Transcripts For CNBC Squawk Box 20140827

Other big s p winners, general growth, regeneron pharma, wyn ddz ham and under armour. Cvs up about 900 . Priceline, chipotle and netflix. Well talk about where that goes from here. First, before we do that, lets get some other corporate headlines. This one, i dont know what you think of this one, joe, snapchat now valued at near 10 billion. A lot company, 10 billion. The number based on a recent investment in the messaging start up. The wall street journal reporting that vc cliner perkins committed up to 20 million. Among the other startups now boasting valuations of 10 billion or more. B b and uber. And payment provider square theyre also getting a valuation boost. On their way to 6 billion. That Company Reportedly in the process of raising about 200 million in cash. Square, of course, run by twitter cofounder jack dorsey. Square was valued at 5 billion earlier this year and you might recall that starbucks has an investment in that company. And then we got a little bit of media tech news this morning because at t is merging its wireless and business divisions into a single unit. Ralph is going to be running it. He had been ceo of at ts wireless segment. At t has been facing increased competition from Cable Companies trying to lure customers away from Traditional Telecom carriers. With all of that, ill send it over to you, michelle. As u. S. Stocks quietly rally, europe focusing on record u. S. Highs. Take a look, germany and france are lower this morning. But the ftse and the mib are higher. Well, theyve had a pretty good week. Ongoing tensions in ukraine and speculation about more easing from the ecb after draghis future of the weekend moving stocks around and pushing them higher in europe over the last couple of days. Asia, overnight, the hang seng was lower by 155 points and twothirds in shanghai was essentially flat. Geopolitical events remain on our radar screen and gaza, israel militant groups agreeing to halt all fighting in the region. As for ukraine, theres no break through in facetoface talks between putin and poroshenko. The two sides have agreed there was a need to deescalate the conflict, but putin is for a trade with ukraine if they continue to be involved with the european union. New numbers in the polls show marusa could lood lose her bid in october. When it comes to what investors wanted, that means the candidate they were hoping would win is actually in third place now and has lost it looks like his shot at getting it. Lets check on the markets this morning. We did hit 2000 yesterday on the s p. Lets see if that causes a retrench. No, continuing to melt up. With a lot of officials saying, what is happening . Isnt it high . And the people that ask and the people that talk about it are people that typically with not a lot of experience in the stock market. This is not totally different than in the past. No. What about jim grant . He says there are so many yeah. Hes more of an economist and a market i wouldnt him in terms of market timing any more than Nuriel Roubini or anything like that. I defer to you on things like snapchat. I want to ask because i do think that theres a lot of potential with snapchat. Initially i thought it was just the kids that didnt want their parents to see. But now im thinking irs. All of the correspondence between lois lernor and all of her agents she must have done it on snapchat. No, theyre going to continue to target, you know, different parts of the population that they dont like politically, i think this then you wont need this to erase the iphone and the blackberry. You wont need to say, oh, my hard drive . Thats burned through. I dont even know how it happened. But its wall street. Theres a lot of i thought there was some i knew you had taken shots from the Public Sector to those nasty guys, we had to go right to the private sector. How about the controversy about the fact that the photos are still around. There is a concern or that they view that they can still be saved somewhere. That some of this stuff can still be saved. And by the way, even if you dont believe its been saved on a hard drive somebody can freeze it on their own. You better hope theres nothing left. Ralph is a friend of the show. Hes been on a bunch of times. Cuban american. Here is a picture of him. He went right from magnum p. I. , and he knew so much about you know, he was on the show for a while, wore a hawaiian shirt. Do you remember him . I did. Is that higgins . Who knows if he looks like that. Whenever i see him, i call him higgins and he laughs. What . He has more of a tom sellic look. Thats insightful, andrew. No, it looksic just like john hillerman. The actor that played anyway, oil, 3. 20 in new jersey. Were at 94. 11. Look at the dollar. Im waiting for 2000 on the s p oh, okay. Well look at the dollar. 2. 37 on the tenyear, still above ten years in spain. And then for the euro, im looking for 1. 20 handle at some point. 1. 31 right now, but not to say that if we do get a little more hype in this i saw an interesting piece that i finally read when i went home, if they try to drain reserves now, theyre going to have troubles. Did you see that . No, i did not. Its complicated, but its not just not a slam dunk. Youre talking about u. S. Banks . The fed funds because every night a bank has to get down to a certain level of reserves or get up to a certain level of reserves. Theres so many reserves now, that they can just ignore it. They would actually have to jaw bone all the banks, which is what she was talking about. But this exit is going to be interesting. I dont know. The more that i think about it, there has to be some consequences to staying at zero percent. Its long because theyve just fed it as zero permanently, then. Its all about when is the problem. I know, but it just here is is what worries me. That if people talk about because world stock marketes and assets have gone up. You saw those numbers, 25 return. What if a lot of that is not justified and once its done, it comes down really hard . What if they inflated a bubble . When it first causes a lot of you heard Marty Feldman the other morning, the reason people have gone into these asset sess theyre desperate for yield and they ignore risks and take auto risks they shouldnt. Lets look at gold. Did you buy any gold yet . Im worried about you in case theres a solar flare and you and those 9 Million People are you always keep enough gold on hand to bribe the border guard. And that would be the guy at the tw bridge in this case. We dont have any. No gold . I dont think we have gold in the house. You are pretending on the good will of your fellow man. You think gold is the best in a crisis . No, im not going to tell you what i think is the best. It would be politically incorrect. Theyre very difficult to get in new york city. They are difficult to get in new york city. But you might have one. Maybe not there. I have a dralgdz. Is that the thing you spin . That is very sweet. We dont want to talk about it too much. Spindreidel that sweet. We dont want to talk about it too much. That is very swe. We dont want to talk about it too much. It was more of a psychological milestone than anything else, although i dont think s p milestones matter as much because then usa today gets involved and everybody else. It has not been on the front page of any of the major news stories. Lets talk about the markets. Joining us now, abby zoolittle. Am i right about that, abigail, that i didnt i mine, i saw it on some News Services mentioned it last night. Then i was watching it and they said the market closed at a new high. They didnt even mention that the s p was above 2000. Its not like the dow, really. Yeah, i think that youre probably right about that, joe. But what you think youre definitely right about is its a psychological milestone. Technically, it means very little. I think that youre absolutely right, there are going to be consequences to this zero rate policy and the bubble that is blooming here. So as high as the stock markets go, i become bearish. Its important to break it down over the near to medium term and the longterm. When we look at this year and what has everybody so excited, were really looking at a sideways range within a trading range. Its easiest to identify on the russell 2000. What makes it important, this range has started to reverse the qe3 uptrend. This happened around a qe1 and qe2 uptrend. This typically signals a correction is coming. When we push that into the medium term and take a look at the dax, you see thats preci precisely what did happen in 201 1 when we see that sideways trend. Same sideways trend appears to be reversing that uptrend and i think a correction is likely. But return to go your point about the big consequences, that would away severe selloff. When we take a look at the longterm chart of a dow and, really, the one thats going to garner a lot of widespread media attention, you see that its trading in a multi year trading range, hitting up on resistance, selling pressure where investors have typically taken profits that have sold in the past. What makes this so important, you can see that the entire bull market trend over the last five years has started to reverse. Its hard to know when it might produce a reaction back down, but again, when you see that kind of gyration around the trend, typically it suggests that youre going to see some severe volatility. And i think, you know, as scary as it is, i think that we could see possibly a 50 or 60 correction, an equal and opposite reaction to all of these unusual policy moves. The first one, when youre looking at just august, an august trading range in the russell, how much do we think anything when things occur in august . I mean, the other day we hit a new high and it was on the lowest volume of the year. But i dont know what conclusion toes draw when none of the real players are around. So i dont know if you can you can just throw out august. What was that other chart with the dow where on the y axis, it had 850 and 1400. I dont know even know what that was. Was that 14,000 . You know, i actually am not able to see the chart that youre referring to right now, but yeah, that is the dow over the last 20 years or so. They got the wrong things here. I dont that must be the that must be the s p. Because it was at 1400 and 950. I didnt know what that meant because it had sorry. Anyway, maybe they labeled it wrong. So you say down we could have a 50 correction . I think that we could be looking at a very severe selloff. We saw it start in basically a bear market. Unfortunately, i think it could really come on a crash, similar to what happened in 2007. Its hard to know exactly what the catalyst would be, but i think thats the very nature of that kind of a selloff. They start slowly and happen very suddenly. I know you cant tell us the tipping point, but walk us through the timing of what a chart like that looks like. Well, relative to the near term, and the trading range in august, it really does people will probably hate to hear this, but it really doesnt mean that much. Were looking at a trading range that represents massive confusion on the part of investors. It actually doesnt matter. Its the reaction out of the range that matters. If it happens to break to the upside, this bull market is going to continue to go on its manic way. However, if we follow the path that occurred in 2011, were likely to see that pull back down. El rif to the timing around a massive correction, if we look at the part of the dow again, around 2000, you see it took months for this actual correction to take place. In 2007 and 2008, it happened relatively quickly. So each has its own nature. But its that gyration, that breach of the up trend that puts us on notice that we could be looking at some sort of a curious selloff. Well, you know, if you talk to mark faber or others, they would say, all right, so we got into 2007 and we had all this private debt and then we moved that of to the public side. Now the central bankers have been printing money to try to take care of that. If you were to say that we lived way beyond our means globally for too long and we have all this paper money that central bankers have put out there and for some reason if that were to become mark to market or valued at what it really is, then i can see how your whole scenario i think thats mark fabers the thesis that weve printed all this to try to pretend that we can print prosperity. And if you dont have the underlying fundamentals that back it up, sooper or later, its a day of reckoning. And that would do it. I dont need to look very far to figure out why it would happen. I absolutely agree with that, joe. And, you know, with mark fabers view, this is a reaction to a 30year borrowing cycle. This started in the beginning of 1980s. So all of these big up and down in that dow chart, its really longterm policy. Thats why its so difficult to time in a way. Can you say for me the rain in spain falls mainly has anyone ever asked you to do that before . No, i can honestly say nobody has youre not related to her at all . You dont even know her . I think she might look like her a little bit. She can play the role. It depends which one youre talking about. I want you to be right there, though, with the hat and everything. No . He has no idea what thats the original may fair lady, rain in spain. Oh, okay. I can honestly go ahead, abigail. I cant do it. No, i can honestly say that i frequently am called allies ya. I have been called the sound of music because Julie Andrews played, so ive pretty much heard it all. Cool. Absolutely. Thats exactly it. Okay. Thank you. Well see you later. Thank you. Such a great scene. With the rain where she finally gets through with the pronunciation. So charming. Not my fair lady. Ill go to the literature where i know i can identify. Movies, you just give me a blank look. Scarsdale fine literature. So you can give me a blank look on this one. Are you ready . Is it about technology . Its about technology. I dont even have to work on it. Go ahead. Another buzz about the apple product launch. The company is expected to introduce a larger version of the four inch iphone. Now the latest reports saying the company planned a bigger ipad for next year with a 12. 9 inch screen. That compares to 10 inches. Some people say that this could become the sort of competitor to a laptop. That by going to this side, it finally would become its got to have power, though. A replacement, if you will, for a laptop. Same as a samsung. How big are haas . Large. I dont know. People are trying to go bigger on their phone, but i thought smaller on on their laptop. What i find, the ipad cannot compete so much with the mac book air when it comes to computer processing. Is it the computer processing or the fact that it has a keyboard . No. No, no, speed and power. We will see what happens. By the way one is september 22nd for the phone and the other is now the 9th of september. If these phones become any more ubiquitous with kids and these devices, it just scares me what kind of world were going to be living in. Every kid i see, its like theres another one. Children of the dam where theyre all walking around, theyre running into each other, they dont seee each other and theyre looking at life occurring on their phone when theres life occurring all around them. Its going to be right heesh. They dont have to look down any more. You wonder if life is going to be not as much fun when were on a grid. A lot of these people are on a grid already. Everything that theyre doing is right here. Did you know this was going happen in the days of the pager . No. Youre sounding, you know, like old people complain about yeah, yeah. Dont do that. Old, yeah. You know who decried the invention of books because no one would memorize anything any more . Dont be like that. Did he, really . Yeah. One of them said i think there were three of them, werent there . There were three, yes. But one of them complained about the invention of the written form. We will continue to complain about the written form and the ipad. In addition, theres some stocks you may want to add into your portfolio as we head into the fall. And find out what happened to this is black hawk helicopterses. It looks like a blizzard in august. Squawk box returns in just a moment. 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. Check out this video out of oklahoma. The National Guard base in tulsa is now cleaning up an after accidental foam spill nearly buried ten black hawk helicopters. The fire suppress system malfunctioned. The foam is nontom toxic and is much like dish washing soap. But they wont be able to determine if the choppers were damaged until the cleanup is complete. Summer is almost gone. I like to think of summer, though, i include september because i have to. Why . Because september is nice for a while. And even october. And the leaves you know, it is depressing. Because you dont have school involved . No, the season now you know, the fall and leaves and, anyway, morgan oh, snap. Who . You know what . Ill take that as a compliment. We are not related, but ill take it a compliment. Ive said that before, but its confusing. The m is the first name and brennan is the last name. Morgan freeman, morgan fa fairchild and i bet this never happened again. Margaret is not competing with us, anyway. Im allowed to say her name, right . Yes. Yes. Like a gejt anyway, good to see you again. Its good to see you, too. As stocks hit new highs, we ran a screen to see what names outperform when summer is over. So what ill call back from the beach stocks. We take a look at september performance across all of the major u. S. Indexes over the past five years. Here is what we found. Even with the 2011 market downside, the nasdaq 100 posted the biggest monthly gain on average, about 4 . And digging into the s p sector, consumer discretionary, Information Tech and industrials led the back with about a 3 gain on average for each of those. The biggest laggards, materials, utilities and financials which have fallen every year in september. Only 17 names are just 3 of the s p 500 have posted increases. Each of the five past septembers. Consumer discretionary stocks like amazon, l brands, Tractor Supply and in the health care, bristol myers, kerrigo and celgene. All of these have returned 4 or more on average in the tech stocks. Dont forget, september is historically the worst month for stocks. But Michael Orourke of jones trading, chief Market Strategist at jones trading, knows that that hasnt been the case post crisis and thats thanks largely to fed policy. Heading into the fall, hes keeping an eye on the bond markets. Could begin to sell off large caps that sell earlier this month on disappointing earnings, but has since started to rally things like caterpillar, kraft and macys. You know what . With the fed, i dont know if anything is looking at the past, maybe it isnt even tame. It looks like everything went up. But its like nothing none of the old historical or technical or fundamental you know, when youve got 25 at least not 25 billion come in. Right. Or they go to 15. They go down another 10 next month. Well be out soon. Theyre crazy. They get 15. Theyll be out. Interesting. So september and you know what . October is the month we think about. Its the one that should work. Thats the bottom a lot of times. Sometimes it makes a bottom, but usually pretty painful process. Volumes are right with a new high. All right, morgan. Morgan. Theres morgan freeman. Thats who you remind me of, morgan freeman. Exactly. In those jim carrey movies. Thank you. Coming up, the s p 500, the dow getting back to record territory. Whats the next step for the market as we prepare for the fall . And Walter Isaacson, president of the institute and steve jobs author is coming out with a new book the innovators, find out who made the cut. And take a look at yesterdays winners losers. Good morning. Andrew, he came in this morning good morning, welcome back to squawk box in cnbc. In makeup, hes like, im home alone. Im home, my family is not. Theyre on vacation somewhere else. And there were two robbers trying to get in last night, he was putting no. I couldnt find any socks. Its pathetic. Did you have breakfast . He cant shave. Hes a mess. I miss my shelter and my wife. Do you want me to come . Ill come into the city with you tonight. That would be great. Okay. Sleepover. We are doing that next wednesday. You are . Yeah. The boardwalk empire premier. He asked me out. You have to buy me dinner. You have to buy me dinner if you expect if youre going to get anything. You dont call me. Becky is off all week. Joe kernen and andrew ross sorkin. Michelle caruso cabrera. Reuters reports a probe relates to a fouryearold complaint to a unit from rival nvidia. If guilty, the company ka face a fine up to 2 billion. Qualcomm is also trying to end a investigation. Allergan is announcing a special Shareholders Meeting for october 18th. Bill akman is hoping to out of the of the companys board. Valeant would have liked this special meeting to happen yesterday. Right. Ooep hes probably happy about burger king, i would think at this point, isnt he . When one window closes, another one opens. But allergan, hes got cramer went off on oh, big time, ow. He did. Which one . Both companies are not great companies. He was right about that. Ive never been i wouldnt you know, i wouldnt i dont need a i dont like the way it tastes like some flame grilled thing and the fries are its doing better in that regard. The question is longterm can they actually step it up . We will see. Lets tell but some other news. Charles schwabb losing a 15 million arbitration case against morgan stanley. Schwabb accused morgan of recruiting brokers. Always a big debate when somebody leaves one company and goes to the other. What information do they have . They think they own the persons brain and all their knowledge. What can you take from the har drive . Markets are suggesting that they are going to have a positive open after we saw the s p and the dow cross 2000 yesterday. The dow would open higher by another 32 points. Europe in the wake of draghis comments over the weekend had slower weeks so far. Now we see germany and france drawing back. The italian mib is higher by another 38 points. Its essentially flat for europe. Asia overnight was mixed. The nikkei was higher by 13 is points. The hang seng lower by 155 and shanghai was lower by 2. The price of oil geopolitics, wti higher by 28 cents, 94. 14. Whats going on with libya and the kurds. Brent is at 102. 75. With tenyear, 2. 375 . And the dollar is lower across the board. 1. 65 for the pound. The euro is going to cost you 1. 31, almost 1. 32. The yen, 103. 92. And the price of gold, which andrew does not have any of, higher by a buck. Hanukkah gelt. But, you know, if you live in europe, youre actually still better off because because of inflation, i know. But im just looking at it in reference to the slam dunk trade that our bonds that the tenyear would be at 3 , 3. 5 right now. Its been two, three, four years that people have said slam dunk and thats happening soon. How can it happen if spain is at 2. 0 . We cannot go here route right. Ive been at cnbc nearly 16 years and the one consistent piece of advice given out by all, whatever you do, dont buy the long end of the curve. Who would want to get paid only 6 . Who would want to get paid 6 , 5 , 4 , 3 , and yet some of the best trades for more than a decade now. 16 years. Youre an intern, an 11yearold intern . Yes, i was, exactly. Lets get more on the outlook for the rest of the year. What do you think, s p 500, more from here . Weve had low volumes here in the last few weeks. I wouldnt get too excited going into september. You look for opportunities on dips to be adding exposure, certainly in good stock names that youve done your homework on. We see some trends in technology that we think are very positive in the second half. You know, First Quarter we all know winter was very difficult. We accept acceleration in the second half and i think a good place to be is technology. Like what . Semi cap equipment is building up to a good 2015 story. Capital intensity going into the development of new nodes that, you know, intel and tfmc need to expand out. So old fashioned. I know. But it has good Downside Protection in a market where youre hitting 52week highs like yesterday on low volumes. Good top line growth in margin improvement. Does he have the economy, do you think, for the assumptions hed made . I think the Company Continues to improve. You look at the aggregate indicators. Theyre at the highest level theyve been since october 2007. This is an economy thats poised to continue to grow. You will need some cap ex. You will need some hiring to get some of these optimistic supgzs for the second half of the year. But its undeniable that the economy is growing. Now, remember years ago mervyn king kaut called it the noninflationary consistently expansionary . Weve been calling this denial at oppenheimer funds, which is the noninflationary access expansion. 49 of americans are in denial of it. So its contrarian. It is. Its not even lackluster expansion. Whats your expectation about what happened with the tenyear yield and when if ever its going start to rise . Well, you can go back and look decades and youll see the yield track nominal gdp. Theres been a couple of times when the tenyear has been oversold and overpaul. It looks overpaul compared to where nominal gdp is. So if youre looking at 237 on the ten year, and nominal is 10 1 2, you would think rates could move higher. Weve been saying low for long. Low doesnt have to mean 237 forever. What it looks like mean is this because of europe . No. Is it our nominal gdp or europes nominal gdp . You have a lot of things going on. For one, you dont have a lot of supply coming into the markets. You have the deficits going down. European debt is expands. And the fed is buying everything. We have an aging population. You see a big breakout in inflation or a failed bond auction, none of the three is likely to happen. Youre right, if spanish yields are going to be at this level, its unlikely to see. And why would the stock market ever become less attractive if everything is under 2 . But what is the bond market . We have a technical person claiming the world is going to end. You could go back to 1926 and look at the stock market. Youll find over rolling monthly oneyear period stocks are up 75 of the time. You look at rolling monthly 15year periods stocks are up 70 of the time. Its not a mean reverse asset. It pays to be a although the media will like that more than the well see. That was a question on the origin. Its from Yankee Doodle dandy. From that song . Yeah. Anyway, coming up, a final jeopardy session. You watch it and you complain about it. I dont understand that. Im not looking into my phone walking around, tripping into people. Collisions. We need stop lights where kids are. Nobody looks up. Coming up, american airlin s s is out, out of orbit 37 could this mean big trouble for the future of travel websites . And superman and lois lane take the ice bucket challenge. Id like to see them take the kryptonite challenge. Will that hurt them . No. Well be back. How do you beat the number one seed . You just have to win 70 of your points at net. And keep unforced errors under 10 . On the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. Data can help show you how to win, no matter what business youre in. Today theres a new way to work. And its made with ibm. Zloo welcome back to squawk box. Take a look at u. S. Equity futures at this hour as we continue in joes words to melt up. The dow looking like it would open higher again today, up by 30 points. Nasdaq would open 4 points higher and the s p 500 up a little over 2 points. Lets show you some video. Superman and lowy lane taking the ice bucket challenge. They were on the sed of batman versus superman, daughter of justice. The man of steel getting a few more extra buckets for the cause. No sign of aqua man. Hey, andrew wow, thats a lot of water. Aqua man . Thats kind of silly. No. Is that for real . I think those are real. Thats a rel tshirt hes got on. I dont believe it. I think thats padded. Those are too perfect. Theyre shaped so perfectly on both sides. Hes superman. You are so cute. Nothing, nothing, im not saying anything. Go ahead. A judge rejecting a bid by the United States to dismiss a 25 million lawsuit by aig hank greenberg. This has to do with the governments government bailout which greenberg says the was illegal. The judge says the case is complex and deserves a trial. That would be unbelievable. How old is he . Hes in his 80s. He almost breaks your hands when he you know he lifts weights. Hes in great shape. Hes a role model youre not thinking about thp. You know, 37. Youre immortal. Go ahead, say it, im immortal. He wouldnt buy insurance if he didnt have to. Insurance is hard. Thats a hard one to buy, especially term, you know . Its expensive. Its every month. How does it pay off . Theres only one way. You know, its like buying it is like anyway, next but you need to. Next, all the stories for the chairs plus a big upset for the u. S. Open. Were going to have that at the top of the hour. Who got upset . At what . Youre kidding me. Miles nadal. And attention surfers, Southern California is calling you. Swells created by Hurricane Maria are expected to peak at 13 feet today. All the news, so last night all the nightly news led with two forms that arent expected to lit hand. Every night you could lead with weather. They could top ought at 25 feet. Which would be the biggest in a decade. Newport beach is expected to see the biggest breakerses. Its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. All right. We are in the chairs and im starting today with, this is, you know, Goldman Sachs lifeline in particular just cant catch a break. This is the telegraph of london. It was just in uniform i brought this. This is a closeup of the big headlines. Come on, lloyd superimposed next to gadhafi. They will face trial in london whether or not Goldman Sachs conned a libyan self funded that lost some billion dollars, they got really mad about it. I mean, come on. Lifeline next to gadhafi. Could goodman sax lose to libya . I think its possible. I dont know much about the my point was only that we had miles on the other day saying lloyd is out of the spotlight. He was thrilled about it. Thegy cant catch a break. There is four people on the protest poster. Four i dont recognize the fourth guy is lloyd blankbife. For two years hes been in a very good place. We know him. Unfortunate unfortunately, jamey wright diamond amoynihan. This may stop it. Someone here sold libya crap that would have undermined th e there, maybe thats what brought down gadhafi. They could have been, you know, like raul along, remember at quest, he was like working for the government. Yeah. Let me show you another story. This, hes the worlds bravest traveler this morning. This is a picture pence a Malaysian Airlines flight. Whats happening, apparently, nobody is going on his planes. Im shocked. At all. Picture after picture. That will probably be the Safest Airline around at this point wouldnt you think . Statistically. Do you get a deal on that . I dont know what the price is. You get one of those braces where the seat in front of them cant move back. I dont know that that matters. Some things have a lot of bad luck. Dont do it. Talk about good luck or bad luck, you dont feed luck in this instance. There is a story in the telegraph about pot, marijuana soda. So there is the development of soda that you drink it and its laced with pot. Its called legal. Its being sold in the state of washington. This is an innovation. Technical advancement. Apparently, its relaxing. Im sure. They have three different flavors. They will also do coffee pot. So you will be able to get an Early Morning with the caffeine in it. Oh, thats. How do you feel about this . Im sure legislateors will knock that down. Its the equivalent of mixing red bull with liquor, which makes eight terrible combination one gives you a buzz the other thing brings you down. Were you focusing on this other story, is that how you happened to see the oh, right next to it. This is what joe is referring to, judges xxxtra credit. I mitsed that story. I didnt even see it. Someone told me in my ear, in my mind to ask you about. They actually say the judge had to watch deep throat for like hours and he said that, he gave a blow by blow description of the climactic scene. The judge is 83yearsold. That goes to show you this will never stand up in court. Did you see, what about that . That is not a good thing. That is not no socks on andrew its the summer fashion. I have nylons on. You do. Did you use a dull aiz i razor on those . No, there it is. Never mind. Its not on the leg, its just thin, it sort of stops because of where the sock line will be. I think the pressure of the socks. As you age. 15 seconds. Coming up, he wrote the book on steve jobs, now hes taking on the rest of the Digital World the info rate issors, walter isaac unveils some of the fames that shape the future right now. Squawk returns in just a moment. Ring the bell on another milestone, where are all the bears and are they coming this fall neighborhood, plus, out of orbits. American airlines is pulling its flights from the travel website. Is this the beginning of the end for travel websites . Retailer tiffany getting ready to report. What will be in the blue box for investors . The second hour of squawk box begins right now shine bright like a Diamond Shine bright like a diamon ha ha, good morning, welcome to squawk box on cnbc. Weigh tried to nail him down on. We can get that answer by the end of the show. Playing the poor guy. Andrew ross sorkin, becky is enjoying time off today. Our guest host the aforementioned walter asacson and author of a few book since steve jobs the innovators coming out in october. You can preorder it now i bet. We will have a conversation with him in a couple minutes. Did you see what happened at the u. S. Open yesterday, a 15yearold American Craft rin c. Cici bellis. She knocked out the seed. Its spanish. Thats not spanish. The first major upset of the open. It doesnt matter how i say it. Get the. She is unable to claim the 60,000 prize money for advancing, because she wants to maintain her am cure status. The most depressing thing i realized. I was there with andy roddicks when he won. Hes now abandoned. I didnt see the next one. I was in there. Its been 13 years since an american won a major in tennis. Did you foe that . No. 13 years, our top seeded guy is this big, you know, jamokey like 6 8 eisner. Hes like 13th. I dont know water happening in american tennis. Isner. Eisner. Very funny. This week pay definitely be a slow one on wall street. Someone forgot to tell the bulls. The s p closing up for the first time ever, the indeck up nearly 200 . Consumer directionary stocks have been the best performers since then, that sector up 1330 . The financials all gaining more than 200 . The worse performing subpoena subpoena Group Telecom services. Keep in mind. Take a look at the screen, the worst performing groups are up 90 and 80 respectively since march of 2009. Kind of crazy. Lets tell you corporate fuse as well, two Public Companies are seeing their values soar. Its now worth about 6 billion. Its based on the current round of capital raising. It was led by twitter cofounder jack dorsey. That company is previously valued at 5 billion earlier this year. Snapchat surging, they now agreed to invest in the instant messaging company the valuiation now close to 10 billion. Snapchat said to take down a bid from facebook earlier this year. Maybe theyre looking smart. With eshould talk to waller about this. Its not worth 10 billion. Its not worth doctor 10 billion as an instant photo thing. But its a way that people can build on it. By the way the market says its worth 10 billion. Klein and perkins says its 10 billion. The park says a ferrari is 200 billion. There are lot of things the market says. Yellin an company, a lot of things are happening globally based on central bankers. Thats what were worried about whether this any of these things are justified. Are those signs . Is it stamps the Baseball Card the other day . It goes on and on. They are getting two cents to the dollar. Are they . . Remember the unmade bed with the used prophylactics and the zbr cigarette butts went for 35 million. I just wanted to start the show by having me criticize the free market. Thanks. So you are saying, you are calling a zero Interest Rates for five years free park. Im not convinced. Its got to be truly free. Gloves are coming off. When you try to make it crystal. Its into its nice to do it in space. If there is one piece of dust, its not perfect. You know how many pieces of dust in this free market . You are shorting all the stock . No, ill stay here him im stay long. As long as yellin is in charge. There are still a couple chairs left. I will dance until there is no chairs left. When there is no care left its bad. It is. All the exits. In global news, imf chief Christine Lagarde is under formal investigation from her days as a finance minister, it involves a fwoith case Nicholas Sarkozy was awarded 343 euros involving a bank credit. Prosecutors say the war was improper. La gardes lawyer is appealing. Crazy story. I think its totally political. Its about whether or not sarkozy influenced her to use an arbitrator who then decided against the state like as if she knew that. Lets get back to our guest host, Walter Isaacson author of a new book coming out in october, the innovators, how digital hackers and geeks started the computer revolution. Walter, welcome. Thanks for having me back. The book is out for real, we hope to have you back. Ive read it. Its a great story about all sorts of people none of us at least had no idea about. Its amazing to me the internet computer two most important inventions of our time. People like yourself, we dont really foe whoible vented them. It was sort of this wonderful collaborative magical process of really cool people. Heres what i want you to help us with. If you were to write this book 25 years from now and you were to look at the current crop of innovators, if you will, who stands out to you as sort of the top of that list . First you have to look at the big plans, which are mobile, social. I think the ability to crowd source and collaborate and do that sort of interactive type of collaboration. I think, obviously, the google people are still leading the way to me. I think elon musk is enormously creative. I think jeff besos who is transforming many industries. Are you not a fan of besos . I am a total fan of besos. I am a fan of publishers. I finished this book. You are not pun u published yet are you . For the, except that, you know, i have a really good attitude, Jonathan Clark and people, copy readers, legal people put together the art and the pictures. One of the things that happens in the digital age is middle pen get disruptive. The publisher is sort of the middle man to me its fine when they disrupt the industry. When you disrupt my publisher i get kind of defensive. Even though you shouldnt. No, i agree. I think jeff is doing great for his shareholders. Hes probably doing good for the consumers. I get protective because i dont like people thinking of the Publishing Industry as unfess middle men. I actually sent it with enormous value. I want to talk about uber. The ceo of that company, hes been accused. I dont know if you see the online. There is lots of debate about the tactics that uber has used what they call underhanded tactics to underpine lift. Which is competitive. I have these technology innovators, steve jobs, who you wrote about so brilliantly has been accused of doing what might be described as illegal, underhanded, if not illegal actions is there something about these guys that brings them close to the edge, if not over the edge . As part of what they do . Yes. Steve jobs believes the rules didnt apply to him. Ord fare rules didnt apply and thats why hes a great genius. Those of us who stick in our lane, were not going to invent the iphone, were not going to disrupt the cab industry, the tech industry, so i think almost innovative, including elon musk, whatever its like, force those are the rules for the old economy. These rules dont apply to me. Thats great. It allows to you disrupt some industries. It also occasionally causes you to scoot closer to the edge. I dont know that uber has done that. The uber case is they are sending people pence cars and trying to recruit the people out of them and also, yes, order it. Is that illegal . Ordering lyst cars and can selling them over and over an over igen. Thats bad. How is that different tan click, click, click, click is this. I think it hurts real people trying to do tear jobs. The average person trying to make some. Also lets be clear, unless you know, i dont know that these things, these allegations are true. We should say travis has said this is not true. He says its not true. We did talk about apple at the w4r50e6789 see this megaipad. Is this an innovation that we thought we were going to get when you finished your book and there was all sorts of speculation about sort of few areas that steve jobs buddy will pioneer including television . You know, one of the things i learned about writing this book, there are two things you need. You feed vision and execution. Sometimes you have to prepare people. Steve jobs is a great visioner. Tim cook is about as good as you can possibly get at executing. They need andy grove. Vision without execution is total hallucination but the reverse is also true. If you have execution but dont have a lot of vision, its barren. Apple executes very well. I cant wait for this new phone. The Industrial Design team is the best weve seen since, you know shares in the 1930s. You know, its great hower that executing. But i still am looking for the big thing they may do. It could be a brift wristwatch thats connected. It could be the tv, a camera thats disrupted. There are many things i think steve jobs really wanted to done. I think tim cook is a great leader for apple now. I think hes about to show and i think well see it this fall some of his new vision. Thats what we will have to wait to see. Meantime, we will get much more from walter. October 7th. October 12th. Walking dead season 5 premiere so that is a big thing. First you have waller issamsons book, then terminus, are they cannibals, will they owe owe i got to know i have no idea. No idea. Hes talking fanatic. Walking dead. Talking heads. He was on talking heads. I hear okay. It all just is coalesceing around. Chris. You met him real time. All right. Great. Anyway, okay 12th. I loved it so much. Is this the beginning of the end of the travel website industry . Check out what could be on the horizon after a Major Carrier stops orbits. Moments ago, earnings beat better than expected revenue t. Company is raising its forecast by 1. 5 wind chill le ask whether Luxury Brands will remain strong with 119 days until christmas. Squawk rurnls in just a moment. Tdd 18003452550 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. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. 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Anyway, we immediately got comments, soon we said this isnt news, the tag between these companies if its not worth it for American Airlines, it koofts too much to do it up. Then again orbits cant compete with travelosity. It almost remind me of the cable battles, sooner or later they get together. Is it over . Is it going to stay off of orbits . This is a result of three things, a failure between american an orbits to agree on business terms, costs, performance and technology. Orbits wasnt performing. It was americas worst performing online agency. They didnt revenue the profits they wanted. It was too expensive. They couldnt help american retail the way they wanted. So american pulled out. American is still on expedia, still on surprise line and so on. The other airlines are selling this. We have to recall, there are a lot of people who are brand loyal but there are even more people who are not brand loyal and the airlines foe that. They got to be on these retailers, not when its too expensive. If i were going to try to do this, i dont think id use orbits if the entire american universe was not going to be a potential part of the deal. And thats a good point. First, three years ago, american orbits had a dispute. They pulled out of orbits, tear business fell approximately 5 . With eseen this movie before. We know how it ends and now with american representing nearly about 36 of u. S. Capacity, you know, this is a big move. Im very surprised orbits could not find a way to make this deal work. I think its a huge loss for them. Well see how long this lasts. Dont you think, who is going to put american, though, american is american in a stronger position you think . Absolutely. American is driving this. And they will not suffer one bit. People who are brand neutral can still buy tickets on online and travel agencies. Henry, if im on orbits or one of the orbits sites and i cant see the other listing, im not going there. Well, you are right. If you are feeling that you want to be, to have full access to all the airlines, orbits now wont be able deliver that to you. Do they know that american isnt available . It may not be obvious to them. If they havent noticed the papers, they lock in, they check. They know. They know now. I think that people are starting to learn. It all depends on what kind of pageing person chooses to make, but, you know, at some point, they will say, oh, wow, im seeing options for delta from here, united and other airlines. Orbits is going to suffer. There is for the question about it. This is probably when we talk about the industry, amazon and is that in the digital age, this, the middle people get this ineebriated. Whats that orbits is. In this case, its different tan five years ago when we saw this movie from before. More and more people are online. They can get it without the middleman. Cable, you cant really they got to settle if cbs isnt on comcast. Isnt that what were saying right here the content is the airline ticket, right . They deliver exactly to the content now. Wage to an American Airline site. Whereas you cant wage at cable to the tv. Do you believe the consumer is smart enough to go to the american website. Im not sure. They dont want to bother. Lets remember something. Orbits is one of the smaller competitors out there. You know, american is still the two largest Online Travel companies, expedia and priceline, theyre still on fair portal and a lot of other websites. The consumer has options out there. This is orbits gain they lost. The other in orbits favor is they have been emphasizing selling hotels, if you want to book a hotel him radio, thats fine if agents that what you use orbits for. Orbits lost the key players the largest in the u. S. Its shameful on their part. Good to see you today. On the side, you ought to do a little atmosphere reach. Its a growth industry. I dont think you need to know a lot. You dont need a lot of experience. The other 97 . Thats right. Just go into that, this little ancillary business, thank you. All right. Coming up, next, e by a nation the options site is revealing the most popular items sold, mens cologne is big if new jersey. Is that why you smell that way . Squawk box returns in just a moment. Ebay has popular items in every state him some of the items caught our attention, delaware robotic vacuums, new jersey mens fragrance, new york firearms in supplies, you are not surprised . Indiana musical instruments, michigan software, mississippi mattresses, colorado hydroponic supplies, security under surveillance. Did you make that up . No. Its on the map . Then hawaii vitamins. You know what the colorado thing is in the new legalization of marijuana . Of course. Why isnt it on the map . The graphics guys went up to talk to him. That is the postpopular item on ebay. Robotics volumes in delaware. Water that about . I know. Everyone is careful about saying things about the flyover state. You will not make comments about new jersey with gra granses . You cant come up with any nasty yooin antijersey there are many combination, maybe you can put them together. I will hold my nose. A total elitist antijerseyite you work here . Its so nice in here. Are you wearing bieber . Im wearing beach, Justin Bieber fragrance. Water in the blue box . Looks like strong profits and guidance fromtive fis. Does this mean luxury players will keep climbing . Retell guru joins us next on squawk box. Aell guru joins us next on squawk box. Iell guru joins us next on squawk box. Lell guru joins us next on squawk box. Ll guru joins us next on squawk box. Guru joins us next on squawk box. Guru joins us next on squawk box. Reports coming in about Time Warner Cable addages. Time warner tweeted, were working to restore services to all areas as quickly as possible. No etr, estimated time of is there people who cannot use us right now . I think theyre basically pleading please let the superior company take us over and fix us, comcast, basically, this will never happen again, hair, direct, did you see thats passed mustard . If that goes through, there is no way to say no to comcast time warner, is there . I think. You got to come up with the right answer, this is the biggest softball. Say, for the, it isnt. Time warner came cost deal does go through. Your integrity is disgusting. All right. Making headlines, michaels shares earnings of over 8 cents a share. The street had been looking for a break even quarter. Crazy video coming into the newsroom, harsh weather hitting the denver area with heavy rain. I paused for that reason. Heavy, rain, thunder and lightning this week. Keep trying. A gurgleing man hole cover couldnt hold the waters back, the lid flipped and flood waters spewed everywhere. Tiffanys reporting a better than expected revenue in this bifurcated economy. Check out the shares up 26 in the last 12 months, indicated to open at another new high of this morning, joining us now with reaction. Global break down of how retailers are fareing, the chelsea Advisory Group and chief research officer. Whenever weve talked about tiffanys in the past, we used to have to talk about japan. Not as much anymore, do we, dana . You have to talk a little about global. Certainly the americans is the important region. That was a part of the beat today. The americas did come in very strong. Thats encouraging for tiffanys. We had a lot of retailing information data out over the last month that got us thinking that things arent so great. Im sure you were watching when we talked about macys and even some of the high end, where we to the they would do better him when macys finally said it, we said, there is something bigger going on here, because of all the firms they have been able to execute. Does tiffany now tell us the high end is still okay . The high end has been okay. One of the things we have been seeing is the u. S. High end is solid. The weekneakness in the tiffany report was weaker. Those were the greater in europe are weaker. Those are the greater exposures than in north america. We are seeing newness in product like you have in tiffany. Check out the tiffany tea collection, joe, tell us what you think, you too, becky, thats the new item from the new design director. Thats what should help to drive the sales as we move forward into the second half of the year. Tea collection . Yes, the letter t. I thought it was tea cups. Sorry. No, no, no, the letter t. Thats one of their new items thats out. First collections on the new design director. Thats what will help drive sales, products innovation and newness, keep in mind the gross margin was better at tiffany also, higher pricing helps to drive this earnings season. Da fa, we have known you for so long, bears sterns, have you your own environment. You are there leading some research meeting, do you sit around with your employees and say how can we figure out janet yellin, the high end and no one can save and get any return on savings, its a bifurcated world right now, do you talk about that to try to physical out which stocks can still do well . Now they call it the new neutral . Rates will stay at zero forever. Do you talk about that . Constantly. If you were at our morning meeting this morning and on monday, were going around the room, where its gaming and lodgeing and whats happening in las vegas. Whether its restaurants and pizza craze. My gaming an a list chris jones is all over vegas, my pizza restaurant analyst is talking about pizza and joe fieldman our analyst is down at walmart now seeing water happening with the discounters. There is a change going on and the change is its less worth. Hopefully, that means Better Things for holiday 2014. Because black friday is coming before we know it. So will it change when the labor market gets a little tighter and people can ask for a little more money and we do see some Income Growth if terms of wages . Has there just been too much slack for anyone to get a raise . It is that. Its wage growth. Its also, think about what people have been spending money on. They have been spending on travel, leisure, they have been spending a little on the home. Discretionary spend has taken aback seat. Maybe one of the change in the back half of the year is whether its few product coming out from the iphone 6. Whether its the new iwatch coming out. Or whether its just new goods, the tiffany t collection, what we are seeing out there from the active wear, whether its df corps or under armour, all of a sudden its a time to buy. Michaels did well today the hobby shop and also tiffanys. Are we seeing it at all levels of the market now . We are seeing slight recovery, yes, in all levels in all different categories. Its not broad based from every single retailer. The inflexion points connect the dots are definitely better. Whether its at limited or macys, j. C. Penney, what we have been seeing out there, look at awe mentioned with michaels, we will get sums Williams Sonoma tonight. Those are interesting reads. Avoid what, name what with both hands . I would buy with both hands, look at the s corpss, active wear the nikes of the wompld i would take a look at the Holiday Season coming, look at macys. I think that certainly is interesting. I think gas is doing better. Watch urban outfitters, three people anthropology is continuing to do well, a turnover a little if urban. If tiffanys is doing well, its good for michael kors. What would you stay away completely from . You want to watch some teen retailers, the aeropostals of the world are struggling out there. Its a calgary. Lake i take a look at the Department Stores like the bond funds and state stores. Theyre having a struggle these days. Dana, thank you. Thank you. See you. Coming up, being besos. Hes created an online book store, turned it into a store for everything. Some say hes the next steve jobs. We talked about it a little. We will talk about it more. Stick around to find out. Apple ready to release a few ipad with both a bigger screen. The unveiling expected to be days from now. Andrew they made a bigger ipad. They made a big pad, is this a maxipad. Its your first joke in three years that work. If i said it he wouldnt have laughed. He stole it from me. The new iphone, a closer look at what people want from these devices and what it means for am when squawk box returns. Youre driving along, having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back. Checking the futures right now. I wish you could see the commercial break. The dow would open higher, the nasdaq higher by four. Making headlines, walk is preparing to put import duties as high as 17 on mexican sugar, this would be a victory for the powerful u. S. Sugar industry. Candy makers have to pay more the sugar industry makes me bananas, leading with support from washington. Just disgusting. We were talking to walter obviously all morning. He has that new book coming out next month, its october. A little over a month. The innovators who created the internet revolution. Jeff besos is from the internet age. Is he one of the greatest info saitors . He profiled him, hes called titans of fortune. Where do we put him in the grand pantheon of innovators an geniuses. I think hes right up there with the rate is innovatorsed on visionaries. How do you compare him . I think there is plenty of room at the apex to put him there, together with steve jobs and sergei broom, larry page and elon musk. Let me ask a question, though, all of the folks you just mentioned, fixed out ways, oddly enough, not just to innovate and change the way we all behave but to make money doing it. I could argue to you jeff besos figures a way to change the way we behave but how to make it a profitable enterprise, not to say profitable, immensely beautifully profitable . Its interesting you say that, because it resembles what happened back in 1999 when he went public in 1997, everybody said this was going to be amazon dotbomb or amazon dotorg. It continued and its first profit was if 2001, i think it was 5 million in one quarter. That same issue continues. He continues to grow. He continues to innovate, continues to develop and continues to dominate and i think at some point were going to see these results, the markets seems to backle up. Will he be better phone for changing the Shopping Experience as we know it or this whole other side of this Business People dont talk about which is really the web services stuff. The clouds. The cloud stuff, sort of back end to the internet that hes built and all of the revenue and money that may get associated with that from the enterprise where you can. Where there is more margin. Where you can extract some margin. I think he is obviously focused on that as well. I think the reality, his legacy will be more in the terms of the way he innovated ecommerce and created a whole new way of experiencing a virtual unlimited supply of merchandise. Every innovator, i would argue, close to every innovator who has had the type of success we talked about has had some runin with the law with regulators, steve jobs had his runin. Bill gates had his runin. Are we on the verge of seeing jeff besos have his own runin. Visa vis this shezet, i dont know if its monopoly power to date. Did you see that coming . Well, i think there is so much information coming out about the shezet deal with colbert coming out saying he is one of the authors of has shchet. I dont see that as a regulatory issue thats going to arise. I think more the question is, why has jeff gone to such an extent of creating negative publicity in connection with his fight with that Publishing Industry when he has such a positive story to tell about the kindle and the evolution of ebooks. Whats the answer to that . Why would he take this on . I think jeff is actually driven by water good for the consumer. He loves to disintermediate things, he likes the taxing industry. When i was at time we decided to make jeff besos the man of the year. Just as we get to the end of the 99, all of a sudden the air looks like its coming out of the internet bubble. So i talked to don logan the president at the time. I said, look, are we making a mistake doing that . The internet may bust. He says, no, jeff besos is not in the internet business. Hes in the Customer Service business. Thats why he will be around another ten years whereas petfoods. Com and the others will be gone. I think thats right. I am wearing a blue button down shirt. By buy them from amazon even though than l. Almost bean, its easier to do it through them. I think he will be remembered as a pure disruptor of how we shop. Why dont any low tech guys get. When i think of besos looking at the world, decide whack he did, i would never have thought it was possible from the warehouses and the distribution, i would have said the same thing with fred smith looking at the post office and the infrastructure it had to be able to compete against that, i would have thought mci, mcgowan and the other guy or ma bell. Why does it having to techs, why cant it be guys that look at the industry. Look at what fedex did to the post office and at t and mci. Were in a technological revolution. You would agree fred smith would be there . Absolutely. Besos, for the doubt in my mind, he should be there. What do you make of besos going into these new areas. He wants to be in media, for example. Theyve created television shows, thus far has not had the traction they would have liked. Yesterday they bought twitch, which is a game, a videogameing. Its more than videogameing. Its actually spectator videogameing which is kind of a unique evolution. Its going to be froming to see how that plays because i would have thought twitch is a Better Company for google to acquire with youtube. But the result is that theyve acquired twitch. There is a really good inner connection between twitch and the ability to bring many more examiners what jeff is saying about being customer centric. Do phones make sense . Is there an outer limit to what amazon is capable of . You know, steve jobs was always asked that question. He insisted on focus. He used to make fun of larry paige. You said, you are doing a million things. You will be like microsoft. You arent doing anything right. In 19 nation, he cut out the product lines and said we got to stay focused. Its interesting jeff is not following that path. The question is, does he end up like microsoft where hes products im for the expert there, i know everything he does. Thats a good question, right . Everyone that went into web services did a great job at it. If he executes well on everything, he will be successful. Ereader . I find kindle to be the most amazing wonderful experience. I think the ebook, water interesting about the ebook is walter in 1999 when time came out with that article, they said the kindle would become jeff besos legacy. It is a connection of the hardware and software, which is what steve jobs did and jeff besos does. Thank you. I wonder whether you will be writing a book about besos sort of a lineup. We will continue to talk about it. Thank you. Up next, the tennis shot of the day. It even impressed his heirness, you know who that will be, that would be Michael Jordan. Plus, backtoschool, backtowork. Will this be a september to remember for stocks . Or is this modelfilled summer, is it ready for a fall fade . A deep dive on your money with the deputy cio of pimco coming up when squawk box returns. The road. It can bring out the worst in people. But the mclass scans for danger, corrects for lane drifting, and if necessary, it will even brake all by itself. It is a luxury suv engineered to get you there and back safely. For tomorrow is another fight. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Box, Roger Federer playing in front of a crowd that included another all time great Michael Jordan at the u. S. Open last evening. Federer showing off against australias im going to mispronounce his name. You pronounce it. Matasevic. Roger returns a long shot between his legs, check this out. Hits his opponent in the back. Jordan impressed with the shot. Federer wins to go onto the 2nd rond on his quest for his sixth u. S. Open title in 18th major overall. It was a Michael Jordan. That was it. During the match. Yes, the guy was really sure it was a a winner, huh . Yeah, he didnt bother to pay attention. Then he, look at it. Watch. But then what does he think is happening . He doesnt even look surprised when he gets hit. Thats bizarre. Lets look at the stocks to watch. Facebook downgraded to future tral. Facebook will begin to face valuation head winds next year. Maybe when the fed starts tightening, if they ever do. Smith and wesson shy of consensus, the company lowering the outlook for the year because of iinventories. So people bought so many guns for so long. You think there has to be a pull back in sales. Tivo earnings topped consensus, prescription levels, a Third Quarter profit range falls largely below analysts estimates. We should be able to talk about any business value. But you dont. Guns, isaacsons here, why make trouble for yourself . Were from louisiana. We have children and guns. Do you get guns magazine . Julia reed is one of my favorite columnists. I misjudge you, i got to work. Its the Time Magazine thing, im sorry. The new orleans goes a long way twortsdz endearing. You know, you dont foe in your experience with him, is that a flyover city, new orleans . Have you shotguns . Its a food city. Not handguns. Not handguns. Shotguns. All right. In the middle. Duck hunting. Still to come, we hit the streets to find out what you really hope to see when the new iphone 6 is is unveiled next month. We are joined with the chairman of yelp, max levchen, he is dealing with fertility issues in america. That and so much more when squawk box returns. Shut down. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. Chocolate, soybeans, thisand apricots. Made with what kind of chef comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. Watson turns big data into new ideas. And not just for food. Watson is working with doctors and bankers to help transform their industries. Today theres a new way to work. And its made with ibm. [ male announcer ] during the cadillac summers best event, lease this 2014 ats for around 299 a month. Hurry in this exceptional offer ends soon. A market milestone, what will september have in store . Its back to school. Its perfect cursive, any more brain busters . And back to work. What . Three hours late. Whats the deal . Find out where you should be putting your money to work now is bicker really better from from apples big screen iphone, guest host an apple expert, walter asacson sounding off on the future of the tech giant. Microsoft, apple and google. Could the new operating system be an attempt to kick the tech giants out of the country. Find out as the next hour of skwux begins right now. We were told the ball was out. So i few he had lobbed it out. So it didnt matter whether federer hit it back. Thats why it didnt jerk. Twitter, thats maybe the one good thing about that stupid services that people do immediately. Welcome back out of squawk box here. Dont respond to that. Yeah. You tweet. You dont tweet . Yes. You tweet, too, joe. I am, therefore, i blog. Thats my only but you hold your nose while you tweet, dont you . Everyone can be a star in hollywood. Dont you want to hear what everyone has to say about everything for the rest of your life . I dont want to join a club that will let me tweet. He only tweeted 238 times. Youre not a tweeter. Where are you . Im at 1,200. Oh. No, 47,000 followers. I follow 100 people. I dont like to tweet. Who is counting. You had 1,400 tweets. I know. You are way ahead of him. I retweet some. I arc with you people. I have learned not to. I hide. This is cnbc. We are first in Business World wide. I never get tired of saying that. People at home, okay, we got it. Your first in Business World wide. Im andrew sorkin, our guest host this morning a rabid twitterer or tweerkts a twit. Walter asookson, 230 tweets does not a twithser make you. Its sort of like a shotgun there check this out. Move over sexpack, there is a few product in beer town. You pay want to bring a couple friends, new packaging features fine chance of beer you with put on your wall. You can sing the song. We will tell you where you can find it at a cost co, right . A bit later this morning remember thats the one place. Wow, what brand is that . This is a cute ad. They try to get it in the car. Well, it shows the economy is coming back. Or the pressure of drinking fine beers. Speak okayf booze the Quarterly Results are out. Earnings and estimates falling short of the estimates, the companys ceo from brownforman sid retail inventory reductions in the United States and if europe. Snapchat is now valued at near 10 billion. The numbers based on a recent investment in the making startup. They say kleiner perkins, received up to billions of dollars. Airbnb and uber. Time warner says the cable has been restored. It said it was experiencing multiple outages nationwide. For the word on the full nature of the problem. U. S. Equity futures are pointing to a positive open. It pushed the s p above 2,000 for the first time higher. Overseas if asia, the markets were mixed. We saw japan was hard with 13 points. The hang seng and shanghai was essentially flat. If europe, mixed markets there today. We will see if that continues. You know, flat. Calm it flat when it co himself to europe. Reports this morning, apple is getting ready to unveil a new ipad boasting a bigger screen. Perhaps this event is likely to showcase the iphone. Is bicker better . Josh lipton with a look at what Consumers Want from these products. Good morning, josh. Good morning. Apple executives have described the companys Product Pipeline as the best if decades, but theyre listening to what Consumers Want to see in the new iphone. Take a look at the top rumors out there right now. First, its widely expected the few iphone could have sapphire glass covering the display, its durable and glass resistant t. Iphone 6 will most likely have a faster processor the rumor is that the new iphone will be bigger, 4. 7 and 5. 5 inches. Its that last rumor everyone says theyre happy about from thats too big. I long legged tablet for my ear. I like to stuff it in the pocket. His is too bivenlg its like a mini tablet. Its embarrassing. I have the note. Reporter so that last guy had a Samsung Galaxy note. Some people want a bigger screen. The majority of people said bigger wasnt necessarily better. At least when it comes to the iphone. Guys, back to you. Real quick, josh, what do we make of the rumor. There is the phone issue and rumors about if ipad, itself, being bigger. Do we believe that . Reporter well, i mean, listen, certainly foe the ipad first came out. It was one size, this is more mature. Its possible executives see it as different use cases now for the different sizes, 9. 7, 7. 9 different use cases what makes sense for business might be different for schools, maybe that 13 inch does make sense at least for certain parents. Thank you for that. Lets bring walter, obviously, back into the conversation. We talked about this in the last hour about the execution. So apple is so far under tims leadership has had great execution. I think there has been an argument about the vision or at least we havent seen it yet panfest itself. There has been a lot of talk this year will be the biggest year. Have expectations been set too high . Well, yeah, i think that, you know, steve jobs, nobody can set expectations higher than following in the footsteps of steve jobs. You have to remember when steve had the ipod, for example. They suddenly said, okay, we can make an ipad, ipod min fi. We can make it if different sizes. You know, steve sometimes resisted. He didnt exercise the lot. The notion a smaller ipod can you wear on your wrist didnt appeal to him. But thats what they did. That was innovation as well. I think we are kind of whiteing for the next big market starting in around 2,000. Every few years, steve zrumed the music industry, the cell phone industry, the Publishing Industry with the tablet, the computer and the ipad. Were saying water the next big industry that gets disrupted, that may be a bit unfair. At the end of your book, you talked about the television being sort of the holy grill for him. How he thought he had somehow found, you know the fix to change the business. I thought i think as many people did, in fact, based on your book in the next year or two, we were going to see apple up end the tv business forever. Did you foe more than you actually wrote . Well, aye, there are things you dont put in the booker i dont say now simply because steve at the end was saying things, i feel thats sort of proprietary to apple. One ting i will say, you talk abouttime warner, comcast mergers, the content thing. What steve was always able to do, especially when it came to music is take the content and connect it to a great device and its harder in the Television World to say, okay, we want something where i can walk in a room, put on squawk box, put on charlie rose and incidentally its there, because you have to make deal with the Cable Companies now. I think, i dont know. I think that was one of the harder things. Steve fogged him out, brow beating the seven music labels, to make sure bob dylan and the beetles. That will never not be the holy grail i dont think. Our ability to watch content on a big screen in our house will never, i cant imagine that ever not being something. I think, you know, what steve wanted to do is have a direct content. Maybe we get more sensitive, maybe you feel things like a theme park and you know you get a little water. Maybe it gets neater and neater in terms of the experience. Smellavision. Television will. Dont you think . Yes. But i also think that we have a pretty messed up system now where if i walk into somebody elses house or a hotel and im looking at two remote controls. Im trying to figure out how to get the squawk box and all these things, its more conflicted than it needs to be. We both got there with three channels watching queen for a day when we were kids and watching bewitched in black and white. Look at the difference, look at it where weve come from there. His point. The ipod was such an elegant easy evolution. Ipod, tv is such a pain right now. We have three different remotes. He did the ipod. Which is one rule. I want to get to anything i want in three clicks. If you make it more complicated, i will dial it back. I want to turn on television to watch i want to be able to watch whatever i want to watch, whenever i want to watch it. Easily. Easily. Let me tell you an apple tv product gets pretty darn close. Its really great. Its just not more. We need to have more deals. Walter, steve jobs is able to brow beat the music executives into this arrangement where he was able to then sell the stuff for a dollar. Are we convinced that he, if he were alive today, would have been able brow beat the content guys or the video guys, if you will, in just similar arrangements which would allow him to see his vision through . Because a lot of us, i think there is a view could tim cook do it . You know, does he have the same personality as steve . Does steve have that magic or is it that the video guys saw what steve did, steven, even if you walked into the office today, they would say, we saw what you did today. The balance of power is different in the television industry. Water that show you were touting . Walking dead. Seve said, i want walking dead on demand, wed say, for the, we own that you have to make a deal with us. There is the middleman. We said earlier in the show the middlemen are going to get disrupted in this digital age but the last to be disrupted are the cable passages and cable bundleers. They havent been disrupted yet. In answer to your question, i dont think super man can go in right now and disrupt the cable bundle. When it finally happens, tim cook is taking it because i think he wants to go to work. Would you ever foresee apple ordering lcd and led materials from corning and constructing ard wiring . It wouldnt be that way, would it . Wouldnt they let samsung give you this thing, they would work with the way you access stuff to cloud or something . Theyre not going to manufacture tv sets, are they . Well, theyre going to, if steve jobs world, you really wanted to connect, the hardware the software not that he would have in the early days he built manufactureling plants near coopertino to make the macintosh. Obviously, i dont think hed be building these things. But hed be designing. The Industrial Designers would be designed in california by apple. So everything is in the hardware design to the software navigation to the content would be in the ecosystem. Just like itunes and the if i were tim cook, i wouldnt think i would live up to the legacy. I want to think steve jobs sed said dont wake up every morning to that. Your new husband would be able to physical out the universal remote hookup. Have you no idea. It takes you six clicks to turn the tv on. I have no idea. Were in tv disaster. Oh, yeah. All right. More with walter throughout the hour. Coming up next, the market milestone names you should be investing in now. Pimcos deputy cio will tell us why they are betting on the gaming sector. Squawk box returns to that and a lot more in just a moment. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back to squawk box. Making headlines, another reteller showing signs of trouble. Earnings and revenue fell short of estimates and Gross Margins dropped by more than 2 t. Company said it had to boost park downs to move its seasonal products. Stocks continuing tear record run yesterday with the s p scoring its first ever finish above the 12,000 mark. After breaking that barrier, does this rally still have legs . Joining sus the deputy chief officer, David Blitzer is the chairman of s p 500 index committee. Guys, good to see you. Good morning. David, what do you think, 2,000. There you are. Are you feeling victorious . I think it keeps going. I must say we did it by the narrowest of margins possible. We could have done 1 cent. I guess. Are you pleased. Did you say, gosh, you picked the right stuff. So we got to 2,000 . I think the sentiment is clearly there. Everybody, theyre talking about it today. The people who feel tray missed out are going to start buying. So we get a little pop. Beyond that, the economy is looking very, very solid. Good job growth. Building more airplanes than one could imagine according to boeing yesterday. You know, housing beginning to sort of stabilize, generally, it looks good, anything we will see anything from the feding until sometime next year. Water the phrase mark, are you as sanguine . We are pretty constructive on equities as well as Corporate Bonds. We think that basically were in this goldilocks scenario where inflation and wage growth is very low. It allows the fed and Central Banks to say accommodative. Yet, this is happening in the context of a private sector, which is doing quite well. Many areas of the economy like housing, airlines, energy, gaming, are picking up, so those areas actually have very good fundamentals. Thats where we are investing. I am looking at the photos here, you say Corporate Bond markets are attractive at yields of 4 to 4. 5 . Are those junk bonds . Where can i get a deal like that . These are investment funds, both i run. One is an interpede Investment Grade fund another is a Long Duration investment if great funds. Theyre basically invested in Corporate Bonds as well as bonds we think will be improving if terms of spread tightening. Corporate funds are in the sweet spot right now. The private sector is healing. At the same time, Central Banks are pushing out an extra session. Thats compressing credit spreads, so Corporate Bonds should be favored today over government bonds. Im so surprised. Thats what junk bonds are yielding, 6 . It seems like its so compressed. I know theyve got one lately. It seems high to me considering where else the mark is going. Yeah, we had 7. 1 billion of outflows. It started about three or your weeks ago with ets. The junk bond market actually got really oversold. We were actually buying a lot of the double bs, which is the highest quality segmentf. Were getting 5, 5. 5 on these companies. They have enterprise value, leverage three, four times. These are great investments right now. Is that a separate fund you have with junk in it . What we do, we buy rising stars, these are bonds which basically are rising up to Investment Grade. A lot of these companies are actually organically delevering to the tune of one turn of leverage a year. So the companies are throwing off so much free cash flow, theyre organically improving. Speaking of leverage, david, it sounds like you are concerned about the end of qe potentially coming . I dont think the end of qe is significant. Its been winding down steadily. Virtually everybody has seemed to have forgotten its winding down and so on. I would be concerned about the point when the fed does finally do something by raising Interest Rates. I dont think that will happen this year. The earliest would be sometime in the First Quarter next year. There are a couple other black clouds hanging in the horizon. Its still an awful lot of turmoil in the middle east, russians still were messing around with the ukraine and various other things there. And all this easy. From the Central Banks and the United States throughout europe, japan and so on, still threatens to creek e wreak havoc in some emerging parents. So were not home free. But it doesnt look like there is something right on the horizon thats going to be a big shock and everybody does seem to be very upboat at this point. Park, you know, i think about the environment for people that might be living on fixed income or anybody trying to have their money work for them. At 4. 5 to 5 historically it doesnt sound that nice, you should keep doing it especially if pimco is right about the new neutral with restuck here for a while. If you can find companies that are definitely not going out of business. Theyre not the u. S. But 5 would help a lot of pension plans. What can you get on a convertible in terms of a coupon market . Is there anything where you can participate on upside . Is there anything at 4. 5, 5 convertible if underlying stock at some point . No, joe, there is not a lot of convertible issuance. The market has been very, very quiet. Why should they . They dont have to throw this in. Thats the world. 4. 5 to 5. You got to take creddor risk. Which is unbelievable. Were still in this situation where to your point about getting underlying asset moving, theyre im shower Many Companies in the s p 500 their stock deals more than their debt. People choose the debt instead. Why wouldnt you buy stock to get the yield and hope it depreciates at the same time zbru can lose on a friday. If you are a longterm holder, what if it goes down for five years . You are getting paid to wait. There are people that think thats too much risk. Yeah. People that used to get 8 in a treasury or 7 in a tax free bondch these people, how are they living now . They also had 4 or 5 inflation. The real thing that matters the 4 to 5 is attractive. No question about. That dont go comparing it to 30, 40, 50 years ago when you had more inflation and volatility and inflation than you do today. Today is a very rare moment. Lets hope it lasts well into next year. Because when it changes, it could change very swiftly. Were not home free forever. I think were hooem home free for six months. It wont last forever, david. Thanks. David, you tell people on fixed physical, hey there is no inflation, that 02 is. 5 inflation you are getting you can live high on the hock. People cant live on 1. 5 . You should feel good there is no inflation you are living in a one bedroom apartment, your 11 kids are at home. Good to see you. Mark, david, a pleasure. You are eating hamburger helper without the hamburger. There is no inflation, you should feel good, coming up, apple, google, microsoft the company issing willing to create the operating system to take on the west. Right after the break, something that will have you smiling this labor day weekend. Youve had a sixpack. You had a 12pack. You probably heard of a case or a suitcase. One bear company is rolling out something you have never seen before. We will show you right after the break. She inspires you. No question about that. Like needing to go frequently or urgently. 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It was the First Quarterly report from michaels since it went public if late june, higher than 10 . Special retailer express beating street forecasts with both profit and revenues that came in and despite higher operating expenses, express raised its full year forecast. 11 in premarket. Our next guest is looking to remake Consumer Finance from the ground up. Joining us now is max levchen the ceo of point of sale Lending Services affirm and womens Reproductive Health group glo. Hes on the board of yahoo, full of Silicon Valley winners, pinterest, part is things, which was bought a little over a week ago by samsung. Its great to have maxon the program this morning. Thank you for being here, max. Thank you, its great to be here. Help us. Give us a sense of where we are. I want to get into the fertility thing in a minute. Actually. I want to understand where we are in Silicon Valley with these transactions earlier with twitch sold to amazon. I dont know if yahoo looked at that. I think they might have at one point. What do you make of the price . Does it make any sense to you . Im not too familiar with all the transactions taking place in Silicon Valley. But twitch appears to be an incredible success. Its a niche product that turned out to be way bigger than a niche. But you have made investments all across the valley. You see the valuations skyrocket. Do you look and say to yourself, wow, this is right on . Do you say we should probably sellsome of the stuff right now . Guess what, this thing cant go on forever . I think its a lysle little more nuance. I think Silicon Valley is rapidly becoming bipolar. There are amazing successes such as uber or twitch that are just truly one of a kind, very valuable and whatever valuations they are putting on them. Its a lick liquid market. People are paying premiums that deserve. They are paying what they do not deserve those numbers but because giant legacy exists. What do you callant aquihires, pacific, yahoo, which are you on the board of has done a number. There was an article last week critical of the practice in part because they said yahoo has brought a lot of stuff and brought talent in and shuts it down and uses it for other things. I dont think theyre being deceptive about it. However, people do buy talents because entrepreneurship in the Silicon Valley creates the fusion of our company. Many fail. When the company has failed the team wants to stay together, being acquired by a largely successful player, a place to continue talking trade and trying to reinvent the world is about out come. Walter isaacson has a question. The question is a lot of things seem to be happening on Payment Systems based on bitcoin and another cyber currency and people trying to do small payments on that. That would seem to be a real game changer. What do you think of that new trend . Obviously, im a part of it, so i cant completely agree. Having said that, affirm on my project is the a credit blip. We are trying to reinvent credit underwrir writing at the point of sale, making it faster and using few kind of data. Overall if you look at the payment ecosystem, the banking system, which andrew knows quite a bit about, it hasnt been touched in 20, 30, 40 years or so Math Technology is very ripe. Its hard to do. Its really worth while. So, max, im interested in this fertility stuff, too, andrew is going to talk about it. Thes very expensive if you are infer tile. The points you make a third of women are off by up to six days if correctly estimating tear cycle. Half off by four days. If are you off, its not going to happen. What is the app for . What does it measure, more exactly or something . So it uses your data and data we pull off electronic devices, a lot of people use thaeng anything from way tie scales to build a personalized model of your fertility window then narrowing the you fit window down to a couple of oushs, literally when are you the most fertile. Max what are you doing for the men, though, where the woman says, you got an hour and do you got anything you can do for the pan all of a sudden hes in a position where he has to. Its not quite as precise as one hour. It gives you a half a day. How many hours do i have . Just so i know. A romantic evening is all it takes, you need know which evening. You are under the gun, dude, there will be pressure beyond belief. You are way more under a gun when have you for the idea and the pressure that puts on couples is way worse. I think you ought to consider the man. It so happens, we have a enmens version, there is his and hers. They work well together. How does the big data plays in how. We use Machine Learning and modeling based on the information the woman puts in when she has used the ovulation test and the data that we check from things like our thermometer and nutrition, feel, et cetera, to forecast fertility precisely as opposed to the period plus 11 days. Packs, do people have anything are people worried about privacy online . This seems to be one of the most private issues that you could have. How do you work around that . How do you think about that issue . We dont work around it. We address it head on. In all of my projects, its always about data and value algs. Its about secrecy privacy information. We take it serious. We test our security all the time. We store it. Most importantly, with retransparent. We tell them what they should or should not share. Why would you want to steal information about when people are of lateing . That, i cant tell you. Why do you need privacy for that . Its all this me thing, id be saying. Max, what does the app cost . Its completely free. Will it remain to be free . What would be the revenue model for this business . The ultimate goal is to reinvent a financial piece of our economy. I think the Health Insurance in this country and perhaps in others is just broevenlt it needs to focus on prevention as opposed to the very expensive correction. So figuring out the arbitrage opportunity between letting people not pay 45,000 on average for the treatment is the revenue. But you capture that revenue how, i dont understand . We will eventually sell. We are already selling something that looks like an insurance policy to payers. Today, infertility is not covered pretty much by any states with some exceptions by employers and so. So being able to offer this as a service, a perk, really, frankly, to your employees. 50 you talk about and they pull and if you dont, this doesnt cover like, some people do need invitro, max. Definitely. There are people that are going to need it. That will remain expensive. It will help you, we will help you defer some of those costs, overtime, we heap e hope to completely cover it. Max, you will be successful selling every company off the carts to somebody else in some cases going public as well. When you think about a business like that, being bought, in sort of how big is the universe . The universe is pretty huge, but to be honest, i never think about my Company Getting bought until it somehow sometimes happens. My goal is to build something. The older irget the more concern, something that lasts a really long time, i am least concerned about scenarios, most concerned about building something for a long time. Max, final question. The question we asked walter. Who is the most innovative person in Silicon Valley these days. If you take yourself off the list, who do you think is the most innovative these days . Its a long list. I have to, marissa at yahoo. He has so many friends. I was going to say, you cant assess people. Marissa at yahoo, its the amount of vitality she injenninged into that company from the outside looking in, its just pretty incredible. Seeing productivity on the board, i am truly grateful. I know you are on the board. When are we going to see the payoffs, though . A lot of people made the comment you made about really how much energy she has injected, but not that we have seen the payoff just yet. I think we are seeing it. I think if you look, obviously, as a director, i see more than the public numbers, but i this i if you look at the moves that theyre making, you can already see the change taking place. The way the kane has reinvented itself in the mobile world is amazing. Always fantastic to see you, max. We appreciate it. Good to see you. Six hours is better than say six days in a row, right . You are not a man. You dont know how much it says now. You dont know. Always taking the conversation to a up next. Family shy. Up next, a new warning from the World Health Organization and then should big tech be afraid of china . And ongoing battle with microsoft, google apple pushed the company to make its own operating system to compete with the tech giant. Is there a way to ultimately stop them from doing business in the country . We will discuss it when we return. Your chance to rise and. With centurylink as your trusted technology partner,. Welcome back to squawk box, a new warning from the World Health Organization. This time its about ecigarettes in a bid to set policy, w. H. O. Who says a popular nicotine vapor products could serve as a gateway addiction for children. The organization is working with natural regulatory bodies. Its a fess precondition for establishing a scientific basis on which to judge the effects of tear use. The regulation is supposed to come before the science . Well, i think there is a question about the gateway issue. Right. Theyre saying the reg lakes has to come before the science, in other words, they dont want to do the science. Why wouldnt you on a precautionary basis wait for the signs to come. There are individuals or choices in the world. I dont believe necessarily it is a gateway product. There is no evidence of that at this point. We will see. Moving along here, coin has a new western tech company like google, apple and microsoft. The company is announcing it will build its own operating system. What to the implications . Susan lee cohost of squawk box asia joins us again on squawk box u. S. I guess. How lucky am i . Is that rhetorical . No, im happy to be here. Lets talk about microsoft. It has been a happy year for them in china. Not only did they get their offices raided. They have been the focus of consumer reports, telling individuals not to use windows because its a conduit for foreign hacking, also they have loopholes that allow you to get hacked into as well on the internet. China says they will launch their own operating system maybe as early as october of this year. I should point out they have been trying to develop their own operating system since 2002. Apparently it isnt good, frankly, windows still has a dominant position if china. I think 92 of pcs use windows, 70 use pcs, which is an archaic dinosaur of windows, and microsoft stopped supporting the year. More importantly, windows still powers a lot of atms in china. Maybe they should ween atps of windows. When it comes to the mobile space, how do you get 85 of smartphones in china, which have sold off Something Like android, right, theyre trying to develop their 18 android platform again, its not very good many people arent using it. There is incredibly rich. Does anybody pay for windows . Good question. Steve ballmer in 2007 said he makes more money in leather lands. Stick around, lets bring in gordon chang a frequent guest here and author of the coming collapse of china. Gordon, your to the on this. Well, this is a bad story. Not because china will sort of fail with this. It failed with mobile. It will fail with the operating system as well. What this really says is coin is closing itself off from the rest of the world. Its a closing of the chinese mind. I think is is probably do to a number of factors, powerful enterprises trying to undermine foreign businesses, whichever way you look at this, this is very bad for china. What are the chances they could come up with their own operating system . Well, they will come up with an operating system. It probably will be later this year than they talked about. But its people are not going to take it up. I think because they can put this stuff out there. But theyve got to be consumer acceptance. They can force a few state enterprises to take their operating system. Eventually, there will be resistance. We seen this in so many attempts china has had to impose its own software on china. It hasnt worked in the past. This one is not going to work. Microsoft is not going to take this lying down. Waller what do you think behind closed doors, are they rolling their eyes, you are crazy, one, you think you can develop a system that ka run, compete, god, this is rich. Are you sueing us, you dont pay us anyway. It has to be galling, right . Its almost inevitable it seems to me coin would be doing this. Henry kissinger has a new book next week called the world order. Its about how do you get various countries, islamic oil and coin to have a stake in the world order. A lot is going to be a are you a part of the world order when it co himself to the digitalle economy, intellect cull property. China is the postresistant of that. In other words, once they have their own intellectual property it should be paid for . All of my books are published if china. Theyre pirated. People take it. And then the chinese publishing routes took the steve jobs biography. All of a sudden they cracked down on piracy. At a certain point within they have a stake in the game theyre going to crack down. Thats a good question. You know, i was talking to a lot of the tech analysts, they were looking at the likes of sha meade, which is the number one seller, linovo. They have global ambitions. Not many see smartphones based on a chinese operating system. Its not very good right now. They dont have the tech following development. Isnt it connected. The state is going to dictate this partly for their own cyber security. A lot of agencys will probably use this chinese operating system zbru want your stuff to work. I dont think you have quite as much of a free market there if they decide to dictate this. Gordon. This is a big deal. Microsoft doesnt want to tack it lying down, because 1. 4 billion consumers over there. The thing is, this is sort of a story that comes from last july where they cracked down on the multinationals. All of them. They got them into a room and said you must confess to antimonopoly allegations. Its not to say Foreign Companies are clean in china. But it is to say there is discriminatory enforcement. This is just another example of china going after Foreign Companies, eventually, you can see the fbi numbers come down. If july they were down 17. 0 . For that. 0 , and for the year, down 3. 5 management. Greet to have you, great to see you. All right. Sorry. Susan, thanks. When do you go back . End of this week. Do you sit next to bernie . Yes, i do. How fun. Ive been watching it, bernie, hes aalone . Yeah, by himself. Hes corny. Theres no one there to rescue him. He took it back from seoul, oh, a place where they have a lot of soul. It was that obvious its cute. Is it . Its cute. Hes corny. No one stops him. Its funny. Do people watch us over there . Yes. They do. Im watching him, and he could be watching me . He probably thinks im corny. Have you met him . You have people to rescue you. I do. Hes lonely. He is . He seem to be. He has no shame when he says corny things. Love you, bernie. Reminds me of someone else i know well, right . Investors looking to build a market milestone, but how have the rich faired in the rally, and how they invest next. Squawk box will be right back. Tomorrow on squawk box, the business of fun, the ceo of cedar fair talks roller coaster profits and the state of the economy. Squawk box starts at 6 00 a. M. Eastern here on cnbc. With all the opinions about stocks out there, how do you know which ones to follow . The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back, a market milestone in the books, the s p closed above 2,000 for the first time, so have how the rich faired in the rally . A guy who knows them well, robert frank, our wealth editor. They are nervous now and bullish on stocks. The latest Millionaire Investor Confidence index, yes, there is one from spectrum. Confidence fell in july, remained at the low level in august. Its well below the big top we saw in january and june for confidence. Millionaire investors are still more bullish than everyday investor, but the number of millionaires buying stock fell 3 , bonds not better, falling 2. 4 , and millionaires pulling in on horns in every asset, class real estate the lowest in six months. What worries the guys . Not the economy or the stock market or politics which had been the big concern. Its overseas crisis. 49 of millionaires cited International Problems as the top concern. We talked off camera where nay are going thousand, where the wealthy put their money in aside of paintings and properties, is private equities. Anything collectable. Anything collectable. Comic books, you name it. Speaking of the rich, coming up, warren buffet, a mustsee faceoff with the boxes great. A picture worth millions of words when we return. Later, the executive chairman of the estee lauder, William Lauder talking high ends retail and the economy. Comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. 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May need investment advice. Crazy. He never looks like anyone is close. He makes walter money. We thank walter for being here, a great two hours, good luck with the book and hope to see you soon. October 7th. Well have you back around then. Join us tomorrow and squawk on the street begins right now. Good wednesday morning, welcome to squawk on the street, im Carl Quintanilla with sarah and the s p closed above 2,000 for the first time yesterday. The dow is 80 points away from waking august the best month of the year. Road map begins with another record alltime high, the best august for the s p in 14 years, but can it hold . Tiffanys continues the hot streak. Earnings blow away estimates raising