Transcripts For CNBC Squawk Box 20130826

Stocks Closing Price on friday. Michelle, how was your weekend . It was great. How about yours . Fabulous. Good, good. In global news, chinas Statistics Bureau says the countrys economy is showing clear signs of stabilization. Among the reasons, policy support and some improvement in global demand. Chinas economy is said to be on track to meet the governments 2 on 13 growth target of 7. 5 . U. N. Inspectors in syria are now heading to the site of the alleged poison gas attack. Syria has supposedly agreed to allow the inspectors to visit the site. This comes amid calls from western powers for military action. Well have more from john harwood in just a few minutes. Here in the u. S. , dozens of wildfires burning this morning across the west. One of the most severe is raging out of control in the mountains of northern california. The latest reports say the giant wildfire has charred 15,000 acres within Yosemite National park. A live report from scott cohn who is on the ground there in the next hour. Joe. Lets check on the markets this morning around the world. Talk about the u. S. First. Kind of a healing week last week after a couple of rough ones. But not a lot of great action today. If you are hoping for a rebound in the averages, down about 18 points or so. As far as energy prices, well take a look at the oil boards right now. Weve got not a whole lot happening. 106 or so. The dollars been quiet recently as the euros been around 1. 33. Theres the tenyear at 2. 82. A lot of people going to watch obviously what happens there. A lot of the equity action on what happens. 2. 82. We can take that a little bit more than when we were thinking about it. Been there. Kind of getting used to it. It all takes time. Theres the 1. 33 on the euro. A 98. Time for the Global Markets report. Louisa is standing by in london. I saw you when i walked in the place today. I saw you up on the screen. Good morning. I am. Im not pretending. I am here. Im pretty quick. Despite the fact that it is a market holiday here in the uk, right . So theres no trade taking place for ftse traders. They might still be lying in bed taking it easy. Its apparently called the august bank holiday for no apparent reason. We have a number of Bank Holidays scattered here and there in the uk. Given the uk is such an important market in europe, the stocks europe 600 a little lower. We were called a couple of points higher, just taking some momentum from both u. S. Trade as well as from asian trade on friday, managing to see both markets closing out in positive territory. This morning, though, just coming back a bit, falling a few points lower. Our main european markets showing you exactly this emerging. And indeed, weve seen more selling taking place in the italian market, down by approximately some 2 or so. Seeing some additional selling there. And in particular, some of the larger financials were seen selling in. Xetra dax down by 0. 3 and the ibex 35 off by 0. 6 . The troika taking place this week and the notion of whether greece will be needing a third bailout. I know youve been talking about it as well. Some of the latest from chancellor merkel ruling out a greek haircut, but seemingly leaving the door for aid open. And then youve got the finance minister talking about how they dont want to have to go through new austerity measures if they were to see another round of aid. To the upside, weve got health care, telecomes, real estate and then the buck stops there. The euro stops there, i should say, with the rest of the sectors trading in negative territory. Banks off by 0. 9 . Just coming back down a bit. And the bond markets. Again, were talking about the yields heading north and how long this story can continue. Well, by the looks of things, not forever. Were seeing some buying in the bonds today and buying in the u. S. Tenyear. We continue to look at the broader stare about it money flows from emerging markets continue to come out of these markets, where is that money going. And is some of it going to be placed back in some of the traditional safe haven Asset Classes such as the german bond fund. The yield at 1. 9 . Gilts now yielding 2. 7 in the corner. And youve got the tenyear italian yielding right around 4. 3 . So just being sold back by a tad. Showing the currency markets. Flattish trade. Euro dollar Still Holding on to that 1. 33 mark. Were a little lower, if anything, but it is a quiet day given the bank holiday here in the uk. Weve been talking to viewers on Worldwide Exchange about bavarian cuisine, which is a completely separate chapter given the runup to german elections. Did you know liberkesse, it looks like bread, but its meat. Directly translated, it would be liver although it doesnt have either one in it. I did not know. Now you know. Yes. It will come in useful. Yes. Very much so. Louisa, thank you. Who . I dont know what im doing. Boreson. Im thinking of julia borsin. Youre colleagues. Colleagues arent safe. Its everybody. We have some other news to bring you. The Financial Times reporting that Goldman Sachs putting employees on leave. The error is likely to have cost the bank tens of millions of dollars. Goldman accidentally sent thousands of orders for options contract after a systems upgrade that went awry. While were talking about Goldman Sachs employees put on leave, did you see this story over the weekend about the Goldman Sachs managing director, jason lee who was put on leave and is now accused of rape in the east hamptons. Did you see this . I did. Its pretty unbelievable. It is. Married guy, parties with these folks, and then 20yearold a big party in their backyard. Everybody apparently they were in the pool maybe without bathing suits. All sorts of things may or may not happened, but a toyearold involved. All of a sudden theres a lot of naked people and theres a guy in trouble. Jason lee. That was a famous martial arts guy, too. This is a different guy. Unrelated guy. 37yearold guy worked in the equity he was an m. D. , though. Big deal. Managing director. You know what . I dont know anything about it. I dont know any more than ive read. All i know, that it was a pretty wild it was a pretty wild party. Thats what it sounds like. The last two weeks in august in east hampton. Is it really . All i know is you cant you cant get there from here . Right. By the time people get out there on the twolane road, theyre ready to drink. Bitter mood, yeah. They are ready to drink. Theres not enough alcohol. And then the alcohols trying to get out there, too. If you want to ride uber, its Something Like a 100 minimum. Take crown transportation if she goes to east hampton, believe me. Helicopter. You can only land at certain times. But this has nothing im surprised you brought it up, though. Yeah. Why do you say that . It has nothing to do with Goldman Sachs. Its just a guy. Its a guy. He works at Goldman Sachs. We have a business story about goldman. Were a business network. Hes a managing director of Goldman Sachs. It just seems like a personal are you suggesting ive taken the show to a tawdry place . No. I just dont think it goes any further than this unfortunate oh, right. This isnt somehow related to the firm. Met on wall street with money who drink a lot and end up in troubled spots is not an uncommon thing. Its a story you with tell over and over again. Exactly. Allegedly. Rape is bad. Very bad. You want to talk about microsoft instead . What happened there . Segue there. This is business, right . Yes. Microsoft will take on googles motorola mobile unit this week. Its the second of two landmark trials between the companies. The jury trial starts today in a federal court in seattle. It will decide whether motorola breached itself with Technology Used in the xbox game console. Did you see what david pogue wrote about ballmer . I thought it was insightful. I thought it was critical. Everything over the last 13 years. I looked at it and looked at net income and number of employees and revenue and everything eliminatise. The one thing that stuck out, obviously, was that the stock was still down from where it was in 2000, but thats the same with any its a 6 billion market cap. That was the blue chip sort of mania that put coke at 50 times earnings and General Electric at 60 a share and all of these stocks were way overbought and overloved in the late 90s. You look at just how he managed the business itself. It is a what do they make . What do they do in revenue . What do they make per year . I think two or three times what they used to make when it was a 600 million company. I dont know. They provided software for pcs. They battled the open like linux, whatever, they sort of prevailed there. The question is whats going to happen with the company in the next ten years . To me, give them credit for managing the earnings of the company over the last decade, but that was based on the innovation of the decade before that. So there was sort of a decade of innovation. They reaped and sowed the benefits of that. But ibm, while it did sort of navigate the waters and didnt die with the mainframe, it didnt become the leading serve engine. It didnt become the leading pc Software Maker either. Its like the innovation seems to spring up with new companies. I mean, microsoft, you know, was revolutionary, and then google was revolutionary, but google didnt do facebook. You know, its like each of these had come along. So was it a basic mistake to decide that he wanted to transform the company into some kind of device and Services Company instead of just acknowledging this is what we are . Or the classic Harvard Business school study is, you know, you dont selfdestruct and reinvent yourself over and over again. Youre going to die. Anybody that feels bad for him just needs to know hes worth a lot. Not bad for him, but ballmers 57 years old and got 10 billion. I think hes a nice guy. I dont know whether anyone would have when you mention google, i look at that company and say they figured out search. Then they did maps. Then they did android. Now the google glasses. There seems to be a sense of repeated innovation. Other than search, what have they had a huge home run with . My working assumption is that android eventually brings in it is getting huge market share. I dont know. Microsoft would have been tough. And theyve continued to, you know, their revenue numbers have continued to go up. Its a massively Profitable Company that i thinks been i really want that driverless car to work out so badly. You do . Yes. It would be so great. I like driving. Hes got a driver. He never has to drive his car either. I like that, too, but theres so many implications, production and Parking Spaces needed in the country. Im not basing any of my future excitement on a driverless car. Singulairity . Yes. I want to be a cyborg. That must have been after my time. This is night rider. Hasselhoff . On the floor with the cheeseburger. Although hes a very nice man. In other legal news, donald trump and his forprofit Investment School facing a 40 million lawsuit filed by a new York State Attorney general. The a. G. Accuses trump of engaging in illegal business practices. Eric schneiderman says that trump, a former executive in the Trump Institute made false claims about classes at the School Including that trump had hand picked instructors. What do you think of that . I dont know what to think. I didnt know he had a school. So trump says its a political stunt. It is. Which wouldnt be i have no doubt. Which wouldnt be above this a. G. However, theres been a number of lawsuits brought by students who said this whole thing just doesnt work. I didnt even know he had a school. I knew he had ties. About a year and a half, two years ago, there were a number of stories written about this. Learning a trump way. No, but it was when i believe some of the lawsuits started. Anyway, at some point we should have trump respond or have the a. G. Come on. Or have both of them on. At the same time. That would be like icahm and ackerman. Its early in the morning. It happens. Oh, right, ackman. How very nice of you to do that. Just to pretend. But trump and snyderman, that would be awesome together. How do you say this washington news. Lawmakers debating what to do about this awful situation in syria. John harwood joins us im trying to figure out, john, so youve got chemical weapons. Youve got gas. Where does it get you to use it . I dont thats the thing thats so puzzling. I dont know what this did for, allegedly were now saying that the rebels probably didnt have the capacity to do it this way, and it was obviously done by someone. So were i think weve known all along it was probably assad, but what was the point . I dont get it. It turns the entire world against you. Reporter well, on the one hand, you can strike terror in the hearts of the people youre fighting. And on the other hand, if they thought, in fact, that the world was not going to respond, it would have sent a message that the regime could do whatever it wants. But what weve seen as the situation has evolved over the last few days is that leading powers in the west including the United States have decided that they cannot ignore this. Thats why weve got the u. N. Inspectors looking today, we dont expect too much from that because of the way the evidence degrades, you know, pretty rapid fashion. But youve got france, the uk, the United States all seeming on a track towards striking the regime. Dont know how quickly that will come. And the challenge is going to be how do you limit that, and how do you prevent that from an openended involvement in a war that clearly president obama and the United States military does not want to get involved with in a deep way. The public apparently has no appetite for any other conflict . Russia immediately said, you know, dont you people dont need another adventure in the middle east like iraq and iran. Obviously saying the same thing. Its really tough. Its really tough for the president to try to walk. Reporter its more than tough. And you saw assad in an interview with a russian newspaper yesterday saying warning the United States that you get involved again, theres going to be a failure like all your interventions in the past. Clearly the lessons of long and protracted wars have weighed heavily on the president. This is a president , after all, who got into politics, opposing the iraq war. Says he doesnt oppose all war, but he opposes dumb wars, and its pretty clear from his language and body language and the entire stance of the United States over the last several months that he believes it would be dumb for the United States to enmesh itself in this conflict. And so that being the case, how do you have a surgical targeted strike . Thats what theyre trying to figure out. John, reading more and more about it, the issue doesnt seem to be necessarily just syria anymore, but this idea that the president , probably in retrospect, made a mistake when he used this phrase, the red line. And now if you dont enforce it, you have told the entire world you dont stand for what you mean. Reporter exactly. Thats exactly right. This is not about syria anymore. This is about everything else. Thats the problem. Reporter yes. Youre right about that. And i think the president probably regrets having used the red line phrasing, but part of the implication of this situation is iran, which has sort of become the overlord of the syrian regime, how do they view statements by the United States that we will not permit them to have a Nuclear Weapon if were willing to tolerate this use of weapons of mass destruction . That appears to be part of the logic of why the United States is going to take some action here. Richard haass, the Bush Administration state department official, said the administration has to enforce the norm against weapons of mass destruction actually being used. And part of the reason for that is to maintain credibility with iran. And in the times today weve got to go, john but its apparently Common Knowledge or its thought to be Common Knowledge in egypt that the u. S. Has an alliance with the Muslim Brotherhood, and theres pictures of the president with one of those long calleda bed people on the street Common Knowledge. Americans are with the Muslim Brotherhood and supporting terrorism. They killed osama bin laden, but theyre with al qaeda in terms of egypt, which is just bizarre. Reporter it doesnt really make any sense when you think that the administration acquiesced in the removal of morsi, but on the other hand, the United States doesnt want the Egyptian Military to absolutely crush dissent because thats a prescription for long civil war that would be very destabilizing and call into question the future ability of egypt to maintain its obligations with israel and everything. Yep. Hotspots all over the place over there. John harwood, thank you. See you later. Reporter you bet. Were going to get in a quick break here. When we return, why one insider says forget about Larry Summers and janet yellen because tim geithner could be the man to follow ben bernanke. First as we head to break, lets check on the National Weather forecast with the weather channels alex wallace. Alex. Good morning to you. Its going to be a hot one across the upper midwest. A lot of areas thought we were done with summer. Not the case. Extensive heat warnings and advisories out there for us. A big ridge of High Pressure for the early part of the week. We saw it start over the weekend. S 10, 20 degrees above average. That puts numbers well up into the 90s. Even triple digits. Minneapolis, 100 for the day. It will feel at times closer to 110. While all thats going on, disturbances into the northeast. Thats going to keep things unsettled. Chances for storms on the increase from detroit, syracuse, back towards that 95 corridor. Our last stop takes us into the southwest. Tropical moisture meaning more showers and storms for the day. And some of these storms could produce some flash flooding issues. Well have to keep a quick eye on these. More squawk box coming back in just a bit. Time now for the executive edge. Its a daily segment focusing on giving Business Leaders a leg up. Our first story comes from cnbcs own larry kudlow where he says a key insider source tells him that geithner has been leading the search for Ben Bernankes replacement as fed chairman. And larry points out the same source predicted a Larry Summers boom well before summers name became public. And now the source says the only way to end the fighting between hopefuls yellen and summers is to find a third option, and that option is said to include geithner. Along with former fed insider don kohn. What do you think . Geithner running the fed . Okay. I have been told repeatedly repeatedly, because this geithner idea has been floated many times. I floated it at one point, and ive been told that he is off the table. Do i believe hes in the room you floated it . A long time ago. Andrew ross sorkin floated it . A long time ago. A year ago. People talking about Andrew Ross Sorkin floating it . What does that mean . I think its going to be carrot top. Maybe it will be carrot top. Maybe it will be carrot top. Joe kernen floated carrot top. Youre delusional. You have delusions. Everyone i know does not believe that hes actually going to do it. Therefore the question is, is this the third option . If hes a larry acolyte. To me it looks like all along, if the inner sanctum of the Obama Administration didnt really want summers, the criticism from the left would have been so hard by now, would have been so strident that hed be gone. I think they really want him. And if they want him, theyre not going to just settle and say gee, theres an argument between yellen and theres an argument between yellen and summers. Youve got to find somebody else. Why would you have to settle it that way . Thats what i think. Why do they have to find a oh, no, we cant do yellen or summers. Why not . Why cant you still do either yell d yellen or summers . You could. Why do you need a third person . Oh, theres a feud. Between whom . Thats what it says right in the article. The party about who should be this person. Thats why its got to be too political. Thats the problem. Eric schmidt is firing back go ahead. Ellison argues google, quote, took oracles stuff through its use of java and android. Oracle lost that legal place. Plus ellisons claims are simply untrue, he explains that the courts ruling in googles favor, quote, protects a principal vital to innovation. You cannot copyright an idea like a method of operation. Oracle has oracle has java because they bought sun. Eric used to run sun. Yes. Google oracle ended up suing google. They lost the case. And then if you remember, Larry Ellison went on charlie rose, i think it was cbs this morning, explained that he thought google was evil i like it when someone calls google evil. And this is erics response. Of course, not on facebook or twitter or anywhere else, but on google plus. Because companies that say we will never do its kind of sanctimonious. But he was right. I like what larry i like when larry stirs things up from time to time, too. I dont know enough about the question is whether you can copyright an idea or a method. Thats the issue. But when its google, do you see some java presence there . I wouldnt know java presence. I have java every morning in my cup. Thats the on jauly java i k. I havent seen iron man 22. Teslas elon musk is building a reallife iron man laboratory. He tweeted late on friday, we figured out how to design rocket parts just with hand movements through the air. Seriously. Now need a high frame rate holograph generator. I dont know what that means. Musk promises to post video this week on the system. Iron man based on elon musk. Anything with a concrete wall. Okay, now, heres the thing. Jon favreau, the director of that film, tweeted with musk back and forth over the weekend on this issue and said, is it going to be like the movie. The movie, and he said yes. Thats where we got the idea. My only point is if this is what it is, thats something. They got this from minority report. Because ive seen tom cruise do this. To me, i dont i dont want any for a rocket to really work, how do you get enough, you know, just with your hands . Dont you need some engineering and math and stuff . This is then going to make the robots actually make the i just dont see how your hands can be descriptive enough to design a rocket part. To me i didnt understand that. Which rocket part . Maybe i could show you how the fin needs to if i were a tesla shareholder, doesnt elon musk but hes always had a lot going. Spaceships. Thats his other job. I know. The space x. My question has always been the most important question was since it was based on him, tony stark, does he really have a stripper pole in his jet . And my question was, is he a player like Robert Downey jr. , like tony stark . Is he a playboy . Hes married. In all likelihood, he does not have his exwife was in the divorce document degree. Its unlikely he has a pole, unless it was for exercise. You have a pole in your car for exercise. Weve gone here, like, several times this morning. To the pole . To places. He brought us with the yeah. Coming up, the street reacts to amgen buying Onyx Pharmaceuticals. Plus, the key events likely to drive trading in the week ahead. Ive been doing a few things for a while that i really love tdd 18003452550 playing this and trading. Tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. Tdd 18003452550 and schwab really helps me step up my trading. 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Tdd 18003452550 open a schwab account and learn how you can earn up to 300 tdd 18003452550 commissionfree online trades for 6 months tdd 18003452550 with qualifying net deposits. Tdd 18003452550 call 18882542600 today. Tdd 18003452550 welcome back. Among our top stories this morning, amgen buying cancer drug maker Onyx Pharmaceuticals for 125 per share or about 10. 4 billion. Joining us on the news line to discuss this, the fti consultings barbara ryan. Good morning. Good morning. Help us through understanding this transaction. Its a big price. You look at a company like onyx. I was looking, tony coles, the ceo, weve had him on the show a couple times, became the ceo of this company. The stocks up, like, 330 . So its a huge win, im assuming, for them. Yet shareholders more recently thought that this company was going to go for Something Like s 130 a share. Absolutely. I think tony coles and the team and onyx have obviously created tremendous value. And thats really been underpinned by their pipeline and their lead drug for multiple myeloma. And certainly the valuation here is being driven by what analysts expect. Ultimately the sales of that drug can be. This is just under a 10 billion deal net of onyxs cash. And the drug alone could generate 2 billion in revenues, and that is not a partnered product for onyx. And so certainly amgen is looking to complement its oncology portfolio. I think its interesting, this morning to see that amgen is actually indicated to be up 4 . And i think thats indicative of the accretion that analysts see coming from this transaction. How big a risk is amgen taking . And i ask that given that this is a company, as you said, with expectations that onyx could be making 2 billion in revenue on that drug in particular, but currently only making 125 million. Yeah. Well, thats a good point. The drug obviously has just been launched. And the expectation is that well have other indications down the road. Its not obviously the only product that the company has. And, you know, i think that there has been a lot of data. Which is expected to be a very large market over time, particularly as the product expands globally and has other indications. What are the other indications . Whats the mechanism . I thought it was 125 revenue for six months. It was 125 million in revenue for six, but i thought it was expected to grow to 1 billion. Grow to 2 billion. Thats the expectation . Still five times sales. And thats assuming that the testing goes well with other indications. What else could it be used for . Multiple myeloma its used earlier and earlier in malignant melanoma. Malignant mel loem thatmelan. I misspoke. I apologize. I just fumbled. Anything else . Do you know what it does exactly . Are you familiar with it . I dont know the mechanism, no. But theyve got some other stuff, too. Yeah. They must be banking on that. And amgen, will they finally lose some exclusivity on those two drugs . Yeah. And certainly amgen is much like a large pharma company, and now its 17 billion in revenues, largest by a tech company in the world. And obviously a lot of its products are maturing and ultimately will face competition from biosimilars, and is looking to complement its portfolio. Amgen has a new ceo who was an investment banker. And it looks like, you know, they kind of came in pretty accurately on the price. There were other Companies Involved in oncology certainly looking at this property, one would expect that those were pfizer, novartis and astrazeneca, a minimum which has been reported in the press. The journal says 125 in the first half of this year and 1 billion by 2015. But eventually youre saying 2 billion. So the expectation is that 2015, this may be 5 accreted. Thats what the analysts think. But that it could be much more as the pipeline develops. Barbara, weve got to go, but one last thing which im trying to understand. The fast money that got into it late thinking it was going to go for 130 a share and the other companies that didnt bid or didnt bid high enough, was this ultimately a good deal for amgen . Have they overpaid . Paid too little . Should have onyx held out and waited longer . I think both sides i mean, i think that amgen, based on the Market Reaction, paid the right price based on the expectations for the portfolio at this point. Obviously that could change. And i think that, you know, certainly that onyx has created tremendous value. The stock was trading, you know, 50 below this level prior to the deal being announced. They went out and did the right thing and had a full auction process to sell the company and came up with a value of 125. So i think, you know, at least today, it looks like a winwin for both. I think just lastly, id just like to mention, there are a lot of stocks that have run up on speculation of deals like this. And i think that the implications of this deal being announced at the price it is being announced is that those stocks are not going to continue to run because, as you pointed out, the numbers were, you know, well above this at one point in terms of expectations for onyx. Were going to leave it there, barbara. Thank you for that. By the way, they bought a company for 300 million. Is that a deal or what . 300 million. They didnt develop that. Onyx didnt even develop it. They bought it. 300 million gets you 10 billion. Awesome. Welcome to america. Now to the markets. And the week ahead. Director of fx strategy at bks management and bob ruska is fao economics chief economist. Bob, i used to worry that, you know, everythings supposed to just go perfectly according to schedule for the fed to start tapering. And helle is going to be on saying were going from three years to 3 . Youre not sure its a slam dunk that things keep improving. You think housing looks weak and theres other numbers that arent cooperating with the fed in terms of showing that were getting above stall speed. The backtrack and new home sales last week was unexpected. It was severe. And it was widespread. And, of course, because new home sales are listed at the time you sign the contract, whereas existing home sales dont get posted until after you close the deal, you see the impact of Interest Rates and new home sales you already see it. And so yeah. You saw this big decline. And you also saw that average home prices continue to go up or median home prices went back, which means that yeah, youre hurting people in the lower end in the Housing Market much more than the higher end. Exactly as expected. If they start tapering in september, they may end up regretting that because they may have to come back and say that was too early. And theyre seeing numbers that maybe arent as strong as they need to be, but theyre ignoring it. Is that your point . Theres that. Theres also the fact that toward the end of the year, a lot of things are going to happen. Youll be done with german elections. There could be Different Things going on in europe. We still have fiscal hurdles to deal with before the end of the year. There are i athe a lot of thing could harm the economy. And as you get into next year, you have a new fed chairman. Youre going to have several fed governors that will be gone. Youll have a new rotation of voters on the fomc. Do you want to take the new team and give them a new ball . Do you want to take the ball out of the hand of the fed chairman . Is the evidence clear enough to do that . I think there are many, many more reasons to say hey, lets wait and see whats going on than to say hey, lets rush this into september because people have been talking about september. Keep doing 85 billion. It would be rushing it to pair that at all. Not whats rushing it is to cut it without a good reason. Well use this this is the fuel that our economy is running on, the 85 billion. Well, this is what the stock market told you on friday when the housing number was weak and the stocks went up. The economy looks like its getting weaker. You think its the fed holding us up. My view of the economy is wile e. Coyote standing on the cliff. You think because hes standing there and hasnt looked down on the fed with holding him up and when he looks down, look out. I dont think physically that would happen, if there was nothing under him. Really . Well, youre the scientist. I think thats a cartoon. Do you have a view of the economy thats as negative as bob . I am cautious just like bob is right now. I think its really true that the fed i mean, what came out of jackson hole really was a sense of caution. Even bullit who is viewed as a hawk says theres no reason to rush. Date of dependency pretty much has been the takeaway from jackson hole. I think everybody is looking to see just how good the numbers are. Right now i actually read a survey saying that only 10 of economists are forecasting that the actual taper will happen in september. That they may communicate theyll do something forward, but not actually do anything some september itself. I do think theres definitely a sense of caution now. For this week, it feels like markets are on a deep vacation. I read the article that both Francis Hollande and italys lady are working through august, but the markets themselves seem like they just want to curl up and go to the beach. Theyre working through august. Imagine that. Yes. This was a major coup in european politics that they decided to work through august. But as far as the markets, i think traders on both sides of the atlantic are kind of taking this week off because next week is when the whole party starts. Thats when we get all of the data and thats when youll see whether its going to be do or die for the fed in terms of tapering. You dont follow oil, do you . You know, i follow it obviously because you guys hes on to something else. No, im not. Im talking about oil. Because this is made of some type of oilbased is it not . What is this . I dont know, but if i run out of gas, i can put it in the tank. What is this zipper youve got a zipper on a suit. I do, yeah. But its not that im not touching that zipper. Come over and feel this, sorkin. Seriously. What is this made of . This is like this wont get wet, right . Its something you wear in the summer when its hot outside. But since youre in this aircooled studio have you ever seen suit made of a material like this . Whos it by . Who are you wearing some whats going on in here . Whats it made of . Like rayon or something. I dont know whats going on. I think this explains oil prices. You can wear this in the rain. Its like a rain jacket. Thats amazing. I think you could, but youd get wet. I think it comes right off of it. Did you feel it . But did you note advertise . You want me to come feel your suit, bob . Hold on. What is it . I tie it had bad it back to didnt . I its lord taylor. Its amazing. If youre in studio, youd get this kind of treatment. Theyll frisk you and theyll steal your wallet, so look out. Im looking forward to it, joe. I expect nothing less from you. That one zippers wide open. Thats the zipper that can be. But im not in the swimming pool. Have a good week, guys. It might have felt like you were swimming with the sharks this morning. Coming up, big data and the bigger Ways Companies are putting it to use 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. Alert. The beach on your tv is much closer than it appears. Dive into labor day with up to 50 off hotels at travelocity. Welcome back to squawk box. In todays big data driven world hewlettpackard is partnering with nascar. What does this Partnership Mean . When we talk about big data, everybody talks about it. How does it work in this context . Sure. Big data for us really means tweets from our fans and posts from our fans so millions of tweets and posts as well as whats been written in the traditional media. So print, digital, broadcast, takes it all, that big data, and pushes it down into something thats actionable for us. So its a tool that we call the fan and Media Engagement Center. And the fan and Media Engagement Center is unlike anything thats ever been out there before. What is it . So essentially its a room on our eighth floor in our nascar plaza in charlotte. And 600 square foot room that is glass encased. It looks beautiful. But the key is that its an enormously powerful tool. It brings it down to something thats actionable in realtime. What do you action . So the action is so essentiallyaction . The action is, essentially, if we see that fans are confused about a particular column or race or something happens with a promotional thing that happens with a particular sponsor, were able react immediately and eat ver our broadcast partner make that change an retell the story in some fashion, but it allows us to do it importantly in realtime, so it is like anything we go ahead. How is it lil literally going beyond whats trending . I see people happening on google news, this is taking all that and funneling it in one direction . So its not just social media, its traditional media as well. A lot of listening centers out there. For us, its not just a listening center. Its also an opportunity to hear whats being written by the media as well, what is being talked about. How is the technology you are bringing to bear different from the other companies, to the extent other companies arent doing it are you making it available to others . I work at nascar, we partnered with hp. Our vision was to try to hear about the do i log. Whats the tenor of it. What does itting will like . What is being said, to be able react to that, hp built something for us that is both hp software, hp consulting service, hp hardware. Will you be able modernize this in anyway . The monitorize isnt the direct piece. Its about us doing something or our ecosystem, our drivers, our teams. Wouldnt it be great add another ref now steam . Isnt it possible . Apt this particular time, the answer is no. Its about serving the fans. Are they getting marketing or for free or are you paying for the service . We pay for the service. We have an official sponsorship with them. They are breaking the spot today. This spot which unfortunately features me in it really talksant this partnership. How did that happen . You look great. You look good. One quick question before you leave. Sure. Is there any effort at all to collect data off the vehicles . A lot of people are talking about the future in which tesla cars, for example, pump back all the data to a user in. For use, were the whole thing for us is about infovation. This is one part of that. So for us to get data that spins off, which we do now, we do it through our different apps and opportunities for us. We are excited about it. Thank you for coming. Still to him co, donald trump, they fire a 40 Million Investment for his forprofit Investment School. Well be right back. Herworldly. 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. Suddenly, faraway places dont seem so. Far away. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is lov 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. The new blackberry q10. Help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. We have news to bring you, murial mickey see better has died. She was the first woman to become a member of the new york Stock Exchange. She dies at the age of y. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Good morning. Welcome to squawk box here on cnbc. We also have Michelle Carusocabrera at the table in for becky quick. Lets take a look at the futures se how things are waking up for a monday or the week. The s p is down off about 2 points. The nasdaq off about 2 points as well. Lets talk about the morning head loins, amgen buying Onyx Pharmaceuticals. It ends a twomonth option. It is the fifth largest deal in the biotech industry. There is a lot of implications of whether there will be other transactions like it. The government will be releasing durable gods, a 4 drop in orders. We will have the data and Market Reaction at 8 30 eastern time. New York State Attorney generals filing a lawsuit against donald trump and his for profit investments. Attorney general eric snierdman alleging they made false claims at the school, including trump hand pecked instructors. They say the skl operated without an educational license, misleading consumers into courses promising to teach techniques, donald tweeted, a light weight nys attorney general Eric Sneiderman is trying to extort me with a civil lawsuit. Good bless him, elliot is coming back from all indication, spitzer. Hes got, you know, the new york media is doing all it can to try to write nasty stuff. Ee but i remember sits inner went after big banks sits inner snitzer. He says i talked to a guy ha says you didnt hand pick him to be your struckor. Boy, you are that is light weight. Thats not what this case is. I dont know who is right or wrong, i did read the case. The case suggests there are kids who are spending a lot of money to go to the truch program, say an enterprise institute, expecting, a, that you will meet him, b, that you are going to benefit. To meet him . Somehow you will benefit from his program. And there is a lot of kids thats the argument. Done you think there are kids new York Attorney general to be concerning himself with, i dont know. He loves media coverage. There are things where i thought he was a complete amateur, a shakedown of, what was it . Whats he best known for . He went after standard charter. It wasnt his jurisdiction. If you connect a lot of dots, can you say im in a position to do this. It was a stretch. Remember he was e he was on the show with the whole thing. He had no idea. On press release. Yeah, exactly. I dont know. On that note, eric. Have you invested all morning . No, western you the first person to suggest him for the attorney general . He voted it. Didnt you . You floated the idea of having an attorney general in the state at one point. I did not. I did not. What do you got going on this job . A lotofright turns, the history in the middle east. With you anchoring. U. N. Inspectors are investigating an alleged chemical weapons strike last week. Calls for action are growing. A ceasefire is currently in place. While the u. N. Conducts their investigation. We are now getting reports that the u. N. Chemical weapons experts were deliberately shot at multiple times in damascus. Thats according to a u. N. Spokesman, as they were finally allowed to go to the actual site. We will get more details on this as soon as we know them. Meanwhile, president obama says there is little doubt president bashar assad used weapons. Mr. Cook, good to have you here. Good morning. What does the president do at this junkture . Well, i think he has spoken any number of times about red loins and the administration has indicated a number of months ago the syrians had crossed the red line. I think the pressure now given this escalation is on the United States, the british, the french, to take some sort of action to demonstrate through assad that red lines do, indeed, matter. And i would expect in coming weeks, perhaps, a military strike on assad forces somewhere in syria. Richard, has your boss has wren because of this statement related through the red line, with i the president likely regrets, if they dont do something here, its a message to the rest of the world that you cant believe what the occupation says and emboldens all kind of other actions. We had john hardin, the concerns are in syria. Its iran, because of this red line situation. Are the implications really that big . They are that big. I have from time to time disagreed with richard, on this one, hes got it exactly right. The more that the United States an its allies dither, particularly now after the use of chemical weapons last wednesday, the more it sends the is thatle to both the syrians and the iranians and i should say in addition hezbollah that they can run the table in the middle east, do whatever it is that they need to do, whatever times of atrocities, to achieve their interests with no consequence. Is there anyway to step this back at all . I mean, the American People do not want involvement in syria. Taking sides in syria, its a civil war. Is there anyway . Indeed. This is an extraordinarily difficult situation. This is someone elses civil war. But the use of chemical weapons are something quite different and they need to be responded to. They do set a precedent and there is something to be said about sending a message to the International Authorities that you cant use these weapons. How do you send a message and do it halfway . Effectively, its what everybody wants, maybe not appreciate the implication of not going all the way . There is always the risk of that slippery slope. But the United States and its allies certainly have the capabilities and means to do significant amount of damage to offset the military regime, the military weapons, in particular, the chemical and biological weapons. I think the israelis have demonstrated any number of times over the course of the last number of months they can use the technology at their disposal, certainly, we have the same if not better to target systems. You do it as a one off strike and get out . Is that what you are talking about . You can do it as a one off strike or a continuing number of strikes to continue to degrade their capabilities to the point where they are for the longer able use these types of weapons. We move on to egypt and reports there are many people on the ground that think the United States is in cahoots with al qaeda and being supportive of the mum brotherhood because of the situation that has unfolded there, the u. S. Not being supported in the military actions. Is it possible they really believe that . Well, there has been a tremendous amount of propaganda in egypt. One of the unfortunate side effects of the current political turmoil into egypt is the perception that the United States has somehow supported the Muslim Brotherhood, what the United States did, in fact, honor, it honored the results of elections that were held in late 2011 and 2012. When it came through the coup detat, the United States made it clooer that change in government through the force of arms was not the best way of going about building a more democratic society. So bret stevens wrote in the wall street journal last week, look, you may not like the military, but they are our best option and in our national interest. Should we keep it that simple . Well, you can make the argue the military needs are the last ones that do share washingtons interests in ensureing transit through the suez canal, upholding peace between egypt and israel and allowing u. S. Military access to airspace on its what i to the persian gulf. The egyptians played an Important Role lodgistically, so, yes, can you make that argument. Mr. Cook, thanks so much for joining us this morning. Council on foreign reels, stephen cook. Coming up, more fed speak and focus this week. We will talk markets next. Then later, the ceo, cfo of ubs joins us with his view on the Global Economy and more. Squawk box is coming right back. Zplmplts. Looking at futures down about 16 points. And it is official, the headline we talked about earlier, an Investment Firm is buying tms international. Yes, thats true. For 1,750 a share. Tms proceeds procurement and other services to steel mills. Why are you looking . Its a fed deal. It was a deal. They are looking for someone that will give me positive reenforcement for talking about it. You did a great job. The dow is back above 15,000 thanks to names like microsoft, verizon, at t, phil orlando is chief strategist and senior president. Joining him is the chief economist. Were you already here . I already talked about you today . Not on campus. I did. What did you say . You dont listen on the way in. I look at the others. Its coming if cold. What i said, we had him on, wearing this weird poliester jacket. I saw it. He made us touch it. His jacket. His jacket. He did shine a little bit. It was unbelievable. It was why the pressure was hot. Obviously, making a lot of clothing out of it. My point is he was not that positive about the prospects. I said, you said, we are going from 5 to three years at 3 , it would be perfect for the fed, if they dont get that, they may be getting out too early and get back in. So he said housing was something he felt was definitely weaker. Housing will probably have three or four months of weakness because the Mortgage Rate went up so fast. But by the spring season, i expect housing to come back strongly. If you walk in and its your day of closing, and its 110 basis point higher than when you decided to do this, you mit be tempted to postpone the closing for a month, a monthandahalf, to see whether or not you get a better Mortgage Rate. Will settle down if you say at that Mortgage Rate, people buy houses because they want to live in it. Unless you are young, you know 4 or 5 historically is its still very, very low. We came up with Mortgage Rates so fast that you got to have a couple of months where things will be slower. Spring season, i think it will be quite strong. I think the labor market will improve by then. I think the inflexion point is probably Third Quarter we will probably still be in the 2 range. 4th quarter and beyond, weheaded to 3 gdp growth. Guess what, the feds outlook is correct. Therefore, they will follow through with a tentative tapering. They might do only 10 billion. When . I think theyll go in september. From 85 to 75 . Yeah, i think both brul ard and rossengram said it wouldnt be a bad idea to do a little teeny tightening. So bernanke is a consensus guy to get the doves on board to get it started. You know, it basically, if somebody walks into prison, they are a her when addict. You dont put them cold turkey. You get the process started. We need to start to reduce the addiction to quantitative easing. So the latest correction in the market, does it have further to go . Or you think its safe to we put out a note a month ago, the s p was approaching the 1,700 level at that point. We said we were going to run into problems over the course of the next couple of months. We could see 4 or 5 correction. 1650, 1,600 were the levels we talked about. We are halfway lou that. The issues we think the market is nervous about with some legitimacy are all washingtonrelated issues. On the fiscal policy side, you got as Congress Comes back the debt ceiling issue, on the Monetary Policy side, you got the issue of the fred fed leadership transition and the tapering schedule way out. Those issues are not insurmountable. Theyre enough to flush out some of the weak hands, we think that will be a nice viable bottom over the next month or so. With these fed transitions, you never know what will happen. I personally got powell soeker reappointed back in 83. It was the a. G. Becker poll that made don reagan change his recommend aation. We all live in our own reality. So. These president s want their own people, but politically, sometimes it just doesnt break right for them to get the person that theyre closest to. Thats an issue here with the allen versus somers. Hes, the president is very, very comfortable. Knows larry somers very well, not as close to yellen. He may end up the third candidate as a result of that. For him, i thought yellen would be politically correct. I mean, everybody wants it. Its such an easy thing, im amazed that he, he must be tight with summers. He may be promised something. Amazing. The officials of theed a my opinionstration are a part of that old builtin boys club. So the boys club. Its causing problems with his base. They think larry is mr. Deregulation and antiwoman. Both of them are very qualified people. Its not leak we have a choice of two people, neither of whom is qualified. Either choice. You think the market wants one . I dont think the market cares a huge am. I think the market is unimpressed by the political turmoil associated with it because it makes it look, makes the fed look more political, more politically controlled. So that part of it where it became clear that summers was prominently positioned where it was, that was what ripped the market because his personally isnt he said something about qe, though. Also, you would have more turmoil. I dont know. Sometimes i think people leak new stories. I dont think that the thought that it will be Larry Summers instead of janet yellen had any market impact. What did have an impact is the sense of disorder in decisionmaking. This is a pretty disorderly process. How did we get to the appointment of the fed chairman being kind of like dancing with the stars. I mean, what is going on in our decision we are all weighing in. What is it . This is not a very impressive process of choosing the leading monetary official of the world. He has always been leak this, its cnbc. I think it has been that way, but its been kind of behind the scones. This is very much out in the public and i dont think i remember voelker had a lot, the second time, there are a lot of people that didnt want him. I can remember, im old enough to remember, g. William miller, people thought he was like a bozo. Well, the morning after, the wreetd journal ran the following comment from someone, just what the Federal Reserve needed, a good tool and dye guy because he come out of textron, a machinery oriented executive. So g. William miller was not a financial executive. He was an executive of an Industrial Firm and that was part of the reason why you got a pushback. Both are fairly positive. Phil you think it may not be over, were in corrective mode. Its also august. You dont think well have an october problem, a mark farbar selloff . The short answer is no. We dont have a sense of timing as to when this will happen t. Key issue with yellen and summers is senate confirmation. I think yellen will go through real estate. I agree with you. The one god news about washington is boehner seems to have shifted the republicans towards the program of delaying obama, with i is not as disruptive as trying to defund it when the senate is democrat and the president of the United States is a democrat. We got to defund obamacare when obama is president of the United States . Not going to happen. Thank you, guys. That could be contansive. There is a beautiful course. Coming up, move over lady gaga, miley is in town. If you missed the music video awards last night, you want to stay tuned to see this video. Also, amgen buying bio. And then in the line of fire, wildfires growing in the person part of the u. S. We will get an update and talk about whether taxpayers should be footing the be ill for firefighting efforts. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . Masters champion adam scott, winning the championship. Tiger misses by inches. Right in the center. Gary woodland had a shot to tie scott from 10 feet but missed. I think dustin rose had a 3foot putt. This is the first part of the fedex playoff. Its a huge payoff. Its an afewty or Something Like that. That course, people liked it. Will is tigers old caddy, williams. But we also have music video. Lady gaga has nothing on miley. Miley cyrus, a racy performance and on stage antics last night at the video music awards, stumping viewers, making her the talk of the town. This morning, pretty much. That is known as torquing . There was a little Michael Jackson moment that sort of youve michigan euphemism. This is going to be called the adult music award. Her father, what does he think this morning . If you get a chance to go on twitter. There is a picture of will smith and his family watching a all of this. Smack jaw with here mouths agate. It is quite a picture. That is not lady gaga. Is miss cyrus, herself. And thats called work to tworking. Thats miley cyrus there. We didnt show anyone but her, did we . We stayed on miss cyrus. Two different outfits . Thats robin thicke with the number one song of the summer. This you expect of robin thicke. Oh, come on. You want to hug me . Honestly, i thought that was alan thickes son, i swear. I did. Here it comes. Oh, were going to play it. Comments, questions, anything you see here, email at squawk at cnbc. Com. I want to play this and up all night to get lucky for the rest of the summer. Coming up next, tools of the trade, other than mileys performance, what traders will be screaming today. They will joan us to discuss financials, squawk box will be right back. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easytouse platform. Welcome back to squawk box. Firefighters are battling a wildfire. Cnbcs scott cohn joins us with the latest. Scott. Reporter good morning, andrew, you know when you see this many fire engines around, something serious is going on. This is a small fraction we have here in california, sort of the base camp for the fire to the east of us. A lot of what theyre doing is basically structure protection, for the structures that are threatened by the giant rim fire as its called, whether they will be busy will depend on the fire zone, where there is some 2,800 firefighters trying to battle this blaze which burned an area roughly the size of a city of chicago. They are focusing much of their attention on setting up basically fire lines to stop the fire to the north and the west, where the populous areas are, also to the east, i dont want National Park and also the reservoir, a lifeline for the city of San Francisco, where they get their water supply, much of their hydroelectric power. So the effects of this fire could be felt far and wide. Its one of about a dozen fires burning right now in just the state of california for the agency in charge of coordinateing all of this, it is certainly a logistical nightmare. Unfortunately, in wildfires, the floods, were very exercised in moving resources. We do it on a daily basis in california, for us the program is something we exercise on a daily basis. Its a chess game, we adjust resources depending on the state of activity. Reporter nationally, those resources are stretched almost to the breaking point. Now 11 states have wildfires burning. The gao was out last week the Government Accountability office saying there is Improvement Needed in the National Firefighting scheme, particularly the giant aerial tankers. We now have 8 of them left compared to 44 ten years ago. A lot is the result of bour kratic paralysis where the interior department and the Forest Service are not talking to one another, not figuring out what information they need to share, what needs they have an, innics, the budget nationwide is impacting fire efforts. They are managing here, trying okeep this fire controlled, only 7 contained, nationally, we are dealing with a serious situation. Guys. Okay. Scott cohn in catch, thank you for that report. More on the market, obvious currencies is camilla sutton, and stephen short, ladies and gentlemen, good to see you. Camilla, let me start with you. Considering all the discussion about whats going to happen with Monetary Policy. Absolutely, i think for us its a case of u. S. Dollars likely to be stronger him when we look at the euro, all the signs fundamentally have been for a weaker euro. It is based on flow driving out of the oem and the u. S. Markets. All of that has support euro. The option markets, are highlighting that euro is likely to begin moving lower. Thats because of weakness in europe, not because of fed tapering or both go handinhand . I think both go handinhand, however, i think when we get into september and we really look towards tapering through that nonfarm payroll, it is likely to be an environment where the u. S. Dollar strengthens, the euro is supported by those flows. They begin to fall away. A does drive a much weaker euro. You plan any of these big emerging markets and front ear markets moved, if rupe, the brazilian royale suffering dramatic declines as a result of the expected fed tapering . Are you playing in any of those . Absolutely. I think the way we have looked at it from an ad advanced economy market is those lows have been searching liquidity. It becomes more than the u. S. Dollar. Thats why we have seen euro and sterling so strong. I think the flows have been a major impact across the market. Now when you look out to a time when they should taper, thats an environment where really we should see that u. S. Dollar strength come back. Its amazing the divergence the u. S. Dollar against the xy, which reflects the advanced economy. Stephen, if shes right, are you strictly focused on supply and demand at this point . At this point, yes, supply and demand, right now, we are over the hump of the season with regard to crude oil as we go into the fall refinery season, demand will tall off further, at the end of this weekend, were going to start to see an elasticity at the pump fall at the end of this driving season, so kernen is not going to be able to drive out to his summer estate any more. You are confusing him with matt lauer. We had a record draw down in crude oil supplies, one of the strongest demand periods in 31 years. Said, we have a comfortable level of supply. Now, of course, we have wall street to contend with. Oil prices have not traded below 1. O8 a barrel since the 4th of july holiday. In that time, a ton of wroet money had moved into the market. Is the equivalent of four months worth of refinery demand. At the same time, wall street is overextended to the point now they could outdraw the nynex. So the implications are what, they have to do a massive unwind . The price goes down . Absolutely. We are at the point where the template is lower. Now, if your guest is correct and a dollar does move higher, again, we have another wait in the bears defense. Now the caveat here. Well, the we break the current rate, 102 to 109, we break that 102, which given the fundamentals laid out, we go back to where we were indown. 9295 rate. 35rden the rhetoric. We have the known unknown. You have the situation in syria. Did they not use pep weapons of mass destruction . Chemical . Did we invade . Egypt, a train derail him in quebec . The taper talk. They are potential drivers for higher prices, take that out of the pictures, the fundamentals suggest lower prices into the fall. With all those caveats. Ladies and gentlemen, thank you so much, good to see you this morning. Thank you. So he looks like alan thicke . He does. A younger version. Oh, he is, robin thicke is the son of al thicke. Then thats sad, now i know at least who his father is. Hes a famous singer. Yeah, very famous. He has one of the two songs of summer. Growing pains, he wasnt the kids . He was the father. Alan thicke was the father. I know. Up next, cnbc, cfo council of ubs will join us to discuss the financials, the economy and more the deal on the morning amgen buying onxy form suit cals for more than 10 million and the fast growing business of cancer frooemt treatment. Welcome back to squawk. No matter what, the tech hiccup shines the market on market and stability. Where things go from here, we will turn to us chief Financial Officer tom naratilment where were you last week when the nasdaq shuttered . I was actually in zurich. What was the view . For all of our clients, individual investors overall, certainly, its a disturbing event to see what happened. I think its critical for regulators. Its critical for the exchanges. Its critical for Market Participants that represent our clients, individual investors, to get together to ensure something leak this doesnt happen again. Did they handle it proper . Bob greggo said he was getting accolades, Market Participants, traders who said they handled it completely improperly. Jim cramer came on and said, who are these people . Are you one of them . I think its always pretty difficult to monday morning quarterback the issue when someone is in the middle of a crisis. Certainly, i think there are some things that can be learned from both of the issues the nasdaq had, in terms of increaseing communication even more from what weve experienced. I think Market Participants overall in terms of firms representing investors directly and certainly you and the press would like a quicker response an better information. Was your firm informed adequately enough, do you think, during the process . We think there is some room for improvement. Okay. Lets talk about the markets. Lets talk more globally about the economy and the cfo, one of the largest investment banks in the world. When you look at whats going to you, or not going to happen this september with what you think the fed is going to do, what is the expectation of ubs and its implications. We certainly think you will see the tapering before the end of the year the december question. It ma itselves in. In the long run, that itself not a really material issue. I think the process of tightening is tightening. So you can call it tapering or tightening. Tightening is not a pleasant experience. How is it impacting the corporate clients and the individuals . From a corporate client perspective, certainly, its more the uncertainty, not from the fed, more the uncertainty lick issues like the euro zone stability, the affects coming out of the tapering, meaning the effects in the emerging market, certainly is affecting confidence and mna activity. When you lock at individuals investors, when we look at our clients outside the u. S. , when we lock at our clients inside the u. S. , theyre holding near record levels of cash still. Life is relative. Last fall, people talked about uncertainty for different reasons, the election, all sorts of other things going on. I would argue it felt more like uncertainty a year ago tan today, start . That actually is true. However, however, you still havent seen a solid commitment from investors to move completely away from historical levels of high cash. So its more im out of fixed income, because i know i dont like that asset class. Will is some slight exposure increase to equities. You dont see the big rotation that everyone is expecting. A lot of focus is on the general election. People who think about sovereign bonds think that is the moment we know whats going to happen in europe. Ange average la merkel got elected. In europe, it feels more than we are here in the United States. Certainly, i say overall, if you looking at our clients globally, europe ranks in the top list of everyones concerns because it drives export markets, you know, in asia, it drives certainly the way that we would react here. However, were not that negative. We this i that europe wimps along. We think gdp growth in europe will be positive as you move into 14, 15 and 16. It is the slow grower in the economy. Let me ask you about the banking business real quick. Were coming up on the fiveyear anniversary of the banking crisis. Many say theyre well capitalize. They say look across the pond, not nearly as capitalized. Do you believe that . Im not sure were pointing at you. The swiss banks are a different case completely. You had to raise capitals at levels that frankly may not exit here. Correct. It would be tough to point to us. Were the best global bank. Overall, if you look in the u. S. Going back five years ago, you had a forced recapitalization of the Banking System in one shot. Whats going on in europe is a rolling recapitalization of the Banking System. So until thats, you know, a significant portion of that is complete, thats one of the toughest things towards getting the confidence that we talked about earlier. When wing will back at that experience, versus piecemeal, each bank gets in trouble. Then you do it. Country by country. Which makes more sense, ultimately . Do you think we will lock at the u. S. Example and say that worked or the other one and say that worked . I think you will look at the u. S. Example and say that worked. The momentum in the Global Economy today certainly shows the greatest amount is in the u. S. I think that taking your medicine, the bitter medicine up front was certainly smarter. Okay. We will leave it there, tom, thank you for joining us. We appreciate it. Thank you. Becky is not here the prompter says becky should read this. You are sitting in her seat. Him dock up next i didnt know if joe wanted to read it. He did it before. Its monday. A big dole, amgen buying them for 10 billion. We will head to brick and a look at the futures at this hour. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. Welcome badge. Lets get back to our guest host, phil orlando. We had i guess what would be if you go back to the anniversary. Is this a fiveyear bowl we have been in so far . We are up 150 . Compound down annual growth rate of five. 5 years of 23 , which is extraordinary. For the dow. For the s p 500. I think a little better on the nasdaq and the russell. Why doesnt it feel that way . Everyone is still scared to death. But if you look at the underlying metrics of the mark and we spent a fair amount of time looking at this, from a valuation perspective, weve gone from 11 multiple in march of 09. We are trading at 15 times this years consensus top down earnings. Next years corporate other thanings. They have doubled. From our perspective, looking at the pet tricks we like to focus on, level of direction of Interest Rates, level of direction of core inflation. We believe the multiple can continue to grind up to 17 or 18 times looking out over the next four to five years. Now, the pace of growth of the stockmarket we think is unsustainable at 23 . But we absolutely think we could do 10 , 12 total return over the next four, five years. Thats not great, given the alternative of making 0 in cash or losing money in treasuries stocks still ought to get the nod here. People say long term its only 6 or 7 if you include dividends. If you did 12, that doubles in six years, thats pretty good. Absolutely. The rule is 72. From this perspective, if you boy our argument that were still going to see some modest multiple expansion with corporate earnings world limping along, mid digits, its not a bad environment given the alternative Asset Classes. Lets get to this amgen deal buying, onxy for just over 10 billion. Joining us over the phone, r. W. Baird and company, chris, its got to be. I have been trying to figure out how this could probably be its got to be some of the other drugs, even though they have, i guess they dont get all of the they got partnerships with buyers for those. Is this a lot of money . It seems like it . Reporter i think it is 10. 4 billion. Certainly, i think another way to think about this too, though, is when you look at the Value Creation for amgen since this deal was announced. You look at where the stocks bid up today thats about 10 billion premerger announcement, were not talking a o10. 4 billion deal. Its a 20 billion value deal here we are seeing. How do they get to that akriegs numb accreings level . When this deal was combined, we combined ours like everyone else did. Were seeing low digit accretion in 2015 into 2016. Its a nice little bolt on. I dont see this as a particularly game changeing deal for them. I asked some other analysts about the other indications. Its not that this drug will be used for something other than multiple myeloma. Right now you have to have failed two therapies. So if it canb the first choice or after a failure of one, then thats how you go tote a billionandahalf . Well, i think thats correct. Its differently only a myeloma drug. Thats the problem. Its been a 2 billion drug world wide right now. Now is the pipeline at onxy. They dont seem to be a big r d company. They bought this. The other ones theyve partnered with. Is amgen buying them for any r d or pipeline . Yeah. No, in is, you know, mostly centered around the existing pathway to getting this drug used. They are replacing some of the revenue amgen will lose in the patent. Yes. Thats trough. Chris raymond, we appreciate it. So far so good for amgen. They got a lot of cash. Coming up, we will talk blue skies or Turbulent Times ahead for the airlines. A good question. We will speak to the ceo of jet blue about the business, the airline landscape and much, much more. Before we go to break, the dow is opening off about 15. 5 points t. Nasdaq is up about a point as well. We are back with a big hour in just a moment. If youre serious about taking your trading to a higher level, tdd 18003452550 then schwab is the place to trade. 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Tdd 18003452550 and learn how you can earn up to 300 commissionfree tdd 18003452550 online trades for six months with qualifying net deposits. Tdd 18003452550 our trading specialists are waiting to help you get started. Tdd 18003452550 so call now. Tdd 18003452550 welcome back to squawk box here on cnb first on business worldwide, im joe kerr fen along with Michelle Carusocabrera, phil orlando, chief strategyist at federated investors. More from phil still ahead, first, though, andrew had your headlines. Amgen buying onxy farm suit cam for 125 per share a. 10. 4 billion deal. Ending a two month long auction of onxj. You can see that spike income june and july on transactions that it might happen at 130 a deal. Tms provides procurement and services to steel mills. . Dozens of wildfires burn this morning across the west. One of the most severe is raging out of control in mountains of california, threatens a reservoir, also provides power to key areas, including the airport and the latest reports say the giant wildfire has charred 15,000 acres in i dont want National Park. Scott cohn is on the ground there. Lets check on the markets, though, first this morning. Not a whole lot of movement so far. The dow has been indicated down between 15 and 20 points for most of the morning, pretrade session. After, you know the last three weeks, we have been in correction mode. Heres whats happening in asia this morning. The nikkei had been strong at the end of last week. Europe pine markets, the most, the reason that were showing you italy today, its down 2. 5 . I dont know, its some weird holiday inn Great Britain and the u. K. There is threats they want to try to pull berlusconi out of the parliament, so his party is threatening to fall apart, berlusconi finally got convicted and sentenced, something. I said the reason we showed it is because the u. K. Is a holiday. U. K. Is closed. We got the latest janet yellen picture finally. You want to show it . We had it and then we didnt have it on when we showed summers and yellen. We showed her like four years ago. Now we got back to current pictures. Ten we got it with her. Larry at the same age . Larry, thats what larry looks leak. There are the two. Who will be the next fed head . Theres. Kudlow in what is like the oldest news in the world thinks that maybe geithner could be. Maybe donald trump, too, thats what we were talking about at the top of the show. The idea there has been so much blood letting between them. They have to sh. Acrimony, to bring everyone together, people that love yellen everywhere else. There are some specific people big summers guys apparently around. So the debate continues over the fed, the state of the economy the taper time line, et cetera,et set remarks bob brown is president of Fidelity Investments bond group and rich steinberg chief Investment Officer of steinberg global ace set management. Bob the backup in rates, 2. 8 down from 2. 9. Where do you think it will go from here . Stay in this range or move movement to come . A great question, the last time i was on squawk box, we are above that 2. 82. Most people think the risk for bond yields for the ten year is asymmetric. Worry not quite in cha camp, meaning they cant go slower, they can only go higher. Several influence, disappointing u. S. Economic growth, a stall in the housing recovery, a stall in the china growth, em blowout, a european, another crisis. So there are Many Political and economic factors out there that could really cap what we see as a further rate rise. Would could they hit 3 at the end of the year . Probably. At the end of the day, we think there are enough factors out there. Probably 2. 75 or 3 . Witch rich, what are you thinking about . Is that what you factor in when you think about stocks . Yeah, i think one of the issues we dont know is the markets have moved rates quicker than probably the fed likes getting up to these levels. If we end up with taper talk, it could affect the market, if we pierce that 3 level, we shall. Really, investors have to think about their game plan and remain patient. We will have a lot of choppiness over the next two or three weeks. Labor day weekend, skeleton crews during the holidays, the employment numbers on the 6th. There will be a lot of less liquidity and choppiness. So if you have a game plan, levels go down to where fill was talking about earlier, 1650, 16. 25, you have a chance to accumulate of stocks. Last week 14 billion came out of stock funds, that money has to go back some place. Our guess is at stocks lower levels. Phil orlando is nodding his head up and down. Absolutely. Were right here. Our next move is in. Were trying to to be patient, we think there could be a lot of things which rich identified. If we get in that 16. 25 level, were comfortable with a longer term view, we are likely to move in. You make what assumption on the tenure . On a timing standpoint, we are already there. The longer term view, we think the treasury is leaking air. Were 5 . When . Over the course of the next say three years. We will gradually move up. The market with hand him ha . The equity market can. If you look at the way these relationships work, multiples expand. The point where the treasury yields exceed 5, thats the point where we see multiple krrgs. Worry in that pete is spot right now. We are comfortable with pd multiple expansion as treasury yields work higher. Bob that, new home sales took air out of the belief that tapering would happen immediately. Does that mean the durable gods numbers, normally we dont pay much attention to, maybe it takes on more importance . I think at the end of the day, we have to ask ourselves two important questions, has the policy over the past couple years, combined with quantitative easing allows the u. S. To be at a point where they will have sustainable economic recovery . Gdp print north of 2 , or has will been enough to allow the economic output that stops us from going back into a discretionary period . We are much more in the latter camp. What are you telling people to do at this point with all this uncertainty . Well, theres use cases for bond, so at the end of the day, one is obviously a hedge to stockmarket risk, the other is a wealth acume laying over a period of years, 3 doesnt sound great. Over ten years, its not compounded, that should be a part of the well diversified portfolio, as rates go up, there is generation of income. Corporates . Corporates, they spent the past three or four years really improving their blown sheet. We think there is an attractive play there. And we find, you know, the financial sector, the reit sector very god at this point. I look at these Corporate Bonds yielding less than the stock of the same company. I still dont understand why people wouldnt buy the stock in set. You were talking about when the cash comes back, you think it goes to equitys . Yeah, if you look at the dividend sector, if you kind of underrate utilities, more interest sensitive names, in fact, i think if you have a 3plus percent yield in a stock and you get a modest return of 3 or 4 in the price, a 7 total return for a conservative portfolio really exceeds most peoples spend rates. You know, phil was talking about a 5 ten year which i think is way out there. Our clients endowment foundations and wealthy families. Planners have talked all of those people down to a 4 spend rate. So i do think if you were to get the ten year back at 4 or Corporate Bonds above dividends like you were talking about, then i think there becomes a little more competition. This sub3 member probably not so much. We used to talk about a 5 burn rate for those constituencies. Now weve talked more about 4 . So i think people can find good quality names. I know my team of. Managers is finding, are finding names that are attractive and have a game plan in place to be able to pick up some names at lower levels. Gentleman, good to have you, thanks so much. Bob, rich, phil orlando, stay with us for the rest of the show. We got a talker to talk about right now. We have been following new York State Attorney generals filing a 40 million lawsuit against donald trump for his for profit Investment School, attorney general Eric Sneiderman alleged the real estate mogul made false claims about classes at the school. The attorney general says the school operated without an educational license while misleading consumers into paying for courses, promising to teach trumps real estate ec neex, tweeting about the six over the weekend, saying light weight new York Attorney general Eric Sneiderman is trying to extort me with a civil lawsuit. He went on to say and suggest rather that this was the fact that he wasnt giving him donations. Anyway, take a listen to what trump just had to say on the today show this morning. I was totally involved. I was involved to a very high degree. Obviously, its not my main business, but applications, resumes, i met with people. I had a lot po do with it. I had a lot to do with what they discussed. It was a related to the allegation that he didnt hand pick some of the instructors. That he didnt hand pick the instructors, apparently, you didnt meet him even if you were told to meet him. That was a weird one. You would go and take a picture next to a life sized version of donald trump as a posed to. Like a cardboard cutout. Not even a wax figure . Not even a wax figure. I dont know what the students were expecting to begin with. Having said that, clearly, there is a claim. Did donald claim he would be rich . Im sure he would. Trump university provided 11,000 testimonials to mr. Sneiderman to students appraiseing the program. 98 of the students termed the program excellent. I mean, if you i hope you won pay that much money to meet the donald or his hair, would you . I mean, if you paid it just to meet him, look. I think there are is a lot of people out there. The reason they are becoming students to begin with is because they think they will get on apprentice. He will hook them up with something. Thats what this is about. Some students were dissatisfied. Whether they should be or not, we dont know the answer. They bring on what mr. Sneiderman wants. He loves this publicity. Thats why he sued donald trump to get more publicity. Im sure he loves this, too. Trump did skribt to sneiderman in 2010. Apparently he hasnt contributed enough, this is a shakedown. Competitions dont do that. Coming up, winds in california are pushing wildfires closer to urban areas, now threatening water and power in the reservoirs. We will get an update next. Still ahead, jet blue ceo jeff barger plans to hire. Right now as we head to break, check out the squawk box market indicator. 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. Make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you start using active trader pro today. Welcome back to squawk box. The dow opposite off 4 points, the s p off 2 points. The nasdaq off 2. 5 points. A typing error by a clerk at the Stock Exchange causing one of israels largest Investment Firms to lose 100 . The share prize of Israel Corporation fell after an Exchange Clerk entered a wrong number. The trader was trying to sell shares and accidentally selected israel core. It pulled the major tel aviv index down to halt trading. The transaction was cancelled after the clerk realized the error. Coming up, wildfires threatening the Water Supplies for the city of San Francisco. Scott cohn will be joining us with the latest. Scott. Reporter good morning, andrew the fire is just over that way. Were at the staging area. About 167 miles that way is the city of San Francisco so why are they concerned . Well, their main source of fetch water to the reservoir is near the fire zone. One of the key efforts here is to try and protect that. San francisco is already being forced to boy electricity out on the open market. Is just one of the issues theyre doleing with. A fire thats known as what they call a crowning fire, jumping from tree to tree in some very, very difficult terrain. So what they really need are some of those aerial resources, the tankers, the helicopters. The resources are stretched to the limit. As we reported last hour, there are only eight of those big aerial tankers left that the Forest Service owns, so they use military allergic as well and some of those planes are flying in all the way from the east coast. When they get here, the days are grueling. We try to get a handle on it early, depending on the conditions, if its a low humidity, its conducive to fires as opposed to a high humidity day. We could have a day where were fighting fires all day. Its a constant circuit of coming back here, reload, refuel, an back out. Reporter this fire has already burned roughly 220 square miles, an area roughly the size of the city of chicago. At last report, it was about 7 contained. Doesnt mean put out, that means contained, where its not spreading more. Already concerns that its going to continue to spread further to the north and the east, where that critical reservoir is for San Francisco and everything now is all about protecting that, protecting some 4,500 structures and trying to bring this fire, one of the largest in california history under control, guys. Okay. Scott, thank you for that report. We will see how things develop layout the day. Coming up, durable gods for july due out at 8 30 a. M. Eastern. Economists expect to drop 4 in durable goods orders for the period. 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This is the pursuit of perfection. Welcome back to squawk box. Four Senior Technology specialists on leave after a trading glitch. The error is likely to cause the bank tens of millions or dollars. Some estimate as much as 100 they indicted three men for steele stealing a source code from an Automated Trading Firm t. Criminal complaint campaigns three men that worked at flow traders in new york emailed themselves leans of code that contain secret algorithms at the trading strategy. One of the traders shared the code with a College Friend from m. I. Tive. Gentleman, it was you . He doesnt know how to use the file thing. A file service, on drop box. You know what that is . It accuses them of using secret software to start their own company. If you recall, gold man sachs alleged a Similar Program with their programmers or a year before. The scaleability and granularity i find i am doing something cloud based. I am basic. I am cobalt. Okay. 2s, a lot of 2s and 1s. I dont know. You dont have a drop box . I got a lock box and Social Security like al gore. I dont have a lock box. In luxury car news, tesla is out zell selling porsche and Land Recovery in catch. Elon musk capturing the sport market in the state furth first half of the year, all the greenies out there love that. In l. A. , i dont know how youd know you would be able to get to where you are trying to get. If you get stuck if traffic. I saw this horrible, i didnt like this new show, i didnt like it. Show time, it was horrible. Hes in l. A. He says, ill be over in a second. Hes like leaving to go from like way out in malibu to pasadena. Its like your brother is going to be dead by the time or in a there is no way you just leave malibu and get to pasadena. You dont just do that. You never lived there. It all looks oeasy. The stalker would be gone. They would have long escaped. Its not like that. Anyway. All right. Coming up, breaking economic data. Minutes away from the durable orders for july. As we take a break, head to u. S. Equity futures. [ 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. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box. The average price of gasoline slipped in the last two weeks. The average cost of a gallon of relevant lar falling from 4ents to 3. 55. It points to abundance supplies from the lungberg survey as the decline. The summer driving season, you figure it should have been here. Correct me if im wrong, it is august . It is the summer driving isnt, isnt it . Getting towards the owned of it. The economists find the biggest fiscal challenge isnt whats happening now, its what could happen beyond the next decade, a survey by the National Association for business economics find 43 of economists named budget gaps in the 2020s and 2030s as the top fiscal challenge. Wait until we are all living forever, we accomplished most, how much will that cost . We will cure a lot of diseases before that. And in hollywood news, civil rights drama lee daniels, the butler took home the second straight Weekend Box Office tile. The Jennifer Aniston comedy we are the millers came in 2nd. I like the butler. Oprah winfrey is in it. Its supposed to be really good. For july, economists expect a drop in durable goods orders for the period. Rick santelli is standing by at the cme in chicago. Brian leavitt is ginning us from new york. We got about a minuteandahalf, brian. Were going to get a bigger number, maybe. Is gdp later. What are the big numbers this week . What are you expecting . Of course the big numbers will be gdp. Obviously, we will be focusing on payrolls as we head in september. A lot of people are thinking baaed news would be good news at this point in the economic cycle. Essentially saying the economy is not showing a big acceleration, maybe concerns about fed tapering. Durable goods numbers, weve had three months in a row where orders have been close to over 1 . Which is god. Leaves a lot of people to think second half Economic Activity will be a little bit bit better. Will is a lot of uncertainty coming into the fall. You see it in the survey data of Business Leaders. So i wouldnt expect a breakout in nondefense capital goods extransportation. Is the feds mind already made up . Or do numbers still matter . I think the numbers still matter. The fed will move ahead with a taper in september. It probably will be lighter than people had initially expected. Of course, what becomes most important now is the guidance Going Forward. Just because you taper in september, doesnt pine you have to extrapolate that to mean there is not going to be purchases as we move out later. For me, the guidance Going Forward is always more important. The guidance going backwards, you should see how reliable i am on that. Anyway, stay with us, brian rick, the numbers are ready, what are they . Durable goods down, a whopping 7. 3. They can out transportation, down. 6. If you look at capital goods orders, we were just discussing it, nondefense exaircraft, proxy for Capital Spending down 3. 3 and the shipments, which were down. 9 last month, which was an outlier is continuing with minus numbers at minus 1. 5. This is a big set of red lights at the durable goods intersection. These are much, much lighter than we were expecting. This is already expecting a down 4 headline. Lets go through the intern also of last month quickly, 4. 2 downdpraded to 3. 9 for june. Most of the other revisions are somewhat subtle, all tow, the orders kicked up to 1. 3 and those negative shipments from june last month, down. 9, becomes down. 8. Both of those really are quite weak. What has happened . Well, yields moved down a little bit to 2. 80. Of course the preopening equities, looks like down 20 in the dow futures and the dollar index unchanged in lew of all the other data points that well be trying to assimilate this week. Back to you. All right. This is going to be a pretty good litmus test to find out which news is good for the markets at this point. I still dont know. You think this makes it less likely in september, dont you think . I think that the taper is going to occur, but not, let me rephrase. My own opinion is its impossible for thesegys to remove the subsidy. It seems like the rest of the globe has been somewhat viewed as collateral damage. A lot of the headlines this weekend. So you will have a lot of these emerging market. If we decide, geeze, fellows, we will change our mind, taper, were covered. Maybe were not going to do that so quickly. So you will see a lot move extra volatility in the ems. Were not building a long list of amiable relationships with these emempblging markets as emerging markets as we give them extra homework. We will get to our economists in a second. But we have seen the most recent pullback came from Economic News being god enough to taper. Thats why we pulled being. Are we definitely off of the, you know, not wanting the taper being more important than the economy . I still think these shortterm guys love the accommodation. They dont want it to go away. Bad news is no news. This durable numbers was so horrific. Very much in contrast with the improvement we seen in the ism manufacturing data in the last few months. We were 49 in may. Number popped up to 55 in ul j. Yet this durable goods numbers lets get to oppenheimer funds. Senior economists that were going to bring if right now. The oppenheimer funds, we talked with brian. Every time we get a durable goods number, we almost say its like a tech savvy nasdaq, a highly volatile durable goods. Is there a Silver Lining . It is a highly volatile number. Its tough to shug gr coat. You get business opt mick about hiring new workers, only to run smack into a bunch of uncertainty, a couple years ago with the debt ceiling or europe and what were going to face headed into the fall with a variety of different fiscal and monetary issues. So i dont see this as good news. For all the talk about tapering. What it will come down to is whether companies can grow earnings. In order to grow earnings or revenue, you need to see improvement in nominal gdp. What this points to is further proof this economy is not accelerating. Probably keeps the fed in the gym longer than some had expected. In part to sugar coat it, this is not good news we received this morning. All right. We will see more with the gdp number. Im not convinced the market doesnt go up if september gets off the table. He was already leaning that way that its not september. 6040. What do you say . These guys, im telling you, they trade in a better economy for heroin. The traders. Yes. The reason and if you get to, where is the ten year now . Where is that going on this muse . Its slightly dipped below 280. Its not that traders prefer one form of manipulation over another or none at all, its just that at the end of the day, i think that every trader would rather see a clearer path to catching a bigger check versus a merkier one. Why do you have to do your home . Why you have to study the economy, put in the effort. If they will do more qe because the economy is on an unsustainable path, regardless of the helpings of mashed potatoes make a difference at all, traders arent dumb. They will take the path of least resistance like water flooding your basis. We are below 2. 8 now on the ten year. Phil, five years, 23 . Compounded in the markets, right . It hasnt been because of the economy. No, its largely been because its all been multiple expansion. A lot has been the extraordinary efforts of the fed. It certainly hasnt been fiscal policy, Monetary Policy has been carrying the game at this point. Carrying what became the . If it was carrying the game, why would they have the taper debates . They would stop, the game is going on as influenced in a positive fashion. On the fiscal side, maybe were better off we havent gotten anything out of washington. You dont know what the other side of the mountain looked like. Im still wandering, whether i think we need to pass the baton to the economy eventually to get the market to go higher. Absolutely. In the meantime, these guys still do, you know, just theyre almost say make me chase who is that thomas, make me chase, just not today . You know, i want to get off this qe, just not in september. Let me, give me another couple of months. So well see. Because the ten year has been the fly in the ointment, rick. Every time that moves, the market is going down in the past three weeks. It will turn into a bumble bee in the ointment. Pretty soon it will turn into a full fledged raptor. Sooner or later. Sooner rather than later, i think. While we di bait this, they are in every day doing several plus or more billion buybacks. I guess in the ends while were playing threecard monty, theyre accomplishing the mission to make sure the treasury pockets are always empty . What is heck is ailing, everybodys got different reasons, but, i mean, is this going to be jimmy carter 2. 0 . 8 years of malaise . A rhetorical question . Lets put politics aside for a second, were still in the after math of a financial crisis. So its still a prolonged deleveraging process. When do you stop saying that were deleveraging . I mean, we talked about the crisis. This is our new neighborhood. Seven years of plenty followed by the seven years of lean. I dont want to make a political statement or apologies for the administration. Seven years of plenty. We have been talking about it for a while here at oppenheimer fund. Essentially what it means is that businesses continue to work through the aftermath, generally moving forward with modest investment and equipment and software and ultimately as Earnings Growth rolls over, it means that businesses have to step in and make meaningful investments. So long as the housing hold sector delevers, we dprap him with fiscal uncertainty in washington, businesses will be cautious. Can i tell you one thing . I want to say two things. Two things. We could do 10,000. I dont want to suggest we couldnt do better than we are doing right now. Because we could. You said the s p is up what 165 . 150 over four. 5 years. A counter fact, to sit around and complain somehow the world is coming to an end or is horrible. The world is not good for the people that want jobs, andrew. Its waning, complaining. Who said complaining . I did. What was that . I did, an drou did. Complaining. I dont know. Just think about what you are saying. You would think im complaining that you are i wasnt suggesting. Everybody, your kids have a 53 grand price tag on their heads, andrew. If anybody should be doing complaining, it should be all of us parents. Im not disagreeing. We are saying, i was talking about some of the stuff that joe was saying, others were saying about how the world somehow is awful. The recovery never seems to get on track. And there is reason. So far, i dont want to suggest its not. Its not that we are doing the best we can. We have done, that these policies have actually mitigated how bad it would have been, a lot are adding to the problems. Thats the age old argument that we have here. If you dont think obamacare is adding to the problems of this economy, andrew, i mean, you are smoking something. Nbc news did an investigative piece. Yes. And figured out that obamacare was actually causing the numbers of hours of parttime ploy yes, sir to go down. Its obvious. You dont want us to be, i mean, now we get to 7andahalf, what if we start going back up in unemployment . I hope we dont. Five years into this, were at 7. 5, how many are we still down from the break . Really more like 14 if we all wanted to be really honest about it. Before the recession, we were still 4 million jobs shy of where we were. I dont care how much qe they do, if you used to hammer males, you cant make it hammering chips inside a device. We are skills issues and educational issues. I dont see how the fed buying tenures we auctioned off weeks ago. The American Dream is dead, yet you say the market is up. The American Dream isnt dead. We have to get the government to move off the pillow, thats all. Income disparity. People cant do what they used to do. Income disparity. Complain about it. The other point the American Dream is much harder. You dont believe that . A lot of people manage to go to the vineyard for vacation. How much disparity is there . Be careful with that tie, phil. Coming up, jet blue airways building its network, planning to create 1,000 new jobs this year. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. A lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of Fidelity Investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box. Jet blue airways is trooi drawing inspiration from the new york Fire Department. Joining us now the ceo of jet blue, what do you mean you are hanging out with the Fire Department in new york city these days . Hey, were new yorks hometown airline. The Training Academy handles that one. The fire fighter for a day program with the fda and y foundation, it was awesome. Are you sending all your employees through this program . We oefrts huddle almost monthly. When you learn from the fdny is going through, mix but also know your position and also leadership, thats necessary. Really . To firefight here. Im worried its not just the officers that need this. I want the people in the planes to have this. We take this to the front line crew. We have over 250 retired fdny firefighters who support us at jet blue today. So this trickments into the organization. Can we talk airlines for a second . Of course. American air, u. S. Air, the government is saying to go. What do you think of that . Well, i think it was a surprise, thats for sure. Anybody that says otherwise when you look at whats happened in the industry would not be truthful. All that said, its going to play out later this year. Theres a part of me that says, if you are you, you say this is great, maybe it makes it easier for you, part of it is bad, if we ever wanted to have a partner, we cant have one. Consolidation is good, we look at a lot of bankruptcy, this is right size in the industry. So gdp and capacity, those are the issues, macro issues. Would you support this trance agency . We went either way, whether it does or doesnt go through. When you read the complaint, they say that you guys tacitly collude and the fewer there are of you, less likely polices are to go down. Its interesting, justice certainly has a firm hand on that, right, as people talk about again your word collusion, this is an industry where you start to look at the consolidation in an industry that has historically not covered its cost to capital. This i think will be a positive development. If it doesnt go through is it possible for customers when prices go up . Prices go up, less routes. Its interesting. And the airlines say more routes because we somehow give you more access to hubs and this and that. Right. Overall, less routes, less competitive prices. You dont Want Companies going bankrupt three or four times in rain shower lifetime. The miles expire. It would be nice to have a viable industry to fly on. You love to travel. I love to travel, i love to travel cheap as you know. Let me ask you a different question. Andrew, prices today compared to deregulation. Im not disagreeing with you. It was 500 to go to florida within i was a kid. It was. Is there the argument to be made, it cant be a competitive market . If you have a truly competitive market, airlines fail . Oh, id disagree with that 100 . Now i believe, first of all in the c suite, you have leaders focused on returns and because shareholders, our owners are demanding it, supported by boards. I tell you what, this is a good time. How does that make sense . A a truly free market economy, the price would adjust to where its viable. Its only down to a monopoly or arogopoly. What does it is when you get regulators come in and do the wrong things, its like trying to build a crystal here. You need to build it in space. One little tiny thing can mess up the whole dynamic, cant it . You can. You guys are doing new routes or same route, you are putting Business Class on your planes to go from new york to lie. New york to san fran. Okay. There is a lot of competition on those routes already. Sure. Are the Airlines Across the board, are those flights profitable for nearly as profitable as the flights to charlotte or to ithaca, new york. Or to name your small town where frankly people get gouged . Sure. What about gouged . It costs more to fly to those prices. The price could get set by market forces. You would ask the same, why doesnt everything fail if there is competition . On the biggest, on the flights and if flight paths, that are the most competitive, people are not making money. The reason were doing it is we knew there were customers lo ill to jet blue who werent flying us. Theyll tell us theyre not flying us, transcon from new york to San Francisco and lax bus of lack of a premium product. It is one of the few products in the world where people pay for that seat as opposed to being upgraded based on loyalty programs, number two the lack of wifi. Literally all is solved into the 4th quarter. Not the ground days to the airplane wifi. Were doing it because those customers werent flying us. They told us they werent flying us. Can you remain competitive if this dole goes through and remain independent . Do you need to do a deal in. Theres theres three models now in the industry. Theres the Legacy Airlines that right. For the most part the for of bankruptcies can mergers live on alliances, super discounters. 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Down to the new york Stock Exchange. Jim cramer joins us now. I still i dont know i go back and forth, i dont want i want that 85 billion, thats more important than a good economy. The markets gone down, tenyear moved up in yield and looked like september was likely. Wont it go back up if we get a couple of more months . Make me chase, just not today. Look, im sure people said, joe you made it sound too simple. When the tenyear goes down in yield, the market takes off. You may hate it. How many times have we hated what propels the market and yet the market goes higher . We were down 17 all morning on dow. We got the ugliest durable goods number in the history of the world which makes me scared, jim, we can never get off of this, you know, this my biggest fear and i know you think that hopefully the economys going to get better and better as time goes on my biggest fear is that it doesnt go according to plan and these guys, since theyd be hesitant to taper and then go back on the taper a couple of months late somewhere add 20 billion back, theyd hate to do that, so theyll wait until its clear. What if it doesnt get really clear we can go past the brazilians were selling treasuries, chinese selling trez wries. Its clear despite what build sarz theres a gigantic slowdown in housing. If it happens this fast, we talk taper nontaper. Look, were going to have a slowdown because of how high the rates have gone and the brazilians dont care. Sell 70 billion in dollars to repay. What do they care if our rates go to 4 . I think youre right. We cannot have a continued big rate increase without derailing american economy. Oh god. Well, now, liesman was early with no september. Now and good. Well see, weve got gdp, a jobs number a week from friday already, is that true . Where is everybody . I got into hamptons. I took a rocket to the city. Theres no one around. You better not get anything big today because its going to be exaggerated beyond all means. Once you get out there you cant get back because its a twolane highway. Once out to 27, its tough. Fly. Thanks, jim. Guest host from federated investments, well give him the last word when we return. As we head to break, this is not a spoiler for you, joe, you have not seen this, look who made a cameo in the new episode of breaking bad p. I dont want to see this. Its mickey drexler. Okay. There he is. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but run different. To give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because now more than ever, the future belongs to those who challenge the present. Final word from our guest host, phil orlando. We were down 18 on the dow before the durable goods number, now down five on the dow. Maybe we dont close up today, but so far, it did not derail. What it shows is the fed is extraordinarily important in this decision, two arguments. More important than a good economy . The market wants to see this fed juice continue. We think bernanke would absolutely like to start the taper before he retires, but at the same time, we dont think hes going to do it unless the data is Strong Enough to support that decision. They dont want to start and have to backtrack. You dont want to backtrack. You want to be at a point you can comfortably start the taper. Maybe septembers off the table but december in play. Well be fine by then. Phil orlando, thank you. Squawk on the street begins right now. Good morning. Welcome to squawk on the street. Im david faber with jim cramer and brian sullivan, live from the new york Stock Exchange. Carl quintanilla on assignment. He will be joining us later in the broadcast. A look at futures. We are setting up for well might be a up opening, well see. The durable goods number was not good at all. Dow jones future, its a relatively quiet day. What does everything play off of . The tenyear yield, we might reach 3 last week, didnt do