Transcripts For CNBC Squawk On The Street 20140729

The german 10h year dropping to record 1. 12 and the road map begins with u. P. S. Failing to deliver and missing the estimate s and lowering fullyear guidance and merck and pfizer are beating expectations and both citing new drug offerings. And darton ceo Clarence Oden will be stepping down after more than ten years on the job at darden and still a fight over the board of directors. All right, meantime miss for u. P. S. And the Company Posted a a profit of 1. 21 for the daily rate and they also lowered their guidance wend will talk to the ceo curt kuhn and in terms of the packages, domestic daily up 7. 4, but the rates even though they are going up, people are finding ways to ship less and less. But they are spending a lot of money and that is one of the misses so is that what didnt happen in christmas time, and remember, all of the overtime costs, and dont let it happen again and the stock come canning in well behind the rest of the group. I didnt think it is that bad, but everything is overshad edow by this Little Company called winstream. Apparently they are spinning off assets, and so while United Parcel is going to transport, the two Largest Companies that watch the show wont. Yes, i am glad that we are transitioning, because this is developing in the last couple of moment moments. Verizon and i. T. On the move. And one of my reliable people helping me to understand what is going on in telecommunications, and for windstream to spin off certain assets into publiclytraded real estate trusts will en a able them to do a lot of things, but it may very well be things that can be done by all of the other rlex and mean i meaning the regional frontier. Yes, and the impact on and perhaps something that verizon and at t cant do. So i have to do more reporting on this, but it is a taxfree spin in the case of windstream going to allow them to what they are talking about lowering the debt by 3. 2 billion and increase the Free Cash Flow to increase the broadband investments, and it is not about the this 6 billion company, but it is a whether or not it is a blueprint to be followed by far larger companies, and we will keep an eye on this name and verizon and at t and frontier and others. We have seen a real retrend in a lot of areas. And this morning john verachi is going to be on mad money and he was suggesting it. And yes, you become a fan of france and you can can move it. Well, i have not liked the wire land business and he told me not the worry about the d dividend, but i did not worry about the Capital Appreciation in it. When you think of verizon, you have a Wireless Company buried within the gigantic infrastructure and huge amount of debt and then suddenly it is a reit . Yes, and it allows the Parent Company to delever, and not 3. 3 times in terms of the leverage ratio which is much, much lower because the reit wont be paying them. And carl, we have a screwed up tax regime in the kcountry, and people are getting to take look, windstream has been in the business for years, and it is an old ma bell spinoff. And yet suddenly the tax code says that we can do this. And boy, we have a great republicans and the president and the treasury secretary will let anything go and you are right, the democrats, but you are going down the income statement if you are a company and you have hit so many area, and you have not hired a lot of people, and you are now at tax rate to absorb any cost you can. And centurylink is up as well. And so when you say what is going on, well, that is it. And wrap it up with a bow. And u. P. S. , you think that you did your piece on the incredible documentary on amazon and we know that e commerce is a lot of what u. P. S. Is doing, but with we know that u. P. S. Is facing a struggle that a lot of companies are which is that people are doing a lot of the ecommerce, but they dont want to raise amazons business, but they cant ray raise the prices like theyd like, and it is a Strong Company and it is not going to change in my opinion as a strong hold. And now to the beat the streets with the Second Quarter results including eitems of pfizer saying they are earning 58 cents more a share because of the oncology drugs, and merck saying that they have offset with patent protection on older medications. Nasonex came off, and some of the 2. 4 billion of the Consumer Care business to buyer, and neither of which are closed so they are still in process. Yes, missed a lot of cash there and this is finally the monetizing of the shooting plow of what some people thought was a high price. But they have a lot of levers, merck, to be able to make it so that people say, you know what, i just might stay long on this Great American blue chip. And great sales for the big five franchises up 6 and they say that the fda could make a decision on the cancer immunotherapy by october. That is another catalyst. Yes, we thought that pfizer would do the inversion, and merck has flexibility to do Animal Health which is a great, great business and franchise they have. These companies have a lot hidden asset, and all of this is happening within the same confines over and over again. Companies are looking at what they have and say issing this is worth more to someone else, and this makes our company more easily understood, and this business can be sold to someone. It makes it so it is very difficult to say, wow, i picked up the paper and gaza is bad and what the heck is in oh, the ebow la virus. And some of this is from the activism, and this constant drum beat of activism on so many share shares and we will get to it in the care case of darden, and that has not happened in merck and fpfizer and some of the meg caps, but the message for pfizer that they are sure to get is what is the strategy post astrazenica or are we really post astrazenica . And remember there was a not far away that should conceivably pfizer want ts to come back aga, they could with a bid for astrazenica and the original bid having been handled poorly to say the least from the strategic of how you actually get a deal done if you want to get the deal done from the initially saying that we are not going to go hostile to the best and the final, and none of that to keep the stocks from coming back and all of that to help elevate the inversion debate to a level now where it is all, everybody seems to be in on it. And pfizer, it doesnt matter, because the people are fine with it. Well, it is multiples like 13. 6 and 14 times . Yes, it is a Growth Company. It is a Growth Company . That is sbg kibeing kind. Well, it is not growing like it used to. It is not the key to the market. Well, tonight on mad money i have Waste Management and international paper. Waste management sells the Wheeler Division and the stock is up, a a nnd people are not looking at the bringing out value and a lot of it may be activists, but this is an amazing moment when company cans are doing things with the assets, and this morning i looked at windstream and i said, wait a second, you cant do that spin off copper and fiber, and then it is up. And the important part of windstream is is that they got the favorable private ruling from the Internal Revenue service, and the irs said that you can do this which means that every other telexhcommunication company who have wire in the ground, okay. And the irs says that you cant do something. And the irs should say, look, we wont let you do inversions any more and this is an example of the power of the irs and verizon is a huge company. Look at verizon, it is going to be up two points. Well, you cant, and centurylink is up, and obviously, everybody is going to do it, and it makes no sense not to do it, and this is another way for a market that is not supposed to go up. We are supposed to be worried about the fed and why arent you worrying about the tapering more and worrying about the crash like some guy did yesterday, and why are you insisting on looking at the fundamentals . Well, you cant feel good about this as a driver of the market. Well, what is the market . 54 be big for verizon is too big for the market. I dont know what to do, carl, you are right. And a stroke of the pen, and there is a huge buyback. They havent had the stroke of the pen at centurylink. It does not lend itself to traditional secures analysis, and is El Pollo Loco not lending . And what i would do is if i could come up here and very easily saying, other than Illinois Tool Works, there is no other industrial that did well. Pfizer has no growth, but you know, i sound like some naysayer. Naysayers are right, and meanwhile, the market is passing you by. Yes, i am buying a bucyk, no buick is the big seller. Yes, past gm. And we will talk to Nobel Laureate Robert Shiller about the latest release. And take another look at the futures doing okay, going up 40, and we are back in a moment. N us during the two weeks at wimbledon. N us true tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. Dovisit tripadvisor new york. With millions of reviews, tripadvisor makes any destination better. And case shshiller showing the home prices slowing in may. And joining us is Robert Shiller, the founder of the index and Nobel Laureate. And robert, this is the biggest tumble since 2011. Yes, what is particularly interesting is that on a seasonably adjusted basis, nationally the home prices are fine, but only a smidgeon, 0. 3 of 1 , but the way that the markets are going, maybe it is a turning point. And looking at the data, what does it say about where we are in july . Well, i cant i dont have the july data, but the pending sales are down and new home sales are down and there is clear evidence of the weakening and the market has been strong since 2012 up 20 since march of 2012 and a huge boom and the question is what would end that boom . It might continue. This may be a little downward blip and continue going up, but i kind of think it is not going up a lot more, but maybe 10 more before a correction. And we always make a turn in the conversations, robert, from housing to stocks. You know, you are joining us on a morning where the conversation of tax inversions and moving the tax base to europe and now a wave of companies attaining reit status to get returns that way. And what is that signals about the health of the market or the innovation of cfos . Well, yeah. It is an innovative time, i guess. And the thing that, one of the lessons of history is that taxes are very important part of valuation. You know, years ago, we had a top tax bracket on corporate profits well over 50 . When the governments do things like that, they are going to in effect nationalizing half of the stock market, and now we are down from that, and you know, it is a game. We will have to see how the government responds to the new ideas, but it is going to make it clear how hard it is to forecast the market. You have to forecast it is a lot the forecast the stock market. And mr. Shiller, with we are seeing kind of a huge headwind developing in the economy from real estate. I mean, we have had really bad numbers with owens corning, and armstrong real bad numbers and a lot of it is because the new houses are not moving and the prices went up too much. Isnt this healthy that they come back down . Didnt people raise the prices for housing particularly the Home Builders way too quickly . That could be. There seems to be some new anxieties at work, too. You know, i think that economics needs a little bit more sociology in it. We dont understand these. It seems like optimism about housing is weaken iing. I dont know what it has to do, and maybe, i think that, maybe the internationals and all of the talk of ukraine has people rattled, i have felt it in the past that International News affects the Housing Market. I dont have proof of it, but something is weighing on the consumers right now, and i dont nt know if they raised the prices too fast, but they were caught in another headwind that is hard to measure. Professor, do you think that we will always hear that the banks are too tight on the credit and has that been a continuum or some new regimen where the remaining houses that are for sale is and the banks are being tough . I dont see of any or know of any change, but it has been a festering problem that credit has not been as available, and that s that is inevitable since we have had a bank iing crisis of five years and not going to correct any time soon. And can you tell us about home buyers locked out of the market, and the idea of a fresh mortgage and the investment of institutions into housing, and the weaker confidence, if that is reflective of that is reflective of the consumer or a new highpowered player in the game . Well, the highpowered players are beginning to play in the market, and that is a fundamental change, because the Housing Market is so different are the the stock market, because it is not professional. It is you and me, and i dont mean you, but it is ordinary people trading. Yes. And forgive me, because i did not mean that. No, no, no i knew exactly where you were going. But as the Institutional Investors become more prominent, it is more quick turns in the market, and when they see demand weakening, maybe they are going to move it up and make the effects more profound. Robert, thank you. Until next time, Robert Shiller looking at the markets. And lets get to the cramers mad dash a after the break and count keowen to the opening bell and look at the futures and talk about some of the earnings that we have not gotten to yet and mainly herb life last night, and unplugged mcdonalds guidance in japan. We are back in a moment. What can your fidelity greenline do for you . 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Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. Darden lost the organic national that was not real areally theirs and lost the pizazz and if otis were to leave the stock would be indicated 5 higher. All right. That is the mad dash starting and we are 7 30 before the opening bell, and the stock is up 4 . And otus has left the building. And if you have starboard on the board, and now they did finish the red lobster spinout. They closed it which is criticize ed criticized by the largest shareholder starboard which is not satisfied with otus leaving and then leaving three seats vacant for the upcoming vote which means that starboard has nominated 12 nominees for a board of 9 for and dont you want three, and they are saying no, this is not enough, and not a coincidence that mr. Otis is stepping down with conceding three seats at the proxy contest at the irreversible destroying. And i like icrb very much, and i like the windstream, and the comcast reits. We are getting ahead of ourselves. Well, a joke that all of the Cable Companies have fiber in that, and it is easy to see the fiber deals, but this reit deal took people by surprise and people felt that red lobster should be fixed, but they didnt fix it. And they are talking about fixing olive garden and on the right track there. But the main thing is that otis lost leadership and a new guy could come in and freshen up the red lobster and freshen up the olive garden, because the remake is not that good and the stock still goes higher, but david, i have Cable Companies on the mind and teleco on the mind and sprint on the mind, and i dont know if they can do it, because it is all about going reit. It is funny how amazing that darden and reit, and that is something they didnt want them to do. Right. They didnt want thel to do that because they felt more value to oo either turnaround red lobster and also do up a more valueenhancing real estate transaction with the underlying deal with red lobster. And you can see what happens with the restaurants. Dinette announcing the good number numbers and refinancing the Balance Sheet, and Master Limited partnerships and Real Estate Investment trusts get the irs approval of the inversionings and we did not think at the beginning of 2014 these would be areas where money could be made in areas that we pretty did not expect. I have no idea where you come back down on it and whether jeff smith and starboard deserve to have entire board look, not not all restaurants are doing badly, apple bees, and ihop and this company, it was beat by panera and chipotle, and panera is vulnerable, and wendys made a comeback, and dont rule anything out, and darden does have brands. You still cant get into olive garden, but it is just that they are not doing well, which is rather amazing. And yogi berras old thing. I dont know anymore, and it is too crowded to paraphrase. I used to wear my cargo pants and stuff some rolls in there, and i dont go there anymore because i am svelte. That is right. He is. And we havent gotten into so many other earnings this morning, and of course, taking a look up there at the latest marvel offering, and this is a disney company. I am doing it a reit on myself, and doing the circulatory system and reading that and going back to my mus u muscular days. And they are telling me in my ear who that guy is, but i have no idea. I dont know who he is. Sorry. We have to go because opening bell is coming up next. [music] jackies heart attack didnt come with a warning. Today her doctor has her on a bayer aspirin regimen to help reduce the risk of another one. 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Well, disney is a frap chiz compan company, and they put out the same, i dont know, same, but the same cast of characters and these are almost like Real Estate Investments for disney. The theme parks, and why dont they spin them off, but no. And are they fixed real estate . Yes, and star wars and starting the preview and a trailer on the star wars and everyone will go to see that. That is going to open up nationwide this friday. Over at the nasdaq, the first trust is celebrating the first etf with Dorsey Wright International Focus five. So with that, if you are just missing the news this morning, how do you put this win reit news into laymen terms and people turning on the channel and have no idea what we are talking about . Well, what happened is that windstream got a private letter ruling from the irs saying that we will allow you to put your copper and fiber, existing fiber and Copper Network and other fixed real estate assets into a Real Estate Investment trust and what does that allow you . You can spin it off and reit has to pay off 90 of the earn togs the shareholders, but it also will allow them to pay back an enormous amount of debt from the reit to raise from it, and it comes back to the company so they can reduce the debt of 3. 5 of the reit going into new debt, and it is going to pay existing windstream debt so they will retire 3. 2 billion of debt and get the ratio way down and enhance the profile, improve their efree caFree Cash Flow an in Strategic Initiatives to help fuel growth. So this is being seized on by investors across the telecommunicationings arena, and frontier and centurylink are two of the keys there, because they do very much the same thing and have the same assets as windstream, so keep an eye on ftr and we can look at it and ctl and we can look at at both of those this morning, but beyond that, and we were bringing up frontier, but it may also have an impact on at t and verizon and even our Parent Company comcast, all of which have a lot of stuff on the ground which conceivably now as a result of the private letter ruling you could say, all right, lets spin it off into a Real Estate Investment trust and that is why all of the stocks are up sharply with verizon up 3. 5 , and at t up 4 . Now, step back for a second, because we dont really know what it is going to do to the earnings. Nope. We are all making assumptions that the stocks are going up at levels where we dont know whether this is what the Actual Company is going to look like after. I am just warning people that it doesnt and you cant just keep bidding ever higher for this, because at a certain point, we dont know how long it is going to take to do and we also dont know whether a utility could do it. And a lot of changes or the law everses . Well, the market cap appreciation here is dramatic. Time warner cable sup, because comcast is up, and charter is up 2. 5 , and cablevision up 2. 5 , and directv is up because at t is up, and the Cable Companies as well. I would tell the people, if you own one of the stocks, they are great stocks, but i would actually sell some of it, a little bit of some of these, just because, just except they may rush to this now, and if you are in a cfos big picture. And do it as quickly as possible and let Congress Deal with the impact of this next year. And what is going to happen is that lets say that verizon doesnt do it today and should you have a chance to buy it, no, you should not trade it, but the vision is that if you sell it, you should buy it back and these are income producing stocks, and what i am saying is that the hoopla is presuming that everybody is going to do it, and they are all going to do it instantly and maybe that is exactly what happens and then verizon becomes this great Growth Service company, and how many times, jim, have you said that the growth in verizon is slow, and what would verizon look like if it were just verizon wireless, and with the refinanced Balance Sheet, and take something off of it. No, it is about taking something off of the wire business and anything in the ground, but it is sending shock waves through the industry. And these are boring stocks and suddenly trading like biotechs. Wow. Some of the names that are following time warner cable, and comcast, and david mentioned the dtv and they are on a tear the for other reasons. Yes, consolidation, of course. And remember that verizon and you say, well, i was at this, i went to the i gave a speech at the quahog library in long island this weekend and i said, 4. 1 is not anything, but it is 4 , and better than lucky on that call. Yes, every time. Absolutely. And costco has a 2 gain and goldman is taking it to conviction buy and downgrading walmart to neutral, jim, arguing that e commerce is taking the wind out of general merchandise, and dollar store is taking the wind out of broad lines. That is a bad downgrade for walmart. If i read it, and walmart, they are spending to what . We dont know what they are spending to do. And it seems that they are just spend spending. And costco, i like them very much, and the Charitable Trust owns it, but at the same time, i did not see anything, lets say holding the conviction buy in the costco upgrade and it is like, hey, we have to recommend something now, and lets recommend costco. And vp, and the q 2 profit up, and they warn of the impact if the russian sanctions are more serious, and the eu leaders are meeting in brussels and we know they have a 20 stock in them. And we know that when visa reported getting clipped a little bit, but it is the First Company coming out to say, be careful, and also the company most in bed with the russians, and look at the bafs is using the pump to keep the spigot open, but it is the most directly impact ed and it is growth that i didnt want, but there are so many Great American companies. So i dont know if you need to own them right now. And walmart, we announced the deal, and we know it is a volatile name. And 32 new jen keys and remember that people love this stock, and they had that plug power had the huge run and then the Equity Offering and people like the 3d printing again and they like this stuff. Look, people are going to say, top, top, top, top verizon, apped top windstream, and top pollo loco, and all i can say is stop it some stocks are going to go up and some arent. And whole notion of top, and l zillow, i mean, i am telling people to sell zillow right now, so i can lock in the 100 points that i told people to buy zillow and spencer dont take it personally, because it is great and it is something that i should sell. Well, it is down again. And there is an antitrust there, too. How to define the market. And you are okay with me saying spence. Yes, zmen and spence. Yes, and one thing is that how can you like the zillow deal, yep, thats it, recommend it at 20, 50, 120, and im done zillow, there, kaching, kaching, done. And are you done petsmart . And the stock is not moving, but it is some time ago that we were told that janet owned 6 of the company, and this morning they put out a letter saying, hey, we like to work constructively with the boards and work on making changes while the company is public, but given petsmarts chronic underperformance and this is a letter from jana and a sale in this case very likely offers the highest, highest risk adjusted return for shareholders, and that is why we were stunned by the recent reports suggesting that your board is only thinking of looking at a leverage recapit recapitalizati recapitalizatio recapitalization, and that not doing anything to move the stock higher, but they are pointing to private equity and Significant Interest in petsmart at the sale. And the company had fallen behind, and this is a company that is amazond and easier to buy food online and the website is cumbersome, and any one of the retailers when they get a spur from underneath, people start to think, well, somebody is going to take them private, and one retailer that people are angry at me, because i am behind rite aid and then the seller and the changing of the cfo, and riteaid, maybe, too, but there are some companies in the crosshairs if they dont go up. And let me divert to risk arbitrage land and inversions, and two great topics, i know. Looking at the spread in the abby shire deal, and the spread in the covidian medtronic deal. And they are significant. Covidian at over 8, and look at that. Wow. And these are two of the largest transactions of the year, and inversions where medtronic will become, and a abbvie will become foreign to say the least, but talking about inversions and the president of our own network has pushed some people to the sidelines and said we wont take our chances with the idea that you will get something retroactive and that being said, most people i speak to think it is a 5 chance, jim, that you get any legislation or anything that would really stop these deals. No, you are not going to stop them, and i think that Everyone Wants comprehensive tax reform, and that is not going to happen, and it is game on. It is gameon. And i think that people who want to say that the president who talked tough last week with Steve Liesman can play a role, but the only thing they could do is that the irs issues a ruling saying we are not going to let this happen anymore because the irs has that power, but neither body the congress or the president thinks they have that power and look at verizon today. The irs could come out and say, we will study this for all of the companies doing it right now, and every lawyer would say the same thing, we cant, and the irs, we dont go against the irs, but nobody wants to tell the irs to do that. But the irs today with this private letter ruling to windstream, you think that that do doesnt really need congressional approval . Yes, it does, but irs can do what it wants, but it does on inversions which ridiculous. And who cant keep up with the financial inversion. And so we go back to the h. Q. I just got off of the ceo of Merck Ken Frazier and a lot of questions about what is going on with the industry consolidation, and he said no calls from the major shareholders urging one of the big industry consolidation deals and this is in the backdrop of all of the tax inversions, and he called the issue the du jour and it is his job not to take the ball off of america which is 100yearold company, and the eye on the ball is to focus on the innovation to get medicine s s to the market faster, but he said that he needed to reform the fax system, and puts companies at a tax disadvanta disadvantage, and it is looking at the consolidation issues, and also, looking at the hepatitis c getting a triple combo pill, and ken frazier is not looking at one of those big consolidation deals. And everybody is asked about this, jim, and maybe it is business feeling their moment to demand some policy change, some broad policy change. Look, this every time i think of the covidian and medtronics i think of st. Jude coming on the air saying that we are at a di advantage, and a superior medical company not doing one of the inversions. And smith and efew. And alchemies. And where is that . Well, the island, right . Well, they love lebron, and they are in cleveland. But they are an irish company. Yes, you buy the stock here, and it is down and then some company buy them and lower the tax the, and they are vulnerable, because they keep skrug it up. And we are right around the dow 17000 and down to bob pisani on the floor. Well, listen, i dont know this guy, chris pratt who is starring in the new marvel movie, but he has a lot of fans here, teenaged girls and i dont know where they came from, but they are trying to get chriss attention and he walked off of the floor and apparently a big fan base, and i dont understand that, but you know the young stars. They are not talking about the stocks this morning but the bond yields that are so low and sp spanish bond yields are below the bond yields and i bring it up, because when the Stock Traders talk about something other than bond yaels, the spanish below u. S. , and jgerman bonds 1. 11 which is a new low. You want to know how low it is . They were passing it around at the start this morning and this is the biggest thing this morning the full screen, the lowest rate in centuries, germany, and lowest rates since the early 1800s. France, 250year low, and spain 200year low. 500year lows in the netherlands and we all know what is going on here, and we know about the central bank stimulus, and the effect of the low rates and the sluggish growth, but now with the ukraine crisis, we have lower yields yesterday and today. So that the ukraine is having an effect, and of course, we talked about how low the euro is going in addition to the recent weakness in just the last few days here. Lets talk about some earnings, and masco beat on the top and the bottom line and talking about the foss and cabinets, and it is rebounding, but tough time, with armstrong and a lot of the d. I. Y. Companies are having a tough time. And the masco ceo is saying pent up demand for the high ticket items like cabinets, and they are expect iing them to lag as e cop sumers defer high ticket expenditures from the ceo of masco and even though the stock is up, they are cautious on the big item. Three big industrials today, they have one big characteristic. Half of the business in the u. S. And a quarter in europe, and so talking about eaton, and toolworks and paccar. And eaton was light on the revenues and on the downside rather notably, and Illinois Tool Works is car parts, but adhesives and sealants, and they are trending better. And paccar is mostly truck and truck parts and they beat on the top and the bottom line and you can see that Company Trading to the upside. And New York Times missed on the top and the bottom line and they are trading on the downside. One final point, guys, the day before the fed meeting and the drift term that is being used a lot, buy on the day before the fomc announcement has worked for many, many years and act mick papers supporting of buying on the day before the announcement according to academic papers. And we are going to go to Rick Santelli on the market. What an interesting vast Global Market we have on the day before the twoday fed meeting where the talk is on the paper, itis decomplete. And lets talk about the maturity on the curve of a fiveyear on the year to date chart. And you know where we closed last year . 174, a nd so a handful of base where they closed. This is the 10year hovering at 2. 46 and after a lot of visits, we have not closed it at the. 44, but it is coming according to the traders and maybe today is the big day. Lets look at the 30year bonds at a 14month low yield basically since may of last year, and looking at the yield curve, because this is important, and none of this new, because it is going on for months, and the titus of june 13th, and what is that saying about the fed . The tightest since january of 0 09, and looking at the bundes that bob ereferred to, why are the rates going so low at time when the Interest Rates dont seem to help . Well, it is the stock market back to 17000 pounding that. Back to you. Thank you, Rick Santelli. And ceo, kurt kuehn and his companys earnings this morning coming up on squawk on the street. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. 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We are three days away from jobs friday which means another chance for you the nail the n b number and tweet us the predictions for the nonpharma predictions. And go to nailthenumber. And we go back to a momentus occasion, and the reconciliation. And you might remember there was a tshirt to mark the event. And if you are one of the lucky winners, you will get a original sh you will get a tshirt, and look, it has words on both sides. Very cool. And peaches and herb. And you will have until the friday at 8 30 to send the predictions. And the consensus is 284 which is a sixmonth of the gains. Well, another, and i should talk about how the fed has to tighten and the market is going lower to be consistent . Yes. Here, will you sign this. And yes. The fed will tighten and rates will go low. I will pass that on. When is that going to happen . Well, when it actually happens, it could happen. And at some point the market is going to go down and you know how smart i am going to look. And the people are making a look at the u. S. Treasures looking at low growth. I am stuck with the dow up, and look, it should go down, and it should go down, and what good is that to say . It should go down. There. And more stock trading with jim, and the dow is up 37. Dont go away. D come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Having Necessary School supplies can mean the difference between success and failure. The day i start, im already behind. I never know what im gonna need. New school, new classes, new kids. Its hard starting over. To help, sleep train is collecting School Supplies for local foster children. Bring your gift to any sleep train, and help a foster child start the school year right. Not everyone can be a foster parent, but anyone can help a foster child. 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. Go to comcastbusiness. Com checkyourspeed if we cant offer faster speeds or save you money well give you 150. Comcast business. Built for business. And sometimes you see them pop, and you say, what the heck is going on there . Well, one of the things that people are trying to figure out there is who is going to be involved in the iwatch, this apple launch, and the chat ser that ibi may have a Wireless Charging station and a good number last night, but one thing that people have to recognize is that if you have a apple contra contract, you will lose the apple contract if you mention apple. So it is interesting if you do the homework and look through it, all you will see is the Tech Publications that mention that they could be built into apple, and that is what is drive the stock, and matters tremendously and a Wireless Charging station, where do i sign up for this . I am as josh said, tired of plugging things into the wall. Can i stop plugging things into the wall. One day. One day. And what is on mad tonight . Well, we are at ground zero of the companies trying to bring out the value. We have Waste Management dave steiner, and richie perry, my old tutor at Goldman Sachs is going to be talking about doing a growth. And they could pursue Master Partnership partnerships. And yes, john faraci at International Papers and Martin Richenhagen of agc osho, and th trading is unreal. I like windstream very much, and my job is to widen up my ideas and look at the tax code, because everybody who knows the irs knows that the tax code is about five books. I have to study. The ca illac summer collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. In a we believe outshining the competition tomorrow requires 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. Welcome back the squawk on the street, and we have the july read on Consumer Confidence and buckle up, this is historic, 90. 9, and yes, you read it right, 90. 9, and this is the best since october of 07. It is just off of the charts better than expected. So obviously, people on those surveys must be long treasury, and simon hobbs, long hobbs. Well, that is one hell of a figure, and it is day one of the fed meeting and what does it mean for the future of the markets . Our senior economics reporter Steve Liesman has more of what to expect, and steve, more importantly, the results of this months fed survey. Yes, simon. I want to show you the respondents predictions of stocks and bond ss and the outlk for the Federal Reserve. Looking at the outlook on stocks and bonds, they see the s p 500 getting above 2000, but by december just at 2000 and plus 22 points, and by june of next year, 2053 and the end of the prediction of 2015 is 2075 and the percentages are 1 , and then about 4 and then about 5 , so no terrific gains predicted by this group. The good news is that these guys have been wrong. Look at the predictions for this year. They have begun the year predicting that we would end at 1857, but look at a, that they are not much here. And looking at the outlook for the 10year yield, and that has come down as well. Current 249 and looking for 2. 8 , and 3. 8 by june, and up by december of 2015, 3. 4 . This is the outlook for the Federal Reserve and looking here, sorry, the cpi forecast fir first, and they have raised a quarter point from the last survey, and june and july, lookinging for the 2 inflation, and it goes along with the j general sense that inflation could be running a little bit hotter than before. And now we look at the fed forecast, and that is up 30 basis points from the prior survey, and you can see that is the april number 0. 97 and now 1. 05 and looking muted for the rest of the year, but that is right on line with the fed Economic Outlook along with where the fed Fund Futures Market is, and we also asked folks, is this going to end well or badly . And this whole experiment in Monetary Policy . And it is equal, 34 say it will end even, and 34 , saying it is going to end bad ly. And now,b looking at some of the comments. This one from kumar, we maintain quality and maintaining cash reserves. And this one, ceos are very concerned about the longterm prospects of the u. S. Economy and not making longterm investments as a result. That making stagnation light situation for the u. S. And then this one, by year end, labor shortage is going to be appearing, and all of the conditions for the fed tightening will be in place. Sarah, one thiam throughout the survey is that a whole lot of folks are thinking that the fed is behind the curve. Back to you. Yes, that is the mantra of the moment. Thank you. Thank you. And meanwhile, the stocks are pushing higher today and the dow is up 46 point, and lets bring in the managing director and chief managing director with jefferies. Obviously, we ve to talk about the fed, but what about the k Consumer Confidence number of coming in above the 90s and the treasurying pa ining pear ing the gains and does that concern you . Is. Well, it is the part of the economy that has lagged pick up, sarah, and sort of a tale the of two cities with the consumer being a drag and the businesses sort of waiting for the consumers to start up again and the Balance Sheets to get erepaired, and it seems that some of it is coming through, and that should be good news. Maybe it is going to take longer, and we have seen it, seen some surprises to the upside before that have not come through, but it is fantastic news. And i know that you have been sup p supportive of the federal ereserve of the quantitative easing defending ben bernanke and janet yellen and do you believe there is a surprise this week, and obviously, we will hear from her, but no statements to recognize the better data on the unemployment, and the creep on higher inflation . Well, you have discontent on the committee, i think, so you have a few people who may throw out some dissenting voices. Largely, president s from districts that dont really matter, but it could get the market a little nervous. And you know, we have all sort of hoped for a mistake or a misinterpretation to get some volatility into the market, because there has been a lack of that, but, you know, i really without a misinterpretation, i dont believe we will get anything done in the meeting, because it is offcycle and we dont get the s p forecast, but we will have have an exciting fall, and end of the taper and the guidance into the next year and the data is looking a little bit better and the gdp report is biggest wild card this week coming in negative 2. 9 last quarter was a shock to everybody. That could be, that could be very high or very low and get some people sort of hot and bothered. So i am more focused on the gdp report this week and the payroll at the end of the week and eyeing the fed. And a it seem s ths tha s ja not want to upset the market, a san diego that because she is dovish or because she feels that the conditions are hence ripe at the condition and only signal it when we have to . Well, i dont know the word super dovish is the right one, but it is closer to accurate than just dovishch dovish. She does have strong leanings towards repair of some of the damage of the labor market that took place in the crisis. She sees history, and she sees slack, and she sees a lot of suffering and i think that and the policies, david, are they really doing anything to address that . Well, i think that they are. And i think that they are starting to see the u6 Unemployment Rate coming down, and that is a factor, and we are starting to see the parttime for economic reasons data that was extraordinarily elevated come down. It has been slow, and the Consumer Confidence data is a positive. Look, we have all been waiting for the consumers Balance Sheet to be repaired and the house prices to go up and get people back to some sense of normalcy with the debts they accumulated in the 2000 housing bubble. It has been slow and we fix ed the debt markets in the corp rats and fixed the debt markets in the institutions and in the governments in many ways borrowing at recordlow rates, but a lot of the stimulus did not make it to the consumer, and it is unfortunate and what is taking a while in the u. S. But look, i remain optimistic it happens over time, and unfortunate it did not happen in a more symmetric fashion, and it is working. I think that janet is focused on the basic idea that there is little wage and price pressure, and so she can can take a bet here. Well, that is a slightly subjective view. David absolutely. And david, cominging a back to the policies, jackson hole in three weeks time is under heat, because they have not invited the big constitutional economists there from wall street, and so there is a speculation that they will take an exit strategy to rebalance the Balance Sheet or raising the rates and is it possible to the have that conversation without upsetting the market . No, it is very difficult. We saw the ticker tape markets, and the fed underestimated how the guidance would feed its way through the back end of the yield curve and came back without a september taper, but december because of that, and with are seeing the housing data weaker than we would have because of the rate rises, and yes, it is healed somewhat in the longterm rates coming down, but certainly, i think that they were shocked at that, and they are going to be very, very cautious about how they tween market off of this wonderful antidepressant that we have been on called qe for the last five years. Yes, david, you mentioned that you are paying close attention to the gdp tomorrow, and this is particularly exciting week for friday jobs and reserves as well, a nd are the gdp and the jobs telling a different story for the economy and what are you expecting for the economic numbers . Well, my colleague has been playing this out for a long time, that the gdp data is tell telling you a different story from virtually every other piece of data out there, and that is why there is a risk of surprise and the medical payment side of it and some is of the intricacies of the data and the aca coming online have made it a complicated story. So there is potential for something to come out that is surprising to the market. It has been inconsistent, and either we are going to see one story or another story develop, and based on every other piece of data, things are looking b better than what the gdp data may be telling us. So glad to have you here for that, david zerbos of jefferies. Thank you. And now over to Bertha Coombs. And we have a lot of earnings and big movers and to be those, the stock is moving lower after the company saw the profits slip as print advertising fell 6 for the New York Times. New york times trading off by more than 3 at this hour. But a different story for level 3 Communications Service provider and gaining ground with telecom today among the best performers and off of the higs s after reporting a better than secondquarter earnings, and gaining in the Core Services in the north and latin america, and it is up over 5 on the day at a new 52week high. Carl . That and windstream will get you action in telecom. Thank you, bertha. Uber is making life easier for travelers. We will tell you about that. And two dow components beat the street, and we ehave the numbers from merck and pfizer and we will tell you why at t is up nearly 4 . We will be right back. 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. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Uber is debuting a new business called uber for businesses to make it easier for people to get to their businesses while traveling. And josh has more on that. Well, carl, uber is taking aim at business travelers here, and a new service to let the users build to bill the travel directly to the business. They can toggle between Payment Options meaning that the business options can be expensed while personal stays personal. They are partnering with American Express offering partners Double Points on rides and also with 25 million customers, this is a Growth Opportunity for them. They are valued 18 billion which is the size of hertz and avis combined. It follows a similar model from abbive who conquered with his own service for business. And both are trying the cash in on the fastgrowing market for travel. The industry expects Corporate Travel to generate 1. 2 trillion in revenue up 7 from last year. Uber is available in 160 cities around the world, and the ceo travis calnick says that the revenue is doubling every six months with faster startup this year than last. But it is coming at a cost with the growth, because uber is facing a fight with the drivers regulations as to adhere to other taxi services, and there is a come petition from other groups like lyft. So will groups adopt them as quickly as the consumers have for business . Well, later on in the morning, we will have more on squawk alley at 2 00 p. M. And now, we are joined with all of the details of merck and pfizer, because of all of the activity, meg. Yes, sarah. I got off of the phone with merck ceo ken phrafrazier and ag him about the doles and questions from the investors and whether they will do their own inversion, and he said, no, no calls from the major shareholders wanting us to do a large industry consolidation deal, and he called conversions, the issue du jour and he said that the u. S. Tax system needs to be reform and puts u. S. Companies at a disadvantage. For merck, their revenue topped estimates bs estimates, but the pharma sales were down because of some of the loss of the patent exclusivity in a couple of the major drug, but seeing growth in some of the new drug, and down the poipline is immunooncology which is the new drugs. And also, coming to gileads new pill zuval deshgszuvalde coming. And now for pfizer, there is a guidance due to celebrex and they have other drugs coming out related to breast cancer, and also new prevnar 13 for adults and could they come back to make a bid for sastrazeneca, and all of those details will bon the call. Back to you, simon. Yes. And coming up, equinox planning to buy more gyms and expand the luxury footprint, and it is being called a major play, and the ceo of equinox will join us live and exclusively. 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. Yyyup. With xfinity internet soyour family can use all their devices at once. Works anywhere in the house. Even in the garage. Max whats going on . Were doing a tech startup. Were streamlining an algorithm. Were going public [cheering] the fastest inhome wifi for your entire family. The x1 entertainment operating system. Only from xfinity. One of the biggest players in the luxury gym market is expanding again. There is going to been a expansion in new york and l. A. And d. C. , and plus a purchase of the reebok sports clubs, and equinox ceo is on tour of one of his clubs and joins us from the sports club in l. A. , and the empire expands again . Yes, simon, thanks for having me back and our business is continuing the grow, and we are excite excited about the acquisition, and on and off acquisitions for better part ofs so it is great to bring their trophy assets to our club members going forward. And this is the Second String of acquisitions from the Millennium Partners as you inferred there, and i am not sure that you can confirm this Purchase Price of 10 million, but it is 18 million per gym, and if you are in miami as you are talking to the staff, how are you going to drive profitability to make the Purchase Price worth it . If you go back to 2011 when we bought the three clubs in west coast and the one in Rockefeller Center for total of four, at the time we paid full price, but these are big clubs with a lot of Capital Invest ed over the years, and mostly 100,000 plussquare feet, and so it was the Purchase Price of what was invested a on the opportunity for us. If you look back to 2011, it is a Great Success for us, and the profitability of that business has doubled a and the personal training business has doubled and so it is bumpy at the beginning, but it is now integrated and the members are happy and the retention has improved and so it has turned out to be a good investment, and we hope the same for this time around. And you have acquired sole cycle and yoga and budget blink fitness and still owned by the real estate giant related which is huge certainly in this city. Does this make an ipo more likely now, and is that where you are heading . Well, you know, simon, i know you have asked me this before and others have, but obviously, we get the calls and the incoming, but we have no plans of going public. And simon goes through some of the names of the portfolio, and trophy property, and highend gyms and is that opportunity, and do you have more opportunity to expand to the lower priced gyms such as in the mainstream . Well, the middle is not the place to be in a competitive industry, and so we have had Great Success catering to the higher injury, and blink is more fitness for everybody, so we dont see the opportunity for us, and others are out there, but we wont come down, and if anything, we are looking to elevate the portfolio as we inv invest in the existing and the new locations. And one of the Major Investments is in the technology, harvey, and we have spoken about it before and we are all waiting for apple iwatch perhaps in september, and what is the new mobile app that you v have lawn. Ched do that it didnt do before . Well, the new app does a lot of things, and it is really phase one. We wanted to get in front of the members and the commune tate large, but one of the things that ties into, you know, what apple and others might be doing, and i am still wearing the jawbone is the tracking ability. So now with the app if you use one of these devices, you can plug into the app and track calories, distance, sessions. So with the beginning of us assist ing t assisting the members in what we call the quantified self and helping them to optimize the performance and we have been about High Performance living, and this is another step in that direction. And you, changing the direction slightly, harvey, it is reported that you and the parentrelated may save the city bike program not just in new york, but eight other cities as you buy a 51 stake it said of that operator, and can you confirm whether that is the on the cards or whether you are troying the do that sort of deal and if you are trying to do it, is it about branding or trying to ensure that there are thousands of bikes in any city exactly where you want them . Well, so we have formed recs ventures to pursue opportunity thes and incoming and recs ventures is owned by the ventures of related and myself, and so one of the first conversations has been citi bike and i can confirm that we are in advanced negotiations, but no deal done at this time. In terms of how citibike interfaces with equinox or other brands is to be determined, and we are not doing it necessarily for that purpose. And sorry simon. Why is this deal taking so long . Who is dragging the feet here . Well, you have a lot of people involved, you have the city of portland and the city of new york, and buyers in portland and constituents that are buyers and there is progress. Thank you, harvey s peshgs evac spevac joining us from one of the gyms he just acquired. And we will talk to the cfo of u. P. S. When we return. And we will talk to the cfo of u. P. S. When we return. The cc summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. When the world moves, futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. 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. Lets send it over to Bertha Coombs for a news flash. Caterpillar and the stock is rising today on the news that the company is agreeing to purchase stock from where it is right now. Thank you. And know logistics at the giant continues to grow, but u. P. S. Mi missed expectations by four cents per share, and missing the guidance due to the fact that it has a 175 Million Investment to the prevent a repeat of the delivery turmoil that everyone experienced last christmas. Joining us on a first cnbc interview, kurt kuehn who is a member of the cfo council. Thank you, kurt. Good to be here, simon. A lot of moving parts here, and i am trying to understand the underlying state of the business, so pricing is up, but what is happening to the margins . Well, it is an interesting time. We are seeing the strongest growth in the domestic business that we have seen in over a decade, and certainly, the e commerce is driving a lot of it, but we are making at the same time Big Investments to expand the capacity and handle all of the growth, and that is why you are seeing the mixed growth economically and growth in demands. And there is still clearly a problem of the volumes growing of dealing with the volumes and we saw it before where you have to go to the third parties and buy in expensive operations to get it moving, and this time it is in europe. Are you satisfied with the way that you are dealing with the volume and planning ahead . Well, we have seen strong growth. I mean, shipments moving across european borders are up 13 this quarter, and that did put a little bit of the squeeze on us, and so we had to buy shortterm capacity, but the longterm, this is a great problem to have. U. P. S. Has a great history of bringing that growth to the bottom line. We are going to be investing in automating the facilities and adding capacity, and we are very confident as we are caught up on that, we are going to be in great shape. And hone in specifically on this 175 million that you are spending to ensure that you have the capacity after thanksgiving and moving through the holiday season. What exactly are you spending the money on . What is going to make the difference this year around . Well, yeah, it is a combination of things. We are investing with technology to more deeply integrate with our customers so they can forecast volume, and we can plan for it during the holiday peaks. We are expanding the operations on the day after thanksgiving to smooth out the spike that happens with that very busy holiday for the weekends. We are adding new facilities and adding some temporary capacity that we can use from yeartoyear, and so allinall, simon, the new acquisitions will allow us to operate more effective, and the other half is sorry. How much of it is i. T. , and the ability for you the zone in on the Enterprise Software of say a customer like amazon and see at the point of the click whether it is coming your way . Yeah, those are important technologies, and we invest over 1 billion a year, and certainly a good portion of that is focus odd then customer alignment. That way they can show their customers exactly where their goods are even if we have not received them yet, we will know they are coming in advance and keep the ecommerce and the consumer satisfied of the status of the shipment. And hey, kurt, cfos keep coming up in the conversation lately and this morning it is about reits and mlps, but it is about tax inversions for the past few week, and have you guys had any discussions about either of those paths and can you imagine a day when u. P. S. Would pull either one of those triggers . No, i dont think so. We are happy based here in the u. S. The issue though that we do feel strongly is that the United States needs to rationalize its co Corporate Tax structure. Today, there is such a huge spread between the u. S. And the rest of the world that, you start to distort the decisions, and do things based on the taxes rather than business fundamentals, and all we ask is that as an americanbased company is to give us a relatively level Playing Field so that the taxes dont drive the decision, but economic benefit does. And some might argue in turn, you are getting a workforce that is skilled, and you are getting a rule of law and clarity and transparency and relatively speaking of the financial mar t markets and is that worth anything or all about taxes now . No, i think that the u. S. Is a great place to be and it has all of the strengths and it is sad to see that because of this, the u. S. Being so far out of whack, we are creating, you know, behavior that in some cases makes no sense. As a Corporate Citizen of america, we are pleased with the strengths and the bullish, but we are seeing that, you know, the big spreads in taxes really put the u. S. Companies at a disadvantage, and they are forcing in some cases forcing them to make structural differences. And what about the legal system, kurt, because the rival has been indicted by the d. O. J. Of what is in the package, and prescription drugs that should not have been sent by fedex and robustly defending that saying that we are not the government. We are a logistic service, and you of course, did a deal, and you settled with the d. O. J. For 40 million last year. In hindsight, was that in share hoe sharehold ers interest or should you have taken them on . No, we think that u. P. S. Followed the prudent approach. You know, there were some areas that we needed to improve our control and understanding of what is going on. You know, our responsibility isnt to inspect packages, but if there is a suspicion that comes up that there may be an illegal activity happening and goods moving through the network, we need to communicate that and being diligent in making sure that the network is being used for legal purposes. Good to see you, kurt, and thank you for the time. Kurt kuehn, the cfo of u. P. S. Thank you. And now back to a story that we dont often mention, but it is having a broad impact on the telecommunicationrelated companies this morning and that is windstream. It is a Telecommunications Company that has received a private letter ruling from the irs which says that you can do this which is proceeding with a transaction in which it will transfer its existing fiber and copper that is in the ground, and other real estate assets into a publiclytraded Real Estate Investment trust. Why is this important . Because in the case of windstream, they will offer shares of that reit to their own shareholders, and that reit will then lease the equipment that it has to windstream receiving 650 million a year, and perhaps more importantly, what it will then allow it to do is to take on debt at the reit which will then be paid to windstream which will allow it to significantly reduce its debt by 3. 2 billion in fact, and thereby increase its Free Cash Flow significantly, and allowing it to invest in other potential growth initiatives, and why the impact broadly for telecommunications . Go through centurylink, frontier, and then the big guys, at t, and verizon. Dont stop there. Cable companies that also have fib n fiber in the ground, our parent comcast, cablevision, all of the companies, level 3, they are seeing significant moves up in the stocks, because of the idea being that if the irs has signed off on the basic idea that copper and fiber in the ground can be treated as a real estate asset, you could conceivably see similar transactions pursued by the names mentioned. Will i happen . I have no idea, but right now the vin toes or thes are taking the approach of, hey, lets buy some of the stocks, because of the possibility that you could do it, freeing up enormous amounts of Free Cash Flow for the companies were they to pursue the same deal that windstream has gotten approval from the irs to do, and of course, its stock is the biggest performer in terms of 23 or more to the upside this morning. Yes, quite a move on the chart. David, we will keep an eye on that. And makes you wonder if anybody is going to be paying the Corporate Taxes ten years down the line, really. Well sh, on what is left, but is the reits who do pay out most of the earn togs tings to the h who dont pay a lot of taxes, yes. And speaking of the taxes and m a and inversion, and what lies ahead . We will be joined by the head of m a at citigroup when we return. Hi can i help you . Im looking for a phone plan. It has to be a great one, and i dont compromise. Ok, how about 10 gigs of data to share, unlimited talk and text, and for a family of four, its 160 a month. Wow, sounds like a great deal. So im getting exactly what i want, then . Appears so. Now, um, im not too sure what to do with my arms right now cause this is when i usually start throwing things. Oh, thats terrifying at ts bestever family pricing. For instance, a family of four gets 10 gigs of data, with unlimited talk text, for 160 dollars a month. Then boom. What happened . Stress, fun, bad habits kids, now what . 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Global m a has surpass ed the trillion mark and that is the highest mark in seven years, but the key question, is will it continue at this rate . Joining us is mark shafir who is the head of global m a mergers. And it has been a year since we have sat down. Yes, quite a year. And put it in perspective for me, mark, busy as you is seen it . Yes, as good as it has been in the financial crisis in the 2008 period. And so the transactional deal is driving the flow. But we had the second highest volume in the firms history two weeks ago. So it is big and seems sustainable. And i have concerns about the pricing, but beyond that, we are in a real cycle. And it is driven by the strategics, and we dont typically talk about the private equity guys, but in 2006 they were one of the Record Number driver drivers in m a. And it is about the strategic deals and obviously other things going on with the inversions, but quite clearly, again, it is the high end of the market that is driving this. We dont see anything that is going to stop it at this juncture, because the macroeconomy is better, and the desire of growth from the industrial base, and the benign capital markets, and all of these things fit together and created a cocktail mix. And you say you dont see anything that will stop it, but you did mention valuations. Yes, valuations. I am looking at the slide that you sent my way and that is scaring me when i look at the multiple of eby ta ebita going to 12. Well, if i step back from this, i can see that the concern from this is in previous cycles when you hit the peak pricing towards the end of the cycle, that is nervous to me partially driven be by health care and the valuations that we are seeing, could it shorten the cycle if the pricing is to the point where the buyers start to the revolt or react. Should i be worried as a investor or buyer that the strateg strategics are getting too much in animal spirits and overpaying . Well, they are financially creative and the questions of the return on investment accounts are harder to justify, but on balance, it is too early to call it, but i do believe it gives me pause for concern. And inversions, again, they have been one of the engines behind some of the biggest deals. Abbeve shire, and this morning in New York Times, my buddy takes a shot at the bankers, and to many, i dont feel good about this, but this is where it is going and what the clients want to look at them, and that i will doing them, and are we going to see more . We will. It is about 6 of the volume yeartodate and ten large transactions and mostly, david, most of the stuff i see are strategically driven and i have not personally looked a at situation where somebody says, i want to do a tax inversion, and go find me something. That is not the way it is worked. You can raise up the Public Policy issue, which is legitimate, but i dont believe that sorkins piece is fair. Why not . We are in the environment where the rules are what they are, and as i said earlier, the Public Policy issue is legitimate issue, but it is incumbent on the congress and the president to change the rules and not us. And you will do more of them. I assume an ave lalanche of the because people want them closed by the end of the year worrieded a about the legislation next ye year. More to be coming . There will be more, but i dont know if it is a lot more. It is the flavor due j du jou for a while. My strategy is about growth and Financial Strategy and not inversion. And you to well, we can debate this until the cows come home, and there is other things going on and activism is very interesting and you know my views on activism, and we need better disclosure and the holding periods. I think that the pendulum has gone too far as we have done it sglpt and you have moved away from the inversions because you dont want to talk about that anymore. Right. And today, we see petsmart, and there is activism of companies doing things that they dont want to do or perhaps more quickly, and it is here to say, so what is your problem with it . Well, it is about disclosure, and the 10day window has to change to the post 13d filing and we need disclosure on the derivatives. Expla into people what you mean. If 2 of the company can dictate to the other 98 how the Corporate Governance is done and the strategy and the return of capital, there is something wrong in the system personally. But many times the activists will say, that we are speaking for the lone institutions who cant speak up, and that is because they are so lliciting t 401 k Pension Funds from them. And they are getting more vocal and standing up for themselves, and the companies are make them do more on the governance side and get away from the proxy services, so it is a misnomer. I brought up, dell, and i wont, but lets end on the private equity guys. They are nowhere to be seen and i have heard a lot of them are worried about valuation, and doi doing the exits and not a lot of the big deals and why not . Certainly more on the exit side side, but the volumes are up year to date and not as robust as it was as you pointed out six or seven years ago. There is, i think that it is harder to find the inventory and compete against the synergys. And obviously f they have a platform or a suite of assets to find the synergy, it makes a difference, but this is largely strategic and transformational markets. Rates go up, this comes to the halt . Well, it depends you tell me if we get disruption in the bond market, and if so then we have disruption in the equity markets. That is a concern. Okay. Thank you, mark shafir. And now, coming out of brussels, there is going to be more sang is shuns imposed on russia. This was confirmed by Prime Minister cameron with president obama yesterday. What is interesting is that they have move toind the positive session currently, and so it looks as the Market Impact on that call is muted. We will keep an eye on that for sure. And when we come back, uber is targeting business travelers with the new business focus. We will talk to the svp on squawk alley when we return. Businesses can operate tax free for 10 years. No property tax. No business tax. And no sales tax. Which means more growth for your business, and more jobs. Its not just business as usual. See how new york can help your business grow, at startup. Ny. Gov for that moment, where right place meets right time. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. 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In fact, incredibly difficult. If you go back, weve been under a, quote unquote, stimulus regime the past seven years. First a monetary stimulus in october 2007. To undo seven years of persistent manipulation and intrusion will be incredibly difficult, not the least of which, the invedable size of the feds footprint in the marketplace. If i really pushed you and said, okay, listen, jeff what is the percentage that you would give that all of this central banking activity will turn us to normalcy without any glitch, any bump, like everythings going to be smooth sailing . What percentage would you give that outcome . Pretty close zero. Look, weve already had numerous ep sides of qe. Banker around the developed world intruding in every marketplace and none has gone to plan. Look at gdp growth here in the u. S. , since qe 3, gdp growth increased half of what it did beforehand. Were supposed to ignore the negative gdp print in the first quarter, but that indicates something far more serious than just an economy returning to normalcy. You know, jeff, i get sent one chart almost every day, sometimes three times a day. Sometimes more. Its an easy chart. Dont even need to show. Its a chart of the Balance Sheet of the fed against the level, for example, of the stock prices. Now, in the last few seconds that we have, you know, why is it that something so easy to comprehend is dissed by so many intelligence market whisperers as to say that, no, it doesnt matter. That isnt the driving force behind things like equities . Well, i mean, look, the fed has never correctly or adequately modeled Financial Markets and they dont see the inefficiency. Thats what it is. It comes down to Central Banks create a lot amount of inefficiency they dont model for and therefore dont think exists. Thats what happens. The economy grows more and more efficient, as they destroy essentially price discovery. Now, we dont have much time left, but as i look at yields and in places like spain, even in boons move lower what are those markets telling you, for our last question . Those markets are telling me that they buy into the premise that the ecb will come in, if needed to, and enforce essentially a narrow band on the marketplace. There is a floor under bond prices. It doesnt tell us anything economically. So there isnt a lot in terms of relevant price discovery or discounting, but it tells us the market kretdably believes the ecb will buy bonds. So take it for what its worth. Excellent. Thanks for taking the time, jeff. After we read the statement well have you on again to see if theres any new to parch. Sara, back to you. Thanks, Rick Santelli. Over to Kayla Tausche with a look whats coming up next on squawk alley. Sara, uber is gunning for the business crowd. We will talk to the executive in charge of that effort to talk about how exactly the Car Sharing Service plans to get there. And, of course, twitter reports earnings after the bell. Were looking for money. Were looking for monthly active user, but else what else should you watch for . The lowdown on twitter. Finally, why did investigators go to microsoft the office in china . To their operations be in jeopardy there . That story and much more on squawk alley in just a few minutes. Ss. 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. No question about that. But your erectile dysfunction that could be a question of blood flow. 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Ask your doctor about cialis for daily use and a free 30tablet trial. Were just three days away fra jobs friday. You know what that means. That means another opportunity for you to nail the number. All you have to do, tweet us your prediction for the july nonfarm payroll. Use our handle squawkstreet, dont forget the mailthenumber. If you win, youll get a piece of history. One of the original tshirts we printed to commemorate, reconciled. The moment of reconciliation. Presenting the tshirt to icahn and ackman. Here it is. Were going to sign it. Turn around. Im going to sign it on your back. You can win. Seriously, a lot of optimism going into this. I thought were you putting it on a trader ep back . Im doing it on yours, simon. Jobs market tightening up there there we go. I get to do it on your no. Im wearing white. Carl, with that, before he gets to sign it, over to you for squawk alley. Simons finally useful. I know. Tell me tab. 8 00 a. M. At headquarters in san francisco. 11 00 a. M. Here on the east coast. Squawk alley is live. Good Tuesday Morning. Im Carl Quintanilla with jon fortt, Kayla Tausche. Squawk alley this morning with the dow up 41 points. Busy day for tech especially given the twitter posts tonight after the bell. Julia boorstin joins us from san francisco, talking way ceo in a few hours. Good morning, carl. The bar is high for twitter following facebooks better than expected earnings raumt out last week, and after a recent management shakeup, twitters ceo is under pressure to show growth in two key areas. First, monthly active users, where growth has been slowing. This quarter, twitter is expected to get a boost from the massive global conversation about the world cup, expected to add about 12 million user to grow at about 267 million. The question, whether theyll be able to staunch the turn and hold ton those new yeusers, second, average revenue per 1,000 timeline views. How much money twitterar