Investigation. And today the u. N. Security council is expected to vote on a resolution calling for full access to the crash site and an International Investigation. Well check in with our nbc colleagues in russia in a couple minutes. Also, we are closely following the situation in the middle east. Israeli air strikes pounding gaza again today. Officials say more than 500 palestinians have been killed since the beginning of the offensive. Yesterday was the deadliest day. 20 israelis have been killed including 13 soldiers who died during heavy fighting yesterday. And the u. N. Security general and u. S. Secretary john kerry are headed to egypt for talks on the crisis. Israel has every right in the world to defend itself, but were hopeful, very hopeful that we can quickly try to find a way forward to put a ceasefire in place so that the underlying issues, so that we can get to the questions, but you cannot reward terrorism. There cant be a set of precondition demands that are going to be met. So we support the Egyptian Initiative joined in by israel and others to have an immediate ceasefire. Were going to have a live report from our nbc colleagues on the ground in gaza in just a couple minutes. So its been a tough weekend, to say the least. Well check on the markets this morning. Europe is lower this morning. Well see if it is falling over the u. S. Futures after the big rally we saw on friday or the recovery rally we saw on friday. The s p opens lower by three points and the dow is lower by 23 with the nasdaq down by 3. In europe theres talk of the new ultimate tim to putin whether we have sanctions from europe. The ftss lower by 19 points. Germany is lower by 61 points. Big selloff in italy lower by 186 points near. 90 . Heres what happens in asia, japan is closed. So we are not showing you what happens there. Hang seng and hong kong lower by 67 points. Shanghai is lower by 4. 5 points. Oil despite the disruption, no big rise in the price. Nymex is at 103 dollars a barrel. Ice brent is lower as well. The yield is still below 2. 5 as we saw the stock market rally. The tenyear sold off a bit but the yield never got to 2. 5 as we saw people moving into equities. As for the dollar this morning, stronger against the pound and the euro, weaker against the yen. The pound is going to cost you 1. 70 and the euro is 1. 30. This morning gold is higher at 1315. Thank you, michelle. The Holding Company has filed for protection. Right. I thought we were worried about that in the world markets. Was this not the worst they were wondering would happen . When it comes to portugal or europe . That was the bank we were worried about. Right. We were. Well, the bank itself, are you saying that the bank is no, the Holding Company. No, but it was the bank that everybody was confused about or concerned about because they were worried it was the beginning of the european banking crisis renewed. But as people look more and more at that situation, it looks like a situation of really very bad governance of latin america in the 1980s and the 1970s, so they are thinking it is isolateisola. And portuguese debt was the biggest rally of last week. Thats good. Well go to moscow now to join jim maceda there for us. One of the top stories, the International Debate over the plane crash site in ukraine. And nbcs jim maceda is joining us from moscow. Saw you last week. Hello again, jim. Reporter hi, there. We have heard some remarkably angry comments today from the likes of the australian and dutch Prime Ministers, not to mention the unsurprising bitterness coming from the ukrainian Prime Minister. But none of this, joe, seems to have swayed putin to cut ties with the rebels. Theres been a lot of talk over the past few days about the crash of malaysian flight 17 being a gamechanger. But what we have seen is that so far the game in ukraine hasnt changed. The war is still raging on there. There are reports of fighting going on today inside donetsk, the city of 1 Million People with tanks reportedly now in the city center. So what we are seeing is, i think, putin paying lip service once again to peace but using his proxies to defend his very specific interest. So theres no doubt that putin is facing the biggest crisis of his presidency because of this plane crash. Putin, the former kgb lieutenant colonel, bust know what did or did not happening to the boeing 777. The United States thinks it knows but he really must know. And if there is a direct russian connection to the crime, analysts here are telling us that putin will do absolutely everything that he can to hide it, to drag out any investigation so that he can continue to kind of plausibly deny everything. And he just waits things out. Hes still believing that he can win that battle. That europe will not have the stomach for the tough secretarial sanctions that might hurt him. And by the way, he has an 83 Approval Rating from russians here to back him. Back to you. All right. Jim maceda, we appreciate your reporting. And it is at this point, its all going to be recriminations and cleaning up the site, the whole thing is unfortunate. I dont know what well finally hear. Eventually you would think that you would hear im sorry or something. Then they would have to admit they were involved and im not sure they want to admit that. From putin or the rebels . No. Havent we got a pretty good idea what likely happened overall. They initially shot one down a couple days before that. They were kind of happy. Then it is like, oh, no, we made a mistake. So its just awful. I think the question now is, does europe finally do something very significant when it comes to sanctions . We have been asking and asking and they have been talking and talking. What about china . Does china do anything about this . They could, but i think thats one bridge way too far. Oh, yeah. It prompted a war in ukraine all year. That was the point over the weekend. We kept emphasizing that it became a european conflict at that point because so many europeans were on board. Joining us now to discuss the situation in the middle east and russia is ben white, chief economic correspondent of politico and cnbc contributor. We wouldnt bring you in here to talk about your expertise on the ukraine crimea region. But we will bring you in to talk about the beltways response. So thats what we are talking about. I can talk to you about that. What was interesting over the weekend is republicans hit the president very hard over the series of International Crises that dont seem to be improving under his watch. They want to see a lot more tough response to putin on this, in particular, sanctions on him and perhaps sending nato troops to try to secure the site there. What i find interesting, politico has a new poll out this morning on domestic Political Attitudes towards international entanglements, and 17 said the United States should be more involve maryland the situation in ukraine. That was before the plane was shut down, so the numbers will probably go up after this, but the americans are increasingly not wanting us to play a much bigger role in ukraine. While republicans are very critical of the president , and rightly so, but the National Opinion on him getting involved in the International Crisis is very low. And republicans like rand paul tend to move in line with what does that put us in our place in the world if we do nothing . It probably doesnt help our national standing, but the question is, what do we do . After a war in iraq and afghanistan, getting involved in the area where there doesnt seem to be a solution in the middle east where we see the same thing happen over and over. In gaza it is hard. I wouldnt say its the typical lines drawn between where people are, but there are those that would say, look, if we had rockets landing here, we would do the same. But then kerry, you heard the hot mike where he said sarcastically, the outrage in paris and other european countries, many times it seems like theres a lot of empathy with hamas really and with the situation. And the civilian palestinians, not really hamas. But the battle lines are drawn there as well. It is dangerous american politics to be seen as anything other than very strong in israel. I think people are very willing to say what is israel doing. Ive seen people say, because the rockets fired by hamas usually dont hit anything, and because when israel responds, there are more casualties. Somehow that puts israel in the wrong. Thats the prison of the American Media for sure. Thats what im talking about. I think it is interesting, why is john kerry in cairo when hamas obviously rejected the idea of talking to egypt about a ceasefire. Michelle, you know more about this than me, but it seems like hes in the wrong place right now. Would that be the first time he was nevermind. It strikes me as odd hes going to a capital where hamas is not interested in talking to egypt and their brokering of a ceasefire. If you want a ceasefire, where is it going to come from . Did anyone notice complete failure of iran over the weekend . Thats the one thing that is amazing because of ukraine and because of gaza, nobody has talked about the fact that by the way we have not really gone anywhere on that front either. Well, theres not a lot of successes that this administration can point to in terms of Foreign Policy. The u. S. Gets four more months to dress up concessions to iran. But then the question, does this play into the 2014 midterm elections and do democrats get hit as soft on Foreign Policy . Maybe they do, but americans dont seem that concerned. I know americans do not want another entanglement, but it is different when, its a different level when president obama, the minute he becomes president announces in the middle east, were not the same country anymore. Dont worry about it. Syria, redline, no, right . Those if we have maintained a strong stance, sometimes that means you dont have to get militarily involved in the first place because people see you as strong and know that you would do something. Putin obviously does not view us that way. And rightly so. I agree with you. Explain this, ben, in Morning Money you have a piece that says russian billionaires freak out. Im wondering why given the fact it seems we are as timid as we think we may be. The article that you quote from says russias businessmen are increasingly frantic that this will lead to crippling concessions and are too scared to say so publicly. As jim maceda reported earlier, people say this is the Tipping Point changing moment for sanctions on ukraine. I mean, on russia. I dont think thats necessarily true. It depends on the germans, are they willing to get tougher, i doubt it. This doesnt seem like the moment where the sanctions bite, but they are freaking out that their assets get frozen and putin pushed it too far. And the next question is, does putin even care . If they go that far . Does he care . He may care much more he may care much more about his own expansionary policies and the geopolitics on the ground. His desire for expansion. Much more so than the billionaires with their assets frozen. Well go to israel to get the latest on the middle east. Amman is joining us from gaza. Amman . Reporter good morning, guys. Youre talking about the issues facing the people here and no doubt accord on the united nations, gaza is facing a humanitarian crisis. Look at the number of misplaced people. They are responsible for 80,000 palestinians sheltered at 61 different u. N. Schools. They have to make sure they have food and basic me testies. In addition to that, the Health Officials are overwhelmed by the risiing casualty toll including 80 People Killed in one neighborhood. And disturbing news from the southern part of the the territory. And israeli strike killing 27 other people including women and children. Now, when you put all of that together, human rights organizations say it is a disproportionate use of force that israel is using against the civilian population. We have heard time and time again israel saying they are using surgical strikes to target hamas members, but the reality on the ground tells a different picture. We are seeing neighborhoods destroyed and entire buildings collapsed. It doesnt seem surgical according to the palestinian and medical officials trying to recover the bodies as they have been over the past 48 hours. But for its part, the Palestinian Group hamas is still fighting strongly and firing rocketed. And yesterday the single deadliest attack on israeli soldiers. 13 soldiers were killed when they entered this neighborhood in east gaza and came in close contact with hamas fighters who apparently launched a pretty bold attack on the soldiers killing 13 and injuring dozens more. So a very intense day of fighting yesterday. One that does not show any signs of slowing down today. We have been hearing over the course of the past half hour or so dozens of shells landing in the eastern part of gaza. Air strikes that we saw a short while ago with palestinian rocket fire into israel. So it does raise questions as to who is winning and how this comes to an wednesday the diplomatic efforts underway with q qatar and others that could bring about an to end the violence. Back to you. You can even hear with ayman, you cant help but think, wow, the force is assymetric, but hamas must know that this is going to happen that way and the Palestinian People get hurt and hamas keeps pushing and pushing and then they know they are going to have opinions sway their way. It will help to stop shooting rockets. Thats what you ask yourself, can the force, if you are not the one instigating that hamas would say israel by the existence is instigating, but if you are not instigating in terms of offensive moves and just being subjective to it and respond, do you measure that response in a way that doesnt include that you were the one that wasnt instigating it in the first place . If you want to stop that up city investigati instigation from hamas, i dont know if it works, but israel has to have a disproportionate response from having this happen in the future. But it is hard when youre being bombed. Then women and children in all the conflicts are being used as shields. Which is disgraceful. So the rest of the world watches. Joining us is the professor of the International Affairs program at the new school university. Nina, what im getting from your comments is that what we were talking about earlier and was written over the weekend that suddenly there are so many different nationalities on board the plane that all of europe is now drawn in to what had been a conflict in ukraine. This could fundamentally change the ability to get tougher sanctions signed off on by a lot of europe, is that how you see it . Absolutely. I think it is really the time for Vladimir Putin to face the moment of truth because before that it could be dismissed, not dismissed but at least explain a way as a local conflict. Now it really is a conflict and russia looks to the world as a mass murderer who doesnt want to accept responsibility. Vladimir putin last night moscow time at night, who addresses a tragedy like that at night . Who are you speaking to . So he issued a very short address on the kremlin website saying, well, ukraine is to blame and we want International Investigation and nobody should use this for their advantage. So there are momentarily three problematic issues with this statement right away. And first of all, russia doesnt accept responsibility and hampers the investigation because it has been four days and he finally calls for International Investigation and wants it to be fair. That really shows how hypocrite call this regime is. And i think earlier there was a comment that putin may not care that his billionaires are very scared. Well, maybe, but he pushes the International Community to see how far it can go with the sanctions. Lets push putin and see how squared or not scared he can get with the International Community going that far. What if theres retribution. What he if he says the gas you get from me in the winter you dont get. This conflict is not going anywhere unless putin do they have the stomach to do it . Do you think western europe can take the stand to be selfpunishing . Well, western europe needs to decide whether it can take the stomach to do it or it actually wants to bring the violence home. Because we know a lot of the headlines are really condemning putin and russia with that, so the countries need to decide whats more important to them. As i said, this conflict is not going away and this is just if it is not going away and putin has not stopped with this, this is just the first disaster that only happens. So i guess i cannot be responsible for saying what the government should do, but they certainly should try much more than just a conversation and condemning putin in private conversations. So nina, we watch this unfold over the past six months, and there were times when we thought, wow, hes not going to stop with crimea. Hes going all the way. But then it looked like the troop buildup, it looked like he almost was appeasing the west to some extent or lulled us into a false sense of security. But meanwhile, do you think he was in there sort of getting ready to still causing trouble, still funding the rebels, still exacerbating the situation, but could it be now that hes been thwarted, this really kind of, i dont want to use the term blew up in his face, but if this wasnt planned and all of a sudden we are focused on all the things hes been doing where he really hasnt been honoring the commitments to not doing anything, to not make things worse, he has been all along and now it almost seems like this could be where he got caught. And now maybe it ends up being a positive because we all know what hes been doing all along. Absolutely. I think it is a school of thought that before the International Community was willing to take him at his word, although of course understanding at the same time that they may not, they shouldnt be doing this, but they were doing it anyway because its true, i mean, whats the alternative . But yes, hes caught redhanded. I think theres going to be a u. N. Resolution today and it does seem that russia is thinking maybe it should sign it, the resolution, on opening the crash site to the international forces. I mean, that in itself already is suspect. Why would they be even considering that . It should have been done four days ago. One school of thought they were going to get control of the black boxes, basically. And the bodies. Do the civilized thing, which is to give the bodies to the families. So thats one school of thought. But ive been studying putin for 15 years and it always seems that is what he does, he pushes as far as he can and then sort of pretends that things are going to get better. But he still sees how much he can get away with really being an international spoiler than having his own way. Because what i absolutely know for a fact, he does not back off. Do you think you studied him for 15 years. Yes, i have. Do you think he ever plans to step down . No. I think the reason hes so tough is hes really trying to speak not only to his own nation to sort of foster this kind of Nationalistic Movement in the russian minds saying, wow, we are always the west is always out to get us, so we have to band together. But also speaking to some parts of the International Community that are very often sensed by the United States imperfections. And he strategically plays this very well. The reason i ask is a lot of people believe that hes stolen a lot of money. And the minute hes no longer the leader of the country, he now becomes open to sanctions, to being jailed, et cetera. Absolutely. He faces every day a threat. He must remain the leader of this country or else he likely goes to prison. Is that his calculus . That was my sort of next point is to make, that he really plans, like all authority leaders, he really plans his leadership for as long as it can last. Absolutely. He cannot leave power. Because he knows what happened to gadhafi and saddam hussein, to others in soviet history, he cannot leave power and thats why hes playing various games to make sure his next ten years, because thats how constitutionally hes supposed to be in power, the next ten years hes still there and then hell be a man in his 70s and god knows what. Hes a good judge of us, too. Because even when he appears to pull back but still continues doing all these things, we are willing to we want to believe, we dont want another cop flikt. The europeans dont want another c conflict. They are looking to an offramp of deescalation. Are you kidding me . That will take care of everything, the u. N. Resolution. It was great to have you, nina. When we return, another food scandal in china. This time both kfc and mcdonalds caught up in it. Details from beijing. But first, squawk sports news with rory mclroy capturing his first british open. The 25yearold picked up the third leg of a career grand slam. He only has the masters left. If he wins a green jacket, he could become the sixth player to win all four of golfs majors. Is this more proof that its bet tore be single when playing in the majors . Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] savings worth talking about. State farm. Welcome back to squawk box. A supplier sold kfc and mcdonalds expired chicken. Eunice yang is here with more. Eunice . Reporter hay, michelle. Its a bad situation. Just when you thought young brands was starting to recover from a food safety scandal from two years ago, it and mcdonalds are now the target of a new food safety scandal. Just as michelle mentioned, both of them used a supplier that was targeted in an investigative report by Chinese State tv. In that report a reporter went undercover for two months and said he found unhygienic conditions and expired beef and chicken which was sold to both of the Fast Food Companies and could end up in their restaurants. Now, this as you can imagine has outraged many chinese consumers and is the talk of the country today. Also, its very bad news for both of the companies who want to dominate this market to help offset sales in the United States. Now, china is young brands biggest market. Its also mcdonalds Fastest Growing market. In terms of young brands that owns kfc and pizza hut, it started to see a tunaround in the business in the Second Quarter. A lot of good news last week when we saw sales jump by 50 . But today is a different story. Both companies are now in fullon damage control mode. Both of them have issued statements saying they stopped using the shanghai supplier, a local unit of an illinoisbased Company Called osi. Both have also taken their meat off the shelves and are conducting a thorough investigation. They say they are also cooperating with local authorities. The most importantly of all, they are apologizing over and over to the chinese consumers who are still very angry about this scandal. Guys . Okay. Eunice, thank you. Wow. Young had just gotten over the last chicken issue. And it is so much more important to them compared to mcdonalds because it is so much more of their revenue. Not good. I havent really eaten today. Coming up, a busy week for earnings. Plus, why hasbro is partnering with a 3d printer. That story when squawk box comes right back. Collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Good morning. Welcome back to squawk box here on cnbc. Im joe kernan along with Andrew Rosssorkin and Michelle Carusocabrera sitting in for becky quick. The wall street journal is reporting the investor plans to spin off its vmware unit. A couple people have been talking about that. And verizon is now boosting the upload speeds of nearly all its fios connections to match the download speeds. This is amazing for those of you who use Internet Service at home. It will shorten the time it takes subscribers to send videos and back up their files. You can get faster download speeds and upload stuff. But in this era where we the user have become creators changes the dynamic of how this works. What do you mean . I dont like change. We are moving and everything, so temporarily we have fios, and i just think its awful. Awful. Its not faster . No. I dont know how to work any of the stuff. There are times when it is not working and you have to hit the men y menu button. And it has to reattach and takes a minute before it comes back. What do you have . I am still on time warner cable. I will take fios. Have you had xfinity . I want xfinity. As a consumer im a huge beneficiary. I hate this. I would love better upload speeds. Are you uploading images . I make scrapbooks on my computer and it can take an hour to upload. Print it like ai book. Im talking about tv. Xfinify is superior. Some day well learn. Ive seen it, its amazing. Have you been to paris . I have been to paris. In other news this morning, hasbr sorks pa hasbro is partnering with the 3d printer shapeways to sell my little pony art. Its a thing. I did not know that. Its a thing. I know all of them. Minty, because my daughter i thought you know men who liked the ponies. Maybe i do, maybe i dont. He doesnt want to we had all of them. Raspberry. You know all the names. Hes been printing the ponies out all weekend on his new 3d printer. There are 14 now, so it hasnt been that long. Time flies. The New York Times says hasbro hopes to expand it to other materials. Joe and his ponies, over to you. She was very cute, my daughter, because she couldnt say rs. Try to say that. We have a big week ahead with dow components set to report tomorrow. Joining us is jeff south, chief investment strategist who is the chief investment strategist at januaryi janning montgomery. Kind of interesting, because janet yellen noticed something in social networking and biotech stocks. Anything social media or cloud related or biotech is an example of the frothy part of the market, which might say things about the market in general, right . Yeah, i mean, youve got evaluations especially in the small cap complex. I think the russell 2000 is trading at 26 times forward, 12month earnings, while the s p is trading about 16. 6 times forward earnings. So you have the valuation concerns. You have had a price divergence whereby the s p and some of the largest cap indexes are continuing to move higher while the smaller ones didnt. And last week you got what they call a breath negative divergence with the s p and dow making new alltime highs on the intraday basis along with the new high gain. So i think its a time to be cautious. Ive been bullish since march of 09 on your show, called for a couple pullbacks, but basically we are in a bull market with years left to run. But we are due for some kind of pullback. But i also saw the third biggest bubble ever, i dont know how you measure that, but there are people who dont think this is just a 10 pullback but that the bull itself is waning. But at when you say 16 or 17 times earnings, that usually doesnt indicate the euphoric end of the secular bull to me, but i could be wrong, obviously. At the end of the secular bull, you will see what happened in the late 1990s. You will see the individual investors calling up their Financial Adviser and telling their Financial Adviser which stocks to buy. Just like they did with tech and t telcom in the late 90s. Is that your view . Because that sounds so pat. We know history doesnt repeat it, it only rhymes, so if we could know for sure to wait for individuals to call up their Financial Advisers, that would be the top we wouldnt know when the top was. Do you think it is that simple to figure out . I like to think it could be that easy. That could be a factor because jeff said thats a leading indicator for topping this in the equity markets when everybody pushes their chips all into the middle of the table. But given the fact that as jeff mentioned we are at 16 times forward, which is certainly at the richer end of full valuations. We still think equities are much more attractive than bonds or cash, but exceedbingly vulnerabe to geopolitical despite a spike in oil prices. As this begins to shift monetary policy, we start to talk about more when it may adjust the fund market rate and the markets are pulling forward if we continue to get better than expected payroll numbers. All of these factors could trip up the equity market. I worry a little bit theres so much consensus with a 10 to 15 correction that suggests to me it will be 5 or perhaps 15 to 20 . And then you just said it, because we know that at some point we are going to have a rate increase in fed funds. I dont know what it will be. Theres one school of thought that says the minute that happens, you aught to at least lighten up because thats the trouble side. And then there are other people who say, we are so low that historically you can find a lot of precedent where the market can continue to go higher as rates go up because it was indicating a stronger economy and so it went up. Its like 50 50 on what strategists say, jeff, so which is it . Rich bernstein just recently said a twostep in front of a couple different people. If earnings go up at a faster rate and the stock market can still do well, he thinks this is the biggest secular bull market of his career. And martin . Well, i dont know if we are necessarily defining it as a cyclical or secular bull market. We think we are in the midst of a bull market regardless and any correction should be bought as opposed to contributed to sinister. Rates going up, the fed increasing funds, is that bullish or bearish once that starts happening . Well, three steps and a stumble. Usually it takes three rate hikes before the market gets uneasy with regard to not only the direction but perhaps the height of the fed fund rate acting as friction on earnings and profit growth. As a consequence, we are not unnerved unless the fed is caught flatfooded with the rate hike starting at zero percent. Gentlemen, its coming. Late this year or maybe mid next year, who knows. Thats something a lot of people say as they it could be that simple. When that starts, its obviously what has the market where it is. And if that goes the other way, maybe it makes sense. I dont know. But then you dont get back in. Anyway, jeff and mark, thank you. Well find out, though. We are. Well be living through it, hopefully. Knock on wood. Coming up, a threeday workweek . Why one billionaire is calling for it. Thats amazing, right . You know him. He told me once a fourday workweek and thought that was crazy. Its a tease. Why does he work at all . As we head to break, a quick check of whats happening in european markets right now, weaker across the board. E financial noise financial noise financial noise financial noise yyyup. With xfinity internet soyour family can use all their devices at once. Works anywhere in the house. Even in the garage. Max whats going on . Were doing a tech startup. Were going public [cheering] the fastest inhome wifi for your entire family. Welcome back. Carlos slim is calling for the introduction of a threeday workweek. He suggests this will produce a healthier and more productive workforce. This is to the tune of a 10 to 11hour workweek. Then later a longer retirement, so you work longer. Work less but longer over time. He can afford to do it. Im not sure everybody else can. He works like crazy despite supposedly being retired. When we come back, we have a number of q reports out this week on the housing industry. Well get a preview of that next. Then at the top of the hour, well welcome Mohamed Elerian. Squawk box is back after this. Yosave at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. 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Thats why its important to focus on the overall trends. Because was it weather in the south, what was going on in the midwest, with 97 strength. So its important to step back, look at year over year trends and realize that, like you said before, its been about ten months of slowdown. If you were king for a day what would you do about it from a policy perspective . Thats a good question. You know, i think at the end of the day you have to lower credit standards a little bit. You have to get off of you want to lower credit . I read an article this weekend in the New York Times about lowering credit standards in the auto industry, everyone said the whole thing is going to blow up. You think we can do that . Thats true. There are smart ways to go about it. I think there are a lot of people who are credit worthy who got hurt in the financial crisis who could make Monthly Payments if there was a little bit more subjectivity to bank lending. What kind of fico score do you want or how far down the specific twrum are you willing to go . Actually if you look at the data Housing Loans are down about 90 to fico scores in the 600s. Which i think is just an overcorrection from the massive recession in 20082009. Whats your number then . Youre saying anything in the 600s is okay . Low to mid 60s, yeah. But again i think there needs to be subjectivity to it. Thats going back to more of an objective standard of just one number. I think you have to look at more than fico. I think it has to be a little bit more of a narrative. It has to be a little bit of individual learning. So what are we saying about janet yellen . Is this strategy not working . Is that what this all suggests . I just think at the end of the day when we had 30year fixed mortgages below 4 we saw massive increases in housing. The slope, the trend was very high. Since the correction in may 2013, we very much slowed down. So, i mean, holding down Interest Rates absolutely stimulates housing. But, when 3. 5 is considered the low, and stimulative and 4. 5 thwarts the Housing Market, then we need to look to other things, which is the labor market. But if Interest Rates go up, where does this put us . I mean if you were to sort of map out how this goes . Absolutely. I think if Interest Rates even remain where theyre at the only solution is going to be to loosen credit standards. If Interest Rates go higher i think we have a flat Housing Market for the next several years. Jay loosening credit standards. Its not a bad tag line. Thank you, appreciate it. Absolutely. Thanks for having me. Coming up the latest geopolitical stories that have the attention of Global Investors then well welcome squawk market master Mohamed Elerian and ask him to weigh in on the big stories of the day. A world of worry. Another deadly day of fighting in gaza. It is an absolutely shambolic situation. We picked up the imagery of this launch. And an International Crisis brewing over the plane crash site in ukraine. Earnings in the economy. The flood of corporate reports due in the coming days. Plus key reads on the economy including a look at Second Quarter gdp. And our newsmaker of the hower, well welcome Mohamed Elerian as the second hour of squawk box begins right now. Good morning, and welcome back to squawk box on cnbc. Im joe kernen along with andrew ross sorkin. Were having some things you just saw boards again and again, because master control unable to run and not just us, i think. Across the nbc network. Maybe nbc. So with that in mind, you probably didnt see the latest thing about if you put something in your ear, have you seen you go ow like that. So buy this thing im going to do my own commercials. This is like you stick it in and it actually sucks out the wax. The wax thing. I dont know if those guys but wait, theres more so do not do like pretend like this is a qtip. Oh dont do that. Okay so now ive earned they can still pay us for that commercial. You know the name of the company . No. Product. How many times have you seen the ad . 100,000 times. You dont know the name . Do you . I dont. No, but i just know that it goes in and goes and dont you want them to still fiezing . Yeah, i just did a free advertisement for them, did i not . Because we were unable to you forgot to provide the 800 number. No. No. Or the website. Lets get some of this info you know what, i was wracking my brains to think of another commercial and couldnt come up with one. Mercedes. Lincoln. High end cars. All right our guest host this morning, you know, i dont know how many mercedes he has or how many drivers, Mohamed Elerian, former pimco ceo, now the economic adviser to allianz. If youre working three days a week, thats probably were probably overestimating now that youre sort of just a big muckatety muck retirey. Are you still working hard . Youre not running pimco. Im working hard but working differently and a lot more time to spend with my daughter. See. Thats nice, isnt it . It is. Thats like working less. You get a new dog, you still got is everything okay dogwise . Weve got two dogs. I know we both have had, you know, if you have dogs. Issues. You do have issues. As investors watch the latest developments out of russia, ukraine, the middle east, and futures, we have the tenyear. Thats what were looking at down 39 points today. We closed on the dow at 17,100. Almost exactly 248 on the tenyear. Which has so many Different Things going into that yield at this point. It really is almost a global yield. You throw in the fed and the extraordinary actions that theyve taken over the past five years. Add it all together and its 2. 48. I dont know whaf the that is orchestrated. Its 2. 5 on friday even after we saw the really Strong Equity rally. I would have thought getting above 2. 5 , but it didnt. Because its a global bond market now. I think its not just the fed. Its what happens in europe, and ecb and Everything Else. The chinese. All right were closely following the situation in the middle east. Israeli air strikes pounding gaza again today. Officials now say more than 500 palestinians have been killed since the beginning of the offensive. 20 israelis have been killed, including 13 soldiers who died during heavy fighting yesterday. U. N. Secretarygeneral ban kimoon and u. S. Secretary of state john kerry are headed to egypt for talks on the crisis. Martin fletcher joins us now from tel aviv. Is anybody going to listen to what happens in egypt, martin . Michelle, no, at this moment, no. Everybodys hoping theres going to be some progress towards bringing together the two peace proposals that appear to be in the making. One is the egyptian one and the fact that both of those people are going to cairo makes it the dominant one and theres also the turkish, qatar track which favors hamas. The egyptian proposal favors israel. So kerrys work, and the secretarygeneral of the united nations, their role is going to be to try somehow to bring those two proposals closer together, make them more acceptable to hamas and israel, present them, and then see what happens. But in the short term, fighting is only getting more intense. I wouldnt say eyes are on cairo to see whats happening with the proposals. Eyes are more on gaza to see whats happening with the fighting. As i say, becoming more intense this morning, there was an infiltration by palestinian fighters inside israel. They came up to a tunnel, came out inside israel, split up into two groups to attack two civilian settlements nearby but they were spotted one from the air, israel hit one group with the rocket and israel says killed them all. There was a gun fight on the ground with another group. So the israelis say they killed ten palestinian fighters this morning. And apparently there are also israeli casualties but no numbers have been announced yet. At the same time, of course, the fighting in those northern suburbs of gaza, where there was such heavy fighting yesterday, that ended in those high casualty numbers, thats continuing. Israel still going house to house looking for weapons stockpiles, looking for rocket launchers. The civilians still caught in the middle, one assumes by now most of the civilians, if not all, will have got out of there, hopefully, but when we havent heard yet what the civilian death toll is today, the fighting intense in the northern suburbs of gaza, israel continuing to hunt for those tunnels which they say theyre not going to leave gaza until theyve exposed the entire secret tunnel network, and destroyed it, but that could take some days, and so, if the ceasefire proposals become serious, now well have to see who accepts it, israel and or hamas. Michelle . All right. Martin, thank you so much. Joining us from tel aviv. Okay. We got some breaking Corporate News to bring you this morning in the soap opera that is the valea Valeant Allergan, bill ackman i dont know what you would describe it as no frowning allowed. Heres whats going on. Sources telling us that Valeant Pharmaceuticals and bill ackmans personing square have now gone to the s. E. C. To make complaints over claims that allergan has been misleading investors by making statements about the company, including a statement on friday claiming that valiant has stagnant or declining sales in its bausch lomb business on its pharmaceutical sales side, we should say. The complaint actually coming, this is kind of interesting, robert kuzami who used to be the head of enforcement for the s. E. C. Now working for valeant, and bill ackmans personing square. So they have gone to the s. E. C. To make these claims. We should also tell you that sources are telling us that they have separately gone to the regulators in quebec. Now interestingly, the regulators in quebec have historically tried to protect canadian companies. This would be the opposite case. If this transaction were to go forward, quebec, or actually valeant, would become the Largest Company in all of canada. Forget about just quebec. So you could see potentially how this could play out. Let me show you what they are upset about, or at least what im told theyre upset about. This quote came from an s. E. C. Filing on friday that allergan had made about a statement that valeant had made. Valeant continues to cherrypick data that fails to provide analyst investors with Financial Information necessary to truly evaluate bausch lombs performance. Veil yents latest attempt to hide the ball appears to involve focusing directors on growth from medical device products rather than on pharmaceutical products that continue to stagnate or decline. Its the stagnate or decline piece of it that valeant appears to be so upset about. We should also tell you one of the reasons that they do seem to be so upset. The wall street journal reporting just today that Capital Research and management has now sold out of its shares in the company, in part after having meetings with the coo of allergan. So david peot has made certain claims to them and to others so you can really see how this fight is starting to shake out, and this now you go to the regulators. There is a little bit of the kettle the kettle calling it black the pot black. Because in some cases if you look at what bill ackman has gone in the herbalife debate just the opposite claiming that there have been false allegations or herbalife has gone and said that bill ackman has made false claims about it. So its a bit rich. The whole thing is rich. But nonetheless, a new claim in what is turning out to be quite a soap opera. To add to the richness, i thought president obama was going to stop this revolving door of going from government to then lobbyist, right . Youre talking about the Robert Khuzami element. Uhhuh. You cant lobby. Thats true. You cannot lobby. So this isnt officially lobbying. And i get that. But the spirit of the criticism is exactly the same. Right. I mean the other question was in the context of a takeover battle, what can you actually say about your competitor, and can you make claims that are, you know, how far can you go with those claims is sort of a larger question. What is hyperbole and then damaging lies. Apparently went up to canada and met with all sorts of different investors, piot, and the valeant people were furious about this because they thought they were making misleading claims to them. Now you have a major investor leaving the company. So if you add the market caps together it would be canadas Biggest Company. 40 plus 40 becomes 90. You become the Biggest Company in canada. Remember what the Biggest Company . Used to be a little Company Called blackberry. Its 5 billion it was 15 times the price at one point was 150, its now 10. So 15 times 5 its at least 80 billion at one point. Amazing. The only other question i have about this, does the s. E. C. Actually do something about it . Do the regular laters in canada do something . And what kind of steps can they take . Well, in this environment, the s. E. C. Would love to do anything possible, right . I dont know about that. I dont know about that. We will see how this all shakes out, and see if the Company Makes any comment on either side later today. So we do have a lot of earnings but geopolitical stories are definitely on the front burner this morning, eamon javers joins us now from washington. And we led the show with the two that are up front and center, eamon, i guess youll talk about both. Yeah, thats right, joe. We start off the day with secretary of state john kerry, who is on his way to cairo, egypt, the United States here hoping to broker some kind of ceasefire or peace deal between the palestinians, and the israeli sides over that violence that weve seen escalating in the gaza strip. Heres secretary of state john kerry yesterday on meet the press. Israel has every right in the world to detent itself but were hopeful, very hopeful, that we could quickly try to find a way forward to put a ceasefire in place so that the underlying issues, so that we can get to the questions, but you cannot reward terrorism. There cant be a set of precondition demands that are going to be met. So we support the Egyptian Initiative, joined in by israel and others, to have an immediate ceasefire. United states walking a tricky balance there. Theyre saying that support the israelis right to do what theyre doing in gaza, but also cautious and urging a limit to any civilian casualties. Obviously weve seen a lot of civilian casualties so far in the violence there. Also walking a delicate balance as you said in terms of russia and the ukraine. The United States very concerned now about this issue of shooting down the malaysian jet in the ukraine. Who was responsible for it over the weekend the u. S. Saying it was clearly russianmade weaponry. But not going so far as to blame Vladimir Putin himself. And just within the past several hours weve now seen Vladimir Putin, guys, come out and say that no other foreign leaders ought to try to take political advantage out of the tragedy of shooting down the malaysian plane. So tensions very high in that region, as well, along with reports that some of the bodies and the crash site are being controlled by separatists, not being released to international investigators. So a lot of tension there, as well, guys. A lot to chew over during the course of the week. So that i like the cliches that cant reward terrorism. The administrations going to keep going with that expression. Even though i dont know, it just i hear it now, and i after bergdahl and all, it just kind of rings hollow. Is that just me, eamon . Well, look, its a dicey situation diplomatically for the United States. Obviously the u. S. Supports israel. But with this unfolding violence its going to put more pressure on the United States you didnt catch my question though about now that we traded though about now that we traded five guys did you know a tensecond test though about now that we traded five guys could help your business avoid hours of delay 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. Doubtful in view of the events that have happened over the past few days. But i think its very, very important for the United States to make clear that its very upset and does not appreciate the actions that the russians have been taking towards ukraine. I think in terms of you asking me what kind of advice i would give to the president . I would go back to the table in terms of trying to get the negotiations started between the Ukrainian Government and the rebels. The ukrainians have said theyre willing to have a ceasefire, theyre willing to engage in a conversation with the rebels. But i think its very important while we talk about a ceasefire, that at the same time, parallel to any ceasefire, that it be that a sealing of the border between ukraine and russia take place. That no weapons be funneled from russia into ukraine, and that no personnel be funneled from russia into ukraine. At the same time that this border should be viewed by international monitors. I think its very, very important, because over the past few days that sounds like a lot of talk and things that have been said all along, and sounds like doing exactly the same thing that weve been doing. Am i hearing you wrong . No, no. I understand what youre saying. I think the key point here is to insist upon the russians that while theres a peace negotiation going on the sealing of the border has to take place. But insisting does what to putin . Nothing. Let me get to the next point, if the russians do not accept this kind of proposal i think its very incumbent upon the United States to take two further actions. Number one is to examine the broadening of sanctions, and the second thing i think is very important for the United States and the west to consider giving military support to the Ukrainian Government. When i say military support im not talking about boots on the ground, but im talking about military equipment. You have to realize that in the last three weeks or so the Ukrainian Military was making headway against the rebels and it was only at that stage that russia started funneling in the type of heavy military equipment that weve now seen engaged in the frankdy of the Malaysian Airliner. Let me ask you a question, in a months time when we look back on this, will the tragedy have marked a changing point to deescalating of tensions, or are we going to see further tensions and more sanctions and more countersanctions . I definitely believe this is kind of a game changer in terms of the incident that took place, the tragic incident with the Malaysian Airliner. I think its a turning point toward the positive because now theres a lot of International Attention on the scene. Theres a lot of international concerns. I think the pressure is going to be much broader against russia. So when i say its a positive, i mean in view of the tragedy that took place there could be a positive development out of it. I firmly believe this is an opportunity to move in a direction to get this issue settled in Eastern Ukraine. Doctor stent let me ask you about this, theres a story about ben white and his Morning Money with the head line russias billionaires freak out. Russias businessmen are increasingly frantic that putins policies in the ukraine will lead to crippling sanctions and are too scared of reprisals to say so publicly. Should they be freaking out . Well i think they should be very concerned. I mean so far our sanctions have had an Economic Impact on russia. Theyve also weve also banned people from coming to the United States, and from access to their assets. So i think these people, if the story is true, the oligarchs, the billionaires, worry that if mr. Putin doesnt compromise, if he isnt willing to take a constructive attitude towards allowing, first of all, immediately International Inspectors to come to the crash site, to do what they need to do and secondly as the ambassador said, to end the crisis in ukraine and stop the flow of weapons and men to Eastern Ukraine as weve seen, if hes not willing to do that, then there will be further sanctions. Even though those sanctions might not impact russias policies, they might not change what russias doing at the moment, they will certainly make it harder for these billionaires, for these people who like to and is that good enough . I mean good enough for what . The point is to change putins calculus. Yeah, well its and youre saying that they wont. They may not. I mean, i hope that they do. But you have to understand that as far as we know president putin is quite isolated. That he doesnt really listen to these billionaires exactly. Yeah, so those affect the limits of our own influence, the wests influence over russia and i think we have to be i mean i hope this is a turning point for the positive but things could get much worse if mr. Putin and those around him just want to entrench themselves more and more there, and not do anything to try and defuse this crisis at the moment. So thats a key issue. Is it a turning point or are things going to get much worse . The ambassador said this is a turning point. Do you agree . Well, its a turning point because i think it reminds us that, you know, the situation in Eastern Ukraine, whereby the russian government has been trying to destabilize ukraine, that weve had this horrible tragedy, this accident. But the question is, is it a turning point from which people will draw some more constructive conclusions . And i would say at the moment, its too soon to tell. We have had radio silence from the kremlin apart from a few statements that have been put out on the website. And i think they must be trying to figure out whats how they can go forward without incriminating themselves in whatever will come out from this investigation. So, i think it could be a turning point, and i think things could get worse. I hope they get better. Okay. Were going to leave the conversation there. Thank you dr. Stent, ambassador we appreciate your time this morning. Helping us make sense of some of this to the extent we can. Before we you know, i was a little bit. I didnt like what you were saying about mcilroy Caroline Wozniacki the jilted person that mcilroy she won yesterday. Right. Won theyre both single. So youre saying it works both yeah. Because you mentioned agassi. Andre agassi she won 61, 61 you can focus more. Maybe they just werent good together. Thought you were saying some kind of no. When youre single you can focus more. His dad placed a bet almost ten years ago, 500 to 1 i know that he would the father believing in yeah. Over ten year time span. And sergio it unfortunately it was the Third Straight tournament where the winner we sort of knew on friday almost, and it doesnt make for a great compelling its a bit like the yankees on friday. We knew you were going to bring that up. I was going to bring it up. Friday, saturday and sunday. You dont even like the yankees. You like the mets. So you got to throw that in my face that they swept the reds. I tweeted from there. I was at that game yesterday. Ninth inning . We didnt make you know why. Typical fan. Im not a typical fan. I have a dog cooped up in a room, a German Shepherd cooped up in a room. We left at quarter of 12 00, it was 4 00 and were still there. I have commitments. These pitchers, my god theyre watching these guys they took so long. Anyway, well well get to mohammed in a second. I wanted to stay but we couldnt. Im not a typical fan. Kind of typical. But anyway. All right. We want to get to the ground in ukraine for the latest of whats going on there. Keir simmons joins us live. Michelle, Forensic Team has just arrived here and they say that they should be able to move the bodies of the victims from a local train station today but even as they arrive, fresh fighting broke out at another train station nearby meaning you got to wonder how the Forensic Teams and examiners are going to be able to look at wreckage like this, left strewn around this ukrainian countryside when there is so much conflict, such a volatile atmosphere. One person here said grief like this should bring people together, but instead, the Ukrainian Government and the prorussian rebels who are in control of this part of Eastern Ukraine are blaming each other for getting in the way of the investigation. So a very, very difficult place to work, we are now four full days since the crash. And still most of this wresage is here. No kind of i mean this is a crime scene yet no investigation of that kind has even been able to begin. Michelle . All right, keir simmons, thank you so much. Coming up market moussings from Mohamed Elerian and when squawk box comes right back. Well have a lot more. Right after this. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. Share your summer moments in your mercedesbenz with us. Futures suggest the u. S. Markets will open slightly lower. The dow would open roughly lower by 34 points, the s p by 4. The nasdaq lower by 4. Dont move, Mohamed Elerian will join us when squawk box returns. Here at optionsxpress our clients really seem to appreciate our powerful, easytouse platform. No,thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you just set your start and end price. And let it do its thing. Wow, more fan mail. 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. Finally get to our guest host this morning, Mohamed Elerian, allianz chief economic adviser, also the former pimco cio, and i never mock you. But the mellifluous tones, and you use you never use more words than necessary to explain things. Im looking forward to hearing your analysis in dulcet tones of all these important issues. Thats how im going to start. Because i know youve prepared things. Youve got you know exactly what youre going to say. Heres my question, with that in mind. Both of these situations, can you connect the dots in either one of these situations to Financial Markets here, and whether there will be an effect . And can i assume it would probably be just oil, or is it possible it could be the dollar that could be affected . Or even the bond market . Any of these things either ukraine or gaza right now . Should we be paying attention to it as investors . We should be paying more attention to it than we are. The view in the market i guess thats how i ask the question. The consensus view is its not going to affect any of the markets. Why . One the market believes they are containable. So that while they are tragedies, they do not spill over to borders. So this is the consensus thinking of the markets right now, which may not be true . And some go further. The Ambassador Says this is a turning point. A positive turning point for the markets in russia. The second issue is that the markets say even if the spillover effects, it doesnt matter, earnings are strong and the fed is there. Is one of the assumptions that europeans and the United States do not do sanctions that are punishing enough . Correct. I think that there is notable complacency in the market, as to how much worse this can get. But this notable complacency is understandable, and moreover, has been repeatedly rewarded in the past. So investors are conditioned every geopolitical event has been a buying opportunity. Correct. Correct. You look like if you sold in to iraq. If you sold into ukraine the last time. Every time. Correct. The problem is if you step back, the process is getting worse. And theres two reasons for that. One is it involved nonstate actors which means its much harder to contain. Look how hard it is to get bodies out of a crash site. Thats absurd. And to assign blame to rebels where you dont even know well you know where they got the equipment. But you cant directly put blame on putin, at this point. So the nonstate actors, youre right. Its hard to hold someone accountable. Its presumably because theyre a nonstate actor that these yahoos made the mistake in the first place. If it were a real state running this equipment wouldnt have made the same kind of mistake. Correct. And the second issue is that we live increasingly in what ian bremen is saying called the zero world. Unlike the old days there is no outside power that can inform, influence, and impose outcomes. So you get into a situation where lots of things that are uncontrol on occur. Now if you step back and you look at it, its a time series, its getting worse. But at every point because the fed is standing there behind the markets theres reason to fade any selloff. Is the market even more vulnerable if theres an accident when it comes to the situation in gaza . I mean when you read the assessments, the wall street assessments, and theyre like israelis, going to wrap this up, this is going to be just like five years ago, i mean horrific the way that its seen as something thats so routine and yet, if it doesnt become routine, is the market vulnerable . The markets vulnerable there for two reasons. One is that there is nobody addressing the underlying cause of the problem. Thats been true for 50 years. Correct. But, therefore, okay, it doesnt get solved. Secondly the region itself is much more difficult. This radicalizes people around the region. The minute you Start Talking about radicalizing people around the region you bring in iraq, you bring in syria, and you bring in other countries. I think stepping back, yes, markets can fade this but fundamentally the trend has been for geopolitical concerns to get higher and higher while risk premiums have been coming down and down. So it is the pricing of these geopolitical issues that is at issue here. When does the risk premium go up . The risk premium goes up under one of three conditions. One is a policy mistake. Were not going to likely get that. Two is a Market Action the market gets too extended. We are near that point. When you say near that what is you said were not at that point. What does that point look like . That point looks like a lot of what weve been seeing. And think again, the housing thats why you think were there. I think were close. Were not there yet because theres a lot of money on the side lines. Theres a lot of money on the side lines, willing to engage. But we heard lending standards are going to have to fall yet again. Right. Today theres a story in the Financial Times about emerging markets. Even yellen we got all distracted. Did you tell me which markets we need to stay most closely i have a whole series of suggestions when we come back. Is it mostly oil related or dollar related . Where would the tumult be if things did i think its the correlation of markets as the issue. I told you you would say things that are just, you know if you listen to him inform, impose, and influence. You had those inform, influence and impose. Oh, sorry. Thats what you want to do with your friends. But if youve written if youve written an f. T. Piece on this already . Because your thoughts were all in order. I knew they would be already. Is this new to us . Its hard for me for my thoughts to be in order if i dont know what questions youre going to ask. Thats how i have to keep you keep you on your toes. Were going to take a quick break, come back with mohammed. Still to come on squawk box a check on the situation in gaza. More bombings today and then oil imports on the rise in china geopolitical tensions pushing prices there higher. Were going to talk crude realities in just a bit and find out what it means for your portfolio. Were back in just a moment. Its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleepiqtm technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleep iq™ tells you. Only at a sleep number store, mattresses with sleepiq start at just 999. 98. Know better sleep with sleep number. Welcome back to squawk box, making head lines this morning, mcdonalds and yum brands issuing apologies to consumers in china. That follows the shutdown of a shanghai meat supplier used by both companies. The supplier was a china based unit of osi group and supplying Meat Products suspected of being past their expiration dates. More ignition switch related issues for general motors. The company has not come up with a fix for some models of the cadillac cts line. They were among those recalled for faulty ignition switches in which engines can be inadvertently turned off if the drivers knee bumps the ignition key. Dealers have been told to stop selling the affected models. Hasbro out with quarterly numbers this morning. Hasbro matched estimates with Second Quarter profits of 36 Cents Per Share with revenue coming up short of consensus. That follows worse than expected results for rival mattel last week. Hasbro says its inventory is well positioned for the Holiday Shopping season. Okay. Were going to get to our other we have two eamons, spelled differently. Were going to get to ayman mohyeldin. We just spoke to eamon javers. Is he good now, greco, or not . Yeah. Israeli air strikes pounding gaza again today, officials now say more than 500 palestinians have been killed since the beginning of the offensive, 20 israelis have been killed, including 13 soldiers who died during heavy fighting yesterday. Ayman mohyeldin, were told, is good. Joins us from gaza beginning this morning. Hello again. Good morning to you guys. Actually we lost power here just a few seconds ago. Thats partly because gaza for the better part of the last several days has only been running on electricity for about four hours a day. Thats 1. 7 Million People really with access to electricity just for about four hours of the day in this heat. It gives you a sense of how not only because of that, but how many challenges theyre facing. Hospitals have also been complaining, running low on supplies, they dont have backup generators, and if they do theyre missing spare parts. More importantly theyve been overwhelmed by the number of casualties that you were just talking about there. In the past 24 hours alone the single deadliest day in fighting since this conflict began. The Israeli Military announced it has lost 13 soldiers after its forces pushed into the eastern part of gaza and came under heavy gunfire by hamas fighters. But as a result, the Israeli Military began shelling the area in and around the eastern part of gaza city. As a result of that, the spike in casualties in that one day alone topped 75 people according to palestinian medical sources. Many of them women and children, and this morning we are also getting word of continued israeli shelling in the southern part of the gaza strip. In one single attack according to palestinian medical sources, 27 people were killed, including 12 women and children, after israel targeted the home of a Senior Member of hamas military wing. He was killed in that attack, along with those other civilian individuals. But, as you can probably hear behind me, theres no sign that the shelling is slowing down. The operation is still very much in full swing. 85,000 palestinians have now been displaced from their homes, and theyre taking refuge at u. N. Schools. That is separate from the palestinians who have been displaced and are taking refuge with either family or friends across the gaza strip. So very tense situation, and one the palestinians describe as a humanitarian catastrophe. Guys, back to you. Okay. Ayman, thank you. And sometime we need to talk to you about this, because i mean i see things and its just tough to figure out, mohamed, people say israel has a right to to protect itself. Then others say its almost like apartheid in certain ways, that people are almost, you know, sort of confined to this area, and its not is it going to be our entire life where this is not solved . So i go back to the issue of you need to address the underlying problems. I think for the shortterm, what the u. N. Secretarygeneral has said, what president obama has said, what secretary kerry has said, what european leaders have said, is absolutely right. That the israeli response, while its understandable that theyre respo responding, is disproportionate and that the casualties involved of civilians but how do we address the underlying issues . And can it ever be addressed in a way that both sides somehow feel you know, there Northern Ireland be an example, south africa, there are many examples where people believe they couldnt be addressed. But if you step back you can address them but it requires compromise and requires a vision to look beyond the immediate political gains. Okay. Coming up were going to get a check on currencies and oil. Then later media analyst rich greenfield is going to share his thoughts on Rupert Murdochs bid for time warner and preview netflix earnings which are out after the bell and tell us why its all about subscribers. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. With diabetes, its tough to keep life balanced. I dont always have time to eat like i should. And the more i focus on Everything Else, the less time i have to take care of me. Thats why i like glucerna shakes. They have slowly digestible carbs to help minimize blood sugar spikes. Glucerna products help me keep everythibalanced. crash ugh im good. Well, almost everything. [male announcer] glucerna. Delicious shakes and bars. Welcome back. An update on the story we brought you just a couple moments ago. Valeant pharmaceutical is confirming what we learned earlier. Valeant complained to both the s. E. C. And canadian regulators that allergan is making what theyre calling misleading and manipulative statements about its business practices. Valeant and investor bill ackman are leading an effort to buy allergan which allergan has rejected. Mr. Ackman will be on scott wapners Program Later today. On the halftime report. Hes going to appear at 12 30 eastern time so youre not going to want to miss what he has to say about all this. Lets get a check now on oil and currency markets in the face of escalating tensions overseas. Joining us to talk oil is matt smith of schneider electric. Hes an Energy Analyst and from new york on currencies is bk Asset Management managing director. Kathy, i mohamed might jump in, because i asked him specifically if either one of these geopolitical situations were to affect a market somewhere, what would it be . Do you have feelings on this . Well, i think that the only market thats really affecting are the local markets. Because this is not one of those events, or you know, both israel and gaza, as well as the Malaysian Airlines are not events that will increase volatility historically. And the market are looking at these events very localized events that wont cause significant macro disruptions. Were seeing that in the price action today. We saw that in the price action on friday. So for the most part, i think the only markets that will be feated are the local ones. All right. I think were all talking about, you know, whenever we look for something, matt, we look for oil. Is that one that could probably be affected . Couldnt even move psychologically without supply disruptions, it can move. Yeah, thats probably true, joe. At the moment were not seeing that. The crude market is looking relatively calm. Given the escalating tensions were seeing. The reality is, even though theres all the concerns between ukraine and russia, were a ways away from seeing supply disrupted there. We know that russia is reliant on the revenues from europe, sort of 80 of their crude goes in to europe. And also sort of a third of europes natural gas is reliant on russia and so, theres a symbiotic relationship there. One needs the supplies. One needs the revenues, so this isnt really impacting either of those markets at the moment. So, let me ask you a question. Had we looked at had we put in a conventional model the amount of Global Economic activity, wed come up with a oil price well below where it is today. So what is your estimate for the geopolitical premium thats already in the poi price and how stable do you think that premium is . Sure, mohamed. Theres always this premium in prices whether its 5 to 10. But the reality is that as one tension eases in one area, say iraq, we see another one pop up. We saw libya production reach 600,000 barrels a day last week. That was the highest level in five months. The market eased lower. Were seeing those supplies drop lower again, as the Tripoli International airport is being bombarded there. So its kind of a game of whackamole where you see these different tensions emerging in different areases. Ultimately prices should be 5, 10 lower without tension. But the reality is, that is always present in the market. I just want to add in here that the price action were seeing in oil is very similar to the price action we saw after russia invaded crimea. Which is that we have nothing more than a oneday spike in oil prices, at which point oil peaked at 104. 92 and then went down to 99 ten days later. We not only see this in oil, we saw it in currencies, equities and treasuries. The same situation is playing out right now because the thinking is the same. Which is that the disruption is going to be minimal, and the International Communitys response is going to be weak. Thats a fundamental issue. Is it is volatility low because, from a bottomup perspective, things are basically okay . Or is it low because theyre being repressed because the view you take on the market implication is very different, depending on what you look at. So, what do you think . Is it because everythings being repressed, or is it because from a bottomup perspective everything is fine . I think unfortunately bottom just quickly, central bankers are worried that theyre repressed. But i think from historical perspective, in the past four decades the only major volatility inducing events are financial crises or fed tightening and were not seeing any of that right now. Okay. All right. Thank you. For perspective on that can i jump in on the crude perspective . Its a bottomup thing really because we see the production is irv creasing in these nonopec countries so the market is relatively well balanced. Its just crude prices are spiking on geopolitical tension. You know. If you take a look at the brent crude contract its averaged sort of 110 for the last three years. The only time its really kicked up is because of geopolitical tension there. Okay. All right. Thank you, matt. Kathy. We appreciate it. And were going to go to break. But im just going to tease something. When we do hasbro again, its down 4. Wow. But theyre actually called grownies. Men who like men who like little pony. They dont specifically like the little ponies. They like the tv series my little pony, because there was a documentary, bronys, the extremely unexpected adult fans of my little ponies. The story it was bros that like ponies. Just so the viewer doesnt think were crazy. Theres a story that hasbro has teamed up with shapeway to sell my pretty pony. You with 3d print my little pony now at home if you have which could be huge with bronys. Yes, producers would like us to go to a break. So would you like to be a spartan . Mmhmm. It is one of the most difficult races in the world and people flock by the thousands to compete. Were going to speak to the ceo of the spartan race next. Thats out front at cnbc what were looking at right now. Check out the futures as we head to break. vo rush hour around here starts at 6 30 a. M. On the nose. 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. Really. So our business can be on at ts network for 175 dollars a month . Yup. All five of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. 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. Welcome back. In just a few years Obstacle Course racing has emerged as one of the Fastest Growing sports in the United States in 2013. More than 3 Million People crossed the finish line of an Obstacle Course race. Joining us now is the ceo and cofounder of spartan races, and author of spartan up, a take no prisoners guide to overcoming obstacles and achieving Peak Performance in life. We should also tell you that we have people literally outside doing the spartan race. Exercising. You know, in our parking lot basically. We do. This is whats going on. We should also tell you by the way that nbc sports is going to be presenting sick spartan races this season, including the world k4r78s. Awesome. The first race airs tuesday night. You dont want to miss it. 11 00 p. M. Eastern time on nbc sports network. How much does it cost to participate in all of this . Average around 100. It depends when you sign up. If you sign up early its less expensive. What is the chance i will be injured participating in this . If our typical race has 8,000 participants i would say youre going to get about 150 ankle sprains, knee sprains and so forth. Pretty low percentages. Spartan brand has become big. When you think about the business how much of it is participants racing in it, versus this whole new push to be a brand in the world of media. I mean youre going to be now on nbc. Where does this go . We view ourselves a little bit as a media company, were pushing out so much content on a daily basis. Whether its the blogs, the book, et cetera. But our core business is still racing and participating. When do you see it flip to the point where you become a media i think were in the middle of that flip right now. I think at our core were always going to want to get people healthy and get them out racing. At the end of the day were a Global Company and weve got to push out a lot of media Tv Network Coverage really, right . This nbc partnership is changed the game for us. Who do you think you compete against . Iron man . Whats the i would say were most similar to iron man in that its such a solid brand iron man. There are iron man competitors, but you cant go to a Cocktail Party and say i did an iron man competitor. You go and say i did an iron man. I think thats the case with spartan race. 431 b. C. Before we go. Got 20 do it quickly. He told us that the thing we have to do the guys name. Burpee. Were going to do a burpee today. Just down here. This is the one exercise you do how many of these a day . 300 every day. Religiously. So were going to go up, down, chest all the way down. Up. Back up. You dont do a pushup youre pushing back up. Okay, 300. Youre going to do 300. Im going to do one. One. But im not going to hurt myself. Thank you very much. Coming up were going to talk market risks and geopolitical tensions with ian bremmer. Hes going to join us with Mohamed Elerian. Plus more russian sanctions could be announced tomorrow. Senator ron johnson is going to join us. Also quick programming note. Tomorrow on squawk box, coke ceo is going to be our very special guest. Were going to speak to him in an interview you can only get on squawk box. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. Habeing able to pay as we goo rawas crucial for a start up. S. Having to fork out a lot of money up front was risky. You can launch a feature really quick, and if the feature doesnt work, we havent lost anything and we can have something up and running in days. And this would not be possible without the cloud. We are now supporting over 25 million users each month. Ideas can be tried and tried again on the ibm cloud. The ibm cloud is the cloud for business. Welcome back to squawk box here on cnbc. First in business worldwide. Im joe kernen along with Michelle Carusocabrera, and andrew ross sorkin. Mohamed elerian. Youre out. You need a third name. Joseph richard kernen. Jrk. Joseph Richard Robert kernen. I have a confirmation name. Checking the futures i have four names. Well i also have a confirmation name. You have about six. Anyway down 44. You dont have a confirmation well, el haron would be my its not a confirmation. Well i was confirmed, though, but thats a different thing. You can be confirmed when youre jewish after you have the bar mitzvah. I didnt know that. But its a different type of confirmation. Okay. You see the futures are down after that big after the selloff the day before. Yeah. All right were going to get to the latest on the situation in gaza and ukraine. But first heres some of the top business stories. Mcdonalds and kfc in china are facing a new food safety share. A shanghai tv station reported they sold expired beef and chicken. The company said they immediately stopped using meet from the company. Shares of bb t trading lower. Results were mixed. Ceo kelly king says core results were strong. And attention clark kent. Google is working on a plan to use pay phone locations to give new yorkers free wireless internet access. Other companies are also considering proposals bids for the project are due today. There arent any. I was going to say, theres very few telephone booths left in the city, arent there . Yeah. I cant remember the last time i saw one. A better superhero is the one that spins around and comes out in uniform. Because clark has nowhere i mean, superman is in need of places to change. I have been told by the way that theyve removed the pay telephones from the courthouse down in new york city. I have jury duty, by the way on thursday. Ill be on the show and now apparently you can actually use your cell phone in the building. This is new york state you have jury duty . Yeah, thursday. Thursday. Just one day . Well, i mean, well see. You dont know. If they put me on a case. Did you get excused once already . I have not used my excuse. You think i should . In the summer anyway. But ill be here on the program. Anyway ukraines Prime Minister says that kiev is willing to hand over coordination of an investigation into the Malaysia Airlines crash to international partners. The bodies of victims were low loaded into refrigerated train cars by prorussian rebels. A russian tv crew was filming as people wearing gas masks and gloves moved bodies in body bags onto train cars. International outrage, of course, is growing and nbcs jim maceda joins us from moscow with a lot more on where things stand. Jim . Hi, andrew. Well, if that anger and outrage is not being felt by most russians here in moscow, and beyond, its because Vladimir Putin has a quite a formidable weapon. Not just missile launchers, but a Propaganda Machine, and his network of staterun television channels. That Propaganda Machine has been in overdrive for two or three days now. We have seen expert after expert appearing on staterun tv trying to shoot holes through every single piece of evidence that both ukraine and u. S. Intelligence have been putting forward, and which, of course, people like secretary of state john kerry have also been promoting. Take the video clip of that buk missile launcher thats supposed to be the one that actually brought down the plane. Now u. S. Intelligence says its clearly come from the border and is going back to the border with russia, into russia. But a russian expert claimed on one of these russian tv channels, based on its serial number, that it belonged to a unit inside ukraine. Take also that conversation that weve heard now a million times between the one of the rebel separatists and his russian handler, where theyre discussing, in a very upset way, the fact that the mistake had been made, and what they thought they were taking down turned out to be a passenger plane. But according to the staterun television, this was not a true single conversation. It was a manufactured conversation based on a number of audio fragments. You have an expert in spectrographic analysis with all kinds of graphs and charts on tv explaining to the public why this had nothing to do with russia, and everything to do with ukraine. So, putin, his machine, has been picking apart the u. S. Case as best as he can, and theres certainly no contrition at all to be seen on his part. Back to you. Okay. Jim maceda. Thank you for that report. Lets talk more about the escalating tensions overseas and what it call means for the global markets. Joining us, ian bremmer president of Eurasian Group and still with us our guest host Mohamed Elerian chief economic adviser at allianz and former pimco ceo. Ian, good morning to you. Help us through this. If you are president obama, if youre the United States, what are we supposed to do at this point . Well, youre clearly supposed to express outrage. But, youve seen how much willingness theres been on the part of the International Community to support significant sanctions over the course of the past months. That has certainly changed if youre the netherlands right now. But the netherlands does not drive Foreign Policy in europe. The europeans still have the same level of economic concerns of pushing the russians as they did before the mh17 tragedy. And this morning we see the Chinese State media, the second largest economy in the world, has a response to the mh17 tragedy that is virtually identical to what you just heard from your colleague that weve been seeing from moscow. Something that should concern everybody. When the u. S. Says the International Community is with us, you know, whos the International Community . I dont really see that right now. Its a very difficult position for obama to actually rally broader isolation of the russians at this point. So if europes not with us, as youre suggesting, or at least large parts of europe are not with us, and the chinese as youre suggesting clearly not with us. Play out the permutations of what happens from here . I think whats going to happen now today youre going to see a move in the Security Council to try to push a resolution that will allow for inspectors to go in and take over the actual crash site. Putin is happy to negotiate, give something away on that if russia is not blamed himself, and be clear, kerry said a lot of negative things about putin over the last few days. But he hasnt blamed russia directly for striking down the plane. So you might be able to get that resolution. The chinese will be with the russians on negotiating that and thats a distraction. Because, of course, the real issue here is not about whether or not theres access to the site, and the americans know that, too. So do the europeans. Its whether or not youre going to be able to get some form of stability in ukraine. And theres been nothing that weve seen over the last few months that should make anyone believe that the russians are going to stop trying to tear apart that country. Ian, help us with one thing. You advise corporations around the world, when different gee joe political issues come up, they come to you and they say, what should we do . How should we think about this . You look at the economy globally and look at the markets which have oddly enough held up on a relative basis, what do you think of that . Well, first of all, i think the markets dont generally know how to price geopolitical risk until its too late. Secondly Interest Rates are low. Theres been a ton of cash over the last few years. Now they feel like the economics are looking better. Hell its time to invest. Ive got to tell you. Two things, first of all, you know, europe is absolutely the loser here. Their rebound has been pretty limited so far. Theyre the ones with all the exposure as the russian economy is in recession. And as further sanctions are going to pile on. We are going to see more sanctions, certainly from the u. S. , but even some from the europeans. That hurts the europeans more than anyone else. Big winner, china. Theyre the ones that got the big energy deal with the russians. Theyre the ones that will have closer integration in terms of trade. Closer integration over time in terms of currency. I think those are interesting things from a market perspective. And of course, if youre a bank, if you are an Energy Company and youre betting a lot on russia, specifically if youre from the United States, this is a serious problem for you. What are the chances that thats where real sanctions go . What are the chances we gsectorl sanctions against energy and banking. Those are the two things i hear would be meaningful to russia but would be incredibly damaging to the west and the United States. Or Certain Companies at least for sure. It will be much more damaging to the europeans. Far more than the United States. And sectoral sanctionses, depends on how you apply them. Weve argued that weve put sectoral sanctions on the russians. But we havent. Obamas going to say weve done it. Were going to do more. I do think on the finance side in particular were going to start to see meaningful sanctions that will make it much more difficult the europeans are saying theyre coming tomorrow. Ultimatum, front page of the f. T. Oh, sure. That will happen. Theres no question. Youre going to see additional sanctions on folks, individuals that are closer to putin. But is this a game changer yet for russia . I do not see the europeans in a unified way being able to put that forward tomorrow or in the fall. I think its highly unlikely. Youve said, and i wrote it down, nothing to stop ukraine being torn apart going forward. There is a view, it was expressed an hour ago on the show, by former ambassador, that this was a turning point. That the downing, the tragic downing of the Malaysian Airline was the turning point. So people who argue that, what dont they understand about the situation on the ground . They certainly dont understand what theyre not in russia watching the media, theyre not in the kremlin looking at 83 Approval Ratings, theyre not around the kremlin understanding that ukraine is absolutely their single most important Foreign Policy priority in the world, and that has absolutely not changed after the mh17 crash. The one place where there may be a change is ukraine itself. It is very hard for president poroshenko, having now directly pointed the finger at terrorists on the ground, as he calls them, in his own territory, that have knocked down a civilian plane, its hard for him not to push back harder, against the russian separatists in donetsk, and in luhansk. If he does that, and if he shows some success, it will be very hard for putin to just sit there, and not get more engaged in a more public and more clear way on the ground in southeast ukraine. To the extent this is a Tipping Point it is largely towards further escalation, not towards a ceasefire. Were going to leave the conversation there. Mohameds going to be with us. Allergan, we talked about earlier, now announcing in its earnings release, its going to reduce its workforce by approximately 1500 employees, or about 13 of its current global head count. Also its not going to fill 230 vacant positions. The company its doing basically what valeant would be doing. Is this a tacit admission that those criticisms this is a way to avoid it. Say we can do this ourselves without you. The Company Reported 1. 51 which was seven sent cents above expectations. The revenue number was 1. 86 billion versus 1. 77 billion. Couldnt help notice there is not a wrinkle on mohameds face. And not that he ever but, even your forehead doesnt even move when you smile. I mean hes got right here. I think its natural and i dont believe hes a customer of allergans. Well above expectations. All right. I mean im speechless. Youre speechless. But is it the outlook is good, too. The outlook for next quarter is i think 1. 44 to 1. 47. The estimate is 1. 45 for the year. The estimate is 5. 70 and theyre talking 5. 74 to 5. 80. The push was to cut costs. Theyre spending too much on r d so here they go cutting employees, cutting costs. Right. Yes to prevent the potential takeover but at the same time do they admit, okay, we can still achieve what we need to achieve with fewer people . Thats the core discussion about all of these companies, right . When it comes to r d and Everything Else. Theyre clearly willing to do some of it. You got anything . No, nothing. Im so speechless on what joe said. Thats not mocking. No, i know. All right coming up do they do the test too . I dont think they do latisse. Hold on, hold on. Let me see who makes latisse. I believe they do. Im right about that because im going to say, bill ackman, not tying him to latisse in any way although hes got long, luxurious eyelashes, hes going to be on halftime. Look at that. Theres no mascara. Theres no nothing. Thats all natural on time. Hes going to be on with scott wapner who, i mean, he hasnt had any work done but he looks unbelievable. Coming up netflix ready to report Second Quarter results. Were going to talk subscription numbers and the media landscape. Later could more sanctions, just heard about it, be on the va for Vladimir Putin. Putin. Putin. And company. Were going to discuss geopolitical risk, russia in particular. Check out the squawk box market indicator. At every ford dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Its a big week for tech and media earnings with netflix kicking things off after the bell today. Analysts are expecting revenue to come in slightly ahead of the company forecast. For this its all about subscriber growth. I just saw it go by. We do have rich greenfield joining us now, media and Technology Analyst at btig. Someone is getting out ahead of this, rich . I guess i didnt realize it was all the way back where its trading now but its already up, like 5 to 4. 49 right now. In the premarket. What are you expecting . 5 is relatively small move for netflix at this point. I think the question is, less about the subscriber ads in this current quarter. They had a lot of original programming. Obviously, i think the tone and excitement around things like orange is the new black certainly have benefited netflix over the past few months of the Second Quarter. But i think what investors are really going to be looking for is a way to get comfortable in the international growth. I mean, valuation, and whether you buy or dont buy netflix stock really comes down to just how big and how profitable you believe international can be. You know, they obviously are hitting some pretty big numbers in the u. S. But the question is youve got that whole world out there and just how big, you know, we think they can add 8 million plus subscribers overseas in 2015. I think investors are going to be looking to see whether that could be a way bigger number to get excited about the stock or whether thats a hard number to get to as they launch in france and germany later this year. Hmm. You know, rich, i guess just thinking about it personally, every time i search for something that im trying to watch, they dont have the movie i want. They have one that they say is similar to it, and i always get mad about that. What do they need to do to not make me mad . They need more content, dont they . Well, i would say that the experience of trying to watch, and the thing you do want to watch within the existing ecosystem is far from easy, right . Finding it, figuring out where that show is, whether its on hbo go, whether its on itunes, figuring out where the content you want to watch, and once you get there. We did a demo recently of how poor the tv everywhere experience is in terms of how many ads you had to watch just to watch an episode of something that aired on tv a few weeks ago, i think the experience of tv everywhere is still sufficiently poor that even if netflix doesnt have exactly what you want, they have enough things that are interesting to you youre right. That they actually have you watch Something Else and you enjoy it. Its not that expensive. Its not expensive and theres no advertising and every episode is there. So if you want to watch the last five years of, you know, breaking bad, you can do that without advertising, in a binge fashion and its a very good experience. But we look for risky business, i think, and it gave me Ferris Bueller or something and we both know Ferris Bueller is not risky business. But its good. Valuation of netflix right now about 26 billion. In the context of the 21st century fox proposal to buy time warner, people inside, or people involved in that transaction were suggesting that hbo was valued at 20 billion. Does netflixs valuation make sense on a relative basis if thats the way theyre thinking about it . This has been something weve been fascinated by over the last six months. It seems absurd, right . Either hbo is notably undervalued inside of time warner meaning its worth a lot more than that essentially 20 billion. Or netflix is overvalued. Its hard to believe that hbo would be that significantly disadvantaged versus netflix. It has still far better content. You know you were talking about trying to find something you want to watch. Hbo still has this incredible original programming that i think netflix is striving to get to. I mean theyre creating more and more originals. And they hope to be thought of in a few years in a like hbo. But theyre certainly not there yet in terms of the quality of the original programming. I dont think you can put game of thrones next to orange is the new black just yet. I think from their standpoint thats what theyre striving for. Youre going to see netflix devote more and more energy to creating original programming. In the context of this fox time warner proposal do you think a deal gets done . If so at what price . I always feel like once these things start they traditionally end unless theres a really good way for the company to block it. And i think in the case of time warner, without a control shareholder, meaning a Family Member like the rest of the media space, its hard to imagine. I think this is about price and i think the reality is, this is all about, you know whats the price . Whats the number . You know, look, depending on it really depends on how much stock ruper wants to give away. This is nonvoting shares. How much of the combined company does Rupert Murdoch want to be in time warner shareholders hands. I dont think the cash component, even if they do this sky europe deal, i dont think the cash component can be above 40 per share. Theyre offering 32 now. I think 100 certainly is very possible for fox to finance if they do 40 in cash and 60 in stock. The question is, does, you know, time warner want substantially more of the combined company we got to go. One other quick question. Culture. Do you think the time warner folks can work in concert with the fox folks . Does that actually make sense . Weve seen the culture clashes between aol and time warner and what happened there. Well, youre going to get rid of a substantial number of employees, right . I mean, youre going to substantially slim down time warner. You think about everything in atlanta outside of cnn, which theyre looking to sell. But the entire turner facility, you essentially could chain the doors, and move those, all of those facilities into fox on the lot out in california. So, i think youd see a substantial amount of cost savings that would certainly not eliminate but certainly would reduce some of the culture conflict changes that youre talking about. All right, rich, thank you. Thanks for joining us today. Thanks. They all got to go through probably. Yesterday at this baseball game theres a blimp, big blimp and it had on the side, directv but it had a screen on the side and you could watch tv on the blimp. Really . Thats cool. I think it said directv the future of sports. So thats what directvs hanging its hat on and at t, that will probably happen. Or all three of these happen. And then other things will happen as a result. Did you see over the weekend in the post they had a picture of brian roberts, his head was on the top of like the incredible hulk. I mean, i just the post is crazy. But i wonder what does brian think, or people that their head they put call him during the commercial break. I dont think it was him. Comment. Hes probably listening right now. Maybe it wasnt photo hoped. I dont know. Coming up senator ron johnson member of the Foreign Relations committee. What was the hulk . Bruce banner . It was banner. Bruce banner. Yeah. Anyway, sanctions on russia, the situation in gaza and how this will all play out in washington with senator ron johnson, when we return. Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. 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Call today to request your free decision guide and find the aarp Medicare Supplement plan to go the distance with you. Go long. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Coming up, corporate stories making head lines this morning, including emc. Weve got details after the break. And make sure you stick around because Foreign RelationsCommittee Member senator ron johnson is going to be joining us in just a moment. When the world moves, futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. 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See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Welcome back to squawk box this morning. Lets take a look at some stocks in the news. Shares of data scoreage equipmentmaker emc on the rise in premarket trading because shareholder elliot is pushing them to spin off their stake in vmware. Shares of Reynolds American and lorillad are under. Lorillad being dragged down with the two recently announcing plans to merge. Legal experts say the award likely to be rejected or perhaps at least reduced on appeal. Well see where that goes. And shares of halliburton the Oil Field Services provider, nearly matched estimates with Quarterly Earnings of 91 Cents Per Share. Revenue above forecasts and also increased its Share Repurchase authorization. Republicans are calling for new sanctions on russia. Criticizing the Obama Administration for not being tough enough. President obamas trying to be deliberative. Deliberative. It comes off as indecisive. Hes trying to be thoughtful. It comes off as weakness. Joining us now to discuss more about the possibility of sanctions on russia, from both the United States and europe, jason poveto. What do you think is going to happen this week . Is the u. S. And europe, are they both going to do something more that, when you read the paper today, they blame that europes given putin an ultimatum. Is something substantive going to happen . No matter what they do, europe and the United States are behind putins getting ready for this. And has been for some time. For sanctions to work and sanctions are tools, theyre not policies, and that is a big big problem that we have in this town and in europe. Were trying to use sanctions as a proxy for vision for europe. Putin news this. Knew it when the tanks steamrolled into georgia. Thats when we should have been focusing our policy and creating a more secure europe. No matter what we do it will not be enough to tame the russian bear. We have to focus not just on sanctions, on a more robust platform. Things that push our Defense Strategy are you talking boots on the ground . No, of course not. Im talking about supporting our baltic allies, giving ukrained tools it needs to defend itself. Think about this for a minute. I hear the secretary of state yesterday on fox news talk about this republic of donetsk as if its some legitimate organization. That group should be sanctioned as a Foreign Terrorist Organization and by default we should consider seriously designating russia a state sponsor of terrorism. Like iran. Just like iran. Were dancing around very serious issues and the sanctions that have been put in place since march have really not come to the heart of the issue. All were doing is sanctioning transactions. Were not going up to the meat of these things like sanctioning energy companies, blocking them like blocking exports of oil u. S. Oilmade technologies and services. Thats how were going to get russias attention. Not by doing this pinpricks on the russian regime. In addition to evaluate the probability of more sanctions, they also have to assess not just the impact on the fadals but what will it mean in terms of the way i run my operation . Will i have to sell stuff . Will i have to change the way i do various trades . How disruptive are these sanctions to the daytoday operations of investors . And will that, in itself, force selling . As you know the overall u. S. russia Economic Activity is small compared to other trade partners. So unless youre an investor thats heavily invested in companies that do business in russia that really shouldnt be a factor. There are some Industries Like in energy, Certain Companies like weatherford in texas, weatherford international, who by the way has had sanctions issued as late as last year. They were fined by the Treasury Department for engaging in transactions in iran. Unless its in one of those specific industries, even pepsi could who has been in russia a very long time, cocacola, boeing even, you know, its a small really part of the portfolio, visavis where these Companies Invest so i think really we have to take a step back, i know this week will be the week in washington where you have politicians trying to either run for political cover because of whats happened, because of the shootdown, and youll have the markets also trying to assess the reaction by the governments in europe and here. But you know, ultimately, we have to come at this from a concerted front. And i think the confusion in the market has to deal with the fact that the Obama Administration hasnt really had a policy that makes much sense. I mean what are the chances that what youre suggesting actually come about . Do you even believe its a possibility . In a comprehensive approach toward russia and stabilizing europe, i think its remote. I think that starts with vision. Think about this for a minute. Obama and europe have a map, a landscape, economic and Political Landscape in europe that Ronald Reagan did not have during the cold war. Yet Ronald Reagan was able to outfox, outsmart, outspend the russians, and he did it in a very even keeled manner. And what are we doing now . I think thats the message we have to ask ourselves this week. What is europe prepared to do . How far is europe prepared to push the sanctions issue, and then what can we do to help europe fill that gap in a way that makes sense for the markets, and frankly for the entire region . Because europe on the eastern side really needs some help. One final question, jason. People frequently ask why dont we just sanction putin himself . Hes said to be an extremely wealthy individual. If you start saying to banks around the world, you know, your customer, freeze his assets. Why dont we do that . Thats a political call. I mean i think some folks i mean we can target putin but we havent targeted the grand ayatollah in iran, so im not sure were going to target putin. But thats really putins part of the equation. We have to talk a little bit about whats happening inside of russia, and his polls are through the roof right now and we have to be a little more calibrated in how we individually target him to make him even more popular. We have to give people the tools inside of russia to be able to counter this, especially these oligarchs. If we want to target people, target ceos. Target Family Members so they cant travel to florida and disney land. We do it in the case of cuba, for example. If youre a European Company and youre caught trafficking in property in which a u. S. Person has a claim on it, you can be banned from the United States as a ceo of a European Company. Weve done this before. And it trickles down to Family Members. Those are the type of sanctions we should be imposing on the russian regime, not these pinpricks weve been using. Thanks so much for joining us this morning. Thank you for having me. All right. Coming up next, senator ron johnson on the possibility of more sanctions against russia. Maybe you heard this conversation. Later what will dominate market moves this week . Russia, gaza, its a bit of earnings and consumer housing data. Well ask jim cramer who joins us from the New York Stock Exchange shortly. Chocolate is very individual. White chocolate lovers dont like dark chocolate. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow the consumer to customize their 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. The ibm cloud is the cloud for business. Were changing the way we do business, with startup ny. 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But we made it clear, even as we do that, theres no naivete in what president obama has done with respect to these very tough sanctions. And the United States has been working diligently with europe, trying to bring europe along. Theyve included additional sanctions. We think, frankly, that they may need to be tougher. And it may well be that the dutch and others will help lead that effort, because this has to be a wakeup call to europe, that this has to change. Senator ron johnson, member of the Foreign Relations committee, joins us now from capitol hill with reaction. Good morning, senator. Good morning, joe. How you doing . Good, thanks. Senator we just heard, i heard of secretary kerry and i think, you know, a lot of words. But i got to say, you know, some of your comments, prisonero fiddling, hes got to do something, talking about president obama, like both sides theres a lot of words and a lot of rhetoric, i dont know, really, whether we want what you say the president hasnt done anything, what definitively do you think the u. S. Should do in terms of punishing putin . What we need to do is match strength against strength and what Vladimir Putin is doing is obviously using his resources to continue to blackmail europe. We need to certainly undermine his monopoly on energy and weve got to bolster europeans and natos defenses. We certainly need to show our full support with president poroshenko rather than just study the military situation there, we should have had that assessment within a couple weeks and started in a very overt, a very straightforward fashion start rearming, resupplying, the Ukrainian Military so those folks can defend themselves. Theyre brave people, theyll defend their nation. But they need some military equipment. Theyve been asking for it. All weve done is give them meals ready to eat and sleeping mats and first aid kits. We really need to show russia that we will match their military buildup in Eastern Ukraine and well help ukraine match that so they can defend themselves. Senator, something we noticed last week, and i brought it up, i think it was the very brief response the president made in the first case, i think it was like 40 seconds and fundraisers and off to new york for more fundraisers, and even in texas for fundraisers, close to the border doesnt visit the border. So i can see all that and i can see how you might say something. But, you know, the president doesnt need to win another election. He needs to try and keep the senate in 2014. I mean i dont want to be cynical, but isnt that probably whats in the back of his mind, is that he can do more good . These are intractable, seem intractable, these situations. I mean i bet republicans would be doing the same thing if they thought that the senate was in jeopardy. Listen, joe, these are difficult situations. I dont envy the president s task. But hes the president of the United States. And if you know, i keep hearing secretary kerry saying this is a wakeup call. Well wasnt what happened in syria a wakeup call . Wasnt taking over crimea a wakeup call . Now it takes the downing of a commercial airliner from 33,000 feet, thats going to be the wakeup call . Weve had the wakeup calls. Weve drawn the red lines. We have to take action. And action is once again weve got to certainly help poroshenko secure his border. We have the budapest memorandum, russia is in clear violation of that. Nobodys really pointed that out anymore. We are assured ukraine that we would, you know, help them assure their border integrity, and were not doing that. But we need to do that its amazing, senator, when they ask for weapons last time, we didnt provide them, in part because we didnt want to look like we were inflaming the situation, and yet heres russia, absolutely arming the other side. Do you think putin is sitting here shaking in his boots because we delivered mres . I mean i keep hearing we need to offer putin an off ramp. Putin is looking for on ramps. Hes looking for other opportunities to continue to expand russia, all based on his ego. This is ball about Vladimir Putin and i said it when we were in ukraine right before the crimean vote. I said if theres any bloodshed in crimea, theres one person to blame. Thats Vladimir Putin. I think theres one person to blame for this downed airliner. I know he didnt pull the trigger but hes the one providing the weaponry. Hes the one enabling the separatists in ukraine. How far do you go . When you talk about for example assisting europe with natural gas, for example, that doesnt solve their problem tomorrow, this week, this winter. Thats a longerterm solution. But what about do you tell the oil companies, you cant do business there anymore . No. What you need to do is i think its really more of a military sponsor. Im not saying combat boots on the ground. Im saying in a very overt, visible fashion we start rearming the Ukrainian Military so they can defend themselves. And we should be putting more nato troops into places like poland. We should certainly reconstitute the Missile Defense shield that basically president obama unilaterally withdrew. Lets have nato buy those ships, lets have france not sell this mist ral ships to russia. Lets not have anybody in nato buying arms from russia. Weve got to show far greater strength and resolve as the western europe in nato and the United States. What are we going to do, senator, just when these all like so many times i guess, maybe a month or two, these may not be the things that were talking about, well be back to talking about, you know, whether were ever going to get an economy that goes to 3 , and you know, were going to be arguing about what policymakers should be doing to try to help job creation. And, it just seems like 2016 is going to roll around, and were not going to have done anything in terms of helping the economy. Well, first of all, thats what putins counting on is well turn our attention away from this. Hell just take the next opportunity. Like admiral mullen said the greatest threat to our National Security is our debt and deficit and this president also is doing nothing. You can say, and i did say this, that hes out to lunch. Ee is president , nero fiddling as the world burns but hes also president nero fiddling while the American Economy is not recovering. The deficit continues to explode. Yeah we cut the deficit in half but were still in the path to have far greater deficits over the next 30 years. This president is doing nothing to address that. Senator it seems like youve got the president fiddling, and congress fiddling while companies are redomiciling to, because of the tax rates that are too high here. Right. I mean, id love to do Corporate Tax reform. Harry reid says the only way you do tax reform is you have to first agree to increase taxes by a trillion dollars. Joe, look at our utterly counterproductive that would be. If were going to do things big in this country it requires president ial leadership and this president isnt leading. Hes not doing anything on the debt and deficit. Hes not putting forward a plan to make sure that those companies dont leave this country. I mean, again, to me its pretty obvious you have to make america an attractive place for risk taking, business investment, business expansion. Were not doing any of those things. Again it takes president ial leadership and thats why im so critical of this president just basically being detached, going on fundraising trips and not really dealing with the significant domestic and Foreign Policy issues facing this country and this world. Andrews got a bill written to just outlaw these companies from leaving without really fixing anything. Thats not true. I would like to fix this but were not going to so you want to tell them they cant leave. I think in the shortterm we have to think about this. I question, senator, and i wonder your view, what do you think of the companies that are taking advantage of this . Its natural. I mean, if youre going to locate a manufacturing facility for the north american market, are you going to locate detroit at 15 or detroit at 35 tax rate . People respond to the incentives put there by government in terms of taxation, in terms of regulatory environment. We need to benchmark both of those, you know, our tax system, our regulatory system against world competitors and make ourselves more competitive. I dont disagree with anything you said. You take zero umbrage that there are American Companies that have received all sorts of tax subsidies from this country, you can list the things the American Companies have benefited from weve got to talk about go ahead, senator. Well the Corporate Tax raises about 10 of all revenue. All the lobbyings about the Corporate Tax and you know who pays the Corporate Tax . Individuals. The workers in terms of benefits, wages and consumers. How about we make the owners pay the Corporate Tax . I propose andrew is also and others are worried about a race to zero around the world if we start cutting. Why not go to zero and just do it with individuals . And then if you have more individuals thats what paying personal taxes, and i keep hearing you say that the almost like the corporations are ungrateful that the government has built these roads and this infrastructure. Almost as if the government is some selffunding entity that through its generous largesse allows corporations to use this infrastructure. The government is there to take the money from corporations, from create these jobs then people get taxed and then the revenue goes back to the government then they build the roads. But it all theres one major complication. But why do they got why do you take umbrage that like the government did this out of their like the goodness of their heart allowing corporations to use these so we have no price controls on drugs. Thank god. God. If you want to move to the netherlands, great, go and charge us for the drugs the same way you charge the people of the netherland the drugs. Makes no sense. Look at individual tax rate in the netherlands by the way. Go ahead, senator. I take first uncompetitive. Senator . Personally i want lifesaving new drugs, i dont mind that pharmaceutical Companies Make money. There are a number of ways to make owners pay for the Corporate Tax. Llcs, a number of ways to do it, explore that to create incentives for businesses to manufacture close to customer here in america. All right. All right. Senator ron johnson, appreciate it today. Have a great day. I was thinking about it allot, everything that the government has built came from private sector jobs created and then you tax those jobs and then pay for the Government Employees and the infrastructure. I want to fix it, too. I am frustrated you used to sleep like a champ then boom. What happened . Life happened. Stress. Fun. Bad habits. Kids. Kids. Kids. Now what . Not milk. Not sheep. Not that. Lets think smarter. Lets get some science in here. Lets build a bed. Another bed . 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They do not want to go to valeant, do they . Look, if david pyatts numbers are right the stock sells 17 times 2016 earnings after the layoff, and i dont know exactly what valeant gets for you better than that. I think that valeants charges about allergan, i had david on mad money not that long ago, i dont know, i dont think hes saying anything other than whats true, which is valeants a rollup and valeant has cut r d. I think valeant would admit that. Im surprised its gotten vitriolic given the fact that pyatt is saying what most journalists would say about valeant. To me thats cricket. Jim, do you see mohammed thinks we may be understatementing these geopolitic geopolitical situations. I have trouble connecting dots to which market might be affected. I almost think earnings are more important. I think hes right. 20 of earnings from International Companies are from europe. If we take to some extreme, youll seal Companies Like a mastercard or visa, which instantly came out after the crash and said, our businesses are unaffected the point what mohammeds saying, dont want to put words ins his mouth, look, if europe is going to have a slowdown, go back into a slowdown, its going to hurt the United States. We saw it once before. I dont think its in the stocks. Im saying, lets be patient here. I guess it has to get worse, probably. Yes, it does. Definitely has to get worse. Not the ukraine situation but i dont know. Well see you in a couple of minutes. Coming up, well talk about talk to mohammed is what were going to do when we return. Financial noise financial noise financial noise reward card withu a new volkswagen turturbo. Ged so why are we so obsessed with turbo . Because theres nothing more exhilarating than a powerful ride. And you can get that in places you might not expect. Like the passat. And also in the funtodrive jetta. In fact, volkswagen has sold more turbos than any other brand over the last ten years. That is a lot of turbo. Vo hurry in and you can get a 1,000 turbocharged reward card when you lease a new 2014 passat s for 219 a month. Welcome back. Final thoughts from mohammed elarien. We talked about geopolitical issues, impact on the markets mac per spec but havent talked about deal making with Everything Else out there. Theres a ton of m a coming down the pike and people should realize that. I think corporations will find it very hard to continue holding on to it, and theres a good reason to do it now. That speaks to investors, rather than bet on beta, market wide, you have to be very specific, namedriven and go for eventdriven investments. Deliver alpha. We did that. But isnt the m a late . Always late. A late indicator. The companies late, they should have done it two years ago, they could have gotten bet prices. Theres a late indicator, like other things but as an investor, you reduce exposure to the market as a whole and take advantage of better opportunities. Theyre freaking out or freakin couldnt tell whether an adjective or a verb. Vehicling out of their mind. Who is freaking out . People werent doing m a. Now they should be doing m a. You never disappoint. You still didnt react to headlines of the squawk on the street is next. Good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the New York Stock Exchange. The continued overhang of ukraine and gaza, after a tough weekend there. But Earnings Seasons does roll on. A quarter of the s p, half of the dow this week, big names, netflix, apple, facebook, boeing, amazon more on the way. Ten year yoeld under 2. 48. Europe, mild