Transcripts For CNBC Squawk Box 20170705

By a fraction of a percent crude oil, this is the one weve been watching very, very closely. We have wti down by 1. 6 brent it down by 1. 5 . This is quite a rebound from the lows back in june. We are up by 12 from june 21st lows so staggering move in just a short amount of time weird. Weird to see the dow so strong and the nasdaq so weak thats been happening more the nasdaq had been stronger on a relative basis then the rotation happened. I dont know what it means. Maybe its healthy this is scary and not healthy. Maybe the meeting is good, but the reason for it frightening. The u. S. Requesting an emergency u. N. Security Council Meeting today after north korea tested an Intercontinental Ballistic Missile. The missile could put all of alaska, so mainland i dont know if you call that mainland, but pretty close late yesterday the u. S. Military said u. S. And south korean troops fired missiles into the waters off south korea in a show of force back that way apparently it can reenter the atmosphere and maintain the integrity of the nuclear tip device thats there. They succeeded this was like another major milestone for what they are able to do. Also looking at the way they showed exactly how this fired it went for 40 minutes right 37. It went up and down like this but if they if you put it out and put the apex here, it could reach anchorage. Now we are within within range. Im afraid to call him a madman hes so insane. But theres a guy who has potentially he could press a button are we the markets at new highs every day, are we living in some type of denial the geopolitical risks are those things that we know are always there, and they dont matter until they do the question is is this the thing . Is this the change that suddenly makes it something more real to the markets . We have seen these events tip equities, tip the economy before in 19990, 91, with the gulf war, at the time Alan Greenspan was warning of a possible recession. That event hurt confidence and the economy enough has it did contribute to a recession and the downturn in equities this is something we have to watch incredibly carefully while the Economy Today is not vulnerable, it is not growing so strongly that theres no risk. To your point on valuations, the equity market is not crowded but the valuations are high this could lead to some profit taking it is scary. It seems this just seems different. Its not easy to resolve either with putin, you have a guy maybe hes evil, kgb, but hes not going to do something who knows. It almost seems different when you talk about north korea we had Evelyn Farkas on on monday, she still thought russia was the biggest threat trump is going over to see putin. They can talk about north korea almost as being aligned against what could be really destabilizing globally with north korea. I dont know whether russia is our biggest threat right a military response to north korea is so difficult because it almost guarantees that you have a lot of casualties in south korea. 35 miles away exactly japan, our ally right south korea is going to be hit if this escalates. China prefers not to have akz send t south korea and the u. S. Aligned. Well, we have a jobs report thats what we do. Thats going to be a market mover. What about wage gains thats why it is all surreal sitting watching great fireworks yesterday. And the entire community is there at the high school flags, and great music we cherish this. And i dont know if we can just take it for granted that its always going to be as easy thats what i i didnt sleep well the eu approved italys 6 billion state bailout of banca monte dei paschi this comes after bmps thats what i will call it from now on, agreed to a major overall including transferring bad loans and capping pay for senior managers. Volvo says that every model from 2019 onward also have an electric motor this will make it the first traditional automaker to stop making vehicles powered solely by an internal Combustion Engine i was kidding, they have a couple cars that are not that ugly i was like they talk about the old volvos they used to look when they were saf safe those boxy scare vol yy squa i still dont like them but the safety. Theres a lot of safeguards, i dont know if on the tests whether they outperform. Theres been strides made. A lot of Car Companies, yes a lot of Car Companies are safe you dont need to drive a boxy swedish whatever it is its another competitor for tesla on top of jaguar, mercedes and audi which all have cars why cant bmw bmw and mercedes figure it out that is what scares me about the tesla thesis if you have the good german automakers and others even ford and gm, why cant how do we know that theyre going to own that electric car market forever . We dont know that. The stock says they are. They have a first mover advantage. And they got elon musk. On the space company, watching those takeoffs and landings, whether r whatevateve him, its extraordinary to think we can reuse space equipment for the first time in history. Andrew is not here. He cant stop me i look at elon musks hair and think this guy if you look he was bald. You look at him now, so he can do anything. True genius reflected in a mans quaff. He was basically bald and now has a full head of hair. Thats the business you like the reusable rockets. You like the hair a lot of people can do that to regenerate and have a full head of hair after being bald, that speaks to me. A backup plan, huh . Yeah. I think i made it this far if it happens now, its you will go with it i do go with it its very full. Little combover lush, joe now to todays top political stories. President elect trump will leave for poland this morning for his second foreign trip since taking office Kayla Tausche joins us now with a look at the agenda where is eamon is he stuck in ireland did you see his tweets i dont have the full background on what the delay was. He is on his way to hamburg, which is where the g20 meeting will be taking place later this week, joe. The president leaving this morning for that second foreign trip hell arrive in poland this afternoon. Hes expected to make a speech to affirm the u. S. s commitment to nato and allies followed by that g 0 meeting in germany where he will meet with russian president Vladimir Putin thats the first time this bilateralist is taking place since the election that was the highly anticipated event of the meeting but now the focus is turned to north korea north korea after pyongyang launched that Intercontinental Ballistic Missile shown here according to north korean state tv the country says it could carry a Nuclear Warhead and it could reach the u. S. That emergency u. N. Security Council Meeting, that will take place later today after the u. S. And south korea conducted a joint Missile Launch in response to show the precision of those allies in being able to potentially launch a military strike now, President Trump is expected to take up this issue with president xi of china at the g20. He criticized the efficacy of chinas efforts to thwart north koreas ambitions and said perhaps a heavy move was needed from beijing now in response the president did not mention the issue tuesday night at a white house event for military families but he acknowledged that the u. S. Faces challenges i will always have your back. I will always under all circumstances. Our country is doing really, really well. No matter where you look, the economy is blazing on every front were doing well. We do have challenges, but we will handle those challenges hes tweeted eventually about wanting gas prices to be lower, about job creation under his administration, about the stock market hitting spintraday recors a week ago you might say the challenges that face the u. S. Are on a legislative front, but these geopolitical issues crop back up and quickly usurping any other discussion point thats our discussion this morning. You cant i dont know whether you call them black swans or what. Its leak the end of the world, if youre in cash, it doesnt matter maybe gold its hard to prepare for the end of the world it can only happen once, right . I havent confirmed that, but it sounds right. If you were a worry wart you would start worrying at this point. But i dont know if you worry about the overall economy if nothing does happen. All these legislative things look like gravy. Deraeg la deregulation, europe coming back the bo a lot of things are happening. I dont know if the market has the pro growth policies factored in i think they could go further if they get it done i think right now it may be gravy. Specifically with regard to the events unfolding in the Korean Peninsula theres some attention paid today to the fact that asian markets are largely sa sanguine on the back of what happened but theres activity in the Options Market where you might sensevestors are trying to prepare portfolios for a black swan event or something unpredictable to happen. Here in the u. S. , the fundamentals still appear good thats what we keep hearing about growth, corporate earnings, and about some of these agenda items happening behind the scenes. Theres still a lot of confidence baked in that washington can get some of these legislative proposals become behind the finish line theres a lot to get done. The clock is ticking, but for now bigger issues are at the front of table kayla, we will see you soon hope you had a good 4th. Same to you did you see any fireworks i did the fireworks in washington are pretty spectacular on the mall, with the monument in the back. Its a special view. Exciting to see that for the first time they play some music . A little bit of music beach boys, four tops, yeah. Great lineup have you heard this this insufferable katy perry song i am a fire work or something i didnt know who it was she was screaming. All the kids are singing the lyrics im like what is this . She says youre a fire work whatever. Youre a firework god, its just i cant believe what passes for the louder she sings, the better the song is supposed to be im getting old. Thank you. I sound like i sound like the people that used to talk about the beatles when i was young these longhaired kids back in my day music was youre the muppet guy in the balcony, joe i am. Tho that was a real snort. Not a sound effect it was. I need some diversions from worrying about the end of the world. Lets get back to the broader markets, joining us is mark chaiken and rebecca batterspate our guest host mark, you feel markets are in good shape t i guess it would take something unexpected to derail things . I do. Thanks for having me on. I think the transition from a feddriven bull market to an earningsdriven bull market will continue in the second half. The Second Quarter earnings due to start coming out next week will be very positive. Weve got some events in the Financial Sector which i think will help mitigate the weakness in tech that we saw last week. The jobs market, is it strong, full employment . Where are the wage gains are those coming will that give it another leg up is it still not what it appears to be in terms of people working a couple parttime jobs, the Participation Rate not baby boomers but people who could still work is that still high even though the numbers are coming from the government which always make them suspect, im a big believer in what weve been seeing in the unemployment numbers and rising wages and the jobs report. I think this is healthy. It shows the economy is growing. The labor market is tightening this is good and suggests we have a Strong Economy that we can count on in the second half. Mark, good morning. So you have this amazing background with your company in terms of looking at dashboards, indicators to help you figure out your view on the market and specific companies and sectors is there one or two indicators youre looking at now for the rest of the year that if they dont work out as planned you change your view youre fairly constructive on cyclicals going into the second half of the year what would make you change your mind is it the yield curve . Technically driven inflation . What are you focussed on the most rebecca, i think the yield curve is an interesting place to start. It flattened out over the last four weeks that spooked everybody the reality is that a flat yield curve that doesnt invert is bullish for the stock market going forward. We saw the beginnings of that last week as Interest Rates started to move up what would spook me is if Second Quarter earnings disappoint analyst estimates. We had a string of not just earnings surprises but sales surprises. Thats a key factor in our multi factor quantitative model. I would be looking closely at both how Companies Report relative to wall street estimates and also guidance going forward. You know, you have a lot of companies that are benefitting from a weak dollar you saw the beginnings of that with nikes report on thursday where their International Business carried the company to better than expected earnings. Im watching analysts estimates. The trend of estimates, they typically key off earnings surprises. Thats why im so optimistic on the market with a target of 1505 to 1600 for the balance of 2017. Disruptive things happen. I think about retail the world is changing so quickly or media looking at that disney story. God. Kids are doing do you see it, they measure ratings for 2yearolds to 34yearolds. How do you measure im trying to figure it out what i can do to big bird how do we try to costumes. Thats the answer. Going after that demo i keep referencing back watching these fireworks. There were some kids, the fireworks are going on, im like what is that light i look, a kid was on his iriphoe with his fireworks i was almost going to grab the iphone and throw it. What are you looking at on your iphone while the fire works are going off . Will you be in the moment just for a second sorry, mark. Thank you. Thank you. You know what i mean its disruptive. Things are different i dont like it. Change is hard. Change is difficult go ahead. If you look at consumer discretionary, a diverse sector, you can see you have retail and amaz amazon, Electronic Arts and Activision Blizzard are doing well kids are buying, and you see that in the video game stocks. The money is still its not a completely zero sum game, you lose one place and its going somewhere else i understand that. Its tough if you thought disney would be the greatest company in the world forever. You read about espn. Those are the two pillars, the espn and the kids stuff, thats where the problems are its scary comcast has been the model for how to die vefversifdiversi. Theyve done a good job of combining cable with content are you available every day youre coming back, my friend. That was the most compelling thing youve said and the most accurate mark, thats our parent, you know that. I do, joe i hope you remember weve been doing this for 25 years, you and i. I hope i will be back. You will now. You will now, my friend. Youre with us until 8 00. Its a twohour sentence you got today. You made someone mad Chinas Central Bank says the countrys shadow Banking Sector lacks regulation. The pboc is promising to increase supervision and ensure the economy has no systemic financial risks. Eunice yoon joins us now here in asia, everybody in the financial world tends to go to shanghai or tokyo or hong kong to make their money but we spoke to one ceo raking in the profits on the farms. Reporter far from his posh beijing office, roger ying is meeting some of his best clients. We love coming down here. Its always a treat. Reporter the stanford grad from south africa founded a peer to peer Lending Company called pa flshgs ashp pandai the p to p industry in china has run into financial trouble to survive ying lends almost solely to people on the farms. When i look at the china economy, 1. 3 billion people. 300 million to 400 million have already been enriched. Theres 900 million other farmers who have been left behind by the mainstream Financial System we see the demand for farmers. Reporter in this village in southwest china, fu used to be a coal miner after getting injured, he wanted to try pig farming but didnt have the money in the countryside its hard to get money, he says even if i were to get a loan from the bank, it would be too small to start the business. Then the local village chief introduced him to pandai who approved a loan of more than 11,000. Rather than hand over cash, the Company Bought the pigs and feed in one year, fu expects to earn a profit of 14,500 after paying back the loan plus the 15. 5 interest this kind of lending may sound risky, lending to people on the farms who dont have much experience with modern finance in fact, pandai says their recovery rate is 98. 5 and in a country where Companies May or may not pay their deb back, these farmers are a good bet. The farmers, we find them to be honest, reliable and basic people they are just looking to improve their own lives out of poverty reporter good for a economy in need of consumers for future growth this may seem like smalltime finance, but theres a larger point for china. As the economy continues to slow down, policymakers need to find new sources of growth. It makes it that much more critical for china to bring those hundreds of millions of people into the modern Financial System and get them access to capital so they can invest in businesses, improve incomes, and eventually become a larger part of the overall economy guys eunice, thank you live from beijing. If you see any of the leaders over there, can you just ask them to try to help here a little bit with north korea. Just, you know, just yeah, you were talking about fireworks, the katy perry song i was listening to that last night. Oh. We were worried about a different type of fire work involving north korea. Oh, my god. Oh, my god is this it theres like a yeah. Theres another song i didnt like either. I said who is this its miley cyrus to your point, china did have a response today they were calling for calm and restraint on the Korean Peninsula and also asked north korea to remember to abide by the u. N. Resolutions so what china is doing is that theyre trying to put forth their own proposal theyre saying the North Koreans need to hold a moratorium on Nuclear Activities as well as missile activity the u. S. And south korea into suspend their military drills. From the u. S. And south korean perspective, theyre not buying because they say they are legally allowed to do these military exercises, and that its a false equivalency for the chinese to say you need to do both theyre saying the u. N. Resolutions are being breached by north korea north korea has long said it gets scared by all of these u. S. Activities around the Korean Peninsula, and that that is a threat and a reason why they want to have Nuclear Weapons its a real difficult call but the u. S. Is already arguing that and south korea are saying they need to have these military drills. And today we saw more military drills because of the concerns over the icbms that is complicated eunice, thank you. Appreciate it. Had to play that hopefully they play it for the next two hours coming up, tech was the best performing sector had that tiger song you want to give them a play list of things that annoy you . Just screams. Wow well look at tech the best performing sector of the first half can the run continue that debate is next. Stay tuned youre watching squawk box on cnbc so thats the idea. What do you think . Hate to play devils advocate but. I kind of feel like its a game changer. I wouldnt go that far. Are you there . Hes probably on mute. Yeah. Gary wont like it. Why . Because hes gary. phone ringing what . Keep going yeah. laughs voice on phone its not millennial enough. There are a lot of ways to say no. Thank you so much. Thank you so were doing it. Yes start saying yes to your companys best ideas. Let us help with money and knowhow, so you can get business done. American express open. So you can get business done. What in real time . Stomer insights from the data wait, our data center and our clouds cant connect . Michael, can we get this data to. . Look at me. Look at me. Look at me. You used to be the yes guy. What happened to that guy . Legacy technology can handcuff any company. But yes is here. So, youre saying we can cut delivery time . Yeah. With help from hpe, we can finally work the way we want to. With the right mix of hybrid it, everything computes. Yogigspeed internet. Me . You know whats not awesome . When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids. And these guys. Him. Ah. Oh hello that lady. These houses yes, yes and yes. And dont forget about them. Uh huh. Sure. Still yes you can get it too. Welcome to the party. Introducing gigspeed internet from xfinity. Finally, gig for your neighborhood too. Second half is underway. We have james chacmach before we dell ve into the name youre looking at. Are you concerned this will bring down good stocks with the bad stocks because technology is out of favor now i think you can argue its out of favor, but the fundamentals still are there you look at where it was prior to peak levels, its still relatively under indexed the margins are there. We have only seen slight expansion in the multiple, estimates have risen you can make the case. But i think you have to think that were entering a new paradigm of what it means to be a tech company and a big tech company. Were looking at antitrust issues the ftcs role as the Companies Look to merge. There will be a reevaluation of the risks. Are you saying that we have not factored in these risks sup such address ts the antitrust r . I dont think so. If you focus in the old world paradigm, you can make a case that the 16 rise is just the beginning. What we saw in the first half and we can continue in the second half. At the same time the eu is taking a forceful move we have no idea what the u. S. Response will be as the Companies Get bigger, yes, if the experiences are Getting Better for the customer, is that a good thing for the economy . We dont know how the administration will be responding to that question. I think the mega cap stocks driving this growth and the tech sector, you can name them one by one. We dont know, you know, what too big is going to potentially mean as we look forward. If size and regulation is a threat, at least nearterm for some of these stocks, if not all of it, where in that broader space would you be looking are there pockets you think are relatively more attractive absolutely. The two stocks ive been calling out, google because that one, i think, the multiple does factor it in. Its the most favorable risk awards at 10 times ebita pay pal, secular tailwinds theyre benefiting from the growth of all companies. Then cloud services, security services, things of that nature. Those can potentially continue with the rally when you say underindexed, what do you mean by that underowned im saying the proportional weight to s p its been in higher teens in loftier periods, now in lower teens. Your pop tick going intop pid half paypal and google james, thank you. All right if you werent worried enough about north korea, coming up, cyberattacks pose a huge risks to global businesses, and governments what all we need to know about this, and what we need to fear thats cominupex g nt. Welcome back, youre watching squawk box live from the Nasdaq Market site in times square good morning. Welcome back to squawk box. U. S. Equity futures at this hour have been mixed up a little now. The dow is up. Again in keeping with what we saw, the nasdaq is down. The s p is flat. In the dow, at least dow stocks, could disney be facing trouble the wall street journal reports that the companys biggest business, cable tv is stalling and not just the old story that weve been talking about for over a year, maybe two years, not just espn paper says that the Disney Channel and the free form channel have lost about 4 million subscribers over the past three years the journal cites executives who say theyre trying to improve programming and the shift to online platforms, but its tough for kids because they dont use the same pipes to get content. I dont know how you get kids to go back to watching on conventional devices they dont you hand a kid an ipad at an early age, you start getting them used to that. Didnt world they have some problems well see. If you watched disney over the years, they had boom and bust they always figure it out preisner, they were lost they were buying gibson greeting cards this is like 25 years ago. He came in and did a great job then they wandered around after him. Lost frank wells, then iger stepped in a massive cyberattack last week thathit targets in 65 countries could be a round of practice from statesupported hackers, lets bring in wir wireds Andy Greenberg i find this topic fascinating. The implication of saying ukraine is a laboratory or test run is that russia has something bigger planned against bigger targ targets. We can see that theres good evidence that russia is practicing something in ukraine. Theyre at war with North Carolina for three years they attracted every sector of Ukrainian Society from business, government agencies, destroyed government data, paralyzed the transportation systems, finally they took down the power grid twice, the second time they used a piece of automated malware to do that. They probably will want to do that again that looked like a practice round to develop the capability they wanted to use globally. I think a lot of people here who think about cyberattacks, they know the grid is definitely a target the reality, based on what you have seen in ukraine, what was done there could be done here and even to worse effect well, yeah. This piece of malware used in late 2016 to take down the power grid in kiev, it has these modular components that you can swap out you can adapt it from the ukrainian equipment to American Equipment or to other parts of europe it seemed to have this little component that might be used to actually cause physical damage to the grid. Thats the kind of real nightmare scenario weve been worried about for more than a decade the grid can be not just disrupted, but parts of it could be destroyed in a way that would have a lasting effect. I dont think people realize transformers, you destroy a transformer. It takes years to build. They dont keep a spare transformer on the back shelf at con ed in case this debts gueges destroyed. You can use a cyberattack, cause physical damage and that can have far reaching implications these are multimillion dollar pieces of equipment, custom made we have some backup ones, but probably not all the ones we need in a place where they could be replaced quickly. I think once you start to destroy equipment we could start to see not just hours of blackouts as we did in the ukrainian examples but days or weeks even new york city had one of those about a decade ago right my neighborhood, it was ten days without electricity it got old after day two do you think the u. S. Is i would hope to think were on top of this, aware of it how ready are we to respond or defer Something Like this from happening here the u. S. Government is theyre pretty sanguine about this they tell me that were prepared we have better cybersecurity than ukraine one would hope. At the same time we depend on automation more in our grid. Our grid is more modern in a way. That makes it more vulnerable to hackers. More of it can be controlled by computers. What i hear is that it might be harder to take down the american grid it might be easier to keep it down in part because were not as good at responding to blackouts as incoukraine who ha much less reliable, older grid that goes down all the time. So theyre used to sending out trucks to manually flip the power back on. We dont have as much practice at that. So lower probability event, but it it happens, potentially longer lasting danl. Our response is unknown we never considered a cyberattack an act of war. If you look at if you look at the u. S. President ial election hacking, which we might all be tired of talking about. We had no coherent response to that we had sanctions that the white house has tried to roll back, talked about trying to undo. It doesnt seem like we have any kind of unified diplomatic response not just between the u. S. And ukraine but even across american partyandy thank you fon coming up, the executive edge, how companies are trying to deal with a key issue of equality in the rk fwoorce youre watching squawk box on cnbc and the wolf huffed and puffed. Like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies child giggles symbicort. Breathe better starting within 5 minutes. Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. See, you got to be to criticize, sometimes it helps to be close to the person she would understand what i was saying as you can see, you know, we were, you know, basically attached at the hip at the white house correspondents dinner. I sat down for less than a second probably, she looked like she didnt want to scream or run or anything else. Yeah which is the normal response you get . The normal response i get any way, she was very, very nice very pleasant. Did you bring up your hatred of this song then . That was a couple years ago did you know she sang the song this was three, four years ago this is a new song not that new. This is not . This is not new. This fireworks thing is not new . Maybe relatively speaking to the other songs you are acquainted with. Its newer than grateful dead i listen to alt nation. I listen to sirius xm, i listen to new stuff now released in 2010. Fine. Shes got some hits time for the executive edge. National pride month just ended, our next guest is working towards lbgtq equality all year long joining us is Justin Nelson cofounder and president of the national gay and Lesbian Chamber of commerce. Nice to have you thanks for having me. When did you found this 15 years ago. Youve seen unbelievable change, i guess acceptance of advertising to this demo, businesses being started its mainstream now, any fortune 500 company that doesnt get that i think they all get it now, they had to basically to exist in the current world, right . Not just because its the right thing to do, diversity means diversifying your revenue stream, making sure the customer and employee and Supplier Base mirror the one you want to have and attract. The numbers are staggering that im looking at here lbgtowned businesses contribute 1. 7 trillion to the economy. Which is great because for so long we knew what the Lgbt Community was in terms of a Consumer Spending power, about 8 880 billion this year what we buy in consumer goods but we didnt know what we put into the economy my organization sanctioned a study that found we were 1 1. 7 trillion in economic impact. To give you an idea, because i know people like to understand where that puts us on a chart, we would be the tenth largest economy in the world if americas 1. 4 million Business Owners were our own country. So bigger than south korea, bigger than canada, and i think in the National Dialogue right now, something that is important is were bigger than russia. What in terms of how far you have come and how far you still have to go, what still is needed to be done right now . Theres been a lot of progress absolutely. There is still opposition out there. Weve done a lot of Great Forward Movement in the business world. There are still a lot of issues. Theres access to credit issues. Only 15 states and the District Of Columbia have nondiscrimination and access to credit laws on the books for a lot of Small Businesses thats still a very big issue for them theres also nondiscrimination believe it or not, as much progress as has been made in corporate america, you can still be fired in the majority of states for being gay, lesbian, bisexual or transgender. So whithere are still challengi issues out there you hear about the religious, the hobby lobby, whatever. If you look at the way things were with legislation, Public Opinion usually ridictates legislation. Legislation can be on the books or pending but it doesnt go anywhere based on Public Opinion when it gets to a certain point. I think its at that point look at the pendulum on marriage equality. Lets go back ten years and see what it was. Its pushing 70 now you know, its a very slim minority that still doesnt believe that as red blooded tax paying americans we should have the same rights and responsibilities as anyone else. Just one last question. Are you totally nonpartisan in terms of the reason i ask, to be a hard core pro Growth Business guy, do you have to ab democrat can you be a republican . You know absolutely. Our mission is to create opportunities where lbgt Business Owners can become a part of diverse supply chains, whether thats federal government, state, municipal government we take partisan positions on particular issues, especially on social issues. What about fiscal issues we have to be open to legislation thats moving the ball forward for Business Owners okay. Just figured i would throw it out there. Thank you. Thank you coming up, the business of education, well bring you the story of an organization changing the world one pencil at a time stay tuned, youre watching squawk box on cnbc rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Welcome back to squawk box. While american schools are enjoying summer vacation, pencils of promise is a global enindication nonprofit that builds schools in the developing world. Their data driven approach has attracted google, delta and goldman sachs. Joining us is Michael Doherty the ceo of pencils of promise. Great to have you with us. Great to be here. How do you use data in this data is so important for us in terms of figuring out what works. So we test kid at the beginning of each year we test at the end of the year and then we compare the degree to which theyve learned how to read that year with schools where were not working. We use that to refine our approach, report back to our communities and our government partners and then spread that to get better sort of proof of performance so to speak . Yeah, i mean you know what were trying to do is get kids to learn how to read there are 250 million kids in the world that dont know how to read we really believe education is the way out of poverty and so if we can extend the years of learning that a kids in school, get them to read more effectively, we can help their lives and also, you know, grow economies. Tell us a little bit about your particular goal because there are a lot of nonprofits out there that also aim to keep kids in school, to educate children around the world, to build schools. Yeah. So, we work in the rural parts of the world we call the last mile so, ghana, guatemala and laos. These are communities that are off the grid and in the first place we put schools where they dont have one. Literally replacing mango tree in some cases with a school structure. And then we work with teachers to help them have kids read more effectively. Ultimately, we teach the teachers how to help the kids buts are we put e readers in the kids hands. We give them a personal library of reading material that they take home at the beginning of the year, 24 hours a day they can read by the end of the year were able to show that theyve progressed and read more effectively. Which is often the first time that these kids have technology in their hands think of a village that may not have electricity, sanitation, water and hygiene and think of a third grader in her home, reading by the glow of an ereader at night. In thames of the corporate sponsors or sponsors of your nonprofit, how influential are they in terms of what you do was google influential in how you use data, for instance to attract kids or what sort of readers . We use amazon kindles to partner with an ngo called world reader our Corporate Partners are huge. In fact, you know, they really sustain our work in terms of the funding. So we have partners like common bond, we have other partners that really drive our work and the partnership is about social purpose you know, we believe that brands can, you know, consumers essentially want to associate themselves with brands that make a difference and so we do that. We allow brands to partner with us to build schools in developing worlds. And then to show that impact to their own. I know our client base increasingly is looking for opportunities for responsible investing, right doing good while hopefully doing well at the same time. With Something Like this, i think the investment and the return are obvious if you can educate populations, those populations tend to have stronger economies and that benefits all of us how do you show people who give money to their return on investment because it seems like a very longterm thing to educate someone and help the economy that way yeah, so its huge. We actually dont think of ourselves as a philanthropy or charity. We think of ourselves as a social investment. Our donors, whether theyre individuals, family foundations, or you know, Corporate Partners, we publish quarterly transparency reports kind of like a Quarterly Earnings report in the forprofit world we show whats worked and what hasnt we take our donors into the field. They get to experience their impact and meet the kids and the teachers that theyre working with where their dollars are really having impact. And then we show over time that, you know, the enrollment rates for kids, enrollment rates for teachers, the kids scores on tests that theyre improving, and ultimately we know in the long game that makes a huge difference you know, one extra year of learning in a low income country results in a half point of gdp increase, and so we know that it keeps kids in School Longer good things are going to happen michael, thank you very much for joining us thank you pencils for promise coming up this mornings top stories including the Global Market reaction to another north korean Missile Launch. Futures right now are mixed. With the dow thank you up, and the nasdaq thank you down. Dow is up 30, flaz down 21 stay tuned youre watching squawk box on cnbc tclouds cant connect . Michael, can we get this data to. . Look at me. Look at me. Look at me. You used to be the yes guy. What happened to that guy . Legacy technology can handcuff any company. But yes is here. So, youre saying we can cut delivery time . Yeah. With help from hpe, we can finally work the way we want to. With the right mix of hybrid it, everything computes. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. The future isnt silver suits anits right now. S, think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. Good morning its the first full trading day of the second half of the year the dow set to extend its run but the nasdaq under pressure. The full rundown straight ahead. President trump takes off for his second foreign trip. First stop poland. Plus calling all baby boomers and genxors a new report says you might be facing a frightening retirement reality. Its wednesday, july 5th, 2017 the second hour of squawk box begins right now live from the beating heart of business, new york city, this is squawk box. How many kits does she have we could play katie perry all day today. Thats fine welcome back to squawk box here on cnbc live from the Nasdaq Marketsite in times square, im joe kernen along with melissa lee andrew and becky probably happy, theyre probably happy, theyre off today. Actually maybe they went i think andrew probably like why would you say that . Because hes young. I know hes a believer huge Justin Bieber really . Our guest host this morning, Rebecca Patterson, cio of Bessemer Trust and joe, portfolio strategist at richard bernstein. Markets, we checked before we went to break. The dow was actually positive, up 31 points the s p is positive up just under 2 but the nasdaq extending some losses from monday when it diverged from the other averages its down another 21 the 10year, 2. 35, 2. 34 this morning, its back to 2. 35 . And oil prices, monday were back above 45 46. 7 but down 80 cents or so today. 1. 7 the u. S. Has requested an emergency u. N. Security Council Meeting today. After north korea tested an icbm, thats intercontinentalal bestic missile and do the math, you can figure out what intercontinental means and its not good for us. According to analysts the missile could put all of alaska in the range of north korea for the first time late yesterday the u. S. Military said that u. S. And south korean troops in response, they did this they fired missiles into the waters off south korea in a show of force President Trump will leave for poland this morning for his second foreign trip since taking office Kayla Tausche joins us now with the rundown. The president will begin his second foreign trip in warsaw landing this afternoon with a speech committing the u. S. And the Nato Alliance and potential talks on deals for u. S. Liquefied natural gas. Then on to germanys largest port city for the g20 meeting where hell meet with russian president Vladimir Putin on friday for the First Time Since the election but its the standoff between north korea and the u. S. And south korea increasingly taking center stage in politics right now. The Game Changing launch by north korea of that icbm that could reach the u. S. And that pyongyang says could carry a Nuclear Warhead was then followed by the military exercise by the u. S. And south korea launching a precision missile into nearby territory. That emergency u. N. Security Council Meeting that was requested by the u. S. And its allies is taking place today at 3 00 p. M President Trump on twitter again putting the onus on china to do more but a joint statement from china and russia calls on all parties to deescalate tensions. As for the market impact, horizons Greg Valliere writes today, the theatrics are annoying but theyre background noise, the geopolitical risk is far more serious and suddenly thats the new factor in the equation the president just tweeting moments ago saying he is about to head off on that trip and he will be back saturday. Joe and melissa, well see exactly what news we get about a potential u. S. Response from here i found Greg Valliere to be annoying in recent years somewhat annoying. Thank you, kayla for that. In other headlines this morning, well take a quick look, the trial of former Drug Company Executive Martin Shkreli, continues today in new york. Prosecutors have asked the judge for a gag order saying shkrelis statement to the media could taint the jury and disrupt the trial. Why do we know so much about him . Anyway his attorneys say that the request could be rejected on First Amendment grounds. Hes being tried on securities fraud charges. Hes a hedge fund guy, hasnt he when he first bought before he got into, saw an angle there to work, and now, he loves being on camera. Federal reserve is set to release minutes of its most recent meeting at 2 00 p. M. Eastern time today investors will be interested not only in comments on future rate hikes but also on the timing of the feds planned Balance Sheet reduction. Two Foreign Airlines emirates and Turkish Airlines says the u. S. Has lifted a ban on Laptop Computers on their u. S. Bound flights. That ban had been in effect since march but was lifted after newly announced security measures were implemented. Some stocks to watch this morning, potential takeover for world pay the payment processor received approaches from jpmorgan reporting that the offer was in cash and could be announced as early as today vanta is halted for news pending. Pfizer has entered a brazilian joint venture. According to reuters the drugmaker accepted a token payment worth 30 cents for the stake. Apple may get help from the u. S. Government in its tax dispute with the eu. Reuters reports that the government is said to be seeking to intervene in apples appeal that decision that will report a 2. 8 billion in taxes to ireland. Joining us now josh fineman global chief economist at deutsche Asset Management and tom lee managing partner and head of research at fund strike global advisers. Our guest host Rebecca Patterson, and joe ziedle. Tom you got recently not quite as bullish how long ago was that . And are you still there . Yes, joe. Weve been more cautious this year, its been a great call because the markets since the beginning of the year yeah, really since the beginning of the year. And the markets have been great. I think its just proven that this year is a lot more about how technical and liquidity has been a lot more important than seeing acceleration of fundamentals but what fundamentals havent kept pace . Well, if we look at things like Earnings Growth, you know, we had a pickup in Earnings Growth, but its weve seen the p e advance much faster than the pickup in earnings so, you know, we say that if you look at ford, multiples, theyve increased by more than 2. 5 times. So the median p e now is close to 19. And thats in the last 30 years, theres only been four quarters where the median p e has been higher tom, with the p e today, dont you have to factor in the fact that bond yields are so, so low. Does that skew how you should look at valuations right now i think thats absolutely one of the things weve overlooked, that with low Interest Rates, and in the absence of being able to look at other opportunities, stocks may be one of the places. And i think thats sort of the liquidity argument you havent been a bullish, pounding the table stock market person either. Youre neutral now on equities right were you neutral january 1st . We went from overweight equities to neutral last may and weve stayed neutral since then. We left some money on the table by not having more equity exposure but for our client base were talking about wealthy families, they dont want to have to lose it i always hear that. I understand we want to make them the reasons why they invest but going neutral in may was the wrong call last may . Definitely. Yeah, but you know what 20 since may. If we wake up tomorrow and were at war with north korea, having my grandmother was, you know, my grand you know but the no, no, no, im not trying to be defensive im saying to toms point, valuation too defensive i was, i was. But if valuations are higher, the Economic Cycle is getting more mature, the liquidity, slowly, is starting to come out, i think its prudent to take small inkreemtal steps to slowly reduce risk in my portfolio. Because then if we wake up, and theres a shock, be it north korea, be it a cyber attack, be it Something Else that triggers a recession, were going to have to be less reactionary and protect our clients capital, and i think figuring out that balance is what my clients look for. Its not for every trader. Theres never a period on 365 days a year, where youre you dont need to worry about something happening thats 10 downside we all know that then you have to make a decision right am i more bullish or bearish or more neutral. You always want to protect capital and that just goes without saying right our diversified portfolio, yeartodate, so 70 equity risk, 30 bond risk roughly speaking, has still outperformed the s p. Okay. So if i can beat the s p with 70 of the risk im not unhappy about that joe, youve been bullish. We have and i think one of the things thats been overlooked in a lot of these discussions is the Second Derivative of growth which is the change, right that is over the last year and a half, since february 2016, things have been Getting Better, versus worse and i think a lot of people invest according to the notions of good or bad is the economy good . Are earnings good . Is this bad . But what theyre missing is that things have been Getting Better. When you think about stock valuation or you think about corporate earnings, no one really cares how much a company ernst. The first question they always ask is was it better or worse than a year ago. Weve seen since earnings troughed in january 2016 or february 2016, quarter over quarter, year over year, earnings get better and better i think thats been a major key for this, you know, equities rally over the course of the last year and a half i think the signals that weve been getting from various Asset Classes dont necessarily confirm that things are Getting Better you take a look at the rally in the bond market, until just recently where weve seen yields rally, it has been a confusing message, hasnt it so where do you stand and what do you make of that recent rise . Doesnt have to worry about equities and right but you can talk. Economy. Bonds and bond yields but you need to tell us exactly where we are in terms of i think the u. S. , you know, the beat goes on i mean its not a particularly thrilling beat, or a fast beat, but its more plodding and methodical but its getting the job done. Literally. I mean the maylabor market has largely healed i think were back at least in the vicinity of 4. 1. And thats normally, given where we were coming from. In terms of comparing growth to where it was in past cycles, were not getting the kind of growth we had before and were not likely to get that kind of growth the economys potential to growth is diminished in demographic factors and other things relative to that bar, structurally were not back. But cyclically i think weve accomplished a lot i think, well to your point that recovery is mature, fortunately you know, recoveries are not like people. They dont tend to die of old age. They tend to die of a cause and the normal sort of historical causes, still seem largely absent and thats inflation. So can we talk about that for a minute sure. We know some of the factors that have dragged it down recently are oneoffs. Wireless services, that sort of thing. Do you think inflation recovers from here . I feel like that has a big part of everything were talking about. For sure. What happens to yields. The yield curve, cyclical stocks absolutely. Even the fed minutes how much theyve been saying they think a lot of it is transitory well get more of a read on that i do think inflation picks up a little bit in the very low readings weve been getting recently still i think its going to take awhile to get back all the way to the feds target. I think thats one of the reasons why that normal historical recession, you know, inflation picking up a lot, the fed slamming on the brakes, i dont think so i think theyre going to move very slowly. Tom, its been a very tough year to call and youve been long crap, thats your new acronym but its been crap this year well, its been good, banks have been good resources and telemon i think theres a lot of resources to like resources and telecom in the second half i think oil for instance the market looks like it is coming in to balance the second half. Oil credits gone really well, so we think theres a convergence trade there. And then on telecom weve written about it recently, i think what people are overlooking is the potential for consolidation at industry has the best probability in the past ten years because of the new administration, a much more friendly dod lly doj and ftc ank it really is time for that group that trades at twelve times earnings to get rerated. Again Telecom Credit traded in line with utilities. Telecom equities have underperformed 22 pshs the last six months which is a near historic underperformance. So i think crat, i think a strong second half just because you found the four initials for i still dont think thats okay to say, you know, that to go from fang to crat, you think its okay to say crop what about the parc. It could be fresh the crap stocks, really but theres the comments, because we like fang in junior high or something well, you know theres a Common Thread between fang and crap there you go again. Theyre the earnings drivers. I think thats, you know, were talking about all this whole conversation about rate change improving, and you know, leverage to gdp. You know, these are the groups that have been driving earnings, but, they havent all been getting the p e credit so i think thats the opportunity is that an urban legend, Thomas Crapper did he really invent im not sure. Im still trying to figure out if Samuel Johnson made a mistake my father had a biography in the house. I didnt know if it was a joke or real. But, yeah. Because, bob newhart, they really did, when he asked them wheres the funniest place you ever made whoopi that actually happened did you look that up yeah, that actually did you know that . I dont know that you mean on the Thomas Crapper is not, either here he is right here. Thomas crapper the more you know you know, we havent talked about joey crest nut, either speaking of fireworks no, 72 hot dogs in ten minutes. Oh, i know. I know hes still somewhere suffering doing something. Hes used to this now he is the championship hot dog eater. What goes in, must come out sir Thomas Crapper good way to round it out. Exactly, thank you, guys. Still ahead, major changes coming to the Housing Market it will make it easier to get a mortgage but there is a catch. Well tell you what it is right after this break plus the state of main street new data out on Small Business job growth bringing all the numbers 7 30 a. M. Eastern time and later millennial men are spending less time at the office the reason, video games. Weve got the details. Stay tuned youre watching squawk box on cnbc a used car, the future isnt silver suits anits right now. S, think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. Welcome back to squawk box. I saw this, and now its on the teleprompter the President Trump tweeting four minutes ago he had tweeted earlier about embarking for poland now hes saying the United States made some of the worst trade deals in World History why should we continue these deals with countries that do not help us . So well keep an eye the twitter feed see what else is forthcoming that do not help us i think were talking about china. This is all about north korea. Mmhmm. All right a Ratings Agency moodys has downgraded qatars economic outlook, ahead of todays meeting with arab nations where they plan to discuss the ongoing diplomatic crisis in the persian gulf joining us now the former u. S. Ambassador to the United Arab Emirates and to syria who is currently the president and ceo of amiti a nonprofit focused on education, training and development in the middle east and north africa ambassador, thanks a lot for joining us my pleasure today was the deadline for doha to reply to the sanctions whats at stake at this point . What sort of response do you think could help doha in its effort to have this block lifted well, saudi arabia, the emirates, egypt, put forward demands, 13 demands on the qatari amir that are clearly not realistic in terms of his willingness to meet them and so you have to ask what the next step is because, asking him to close a base where turkish troops are stationed downgrade relations with iran, and close al jazeera, the flagship of flagship Satellite Channel in the middle east, would be humiliating so theres no way out of this immediately. Do you think that the 13 demands were an opening gambit and which demands do you think are make or break . Are ones that doha would have to comply with in order to further the conversation you know, when youre dealing with gulf rulers, theyre very secretive. Ive been in saudi arabia in a senior position, the emirates, and the like and really, often u. S. Officials are a bit in the dark as to what they intend. I think this is very puzzling, it is the toughest ive ever seen these states go after qatar, even though there have been tensions between them before and one has to wonder what they intend i think the most the area where qatar could please the u. S. , and ease some of the pressure, is to quit supporting islamist terrorist groups, but the gulf countries consider the Muslim Brotherhood a terrorist group. The United States has not labeled the Muslim Brotherhood a terrorist group thus far you know, about a couple weeks ago, three weeks ago, or so, Qatar Airways announced an interest in buying stake in American Airways and theres sort of a, what are they up to could qatar be looking to have american support in some way and align itself with the u. S. Im just curious what your take is on this, given what the situation is well, not just qatar but all the smaller gulf states in the gpc, in up with way or another, have looked to have allies because theyre very vulnerable. Theyre like kids in a tough neighborhood, who have too much lunch change in their pocket and therefore, they need friends and allies kuwait, we saved kuwait during the 19901991 period when Saddam Hussein invaded. Because of the ties that existed between us, kuwait and the gcc states so of course qatar has looked for external friends one of the dangers here is that qatar could be pushed closer to iran rather than farther away by these demands. Ambassador, this is Rebecca Patterson. Good morning i just wanted to follow up on that point so far from an investors point of view this has seemed fairly contained regionally the markets globally havent been impacted very much by the developments here. Do you think theres a risk that that could change . Or do you think this is likely to stay pretty much contained to the region is there something youd be watching that would say, uhoh, this thing is getting bigger one thing that may happen is a secondary boycott, much as the arab league put on israel for decades. Whereby, the uae, saudi arabia, and egypt would say, well, if you do business in qatar, were not going to do business with you. Now that would be a little hard to enforce with Companies Like boeing and lockheed, which sell Fighter Aircraft to all of these states, or most of them, but that could be another step that is taken United States is committed to keep being shipping lanes in that region of the world open. So i dont see any move to close qatars court to Oil Shipments and gas shipments in iraq. Mr. Ambassador, thanks so much for joining us. We appreciate it my pleasure so, first thing president tweeted was about making bad trade deals. And why should we continue to deal with countries that do not help us. And we immediately said china. And now President Trump says trade between china and north korea grew almost 40 in the first quarter, so much for china working with us. But we had to give it a try. So had to give it a try. But he that implies hopeful, and that theyre friendly and he had developed a Good Relationship supposedly with xi. And now, it looks like hes frustrated that, you know, things have not changed. And has everything to do with that icbm from yesterday or mmhmm. Major changes in the Mortgage Markets go into effect this month. They could help more people get a home loan but there is a risk. Diana olick joins us now from washington with more good morning, diana. Good morning, joe the two major changes in underwriting that go into effect this month should help thousands more borrowers qualify for a mortgage but no question, both will add risk to the mortgage market. First, the Credit Rating agency, theyre dropping tax liens and civil judgments from consumers profile. Of the 220 million americans with a credit profile, about 7 have these credit hits without them, their fico Credit Scores could go up by as much as 20 points per person now, second, and unrelated, fannie mae and freddie mac are increasing their debttoincome limit for borrowers. Its going from 45 to 50 of your income allowed towards debt payments thats a reaction to todays high level of student debt and yet it means consumers will be saddled with even more debt but fannie maes chief economist claims the risk to the system is still low. In this case, were not changing the underwriting criteria and we believe that the initial increment of risk when making that change is very small. And given how pristine credit has been postcrisis we dont feel like thats an unreasonable risk to take but others argue that the two together will increase the potential for more mortgage defaults, and possible foreclosures yes, we are near record low default rates right now, so maybe there is some room for risk all right, thanks, diana. Check this out, were just talking about it, and the aftereffects you were talking about the aftereffects i was, before it even happened i was talking about the aftereffects because i think, i just dont know about this whole contest, it reminds ive seen it, is it in the movie stand by me remember they had a pie eating contest. Its just grotesque. The nathans hot dog eating champ, is yet another victory, under his belt, so to speak, Joey Chestnut set a new record, putting away 72 hot dogs and buns in just ten minutes this is his tenth career title on coney island. I guess, groundhog day, bill murray talked about, you know, needle nose ned and says, you dont remember i won the belly button contest, and he asked him did you ever go pro with that . And, is this guy actually a professional athlete do we know is this professional eater. Yes but can you go pro hot dog eating he makes money off it he won 10,000 by eating those hot dogs that will cover his medical bills for the next look at the crowd there, too. 1,000 a minute he made i think that its not bad and recent eating contests, someone choked to death on a pancake thing . I mean i pancakes are very dry and hot dogs . I dont know. Coming up, right now im telling you. That guy is somewhere sitting on a crapper, a Thomas Crapper. New data on the state of Small Business about to hit the tape rtmui llre dn the numbers. Hes next. Starting to ask. Why . Why . Why katie perry. Why . Because i referenced it earlier that i heard this new song by her, youre a firecracker. Ten years old seven years old played it last night at the mill burn fireworks thing and i thought, i dont know. Made sense real fireworks. Good morning welcome back to squawk box here on cnbc live from the Nasdaq Marketsite in times square among the stories front and center, illinois may be about to resolve its ongoing budget issues three budget bills have been approved by lawmakers and then vetoed by the governor however the veto was overridden by the state senate the states house of representatives is expected to vote on a veto override today. Journal has a interesting lead editorial on illinois. State finances. And then some mayors in some of the cities where we think, wow, their finances are a mess. And usually democrats for years, mayors anyway that doesnt prove anything. Shares of payment processor vanta were halted. Reports say vantiv was about to announce world pay theyve been approached by vantiv and jpmorgan chase. And automaker volvo is planning to make only electric cars or hybrid cars as gas is below 2 a gallon july fourth. Anyway by 2019 theyre going to do that and doing so would be the first traditional automaker to phase out completely internal Combustion Engine vehicles got to love their timing as well well see. I dont know i think its you know, the grid is not always the cleanest place necessarily it still needs coal or nat gas, right, to run the grid . Yeah, you do. So youre charging your car right youre still a consumer indirectly i have a feeling that we wont have any boeing electric powered jets any time soon, either so we should at least still have the capability did but battery the Battery Technology has not caught up to that, thats for sure. No. We dont want to shut down all the hydro Carbon Development i know it sounds good and all. But, volvo we are just dayses away from the labor departments june jobs report joining us now to talk jobs in america and the u. S. Economy is ellen hughes cromwick, the former chief economist for the u. S. Commerce department ellen, thanks for joining us thank you what are we expecting this friday and i believe its one of three jobs reports well get before the September Fomc meeting so how important is this going to be yes, indeed in fact, as youve seen weve had a pretty decisive slowdown in job growth recently were running at about 1. 5, 1. 6 year over year so we really do expect to see job gains that are a little more subdued. You know, were tracking something around 150 to 200k for a monthly gain in june, and i think that that will kind of reinforce the fact that were in this slowdown mode as we march to the september meeting, and the journal just had an article today saying that septembers going to be the date at which they announce normalization of the Balance Sheet, thats the first step to be taken, and they wont hike until december, just to see if normalization actually works as we go to that september meeting what are you watching most closely particularly as we get the fomc minutes today, for may for instance they said the tight labor Market Conditions could cause inflationary risk, there are others who saw downside to inflation. What are you looking for yeah, i dont see any inflation risk in fact, as you probably saw, weve had, you know, three months now where, you know, the cpi is really not moving at all. And what are the Inflationary Forces out there if anything were seeing more disInflationary Forces you know, the Global Economy is picking up, but competition is pretty intense so thats keeping a cap on pricing, and all the disruption in the retail activity is further meaning, you know, a lot of companies, theyve got lower unit costs, they can pass that advantage along to the consumer. So i dont see any nflation. But i think the feds going to be looking very carefully at all the hard data. You know, the monday pmi was encouraging. That looked fairly strong across the board, especially some of the key components but youre looking at that, but also industrial production, the shipments numbers coming out, and durable goods orders so incoming data is going to be critical here. But theyre definitely, you know, on this rampup to normalize, and i wouldnt be surprised, even though the fed funds futures are saying what about 18 probability of a september hike, you know, that could be on the light side ellen, this is joe ziedle, just a question for you on the possible sources of inflation. You mentioned tight labor markets, and you know, its a classic kind of late cycle environment where, you know, we have had years and years and years of expansion, labor pool itself, you know, youre hearing a lot more competition for workers. At what point does that translate into higher wages . You know, i guess i dont really agree that we have really tight labor markets. Yes, the Unemployment Rates at 4. 3 at the same time, you know, job growth has slowed. Were down to, as i say, like 1. 5 you have a lot of people that are under employed you know parttime for economic reasons is over 5 million. And if you look at the u6 Unemployment Rate were still hanging above 8 44 so there are a lot of folks out there that are either underemployed, or you know, looking for a fulltime job. So i think, you know, we just have to dig in and train a lot of these people. You know, the future of work, especially with automation, is that weve got to get the training out to these people but theyre employable so i think theres a lot of labor on the sidelines ellen,thanks so much. Appreciate it. Thank you plays right into this next segment, news just crossing on the state of Small Business in america. Job growth declining for the fourth consecutive month but hourly wages are rising according to paychex Small Business employment report joining us marty mucci, paychex ceo. Hopefully you were listening to the last guest marty, from the anecdotal evidence youre saying it sounds like the job market is pretty tight and were finally starting to see some wage increases and that would explain why, you know, the index goes down but wages are going up but we just heard that maybe there still is some slack in the jobs market in terms of people that want to work more or work fulltime. Whos right . Yeah, i think well, joe, i think its very specific i think its two Different Industries if you look at the construction industry, construction we saw is down in that sector pretty strongly year over year and i think its finding the right labor in the training. She did mention training its very important to find the right people for the right jobs. Thats where i think it might be tight is trying to find the right folks for those jobs overall we saw the index come down fourth month in a row after a pretty strong start to the year, and were getting back to kind of that normalized job growth that we saw in our base year which is 2004 and now its all about the wages, wages almost hitting 3 overall. And i think that will be important to watch, as that wage growth gets stronger if it is a tight market what should we aspire to . Whats the out west, its the fastest wage growth. Its almost 3. 6 whats the best weve ever done . Whats the best we could hope for . Well, i think typically, you know, in the tightest of markets, probably a little over 4 maybe 4 to 5 i think weve seen in that really tight market, and its going to be very specific. Again, some of that wage increase is tied to minimum wage increases. So youre seeing the biggest growth in wages on the lowest paying jobs. That youll see. Because, its in other services. Its in leisure and hospitality. Where minimum wage increases, a lot of those are taking effect right now in washington state, in california, in arizona, and that is seeing lower job growth and higher wage increases. And frankly hours are up as well because theyre not hiring as many, theyre just pushing more hours on the employees they have today. Are you suggesting that this is a oneoff that a lot of the wage gains were seeing in this report are coming from that minimum wage increase that we shouldnt expect to continue seeing the same sorts of increases in the months ahead no. I think youre just seeing part of this wage increase is driven by minimum wage. But i think overall, because youre seeing pretty consistently across the country, were in that 2. 5 to 2. 7 overall kind of wage, even though the west is higher where you have some minimum wage increases, arizona, again, and washington state, where thats growing at over 3. 5, i think the rest of the country is still somewhere between 2. 5 and 3 and i think well continue to see that that will be the thing to watch, are wages increasing to give more spending power to the consumer all right so job growth in the south, but wage increase is best out west i guess. Thats correct okay. Marty mucci, thanks. Well see you next month okay. Still to come, playing hard and working less well tell you how many 20 somethings are logging fewer hours at their jobs, and more on their couch gaming stay tuned youre watching squawk box on cnbc time now for todays aflac trivia question are you ok . What happened . Dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac Flexshares Etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if there was a single site where you could find the right hotel for you at the best price . There is. Because tripadvisor now compares prices from over 200 booking sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Now the answer to todays aflac trivia question weve got an update on a story we told you about earlier. Uk based Payment Technology Company World pei has agreed to a takeover off of Vantiv Worldpay shareholders would own 41 of the combined company, but the two sides say talks to hammer out final terms are still ongoing. Also according to headlines worldpay is in talks between parties remain on worldpay and remember jpmorgan had been in the mix as a potential reported bidder in this whole story that would have been jpmorgans biggest deal since the financial crisis but it looks like vantiv hammered out terms with worldpay. Vantiv shares were halted at last check theyre halted right now so well keep you posted on how these two stocks do. All right millennial men work 12 , 12 , 12 fewer hours in 2015 than they did 15 years ago, and one study says that the biggest reason is more video games the National Bureau of Economic Research analyzed how people spend their time when theyre not working. They say video games have been responsible for reducing the amount of work that young men do by 15 to 30 hours over the course of a year the study also notes a lot more men between the ages of 21 and 30 are living with their parents, or some other relative. Is there a correlation here absolutely. Theyre in their basement, playing video games. Its all drshs eating avocado toast, probably avocado toast while theyre playing video games . Or do they just want cheetos not milmillennials. Avocado toast from whole foods or amazon. While theyre in the basement all right. Legg mason is out with its fifth annual Global Investment survey among the findings baby boomers and genx investors are not meeting their goals for Retirement Savings joining us james norman qs investors president and head of equity strategy. I read somewhere that paying people to save did you see that it was an article, paying people 10 yeah i think theyre trying to encourage people to save, because people are not really meeting their goals and actually one of the things we found from the survey that was really interesting and also concerning was that people are really arent meeting their investment goals by quite a bit baby boomers who are closest to retirement or in retirement actually have saved less than half of what their goal is and thats really concerning that sounds like an Insurance Company and Pension Managers and states with retirement plans nobody is hitting their goals with a 2 10year. Yeah this is one of the difficulties, as well. We also found that their asset allocations are way too low to growth asset for example baby boomers have more money allocated to cash than they do to equities so they have on average 30 and we all know, money markets, its close to zero, inflation call at 2 but theyre young they can they can ride things no, they ought to be buying over time stocks outperform Everything Else but do you get into stocks now. If youre underallocated not if they listen to you in may of last year my clients are doing just fine thank you very much. Okay. But if youre 20 since may if youre a baby boomer now yes and youre saying okay i dont have enough money to retire, do you put money into the equity market now, at your age given your goals, i mean its a hard call let me use my mother as an example. Shes 78 and you know god willing shell live as long as my grandmother who died at 95 so, she still has a long way to go and the thing is if she doesnt invest in growth assets, if she has 50 too much money in cash, we all get the calls from our relatives, as soon as theres market gyration or some geopolitical news like with north korea people get concerned i get that call from my mother, im really nervous, im not going to have enough time to recover, should i put stuff in cash ive been able to convince her to keep in the market compared to many of her friends who havent and the result, the difference is stark. You have to invest there are some rules you should follow as well theyre going to be in to hold the bag the millennials will finally get into the stock market like when it peaks well, thats one of the interesting things we did find from millennials, as well, is that they really have underinvested in equities, because you think about the type of situation they represent you with they were presented with their parents and grandparents during the financial crisis losing a lot of money, some of them losing their jobs, and that was really, i think traumatic for them so they have not been investing much but what we did find from the survey was that this is the year that they all of a sudden want to increase risk dramatically. Hmm and they might be buying up the top. And the problem being is if they have a bad experience they might be out for another 20 years. And it might be one of the reasons this equity market has run as far as it has and may continue because people are so scored by 08, 09, its fascinating. Youve seen more than double the amount of money going in to fixed income and credit that youve seen going into equities cumulatively since 2008. Equity market is completely underowned which is your point yes, exactly. And also if they stay in cash, think about it, baby boomers have on average 30 cash 24 equity they need to really invest in equities now of course they should manage their Downside Risk and really, you know, pick some of the best principles of allocation, they should diversity u. S. Has had a great run time to maybe put a little more money in International Markets and emerging markets as well you dont know where the return is going to come from and you need to diversify that so they are saving some theyre just not putting it in equity i thought they were experiencing things arent they like experiencing theyre going to live forever. Theyre immortal right but arent they experiencing things leaving the parents basement to go out and like experience something . Or right, i mean theyre blowing their money, right . Well they can save later yeah. And theyre just theyre always thinking, you know, if i use you know, whats the point of saving it because i might lose it in a drawdown. Thats for millennials more concerning i think is for the genxers like myself or the baby boomers like my mother, theyre going to be living a long time. And if they do not put the money in the market and sort of focus, and also income was another thing we found out generation z really what they call people after millennials . They do, and i saw an article, much more conservative generationz theyre not you know, you look at the current milieu in terms of, you know, College Campuses we keep going down this route, the country is in think might even have if theyre more conservative no, no, no. Theyre being more probusiness. They wont feel dirty if they invest in capitalism like the millennials. Which is also part of the problem. Right all right thank you. Appreciate it. Thank you r e coybng up retail plaook fothsend half. Well talk to an analyst next. [man] were campers. Look at us. Look at us. Its so nice to get out of the city. Its so. Quiet. Is it, too quiet . Its awful. Yeah. Feel at home, pretty much wherever you are. Tmobile is americas best unlimited network. This is a story about mail and packages. And its also a story about people. People who rely on us every day to deliver their dreams theyre handing us more than mail theyre handing us their business and while we make more ecommerce deliveries to homes than anyone else in the country, we never forget. That your business is our business the United States postal service. Priority you the power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. The future isnt silver suits anits right now. S, think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. The Retail Sector has seen a number of bankruptcies, and a Record Number of bankruptcies and foreclosures in the first half of 2017 here to give us the second half retail playbook randy connick, jefferies analyst covering Consumer Department stores and Specialty Retail good to see you. Youve actually had safety Retail Stocks. What you call safety Retail Stocks what are who is immune to what is going on, aside from amazon thats the obvious the way to think about the retail space today is to think about what has limited competition. Brands matter. Amazons taking away mall visits but its not taking away brands. So our top pick this year has been nike. Performed very well helped by the most recent quarter last week we also have a big pickon tiffany. So tiffany youre not going to buy a 20,000 piece of jewelry on the internet. So most of the winners this year in the first half of the year have been companies that cant be amazon, as well as companies that are basically value plays for retail offprice retailers or basically Retail Stocks have been down dramatically its trying to find stocks that arent going to go down. Even though the huge gain in nike shares you would say continue to buy the stock . Yes, very much so we really believe nike has a big play in terms of no fx issues in the back half of this year into the next fiscal year or and fiscal 19 in addition we like the athletic sector generally speaking. Again, theres only three companies that really matter in that space nike, adidas, and its under armour under armour is a name where most of the sell side, in fact all the sell side pretty much dislikes right now what were recommending to our clients since the month of march is go into under armour, go into nike, play the strong athletic cycle and theres two companies that really matter so amazon wants to buy whole foods. Do you start to take a look at some of the names in the sector, beleaguered namgs with a physical foot print and think, they could be targets for somebody like an amazon looking for some physical presence, and some just sort of brand . Yeah, i think amazon tells you with the whole Foods Acquisition that retail matters. What i think is interesting about the retail space generally speaking, its underowned. And underowned does equal under valued i do think as joe said earlier, we do see the ability for retailers that have strong cash flows to basically improve those cash flows by cutting their store bases. If you look at retail over the next two years, majority of them can close 50 of their store leases within the next two years. So thats an ability to rationalize your supply, match your supply with demand. The consumers actually pretty strong 2 gasoline is pretty good it gives the ability for the consumer to spend a lot of money and stores will matter in the longterm. Randy, thanks all right, thanks to Rebecca Patterson and joey ziedle for joining us this morning. Sam waxle is going to guest host for the next hour. Coming up the trump agenda and the impact on farmers. He will be our guest host for an stur ay tuned youre watching squawk box on cnbc a developing story a u. S. And north Korean Missile standoff the latest is straight ahead prosecutors want a judge to silence Martin Shkreli during his trial. A live report from the courthouse coming up plus new this morning did Amelia Earhart survive a crash landing in the Marshall Islands . Well bring you a never before seen photograph that could be proof as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Marketsite in times square im joe kernen along with melissa lee andrew and becky are off today and our guest host for this hour, timely, dr. Sam waksal, founder of cadman and Imclone Systems and well have a discussion with sam. A lot of health care stuff a lot of i dont know where to start. It is complicated. Its 17 of the economy. And weve got to figure this out somehow. Right . We do and i dont, you know ill help youll help but tell me how difficult it is between pricing, and trying to curb increases and yet not hurt innovation weve got to make sure we do it right. So thats the trick its walking that tight rope between making sure that we deal with this big part of the economy, but making sure that we innovate so that we actually save money by saving patients lives and curing disease it is important. And if you take a pill, its a lot cheaper than sitting in a hospital bed for a week. Or being in intensive care unit and like there for nine weeks before you die right right. And baby boomers, and i mean at the turn of the century, sam, i think what was the Life Expectancy i dont even like talking about it, it was like 39 years old in the 1930s not the last century, the century before in the early 1900s, into the 1930s it was what the average Life Expectancy in new york city was 44 years of age. That all changed because of vaccines, and antibiotics, and we changed the world and now, drugs, which are making people either saving peoples lives, or allowing people to live longer. And that actually saves money, puts people back to work, it saves lives, and it is critical. And its what biotech and pharmaceutical industries weve got to figure out the last six months, too, dont we we do we do. But we dont want to do it in a heartless way, or i dont know how you do it well, there are ways to do it i mean, we give patients and families choices we tell them that that in the last nine weeks of someones life, that payments are going to be different than they are if we really change outcome. And we have to figure out how to deal with that we do live in a new world. I mean, in 25 years, in 20 years, were going to be spending a trillion dollars a year taking care of people with alzheimers. 50 of people who reach the age of 85 have alzheimers and we have to find a cure i mean there are people out there that are doing brilliant work, scott small at columbia, greg pesko at cornell are doing brilliant new work thats changing the paradigm of what this disease is. I dont even know how the plaques come, are they first or second second. The plaques arent causing it i believe that its a transport mechanism work thats going on, is talking about transport, talking about cleaning up the brain. Wow we may have to talk about some other things. But well yeah, thats we got sidetracked. In fact that was your first that was our first discussion probably i dont know theres a lot more to talk about. Ahead making headlines this morning the United States is condemning north koreas first test launch of an intercontinental ballistic missi missile. An emergency meeting of the u. N. Security council is set for today. And in the last hour President Trump tweeting trade between china and north korea grew almost 40 in the first quarter. So much for china working with us but we had to give it a try. Meantime in corporate news, uk based Payment Technology Company Worldpay has agreed to a tentative takeover offer from u. S. Based Payment Company vantiv it would be a cash and stock deal valued at nearly 10 billion. Worldpay shareholders would hold 41 of the combined company but the two sides say talks to hammer out final terms are still ongoing. Lets get back to our guest host this morning. Dr. Sam waksal. Founder of cadman and inclone systems. Weve talked about a little bit, you know, in the past when weve had Pharmacy Benefit Management companies on, i get you you email bomb me with the, you know youre going to get a chance to talk i thought they were part of the solution, not part of the problem. I think interestingly because of the lack of transparency, you dont know we dont know. And i think if you ask pharmaceutical companies and Biotech Company ceos why they raised prices, a lot of what they will tell you is they raised prices to deal with the kickbacks that pharmacy benefit managers get on the more expensive drugs. Is that kickback are they legal . Or is there another word im not sure. I think its discounts so lets think about it this way. If a drug is costing medicare thousand dollars, and the Pharmaceutical Company says to a pharmacy benefit manager, well only charge you 700, that savings doesnt go to medicare that savings and that money goes in to the hands of the pharmaceutical is a way they can hide their Profit Margins so that we dont know i dont think a lot of them are owned by Insurance Companies, and i dont believe were going to have a pharmacy benefit managers ceo on today. So well see. Were going to ask him. Well see what he thats your guest, right so well see. But we believe that i think a lot of the industry understands that those savings do not go to either the insurer, or to the payer, more importantly, or to the patient. If amazon said we have reports that amazon wants to get into the pharmacy business could they actually change whats going on . Could they make the system amazon is known for transparency, go online see all the prices, they tell you the different sellers. Could that be revolutionary . I think it could be the big question is how we deal with the fact that people might get their drugs online its one thing to get your statin online and not worry about abuse. Its another thing to get your cancer drug. Online its a new world i think that new media that the internet is going to change efficiencies, and efficiencies are critical so, i dont know where you were when obamacare was passed and i know where the public was. It never even hit a plurality until you talk about taking inchanging it or repealing it, and suddenly its more popular then its ever been. Its above 50 one of the most unpopular pieces of legislation in history until now when you try and thinking of how to replace it. Do you think, have you always thought it should stay or have you thought it should have been repealed up to this point . I thought that there were real issues with obamacare and i think one of the issues that we have right now is a polarization in politics thats overwhelming and i think what we need to do and look, there were the senator from louisiana, and the senator from maryland, that were both on meet the press this weekend, and one of the things that was clear is with medicaid, which is a big part of the controversy right now with health care, the states really need and have different issues, and need to have controls. And a lot of the runaway costs with medicaid are because the federal government just ahowed runaway costs for a long time, and it was very hard for states to get waivers to do things their way. And i think right now, both the republican and democratic politicians need to sinner just in the way they look at the world, need to compromise in the way they look at the world, fix the grave mistakes that occurred with obamacare, but also make sure that we deal with our patient populations and make sure, as the president s said, deal with preexisting conditions and make sure that Insurance Companies begin to deal with things a little differently. Ill give you an example, in the future and in the near future, were going to have one time cures with gene therapy, or gene editing. Gene editing is further away but with gene therapy. So were going to cure disease and if youre both insured by company a, and they pay for that cure, say that cure is a lot of money, say its 50,000, 100,000 you leave that Insurance Company and go to a new one, the old Insurance Company didnt want to pay for that, because the new ones got a cured patient. So we need to figure out how to amortize these things, how to have Insurance Companies agree that when we cure a disease, when we change outcome, we figure out how to pay for it hmm so that continues innovation. It continues keeping us alive, and in a positive way, and i think thats going to be one of the other things all right well return to this mind boggling, though, isnt it yeah. Its tough. Then we have north korea anyway, weve got a lot of things to try and figure out that are difficult, sam will be with us for the rest of the hour coming up, a roundup of this mornings biggest market movers. Plus a story that could rewrite history. A new photograph that appears to show Amelia Earhart possibly surviving the crash landing in the Marshall Islands back in 1937 this is a picture you need to see to believe stay tuned youre watching squawk box on cnbc a used car, welcome back to squawk box. We have a story that will have everyone talking this morning. New evidence from the History Channel suggests Amelia Earhart and her navigator fred noonan survived a crash landing in the Marshall Islands in 1937 nbcs tom costello reports on a never before seen photograph discovered in a formerly top secret file in the national archi archives reporter Amelia Earhart on a flight with navigator fred noonan took off and was never heard from again reporter for 80 years the world has wondered what happened to Amelia Earhart and her navigator fred noonan . In july 1937, they were over the pacific on a round the world flight when they disappeared this photograph came out of reporter but now investigators from history believe they found evidence the two were blown off course and survived i have a photograph which i believe clearly indicates that earhart was captured by the japanese reporter retired Treasury Department investigator les kenny has spent 15 years looking for earhart clues. While searching through formerly top secret files in the national archives, he discovered the this photograph from about 1937 marked, jaluit atoll in the Marshall Islands a string of small islands at the time under japanese control. We have a cow caaucasian womn with her back to the camera sitting there looking over towards the ship you think this is Amelia Earhart . Thats right. Photographic analysts tell history the photo appears legitimate and undoctored. Former fbi executive assistant director sean henry and nbc news analyst worked on the project. When you pull it out and when you see the analysis thats been done, i think it leaves no doubt to the viewers that thats Amelia Earhart and fred noonan reporter in 1937 the japanese had banned nearly all westerners from the islands. But in the photo it appears there are two caucasians on the dock a man standing on the left, and what appears to be a woman, with short hair, wearing pants like earhart, sitting on the edge henry took the photo to facial recognition expert kent gibson, who first overlaid the photo of the man with file photos of fred noonan the airline is the most distinctive characteristic its a very sharp receding hairline the nose is very prominent reporter the airline and nose all appear to match up. Its my feeling that this is very convincing evidence this is probably noonan. Reporter then the person sitting with their back to the camera, with air that appears too long for a man and too short for a native woman gibson compared bodsy measurements with previous photos of earhart. Again, striking similarities i usually go from not likely to likely to very likely to extremely likely and i say this is very likely. And theres more evidence in the distance, the japanese ship, which is towing a barge with something measuring 38 feet long the same length as earharts plane. For decades locals have said they saw earharts plane crash and the japanese ship koshu took her and noonan away. A story even documented in stamps issued in the 1980s now, photographic evidence that the story may be true. We believe that the koshu took her to saipan and that she died there under the custody of the japanese we dont know how she died we dont know when she died. Reporter the history team may have even found pieces of earharts plane. And the prison in saipan this may actually have been her cell reporter this morning this newly uncovered photo is opening a whole new set of questions about what happened to earhart, and noonan, and what, if anything, did the u. S. Government know . We have no evidence anywhere that she crashed into the ocean, even though thats been the common narrative for so many years. I think we have a lot of evidence that she lived, and survived, in the Marshall Islands. Guys, were live here at the air and space museum, and this is one of Amelia Earharts planes of course the plane that she was trying to go around the world in has been missing since 1937. Now the locals in the Marshall Islands said that they were told by the japanese at the time the woman in the plane is a spy, dont talk about it. The japanese, for decades, have said they know nothing about earhart. We reached out again to the Japanese Foreign ministry, the defense ministry, and the Japanese National archives all of them say they have no documentation that earhart was ever in their custody. Of course, any official alive then is today not alive, and much of the evidence and much of the documents from that time have long since gone they were destroyed in the war but, the question now is whether this photograph really kind of reopened the entire investigation. It is a fascinating, twohour documentary on the History Channel, on sunday, 9 00 pardon me, 9 00. I got to tell you, i watched it. I was riveted. Then i interviewed all the players and i came away thinking this may be the real deal. Guys, back to you. All right that is thats something. Before you said that and explained it, tom, you would think they have some records, but it was all destroyed in the war. So you dont have that so i dont ne whether this ever is definitively decided if theres no paper trail whatsoever no ones alive, obviously, from well, and theres more. You want me to entice you even more listen to this there is a file in the national archives, marked Amelia Earhart in the Marshall Islands. It was a file composed or created by the office of Naval Intelligence 176 pages. Those pages, those documents, are missing. They were purged in the 30s and 40s we simply dont know but at some point, office of Naval Intelligence had a file. So if the United States, first of all the United States gets this photograph. Do they know that that is, in fact, Amelia Earhart in the photograph and fred noonan . Or are they simply compiling photographs of the Marshall Islands, because theyre trying to keep track of japanese troop movements at the time . Is that what was going on . Yeah. And by the way the person who took that photograph they believe was later executed by the japanese for being a spy wow so you can imagine that if the United States or the australians knew that somebody was taking photographs on their behalf in the Marshall Islands, they wouldnt want to compromise them well, that is thats even more you know, i havent followed it that closely. I never even heard of fred noonan ive heard of danny noonan from caddyshack. But why are you laughing . A real person danny noonan is not real either fred noonan only you would take this to caddyshack nobody else but kernen would take this to caddyshack. Daddy noonan. Thats not what she said. Fred noonan i never even heard of him heard of danny noonan. Anyway, tom good to see you. And a free cup of soup with that hat all right thank you. Thank you tom costello the trial of former Drug Company Executive Martin Shkreli continues today in new york. Prosecutors have asked a judge for a gag order. Saying that shkreli, and sam waksals idol that his statements to the media could taint you really dont like this guy i really dont. Well talk about that after we hear from meg but it could taint the jury and disrupt the trial. Meg tirrell is covering the trial for us off camera sam goes off. Maybe well get him to do that on camera. I think theres a high likelihood that sam will express his opinions about that. So there is news in the ongoing Martin Shkreli trial on Late Wednesday the prosecutors requested a gag order on both the defendant and counsel. And really counsel for all parties in the case citing comments that shkreli made inside the court house, outside the courthouse and on social media saying that theres a danger that his comments could get back to the jury and corrupt this very carefully and long taking jury selection process. It took them 2 1 2 days just to get down to 12 jurors and 6 alternates the defense has objected to this request, saying that while they oppose a lot of the Media Coverage around the trial calling it inaccurate and biased that they need the ability to respond to that Media Coverage so they have asked that the request be rejected. We expect the judge will address this today, this morning in court and we will see what happens there. The prosecution in addition to asking for this gag order has said they dont want to grant that, or if, you know, in addition, theyve asked for a potential semisequestration of the jury theres no real i talked with law professors about this, no definition of what a semisequestration is, but say maybe limiting social media or any sort of media access, Electronic Media access that the jury has during the course of this trial of course a full sequestration they have to be staying in a hotel and that would really annoy the jury Martin Shkreli famous for increasing the price of a drug by 5,000 . That is not what he is on trial for. That is for securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud to which he pleaded not guilty okay. So his twitter account, his alleged twitter account because he had an original twitter account under his own name and then he had an anonymous twitter account i guess, was suspended thats right. So the prosecution actually cited this twitter account Martin Shkreli had been banned from twitter for harassing a female journalist. It appeared that he had come back on the social media platform and in this prosecutions request they really cite evidence showing that shkreli on a youtube scream because he likes to live stream his life cited this tweter account as being his and this morning we have seen that that twitter account has been suspended. Live streams his life yeah. Yeah there were even a few times during status hearings leading up to the trial that he would show up sort of periscoping, walking into the courthouse. Showing the press around him and so, hours and hours of footage of Martin Shkreli online that he has taken himself. Just ordinary mundane things, right . Like eating a bowl of cereal or whatnot . Yeah. He has many fans, he also analyzes biotech stocks. So well, he does that for not for me, no. So weve had on here Scott Gottlieb as a cohost with me. And one of the first things new commissioner of the fda fda commissioner. Were really lucky, the countrys lucky. And one of the first things that scott did to make sure that we dont do the kinds of things that shkreli did before was put out a 60page report that will, in the future, when there is a generic, and its the only one so that people can play with the price and raise pricing, put out a report saying what the fda is going to do is get drugs very quickly on to the market, that are competitive generics, so that they dont price these drugs that way, that affects patient. These are 60yearold drugs, theres 50yearold drugs, a courtco steroid it would have been well epipen is a specific issue because of the Delivery System right not that the epinephrine cant be made by other people. But you cant there was a feet dragging in terms of allowing application for generic epipens have been rejected the market is so when the market cant cure things, and competition can cure things, even with innovative drugs, we now have a slew, richard pasdor has said stop making antipe1s a new class of immune owe therapy. A new class that are really changing outcome, theyre going to make that market competitive, pricing will be affect the, and i think patients will be happy because they really have changed outcome for cancer patients. Lets talk more about drug pricing, thank you, meg. Meg tirrell. Joining us now kyle fields, ceo of an ohio based pharmacy benefit company. Kyle, thanks so much for joining us thank you for having me thank you. Your industry has pointed to pbms as the pull prit for high drug prices. You say your company is different. You provide transparent to the consumer so if you were using the transaction would a consumer know exactly how much he or she is paying for a drug how much, you know, the Pharmaceutical Company is getting by way of discounting . I mean how are you different essentially the patient has no idea what the actual price of the drug costs a lot of cases, its zero copay at the point of service at the pharmacy, or 10 copay but the pricing models that go in to that, that are kind that from the drug manufacturer all the way down to the patient receiving the medication, is such a complex, intentionally complex situation that unfortunately even the savviest fortune 500 ceos have a hard time deciphering sure. But getting back to the original question, how is your Company Different . How do you provide how do you cast a light on that murky process so the consumer knows exactly how much he or she is paying essentially its passthrough pricing. Basically our clients and our payers, our employers get to see the same numbers that we see and so if theres 1 that comes in, for a rebate, for example, that 1 goes out to the employers in order to lower the cost of those drugs. Also, we make sure that our contract pricing between the pharmacy ends with the employer is the same, as well so if were in a situation where we get better pricing through one channel or another, that the actual patient, the actual employer payer gets to see that savings in realtime. So, am i going to be paying less for drugs in general if i buy through approrx is the pbm involved as opposed to another one out there . Shorter answer is yes not only be paying less on average as weve been able to do for hundreds of clients across the state of ohio and thousands across the United States, but you also get the its not just you get a better pricing we actually are able to show Better Outcomes so if youre taking a medication we dont want you to just have a good price on that medication. We want you to make sure that that medication youre taking is actually working so what are some of the biggest discrepancies in terms of pricing between what your Company Might distribute versus another pbm . Again, the pricing companies down to what are the rebates how much rebates are being passed through, how many rebates are being paid by the drug manufacturer to lower the cost of the drug and actually making it to the employer and to the patient. Also, what what does a pbm make per transaction you know, in the state of ohio, a good healthy pharmacy, pharmacy can make according to the ohio pharmacy association, should be profiting around 11 per per description. We have faces where weve taken over accounts for the pbm is making twice, three timeses, even four times that amount per transaction. And so and the employer doesnt know that. And thats where it gets very interesting with the pricing, to say the least. So, kyle, that means that, for example, patients would do better paying out of their own pocket for a drug than for, example, getting reimbursed by their payer, so were talking about a situation where pharmacy benefit managers have become a middleman to add pricing on rather than making sure that things are cheaper for the patient, or the payer . Im not saying pbms dont have a legitimate place but there are instances sam that absolutely we have numerous examples that i think ive even show you that if a patient had actually paid cash that it would have saved not only the patient money but also their employer who is actually footing the cost of that bill so how did this happen . How does it happen that suddenly we have a new industry popping up and you know, right now, with congress, with payers, with patients, everyones ire is aroused, and we have a new industry thats totally nontransparent, gaining moneys that are supposed to be saved from both payers and patients how did that happen . Again, its what is a pbm the average person on the street dont know what a pbm is so our biggest problem is education. If you dont know what a car is, how do you decide between one brand manufacturer and another brand manufacturer but you dont know what a car is and the problem is the people the same people i speak to have been driving a car for the last ten years. In this case, theyve been purchasing medications, utilizing pbms, but its pbms have become thegate keepers. As a pbm myself i dont distribute the drug, i dont prescribe the drug but yet in a lot of cases we make the most profit on those medications. As a pbm we dont. We want to make sure the employer, the patient, sees the actual pricing thats out there so they know that theyre getting a good deal and were doing our job and were making money simply on a transactional basis. So its going to be the old thing of who will watch the watcher, right right now correct right now the pbms are doing things that really arent helping the Health Care System, arent helping the manufacturer, the Biotech Company, or the Pharmaceutical Company, and clearly arent helping the payer of the country weve got to leave it there, kyle but we appreciate you joining us good discussion. Kyle fields. Thank you very much beautiful shot. Two great stadiums, fortunately one is the bengals, and the other is the reds. The north korea threat escalating the country tested an Intercontinental Ballistic Missile over the weeks and experts say the missile could have the ability to hit alaska joining us now is james woolsey, a former cia director and former National Security adviser to Donald Trumps president ial transition team, and we should mention that director woolsey wrote the forward for a new Brennan Center report, known called securing elections from foreign interference director woolsey, thanks for joining us, the icbm was qualitatively different in a couple of ways i guess you know, its just not another Missile Launch this one was very concerning, no thats the position that most of the establishment takes im afraid i think its worse than that. The North Koreans have been able to detonate, in orbit, for several years, a Nuclear Weapon. Orbiting a small satellite is the easiest thing thats done in space. Thats why sputnik and russia in 57 was the first thing done and so forth and if you put a simple Nuclear Weapon, something about the size of a golf bag, into a simple satellite, and detonate it, 30, 40, 50, 100 miles above an area, you can knock out the electric grid of that area. And i think the North Koreans have been able to do that for now several years. What they have not been able to do is to launch an icbm, an Intercontinental Ballistic Missile that goes up into space and comes back and reenters the atmosphere, and has heat shields, and accuracy, because its being shot at a specific target all of those are hard to do. And the North Koreans are coming along on that. Theyre much further along than they would like to see, but theyre theyre they made progress by this launch. But, i think they have been able to knock out our electric grid now for several years. S. Where would they how close would they have to be to mainland u. S. To do this 50, 100, 150 miles up in space but they cant go these icbms cant travel that far yet, can they the Intercontinental Ballistic Missile that was tested, in a sense, goes up into space, briefly, but it follows a ballistic trajectory, and requires heat shields and all those things i described, and its aimed at a specific target. Right the North Koreans have made progress now toward doing that what im saying is that if they had wanted to, and the same will be true soon im very afraid of the iranians, if they want to detonate a Nuclear Weapon up above the United States right somewhere in orbit, 50, 100, 200 miles thats within that is much easier to do and it knocks out, im afraid, under most circumstances, the major share of our electric grid thats all we need. So what china going to help eentzly . President trump is sort of laying, sort of nudging them again today. China is kind of the ball game on north korea. We really need them. We need their policies, towards exports for north korea, we need them to lean hard on north korea. Theyre the only real source of north korean hardware, and economic progress of any kind. And they are dragging their feet weve got to wrap this up but ive got to ask you one more thing. You were director of the cia is the idea of elements of the cia deep state elements, is that a tin hat conspiracy or is it possible there are still elements left that want to see trump either fail or embar osed i think probably there are some who disagree on policy. I think almost all of them are good enough americans that theyll play it straight, even if their views on a substantive policy matter tilt much more toward the obama way of doing things but there are people, obviously, career sure. But you figure most of them as you said theyre patriots i think they play it straight, 90plus of the time that leaves 10 90plus so 5 you know we could talk about a lot of other things. The president heads off to see putin so theres a lot that were leaving that were not talking about. Right mr. Putin is sitting in the catbird seat, and he can foul up our elections three years from now, and he will do everything he can to do so. And we are we need badly to take some steps to preserve our voting ability director woolsey, thanks for being with us this morning appreciate it. Coming up isorng sckth mnitos to watch, including a deal, squawk box will be right back. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Well it looks like there will not be a bidding contest for Worldpay Jpmorgan chase saying it will not make an offer for the company. The bank had approached worldpay in what it calls a very early stage consideration about an offer. Just a short time ago worldpay announced a deal to be akwiefed by vantiv for nearly 10 billion. Coming up rules of the road. How deregulation could Impact Health care mpie acoans,nd investors. Stay tuned youre watching squawk box on cnbc if you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go . Expedia gives you the world in your hand, so you can see more of it. Expedia. At crowne plaza we know Business Travel isnt just business. Theres this. a bit of this. Why not . Your hotel should make it easy to do all the things you do. Which is what we do. Crowne plaza. Were all business, mostly. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Health Care Information Technology is one sector that could shift with deregulation. Our next guest was an early investor in the space. Andrew adams is cofounder and general partner at okay hcft great to have you with us. Thank you for having me first what kind of health care are we talking about . Theres so many different ways to invest in the sector. Our belief is theres no Silver Bullet technology theres no app thats going to solve our problems in this system what it takes is a convergence, a purposebuilt Technology Platform, modern Technology Platform and a Specialized Service. That combination is what can really impact cost in the system so what we do, is we look at big dollar problems. End of life care we look at a Mental Health we look at primary care. And we train those solutions on containing those costs how, if at all, are your decisions to invest in a particular company have to do with policies and what policies exist at that moment in time we do not like taking stroke of the pen risk. What we do is focus on that almost trillion dollars thats wasted or misspent every year in the Health Care System where can we make the system more efficient where can we provide care at a lower cost setting that is very beneficial for of aing money and getting in front of the cost trensd that were battling with right now. So who how im just trying to understand like if you have an app that helps to manage the cost of end of life care absolutely. Who is paying for that app . How does the company make money in that situation . So its a great example so when becky goes out to omaha and Charlie Mungers talking about the 200 billion we spend in the last sixmonths of a persons life. Their company out there is aspire health care they get in front of that end of life care 12 months ahead of end of life, dealing with that conflict patient in the home and community and outside of the hospital its a third of the cost and you can do that through a specialized Technology Platform and a Specialized Care Team coming together. And its a win, nine out of ten people dont want to be in the hospital receiving that type of care, and again a third of the cost of providing that care in the hospital so, a long time ago, youre talking about end of life care and the last century, it wasnt that long ago, and the earlier part of the last century, a patient went home, and if he was dying his family surrounded him, and he died beautifully, and without a million tubes everywhere, spending money, and not really having a change in outcome. How does this save money, and how does it change what were doing right now, in spending a ridiculous amount of money with patients that really arent getting any benefit . Its a very similar model to what you just articulated. That 200 billion is spent in the last six months, a significant portion of that is inpatient unnecessary inpatient stays you can still facilitate high quality care in the home and community through the use of a modern technology, a care platform that unifies that team, and again, providing high quality care and that lower cost and saving all that money absolutely. The flip side of this is that technology can be used to prevent conditions from happening, and to monitor conditions to ensure compliance for medications. How big a part of your portfolio, if it is at all, are things like apps that help you monitor your health, monitor for instance diabetes, or monitor, you know, medication you know, were big believers in the use of preventive care. But again, we dont believe that can be done with just an app it has to be married with a Specialized Service to really change the behavior of that individual and so, really, we focus on more of a convergence than an app, per se all right we have to leave it here, andrew thanks so much fascinating. Thank you sam, youre if memory serves youre an m. D. , are you not . Youre a ph. D. Okay then you cant help when you eat 72 hot dogs in ten minutes, what happens to your i mean is that healthy can that not be all week weve been hearing about this hot dog eating contest. First of all that stomach is really stretching. Its stretched. And what happens over the next three or four days you go to the bathroom a lot. You do a lot i worry he wants to know how. No, ive got some video im worried this is eventually going to happen at one of these hot dog eating con this was a Blueberry Pie eating contest that the people havent seen this video, this documentary thats what can happen its not a document rid this is a movie this is this is not real. Its not i thought that i thought it was real i mean its happening oh, it is youre right its stand by me. Okay but im worried that is going to happen at one of these hot dog im worried, as well. Somebody iss going to throw up somebody there are consequences to there are consequences to treating your body like that op have you seen these things . Pele are about to, because you cannot regurgitate any part of what youre consuming i hired some help. He really knows his wine. This is the new guy . Hello, my name is watson. You know wine, huh . I know that you should check vineyard block 12. Block 12 . My analysis of satellite imagery shows it would benefit from decreased irrigation. I was wondering about that. Easy boy. Nice doggy. What do you think . Not bad. Time now for your kensho stat of the day fourth of july weekend isnt just about barbecues and fireworks its about big hollywood movies hitting theaters Julia Boorstin is in los angeles with a look. The Holiday Weekend failed to turn around a weak Summer Box Office with the Summer Season down 9 from last year, dragging the year to date u. S. Box office down nearly 1 from the year early according to com score that reverses gains we saw earlier in 2017. Despicable me 3 topped the weekend in the u. S. But about 10 million lower than the opening for despicable me 2. Sonys baby driver and will farrell and amy po hers comedy the house from Warner Brothers fell flat. With the exception of wonder woman and guardians of galaxy,er, its not expected to improve. Saying in a note given tough comparison for july and august we estimate 3 q will likely fall roughly 6 morgan stanlly slashed the price target on regal on a Lower Box Office forecast. For studios, the bright spot continues to be overseas where films continue to outperform despicable 3 off to a huge start internationally and the fifth films in the pirates of the caribbean and transformers franchises have had a huge run overseas the global audience can further shift what movies hollywood decides to make. Back to you. Thank you Julia Boorstin up next, biotechs landlord shares of alexander real estate up 9 . Iswi jn rhtftig aer th baby crying slow jazz music fly me to the moon and let me play bell ring the power of 100 of the worlds top companies. The power of a proven 15year track record. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. Can we at least analyze customer can we push the offer online . Legacy technology can handcuff any company. But yes is here. Youre saying the new app will go live monday . Yeah. With help from hpe, we can finally work the way we want to. With the right mix of hybrid it, everything computes. Your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Welcome back to squawk box. One Company Helping build the biotech rev ligs literally joel marcus ceo of alexandria Real Estate Equity a reit that owns life sized buildings. We own and operate the best facilities and the best aaa locations, the key coastal science and Technology Markets on each coast. Theyre clustered and i was looking at indeed. When i saw cambridge i was going to ask you, Kendall Square or out near Harvard Square Kendall Square probably. Kendall square, technology square, and the street corridor, three large campuses surrounding m. I. T. So, you own the buildings or do you own the is it also part of the centrifuges and the equipment or just the space . Its basically the infrastructure and the land. Yeah. So we provide the infrastructure so that companies can do great make great scientific breakthroughs and they do, i guess, because of talent being close to the university or intellectual, you know a place to draw the these people from so they congregate together. You must have some in south San Francisco. Back in 2004 we made a big bet at Mission Mission bay in San Francisco when no one was there, 05, a big bet in new york city before the industry came here in a commercial way and 06 a big bet on cambridge and luckily those bets turned out to be wellplaced bets and today the best place to recruit and retain great talent. Im trying to understand your business, how closely do you mirror biotech stocks or what measure do you look at to determine whether companies will be willing to take on space . Well demand is generated by the biotech and pharma sector is not so much tied to the general economic Macro Economic condition its more event driven and 50 of our revenues are from Investment Grade tenants we actually can sleep well at night. Over half of our leases are over ten years. And our shareholders and 80 of our revenues come from these class a buildings, brand new buildings, in these amazing markets. So its actually a very safe i. Its kind of an alternative way to play the industry in a safe fashion. This year weve given guidance for about 10 Earnings Growth and a 3 dividend more or less its pretty good as a stable investment. So, when i read sam zells book and learned a lot about reits, by reading that, yours is really different than the paradigm you know, we see, you know, with Equity Partners that they built space in these great office areas, the best buildings, the best space, but you do something really different and youre outside that pack and you dont really have the changes that occur for the rest of the industry. Thats essentially correct. We have very similar super new, hightech buildings, but they have the infrastructure as you know to drive laboratories, the infrastructure for the gases, the waters, the right. The air and floor to ceiling heights that allow you to put that infrastructure in. Floor loading capacity which allows you to put heavy equipment. So those are buildings that historically investors schehied away from. Do you worry about the private or Public Sector more . Do you need a National Science Foundation Funding to continue n. I. H. Funding. People ask what keeps you up at night its one word, government. Industry, the factors that drive our demand really are multi multiple one is the r d generated by the private sector which is about 180 billion a year and has had increases every year, the n. I. H. And other government funding is about 40 billion and luckily its been pretty stable, philanthropy today is about 30 billion in the medical research which years ago didnt really exist, and about another 15 billion of venture so you have an over 200 billion of r d per year going into this sector which really drives space demand so 120, right now the reit, the units i guess, yeah . Its a share. Thats a share. Okay up about 93 over the last three years. It is the yield is almost 3 you buy it for both yield and correct weve given reits have two parts of growth, one is internal growth from existing assets, ours this year is predicted to be 6 , which is at the high end of reits, and external growth to be approaching that, which is also strong. Plus the dividends you get a pretty good return. All right better than investing in bristolmyers, right. Thank you and sam, thank you youre welcome. Melissa, thank you. Joe thank you. Especially for that throw up video. You dont do that make sure you join us tomorrow squawk on the street is next become to life back to reality good wednesday morning welcome to squawk on the street. Im Carl Quintanilla with david faber and jim cramer who is back at post nine of the New York Stock Exchange first full day of the new quarter and a lot to keep on the radar including north koreas missile test, president heads to poland and later the g20