. Look at that move over one year, right . The stock was crushed for a while, up 200 . Cant even speak. Im choked up about it. The move has been dramatic. China Internet Company a ali baba reportedly thinking of taking a dole to the south. They widely were assumed to list in hong kong. The founder wants to keep more control with dual class shares allowed in the u. S. Not no hong kong, the future has a huge impact on the future of yahoo. Well the markets may have pulled back from their summer highs, but our next guest is not deterred, in fact, he sees more opportunity. Eugene profit ceo of Profit Investment management. We also have our panel of guest hosts. Eugene, welcome. Its good to talk to you. Its good to be here, scott. So undeterred and a boyar, i guess. Yes, we r. I think that were not surprised that the markets take a little apause. Folks are focusing on the interest rise increase. The Economic Data was a little softer. However, if you look at company earnings, the operating margins have improved. We have quite a few stocks, high quality names trading down, so we think its a selloff is a good thing. What if were not ready for the taper . It clearly feels like the tantrum we are having could go worse. If you look back on the history in september and october, they havent been the greatest of months. I am very well aware the pundits, massive selloff, going to cash and the like. I think in our work, we dont see that in the data. I understand some of the trend lines and the like, but we are fundamental investors looking at specific companies. In fact, the companies are doing quite well. Theyve had easy money for some time. Margins are good. The economy not ragingly strong is improving. We think with that back drovp, its a good time to be investors. You deterred, you like cisco, even after yesterday. Id love to buy it at a 10 dip. Inside of ciscos numbers, right, of course, most folks look for headline on the headcount reduction and seeing a lower guidance. Thats more a macro call than execution, itself, inside of cisco, what it looks like to us is when cisco first got solved, it was after the acquisition of the desktop systems quite some years ago. If you look at the wireless side of their business, that is growing 32 ini dont see. Thats the leverage to that. Were not even vesting for the next month or two months. Were three to five year investors. We think that cisco is headed in the right direction. This is jason trennert. Mark mentioned something before, which is to say the correlation of stocks have come down. Mainly because the profit mar jens are so high. Its very difficult to generate profits with outlying gret. So the question is, the Companies Providing it the multiples are moving higher t. Ones that arent, though, are starting to falter. I think you are absolutely rights jason. With the correlations being separated, i think you kind of go to your question. As i said at the outset, we have seen soft revenue on the top line. I think that comes in with improve him across the board and the economy and some of the industrial names which are still lagging or a name like cisco come into play, more activity coming from new buyers coming into the market. I think thats where you will begin to see top line growth. You ternly wont see it from a pricing standpoint. But i do think if you are looking at the Data Companies specifically, what have you seen the margins have to be efficient. Certainly, where it is most visible, you are right the valuations have gotten stretched. Thats why we are looking down in those areas, where you see 12 p. E. S growth rates still in the high single digits. And quality franchises that are very little risk of gentleman out of business. You say its a great time to be a stock pecker. The point i guess coming up here with the taper looming is that thats your only option. You have to be a stock pecker, because the overall market as the fed pulls away is that risk of not going up the way it has, certainly at the pace or the size that it has in, you know, recent memory here. Well, yeah, i think with the fed coming out of the mark, thats not going to be so much you know the case. Certainly as an active investor, i always liked a market that, you know, were being paid for our Equity Research and while we like the tail whipped of easy money or the rising market across the board, we make our best returns when we are new to our work and also in the segment, you talked about green pound tain going into nasdaq. We bought that stock as a Small Cap Company back because we were looking at mcdonalds and saw they were using them in the northeast and their coffee tests exceeded starbucks. So when you are an Equity Investor doing your own work, you are able to see some dislocation, some mispricings, versus what others are seeing, and thats the time where, you know, we make our best returns. So were happy in this type of environment. Give me one more pick. United, uri you like. United reynolds is a Leasing Company that essentially acquired our it owned a 12 of the fragment of the market. Construction companies leasing their equipment as opposed to buying it as a conserved capital. Essentially, this particular company, although it has, you know, high debt levels is leveraged towards improving the economy. If you look at whats going on, you are seeing that activity in housing go up. And the amount of companies producing is 80 in europe, so lots of room to grow here. Pretty low p. E. Company, an attractive leverage to the environment were in. Eugene, thanks so much. My pleasure. Thank you. All right. When we come back, disney is big on infinity, we take a look at the media giants new media game platform. In the next hour, honest toddler, we follow her tweets around here, theyre hilarious. Some 250,000 follower lack every day except for maybe jessica alba. She will join us in the next hour. Squawk box will be right back. Lets get the ball rolling. Cocacola is partnering with nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. A Community Wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. 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[ 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 ]. Welcome back, everybody. The markets still not decidedly one direction or the other after a big loss yesterday, the dow was down yesterday. You see its up ten points above fair value. We will see how things shake out as we get closer to the opening bell. Disney is overhauling its strategy with infinity. Its a new video game program. We have a look at the game and what it could mean for the media giant. Good morning. Andrew, good morning, its a totally new video game strategy, bringing together disney and pixar characters in a mashup allowing gamers to create and play in a custom disney world. It starts with a 12350i6 starter pack, which includes three game figures and a pace. The base plugs into any game console. You put the figure down, that character appears in the game. For another 30 buck, they can add extra characters and locations to the game. You cant expect characters to come into the mix, which would be a dramatic shift for disney which never before allowed characters to mix. Now this replaces disneys money losing strategy of introducing a stand alone video game for each of the big movie releases. Now, Analysts Expect the game platform to bring the Interactive Division back no the glass. I think this game has billion dollar potential. I would guess at a 50 margin or higher. I think this has the potential to generate 500 billion in only profit. Activision also involves plastic pieces and video games. They say it generates threequarters of a billion in sales last year, 250 million of which was from its high mar jen figurines. Disney has the huge advantage of its brand recognition, before anyone played with infinity, it has half a million likes on facebook. More skylanders. This is still a huge bet that didny can make it work and if it doesnt work, they may have to car strategy. Becky, this Holiday Season will be a very important one. You bet. Julia, thank you very much. When we come back, final market thoughts, plus check out the futures. Squawk will be back after a quick brake. Ts time. Time to have new experiences with a familiar keyboard. Welcome back. Gold medal is hitting gains, a strong buys from china and Short Covering after the precious metal broke through key technical levels. Silver trading near a threemonth high. Metal spikes 5 yesterday, silver is on its strongest sixday winning streak since april of 1987. China and japan led an exodus from u. S. Treasuries in june. The selling came after the first signals the fed was preparing to wind back its stimulus. Data released yesterday showed they accounted for a record 40. 8 billion of selling of treasuries. As for currencies this morning, lets take a look at what the dollar ask doing versus a basket against the yen 97. 50. Eurodollar about 1. 33 and change and there is the pound versus the dollar at 1. 56. An drou. As for todays market tests, check out the economicalen dar, you want to be with us when this happens. At 8 30 eastern time Housing Starts and 9 50 a. M. , we will be getting august consumer sentiment. All right. Lets get back to your market panel. Gentleman, we were talking on the commercial break about some of these strange potential opportunities you had, mark. You seen whats happened where people are overreacting to tapering. What has been happening in the market . Sure, you look in the muni market, we see 10 tax equivalent yield. The bond im talking about, the pittsburgh bond is doing pretty well. Were at the hiemds down in texas. So we got some visibility on water going on with the economy down there, worry not afraid of that, the credit risk, but it is a 30year bond, 10 , thats a crazy price, you look at whats going on closing funds in here, we got one where the nav is going up, trading at double digit discount. Wow unmanagement portfolio. So we like whats in there. The price action just doesnt make sense. There is a lot of this dislocation thats happening around this space thats in the fixed income space thats creating a lot of buying opportunities. Texas isnt detroit. But does detroit have any impact on what was happening with that muni bond . I think it is, it is scarying investors. Its very tough to be a Retail Investor in a lot of these markets right now. Because you dont have the visibility. You mentioned the detroit situation. Thats going to be interesting. The thing thats going on in california also, there is a lot of things set about who has priority in these cases. Are you talking specifically the town considering taking back through em90 domain . Thats not really what im talking about. Its more about the fight between the pensioners and the hoerlsd and the rest of the players in these situations. It could happen on a federal level. You are talking a 30year bond. Its a long time to hold out. Definitely. At 10 . Thats a crazy number. So my. Is the that any sort of normalization of these markets will see those, a nice inflation and total return in a im in like that. So we like those things. There are more and more of those popping up on our radar screen every day. You are right, for a Retail Investor, its hard to look around and find opportunities like that where you know the prices are out of whack because you know the rick is not at that level. Which is great for professional investors, right . Our business gets better when things get volatile. Can i ask you a question . Sure. What do you think will happen . There is an article about the banks the agreement they reached before the bankruptcy in which they took a 25 haircut t. Argument is that the pensioners will take a 90 haircut. Whats the right. I mean, if this is a very complicated issue. But, you are looking at a snapshot in time and taking a price cut. This has been a long period of a lot of very bad moves by a lot of very undisciplined people the way i see it. Thats right. They havent stepped up and lid and pushed their reality to the pensioners, to the banks. You got to create certainty to get breathe back into detroit. Thats the only thing that will save these people. Here they are. They find themselves in bankruptcy. That was the move that made sense in order to split these two big groups. Are we going to get that . Thats a tough question. And given the implication, there are people who would argue fair means cutting more on the banking side or the investor side and giving more to the pensioner, but the implications for the rest of the country may, therefore, be unfair. It checks out well. If you are looking at michigan, just some of the munts paelts in michigan right now, fntsing costs have gone up dramatically, right, now you are starting to see the bond assurance company. Its not just a what if situation. It has changed over the last i just on vacation last week, i read a book called detroit in american autopsy if you get a chance to read it. Fantastic. A plug. What a writer. A trick writer. Poignant. But it speaks to marks point which is no one has clean hands in thisment you can basically, everyones got a hand in what happened in terms of the dysfunction of this city. I will say, though, are you setting a precedent if terms once you start messing around with the credit structure. You know, it does have, could have very, very significant ram ramifications for the united nations. It may not be fair. In this country, were obsessed with being fair. Its one of the things that make u. S. Great, but also there is a limit when you dont have the money. There has been a question as to whether the federal government would get involved for this very reason. I dont see it happening. No. But its quite an interesting situation to watch. When new york went through its problems in the 70s, there was a famous daily goes cover throughout new york city, but the thing, ultimately, ford, though, caved a month or two later. But it was only after he set very, very strong, you know, series of things that they had to do, the state and the city had to do to get themselves back on track. So i dont know whether the Obama Administration may do that. I think people would find it acceptable if they say, listen, you really have to get your act together here. But right now, frankly, there is not a lot of, i dont have a lot of confidence that that is happening. Would you invest in munis . Im intrigued. Mun is in general . Yes. I think aside of detroit, 49 of 50 states have balanced bucket amendmentsment state and local governments are going to increase spending next year. Up 4 . Next year. I actually like so theyre going to actually offset some of the sequestration and some of the weakness from the federal spending cuts. So i like munis in general. Buying detroit munis is another it was an area of the market that sold off the last time we had this vicious move higher in rates. Now, if you take that equation along with the detroit circumstance it taik makes it a little more murky. A lot viewed the last selloff as a great buying opportunity. It was. There will be buying opportunities and selloffs. Its hard to call. I got to throw this lost plug in, its one of the things we do and we always talk about it. But your floating rates, so you get to get out of all this mess. There is a lot of transparency. You get an exposure to an improving economy because theyre a high yield credit. I like bank debt in here. Its a place to play defense. Retail investors can get access to. How specific do you have to be on that . Is it a broad call . There are ways to get them in etfs, in mutual funds, there is a lot of different players out there. One of them, we got a lot of great competitors. Spend some time looking at it. I think its a good thing to focus on. I think for the individual investor, one way you could play this, honestly, its banks themselves, some of the regional banks the financials. Im of the view now bonds arent the way people think they v. They will do lending. Until like the last couple months, they did well. Now there will be much more of a focus on credit analysis, making loans. Its very positive for the economy longer term. They will be positive i think for the banks, bottom line. I agree with that, its a good call. Mark, thank you for joining us. Thanks for having me. Its been great talking to you, we will see you soon, mark lakada. Jason trennert will be with us. Applied materials are expecting customers to hold back spending in the Current Quarter. Weak guidance sending those shares lower. You can see that right there on the screen. Also some retail news, nordstrom Second Quarter revenues missing estimates as comp sales at its Department Stores slipped, the Luxury Department store chain is now lowering its full year sales end profit forecast as a result we keep having more and more of these. And joseph a. Banks warning that its earnings will fall below current wall street consensus, shares tumbling on that news off about almost 2 and i have one other piece of news to share with everybody. This is what we were talking about it. There is a few report out that says your iphone, this is the thing i was mentioned during the break, your iphone takes up as much energy as a refrigerator. Now to be clear, its not you think are you so green, andrew. Its not the battery thats taking up as much, between the energy on the battery on the phone and the energy used at the cell tower level an all of the energy used from the different data servers an other things, that you actually split all that up, it is apparently as much, its more than your midsize refrigerator. Is this greener, my blackberry . I doubt it. What does al gore have to say about it . Hes on the board. You should ask him. This is really an Inconvenient Truth that andrew is carrying with us. Anyway, coming up, the battle of honest on twitter t. Honest feud with jessica alba and her Honest Company. We cant make this stuff up, honestly. Check out the ten year notoriety now. We will put that on the screen after you look at that honest toddler 2. 798. We will have more on the markets, what investors should take away from yesterdays saleoff. Stay tuned for a very big hour of squawk. From what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Ive been doing a few things for playing this and trading. Ove tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. Tdd 18003452550 and schwab really helps me step up my trading. Tdd 18003452550 theyve now put their most powerful platform, tdd 18003452550 streetsmart edge, in the cloud. 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Topics from the honest toddler. I love apple. The design is beautiful. Round is a favorite shape of mine as it is ideal. Well take a look at business and investing through the eyes of a child. You know what, i cand even tell you how i feel about these wall street fat cats. I want to punch the economy in the face. Because the language i would have to use would be very inappropriate. The third hour of squawk box continues right now. Welcome back to squawk box here on cnbc, first in business worldwide, im Andrew Ross Sorkin and becky quick. Where kernen will be back on monday. Our guest host jason trennert, chief research partners, lets get started with the market. Take a look at u. S. Equity futures at this hour. We do have some green aarrows. S p 500 almost call it if nasdaq up 3. 5 points. We should note stocks finishing near session lows yesterday with dow down more than 200 points, major indexes posted their biggest twoday losses since june. Volume was slightly heavier than usual, especially considering were in the middle of august now. Meantime the yield on the ten84 treasury hit its highest level in two years. Can you see that there 2. 797. Also, lets flip that board over, check out the overseas action in asia. You can see there, red arrows across the board, hang seng off about, eh, not so bad. Then take a look at what happened in india. Hitting an all time low to the dollar. Lets put that screen over one more time check out what happened across the pond in europe. Seeing a mixed picture. The footsie was off slightly. The dax off slightly t. Kak up slightly. Dell plummeted 72 last quarter. Earnings beat the street a penny. Sales spiraled in the company embroiled in a takeover battle between the founder and carl icahn. In retail news, nordstrom Second Quarter estimates reached estimates at Department Stores slipped t. Luxury Department Store chain is lowering its fullyear sales of profit forecasts as a result. Scott, this is interesting, this is something Alan Questrom had been talking about. He was worried that some of the issues that had started with the discount retailers might spread to luxury as well. He thinks the second half, luxury could perform a little worse than expected. The one area thats held up okay, depending on the names you look at. Kors, knockout numbers. Most others, blah, mixed names have done quite well. Overall, the numbers coming down the pike lately have been concerning. The higher taxes kicked in the beginning of the year, affected the lower end shopper, eventually trickments in. They will start feeling. You have to worry about the Department Stores based on some of the numbers that weve seen. Even though there are some reports out there that even j. C. Opinionny maybe is trending better. Macys was a real disappointment. They did say the trend has been improving, at least in the recent weeks in the Current Quarter. Well see. You. Oh, thanks. The dow is a few points from posting its worst weekly loss of 2013. Lets get to our guests this morning. Stephanie link is cio of the street and jim mckoggin. Jason trennert is with us as well. Jim, im going to begin with you. Good morning, its nice to see you on this friday. Good morning. Take us through, what do you think was the result of yesterdays big selloff and what are the broader implications of it . For u. S. Equities, yesterdays selloff was a buying opportunities. Any longterm investor who is insufficient way or has a lot of new money coming in should be using yesterday as an opportunity to get into the market. The u. S. Economy is healing and the job numbers yesterday showed that. There is not much inflation around. So, bakke amy, the u. S. Is in a slow recovery and its almost ready to come off the intensive care of the quantitative easing situation. Zach. First of all, i wish i had the accent. It helps with the authority factor. Although i do agree. You could use some help. I do, for now i have to stick with what i got. Its august, unlike two years ago, august was a highly eventful month. We had the euro zone crisis, last august the concerns. This is not an eventful month. In the face of not a lot of news, low level trading on the mark, Global Concerns out there i think you have a trend lower in august for no great natural reasons. I know we all like to tell a story. What are you talking about . The taper is looming. Everybody is having a fit. The taper may be loming, if you go from 85 billion to 60 billion on a taper, the actual macrospe everythings of that. It is psych logical, they start to the taper means a finish. In my view, even the finish as a mark ro factor, equity, a u. S. 15, 16 trillion dollar economy, the actual amount of buying versus the amount of activity has been always more diminimus than the psychological effect. You dont think it has done that much in the end . As many say, the actual effect over time decreases even with modern economic i think the feds use it, too. Thats why have you all this chatter. The taper is not tightening. The Balance Sheet is still increasing. Its a psychological. I know there is a psychological moving towards reigning things in. It is a move towards winding things down. You are still easing. Yeah, but you know its the drix. Its always the direction that is in in the moment. I think it is much more until we have seen until very recently, its had a much more bigger impact on the bond market than the stockmarket. We are in a transition, right, won you say . We have issues with the fed. We dont know, we dont know who will thieve fed. Thats the question, too. Its a very big question, august september, choppy months in general, right, to me, with earnings out of the way, now were at the mercy of the macro data. We are now data dependent then. Now every incremental news, we will be parcelling it. Which is why the market moved so drastically. We have the velocity. To me the u. S. Market is in a transition. I think you can use the really big base i days like yesterday to be picking away at high quality companies, cisco is a perfect example. This company has done a great job transitioning from Old School Tech to trying to find recurring growth revenue stories. Theyve done a great job. Unfortunately the macro is in the way. Its a perfect opportunity to be buying it. I would say you want to tilt your portfolio to international. The expectations are lowerment the stimulus is aggressive. We are starting to see stabilization. Valuations are cheap. Im glad you go there. Jim says, i see in the notes, you Say International looks less attractive. I think thats right. I think that europe remains a very treacherous place. The debt levels are too high. I think japan could be interesting if they get the yen down, it has been worryingly strong. The government there definitely wants the yen to make japan more competitive. I think thats worth watching. And i do think for anyone who has a long enough time horizon, accumulating emerging equities could be quite rewarding. The next six to twelve months will be extremely volatile in emerging markets. Something i do want to get on to is the bond mark the people that should be having a fit about tapering are those bond manage that have too much duration in their portfolios. This is not a buying opportunity for them. Treasury yields are higher limit your duration as you look for yield itself in the bond market. Tleemp with bonds, there is an assumption rates are entirely dependent on bank activity. It is true short term rates are. Longer term rates ten year and up, we live in a world of emerging commission. Its capital creation. There is a lot of emerging labor and capital. So i think longer ferm, you have this spike from a dramatically low rate to a historical rate. 3 on a tenyear note to be a historical low rate. We will probably end up there. Mark will probably overshoot in its expectations of whats going to happen. But at some point, were not going to, this expectation will go up and up and rates will be 4, 4. 5, 5 . Will prove to be completely wrong. Im sorry, jim, you answer that. I would agree that. I dont see there is any sign emerging. The price of media in longterm credit is very dependent also on Economic Activity and as that improves, the natural rate for the ten year does go up. Now the question is, how high does it need to go before it chokes off the Housing Market . I think thats 3. 5, 4 . Id start to get worried. 3 doesnt worry me at all. I dont think that will choke up the Housing Market. Even though, you know, Mortgage Apps have already seen a drop as a result likely of these rates going up, jim . Yeah, but thats the elimination of rate financing more than anything. I think you are not at a stage yet where its hitting new home starts, for example. If we got to 4 in the ten year, i think it would. So for an Equity Investor, the one thing oddly enough i would look at slightly nervously is the treasury tenyear yield. If that goes up too far too fast, then the benign period may be shorter duration than i think. We asked this in the 7 00 hour. You have an opinion on this. If the taper doesnt happen, do we go up or down . Is the good news bad news or is rather in that case it might be bad news good news . Sore it bad news, bad news . Gosh, i think thats too hard to call. It depends on a lot of things going on at the time. If the taper doesnt happen, it depends on the explaination we derive from the famc speeches fomc speeches and comments, if the taper doesnt happen in september, you will look to see, is it because the fed is worried about the rates going up too much or is it that theyre worried about the economy healing too slowly . I think the former would be okay. The latter, actually, might be quite bad for the market, but i dont think its going to happen. I think thats why its so important to look at the data the next couple of weeks. It will be so important. It will be the driver of the direction of the markets. I would take the under on the taper in september. This is a very, you know, it may be very krar contaxpay contr. Does anybody around the table and jimmy can weigh if, too, anybody buying gold here . J. P. Morgan is out with a note this morning saying buy gold. We seen this turn around in gold. My own particular view, i will answer quickly, i view gold as insurance for the portfolio and if you have a longerterm view, you probably might want to buy some gold. I still think the bank of england has doubled the size of the Balance Sheet the bank of japan is going crazy, if you take that type of longterm view as it might be interesting. As a trade where i would buy gold, the freeport is kind of the wimpy way to do it. Because i prefer to own a Company Versus the etf. I think the commodities in general are interesting. If you look in the last month, we talked about this, the material stocks have done very well in the last month, up 3. 27 in total. Mining stocks up 7 in the past month. The activity of gold this past three or four months, activity of bonds, any investors for the search for riskfree investments its going to lead you towards ricky investments and, you know, you may want to hold gold because its diverse, people own it. As insurance, i dont think you have insurance in this market. I think the search has been one of the postdestructive things in the past couple years. I would take the negatives on gold actually. When rates go up, its more expensive to hold a asset. I would take slightly more negative view than the others. Have a good week. Thank you very much. When we come back, we got some tech stocks, well ask about results on dell and cisco and the battle over apple and the thenyear anniversary of goog ooms ipo. Ouch. Has it been nine years . By the by a way, if you arent familiar with the honest toddler, stick around, a perspective of a toddler. The honest toddler tweets us his take on apple. It bothers me that theres a new apple product being forced down our throats every few months, i mean, apple juice is wonderful, smooth think in a bowl . Failure. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 market centers. Maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box. Of course the upcoming nine year nice of googles ipo. Then years. A Senior Analyst is here from turner capital, he joins us now to break it down. Good morning. Good morning, sir. Help us through cisco. We had John Chambers on the program yesterday. He tried to expla into us what he was doing. I have to say, we werent, it wasnt we werent convinced. I think we didnt know what to make of it because he was cutting 4,000 people at a time when he was trying to say that the world was actually better than we thought. Thats an excellent question. Im a little bit confused too. I listened to the conference call. Heres a kane that essentially met Analysts Expectations for the quarter. Their guidance was essentially in line, maybe the slightest bit less, but heres a company that starts with 80,000 employees and decide decides to fire 4,000 of them. I dont know if chambers mentioned this, a year ago the company had 66,000 employees. So theyre up substantially but they are cutting about a third of the increment am employees that theyve added in the last year. Youd hold onto the stock . I think i would. The only price at which id become a better buyer is probably the 2021 hand him. Can we talk on dem the earnings obviously an abomination except that Analysts Expected them to be an abomination. I asked the question earlier, do you think dell is sandbagging the numbers on the expectation they will go private or do you think things are as bad as they seem . I think its the latter. The pc industry is clearly in secular decline, not a transitory problem, a secular problem. Thats why when this Company First delved into going private, a lot of venture capitalists and private equity firms looked at the company and 10, 20 years ago, this would have been a marquee deal that everybody would want to be involved in, but nobody wanted this deal. They look at it in a bad way. I sure would. What about this idea, paul, that dell is already, pcs are passe, they dont care about pcs so much going forward. They know its a dying business. Theyre sacrificing anything theyre doing now in terms of prices to gain more business in what will be luke ra different services, things like that . The problem is, heres a company that has seen the demise coming in the pc business. They had a chance under the same Leadership Team to make these changes necessary and they havent done them yet. What makes us all think that as a private company they will do it better . Lets move on briefly to apple. Carl icahn pushing for a buy back. You are a Firm Believer in apple. You think its a 600 stock . I think its about a 650 stock. Carl thinks its a 700 stock. Do you think you will get more cash . Do you think there will be a buyback . This is very interesting because obviously carl icahn is a brilliant guy, a billionaire. Last couple years his picks have been great. What kind of surprised me with his announcement is he is harping on the Capital Allocation and increased stock buyback. Heres a company after David Einhorn pushed for the same thing couple quarters ago, that last quarter bro bought back 16 billion of stock t. Prior two quarters before that they didnt buy back 2 billion. I would go to mr. Icahn and say, i hear you, im doing it. We will see if that happens. Paul, thank you for joining us this morning. Thank you. Appreciate it. Coming up, breaking nick data. Light Housing Starts, second productivity numbers 8 30 a. M. Eastern. About ten minutes from now. Stick around. What were you doing nine years ago monday . You should have been buying shares of google for 100 bucks a pop. Well talk about the internet giant on the 9th anniversary of its ipo. Thats monday on squawk box, starting at 6 00 a. M. Eastern. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but run different. To give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because now more than ever, the future belongs to those who challenge the present. Gunfire in cairo this morning. They are planning this and its a developing story. Absolutely, becky. We can hear live rounds being fired right now. Its probably less i would say under a mile from here. You can hear the gunfire, protestors are moving across the bridge towards our side, below us, they have set up and soldiers are in formation, clearly expecting an approach by protesters. Choppers have been moving above. The army made it clear again through state television they will deal firmly with any violation of the law. The rounds are being fired. Its quite a large group coming from the bridge. We will give you a better sense of whats happening. Theyre happening across the country in different part of the city. The worry was these protests would be large in size and difficult for the army then to break up. Protests are effectively banned. The country is if a state of mortgages. This is definitely an escalation. This is right here by the river in the heart of cairo. Remember Tahrir Square has been completely corydoned youve. Almost nobody is in there that is the symbolic heart of this egyptian capital. But well try to keep you posted. Let me throw it back to you for now. You obviously pointed out, this is continuing throughout the country. We are seeing reuters headlines citeing medical sources saying four protesters were killed. We are still in a situation where there is a curfew there . Well, the curfew ends 6 00 a. M. In the morning and starts at 7 00 p. M. So its an 11hour curfew. There is no curfew in effect as we are talking right now. Again, the army moved rapidly since the Morning Hours ahead of friday prayers. They were pretty much in position after friday prayers expecting those protests to grow. You can see people running there on the bridge, that is one of the key arteries of the citys the gunfire continues. It is unclear where the gunfire is coming from. It does sound like live rounds, like machine guns being fired. We have to wait to see how this really evolves. There is obviously a very, very large potential here for this to escalate much further and that well have to see how much restraint the army can really exercise while protecting a lot of these key institutions that we mentioned were in many cases torched around the country. All right. Thank you very much, again, he will be monitoring this and bringing us updates as they occur. We are a few minutes away from july Housing Starts. Right now, though, take a look at u. S. Equity futures. Theyll rebound, really, the dow was off by 225 points, things are flatlining across the major averages, squawk box will be right back. T there owning it. The ones getting involved and staying engaged. Welcome back to squawk box, everybody. We are a few seconds away from the july Housing Starts and Second Quarter productivity numbers. Rick santelli is standing by in chicago. Steve liesman is here in the studio. Markets are flatlining, waiting to get direction. Rick, go ahead, take it away. All right. On the productivity side, we see an increase in productivity up. 9. Its 30 more than we were expecting. Down 1. 7 now strands our last spree, originally stated up. 5. What did he say about labor costs . Well, they increased a bit, based on expectations. We are looking at 1. 2, 1. 4, once again, a revision released down 4. 3 to 4. 2, rising costs, rising productivity. I dont know what that means. Housing starts, 896,000, thats, of course, on an annualized seasonal basis. Thats up close to 6 from a revised 846,000 last look. If we look at permits, 943,000, that one matches expectations. Last month had a subtle revision in 918 which places it up two and three quarters. Lets see how that 896,000 figures in time. If i look back, well, we had 928,000 the month before last. It fits in there. West germany, we had a number over a million in march this year. We can debate how great housing stocks may be doing. But in the end, rising Interest Rates cant sweep that under the ruk. It will havent effect on housing. The dewitt is about how much of an effect. Back to you. Rick, lets get over, steve. I like the rebound in housing. The numbers suggested maybe so far a muted effect in that rising mortgage rates, we are really in this nebulous world right now where there is an expectation in the market. The economy will improve. The numbers stephanie was talking about at the break on the surface didnt look so great. Its an electricity problem and auto supply problem. It, manufacturing will do well t. Jobless claims numbers remain down, it suggests better job creation. We have that second half rebound, maybe we oouth ought to do a little more forecast based on forecast and data. It creates a rear view mirror effect. I was going to say, why does it make sense for the fed to move anyway way on expectation at this point rather than on results . Because then rather than being late, you will be very, very, very late. Thats the problem. You have to do policy looking out the front. The mirror, the windshield. The problem is the fed is late even when it is trying to be ahead of the curve. Its late when it is trying to be earlyment now i think in for a penny, in for a pound. Might as well. The Balance Sheet started 800 billion. Its 3. 3 trillion now. You know, i think you really want to see the whites of the eyes. It seems to me. What is your physical handicap mou . Im 4060 against the taper. I got to 50. You were away. It was before. I dialled it back a little again. The data has not come in, in a way thats definitive, im probably overinfluenced by the comments by lockhart and bullard, both have said, you know what, we dont have the data to do it in september is there what is your take on the bond yields rising . What do you think is behind that then in. Id hope, can you never know, lets be clearant that. I hope its because of the better Economic Data, the jobless claims data. What i was going to say to rick, we talk the question is how high its going to go. You listen to the influence that it has, which is what rick was asking about. I wonder, rick, if its time to start trading equities as if you expect a 3 tenure and thats the kind of way, if i think about the world that way, have i given myself enough safety or margin for error on my equity valuations. Two points. You know, you talk about results. You talk about the fed, you talk about data. I do. But then when you look at Interest Rates, you say, well, i certainly hope theyre going up because of the better Economic Data. But yuvsally, the better Economic Data is being downgraded because of the argument of taper. Its such a circular argument. As far as Interest Rates, hey, everybody watching, you ever take high school physics, you have the ball bearings, you bounce it, it shows the Energy Continues to go back and forth. You see, the problem is the same with treasury rates. Do i think 3 . Of course i think 3 . But the issue is i dont think they go where theyre supposed to go or even close to where theyre supposed to go based on the feds quarantine of a lot of treasury. I think the energy and the compression of the fed is going to make rates go higher than they would have otherwise. Put that under unintended consequence part 49. It will be up to me to write the book of san themlys metaphors. Rick, if you dont do it, somebodys got to do it. Pa us that one, thats a really great metaphor. I think its interesting that ultimately, you got to physical out where that energy goes. Im thinking 3 is the number, rick. Im thinking its a big e. But i think once we get there, weve explored, how do you say the outer edges of the universe. I will feel much more comfortable at that level and to stephanies point, if we get there with better manufacturing data, i think thats a pretty good bet, given whats happening in the autos. We get there with better employment data. She made the point that every single number matters. We are in the decision to taper in december or not t. Fed has to look at every single number. One that matters is productivity, which is a much more of a statistic but. They have revisions. We knew that was going to happen. What you basically have in this economy is certain sectors becoming massively more productive than the 1 or. 9 or down 1, massive parts of the economy that arent showing any productivity, low level retail sales are not showing a lot of man hour productivity games. The goggle effect is not captured, so we dont know how to capture the time save factor of those kind of technologies. That is what is driving the profitability of companies, whatever marginal growth in the economy. Its hard for banks to grapple with. Its a new factor we dont know how to calculate. Steve mentioned the impact on the multiples for stocks. I have to say you have been at 2. 8 or 3, you were nowhere near something of course, its always at the margins, but all the things ive used to determine what the proper multiple for the mark is, the lowest number i can come up with, believe it or not. I wouldnt put down on paper, really, it wouldnt seem socially acceptable is 18andahalf times earnings. Inflation and Interest Rates are so low, you start discounting future cash lows, you get high multiples. Im not worried. That means you have upbeat on earnings, you woirn spooked yesterday by walmart. I just think the multiples, frankly, are likely to continue to move higher. Do you think that old formula of the yield on the fed. Right. You come up with. Guys, i will say, i will be next up on tv from jackson hole. We have an unbelievable lineup. Even though bernanke is not there, we dont need him. We have a great lineup of top officials on. So there will be news next week. You might do some fishing . Thats in between the great interviews we have. Good luck fishing between now and then, we will see you wednesday, thank you, steve, thank you, rick. Everybody else is sticking around the rest of the hour. Coming up, jessica alba. No, from the mouths of babes, honest toddler, a twitter account that looks at the world through the eyes of a child. We will talk to the author and creator. As we head to a break, here are a few honest toddler highlights. Right now, 7 years of music is being streamed. A quarter million tweeters are 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. We replaced people with a machine. R, what . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Your money needs an ally. Oh, hes a fighter alright. Since aflac is helping with his expenses while he cant work, he can focus on his recovery. He doesnt have to worry so much about his mortgage, groceries, or even gas bills. Kick kick. Feel it feel it feel it nice work you got it you got it yes aflacs gonna help take care of his expenses. And us. Were gonna get him back in fighting shape. [ male announcer ] see whats happening behind the scenes at aflac. Com. Welcome back, everybody. The honest toddler franchise has taken parents and others by storm with the hilarious number of tweets and books and a television in the works with darren star, the create or of sex in the city. She posed a parody account of her son. Funny you lunchables are out of the budget. When it comes to arbor mist, we have bruce lane money. The all organic Child Company started by actress jessica alba is going after the mom of three over the honest name. Joining us from montreal is boomy the creator of the honest toddler the twitter handle the book, a childs guide to parenting. Boomy, thank you for joining us this morning. Thank you for having me. I will tell everybody. I started following you about two years ago. And just found you and have been a very ardent follower because i think you speak very truly when it comes from the mind of todd lers. I appreciate. Tell us a bit about how you started this twitter account and where its led. Well, it started out of my then 2yearold. She is 3 now. She turned 2 and transformed from, you know the sweet little baby to the toddler, the terrible 2s, theyre real. I just started. I thought, you know, it would be funny to just kind of share tweets about what i thought she was thinking and its been a lot of fun. Okay. Let talk about the dispute you are now having with the Honest Company. What is happening . You went to trademark the honest toddler. What happened . Well, i got an email, after a phone call i was asked to withdraw my trademark application. I said i wouldnt do that, so worry here now. Because the Honest Company it creates organic goods. Its a company that gets a lot of good reviews on things. They say they have the right to the honest toddler or the rights to honest name . Im not sure. Theyre protesting on the ground that im bringing confusion to the marketplace. I dont understand that, they actually interviewed me for their block last year. Today im a problem. I write a progress. Thigh have ecofriendly products. I think worry very different. Lets tell you about the company, they gave us a statement. I will read it for you. What happened at first they told you you could do it a year . Basically, they want to own the trademark and license it back to me. I find it problematic it would put me at their mercy number one, honest toddler is something i have been doing. Why should they have it and give me permission to use it. First they wanted to give me permission for a year. I felt thats ridiculous. First of all, to give me permission. Id like to own my own name. Second, permission for 50 years, id rather have my children, i wrote a book about this. Id rather have my children inher ret my work rather than jacey e Jessica Albas children. I just feel like they have an ecofriendly Company Based in california. Im writing a humor blog. Why cant i own my own name . I guess their point is. I looked at the things they have posted on this, too. They put up, you own at the honest toddler, the twitter handler and they own the honest toddler. They said they put it up a few months earlier and never trademarked that name. Its a person who owns the target. Com a few months before target. Com started the retail chain says i now own target. Im going to license your company back to you. You know and the u. S. Trademark and Patent Office gave me preliminary approval within i filed my trade is mark application. They did their own search and found i wasnt violating any. The Honest Company have a big problem with it. Now were tangled. We should point out there are other Honest Companies honest tea that make kids juices and drinks. Seems to be okay. Honest kids exist. Honest mom. Com. Shes a friend of mine. There is honest living. There is honest dad i believe. I even saw a community. I dont know why they have a specific problem with me, especially after interviewing me for their blog. I just want to wrist. I want to own my name and write. I wish they would kind of let me do that. So where does this go . Are you going to pursue . Are there now going to be official legal names in court . Are you going to defend yourself . How is this going to work itself out . We both have lawyers. We have a very, you know, very vast fancy legal team. Ive hired a lawyer and we have, its a long process. It could take a year, ive heard. So i just have to keep doing this because how much has this experience helped oddly enough your business and maybe even their business by bringing a lot of attention to both . Well, you know, it has brought some attention, but, i men, i would rather have avoided this. I have three kids the youngest being two months old. In terms of the emotional and financial strain, its not something i would like to do. I was raised to fight for what i believe in, my mom was raised in the army. Do i do fight for what i believe in. And i wont give up on this. By the way, i liked how you tweeted your response, too. It was a video of your toddler . Ridiculous. Yes. Ridiculous, thats how we feel about it. Boomy, thank you for joining us today. We wish you good luck. Thank you. Thank you so much. Coming up, a new you a agreement between journalism c. Penney and bill ackman. We cant get away from that story somehow. Also, kids coming to l. A. Not way you might think. We have more on that story when we return. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Otherworldly things. But there are some things ive never seen before. 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Having said that his cost basis on this stock about 25 a share and you can see there on the screen, stock trading at only 13. 63. So hes going to have to hang on quite a while if he wants to get back to par. That will be surprising if he sold at this stage, dont you think . Even in light of everything thats gone on. Just given where the stock is. Dont you think . Thats what i would think. I think we have to get a better understanding of what it means to register these things and the opportunity to do it four different times. Sports news this morning. Arena League Football fans are getting ready to rock n roll all night. The league is returning to the los angeles with a new Expansion Team named after the rock band kiss. The team is going to begin play next year. Season tickets will be available for 99. Its not a bad deal. Inaugural season seat holder will be invited to a free kiss concert next year. Thats a really good deal. 99 for a seat . Yeah. Not so bad. All right. When we come back, car lovers are flocking to pebble beach for the annual vintage car auction. More than 250 million thats expected to be sold this year. Robert frank will join us with more. This 1967 ferrari could become the second most expensive car ever sold at auction. Well tell you why this car can fetch more than 2032 20 millio saturday. Tdd 18003452550 call 18882849410 or visit schwab. Com trading to tdd 18003452550 learn how you can earn up to 300 commissionfree online trades tdd 18003452550 for six months with qualifying net deposits. Tdd 18003452550 see how easy and intuitive it is to use tdd 18003452550 our most powerful platform, streetsmart edge. Tdd 18003452550 we put it in the cloud so you can use it on the web. Tdd 18003452550 and trade with our most advanced tools tdd 18003452550 on whatever computer youre on. 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As you mentioned, more than 300 million worth of cars to be sold this year. That would be, by far, the alltime record for a collection of auctions. More than 1200 cars. And again, that sales record, that beats last years 265. And that is way above the precrisis. Were t not just back with collectibles. We are at an alltime high. This is all being driven by the boom in collectibles. The wealthy are looking for hard, tangible assets they can invest in, grow in value, but can also really enjoy. Take a listen. Lets say this car is 300 grand. You buy it for 300 grand and you love it. Its a goes to 50, who cares. Goes to 350, you like it more. If you buy 300 grand with the stock and it goes down 3 , youre all upset. So you buy a car. Its more fun. Now, you know, price is up 40 . This year alone collectible cars are up 22 . Thats better than the s p. People hearsay its not about the money, its about the cars. And the car thats expected to fetch the most money that is that ferrari, 1967 ferrari, 275 gtv4, north American Racing Team so its got that great racing history. Estimate is 14 to 17 but theyre saying it could fetch more than 20. Would make it the second most expensive car ever sold at auction. We want to show you one more car thats right here. Its a luzon. Its a 1935 car. One of the great names in french automotive history. This car could fetch between 2 and 3 million. Its one of the first sunroofs ever created. The whole roof is retractable. Yours for 2 to 3 million. To give you a sense of how car crazy the rich guys are, the guy who just interviewed, the great dog, the dogs name, ugati. But he is not for sale. Guys, back to you. Wow. Robert frank, thank you so much. You have a rough day ahead. Take it easy out there. I love my job. 20 million for a car. Thats 2 million. The bugati, we had one out front a week ago . Yeah. That was a couple Million Dollars. I like the dog better. Yeah. I dont know. Anyway, guys, we want to thank our bests who are here today. Jason, thanks for being here. Stephanie, zach. We really appreciate your time today. If you have a quick final word about the market, one, what would it be . Use volatility. Find ideas in u. S. And some ent find b international. Buy on weakness. Okay. That does it for us today. Okay. Thank you, judge. Make sure you are here on monday. Squawk on the street begins right now. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with david faber at the new york stock exchange. Cramer is off. With us at post nine mike, Senior Editor at yahoo finance. We are coming off the worst day for stocks in about two months. Only the third time this year weve had backtoback triple digit declines. Futures are steady this morning but keep your eye on the tenyear yield. We did hit 2. 82 yesterday before settling back at 2. 78. Keep an eye on golds