Transcripts For CNBC Squawk Box 20140711

Portugal recovering by more than 2 . That doesnt get back all the losses from yet. Lets get more headlines from sara. Billionaire investor carl icahn putting up the caution flag. Reuters says it is time for investors to be cautious about the stock market and hes been very selective about the companies hes choosing to purchase right now. Well hear more from carl icahn next week. Do you have something to say . I can just tell you, ive known him a long time, ive been to dinner with him many times. Hes always every time i have had dinner with him, hes on the stock market, every single time. And especially like carl that looks at first vacations, a lot of these ooips guys always sort of think that things are overvalued. Im thinking this time i dont know if we had children, i mif just had any daughter. So its 14 years ago. We had a huge discussion at dinner on and on and on about it. All these reasons. And he went up well, since then weve tripled, probably. But weve at least doubled over the next few years. Guys like him are always looking for great deals, right . When they cant find them nobody has a better record over the last ten years. When i was talking about him, he was a billionaire. He went down to hundreds of millions of dollars, right. To get that kind of a search, whether the market is overvalued, undervalued. Theyre looking for a change. Guys will talk about that. And down at the lows of 656 on the s p, roubini kaem out and i was a stock market timer. All of it when they come on, Alan Greenspan at 5,000. The pundit crisis. Wells fargo is going to be reporting this morning. Analysts expecting profits up 1. 01 a share. Thats versus 98 cents in 21. 4 billion a year ago. Well have instant reaction to those numbers as soon as they are released. Same story. Who is supposed to read this . Yes. Citing gains on asset sales, chevron reported First Quarter earnings of 2. 36 per share. Chevron expected to report Second Quarter earnings in august. Gap reporting that sametore steals fell 2 in june versus a 7 increase a year ago. Comparable scales fell 7 . Turchbs out thoughts sales at its old navy shot, pretty mixed picture were getting in the last 24 hours. Youve got the other guys that are actually and people will never look at carl and say wow, he doesnt know what hes talking about. Jeremy siegel, or pick a guy like ron baron who is always optimistic. Suddenly were at 17,000 and you look at those guys and you snicker. But were at 17,000. Who has been right . Al. Ableson, who is so smart that hes always bear yesh from 800 and maybe it just doesnt change. You guys are late, great if i came back as something, i would come back as appear embarrassing they have celebrity status. They do. And you can feel like a contrarian because you feel like the market is the crowd. Finally, their moment and its going to get worse or its over. Lets get to the conflict. Were talking to Martin Fletcher who is legendary. I used to watch him. But now i get to toss him which is an honor. Martin fletcher joins us from tel aviv. Hello again, martin. Hi, how are you . Im well. Good to see you and glad to be able to speak to you. Did you ever find out what that was yesterday that you were hearing . Were those more rockets . Well, there were more air raid sirens, but no rockets over tel aviv at that time. Hamas today issued a statement warning airlines not to fly into tel aviv because they say theyre going to target there are archts. I flew it into the air a couple of days ago, lufthansa delayed their flight to tel aviv for about five hours. They said because of the political situation. The iron dome presumably will be an effective defense. Auto serious set from her mad military wing. And at the same time, israel is continuing its attacks against gaza. We will see more in just a few moments ago. Is israelis have been ringing their cell phones and sending Text Messages saying evacuate the hotel, you have ten minutes. Theres cell phone calls and drops telling them leave your homes now. Normally that is a precursors for raids in those places. So if you had to handicap that at this point, mart yip, thats one of the things we talked about yesterday is how many times weve seen something similar to this play out. A lot of times, it doesnt accelerate into any or get worse than it is at the current time. What is your gut feeling this time . Thats right, joe. Israels movement here is to prepare for a Ground Invasion of gaza. To terrify everything that its going to happen. Hoping theyll be too afraid of the combination 37 that will stop. Everyone is afraid of a Ground Invasion. However, it may happen. Its not something israel wants to do. As long as the rockets keep being fired from gaza, israel has to find a way to stop it and the Ground Invasion increasingly day by day becomes more likely. The palestinian rockets, our 550 palestinian rocket have been in israel over the last twoweek period. Nobody has been killed by these rockets. But today, a rocket did fall on a gas station creating some serious damage in the gas station. Eight israelis were wounded, one seriously. Thank you for your reporting this morning. You figure israeli reservists are they dont mess around. Not that we dont have guys here, but a reservist is almost like a regular database. Well, theyre more ready to be called up. Exactly. If i was a reservist you would have on be trained first. You could do it. Everyone in israel does it when they turn 18. Lets get back to the problems in pore tu began. Steve sedgwick joins us from lisbon. Hey, steve. Hey, michelle. I remember a conversation i had with john, i think it was about the lisbon zoo. But that was premay 2011. Thats when they had their bailouts because sth this economy was in a real big problem. The season is expected to get nervous. The fed in porch with a tenyear debt saying below 4 before this crisis, and the peak of the debt crisis in 201 is. People just didnt know what was going on. They saw the questions about default at one of the paring companies. Theyre still not sure how this goes. It is a paid three. The company is reported on its loans is not bank your despirit, and its controlled by this operate family. Getting back to what were doing today, a little bit of calming with the market. They are problems isolated with the family who have a lot of explaining to do. Portugal telecom, which has loans for the Espirito Santo family. You can see the issues here. Everyone doesnt have any clarity. Theres a lot of questions remaining and thats why people got nervous. People get very nervous and rightly so. Absolutely, steve. We were wondering if its slighted or symptomatic here. So this is current. Wells fargo results, is that the day at 8 00 a. M. . That is today. And from rome. Threes company. Im sorry, just me. Anyway, lets continue our conversation. The worries over oorp and portugals banks were muted anyway, that was a short session, dont listen to what everyone else is saying, what, did it go down 6 30 or something . Should investors be concerned . I dont even know what happens in portugal. You said its going to hit 2 at some point. Well, its on its way, well see. In a macro accepts, that the fiscal troubles are back in that part of europe . The bank itself and his oven buy of five or six different holding companies. But my concern here is the ecb and as portugal moves in and investigates the Holding Company, theyre going to buy more than we even know at this time and general michigan experience on wall street has been that is what always happens. My second concern of the situation is contaj him, fear some of the difficult is. Because its al intertwined and we dont mow the answersess. Im shocked 37 and if they ferg out how its whether the ecbc has over this, if that doesnt allow them to capitalize, then what would . Well, i think thats right. I think thats why the market normalized later in the day. I think the two issues here that i mentioned, the contagion issue and whats really there, but i dont think its going to be a disaster for the american markets. Mark, we were just talking about rome and spain. Quality of life isnt bad. In terms of like the brakes in the middle of the day, i remember in pore due gal, not a lot happening between 11 00 and 4 00. Is this a problem in all the Company Companies over this . You do need at some point. The european european country and thats been one of the difficulties of meshing all this together. Honk are we talking about europe in terms of our own situation over here . I think the big issue between europe and the United States is how low their Interest Rates are. In the fiveyear german sovereign debt is 500 less than ours. Which is one of the reasons that compared to value, a relative value basis, certainly you talk about all day in toerms of the equity markets, thats one of the main reasons i think the u. S. Is going down by comparison. Okay. Well, i just we made a lot of portugal yesterday. If none of this is important, i feel used. I think the question when we woke up was, like i said, isolated or symptomatic or something far more widespread . And when you start to read about the governance issues of this particular bank, how the bank of portugal has basically nationalized the management, you start to think not a lot of people on but the Biggest Country to worry about has not moved forward with reforms. This is not a reform issue opinion all right. Mark, youre very calm today. You are basically saying this is not going to be anything. What do they need to change . They dont need were going to keep going there. Its the greatest place in the world. They just need restructuring. I go there and i come back here and think, why dont we all nos to italy. The fact that theyre not going to pay it back, they can just keep going with it. Remember when we said g2 no, it wats g1, when al pachino was struck by lightning. Coming up, three of the worlds richest men are calling out cob for not taking any drones off am con. Check out the fuchs. Weve seen declines in three of the last four sessions. Lookses look like were going tokt a rebounce today. N riemomentum indicator that makes researching sectors and Industries Even easier. Because at scottrade, our passion is to power yours. Act zon making a request to the faa to Start Testing its drone delivery service. Granting the Internet Retailer an exemption to drone testing rules to restrict flights and fix official staging areas throughout the cup. The countrys drones can now carry about 5 pound loans over 50 miles per hour. Outdoor flights and potentially Pilot Program would take place in the seattle area, about five pounds. I dont know. I dont know about this. Tested in seattle. Did you see where those guys were arrested for flying something around, they were commercial helicopters and they almost ran into each other . How far is seattle . Far enough from you. I dont know. How do you feel about it . I wonder how they would do this in new york city. You can put an eye out with one of those things. Yeah, that and how do you reach the fifth floor . I dont know. The windows open, it would be like hovering out there. I love the whole concept. Thats nice but, you happen, Science Fiction is nice, but what if it runs out of gas and hits you in the head . People said that about planes and cars at some point in time, right . Were going to look back and say remember when we worried about drones . Okay. Three of the worlds richest men are taking up the issue of Immigration Reform. Sheldon adelson, Warren Buffett and bill gates have an oped in the New York Times this morning. The three are calling out congress for not taking action on Immigration Reform. Weblg it borders on insanity to train intelligent and motivated people in our universities, often subsidizing their education, and then to deport them when they gautt. Many of them people, of course, would like to stay. But some return to their home country. Thats fine. But for those who wish to stay and work in Computer Science or Technology Fields badly in need of their services, lets roll out the welcome mat. The three of us vary in our politics and would differ also in our preferences about the details of an Immigration Reform bill. But we could without doubt come together to draft a bill acceptable to each of us. We hope that fact holds a lesson you dont have to agree on everything in order to cooperate on matters about what you are reasonably close to agreement. At the time that this occurred, they picked the easiest stuff to talk about. We all want Legal Immigration to come in, how then do you address whats happening in texas and the concerns . Its almost like a different bill. Its almost like a different you know, almost a different aspect of the whole issue . What a lot of folks dont want to say out loud is we need immigration, high skill, but we also need low skill immigration. No one wants to go near that and that speaks to the border issue that youre talking about. Trying to bring those two items together, incredibly difficult. But that doesnt mean they shouldnt try. They call out what happens in virginia where 36,000 votes elected someone completely new which put the whole immigration issue off the table and saying thats completely ridiculous. We didnt elect our congressmen for that. But out of the people that have come in so far, what is the answer for what we do . They go back, they stay, what do they do . I thought you were talking about the amnesty issue. Youre talking about the children . The people crossing the border right now, what do we do . The logistical details of trying to return all of the people who but how many border people are now trying the keep people out rather than pay for the people who are already here . Boy, so if we had a much better immigration system, a lot of that would be reduced dramatic will i. Then those who are trying to sneak across the border you know because of the criminal element and you think its a humanitarian issue right now . Yeah. If you were in texas and there is a humanitarian wouldnt you have gone for the season . Uhhuh. So this is a poisoned atmosphere in congress causing all this . It has become a political issue. Thats what the president is making of it right now. Despite the fact that its a humanitarian issue. Why would a photoop means that why would that somehow tarnis his image if he was photographed at the border assesstion the situation . I dont know. Because it would somehow associate him with the problem. Were at a place in politics in this country right now where theres a lot of plame on both sides, but its unbelievable. Its part of the lame duck. Hes not running again. Which is why i dont understand why he cant take up immigration. Thats some relief there. You want to make well, i dont know. Someone said literally. Coming up, should the bulls proceed with caution as carl icahn says . And as we head to break, a look at yesterdays winners losers. Veggies youre cool. Reworking the menu. Mayo, corn dogs. You are so out of here ahh. The complete balanced nutrition of great tasting ensure. 24 vitamins and minerals. 9 grams of protein. With 30 less sugars than before. Ensure, your 1 dr. Recommended brand now introduces ensure active. Muscle health. Clear protein drink and high protein. Targeted nutrition to feed your active life. Ensure. Take life in. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. But ive managed. I got to be pretty good at managing my symptoms, except that managing my symptoms was all i was doing. When i finally told my doctor, he said my crohns was not under control. He said humira is for adults like me who have tried other medications but still experience the symptoms of moderate to severe crohns disease. And that in clinical studies, the majority of patients on humira saw significant symptom relief. And many achieved remission. [ female announcer ] humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal infections and cancers, including lymphoma, have happened; as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening Heart Failure. Before treatment, get tested for tb. Tell your doctor if youve been to areas where certain fungal infections are common, and if youve had tb, hepatitis b, are prone to infections, or have flulike symptoms or sores. Dont start humira if you have an infection. If youre still just managing your symptoms, ask your gastroenterologist about humira. With humira, remission is possible. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with Michelle Caruso cabrera and sara eisen. Were playing these weird songs and stuff. I had gender blind. If im playing andrew today, i guess you are. You know what they say in universities . Gender is a social contract. Im blind to everything. Im blind to everything. Politics. Everything. And i get a lot of mail that says that im blind to everything. And the headlines this morning, britains Imperial Tobacco says its in talk toes buy assets from Reynolds American and lorillard. Our david faber our david faber . Yes. Has been reporting that reynolds and lorillard will soon announce a merger deal and that imperial is likely to buy and possess the assets. Analysts say it could be worth more than 5 billion. Sales of video streaming devices are booming. New figures show that roku and googles chrome cast are leading the way. Roku and chrome cast each accounted for about 32 of u. S. Devices held last year. Al. Tv was third. And the Energy Department says there wont be a repiece of the long gasoline lines that were seen during sandy last year. A planned 1 million barrel gasoline reserve will be in price. There a peak between midaugust and october. Lets check on the markets this morning after the selloff that we saw yesterday. Futures are higher. We can share. Go for it. Lets take a look. We are seeing a calmer market right now. Looks like we are headed for a higher open on the s p. On the dow, up 40. This is a reversal to yesterday, though. Yesterday didnt end as sharply as it looks like at the open. We should note, we are headed for the biggest weekly decline on stocks since back in april. Three of the last four sessions were negative. Theres the european picture. As you can see, its a big improvement from yesterday, especially with portugal. Portuguese stock market up almost 2 right now in italy. Joe, up 1. 5 , perhaps while the traders were listening to those positive comments. Look around. Youre in italy. Youre in italy. I guess thats a what more do you need to know . Germany is pretty much flat. France and the ftse over in london, not big gains as were seeing in the peripherals. In asia overnight, the nikkei fell. They were reacting to what we saw in the u. S. And european sessions yesterday. Although interesting to see in shanghai stocks finish higher. Looks like weve got energy here, as well. We can do that. Pressure on wti and on brent. Wti down for the 11th day in a row. Brent, the international benchmark, also lower, down by 0. 5 from shaking off the geopolitical concerns there. And there is your market, michelle. Markets ending to the down side, well above session lows in portugals banking problems, initially rattled investors. Those fears seem to be contained at least for now. Carl icahn says its time to be cautious about u. S. Markets. Is he right . Joining us right now, bruce kasman in new york city and patrick. Its great to have you guys here. Patrick, you agree with carl icahn, i understand. Yes. There are two things to drive this market forward. Theres valuation momentum and earnings performance. Last year, twothirds of the gains from last year came from multiple expansion. Thats fine. There are years where people expect it to get better. But usually consequence years performance is about delivering on that. And so this is why Second Quarter earnings season is going to be critical. We need to see whether the actual performance is going to put some foundation underneath these stock prices. Are you making a bet on that right now . It sounds like youre skeptical. No, it just needs to happen. You know, the numbers that were seeing for the Second Quarter look strong. They look like theres a rebound taking place. And we think that theyre actually, its a little bit more cautious than the consensus about earninges this year. We think its going to rise about 4 1 2, 5 . But thats good. Anything that moves in the direction of actually put Something Foundation under the stocks rise that weve seen this year is good. Bruce, are you in agreement . Whats your assessment of it . Youre the economist. Looking at it from an economics point of view, i think the big issue were trying to grapple with right now is how you interpret what happens after the pothole of the First Quarter p in p. I think what were watching right now is an economy that has the momentum. I think after the big drop in the First Quarter, 2. 5 , 3 the growth in the Second Quarter is not very impressive. But theres some inklings here. And i think its the rpt cos that didnt go back after the first quart he. Some of the survey doing better. That stuff is interesting and i think it holds out hope for the second half of the year. But right now, i think its a disappointing first half with some hope more than that. Can we put that to bed . I dont think theres a systemic threat in europe. I think it is a reflection, the fact that europe still hasnt gotten its act together in terms of dealing with banking and more generally with i think structural issues. I think what really bothers me, though, is that the european economy, which we thought would be gathering momentum at the middle of the year looks lackluster here. Its not a real threat of something really bad happening, but sort of softness in europe is i think a concern. And about financial markets, the Banking Sector is part of that. The concern seems to be in the u. S. Economy or at least a wild card. The u. S. Consumer. We got negative samestore sales from gap. What is the state of the consumer which obviously is the most important part of the economy . I think its been kind of odd. I think we have had a problem with higher inflation. But weve had good labor income. Weve had wealth go up. The back drop looks good and weve had some decent news recently on car sales and home sales. So the spending numbers have been disappointing. Its something that has to turn here. We think it is going to turn. But i think youre right to point to the consumer as one of the sources that has been a bit of a problem here. Im less worried about that if were right, that the corporate sector continues here with job growth and with the pick up were seeing in an underlying sense on the spending side. Patrick, if youre cautious, are you looking at cash . What are you doing . No. All last year, people were saying move money into cash. I think you have to be part of this market. But look, you know, people are uncomfortable with this recovery because it doesnt look like recoveries past. Its not driven by the consumer. And i think we all, even though we all say that 2008 changed everything, that really people want to go back to the worth before 2008 where the u. S. Consumer drove the Global Growth story, the emerging markets provided that growth. Were fought going back to that. We are in an environment where i think were going to see significant Global Rebalancing and actually what were seeing is a production story out of the United States. And what were going to see is a consumption story out of emerging markets now. Thats a good story. But its not going to happen overnight and its will say also very disruptive. Its very different from the growth patterns that were comfortable seeing. Thats a turning upside down of the way we used to look at the world where we were waiting for the emerging middle class to finally emerge with these big consumers. Are we there . Well, i think the last four of five years has been a story where the u. S. Demand picture has been weak. We started the cycle with strong em and now em and now were in a funk in the Global Economy overall. It feels to us, though, that the adjust manies in the u. S. Private sector over this drags from the u. S. Public sector starting to fade. And we should be able to do better here. I think the issue right now, which is a low bar, is where we can get from 2 growth to 3 growth. If we cant do that, theres something really seriously wrong with this economy right now. Right now, the first half of the year hasnt given us enough confidence. I think thats unbelievably bullish. Weve waited for a long time. We know the problem from china is they need to do from a producing country to a consumer country. And over here, given our trade imbalance and how much we owe china and how much were paying it forward a little, the idea that we could become suppliers to the rest of the world, how many levis can they buy . Eventually, thats incredibly bullish. Its not its not going to happen easy. Its a transition its the only way out because its not a way out. Were doing pretty well the way we are. No, look, if the u. S. Is going to achieve any breakout momentum, it has to come from external demand. The u. S. Is not going to leverage back up again. Its not sustainable if they do. The u. S. Government isnt going to come in and replace them. So it has to come from this, you know, in china, you see 4 trillion worth of reserves. Its buying power. You almost sound like its negative. Were looking at the production economy and well, but it almost means that rising standard, Living Standards in the United States have to come from productivity gains. And they have to come from exactly. But its 4 00 in the morning. What time do you want me to get up, 3 00 . Maybe they wont come from you. Ive given. You know, one of the problems here is that europe has not europe has not seen internal regrowth. Its seen internal rebalancing. So its on the back of the u. S. Demand. Thats not a sustainable story. That puts a real cap on the growth story out of europe. Anyways, the growth stories in europe and the United States are theyre all trying to draw on the u. S. Consumer. Were in a bad place right now and were going to come back there. Do you remember . How internally open mystic he was about our process . Were going to get back there. I dont want you to worry so much. Youre a young fellow, arent you . Am i right or aim right . Were coming back. The American Dream is alive and coming back. In i think were going to do better, but i think weve lived on emerging lets leave it right there on a friday. All right. All morning in america. Its always morning in america. Its always morning on squawk box. And with that, coming up, how pharma is dealing with the battle against alzheimers epidemics. Well hear a live report, next. [ both ] we checked into our hotel in paris, and our luggage was immediately. Taken to. Stolen from. Our room. The Hotel Manager was clearly behind it. He was such a. Kind man. Con man. My husband wanted to. Hug him. Strangle him. And to this day were still in contact with. The manager. The police. I wish we could do that vacation all over again. Dont just visit paris. Visit tripadvisor paris. [ male announcer ] with millions of reviews, a visit to tripadvisor makes any destination better. Welcome back to squawk box. Lets take a check off u. S. Equity futures at this hour point to go a higher open across the board. The dow up 34 points. No major earnings. Wells fargo earnings will kick off earnings in full. Portugal in the lead up 2. 6 , sharply rebounding from yesterdays even bigger selloff. Were seeing that iraqi. When we return, dealing with alzheimers epidemic. Right now, it impacts 30 Million People worldwide. That number is expected to triple by 2050. Theres huge challenges facing society and the pharmaceutical industry. Well have that next on squawk box. B 4 you know what i love america, fine barbeque good times and zero heartburn. And thats why i take prilosec otc each morning for my frequent heartburn. Because it gives me zero heartburn. Annc prilosec otc ahh. Annc the number one doctor recommended frequent heartburn medicine for nine straight years. You cant beat zero heartburn. Annc prilosec otc one pill each morning 24 hours zero heartburn. To guy with the alzheimers epidemic, meg terrell joins us now with more. It should be, i Mean Companies dont always do things for altruistic reasons. Thats not the only reason. They usually dont. That doesnt mean that this isnt going to get handled. Because this anyone that figures something out with alzheimers is going to make a lot of money and help a lot of people. Absolutely. This is a double whammy doing well by doing good. Think how many people that were talking about. And you look at what it might cost a year youre talking about 10 billion, 20 billion in drugs. I was thinking about that this morning. Two years ago, three years ago when there were a couple of trials going on the estimates for what these drugs could bring in was about 5 billion. Now you see drugs for hepatitisc getting up to 11 million a year. Thats an epidemic but its not like this is an epidemic. Something like alzheimers you can imagine it would be huge. Would affect how many people . What are the numbers . How many people weve got 5 Million People currently have alzheimers in the United States. Its the sixth leading cause of death. Worldwide 36 Million People have alzheimers or dementia. And as you said in your intro earlier, thats expected to triple by 2050. So were talking a huge number of people potentially getting alzheimers. And we actually dont know what causes it. We dont understand the biology well enough beneath this disease to be able to treat it well. Theres currently five drugs on the market for alzheimers. But they treat the symptoms, not the underlying cause of the disease. When you look at the pipeline, it looks like potentially good news. At least drugmakers are still working in the space, even though we dont understand the disease that well. Theres 67 medicines in development, up from 22 in 2004. The biggest players are some of the biggest names in pharma, pfizer, j j, glaxosmithkline, roche, jen entech, eli lilly and merck. A couple were working in the space earlier and had the big blowups. You probably remember from 2012 when eli lilly had the phase three trial that failed. Lilly is still trying to work in the space. Theyre really trying to bring these drugs to market and this weekend should give us a glimpse at what the latest research is, where we stand. But even the drugs that are on the market now, this forest labs drug nemenda was the last one approved. It just works on the symptoms rather than the underlying cause. So theres a huge need here. You think about with cancer you think about theres life years, people that die at 90 that finally get cancer, theres that. And with alzheimers, if you get this when youre 50 or early onset alzheimers, youre talking about 30 years of being cared for, and think about the cost to society and to families. And then theres the notion where dementia, theres all kinds of different dementia. Sooner or later the brain just seems to age like other organs, so if we live long enough, if we outlive our brains, youre even talking about a larger percentage, maybe not necessarily alzheimers, but some type of dementia or what we think of as just senility, or old age. Absolutely true. And i dont know what the difference is between maybe even you look at what parkinsons does, and you look at dementia, can you call is it always associated with plaques like alzheimers . Or is it just associated with the aging of the brain . I think some dementias are just associated with aging. But alzheimers really has been tied to these plaques and this amyloid beta hypothesis. We dont know whether the plaques come after you get alzheimers or the plaques cause the alzheimers. Thats the issue. We dont know what is causing the disease. But this seems to be the thesis this amyloid beta hypothesis. Theyve been attacking that for five years. Are they getting any better at testing for it . Because the tests are antiquated where its just question and answer, theres no real thats a great point. Imaging is a huge part of this. Trying to treat the disease earlier and figuring out who is at risk of getting it. Who is in the early stages. Some of these trials that they tried before, now theyre saying maybe it would have worked if we tried it earlier in the disease. Thats what lilly is doing with the drug that was in phase three. Theyre trying to test earlier. People are starting to make progress youve got alzheimers, diabetes, cancer, those are the thats the future for pharmaceuticals. And its not only is it something you want to do for society, but its going to be very, very lucrative with the companies that do well. You have to hope that they succeed. Well, we do. And thats all companies we hope succeed but in this case even more so. Then we got to think about how to take care of everyone that lives forever. Thats true. You better get a 401 k going early. Thank you, meg. Thanks. Coming up, our guest host today turnaround specialist steve miller. A famous band member, and also nonexecutive chairman of aig. Were going to beat this to death. Were going to talk to him about everything. The problems bubbling up in europe to the state of the Insurance Industry. Is the fed ruining the Insurance Industry . Squawk returns in just a moment. If you have moderate to severe rheumatoid arthritis, like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. 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But will this keep the bulls from running again . Oil surprises slipping. Crude in the middle of a losing streak. Will the negative Economic News around the globe continue to push prices even lower . And if the markets are no fun then its time to check out brunswick. Boating, bowling and billiards are paying off for the recreation giant. The companys ceo answers the ceo call. The second hour of squawk box begins right now. Good morning. And welcome to squawk box on cnbc. Im joe kernen along with Michelle Carusocabrera and sarah eisen. Becky and andrew are off today. Our guest host, aig nonexecutive chairman steve miller. Good morning. With plenty to talk to him with children on the set. But i think we should do it once in awhile. Have you heard you know, there was a you heard of this guy steve miller . You were before him, though, really. Shhh. Yeah. Im older than him. I remember, actually youre about the same time. Because you started restructuring something, i can remember as a stockbroker you were structuring. Well my first big one was chrysler corporation. That was ike. That was kcars. I was with iacocca and i was the cfo and vice chairman. Do you remember what year that was . Yeah, i went there in 1979. So thats yeah, okay. So steve miller living in the usa probably before that. So hes before you. Anyway how old does that make you . Yeah, well, this is a wellknown fact that im in that late 30s to early 40s to mid to late 40s to early 50s. 40s is the new i have tried to shave time off but then that means if you shave it off, then you werent you didnt see the moon landing. You have no idea whether that was real or not. No kidding. See i was there. So should i not want to be old so i can say that i didnt see the moon landing . I want to have seen i want to have seen the moon landing. Lived under reagan. Exactly. Yes. But youll never be able turn around chrysler, steve miller. First lets check. Markets futures are rebounding a little bit but they rebounded midsession yesterday. It could have gotten ugly, was down about 150 points at one time and it ended, you know, kind of with a whimper. The tenyear got down to the low 250s yesterday. Or still there. 249 actually. 252. 5. It was 243 the day that we released the gdp down 2. 9. That figures that it rallied into that. And then, sold off as you can see and got all the way back up to about 270 or so and who knows 270. Where you cant really who would get a mortgage when ten years at 2. 70 . I though. You have to be crazy. Another thing you dont remember. You remember 18 mortgages . I have studied enough to know that there was a time when 18 mortgages were in this country. 21. 5 prime. Have you refinanced . 13 aaatax frees. And people were afraid to buy them. No, i was a broker. You know what people brought from me . Floating rate Municipal Bond trusts so they floated all the way back down to 5, which was sad to see. All right. Done reminiscing . Well go to the head lines. About an hour away from key Earnings Report that would be wells fargo reporting its Quarterly Results 8 00 a. M. Eastern time. Analysts are looking for Second Quarter profit of 101 per share on revenues about 20. 8 billion dollars. Well have the numbers, of course, instant analysis, as soon as they are out. The oil supplies are ample according to a new report by the International Energy agency thats being helped by rising production in the u. S. , and in canada. But the report also does say that risks, especially the volatile situation in the middle east, remain, in its words, acute. And thats why it expects prices to remain historically high here. Argentine officials will be in new york today. Theyre going to be meeting with a Court Approved mediator. Argentina, as you know, is trying to resolve that dispute with investors over its sovereign debt with a july 30th deadline approaching. Theres been growing optimism here that a deal can be reached with investors who had rejected the countrys debt restructuring after the 2002 default. That optimism has pushed the price of argentine debt higher in thursdays trading, as you can see. All right time for the Global Markets report. Karen cho joins us now from london. Here in the United States, karen, it feels like, hmm, never mind. Michelle, you might be right with that. Because the closing bell yesterday proved somewhat of a Circuit Breaker for these markets. Stock indices bouncing back right across the board. Even some of those countries with direct links to banco Espirito Santo have rebounded in trade. There was a trading suspension for most of the morning in europe. It was lifted about a half an hour ago. The stock promptly soared 11 . Yes you might be looking at this now saying it is a very different picture because those gains didnt hold, its now trading lower by just over 2 . Keep in mind there is now a short selling ban on the stock. The central bank of portugal has rallied behind bes saying it has sufficient capital to weather possible negative impacts from its recognized exposure to the Holding Company without compromising capital ratios. Now bes itself released a statement earlier, european time, confirming its exposure is 1. 15 billion euros. Bes explained that it had more than 2 billion euros over the minimum required capital ratio back in march. It has raised a further 1 billion in a rights issue. So the numbers crunch out if there is a complete writeoff of that bes exposure and other factors remain stable. But that is a big if. Because the problem arises if the potential black hole is actually larger. Local sources are telling us in portugal the exposure could be as much as 4 billion plus euros. Citigroup has put out a note and they also agree, remember the founding family woes are not the only reason the bank is in a pickle. Its grappling with bad accounts out of angola, as well. But for now, and today the message from the establishment is that there is nothing to see here. The Prime Minister of portugal is also drawing some distinct lines between the funding difficulties that the founding family and also the bank created. Just a quick look at some of the other stocks out there. Want to show you how Credit Agricole is doing, one of the major shareholders as well. Bounced back. Portugal telecom owns some of the debt. Let me toss it back over to you. Karen, did you show an intraday espirito desanto chart . Do you have one of those . I dont know if we have an intraday to show you. But we have the course it opened up 9 . Now its down 3 . 11 . It opened up 11 higher then it was 9 , then it tanked, its been down 4 . It is very, very choppy across the day. Some people taking this as the opportunity to get out of the stock. Thats what i mean. Yeah, someone was selling. But our futures are still sort of moving a little bit based on whats happening there. All right. Thank you. Those concerns over major portuguese lender rattled Global Markets thursday. Joining us with this Market Insight is jurrien timor, director of global macroat fidelity investments. The tracks of his tears still after that first goal, you knew when that guy missed that first goal, you know there was a problem, did you not . Did you not . A little bit too well during that match. I had a sinking feeling. You know you are a big talker. Big talker about that dutch team. I dont you know, you dont live there anymore. I dont know why you even care. But im not going to say anything. Meanwhile, germanys throwing for a Little Country they did pretty well. Oh, okay. Okay, fine. Here we go. All right. Now you get offended. Before you were going to okay. And our guest host this morning is a man with his finger on the pulse of Many Industries from autos to insurance to aerospace and beyond, steve miller is nonexecutive chairman of aig. Also chairman of mid Ocean Partners and former ceo of delphi corporation. Well be with you in just a second jurrien. Ive always wanted to ask you, steve, take a look at the state of the u. S. Right now. I want you to turn it around. What would you do . You would know how to do it. And at least can you diagnose some of the symptoms, some of the things that are causing us to i mean in general this feels to me like the end of the carter administration, where we thought wed never come back to our the malaise and yes reagan came in, and did a lot of things, including cutting tax rates, both corporate and personal tax rates. Tried to slow the growth of regulation that was strangling business, and i think that cookbook would work again now. Right now, business is afraid to invest in the u. S. , they dont know what all the new regulations are going to mean, what the Health Care Plan is going to mean for the cost of employment. Dont know where taxes are going. The politicians are all talking about raising taxes in order to close the budget gaps. Instead of cutting government spending. So, theres a lot of concern in the Business Community that i think holds us back. And theres a lot of opportunities elsewhere on the planet to go invest your money. And capitalist global, its not limited to any one national border. You can see it, and i had we didnt prepare this. Im not leading the witness. I mean, i asked you tat question and you know where i was no disagreement from me. But you soared. Your answered soared into i mean that its clear to me that thats whats happening right now. And what you were just going to talk about. Capital in the United States, we can see it state by state. And how businesses react to that. Why dont we know that this same thing happens globally. We see what happens in illinois. We see whats happening in texas and florida and other states that are friendlier to business and we see that money flows and it leaves and so do tax revenues but we dont seem to understand that at the federal level. You know, texas is booming because its the most business friendly state that there is. And they are pulling jobs and employment and capital out of the other states that have a different view about how to encourage the economic growth. And you also see this on a global scale. I mean, france has got a regime in right now that is, you know, wanted to raise taxes through the roof, very antibusiness, and guess what . Businesses are able to move globally. No matter what you do. And in the u. S. , our other big problem is the tax regime. Its the highest approximately the highest corporate taxes and all these things im going to go to jurrien and we are not saying all europes bad. I want you to relax. And a lot of people over there they, you know, its a good safety net and social welfare some people think thats the way to go. You got very defensive about the netherland soccer team. You notice he doesnt live there. Yeah, yeah. He lives here. You know, theres a reason i live in the u. S. , by the way. And you are welcome here. We got to figure out how we welcome people from around thank you. The market yesterday you heard now its carl icahn, it was stiglitz a couple of days ago, it was the New York Times were in bubble territory. People have been coming out of the woodwork really for years that we need a correction or some kind of selloff and the market continues to confound. Do you think that its due now . Is it overvalued . No, actually i dont. First on the portuguese situation. Our own Analysis Shows that, you know, if this bank needs to be nationalized and were not saying it does, but if it does, you know, the sovereign will have the resources to do so, and of course the ecb will provide liquidity, and its got its new ltro. So its unlikely that this situation systemic although it did happen on the backs of a very big compression in peripheral sovereign spreads, and obviously very, very low volatility levels, as we all know. It shows you when everyone gets complacent and something happens you do get an outsized reaction which we got yesterday. Although, as someone mentioned earlier, the s p closed well off the lows yesterday. So i think, you know, like the ukraine, or the more recent situation in iraq, or even cyprus, awhile ago, after a few weeks of being in the head lines, eventually investors will return to look at the fundamentals. And the fundamentals, q1 was terrible but the numbers recently have been much stronger. The payroll number was pretty good. And you know, earnings are growing at around 6 , 7 , and you add 2 dividends, you get 9 , maybe add a point per share buybacks. You earn a 10 market on valuations in the mid to high teens. Its not great, but its not terrible. Thats the point. So we had someone earlier saying dont look for any help from multiple expansion. I dont know if he knows that. Were in the sort of the high middle part of value what are we, 17 or 18 . And in the end of bull markets were up in the 20s. Yeah. On a forward basis were around 16 times on a trailing basis around 17, 18. You know, from the beginning of a secular bull to the end of a secular bull the ps go from 10 to 20. March of 09 on a forward basis the p e was ten. Were at 16 now. If we are in a secular bull market which by all appearances actually we are, since weve broken out to new highs about a year ago, you know, theres still a ways to go. Youre yen if you look at whats working, it is some companies, the income plays like utilities, best performing groups so far this year. Is that where you want to be given the fact that you present that the economys recovering and if you look relative to some of the other Economic Data from around the globe the u. S. Is a bright spot. It definitely is. Since 09 china was the marginal growth leader after that huge infrastructure stimulus that they put in place back then. And now, you know, china clearly, at least in my view, is slowing on a structural basis because their credit cycle appears to have peaked. But at the same time, the u. S. Seems to be now the leader. Obviously the growth rates are much slower. But, you know, were in a pretty steady midcycle expansion. And thats a pretty good deal. So, the markets are kind of boring. You know, volatility is low. Youre clipping coupons on the bond side. But, you know, sometimes boring is good. Especially after 08. All right. Jurrien, thanks. Steve youre going to be with us. I want you to think of something and how we do this. Youre describing something that the other side would call as trickledown. The Companies End up doing well and it doesnt mean everybodys going to do well. Do you have ways that we can help with the to equalize opportunity for everyone so if we do have 3 or 4 gdp growth we can lift up . I mean could you restructure education for me . Could you restructure entitlement . Im asking you to do a lot here. But youve turned around a lot of companies. There are a lot of tasks here. And education that you mention is one of the critical ones. We are not training the people that it takes to run sophisticated hightech businesses of the future. And thats the earning power will come from those hightech skills. Lowskilled labor is very much a global commodity these days. And thats why so much of that is leaving the u. S. , and going elsewhere. And if we dont educate our people, then they your kids and grandkids are not going to have the lifestyle that we had hoped for. With 4 growth, you look at all of our problems right now that were wringing our hands about, i mean, that just by definition fixes a lot of things, doesnt it . We could do infrastructure, education, a lot of things with 4 growth. Being a business guy, i am very much, you know, probusiness, and the role of business in driving a better lifestyle doesnt business create jobs . Business creates jobs. People that dont understand that, what are they talking about . Right now, investors i know are afraid to invest in the u. S. In job creating industries, because they dont know how punitive the regulations will be, how costly the health care mandates are going to be. And why would you do that if you can get your labor component done so much more they would say that its still a lack of demand from the hangover from the financial crisis. Theres a lot well, obviously. This whole immigration thing is just when we return is the fed ruining the reInsurance Industry . We put that question to our guest host next and for brunswick theyre all business when it comes to having fun. The companys ceo will tell us if consumers and shareholders are having fun in the recreation economy. Squawk is back with more in just a minute. Vidual. White chocolate lovers dont like dark chocolate. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow customers to customize their preferred chocolate. We needed a scalable Cloud Solution allowing them to select what they are looking for. Now there is endless opportunity to indulge. Customization is made with the ibm cloud. Starts at 6 30 a. M. On the vo rush hounose. Und here but for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Europe appears to have calmed a bit with u. S. Futures right now suggesting a positive open. Lets get back to our guest host for some perspective on reinsurance. Steve miller is nonexecutive chairman of aig. The companys own turnaround kid. There have been lots of reports about different pockets of the market that have been affected by the fed. And theres reports that people so desperate for yield, pension funds, hedge funds have been going into insurance and reinsurance and accepting low premiums and taking on undue risk. Its so bad that the ceo of a Company Called score which is in the reinsurance business said my message to mr. Carney, mr. Draghi and mrs. Yellen is please stop ruining the reInsurance Industry. Yeah, well i feel sorry for his company being Collateral Damage in an era of low Interest Rates. But the job of any Financial Services company is to make sure they have balance on their Balance Sheet so that whether rates are high or low, they are relatively protected. It is tough for us, for example, as we are an insurance company, aig, and we offer Financial Products to our customers but in a lowrate environment its hard for them to save money through us and have enough income. Are you worried, though, about players getting into this market that dont understand the risks that it entails and offering lower premiums than that theyre going to suffer from later on, when some catastrophe happens . I think theres been a sea change in the regulation of Financial Services companies around the globe as a result of the meltdown in 08. Unfortunately aig was a big part of that. Those days arent going to happen again. The regulators are going to make sure that people dont go out the risk curve as a way of solving their earnings problems. I think the real problem with the Interest Rates simply is that its a fools paradise. An unsustainable model for us to assume that we can have massive government deficits and keep rates low indefinitely. Janet yellen as fed chair this is really exciting, youre right about this. The one bright spot in this economy, which must be a shock to you, because youve done so much work there. But 17 million. What did we run, whats the run rate for auto . So this is a good business, auto parts, is it not . I believe auto parts is a good business. The news of the day is that zedoff is taking over trw if their bid is successful. Creating the Worlds Largest auto parts company. Yeah. Bigger than bosch is big, thats 37 billion. And the Japanese Company denso is 47 billion. This would be a 40 billion company if trw goes to zf at this point. Its a tremendous company, but two big things or three big things about the auto parts industry that supports the Auto Assembly industry. One is, its going global. The Auto Companies need globally competent companies. Secondly, it reflects specialization. The focus here is on the safety, of the equipment for automobiles which is becoming a bigger and bigger imperative. Just pure size in the auto parts industry so that you have reliable and financially sound players so that they dont let you down. That traded as high as 102 yesterday. It was up huge yesterday closed at about 90. Its not reflected on those charts. Another company, though, the tax dollars are no longer becoming domestically taet true. Its not an inversion but its going this is not a pure inversion where they just simply move the headquarters but theyre buying up, because they can rationalize a very large u. S. Tax paying entity will now be headquartered over in germany, and our u. S. Politicians cant tax them any more. Right. And that said youre going to see this more and more and its possible that a u. S. Company cant make it work and save it from going to germany because they dont have the tax advantage that the German Company has. Thats right. I mean, our tax structure weve got to run. Steve, hold that thought. Well have more squawk. Got to get out at 24. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Okay coming up next we have oil and currencies at the center of todays trading bloc. Plus fun on the water or fun any time. The chairman and ceo of brunswick. I thought i bought one of this guys dusty mccoy, doesnt he sing on the highway. Star in dallas, right . Were going to tell us if consumers are spending more money. Welcome back to squawk box. Lets take a look at some of the stocks in the news this morning. Tobacco companies Reynolds American and lorillad have released statements saying they are in merger talks. Our david faber had reported last friday that the two were talking and likely to announce a deal in weeks. He also reported that britains Imperial Tobacco would buy divested assets from the two and imperial did release a statement confirming that earlier this morning. Also keep an eye on shares of whirlpool. That company is spending a little over a billion dollars to buy majority stake in indesit. Whirlpool says it will help strengthen its European Manufacturing operations. And retailer gap is in the news as well. It reported a 2 drop in samestore sales for june compared to what analysts were looking for which was an increase of 0. 7 . Gap did see rising sales at its Old Navy Chain but declines at gap and Banana Republic stores took their hits. Onto our trading block right now. Light Sweet Crude Oil settling slightly higher yesterday after nine consecutive days of losses. Also taking a look at currencies this morning. Joining us now from houston on oil is carl larry oil outlooks and opinions president. And from new york, on the dollar, kathie lee. Kathy, correlations are breaking down here. What does the dollar mean for stocks and for oil . Does any of it matter together anymore. Thats a very good question. Weve seen a little bit of a bounce in oil. Overall oil is down yet the Canadian Dollar has not reacted at all. This is all a story about the overall dollar weakness that weve seen since the beginning since over the past month, where, you know, u. S. Dollar is pretty much weakened across the board. Now we got a very important week ahead of us. And i think that the dollars due for a bounce and it will probably see a limit to the decline that weve seen so far. Because if you think about it, theres very low justification for the decline for further decline in u. S. Yield. Weve got janet yellen speaking. U. S. Retail sales. All of which could shed a little bit more optimism for the u. S. Economy but kathy, people have been saying that for awhile. Theyve been saying yields have bottomed and they keep going lower. Is that going to be the key to get this dollar to turn around and go higher . It is the key. I know i sound like a broken record. But at the end of the day, i think theres no way were going to revisit the 2. 44 low that we had in tenyear yields. I do think we could potentially test 2. 5 but we need a shock to get below that. So thats why i would start to look at scaling in to some dollar longs. If you get the euro dollar up to 1. 37. Dollar yen drops down to below 101 which is not far from current levels would be a Good Opportunity to buy. I think were reaching value points in the dollar. Carl, are you surprised to see whats been happening with oil . This string of losses given increased tensions in israel, and iraq, and none of it is solved, and none of it seems to even be near ending. You know whats changing so much is that oil has become us and them and wti is american oil and we have plenty of. I mean were hitting almost near record levels right now, 8. 5 Million Barrels a day. We were just at 7. 4 Million Barrels a day aier ago. At this pace its likely in 2015 were pumping 10 Million Barrels of day of crude oil alone. So were becoming this oil independent country we always wanted to be, and now were just dealing with the repercussions of that. Should that affect wti and not brent . Brent has also been down to 108. Libya came back online the past week or so and thats kind of put a little pressure there. It is the geopolitical tension. Remember that brent contract is really, really kind of related to what we do here. Its based on imports. Its based on the same grade. So as we decline they kind of have a little bit of a sympathy move, also. But definitely that contract will see a little bit of a bump up, especially as those tensions continue to rise, in israel, iraq, you know, countries out there. Libya has to be a big part of that story. Kathy, janet yellen you mentioned speaking next week. Shes going to be testifying before congressional panels. Are you expecting a different message, perhaps, given what weve seen with the jobs report, steady improvement and with some of the other reports that came out after the minutes . Well, i expect it to be a bit more optimistic. Just kind of like the tone of the fomc a bit more optimism. But at the end, Everyone Wants to know is whether shes going to provide any signal in terms of the pace of tightening. I think the answer is no. Theyre not ready to do so yet. Theyve made it clear theres going to be a long period between the end of qe and the beginning of a first rate hike i think at this stage we dont want to risk a shock to yields. As a result theyre not necessarily going to provide that clear timing, what we may have had when she first took office when she gave the sixmonth mark. I think theres going to be very little anxiety in the markets around that. And so as a result, we may see a little bit of a bounce in the dollar, but probably not much more beyond that. Which is the key currency right now for stock, kathy . Is it still the japanese yen where it weakens and thats a good thing for stocks . Yes it is. The euro dollar itself seems to be the correlation between dollar yen and stocks is probably strongest right now because the euro dollar is disrupted and distorted by some of the problems in the Banking Sector in portugal as well as the mixed messages were getting from the ecb. If youre looking for a tight correlation its either stocks and dollar yen or ten year treasury yields in dollar yen. Carl i know you follow oil. I want to ask you about gold which has been sort of a surprise winner so far this year in the last few days. Do you need to own a little cold given whats going on around the world . Well, you know, heres the funny thing about oil, gold, the dollar, stocks and bonds. You know, because doddfrank kicked in in 2014 theres not really much else we can invest in. So gold is seen as this almost i have nothing else to put my money in kind of boost right now. I think you see a little bit of instability globally that kind of gives us a little bit of an edge towards gold. At the end of the day theres nothing else to put my money in. Stocks are at their highs. Interest rates are low and not moving. Gold is just your next alternative. Kathy it just seems weird. We are seeing improvement in the u. S. Economy. We are seeing stockses amazingly resilient. The u. S. Economy doing better. Shouldnt we be seeing a stronger dollar, higher treasury yields . Why is it all out of whack . We absolutely should be. Right now youre seeing a little bit of risk coming back into the market. For example, the portuguese Banking Sector, the fact that israel is mobilizing its troops and we also have puerto rico introducing a new law to restructure its debt. Its reminding the markets that there are risks out there. As a result youre not seeing the expensive extensions that youre seeing in stocks. Thats causing a little bit of anxiety in u. S. Yields. Which is also driving the dollar lower a bit. Theres a lot going on. At the end take a step back, really in a low volatility consolidation mode in fx. Were just talking about a little bit of half percent rise here, half percentage drop here. At the end of the day i think we will get a bottom in the dollar and that could come in the next couple of months especially as we need the end of quantitative easing. I know a lot of people are long that etf eup. Guys good to see you this morning. Talking oil, commodities, and currencies. Thank you. My favorite. Okay. You were on the board of reynolds . Yes, i was. So this to keel in tobacco at this point its got to be a youre doing it globally, is it a dying industry in this country . Well, the utilization of cigarettes is, you know, down by half or twothirds from what it was at the peak in the early 80s. Its been phenomenal impact of government regulation, and just changing Consumer Attitudes about smoking. What were you thinking on the board of reynolds when you were there a few years ago, what did you guys talk about on how to try to preserve value for shareholders . Well, one of the ways that we created value, was we did a merger with brown williamson, which brought tk the kool brand and a couple other things to the pleau yo of the reynolds company. Through the merger we got cost efficiencies, distribution efficiencies and created value in that way. But the longterm trend is very strongly downward on consumption of cigarettes. Both of these stocks are sharply higher today, though. Lorillad and reynolds, right . Oh, yeah. Its just makes sense thats because theres a lot of synergies from the business combination. Are the regulators going to let this go through . I would think so. Doesnt create concerns about duopolies . No. Monopolies . The ecigarette. Is that one of the reasons why we see a decline or is it just the the ee cigarette is certainly spectacular growth. But a very small base. The real thing is that it is now become you cant smoke on an airplane. You cant smoke in a public building. You cant, you know, in some places like california, i think it is, you cant even smoke on the beach. And you know, where are you going to go have a cigarette . And that has driven it down. Is this okay, so reynolds is owned majority by btf by British American its a very significant controlling interest but not a majority interest by British American tobacco. Is this another if lorillad, if reynolds, reynolds is still domiciled here . Yes. In winston salem, north carolina. Right. Where the elevators say thank you for smoking. Right. And they sold winstons and salems. Yes. Reynolds is camille, lorillad is newport. Lorillads biggest one is newport. Reynolds american had the winston brand, the salem brand, the camille brand. And so on. Is there any money in other forms of tobacco . Not these guys very little. I mean theres the smokeless tobacco, a tiny fraction. Pipe tobacco. This is still about cigarettes. Its still about cigarettes. Is it an international play for these two companies or is it here . Well, Reynolds American had become purely an american company. They had sold off all their International Businesses elsewhere. And part of that, its very hard for a Cigarette Company to diversify because youre always such a target for the trial bar. Now there was this big settlement a decade ago, kind of settled things down, and made Tobacco Companies into a public utility for the benefit of the trial lawyers. And you know, thats not changed much over the years whats amazing to watch is that all these states depended on all that revenue from that settlement and now theyre struggling with that revenue falling off, and theyre they wanted cigarettes to last, quite frankly, even as they publicly said that they didnt. Yeah. Tremendous political twosided discussion. You need the revenue so you want more cigarettes. Yet you continuously demonize it. There are people that still smoke marlboro lights. And what is it like 8 a pack or something now . Well in new york its about 12 a pack. Is it really . Yes. Holy moley. Menthols, very popular. I dont you know, im kind of like everybody else now. I look at and just wonder what are you thinking . You got kids. I wonder, what are you thinking . If youre smoking at this point i believe cigarettes are if you want if you want to do it, fine. But you got to have rocks in your head. But im not going to tell you not to. But you got to have your head examined. They ought to be free to not have rocks in their head. They should be free to have rocks in their head. They are free but they ought to stop smoking. Could amazon drones be taking to the sky sooner than you think . That story is next. Plus mark mahaney takes on what hes expecting talks about what hes expecting when Tech Companies start reporting. His tech earnings preview is being released this morning and we have him next. And from bill yards to boats brunswick has you covered for fun in the sun. The companys ceo joins us to talk business. Well see you back here in a bit. trader vo i search. I research. I dig. And dig some more. Because, for me, the challenge of the search. Is almost as exciting as the thrill of the find. announcer at scottrade, we share your passion for trading. Thats why we rebuilt scottrade elite from the ground up including a proprietary momentum indicator that makes researching sectors and Industries Even easier. Because at scottrade, our passion is to power yours. He cadillac summer collection is here. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. But parallel parking isnt one you do a lof them. Ings great. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. In a we believe outshining the competition tomorrow quires 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. I make a lot of purchases foand i get ass. Lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Today momentum stocks hitting the brakes. Is now the time to buy or will we see more pain before the gain . The strategies you need to put the odds in your favor. Options action 5 30 eastern sponsored by thing or swim by td ameritrade. Amazon is making a request to the faa to Start Testing its dronebased Package Delivery service. Amazon is asking regulators to grant the Internet Retailer an exemption to drone testing rules, which restrict flights to six official staging areas throughout the country. The companys drones can now carry five pound loads over 50 miles per hour. If the request is granted outdoor flights, and potentially a Pilot Program would take place in the seattle area. Earnings season kicking off and a couple of key names are going to report. Plenty of high flying momentum names have been hardhilt lately. Lets find out whats in store. Joining us is mark mahaney, lead internet analyst from rbs Capital Markets rolling out his Second Quarter review for tech results. Good morning. Whats the big highlight youre watching for. The most important thing in this space . Where we see the greatest risk going into earnings is with three names in particular. Ebay which had kind of a trifecta or perfect storm of events intraquarter. Very specific to the company. Netflix would be the second one, and then twitter. So all three of these, weve had a bit of a trade down recently and for probably for good reasons. Theres a couple of stocks where we think theres least risk which we particularly like into the quarter and for the next 12 months. Those would be facebook, priceline and pandora. We just told you about the amazon drone story. Weigh in on how much that matters or doesnt matter to amazon. I know it gets all the publicity. But i keep hearing its the Cloud Computing aspect of that company that matters the most at this point. The drones are completely immaterial to the investment pieces probably for the next three years. But this is a part of, you know, longterm innovation by the company. I think a bigger innovation in terms of the delivery is going to be the use of robots within the companys own distribution centers. And in nearterm theres a slew of investments that amazon is making that are probably much bigger than drones. The investments in china, in video and devices like these smartphones, and then into grocery delivery. This company is probably taking more risk in terms of the spread of investments that its making now than it probably ever has in the last 20 years in any one year. And thats the why its corrected so much. The constant debate we have about amazon. Amazon gets a free pass. Theyre never super profitable. Its revenue, revenue, yet when are they going to make a lot of money for shareholders. Where do you come down on that . The truth is we had thought this was the year in which wed see margins come back up and i think the market thought so, too. Thats why were all disappointed and the stock traded off. We think its next year. Its hard to know. The way jeff bezos runs the company hes got a longterm investment horizon. He did show reasonable profits for about eight years 2003 to 2010. They did run at 6 operating margins which is what you should expect this company to do. Its a mass market retailer. Those are the kind of margins you should expect. We think we start seeing a recovery next year. Unfortunately i think i said that last year. You excited about alibaba next month looks like . Licking lips to cover that one . Im going to avoid that question like the plague. Were completely restricted on that. Oh, got it. Sorry. Okay, thats too bad. But, you cant even tell me in the pantheon of like the twitter going public, facebook going public, wheres that going to be . No comment. Look, weve had weve had a series of big ipos in the internet space over the last couple of years, and they always involve a heck of a lot of work. Google is the big one next week. I know you have a buy on the stock very quickly. It missed in a big way last quarter. This one going to be different . I think so for one particular reason. Last quarter they didnt announce until after the earnings call. They had a onetime very significant legal expense. And a couple of these big tech names did. There was a poaching antipoaching employee settlement between some of the largest Tech Companies, and the u. S. Government. So that was about 100 over 100 million in onetime legal expenses. We dont expect theyll be back this quarter. We dont think well have the cost expense. We think the revenue results are roughly in line. We like google for the print and longterm. Thank you, mark. Coming up when you hear the name brunswick you may not think of boats but the company owns some legendary names on the water like boston whaler and sea ray. The companys ceo will be joining us after the break to talk about Business Conditions and summer sales. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. Gritty and anyway, lets talk boats, bowling and billiards. One company that is a strong indicator of disposable consumer income in america is brunswick corp. Its the Market Leader in all three of those segments. Here now the ceo and chairman f brunswick, dustan mccoy. Its boating for brunswick. Boating and engines. And engines for boating. How much does that represent . 25 of our revenues are boats, joe, and 50 would be engines. So were 75 marine. And i mean, you know, i think about this country, and if you cant go out in the summer and see some lake in the middle of this country and see a brunswick boat or a boston whaler i mean it is, thats so americana. I feel good talking about it. Right . Well, it is the heart of america. Were probably the greatest family Recreational Activity there is. I like to tell people if you have children and boat with them youre going to do well. Because youve got to talk to each other when youre on a boat. You know what i dont like . I dont like cleaning the hull. And taking it out its a pain. Isnt it . Well, theres lots of things that can help you do that. First theres lots of mariners tat will pull it in and out for you. Secondly theres a lot of floats, you pull your boat on a float it always gets dirty inside. All the beer cans and everything. Can you boat on the ohio river . Actually boat on the ohio river. And youre having fun when youre having beer cans in the boat. I used to ski on the ohio and fall in and sometimes swallow a bunch of water and i never knew if i was going to live or not. That is disgusting. You and i are a little older than some of these young ladies. The ohio is a lot cleaner now. Its beautiful now. Are people on a scale of one to ten, it is a luxury, isnt it . What are i would say its not a walmart item but its not a tiffany item either. Its somewhere in the middle. It depends on the type of boat. We sell boats from 10,000 to 3 million. So, the range of buyers is going to be different. Wheres the sweet spot on that spread . Boats over 40 feet is where we make a lot of money right now. And those boats right now are really hot. Were fundamentally sold out on backlog. And those boats start, michelle, 800,000 to 1 million and move on up. Thats really the sweet spot. And you can sleep in those, too, and go down underneath. Thats so much fun. Theres an exploding segment, interestingly, pontoons. Why . A couple things. Theres probably been more innovation in pontoons in the past five to seven years than any other type boat. Are they house boats . No. Pontoons. Classic pontoon. But its not your mother and fathers pontoon, its really not. So youll have seating that haslettha has leather thats better than any luxury car. 250 horse poweragens. If you want to do, but a lot of people want to do 60, 65 miles an hour in a pontoon. If you want to let your children ski or tube and things like that the boat serves a wide variety of persons. Your stock has underperformed the Broader Market so far this year. I know its had a tremendous runup up until now. Is that a play on the u. S. Consumer . I actually think its three things. When the consumer durables are always going to be under pressure when youre in a flat gdp environment. Thats kdly what we are in the first half of this year. The second all come back after the weather got nice. Well, were very second half loaded and weve been saying were second half loaded in earnings. So i think a lot of folks are going to be wait and see. Compared to where weve been, though, were talking nickels and dimes right now from my perspective. Im confident about where were going. Our path forward has been laid out very clearly. Weve given 2016 guidance already. And were confident does the in the middle of the financial crisis, did people think the world was why would you stock tell for two . Did people think the world was going to end and no one would ever buy a boat or go bowling again . I think what happened, joe, we had a lot of boats in the field. The company itself could have gone out of business . No. We were worried about it. And the reason was we had a lot of floor plan liability out in the field. We back up our dealers on that floor plan liability. A lot of folks thought the dealers would start to fail and then we would have to come in, and we wouldnt have enough money. It actually was that simple. We spent probably less than 20 million in the deepest part of the recession taking care of dealers. And thats a tribute to our strong brands. 20 million and you could have bought the stock for two bucks, and now its 40 again. Unfortunately, one or two days under 2. Weve got to have you back. Weve got to go somewhere i guess. Wells fargo earnings. Okay. Thank you for having me. We didnt talk bowling. Coming up. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen, im hurrying because i guess wells fargo is getting ready to come out. Im with sarah eisen and Michelle Carusocabrera. Theyre looking for 1. 01 for wells fargo right in line with what the company just reported. The revenue estimate was 20. 83. And it looks better. Its 21. A little bit better. Because 20. 8, if you round it up, its 21. 21. 07. The net income number is 5. 73 billion. Theres a provision for some credit losses. That came in at 217 million. Net chargeoffs in the period, 717 million. Stock is already trading a little bit higher on this news. Closed yesterday at 51. 81. Bidding 51. 99 now. Bidding 52. Do i have 52. 05 . Bidding 52 even and 52. 25 is where the ask is. 52. 02 now. The yearly high, were getting close, setting a new high. I believe a new 52week high would be a new alltime high. 53 would be that would be a new alltime high. It has outperformed the xlf financially up about 15 this year. I dont think its ever been up here. It is still even though not in terms of assets i dont think its the biggest, in terms of Market Company it is by far the biggest. Worth a lot more than jpmorgan. Worth 272 billion. Jpmorgan about 210 billion. And bank america 162 billion. Okay. So a guest host occasionally says Second Quarter results reflect strong credit call driven by an imper let me hit that driven by thats part of improving. Right. I should have probably should have known that. Actually i cant find the rest of the quote. Driven by improving something. Improving results what other scrolling, too. Whats the other you see other news worth no. The impressive thing here is theyre facing a slowdown in mortgage refinancing. That was what we saw last quarter. And theyre able to offset that with growth. Strong results in the Second Quarter reflected our diversified business modded and longterm focus on meeting financial needs of our customers. Second quarter was helped bys housing market. The application pipeline was 30 billion at the end of the quarter. 27 billion at the end of march 31st. And i found it here. An improved economy, especially the housing market, and our continued risk discipline are what drove it. Mortgage originations 47 billion in the Second Quarter. Up from 36 billion in the prior quarter. So that is pretty good repurchased 39 million shares. And weve actually got the stock now, 51. 89 to 51. 94. At this point, when we talk to an analyst that has they have like estimates for every everything that the bank puts out, there may be something in here that may be better or worse than expectations well talk to someone about it, but thats the preliminary look. Other head lines this morning. We are watching gold prices this morning. Although it hasnt moved that much compared to yesterday. The metal is on track, though, for its sixth consecutive weekly gain. It is near a fourmonth high with port gral related concerns. This morning lower by six cents, 1338 per ton. Carl icahn says its time to be cautious about u. S. Stocks, joe. The billionaire investor told reuters that despite a great year so far hes being very selective about the stocks hes purchasing. And we are watching shares of chevron today. The company says it expects Second Quarter profit to be higher than it was during the First Quarter. Self rons bottom line has been hurt by currency issues though asset sales are helping. Chevrons Second Quarter Earnings Report is due to be released on august 1st. Portugals largest bank reinsuring investors overnight over troubles at its biggest shareholder. The bank saw stock climb 19 over structural issues at the bank. A lot calmer today. Steve sedgwick joining us from lisbon with the latest. Good to see you, steve. Good to see you. Ive been thinking about how these crisis can turn into something bigger. If it wasnt a bit of smoke we wouldnt have had the fire of the last 48 hours. Yes, banco Espirito Santo said they dont specifically have problems but there are still question marks about that statement, as well. Theyre saying its about the Holding Company and that is contained. But if there are problems at the Holding Company which owns a company which owns a company which then owns bes and we dont know the structure of those debt problems, of course everyones going to get worried. Because this comes down to the fact youve got a family called Espirito Santo who own a Company Called eoi which owns company, and then owns a Company Called eosg that owns bes. No wonder people are worried about this. People start thinking about the Broader Company as well. Are there problems, theyve got billions of dollars worth of loans, to we dont know who. And therein lies the issue. Thats why the likes of goldmans have downgraded the stock. Then you think about the country itself. How far away is it from, how different is it from the country that i was here three years ago when we had a 7 billion bailout. The answer is its a bit different. Its a bit better. The deficits a bit better. Theyve still got 15 unemployment. Theyve still got 130 debttogdp, negative growth in the First Quarter and corporates who have got debt of 25 as a percentage of gdp. Yes, this may be contained this time round but there are still some shocking fundamentals. Back to you. All right, steve sedgwick, thank you. Yeah, youre right. I told you about the theres a hippopotamus and they were shooting water into his mouth. At the lisbon zoo. I think thats what we talked about back then. Three years ago, joe. Its a heck of a zoo. Three years ago. You were going on about the zoo. I was. And its beautiful get over the zoo. I havent been i love in london. The society of london. We dont need other zoos. How about sintra, have you been up to that incredible place . They have a conference up there. Amazing, beautiful part of no, i havent. Anything . Can we show the view . Look at this town. Its stunning. I cant hotel airport. Hotel airport. I didnt get to see okay. I know. Our next guest was one of the legendary investor Julian Robertsons first tiger cubs he launched his macro Investor Group responsible for some of the biggest calls during the 90s like the collapse of Petroleum Prices after the start of the persian gulf war. Also the drop in the british pound joining us now is david gersen hower president and pounder of Capital Management huge fund guys typically cant just bloviate and pontificate and suffer the consequences. Im not going to mention anyone in particular. But you did 53 in your equity fund last year. We did. Even in the macro fund, which is probably the risk profile is different. Yes. Still able to do, what, 19 or 20 . About 14. But whos counting. Yeah but whos counting. At this point, you hear, and i dont know what do you smile when you hear do you watch cnbc . Yes. Do you smile when you hear everyone say its got to pull back and its too high now. Does that make you happy because you can be contrarian. Everybody thinks its got to pull back because its gone up. But you have friendly Central Banks pumping in a lot of liquidity and i think any pullbacks are going to be quite limited at this stage of the game. We have an economy thats expanding again at a reasonable clip. The First Quarter was an aberration. The Second Quarter things are coming back. Third quarter seems to be off to a decent start. Im not sure what the argument for meaningful pullback is at this point in time. Do you care whether its Earnings Growth or multiple expansion . Or a combination . Do you even try to figure out which its going to be. We do try to figure out which its going to be. So far youve had a fair bit of multiple expansion driving the market. You have modest Earnings Growth. And you have a benign Interest Rate backdrop which ought to keep multiples reasonably elevated. And the feds are so lucky because theyve got to exit but theyve got europe giving them cover. Its like they wont spike here because of whats happening over there. Thats very lucky for them. Is it serendipitous . Theyve been lucky with bonds. Bonds dont show good value but german bunds is generating attraction to u. S. Bonds. Everybodys buying them. Why . Everybodys buying them. Thats a good question, i wouldnt be buying them. Yet millions of investors are. Theres a lot of cash out there at this point that needs to be invested. So its finding its way into the bond market. Is it because of the ecb and its dont fight the Central Banks and the ecb has come in as a backstop and said theyre going to do everything it takes . They have said that. And they have a very aggressive Monetary Policy and its not clear theyre done at this stage. I love that youre here. 2,000 on the s p by the end of the year. Next years a long way off but do you think we can continue to make gains in equities next year . I think as long as earnings move up at a renal pace we ought to make gains in equities next year. The conditions that end a bull market, which is the fed tightening an economy thats overheating arent in place at this stage of the game. I like people like you that, you know, that go back and they talk about like these huge macro calls that you make. Because i want one now. I want a big one so i can sound smart if i go out tonight or something. The also yesterday was sitting here with wilbur who is so smart, willler ross and just looking at that euro during the portugal story, looking at where rates are and 1. 36 we both just said why is that thing at 1. 36. Can you tell me . The problem with the euro in terms of why it doesnt go down is they have a very large current account surplus. So theres a lot of capital inflows so its not destined. Its not doomed to go down . I think it will go down. I think were set up for a stronger dollar environment. The fed is going to be tightening Monetary Policy before the other major Central Banks. Youve got both europe and japan with extremely easy monetary policies. And the u. S. Will be done with its bond buying purchases in october. Whats your big macro call . I think the dollar being stronger is an obvious macro call that we can make. Can i ask you about something and you know we have delivering alpha next week and everybodys still wants to know about the fed. And the argument about the fed is whether at this point they stayed at the party, just too long given that things arent that bad in this country right now. In terms of employment, in terms of almost anything you look at. Maybe the consumer is sluggish. But we are in emergency mode for the fed, and you just wonder whether that ever has adverse consequences. I think that behind the curve. They are. You do think that . I do think theyre behind the curve. What could be the negative consequences of that . Well the negative consequences are a loss of fed credibility. Which is negative for the markets. So the real question i think is whether or not the fed changes its tune in september can the fed change its tune though . Well and thats the problem. You know, if we see the economy continuing to move ahead at a reasonable clip, the Monetary Policy settings on a forward basis are inappropriate. Do you worry about that . I am very worried. I think the Current Situation is unsustainal. You cannot keep rates that low while government is running these huge deficits. Ultimately it has to break. The problem is it probably wont break at a nice, even pace. There will be some triggering event. Hopefully in portugal you know that triggering events been avoided because somebody else is going to bail out the bank. But, at some point there will be a triggering event that will cause a sharp rise in rates, people will get afraid. Theyre not in position for that either. This is something i didnt think of, i was thinking europe will keep us low. What if it starts there . Those yields can go to 6 or 7 . They went there easy last time when europe looked shaky and we wouldnt be able to say the whole world has low Interest Rates and we could spike higher here, right . Well i dont know that youre going to get a rapid spike higher in rates but i think that the idea that rates should be higher by the end of the year is one that people ought to Pay Attention to. They certainly dont represent good value at current levels. Can you play on this idea if the fed loses credibility anybody covering the emerging markets knows what happens when a central bank loses its credibility. What would happen if the u. S. Central bank seriously lost its credibility . Youd be in for a good correction in the stock market. Whats a good correction . 10 easily, i think. Thats not that scary considering. In a market thats had such low volatility recently i think that would get peoples attention in a big way. I thought you were going to tell my a sharp rise in Interest Rates like really sharp. I think if the fed loses credibility the prospect of Interest Rate curve steepening substantially is quite real. At this juncture. Or do they buy u. S. Government bonds like what happened when we got downgraded by s p or the dollar rose and treasuries rose . Well i think theyre done buying dollar bonds. The fed is getting out of the market. Theyve been a meaningful force in the market for bonds. Theyve absorbed essentially the fiscal deficit with their bond buying. And this program is coming to a conclusion. And you know, the exit will follow. Last time you and i talked we talked about japan. That was certainly a big macro call and it played out nicely for those that were long the equity market there short the currency. Is that trade over or do you expect it to ramp up again as the Prime Minister and the Central Bank Governor continue to turn this economy around . I dont think its over. I think the economy will surprise people as we come into the third quarter, with the degree of robustness that shows after the impact from the sales tax increase that theyve had. So theyve had some setback as a result of this, but, i think the general fear is that theyre in the 1997like situation when asia went into crisis. And thats not the case at all. Their external trade partners are growing at a reasonable clip and the Domestic Labor market is very tight providing wage gains for consumers, and this ought to help support the economy. So we think it does reasonably well and the stock market i think is in the early stage of a bull market. Yeah. Now, you have the macro in the equity. How much is in can you tell us . I cant tell you on tv. Youd have to because of regulations . Yes. Youd have to kill me, huh . Are you still 220 . We are. Youre not so great that youve been able to is it is it over a billion dollars . Never mind. All right. Im doing the two and 20 math on 15 and 14 and hes done well. Its awesome. Anyway, shall we change carrying interest or you dont care . Carrying interest is much more important for the private equity guys than it is for the Hedge Fund Guys where things tend to get realized on an ongoing basis. Doesnt matter that much . Doesnt matter that much. You ought to charge 3 . Listen we need to do that every year. If its 3 its 53 he needs to charge 25 . Keep the asset, and keep the two where it is. Good point. Kwaen way, thank you. Come back, please. Okay. Appreciate it. Thank you very much. Lets get more reaction to wells fargos Quarterly Results. Joining us is anthony pollenny, banking analyst at raymond james. Came in at 101, what are your thoughts on the numbers as youve dug through them . You know im so used to wells fargo beating that initially i was a little disappointed. The more i look into the quarter the more i like it. They had higher litigation expenses. If you add back thats three cents. They had a higher tax rate, if you add that back its four or five cents. On an operating basis they did beat where did that come from the operating . Expenses were under control. Revenue was sleetly higher. And the big positive was commercial loan growth. It actually went up. It went up. And its double digit now. Its actually if you annualize it, its well over 10 on the c i. That would be great news for the economy overall generally right i mean when people apply for loans and because they think they can actually pay them back and the banks willing to give them the loans, thats a great, great signal. What is this telling us about the rest of the Banking Sector, do you think . Well, i think its good news for the u. S. Economy. I mean, wells is always a good indicator. You either have a National Banking platform. Their ceo john stump has been particularly bullish on the economy. Now some of the big banks have other problems like citi and jpm et cetera but the bottom line here is that this is a very good indicator that the economy is on track for an improvement. Very close to 52week high. You buying it here . This you know theres another 8 or 10 points in wells. You know, its due for a breather. It has been one of the best, certainly out of the big banks the best performer yeartodate and the best performer this quarter. Okay. But by historical measures its still relatively attractive. Thanks anthony. Good to have you on this morning. Anthony polini. So youre doing squawk box and squawk on the street. A twoer if. Thats like csimiami, all of the different parts of the franchise. You can do it all. I enjoyed myself this morning. Even though you treated me a little like andrew. I was getting abused a little bit. Its the chair. Its the chair. The chair or maybe its well youre from and youre from the west side. If you dont think im going to have a chip on my shoulder. Youre from amberly. Have a good show. Sensitive. Thank you. It was fun. Make sure you tune in to the closing bell because wells forgo ceo will talk about the companys results and next week join squawk box when youre going to have chairman and ceo john stump on for a full hour as guest host on thursday. You do a lot of things great. But parallel parking isnt one of them. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Some breaking news right now. Synk technologies. Shares have been halted. Its a social networking company, supposedly. Its got no revenue. Its got no assets. Its got one employee. Its stock soared thursday to a market cap of over 6 billion at one point. The firms meteoric rise is so unlikely that even its last auditor says it defies longic. Cynk is based in belize and only has one reported employee. Runs a social networking site called intro biz. Says it allows users to both buy and sell the ability to socially connect to individuals such as celebrities, Business Owners and 258ented i. T. Professionals but it is not clear how many registered users it has. Cynks stock was valued at less than a dime in june. June . And rocketed to over 20 bucks at one point thursday morning. That feels boilerroom, doesnt it . Feels late ninetyish. Yeah. I dont know anything about that. No, neither do i. I thought you were talking about siri. Isnt there a ford sync, something in fords that allows you sync technology. Like synchronization. Something like that. Thats giving the company way too much credit i think. All right coming up we head to the i hope youre not watching. Cynk . Youre being really mean. To the one employee in belize . We had to the Media Conference taking place in sun valley, idaho. Kayla tausche will discuss media, and the article in the New York Times about more. No,thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you just set your start and end price. And let it do its thing. Wow, more fan mail. Hey ray,my uncle wanted to say thanks for idea hub. Oh,well tell him i said youre welcome. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. Yea, and these ideas are across the board bullish, bearish and neutral. I think you need a bigger desk, pal. Another one . Traders love our trading patterns, now with options patterns. Whats not to love . They see what others are trading like the days top 10 options trades by volume and get ideas yea i have an idea how about trading that in for a salad . So come trade at a place thats all about options and futures. Optionsxpress. Open an account today and get a 150 amazon. Com gift card when you call 18883303137 now. Optionsxpress by charles schwab. Welcome back to squawk box. Lets take a look at some stocks in the news this morning. Were going to check in again on shares of wells fargo. The match street estimates of quarterly profits of 1. 01 per share. Revenue slightly above consensus. Right now the stock is lower. Initially had gone higher, looked like it was going to approach new 52week high. Its world cup weekend and we have some football news. It was an awful season for manchester united. It did nothing to dim one of the most valuable franchises commercial appeal. The team is ready to sign a sports wear deal with adidas worth twice what rivals have been earning. The partnership in a short sponsorship with car brand chevrolet will likely help underwrite a rebuilding of the team. Nike pulled out of contract renewal talks saying the price had gone too high ending a partnership dating back to 2002. There are reports adidas offered upwards of 102 million a year for a tenyear deal and it will see it replace nike in 2015. World cup has changed me to some extent. I saw the story about, they kicked our spy out of germany or something. And im thinking theyre getting theyre feeling their oats they think theyre pretty cool. Argentina is up here. I know their mind isnt on this debt restructuring. The match you have to call it a match, not a game. On that match as it should be. Coming up ken allate to live from sun valley. Well have that next as we head to break. U. S. Equity futures. Humans. Even when we cross our ts and dot our is, we still run into problems. Thats why Liberty Mutual insurance offers accident forgiveness with our auto policies. If you qualify, your rates wont go up due to your first accident. Because making mistakes is only human, and so are we. We also offer new car replacement, so if you total your new car, well give you the money for a new one. Call Liberty Mutual insurance at. And ask us all about our auto features, like guaranteed repairs, where if you get into an accident and use one of our certified repair shops, the repairs are guaranteed for life. So call. To talk with an Insurance Expert about everything that comes standard with our base auto policy. And if you switch, you could save up to 423. Liberty Mutual Insurance responsibility. Whats your policy . Lets get to sun valley and the allen and company Media Conference. Kayla tausche is there. She joins us with a special guest. Hey, kayla. Hey, michelle. Good morning to you guys over there. Ken auletta is the author of ten books and hes been writing the annals of Communications Column for the new yorker. He joins us now. Ken youre the eminence grieze of this industry. I dont feel like it at 6 30 in the morning. Youve been coming to this conference for awhile. I wonder who you think the it person is this year . I dont know if theres one person. You see people gravitate around certain individuals, certainly the ceo of google, certainly Mark Zuckerberg of facebook, tim cook of apple. Certainly jeff bezos of amazon. Those are people that you see crowds clotting around. Why do you think that theres a fourway tie on that question . What is it about these companies and what theyre doing right now that you think makes them have so much gravity . Well, you just look at their either their market cap, or their user base. I mean, facebook doesnt have the market cap that apple or google has but what it has is 1. 2 billion users around the world. So, and growing. And so people say, this is a big company. Theyre all disruptive companies, too. Theyre all challenging the old order, in various ways. And so thats one of the reasons why people gather around them. If you watch their schedules, these people are packed in interview times all afternoon. And sometimes into the evening. Back to back, which they scheduled before they came here, to talk to other people. Including traditional media. Most interesting pair you saw talking . Oh, i just saw a lot of them. I mean i want to be a little discreet in that, you know, thats supposedly off the record. But you see the heads of Telephone Companies meeting with, you know, each of these people. You see the broadcast networks and the Cable Networks meeting with each of these people. So its very common. And it doesnt necessarily mean anything. Some of it is just dancing around getting to know you. Its certainly interesting. I know joe back at headquarters has a question. Ken, good to see you. Fall of the house of lehman, i couldnt help notice that bunker behind you. You know who used to play out of that bunker all the time . I know you do. Dick fold, right . That was his course. I didnt know that. Oh, yeah. I assume he had a i assume he had to sell his property here, right . I dont know the details. I saw them the other night at a charity function standing in the corner looking sort of, you know, god bless him. Just kind of looked shadowy. I feel bad for the whole situation. Thats not where i wanted to go. I wanted to go to whether i think i might consult with you if i were a Media Company right now. Because i think about three blind mice and the way you documented the decline of the network, and the business model. And then i think about where networks and media and comcast, or 80s, wherever. What you are dealing with back then to try to explain and try to forecast what was going to happen compared to now is so counting, do you have any idea how to forecast the future in media, and what to tell network or media executives at this point . No but the analogy youre making with the book three blind mice which came out in 1991 and how the broadcast networks were being disrupted by cable. And today the traditional media, and i mean by that, everything from Telephone Company to retail sale stores to Cable Companies are being disrupted by digital companies. So something similar is happening. A new technology, in this case digital and the internet, comes along and suddenly traditional ways of doing things are challenged. What about aereo . Do you think aereo is innocuous. They tried to get around the retransfer fees. Now theyre going to be paying them. I think it would have been usually disruptive to the entire television ecosystem, including cable, not just broadcasting if the Supreme Court had ruled differently than they did. But i think now aereo is challenged to stay in business. But the Supreme Court said you cant take stuff off this way. The consumer can record things so im sure some other technology will come along that will be potentially equally disruptive. This is a period where no one gets to sleep peacefully. You spent two years embedded at google. There have been questions about google ambitions in content with youtube, which is worth a fortune at this point. That was a very welltimed bet several years ago. Im wondering what you think about where google will go next and what investors should expect from that company in the next couple of years. The criticism of google had been there was a one trick pony search and i always thought that was kind of crazy. Its a multiple pony business. I mean just look at android. Android has 70 market share. The operating system, which they give away for free to all cell phonemakers around the world. That is a growing business and what it is, you give it away for free, but it features google applications on your cell phone. So they are cleaning up. Theyre cleaning up with youtube. Theyre cleaning up with search which continues to grow, particularly on mobile devices. So google, and then they have all these other investments that theyre making. So google is a very vibrant company, and what they will choose, what fields they will choose to enter, theyre in driverless cars, glasses, wearables. On that note, ken . Hi, its michelle here in the studio. On that note in googles other investments can you give us any insight. You mention the driverless car. But theyve done this big purchase push when it comes to robotics. Where do you think theyre going with that . I dont know. But i mean, i think google is such an Ambitious Company and they have so much cash that they are willing to make big bets on things like robotics, artificial intelligence, and see whether those bets pay off in the future. They are not worried about quarterly returns, theyre not worried about satisfying investors concerns this quarter or this half or this year. Theyre long time players. Should they be . No, because they control the stock. Larry page and eric schmidt control the majority of that stock voting stock. Its a twotiered stock plan the way mr. Murdoch has, the way, you know, Rupert Murdoch had. Murdoch and Warren Buffett have the same thing. Ken, i think that aereo would have hurt content in some ways, or at least the production of it. See being this daunting unknown future can you guarantee me that content is not going to come less valuable, and you know i look at sports is now, since its live it seems to be more valuable. I dont know if i were a network whether id try to do a drama series given what can be done with, you know, even a netflix or something. Can we just be confident that content will always be rewarded for great content . No. You cant you cant be confident. Thats the wrong answer. And you cant yeah, but you cant. I mean how can you be . On the other hand you know, if you look at it, when i wrote three blind mice in 1991 i thought tv networks were in trouble because they were reliant on a Single Source of revenue which was advertising. But what has happened . Apple comes along with itunes and netflix comes along and amazon comes along and suddenly they have other platforms to sell their content to. So the tv networks looked like theyre pretty strong today. But will that be true a year or two or three or four from now . I dont know. You wrote a fascinating profile of Reed Hastings earlier this year and you started with an anecdote from the year 2000 where he flew to dallas to blockbuster headquarters and offered them half of his company, wanted to merge. Thinking about where netflix is now, and Reed Hastings reputation as a bull in a china shop, so to speak, are you surprised at what theyve become and how big a bet theyve been making on content . I think Reed Hastings was brilliant in understanding that the world was going to move away from dvds, and mailing your dvds, to a world where you can get over the internet. And hes been a leader of that. Hes also a leader of something else, which is really potentially disruptive to cable, and to broadcast. If you watch netflix you pay 8 to 10 a month and you get no advertising. And you can watch as much as you want. You can eat as much as you want for as long as you want on any device that you want. And thats really disruptive. But the advertising, the fact that theres no ads on that, even on places like youtube, you can skip ads there, and so cable and the broadcast come along and say you got to watch a third of your program is going to be advertising. Well, young people who grow up on netflix, without ads, and hbo without ads, are they going to when they become adults be like their parents, and watch the ads . Orb are they going to say no we want to be able to skip them. And if you skip them, you then skip the major source of revenue for broadcast and cable network. Cord cutting is a real thing. I know we have to go but i would be remiss to leave without asking you about fundraising here at sun valley. You have Chris Christie the governor of new jersey here having dinner with Mark Zuckerberg. Ken langone big fundraiser. Do you sent rumblings about 2016 . Rand paul is supposed to be here, too. I dont and kerry, secretary of state was supposed to be here. He was in afghanistan yesterday. I dont know where he is today. In any case i havent seen a lot of evidence of political fundraising here. I mean Chris Christie was at this dinner last night. I mean i dont see him Walking Around with his hat to raise money. I think hes Walking Around shaking hands to meet important people who might be fund raisers at some point. Or certainly a media mavens for someone like him. To be continued, ken. Come back and see us in new york sometimes. I will. Ken auletta from the new yorker. Guys back to you. Kayla you meet him, and hard not to like him. Id be doing that, too. Hes got a unique talent. Kayla were you in the back room or the front room of the pioneer . Did you oh, we cant hear her. She tweeted out a baked potato. Did you see it . She didnt lead with that in her report today . She didnt talk about that. She had a hamburger. I went into the whole menu, wondered if anyone had dessert. Theres this back room where theres this great ambience. This is this great restaurant in sun valley . This rustic, cool place that serves steak and shrimp and baked potatoes that big and everything else. I asked her through twitter where she ate but she didnt shes busy. Anyways, liesman, if you say feds fisher nowadays, you its confusing. Stanley fisher, giving his first theres a c in it. I said if you say it correctly. Did you say it with a c or not . Its up to you as anage core. Hes the new fed vice chair to talk about stock valuations. We love richard fisher. And now stanley. So there really are two Fisher Fisher and fischer. You get it . No. Are you taking those anchor lessons they tried to get you to do . No. The one where you read the prompter without sighing . But you cant really we got to go. We got to get to this report here. Stan fischer the new fed vice chair gave his first speech yesterday and he was asked after his speech about financial Regulatory Reform whether or not theres an equity level. Before we roll this sound want to give i ail little decoding here. Hes going to use the term mopping up and that refers to the greenspan idea of letting the market run, and the fed addressing the aftermath of it, rather than picking the bubble ahead of time. Heres what stan said last night. At present we dont face a very serious macro any serious asset price problems. I think theres a general concern about how strongly the equity markets are. But, i dont think i think when youre dealing with equity, the stock market can go down without producing a financial crisis. Weve seen that. Many people say that the reason that mopping up worked in 2001 was that it was an equity price bubble, and that was much easier to deal with. We keep looking. And we havent found anything big yet. Now there are people who disagree with that. So youve got to keep checking and youve got to keep listening to what other people say. And if you were to decide that you didnt have macro prudential measures, and there was a problem, youd have to think of using the Interest Rate. So a couple things about that. The first thing is his idea of an equity bubble may be our idea of an equity bubble are a little different. Feds concern is can the market pop without creating financial instability . Without getting systemic risk. Thats one. The other one is whether or not the fed needs to come in and use the Interest Rate ahead of time. Might be a little different between fischer and yellen on this. He seems a little bit more willing, not a whole lot warning. Lets just go to the companies who are saying it wasnt me. The bunch of companies out there the last couple days who were saying, its the economy as to reasons why guidance is lower. Popbelly we had yesterday on this show. Rent assenter last night, family dollar, i think joe kernens Favorite Company the container store, walmart, lumber liquidators, and heres a quote from the guy and bob evans as well saying the consumer is constrained heres a quote, Macro Economic pressures continue to burden our financially constrained consumers contributing to softer than expected demand in our u. S. Business. So thats something thats been out there. That we have to follow. We did we know we sold a lot of cars. Whether that hurt some of the discretionary consumption, we dont know. Well have to be monitoring it. Who do you have delivering alpha . Im not doing anybody. Youre kidding me . The person i asked decided not to come. Who was that . I cant say. Why . You cant invite somebody, they dont come. Is he also bald . They could be bald. Does he have a beard . Toy may have facial hair you know what we didnt talk about yesterday talking about the bald, antibaldites. Andy baldites. Which you are. Yes. Youre an antibaldite. And antidentite. I dont like dentists. They cause pain. Up next do you know who the dentist was in the seinfeld . It was the guy who was bryan cranston. Unbelievable. But theres a whole bunch of stuff he did ahead of time. Okay. Got to go. Theyre yelling at me now. Were going to talk china with John Rutledge from Climate Change deals, to Strategic Oil reserves to apple being a threat to National Security in china. All with John Rutledge. This week u. S. Markets have dealt with the feds plan for exiting qe, chinas export numbers, the port kwees bank drama. Joining us to talk about some of the big issues is John Rutledge who joins us right now, chief investment strategist at the private Investment Firm in california. Hes also the honorary professor of the Chinese Academy of sciences and a cnbc contributor. Hi, michelle. Want to focus exclusively on china because one of the reasons the market sold off yesterday is the fact that their exports numbers werent as strong as expected so maybe we werent importing as much, a reflection on a weak u. S. Economy. Whats your sense of whats happening in china right now economically . Growth is actually settled down and firmed a bit. In recent months. And one of the best ways of seeing that is looking at copper prices, or stock price like freeport that, you know, people were very worried about growth for a time but it stabilized some. Theyre also shifting from exports over to domestic consumption as a growth driver. And so i think thats not the thats not the problem thats on their mind right now. But, you know, growth this year looks like 07. I look at every single day the head lines in the chinese newspapers and they tend to be really horrible when it comes to the real estate sector. Whats your sense of the real estate sector and should we in the United States be worried about the chinese real estate sector . Well, real estate in china has huge swings, of course. Because so much of policy in the last financial crisis worked through building infrastructure, and real estate projects. And rl estate projects, but what makes it less dangerous here or other places is most property in china is bought without mortgages or large down payments. Theres very little speculative housing other than the builders themselves, so we see prices going up and down and right now, prices are softening, but, you know, chinas got 2. 5 inflation rate so softening prices are not that bad. I dont think collapse of growth is the story there. They have a lot of problems, problems include pollution, corruption at local level and thing the new government there is working hard to get their arms around. Ill be there in a month for meetings before the g 20 meeting. Okay. But its those things and the East China Sea issues with japan sure. With the philippines is important. All right. So when you go and come back, well have you on again to tell us what you found. Thanks, john. Looking forward to it. Great. Coming up, jim cramer on wells fargo and what to watch today, rest of the day, and next week on wall street. Well be right back. With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Get to the new york stock exchange. Watch how i do this, jim. I looked at the show and what youre covering. Youre covering wells fargo a lot. Ill wait to cover that. I wanted to ask about the trw deal, biggest auto part, another company paying taxes now to germany instead of us. Its funny. This deal was so huge, and yet no one talks about it anymore. Youre talking about a consolidation industry, a giant amount. Joe, do you remember the days if you got a 2 billion deal, we spent the morning on it. This is a humge deal, and like, oh, yeah, its fine. We are too complacent on takeovers, really are. I wonder if a u. S. Company can compete with the German Company with a better tax bases, and i dont think anyone from the u. S. Can buy. Its a major issue. People do not understand these companies if youre an american company, you have to do the deal if your competitor does one, each sectors foiled if it happens, and youre right, government whether its treasury or congress, they dont understand the lack of competitiveness they are creating. Its industry after industry going through the rest of the year. I dont want to lose trw, jim, but the germans with their machines, the way they play soccer, i just, you know, i cant stop it, can i . No. I lost the bacon maker, you know. Look how important it is. You cannot stop it. Someone in washington has to recognize this is wrecking. Carl levin will figure it out. They are not even focused. Well see your wells stuff in a minute. Thanks. Squawk box will be right back. Financial noise financial noise financial noise humans. Even when we cross our ts and dot our is, we still run into problems. Thats why Liberty Mutual insurance offers accident forgiveness with our auto policies. If you qualify, your rates wont go up due to your first accident. Because making mistakes is only human, and so are we. We also offer new car replacement, so if you total your new car, well give you the money for a new one. Call Liberty Mutual insurance at. And ask us all about our auto features, like guaranteed repairs, where if you get into an accident and use one of our certified repair shops, the repairs are guaranteed for life. So call. To talk with an Insurance Expert about everything that comes standard with our base auto policy. And if you switch, you could save up to 423. Liberty Mutual Insurance responsibility. Whats your policy . In a we believe outshining the competition tomorrow quires 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. Lets get back to steve miller from aig for thoughts on the aig succession. The new ceos ready to go . Announced, taking office september 1st, running the Property Casualty division, the biggest division, well groomed, and hes ready to go. Put up with a lot and did a great job. Yeah. I call him our general patton, generally, he ticked people off, but got the job done. If you had heard stuff from whomever, you would have been ticked off too. Pay, whatever it is. Can a ceo is the ceo not allowed to piss people off can we say that word . Public sector objectives, and we needed to save that company and get it back on their feet, incentivize and motivate the people at the time. It was a huge talk over executive pay. Still something front and center, a lot of things are front and center that i think are not productive for the private sector and were both hoping someday maybe well snap back. Im just hoping on a lot of fronts, our Public Sector gets out of the way and lets the ingenuity of American Business get our economy going again. There with you. Hope so. Great having you today. Thank you very much, steve miller. Never gets old for us. Join us monday, and squawk on the street is next. Good friday morning, welcome to squawk on the street, im Carl Quintanilla with jim cramer and dave faber, and the premarket relatively indecisive here, wells fargo kicks off financials today. Ten years around 2. 52, evans and lock hart on tape this afternoon, and europe trying to recover some of yesterdays losses, while we obviously watch portugal as well. Road map begin