Transcripts For CNBC Squawk On The Street 20140718

Like indonesia closed higher. Road map goes like this, israel continues the ground offense with potential for significant operations. U. S. Officials concluded malaysia air flight shot down by Eastern Ukraine, by by whom is yet to be determine. Biggest oneday loss for the s p in three months. Stocks are trying to digest earnings from ge, google, and ibm as well as a 54 billion deal between abbvie and shire. A lot of news this morning. Israel continuing its ground offensive in gaza to stop rockets from militants. Benjamin netanyahu considering the pomt of widening the operation significantly in his words. We have a lot on the plate today, back at hq, hi, michelle. Reporter that annoyancement 1 a key issue this morning raising the level of uncertainty about the outcome of the situation in gaza. The Israeli Defense forces confirms to nbc news the ibf struck around 120 targets in the gaza strip since midnight. This is video released from last night. Idf says among them the targets are nine tunnels and 15 rocket launchers. Reports a 23 palestinians dead, pointing to health sources, and israel says one soldier is dead. This is video last night as events unfolded, late in the session in the u. S. Stock session when this began. Thats when we saw the second down for the u. S. Markets and particularly a sharp decline, further decline in the yields of the treasury, u. S. 1046 year, that we continue to see this morning. Israeli Defense Forces also releasing video they say shows hamas coming out of a tunnel which the israelis say was about to be attacked. There you can see, were going to see any moment now. This is the opening of the tunnel, and then the militanted attacked by rocket fire as you see. According to the ambassador to the United States, 24 is one of the catalysts why the invasions began last night. Now, to your point, carl, israels Prime Minister ordered the military to prepare for significant expansion of the ground operation gwen gaza militants. Benjamin netanyahu saying the military is instructed to deliver a blow to the hamas network which it could not do only from the air. Even though well make the most surgical attacks, surgical attacks possible, sometimes we get it wrong, and sometimes theres a mistake, and we regret the loss of any civilian lives. I have no doubt hamas was celebrating when the children were killed no. One in israel was celebrating. Thats the ambassador of israel. What he referred to in the last part of the bite is the situation that occurred in gaza where four were killed on a beach in a rocket strike, and the use of, perhaps, the situation as part of the larger pr war thats constantly the situation between the hamas militants and the Israeli Government. Carl, back to you. Thank you, well watch that and come back to you many times today at hq. Meantime, u. S. Intelligence Officials Say a malaysia jet carrying almost 300 people, as you probably know, crashed in Eastern Ukraine after being struck by a surface to air missile. Yet to be determined who fired at the plane. Russia and ukraine point fingers al at each other over the accident, and that crash site, by the way, 10 miles wide, separatists claiming to have some of the black boxes. One reason, though, for futures today, some argue, unclear how different u. S. Interests are today than wednesday, and the possibility that maybe no one has any interest in widening the conflict. Well have more on that. It is so serious. Actually, they wont escalate at this stage. Its in everybodys interest to pause, and that, in many sense, what you see in the briefings coming from the white house. Speaking of which, the president talked to the malaysia Prime Minister yesterday, but continued with his agenda talking infrastructure, political events in new york city last night. Were on the lookout if he has anything new on the schedule today to address this, david. Well look to others who report on this stuff regularly to inform us. I think if youre a participant in the market place yesterday, you are dealing with earnings, and then along come the political shocks, not that we have not been dealing with them prior, but gaza, the flight shot down, you suddenly have to move to the geopolitical if youre an asset manager and earnings become less relevant, at least for some period of time as you work through these things. The vix went up 30 . But a defining characteristic of the markets over the last six months to a year is incen insensitivity to geopolitical events. True. You can argue because it does not affect Corporate America earnings, what you see in stock markets, because you already drove the yield so far down with what the Central Banks have done, and in many senses, disrupted the function. Theres no flight to quality left. In europe, for example, they are at record alltime lows. Uncertainty, markets never like it, and there are questions left. Lets look, though, at u. S. Futures right now, because as carl mentioned, we are seeing a little bit of a rebound coming off the worst day in three months following the Malaysia Airline jet crash and the Israeli Ground invasion in gaza. Post nine, chief u. S. Equity strategist with citi. Tobias, talking about the concern in the market, any Economic Impact or impact on corporate earnings . Do you see that at this time . Not really. I think, you know, you guys are talking about how there seems to be a desire to diffuse whats going on in ukraine and cry mia, but important importantly, think of it from the middle east perspective, dealing with libya, syria, iraq, and now its moved into the Israeli Defensive actions in gaza. In that context, if it widens out, that is what you have to worry about, they are trying to keep isis out. You dont see the Egyptian Government condemning actions, but not opening up any crossings for palestinians to come from gaza into egypt either. It is not escalating beyond that. S headlines scary, but i question russia, the 8 th largest economy in fact world, considered the Fastest Growing emerging market, and stocks down for a fifth day, sanctions only ramping up there, looking increasingly like putin is under pressure there. That has to be a concern for broader markets and multinationals. From a u. S. Market perspective. In other words, how much business are American Companies doing in russia against how much business they expect to do in china, for instance . Theyll watch china much more carefully. Two years, for example, the Chinese Markets and american markets went in two directions. You asue m russian economy do not implode, and the new sanctions you got from the United States government say those corporations cannot borrow in dollar terms anywhere in the world. The europeans may follow through on that, but the situation is now more serious. At some point, there has to be a risk one will blow up, surely. Always a risk the economy will blow up and assuming the e. U. Will take actions when they are fairly dependent on natural gas. 30 of the gas comes from russia. The biggest sticking point, they want an e. U. Buyin, but not in an environment you deal with the need of the gas. Technicians looking at the streak of 1 move in the s p, 62 days we made it. History suggests when the day comes that you break that streak and its bearish, its a lot worse than if you had broken it bullish. Is that true . Yes. I mean, when markets are going down and get this incredible volatility, they go down rapidly. Whats interesting is we look at the shape of the yield curve for an indicator in the markets, and its not happened right now, and it could be because of suppression from the central bank, easing policies, but irrespective of that, even a low vix, everyone looking at the vix, oh, its under 15, between 10 and 15 on the vix, 88 of the time the market is up 12 months later. You dont want to be 25 to 30, thats when you lose money. Even people look at, oh, theres complacencies, horrible, horrible, do the statistics, what do the markets do, not what you want them to do, and thats what we spend a lot of time doing. Im von kiconvinced. I joke around. Im married 30 years, have three kids, evidence nobody listens to me. I dont opine that often. We had Goldman Sachs yesterday talking about raising the near term estimates, but kept estimates for two and a half years down the line where they were. To cut a long story short, talking about a gain in the equity market of only 1 1 to 12 over two and a half years. Does that seem right to you . Is that polssible . I dont have a forecast for two years, only david has that foresight. Markets go up with earnings historically. If you believe earnings grow 5, 6, 7 a year, thats the return to expect for markets. We give him a hard time on cap expectations. Citi did work on this, is it happening or not . We did a lot of work. We track over 700 companies, doing this for three years. In december, the 7 00 Companies Tell Us that Capital Spending is up 1. 5 in 2014. In march, up 5 . Now they are up 7 . They are accelerating the programs. Just think about what ceos are doing right now. They are willing to hire because of the jobs numbers, maybe not fulltime employees, but that could be obamacare. We dont know. They are willing to spend more, and you see m a activity. The confidence is building. Those are still expectations, right . Still waiting to sign a check. Okay. Now ill go another way with you guys on this. Again, im a data houpd, thats what i focus on. 2011 was a record year for Capital Spending for the s p 500 companies. 2012 was another record year. 2013 was another record year. Oh, by the way, buy back record year . 2007. This perception that all the money a terrible time to buy stocks. Can i catch up . How do you define Capital Expenditure . Stock buy backs . No, thats Capital Spending. Thin this country . Total number also or percentage doing it as a percentage of revenue and earnings, still at alltime highs . Two ways. Total Capital Spending anywhere in the world. Including m a . No, no. Okay. Capital spending anywhere in the world, build a plant in vietnam, doesnt show up in our gdp, but companies spent the money. Davids question, Capital Spending is a percent of assets, for example, but some is efficiencies. If i build a facility in a place 30 than building in the u. S. , i get the same dollar value of output more efficiently. Thats not a bad thing if companies are efficient, using technology in ways giving them incremental efficiencies to profit. They say its not kept up with overall growth in profits. I tend to agree with that, stretching life cycles on things. You know me from the old days as an analyst, so you can take a rail car, a box on wheels basically, and run it until it literally falls a part. You dont have to change it every ten years. I dont know the average age, but probably north of 17 or 18 years at this point. As long as it carries freight, its fine, on the other hand, dealing with technology, constant change in technology with, again, incremental efficiencies, we see that thing turning over. That we track. We watch it on fouryear life cycles, seeing apple spending picking up to replacing thinking long term, the geopolitical events, scary headlines are not changing the view . Not yet. If they get wider, they well watch im watching, for example, with the middle east conference, watching the dollar, watching whats hatching not just in the telaviv exchange, but the palestinian stock exchange. They have not move. They trade see gold up, treasuries up, the yen up. A little safety going on. We have not seen a hundred dollar move in gold, but a 15 move in gold. People are not panicking because its not gotten wider. Thank you for joining us here at post nine. Thank you. Chief economic strategist at citi group. We have earnings from ge, google, ibm last night, and, of course, abbvies big multibillion dollar deal. Did you see global m a . 2 trillion now. Oh, yeah. Were going gang busters. You know, these kinds of ge geopolitical threats end quickly, but wow. Word that the ntsb and fbi will, in fact, send investigators to the ukraine to assist in the investigation of mh17. More squawk on the street from post nine in a moment. Kid hey dad, who was that man . Dad hes our broker. He helps looks after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at Charles Schwab at every ford dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. General electric recordings earnings at 39 cents, in line with estimates, revenue short of consensus, but revenue beat expectations, services orders up 14, backlog up 10, but probably the big news of the morning, david, kicking off the road show for that ipo of the north american Retail Finance division. Slowly but surely. A lot of things have changed, and we know our own experience as a company divested from ge, but, yes, they have slimmed down. Finance has been a key focus as you well know, carl, in terms of taking that Balance Sheet down. Thats one part of the battle, but a vibrant finance business at ge. Yes. Raising 3 billion, road show begins today with the filing, keeping the stake at 17 billion, but jet engines, the farm bureau air show, 36 billion worth of orders for ge. The face of the companys changing. Sure. That continues to be the impression analysts have on the company, can they shift and steer it to an industrial base, which hes doing, and get rid of the appliances and Media Company without sacrificing revenue growth, and so far, investors are happy what they see today. I disagree. Theres a 10 under performance relative ibm earned 32, beating estimates, revenue above consensus, down for a ninth consecutive quarter. Google reporting a 22 jump in revenue, overshadows the earnings miss. Company announces a chief Business Officer leaving to become vice chairman of soft bank who oversaw operations. Ibms story interesting. The share count, david, blow a billion, 2 billion in 1995, and although clouds booming, hardware continues to be a challenge. You know, some would say as they continue to try to change this company, its difficult to change three tires on the automobile while its going 60 miles per hour. Thats what youre dealing with. A beat, but some say a low quality beat, miss the bid on the estimate, but moving aggressively in the areas outlined many times in the annual report and the interview weve done. The bigger part is the partnership with apple that took place announced earlier this week, you know, cloud, mobile, security, thats what you keep hearing from ibm, and, yes, heard it at delivering alpha who shorted the stock, that is the constant criticism, yes, shrunk the cap base and thats not through ogranic growth. Or investing in your business, one of the gripes. Although, let it be fair, they have invested a lot. Cap x, they could have done more, the overall table, they are not insixty sums. You know, 3 billion the other day, john kelly was here in terms of research, so they are putting min in, but, yes, theres no doubt theres criticism that is levels of the company in terms of constant buybacks that are engineering to use the word that bottom line number. Well get to google after the bell, im sure. A lot of news for investors to digest today. Art cashin helping us in a moment, and futures, again, mildly positive. A lot more squawk on the street from the nyse straight ahead. Some say 35 of drivers are considering switching from traditional gas guzzlers. The customer cannot automatically use when the battery runs out of charge, the customer has to contact the control center, and they fuel the last ten kilometers. Its the worlds first family car on solar energy, a car that provides energy instead of just using it. We saw electric vehicles coming up, practical, but have a limited range, and on the other hand, we saw solar cars with a huge range, but not practical. You see it as a normal electric car. Highlights from industrial revolutions. How do you know which ones to follow . The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. [ tires screech ] 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 july 31st. Share your summer moments in your mercedesbenz with us. Just about six minutes before the bell on this friday, bringing in art cashin, director of floor operations of ubs joining us, and things got spicy at the close yesterday. 4 00, not a minute too soon. We had enough geopolitical surprises, and them with about six minutes to go, word came that there was a lockdown at the white house. No details, but that got a nervous market more nervous so we closed in a limp fashion. Whats your take on europe and our setup . I think europe is waiting to find out a couple critical things. Assumption right now is that the missile may have. Fi been fired by the prorussian ukrainian rebels. Where did they get the missile . If from putin, that puts pressure on the rest of the world to increase sanctions, and as eluded to earlier, not only that the eighth largest economy, russia happens to be the Third Largest trading partner for all the e. U. If sanctions are onerous there, it has implications for the European Union. If, on the other hand, they captured the missiles from the ewe cre ukrainians, that lessens the pressure. Good to get the scenarios from you, art. In terms of the Market Reaction yesterday, it was a brutal day. How much technical damage did we do . Some. The s p, if it stayed above 19 59, 1961, in that area, but it broke through. They are going to have to begin to repair. I think we can do things one step at a time, and now has count credible resistance at 1990. Volume today and more today thanks to expiration. Option expiration day, looking for an increase in volume, and that will kind of limit both the Opening Movement and the closing movements. Well see where we go from there. Long day ahead, art, thank you. Opening bell is just a few minutes away. [ bell ringing, applause ] five tech stocks with more than a 10 . Change in aftermarket trading. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your trading floor. Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Youre watching cnbcs squawk on the street, opening bell in 630 seconds, and will be interesting after breaking the 62day long streak, the s p without a 1 move, broke below the 20day moving average, highest s p volume since may 15th, and, of course, i dont need to tell you what vix and gold did yesterday. Interesting gold is down almost ten bucks, giving back pressure built in. Gold jumped yesterday, 10year treasury ye below 250, flight to quality trades. Vix at its highest. A lot of the excitement in here. Day two of the investigation, abbvieshire we have not mentioned yet, huge 54 billion deal, and earnings from ge, google, ibm you name it. Theres the opening bell, the look at the s p at the top of the screen, and it Service Provider based in argentina celebrating today. Over at the nasdaq, an Enterprise Software company celebrating its ipo. The excitement i was referencing are the glow sticks for the ipo. They are out in force. Right out of the gate, lets check in on google, mentioned earnings before the bell, 608, a miss, estimate 624, but revenue, again, up more than 20 . In this case 22 , paid clicked up 25, roughly what they did in q1, and david, cost per click down, but not as. Investers like it despite the miss. Cost for click comes down as you move traffic to mobile devices, not monetizing at the same rate as you can on desk top, but responding positively to it as you said. The revenue number okay, not bad, added 2200 employees, drawing in enormous amounts of cash which they put in a lot of areas. Oh, yeah. As we well know. As we know from market response, carl, more or less positive response. Interesting move on the gentleman on the call. Vice chairman going to run internet and media, bunch of analysts not worried. A lead business guy will step into the role, but hard to walk from a company like that, especially if youre a lifer. What does he say about the conditions . Surely that is thats a good point. We know that he has a 300year plan with grand ambitions, main one trying to get a deal done, but, yes, moved operations of sprint to the Northern California area, and this is definitely speaking to that, i think. Yeah. Googles the sec best performer on the s p behind Huntington Bank shares. A big loser today is amd. Two cents misses by a penny and forecast a miss as well. Stocks down 17 in the premarket as they clearly cant keep pace with intel. A big concern, Current Quarter is a peak in game consuls. Watch that space. The note today titled inconsistency is the only constant, 19 at the open. That was a sharp fall. Perhaps recalibrations. They are looking up for intel, but not too much for its rival. The argentina is noisy, arent they . I dont know how much gets in the microphone, but it is active. What do they think, its a soccer match . A futbol match . Terribly. Messy. Honey well topping 10 billion, raising the low end of the full year forecast on better ogranic growth, better margin caption, automation and controls up ten, transportation up eight. If jim were here, david, hed say nice things. About his neighbor. About his neighbor. David cody . He would. It is in some contrast, at least to ge, down slightly this morning on the quarter, although those parts of the business were good as we know in terms of industrials as well, but honeywell has been a great performer. And theres the bell at post eight. Yeah. Maybe its maybe its true canyon, another ipo launching today, an initial 10 gain at the open. Watch that as well. Vf corp. Beat by a penny, timberland, another cramer stock, up 19, northface up 11 as the Action Sports business and Outdoor Sports do okay. Stocks not responding to that news. Have not mentioned hbq. No, have not mentioned the change there. Earlier this week, mentioned the sad news, of course, about ralph whitworth, wish him the best resigning due to health concerns. No longer splitting the job. Whitman takes over as the chairman and ceo and add clooinfeld to the board of directors, fairly strong director person of the ceo as we know of alcoa, but hp shares up a half percent this morning. A good year for them. Look at that, up over 23 . Of all the boards in Corporate America, this one gets the most focus, no stranger to criticisms, scandals, issues, so i wondered what you thought about the takeover them giving her the reigns. They had, for many years, impressive directors, but plagued, as we know by technology. When its the scandals or ones prior to that with the snooping on the board. I mean, theres been acquisitions. Under meg whitman and whitworth, no such issues. Mention Board Changes at apple as well, exiting blackrock, looking to increase diversity on the board as well. Whats fascinating for a woman when is fairly wealthy, the enumeration you get on apple, 50 thoir 50,000 and stock award of 1 150,000. Do that from the prestige or love of it. Tim cook stressed the fact her background and intense was on m a. Thats what i was going to say. Thats potentially very interesting as everyone looks to apple, just hit the biggest acquisition yet with beats. The speculation mill is up. Google making big acquisitions. Wonder whats next . Good feel for Financial Markets and good contacts in Financial Markets in the wake of the icahn friction an the rest of it. Sure. Big week for murdoch who finally tweets again having not tweeted since july 8 th saying, sorry, im busy lately with many preoccupations. Relaxing at last, few hours in the aussie bush, cows calf, great weekend. And then about not buying the l. A. Times because of antiquated cross ownership rules. The tweets are bizarre, where is his mind going . We know where it is right now, and thats time warner, which ill come back in the faber report, and m a news, we have not got to abbvie and shire. We knew the deal was coming once they agreed to negotiate, once shire said it was acceptable to us. They got it done. Key question and concern overall, of course, is what we pointed out, tax inversions. Yesterday, senator orrin hatch put a letter out in response to jacobs letter in the week, a critical sentence in it that seemed to freak people out briefly, although, the consensus is the chance for seeing legislation when it comes to inversions is very low, even if something were to come out of the senate, the idea it gets to the house, you need congress to approve any real change in the rate. You hear this 20 going to 50 . Weve got a ceo doing an editorial in the journal today talking about convergence, and, yes, the money earned here in the u. S. Is taxed at the u. S. Rate, but i will say one thing, i find some of these defense disingenuous talking about inversions in the sense of whats the problem . I get it, by the way, and its not unpatriotic, but over time, if you can plan and know your tax rate is lowered overseas, you will absolutely find ways to earn less in the u. S. There are ways to do that. Cant you invest more in the u. S. . Cant you hire more . Beef up research and development. You can bring cash from overseas no longer due to u. S. Taxes and bring back to help your business here, but at the same time taxable earnings here are going to go down. They are going to go down. Someone has to pick up the slack. Certain corporations are less than others. If youre walgreens selling from a store, thats not going to change, but pfizer, other things, you can turn thirngs around. Back is no longer the United States, but the u. K. , flows into the u. K. Surely. Economic patriotism in the words of the treasury secretary. Yes. Political posturing, no expectation among those who follow it closely that well see it. Explicit if theres a change in the inversion language or inversions that that deal conceivably could be stopped. The spread did blow out yesterday on that as a result of the hatch letter, and that one thing, well, maybe we try to do something in the short term, nobody expects it. Dow up 60 s, and dom is on the floor. It may be with the geopolitical risks to bring companies public, but we have a couple getting attention on the floor. The first one, true canyon, the commotion that you heard right after the opening bell. That, of course, for globen. This is a medical Insurance Company for your pet. They set a range of 13 to 15 a share for the ipo. They priced at 10. A steep discount. Right now, shares up to 10. 80. That discount pricing led to an 8 gain in trading for that ipo. Behind me is globen, the argentina Cloud Computing company. Its also priced drsh priced shares at 10 a share, also a discount to the 11 to 13 they thought theyd price. Trading, again, opening at a discount here. The indications, not trading yet, but indications here at post six for Goldman Sachs is that it could open at 12 to 13. Again, a possible upside move for the ipo as well. As you talk about the environment that were in, geopolitical risks are a focus here, but companies are still going public, although they are pricing their ipos at discounts, allowing investors, true canyon to realize a pop on the trade. Were waiting on globen. Indications are right now between 12 and 13 at post six. Were going to find out whats going to happen here. Of course, all of this is centered around whether or not theres developments elsewhere in terms of what the geopolitical risks are. Interesting to see how the market reacts. Remember, a decent down day yesterday, futures down marketedly early last night, and now very much in the green. Again, simon, carl, guys, just a very interesting trade at least with a couple Companies Going public here, guys. Back over to you, carl. Thank you so much. More breaking news, we have michelle carusocabrera. Reporter officials believe it was prorussian separatists who brought down the plane firing the missile. This is new. We long heard they believed it was a surfacetoair missile that brought down the Malaysia Flight. The question was, who had shot it . Dow jones, only News Organization quoting this, but quoting u. S. Officials, u. S. Believes prorussian separatists fired the missile at the malaysia jetliner in ukraine. This is now weve learned as well as you reported earlier, carl, that the United States is going to send members of the fbi along with the National Transportation safety board to do an investigation, that according to nbc news quoting u. S. Officials. Dow jones saying that the u. S. Officials caution that the investigation is not complete. At this point, they believe it is the prorussian separatists who brought it down. Its a crucial link, what gets us closer to the potential for a much higher round of sanctions. Guys, back to you. Forgive me, the next big question, important for Financial Markets, is where did they get the technology from . If they got the technology from vladimir pew tins army, that accelerates us, and if they stole it, theres a tweet to that effect, from the Ukrainian Government when they were looting at some point, that, in a sense, is a deacceleration im right in saying. Giving russia the ability to say, look, it was not necessarily us. At the higher level, Angela Merckle said, look, russia, you are responsible for this, you have fermented the prorussian separatists, armed them in the past, maybe they stole this particular equipment, but look to putin in russia as being the reason this group feels emboldened to fight against ukraine. Thank you, michelle. Michelle carusocabrera back at hq, of course, bringing us news as it happens. Lets talk about, of course, the big potential deal from this week as im going to be want to do perhaps for many days to come. Time warner and fox is what were talking about. Certain things to share, of course, after reporting each day with you on this, but were going to be in somewhat of a holding pattern, if you will. Every time, of course, a share of time warner trades hands, conceivably fox says, well, thats good news. We have someone in this place, not willing to watch time warner, simply say no, and watch the prices fall dramatically. Theyll pressure management and the board to sit down and negotiate. Thats what you hope for if youre fox. The other thing expected, though, if fox, in fact, wants to continue to try to engage. They have to try to do so at some point by, yes, bidding against themselves, at least the idea of it at this point. What will that be . Well, what i continue to hear from people close to fox is discipline. That is the word they have chosen to use. Many times during the shareholder base, they are not going to go well above what might be expected to procure the potential deal. Of course, that board said no thank you at all to the share bid roughly presented to them previously. In that case, though, im told it would not be cash. Theres no desire to lever up at fox at this point, no desire to bring them anywhere close to the close calls they had two decades ago when they added a great deal of debt, and no desire to use voting shares. Now, those things can change. They always conceivably can change. Thats what im hearing right now. Youre left with thinking, well, if the consideration were to be increased, largely in the nonvoting shares, and, of course, time warner has forcefully combatted that with the thoughts of governance, lag thereof at news corp. , what they say is at least a lack of secession plan, giving up lack of control from their company to their company, whose family inherits the business conceivably, although you have a great manager who would stay on past integration of the two businesses. People buying fox right now will see. Overlap is also a key. We talked about it as being a positive in terms of fox and its ability to try to win the war here, if you will, in terms of evaluation, but time warner combats that. Let me give you some of the numbers at least, 75 of time warner shares are owned by fox class a shareholders, class a own more than half of time warner shares. Were talking significant overlap, 22 top shareholders own fox a, the top 2r5 25. People own them across the board, viacom, disney, no indication they are buying across the sector in general is not an indication theres a desire here to do a deal. They would point out while its significant overlap at the institutional level so blackrock has that within each fund within black rock run by a separate manager to beat the s p. Overlap is lower at 36 . They report on august the 6th. We are awaiting a paper from time warner laying out why they believe this stock can reach at least 85 on its own merits, of course, already there on the takeover bid, and or higher than that based on simply earning a lot more money. All right. Any advice that cbs would buy cnn if for sale . No, but youd think. Weal see what happens in the case as well. Lets go to Rick Santelli in chicago. Thank you, david. The twoday chart gives 1046 year best. Up a smidge, you see it was due to yesterday, obviously, the issues of the day. Look at june 1st of last year charts, the 10s a toying with the lowest level. All that stands in the way is the 244 low yield close. The 30 years you see on the chart arrived at its kovrp of 13 monthings. If we look at the yield curve, 5s up, 10s down, curves flat ping. The 5s, the 30s, wider look, they are the flattest making new flats every day. In five and a half years, february twine on that. Look at a year to date chart of the dollar able is happening, y improving rather dramatically, but the next chart, intraday, reaching 135, have not done that since the markets had a big tech day in early february. Look at year to date, we are very close for the year row currency to trade at the lows of 2014. We have to continue to monitor how issues of the day are intuitive way, as horrible as the stories may be, affect the neighbor of the closest in proximity and the big trader partner, and that, of course, is europe. Back to you. . Rick, thank you very much, Rick Santelli. When we come back, former u. S. Ambassador to israel, Daniel Kurtzer, his reactions to israel this morning. The dow up 48. Back in a minute. Kid hey dad, who was that man . Dad hes our broker. He helps looks after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at Charles Schwab why let erectile dysfunction get in your way . Talk to your doctor about viagra. Ask if your heart is healthy enough for sex. Do not take viagra if you take nitrates for chest pain; it may cause an unsafe drop in blood pressure. Side effects include headache, flushing, upset stomach, and abnormal vision. To avoid longterm injury, seek immediate medical help for an erection lasting more than four hours. Stop taking viagra and call your doctor right away if you experience a sudden decrease or loss in vision or hearing. This is the age of taking action. Viagra. Talk to your doctor. Developers are all about speeds and feeds. Of taking action. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. The ibm cloud is the cloud for business. Really. So our business can be on at ts network for 175 dollars a month . Yup. All five of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. Just getting word the president will deliver a speech to ukraine at 11 30 a. M. Eastern time in the brady room. Well see if hell take questions. Thats something to note in an hour and a half. Israeli Prime Minister Benjamin Netanyahu says to expect the operation could expand significantly. For more insight on the wors worsening situation in the middle east and what the u. S. Response should be, Daniel Kurtzer former ambassador to israel and egypt. Good morning to you. Good morning, carl. Objective, he says, is not to topple hamas rule, but target t tunnels and infrastructure. This is going to take a while, isnt it . Oh, for sure. The expansion of the operation means that the initial goal of israel, which was similply to degrade hamas capabilities and restore calm has expanded going after the tunnels and try to hunt down specific groups of terrorists that have been using civilian populations as a shield in order to hit israel. Are they going to be able, mr. Ambassador, to be able to do that to protect themselves from any further rocket launches and target all of the tunnels and all of the hamas rocket fires . We have seen this back in 2009. We saw it in 2012. It did not put a stop to it. Well, no, they are not going to achieve their objective. At some point theyll declare victory and decide to stop. What they are looking for, though, i think is something longer term than two years achieved after the 2012 engagement. Even that will be hard to accomplish. Hamas has a real interest in proving they can with stand assault and the resistance movement. This is a conflict with no particular end date or end goals by which to measure success or failure. The articles say the common desolate tragic patent you see where israel attacks hamas, hundreds of civilians die, and sufficient civilian outrage, and it stops. What should the role of the United States government be here . Remember that Ronald Reagan did int intervene in the 1980s and made a call of a cease fire. Should that call be made from the white house here . I think theres two things to look at. One is how do you end this immediate round of violence . I would agree with you that in addition to supporting israels right of selfdefense, we have ought to be talking seriously to israel about the degree to which its hurting civilians and infrastructure in gaza. Theres a larger question here. That is, are we going to see this happen every two or three years or final lly a grip on th Peace Process and have a political solution. We have to empower the palestinian president , abbas, and use this as a catalyst to get back to negotiation, which, hopefully, can produce a political solution. Would you lay the fact or blame that we dont forgive me, sir mr. Ambassador, stick around. We have a quick bit of data. We have the july preliminary university of Michigan Confidence at 81. 3. This is not what we were looking for. Its the weakest level since march of this year. It is preliminary, compared to the previous finals. Carl, back to you. Thank you very much, Rick Santelli. Simon . Ill ask the question i was seeking to ask you, though. You spoke to the fact we dont have an active Peace Process at the moment. Would you lay that partially at the door of the white house . Do you think kerry and the president have engaged to the fullest extent they could to sort this out . Well, i think kerry did an admirable job until february and march, but until he got pushback from the palestinians and israel, they decided to call a pause and reflect what happened. The argument would be you dont take no for an answer. If you invested significant amount of time and effort, the president has determined this to be in our own national interest, and we are the United States, after all. You dont take no for an answer, and you keep pressing the parties to come back to the table to fulfill their obligations and to move this thing forward, so, yes, i think the United States has responsibility both in terms of a cease fire, but more largely in terms of the advancing the Peace Process. Mr. Ambassador, thank you for the time, and not the last time well discuss this issue with you. Thank you very much. When we come back, breaking news on leading economic indicators, plus, House Foreign Affairs committee, ed royce on politics, the crash, tensionings in gaza, and we have a mild gain of 43 points. Were back in just a second. Rso0 turbocharged reward card with a new volkswagen turbo. Why are we so obsessed with turbo . Because we like giving you power, but we also like giving you fuel efficiency. Like the sporty jetta. And the turbocharged passat tdi® clean diesel. Okay. And the iconic beetle. And the powerful tiguan. Okay you cant forget the cc. Guys, this is going to take a while. Avo hurry in and you can get a 1,000 turbocharged reward card when you lease a new 2014 jetta se for 199 a month. It can help your business save money. False. The truth is when you compare our Fastest Internet to the fastest dsl from the phone company, comcast business gives you more for your money. 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, june leading indicators up momentarily following preliminary july university of Michigan Confidence number. Were waiting. Nothing yet. 3 on june leading indicators, a little light. We expected up half of 1 , and indeed last months half of 1 stands unrevised. The data points leave the 10year down five points on the week, but up two overnight. Carl, back to you. Thank you so much, Rick Santelli. As we were mentioning, israel continuing a ground defensive in gaza trying to stop rocket launches from palestinian militants. We are joined from gaza, martin, good morning to you. Reporter hi, carl, good morning. The Ground Invasion underway now for a good 18 hours. Army said it could last two weeks as least. The goal is to take out tunnels that the mill tapts in gaza built between israel and gaza to use them it attack israel. The army is tracking those tunnels along the perimeter in the north, the center, and the south, trying to destroy the entire network. At the same time, the army is moving forward on all fronts, slowly and carefully, backed up by massive fire from the sea and air at palestinian targets, about 24 palestinians killed so far since the Israeli Ground invasion began, of course, in addition to the 260 killed in the last ten days of shellings, the the palestinians, despite pressure, are keeping up the rocket fire in israel, able to fire 60 rockets into israel since Ground Invasions began. Theres no significant casualties or injuries here in israel. The Israeli Government called up more reserves, making it about 6 60,000 reserves joining the army on the ground assault on gaza, targeting rocket launchers that have been used to fire into israel, but the israelis are moving closer and closer to urban areas. In particular, in the north where most of the rocket launchers are. There, the area, if you remember, the last few days, israel drops leaflets warning palestinian residents to leave their homes, quote, for their own safety. Many did leave their homes so israel is advancing slowly. They are checking the area, building by building, going into schools, going into mosques, looking for rocket stockpiles, any sign of the hamas military presence, but the key effort at the moment is to find the tunnels that lead into israel. Israelis say there could be several dozen of them, and the reason they launched the Ground Invasion now was because they couldnt find those tunnels from the air. They couldnt knock them out, felt the only way to do it was from the ground, one of the key reasons for Ground Invasions. Back to you. Mow made a good point last night whether this offensive antagonizes the rocket launchers and increases them in number or cuts them. Do we have an answer on that in this early stage . Only can look at numbers, since today, they fired 60 rockets in israel, half the daily average. Palestinians have been firing 130 rockets a day in israel. They fired half that today, but were only halfway through the day, so i suppose the, you know, looking at the numbers, the palestinians are stimable to keep up rocket firing. The israeli army, looking at what hamas is doing, they are complimentary, impressed by the ability to keep firing rockets. Hamas is wellorganized, wellarmed, well dug in, and they know any Ground Invasion, which now has just begun, will be very, very difficult, if they are forced to go into palestinian urban areas, and that would definitely lead to greater loss of civilian life among the palestinians, which is already very high. Martin, thank you, joining us from telaviv. One political market to the other. The latest on flight 17 that was, of course, shot down over ukrai ukraine. Our correspondent, michelle carusocabrera, has more on that. Michelle sm. Dofficials believe prorussin mill standpoints shot it down, and before that was it just a surface to air missile, but not by who. If this was true, how did the rebels get the equipment . The fbi and National Transportation safety board is going to ukraine in attempt to investigate the crash site according to nbc quoting two Senior Administrative officials. Malaysia airlines verified nationalities of all but four of the 29 5 people on board, and by far, largest are from the netherlands, 189. Speaking of which, Indiana University says one of their ph. D. Students died in the flight, 25 years old, a member of the rowing team, she was from the netherlands. There were a large number of aids researchers and activists on the plane traveling to a conference set to begin in australia in two days. Not the conference organizers stated in recognition of our colleagues dedication to the fight against aids, the conference will go ahead as planned and will include opportunities to reflect and remember those lost. Today, putin calling for a cease fire between prorussian rebels and the Ukrainian Government to allow for negotiations, making those comments with Orthodox Church leaders. Merckle said, whats a political solution and above all, its russia responsible for whats happening in ukraine at the moment. She spoke at the presummer holiday news conference. To show you the russian market, hit hard yesterday, falling again today, we just learned that jpmorgan downgraded it by a little more than 2 . You see the decline. Looking at the currency, its declined. Reflection of the movement of the dollar. Dollar strengthened dramatically, off the highs, but theres an impact. Back to you. No question, pressure is rising on russia. Thank you very much for the update. See you in a bit. What are the geopolitical implications at play . How should the United States and European Union respond . Joining us now, the director at the euroasia center at the atlantic counsel. Thank you so much for joining us. My pleasure. What does the United States do with that information assuming that the report is correct that u. S. Officials believe that prorussian separatists are responsible, but without knowing where they get the equipment and weaponry . Theres already substantial evidence that it was the russian supplied and led rebels that shot down that plane. If theres more persuasive evidence, the u. S. Government should release it so the world sees clearly who was responsible. At the same time, the west, the United States, in the lead, should give mr. Putin seven days, ten days to stop all milita military supplies, all supplies of fighters and equipment to the insurgents in Eastern Ukraine or enforce sanctions on the russian economy. This is the key. It was, in fact, defective, and especially of the European Union not putting down sharp sanctions at the end of last month as they threatened to do, leading to the increase of russian hardware into the conflict. Let me pick up, specifically, that point, ambassador. Wednesday, of course, we got the decision from the white house to launch specific sanctions on specific russian companies, you did not get a response if the europeans, but they should do public lopes moving forward. Do you think given words from angela in the last 12 hours they will be mindful to instruct european banks not to lend directly to russian companies, which, of course, could hurt the russian economy and therefore be a very effective sanction more strongly . I would hope thats the outcome, but europe has been reluctant thus far to take the necessary steps to protect their own security. It may be this is a game changer. Well have to wait and see. I was just going to say, is could this be the point, the Inflection Point in the conflict in that this is a wakeup call for pew tip for what hes doing arming separatists and the pressures just going to mount so much it has to stop at this point . Well, putin has felt end bold ped. Again, in early june, if russias interference does not cease, there will be sector sanctions. Merckle said the same thing on june 27. They gave russia three days, but when june 30 rolled around, there was no talk of sector sanctions. Since july 1, russia poured substantially more fighters and heavy equipment into Eastern Ukraine. We dont know if these missiles came from russia during this period, but, certainly, the separatists have the missiles over there in their hands and have used them. Ambassador, 11 30 eastern, the president will make a statement. There was issues he was doing fundraiser in new york and not as on the case in terms of public appearances in what he was saying to the International Community as he might have done. Indeed, he gave a speech yesterday suggesting it might have been a tragic accident. What now do you want him to say at 11 30 . Well, 23 tif the report you put out that u. S. Intelligence believes strongly it was done by russian separatists, it would be good for the president to say that. It would be good for him to, in a strong speech, reach out to europe and say its now time for us to take additional sanctions from russia. Unless putin stops now, or within a few days, supplies of weapons and insurgents in Eastern Ukraine. Going to be a busy weekend, mr. Ambassador, thank you for joining us, and, of course, well bring you the president live in a little less than an hour and a half. Markets up 51 points after the dow had a sharp selloff on two geopolitical events. Lets get analysis. David kelly joining us, chief global strategist with jpmorgan funds. The market seems resilient in the face of horrific headlines. Should be. Theres a lot of senseless human tragedy involved in gaza and ukraine. I think from an investment perspective, realize this means stalemate in both cases. Were not going to have a strong, independent ukraine, but, ultimately, i dont think they meant to bring down a passenger jetliner, but whatever it was, weakened putins hands. I dont think you have a conclusion in ukraine, and i dont think israel will smash hamas, but have an impact. Its stalemate in two cases. Stalemate in the conflicts, next week, i think americans will start turning back to the earnings season thats looking good. I think that should allow the e equity market to resume the slow upper climb here. Cracks in the rally, not at least the outflows we had from high yield effs. Some confidence overnight. Your chief worry is the fed is behind the curve . Yes, it is, and what im worry about investors would take the wrong message from this. You see the 10 year rallying below 250 here in flight to safety, but if next week, well, this does not change the global picture that much, just means the bonds are still more mixed. I think there are signs also particularly within things like high yield and, you know, yellen mentioned other areas where there may be some bubbles building, which we have to watch for here, but i dont think the basic story changed. Global economy is growing. The other thing is dont avoid International Investment because of the Bad International stories. Theres opportunity outside the United States and opportunity both within the United States as this economy picks up steam here. Do you at least, david, say perhaps you should have some money in cash, gold, treasuries, a safe hain . Its not uncertainty in israel, but iraq. Theres so many questions right now on the geopolitical sphere, and i get that, but it does not necessarily impact the u. S. Economy or u. S. Corporate earnings, but you see what happens. The market is vulnerable given the fact we ran up so much, maybe you should hole something safe. Well, sure. Fist of all, briefly on iraq, i think isis is in the stalemate situation with the Iraqi Government because they dont have the power to take over the country, but, look, you need to have a diversification at safety. I think the cash base pays you 0, its not the best insurance policy out there. I think you need to be diversified. Not a fan of gold, but commodities are a good way of diversifying the political events because they affect energy supply. You know, be diversified, and that, i think, is your primary protection against risk in this market rather than being overweight cash when its paying you nothing. Ill put you on the spot then, david. If you had four sectors, how do you diversify . What is the split . Any money in bonds and fixed income . Oh, no, of course i would. Relative to the normal portfolio, overweight equities relative to u. S. Equitieequitie. I like europe and emerging markets more than the u. S. , but overweight equities, underweight fixed income, and have alternatives. What commodities would you want . Well, i think energy, food commodities, if you could have both in there, food commodities because of growth in emerging markets, Energy Markets because of risks, and real assets. Ultimately, this military experiment could result in inflation and real estate does offer a protection against inflation also. You know, i think its spread around. In the meantime, david, it is the weekend. Have a good one. Thank you very much. David kelly joining us there from jp morgan funds. When we come back, google higher today despite a mixed Second Quarter and suggest that mobile advertising is not going anywhere. How do you play that now . Well talk about what when squawk on the street continues. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. As you can see, google trading higher despite mixed Second Quarter resultings yesterday. The tech giants missed etf estimates, revenues were 22 higher from last year. A surprise announcement in leadership, the long time chief Business Officer is departing for soft bank. Here to discuss google is the global head in media research, a buy rating on the stock, investors like the news out of google despite the miss on earnings per share and the departure. Do you agree . Yeah, we absolutely agree. We dont think the etf was much about nothing. Its mostly related to below the line. Its a onetime thing. Its lower interest income, et cetera, its not an issue. We are excited about the quarter for a couple reasons. You have to be into it whats driving it, and is it sustainable . The first thing is most of the growth actually came from international, outside the u. S. And u. K. Up 30 . Thats a very, very robust number, and so what that tells you is they are basically duplicating success in the u. S. , u. K. , and other parts of the world translating well. There thi other thing is if yo at where the growth came from, network or google sites, the majority of it came from google sites, and what that tells you, google is now more in control of its destiny not relying on the third party to drive traffic to it. A good kwauquarter, and we like. If you are worried about something, worried about the fact they are getting less money for the marketing spots, average price for ads declined 6 . How has google justify soffset is that a concern as they change and shift to mobile . Yeah, thats not the concern, actually, because thats just makeshifts of more traffic coming to mobile where modernization up until today is still running below desk top. We think that overtime that reverts. Frankly, we think a click on mobile is worth more than a click on desk top. We dont think its a structural issue there. Wow. If you want to point to problems or potential problems, point to cap x which last quarter hit another record, 2. 65 billion, 17 of the gross revenues, a huge number. When Companies Grow bigger, it goes down, but its been going the other way. The only reason its not a concern today is because it has not been put pressure on margins, at least margins we see, but thats an area where management got a lot of questions, and well continue to monitor. Weve been down that road before, right, snna out of hand, discipline on spending questioned. Do we need to worry about the main money guy leaving in a company run by engineers . Well, remember, you saw Tim Armstrong leave a few years ago, four years ago, to run aol, and marissa leave, and the google diaspora is far and wide. We think this is just another departure of a key executive clearly, but, you know, we think google is 5 lot bigger than just a single person, right . If the founders were to decide to quit or not get involved anymore, i think that would be a bigger issue, but its been you know, tits replaced by another google veteran. We dont read too much into this. Echoing optimism on google this morning. Thank you for joining us. Up next, uncertainty plague oil markets in recent weeks. More on whats ahead in the Energy Sector right after this. Toffee in the world. T its delicious. So now weve turned her toffee into a business. My goal was to take an idea and make it happen. Im janet long and i formed my Toffee Company through legalzoom. I never really thought i would make money doing what i love. We created legalzoom to help people start their business and launch their dreams. Go to legalzoom. Com today and make your business dream a reality. At legalzoom. Com we put the law on your side. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. [ tires screech ] 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 july 31st. Share your summer moments in your mercedesbenz with us. Welcome back to squawk on the street, Second Quarter investment letter out saying were entering a decisive peertd and normalized thinker quarter growth will mark key Inflection Point, and anticipating a market point, and Williams Company and anadarko petroleum, and top losers are financial, sony, and rack space. Seems like that cloud situation not so good these days for stocks. Simon . Thank you. A check on energy and commodities. Good morning, simon. We are watching Energy Prices very closely after we saw a 2 spike in crude oil yesterday. Were seeing were mixed on both sides of the atlantic here. Slightly lower on wti, slightly higher on brept price, wti hovering over 103, and brent at 108 a barrel. They are locked on geopolitics, watching the plane crash over ukraine, seeing developments as headlines come out, but they are focused on the conflict in gaza. One trader watching iraq as well, while its burning over there, no one is talking about it. A lot of flash points to keep an eye on. We saw prices this week under 100 a barrel, so a big spike here. Seeing a little profit taking probably today, but traders say they dont want to be short going into the weekends. The new levels to watch while we were talking about 98 a few days ago, now were talking about 105 a barrel so that is the next point to keep an eye on. I just want to point out that gold prices down ten bucks as well. What we did see yesterday is short covering, not necessarily new safe haven buying, and thats why gold prices are not muching move, but still over 1300. Back to you. Thank you very much, jackie. Straight ahead, the chairman, ed royce, of the House Foreign Affairs committee weighing in on the flight and the situation in gaza. Back after a quick break. So when my moderate to severe chronic plaque psoriasis was also on display, id had it. I finally had a serious talk with my dermatologist. This time, he prescribed humiraadalimumab. Humira helps to clear the surface of my skin by actually working inside my body. In clinical trials, most adults with moderate to Severe Plaque Psoriasis saw 75 skin clearance. Is h talking about. State farm. When you compare the top speed of dsl from the phone company with the top speed of comcastg about. Business state farm. Internet. 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. One hour into trading. Some stories were talking about, 7 30 on the west coast, 10 0030 on the wall street. Expectations falling more than a point, and honeywell rising to new all time high after Second Quarter results above estimates raising the low end of the full year enings forecast, and vf corp. A loser on the s p, despite better than expected results, but wrangler and vans issuing full year guidance below street consensus. We have a large deal that got down, expected that would be the case after the two parties agreed after what was four attempts by abbvie to acquire shire. It was the fifth that were completing what is a deal worth over 50 billion. Of course, we quoted all to you in pounz, im not sure we have the terms, but the deal itself, a significant premium over the price that shire had prior to abbvies interest becoming known. You see abbvie shares down relatively not a great deal at this point, although, they have been down since this began. A bit. Lets leave it at that. It is another, of course, in the long line of inversions that have taken over much of the mer merger activity in pharmaceuticalrelated industries. In this case, no change there as well. This will be an inversion to the u. K. , talking about a tax rate, though, that could be as little as 13 for the combined company. And it, of course, putting another light on overall inversions, and the continued rhetoric, at least we are hearing. Earlier this week, heard from our treasury secretary at the alpha conference on inversions, wrote a letter also about them indicating in some way he viewed them as up patriotic. We had news from hatch, the senior senator, combatting much of what lew said, but had a press release that had people, at least counting on these things continuing, a bit concerned when he say there may be steps congress can take short of comprehensive tax reform to address the issues. With that said, people familiar with the issues and workings of congress do not believe anything will take place, certainly not prior to the elections or prior to the end of the yearment by that token, we should mention this deal is expected to close by the end of the year. They dont need the approval of china regulators, which in many of the deals, extended them for longer periods which would be the case because the chinese do not get around to antitrust work for a long period of time it seems. Its not dependent on whether theres an change in the inversions or not, by the way, in terms of the deal, and you do not need chinese antitrust approval. We do have the backdrop, of course, of continuing conversation about these tax inversions. Did you see miles in the oped . Not cheating, not abuse of the tax systems, clearing up myths in defense of why it is not an abuse of the tax code they are trying to get around. When i think about the issue overall and actions Corporate America has taken over the last five to seven years to increase its margins, you go down the list through your costs, and when you are towards the end, you get to your tax rate. I think that is really simply what has happened. They went through everything else, and now theyre at tax rate saying, well, why are we paying this . How can we attack it . What can we do to, obviously, advantage the shareholders. We have been discussing the issue longer than anybody has been discussing it, the first inversions. When a number of companies in your industry do it, you are competitively disadvantaged if you dont. Goes back to bermuda incorporating. And valiant, a story for the another day, has the lowest of all of them. Shire headquartered in dublin for tax reasons, we have to mention that. It is republican to say if that is what you focus on, we change the rules it less point. Youre right. Were paying the tax. Continue to pay taxes on earnings in this country. That will not change. What will change, of course, i argue, is that overtime you find ways not to earn as much in this country overseas, and whatever you earn overseas is not taxed when it comes back to the country if you want to bring it back and only taxed at the rate you are currently taxed out. In the case of valiant, helped them e nor nously. Still ahead, the chairman of the House Foreign Affairs committee, ed royce, will join us live. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. [b ll rings] time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Can i get my actual Credit Report. Like, the one the bank sees . [ male voice ] sheesh, i feel like im being interrogated over here. [ male voice ] shes onto us. Dump her. [ pay phone rings ] hello . Oh, man. That never gets old. No, it does not. [ female announcer ] not all Credit Report sites are equal. Experian. Com members get personalized help and a real Credit Report. Join now at experian. Com with enrollment in experian credit tracker. Join now at experian. Com in a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Check out General Electric in addition to its earnings today. The company is spinning off the credit card unit expecting to rise 3. 2 billion in an ipo and expects to price 125 million shares between 23 and 26 a share. This comes after they reported Second Quarter earnings. What they talked about on the call is the fact they are doing it as a spinoff because its tax first time for shareholders rather than trying to sell the unit. Tax efficiency these days, thank you. News crossing now on forbes. Julia has the details for us. Thank you. Forbes media agreeing to sell a majority stake to international investors. Not commenting on dollar amount or valuation, but the group led by Hong Kong Group management invested 475 million. They are exiting the investment in the Media Company, the fund led by bono, buying a Minority Stake eight years ago then have to write the deal down. The Forbes Family will retain a significant ownership stake and stay actively involved. Steve forbes remains chairman and editor in chief, and the company will continue to be led by ceo mike per liz. They said in 2013, they had the best Financial Performance in the past six years, carl . An amazing story. Thank you, julia. When we come back, fedexfacing serious charges from the Justice Department with drug trafficking. We have details on that when squawk on the street continues. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. My motheits delicious. Toffee in the world. So now weve turned her toffee into a business. My goal was to take an idea and make it happen. Im janet long and i formed my Toffee Company through legalzoom. I never really thought i would make money doing what i love. We created legalzoom to help people start their business and launch their dreams. Go to legalzoom. Com today and make your business dream a reality. At legalzoom. Com we put the law on your side. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Fedex indicted today in connection with a Justice Department investigation into drug trafficking. We have more on that back at hq. Good morning, scott. Good morning, carl. This is trafficking of prescription drugs purchased illegally online. Since 2004, they were helping internet pharmacies ship drugs and substances to customers without a valid prescription even after u. S. Authority warned Senior Management the practice was illegal. They say they are innocent and puts privacy at risk. We want to be clear in a statement, the government assumes fedex assumes responsibility for the millions of pax cartilages we pick up and deliver every day. Were a transportation company, the company says, we are not law enforcement. Fedex shares fell sharply after hours last night. The stock rebounded a bit today, up 15 cents, just two weeks ago, we reported how buying drugs online can be a game of prescription roulette. We found pharmaceutical companies do make less expensive versions of the exact same drugs overseas that u. S. Customers can and do Purchase Online and through brick and mortar facilitators, but in the investigation, we interviewed dan in california, his wife, cherl, addicted to painkillers, and three years ago had an overdose of medications bought online without a prescription and with surprising ease. They come via fedex, any address you want to put them to, as long as theres a credit card to pay for them. Similar investigations last year paying 40 million in closing thes of rogue pharmaci s pharmacies. In our investigation we ordered lip tor from six pharmacies, all tested safe all coming by regular mail. Guys . Thats quite a story, scot back at hq, thank you. Rick santelli has the santelli exchange. Good morning, rick. Morning, carl. We know what happened with regard to Malaysia Flight tragedy, and we want to get that out there. Well switch gears a bit, though, because it is our job to look at the markets. And when i look at the markets today and think in the context of the tragedy and ongoing issues and sanctions with russia, i see the euro versus dollar reaching 135 for the First Time Since valentines day. Is that the message of the market with regard to the story of the day . I think thats part of it, rick, but, you know, as we always know you cant help talking about it without talking about gold. People who buy gold on geopolitical events, its a sorry state. I have the scars on the back to prove it. It does not pan out. Once those geopolitical events recede, then the gold drops dramatically because its a silly reason to buy gold. It gets bought for other reasons. The currencies, the euro is remarkably holding up. This could put us close to new lows. 135 considering the state of unemployment and economic activity. Europe is remarkable. You know what . Were still buying. The feds are adding reserves to the system. Draghi talks a big game, but look at the ecbs Balance Sheet, its shrinking. Yes, negative rates, but we no it does not drive currency down. Anyone who lived through this as myself being when the swiss rates were negative, they performed well because of the full arguments in favor of it. That seems whats going on. Everybody who, myself included, im a global macro guy, it should be weaker, and its not, and sustaining itself. Its a flawless argument more than anything. A bigger argument in the last minute. The argument is you have traders to avoid fundamentals as you pointed out, and in many instances, its more flows, follow the money, so what are the trends . Interest rates down, a spongy dollar, a too high year row, Energy Prices have trend that have back pedalled, and im saying is this tragedy, my opinion, even though it impacted the market, it did not have the impact that the market was not a willing accomplice where the preset determinations on where it wants to go. Absolutely. What trader traded . You know what . Horrific tragedy, and the middle east, israel, gaza, a tragedy. Tragedies have been with us and the markets have got more sophisticated with it. We come back to the flows. Probably more in the market interesting to watch the action with joes wonderful interview with sam, and anyone in my camp who works from a global macro perspecti perspective, that was a wonderful interview, but left me with two questions to ask stan, and ill ask him right now. Stan, are you listening . Go ahead. Stan, if youre right about the views, the long end of the curve, the bonds rally. I know itll eventually change, and joe forgot to ask you, if you take that view, how much gold are you buying in anticipation of the feds credibility at stake . He said long term, and the alpha conference this year was off the charts aplus back to you. Thank you very much, Rick Santelli. Still ahead, president obama making a statement on ukraine in a little over an hour. Well bring that to you live as it happens, and squawk on the street will be right back. From state farm. Sounds like a really good deal. Jake from state farm at three in the morning. Who is this . Its jake from state farm. What are you wearing, jake from state farm . [ jake ] uh. Khakis. She sounds hideous. Well shes a guy, so. [ male announcer ] another reason more people stay with state farm. Get to a better state. Get to a better state. Veggies youre cool. Reworking the menu. Mayo, corn dogs. You are so out of here ahh. The complete balanced nutrition of great tasting ensure. 24 vitamins and minerals. 9 grams of protein. With 30 less sugars than before. Ensure, your 1 dr. Recommended brand now introduces ensure active. Muscle health. Clear protein drink and high protein. Targeted nutrition to feed your active life. Ensure. Take life in. Take a look at the markets. Dow up 55 points. The president will make a statement on ukraine in just about 40 minutes time. Assuming he is on time. 11 30 a. M. Is wa its scheduled for. See if he takes some q a. Time being, dow not only getting back of some of what it lost yesterday, but jumped from the early, from the early session at the open. Meantime, joining us first on cnbc, House Foreign Affairs committee cahairman ed royce. Mr. Chairman, good morning to you. Good morning. In the past hour Samantha Powers talking to the u. N. Saying what a lot, whats been reported, namely, that they suspect surfacetoair missile fired from separatist controlled location, and says, cant rule out Technical Assistance from russian personnel. Do we think thats what happened . Yes. Very suspicious, because in the past, two different ukrainian planes have been shot down by that particular device, and so now that youve got this jetliner shot down, just in an area, i would say its its about 20 miles from the russian border, very suspicious. We need the International Observers on the ground and to that happen we need a ceasefire. Russia should help us get that ceasefire. And i assume they should assume this crash site, ten miles wide, is not con tamatcon . Allow them in immediately. 40 dutch inspectors on the ground right now. Most of the passenger was from holland. They need to get out there to that site. To have that happen, they and the International Community are ready to go right now. Weve got our lead inspector in kiev right now, and the only Thing Holding it up is cooperation from russia. Those separatists take their orders and get their weapons, most of their weapons, from russia. Russia needs to cooperate now. Mr. Chairman, did you see the comments that Hillary Clinton has made to charlie rose . She is suggesting, actually, that its the europeans that should take the lead on sorting this out. Do you agree . Do you feel as we await the president speaking in now 26 minutes time, that the white house is playing the role that it should do . Well, the reality is that the europeans are on the ground, with those 40 dutch inspectors, you also have the wider inspection teams of ikl and the other International Teams that deal in civil aviation. Cases like this. The question is whos got that black box . Lets get it. The question is, lets get to the crash site before, as you say, its contaminated, and lets get cooperation out of russia to show theyre going to work with the International Community and especially the European Community that frankly is on the ground right now. Chairman royce, i want to ask you about the escalating situation in israel, in gaza. I know its an issue very important to you. You have been very supportive of israel in the past. What is the role of the u. S. President there . Is he required to get in here and start negotiating a ceasefire . At least come out, as you know, p. R. Is so important when it comes to israel against gaza and the International Criticism starting to build . It is, but the unusual thing here is that egypt negotiated a ceasefire, and for six hours, israel held its fire as rocket after rocket and these are longrange rockets, were sent, you know, targeting tel aviv, central israel. Now, in an environment like that where youre talking with hamas and hamas is demanding more money saying theyre not going to stop, in an environment like that, israel is naturally going have to try to sue flappress th fire. Yes a role for us in helping, but what do you do when you have a terrorist organization that will not quit launching these rockets, and when do you do with iran, who continues to build the inventory for hamas . They were just caught bringing in more longrange missiles to hamas. Mr. Chairman, my concern would be that people are not aware of what is actually going on fully in the country. We keep seeing very surgical pictures of nighttime activity, bombing tunnels, which are supplied by the israeli army. If you look at the figure, the palestinians say, 263 people, civilians, have been killed since july 7. The United Nations says 22,000 people are displaced and it is rising rapidly, at a time when netanyahu is calling up 18,000 reservists. This is listen, i have a disaster, surely . I have to tell you something. I was hifi. Only the iron dome is preventing this situation from killing israelis. On the other side, they were putting launchers in civilian areas, and using civilians in order to try to disguise the launchers. Now, israel has broadcast into these areas, before they make an attack, they ask people to leave the site from which theyre launching these rockets. What would you do . In an environment where youve notified people youre going to take out that rocket launcher, and people refuse in solidarity, to leave the site of that rocket launch jer this is a very, very difficult situation because of the indoctrination of hamas and this suicide mentality that so many have who are a part of hamas. Mr. Chairman, back to ukraine and the crash. Yes. We have the Worlds Airlines avoiding airspace, right, that 24 hours ago, they were going right through. To create a link between western europe and asia. Do you believe its now safe to fly to europe . Well, its safe to fly to europe, but in prudence what is happening is that flights are being rerouted so they do not fly over Eastern Ukraine until this situation is settled. Now, i would say that this could be settled easily with the cooperation of russia. There is a very generous peace offer made by the president of ukraine, which will deescalate this crisis. We need a ceasefire now, and its in russias hands to get the separatists to cooperate, because they can only continue their resistance on the ground with russian training, with russian weapons, and with the leadership of the russians agents sent into this region around donetsk. So nows the time to get that cooperation. And if putin doesnt do that, if for some reason hes even further isolated, doesnt provide the cooperation youre looking for, how should the sanctions look any differently than what we heard wednesday night . Oh, i think at this point, russia is becoming so isolated internationally, and especially especially with respect to Public Opinion in asia and in europe. Theres enormous pressure here. So we need to build on that pressure, but part of diplomacy right now is to figure out how to get these teams on the ground to get this ceasefire in place. I imagine chancellor merkel is probably on the phone, or will be soon, talking to president Vladimir Putin about the necessity here to deescalate the crisis. Lets find way out of this. Lets find a way out of this horrible, horrible tragedy to have russia cease and desist, and maybe the entire International Community agree in the future, there will be no more transfer to separatist groups, to rebel groups, of weapons by any major power, because it only leads to this type of crisis. Mr. Chairman, appreciate your time today very much. Ed royce, chairman of the House Foreign Affairs committee joining us from california today. With that, dow is now up up. Almost 85 points. Yeah. Rebounded from yesterday, where we saw the worst sell offin three months. Worst for the dow in two months. Obviously, geopolitical tensions escalated jolted the markets, but we are seeing zed heading into the weekend gains. See how he finish out the week and option exploration going on. Many people will tell you the biggest risk is toish short the market going into a weekend like this. We keep back to monday and lost cash, too. Climbing the wall of worry has been the ones consistent theme of this market, even when it comes to geopolitical concern, carl. Guys, have a good weekend. See you soon. Samen and sara. Should make note, the president s going to make a statement on ukraine in about 30 minutes. Our chief washington correspot