Transcripts For CNBC Squawk Box 20140731

Right now. Take a look at what happened in asia overnight, as well. A lot of these headlines hitting as japans market was opening there. That was the first sign that argentina was not going to be able to make its payments. As you can see right now, the nikkei closed down by about 25 points. The shanghai, though, was up by close to 1 . Among todays tests for the u. S. Markets, we have economic numbers, more earnings that will be hitting. At 8 30 eastern time, we will be getting the weekly jobless claims numbers. Polled economists were filed last week, up 21,000 from the week before. When it comes to earnings, Oil Giant Exxon mobil, Conco Philips are both reporting. Mastercard and kelloggs, those are among other names that well be expecting today. Right now, lets get over to michelle with a roundup of some of todays other stocks to watch. A number of companies posting results last night, becky. Revenues came in just shy of expectations and the company is cutting its full year forecast for the fourth time. Its a tough Competitive Landscape. Yelp reporting its first quarterly profits since going public beat wall street expectations. But the Consumer Review websitess business account group fell short of expectations. You can see its pretty tumultuous in after hours trading. Kraft foods posted a 40 drop in Second Quarter profits. Price increases to cover rising commodity costs hurt consumer demand. The companys ceo told investors, quote, theres no question economic and Consumer Trends are creating top line challenges for the food and beverage industry. So unable to pass on price tags, necessarily. Shares of yum getting hit in extended trading. The Company Warns china food safety scarce have had a negative impact on samestore sales there. They point to a local expose that showed improperer meat handling by one of its suppliers. China is yums brands number one consumer. Target has been looking for a new top exec after removing Greg Steinhoff following targets massive data breach. Ive emailed back and forth with him a couple of times. It was not just the data breach. It was also canadian acquisitions. Theyve had a lot of trouble with that and thats one thing the street has been focused pop. Cornell has been at pepsi for nearly a decade. This may be another important component, its not just the implications for target but also for pepsi because the journal says he was a contendtory sa keyed the current cfo of pepsi. We will see if they have a deeper bench than just him. General electrics credit card unique is now the biggest ipo so far this year. Argentina failing to reach a deal to keep it from defaulting. Here is what Fortress Investment group mike nobagraft told us earlier this month at the delivering alpha conference. Something doesnt happen and they have a default, youll certainly see a selloff. But that selloff will be met with capital coming in. That will be a buying opportunity if youre not already in the trade. The full video of novogratzs delivering alpha panel is available now at cnbc. Com. Joining us now is kate kelly. What does this mean . Becky, were still waiting for the official word. But for all intents and purposes this morning, argentina is in default after mentioning important payments to bondholders last night. At issue, 539 million owed to a variety of creditors and another 1. 33 billion who havent received payments in years. The hold ups prevailed, at least legally, but argentina has steadfastly refused to make good. At a Heated Press Conference last night after two days of settlement talks, the argentinean Prime Minister was resolute saying the country would not and that the situation was unfair. That prevented argentina from paying the half billion it owed to the nonholdouts without paying the hold outs, too. Elliott management led the hold outs charge in court, said in a Statement Issued at exactly 12 01 this morning that argentina had shunned numerous solutions to the impasse pushing it into default. This is argentinas second default in 1 must know years. Prior to that, argentina had intrd the largest default in World History on roughly 100 million in 2001, the very event really that spurred todays events, guys, because of the hold out. Exactly. I mean, the vast majority of the bondholders agreed to restructure bonds in 2005 and in 2010. But these hold outs wouldnt do it. They wanted to be fully paid and they had taken it to court, taken it as far as the Supreme Court which declined to hear a crucial aspect of the case, did hear another, but more importantly kicked the ruling back to a lower court which said absolutely, average teernlg tina, you have to pay. And specifically if you dont pay, those that took the discount webs if you dont give the hold outs money by tend of july, youre in default. So for the view erts, why is this being litigated in the United States in the first place . Because the bonds are governed under american law. If you have euro denominated bonds, those might be governed under english law. But if you are an american investor, you bought argentinean bonds, you might be, as well. And why would a kch that has argentina law be accessed in new york. They wanted access to the markets. Maybe longer. You want to be able to raise money for the government finances, they want to have their corporations have access to International Capital markets at lower rates. They do, by the way, but the borrowing costs of Companies Like ypf are likely to rise as a result of that. Were going to talk in a moment about macro implications to the degree there is going to be some. But what is paulsingers end game now . A couple of things. Negotiations are supposed to pick back up today. So this is just a big dance . Well, that depends on whether you think argentina will settle. So far, they havent. It sounds based on the reporting they reiterated later saying, hey, take a haircut, which these but have the holders said well take less than 100 . I think theyre amenable to some settlement, but so far, the sides are very far apart. Argentina didnt even show up, by the way, until two days ago and that was a surprise. Doesnt this act of default take the boot off argentinas neck a little bit. Because this problematic clause said if you pay those guys that much, you have to pay everybody else that much. Does that clause now go away . So there was an equal treatment clause argentina was worried about. And that expired at the end of this calendar year. If they can get to the first of the year, 2015, theyll have that behind them. Then they pay off the gas price . Then they relieve the pressure. If argentina doesnt follow u. S. Courts on them, why would anybody believe them in 2015 orr beyond when they start issuing new debt . That is an excellent question and thats why these are essentially distressed bonds that pay higher yields because the risk of default is great. Argentina is regarded as an especially bad actor in this arena. I believe theyve defaulted eight times in history. That is a risk that everyone takes. If we want any access to the International Capital markets, they have to play sooner or later. But so far, theyre saying well take our chances dealing with our own finances ourselves domestically. And its that important to us that we not set a precedent. Is there any chance that they get nothing from all of them . Theres always that chance. Hes gone as far as the Supreme Court and found in favor of his position. But its still effectively saying were not paying you. Right. Effect ily. So it is possible. Theres a key lesson were seeing with greece, puerto rico, and now argentina. With that bond that you buy, what law . If you bautd a uk bond, youre getting 100 on the dollar, a ton of money. So a lot of countries that are problematic turn they want lower Interest Rates so they turn to the United States or the united kingdom. Why is that . Because what greece did, they couldnt impose laws retroactively. So puerto rico when it last went to market, no longer issues under puerto rico law. Now it issues under new york law. Right. So theres a lot of judicialal arbitrage that goes on. 100 cents on the dollar, great. But in new york, apparently our lawyers arent tarnlg tina is not paying better attention to the holes, right . Thank you. Youre very welcome. A funny moment, leonel messi said this is a sad day for argentina. I was going to mention it on air, but it turns out he was coming out of a funeral, not commenting on the default. Were going to continue this conversation and see you in a little bit. Thank you. If youre just waking this up morning, futures are not looking pretty. Lets show you was going on right now. They suggested the dow would open lower by 88 points, the s p lower by 12 and the nasdaq lower by 26. In addition to argentina, the market is turning its attention to friday jobs report, the Second Quarter gdp data and the fed production is out of the way any worries about our computer . Argentina is something that weve been indicating has been in this press for quite some time. Its something that the emerging markets have been dealing with for quite some time. Systemically, you dont you can have a hiccup on the back of it today, but nothing systemic is going to come out of this, no. It wasnt july 10 it was portugal. Portugal was 1. 5 of the european economy. I think this thing will go away. Its not like the Global Financial markets crisis in 98, russia defaulted. Its not going to set off a worldwide story. Then why are we all crazy about this . But then i say to myself it is absolutely. But the sun is going to come out in argentina today, right . Its not like the world is coming to an end. We had Martin Sorrell on the program just coming back from his vacation in greece. My point is, its not like in items of investment prevalence, it could have an eye on. But on the other hand, stocks are at important levels here. Were at new lows. That follows through the next day. What about the Economic Data . When you look at the gdp number, its a glass half empty, its a glass half full, the reality is the glass is just half. Up 2 on average over the last three years. Not a particularly good performance and oh, by the way, the first number is pretty good. To me, theres no new information youre not pulling the feds Interest Rates forward . Not at all. I think a lot of the fed members, its kind of a split committee at the moment. I like the people who think about raising rates in march next year. Now, theres many indicators out there like durable goods, initial unemployment claims, exports, car sales. If that was on the feds dashboard, they would raise rates right now. I dont buy it. What about the employment report on friday . If it comes in stronger than expected, does that any employment report is expected. The problem is what level of threshold do you need in order to change the perception among members of the committee. I think the answer is you need he a fairley large number. Its a number where a lot of the jobs are full time jobs. Its a number where hourly combination is going up. Hours worked is goc up. Something we havent seen. Something we havent seen. And the same is true with the durable goods numbers. So at the end of the day, we just have a glass thats half. Cant say that its half full or half empty, its just there. So what about the fed acting sooner could put of the margins. The forecasts are very important at the moment. 13 out of 16 see 2 higher fed funds rate at the end of 2016. That means they have to start in june next year. If anything, it will be pushed forward. Are you suggesting they only do a thwarter point move . Yes. Every other meeting, they put that out there, like the 10 billion cuts. They put out there when we go, its going to be every other meeting. I wish they would normalize rates. Does the fed ever come back into play here . The markets, annoying this, continue to move towards record levels. Yes, the fed has a forecast. The problem is their feds have been potential. The forecasts are horrible and i dont buy their forecasts. I think this economy stuffed at around 2 growth and thats why were going to be. Were not pulling down excess capacity and thats what the fed is concerned about, as well. The net result is we just sit here longer than anyone participants. Coming up, talking about everything from battling. First, were going to get a little liquored up and diageos ceo will join us to talk about the results and the future of the worlds biggest disteller after the break. Squawk returns. [ male announcer ] dont just visit miami. [ jackhammer pounding, horns honking ] [ siren wailing ] visit tripadvisor miami. [ bird chirping ] with millions of reviews, tripadvisor makes any destination better. Starts at 6 30 a. M. On the vo rush hounose. Und here but for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Welcome back to squawk box. Diageo posting a drop in the profits. Meantime, americans are drinking cheaper vodka. All of these trends spelled trouble for diageo. Joining us now, the cfo ivan menedes. I joked before the break that it might be time to drink. Its 5 00 somewhere. It is. But in this particular case this quarter, you didnt look as good as i think some people had imagined. In particular, the china piece, sales down 33 . What happened . Let me put the business in context. North American Business is very strong. Its up 5 . And in our u. S. Spirits and wine business, which is a fallout for the company, so about 40 of our business. Western europe has recovered. Its stabilized, which is significantly better than where weve been in the last few years. And the emerging markets had been choppy. Weve historically grown double digits in the emerging markets. The last 12 months have been more difficult. China, to put it in context, is today about 1 of diageo. We had a Business Plan where there has been a shut in the marketplace which has dropped significantly this year. But the fundamental necessary china are still strong. Our top end business, Johnny Walker blue is up 40 in china. So i am comfortable with china gets back to a consumptionled economy, well do well then. Im just talking sales in china fell 33 . So your sense is that the market there is still strong . Yes. A big piece of it, with the change in government gifting and entertaining, its a high end product. Its about 100 a bottle. That is the segment thats been impacted. A brand like baileys is showing a 20 . High end scotch whiskey is doing very well. We built some Johnny Walker house necessary shanghai and beijing. The business did have a disruption, but the underlying trends on consumer led growth, im still optimistic and bullish about. Ivan, youre not the first highend company that ive heard that from, about the crackdown in china changing those gifting policies. Is that a disruption that is here to stay . You dont expect that part of the business to come back any time soon, do you . No, i dont. Nor do we need it to. Because our focus is to really build our brands for private consumption and were seeing the response to that, whether its the young women in their 20s drinking baileys or young entrepreneurs going into the Johnny Walker houses and spending 2,000 or 3,000 a bottle on special blends of jaukny walker. But the demographics are very good. We have 23 Million People drinking wage every year. So that nature of business i think will not recover but the consumptionled growth. And whats going on in the United States . Why are we drinking cheaper vodka . Its not true. I dont know who is writing these stories. The fact of the matter is the United States spirits market is growing the faster at the top end. So americans are spending more on priceyer spirits. Whats priceyer . Whats really expensive vodka these days . If you look at surrock, the top end is if you look at spirits above, say, 20 a bottle in the United States, thats the fastest part of the market. Johnny walker blue is up oh, yeah, every hipster in brooklyn drinks that. I want them to spread the word. Right now, the other question was going to be about india as an emerging market and a big market for you. Where does that stand . Yeah. Just this month, early july, we now have the majority stake of the United States. This is the lead spirits player in india. It has nearly half the market. India now becomes our second biggest market after the United States. I think this is a fantastic market. Indians drink western style spirits. Diageo is big in whiskey. I see Enormous Growth potential out of this market for us. And we do have the price assets in the United States now. So im very optimistic. Our own brands had Johnny Walker. Any hope for europe at this point. Its getting better. It has stabilized, which is better than i would have predicted a year ago. Our business in europe used to be down minus three, minus four, minus five. This past year, weve been flat and encouraged. Markets like the uk are in growth. The benelocks and gbr in growth, even southern europe, we were minus 1 . Thats a huge turn around. I bray there are enough issues and challenges. Hey, ivan, before we let you go, im going to let you in on the gossip and cocktail chatter out there. Theres been a lot of rumors about sab miller, the potential interest in a merger with dia dw eo. Whereas inbev just tell us the lay if you wouldnt. Our business has groan through organic growth and act session. I certainly plan to extend that leadership position over time. To both organic growth and m a. We have the leadership positions around the world. Are you a Liquor Company or do you like the beer business, too . With 20 of our business is in beer. And we have a very strong business in africa. Africa has amazing prospects for us both in beer and in spirits. Okay. In africa today, the beer consumption is about onefifth of that in america. Spirit consumption is onetenth. Okay, eye vap, thank you. Thank you very much. Appreciate it. Make sure its guinness. If you are just waking up this morning, were seeing a lot of red arrows. In fact, the u. S. Equity futures at this point up their weakest levels, but still down by about 88 points below fair value. S p futures down by close to 12 points right now. When we come back, changing the world. The boys and girls clubs of america launching a new initiative today in both the chairman and the ceo of the organization along with mark lazarus, the chairman of Nbc Sports Group will talk to us about shaping the future of americas youth. And what does the future hold for capitol hill . Our john harwood sat down with paul ryan to talk about pressing issues facing the government right now. Or if light could seek out the dark . What would happen if that happens . Anything. Welcome back to squawk box here on cnbc. Im Andrew Ross Sorkin along with becky quick. Michelle Caruso Cabrera is here sitting in for the vacationing joe kernen. Futures pointing to a sharper low on wall street. Theyre off their worst levels of the morning. Part of that is the argentina situation. Theyre trying to figure out what the fed is going to do. In any event, dow could open down about 80 points if we do it now. The s p 500 would open about 11 points and the nasdaq would open off about 25 points. Michelle. A busy morning for earnings, as well. Time warner cable earned 1. 89 a share for the Second Quarter. The company did see Profit Growth from a year ago thanks to a jump in Residential Broadband customers. This is going to trade, though, on deal prov, right . This is all comcast, our Parent Company, or not. Aetna raised its forecast for the year. Cignas premium revenue grew in all its business segments. Panasonic confirms it will invest 5 billion in tesla battery plants. Every day, 15 million Kids Leave School with no place to go. The boys and girls clubs of america is tracteling this Initiative Head on. Its called great futures to campaign for americas kids. Its goal is to support after school and summer programs and redefine the equation of opportunities for kids. Joining us now, jim clark is the president and ceo of the organization and mark lazarus is the chairman of Nbc Sports Group and a board member of bcga. Cnbc Parent Company comcast, by the way, we should mention his immediate partner for bgcas campaign. Gentlemen, its so great to have you all here today. We appreciate seeing you. Tell us about how big of a problem this is and what your organization is doing to try and address it. Well, you know, when you think about it, theres 45 million kids at 3 00 in the afternoon get out of school and 15 million of them, roughly a third, have no place to go. So it would be easy to see them get in i come from chicago and if you read the headlines on a regular basis, too much of our residents across the country are having problems after school. Bad things happen if they dont have a place to go. What were trying to do is persuade the company, your child, for great futures. Jim, tell us about how youve been successful in the past. Boys and girls clubs of america has been part of the fabric of this nation for 154 years. Serving almost 4 million kids a year at over 4100 locations. Here and around the globe by military basis. So a lot of the work that we do focuses on inspiring young people, especially kids who need us most, to reach their full potential. And to concentrate on three key areas of academic success, good character and citizenship and Healthy Lifestyles. So this campaign that were launching today is all about galvanizing and mobilizing america to understand the Critical Issues that kids face, but also what some of the solutions are. As ron said, its about school and its about out of school time. And thats what equals a great future. So the focus on summer programs plus after School Programs like boys and girls clubs is what were concentrating on and bringing attention to that so that america can join us as part of this catalytic movement to change the dynamic for kids, especially those who need us most in america. How soon we join you . What can we no, legitimately, what can we do . Is it money, volunteers . Its only above. We need to get people to begin to think about these youngsters in a real and meaningful way. A lot of these kids dont have homes to get to after school, places to go where they get the kind of enrichment that all of us were fortunate enough to have. So we need to find people that will spend the time. Weve got almost 300,000 volunteers working with 4 million kids. We need more because we only deal with, as jim said, roughly 4 million kids. Theres another 15 million kids that are Walking Around on the streets with nothing to do. Mark, i know you got involved about 14 years ago. How did you first come to the boys and girls club . I got involved, thats right, 14 years ago and locally in atlanta and in the Southeast Region and then in 2007, was honored to be invited to be on the board of governors. And i found it to be an important issue, a gratifying things to work on. And i think that this campaign is really intended to do is to express the urgency of this issue. And for our ability as a media company, and im proud of our company and the role were playing in exposing this as an urgent issue and other media companies, as well. Fox, disney, others and other corporations who its important for us from the business point of view to have vital communities. We also have local communities, national communities, and its important for to us serve those communities and to create Business Opportunity for ourselves, to create Strong Customer bases. And if we dont keep americas kids going and growing, and take care of them not only in school but after school and in other times of the day, were going to hurt our own customer bases. This is not only the right thing to do, but its critical. Do you have any data showing kids who go to your program versus those who dont, how they perform . The answer to that is absolutely, yes. But the most important thing, is when we survey our alumni, 57 will tell you we saved their lives. Not that we made their lives better, but we saved their lives. Most of these youngsters are coming from disadvantaged backgrounds the. Are all these people showing in the Boys Girls Club . Yes. And many, many more. We have 4 million kids in our program today and have been in business for 150 years. Its interesting, you point out some of the face thats we just saw, denzel washington, j. Lo, magic johns job, shaq, many of them were involved in the last commercial effort that was directed by ron howard talking about the successes that come out of it. But this commercial is a little different. Why is that . This is about creating, as mark mentioned, urgency around the Critical Issues that kids face and what the solution is. So its pointed at parents, its pointed at the community. There is a resource for kids and families to take advantage of boys and girls clubs in their community. But its also about bringing together the community, partners and leading a public discussion in a public conversation around school, out of school time, public partners, private partners, coming together to support the organization and the difference that it makes. To your point earlier, what can we do . Its about educating, engaging and donating. Go right to our site, greatfutures. Org to do that. A lot of our futures looking at the position of the kids, how much money do you raise from individuals, from corporations . How much are you looking to raise this year . This is the interesting thing. 70 of our budget is philanthropic. As people and corporations donate, 70 of the budget is philanthropic. Donations. Individuals and corporations and foundations. The other 30 comes from various levels of government. Because we do run day care programs and other kinds of things. But what we would ask you people to do and asking, this whole effort is to raise the level of activity. Right now, we started two years ago with the quiet phase of the program and the budget for the whole organization is 1. 5 billion. Our goal is to get to 2 billion. So we want to thats a growth . That is a growth. Raise 33 more money on a sustained basis by the year 2018. Is the economy appearing to learn, look better . We hope so. But quite frankly, even if the economy werent going to turn. 94 of the public recognizes boys and girls clubs, but they dont know what we do. People think of us as swim and gym. Youre right. What we need to tell people is we have three basic pillars that we try to help these kids with. We want them to graduate from school, high school with a plan for the future, we want them to engage in Healthy Lifestyles and we want to make sure that they have good chakt racter and citizenship. So if we can get kids that far, if we lead them at age 18, having understood what the problems are with not living well and taking leadership roles, weve really done our job. And if we can get the public to understand that and youve got some great supporters and well point for example has been a trirveg support and cocacola with Healthy Lifestyles. Mark, what is the most Important Message youd like to get out to corporate leaders. I think that please continue to donate, please continue to encourage employees to stay and stay involved. Comcast has taken a Technology Point of view and we partnered with the boys and girls club around club tech. This new campaign will be my. Future. I think those kinds of things which give kids the opportunity for safe and secure use of the webb will be things that our company can do and everyone can do it in their own way. Take the time, take the energy to understand what wear doing. This is critical for our business and we dont want to lose a generation of kids because were neglecting what theyre doing in school or out of school. Thank you for coming in. Thank you. Good luck. We still have a big lineup of key Players Behind the boys and girls club today. Oracles chairman jeff henry will join us to talk about it. Along with dr. Peppers snapple cheese larry young, as well. The incoming ceo of taco bell, brian niccol. And Michael Groff will sxwroin us to talk about this big burnlth. The highlights are straight ahead. As we head to break, check out the futures this morning. Off the lows, the dow would open lower by roughly 78 points. Stick around. Well be right back. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Developers are all about speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. The ibm cloud is the cloud for business. Welcome back to squawk box. Take a look at u. S. Equity futures at this hour. Ahead of the open, were still more than two hours ahead of the open, but boy, does it not look good at the moment. Doe off 75 points. The s p 500 off close to 10 points and the nasdaq off almost 24 points. Thats as a result of were attributing this to argentina, what the fed is now going to do. After the 2 00 statement from the fed, the market stabilized a little. But i was surprised to see the selloff. Because remember in the morning after the gdp numbers, markets took off. It dropped down before the fed meeting and stabilized. So i dont know if you read this into argentina. Out of europe, it suggests they have inflation issues to worry about, deflation issues with the data not coming in very strong. And in the meantime, paul ryan, hes speaking out. The congressman sat down with john harwood to talk about some of the big challenges facing the nation right now. Both foreign and domestic. Weve got that when we return. And what will the Shopping Experience look like in the year 2039 . Find out what retail futures do for consumers in a special cnbc 25 fast forward. Thats coming up in the next half hour. You are not going to want to miss it. Were back in a moment. Congress is about to call it a summer but before they scatter across the nation, congressman paul ryan sat down with our own john harwood to talk about a variety of topics, including taking on poverty. John joins us now from washington. Hey, john. Mish michelle, paul ryans got a new plan. The interesting thing about it is it does not seek to cut the budget. Thats what hes become known for as chairman of the house budget committee. But on this proposal he says he wants to consolidate federal spending programs, make them work better. And i asked him in our interview yesterday whether he was sending a signal to House Republicans that the time for cutting these programs is over . I didnt want to get into a debate about proper funding levels of the status quo, because we would spend all this time talking about budget numbers. I wanted to start a debate about how to reform the status quo. The fact of the matter is, is these reforms could occur at any spending level, you can decide later on. But do you want them at a lower what im saying is, lets take whatever our federal government does in these programs, and keep the same level of funding for the states who choose to use the opportunity grant, which collapses as many as 11 programs into one funding stream, to go to states to have more innovative ideas and solutions for getting people from welfare to work. Thats the key issue here, is not the level of funding, which would be the same for say if wisconsin did it versus any other state that didnt do it. But lets focus our poverty fighting efforts not on inputs, not on effort like how much money we spend, how many programs we create but are we getting people out of poverty . Results . Thats the kind of thing were trying to get to. Two objections i heard. One i talked to Hillary Clinton last week, she said this is not a good idea because if governors wont take federal money, free money to expand medicaid, they cant be trusted to protect these programs, a. And b, that you eliminate the automatic stabilizer function of these programs, that allows them to expand when the economy is worse. Yeah, so ill take the last one first. The baseline of funding changes per the economy. And i would anticipate doing the same thing here. With what you call automatic stabilizers. The first point, though, i just disagree with. This isnt free money. States are getting put on with obamacare and then the federal government ratchets down its funding rate. So it is an Unfunded Mandate at the end of the day. More importantly its an apples to oranges comparison. Its not the same thing for a governor to say i dont want to take this topdown, heavy handed approach from washington of a Government Health care system. Theres nothing inconsistent with the governor saying no to that and then saying yes to i want more flexibility for how to customize benefits that get people from welfare to work. So i just dont see that as an accurate comparison. Now, michelle, well have more of that interview on squawk on the street. But the significance of this proposal is that it does open a conversation democrats can have. They would fight with him over funding levels, but reform is something that democrats and republicans could both talk about and, of course, the other question for paul ryan is, what is this future going to be . Is he going to run for president in 2016 . He said he likes the path hes on at the house. But well have more of that later in the day. John, to me it sounds like what president clinton did with welfare, right . Which is to say, okay, were going to do 50 incubators of innovation to figure out what works to get people off of welfare. He wants to devolve to the states for them to figure out programs to do it, right . I mean thats it sounded pretty rich for Hillary Clinton to criticize something that i thought her husband really pioneered. It is something that bears some resemblance to what bill clinton talked about. Theres some interesting back and forth on his idea. One of the things that paul ryan is suggesting in this plan is that each person who is on public assistance have some sort of uber case manager who will grade how theyre doing. Who will evaluate their response to public assistance, their effort in seeking work, and finding work, its gotten some criticism from both democrats and republicans for being paternalistic, but one republican, whos been involved in efforts to try to reconstitute a republican majority said yes its paternalistic but its also thoughtful and compassionate, the best way to go to try to make these programs work better for people. John, before people jump down on partisan divides on these things, i did hear robert reich saying he thought this was a good plan. Its not necessarily going to be a right left divide over this. I think in the end it likely will be because of the underlying funding issue and what paul ryan didnt do was rule out future cuts in those programs. Thats something that democrats and republicans surely will fight about. But if you can make the discussion simply on how to make them work better, you are right, this is something that the two sides could have a constructive conversation about. Yeah, for sure. All right, john, thank you. You bet. When we come back, making sense of this mess in argentina. If youre just tuning in this morning. Check out the futures. Theyve been down pretty sharply. Right now down about 78 points below fair value. We will have much more on the markets straight ahead. Then changing the world through the boys and girls clubs of america. Oracle chairman jeff henley will join us for an exclusive interview on how the tech giant plays into this new campaign focusing on the youth of america. Plus the mood in Silicon Valley. Squawk box will be right back. Honey, we need to talk. We do . I took the trash out. I know. And thank you so much for that. I think we should get a Medicare Supplement insurance plan. 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Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Go to comcastbusiness. Com checkyourspeed if we cant offer faster speeds or save you money well give you 150. Comcast business. Built for business. Argentina fail. A deal to divert a default falls through. How will the International Mess play out on wall street . Changing the world with the boys and girls clubs of america. Oracle chairman jeff henley is a key player in a new campaign to shape the future of the nations youth. Hell be our special guest. Time to go shopping. In the year 2039. Hello, welcome back to the gap. What will the Retail Experience look like in 25 years . Will malls turn into ghost towns . The second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with Andrew Ross Sorkin and michelle carusocabrera. Joe is off this week. Weve been watching the futures. They have been under some pressure today. Dont know if you write this up to argentina but you can see dow futures down about 73 points below fair value. S p futures are down by about 10 points. Also if youre taking a look at whats been happening with the tenyear at this point, the yield is sitting at 2. 55 . We did see a big bump after the gdp numbers came in better than expected at 4 . Thats the first time we rose about 2. 5 in several sessions. Some of the things that have been cause for concern overnight include argentina defaulting for the second time in 12 years. The country failing to reach a debt deal, blaming socalled vultures for holding up an agreement. Kate kelly will join us for more in just a moment. The Labor Department will be out with its weekly look at firsttime jobless claims. Thats a day ahead of the widely anticipated jobs report that we get on friday. Economists are looking for this number to increase in new claims to 305,000 from the higher weeks 284,000. And pepsico executive Brian Cornell will be targets new chief kexecutive officer. John mulligan had been serving as interim ceo. Cornell was said to be a strong contender to succeed at pepsi. He was running one of the four largest businesses there the food business. He also does have some Retail Experience as well. He was the former ceo of sams clubs, he also was ceo at michaels. So well talk more about that in a little bit. Also a media merger in the news this morning. Journal communication and ew scripps will be merging their broadcast operations. Theyll also be spinning off the newspaper businesses in a separate publicly traded entity. Its a complex stock swap deal that involves special dividends for scripps shareholders who will end up holding majority stakes in newspaper and broadcast businesses. In ipo news general electrics credit card unit Synchrony Financial pressing at 23 a share at the low end of the price range. The offer raising 2. 9 billion and its the biggest ipo so far this year. In other Corporate News Johnson Johnson is pulling a hysterectomy device from the market. Regulators have expressed concern that the electronic surgical tools raise the risk of spreading cancer to other parts of the body. J j suspended sales of the device in april after the fda discouraged doctors from using them. And watch shares of yum brands today. The Company Warns that china food safety scares have had a negative impact on samestore sales. Yum points to a local television expose that showed improper meat handling by one of its chinese suppliers. China is yums number one market. Becky. Now back to argentina and the countrys default. Kate kelly joins us with a look at the ripple effects. Thanks so much, becky. At 12 01 this morning argentina entered a state of default on an estimated 20 billion worth of outstanding debt. The event came after a u. S. Judge mandated that the country pay 1. 3 billion to a small handful of creditors who were fighting it over terms of their investment contracts at the same time as it was supposed to pay its other investors who were owed about a half billion dollars as of june 30th and a grace period that ended yesterday. The socalled holdout creditors had refused to accept a discount on their bonds. Whereas the others who had accounted for more than 90 of argentinas Foreign Investors had already taken a 70 cut. Argentinean stocks took a dive on the news that talks between their countries and the holdouts had ended without a resolutions the payment deadline loomed. Meanwhile investors are watching to see whether the impact could stretch narter beyond latin americas Third Largest economy. Distressed debt investors and bankruptcy experts are watching the situation closely and some are calling for changes to bond agreements that allow a Minority Group of creditors to hold out for better Payment Terms when the rest of their peers have already taken discounts. In a speech last night at the countrys new york city consulate argentinas economic minister was defiant. Translator the president said it. This state, this government, is not going to sign anything, more consent to anything, despite the pressure being exerted. But hes going to respect the parameters of the law and respect the interests of the argentine people. So we offered what was within the possibilities available to us. Which was either join the exchange, or grant a stay. Join the exchange, meaning the bond holders already took a discount, or try to argue that the judge should lift his preexisting orders. Those, of course, were options that the holdout creditors, led by a subsidiary of the 25 billion elliot management had already rejected. So i think there was little or no chance if those were the offers that they were going to come to anything yesterday. The only question i have this still seems like one grand game of chicken. I cant imagine that paul singer is going away quietly. He cant go away empty handed. Right. If they reach a deal today, tomorrow, next week or the week after, does it matter that they quote unquote defaulted last night at midnight . It matters very little. Well see what the markets do. Even becky mentioned futures were down a little bit this morning. Were certainly going to see some ripples in the barng certainly in argentine stocks but yeah, if they resolve this quickly it will be a momentary thing. However, its setting legal precedent. Its setting bond holder precedent. It got as far as the u. S. Supreme court which did deal with a small portion of the matter, not with another. This is something thats very much capturing peoples imaginations. Kate kelly thank you. We were talking about the boys and girls clubs of america this morning because they launched a new initiative today called great futures. The campaign for americas kids. Its part of that campaign teaming up with some very heavy hitters in Corporate America to raise the level of support for afterschool and summer programs. Joining us now is a key player in that campaign, jeffrey henley, the chairman of the oracle corporation. And we appreciate him being here. Youve been involved with the boys and girls club since you were you actually went when you were a kid. My brother and i. In those days they were boys clubs. My sister couldnt go. But my brother and i did. Lets talk about this campaign. We talked a little bit about it in the last hour but i think whats so interesting about your participation and oracles participation is in what youre trying to do with kids, and particularly s. T. E. M. And trying to create a new generation of engineers. People who can go in to your business. You know, its not its broader than that. Its clearly engineers but its just people with more critical thinking, more math skills. Because, jobs in all industries are being more technical. So you know, lots of jobs, you dont need to be an engineer but there is a technical side to these jobs. Mrs. A misperception out there about the boys and girls club in terms of what it is. In that people think of it as the y or something else. Just take a moment to explain whats actually going on. Were not focused on the entire family as the y is. We primarily target or located in underserved or underserved communities. So its not its more narrowly focused on kids through Grammar School through high school. And kids at risk. Kids at risk. Thats what i meant by underserved. Primarily were dealing with people in urban areas, rural areas, indian reservations, military families awful over the world, its a lot of people that need support, need help, and ive been doing this 30 years. And unfortunately, the National Statistics are getting worse. I mean, we had a huge opportunity gap in the country, and so you know, i think its important that everyone do what they can to try to help solve this opportunity loss. So im very passionate personally, having been involved. I give a lot of money. And oracle cares about this, too. So a huge part of the budget for the boys and girls club relies on corporate sponsors. So what is it exactly that oracles doing, and to the exconsistent that theres a ceo, cfo, chairman who is watching this morning, what should they be doing . Whats the opportunity to be involved . Oracle has for years believed in s. T. E. M. Education, and we certainly give a lot, tens of millions a year, to higher ed, to train students in Computer Science with curriculum, with free software, stuff like that. Ry mind me s. T. E. M. Is science, technology. Engineering, math. Right. But we also for years have been working on this Digital Divide issue, so figuring out how to wire schools, how to give kids computers, all that sort of thing. I think that as much as weve done, and weve done a lot, we are really doubling down now on this notion of s. T. E. M. At the level of Grammar School, high school, to create more interest and so forth, and so, what boys and girls club does, fits well with oracles agenda. Were supporting much more broadly than boys and girls club. We spoke to kahn academy, all sorts of ideas to get people more interested and excited about s. T. E. M. You know. And our communities, unfortunately, the minority representation in companies and technical jobs is low, and women, its low. Right . So, were specifically focused on expanding the supply the pool of talent that can work on s. T. E. M. Related jobs. We do have a jobs number coming out friday. Weve got jobless claims coming out today. Where do you see the jobs market heading and how is oracle in particular kind of playing into this in terms of hiring . I think in general it seems like the economy is slowly recovering. Wed all love to see it recover faster. So, and certainly the tech industry, i think, is doing reasonably well. Depends on what sector of tech youre in. But in general i think Silicon Valley is alive and well. It feels a little bit in some of the markets like social media in the cloud areas, a little bit like the bubble 10 years, 15 years ago. Public policy question, giving your involvement in the boys and girls club and what youre trying to do in terms of creating a new generation of students who can work in more force at Companies Like oracle, on the other side of the argument, or on the other side of the story, many tech companies, including oracle are pushing for immigration reform, they want to be able to bring more people in to do a lot of these jobs today. How many jobs do you think right now oracle has open for example . That cant be filled because the Skills Mismatch just isnt there . Id be guessing. I havent asked that question recently. But, there is a shortage. And the alternative is either the jobs go unfilled, or you take some of these jobs overseas. Right . And weve done that, everybodys done that. The gap in wages is actually, you know, getting a little narrower so theres an opportunity to do more of these jobs in the u. S. If we have the supply. And as a matter of public policy, everybody in our industry believes that its crazy to bring all these bright kids from india and china and to put them, stanford, and cal tech and these places and then not give them a job. They just go back to their countries and compete with us. So its a matter of public policy, its ridiculous. We shouldnt be afraid of hiring ph. D. S and master degrees in engineering, and keep them in the u. S. Its good for our economy. Its good for our global position. What do you say to people who say, gosh, china, india, the emerging markets are all training these engineers, and because of technology, maybe they dont even have to come to the United States, and you can hire them. We had a ceo on last week who was hiring a ph. D. In the ukraine, for onefourth of what it would take for, you know, it was cheaper than hiring a secretary, he said. And so, as a result, do you want to go into engineering knowing that somebody else can do it cheaper and not even have to come to the country . All i know is if youre a welltrained engineer from a good school, youre plenty available to get a job in the u. S. So this is a myth that the facts are, look at kids today. Im a big involved with my university of california at santa barbara. More than half the kids incoming freshmen now have declared a technical degree. Thats way up, stanford i heard its 75 . So kids get it. That theres real jobs, thats where you can have a job these days, is in some sort of science, engineering, math, you know, so i think theres plenty of opportunity. That were not the only place thats going to have smart people. But i mean going back to the immigration thing. Why shouldnt we educate these people over here, and they want to stay, right . And they want to become u. S. Citizens. They want to work here. Why not keep them . Jeff, while youre here can we clear up a point of business. Earlier this week, oracle filed some s. E. C. Filings that showed that the Stock Options granted to Larry Ellison and other executives were about half what theyd seen in the past. That doesnt mean that youre not going to grant them more later in the year but the speculation is that this is what theyre getting that their awards have been cut in half. Is that true . Im not going to go there. I came here to talk about boys and girls clubs and philanthropy. My goal was not to talk about oracle matters and board matters i know thats your goal. Whatever we file stands on its own. We dont necessarily just do free advertising. I cant think of, you know, a cable show as just a place to youve got a real job and a real role. Sure. And those kind of questions are absolutely fair game. Again, well stand by what we filed. So the speculation is probably right then that thats the filing for the year . People can do with what they want. We stand by what we filed. We file all sorts of things, as you know. Why dont boards want to be clear about what their intentions are or what they mean or what kind of signals theyre trying to send . I think were like all companies. You know, we file a lot of material in our proxies, make all kinds of statutory filings, quarterly filings. I think were we have our chief Financial Officer goes out and talks to you folks all the sometime. We do a lot of communication. Thats not my job as the chairman of oracle. Jeff, let me ask you two other questions related to boys and girls club. One is about generally philanthropy and the role of business in philanthropy. I applaud you doing this. There are shareholders in america who dont believe the public corporations should be giving money thrillen popically, that thats not part of the role, give the money back to the shareholders. The shareholders if they want to spend the money should go spend the money. What is your position on that . Yeah, i think were like most companies. I think we dont give away all of our money to charity. But i think as mark lazarus said earlier in the earlier interview, this is good for business. To the extent that we can promote s. T. E. M. And get a better workforce, get better customers, that can use our technology, its good for business. So part of it is good for business. Our employees love to volunteer. So promoting an active volunteer program our employees really feel better about oracle. This is good for business. And that doesnt cost the company anything. Doesnt cost the company anything. So we have thousands and thousands of employees that go out and volunteer for boys and girls clubs, other things. And we support that. Because, they make take some time off work. Thats okay. It makes them feel better about oracle. Makes them more productive and caring. Were all for that. So this is companies dont do this out of just the, you know, theres a Good Business reason beyond helping people that we do this. Right. Jeff henley chairman of oracle. Thank you for coming in this morning. My pleasure. Good luck with whats going on with the boys and girls club. Its a great thing. We have a big lineup of key Players Behind the boys and girls club launch today at 7 40 a. M. Larry young interview at 8 00 a. M. The incoming ceo of taco Bell Brian Niccol and Toyota Financial Services Michael Groff. Before all that a trip into the future. What will shopping and the Retail Experience look like in 2039. Will malls disappear . And what happens to fifth avenue . Thats next. But as we head to break check out the futures. More squawk in just a moment. Developers are all about speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. The ibm cloud is the cloud for business. As cnbc celebrates its 25th anniversary this year were taking a look into the future. Todays focus is retail. Courtney reagan has been talking with futurists, branding experts, and Retail Strategists with what shopping will look like in the year 2039. Hi, courtney. Hi, michelle. Some say retail will change more in the half decade than it has over the last century and physical stores wont go the way of the dinosaurs, 25 years from now but the Shopping Experience will look and feel a lot different than it does today. The future of retail is now in the making and manhattan studios, Silicon Valley startups, and retail labs that look like any old store but are smarter. Physical retail is the temple for your brand. It will feel a lot like your digital Retail Experience. If im a shopper and ive got this dress, im interested in this dress, i can come over to the screen over here and the screen will pick it up and know what ive got in front of it. You can pick your size, and if you logged in you can add it to your fitting room so youre creating a shopping cart kind of like you do online. The intersection of online information of physical product and personalization from Data Analytics will redefine the Retail Experience. By opting in, retailers will know who we are, what we like, and how we buy as soon as we step inside. As i move my feet it creates artwork on the screen. And personalization will be paramount. Like customizing a pair of converse or every shopper in the store. The store knows who you are when you come in. They can promote to you individually. Based on your buying preferences. Based on your history. Based on what they think youll react to. Smart store fronts that sense what sports teams you like, and display the team jersey to prompt a purchase. Digital halos around every product that tell a story. Where it comes from. How it was made. And peer reviews of its performance. Powered by your personal preferences and particulars, smart shelves will also protect you. That intelligent shelf understands that your daughter has a nut allergy which is really incredibly dangerous. Now imagine that every single product in the store that has nuts in it, peanuts in it, or was made in a factory that had it, they all go dark. And through all these experiences, the consumer will be in control. I dont think its a world where youre purely going to walk in and a robots going to hand you the shirt that you browsed online. Theres going to be people that do want that humantohuman interaction. I think the difference is, theyll actually be able to order it on demand. Whenever they want it. Their way. So the transformation of the future of retail wont really be like minority report. Its more about the retailer using technology to offer the consumer additional personalized experiences both online and in store that give them more choice in the way that nay want to shop more so than ever before. I have to admit, i cannot believe the change over the last probably two years for me. How infrequently i walk into a mall. How often im shopping online. How many boxes are coming to our house. I mean that has to shake these guys up. It definitely shakes them up. You know almost every retailer has an amazon war room about how theyll fight amazon and retailers like amazon and almost everyone believes that we will shop much, much more online. Right now, still more than 90 of purchases are bought in store. Really . Yeah. More than 90 are still bought in store. But that will shift. Will stores completely go away . No. But theyll be very different than what they are today. The mall, however, might disappear. At least as we know it today. Look at where they are now. More an experience center than anything else. Things you have to do in person. Get your hair cut. Take your kid to gymnastics. And theres a Couple Stores maybe you might hit along the way but that will really shake up. For the kids to get new shoes you got to go measure their feet. Because they grow all the time. For certain things like that. Maybe you go, get their measurements and maybe you order it there and they ship it to you an hour later rather than having it actually be picked up in the store. That would be cool. It will be cool. Thank you. All day today by the way, youre looking at the futd your of relay. Coming up on squawk on the street, courtneys going to be delving into data. Students may have a few more dollars to pend on backtoschool shooping. We have stathss on College Lending when we return and check out those futures off the lows of the morning but they are still under pressure. Dow up 81 points. Could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. 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. 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. The ca illac summer 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. Welcome back to squawk box everyone. A report from sallie mae says American Families borrowed less to pay for sending their kids to college in 2013 than in the previous two years. Families borrowed 22 of the cost of college on average. Sallie mae says the drop can be attributed to families making smarter choices about where their children go to school and thinking about other ways to cut costs. When we come back, medical diagnostic and Imaging Company illogic has seen its stock rise about 19 in the year. Carl icahn owns a stake and new the ceo Steve Macmillan is talking to us first on cnbc. He took over eight months ago. Right now, check out where the futures are this morning. They have been under pressure all through the opening session. Dow futures down by about 80 points below fair value. S p futures off by close to 11. Squawk box will be right back. We never thought wed be farming wind out here. Its not just building jobs here, its helping our community. Siemens location here has just received a major order of wind turbines. It puts a huge smile on my face. Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. I voted for culture. With a k. how are you . I voted for plausible deniability. I didnt kill her, david. And i voted for decisive military action. America, you cast your votes. Now, go to xfinity on demand and select the peoples hotlist to see this summers top 100 shows and movies. I voted welcome back to squawk box this morning. In earnings news we got a couple of things to tell you about. Mixed results from conoco phillips. Earnings beating the street by a penny but revenue falling short. That company pointing to increased oil and gas production. Russias lukoil says investments will cause them to reduce the program. Lukoil down about 5 so far this year. Also challenger releasing the latest report on planned job cuts. Its the second highest monthly level yeartodate driven by large layoffs announced by microsoft. Beck . Medical diagnostic and Imaging Company hologic out with fiscal Third Quarter results after the bell. The Company Reported a 1 increase in revenue. Oops i didnt mean for you to take this just yet. I was giving you a scale shot. The stock is up 17 since carl icahn disclosed a 12 stake last november. Joining us now in his first cnbc interview since joining as ceo six months ago Steve Macmillan. Thanks for coming in. Great to see you. Lets show everybody what we accidentally just showed them a second ago. This is a 3d image. These images here on this side are all the 3d images that point out im going the wrong way. This is really hard to do. Vanna whites job youre doing good. Your images show something that you wouldnt see on the 2d image which is over here. In simple terms youre going from a single vision, a single image of the breast, that has always been done, to where we can now slice the breast into effectively 60 different images. So what it does is, instead of looking through it, you can slice it and then see the differences. So there youre seeing malignancies if you see the little numbers in slide 43, you see something that did not exist previously. And right before we came on air michelle was talking about having had callbacks for false biopsies. One of the great things of the jama study in this technology is bringing is a 15 reduction in the number of women being called back for additional imaging or painful biopsies, not to mention the mental duress that youre going through while youre waiting for that callback. So its probably the single biggest breakthrough in breast imaging in history. Callbacks are significant and never thought id be talking about this on television. But i stopped getting mammograms because three false positives, three years in a row, three invasive biopsies that were very painful, taking the day off from work, and then for no good reason it was very, very frustrating. So youre saying this will reduce that occurrence . Yes. Because i have to tell you, i cringe when you say youve stopped getting them. Because as a person i would encourage you to go back. Make sure when you do go back and get your next one that you demand 3d. Are you still squashing breasts like pancakes. Still squashing them more than we would like. Its still painful. So yes. And were ultimately as a company thats very focused in the Womens Health space we hope to be able to do better. How you doing, andrew . Im fine. Im fine. We also have a pap test, hpv tests and all kinds of other things. Its good that joes not here today. How do you even know if what youre getting in terms of when you go in for a mammogram i dont even know how you understand if its a 2d or 3d technology and if your insurance definitely going to cover 3d . Most of the insurances are now covering 3d. Were the only ones with 3d in the country. Its really just been rolling out. So theres less than 1,000 systems installed in the country today. It is one that i would absolutely ask, and i think over the next few years, it will probably the whole shift will become 3d. But i would very much ask. The way you can tell, by the way, is if you see the machine moving. Because effectively what weve done is a single static image, now what we do is we develop a moving, basically its an arc that therefore is able to cut three, cut through in a nice way, just visually, and see the breast in many different dimensions. So thats what gives the radiologist so much more clarity, because in the past, you see a little bump, they just say hey lets put them in for a biopsy. You mention that its able to decrease the number of false callins. Yes. By 15 . Whats it do in terms of catching things that wouldnt be caught otherwise . A 41 increase in invasive cancers. So those are the ones you want to catch early. This is whats fascinating about this study and why i think its good for patients and good for the health care system, its a 41 increase in invasive cancers. Those are the bad cancers. By the way, there was no increase in basically the, you know, nonductal carcinoma. Benign. No increase in that. So we wonting raising it and then the additional clarity is reducing the callbacks. That 41 increase. You want to catch the cancers early. Thats why a cringe a little bit. If you ever do have a cancer, if you catch it early you can avoid chemo. You can avoid a lot of the big stuff. You can deal with it early and thats the big benefit. What does the 3d machine cost versus a 2d machine . 3d machine is about say 100,000, 30 more than a 2d and you can also upgrade basically were effectively developing a Software Upgrade for people who have our 2ds. Does that provide you a continuing revenue stream as well . Yes. So cable box and the Monthly Payments as well. Yes, its a win win win. Win for the patient, win for the Health Care Provider and a win for us. Its a good model. You came to this Company Eight months ago when carl icahn announced his 12 stake. Whats it like working with carl . You know what . Its actually been very good. I would say he has a very simple model which is create shareholder value which frankly is what our other large shareholders looked at and a lot of people looked at this company and thought it has tremendous assets but was being under, you know, effectively undervalued and i think weve been totally focused. Ive done here what ive done my whole career which is build great teams, raise the bar on expectations. Focus on innovation. And then the shareholder Value Creation starts to come. And i think were seeing that in our turnaround here. How deep does he get in the actual operating details of what youre doing or the technology or anything like that . Hes very little. He focuses on do you have the right Management Team in place. I will tell you he was fascinated by this technology and had seen this before i had. And one of the early questions is, you know, steve can you do more with this mammography equipment . Looks like its one of the biggest breakthroughs in that industry. They dont seem to be doing enough with it. So, but its beyond that, hes been very its amazing because he has one of the great investing guts of all time, and unlike other investors, who some of whom are very in the weeds, and think that they can micromanage or understand the details of a Technology Im not sure ive always sort of wondered whether he even knows about that stuff but that somehow he has this gut or this sixth sense about what a great investment is. I think its the sixth sense and i think its a belief in, at the macro level, are you focusing on the right things. But clearly not a micromanager and not into our shorts at all. How do you feel about this manners and methods sometimes . Like when you see him call bill ackman the crying kid in the schoolyard on television . You know, ill probably stay away from that. Hes a very large shareholder. I will just say hes being very supportive of us. But hes never called you the crying kid in the schoolyard . Ive never been called the crying kid in the schoolyard. So far i hope im being called pretty good things in the past people have looked at hologic as a takeover target. What do you do to beef up your defenses to make sure you dont get bought out . Or has anybody approached you recently . Weve obviously never talk about the specifics of being approaching. Ive had a simple model. Run the business as well as you can. You end up getting hopefully a more premium valuation in the marketplace and then you control your own destiny. I always focus, even with our team, our team when i got there, a lot of people were despondent thinking were going to be broken up. Then everybodys attention was elsewhere. By basically saying lets control what we can control, control our customers, control our products, let the stock take care of itself andrew youre not going to ask about inversions . I was i thought that would be my final question. Oh, there you go, okay. I knew it was coming. I apologize. On npr the other night. So whats your take . I think this country absolutely needs a different tax policy. I dont disagree with you. We have to. But are you do you take any umbrage no, by the way, you will be amazed to hear we just paid a 34. 75 tax rate. We are probably one of the very few who are paying truly the statutory tax rate. It is an opportunity for us to try to work on over time. Our initial focus right now is far more on Product Innovation than it is on tax strategy. If i told you that we couldnt get tax reform, and i want tax reform as much as the next guy but if i told you that we couldnt, from a policy perspective, do you let that become the wedge that hopefully forces tax reform . Or do you allow one of these other types of policy proposals around effectively preventing or making it more challenging for u. S. Company to leave the country in the meantime on the assumption that once the toothpaste is out of the tube youre never getting those Companies Back . Those shortterm efforts to me are bogus and are not addressing the fundamental issue. You know, we need to washington many of us ceos have been advocating for 5 1 2 years that we need to change Corporate Tax policy and recognize we exist in a Global Economy right now. I was in costa rica last week. Should have had you with me michelle, i was in costa rica last week. We make products in costa rica, they may go straight to europe or straight to asia. Why do we pay tax on them necessarily in the u. S. , right . The u. S. Has not grasped we are functioning in a global world, there is opportunity for the u. S. To capture huge tax. If we dont act its going to go the other extreme and people will figure out a way to get out of here. Are you paying an Obamacare Tax because youre a medical devicemaker . Yes. 2. 3 of sales, which youre exactly spot on, not an income tax. Thats a huge unbelievable. On top of a precedent. I know its an issue that youve been on for years becky. So it is very concerning. And especially for the smaller companies. And it only occurs for the u. S. So its another reason, and another incentive the u. S. Has put in for medical Device Companies to move their business elsewhere. So weve got to get to i know the rhetoric is all over the place. Weve got to somehow come together and washington needs to listen to the business community. I dont think most Business Leaders want to go do inversions. Right. But they will ultimately if we dont address the issue. And just mandating, you know, by executive decree is not the way to deal with this. Okay. Steve its great seeing you. Great, thank you. Thanks for having me. I might go get a mammogram. Well see. Make sure its one of ours. All right. If you need the okay. You guys can trade cards. Coming up earnings from exxon mobil. Were going to get you the results as soon as they cross the wires. Conoco phillips suggested earnings came in at 1. 16 a share a penny better than expected. Theyve been selling noncore assets to focus on those with higher returns. Squawk box will be right back. Up next, the doctors in. The ceo of dr. Pepper snapple talks drinks, jobs, and the economy. Squawk box on cnbc is back after a quick snack break. Over 20 million kids everyday in our country lack access to healthy food. For the first time American Kids are slated to live a shorter life span than their parents. Its a problem that we can turn around and change. Revolution foods is a company we started to provide access to healthy, affordable, kidinspired, chefcrafted food. We looked at what are the aspects of food that will help set up kids for success . Making sure foods are made with high Quality Ingredients and prepared fresh everyday. Our collaboration with citi has helped us really accelerate the expansion of our business in terms of how many communities we can serve. Working with citi has also helped to fuel our innovation process and the speed at which we can bring new products into the grocery stores. We are employing 1,000 people across 27 urban areas and today, serve over 1 million meals a week. Until every kid has built those lifelong eating habits, well keep working. 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. Some breaking news on argentinas default. Kate kelly has the details. Thanks so much, becky. Bank of new york mellon which is a key trustee or handler of the argentine bonds in question is without using the actual word essentially declaring a scenario in which argentina is in default. In a notice to bond holders just issued moments ago, bank of new york mellon indicates that the judges order mandating that argentina have paid a variety of payments as of the end of the day yesterday is still in place. Has not been changed. And that the payments were not made again in accordance with a court order which insisted that two groups of bond holders, one that has taken a haircut and another which held out for full payment be paid at once. Since that did not happen bank of new york mellon is indicating that things have not changed and therefore with the deadline having passed we can conclude that argentina is in default. However, argentinean officials insisting just this morning they are not in default, they have posted the money in question to at least one class of bond holders and that those bond holders should insist that the money be paid by prevailing upon a judge, andrew. Very complicated mix of stories here. Its rhetoric versus objective third party saying look the calendar is the Court Rulings are that the deadline has passed. The deadline has passed and yet the game of chicken continues. Thank you, kate kelly. Appreciate it. Weve been talking all morning about the launch of the boys and girls clubs of americas Great Futures Campaign and our next guest is a boys and Girls Club Alumni and joins us now to tell us why his company is committed to educating and encouraging the countrys youth. Larry young, the ceo of dr. Pepper snapple just told me were you drinking a diet dr. Pepper . Diet dr. Pepper as i came in. At this hour. Coffee. I drink soda in the morning, too. But i i wont say what brand because i try to keep it very, you know, i try to go back and forth. Exactly. Not snapple though . Oh, ill have a snapple during the day. Snapple makes an orange joins. Orangeade. I have that when im back in texas. Lets talk for a moment about the boys and girls club. I want to get into a little bit of your business. You were an alumni. Exactly. You were there when how old were you when you first got involved . I went in in the 50s. So back then it was just the boys club. And you know, through the years ive seen dramatic change in how we went from being a club for boys, that was a lot of physical activity to now where we do a lot of programs where we help children get prepared to finish high school, and then get ready for college. So its been a big, big change. But a long time ago that i was in there. Was it meaningful for you . It really was. It was why . It was especially important for me because i was a farm boy. I was out in the country. Came into town and got to be around other people. You know, we had sports activities, there were Different Things we could do to get some social skills and so i really enjoyed it a lot. So heres a question for you. We had the chairman of oracle on earlier. Businesses, who spend money philanthropically. Correct. I applaud it. But there are 4rlots of people the world who think businesses shouldnt be in the philanthropy game. Youre raising your hand, right . You think the money should go back to the shareholders and if shareholders want to spend money philanthropically they should. Especially in our business where the right corporate social responsibility, where youre giving back to your communities where you do business, where our employees live, where our customers are, our consumers, those will be the strongest businesses in that territory. And so its been very beneficial to us. It also helps us that we know we had the youth of tomorrow that is prepared to come in and be a part of our organization and help us drive our company. So what are you guys, in terms of the boys and girls club specifically, how are you guys involved . Well, since we went public in 2008, we went we got involved with boys and girls club immediately. My wife and i are involved personally. Being alumni, whenever i gave an award out in 2008 i think it shocked a lot of people when i got up and talked about being in the boys club. So we have a challenge out there that we want to try and get to 16 million alumni to come in, go on to great futures. Org, start giving back whether its money, its time, but get back involved with the boys and girls club to help us hit our goals. Our goals are to grow from 1. 5 billion in revenue to 2 billion and make it sustainable. Thats the big key for us. Let me ask you a question about your business. We often talk about coke and pepsi, the big giants. Uhhuh. Can you remain an independent company and effectively compete against those guys for the foreseeable future . Or do you end up getting bought by somebody . You know, dr. Peppers been around since 1885. And ive had that question since ive been ceo since 2008. Everybody says how does how do you go against the monsters out there . You know, we have great people, great brands, and they deliver great results. You know, we just keep going out there i mean we know what our consumer wants and thats what we go after. Ive seen in the past, just studies of how different flavors, and different sodas do really well in different regionswhere is dr. Peppers biggest the heartland is texas, oklahoma, louisiana, arkansas, missouri. Thats the heartland. My favorite diet drink is diet dr. Pepper but i struggle to find it. Because diet coke and coke zero is so pervasive, diet pepsi is so pervasive. Youve got to remember, too, in a lot of the markets coke and pepsi are partners. Not only are they competitor for me they distribute dr. Pepper in different markets of the country. How important is it for you to diversify outside of the country. 88 of your business is in the United States still. Correct. Relative to coke and pepsi which is probably 50. Ours will probably not change a lot because back in 199 when cadbury was splitting the company up they sold a lot of the brands to coke and to pepsi. So were pretty much a north america brand. Were starting to look internationally on some of our snapple brands. Especially out in the middle east. And the far east. Is that going to cause you to partner with somebody else . No were going on our own. Whats the framework for thinking about it and why havent you done it before . We just now had the licenses come through. They had licenses with cadbury that just came up. Okay. So this is your first opportunity really. Correct. To talk about international expansion. Correct. Do you think this is going to add a lot to growth . Were just were not putting any numbers out yet because were just really getting started. Obviously because youre a Industry Expert i want your insight on this in a very real way. Theres this big debate about the future of pepsi. Nelson peltz believes that pepsi should be broken up, that snacks dont belong next to the soft drinks. Runs pepsi thinks its all one big thing and its got to be that way. What do you think . You probably ought to ask her or nelson that. Like i said, theyre not only a competitor of ours but theyre also a partner of ours in strib utding our products. I think both systems have a lot of merit. Coke is bringing the franchises back in, coke pepsi wants to keep them and we have kind of a mix in our business. But do you see, you see the merits of either side . Do you say to yourself you know what, actually i wish i had more snacks . You know ive been so focused on our business, and the boys and girls club here lately i havent really taken the hes got youve got you havent looked for you havent looked for potato chip brands . No we like to stay very focused on drinks. Last question, this is a health question. How much pressure do you feel around your brands about making the smaller bottles, you know, cocacola theres a big article i think on the cover of business week this week about how theyre trying to redefine themselves, coke is now a treat as opposed to something you drink, you know, five cans a day. Right, right. You know, thats one of the things, again, we do this with the boys and girls club. We look at making sure we have physical activity out there. We do a program along with the boys and girls club called lets play. We want to make sure that these kids during our campaign will be out there doing 4 billion hours of physical activity so they have a better lifestyle. Theyre more healthy. Theyre eating the right foods. Well also feed 500 healthy snacks and meals during that time. So we stay very focused on that. And thats what we do out in the community. Okay. Larry young. Appreciate it very, very much. Thank you. My drink is diet dr. Pepper. No, im diet snapple iced tea. Oh, thats a good one, too. Snapple iced tea. Pretty good. Anyway. Appreciate it. Thank you. Nice to see you. Come on back. I will. Thank you. Dont move over here. When we return the incoming ceo of taco bell and the companys campaign to invest in americas youth. Squawk box will be right back. Mmm, progressive insurance here. Ever since we launched snapshot, my life has been positively craycray. Whats snapshot, you ask . Only a revolutionary tool that can save you bigtime. Just plug it in, and the better you drive, the more cash youll stash. Switching to progressive can already save ye 500. Snapshot could save ye even more. Meat maiden bringeth to me thine spiciest wings of buffalo. Who dont have electricity 400 Million People and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Weits not justt wed be fabuilding jobs here,. Its helping our community. Siemens location here has just received a major order of wind turbines. It puts a huge smile on my face. Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. I voted for culture. With a k. how are you . I voted for plausible deniability. I didnt kill her, david. And i voted for decisive military action. America, you cast your votes. Now, go to xfinity on demand and select the peoples hotlist to see this summers top 100 shows and movies. I voted a number of companies posting results after the bell last night. A mixed bag for whole foods. Earnings beat by two cents. Revenues came in just shy of expectations. The company is cutting its fullyear forecast for the fourth time as it deals with a tough Competitive Landscape for natural and organic food. Shares down 34 making it the second worst performing stock in the s p 500. Yelp reporting the first quarterly profit since going public beating wall street expectations. Revenues also topping consensus. But the Consumer Review websites business account growth fell short of expectations. Kraft foods posting more than 40 drop in Second Quarter profits missing the streets mark. Price increases to cover rising commodity costs hurt consumer demand. The companys ceo told investors quote, theres no question that economic and Consumer Trends are creating top line growth challenges for the food and beverage industry. Coming up in the next hour of skwng skwk, earnings from exxon mobil and conoco phillips. And are tax inversions economic treason . Is a move overseas unpatriotic . Or is this just political posturing . We are going to speak to the director of domestic policy studies at Stanford University about that very topic. Plus jobless claims are out at 8 30 eastern. Squawk box returns with that and a lot more in just a moment. Up next taco bell, teaming up with the boys and girls club of america, and their campaign for americas kid. Squawk box will be right back. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. 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. Investing in americas youth. The boys and girls club of america kicking off a special campaign and teaming up with americas largest companies. The incoming ceo of taco bell and the ceo of Toyota Financial Services join us for a special interview. Panasonic seals a deal, but chat could send shares of tesla lower tonight when the high tech automaker reports earnings. No deal in argentina. Holdout creditors failed to reach a deal to company the country out of default. We talk market implications and the worry about global inflation as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc. Michelle carusocabrera in for the vacationing joe kernen. Take a look at futures right now. We do have some red arrows. Theyve been pointing sharply to a open an wall street we thought they were going to be pointing the opposite way. I would have, actually. Dow looks like it will open off about 78 points. S p 500 off about 10 points. And the nasdaq off about 24 points this morning. Partially result maybe of argentina. Well talk about that story with you in a second. Michelle, partially result you think of the fed yesterday and now people thinking, are they going to or the gdp number, youve got to wonder if youre going to get you have to see the employment number tomorrow, right . But maybe the fed gets more active sooner. Our top story today argentina has defaulted for the second time in twelve years. The country has been in a long legal battle with hedge funds. Talks with holdout creditors ended without a deal before a midnight deadline. Heres argentinas economic minister talking to reporters last night. Translator the president said it, this state, this government is not going to sign anything, more consent to anything, despite the pressure being exerted. But hes going to respect the parameters of the law. And respect the interests of the argentine people. So we offered what was within the possibilities available to us. Which was either join the exchange, or grant a stay. As kate kelly told us just a few moments ago, bank of new york mellon has informed Exchange Holders of argentinas default making it one of the First Trustees to do so. Out placement chairman challenger reporting a jump in u. S. Job cuts this month as employers plan to lay off nearly 50,000 positions. Its the second highest monthly level year to date driven by large cuts announced by microsoft. In about 30 minutes were going to get weekly jobless claims. Economists expect 305,000 claims were filed for the first time last week, thats up 21,000 from the week before. Andrew . Okay. Corporate news, Johnson Johnson pulling a hysterectomy device from the market. Regular laters have expressed concern that the electrical surgical tools raised the risk of spreading cancer to other parts of the body. They suspended sales of the device in april after the fda discouraged doctors from using them. In other news a new report expected to be released by Homeland Security today suggesting technology that lets people work from home is letting cyber criminals break into the networks of retailers like target and neiman marcus. Unbelievable. New york times saying that the report will warn that hackers are scanning corporate systems for Remote Access software, then the hackers deploy highspeed programs that guess login credentials. Okay. We are just getting some numbers in from exxon mobil. Taking a look very quickly to try and figure out what it was. Street was looking for estimates of 1. 86. It looks like exxon is coming in 2. 05 versus the 1. 86 the street was expecting. Cant really go through on revenue because there arent very many analyst expectations or estimates for that. Again, though, it looks like earnings per share came in at 2. 05. Street was looking for 1. 86. Thats an increase of 32 from a year ago, as well. Capital and exploration expenditures 9. 8 billion. Down 4 from the Second Quarter of 2013. They also say that Oil Equivalent production decreased 5. 7 from the Second Quarter of 2013. And cash flow from operations and asset sales were 12. 8 billion. You can see that stocks up by about 1 right now. We are continuing our change the world series on the launch of the boys and girls clubs of america. New initiative, great futures. The campaign for americas kids. Taco bell is a partner in this campaign and incoming taco bell ceo and current u. S. President brian niccol joins us right now. Great to see you today. Yeah, good morning. Great to be here. I know that a lot of young people eat at taco bell. But, i didnt realize what a huge portion of young people are working there, too. Why is this initiative important to you . Yeah. The Great Futures Campaign is a huge initiative that is very important to taco bell. We see teens literally as not only our customers but theyre our team members. They represent 30 of our workforce. And so we really see their futures as being critical to the brands success. So, we have a mantra around here, teen success ultimately is taco bells success and ultimately their local communitys success. What specifically have you done with the boys and girls clubs to be involved in this initiative . Yes. So weve been partnering with the boys and girls club for many years. Weve actually, over the years, invested nearly 45 million, and with this specific Program Going forward weve committed another 30 million over the next five years to really make a big impact in the clubs. Which are very in pretty much every community that a taco bell is in. So youll be seeing between now and 2018 the boys and girls club adding a very focused effort on teens. And its really one of those things that we believe can make a huge difference in everybodys communities. Are you recruiting kids from the boys and girls club of america to come in and work in the stores, too . You know, we actually do big programs with the kids that come out of the boys and girls club. We actually just finished a program last week. We call it camp taco bell and we brought in close to about 100 teens, all boys and girls club teens and literally we spent a week with them going through how we create new products, how we think about the financials, how do we work with our franchisees. How do we bring that market to product, or how we bring that product to market. And literally we had two groups come up with great products that we literally for a day sold in our stores. The products were great. The smiles were even better. I have to ask you while youre here just some business points, too. Yesterday that ruling from the nlrb saying that mcdonalds, and other big franchisers, could be held as joint employers for some of the franchisees. That really turned the whole franchise business on its head. What do you fwhi that ruling . You know what weve been always saying about taco bell and the franchise Business Model is one where we give true opportunity to entrepreneurs to make a positive impact in their communities. And thats what we will continue to do. And well continue to make sure that we do the right things for our franchisees, our customers, and our team members. Will that change how you do business . Or do you think that this is a decision that could get overturned . You know, im not im not going to comment on that. What i can tell you is, you know, we know when we do the right things our franchisees businesses prosper. We know our team members prosper. And we know our customers reward us with more and more business. Brian, what do you think about food prices . The fed finally saying that inflation looks like its nearing their target yesterday. What have you seen in terms of inflation . Does it affect you and food prices or in fuel costs . You know, obviously weve seen some of the key input costs to our business go up over the last six months. And you know, we really work hard to do is figure out how we can, you know, smartly plan for that. Because we only want to ask our customers to pay for the things that truly add value to their experience. But we definitely have seen some inflation come across our business over the last couple months. You guys have had some huge success with you may stop before you think, you know, tacos and innovation, but you guys have had some huge success in terms of bringing in things like doritos and special clips. Ive been amazed to see whats happened. How do you come up with some of these ideas . And whats been the most successful one . Obviously the doritos taco was a huge success. Right now were in the midst of doing a great product called the queserito. These come from a couple places. We look to see consumers trends in eating. How we can create mexican inspired versions of what people are doing today in their eating habits. And you know, then we try to figure out how webly it to market in that unique taco bell way. Theres only one brand that can live mas. Have you thought about rationalizing the menu at all . When i think theres 200 things on the menu but they all seem to have the same thing in them. Its one of those things we always look at. Of course people always have their favorite im sure, becky you have your favorite. I was just out with my family last night and another family and a group of ten there and everybody rattled off one of their favorites off the menu from the nexti melt to doritos logos taco. Do you see any impact from your Parent Company in china over the whole food scare. Theres no taco bell in china, right . Taco bell doesnt operate there. Obviously, im focused on what we can do for taco bell in the United States. And then ultimately how we grow taco bell internationally, as well. But, were very proud of what were doing at taco bell. And were going to continue to, you know, hopefully connect with customers, and our team members better than anybody else. Brian, whats your take on the success of chipotle. Do you look at them as a direct competitor . Or do you put yourself in a different category with them . How much of the business are you trying to take from them . Just give us sort of the label end . The good news is the mexican category continues to just grow in a big way. And were seeing the fast casual side of that segment grow very quickly. And you know, what we always say is how do we do things that are true to our brand across all the various segments . I think the segment that they serve, theyre doing a terrific job. And i think, you know, weve got opportunities abound in our business. But to follow up on andrews question, do you think youre competing against other mexican food . Chipotle is much more expensive when it comes to price points. Or are you competing against other Fast Food Companies that have similar price points to you . We literally feel like were competing for, you know, everybodys share of those meals. So we look across our industry, other habits that are taking place at the grocery store. You know, we want to be relevant for our customers the way they want to eat. So, you know, we dont really zero in on one competitor. What we really believe is, our job is to know the customer the best so that whatever segment or time of day they want an experience we want to be able to solve that experience for them. So you know, thats why weve gotten into breakfast. Thats why weve been famous for late night. Our lunch and dinner business. Were really becoming a brand that truly can connect with customers. Late night business is big business. The fourth meal. It is. The obesity freaks dont go after you on the fourth meal . What did you say . The antiobesity groups dont go crazy on the fourth meal . Know the fourth meal is one of those meals where usually people have a lot of Great Stories and a lot of great memories from it. So you know, were very happy to be that brand that shares those memories with people. Important question, brian, has business gone up in colorado . Well, yeah, i always get that question. You know, pretty soon, you know one of the biggest requests we get in colorado is delivery. So, stay tuned. Brian i want to thank you so much for joining us today. And thank you for the work that dour youre doing with the boys and girls clubs. Thank you. Thanks for having me. Coming up next treasury secretary jack lew implying tax inversions are unpatriotic. Stanfords director of domestic policy is going to join us next. He says its all about politics. Next shares of exxon mobil posting ernst of 2. 05 a share, 19 cent s better than expected. Take a look. Since people have had the time to look through that release that stock is down 1. 2 . 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Whats a morning on squawk box without a little talk about tax reform and inversions . Our next guest questions treasury secretary jack lews logic when it comes to Corporate Taxes and just what it means for companies to show economic patriotism. With us now on set is chief Research Fellow at the hoover institution, and director of domestic policy studies at Stanford University. Good to have you here. Good to be here. Is it not patriotic . Are companies acting unpatriotically when they do an inversion . I think the reality is companies are responding to our tax code and incentives that exist in the tax code and doing what they can do to minimize their Tax Obligations. I dont think its unpatriotic at all. You wrote recently to say doing an inversion is unpatriotic theres all kinds of other things, for example what could be unpatriotic if you used jack lews framework for thinking about it . The logic is silly. Basically if you take advantage of any tax break, the wind production tax credit the biodiesel tax credit, even providing Employer Sponsored Health insurance could be deemed unpatriotic. It minimizes your Tax Obligation. It lowers your Tax Obligation. I think that kind of logic just means that any business that takes advantage of any tax break is theoretically unpatriotic. Hold on. But youre leaving the country. Youre not even leaving, youre pretending to leave the country. Its not about leaving the country. The issue that theyre raising is are you minimizing your Tax Obligation. Thats really the crux of this, i think. Theyre saying oh, see i think i go farther than that. Its about the Tax Obligation but also the longterm implication of you effectively moving your at least technical headquarters which may start out as a technicality but longterm could turn into something else. The bottom line is this. Businesses are responding to incentives. And our tax code is riddled with the wrong incentives. We have to figure out a way to get to fundamental reform. The president has talked about this. Jack lews talked about it. Its all talk. They never do anything heres what ill say about it. I think both sides share some blame here but the reality is weve got to get to fundamental reform on the corporate side. We should get to it on the individual side. But we seem to have agreement that we need to do it. Lets get to the details of doing it. What is the rate that actually works . Whats the number . Well, i think somewhere in the mid 20s would be best, frankly. Were way out of whack now. Were the highest in the oecd. Its unacceptable. And not only that, weve got a system that encourages the kind of activity were seeing in the form of inversions because we dont tax income earned domestically or abroad at parity. So we need to move to a territorial system, too, in order to make this work. Everybody says we need to move to a territorial system. Except for the administration by the way. Theyve been hostile to that notion. Theyve talked about a repatriation holiday but theyve not if you go to a territorial system could you do it in a way that the cbo scores it as neutral . Thats the challenge. Or are you talking about dropping revenue . The transition is going to be tricky. Theres no question there are some complexities to the transition there. But in the long run i think it makes sense as the long run. I look at the shortterm political when you cant get to the idea of whether you want to raise a trillion dollars on this or lower what corporations are actually paying. But if youre losing revenue over time we had peter orszag on the program about a week ago. He made the argument to go towards a territorial system, but not taxing necessarily profits directly in each territory because, arguably, what you could do is, theres a lot you can play a lot of games. Right. So what hes saying is actually should be as a percentage of sales in whatever territory it is, which is a number thats much harder to deal with. I think there are a lot of does that make sense . That does make some sense tax revenue instead of profitability . Youre look to look i believe youre going to look at the percentage of revenue and then and then youre going to look the profit. Right. I think the bottom line is there are a lot of different ways that you could jigger the system to frankly make it better than it is now. And to bring some parity to the way that we look at the income that you earn here, versus earning abroad. That is fundamentally whats causing the problem here. I think there are questions about the transition, there are questions about exactly how the system looks. But at the end of the day, what we do know, is that the system we have now is creating all the wrong incentives. What do we do . Do we wait for what the next election . I mean, there really seems no changes here. You know, the next election could be a triggering event. That could be something particularly if the republicans win back the senate this november. That could be a triggering event. But i ultimately think its going to need to be the next administration. Let me ask you a political question, though. In 2004, when after the Bush Administration at the time decided you know what . You cant do it wasnt a technical merger inversion, people were just going you couldnt go we decided that going to the Cayman Island was no longer around. Almost for moral reasons. Were you okay with that . Yeah. You were okay with that. But then well no i think look we blocked that because we felt that it was wrong. Right . You know, i think the difference now is that what i question is i question the rhetoric. I question the timing. But i also question what this will do if our effort is really to get the code reformed. I think we are at a point now politically where were having this discussion about tax reform. It is in the ether. You know, i dont know if it was so much the case ten years ago. Right. And i worry about poisoning the well. This kind of rhetoric. One more piece on this. So many of these companies are pharmaceutical health care and drug companies. They rely on tax dollars from the u. S. Taxpayer. Thats where a huge part of the profit margin comes from. We have no drug price controls on drugs. Right. For uk companies they rely a lot on us, too. Its not just u. S. Companies, u. S. Drug companies i mean this is a danger, i think, frankly for the pharmaceutical industry is that if the discussion begins to move forward how do we tamp down how do we tamp down prices, and if the answer goes toward price controls that would make me very nervous. I thought this was a settled discussion by and large that we had made the decision that was the wrong way to go. Im not suggesting we have price controls im suggesting isnt that a benefit of being because we dont have price controls isnt that theres a benefit of being an American Company i mean you were arguing that you get the benefit anyway. If youre i think thats right. Youre just selling. Youre selling in a Worldwide Market now. And the reality is i think that there are some sort of benefits and costs that trade off. But its a Worldwide Market. Weve got Economic Data coming up so weve got to cut you off. Thats fine. Thank you. Thank you. When we come back, u. P. S. Plane runs into a bit of trouble in california. Well have the details right after this. Searching for trade ideas that spark your curiosity tdd 18003452550 can take you in many directions. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. 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The plane landed around 12 30 eastern time at sacramentos airport. Four crew members were on the plane at the time. The pilot quickly turned the plane around after realizing the engine problems. No one was hurt. Coming up this morning, we want to know what you think. Could tesla survive without elon musk . Get ready to vote in todays poll. Plus well be previewing tonights earnings. Squawk box will be right back. When we return, jobless claims data that will move markets. Plus, the ceo of Toyota Financial Services, on whats driving kids for future success. Squawk box rolls on, after the break. 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. Weits not justt wed be fabuilding jobs here,. Its helping our community. Siemens location here has just received a major order of wind turbines. It puts a huge smile on my face. Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. I voted for culture. With a k. how are you . I voted for plausible deniability. I didnt kill her, david. And i voted for decisive military action. America, you cast your votes. Now, go to xfinity on demand and select the peoples hotlist to see this summers top 100 shows and movies. I voted welcome back, everybody. Check out shares of exxon mobil. The oil giant posting earnings of 2. 05 a share. That was 19 cents better than expected and initially that stock was up by just over 1 . You can see its down by 1. 4 . That could be because production actually declined at the company. It was down 5. 7 on an Oil Equivalent basis. Revenues of more than 100 billion in the quarter. Always astounds me on the major revenues they bring. In Brian Cornell will be targets anew chief executive office. John mulliccen had been serving as interim ceo. Cornell is said to be a strong contender to eventually succeed the ceo of pepsi. Guess not. Argentina has now defaulted for the second time in twelve years. The company has been in a long legal battle with hedge funds talks with holdout creditors ended without a deal before midnight that was the deadline bank of new york melon has now informed Exchange Holders of argentinas default making it one of the First Trustees to do so. We are now just seconds away from jobless claims, and the employment cost index. Our good friend Rick Santelli is standing by at the cme in chicago. Futures not looking great. I dont know, you probably are going to have a view on that. But, in the meantime lets go if youre short they look great. We always forget that aspect. Hey, 0. 7 of the employment cost index thats the Second Quarter number thats about 10 , 20 hotter than we were expecting and its more than double our last look at 0. 3. 302,000 is initial claims. So, lets see thats from a revised 279 so we had 21 and 2 yes we are up at 23,000 on a jump but remember this is from a very historic low number especially in this cycle. We continue, of course, to draw some correlation between less claims and more jobs. Its quite logical. So friday, tomorrow, maybe well get a pretty good number. Up 0. 6 on q2 quarter over quarter on wages so that also is good news in double expectations. So wages up 0. 6. Costs up 0. 7. Listen you know a whiff of inflation with higher wages isnt bad. Everybodys talking, of course, about how europes inflation rate is slow. I like beater bookmyers comments. Everything thats wrong with europe is going to be cured if their currency could just lose a bit more ground. While you were talking we did watch the tenyear continue to pick up in terms of theyearold. 2. 596 was the last tick i saw on that. Thats a substantial pickup over the course of the week. Yes, and no. It is a substantial pickup from the 240s. But lets keep in mind the range that was established in may, may 12th, high yield, close at 266. 28th low yield close at 244. That range has been just an easy trade for most of the technicians on this floor. And i fully suspect its going to work again. So, watch it more from a range perspective. Weve kind of been there, and done that. Still the biggest feature of the year is the fact that we closed at 303 in a tenyear on december 31st. What was the top of the range . 2. 66, and 2. 44. Okay. Well keep an eye on it. Thank you, rick. More on the numbers right now Steve Liesman joins us. What jumps out at you . Well, Employment Costs or wages are the price manifestation of how tight or how loose the labor market is. Okay . This is the eci is the biggest increase in six years. This is the 0. 6 on wages right exactly. 0. 7 total on the eci. And the argument that wages are low is one of Janet Yellens argument that theres a lot of slack in the labor market. And the argument makes sense. Listen, theres a lot of people out there that will take work. Then theyll take it as a lower price, and so i shouldnt see wages going up very much. Now, theres a lot of ground to make up. Yellen has said shell let it run. But in terms of tightness in the labor market which weve seen, by the way, in the nfib survey, difficulty finding workers, there are a bunch of manifestations out there kind of like the tale of two job markets. But if 0. 6 is strong. Its strong. The biggest increase since 2008 which were still in the middle of recession. Still in the beginning of recession but its getting back to a place where, i mean look, its a good thing for wages to go up but its something thats going to suggest to the fed, maybe it has more room to go. Just to explain, and if you take a look at whats been happening as we watch the tenyear ticking up to 2. 6s where we also have been watching futures for the stock market continue to decline. Where, about the weakest levels of the morning if you look right now. Dow futures now down by triple digits, a decline of 105 points. S p futures off by more than 12. 5. And i wonder does this mean that theyre looking at maybe more teeth in that fed statement from yesterday than people initially thought . I think its geared to the economy. And geared to the date that that we get. Its also worthwhile looking at the twoyear, which this morning the yesterday was at a two year high at about 0. 5 six if they can get that because whats interesting about that is people go to the two year in order to get out of the way. Right. Of what would happen, so maybe losing money on the short end. Very concerned about having control of the short end. Yesterday the feds statement brought made policy this thing that yellens been talking about the idea of labor slack. Lets look at how much labor slack there is out there. 9. 5 million unemployed people. 2 Million People margely attached. That means . Theyre looking for work in the last year but not necessarily every month or every week. Part time for economic reasons means they want to work full time, cant find it 7. 5 million. For a total of 19 million, giving you 12 or 12. 1 if we didnt run out of room there on the righthand margin, which is the u6. Thats how you get to the u6. So go back and look whats normal were about three points before where it would normally be depending upon what averages you take, could be four points, about 5 Million People out there that are extra from what would formally be the case if we had a normal economy. Are you saying thats one of the reasons why even if we see 0. 6 today janet yellen may argue lets get to the next chart which shows you the pace at which weve been soaking up the slack. Right. In the past year the Unemployment Rate fell by 1. 6 percentage points. The u6 fell faster. 2. 2 million fewer unplied. 554,000 fewer marginally attached. And 650,000 fewer people working part time for economic reasons. You can see 3. 4 million. What was the number from the prior gaffe, 5 million. So it would take about a year, year match or so at the current pace to get rid of the extra not get rid of it, i dont mean in that way, soak up otherwise employ or absorb the 5 Million People we have out there. So, thats fine. That gives the fed time. When does it need to be at normal . At that point it should be much closer to normal than it would be. Following these gauges, and i think yellen is going to have to explain some of this. I think theres a lot of hope that in jackson hole later this month, or next month, that the fed yellens going to step forward and give us some metrics. Are you going to jackson hole . Yeah. You got the invite. All those people who got uninvited . Theyre wall street economists. Im just a reporter to objectively provide the information. You rate. You rate buddy. Thats good. I like that. Did you get the math . Yeah. Thats all im trying to give you. And we keep showing the intratoday the tenyear. Its going up. Up next one of the founders of the boys and Girls Club Campaign great futures. The ceo of Toyota Financial Services joins us from investing in americas youth to make sure car buyers are getting loans. Then jim cramer live from the New York Stock Exchange as we head toward a rough open on wall street. Squawk box will be right back. 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. We stathat the kid on thehought back of the bus might have a song that he has in his head but he just cant get out. With the technology of cloud, we change all that. I can sing something into my device, up to the cloud it goes, back down it comes, sounding better. We break down the walls of creation and we give music creation for the masses. Unlock the creativity in anyone. With the ibm cloud. The ibm cloud is the cloud for business. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. El welcome back to squawk box this morning. Take a look at futures. We do have red arrows. Dow looks like it will open down 97 points. S p off about 12 points and the nasdaq off about 28 points. Weve been talking all morning about todays launch of the boys and girls club of americas Great Futures Campaign. Our next guest is a Founding Member of the campaign and has been a big backer of the boys and girls club for years. Joining us is Michael Groff, ceo of toyota financing services. How long have you been involved with this . Since 2007. So about eight years. How did that happened . We have a long history at toyota and this country supporting community organizations. But, a few years back we decided to get focused on a specific area and thats at risk youth and more specifically on education. Because . Thats where we headed. We talk a lot about the ceos and cfos and Board Members who have watched this program and why they would want to be involved with this organization, as opposed to another organization. Had a larger conversation in the past hour about whether corporations should be involved in philanthropy at all. But to the extent that you are, what is it about boys and girls club . First of all were involved with lots of other organizations but this is one of main emphasis for us. But specifically because we like the work that were doing with them. And in terms of the idea that we really saw this need for afterSchool Programs. And the idea of the kids needing a helping hand. They need mentoring. They need support. They need counseling are you doing it nationally or are you doing it in specific markets where you have factories and other offices . Were doing everything. So we started locally and our headquarters is in california so we start with clubs in los angeles. We like what they were doing. We now have affiliations with clubs all over the country where we do business. But we also have regional and National Support programs. Is there a specific thing that toyota is doing within the clubs . Very specific things. A couple of them im particularly proud of. First of all were involved with a program called diplomas to degrees which is a mentoring program for high school youth. And the idea is in many cases these young people, they may be the first in the family to go to college. So were matching them with our associates who serve as mentors through their High School Years to make sure theyre doing all the things they need to be doing to get them ready for college. We also have scholarship program. So this year alone, weve given out 100 scholarships, worth 1 million, to High School Students to give them a push towards college. Those are big, 100 scholarships to a million dollars. Those are big scholarships. Theyre big scholarships and we are committed to this because we have seen the success. In fact, since we started this, in 2007, we met some of those students in high school, weve seen them through their college years. They have graduated, they have jobs. A couple of them are working for us. Question for you. We talk about autos just for a second . I want to talk about the financing of autos because there has been talk that there is a bubble going on especially in the subprime sector that we have to worry about on the financing side of the automobile world. Do you buy in to that . Well, look, i think theres markets to be served. Right . So it would be prices hit, the markets dried up. Credit got very tight. It was very difficult to get credit. So i think some of that is shifting back a little bit. We dont subscribe to putting people in cars that cant afford them. We want our customers to buy more cars. So why would we put them in a vehicle they cant afford . So we subscribe to the idea of putting people in cars that they can afford and making them long time customers. When you finance a vehicle what do you do with that loan . We keep them. You keep the loans on the books . You dont securityize them and thend accept out like called abs. We do some securitization but its not our main form of funding. Most are kept in house. Do you have a market call or a view of what you see happening in the market . Standard poors said they thought there were going to be higher defaults. Again i think its shifting back. So if you went, think about it but its shifting back, is it too far back is the pendulum swinging from the evidence ive seen it looks like its shifting back. Its too soon to say whether its gone too far or not. For us specifically that a market we dont really play in. Our customers are typically credit is a little bit better. But also again for us, we have a longterm view. This isnt just about making a loan. This is about having a customer be in the toyota family for a long, long time to come. Why dont we talk about auto sales overall. North of 16 million its been a very strong year. What specific trends are you seeing right now just in terms of sales . We feel very good about it. So, we certainly think the years going to finish maybe around 16. 3. For toyota. That would put us maybe about 2. 3. And probably up year to date were up 6 over last year and we feel good about the market. Do you remember when, oh, those days when it was 10 million per year and just such a massive depression in the Auto Industry . You have to remember those numbers to think, okay, were not back to the 20 million that we did at one point but 16 million looks pretty darn good. There were some tough years, thats for sure. But its definitely better now. We feel good about the breadth of the market in terms of the customers that are buying because were really selling into all segments. Were a mainstream provider because we have economy cars. We do a lot of business in sport utility. But our luxury business lexus is having a great year. So really all segments really doing well. Were going to be talking a little about tesla and im curious from a technological standpoint tesla clearly made a big bet on batteries. You guys have made a bet of sorts on batteries but also on a number of other different products including Hydrogen Fuel cell which i just saw the big vehicle youre coming out with. Right. Longterm, do you look at a tesla, which is, you know, double down, triple down on batteries and say thats the wrong technology . Well, i think you know, our point of view is its been very difficult to figure out what is the right technology. So everybodys experimenting with Different Things. So, there is room for electric for sure. Weve done electric, too. We have some electric vehicles. But we also have concerns about the weight and the cost of the batteries. Weve landed on hydrogen. We think theres a real opportunity there. But you can look back to when we launched the hybrids, which was back in 99 or so. And when we came out with the first prius as a hybrid, a lot of people said, theres no room for this. Who is this serving . And now you look at how hybrids have become really a dominant force. So you have to take a chance. Theres bets to be placed. Were going to stay in hybrids big and move into lied row jen. We think theres a great opportunity there. Michael thank you for coming in and all the work youre doing for the boys and girls club. Thank you very much. When we come back, jim kraker live from the New York Stock Exchange. And then a preview of teslas earnings. Plus what we want to know from you is could tesla survive without elon musk . You can go to cbs. Com vote. You can play in our realtime poll. Polls will only be open for a slort time so hurry up. Squawk box will be right back. Tomorrow its jobs friday. Well have the numbers, and instant Market Analysis from our panel of experts. Plus, guest host dallas fed president richard fischer. The ceo of 3m. And the cfo of procter gamble. A big lineup to end a big week of earnings and Economic Data. And its only on squawk box. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. At a special site for tv viewers; weits not justt wed be fabuilding jobs here,. Its helping our community. Siemens location here has just received a major order of wind turbines. It puts a huge smile on my face. Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. 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. Only from xfinity. 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 to squawk box everybody. The futures have been under some pressure right now. Theyre down by triple digits. Loss of 104 points for the dow futures. S p futures down13. They were sharply lower this morning. They started to come back before dropping into this lowest territory of the morning, right around the time the jobless claims came out. Jumped by 23,000 to 203,000 after touching a 146 year low. The Second Quarter employment cost index jumping by a bigger than expected 0. 7 of a percent, the fastest in ten years. The tenyear note also touched at 2. 6 briefly. Thats got to explain a lot. Lets get down to the New York Stock Exchange. Maybe jim cramer can help explain whats going on and what were supposed to think this morning. Just think about russia. It finally happened. It finally had the tipping point. Youve got different executives. Adidas doing very bad. Oil companies talk about listen, its real impact. Ive got bp on tonight. Theyre talking about the emotional situation. The president of the United States is trying to ramp it up. This is not good. Europe is going to be slowing. It tends to put the really, the focus entirely on companies that do international and how badly theyre going to be hurt by russian sanctions. You say its russian sanctions. Its not what happened yesterday. Its not the idea that Interest Rates are going to spike. No, we need rates higher. The whole all those people are negative on the market if rates dont go up. I mean and i say delivery people. Those control trillions. I mean, this is the beginning of what i regard as being cut numbers russia. And dont forget with the euro just going down, cut numbers europe. So no. We can be fed centric, and thats absolutely fine, but youre going to take the eye off the ball if youre not focused on russia. Youre going to see Many Companies that are going to come out and say you know what . Its a game changer, its bad. And i think russias the is going to drive a lot of money out of the International Big internationals that have really been the backbone of a lot of the rallying in the last three years. What about exxon mobil . It was up initially, but what did you see . Had to do with the earnings. What matters is production growth. Take a look at royal dutch. Which is actually up, despite the fact that they said very worrisome things about russia. Exxon had minus 5 , 5. 7 production growth. Look at whiting patre ining pet. Its up big. Production growth predicts the future. Do not look at exxons final number. As much as they might tell you thats all that matters, it is the least most important thing. Just a view on argentina. Are we supposed to care . Does that have anything to do with anything this morning . Argentina shakes people up. Theres just all these Macro Hedge Fund guys and as soon as they see any negative news, they short the s p. Europe did not go down nearly as much because those guys dont short s p europe futures. The algorithms say thats negative, lets short. The actual real issue is russia. Argentina, i dont know. Ypf was up five and down two. Argentina is not that important for most of the companies other than directv, theyre being taken over. Okay, jim cramer, were going to see you in a couple minutes. Up next, though, tesla signs a deal with panasonic. Well give you a preview of tonights report and talk about the future of that company. Speaking of the futures, we want to hear from you. Could tesla survive without elon musk . Well have the results on this program. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Take them on the way you always have. Live healthy and take one a day mens 50 . A complete multivitamin with 7 antioxidants to support cell health. Age . Who cares. Tesla ready to report after the bill. Lets go under the hood with phil lebeau. Phil . The number to look for when tesla reports after the bell is a profit of four cents a share. Revenue coming in at 811 million. There are some people whispering that that four cents will be easily met and that you should look for a number closer to maybe 7 or 8 cents. Thats simply what a few people are looking at. A couple things were going to be looking for when they report earnings. First of all, rising operating costs. How much have they increased for tesla as theyre building up the factory, as theyre getting ready for more production with the bottle x coming online. Also, are Third Quarter deliveries slowing down because theyre running into a lithium ion battery shortage or problems getting enough of those batteries built. Those are the two issues that people are going to be focused on. There was the agreement signed overnight with panasonic, where panasonic is going to be one of the primary financial backers of the new tesla gigafactory. Thats going to be what were looking for on the Earnings Call after the bell, what kind of guidance will elon musk give in terms of a, when are they breaking ground, where is it going to be at, and are they still on target of getting production at that factory up by 2017 when the model three rolls out. Model x deliveries, they start next year and a lot of people are saying okay, youre going to have this suv coming in at about 70,000, roughly in line with the price that you have for the model s as far as the entry point there, and how much demand is beginning to be there and how much of a boost will it get . Thats what were going to be watching after the bell today. A lot of people focused on that factory. Were asking people right now, could tesla survive without elon musk, and watching it here, the vast majority are saying no, 70 . Are you surprised by that . You agree . Not at all. I do think that tesla could survive without elon musk. But he is such a dominant force in terms of the vision at that company that thats all people know right now when they think about tesla. They dont hear about the other executives who are involved in the company. Thats going to be a challenge for them. Hes already said that hes committed through the model three, which comes out in 2017, through its production ramping up. So lets say 2018 what does that mean when he says hes committed through then . Does that mean he could leave . It means that he says hes not going anywhere, andrew, until they get production up. Lets throw out a number here. 200,000 units a year. That hell be there through there. Nobody thinks theyre going to get to that point before 2018. So it looks like youve got musk at least for the next four years. Whats their annual production right now . They probably will do 35,000 next year. But thats before they have the model x which starts production next year and youve got the model 3, which will start in 2017. At least thats the plan right now. So the model 3 instead of the letter e . Which one was it . The s . The x. And sex. Sex. Sex sells. Sex sells. Ran into some trouble with that. My producer said if you take the model three, turn it upside down its an e again. Im sure thats why they went with the model 3. 74 said no after the polls closed. Not surprised. Hey, phil, thank you for joining us. Well talk to you again soon. Keep an eye on whats been happening with the markets this morning. We were looking at the dow futures down by triple digits. Were now talking about a decline of 116 points. Also watch whats been happening for the tenyear note. Michelle, thank you for joining us. It was a pleasure. Right now its time for squawk on the street. Good thursday morning. Welcome to squawk on the street. Im Karl Quintanilla with jim cramer this morning. The biggest u. S. Ipo of the year, default on argentina. As becky just said, futures do imply a gap down at the open. The tenyear yield is up almost. As for europe, germany is down a full percentage point and it has hit its