330,000. Also manufacturing pmi, the fhfa home price index, the leading Economic Indicators and then the Kansas City Fed survey. The annual fed symposium in jackson hole is just Getting Started and steve lessmiesman w join us from there. Were going to get over to michelle, who has some headlines for us. Corporate news. A number of tech stories this morning. Hewlettpacka hewlettpackards Third Quarter earnings and revenue met estimates. A 9 decline in the Enterprise Group revenue. Thats hps second Largest Division and key part of Ceo Meg Whitmans turn around plan. The companys outlook was also disappointing. Hp announced it is shuffling some of its top management ranks. Shares falling in after hours trading, lower by 8 in the premarket. Well talk to well talk to an analyst in the next hour and ceo whitman will join squawk on the street 9 00 a. M. Eastern time. Apple lost tablet share in china. A drop to 28 versus 49 a year ago. Samsungs market share increased at the same time. The real winners, though, were small domestic rivals in china. In other tech news, yahoo has overtaken google as number one in internet traffic. The ranking released in the monthly report. Andrew . Unbelievable, yahoo overtaking i dont understand how that is possible given im in google every ten sebds sea sh in google every ten sebds seaec searching for something. I would think every search would count. Who knows. We have financial Industry News to bring you this morning. The s. E. C. Reportedly investigating Goldman Sachs over the erroneous options trades. The ft says the regulator saw parallels with the night Capital Trading glitch in august of last year. You remember that. And then the s. E. C. Is looking at whether any of the rules were broken before. Meantime, goldman is assessing the financial damage caused by the trading glitch. An estimate of as much as 100 million. Britains Serious Fraud office is working with u. S. Counterparts into the investigation into the jpmorgan london whale case. Charges were brought against two traders last week. Also some news on wells fargo this morning, it cut 2300 jobs in its home loan business. The bank says fewer customers are refinancing as Interest Rates rise. Cuts would represent about 3. 3 of the banks Consumer Lending employees. Joe, over to you. Lets check on markets this morning. Yesterday, a new rule of thumb, for every ten basis points in the ten years that yields rise, we lose 100 points in the dow basically rule of thumb. Up to 291. From basically 251 to 291, 40 basis points and 400 points. The market has a lot of trouble getting out of its own way. Today were looking at to count on that being a positive close at 4 00, 14 points, with the jobless claims number coming is, you know, it is kind of meaningless. One of those situations if the jobless claims number is really good, then the tenyear yield rises and does the stock market fall in. Who knows. But with hewlettpackard in the dow and now we know, i dont know whats wrong with that company, meg whitman will be on. She goes on with favor, basically. All relating back to the ebay documentary, i think. Hes got a lock on dont even call her. Shell tell you no. Thats not aimed at david, no. He asks tough questions. Yesterday we had a conversation about tough views, how the company is being matched. Interesting news about whether shes the right person for the job at have we asked that about the last four ceos . We ask that a lot. And the board. And also lets look at well get through the boards. Thats why they dont they wont let me read any headlines anymore. Why . Youre good at it. I dont know. Going where the strength is. I think i dont know my relationship with the teleprompter is not great. Lets be honest. They wont pass it to a certain receiver because they think maybe he showboats. I dont know what it is, but if thats the way it is going to be, thats trying different little things. Im going to try to turn my spots. So lets look at the oil board now. Oil is up 51 cents at 104. 36. Well look at the tenyear, we already referenced. Tenyear at 291. That was the problem yesterday. Quick look at the dollar and then gold. Gold is suddenly shining a little bit, regaining a little luster. Euro at 1. 33. Yen at 98. And finally gold is down 1367. We have one problem, if i cant ask you how yahoo can possibly have more traffic than google, i didnt understand how that was possible, because remember the other day, google was down for five minutes and traffic was down 40 . How can yahoo possibly and i read the reports, i started looking online, is this you dont have the answer . I have no idea. I misuse google, i dont know, 50 times a day, 70 times. Do you take back anything you said about mauririssa mayer now that yahoo the pose in the vogue . That and other what was i dont think you think shes the right person. No, no, no. I think shes done an i think shes done an extraordinary job. I think, though anybody could have done it. The value of alibaba was going up irrespective of who you put in that place. Shes done an extraordinary job of bringing a whole new group of people in. I think the jury is completely out as to whether the strategy itself is working, but i think now people are looking at the value going up and going, it is her, i would suggest to you it is this other thing. But it is also possible shes doing a great job and we wont know that part for a couple more years. Maybe all the employees just constantly searching. Going to yahoo and well find out there is search farm in india. Go sit while the investors walk through and trade some broadband. Im not sure whats going on. Also, we had some other earnings news this morning. This is not earnings news. This is loss news. It is loss news. Sears posting a bigger than expected loss. Were going to watch the shares today. You stheee them trading 43. 27. We go across the pond, say hello to carolin roth, standing by in london this morning. Good morning, carolin. Good morning to you. And we are seeing european markets rally on the back of better than expected pmi numbers for the eurozone. Activity the high northwest tes years. France a bit of a disappointment, close to the session highs, up by. 9 . We had better than expected earnings news, impact the dutch market. I want to show you the markets one by one, the ftse 100 up by. 9 . The xetra dax seeing nice outperformance. It is the peripheral economies of the markets which are seeing the best gains. The spanish market up by 2 . Portugal rallying this morning. We spoke about the dutch supermarket chain, ahold. This Company Really the shares up nicely by almost 5 . Now it did beat expectations, it gained market share in its home market. Having said that, sales in the u. S. Are still slowing. Keep in mind it owns the stop and shop stores. Meanwhile, if we look at the forex markets, this really is a picture of dollar strength. Euro dollar, it did spike to a session high on the back of the pmi numbers, but has come down since, down by. 3 . Dollar yen is up by more than 1 , seeing very nice gains approaching that 99 handle. Essentially finally the dollar is now tracking u. S. Yields higher. Back over to you guys. Thank you very much, carolin. Another major story today, what is being called chinas trial of the century. Disgraced politician bo xilai faces charges of corruption, bribery and abuse of power, being billed as a fight against corruption. Eunice yoon joins us from outside the courthouse in jinan. Eunice . Hey, guys. As you said, this is chinas most important trial in decades. It is happening right behind me in the courthouse behind me. Now, most people have been talking about how bo xilai, this once high flyer, a man who a lot of people here believed was going to become a leader of the nation now has been disgraced. Because of that, we saw him run into quite a lot of political trouble, political scandal, that really shook up the communist party and now hes on trial for charges of corruption, abuse of power, as well as bribery. What is interesting is the trial is being billed as a government cleanup, highly choreographed and we expected it to be so. I want to pull up a photo for you to give you a sense of how stage managed this is. You should be seeing a photo now of bo xilai in the courtroom, flanked by two police guards. Bo xilai is actually 61. That means the Chinese Government had to actually come in and find two basketball player sized chinese guards to make bo xilai look really small and weak. So we know this is a carefully crafted trial, but at the same time, what is interesting now is that bo xilai seems as though he didnt get the memo. In the afternoon of this session, bo xilai has started to really show his personality. Hes very charismatic man. Because of that, hes been very divisive here and he started to pull apart the charges that have the prosecutors have been bringing forward. Hes been pulling it apart detail by detail, denying him, defending himself and his wife came in and submitted testimony against him and he said he shot back and said his wife had mental issues. This is a very unusual situation that were seeing in a chinese context, just because he is speaking out so loudly, defending himself, and a lot of people seem to believe this suggests that hes going to fight for himself until the end. Lets underline that, the fact hes trying to defend himself is significant. We take that for granted here in the United States. Not so in china. That photo, at least it looks like it is definitely him, because remember, the trial of had his wife, when she came out, people thought that that might not actually be her. She looked so difference. There were people convinced they didnt put his wife in the courtroom, but somebody who sort of looked like her. Yeah, thats right. A lot of people thought it was a body double. In this case, thats not the conversation that people are having here with bo. They all do believe that bo xilai was in the courthouse and in the courthouse and defending himself. What is also interesting here, you mentioned things you take for granted in the United States what is interesting is the security presence here. There is a very heavy security presence all around the courthouse. Yo wow thi you would think he would potentially have angry mobs coming out to lynch him and thats why you have the security presence here. But in fact, in china, it is the opposite. The security presence is in place because bo xilai is so popular. He has a lot of supporters who have been coming here, basically, you know, showing their support, but at the same time anytime we try to talk to them or other journalists try to talk to them, or even a man on the street, they get whisked away by the police. A different situation here. And this highlights how the government is very sensitive about the fact that he has cultivated this image for himself as a man who is a champion of the little guy. It is another reason why people think the trial is going to move ahead very quickly, that it is probably going to finish up in another day or so, just because the government will want to get rid of this trial, move forward so they can focus on policy issues and really tackle some fundamental issues facing this nation. Thank you, eunice, joining us live from jinan, beijing. Little bit of news back here at home. If youre a tennis fan, you might have might be a little happier. Time warner cable saying it is going to offer a free preview of the tennis channel during the u. S. Open tournament to its customers because, guess what, theyre affected by the blackout from cbs and cbs carriers. But live coverage wont be available. Drama. Little bit of drama, little bit of tennis, but not the full thing. You get all the first rounds. People say that cbs should have had this contract expire not in the summer when there were things that would have gotten everyone much more up in arms about not having it. Nothing that anyone is missing. You think this is bad or good for cbs . Dont you think cbs wins this anyway . Content always wins. But im saying he made that point, it would have been better if the contract had was going to last when home land returned or nfl football would be on or something that beth would hapeo up in arms about. Officials in three states pushing back against the federal governments attempt to block the proposed merger of American Airlines and us airways. A florida, texas and North Carolina say the combined company would benefit their local economies. The three states are home to large hubs for america and us airways. How do you feel . It reminds me of the sirius xm messing around. Even with at t, tmobile, i thought that was stupid. This one, do you think they should get together . I always thought this would happen, i feel sort of like, you know, the barn door already has swung open. A little late now. I wonder whether leaving them out there means they just fall apart and die or they actually, if they were together, this he create you know the key stuff they give out, the combined airline would control a huge percentage of flights out of Ronald Reagan airport. The bure cat bureaucrats were. They didnt use that antiquated whatever it is, that rule, that they use with at t and tmobile. 4 to 3, 3 to 2. No, the name. The highsenburg principle of uncertainty. Youre watching too much breaking bad. No, no, no. I only know dont do that to me. I only saw him call himself highsenburg once. Is that his name with twocall . The fact youre still talking about it means you have not seen enough. Right. You were first season. First season, episode five. One successful businessmans proposal to reduce regulation, and increase jobs. First, though, lets check in with the Weather Channel and jen c ca carfagno. The moisture, the humidity, the muggy is back today. Storms may fire bag across portions of new york, pennsylvania, overnight tonight, continuing. Could see severe weather. Damaging winds, hail the main threat. Not a widespread threat, but it is there. Were watching for lightning and thunder too across portions of the northeast, back to the midwest. In the south, more rain continuing this week, especially in georgia, florida, across the panhandle area and down into mississippi and alabama too. But we have some changes coming to the southeast. Got to get through the next couple of days and High Pressure building in beyond that. And dry weather. The sunshine returning to a good chunk of the south. Monday looks phenomenal. Just a heads up planning ahead, monday is your day, right across to the southeast. Storms will continue in florida. The forecast for temperatures, summerlike weather returns to the upper midwest. Temperatures warming back up mid to upper 90s through the weekend. Minneapolis, for you, chicago, upper 80s and close to 90 yet again. Our wildfire story continues in the west. It is hot, dry, more than 50 fires burning across the west and a number of them continuing to be below the 50 containment. In particular, watching the beaver creek fire. This one in idaho. Well have more favorable weather conditions. Temperatures in the mid80s. Today, tomorrow, a chance for showers and thunderstorms. Shifting winds with these storms. And dry lightning could always be a concern for sparking Additional Fire burned at fire areas. We have got right now a dry forecast for you. Things will change a bit through the next couple of days. Well see more moisture coming back into the area. This is good news for the fire fight here in the u. S. Thats a look at your weather forecast. Ill be right back right after this. 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. Time now for the executive edge. Daily segment focused on giving Business Leaders a leg up. Wall street journal reports the s. E. C. Is set to propose a rule dealing with ceo pay disclosure. This is required by dodd frank. It would force companies to publicize the pay discrepancy between their ceos and their median worker salary. What do you think . Started i was going to say, well, it is just disclosure to let you know. Then i read what the critics what theyre saying the problem is. And here in a nut shell, they havent described what employee sample you would use to get the median pay. You have to create a sample. There are multinational global workforces that are paid in a lot of different ways, all different you to include Stock Options and pension benefits. Theyre saying for big multinationals, it would be very difficult to find that median and all youre finally doing is saying you would say, the ceo is making 20, 30, 50 times what the median employee is. Well, it is interesting, the most interesting thing i saw is whole foods ten years ago put a cap on its top officers, can only be 19 times the average they didnt include Stock Options or pension benefit. This would include that. But how many times do you see a ceo makes what looks like a reasonable in your view a reasonable salary and then has, you know, makes 60 million in Stock Options. You know the back of the milk carton, i dont care about what the ceo makes versus the lowest guy or the median pay. I want it to say, this is what he made, this is what the stock did in the last year, this is what the revenues did, and then show me the comps and i want a nice little box so i can see what happened and i think that is a much better way to judge whether the pay is fair, than versus when it is lower. This is why certain people in media dont like you, you sound very reasonable. Thank you. I think it is meant to feed into class warfare. It is absolutely meant to divide and you know what it came from . It came in menendez. Ive seen menendez on tv, someone talked about marginal tax rates, he didnt know what a marriage nall marginal, how that differed some of what they know and dont know about normal things would blow your mind. This stemmed from when a lot of the Financial Firms got a lot of government money or became part of the government and then you were allowed to talk about ceo. Now they wanted to do it. But the proposed across the board for every firm, they do it in europe. Thats a reason to do it. Yeah, exactly. In this case, the worst were talk about is disclosure to allow boards and shareholders more information about what they im not against information. But i that piece of information is as useful as the type of we dont necessarily want to that might be better. Only are have to do the ceo. This might be onerous and more this next thing we talk about, it plays into this, businesses are burdened with a lot of stuff right now. A must read oped in todays journal by tom stemberg, on cnbc frequently, on squawk box, hes calling on congress to reduce regulations that he argues are killing jobs. Stemberg hails legislation proposed by independent senator angus king and republican senator roy blunt. They want to create a bipartisan regulatory improvement commission, charged with recommending cuts in the regulatory regime, similar to the defensebased realignment and Closure Commission created in the late 80s to reduce the number of military bases. He writes in 1986, we founded staples in large part because of what used to be an enormously productive American Financial system. The system that fueled entrepreneurship in 25 years ago is now being regulated to death under the dodd frank financial overhaul, which requires as many as 398 new regulations. The next staples and its 50,000 jobs may not happen because of this burden. We heard this from founder of home depot as well. Ever since the recovery has been, you know, not up to par in a lot of peoples eyes we have been seeing this. Welsh, three or four yoears ago every regulation. Some of the old regulations already on the books should be viewed with the prism of how theyre affecting job creation. What got my attention yesterday, gallups numbers for unemployment, theyre more volatile. They had a much higher number than what is being reported each mothe month. I would hate to see unemployment go back up at this point. Work is not done. We need it make it easier to create jobs. Tom says, i dont know enough about this, he says there is requires 16 million hours a year for vending machine and restaurant chains that they must do to comply with new food regulations each year. 16 million hours. Can you believe that . There is a license that magician owners must spend complying with magician. Magician owners. Magician owners . If youre a magician, you need there is some regulation about if youre going have a rabbit disappear. If you have a rabbit disappear in your act, which mandates you spend an actual fee, surprise inspections and there is a whole rabbit disaster plan. They cut, like, young women in half. You want the regulators around. You dont want something to go wrong there. I want to protect the rabbits. Thats a bad example for me. Magicians need a little i love magicians. If they mess up, bad things happen. People disappear, get cut in half, they drown in chains and most of it as, as max and henry like to say, it is pretend. A new report suggests the average American Household is earning less than when the recession ended four years ago. The Research Suggests u. S. Median Household Income adjusted for inflation has fallen 4. 4 in that time to 52098 a year. Everyone is worse off except for those who are 65 to 74. That is actually a point i have tried to make on this program and were defeated. You tie it to some type of income disparity and the growing income. This is all viewed through where you stand depends on where you sit. And most people would say this has been such a subpar recovery, because of an activist government that it has hurt the people that they purportedly are saying that they care about. And on the front end of all the programs, this is why theyre doing things. They dont ever connect the dots to see how theyre hurting their efforts. What is astounding about the stats, when you adjust for inflation, in a time period when we had very little inflation. Right. I think it does suggest that especially when you talk about the kids, 18 to 24yearolds, it is bad. If a lot of the recovery that were seeing is in asset values because of the fed and quantitative easing, the people that are going to benefit from that are going to be the people that have assets. So it is just if you dont if you dont improve the underlying economy, and the jobs picture you cant help everyone. If all youre doing is helping people that have 401 k s and people that own stock and real estate, thats the way it is going to work. You pass laws that make it more expensive to hire like obama care or raise the minimum wage, that hurts young people dramatically. Simple cause and effect for how it is happening. People at the high end are hogging more of the overall income, thats not simple enough to explain what is happening here. I wouldnt dissuade you of that view. We talk about minimum wage. You dont necessary necessarily think thats t think thats wait to go either. This is why the Huffington Post writes about you, from a negative. You do sound reasonable at times. I cant not all the time. No. Not under any means, but okay. Coming up, why the markets were so confused by yesterdays fed minutes. Did you see the intraday chart from yesterday . Up, down, all over the place, crazy. What you should expect in todays session. Squawk box will be right back. I hav e low testosterone. There, i said it. See, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. Serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. Tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. In a clinical study, over 80 of treated men had their t levels restored to normal. Talk to your doctor about all your symptoms. Get the blood tests. Change your number. Turn it up. Androgel 1. 62 . Good morning. Welcome back to squawk box. Im joe kernen with Andrew Ross Sorkin and michelle carusocabrera. Potential buyers have access to trial data on a new cancer drug, potential acquires include amgen, a hurdle was holding up deal talks, which you can see on the chart, when it was disclosed. Womens wear daily reports, they get a lot of scoops, andrew, dont know why, but theyre reporting George Zimmer is trying to put together a team to buy mens warehouse. One analyst tells the trade publication it is obvious the retailers founder will make an offer. Zimmer holes 3 to 5 of the company and there was a time when i said womens wear daily, but i dont say that anymore. It does a great job. They get a lot of scoops. They know the business. Right. Lets show you the morning markets. The big volatility the shmata business. The shmata business . If youre in the fashion industry, it is the shmata business. Shmata ball soup. Does that mean rag . A voice in my ear told me that, holly hunter. Do you put more sal tetines your shmata ball soup. I do. A lot of people just eat the shmata. Right. My father was in the business. The shmata business. The soup business. He got you the job at the new york times. Absolutely. A positive open right now, would open higher by 30 points for the dow, the s p by 2 1 2, the nasdaq by 9. Higher across the board. Over in asia, things stabilized, so and so. Shanghai lower by. 25 . Hang seng higher by a third of a percent and nikkei lower by half a percent. The price of oil, wti higher. Brent at 109. 6 per barrel. The tenyear yield, this has been the problem. Were now lower in the price of the tenyear by more than an eighth of a point, a quarter of the point in the yield at 2. 92 . What is your new rule of thumb . 100 dow points for every ten basis points. A tenth of a yield points. Im not talking about basis points. If it goes, for example, if it goes between 2. 9 and gets to 3, i think it is more than 100 points. Me too. Something psychological. We have given back getting to a point where were in that where that first correction got us a couple of months ago, back to where those levels are. Like a 4 decline. If only we had someone that knew something about the markets to discuss supply and what is there and the resistance level and support level. Want to do the dollar in gold first . I wish for it. There are thousands of companies in the s p 500. Really . I heard somebody we know said that once. Someone we do know. But in some of the averages, there are i think arent there more than 2,000. Some 1500 that include smaller stocks. Technically there would be a thousand and a half. I wish we had an economist that wore glasses to talk also with alek young. Morey harris is on our morey harris good morning. Chief economist at ubs with us and alek young. Ill start with you. I think yesterday the market seemed like it wanted it to trade up, but then something about those minutes came out. You still attribute each micromove that we see with the fed, is that what is dictating all the market moves. I guess it would with the thin trade i trading. Thats fairly true. The fed is unable to send any kind of consistent message about what they are up to. Theyre ambivalent about the outlook. The economist who followed the fed are ambivalent about the outlook. And in those circumstances, there is going to be, you know, wide difference of opinion. My own opinion is the fed still is going to taper starting in the fourth quarter. But the way theyre talking right now, it could be a tiny taper. And hardly enough to make a lot of difference. One question for you. And then alek. When does the tenyear or yields around the world, when do they stop responding to everything the fed does in terms of tapering by going up. And when do they just start going where they should based on Economic Activity and Economic Growth and what they use . Are we getting high enough now to regardless of what the fed does . They might stay where they are, or rates might come down based on the economy not being that strong . The studies of qe said that it was worth maybe 100, 110 basis points on the tenyear. We have backed up that much and a little bit more. It seems to me the markets are rationally b lly building in, t is some unknown pace, but over the next year, youre not going to have your qe anymore. Insofar as this is built into the buying market already, the markets have already taken the big hit on this. What happens to the stock market when the fed really does start tapering and the tenyear doesnt go up. In fact, even if it goes down, then the market you milwaukeeght get a rally does Something Like that happen . There are so many moving parts, it is hard to say. You may get the problem now is nobody knows when it starts, the pace, i think it is way too early for the stock market to start rallying on, you know my guess, when my kids are going to the doctor, it is like it takes three weeks to worry about the shot. They worry about the shot and leading up to it, the day of the shot, and then the shot is done, and theyre, like, that was the shot . You spent the last week worrying about it and could it be the same thing . I think well get right now, when do we get the first move . Most people think september. Maybe we wont get guyett quite as much. Once theyre comfortable with the pace that the qe removal is going to take, then you set the stage for the rebound, the relief youre talking about. I come back to the basic question, we think a lot of people went to cash because stocks sold off at one point as are bonds, right . There is cash. When people have to make a final decision about where to redeploy the cash, fixed income or stocks . I know the conventional wisdom is theyll go into stocks and well have a great rotation. The number shows something different. Theyre buying different bonds, buying shorter dated bonds. These etfs are sucking in billions of dollars. They earn 4 . Not cash equivalent. In terms of your ability to move and redeploy if you need to . Most Institutional Investors would agree there is better longterm value in equities. The public doesnt see it that way. The fund flows dont support that. They dipped their toes into stocks, seems to be coming more from cash. Within bonds, selling longer dated Treasury Bonds but buying shorter dated corporates. Not dont forget, these are Bond Investors if they like stocks, they might have been stock investor in the first place. They seem to be trading to safer bonds. Doesnt mean they cant move into stocks overtime, but were not seeing a mad rush. Morey, you still feel the economy is sort of okay. It would be bad if think started tapering and we got to 2 . You dont expect that, that the economy is weaker than we think now, do you . I think what is important is youre probably going to see the job growth at around 200,000 a month and that ultimately the feds goals are more about a labor market than they are about gdp. They keep revising the gdp so much, you dont know if youre at 2 or youre at 2. 5. But when those unemployment claims stay relatively low this doesnt get revised. Good. Morey, thank you. Appreciate it. Thanks for coming in. I wont ask you this question. When you were a kid, you would rather have a shot in your arm or in your do you remember . I never wanted one that seemed much worse, didnt it . I think arm. It seemed much worse. He tried it. I never liked it when they took the blood from my finger. I thought that was the worst. You get any shots in your how about you . How many vials of blood. Arm. I hate shots so much, i would run around the Doctors Office they would have to chase me and i would kick and scream. It was a scene. Doctors, some doctors prefer arm, some prefer ass. I think im an arm. I wouldnt let the guy you got that achy thing going on when you yeah, yeah. It would stay with you for a while. We have to go. You probably heard about big data. It is becoming a buzzword in many industries. Is it shaping up to be a big bubble . We have one opinion on that question next. [ male announcer ] this store knows how to handle a saturday crowd. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Big data has been getting a lot of buzz. Tech buzz during the last year. Some see it as the next tech revolution. Others see it as a bubble. Big players, particularly google are upping the ante and taking it to the next level. It is called deep learning. Many consider it to be the holy grail of who the whole big thing is all about. Joining us from las vegas, derrick harris, senior writer. Haunk f thank you for joining us this morning. For those of us that dont know what deep learning is, we have a hard time appreciating the significance of big data. But on the deep learning end, what is this all about . At the risk of vastly oversimplifying it, deep learning is a way of building computer models that are as accurate now as we can get at recognizing the features of various things, what they call multidimensional data, it can predict that something it can look at the futures and recognize it. Ill give you a reading the notes here, there is a great definition here, when computers are able to learn and grow on their own . Is that possible . To a degree, right . It is based on a concept called neuro, but based on how the human brain learns. My daughter looks at enough pictures of castles in disney movies, she starts to think that casinos are she has the features right. One example, youtube has it right, it featured where effectively youtube learned or google learned to be able to look at cats and dogs and figure out what a cat and dog looks like every single time, for the most part. They built a model that could decipher things. How does it know it is a cat . It wouldnt. Someone has to go in and train it to say it is a cat. Im counting on the laws of sing latulairity singularity, when machines know a thousand times as much as all of human knowledge, which will occur at that point, that we have no idea what the future might bring when things are that smart. And what theyre going to be able to do. I saw someone, a neuroscientist, and anyone in the current milieu will always underestimate what is possible, because they dont know what can happen. But he said the brain can never be replicated because it has its own revolutionary copy right protection. I heard the opposite. What were trying to create is a unified theory of the brain. And once we have that, the machines will run like our brains, but only much faster pace. I want it to happen. I faster pace. Id like that to happen. I have a grid picked out for my family. Is that just a pipe dream, do you think . Actually, google brought on the goodfather of the singularity teary. They have a university called singularity university, which i have been to. What google is doing is work on Super Computers are doing to simulate real life activity like trillions of neurons at a time. Its only 2013. Were talking kuring all disease by 2030. If you look over the history of the earth, you can pick out these water shed moments. Were on track to do this, theoretically. Have you read this, singularity is near . You need to. I am saying, listen, were on the cusp of being able to predict lets say or treat diseases i think very, a lot more accurately based on big data, certainly. Again, i say thats real quick, before we go, what you see happening is we have all these companies coming on to say they know how to analyze big data better than anyone else. Google seems to be the only one out with this newark texture for how to do this from a machine made way to do it. Do you see others doing this . How far ahead is goggle relative to the rest of the world . There are some things they are working on. Gockle has a lot of very smart people. This stuff takes a lot of computing cores and a lot of ability to program things that run across hundreds of thousands of cores. Google is one of the companies with the brain power to do it. Thats yits on the forefront. Thank you so much, derrick. Appreciate it. Have fun in vegas. We do hope the machines are noise. They think they may create a machine that will do these things, we dont know it yet. Is it malev lent . Will they not need us anymore . Still to him co, hunter killers . Hks, do we send someone back in time to make sure the person we just had on was never born . I dont know. We will welcome fovrm former goodman sax international, the global markets, growth in china and much more once squawk box will be right back. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. 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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. See, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. 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Take a look at the futures after what was a roller coaster day, this morning the dow looks like it will open 15 points higher. The s p higher t. Nasdaq close to 9 points higher. Lets get you through the Morning Headlines this morning, retailer sears are out with quarterly numbers. Sears lost 1. 46 per share for the quarter. The taken says an increase in promotional activity resulted in what they are calling a meanlingful jump. U. S. Comparable store sales were down 1. 5 from a year ago. Of course, many of the retailers have been hit across the board. Also, we should say in the spotlight, dow component Hewlett Packard gave a downbeat forecast for the full year. Ceo meg whitman will be a special guest at 9 00 a. M. Eastern time. Also signs of improvement in the widely watched august purchasing Managers Index rose to 50. 1, which indicates an expansion of manufacturing activity, they had been contracting in prior months as the Economic Growth rate fell to the slowest in two decades. Also, chinese politician is denying taking bribes from a Development Corporation as this trial is getting under way. They accused him of a scandal in decades, its pitted, the social programs against the, what were calling the capitalist leading stance taken by the leadership in by a jenning. It is exposed to business in the communist party and the trial will last two days. Chinese state broadcaster says the verdict will likely come in early september. I do want to talk to formats here. You know a little about china. Dont you . The formats is here, under former politician of a lot of different stripes. Now you are a private citizen. Actually, after hearing you talk on the show, youve come around to a lot of the free market views. Its good. You got out of the beltway for a while. Should we tell people what were discussing . The most recent thing i saw was the current leadership in china, suddenly its very maoist again, the whole trial might become, they might lose their will really to make a big deal out of this since theyre embracing the big thing he was talking about. I think it has been about the focus has changed considerably. One, theyre trying to improve, from the foreign investment, because wages are going up, theyre looking for higher end investment. If they want to get higher end investment. They have to have intellitual property. You saw the president is talking about the anniversary. Suddenly, hes made a concerted effort to be much more. You talk about mao a lot more than the previous guy. I think he does that, in part, because it strengthens the legitimacy of the communist party t. Policies are much more plomarket oriented. Theyre focusing. In here. And there. With the current administration. Another geopolitical situation. Opposition forces in syria, asking for chemical weapons inspectors to verdict the region hit by an alleged chemical weapons attack. May have to bait as alassads forces continue heavy development around damascus. If found true, it would be the worst chemical weapons attack in the countrys history. Nbcs Richard Engel will join us in just a bit in the latest of what is turning out to be a horrific story. Joining us to talk about this egypt unrest and how it can relate to your money, bob hor vats. We introduced him. You didnt read joe. Oh, i missed it. I need glasses, i definitely need class ifs. I know, i dont want to wear them on tv. They look good, though. Theyre red cat eyes that they match that dress. If you put them on, youd be red, white and blue. You had them on the other day, were you former under secretary for Economic Energy . So you are under there. You were like a vice chairman or former champ of some part of Goldman Sachs. Never the top of any of these things. To be secretary of state you can be on top. You were almost secretary. I was the economic guru for hillary. So it was the kind of job i wanted and actually had some opportunitys to make some progress on issues. The middle east is one area where we tried to make progress. We didnt nearly do as well as we thought we would do. Largely for the reasons this is an area thats deteriorating as we saw yesterday. Egypt is very, very pom larized. The whole region, itself, is in trouble. It does have as you suggested an impact on the u. S. , because it impacts the stability of the energy markets, not that those companies produce energy. They have a widespread impact on saudi arabia and the gulf. I think the gulf an saudi arabia are more confident about the government in egypt today than they were under the morsi government because they didnt like the brotherhood. They felt they were doing a lot of things that interrupted the flow of their relationship. Now they feel more comfortable with the military government. They think it will bring stability. With stability. Saudis have to deal with their own internal problems. Maybe the rise of an islam ec. Yes, they were. Dithey did not like the notion that the Muslim Brotherhood could have been interfering. If it wasnt for watching the, what in this, you know, we put our values on the way other regimes act around the world and suddenly, you know, we do seem to do it selectively at times, right . We do. But in the long run, wouldnt we prefer a secular egypt that had less involvement of islamists than the muslim brothers. They did win the election. We do believe in democracy. On the other hand, we did express more and more concerns about the lack of freedoms that the. The dismantling of democracy happening on a daybyday basis. Freedom from minority religions. Those were of major concern. The big concern for the egyptians is they want more democracy. They want more jobs. The part of the problem that the brotherhood has, it didnt create a lot of jobs. So the average egyptian feels unempowered. We focus so much on the vote. It is my understanding of the military, we dont know how much do they control of the economy . They control a lot of the economy. More than half . I would say the conventional number is 40 . It could be considerably higher. I have a major role on the economy. No question about it. So you have a problem with Economic Freedom as well . The Economic Freedoms are not of the military control, of the economy, for the average egyptian, low income egyptian, who is pretty well ed kated. They dont have opportunity. The way tunisia and egypt. Were all about the economy, absolutely. And giving people opportunities. If this government will give people jobs that, will help stability and in turn military sfaeblt will create investment. We will keep discussing this. Coming up next, education secretary arnie duncan talks affordable education. Then a revenue slide for tech bell Hewlett Packard the company trying to deal with a declining pc mark. We go through the numbers. Cnbccfo Economy Numbers on the state of the economy. We have ceos coming up. Squawk box will be right back. Welcome back to squawk box. President obama helping the middle class with affordable education. Joining us with the details, u. S. Secretary of education, arnie duncan, thank you for joining us this morning. Good morning. Thank you so much for the opportunity. Lets walk through this so the audience understands what the president is about to layout. There is a lot of people who have questions about whether we can reform education, whether we can make it cheaper, whether we can actually improve the situation when on average i think the number right now is that College Graduates are coming out of school have 26,000 of debt. How do you fix that . Well, first of all. At a time when going to college has never been more important, unfortunately, its never been more expensive, everywhere i go, the grocery store, middle class folks are starting to think college isnt for them. Its a risk. How do you fix it . We will try to do a number of different things. First of all, we will be more transparent around information, where can young people get good value . Where do they have good Graduation Rates . Are they doing a good job . Ultimately, we want to help move Financial Aid towards institutions doing a fantastic job and be successful. You will be creating ratings system . How is that ratings system work . Because i can tell you that u. S. World reports, u. S. News and World Reports created a Rating System two decades ago. Some argue that system ruined College Education because it created all sorts of perverse incentives about how these statistics were created . I think thats really, really important. We will do it thoughtfully, we will go across the country. The president and i listen to people. You want to look at Graduation Rates. Are they improving or not . Are schools doing a good job of serving the middle class and low income students . What happens with job placement at the back end . I think what American Families are looking for is security. They will have a chance to go to college and wont be burned by debt in the back end. What do you say to folks, conservatives, whatever you subsidize something that everybody already wants, it only gets more expensive. One of the key reasons why the cost of a College Education is rising so rapidly, is because the government subsidizes it so sharply. I think its much more complicated than that. For me, its about shared responsibility. We at the federal level need to invest to make higher investment affordable. We can not do it by ourselves. States have to invest. Too many states have walked away from higher education. Have subsidies caused a rise in the price . Absolutely not. Finally, universities have to do a better job of containing their costs, focusing not just on access by completion as well. So when all of us are working together at the federal level, states and universities, were going to see good things happen for young people and for the middle class. One thing i missed in going over, this is bob horvatz the emphasis on stems and mathematics. You emphasize the importance of enables universities or encouraging them to produce results. The question is, are they plowing results in areas that will enable kids to get good jobs and Science Technology education, mathematics is something this country needs. Is there going to be a special emphasis on encouraging people to take courses in that area where there is a lack of stills i skills, a lot of companies are locking for people, in many cases hiring them from abroad . Cant we do a better job there . Cant the government do more to encourage people to take those courses and succeed in those courses . We feed to, obviously, as you said, absolutely, correctly, so many jobs in the future in the stems field. Yes with eneed to focus that in college. There, its too late. We need to look at the k12 system as well. The president is challenging us to recruit 10,000 stem teachers so in 3rd, 4th, 5th grade, that i have access to teachers passionate about teaching that content. If we wait until college with key do some things. We have to look at the continuum, start with our babies. Is there an argument if you offer a pell grant, perhaps a true capitalist would say you should offer more money at a better rate if you are going to go into stem right now. It, to the extent the country wants to promote that as opposed to being an english major, you know, i like a lot of people are in this majors. Is there any conversation about how do you incentivize students to do that . To be traveling the country and listen we heard those kind of ideas. I think its important we incentivize universities to not give access people on pel grants but make sure they are graduating. They should give more resources. If folks are doing a bad job, Graduation Rates go down year after year, im not sure thats the best for the taxpayer or the family. Im all through the k through 12 emphasis on stems. Its not Graduation Rates, its what they graduate into. What fields and that strikes me as something that would be very important for this program and for k through 12 as well. But were simply not turning out enough people and whatever you do, that is going to be critical for the future of this country. So i applaud the emphasis. It seems to me incentives will be ned to get more people in that field. Mr. Secretary, i know you got to go. Is there anything in this program that you think fundamentally bends the cost curve on education . We want to dramatically reduce the cost curve and make sure people arent burned at the back end. We see many institutions doing three 84 degrees. They go in high schools, that changes it . We node to build best practices, create incentives. We have to significantly over time redo us the cost of college, make sure families have that security, that they work hard, they will have access to higher education. They will not be burdened by debt in the back end. Thank you for joining us this morning. Its a program worthy of conversation. We hope it succeeds. Thank you so much. Coming up, some yahoo will have them shouting yahoo. Earnings from ab ambecrombie and fitch. We will go lou the numbers next. Squawk box will be back after a quick break. 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. [ 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 ] starts with freshlymade pasta, and 100 real cheddar cheese. But what makes Stouffers Mac n cheese best of all. That moment you enjoy it at home. Stouffers. Made with care for you or your family. Welcome back to squawk box. The dow opened 15 points higher. The s p 3 points higher t. Nasdaq up about ten points w. Rewatching abercrombie and fitch t. Retailer reported a quarterly profit 12 cents below estimates and revenue well short of consensus. Ceo Mike Jeffreys saying the quarter was more difficult on weaker traffic and soft result for womens apparel, Comparable Store sales fell 10 during the quarter. When we said higher going into the break, i guess they meant a higher than a year ago is all i can. Popping meant a like exploding air coming out of the it was used in a way that well, i use popping. The bubble popping. I think what they may have meant a. You see that slide. I used to boy a lot of abercrombie xargo shorts. Khakis . No, my wife says ixnay. Its not allowed anymore. Its like when you have negative gdp growth, it was trading higher in a negative way. All right. Yahoo raising some eyebrows this morning. Especially at google. They say web traffic for yahoo surpassed that for google for the First Time Since may of 2011. Yahoo had 196. 6 million unique monthly visitors compared to googles 192. 3 million a. Notable when for marissa miary former googler who made a number of changes at the struggling company. Theyve acquired a number of site, tumbler numbers were recounted separately. Ry expected to reveal a new logo in 14 days. Okay. So we have been talking all morning about how its possible yahoo own sites had more traffic than google since that may north dakota no sense for every day. We use google many times a day. If you are shaking your head saying you use google all the time like i do, frankly the key to understanding what is going on the metric is monthly you fiocco visitors. Visitors only counted once in a month for the matter how many times they return. Thats the critical piece. I can go to goggle 50 times, its doesnt matter, with 67 of market share in june, doesnt help. Also, these monthly comp score numbers dont include mobile traffic. If you are on your iphone or android, guess where you are going most of the time, google, which certainly would skew those numbers highner googles favor, an argument can be made the numbers could have been high fer the traffic from yahoos big acquisition kirn werent counted stratly, meanwhile, with eshould note microsoth, facebook and aol round out the top. That was complicated. It was. Explains it a little bit. All right, robert horvatz is a former chairman of Goldman Sachs. He is International Guest host of the hour. A man of mystery. I want to recreate the conversation you and i had during the break when you sat down. You were complaining about the number of lobbyists. You had stats in washington. You had hadnt been to washington for a number of years. Tell us what your insights were. It does trouble me there is a lot of lobbying going on, money is playing a much greater role in washington. I was in washington 25 years ago t. Role of lobbyists and the role of money and compluns of money was considerably less then. Its in part because the government has gotten so much bicker. In part because lobbyists and government really have very specific goals and they influence the way laws are created. Its a large measure because various interest groups, sometimes for legitimate reasons, sometimes not, want to get their particular point in the law. So if they become more complicated. Its a self reenforcing front. If we had less government, we would have necessary e less lobbyists. I think we need simpler laws. This is physics. If we had less governments. We want the government to do more government protection. We want more regulation. You agreed with me during the break. I agreed the laws have gotten much more complicated. The troublesome factor is for the average american, they see government as a sort of on inside game. Because of this . Because to a large degree it is. They feel that the role of money and the role of this inside game give them the average american less of a role. What percentage of the senate become lobbyists . Roughly, half of former senators engage in lobbying of some kind, about a third of the members of the house. They do nothing when they are senators. Thats another matter, joe. Totally inoffensive. I dont think they suddenly become offensive. Thats another matter. If you are sitting out in kansas, you think washington is doing things that essentially serve the interests of people in walk, its very corrosive of government. The role of money for the average citizen is troublesome. Most countries dont have these hugely expensive schedules. You pass a huge health care law, then, of course the entire Health Care Industry is going to hire lobbyists understandably to understand what is going on and influence the outcome. Or anything else, the average person doesnt know what is the low. The average congressman doesnt know whats going on. Do you think nancy pelosi ever read the Health Care Bill . First of all, no congressman has read them in full. Theyre very long. Sometimes theyre put in there at the very last minute. Will you work for hillary if she wins . I support hillary. I enjoy her, i support her. In your mind she is running . She hasnt said she is. If she does run, id support her. She demonstrated that. She when to the welzly. I do know that. She did a great job at state. Because you are an alum together . One of the things we were able to do, hillary under her leadership was much more supportive of the Business Community and the private sector. According to her choice, what turned out. Largely because we see a lot of jobs the prochtability from export markets. One of the roles we played was to support American Companies that were engaged in disputes. Did you see the last time biden went up against hillary. He got like, this is, i dont want to see this because i you feel bad for him . Hes going to get beat up . Not just beat up, it would be sad someone who served this country. I think he would get absolutely shellacked. I think hed get 4 votes to 15 million. Hillarys more robust than four years ago. I will not get into politics. I think she would be a good president. The Business Community would love her. If you heard this morning, packard scales back ref now growth promises and shufments some executives. Then cfos unite. Council has been called for session with squawk box. We got tech, the Global Economy and how rising Interest Rates are affecting Business Plans for the future, all coming up. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back to squawk box. The latest initial jobless claims. Economists are looking for 330,000 claims from last wooekd week, the u. S. Isnt the only place where Government Bond yields are rising. German bund yields touched their heist. Sentiment has been impacted on concern over the feds next move and better than expected euro zone business activity. Goldman sachs is evaluating a Technical Glitch that caused a flood of option trades earlier this week. At the same time sec officials are looking into whether the problem violated any rules. Estimates of how much all of this will cost have varied widely from a few Million Dollars to hundreds of millions of dollars. Disappointing result, abercrombie had Second Quarter estimates by 12 cents. Revenue was well short of consensus. Same store sales fell 10 . You look to the right of the chart, it looks like its fallen off a blip. Joe. Serious opposition demanding the United Nations inspectors investigate alleged chemical weapons attack. Nbc chief correspondent Richard Engel joins us. This is the last way we want egypt to fall out of the headlines, richard. What can you tell us new that we didnt talk about yesterday . Reporter well the Syrian Rebels arent the only ones asking for the tr u. S. Teams to conduct immediate investigations. The u. N. Teams want to do it, themselves. Instead, they are in damascus, a few miles away from where these alleged atrocities took place and they are holed up at the Four Seasons Hotel denied by Syrian Government authorities to visit these sites to collect soil samples, to do interviews. 35 countries are asking for u. N. Investigation, including washington. We still dont have a very clear death toll. The estimates range from hundreds to well over a thousand. Syrian rebels say they think it was a series of chemical weapons attacks launched on about ten different villages to the east and north of damascus. Of course, the Syrian Regime says nothing happened. It didnt get anyone, this is being invented by the rebels. So, richard, considering that, you know, the inspectors just got there. Some people are saying why . You know, i guess just because you had asked the question, why now . Maybe they took that into account that that could give them plausible deniability. But do you know, is it possible that the rebels have access to this and could have done this as a way of tarnishing . Is that possible . Anything is possible. Weve spoken to chemical weapons experts. They say that the scale of the what is allegedly happened here would suggest not an improvised chemical weapon but something that was weaponized, something that was quite sophisticated. Not something that a Rebel Movement could cook together. It is possible. We have spoken to intelligence analysts in the past. They believe that rebels have been using or experimenting to try and use toxic gas, chlorine, cyanide in the past. Its not the easiest thing in the world to do, to unleash this kind of atrocity and to do it in a coordinated way and to do it in a coordinated way, in multiple villages and have everybody in on the conspiracy seems challenging. Can they keep these people held up at the four seasons without eventually it becoming very clear that, you no know, theyre dock that for a reason. They did do that . 5 miles away. You dont see bodies. 4 miles away. You dont see bodies without any wounds. They dont just appear. How long . Its like a charade. Well, you know, people talked about these events being stagedment we saw images, some of the images broadcast on tv are somewhat sanitized compared to the raw najs out of syria. We have seen rows of infants and todd lers dead, still lying under blankets. You cant fake that kind of thing. You cant line up 21yearolds and tell them to play dead for 20 minutes. While theyre being moved around limp in peoples arms. Something clearly happened. There are no external wounds, how long can the Syrian Government keep people holed up at the Four Seasons Hotel . Quite a while, because in the past, syrian i syria has been acting with impunity and happens not been punished in anyway. People have already been yelling at syria. The International Community has put sanctions on syria. The regime has continued pretty much undeterred. It still has the backing of iran. It has the backing of russia. Ilt it still has the backing of hezbollah. I think the regime thinks the threats from france and germany and Eastern Washington are fairly toothless. Richard, how do you and your team decide where you go and is there a discussion about you heading there and would you be allowed to visit the places to see for yourself and is that on the, are you discussing that . Yes, of course, we discuss these kind of things, but if you look at a map. To get to those areas to the east and north of damascus, you would really have to go with the Syrian Government. You would have to get a visa, land in damascus, show up as the journalist. Have the government welcome you in. Then allow you to go there. Because you have to pass through checkpoint after checkpoint after checkpoint. Its not something we could do different. If we illegally cross in through lebanon or turkey or jordan, we wouldnt have to tra verse miles and miles of hostile territory that would probably take days to get there and the way things are in syria right now, i think the chances of making that trip and surviving it would be fairly low. At this stage we do the best we can. We see if this situation changes on the ground. Can i raise one question about the russians . It seems to me the russians are key to a lot of this. The United States have been putting pressure on the russians for some time to take a tougher view on the policies of the Syrian Government. Is there a chance now with this set of incidents that weve seen that the russians will now be more willing to put pressure on assad to make the changes are you suggesting to open this up to allow the u. N. Inspectors to come in. Sound to me to be a key element. Without the Russian Security council and elsewhere, the Syrian Government is in a much more vulnerable polgs. It could resist. Well have one less strong allie to support its resistance. So far, russia has shown no signs of giving up on its allie in the region. Russia feels its on the right side of history, believe it or not. Not just because of the incident yesterday, but in backing the strong man of syria. Moscow thinks the tide of history will prove it was right. Look whats happening in egypt, having the military come back. Many arab states supporting the reemergence of the strongmen. I think russia is going to decide, no, were going to stick with our allie. This was a dark period, but our decision was right. Im aware of the russian role. But. Russia already by the way said that this was the rebels who did this purposely. Im aware of what assad said. Even if you would. The russians run the risk of a fragmented syria. They certainly do. I think we have a fragled syria right now. Russia seems to be taking the bet that its better to back the strongman and let him contain syria than to back the Rebel Movement and have them take over the government. Its a very dangerous play. If these u. N. Inspectors are let out of the buffet line at the four seasons and get to the area where they can do their tests, that would only determine that, in fact, weapons were used. They do have to figure out who used them. Dont forget, the last time there was a major chemical weapons acrossty that was eventually proven to be carried out by Saddam Hussein in 1988, it took the u. S. Four years to determine exactly what happened and who was responsible. Richard engel. Thanks again for your time you gave us. I dont hope to see you again, obviously, if something hams. Reporter thanks, a lot. If something does, we really appreciate it. We want to talk to you again. Reporter no problem. We havent shown the video, its horrific thats come out of year. You pick up any paper, the photos are just awful. The worse problem is this will continue if nothing is done about it, we could see more of these incidents. This, unfortunately, could just be the beginning, whichever side is using it. They might decide they can get away with it. There is no inspection, that i can do more, which makes this more polarized and violent than it already is, which is bad enough. All right. We will make a tough sec way back to corporate news, Hewlett Packard says hope for Revenue Growth next year is unlikely. Joining us on the latest quarterly results, jim, good to see you. Good morning, nice to see you. Well, the software ref now got better in. Thats right. It was a pretty tough quarter, right, the future didnt look so good eitherer . I would say the big thing is the stock price is up 80 yeartodate. People expect a beat in raise. Last night during the earnings calm, they kept it in line. It brought in a lot more question, Management Changes and loss of share in their server business. Thats some real concerns, theyre making it more difficult for investors to truly believe the turn around story. What do you do with this stock . With a huge rise like that . Suddenly theyre telling you the turn around story that rise is built on is in question. Could it go further from here . Well, i definitelity we will see a pause. You see what that stock did last night during the Earnings Call, it got worse and worse and then worse as the Earnings Call progressed. More and more questions came up. You would expect the Ceo Meg Whitman to have the right people in the right place. She made some more Management Changes. Is she the right person for this. I think so. I really do. People want the people in the right place yesterday and six months ago. They dont want to hear about it today t. Stock is going to pull back near term, you asked what you do with the stock . I think people will step aside and wait and say hey up 80 84 to dakts, lets take a breather. They will set the stage for next year. Thats key event. I expect us to come back and talk more about that. Would you break up this company . This seems to be i dont know, there is a bit arguments made this is a troubled company. They have tried in the past but have been unsuccessful to do. So i think going down that road is a road unlikely to happen. I think you cut costs and focus on the services area. I think going down the road, a breakup is a road they have gone down before. I dont see a breakup in the works. All righty, jim, good to see you, thanks so much for joining us this morning. Thank you. Up next, the cfos of sap north america and t. D. Ameritrade on the latest signals. The Global Economy, how these guys are positioning their companies for success and check out the results of our armchair analyst poll. We asked you at Hewlett Packard if rules would meet, Beat Estimates . 25 got it right predicting hp would meet earnings expectations. A programming note, meg whitman will join squawk on the street. Its jim and carl. All right. Theyll do great but then that will be you and carl will do a beautiful job. Ill be watching quite attentively. All right. Well be right back. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Thegood and close. Q10. Discover the new way to help keep teeth clean and breath fresh. New beneful healthy smile food and snacks. Hell love the crunch of the healthy smile kibbles. Youll love how they help clean. With soft, meaty centers, and teeth cleaning texture healthy smile snacks help keep a shine on his smile. Its dental that tastes so good. New beneful healthy smile food and snacks. Every day were working to and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Hows the health of the economy . Heres one metric Corporate Tax spending, an economic bellwhether. The investment equals a snapshot of Economic Health . What is the currentt trend . We will turn to our exclusive council in studio. Here is the president and executive Vice President bill ge ber, from philadelphia, sap north america, joel bernstein, how is it at this point . Were still spending quite a bit on technology, its obviously our core business. Thats your business, though . Exactly. We spend a tremendous amount of money on, i think our guys in technology will tell you we are not spending enough. Goldman sachs is probably not spending enough. Obviously. That was a comment on that situation. No. Stay away from that one. I wasnt asking, can we push the conversation to the us story . I think it will play a huge implication i would think on how corporations are thinking about health care in america. I dont know if you saw what ups is doing. That i are announcing they are cutting off spouses who have jobs, who have jobs that pay for health care. So if they dont, then you are still on the roll. Otherwise, its a major shift, the question is whether other American Companies will do the same. They say its obamacare pushing them towards this. We have not made a decision or discussed Something Like that. So that would be very unique situation. I do ut that we would go down that path. Are your Health Care Costs rising because of obamacare . Yes, why . The implementation of obamacare and the different penalties, et cetera, so our costs will be going up. Are you forced to cover more than you used to . Preventative care is now free . That kind of thing . Yes. Everything you heard, you agree with all those things sore it different for sap . No, i do. We are working to change our strategy right now to avoid incremental costs to the extent possible. Generally, im in agreement. What does that mean . Well, there are certain policies that you provide as an employer that are too rich, actually, under obamacare. So we have been working to you valuate whether or not that benefit plan continues and how to mieg great to something thats what are the implications . The implications are too rich, meaning that that he can heck that it covers is in excess of what obamacare would allow companies to provide without incurring that penalties or tax disadvantages. Its one of the items they have complained about, the gold plated ones. I thought if you liked your plan, you would keep it. I guess not . You knew this was something you could say and not be sued for libel or slander, it was never true. That was one of the things that got me right, right from the start. Because that was like a red flag that were not really talking about this honestly. As you know, these laws tend to get adjusted from time to time, every big law does. What adjustments would you like to see if there were adjustments, not complete elimination like some people want, what would be the priorities for you . Is that a question for me . Yes. You know, we need to evaluate that more closely. I dont think weve fully appreciated what the impacts are to our company are. I think the highest risks are in the lower wage employees and honestly being in the hightech industry, that is not a major factor for us. All right. Gentleman, thank you. I am trying to, when you say the law, itself, would not take an employer plan away from you. So that part is true. If you like your plan, can you keep it. You dont have to go with it. But if your employer then ends the plan, which everyone, that was what we were all talking about was going to happen. Employers are going to exit and let the government cover it. Can you keep your employer plan if your employer ends it . I dont know. You cant. Im just saying that thats why that statement was false. But you cant keep your plan if you like it. If you like it, you can keep it. Your employer might not keep it. That was always disingenuous. So one of the things ups is saying on this whole front is because there should be cheap affordable programs out there for potential shous spouses and things like that. Obviously, everybody has to provide it. Then your wife or husband will provide it. The critics of what ups are doing are suggesting it has nothing to do with the official cost of obamacare. This is a nice way to cut the costs, in fact, the spokesman made a statement suggesting that their goal was to keep their Health Care Costs flat or actually below where they were before. Some people are without obamacare . That is, there are people that say that. The gold plated plans. There is an argument. It will fall by the wayside. Coming up, reaction to the fed minutes, from former fed head larry meyer. Check out the futures, this morning, theyre suggesting a slightly positive open. Squawk box is coming right back. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easytouse platform. 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Indias finance minister says india will infuse 140 rupies to help state run banks. The dollar versus the rupe. Its gotten hammered. The dollar is suffering in the rising Interest Rates in the United States. All right, coming up, perfect rating from the federal regulators. Tesla cruising down the road of success. Cnbcs phil lebeau sat down with elon musk to talk about the business and expanding the car line. Its an interview you cant afford to miss right here on cnbc. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or Breast Cancer. 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Why didnt you just go home . Thats your home. Are you too good for your home . Answer me well ask s p economist. Elon musk planning to ramp up production of tesla model s. He sat down with phil lebeau for a oneonone interview. Weekly jobless claims hit the table 8 30 a. M. Eastern t. Third hour of squawk box begins right now. Welcome back to squawk box, first on Business World wide, im joe kernen, becky quick is on vacation. Our guest host is robert horvatz former undersecretary at the state department. She was vice chairman at Goldman Sachs. You dont create options there, do you . I never learned that game. First, though, Andrew Ross Sorkin. What is your middle name . David. Robert david horvatz. What is your middle name . Joe richard kernen. We have shares at abercrombie and fitch falling sharply in retail trading. They reported 16 Cents Per Share. It was well short of consensus. The cfo saying it was weaker customer traffic and softer results for sales of womens apparel. As i said in the last how far, my wife banned pe from buying those cargo shorts. I think that has a huge roam. She says i shouldnt try to pretend im in college anymore. Also, retailer sears out with quarterly numbers this morning. Sears lost 1. 46 of the share a. Wider loss than analysts were expecting. They say an increase in activity. U. S. Comparable store sales were down 1. 5 from a year ago. And dollar tree earned 56 Cents Per Share for the latest quarter over sales earnings and Profit Margins higher than a year ago. Hewlett packard matching wheat estimates. They report a 9 decline. The Largest Division. A key part of the turn around plan t. Companys outlook was disappointing. Hp ae nounced it is shuffling to top management ranks. You can see over 7. 5 in premarket action. Ceo meg whitman will be joining us at 9 00. Who wears the pants in my house in. I wish i could tell you i was wearing the pants. I dont. Thats clear. Its kind of sad. Actually, joe and i can agree. I can enforce. You are saying you will wear the pants . I will wear cargo pants. I wear those all the time. What are you allowed to wear then in terms of shorts . You have a new love playing pocket pool. So how about an away game . Call my wife after the show, you guys can decide. Check that out. I did not get that. Away game. Thats good. Never mind, lets get a check on the markets. Someone elses pocket. Oh, i see. Got it. Both of you, at least horvatz is laughing. That is no laughing matter. Stocks closing near session lows. Right now suggesting we would have a rebound, not by much. Now about 2. 9 . Again 2. 911. Liesman was laughing. The annual jackson hole retreat, Steve Liesman joins us with more. How quickly can you get back here, steve . Why do you need me back there, joe . Someone has to laugh at my lame attempts at high school sophomoric rumor, which is what you are probably doing out there right now. Go ahead. Look, what happened i think yesterday is interesting. I think there was hope from collarty of the fed minutes. I think they gave us anything but that. Just to be clear, theyre not designed to be a policy statement and to that extent, i think they were through to a fed that is uncertain about the growth outlook. Here are my headlines from the minutes yesterday the committee was split over taper timing, a few members said they should stick to the plan, it might be time to taper. A few members said the feds should be patient. Finally a number, less kft about Economic Growth. Notice participants, all people in the meeting. The members are the voters. Its those second and third headlines, the ones to watch. Theyre very careful about that particular language. So you have the uncertainty about the morning and the effectiveness. Finally, will is the uncertainty about the leadership. I went back. What month have president s typically chosen replacements. Here are three examples. In 1987, greenspan was nominated or named in june. Per anything in was nominated in october. Then again in august. So it could come any time. There is a february and a may in there. So little instruction that can come any time. The one interesting thing it did come a couple days after jackson hole. I think that was in 2009, so there is uncertainty about the leadership. It seems to happen every four years we come around here. It is unclear who will be the next chairman. So add all three up, certainly over the fed policy, the leadership, Economic Growth. Other thing we will debate is the effectiveness, a bunch of academic things on that score. We will have three fit president s tomorrow . Three fit president s tomorrow . Dennis lockhart from atlanta. John williams from san francisco. Spanning the country east, middle and west. We are going to try to get some clarity. My personal take for what its worth is that this lack of confidence in all of these three things, especially policy and the Economic Outlook is dovish for a taper in september. With a lack of confidence, they may not want to pull the trigger. I want to add one thing, joe, they gave an interview to the wall street journal the president of boston saying if you are not sure you should move small or incrementally. I dont think thats what the fed will decide. I think if they move, they will hoff in some large krung chunk. It may wear the day at the fed. Gildan stern, is he dead . Listen, the one thing i came up with a couple things i need. Thats why i wish you were here. I would have run them by you. Summarize it really quickly. Number one, we watch all of this and watch what the stockmarket does, thats what we are focused on. We are below 15,000 now, in the middle of a correction. Its been a crappy two or three weeks, steve. My latest thing is for every ten yield point rise, every hundreth from 280 to 290 on the tenure, i think we are losing about 100 points. My question is when do we get to the point where ten years would be naturally based on the economic backdrop of the United States and the rest of the globe and if we do get there, even if the taper talk continues and even if they start, if we see that yield not move at that point because its where it should be, will that cause if stockmarket then to say, hey, we will be okay. We will go higher . Do you think its 3 , 3. 1 . What is the number why we would get to where every time we would get scared we dont have another 10 points a yield on . Joe, i think thats a terrific question. Last night in jackson, i met with investors, we had that same conversation. There was an ad advisor for j. P. Morgan. We had this very same discussion, what is the right rate . Id offer theres two reason why yields could be rising. The first would be because of the feds expected withdrawal from qe. So there is some pop in that. Then you arrive at some level of the yield that is appropriate for growth. And this persons thinking was that were not far from that level, joe. If you think about how far we have to go, were further along and thats because whats happened is the increase in rates has almost all been at the long end. If you talk about the spread between the 10 and the 2. There is further to go if the fed would taper on the shortened. In terms of say, you take a 1. 5 inflation rate, remove that from the nominal yield of 3 . You are at 150. So you are not far from a long return rate. Let me ask our guest. You stay with us. I was thinking, if you do see it, it doesnt go higher, the markets will say, wow, the coast is clear. Might get us started. A big rally. For more on this, we are joinsed by larry meyer and i bet you he has an opinion on this and our income strategist. We still have bob horvatz here. Larry, does any of that make sense . You think we are getting to where the rate would be without any of the extern am influences on it on the ten year . Not at all. Not even close. Should bit 4 . I think steve said this, there is a lot more uncertainty about this than there has been before. Weve usually taken 5 of the normal equilibrium ten year rate full employment. Many people think so, particularly in the mortgage market. How much it hurts affects how much you get there. There is a lot of sentiment there is a bias there. If its not what we thought it was before, its going to be lower. Okay. Many of our clients think closer to 4 than to five. But we got a ways to go. It seems leak its years away. Im talking near term as we deal with the stockmarket fluctuations. Its gone all way up herement we havent tapered a bit yet. We are talking about it. It has discounted a lot of the initial pain we will get with the taper, all right . I completely agree with that. What we would say is maybe we move forward, some of the rate increases that otherwise would have occurred later as has been this very great sensitivity in the market to the beginning of taper and talking about the end of asset purchases. In a way we might not have expected. Gee, where are you on all this . What are you felling clients . Were looking at a lower level baseline yield in the treasury markets. Reflects a sluggish outlook. Right now, you can cherry pick the good data or the bad data. The reality is the trend Economic Growth over the next couple years is looking at best 2. 5 . So we are there already. We should be towards 4 . Thats what i want someone to say. At 3 , weve done the heavy lifting already . Absolutely. I think the last 100 or so basis points move in the ten year yield has done a good job for the market, more importantly, its taken out some of the big risktakers. Maybe a lot of fast money feds betting on the fact that long rates would remain relatively stable in the portion of the 5 to 7 year part of the curve. They sold out. They will not be able to sell again on this. Can i ask you about the International Markets . We have seen a lot of implications of the suggested tapering and global markets. I wonder if you could take a look at that and give us some sense of your predictions. We have seen indonesia, a lot of other companies complaining about liquidity going in, now theyre claire i chaining theyre having an ad veers effect on their domestic bond markets. Could you drill down on this a little bit . A lot of people are becoming much more researched about them. Well, this is not a surprise. When u. S. Raises rates, the rest of the world is very sensitive, particularly countries that peg all have dirty floats have their rates go up. There is no surprise. Its a reverse am of that Aggressive Movement into emerging market assets that have occurred previously. When rates were low, expected to remain low, the fed was continuing qe with no talk of tapering. So its not a surprise. It puts pressure on these countries. Lets make it clear the fed has to do what it has to do to promote its objective. Its not a surprise. A lot of investors i probably dont think have anticipated the degree. The emerging market. Slightly. Plus we didnt expect the degree of correction in the u. S. Which spills over to the correction in emerging market. I completely agree with that. We will have you back him we got long at the top, steven, well talk to you, those are great guests tomorrow. Larry meyer, thank you as well. Steve, by the time we deserve more than three, we will need a better economy. It will be okay to go above 3 at that point. That my prediction. Im getting you do that on long term real yields inflation so people can make that choice, which you are asking ability, joe, i think its a terrific question. Coming up, we will talk about the impact on fed policy, could the housing data help make the case for september taper . We will ask s p economists and phil lebeaus oneonone interview with elon musk founder. I cant wait to see this. We route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. 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. Welcome back to squawk box this morning, the futures right now, we do green arrows. The dow looks like it will open hire. The s p 500 up, the nasdaq close to 9. 5 points a. Few headlines from indias finance minister the country has no intention to introduce capital control. They will enfuse 140,000 billion rupies. How much money is that . 62 rupes to the dollar. So its like a hundred. A little money. I think its one of those things, you say you will never do capital controls. I think rupe is a good name. The canadian rupe. Bless you. The peoples currency. I miss jackmans. We may get those back. Bob har vats former under secretary has admitted is this something you know . The draghi is coming back . The dow erased all of julys gains after the fed revealed split timing of the tapers. Still, recent real estate data has been solid. So how is the houseing recovery affecting this decision. Good to have you back. Great to be here. The numbers have gotten better. People are terrified about rising rates and try to get in before they go. We may see a pull back in housing sales. I think thats a part of the reason. I was in a restaurant, i told someone i was an economist. They talked about, should i buy . When you see Interest Rates rise, all those on the fence come back into the market. Thats a good thing. The numbers for existing homes, it was basically a fouryear high, nice news, you saw a lot of activity. Well see what happens with new home sales coming out soon. Those numbers will have much more of an impact on what happens with jobs since they add two to three jobs to the economy. Remember bernanke, the missing piston was housing. I mentioned last year. Its starting to gear up. At what point do we see housing rates paul . I think we need to see Interest Rates go up higher than they are right now. I think the 30 year is at 4. 5 . The recent 30year fixed was 4. 3. Something like. 4. 3, thats terrifying for people who got to see the historically low levels on record for the u. S. Going back to world war ii. Thats certainly scary. 4. 5 is so much lower than whats the historic average . 6. 5 . 7 . Still below the prelevel crisis we saw. I think we can hold on. There is a lot of demand. The household net worth. We had four years, cleaning up our Balance Sheets, getting our fiscal homes in order. I think we do have the capabilities to withstand or cushion that blow. So we will be coming up on two weeks on the fifth year of the anniversary of the financial crisis and i think were going to start having a conversation again about what to do with fannie and freddie. I dont know if you think we will have that conversation or not. About fannie and freddie and whats going to happen. If you were in charge, what would you do . They are getting attention, how many plans out there, how many potential bills on the table . I think whats interesting is that is being addressed, dealing with a gse reforms is that we can right now. Before, during this recession and very weak recovery, they were needed. They were needed and, indeed, we couldnt address changeing the platform for the gse reform itself. Now you can, so that i think was the real picture. There was a lot of resistance in the past. Dont we have to, because it ends up on the Balance Sheets of the United States at some point because its under the structure it is right now . They have to do something. We knew they were resisting for reasons of equity. They thought they needed these gses to do more and enable more to participate. If you think about it, structured finance was pretty much asleep. What did you have . You had the gses holding 80, 90 of all conventional mortgages. We needed them. Now were seeing the houdzing market is coming back, getting stronger and stronger. Congress is saying maybe we dont need them as much anymore. Maybe we can work on how to change the system. Of course, you have a couple plans out there. I dont necessarily think any decision will be made this 84. I think this will be passed on probably after the elections. The good news is housing is Strong Enough to stand on its own. So we can deal with the reforms. Yay i never got a yay that would be a fresh start. That would be so nice. Good to have you on. Thank you. We forgot pesos, pounds, franks. Rupe is a better name and loonies. Denards. Toe grogs the kip from louse, i bet you cant figure out where they have if bolivianos. Coming up, breaking nick i economic data. Laos was the check. Then malaysia. You brought back a case of these from when you were in southeast asia. You had a bad case of the ringets everywhere, disgusting. We were watching youich. Jobless claims at 8 30 a. M. Eastern. Economists reporting first time filings. 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. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk box, a quick retail update, shares of ambecrombie and fitch down largely on premarket trading on the back of weaker than expected earnings. The specialty apparel retailer reported Second Quarter earnings of 16 cents, shyer consensus on lighter than expected revenue 907. 7 million. Well below analysts forecasts. Due to uncertainty around traffic trends, the weakest comes from abercrombies hollister brands. The company says the quarter saw weaker traffic and continued softness in the womens business on the Earnings Call, meek jeffreys largely blames macrotrends and says the reason for weakness is unclear and believes spending has been diverted to other categories. They will be conservative the remainder of the year. Hopefully not inventory shortages caused a large sales shortfall in the first quarter. Squawk box will be right back. 20 years with the company. Welcome back to squawk box. We have Rick Santelli and economist robert bharbara. The numbers plays right. Initial claims jumped 13,000 from a 3,000 upwardly revised 3. 20 moved in 3. 23. Now stand at 3. 36. Continuing claims, well, they moved from 2. 97 to a whisker. I mean a whisker under 3 million. You know, i dont know, i dont think a bounce of 13,000 gets me any more excited that the breakdown to 320,000, mr. Certain areas are exhausting claims, whether people are falling through the system. To me, you guys can fight about the correlations. I want to see real job creation and computer chips instead of potato chips. Where is ross perot . They bellied in the curve yesterday. They took out that 1. 61 level with flying colors. Now sit at 1. 65, 1. 66. So that is pretty much what many traders are looking at down here while everybody else is with their thesaurus trying to come through the mints. Thank you for that. Lets go to robert bharbara. What do you make of these numbers . I think its what didnt happen this year. The last two years, wed have improvement in the spring and a fade in the middle of the year. This year the claims went 375 to 3. 50 that. Ry now down to 3. 30 averaged out. I think its better this year at this time than it was over the last two. Any implications for the taper . Yeah, i think the bond fwoes from 160 to 2. 50. I think that was all because the economy was okay. Maybe the taper explains 40 basis points, but people were hunkering down for real problems. You have the sequester and the belief it would be as bad as the fiscal cliff. It was the dog that didnt bark. The real question is what was the bond doing at 1. 60. Not why it got to 2. 5. Anything from the nomc . Obviously, there is a fair amount of disagreement of how to taper. Where are you on that . If i use my boil the frog analogy, i think the right thing you are supposed to do is not do it abruptly, cut back. Lets say over a 9year period to go to zero. Are you sort of sneaking out of the room without anybody noticing. You are starting if september . I dont think theyll start in september. An interesting number we dont and the to look at, we will get a week after the benchmark re56. They tend to go in the direction of the economy. Since thins look somewhat better. If you added 25,000 a month, maybe you are closer to the 2 o20 than 190, 195. May be important for the meeting after september. Can you comment on the participation, whats happening affect affects that, how that feeds back to the unemployment rate. There are direct implications between the two. How many people are simply not seeking jobs because their discouraged or are you seeing more people now, as the economy picks up . Actually, older data. Old folks are not retiring since the big 401k smash t. Biggest fall is 16 to fwouryearolds. My question is they are not clearly, they are discouraged, there are people because theyve stayed discouraged three years, there are people arguing, maybe it means they all go to school longer. Therefore, theyre not coming back. Therefore, we only need 120,000 a month to keep unemployment steady. I think thats dead wrong, if the jobs were there, youd expect that group to come back. You can envision better job growth. Let me break in quickly, j. C. Penney adopting a shareholder rights plans. The way to explain it, the plan is denied as the board suggests to protect against any future use of coercive or abusive techniques, shareholders should not realize their investments. The plan adopted apparently using outside advisories, by the board is similar to fans int past. We are looking through this statement right now to understand exactly how it sornlgs but it does say anybody that wanted to buy my stock if i were j. C. Penney, id say you dont want to prevent. The stocks might go up on that, god forbid. The deal is the following, if you are an acquiring person, someone who wants to acombier 10 of the common stock, have you to have an exchange offer. Thats how you have for the do this. It says if the term acquiring person will not include Pershing Square or affiliates of nato realty trust so long as the partys Beneficial Ownership is permitted. Their grandfather, typically . This is almost baltimorerplate. Do you see part in boilerplate . No, a lot of companies have stock. You should be so lucky somebody wants to boy your stock or the company. Five years from now, we might get it to when the. You done want to get it to 20 overnight. I dont know. That itself the way i think. Hold onment we missed the paragraph. If a person or Group Becomes an acquiring person eastern to acquire the extra price. You have to acquire it at 55 per right shares of smon stock. Crazy. Would work. See, i wound bay pay 55 myself. This is nut itself. Im soifr. We will take a break. Thank you. A lot of these i forgot, the sheckel. How could i forget you are back to that . What is the jeemdz one . The. The dong. They said how could we forget the lyra in turkey. Maybe it will lead to something. Theyre just saying that was not adopted if response. Nobody tried to buy the company. Thats not right. No kidding no, sometimes, the reason you see those behind the scenes, actually, there was a taper off. Who was crazy enough to do that . Coming up, phil lebeaus oneonone interview with teslas founder elon musk. He is out there now. Hell be here in 32 seconds. That i are planning a major expansion in the model s electric cars. Every day were working to be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. We provide the exact individualization that your body needs. This labor day, dont invest in a mattress until you visit a sleep number store. Once you experience it, theres no going back. Oh, yeah at our biggest sale of the year, every bed is on sale. Queen mattresses now start at just 599. And save an incredible 40 on our limited edition memory Foam Mattress sets. Only at a sleep number store. Sleep number. Comfort individualized. And this is my home team. This is my large lecture hall. This is my professor. And also my coach. This is my booster club. This is the guy whos graduating ready for a great career in technology. [ male announcer ] in 2012, 90 of Devry University grads actively seeking employment had careers in their field in 6 months. Join the 90 . Learn how at devry. Edu. I. Welcome back to squawk box. Phil lebeau spoke to tesla founder elon musk. He joins us now. Good morning, phil. Reporter good morning, andrew. We are here on the model s plant in fremont, california. They are making 500 per week. Eventually they will get up to 770 per woke when they ultimately have this line going at full capacity over the next yearandahalf. Take a look at shares of tesla. They are rating tesla on a hold saying tesla may have a 12to18 month start on its competitors when it comes to tds. This stock is up 4 in the last year. Tesla is saying it is accepting orders for the model s in china. Thats important, because china is the number one market in the world not only for autos. Will be in the next couple of years for luxury autos. Heres what elon musk had to tell us when it comes to the increase in sales here in north america. We are doing actually pretty good sales in north america. We just started deliberating in europe. We will start delivering in asia in the ferc. Yes, sales have been good. Right now, wooer actually not sales constraint. So were production constraint. We are keeping quality standards high, so the main focus is really how do we increase our ploux rate which means all our suppliers have to move at the same pins. Heres the production plans for tesla starting this year going over the next few years. 21,000 this year. They hope to be up to 41,000 this year. End of next year we expect the model s and suv fblt. By 2016, 2017, they hope to be well over 20,000 vehicles as they roll out a lower priced Third Generation vehicle. As elon musk said in our interview yesterday, the biggest challenge theyre facing here is the supply chain. Can they have their suppliers keep up with them as they increase production of the model s. Again, products is currently at 500 per week. Guy, when you come out to this plant, what stand out. I have been in a number of auto plant. Not only here in north america, but in europe, asia, what stands out is you can see how quickly they are building and adding production. Its clear you can tell these guys are riding the bull right now when it comes to increasing production. We will be here all day long. More xents from our interview on the Assembly Line with elon musk. He had a lot of interesting things to say, including, whether or not there may be a problem with the supply of battery cells. We will talk about that later on this morning. Hey, guys, did you talk about safety . I think it was amazing earlier this week, they came out with a note on how safe the models is. Not to be promotional. Its the safest car in the world, not ever, again other sedans, sufbs, minivans. I thought to myself that is a calling card. The we pull this shot out here . Andrew, this is the key here. This is the front of a models. Right here is an extended crumple zone. There is no large block engine there. As a result, in a frontal collision, will is more space to absorb the energy. Thats a big part of why the models got a fivestar safety rating from nitsa. When you look at the hood, i cant touch this one, its in production. There is sort of a trampolean effect, the person will bounce as opposed to coming down with a thud. Itself a part of the safety plan they put into the models. Elon musk believes safety is a priority. They believe they can carve out a niche with electric vehicles and its wornld over the number of years. Build out the infrastructure so people feel more safer traveling longer distances and the electric cars and rely on the electric power distance from where they live. Sure. Thats the super charger network. Theyre slowly doing that. When i are here in california, you can fairly easily move throughout the state as the super charger new yorker builds out, people can start and take charge. Tesla says over the next few years, they will be adding more rechargingation ises. Na will make more people comfortable with Long Distance driving in a modelx in the future. When is that going to come . Thats sort of the suv hybrid . Thats the one with the gull wing doors. Its cool. At the end of next year, we see production. Realistically . Probably the beginning of 2015. It might happen at the end of 2014. You know how this es go. There is not a set date. Is approximately the time there. The pricing point on those e both niece . You were talking the models. You are looking at 71,070. Thats before have you the federal, i heard that thing ticking. The other thing to keep in mind with the model x, it will be roughly the same rate, its that Third Generation, the mass market vehicle. Thats where they will come down in price points. When we talk about how well the company is doing, eventually, you have to factor out the subsidies, you do they get to the point its pure free mark. What do they need to do . Houchl how many cars do they need to build to shake off that yield that its just Government Support thats allowing them for the make money at this point. Well, i think you are talking rabbit the zero Energy Credits out here in california. They will be done with those by the 4th quarter, guys. They say they will be profitable without those credits in the 4th quarter. Its quickly winding down in terms of that element, helping with the profitability. So then its the infrastructure thing thats going to be the rate. Is amace something. You the use the whole front of the door hold the shift. I was wondering, was there luggage inside front . Inkwierk mine want to know. Is a deep question. No. No, no, no, no. I dont think so, andrew, im almost positive when they do those tests, they do not have anything in that vehicle other than the dummy that goes through the tests. Then how do you decide what are you going to put in the vehicle . No cargo pants. Phil, thank you for that report. We look forward to the rest of that interview throughout the day. Meanwhile, coming up, bnbcs interim cramer will august about whats coming un. Also, a programming note, dont miss the interview with mike duke tomorrow at 3 00 p. M. On closing bell. We are back in a moment. Welcome back to squawk box. Jim cramer joins us now from the new york stock exchange. I dont know how you feel about this, jim, and weve never talked about it. To sell to goodlooking, cool people, that irked me so much. Even though i am, in my view, a goodlooking, cool person. Is is this revenge . Is this abercrombie and fat, is this karma, is this what goes around when you say things like that that you dont want people who might not fit the mold in your store . Isnt this what should happen to you . Yes. And i have to tell you, apparel is a disaster. This is the worst quarter for apparel that i can recall. I have to go maybe all of the way back to a period where there was a big change versus denim where denim went out of style. These are just horrendous numbers. Abercrombie is an example of a company that really both got the style wrong and the emphasis wrong. Theyre trying to sell to who knows what. You can say they deserve whats coming but everybodys apparel is is bad. It doesnt matter. Nordstrom, saks, macys. Apparel is a disaster. Weird, too. Im not sure what it means. Do you care are you going to do you think penneys should be turning anyone away . I dont care who writes in and says they think im sexy, i dont care what species. Do you get those emails . I dont even care what species. I dont turn anyone away. Gender, nothing. You and i are near the short hills mall. And 50ive got to tell you, the are some stores you walk by and say, im hopeless, i am old. Maybe you shouldnt stop at those stores. Jcpenney, would you turn anyone away if you were them . No. Look, im a believer that penny is going to make it through christmas and i didnt feel that way before. Now, one of the things you can say, well, wait a second, of course theyre going to. If you remember two months ago the word was they werent going to get any credit, they wasnt going to make it through. I see some turn. I wish they had morehouse wears. House wears is what is selling at tjx and our ban outfitters with anthropology. Sears doesnt have everything. With them adopting this poison pill this morning, how do you feel about poison pills, good idea, bad idea . Give me a break. And if you wanted to buy they are their own poison pill. Right. You want to buy them. Give me some how about that help lo hemlock. Notventicappachin po. Is this cargo pant related . Andrew is not allowed to wear cargo pants because of his wife. I thought it was olive garden because when you wear cargo pants you can stuff your pants with rolls. Those rolls are good. I didnt think of you stuffing your pants. Is that what shes no, you really bob is laughing again. Bob is laughing. Great image. He was talking about pockets before. I would put your foot down. As she said, who wears the pants . You wear the pants. If you want to wear some cargo pants . You wear those cargo pants, andrew. I hope my wife is watching. You put your phone in there. Put the button on. Two phones . Jim, you got meg wittman, too, right . That should be interesting. And weve got to find out where they are now on the term, whether they stepped a couple of quarters back. Good operating cash flow, no growth. In may she told us shea would grow next year. What happened between may and then . Theres going to be a lot of talk it was personnel the secular trends against them and World Economy not so great. Combined to setback their turn around. Lets hear from meg because she always has some good things to say. Youre not an olive garden guy anyway. I love olive garden . You ever cut the line there . No one watches cable. I dont think im too good for olive garden. You ever been to one . Absolutely. You get the lunch unlimited salad and bread sticks and soup. I do unlimited everything. You stuff your pants. And i well, when youre finished, you feel stuffed. Youre really fat. Try getting . Even on sunday at 4 00 you cant get in. I can get in at frankys 457, heath ledgers favorite restaurant, quicker than i can get in olive garden. Im going to message you. It was an old style place on the outskirts of newark on the other side near bloomfield, someone saw your there. Thats the belmont tabernacle. Yes i dont like to reveal that because then ill never get a table. That place is crowded as it is. They have fabulous chicken there. Belmont tavern is great. Someone told me that. Id want to go there. It is fantastic. Coming up this. Our guest host this morning is going to have the last word when squawk box returns. 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That moment you enjoy it at home. Stouffers. Made with care for you or your family. Welcome back to squawk box. Lets get back to our guest host forth last word. You like infrastructure but you want a private Public Partnership . I think the United States needs more of a structure. We had a period of very low Interest Rates. We havent used this time to invest in much needed infrastructure. The way we do, it has to change. It cant be political benefits for the influential. It has to be based on sound private sector as to what Infrastructure Investments makes the most sense. If we waste the money, use it for political reasons, it has to be done to strengthen the economy. Eisenhower understood this. We have to figure out a better way of doing it. To create jobs and good jobs and strengthen the future of the economy. Thank you so much for being here. Squawk on the street begins right now. Good thursday morning. Welcome to squawk on the street. Im carl quintanilla. David faber is off this week. Hps weak quarter last night. Weak retail results out of abercrombie. Well cover all of that. Also, the ten year hit 294 this morning before settling back now just below 29. 3 a sure thing . Were going to talk about that, too. Europe did have som