Transcripts For CNBC Squawk Box 20170810

This point the nikkei ended flat. Hang seng was off just over 1 shanghai composite down as well. And in europe youre going to see at this point it looks like things are also in the red there. The ftse is the biggest decliner down by just over 1 you can see the dax down by 0. 75 if you want to check out crude oil prices, at this point youll see crude oil is up 36 cents 49. 92 facebook it is making a big bet on video. The social media site launching what its calling watch. Redesigned version of its video platform its going to be rolling out to facebook users over the next couple of weeks. It will include a mix of original content as well as live sports recommendations of what to watch will be personalized based on your interests and what your friends are talking about. This is facebooks latest push for tv ad dollars. Mark zuckerberg said video will be the largest driver over the next two to three years. A big push some people wont get it if youre on facebook now and go to look for it today, its going to roll out sort of on a staged basis. You may get it and i may not well see. No shot i get it. I tell you whiegt now. Im in the dark ages one of the most confusing platforms out there. That being said, the stock is still probably headed north. We had martin sor ril here last year. He talked about the ad dollars that come in facebook is number one youve got google number three he thinks theyre headed to number two in second position right now is all of the murdoch empire which is crazy you know, facebook continues to dominate. Somebodys watching. Somebodys watching it doesnt work for me necessarily, but its clearly working for somebody you can make argument its an expensive evaluation theyre going to spend big money on content everybody is getting into that and the question is that hes going to have to buy more content for his channel. And netflix will have to step up disn disneys content and snap wants to be in the video business i guess its good time to be a content creator. Well see how it shapes out and great time to be a customer as well of these folks one would think. But well see who wins its sort of a race to zero. You know, well see how it shakes up. If you think facebook is complicated to use, where are you on snapchat . Nowhere what do you think . Youre looking at me like i should be on snapchat. Its way outside of my pay scale. Snapchat i have a hard time following. Stop. No you dont you dont follow me. I do. I follow you on twitter. I follow you on fast money. What are you talking about that is i mean, im honored. Im not on the snaps i will tell you. I think theres a good chat snapchat rallies postearnings today in a significant way and then falls off a cliff because youve seen a number since its been a publicly traded company, youve seen three moves to the upside anywhere from 10 to 12 i think were on the verge of one now. This one just had a 12 handle two trading days ago i think were around 13. 5 now this is probably headed to single digits. Thats what baron said also on its way to a hats size. My hat size is 7 3 8, i believe. Do you know what yours is . Ive got a tiny head. Joes is probably like 8 7 8. Good thing hes not here. He might be watching. The social network cracking down on advertisers who dupe consumers into clicking on ads promising things like flower delivery but link you to diet pills or pornography its known as cloaking and the fake ads are designed to fool users as well as facebooks internal ad System Company didnt say what measures it will be taking to detect those customers. Tesla reportedly developing selfdriving trucks. Working on long haul semitrucks that can drive themselves and move in platoons that automatically follow a lead vehicle. Now, the Company Reportedly in discussions with nevadas dmv to test prototypes. Wait. They want to test the prototypes now . That seems like a terrible idea. If youre going in a straight line, thats one thing but if the lead truck decides to switch lanes and they all follow youll have to test them somewhere. Not on our highways phoenix is already doing the vehicles but a platoon of semitrucks i dont want to be on the same road as theyre testing those. I dont want like being on roads with trucks driven by human beings let me say it im with becky on this one guys and gals driving, its this autonomous platoon floating around. Have you seen the beta test on any of these . A beta phone i dont want. Beta trucks i dont want i bet theyll have drivers in every truck. Standing at the ready i dont know, andrew. Test them somewhere else. Going to be a long hour by the way, we all go on commercial airplanes the pilots are with a pilot. Theyre technically in the seats but 90 of the flight is driven by the computer its true. Its true, but the pilots are there the whole time and the pilots know this is the way pilots fly i cant speak for what teslas doing. But i imagine therell be a person in the cockpit in this instance we can only hope. Yeah, but again, if youre in the air, theres not the chance youre going to run into something every second of the entire way this is true. You just dont want to be in the car with one truck on one side and one on the other and theyre following the leader last year Tesla Ceo Elon musk announced planned for an electric truck but there was no mention it would be selfdriving as you know, elon always trying the next thing who was it yesterday who said if you bet against elon, youre betting against humanity they said that yesterday . On our air, i believe i love that line. Thats like a josh brown thing to say, dont you think . I dont know im just throwing it out there. Could have been stocks to watch today, becky. 21st century fox reporting Fourth Quarter earnings that beat analyst expectations. Results helped by higher fees by channels like fox news and fs1 but revenue missed forecasts because of foxs broadcast and film units Ceo James Murdoch weighed in on disney on plans to launch the new streaming service. We remain very open minded about, you know, an independently price direct to consumer offering as well. Were certainly mindful of what were seeing in the marketplace and were mindful of how these things are progressing towards some other firms out there as they experiment with packaging as well. Shares of 21st century fox up by 1. 4 . Well talk to a media analyst in a few moments about this live nation reporting better than expected Second Quarter earnings the owner of ticketmaster and several live event venues saw positive contributions from sponsors, concert tickets. And Planet Fitness beat forecast revenue at the low cost gym chain rose 17 same store sales up 9 that stock is up 4 . By the way, credit where credit is due. Jason calkanis was the line. Saw it online. I thought you said it was on squawk box. It wasnt on our air. Might have been on cnbc. Quoting this anybody that bets against elon musk is betting against the future of humanity you did that licketysplit. Who did that for you google. On the google its going to catch on google ninja. You are so behind youre like, oh, the google. At some point. Google, facebook, snapchat all those things and you tweet constantly i am on the twitter i am an early adapter on the twitter. Everything is the. And i do a decent job. The facebook confuses me the stock doesnt. The platform does. Got it. Going to switch to a serious topic. North korea firing back at President Trumps threats of fire and fury overnight calling it a load of nonsense. This just the latest in a growing war of words between the u. S. And north korea eamon javers has more on this story. And what else is taking place in washington this morning. Eamon . Thats right, andrew. We saw a variety of statements from u. S. Officials yesterday including the president of the United States, secretary of state, secretary of defense all slightly variant in tone then we saw this response that you mentioned from the north korean regime to all of that heres what they had to say. They said but the u. S. President let out a load of nonsense about fire and fury, failing to grasp the ongoing grave situation. It seems that he has not yet understood the statement sound dialogue is not possible with such a bereft of reason and only absolute force can work on him. North koreans went on to say they are continuing to plan for a military strike on the island of guam. They said that that would be done in a sort of encircling maneuver that would be planning on that attack through august. Then it would be up to their Supreme Leader to decide whether or not to proceed with it. So it looks like there is some time here for negotiations talks of some kind not clear yet whether the United States is willing to engage in direct talks meanwhile, another war of words here at home in washington, d. C. , this one is surprising one. Its between the president of the United States and the Senate Majority leader of his own party. The president attacking Mitch Mcconnell in the wake of comments from mcconnell suggesting that the president put artificial deadlines on legislation. And that was part of the reason why people have the impression that congress isnt doing anything this year take a look at these two tweets. One from the president one from his social media director the president saying senator Mitch Mcconnell said i have excessive expectations but i dont think so after seven years of hearing repeal and replace, why not done and then the social media director for the white house also put up a tweet earlier before the president and this one saying, more excuses Senate Majority leader must have needed another four years in addition to the seven years to repeal and replace obamacare so those two tweets, a double barrelled blast from the white house to the republican Senate Majority leader. Well see if he replies in kind today. So far his spokes people have held off in another exchange of rhetorical fire here that sets up the debate going into tax reform. A lot of folks on wall street watching carefully to see if the tax reform process can be handled better than the Obamacare Repeal and replace process which ended up nowhere this does not bode well for that if you have the president and the Senate Majority leader of his own party fighting before they get started here. Okay. Eamon, great to see you. Im sure well see you many a time throughout the day. We have other political news to get to. The Wisconsin Senate could reject the trumpbacked foxconn deal we talked about it yesterday Milwaukee Journal Sentinel says they dont have enough votes to sign off on the massive 3 billion investment foxconn could go elsewhere for its first u. S. Factory if the deal isnt approved by september 30th majority leader says he needs more time to do his diligence on the package. Were going to talk to ron johnson senator from wisconsin, thats going to happen at 6 30 eastern time part of the issue is theres 3 billion tax incentive. Alsoa billiondollar bond program. Highways and roads that would have to go in they will be committing to as well. That is taxpayer dollars on the line theyre real taxpayer dollars on the line. The analysis suggests thus far you dont get the money back for 25 years if you do it all. And so then you have to make a decision interesting, though, if youre in congress or youre in the political realm, you can get a big win right now to say youre getting a lot of jobs. 25 years from now the likelihood youre in office is a whole other situation. Foxconn ask also a company that wants to be well, not fully autonomous but somewhat autonomous by 2020. So the jobs created now, are they still going to be jobs three and four years from now . Right thats part of the larger question i thought more about what you said, becky, yesterday and the conversation we were having whether it was a good idea or bad idea if you can decide that this is a bet not just on foxconn but by bringing foxconn there, it is even if you stepped in as a loss leader but you can create a whole ecosystem. Not just the suppliers and restaurants and people who supply other companies but truly samsung decides they can show up and apple and everybody and their brother shows up, then i think you can make the argument. But its more complicated if its i thought about this last night too. Okay. I actually came around to some of your line of thinking too. This is good though. We sit and we think about each others positions and think of reasons why the other person may be right i was thinking last night about it and thinking, okay, i get it. If youre making these incentives, youre getting jobs that wouldnt be here otherwise. Thats a good thing. However, you could be disincentivizing other companies will already paying these rates if im the the guy that comes in, im a manufacturer there and the new guy comes in and doesnt have to pay taxes but gets sweetheart deals on all kinds of money youre throwing my way with things. I might be offended if ive been here 20 years, 50 years beyond that i want some of these sweetheart deals too. That might cut into your revenue in ways you havent thought of the good thing is were trying to consider each others opinions see, we should all go to washington we will talk to ron johnson at 6 30 eastern time all about this very topic meantime, on todays wall street agenda, weekly jobless claims and the price index are due at 8 30 a. M. Eastern time. 2 00 well look at the monthly federal budget statement new york fed president William Dudley will be here as well. Weve got kohls, macys, blue apron closing before the bell. After the bell well hear from nordstrom and snap lets talk markets for now Julian Emanuel is from ubs of course our guest host this morning is guy adami cnbc trader. Let me start out with you, julian youre convinced that in the shortterm we could be looking at choppy sailing. Yeah. If you look at it bayically over the longterm what matters to markets are earnings and the economy. Both of which are doing pretty well its taken us to where were at around 19 times forward earnings which is reasonably high evaluations. But in the shortterm, the last 48 hours have reminded us that publics can matter not in a meaningful way when you look forward, its likely that the debate as your reporter stated earlier is going to intensify coming into a time of year, september is traditionally going back to world war ii the only month of the year where you have negative returns. So we do think there is a chance for a pullback in here karen i dont really see a pullback of any significance really coming because the earnings are doing so much better there are so many investors sitting on the sideline saying i wish i was at the market at this point im going to jump back in and be part of the earnings train Going Forward fing we have a pullback and we may have a correction, i think theres going to be enough investors that will jump in. Guy, what do you think . Thats been an argument for some time. I would submit this passive money thats been coming in that you guys talk about every morning. Its great until it becomes active money i think to your point, when passive becomes active, then things go pear shaped pretty quick. Earnings have been great no denying that. But wheres the commensurate Revenue Growth its just not there. Well, its over 5 . And thats higher than it has been over the last couple of quarters so were in midsingle digits. So i think the companies especially now with the weaker dollar, theyre seeing revenues from overseas. I think they can continue to keep those earnings going. If any you look at projections, a lot of companies are guiding higher and earnings still look good for the rest of 2017 and into 2018. I guess to us and, again, we would agree earnings are fabulous really the best since 2011 but again, valuations have discounted that to a large extent what weve seen this earnings season is sort of a blah reaction and if you disappoint even in the slightest, your stock feels the pain so to us when you add that to the fact that small cap stocks have continued to underperform its sort of warning signs you could have near term turbulence. Longterm investors should be patient and look for the pullback as a buying opportunity. We havent had a 5 correction in almost a year its normal. We want to thank you both for coming in. Good to see you. Coming up when we return, shares of fox rising this morning after the Company Posted the results after the bell were going to talk more after the break. A quick programming note today an exclusive video with the ceo of adp his company fending off an attack from bill ackman whos seeking a shakeup. Thats at 10 30 eastern time squawk box returns in just a moment who knew that phones would start doing everything . Entertaining us, getting us back on track and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save when you choose by the gig or unlimited. Call or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network, designed to save you money. Welcome back to squawk box this morning 21st century fox out with Quarterly Results. Reporting profit a penny ahead of expectations. Revenue just missed at 6. 75 billion. Joining us to talk about the results in the rest of the media landscape is fred harris at cabela and company good morning to you. Thanks for having me. Your headline on these topics the headlines were missed by a penny. The real story was income up 22 . Cable networks the largest part of the business should have the highest multiple given the stability of some of the revenue. How come the Cable Network that is impressive when you look at the results of a lot of Cable Networks where theyre under especially with disney reporting with espn down they have Pricing Power i think across their networks. Theyve got a lot of younger networks increasing distribution and the International Paid tv landscape doesnt have the same secular issues as in the u. S that grew nicely and given all the commotion and headlines over the last months about fox news, they still manage to do very well interesting statistic they put out is less than or more than 50 of ad revenue comes from news and sports from the fox channels which doesnt have the same secular pressure that entertainment does you watch news and sports live whereas, you know, a Television Show you can watch although i would have said the same thing about espn. Fair enough well, espn was a cost story. You had a big stepup in the nba contract because of that, you had a big decline in cost. Im sorry. In profit. How do you see the chess pieces moving now . You know, your boss is always looking at potential mergers and things like this given what and and this whole direct to the consumer play. Right so disney going direct to consumer is a very big deal. Theyre getting ready to live in a postbundle world. And because they own espn which is the largest against the bundle, thats a big deal. So you see one if once this espn goes over the top youll see increased pressure on the bundle higher rate of Court Cutting or maybe cord shaving as they call it youre going to see more consolidation both between distributors and content and the content player so both more time warner, at t, and scripps. Where do you see 21st century to accident . Given the murdoch family, given where they are what did they do in this landscape. Right . You have Redstone Family on one end with viacom and cbs. Then you have the murdochs then you have everybody else and theyre all getting bigger i think its going to be a tale of two cities where you have media conglomerates who are large enough on their own. Think nbcu, comcast, maybe fox. Then the other side of the cable equation which the free radicals, somethings going to have to happen there weve seen the beginnings of that with discovery scripps. And that could continue. But nothing has to happen on the 21st century fox side. You think theyd be large enough on their own. They did buy sky they are making it into distribution maybe once they own sky, they take a sky branded product over the top in the u. S. Theyre large enough to have the option to go it alone versus the smaller operators. Were going to leave it there. Brent, thank you appreciate it. When we come back, senator ron johnson is in the house. The wisconsin senator is here to talk tax reform, tensions with north korea, and the proposal for a new foxconn factory in his state. Well talk to him in just a moment right now as we head to break, take a quick look at yesterdays s p 500 winners and losers welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning. Welcome back to squawk box here on cnbc take a look at u. S. Equity futures at this hour dow looks it would open off about 32 points down the nasdaq looking to open off as well. 24 points right now. And the s p 500 off about 6. 5 points some stocks to watch this morning. Shares of Chicago Bridge iron are falling today. The engineering and Construction Firm reporting a big Second Quarter loss revenue down by 40 . The company is suspending its dividend and pursuing the business stock is down by 9 . Jack in the box is up today rising despite the restaurant chain reporting Third Quarter earnings that missed expectations the owner of jack in the box posted same store Sales Numbers that was good for 2. 2 for the stock. Also elf beauty reporting a Second Quarter loss. Results beat forecast as sales rose by 27 . The koss mcosmetics maker is log at 24 to 28 growth weve got a bizarre story out of cuba. U. S. Officials say a covert sonic device left a group of american diplomats in havana with severe hearing loss from the fall of 2016, diplomats started reporting several hearing some were so severe they were forced to cancel early and return after months. The ploemts had been exposed to an advanced ziens and had been deployed either inside or outside of their residences. Its not clear if it was a deliberate attack or if it was for some other purpose the state Department Says its retaliating by expelling from their embassy in washington back in may cuba has now called the charges unjustified and baseless so much for better relations. Thats a weird one, right you think i mean, it wasnt intentional . Come on. Were they using a spy device on them . For oceans eleven. The seismic device 12, 13, you know what im saying we might have a guy who knows about this. Who is that senator ron johnson i know nothing. But it is bizarre. Right it is very strange anyway, senator ron johnson is here he is senator from wisconsin hes the chair of the Homeland Security committee hes a member of the former Relations Budget and commerce committees they didnt brief you on this no. Its news to me as well. Its a strange story. Maybe there are more there are many to start with today. One of them may be the sniping Mitch Mcconnell and President Trump taking some snipes swipes at each other yesterday saying what will we going to do in tirms of a highlight. May have been a little unrealistic. The president writing back on twitter saying, look, its been seven years. How come health care hasnt been reformed which brings us to whats going to happen to tax reform. When you come back into session in december. Is this something you can can be quickly picked up and passed through the chambers it has to be. Look at the props facing this solution, the administration and congress did attach what i think is the greatest in Economic Growth we rolled back in speculation but there is a cost. I think people are realizing with this administration, theyre not going to have to look at the new registrationlation that will cost them more but thats a positive for the economy. But we did not have a globally competitive tax system what youll see with this effort is up front engagement with the white house, house, and senate try to come up with a basic principle. And from my standpoint, this should be an easy lift health care is a huge mess its a complex problem in hind sooigt, i think weve been better off with regulatory reform, tax reform before we work our way through at least trying to get bipartisan support for obamacare. Part of the problem is that people needed to look for ways to pay for some of these tax cuts coming through. With the border adjustment tax falling to the sidelines, with Health Care Reform having stalled, that doesnt leave a lot of options thats why some people are saying theyre expecting tax cuts, not tax reform that you can do some Different Things from my standpoint, the should do something that is unusual. Rather than just crown the joint Tax Committee or cbo, youre going to give us the score we should go out and do a Sensitivity Analysis look at a different of models and ask to plug in 2. 5 , 3 growth and we as a congress would say this looks reasonable. What fax reform is going to cause greater growth the goal of scoring should be a revenue loss on a static basis made up for Dynamic Growth nigh knackic sports also if you dont like what the referees say, change the referees and the rules ive got my own tax proposal which would solve a lot of problems i would treat all of the businesses equally rather than have Corporate Tax fall on plaurs, why not make why not make ccorps be pass entities youd eliminate any barrier of the free throw of capital across borders. When weve had this score and were getting more and more scores on this, the benefit actually falls more to low income individuals think about it if youre a low tax rate taxpayer and you own a stock, you get 100 of income, you may only own 10 in tax but Warren Buffett would be charged electric all of it i think he got a kick out of it. Hes been very helpful were trying to do the hard work up front in jirl we looking at a tamt reform again, equalized treatment and helping the equality statement. Hopped on board, written positive articles about it lets go back to health care for a moment you made some comments yesterday in chicago saying im not going to speak for john mccain he has a brain tumor right now the vote happened at 1 30 in the morning and some of that may have factored in mccains office said thats not why i voted against health care. The reasons are well known my question is and listen. I think my comments were completely misconstrued. I was trying to defend johns position a lot of us were pretty upset about the process. And i was really just being stuck with his condition that was unfortunate. Came out not the way you intended ive got nothing but respect for john mccain. Do you think Health Care Reform is dead is there a way to get back to this no. I think so thats whats being misconstru misconstrued the process seasoned over. Were trying to notz come up with a proposal that would block grant. They do a better job obamacare is a mess. I notice you had one of the majority sper they win eithery if they increase premiums, theyll get that made up for them in the premium tax credit the nepeople that lose are the taxpayers. And individuals that are busting. Theyre working 60 hours a week. Their premiums have doubled, sometimes tripled. Coverage cut in half they cant afford health care and nobodys addressing that which is one of my complaints. We werent addressing the forgott forgotten men and wum. Preemups doubled since we opened and we should be able to bring it down. That was an artificial increase. We should be able to bring that down through good policy doing root cause analysis understands what caused those to be increased the issue covering with this rating you can do that without collapsing markets and others. But its not going to happen until later. I think we should concentrate on tax reform. Then start working with the Democratic College its their mess. Help us fix it other big headline that everybodys concerned about. Both humanity and the markets. North korea. What do you make of some of the comments that have come out of north korea and frankly, the white house. Ive heard president s and members of congress for decades saying its just unacceptable for north korea to have nick kmie but then were unsuccessful. When will we say were successful in no sun earn terms i would suggest that north korea understand that this is a point were not going to allow them to cross. Because this is incredibly dangerous for the region as well as for america so hopefully the chinese, hopefully russia will cooperate and try and prevent them from going further. Some of your colleagues, though, have criticized the president for going too far in his comments for heating up the rhetoric and perhaps taking this farther. Well, the diplomatic rhetoric hasnt worked for decades. Maybe this is what we need to do to get north koreas attention last thing, will you weigh in on this foxconn such as . Well, it doesnt surprise me that the state legislator is going to look at the deal. But to me this is a big win for both pds, governor walker. This would be a big win for america as well as wisconsin so many some way, shape, or form i think with u. S. Tax policy somehow weve got to make this deal work. This would be huge in terms of hightech manufacturing coming into america obviously in wisconsin it would benefit people but help end i dont know if itll end our debate, but weve been debating. For days. If it takes 25 years for this to pay off, whats the full ration i was making the argument that if this is used to build an ecosystem around it meaning that it creates other Technology Companies or samsung decides theyre going to show up in wisconsin. Others, then it makes sense. Then it becomes more complicated. Youre basing this off of one study. Oftentimes these take a long time to pay off. I think you have to take the longterm view here. You take risks obviously right now this is probably a risk worth taking because we meet you know, i dont see any value. I dont know why youd want American Workers producing high labor content product. We ought tosh focusing on high talent well ha this is a big win for wisconsin and america. Thank you for being with us today. Great to be here. Coming up when we return, retail earnings in focus kohls and macys set to report this morning then at the top of the hour guest host is going to be David Rubenstein, cofounder of the carlyle group. One of the largest private equity firms well be back in a moment. My experience with usaa has been excellent. They always refer to me as master sergeant. They really appreciate the military family, and it really shows. Weve got auto insurance, homeowners insurance. Had an accident with a vehicle, i actually called usaa before we called the police. Usaa was there handson very quick very prompt. I feel like were being handled as people that actually have a genuine need. Were the webber family and we are usaa members for life. Usaa, get your insurance quote today. Welcome back to squawk box. Time now for todays executive edge macys, kohls, and nordstrom all set to report today. Courtney reagan is here. Lets hope the Second Quarter looks a little better than last quarter. Can we smile . I think we can. I think its important to keep it in perspective. Kohls is going to be the first out of the gate today. Looking for 1. 19 and revenues of 1. 34 billion comp sales expected to fall 1. 6 it will be the Second Quarter that under armour is there womens apparel and accessories because thats where 40 of Kohls Business and trends have not been strong. Macys is up after kohls. Expected to see earnings of 46 cents on revenues of 5. 52 billion. Thats 15 and 6 lower than last year. Respectively same store sales forecasted to fall 3 . Shareholders are going to want to hear more about the Loyalty Program theyre going to be unveiling and the revamped simplified pricing and any inkling that macys could give us about the holiday forecast. Nordstrom is out after the bell. Its the only one with revenue expected to increase and comp sales are expected to fall a half a percent. But investors are most focused of any update on nord strostrom plan to go private although its unlikely to get that today thank you, courtney we will hope theres reason to smile. When we come back, the mcbride sisters are entrepreneurs working in a traditionally maledominated feel the global wine market up next, they will tell us what it took to break into the boys club also as we head to break this morning, quick check of the european markets this morning. Things in the red. Looks like the cac is down by 0. 4 . Icarndff 1. 25 squawk box will be right back. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Looking for a hotel that fits. Whoooo. Your budget . Tripadvisor now searches over. 200 sites to find you the. Hotel you want at the lowest price. Grazi, gino find a price that fits. Tripadvisor. Theextreme risk of burstd a pipes and water damage. Y. Soon, Insurance Companies wont pay for damages. That is, not if they can help prevent damages from happening in the first place. At cognizant, were turning the industry known for processing claims into one focused on prevention with predictive analytics, helping them proactively protect the things that matter most. Get ready, because were helping leading companies see it and see it throughwith digital. Okay weve got a fun one. This is one of those great entrepreneurial stories. The global wine market, less than 10 of entrepreneurs are female joining us with what it takes to break into an exclusive world of wine, sisters from the mcbride sisters collection they have brought samples for us were not going to drink, it is too early to do that let us start with the story. How did this happen . We grew up not knowing about each other at all. I grewup in monterey, california, and my sister grew up in new zealand in wine country. We didnt know anything about each other until we were adults. I was 25, andrea was 16 and learned that we both had this background in wine country. You didnt know each other at all . No. How did you found each other . So we have the same father. We have different mothers. He was terminal with an illness but his last wish was to find us and connect us. And you both have a background in wine. No. Just grew up in wine country. We grew up just being around and you decided to do this. So what was the sister power. We found each other and decided we wanted to get into the wine business which wasnt easy to do but we had determination and we started importing wines from new zealand into california. Why the import business a lot of Big Companies started out that way im thinking of nike importing shoes from japan why importing . In the beginning we had two problems the first was we didnt know how to make wine and the second was we didnt have market. So starting in the import business we were able to negotiate long terms from a cash inventory and also in that period of time learned the business of selling wine a lot of people, you know, wine is awesome, its very romantic but its a tough business. You guys did the heavy lifting first, right right. Figure out the business side before you get to the fun stuff. Absolutely. When you decide to make it, tell us about the story. Well, i think in the beginning we started with importi importing and then we were successful and took that capital and transferred that into our first wine company that we established in 2010. And we were able to gain National Distribution pretty quickly. We secured two National Market accounts and Cost Plus World Market and target and that really blew up our business and put us on the map. We mentioned at the top that this sort of i hate to say its a boys club, but what has that been like i think its its challenging at times, but its put us in a really unique position because the Wine Consumer has really changed in the last ten years so were now in a position to lead the next generation of wine drinks which emergency, genx and multicultural women. And what do they want, you think, thats different . I think the style of wine has changed a lot. So i think were right place, right time, expertise to decree rate really highquality wines at everyday affordable prices. I think from a lifestyle we Touch Everything thats wine from wine and food pairings to actual wine events. And whats the goal do you want to sell it to a big wine company when this is over not right now. Not yet. How do you guys do this, in terms of where you spend your time right now where are you focused . What are you putting together . Well, weve launched the collection so its just gone nationwide so were really going out on the word spreading the word, doing lots of tastings and sales the rest of the year. Whats the price point. 16. 99 and 19. 99. Everything in the collection under 20. And its available nationwide at kroger so we have a great Strategic Partnership with kroger and were working on Something Special fun this holiday fun with a cheese shop so we have this whole entertaining holiday guide thats coming out soon, so stay tuned. Thanks. Good luck. We love these stories. Thank you. By the way, i want to thank guy for being here today. What do you mean . Im grabbing one of those bottles on the way out im leaving now so im all set it was great being with you guys when we come back, our guest host is david reubenstein for the next two hours he will tell us how hes putting his money to work. His company has 170 billion in assets under management. Plus we are waiting reports from kohls, blue apron and macys in next hour. Squawk box will be right back. A load of nonsense thats north korea hitting back at threats of fire and fury from President Trump. We have a live report from the region coming up. Plus our guest host David Rubenstein is here well talk politics. The markets and where he is putting his money to work. His comments are straight ahead. Watch out youtube, facebook is launching a big attack on television we have the details of the longawaited content push. The second hour of squawk box begins right now announcer live from the beating heart of business, new york city, this is squawk box. Good morning, welcome to squawk box right here on cnbc. Were live at the Nasdaq Market site in times square wilfred frost is hanging out with us. Take a quick look at the futures at this hour we are in the red. Dow looks 43 points off, nasdaq would open 33 points and the s p 500 down 8. 5 points right now. Lets tell you whats going on in the headlines the government will release the Producer Price index in 90 minutes. Well see if the fed is having any success trying to push Inflation Higher economists expect an increase of 0. 2 of a percent. Were also watching shares of 21st century fox this morning. Fox reported a quarterly profit of 36 cents per share. Revenue did fall slightly short of estimates stemming from the companys movie studio operation. Just in from retailer kohls, weve been watching the retail story every day. It earned 1. 24 per share for the latest quarter that compares to estimates of 1. 19. Samestore sales fell, though, 0. 4 of a percent analysts had expected a 1. 5 drop were also getting numbers from macys in a little less than an hour kohls is looking up in the Early Morning trade there, but well see. The problem is beating expectations is easier to do these days when you bring your expectations down in advance. On twitter just now, donald trump doubling down on his criticism of Senate Majority leader Mitch Mcconnell the president says can you believe that Mitch Mcconnell, who has screamed repeal and replace for seven years, couldnt get it done must repeal and replace obamacare. Of course this is a 24hour war of words that has continued as mcconnell has said that the deadlines that the president has been putting on those in washington is too aggressive this is just one of many war of words at this point north korea also responding to President Trumps threats of fire and fury overnight calling them a load of nonsense. Of course thats rich coming from the people who routinely use words like this. This is just the latest in a grow war of words between the United States and north korea. Lets get to sherri kang who is live in south korea with the latest on that sherri. Reporter thank you very much, becky. So north korea certainly adding to this flareup that we saw this week. North koreas staterun media, kcna following up on the threat yesterday coming out with more details on this strike plan against guam giving out the number of rockets that it wants to have in its place and also talking about the distance, so saying it will be four rockets of four rockets will land 30 to 40 kilometers away from guam. And we have a timing as well midaugust i think this is being mindful of the joint military exercise between south korea and the u. S. Scheduled around the time late this month its true that north korea has made similar threats in the past, but whats different this time around is the level of specific details that its coming out with, with these threats. Also we have a different leader in the United States with a completely different style for a u. S. President in the meantime cnbc reached out to governor of guam, mr. Eddie calvo, and asked him what he thought about this situation this is what he had to say about why he thinks north korea should not really follow through with its threats. Take a listen. I think its important to point out that with the territory of guam, there is enough hardware to, again, cause great harm to north korea. Its important that the United States, japan, south korea and its allies together with china, which is very critical to this, make it clear to north korea that the direction theyre going is the wrong direction and it could lead to serious skong consequences but we feel very confident here in guam. We do believe theres a defense umbrella that can protect this island community, this american community. Reporter but i would like to still point out here that a number of north korea experts that ive been speaking to all this week seem to have this consensus that fundamentals have not changed when it comes to the north korea situation except that we have a different style for the u. S. Leader and north korea is keeping at what its been doing for many years. Becky, back to you. All right, thank you very much a couple of stories to tell you about. Facebook launching watch, a redesign eed version of its vid platform it will roll out the next couple of weeks it will include a mix of original content as well as live sports recommendations of what to watch will be personalized based on your interests and what your friends are talking about. This is the latest push for tv advertising dollars. Ceo Mark Zuckerberg said video will be the largest driver of facebooks business over the next two to three years. It is down premarket in line with the nasdaqs premarket decline. Tesla is reportedly driving sel selfdriving trucks that can drive and move in platoons that follow a lead vehicle. The company is in discussions to test some prototypes last year elon musk announcing plans for the electric truck at the time there was no mention of selfdriving but if it has anything to do with elon musk, you have to imagine this is where the future is going. Lets get to David Rubenstein, the cofounder and coceo of the Carlisle Group thanks for being with us this morning. My pleasure to be here. Thank you for inviting me. We have a million things to talk to you about but i was thinking about it last night and we tend to focus on markets and very shortterm cycles were looking at what it did yesterday, what we expect it to do this week youve got a different way of looking at things because youre private equity youve got a lot of money, youre trying to figure out businesses you can buy at a discount, you can fix and turn around and sell it back to someone else or ipo it in the market or do something along those lines so your view of the market probably is much longer term than the rest of ours. We do have companies that go public and stock thats publicly traded so we do worry about the Public Markets, but clearly the business of private equity, which has evolved to be a significant part of the Financial Community is one where we tend to look at things in three, five, tenyear cycles and have a little bit more time to think about what we can do to improve things than people who are just worried about the markets day to day or hour to hour. From your perspective when you look at the markets, do you see things that you think companies you can buy at reasonable prices, turn around, fix, and do something with them . Can you find bargains these days its harder the way we measure things is the price we pay before the Great Recession, were roughly 9. 7 times your buyouts. Now theyre probably 10. 5 times so were paying higher prices than before the Great Recession. Now, Interest Rates are lower, but the principal change that has occurred between, lets say, 2005, 06, 07 and now is investors are willing to take lower rates of return. It used to be private equity more or less thought they could get base case returns of net of 20 per annum. Obviously you open you can do more today i think people are thinking 15 net per annum now, investors are saying give me 15 per annum, net im very happy. So private equity firms are playing a little bit more but thats the principal change in the industry over the last four or five years. Have you been willing to accept lower fees for the lower rates of return . Well, the rates of return are the fees actually have gone down. Fees have gone down dramatically in the industry. Management fees have gone down slightly but coinvestment is a very important part of the business now and that is for free, so were providing coinvestment to our investors for no charge and so that in effect is a fee cut. What about the lower of leverage because rates are lower but are banks more reticent to allow you to the famous rjr deal in 1989, fi 5 equity to 95 debt. Today its much less debt than before the debt charges are lower because Interest Rates are lower. But a principal change over the last five or ten years is that banks are not as important as they used to be. Now you have so many other providers of debt its not just commercial banks, its hedge funds, clos, a whole variety of International Institutions and so theres so much credit out there. Should that make us feel good about things or we should be worried that the next blowup is coming from someplace were not expecting and not watching i think the banks set the standard and theyre regulated by the fed and people arent diverting that much from it but theres not a lot of capital out there. I think people are much more cautious than they were before the Great Recession and deals are much better financed than they were. At the same time youve said theres never an easier time to try to raise money why . Well, investors are looking across the board and say of all the Asset Classes, what has consistently provided very good rates of return over the last 5, 10, 15, 20 and 30 years and thats private equity. Although their expectations are coming down, theres nothing doing better if you do surveys of what investors think will happen, they say private equity will outperform every other asset class. Does your ability to raise money from people get easier when the perspective is we are late in the cycle for Public Markets, coming back to the point about Public Markets peep thi people think we need to diversify from Public Markets. I dont want to use the word easy because i want to make sure people realize its not easy to do this. Theres no doubt theres an incredible amount of money out there. Public Pension Funds used to be the main source of our capital but sovereign funds will replace that individual investors are saying why cant i do what the big pensions funds are doing and coming in in dramatic amounts. Everybody now has a Family Office it seems. It used to be people wanted to raise their child to be president of the United States now they want to raise their child to have a Family Office because thats the measure of success. So all these Family Office are coming in and investing dramatically in private equity. But doesnt that all suggest that its going to be harder and harder for you to make the kind of returns that made private equity as successful as it was meaning you have all of these you have activists who have made Public Companies better. A lot of people used to say, by the way, cant these companies do what theyre doing in private, cant they do it in public arent to some degree theyre starting to do that in public . Youve been saying this for ten years or so that we cant keep doing it. Its my job to ask the question. Private equity has been in the market and an important part of our financial system, people say you cant keep doing this but we keep doing this youre very friendly with Warren Buffett and people said he cant keep doing this when he was 45, 50, 55, 60, 65, 70, 75, hes now 76, i think. At some point hell have a very good skill set and people are able to do it with lower rates of return. People are happier with lower rates of return. When you look at the other Asset Classes out there, its because of where weve seen Interest Rates, right . Most people think fixed income over the next five or ten years will not be a doubledigit performer. Most people believe that private equity, because you have five years to fix a company or more, you have very skilled managers, you have a lot of people in private equity firms that know how to do these kind of deals and add value, so its not perfect but works reasonably well. Just quickly on the Sovereign Health point, where is it led . In 2001 there was 1 or 2 trillion available now there will be 9 or 10 trillion principally in the far east and middle east. The United States doesnt have a Sovereign Wealth Fund. I think our Printing Press is a Sovereign Wealth Fund for us we just keep printing money. But in asia, china, the middle east, the gulf countries, they have enormous Sovereign Wealth Fund saudi arabia will have the largest of all them. They will have between 1 and 2 trillion thats a lot of money. David is our guest host hell be with us the next two hours and we have lots of topics to still get to with him so thank you for agreeing to be here today. My pleasure. When we come back, dealing with north korea should the u. S. Strike first former ambassador to nato, nicholas burns, will join us to talk about this. Later, its been a rough six weeks for blue apron as a publicly traded company. Pressure from amazon and a growing number of competitors have the investors worried well get the mbnuers and Market Reaction straight ahead. You are watching squawk box right here on cnbc 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. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Blue apron just out with its earnings the company is reporting a loss of 47 cents a share. The street was anticipating a loss of 19 cents a share i dont know if thats apples to apples comparison. They say their Second Quarter marketing expenses were 34. 5 million or 14. 5 as a percentage of net revenue they say their average revenue per customer is 251 you can see the stock is up 9 . If your company is facing an activist, the best defense is to reduce stock price david is taking a look at the Second Quarter report cards from the largest targets in which activists took stakes this year and the results are not pretty leslie picker has more on that story. Hey, good to see you. We did, as you mentioned, take a look at the top ten targets and a majority of them saw their stock price decline after reporting earnings that means investors werent too excited about the Second Quarter results they saw and what does an activist need to win a campaign well, support from other investors. The less happy they are, the more likely a dissident will set a seat on the board. Four of the top ten by market cap, six declined after their earnings were announced. Erickson and uhs saw the biggest with centurylink not far behind. On the Positive Side was caterpillar, Proctor Gamble and honeywell. All three Beat Estimates for earnings and revenue and gained on the day they reported its also worth reporting adp gained after reporting earnings but that was also the day that word leaked about their investment in the stock sending it higher anyway overall if Second Quarter results are any indication, we could see more contention between shareholders and management between the second half of the year, guys. How much more contention do you think we expect . Well, if you the challenge with todays market is that stock prices are high to begin with so that was the Big Conversation around adp, that stock had gone up about 12 before word even leaked from bill actman was in it. So that Company Comes from a position of strength with its shareholders already however, if they keep seeing a if companies as a whole keep seeing earnings that miss estimates and send a stock price lower, that gives activists more of a position of strength to go and run a proxy contest. Question for david on activism right now. Yes. Which is to say activists have gone after much bigger targets. In the same way i could argue private equity went after elephants in 2007 and these were the fattest and happiest of the companies and there was all sorts of fat to trim but what we learned is that was not the biggest elephants, that was not a great way to do it is this going to work . Well, in the 1980s when activists were called green mailers, rightly or wrongly, the institutional market didnt give them money now the institutional market is raising enormous amounts of money. Theyre much more sophisticated, they have much more clever tactics that they use. I think that is a really good longterm investment backing activists generally. The investors have studied their results and concluded they have done pretty well when they go after the biggest targets, its hard to move General Motors perhaps but where you can face a takeover or buyout, you probably get a pretty good rate of return. Do you think it was fair to call them green mailers back then some of the people were green mailers. Its now gone away what these people are trying to do is get the stock price up for everybody so its a different situation, but i think they have had a pretty good record of success. Some are better than others. You wont go hostile and dont think of yourself as an activist, but secretly they are your friends to a large degree because often times when they show up, companies are forced to sell themselves or sell bits of their company to people like you, no . There are so many opportunities for people like us, were not dependent on the activists. So i dont think were really behind them secretly but i do think that they have become an important part of the marketplace and they are taken much more seriously than they were years ago. In terms of market efficiencies and productivity. They hire the best consulting firms, come up with serious plans. Its not just saying im going to buy some stock thats undervalued and hope something will happen. They have carefully drawnout plans now. What size of stake in a company justifies being able to call for changes in the board or call for changes in strategy when you buy a company, you buy the whole thing or a majority. Sometimes activists buy less than 1 and make a whole lot of noise. I agree an activist in microsoft with 1 got a board seat sometimes you can buy 1 or 2 and get somebody to take you very seriously in private equit, you need more than that. The attention people get is more than before. Theres a lot more fear in the board room when an activist comes calling over the last several years. The Institutional Investment world used to say people were trying to change corporate structures and theyre bad people. Theyre gadflies. And now they have pretty good ideas and boards are afraid of ignoring shareholders. Much more with david coming up over the last hour and a half leslie, thanks very much. Still to come, an unusual visitor comes up at the white house and the mooch heads to late night details of both stories coming up futures point lower. The nasdaq down half a percent squawk box will be right back. No splashing wait so you got rid of verizon, just like that . Uhhuh. I switched to tmobile, kept my phoneeverything on it oh, they even paid it off wow yeah. Its nice that every bad decision doesnt have to be permenant ditch verizon. Keep your phone. Well even pay it off when you switch to americas best unlimited network. All right, folks, check this out. A rather unusual visitor has turned up behind the white house. You can see a giant inflatable chicken with a golden coiffe of hair thats meant to resemble President Trump. The chicken has been used in the past by organizers of the tax day march trying to coax President Trump to release his tax returns. Will we see a tweet about it . I doubt it. The mooch headed to late night. Anthony scaramucci, the shortlived Communications Director will be appearing on the late show with Stephen Colbert on monday colbert making the announcement on twitter last night adding, quote, this is just a heads up for our censors to get ready it will be scaramuccis first televised sitdown interview since he was ousted from trumps staff. We should say that colbert has done a couple of skits and other monologues about the mooch with an accent. So well get to David Rubenstein and talk a little mooch later. When we come back, tensions with north korea building. Can the United States get chinas cooperation in dealing with the countrys leader and Nuclear Programs or will the United States deal with it alone . lask former ambassador to nato, nick burns, right after this break first take a look at the u. S. Equity futures i ne temperature for pipe five. Ask the new guy. The new guy . Jack trained him. Jacks guidance would be to maintain the temperature at negative 160 degrees celsius. That doesnt sound like jack. Actually, jack would say, hey mate, just cool it to minus 160 and were set. Good on ya. Oh yeah. Thats jack. Good on ya. You myour joints. Thing for your heart. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally found in jellyfish, prevagen is now the number one selling brain Health Supplement in drug stores nationwide. Prevagen. The name to remember. 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. Good morning, welcome back to squawk box right here on cnbc, live from the Nasdaq Market inspe times square. Weve gotten numbers from kohls which meet estimates on the top and bottom lines and also reported a smaller drop in samestore sales than analysts had anticipated. Quarterly numbers for macys coming up at the top of the hour and nordstroms reporting after the closing bell so well keep an eye on all of that. Kohls trading higher in the premarket. Were also watching shares of blue apron it reported a quarterly loss of 47 cents per share, wider than the 30cent loss anticipated by revenues that stock trading higher in the premarket as well. Well be getting two economic reports in about an hour the government will have july Producer Prices. Producer price index seeing a rise 0. 2 of a percent. Jobless claims predicted to be unchanged at 240,000. President trumps warning to meet north koreas actions with fire and fury sent shock waves through the world. Joining us now to discuss the escalating conflict is ambassador nicholas burns, undersecretary of state for Political Affairs and former u. S. Ambassador to nato. Hes also a professor of diplomacy at the Harvard Kennedy school good morning to you, ambassador, thank you for joining us. Good morning. I want to start with all of this weeks events with that i mean how significant was it that china joined the vote with the u. N. Security council to impose sanctions on north korea, and does it mean that they are now, therefore, on the u. S. side on this debate, whether President Trump is escalating things or north korea is escalating things well, that was a very significant u. N. Security Council Sanctions resolution, 150 that means that china and russia did not abstain or veto, they joined with it that is a departure. The chinese are frustrated with kim jongun. They do not want him stoking a war in the Korean Peninsula. China wants trade normally with south korea and japan. Theyre frustrated with him. The key question is will china implement these sanctions. They could possibly, if they are fully implementeded, reduce north koreas export earnings by a third. That will hurt the north korean economy. Ultimately im not sure the chinese are with the Trump Administration and the United States because china fears that if theres significant pressure, military pressure on north korea, it could lead to millions of north Korean Refugees going into china and even be to the collapse of the regime and china does not want to see a united Korean Peninsula with its capital in seoul aligned with the United States, so in a way it prefers the status quo more than the regime change that some in the United States think is desirable. Is it possible, ambassador, that some of President Trumps rhetoric is not aimed at north korea but is aimed at china to try to force their hand to be stronger with kim jongun. I think many of us saw the extraordinary statement was aimed at beijing because the chinese do have influence. They supply the food, the great majority of it, the great majority of energy to north korea. Thats leverage. Its the kind of leverage that the United States, japan, south korea, do not have and so theyre trying to move the chinese i do think it would be better advised right now for President Trump to ratchet down his rhetoric i thought it was unpresident ial what he said in a nuclear age. He ought to hand this over to rex tillerson. Rex tillerson is a calm, toughminded person. This is a time for diplomacy, back channel diplomacy to the chinese to try to move them forward to help us get the attention of the north korea regime i think that might work a lot better than this very public approach that President Trump is trying. Ambassador, we talk often about President Trumps America First agenda is this a very clear example of that what will people be thinking about this escalated rhetoric in south korea and seoul . Could they be the people that would have the worst fallout if there was a conflict well, i do want to say i think that President Trump is absolutely right to be concerned about this existential threat that north Koreas Nuclear weapons pose to the United States if in fact the North Koreans are perfecting an icbm and if in fact they will make progress in the next year or so in putting a Nuclear Warhead on top of it, its unacceptable that the North Koreans would hold and blackmail the western part of the United States so there has to be movement here i think the president ought to put together a combined military but diplomatic strategy. Thats where he needs to go now, towards a longterm diplomatic campaign, much more likely to succeed that way than pure military threats and i do think it depends who you talk to in asia. The current south korean government is uncomfortable with this toughminded approach, but the japanese government applaud it it yesterday. So i do think the problem is kim jongun. The problem is not donald trump, but the tactics of donald trump have to be appropriate to be successful and i think thats where the white house needs to go. Nick, this is David Rubenstein you and i were together at the Aspen Strategy Group this past weekend. You run the Aspen Strategy Group. What was their consensus, if you can say, about what should be done about this situation, democratic and republican view well, yeah, we were off the record, david, but i think say what i took away from our members, i dont want to speak about the trump people who were there, but our members is that its hard to see a military solution here. Military the use of military force, david, as you well know would be extraordinarily risky theres a threat to civilian life there are 10 million civilians living just south of the Demilitarized Zone in south korea, 23,000 american soldiers. And the problem with war on the Korean Peninsula is you dont really know where it would lead. Would china come in on behalf of north korea . So i do think that we are right to strengthen our military, david, in south korea and japan. Were certainly right to tell kim jongun that we will defend south korea or the United States if were attacked. But the idea that war is imminent, and that was the implication of President Trumps statement, that somehow that we should be on a war footing, theres just no reason for that right now. This is, i think, more a time for diplomacy. Ambassador, just quickly, theres no reason for that perhaps but what is the likelihood i ask simply because the Market Reaction is very muted, the government of guam appearing on cnbc very relaxed and resolute are people underestimating the fact that this does elevate . I do not believe that war is imminent the probability of war i think is low at the current time this is going to be a long, protracted conflict. Youre going to hear emotional words, as you did this week, but its going to be the work of diplomacy that i think will forestall war for the time being. Ambassador, just very quickly, will there be a nucleararmed north korea . Can we live with that . I dont believe we should want to live with it i think we should use all the elements in our power to try to move the North Koreans away from that realistically north korea is not going to give up its Nuclear Weapons any time soon because it feels thats the best way to protect the family that runs that autocratic and dictatorial regime if a missile action an Intercontinental Ballistic Missile were sent from north korea to guam, landing 30 miles offshore, not nuclear tipped, what would you recommend the president do in that situation david, as you know, we have Anderson Air Force base, our most powerful air force base in asia right on guam if its 30 miles away from guam, it would be a provocation. I would not recommend a military response but obviously then you have to go back to the chinese and i think, david, the powerful option that we have here is to threaten secondary sanctions on Chinese Companies that do business with north korea. I think thats where the administration should ultimately go if china cannot restrain north korea. David, if you took your hypothetical example further, if there were to be an attack on Anderson Air Force base, we should respond militarily. But 30 miles off we should just assume thats a mistake or that they intentionally put it there . Do we really think that the North Koreans have the capability of being 30 miles off the coast . If it hits land, at that point there would be no alternative then but to respond, is that correct, in your view . Thats correct in my view thats an attack on the United States thats an American Air Force base but the North Koreans have been firing these missiles into waters off the coast of japan. They have been very careful not to fire over the territory of japan. So youre going to have to look at this closely. But we have to be very careful here remember the law of unintended consequences we respond if were attacked but we dont have to respond to every provocation, verbal or military thats the game he wants us to play david, you know american politics as well as anyone i think President Trump needs to be a little bit more reaganesque. He doesnt have to match kim jongun in being shrill and bombastic, we steely, determined, strong thats how an american president should act here. Thank you for joining us this morning. Thank you. Coming up, the business of blood tests. The chairman and ceo of clinical diagnostics will join us ahead well talk Health Care Reform and a lot more time now for todays aflac trivia question. Prior to going public in 1971, amrdstrom went by what ne . The answer when cnbcs squawk box continues 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 now the answer to todays aflac trivia question. Prior to going public in 1971, nordstrom went by what name . The answer, nordstrom best got some deal news this morning. Invitation homes and star ward waypoint are merging both Companies Operate Single Family rental homes in the United States. Blackstone is the majority stockholder of Invitation Homes and has approved that agreement. Barry sternlicht is the board of starwood waypoint homes. Weve been speaking with David Rubenstein and one Carlisle Investment that is relevant to the National Discussion is a Health Care Company known at Ortho Clinical Diagnostics. The Carlisle Group purchased the company from Johnson Johnson three years ago for just over billion. Joining us right now is the chairman and ceo of Ortho Clinical Diagnostics david, i want to start with you, first of all what attracted you to this company . Why did you buy it and how have things been going in the three years since . First, when we buy a company, we knew martin would be the ceo and he as a terrific track record we had a Large Company that probably didnt pay enough attention to this and so it was a bit of a corporate orphan and we thought there were opportunities to improve it. We also thought that the price while not cheap was affordable and we also had reasonably good financing, good Due Diligence and thought we could improve the company. Over the last three years or so weve made a lot of improvements in the company. Yeah, we took the company over about three years ago and theres a lot to do in these corporate carveouts they dont get a lot of attention. But we were able to put a new management team, a new strategy in and focused on certain segments were very competitive we reinvested into innovation, reinvested in our sales and Service Organization worldwide, its a Global Business i can tell you tremendous excitement now in the company. Were growing again. Its really been fun challenging, but fun to do that. How have you refocused the strategy what was the company doing before and youve changed it how . Before the strategy focus was not so clear they were doing many Different Things and the strategy was changing in this business consistency is critical so we focused on core segments, hospital, core products, blood typing and chemistry, immuny assays about 70 of Health Care Decisions are mainly influenced by in vitro diagnostics. So you have to connect your strength and your focus with what the company can do best, and thats what we did. Its actually quite simple, but its all with executing it in a much sharper way. Dont say its simple, say its complicated, very complicated and nobody else could do this. But lets suppose any of you go to a doctor and the doctor says let me take a blood test or something. Well, who is going to tell you what is in that blood . Well, its typically one of the companies that we either compete with or its us. Were one of the four Big Companies doing this kind of thing. Everybody wants very good diagnostics. They want to know what your blood type is or other things that have to be tested and thats what we do. We provide services and products that enable people to test what your blood is like or other things in your body. And doing that service, that diagnostic service at a lower cost than competitors, is that purely a u. S. Opportunity or is this now an emerging market play as well . Its worldwide. We operate in almost 130 countries worldwide. Its very global what we see is you have a lot of markets such as china or asian countries, latin america, upgrading their Health Care System so investing into hospitals. With that comes upgrades in hospital lab and they want equipment that works. If you deal with blood typing, which is one of our major product lines, the ortho vision system, you cant get it wrong if you go to the hospital for surgery, youre going to be blood typed. If thats wrong, youve got a problem. Most people probably dont know do you know your blood type its rare you should know your blood type and have a card in your wallet i have it in my wallet but i dont know it. Lets talk about that ive heard just anecdotally in the United States about some lab results, about how theyre not always 100 . Ive had my own doctor question some lab results that come back. So how are you in terms of accuracy and where are we as an industry in terms of getting much better an that . All of our tests have to be approved by the fda so you have to meet performance requirements these requirements are always met and were inspected by the fda every year so theres a big safeguard for that the lab oratorian has the ultimate responsibility for that the physician takes it and applies it to the patient. There are a few safeguards in between. Usually these blood tests are pretty clear, yes or noch a few are subject to interpretation and our system would say you need to do more testing. Its tough getting lab technicians, correct we have to make our systems easier to use, more automated, easier to train, more foolproof, more reliable. Thats really a great opportunity for us to innovate. In the last couple of years we focused on obamacare and an effort to repeal or modify it and that deals with the cost and whos paying for it. While thats been going on, the technology in health care has dramatically improved and its the real revolution in health care technology. Is that bringing costs down we keep talking about bending the cost curve. It is bringing it down in some areas but people want more tests than before. When people were born in 1900, the average Life Expectancy in this country was 49. Now its about 80. Why is that . Well, its nutrition and sanitation and other exercise and other things, lack of smoking, not eating excessively and so forth, but better knowledge about what your body has in it by better diagnostic is an important thing so we can know much better than before what your illness might be and, therefore, treat it much better. That is really changing health care as much as obamacare or anything else dealing with the payment of health care. Whether its publicly or privately funded, why is health care as a percentage of gdp so high in the u. S. Compared to the rest of the world . When i was working in the white house it was 17 of gdp and now its 18 to 19 . Thats because were a relatively healthy country and we feel we should have the best health care in the world. What do you think about young blood . People in sun valley in Silicon Valley who are literally betwe doing dialysis with young peoples blood. Its a vampiretype theory. If you have young blood its supposed to help you in a bunch of ways. There are probably a lot of ideas that need some clinical validation and i would say id be careful i would look at the data and the data driven results and see how it works we focus on stuff that works because the customers will ask you do you have the data, does it work. In that case i would ask can you show me that it works . I wouldnt use it if they dont have it. I want to thank you for joining us we appreciate your time. I have young blood. I dont have 20yearold blood but there are people employing 20yearolds and replacing their blood on a weekly basis. Its a real thing. Not in private equity. I would bet we know some people who might be. Coming up, we have more from guest host David Rubenstein plus blue apron stock has been in the red. We take a closer look at the companys Quarterly Results and talk autbo pressure in the box meal market. Squawk returns in just a moment whoooo. Going somewhere . Heres some advice. Tripadvisor now searches more. Than 200 booking sites to find the hotel you want and save you up to 30 . Trust this birds words. Tripadvisor. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Welcome back blue apron results out just a short time ago good morning to you, andrew the stock right now in premarket trading is up about 2 it was going back and forth after the earnings came out. This after the company midon the bottom line. But lets go over the top line because thats probably whats driving shares right now revenues coming in at 238 million. Slightly beating analysts expectations of 235 million on the bottom line. You mentioned its a loss of 47 cents. Thats a 17cent miss. Some other key customer metrics were down, but the company had cautioned to expect that because of seasonality more people are on vacation during the summer so ordering fewer meals. Those metrics include number of orders which were just over 4 million. The number of customers fell about 100,000 from last quarter to 943 million customers average revenue per customer was 251, up from 236 last quarter. All of these customer numbers help analysts assess the potential for top line growth and thats what most are honing into its also worth noting the company has burned through 20 million in cash since december and thats partly due to a new Fulfillment Center ramping up. Guys, back to you. Thank you very much. When we return, retail in focus this morning macys is set to report Quarterly Results. We have the numbers and the street reaction right after the break. In the meantime take a look at the futures. Its been under a little pressure after a down day yesterday for the markets. Right now the dow future is down 36, s p 500 down 7, the nasdaq down 31. Stick around, well be right back im living that yacht life, life, life top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested earnings alert a shopping bag filled with retail Quarterly Results this hour macys set to report billionaire David Rubensteins call on the markets. There is a lot of cap out there, nobody would deny theres not a lot of capital but people are much more cautious than before the Great Recession. He is our special guest. Plus, blue apron delivers its first report to wall street. A rundown of the quarter straight ahead as the final hour of squawk box begins right now. Announcer live from the most powerful city in the world, new york this is squawk box. Good morning, welcome back to dsquawk box right here. Wilfred frost is hanging out with us. Our guest host, David Rubenstein but weve got a lot more coming up in just a minute. First a quick check on the markets. We do have some retail numbers out. Dow looks like it would open off 38 points, nasdaq off 30 points and the s p 500 off about 7 points. Lets take a look at shares of macys. It is talking about earnings on a diluted basis of 38 cents a share. Its 48 cents when you exclude the noncash Retirement Plan settlement charges and net premiums and fees associated with debt repurchases. That compares to the 46 cents the street had been expecting. If you look at whats been coming in in terms of the sales, theyre talking about sales for the company, hold on, looking for it, i can tell you for the full year they are reaffirming both the sales and the Earnings Guidance and talking about the Second Quarter coming in line with their expectations. Sales in the Second Quarter were 5. 55 billion, a little better than had been anticipated. So take a look its been a while since weve seen a retailer like macys report and get a pop in the stock afterwards this is a little better than the street had been anticipating its a gain of 67 cents to 23. 71. Well talk more about this in just a moment. But they are talking about how they are reaffirming their sales and Earnings Guidance for the full year, 2017. Talked about how theyre working with additional enhancements trying to drive traffic and sales. They say theres still work ahead of them but the ceo is encouraged by the progress they have been making in overall performance. Lets get you caught up on some of the other big headlines. The trumpbacked foxconn deal might be in jeopardy the Wisconsin Senate does not have enough votes to sign off on what would be a massive 3 billion investment foxconn could go elsewhere if the deal isnt approved by september 30th theres a 3 billion tax incentive and a billion dollar bond offering that would have to take place for roads and other things. Facebook launching a new section called watch the social media platforms tab will be the home for original shows. You can watch it, reality tv and see Live Major League Baseball games. Its only available to a limited number of users for now. Others will see it in stages over the next couple of weeks. Also new this morning, Consumer Reports saying it is no longer recommending any microsoft laptops or tablets. Why based on recent surveys, the product rating Firm Predicts 25 of these gadgets will present problems within two years of ownership. Thats unusual. Ive never seen Consumer Reports come out with something along these lines. Thats a really unusual report. Microsoft had just sort of, it felt like fixed a lot of things. Come out with the surface tablets, come out with the surface laptop. Im going to take a look deeper into this because thats unusual. Kohls earned 1. 24 per share, above estimates of 1. 19. Samestore sales falling 0. 4 of a percent. Analysts expected a 1. 5 drop. Blue apron delivering its first Quarterly Report they reported a loss of 47 cents per share. Wider than the 30cent loss anticipated by analysts. Revenue did exceed forecast. Blue apron shares right now trading just about well call it almost 2 higher. The big question mark over blue apron has been that amazon whole foods transaction and what that means in the long term and then theres shares of dillards taking a big hit it posted a surprise loss of 58 cents per share. The company said significant markdowns led to the results as it dealt with excess inventory issue. Can i go back to Consumer Reports. They say theyre pulling their recommending of four microsoft laptops after one of its consumer surveys found that the users were complaining about problems they say that the surface was very reliable in the laboratory and performed well in their Laboratory Testing the subscriber survey found some startup and freezing problems. Microsoft is pushing back saying the findings dont reflect the true experience of these owners but the last time Consumer Reports pulled a laptop recommendation was for the asus device back in 2014. The share price recently has been rising because of the performance but also the bounceback in pcs. And a feeling that the company is firing on all cylinders. I like the surface. The sorkin boys play chess on the surface. By the way, we have Consumer Reports on cnbc today at 2 00 p. M. Eastern time. Meantime, north korea issuing a threat against the United States vowing to fly four missiles in the waters surrounding guam north korea calling President Trumps threats of fire and fury, quote, a load of nonsense. Multiple military sources tell nbc news the pentagon has prepared a preemptive strike plan involving b1 bombers if needed. Lets get over to morgan brennan. She spoke to the air force secretary about the north korea threat morgan, what did you hear . Reporter yeah, good morning, becky. So here the air force is taking the unusual step of testing off the shelf Light Attack Aircraft from three contractors to see basically what is already available on the market. It is one of the ways the secretary of the air force, heather wilson, is looking to bolster the air forces readiness. As tensions escalate, she spoke with me about what is needed to keep america safe. This years budget proposal, weve turned the corner on trying to restore the readiness of the air force the United States air force is too small for the missions that the nation is expecting of it. And as a result, we are stretched very thin. We have asked to increase the end strength in the United States air force but also putting money into immediate readiness and then medium and longterm modernization so that were ready. Reporter so the air force has a huge Shopping List that includes modernization of two legs of the nuclear triad, both of which will take years and tens of billions of dollars to complete so to make the air force more ready, more quickly, secretary wilson says she is, quote, looking for new ways to do business and the tests theyre doing here really kick off that broader strategy were going to be talking about that as well as how that could be potentially key to the fight against isis even more as the day goes on. Guys. Thank you, morgan and what a shock, by the way, look at the sun coming up there. Is that gorgeous or what top gun. It is pretty cool. Theyre making a new top gun. Is tom cruise tom cruise is back in it, yeah our guest host has been David Rubenstein, cofounder and coceo of the carlyle board. What else are you on the board of or the chairman of . I feel like theres a lot going on those are enough to keep me busy. Im curious, weve been talking about big funds. And im curious what your take is on soft bank, the idea that a guy from japan has come up with 100 billion out of nowhere effectively and is now going to be investing it around the world. Well, its something that i guess everybody who raises money is envious of. He wanted to raise 100 billion. His own company is putting in 25 billion. He had a meeting in saudi arabia with relevant people and they committed 45 billion. And then uae committed roughly 15 billion. So thats 60 billion from two investors plus the 25 he already put in so thats 85 billion. Hes got 93 or 94 billion its amazing now, can he get the rate of return that hes told his investors . I dont know but hes a very smart person and betting against him hasnt been a good thing. What is he going to do to your business, though . Do you feel like youre going to be competing for assets with him . Theres a lot of people in Silicon Valley thinking about him. He is the topic of conversation. Well, we do Technology Investments for sure but thats not the only thing we do so hes focused on things of the 21st century, very new technologies that isnt what we often do so im not feeling that im worried about him, but hes obviously going to be a force. With 100 billion you can buy a lot of things. How much difference do currency dynamics make in your mind and his mind in terms of whether you decide to buy a company or not. Im not sure anybody is smart enough to find out when you buy something, what the currency impact will be and hedging often turns out not to be that productive i dont know that hes that focused on that part hes going to invest half of this he said in the United States and i think a lot of his investors are happy to have dollar based investments so i dont know thats a big problem. I think the issue is getting a staff. Y didnt have a gigantic staff to invest 100 billion takes a lot of staff to oversee the deals so its quite an undertaking. Would you be long what hes doing . Id be happy to have a 100 billion fund i suspect but time will tell. I think he has to get a certain rate of return to please his investors. I think its 7 or 8 . They have a preferred return of Something Like that. 100 billion, getting that out is going to be not easy. Ive got another one for you. So another competitor of yours, steve schwartzman, you guys have been in the infrastructure business a long time he comes in in the infrastructure business out of nowhere an is raising 40 billion. Steve is a very smart person. He has a very good arrangement i think with pif and we are in the infrastructure business as well. Were very happy to be in it its going to be a great growth area i think the federal government will have infrastructure legislation but its going to be state and local governments. Even if the federal government doesnt pass legislation, well have opportunities we need a lot of new airports, roads, bridges, theres plenty of opportunities in the United States for infrastructure. In thames of publicprivate partnership, lets take the foxconn situation in wisconsin as our example for the morning. Sure. How do you think we should look at Something Like that . The studies say its going to take 25 years to make the money back. The study says, we should clarify. Not studies. For who for the state. For the taxpayers of wisconsin, thats going to be the cost however, there would be a 10 billion investment all in. And there would be jobs that wouldnt be there otherwise. You cant tell how these things are really valued just looking at foxconn investment. For example, suppose it went ahead and somebody else says theres a lot of good workers there and other people will build things so you cant just look at it on its own. Like stadiums, when you build stadiums, theyre good for the environment of the local business community, but you cant look at them just on the cost of the stadium itself you dont know what the exact will be. You dont know what the impact of foxconn is going to be, whether other people come to wisconsin or not clearly its good to have somebody like that producing something in the United States i think ultimately it will show people we can produce things at effective prices in the United States and thats something people have challenged us on, whether we can be a Manufacturing Center once again. So i think its a good investment whether its a good investment for wisconsin, i cant say right now. I dont know enough on the details. And when it comes to Infrastructure Spending, the idea that were going to privatize some of these things we need the money from you, but then theres always going to be theres always this larger question of are we selling too much. Well, governments historically have built most of infrastructure but clearly it hasnt worked. If you ride around this city or other cities on the east coast, a lot of potholes. Maybe they could be fixed, maybe the bridges could be improved, maybe the toll roads could be better clearly something were doing now isnt working. Something has to change. Publicprivate partnerships are done much more frequently in europe than here a lot of people in the rest of the world have better infrastructure than we do. If you go to europe or asia, you marvel what some of the infrastructure is you see there. Here its not so great. Asia in particular but thats because theyre starting fresh too, trying to update an urban center thats been around for 150, 200 years is kind of complicated. Take new york city. You see these wonderful skyscrapers, New Buildings are wonderful. But the roads to get to them have roads horrific. Its unbelievable you cant believe a city like this doesnt have much better streets but it doesnt. And yet theyre under construction all summer long. Theres potholes all around the east coast hopefully this Infrastructure Spending will make things much better i think theres room for plenty of people to invest in this area. One of the Big Questions is when it comes to private investment in some of these things, whether you will want to invest in markets that may be less attractive, so that the money will go to places, for example, maybe like new york city where you can get a return but on some of the cities that might be considered blighted in this country where we want to get things up and running that it becomes harder. In some cases you might need more subsidies than you need in other areas. Clearly the developed markets i have let their infrastructure slide a little bit there have been some emerging markets in the middle east or china much better infrastructure than we had in the United States for example, how many of you have a cell phone drop when youre calling constantly. It never happens in the emerging markets its amazing that we cant fix that. Thats because they dont have had broadband infrastructure, its all on mobile but i completely agree, you lose signal here a lot. David will be sticking around a lot more well talk about oprah and maybe some president s in the future for you. Weve got more time to go. 45 minutes still to go with david. Coming up next, ceo callin sessio session, hell join us to talk about the texas economy. As we go to break, a checkin on macys shares. The retailer out with earnings beating on both the top line, less of a kline in samestore sales. It was up 6 or 7 and is now down half a percent. Stay tuned, youre watching squawk box on cnbc theres a denture adhesive that holds strong until evening. Fixodent plus adhesives. Just one application gives you superior hold even at the end of the day fixodent. Strong more like natural teeth. Finding the best hotel price is whoooo. Now a safe bet. Because tripadvisor searches. Over 200 booking sites so you save up to 30 on the. Hotelock it in. Tripadvisor. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Our next guest is at the intersection of the Banking Sector and oil patch here on set, chairman and ceo of Cullen Frost Bankers is phil green. Phil, good morning to you. Good morning. Thank you for joining us. And well talk about that intersection with the oil sector in a moment but first of all i wanted to talk more broadly about banking. Particularly weve had a couple of rate hikes. Most banks havent responded with depositors rate hikes for savers yet but you did that and got a negative share price reaction. We made the decision that was really culturally based to make the decision for our depositors and for our customers. And so it was not something that we did, you know, on the spur of the moment we had been looking at it for the last six weeks since the last fed rate hike you had seen rates go up 100 basis points and no change in the positive rates at all. We really felt like it was the time to do it. You know, we have had great deposit growth and weve grown, say, 10 over the last five years, great deposit growth in checking accounts, but the money market deposit accounts, those balances had begun to tip over the last s18 months. Customers were seeing other alternatives that they were going to so we felt like our Value Proposition needed to improve. And your Share Price Fell 5 when you made that announcement, so clearly investors felt any potential market share gains youd make would be offset more by negative profitability effects. What has been the reaction in two weeks . Have you gained customers because of this hike in rates . Yes, we have. Weve seen growth in money market deposit accounts and cds. But true confessions, im a recovering cpa in a prior business life. I used to believe that the goal was to run a successful business and you did that by making a series of correct Business Decisions along the way. But i dont believe that anymore. What i believe today is the goal is to run a Successful Institution and you do that by making the correct series of institutional decisions along the way. Theyre not always the same. Whats the difference i think the decision that we made here was an institutional decision. Whats the difference between running a business and running an institution lets take this example this example was for the long term, it was for growing our market share, it was for not putting at risk our trust and our relationships in the business. Youre just talking long term versus short term . Ill give you an example, becky. Take the early 2000s we decided to get out of the mortgage business. Turned out to be right before the meltdown it wasnt because we were smart, it was a culturally based decision we found that that business wasnt a relationship anymore. We took some heat for getting out of that business but it was right for our institution because it was right within our culture. We were the first bank to not take t. A. R. P to say that publicly, it was a decision that customers pay something to own our bank. And we felt like they had already paid and they didnt need to pay the cost of the t. A. R. P. Funds. Were going to go to the oil sector in just a moment. But because youre based in texas, theres a lot of talk out there with deregulation well see consolidation in the banking space in america would you like to expand to another state or do you think youre potentially a takeover target yourself for someone wanting to expand regionally weve got so much opportunity in texas, thats where were focused. Weve got about 3. 5 market share. Its a great state, the economy is great and thats really where our focus has been we never say never at some point there might be the opportunity to take our Value Proposition into some other markets, but at the present time were focused on texas. Whats the strength of it, have you seen ups and downs in line with the Oil Price Moves . The industry is stronger, theres been a lot of deleveraging thats happened compared to what its been over the last 24 months, its very strong today so the industry is really improved were seeing a lot of, frankly, private equity money into the market which is driving prices up on acreage. So again theres less leverage in the business and its really very strong right now. Phil, thank you for joining us phil green, ceo and chairman of cullen frost. Coming up, Goldman Sachs wants to put future employees personalities to the test for real if you want a job there, you have to take a Personality Test. And see how it matches up against some of their other employees. And later, kevin liles will be here. Well talk to him about streaming and the way its changing his googlebacked record label well findut h oow hell find his next big hit at 8 40 eastern time were facing 20 billion security events every day. Ddos campaigns, ransomware, malware attacks. Actually, we just handled all the priority threats. You did that . We did that. Really. We analyzed millions of articles and reports. We can identify threats 50 faster. You can do that . We can do that. Then do that. Can we do that . We can do that. Still to come, we have some breaking economic news, we are just minutes away from jobless claims right now as we head to a break, take a look at the u. S. Equity futures. Yesterday was the first time weve seen a down day for the dow in i guess its the second time out of the last 12 sessions this morning dow futures indicated down 35. Stick around, squawk box will be right back. We are seconds away from weekly jobless claims and july ppi. Rick santelli is standing by were expecting 0. 2 on ppi and futures point lower at the moment all right the data is hitting the wires on the jobless claims side were up 3,000 from a slightly revised 1,000, meaning 240 last week, 241 revision, 244 today. If we look at continuing claims, 1. 951 million, thats down a smidge from 1. 967 million. Lets get to the big data, shall we on ppi, headline is down 0. 1 on ex, food and energy, its down 0. 1 year over year its up 1. 9, falling 2 ex, food and energy up 1. 8, that follows 1. 9, also lighter than the over 2 expectations so all in all, at this stage this pipeline stage, ppi doesnt look very hot. As a matter of fact, it looks a smidge cool. All the inflation data can be important. No matter what metric you use to gauge inflation, whether you believe the numbers that were using or not, the key here is, is that june was historically strong two months in arears. Youve had a june and july employment report all pretty good theres much less wiggle room with the other numbers today cool, tomorrows cpi may be very important. Interest rates are hovering around 2. 23. The last of 22 billion in supply comes with 30year bonds today we had a stellar threeyear, really doggy tenyear. Lets see what the tenyear holds today. Thanks for that, 2. 23 on the tenyear it was 2. 26 a couple of hours ago. Steve liesman is here with us groaning a little bit. Thats an extraordinary report we were looking up 0. 2 and came in minus 0. 1 i see a sea of negatives here. Energy down 0. 3, trade prices down 0. 5, transportation, warehousing prices down 0. 8. Construction prices up 1. 2 there is very little inflation in the pipeline which is why this is useful its not necessarily a 100 indicator of consumer price, but you want to see if theres any inflation building and there is none the yearoveryear rate has fallen to 1. 9 . Very quickly, does this mean the fed is less likely to raise rates this year . Lets jump to that part of the conversation, becky, real quick because going into this number, i have a table here, the possibility the probability of a december rate hike, which is the one were watching, had fallen to 33 , which is the low for the contract there it is right there. As i chat here, i will look up the current number to see if its moved part of that, you want to be a little careful, its a flight to safety, which happened in the wake of President Trumps comments on north korea . On north korea. You had a general downdraft in yields also curiously linked to the jolt survey. I never even watched the trade around the jolt survey but there was a strengthening in the dollar off of that let me talk real quickly about claims because this issue keeps coming up, which is how critical are the claims numbers its very important to watch them to make sure theyre down first of all, take a look. 1. 4 is what we consider to be the insured unemployment rate. This is an alltime low. This is a percentage of the covered employment that employment thats eligible for Unemployment Insurance that is receiving it. I went back 20 years on this chart, i can go back 30, 40, 50, and its never been this low the job market is tight. I want to share with you this comment, jobless claims are no longer a useful guide for payrolls firms want to hire more people, but qualified staff are increasingly hard to find. And so the result, the bar for layoffs, employers are now more inclined to ride out small dips in demand without letting go of staff. So the variability, you want to see them remain low as a sign the job market is healthy, but the variability no longer is telling us what we thought it would or what it used to do when it came to the friday jobs report and now i just want to turn back to inflation because i have a question for David Rubenstein who is an expert negotiator. I dont know about that. If im on the other side of an Employment Contract with you, lets say we agree on the base salary and i say, david, im worried about inflation in the years ahead and id like to build in some cost of living in my contract. Whats the bid ask on that what should i be asking for as an employer, what are you willing to give me as an employer well, for the last 25 to 30 years, inflation has been roughly 2 2 or so so thats been relatively modest compared to what we had before that 25 or 30year period of time over the next 25 years its hard to know but i would guess somewhere between 2 and 3 is what i believe inflation is likely to be but i think inflation is not likely to go back to 6, 7, 8 a year unless something completely unforeseen happens so id be willing to build in a 2 or 3 inflation rate and i think thill be flat. But the argument is youre overpaying for good people im willing to overpay. Right the inflation adjustment is relatively a modest part of the compensation package so i wouldnt worry about that as much as i worry about other factors. When you look at the horizon and outlook for yields, i need a dollar for every person whos declared the end of the bondable market because then i could definitely retire, i wouldnt have to negotiate with you on the inflation adjustment what is your outlook when it comes to rates here . I think its very likely that the fed will increase by 25 basis points before the end of the year i dont think theyll likely do 50 basis points because i dont think its likely theyre going to do something in september i do think theyre likely to do something in december. I think that would be i think thats probably what were going to see i think the fed if the fed did nothing between now and the end of the year, i think the markets ultimately would be disappointed with that. You mentioned that leverage is less a part of the deals than were doing in the past, so rate rises today impact your business less remember, all the deals in the emerging market with some exemptions tend to be nonleverage deals and a larger and larger part of the private equity in the United States is Growth Capital were putting in much more equity so leverage is important but theres so much leverage out there and the costs are relatively modest. Its not as big a factor as years ago. David, can we talk about some opportunities youve seen where you see other things happen. Weve already talked about health care and thats a place where you see a lot of opportunities. One thing we havent mentioned is mcdonalds in china theyre talking about some massive increase in the number of stores, 2,000 Additional Stores over the next five years to 4500. What do you see happening there . Well, clearly when people get wealthier, they want more protein. You know, throughout history so as emerging middle class and others in china get healthier, they want more protein and protein you get from beef or chicken. Yum through kfc has 7,000 stores mcdonald has 2500 we intend to grow it dramatically but thats the opportunity for us because theres so much upside we sell an enormous amount of chicken at mcdonalds because its very popular in china so we think weve got a Good Opportunity to change the menu a bit and change the supplier who are providing the products for mcdonalds an china. Why can you do it better than mcdonalds can were happy that they sold it to us but they were operating things more or less from chicago or oak brook and well be able to do things more locally now that we have local ownership. Just so i understand, starbucks doing the opposite they have bought out their partner in china so they own the whole thing. Meanwhile some of these other big u. S. Companies havent been able to make it work themselves. They dont want to take the risk. I dont know about starbucks situation. We have a very good ceo and she really is able i think to grow this company we think the changes that were going to make will make this a very good investment. Macys out with earnings just now. Courtney is here so macys reporting those Second Quarter results across the board, earnings, revenues and kaumcomps all bettr than what analysts were looking for. I just got off the phone with macys ceo it is his Second Quarter leading the Earnings Call but in fairness his first full quarter over the business. He tells me we had a solid Second Quarter we are showing subsequent shal improvements the initiatives we tested and put in place are working so those are changes to fine jewelry and shoes which is lifting shoes by 4 points and fine jewelry up double digits. He says new marketing at the end of september and a new Loyalty Program in october will lift sales in the second half so i asked him why just reaffirm and not raise that Sales Guidance and he says when you look at what we did in the first half, we had to show subseque subsequential improvement and were on track for that. We have more confidence that well reach that previous guidance now, he says that traffic in stores is still down with the tourist heavy stores seeing worse traffic in the Second Quarter than the First Quarter he said stagizing the bricks business is a high priority but adds our Digital Business is very strong. He also said hes not ready to declare when hell see those sales turn around. Probably a smart and prudent thing to say. Probably. Thank you, courtney. You got it. Still ahead, when was the last time you because a physical cd streaming has taken the top spot as the way most people listen to music. Up next, well talk to the ceo of a googlebacked record label thatssi ung these platforms to make the next hit. Stay tuned, youre watching squawk box here on cnbc. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. That was our own rapping guest host this morning, David Rubenstein is here that was a special message that he was making after investing in dr. Dres beats. By the way, a great deal one of the greatest for you. It was a great deal. Quick turnaround, sold to it apple. We sold it in six months, doubled our money. We invested 500 million, doubled that in six months but i rap coach said after my rap experience that i was the whitest man he had ever met. I thought it was pretty good. I think i would do much worse. Hed say i was even whiter. Im just going to leave that right now. The traditional Music Industry may have met its match streaming made up 50 of the music Business Apple music, amazon music and others joining us is kevin liles thats backed by big investors bike googles longtime work with jay z and others good morning to you. How are you doing what kind of grade are you giving this guy . Hes on the starter kit he ha the training wheels still. Were going to work with him david, come down to the office, i have some coaches. If this whole private equity thing doesnt work out. At the Kennedy Center honors this year, we were honoring some hiphop, ll cool j he is one of our first artists at deaf jam so congratulations on everything. I really appreciate you guys honoring hiphop. Hes the youngest inductee ever, right . 49 years old. Hes a very good friend of mine. I want to talk about music and technology youre using technology in a way that i think people dont fully appreciate in terms of how youre looking at things these days. One of the reasons why we had google being one of our investors, were first generation data. We never knew when we would put out product what would come back to us. Now we have this opportunity to analyze data i have data miners inside of the company, people who are native to these platforms who understand if i put a piece of product out or video out at 3 00 in the afternoon, maybe i should have put it out at 4 00 when kids are out of school at that particular time. So it provides us whether its finding artists or discovering new forms of creativity. Are there artists that you have found Via Technology and social media every day every single day you cant base it on one particular thing because i wouldnt have found highly suspect, my rock band, just based on technology. I found them in a trash bar up in cape cod. But i found t. Grizzly in detroit becau detroit. I looked at youtube and found a lot of great artists and great creators im not just looking for artists, im looking for people who are doing things different people using disruption innovation to create something people want to clamor to. The music streaming services, is that the source of where youre finding people or is it youtube and things like that, the platforms that have been there for a few more years i tell people every day, we call it 300 because theres 300 different ways to find an artist its no one way. David might have a friend. I was just downstairs in the green room and someone said, hey, my daughter raps. Who knows, she might be the next star and i found her here. Is it your gut that you trust overall . You find them through all these different venues at the end of the day i have to feel it it has to tanned for what we stand for as a label. Put your investment hat on for a second how do you like or compare apple music right now to spotify, to youtube, to even snapchat. What do you think is going to win . Who do you think is losing how do you think about those guys well, we know youtube is the biggest screen we know the biggest service is spotify. We know that apple has a sort of base of people to actually utilize them we know amazon is coming into play they have a bigger base than anybody to use so i would make we havent heard about amazon in the music business yet. Theyre much bigger than we Pay Attention to theyre coming in a big way theyre offering a lower fee to enter. If you have amazon prime, its even lower to me its at the beginning stages what people dont realize about technology, its like early in hiphop when people said its a fad or its not going to work. 83 of my revenue comes from streaming. Facebook, snapchat, twitter what do you like facebook. Facebook. Because when we talk about the artists that are holding their albums off the streaming services, quite a few big names have done that will that continue, the likes of adele, taylor swift, things like that a lot of people dont catch the bus, some people dont drive or wear designer clothes on a scale of the business, you have to do streaming you have to do streaming. Theres been a lot of speculation rumors about sound cloud. Do you think its going to work . I think its going to work. Its one of the most important discovery mechanisms that we have out there right now. Thank you for coming in can you come back . Weve got to have a longer conversation. Listen, i appreciate it again, our industry is growing and our revenues are up 11 . Appreciate it thank you. When we return, jim cramer joins ugs us live. You always pay 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. Lets get down to the new york stock exchange. Jim cramer joins us now. How you been . Very good, jim. Wondering what you think of the late day rally again yesterday we get one a bit of selling a little bit of riskoffs in the day. Markets pull back in the end i think youve been so right on the 5 00 which you know i love take our cue from europe at the opening. Europes been soft and you have been very right about the fact that the dollar is strong but rest of the time weak then we struggle off europe end of the day ive been watching europe closely. Europe has put a damper more than you think more than korea. And im staying close there because you give us the best stuff each morning youre kind, jim. But lets talk about macys and kohls little better than expected. Yeah. Kohls already ran five points ahead but still had good numbers. I like the trajectory. I think macys is really, really much better than people think. I think jeff is doing it i think hes got it right. I am not at all concerned about the dividend here. I think the guy understands fashion and Loyalty Program, thats what theyve lacked i think macyins is a buy. There we go we look forward to more on squawk on the street later at 130. M0 a. Eastern time well be right back here on squawk box. You always pay 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 . For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Liberty mutual insurance. At ally, were doing Digital Financial services right. But if thats not enough, we have 7500 allys looking out for one thing, you. Call in the next ten minutes to save on. And if thats not enough, well look after your every dollar. Put down the phone. And if thats not enough, well look after your every cent. Grab your wallet. Access denied. And if thats still not enough to help you save. Ooo i need these well just bring out the snowplow. You dont need those well do anything, seriously anything, to help our customers. Thanks. Ally. Do it right. Welcome back to squawk box. Landing a job at Goldman Sachs just got a little bit harder or easier depending on your personality. The bank will begin using a Personality Test if you can believe this as part of the hiring process for positions in its banking trading and finance risk divisions the test answers will be compared to those of current Goldman Sachs employees who they think exhibit characteristics. It will be piloted on summer intern candidates next year. Are you going to implement a test like this i dont think so. Are they going to give those to the director of Goldman Sachs . And compare them to who to the previous directors of Goldman Sachs. I dont think this is that new. Because when i did all the grad rotation programs, you have to do these types of things on a days induction type sounds like its new for Goldman Sachs. Famously Julia Robertson used to give a detailed test to some people not all organizations do it. Have you ever taken one of these things i havent my last test was my bar exam, i think. David, lets go back to the markets again. You have mentioned some of the place where is you see opportunities. Weve talked about health care weve talked about mcdonalds in china. What other areas when you look around youve mentioned its harder to find opportunities but where do you see them . A couple of things. I think europe has been undervalued. Prices are less for assets there than in the United States. I think brazil is coming back from a fouryear recession so theres some opportunities there, i believe i think Subsaharan Africa has been discounted. There are opportunities there. And i think china has been discounted because of the problems some people think they have but its a gigantic market i think its going to be a great place to invest the next five, ten, fifteen, twenty years. Are you talking about financials weve had people come on say stay clear they havent fixed the problems. We Like Companies that might have european designs but sell a lot of their products in asia or United States. A lot of companies have terrific products but most of their market is actually outside of europe thats a good company in our view are the markets at attractive prices for the companies you may be looking to exit that maybe you spent five or six years, turned the operation around, is this is a good time to sell those businesses it is a good time prices are high as weve sugg t suggested. We have a number of things in he works. Have prices we think are going to be attractive for our investors, yes i want to change the topic completely before the shows over okay. You interviewed oprah yes. You asked if she wants to be the president. She said no. Do you believe her it was a tongue in cheek kind of thing but, you know, shes played with it because shes a skilled television performer i think she has a better job than being president which is being oprah. Oprah is higher than being president of the United States shes a terrific person. Why would you want to be president of the United States when you could be oprah . But now that we have ceos as president s, i want to make it more complicated for you ive got people to ask you about. Jamie dimon was on with wilf recently is he running for president . Ive interviewed him several times. Jamie says he doesnt have the personality for what you have to do as president. He just doesnt feel that he can get along with members of congress or things like that so its not his personality. But, you know, you never know. People change their mind if jamie wanted to run for the president of the United States, hed be a good president Mark Zuckerberg going around the country on instagram youre seeing him with pictures of american flags behind him do you think hes running . The youngest was Teddy Roosevelt at 32. You have to be 35. He could be 35 then but hes very young if youve got a fortune of 60 billion or whatever hes got, i think thats enough to keep him busy. Howard shultz, bob iger i think Howard Shultz is an attractive candidate bob iger also. But just because one business guy is the president i dont think were going to Business Executives david, we loved having you here please come back my pleasure to be here. Thank you for having me. Thanks. And wilf, thanks to you that does it for us today. Now time for squawk on the street. Good thursday morning. Im Carl Quintanilla with jim cramer, carl faber futures suggesting a possible third day down for the major averages that would be the first such streak since april plenty of retail earnings. Europe is red. The 10year around