Transcripts For CNBC Squawk On The Street 20140616

You will, for the markets. Tenyear note yield, as we often do at this time, below 2. 6. I like to compare, france 1. 71. Italy 2. 749. Oil prices of course have become a key. Wti and brent, you can see it, down on wti. Brent is higher. By a nice 48 cents. Lets get to our road map this morning. Starts with m a. Shares of covidien up around 30 , irish drugmaker agreed to be acquired by what was or will no longer be u. S. Based medtronic. Price tag 43 billion. Markets under pressure and as you saw oil is remaining volatile as violence and tensions in iraq continue to escalate. Were going to go live on the ground and get the latest from the region. Target confirming it experienced problems with computerized checkout systems but breathe easy, the issues not security related. Lets start off with m a. Weve got plenty of. The biggest of the deals is involve two medical devicemakers, medtronic agreeing to acquire irelandbased covidien for 43 billion. Values covidien 93. 20 a share. There was no word of this out there. So you have an unadjusted stock price of whatever it was friday. The newly combined company will base itself in ireland, of course, it is yet another tax inversion following names that ive been talking about for quite some time, namely, a lot of the m a coming. This is one of many today. And inversions continue. In this case, as in so many, jim, tax inversions, changing their tax jurisdiction, done as importantly, if not more so in this case, for the ability to repatriate the cash thats a crewing over seas and will back to the u. S. Without suffering significant tax penalties or any in that way. Talking about investing, reinvesting here as much as, what 10 billion over 10 years in r d at medtronic. But its a tax inversion, make no mistake. Yes, theres a lot of strategic parts of this deal that seem be embraced by the market, theyre having a Conference Call talking about that. But its still about taxes. Well, david, im not sure if youre familiar with 20 lower hatch street in dublin, but that turns out to be where covidien is located. See, i thought it was located in mansfield, massachusetts, had the ceo on mad money it seemed like a massachusetts company. But i think that it turns out that its on lower hatch street. Active street. Yeah. Yeah. Not far from there youll find any number of other our major pharmaceutical companies. With with the cleveland indians, the cavaliers and the browns, eaton located at phitz william place. Its another company in dublin. They had their annual meet agent four seasons hotel. I stayed there while visiting the guinness factory. These are new things to me. Theres a medical device tax from obama, healthcare. Looks like being on 20 lower hatch treat street you may not have to pay that. Is that true . What people are buzzing about. If we were to go, ive got several fabulous places we could visit, we could visit trinitying look at the book of kels. We could do a lot. I would love to go to ireland with you. Many major american companies. And stop in on many of the managements, because i know theyll all be there. They have to be. They have annual meeting theres. About the only time theyre there. I wish it were facetious, but mansfield is where covidien is located. But its actually located on 20 lower hatch street. Listen, you we can discuss this to were blue in the face in terms whether companies should be allowed to do this. Of course they are. Right. Their responsibility is to their employees, and their shareholders and customers. Right. Theyre not necessarily responsible to be patriotic citizens of the United States. No. And have to pay taxes. If they can find a tax regime, because ours is not competitive as the rest of the world, why wouldnt they . That will continue to happen until we change rule or come up with comprehensive tax reform that makes it, us, more competitive, particularly as it relates to profits earned outside the u. S. The irs has a set of rules that you study i did a lot of Corporate Tax work in school and then after. The irs actually encourages you to do everything you can legally to v avoid tax, not evade tax. But you have every right to avoid tax. These companies are doing exactly what the irs says. Listen, minimize tax, you should absolutely do it. So thats what theyre doing. Its funny, because i had liked covidien, they bought theyve got great devices that have u. S. Surgical, of course everybody once a part of tyco, added a lot to it. Then that tyco bermuda base went from bermuda to im, in terms of jurisdiction and covidien. When you look at breakup of tyco, tyco, had a division called amp, a division in pennsylvania. I thought amp was located in pennsylvania. Thats wrong. Its switzerland. A town that apparently we bombed by mistake in world war ii. But i dont know, you see, im not sure exactly maybe that was a safe zone. I, again, this is an amazing thing. If youre in washington and watching the show, youd be saying, what . Weve got to stop this immediately. The irs is saying its fine. But in the end, this was not somewhat driven by the idea that covidien has a terrific hospital business, you get a hold of hospitals. Under aca, this is going to been more important, have a broader array and suite of products, so the devicemaker with all of the things that covidien makes, Surgical Supplies and like. Thats why striker has to buy. Youve explained this, as long as new companies, acquiring company, 20 . Of the overall. That will be the case. Covidien shareholders loan 23 . Johnson johnson can they do something . 30 . They may be too big to buy smith and nephew, if you structure a deal, you can get around tax avoidance, perfectly legal. This is happening and its going to cost the treasury a huge amount of money versus repatriation. Ive got a list of Fine Companies that i thought were american companies. But for instance, david, Chicago Bridge and iron, they dont make bridges, they dont make iron, theyre not located in chicago. The old punch line was they were in houston. No theyre in the hague. How great for floor, floors watching and saying we ought to go buy cbi, they just missed the quart. A famous city that has 36,000 people, minneapolis, minnesotabased pent air. And the list goes on and on. Jim, it will continue to grow because the idea of the window closing is motivating more companies to try to do it and its a competitive advantage for competitors if they have it and others dont. Right. I want to get talking about oil. Heres stock futures falling, oil prices up a bit, you saw brent up, of course, escalating violence in iraq the key reason. Cnbcs chief International Correspondent, Michelle Carusocabrera in Northern Iraq and brings us the latest this morning. Michelle . David, yeah, just about 100 miles west of here, another city, tally far taken by sunni insurgent rebels. Another town that has fallen even as the Iraqi Government starts to fight back. The other headline is that the u. S. And iran in vienna, supposed to be on opposite sides of the table when it comes to nuclear talks, now going to be discussing what should be done relative to the sunni insurgents because they both consider the sunnis and whats happening here a problem and the rebels are their common enemy. Strange combination of bedfellows occurring because of the situation in iraq. A lot of people are asking whether or not we are facing the impending destruction of iraq, as we know it. The disintegration, so to speak. I want to show you i kurdish newspaper, running this map which shows exactly that. They have broken up iraq into three different pieces. Not coincidentally they have shown kurdistan to be bigger than what it is now. Theyve added two or three provinces from what i can tell. A lot of belief theres so much frustration with baghdad, that could be what happens as a result. Other story out today, the insurgents, isis, islamic from syria and iraq, turns out, according to the guardian of the united kingdom, they are extremely wealthy, worth 1. 5 billion. The guardian quotes, intelligence sources which say they have found early last week more than 100 zip drives from an insurgents home which shows financial status. So not only did they steal half a billion from the central bank of mosul last week, but apparently theyve also been selling oil from syria. Sometimes back to the Syrian Government because the Syrian Government doesnt control that part of syria anymore. Theyve been selling oil at a discount, but certainly its been bringing in a lot of money. A very, very wealthy terrorist organization is what the central Iraqi Government is up against along with United States as well. Back to you. Thank you. David. Whats the approach here . Michelle carusocabrera, reporting from Northern Iraq. Heres the next thing. Youre going to start hearing that schlumberger, bakerhughes, weatherford, another company that is located in texas, tends to be located overseas, youre going to hear number cuts, i believe, because of iraq. Bp, royal dutch, exxon, spent a lot of money in iraq, i expect a number of cuts in that company. If insurgents continue, what will happen is people from the workers will leave the infrastructure, it will be too dangerous, these are be targeted. Be aware those companies could get hit, though theyre booming in other parts of the world. Schlumberger, baker hughes, weather ford, bp, exxon, question marks now that they invest sod much in iraq. The last key economic report from the opening bell. James woolsey with his take on the crisis in iraq. A lot more squawk on the street. Were just gets started at post 9. I bought a car, over and tells you, and youre like. A good deal or not. Thats what led up to us looking at truecar. Com. And with truecar. Com, theres no buyers remorse. Save time, save money, and never overpay. Visit truecar. Com first day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. They challenge us. They take us to worlds full of heroes and titans. For respawn, building the best Interactive Entertainment begins with the cloud. This is titanfall. The first multiplayer game for xbox one built and run on microsoft azure. Letting gamers around the world interact in ways they never thought possible. This cloud turns data into excitement. This is the microsoft cloud. Welcome back to squawk b box. May industrial hitting wires up. 6 on industrial production. That is much better than the better revised, down. 3 originally released as down. 6. Utilization rates moved up to 79. 1 from 78. 9. We continue to see rather strong moves on the utilization side. Of course, thats may data. June empire came in over 19, that was a fouryear best. And if you looked at the always two months in arrears april tick data, it was a little negative when you had shortterm securities. But when you looked at entire picture, it did improve to some extent. David faber, back to you. Thank you, rick santelli. Its a merger monday, no doubt. Maybe a merger tuesday or wednesday. Were going to get more deals. Lets try to get to all of them. We spent a good deal of time talking about tax inversions. An issue far beyond that of merger and acquisitions relating to medtronic and covidien but they done want to make it that story, theyre talking about strategy. Time warner telecom, bought by level 3. Ten bucks a share in cash, about worth 40. 86 a share. There you can see, Time Warner Telecom shares moving up, as is the stock of the inquirer. Not a big move. No. More typical than not of what weve seen in the market when it comes to announcement of deals talking about net present value, 2. 2 billion. 240 million of total run rate synergies, so thats what gets people excited. Right. Level 3 had been left for dead company. Jim crow built the company, got overvalued. On the verge of bankruptcy. Fiber we know there are other companies. It was 360. So many. The company fell on hard times but never lost its edge as being a company a backbone for the internet. And it had been considered a backup for content delivery systems. The Companies Made a comeback. Brilliant move by lvl3, theyve expanded their ability, maybe able to go to netflix and say we can handle a lot of your traffic because were fiber. A great investment level 3. Theyre only paying 12. 8 times 2014 ebida versus what tyson paid for hillshire. Totally different businesses, i make that point to show how incredibly high that multiple was. They say its 9. 5, if you estimate run rate synergies. So we take that out, were only paying 9. 5 years. Level 3 has to be bought. Its become a core holding for people who want to be able to play the increasing need to be able to have video on your video on your pc. Right. Terrific. Good day for core x management, significant owners of both. I didnt know that. Which one do you want to talk about. Williams department aek ses mid stream neithers. Telling you that they had the absolute best. Chesapeake, by the way, spinoff. Mike came on mad money and said weird the Fastest Growing pipeline company. Williams is buying rest of access mid stream partners. Williams will go up because you can accelerate the earnings of williams and access mid stream. An amazing stock. Really has. Had a chart for that, the companys the best performer, ive been recommending it consistently, the Fastest Growing mlp. Now mike has completed the mission of trying to bring out a lot of value. The ceo the best in the pipeline business. Congratulations. This is a great deal. 6 billion in character will qu qu williams owns 100 of the partner. Fabulous. A big deal. We know how cheap debt is. Companies are using it, not to take it on Balance Sheet and increase leverage, to buy back stock, but buy other asset wlz it be medtronic, level 3 or in this case williams. The sanodisk deal is interesting. They bought fio, it was at 32 in 2012. They had an emc killer. Turns out it wasnt killing anybody. A popular with our viewers, a popular situation, futsionio, the stock was at nine, now an 11. 25 deal. I think theyve given up. You know, those who played in this game thought fusionio was the next emc, it turned out to be the next nothing. Sandisk is on fire. Theyve done a lot of things right and its another very good deal by sandisk. Does m a do all the deals have the power to turn this market, or still going to be more about geopolitical fears. If 3. 6 million gets cut down to 2. 6 million and chaos worldwide spreads well be looking at earnings versus that. Heres a funny one, take a look at the absolute the intersection of all of this. Whetherfords business 33, comes from iraq. At the same time weatherford, its a texasbased Company Located at 2000 st. James place in houston. No, its in geneva. So weatherford on the weakness, it will be weak, might be scooped up pay company that wanted to be located in geneva. Thats one to watch. There you go. If that gets a takeover bid. United all of the themes. Global tension and a swiss address might produce 28 bid for weatherford. More from jim, including mad dash for month as we count down thwarts the opening bell. A look at futures. More squawk on the street. 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And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Six minutes before the opening bell. Yahoo is going to be downen time for mad dash, alibaba new filing of course as ipo draws closer. We get the full fiscal year, the march quarter, weve been working off the last filing yearend as yearend 2013. There seems to be Growth Numbers giving investors pause which is hurting yahoo 23 , you have been very smart, always talking about the taxes and how much value is going to come out. Now, i think when you look at alibaba slowing, first it might have impact on jd, because alibaba was the lipitor, but this cuts to how much mass Marissa Mayer done . People say, yahoo is a shell except for alibaba. This is a measurement and if it goes lower, of what myers accomplished. I always hoped that yahoo would get the alibaba money and then go by a series of Companies Making it more relevant. If there isnt as much money, yahoo may be less relevant. Alibaba, dont be confused, it was sequential growth rate off the last quarter, singles day, that was expected to put in perspective. Full year fiscal Revenue Growth 52 . Net income groat 305 . Revenue growth did decelerate from q4 to q1 of the year, the actual year. But you know, thats because they suck a lot of the marketing spent into that period of the year. So it isnt as much there for the march quarter. Jerry yang will be on. 47 of gmp, revenues up 691 . Maybe those people who felt alibaba was going to be worth 250 billion theyve been the leader in trying to figure out how much say alibaba comes in 200 billion, youd still buy yahoo on weakness. So many other names this morning. Right back with the opening bell on squawk on the street. 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Obviously the news reads horrible but remember, the massacres, but if you want to focus on earnings per share, this is right now in sync with whats happening. Not so bad. There you very it, the opening bell for monday. Taking a look at s p real Time Exchange back at hq, composes itself, perhaps a bit more red than green on the board there for the big board here, progressive celebrates its fifth trading anniversary. And over at the nasdaq, compresco partners. Celebrates the anniversary of its listing for the third year or the third year of its listing, celebrated. A couple other things that are on the move that are actually fundamental that i think we should point out. One of my absolute favorites, isis pharma has youll see that stock climbing, new antidiabetes formulation. Its phase ii but after what happened with merck buying a company that had phase ii work, no longer hesitate to talk about phase ii. Many missed that when it came to the company that were talking about from last week. Lets get breaking news right now on the imf and the economy. Steve liesman back at headquarters. David, thanks very much. Imf with its outlook on the United States lowering u. S. Forecast 2014, to 2 . Down 0. 8 Percentage Points because of the weak first half. Saying the second half should strengthen and maintaining its 3 forecast for 2015. Interesting development here, imf, for the first time, endorsing raising u. S. Minimum wage saying its low by historical and International Standards and it would raise incomes for millions of working poor. A dicey political issue here. On outlook for u. S. Monetary policy, particularly uncertain, whether the risk of quote significant swings in market flows and prices in the months ahead depending on the outlook for Interest Rates and inflation. Imf saying market spreads and low volatility do not reflect Monetary Policy uncertainty, calling for greater fed communication, including press conferences after every meeting. Low rates raised Financial Stability concern for the imf. Longer rage, full employment in the United States by 2017, inflation area pressures needed and the fed policy rate could remain at zero, longer than what the market believes mid2015. Wading into an interesting political issue here because republicans seem to not support raising the minimum wage and they have their problems with the imf. This could exacerbate that concern. David . Interesting to see them wading into our domestic political debates. Steve liesman back at hq, thank you. Lets go to tech for a bit. We havent talked that much about Technology Names this morning. Start off with amazon, introducing a phone soon, big meeting in seattle, bezos will be there introducing what is widely expected based on many reports amazon phone. You can order whatever you want or it will order it for you while you think of it, monitor your brain waves, know what you want. I only guessed a bit. One of the things that was, throughout the copy about the amazon, how much competition there is in the cell phone business. Right. Whether this will hurt apple or hurt google. All of the profits split by two companies because rest is incredibly low margin. Look at the lack of success that google has had with motorola, for example, which it bought in jettison, keeping the intellectual property. Nokia, microsoft, what are they thinking, at the same time those argue well they have to be closer and closer to their customer, cant allow themselves to get disintermediated by various platforms available on your mobile device that do what they do and lead you to somewhere else. The cameras. I dont know. Its causing google to go down, i think. I was with someone who is close to google over the weekend, googles working closely with google maps and Controversial Company uber, turns out that the driverless car is an attempt to be able to take over the taxi industry, six years away. More than that. Well, theyre going two years driving around campus. I mention this google has lots of irons in the fire, amazon has lots of irons in the fire. They do. Its the nature of the beast theyre happy to go at each other without thinking whether there is a market, this is kindle versus ipad. Apple obviously with beats also. Then we have to get used to the company, the idea that these companies are just going at it every single front because they just have to protect their turf. They do. They feel as though they have to innovate the culture that bezos instilled at amazon, not worried about nearterm reported profit but was making investments they believe will sustain and help the business to grow significantly. One company we did mention that has done well with the phone, apple, i think, its name. Yes. Its actually up, which is bucking the trend overall in technology with many of the names that we typically, not a great deal, but down nonetheless. Apple, man, its breaking out. Done quite well. Yeah. Done quite well. Very quiet. The split obviously had did more to attract people than detract people. Theres a lot of people talking about how Third Quarter could be very good quarter for their cell phone. I dont like read the tin cup piece in the New York Times over the weekend . Yes. Tim cook piece. The only reason i focussed on it, the company, but its tim cooks company. I think thats the right way to look at it. It took a little while. Footsteps here are so big. I mean, this is just one of the most amazing transitions. I think its very much on track, a winner in a lot of the innovations are quiet and subtle but adding to numbers which we know is what matters. Talking winners. Wells fargo certainly among that among the banking group, shares up 13. 5 . Some making note of i think the journal will soon become the largest bank of all time in terms of market cap. Pushing 300 billion, not quite, 271, let call it billion dollar market val up down today. You can see 37 cents. Thats because what happened there is this is a Domestic Bank at a time the international bank, the rage, is no longer so hot. It a company that had far fewer fights with the Justice Department and that also has helped them. Their domestic model, john stump, has done more than anyone in the business. They said, look, we can own 30 of the Mortgage Market in the country, cross sell lots of customers. Why do we need to do this International Business . So you know, you hear them losing on fixed income currency and trading. Thats helped them immensely. Ge, our former parent company, shares of which are down 41 cents, perhaps or definitely appear facing competition for its deal from the combination of mitsubishi and siemens. The french government doesnt own a share, its essentially running the auction. Yeah. Always like the finance ministers the one that comments on it. I think the company that drops the bid goes highest. The idea that the french government is running the auction, what that says you have to employ more people in france. I think that before you do that youd like to fire everyone in france, but thats obviously out of the question. The definitive agreement, the largest shareholder, of course, 29 shareholders on their side. But theyve got win the french government over. They have to continue to work on than hoping for a counterbid, the friend. They got it. Instead of raising numbers, ge, unless we see new things you can do well with the hiring, you are cutting numbers. You cant go against these other European Companies hls you want to be diluted. Not good for shareholders. When you have a bid like pilgrims and tyson, notice how much tyson went down when they finally won. Especially because, right the other guy stayed at 55 and tyson went to 63. For a total also ran its amazing how often weve come back to hillshire. They were terminated agreement with pinnacle. Either got to agree to take 163 million in a breakup fee now or argue it can hold the vote which may come in a couple of months, basically blackstone which controls pinnacle may be trying to get more here to go away immediately because they have the right to drag this out for a while. Well see. Pinnacle checked out. Its difficult to see what will pinnacle do to pinnacle, by the way, birds eye, duncan heinz, its a slow grower boosting the dividend, doing the right thing but not meant to be at these prices without a deal. I think its a fine company, at the same time, its just another slow growing company. Right. You mentioned yahoo in the mad dash. It is by far one of worst performers, down over 5. 5 . This is on the new filing from alibaba, remember, of course . Yahoos significant owner will be a significant seller in the initial Public Offering to the tune of about 10 , we dont know it may come down. Primary shares being sole by alibaba as well. Expecting them to hit the road end of july for an offering taking place early august. If they can do it around the 8th of august, lucky numbers, 8, 8, for alibaba. The latest filing includes march quarter and that march quarter does show deceleration in Revenue Growth for the overall business. When you speak to people who know alibaba well, thats what you expect given how big our Fourth Quarter is. It it always draws Marketing Spending away from the next quarter and that is the case. Over all revenues for the fiscal year which ends with march quarter, dont mean to be confuturing, 52 . Not bad top line growth with those margins. A lot of people raising their what they thought growth forecast, behind the scenes for alibaba based on how j. D. , which had come public in the teens, at 27. If jd worked this well, i think alibabas going to work better. This is kind of a take your breath away moment, if you had been buying yahoo up while jds rise theres a lot of algorithmic craziness so thats a lock step. The speculators have said yahoo maybe doesnt have as much money. I continue to like yahoo for reasons that have to do with longerterm structural but people are critical of that meyer regime saying it hasnt shown results yet. Bob pisani on the floor. He okay. Actually, bob, before we get to you, were going to hq. Scott cohn has breaking news. David, the last ditch appeal to wipe out his Insider Trading conviction has failed, u. S. Supreme court denying rajaratnams appeal a short time ago. He is serving 11year prison sentence. This also really vindicates the u. S. Attorney and his crackdown on Insider Trading because the things that rajaratnam challenge the wiretap evidence used to convict him and the idea that the recipient of Insider Trading information has to know that it was obtained illegally. The Supreme Court denying without explanation the lastditch appeal. Hell continue to serve his 11year prison term. The key aereo case, Hampton Pearson is at the Supreme Court, well have that if it comes out. Thank you, lets get to the aforementioned bob pisani on the floor. More of what happens moving. Good morning. Gold and oil to the upside. Metals to upside. Markets on the weaker end, financials are down, some transports are down once again. Other than that everybodys talking about what you mentioned, the alibaba details being filled in. Whats most interesting about this, to me, people on the independents that are on there. Theres a ninemember board, four independents, and yang is not a surprise. Michael evans vice chairman of goldman and hes on the board. A consultant at Motorola Solutions is on the board. The first chief executive of hong kong, awe powerhouse board on the independent side. David mentioning disappointment on the Revenue Growth. I dont know, it seems like nitpicking at 3. 71 billion on net income, revenue up 4. 4 billion. Whats amazing, net margins 47 . Think about this, talking net margins 47 . Thats an absolutely incredible number and the rest of it seem look a lot of nitpicking to me. As david mentioned, yahoo is down on this. We did get transaction volumes for two of the main businesses, up 32 , the transaction volumes. You can see the reaction there in yahoo . By the way, speaking of ipos, the market is going to come, the big company that does market data and indices. A real powerhouse in the overall data and indexing business. Take a look at movers this morning here. Of course we did get that Covidien Medtronic deal. Covidien acquired by medtronic. 42 billion deal, see covidien up 26 . Medtronic up. A biotech company, bluebird, positive result forward gene therapy treatment. On the upside. Goodyear tires up 2. 5 , positive mention in barrons. The comment from michael heartnet, one of the big strategists at bank of America Merrill lynch, the case for summer meltup remains stronger than that for Summer Meltdown as the high liquidity low growth backdrop forces investor cash levels down. A lot of people wondering whether its going from here. I would note, the Federal Reserve meeting this week, its the first one with Stanley Fischer as vice chairman. Considered a moderate. The opinion is were going to stay on the liberal side, or the dovish side. Back to you. Thank you, bob pisani. Valeant, jim, continuing to go at it. Taking an interesting turn. Gotten nastier. A press released by allergan at 7 00 a. M. , continuing to take up the theme of coming at valeant stock price, questioning it, quoting people, many of whom weve heard from in the past, whether its hampton or jim chanos. At end of the press release theyve done something ive rarely seen, took emails they did not get permission to reprint but took emails from rob kindler, a guest this morning on cnbcs squawk box, you may have seen him many times on the air, vice chairman. To allergan ceo which hes pitching for the business, right . What goes on on wall street. Bankers are trying to get on one side or the other because big fees will accrue to you if you can have advice on ear side. Also want to put it in the leak tables, it important to print a big deal. But these rarely have i seen emails used against them. Why . Kindler got hired by valeant last week to help them in their continued pursuit of allergan. So they put these emails out and say, my takeaway, in one, he said not being aggressive enough in going after the vrx Business Model and currency. Another email, not from kindler, but to allergan cfo jeff edwards from another banker at mt. , port of what kindler is suggesting to allow him to use his significant relationships with media and analysts to provide a clear and detailed ar ticklation of why valeant is a house of cards. This happens all the time in a sense a banker trying to get hired morgan stanley, their analyst across the divide, but analyst does have an overweight on. That could be tricky for them to start questioning if they were if they had been hired by allergan, question valeant on their investment side of things. They have a overweight rating. But its ugly. Valeants getting killed here. The business of wall street and seeing some of it up front, you know, you dont want to see, and, b, are they going to burn down the village to save it . Valeant has become a stock you cant own. It goes down all the time. You know, david, a man well respected, a lot of comment whether is r d has generated returns. Its kind of easy to see, r d is the highest there and the growth is the highest there. That man, Michael Pearson question the r d spending by pharma. In this case, perhaps an outlier at allergan and r d spending productive. You can parse this different ways. Sure, most Companies Buy other companies to acquire their drugs but at the same time that r d budget helds develop them. Mercks not going to get credit if it comes to market to treat hep c. Shouldnt that be seen as an r d spend . I have regarded it as the greatest ophthalmological franchise other than what reagar regeneron has with macular degeneration. Theyve figured out uses of botox, does that not take r d or do they stick people all over the place and it turns out something works . No, its r d. Valeant has to figure out a way to turn around the stock price. Rick santelli in chicago. Rick . Good morning, david. Well we are looking at treasury yields fairly close unchanged. Depending what part of the curve youre looking at. Go to the longer end, down a basis point, open the chart up to may 1st. You can clearly see, the fed meeting thats coming up, or the one in the rear view mirror 2. 60 level very significant. Lets look at the relationships between securities and overseas. Look at whats going on on the yield curve, 5 versus 10s, todays new plflat under 90 fla. Tens to bunds, 125 basis points. This is a 15year, yes, 15, on the differential between the two rates. Take one of those legs, the bund, and compare to the guild. Carney and the uk central bank look to be raiding rates on a more aggressive time line than the u. S. Look at their security against bunds, its now 140 basis points of difference, thats a 17year wide. Why do i bring it up . That might reprice whats going on in europe and the developtive value to the tenyear gets affected. All three significant. Look at Foreign Exchange side. Euro versus the dollar, this chart goes back yeartodate. Not a lot of action going on here. But the 1. 35 is support, back to you. Thank you, rick santelli. Up next, stop trading with jim, squawk on the street will be right back. [ female announcer ] theres a gap out there. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Theyre the days to take care of betbusiness. E and care. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Its time for cramer and stop trading. No ones picking up on this and its surprising to me. Really for many years weave been saying, why are all Consumer Products companies saying in venezuela . Little piece in the ft today, venezuela looking to simplify Foreign Exchange system. That would be what these guys have wanted lets go over it. Colgate, 5 of sales venezuela. Avon 5 of sales, dont like avon because of other issues. Kimberlyclark, 2 of sales. Enterprising analyst would raise numbers 2016, that to would be done by 2015, its significant for numbers because we are all tired of hearing number cut venezuela. Strangest thing in these Earnings Press releases on the huge multinationals where you run into venezuela currency a reason for some sort of adjustment. This looks like the beginning of the end of chavez twotiered to u. S. Companies Foreign Exchange system. Youll be hearing about this over the next few days. First, obviously in this, which is great, youre first in a lot of stuff, but shows trying to break ground here. Colgate, proctor, kimberlyclark and clorox. I think you want to own those stocks. Coming up tonight . Were doing a little world cup situation. What companies we think around the world are going to do well. Im tempted to rip it up and talk about the wonderful Eaton Company in ireland but were not going to do that. By the way, congratulations to williams company, wnb shareholders the winners buying access midstream. Stock up 15 . The story of the morning, eye eyes on iraq, merger and acquisition activity. Williams one of the best performerser th performers, that stock up 18 . Yeah. I think we talked about it earlier. I got up at 4 00 to go over the deals and up until the minute we started i was overwhelmed and im still trying to get my arms around the deal. The level 3 deal so important. This is all thats a netflix drive deal. We didnt follow up on yelp. By the way, micron upgraded, old tech doing well. Remarkable time if it were not for iraq, well be going to alltime highs within a few weeks. Medtronic deal for covidien, one rich peterson at capital iq, the largest foreign acquisition at all time. Throwing a little bit of debt there but right there. Medtronic shares, also responding positively. Not like williams but the theme of the acquirer stock going up on obviously the potential accretion and the tax inversion. Right. Looking forward to mad money s if youre doing more on the home addresses, if you will, of so Many Companies that have all operations in in the states. St. Jude, its not at all consistent with what theyre doing. He has an office in dublin. Its a building. How nice. He did more than have a mail drop. St. Jude, if they want to get around that tax that was put in by obamacare, this is the way to do it. I know when st. Jude came on the show, they were upset about they were the ones hit by the tax. They didnt have the lobbying muscle in washington. Too Many Companies located in the same area, not enough senators. I think st. Jude has to do a deal. Jim, see you tomorrow. Were on it. Thanks, bud. Weve got Home Building sentiment coming up after this. Were moving our company to new york state. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Become the next business to discover the new new york. Could save you fifteen percent or more on car insurance. Mmmhmmm. Everybody knows that. Well, did you know that old macdonald was a really bad speller . Your word is. Cow. Cow. Cow. C. O. W. E. I. E. I. O. [buzzer] dangnabbit. Geico. Fifteen minutes could save you. Well, you know. Welcome back to squawk on the street. Breaking news on housing. Home Builder Sentiment jumps four points in june to 49 on the monthly index from the National Association of home builders. This, after barely moving since february. 50 is the line between positive and negative territory. The builders, however, cite strong headwinds including weak consumer confidence, limited availability of labor and tight supplies. Single Family Housing starts running about half of the Historical Rate given demand. Of the three index components, all posted gains but the largest in current sales which jumped six points to 54, crossing into the positive range. Component gauging sales expectations in the next six months rose three points to 59 and buyer traffic increased three points to 36. Weakest component of the index. Regionally, threemonth moving average, home Builder Sentiment strongest in the south and west weakest in the northeast. Midwest the only region to see a drop in building confidence. More of course online. Sarah . Thanks very much, diana. To iraq, tensions rising as sunni militants capture another city today. Cnbcs chief International Correspondent Michelle Carusocabrera is live for us in Northern Iraq with the latest. Michelle . Reporter sar ah, here in kurdistan, where i am in the northeast region of iraq, the situation is much calmer due to the fact they have a Stronger Army and a stronger government than the Central Government of baghdad. A big building boom going on here because this is a part of the iraq where they can drill for oil. While the vast majority of Oil Production is in the south, theres Oil Production slowly but surely coming online here. As a result, you can see new construction all over erbil, the capital of kurd distance. In a huge battle with baghdad. They want to pump their own oil and sell their own oil. Baghdad says they dont have the right to. Cur distance doesnt care. They have been ramping up production, more than 200,000 Barrels Per Day. Their goals are pretty grand. Hope to be pumping 500,000 Barrels Per Day by the end of the year, a Million Barrels by the end of next year, 2 Million Barrels by the end of 2019. Iraq wouldnt help them export their oil. The pipeline that runs to turkey was in official iraqi territory, so what did kurd distance do, built their own pipeline, capacity of 300,000 barrel per day. Before they were trucking oil to turkey. Now theyve been able to reduce the cost of shipping from 20 per barrel to only 10 per barrel. Now a lot of the Major Oil Companies have gotten licenses here, though they could face repercussions from baghdad. They also have operations in the south. But exxon mobil, total of france, explorations in kurdistan. Two companies, the ceo of genel, tony hayward, the ceo of bp during the gulf of mexico oil spill. Headquartered in norway. They, too, hope to be and are using the pipeline. The issue they face is once oil gets to turkey, once they load it up on tankers, because disputes with baghdad theyve not been able to sell two full tankers floating in the ocean now with more than 2 Million Barrels of oil. That just happened within the last three weeks, even before we saw this big insurgency start up. I spoke with the head of external the minister of external relations here in kurdistan. The fight with baghdad, they dont care what baghdad thinks. They want to control the economy, the energy, the security, why should we be part of a country when theres not when that country doesnt treat you equally . Reporter there have been suggestions for arbitration. Baghdad would get 83 of the revenue that comes from kurdistan selling oil, kurdistan would get 17 , the current structure under the constitution. Baghdad wants to stay in control of Oil Production and exports as well. The question is, the situation now so dire on the ground, with a Strong Military in kurdistan is it possible that the kurd government says to baghdad, well help you out but you have to make a deal when it comes to oil. They may find its priority number one when the white house gets involved. Thank you very much. Lets bring in the former director of the cia, jim woolsey, chairman of Woolsey Partners and chairman of defensive democraties. The picture from where michelle is dire. Its raised concerns from all sides. As we have the luxury of you on the program, id like to ask one of the burning questions that really still hangs in the air for many people, why for all of its resources do the pentagon and cia not see this coming . Why has isis been able to blindside both the Iraqi Government and the white house . Well, some have seen it coming. Some of the military intelligence people have been saying for many months that Something Like this was going to get started. But its a natural consequence of i think the weakness that the United States has shown, the u. S. Government, in syria especially. But also in withdrawing every last troop in 2011 from iraq. We didnt even do that in south korea. So the United States has look somewhere between hesitant and incompetent over the course of the last four, five years. And its beginning to show. Nobody worries about us anymore. Nobody is perturbed the United States might not be on their side. Terrorist r. Doing what they want to do engage in 17th centurylong fight of sunnis against shias. Would you agree with mitt romney, i guess from what youre saying, what he said yesterday the United States should have kept some forces in there, a, to teach maliki what democracy means orren clugs means in practice, and more importantly, better intelligence on the ground. And is the adjunct to that argument it is not possible to view with all of the resources that the pentagon and the cia has, not possible to get an accurate picture from outside the country or from flying drones over . We need to have some people not necessarily military troops over there keeping track of whats going on and perhaps helping with thing like drone strikes and the rest. But i think that its very late. We are in a situation that has largely been contrived by president obama in order to make sure he can say the United States is completely out of the middle east. In doing so, hes created a situation in both iraq and syria, i think, that is extremely dangerous and where we have very, very little leverage. Im asking you, with your technical knowledge, a very important question because even now it would appear that the president may have some air strike against the militia forces. That is on the table. At the same time we have war ships, one large Aircraft Carrier in the gulf, two other next to it. So my question again to you is, if youre outside the country, can you accurately determine where those forces are in order to launch air strikes that do their job and not inflame the situation . It depends whether talking about using airpower in an urban area or outside an urban area. Talking about using it out in the countryside, thats where the United States has a huge advantage and our accurate systems can do an effective job. In cities its much more difficult, much more difficult to avoid civilian casualties. Im not sure that even as good as our air force and navy, marines are with air power, im not sure that its an answer for dealing with terrorists operating in the cities, taking peel out and massacring them and the rest. Should the United States team up with iran or at least sit down with iran to discuss this, to fight the common enemy here . Well, iran is a huge problem, and part on the way of developing a Nuclear Weapon and negotiations were engaged in with them are not going to slow them down, if at all. Were likely to give up on some of our sanction. Remember occasionally you are to work with people you dont want to work with in order to defeat the hitler and japanese and we had to be a partner of Josef Stalins and a lot of people didnt want to but we needed him. I hope we dont need the iranians because i think they are craftier than s stchlt alin was. Jim woolsey. A big deal of the morning, medtronic agreeing to acquire irelandbased covidien about 43 billion in cash and stock the consideration. Medtronic shares up bit. Covidien shares up a lot. Meg . David, thats right. Seeing both Companies Rising today. People seem to like the deal. 93. 22 medtronic is paying for covidien 29 premium to covidiens friday closing share price. Medtronic will be able to reincorporate in ireland, take advantage of 12. 5 Corporate Tax rate there companies were stressing on a Conference Call this is not all about the taxes. Theyre saying the strategy to combine gives them products that dont overlap too much, really expands their capacity in emerging markets, ceo of covidien saying in a call today this deals one plus one equal five, saying that is how good the deal is for both sides. Now of course this continues a trend of consolidation weve seen in medical device companies. As the Affordable Care act has added a lot of pricing pressures on hospitals, the customers of the companies, they are starting to combine to get better negotiating leverage with customer. Analysts saying theyre expecting to see more deals in medical devices. This comes after we saw zimmer buy biomed. So theres a consolidation thats begun. Smith and nephew rumored as a takeover target. Analysts expect that to come back into the play. David . Thanks very much. Yeah, of course inversions continue of pace. A point you were making offair, with the tax inversions its not about the tax rate youre going to pay. Its the ability to move cash internationally cashfree, thats the bigger issue. Thats what medtronic is citing. Of course citing a low tax rate here in the u. S. Of 18 saying it not necessarily the tax arbitrage with the irish incorporation that will bring them a lower tax rate but a key in all of the deals the ability to freely move cash generating overseas back to the u. S. Without having to pay taxes is a key consideration, one of the reasons were seeing so many inversions. When one starts it forces a competitor in the same industry to consider the same thing otherwise they have an advantage in different areas it will be more difficult to compete. Health care m a is at a record. Large part because of the inversions. Talk more about. Bring in cnbc contributor here, barbara ryan, managing direct of fti consulting. A lot of talk about tax inversions and overseas cash, barbara. The company says it will be good for the United States. Medtronic, that is. Will it . Well i think you know weve seen as youve all discussed a lot of these deals taking place broadly in health care for the reasons that youve all mentioned. The need to be more competitive, obviously all of the companies are global and generating a lot of cash outside the United States. And there would be sort of a punishing penalty to bring that back into the United States and then as david mentioned, this obviously feeds on itself because then you have to do these types of deals just to maintain your competitiveness and cost to capital. I think that if you look at a lot of these transactions, lets say take paerrigo and alan, it has it does allow them a significant runway to turbo charge their growth outside the United States. And in so doing, as a Company Operating in the United States, theyre going to be much more successful and generating more tax revenue. So its not that these companies are going to leave their footprints in the u. S. But certainly as meg mentioned as well, in this particular deal, there is the opportunity to expand into emerging markets. Yeah. They also talk up the technology and innovation that theyre going to spend here in the United States. Talk about from your world if this gets regulatory approval, what kind of scope and scale this combined company would have in medical devices. You know, im not the worlds expert on medical devices and maybe meg has a better thought listening to the call in terms of what the r d would be, but i would expect that this is an opportunity for the company to reinvest in newinnovate. They talked about something that would drive consistent and sustainable highsingle digit Revenue Growth. Yeah. It also, as weve been talking about, follows a series of consolidations in medical devices and hospitals and Hospital Services driven by health care law, taxes, you name it. Whos next . Whos left out there for mergers and acquisitions . I think meg mentioned a bunch of them but were likely to see Companies Like mylan and perrigo to be inquisitive. A big transaction with valeant and allergan. I think the specialty pharmaed by has one thats consolidated and i dont think that pfizer astrazeneca is likely that the last chapter has been written on that one either. To be continued. Thanks for joining us on the deal. Barbara ryan, a managing director at fti consulting. David, youre focused on where the next deals going to come from. Interesting listening to barbara. I did want to point out, medtronic shares turned down. There is some question whether the accretion is going to be quite as much and as quick as perhaps had been hoped when it was read in the press release as opposed to discussed on the Conference Call. And i also wanted to note, our other big deal if ecan bring it it up, level 3, lvlt, that has turned sharply lower, not sure why at this point. One of the things typical in this robust environment for mergers and acquisitions the stock of acquiring company has gone up. That has dramatically moved lower at level 3, one of the bigger deal, the acquisition of Time Warner Telecom, wanted to note both. Questions about the deals. Up next, more on the technical issues at target that shut down some checkout line over the weekend. And adisle Supreme Court decisions could be issued today, among them the big decision on arrow, streaming local television online. It a biggie. Well bring it if and when it happens. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Looks like stock marks are starting the week on a high note. Its early. Let send it over to dominic chu. Elevated prices. Check out bluebird bio, the developer of gene therapies that aim to repair genetic defects. Treatment for a rare blood disorder, allow patients to go several months with between receiving blood transfusions, stock off its highs but up 39 in todays trade. Back over to you guys. Up next on the program, the chief Global Equity strategist of goldman will join us live for an exclusive interview. Where you should be putting your money around the world particularly outside the country. 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But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the United States, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. [ male announcer ] its one of the most Amazing Things we build and it doesnt even fly. We build it in classrooms and exhibit halls, mentoring tomorrows innovators. We build it raising roofs, preserving habitats and serving americas veterans. Every day, thousands of boeing volunteers help make their communities the best they can be. Building Something Better for all of us. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Take a look at health care sector. Its one of the best performing sectors in the s p 500 right now. Dom chu. Health care stocks are moving higher, and its all about the merger and acquisition type activity weve seen. Covidien the leading gainer in the s p 500 after agreeing to be bought by medtronic at 42. 9 billion in cash and stock. That comes to 93. 22 a share. Followed by four other medical devicemakers. Boston scientific, styker, st. Jude medical and intuitive surgical. Investors are looking for some other plays or consolidation in the medical device industry. Youre seeing a lot of the action today in health care. Clearly, tensions are high in iraq as equities feel the pressure around the world. And theres the imf this morning, in case youve not heard, lowering growth forecast for this country to 2 this year. Saying there are risks of significant swings in market flows and prices in the months ahead. Who better to address that, peter oppenheimer, chief Global Equity strategist of Goldman Sachs traveling from london. Good morning. Why are the equity markets resilient to what is happening in iraq . I think that directly the Economic Impact of what happens going on there is relatively modest and the oil supplies dont look to be majorly disruptive and the threat looks relatively low. Roll tivolt tilt has been falli some time. And i think growth forecasts are really in a narrow range. And that combination with very supportive policy, a lot of Forward Guidance is keeping volatility low and people focused on relatively moderate risks have economic shock. Does that lead to the imf point of bubbles. Its too level i to talk about bubbles. Are the valuations sound or exaggerated because of the slow meltup. I think that the valuations in aggregate are still okay. Clearly in equity space, it absolute terms valuations have moved up a long way. In most part of the world theyre below with averages. But theyre higher here in the u. S. With a backdrop its accommodative policy support. And zero Interest Rates in most places in real terms. I think its too early to be talking about a bubble. What do you think about gold right now which has received a bid on the geopolitical tensions . Do you recommend clients have gold in their portfolios or exposure potentially through gold stocks to hedge against these exonly nift shocks. The prospect of gold are tied to real Interest Rates and v volatility. The prospects outside the shoreterm focus on political tensions are particularly good. So i think that ultimately gold prices are likely to continue to trend downwards. Pack to equities, what you do, where should we go . Where will you get the most upside this year or the next year . Do you follow the Central Banks . Is japan a better bet than europe . There. I think japan and europe, both together, look the most attract everybody regions globally. More than the u. S. . More than the u. S. Japan the strongest Profit Growth and after a period of weaken, economically and in the market, youre likely to see a further rise in earnings revisions and more policy support as welcoming through in the second half of the year. Valuations are attractive. How much cheaper are european stocks than american stocks right now . Well if you look at it in simple metrics, p e, for example most of the broad european markets around 14 times, 14. 5, 1 1. 5 p e in the u. S. , thats not unusual. The key point is difference in earning cycle. U. S. Profits at an alltime high, margins at an alltime high. More sick cali depressed than europe. If you google european etfs you can immediately see the instruments in which to play this. I see the ishares italy index up 15 , spanish index up 12. Where should people go as you break it down . Specifically, these peripheral markets have enjoyed a huge boost, firstly from a sharp narrowing of sovereign spreads from high levels a year ago. And of course, youve seen modest recovery from the recessions in the countries. Sure. From these levels i think its going to broaden out. The overall european indices up more than the s p yeartodate. We think from a country perspective, germany, looks more attractive, its very cheap on a multiple basis, more geared into an economic recovery. Janet yellen has another major decision and conference this week. Do you expect any surprise from the Federal Reserve, commentary on overseas, geopolitical risks and growth . I think the outlook that they talk about will probably remain broadly unchanged. I think theyll continue to be relatively dovish in terms of outlook but not looking for any any major surprises. Youre seeing generally that kind of outlook reinforced by Central Banks across the world, and a similar thing in the euro area. Dots will get higher where they thing Interest Rates might go and that could spook people. Could be a de facto tightening, what people will be talking about and questioning her and the new forecast. Thats right. The broader tenant of what people will be saying theres plenty of slack in the economy, outlook is big, inflation risks are relatively low. The market has broad forward slightly expectation of when Interest Rates will start to rise. The peak lel of Interest Rates likely to be lower than previous cycles and thats the crucial thing. So circle back to europe, suggesting people bought german equities you felt the euro would fall. The euros perched around 1. 35 close to the february low. Everybodys watching this level to see if there is a major break. Do you have to have a major break on the euro to buy german equities or would you go in anyway . No, i dont think its dependent purely on that factor. It would be helpful if the euro came down. Remember, the ecbs package we heard a week ago is broad based, not focused purely on the euro but credit easing across europe and that will be helpful. Its also important to recognize germany a global index, its a big beneficiary of a pick up in global growth, particularly dmled growth operationally levered into a potential recovery. From the evaluations its quite an attractive way to gain access of that improving economic outlook. Enjoy your trip here. Peter oppenheimer from Goldman Sachs. As tensions in iraq rise, well be joined by ed roits, chairman of the House Foreign Affairs committee. Hear what he has to say about the possibility of drones and working with iran as options to solve the worsening conflict in iraq. I spent my entire childhood seeing the world in reverse, and i loved every minute of it. But then you grow up and theres no going back. But its okay, its just a new kind of adventure. And really, who wants to look backwards when you can look forward . Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Knew welcome back to squawk on the street. Christine lagarde getting done with a press conference. Want to bring you some of what she said. Imf making waves with the report on the u. S. Calling for a rise in the minimum wage and warning of marketed risks from low fed fund raider rates and too much certainty over fed policy. Lagarde was just asked whether the recent rate hike by england means the United States has to follow suit. The Market Assessment is generally that once tapering will have been completed to the point where they will no longer be purchases, then tightening might, in short order, take place. We are not that certain about the short order. So suggesting that maybe rates can remain at zero beyond mid2015. Lagarde giving more details about the imfs call for raising the minimum wage in the u. S. Talking about significant numbers, you know, when you have 50 Million People living below poverty level, many who are working people, not people just not doing anything, thats why we are recommending it it. Now, as to give you a number, is it 10. 10 . This is something that needs to decided by legislator tos, clearly. In the report, the socalled article iv consultation with the United States, which is done annually, the imf wonders significant swings in marks due too much certainty in Monetary Policy. Market preds reflect too much uncertainty. Now looking for 2 in 2014, down 0. 8 Percentage Points. 2015 looking at 3 . Again, pushing ahead that higher than expected growth. I find it interesting, that report is out two day before janet yellen has to make this decision and the Federal Reserve is out with its decision on Interest Rates. Weighing in heavily on Monetary Policy, yes, imf weighs if on all economic policies but its interesting, in light of the ecb comments and how draghi followed through. I think thats accurate especially because the uk is going one way, ecb seem to be go further down the road of pushing down rates. United states in the middle now and layer in japan. Lagarde was not asked to put all four major essential banks into some context but you do right there, and its the United States in a difficult place and this report coming two days before the u. S. Fed about to decide. A lack of coordination. Steve liesman, good to see you. The latest in iraq. Islamic militants capturing a Northern Iraqi town striking another blow to the shiiteled government. Militants claimed to have carried out a mass execution of iraqi soldiers. Here on set to share his insights how the u. S. Should be responding, congressman ed royce, republican from california, and chairman of the Foreign Affairs committee. Thanks for joining us. Good morning. Drones, you would like to see targeted drone attacks in iraq . This has been a request now that the Iraqi Government has been making because you have these columns of this al qaeda offshoot, you know, waving the black flag of al qaeda, moving across town by town, picking up more and more wealth. They hit the central bank, took 450 million when they took mosul. This makes it the richest terrorist organization in the world. Clearly if we had responded to and given the air power through drone strikes, this would have helped check this advance on the ground. Drone strikes, what about boots on the ground . I dont think anyone wants to see boots on the ground. But thats not whats required here. What is lacking on the part of the iraqi forces is air support and that can be given by drone strikes or tomahawks, frankly its been four months now since they were encamped in western iraq and since they began their long march, city by city. So this is whats baffling, why dont we hit them. The president has said, hes reviewing all options presumably including this one. Right. What is the likelihood na the u. S. Takes this action with air strike. Ive talked to the Vice President , National Security adviser for some weeks now, this has been in abeyance we dont are a lot of time here. As the situation becomes more dire on the ground, it also brings in iran into the equation. Right. So it would behoove us to move to have moved quickly, and we should move now in order to give that air support. Promising the nation surgical strikes which youve done through history and theyve proved not to be that surgical. Weve heard from the former director of the cia jim woolsey a half hour ago, he was explaining how technically its difficult, depending where forces are, to strike without massive damage. Are you prepared to enflien fli massive Collateral Damage . Think about it, when youve got an army encamped as they were or columns on the road, it is possible to hit those columns. But now moving through towns, you said it yourself. Yes, now that weve waited four months it become more difficult. But the fact is that if we wanted to stiffen the backbone of the iraqi forces, theyre a more secular force, they behave like other armies do when they face al qaeda. They tend to run away. They need some kind of air support. The easiest way to do it is with drones. Theres other options, tomahawks and so forth as ive said. At the end of the day, the longer you wait, the more equipment they get, the more money they loot, the larger the force. On the ground, what would we be leaving . The current government, its hugely separatist. Right. It is going to be a trap, it has been before. Youve got to keep your eye on the main problem, the main problems al qaeda. The main problems, a guy who said when he was let out of prison to american forces, he said, ill seal you guys in the future in new york. You know, this is a fellow who has now massacred maybe 1700 people, youve got daytime crucifix going on, mass atrocities. Radical islam, its in north africa, too look whats going on in kenya today or whether its i mean, so many countries were fighting the battle on a lot of fronts it would seem. In the case of iraq, we would be doing it with a government we dont really support that has not been inclusive in any way and created this problem that its facing on its own. Youve got to admit, the longer we wait in terms of taking decisive action, the more assets they get under their control, the mar casualties they inflict and ignite the sectarian violence. If we moved decisively quickly, we could have provide the support. I understand what the gop has to do it has to show obama is asleep at the wheel because thats powerful than benghazi. At the same time i dont agree with you. Lets disagree. The point i was going to make, there may be no appetite in this country for further conflict or being drawn in any way, the blood and treasure is over, theres no more to give away now. Simon, seriously, talking about an al qaeda affiliate here. You cant wait until this individual establishes a kalla fate. Hes going to cart get the u. S. , jordan and other countries in the region. It makes no sense not to use drones to knock this guy back. S this country going have to be permanent state of on off war . Does it go on forever . I will tell you that as lon as al qaeda is out there, somebody had better be minding the business of keeping them in check because if you dont, you end up with another 9 11. That is the reality of the situation we face. Thanks for the warning. Good to see you, congressman here in new york. Congressman ed royce joining us at post nine. Dom chu, up six point on the dow for a market flash. Dream works, the stocks moving lower as its latest an mission flick how to train your dragon part 2 didnt knock the socks offen investors. Some estimates higher in terms of the weekend take. Stock up 25 over the last month in perhaps anticipation but now investors taking money off the table. Back over to you guys. Thank you. Next on the program, starbucks offering workers free College Tuition. Well take you live to an event in new york as ceo howard shut talks about the new online initiative. Plus, target under fire again for another glitch. This time it with its cash registers. More on that when squawk on the street comes back. Chocolate is very individual. White chocolate lovers dont like dark chocolate. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow the consumer to customize their preferred chocolate. We needed the scalable Cloud Solution allowing them to see all 800 products and select what they are looking for. Now there is endless opportunity to indulge. [ male announcer ] the mercedeis here. Ummer event now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. But you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end soon. Share your summer moments in your mercedesbenz with us. Theyre the days to take care of business. 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Target doesnt have any details at this time on the total number of stores that were impacted or the cause other than to say it was not securityrelated. Target says teams worked with guests on a store by store base basis to provide supports and isolated to in store and not online. But, shoppers took to social media to express their frustration. This picture from twitter user taylor gowen, long lines, keep shopping with you and your commuters keep crashing, failing. Target checkout lines just shutdown. Super thrilling experience right now. And sugar mames says i left the target line, put my items back, drove to walmart, bought the same items and saved time. Target said, earlier this evening we experienced a glitch that impacted speed of checkout at some u. S. Stores. Weve been able to restore our checkout process. We sincerely appaologize to anye inconvenienceded by the issue they tested the system here in new jersey, everything appear to be working normally. This location, however, always closed on sunday. So its unclear whether it would have been one of the stores impacted by outage. They cant catch a break. Thank you. Looking now at a webcast of Howard Schultz ceo of starbucks making an announcement about the companys new College Tuition initiative. Thats not howard shut schultz, i su spec the head of the Arizona State university. Jane . Hi, yes, that is schultz should be taking the stage shortly, supporting our partners ambitions the best investment star bucks can make. Looking back at webcast, where you are, near in new york city, the deal starbucks offering highlights high cost of and increasing popularity of online degrees. Starbucks has had a smaller Reimbursement Program that gave back 1,000 a year. This one could cost significantly more as asu estimates 15,000 to 20,000 starbucks employees could be reimbursed in the new program, strictly online and double asus current Online Student body of 11,000. Look at the graphic. Upper classmen, juniors and seniors who work 20 hours a week will get full reimbursement for course work towards a bachelor degree. Not a class here and a class there. Underclassmen get partial financial aid. There will be coaches, counselors and academic advisers to help employees through the system and no commitment to stay at starbucks after graduation. Employees can also be working at a starbucks, et cetera. If they try to do this, they have to qualify to get into asu where the average gpa of incoming freshmen is just shy of 3. 5 with an s. A. T. Score of 1129. U. S. News world report says there are about 1,000 an line degree programs. We like to call this disruptive. Asu ranks number nine on that. Guys, we had an intern here who did her whole degree at penn state online. Never set foot on the campus. We talk about disruptive. This is one of those disruptive things. Back to you. Yeah. And you have to wonder whether other corporations will follow. Thank you very much, jane wells, good to see you. Still ahead, sandisk buying fusion io today for more than 1 billion. The president and ceo of sandisk will be joining squawk alley live. You wont want to miss that. Were back after a quick break. [ female announcer ] theres a gap out there. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Lets close the gap between people and care. Are the largest targets in the world, for every hacker, crook and nuisance in the world. But systems policed by hps Cyber Security team are constantly monitored for threats. Outside and in. Thats why hp reports and helps neutralize more intrusions than anyone. In the world. If hp Security Solutions can help keep the Worlds Largest organizations safe, they can keep yours safe, too. Make it matter. With the top speedou compare of comcast the top speed of business dsl from the internet. Phone company well, theres really no comparison. Why pay more for less . Call today for a low price on speeds up to 150mbps. And find out more about our twoyear price guarantee. Comcast business. Built for business. Welcome back to squawk on the street. Id like to welcome my monday guest, peter bookvar, thanks for taking the time this monday, peter. Always great being here, rick. All right. We had our first june industrial number in the form of empire. Should we really concern ourselves whether its good or bad with these regional data points . I mean, i dont know, when i think of manufacturing, i dont necessarily think of the gotham city, but yet embedded in this number were some pretty decent data points, were they not . Yeah, it held at the same level for a couple years. Were certainly seeing the spring rebound and a better economy in q2 relative to q1. But the new york number doesnt necessarily correlate well with other regional surveys. And the 64,000 question for the markets is not what happens in q2 gdp, its what happens in the second half of 2014. Yes, thats where were definitely going to watch, Interest Rates and see how they respond because i think what youre hinting at is no what happens in the first, the second isnt going to look good. Lets talk tick data. On the surface it looked like the china was a seller of 8. 9 billion, but that isnt really the story, is it . Yeah, they let in an enormous amount of bills mature. Their total holding declined. Thats been in a steady decline over the past bunch of months, and japan is getting closer to being number two. So thats obviously noteworthy from a Bigger Picture standpoint in terms of the u. S. Dollar and longerterm Interest Rates. All right. Now, the big news last week was mr. Carney supposedly threw the world in a tizzy with the notion that gee, normalizing Interest Rates is going to happen sooner rather than later. And the markets seem to be dealing with it okay. Is this really going to be a cakewalk . Are we forgetting about Balance Sheets and the fact that most assets have priced off of cheap capital now for close to i ahalf a dozen years . Right. Its very easy for essential bank to say were going to normalize things. It sounds nice. When you have asset prices in an economy thats based on abnormal Interest Rates, thats not an easy transition to make. Just look at the twoyear gilt yield. Anybody long that obviously is not having a good couple of days. I think the market is way too nonsha launchalant with the ban england and also the fed. Its going to be a lot more disruptive and messy than investors think. When i look at the spreads between u. S. And boons, i get one picture. But an even more aggressive picture is between boons and gilts. So the uk and europe, your final comment, thats the 17year, what conclusions can i draw from that . Right. We know the ecb is on a completely different path than the bank of england. The ecb is obviously one step just below printing money to try to generate growth in their economy while the bank of england is more in line with us and that they know the time is up for this easy money policy. And its time to normalize. Even though normal is not going to be necessarily what the old normal was with respect to Interest Rates. We know theyre going to be lower for a lot longer than anybody would think. Thanks, peter. Thanks for taking the time. Simon hobbs, back to you. And so to janet yellen later in the week. Lets send it over to Kayla Tausche for a look at whats coming occupy squawk alley. Hey, simon. Sandisk is in a billiondollar deal. Well talk to the ceo why that deal makes sense. Also the latest details on a alibaba. And finally apple. 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