Transcripts For CNBC Squawk On The Street 20140815

Drinks, cocoa la looks to the new normal. The last day of the trading week, overshadowing tension at the ukraine border. Jcpenney, a reversal, jcp, higher sales, better margins, and shares up nicely in the premarket, david. A story breaking yesterday, cocacola required a stake in monster beverage for 2. 2 million in cash. Under the agreement they have two directors on monsters board and transmit business to monster, and they transfer nonenergy business like hansons natural sodas, peace tea to coke, and theres a new Distribution Agreement between the two. This is what cramer said about the mellow drama last night on mad money. I took a lot of heat a month ago recommends you buy monster because i thought cocacola was acquiring it. Not just on the heels, they downgraded the thing. Tonight, they paid 2. 1 billion for a 16. 6 stake in the company, sending it soaring. My man, jim, on july 10th, had a detailed recommendation in speculating perhaps coke was interested. That speculation has been around for quite some time. Whats interesting is coke chose with the last two deals, cocacola, company easily bought Green Mountain or monster if it wanted to, maybe not in the case of monster, hostile, but took the roots of significant stakes with partnership agreements, already bought more of green excuse me, Green Mountain, and they can go up to 25 here with monster. Interesting way to capture upside without taking all the risk of the accusation for a company with the wherewithal to do it. Remember april 2012 . Late stage discussions with monster . The journ reported it was near a deal, i didnt get the sense it was close, but at the time, monster stock price shot up 20 , and it was only at 65 then. Look at yesterday after market, nearly 900 a share, you wonder should coke bought them outright with the chance at a lower price before the market got to where it is. Obviously, it wants those more ogranic brands. It does not necessarily want the entree into the Energy Market like monster would have provided if you bought the whole thing, but its interesting this is now cokes new normal. Bringing the portfolio to a certain extent, distribution is important, and benefit if, in fact, theres increased sales of the energy drink, seemingly going only one way. I dont know if you use the drinks at all . I would literally have a heart attack. I could not, no. Cocacolas in the money on the deal. Do the math, right . 16. 7 for 2. 15 billion values them under 13 billion. Market cap before open just under 12. Theoretically, the stock should be at 13 billion. With the move today, a market cap will be at 15 or higher billion dollars so either the market is adding more value simply because coke is involved or cocacola is just bought a nice premium for itself. Right. Benefitting there as you see the shares, thats not insignificant given the talk of the company with 403 billion shares outstanding, Something Like that. Providing a Reliability Source of profits. They negotiated and previously, coke distributed half of monsters product, and analyst said it could be that monster was responsible for up to, you know, a quarter, 15 to 20 of cokes operating profit by next year. Yep. This is a very important strategic relationship for coke before the deal happened so making sure that you have that profit captive Going Forward when this speculation around who would eventually buy the company is rampant. Making sure coke has that is important. A lot of cash now at monster. Interesting. People noted they stopped buying back stock in the last quarter, and they noted that because typically they do, and inside r stopped selling as, hey, pay close attention, a deal of some kind is coming. They have cash there including the 2. 1 billion they took in. Unclear what theyll do. Happiest man in the world today. Owner the red bull. Thats whats that Company Worth . We dont know, its private. Think about the valuation how this values his company. Hes got wings today. Thats for sure. Not just from red bull. The dog days of august not proving rough for stocks. We dont care about what happened, but what is likely to happen. Lets bring in the chief economist of Deutsche Bank and, guys, welcome. We like to talk about exciting, sexy, shiny, and pretty. Boring, according to your research, is the new sexy in the stock market. Explain. Look back two years ago, exactly two years ago, we began really a risk on market, and that coincided with not surprisingly, the beginning of the latest round of qe. If you take the standard and poors 500, take the most risky, highest beta stock, they are up more than 70 . Take the safest route, boring stocks, those are up 30 . You have this risk on market for two years now. Thats going to switch now, obviously . Well, it runs in cycles. You dont have risk on, risk off go on forever, and we are coming into the second part of the year here where the fed is now going to wind down qe. Qe was what contributed to the environment, perhaps the end of qe and two years running now, higher valuations, might mean that this is off. Before the segment, i ran a search, 14 s p 500 stocks trade at more than a hundred times trailing earnings. I know thats trailing earnings. How worried is Deutsche Bank about the market . No. Were not worried. Weve been constructive for a long time. In fact, simon was giving us a hard time with s p around 1250. Youre not the first person to tell me that. I had to give him a zing because hes not here to defend himself. The economy is improving, growth should accelerate, feds not raising rates yet, supportive for higher equity multiples, stocks are rich, but its the case in all these markets that the broad market ps look good. Companies like macys and walmart warning about the consumer thats not spending money despite credit, and data like today, the Empire Manufacturing index fall when it was expected to rise, arent there some data points in the market not going in the direction that support that thes thesis . Sure, thats always the case. The growth to 50, highest reading in over a year. Theres pockets of strengths and weaknesses. Even when you have strong economic growth, we just had moderate growth. Its not unusual. So what do we do then, kevin, the last quarter of the year, last couple months of the year, what do you advice clients to do . Were overweight equities, because like joe, the data we see it moving in the right direction, but we are cautious about linking the calls strictly to multiple expansion or say that in english, please. In the long run, its about the economy, the economys growth rate drives stocks. Look at the economy, its doing fine. We expect positive returns, but weve moved the market, i think, moved a little bit ahead of the itself. Multiple at a premium compared to where it has been over ten years. We could see a pull back, volatility to your end. We have to be careful. Great quality companies, excellent Balance Sheets, reasonable price, stick with that, you do fine. . Bias to the u. S. , though . Seems like every time we had volatility, expected the fed, but its come from tensions abroad, and so even while people say growth in europe could come back, well, no, not yesterday. Emerging market, no, tensions in russia and ukraine. Does this make you think just stay in the u. S. . Stay in u. S. Equities for the long haul . Our call has been to focus on the u. S. As we go into a period of time where the fed begins to raise Interest Rates, that would bode well for the u. S. Also, im cautious to say abandon emerging markets all together because they have under performed the last couple years, and look around for value, its one of the few places you can find value. Joe, talking about the rest of the world, i mean, europe may be going into another recession. I dont know, maybe overstating it, but things are not great, japanese down, and contraction in terms of credit in china. Not to mention, 1 Interest Rates in germany, 2 here, and speculation moves in as people look for yield, and thats getting more worrisomisomworris. That give you pause . For sure. Theres a handful of stocks in the s p that are rich, but 317 bond yields is insane. Buicks economy is on track to generate best job growth since 1999, Unemployment Rate 1 half a point above the trailing average. Its moving down. The u. S. Remains an oasis of prosperity, and the overvaluations when the fed pulls back, people say we are doomed. Back in 1994, we fell 9 when we fell 9 back in 1999 when they hiked, and well have a 7 to 9 correction at worst, and stocks will benefit from the inflow from treasuries or bonds in general into stocks. We have had 4 trillion of inflow in the bond market in eight or nine years. Its unbelievele. To be clear, though, you anticipate a fed led pullback at some point of course, yes. Ultimately a buying opportunity. Absolutely. Steve agrees with that . I think its fair. We look at the broad set of Economic Data, and what you have as a problem is you got the fed looking at the Economic Data determines what to do with monetary policy. At the same time, you got the economy that is cueing monetary and how it proceeds. You have circumstance lal logic going on here, and the market will have a tough time figuring it out, and the fed will have a tough time. Interesting 12 months. When fed moves, rates up, financial engineering, companies have to spend more, which is long term bullish, fed pulls back, initially its a scare, that, i think, is bullish for Risk Appetite investor of main street confidence. All right. Thanks, guys, very much appreciate it. Sorry i didnt wear the pink pants. Next time. I like the tie, though. Thank you, i toned it down a bit. Have a great weekend. Jcpenney posting better than expected results. Should you buy into the turn around . The battle for teslas giga factory, pulling out all the stops to land it in his state. We have more squawk on the street live from post nine coming back right after this. A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com 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. July Industrial Production capacity out up four tenths on Industrial Production. Were expecting about that. Last look was doubled from. 2 to. 4, and utilization rates, 7 preponderate 2. This is significant. 79. 21 the highest rate going back to june of 2006, which was the comp with our 79. 1 last month unrevised because the june number is 79. 3. We continue to operate at a very intense rate. These numbers on the production side and the manufacturing side, on the mining side are pretty sol solid. Back to you. Continued a mix bag for data, but for now, thanks, rick. Second Quarter Results beat estimates, and the managing director and Senior Research analyst at Piper Jaffrey gives it a 12 price tag. Good morning. Good morning. In your note today, you called jcpenney a rose among thorns, cash flow positives, margins improving, comp sales up 6 . Anything not to like in yesterdays report . I have to tell you things moving forward on jcpennye, its about the turn around, it looks good, so goes back to school tend to go holiday. Were really encouraged by the double digit increase closing out the quarter and headed into back to school. But how much is due to the fact on a relative basis last years comps were really weak. Its competitors in the space havent posted good numbers so jcpenney by comparison looks strong, but do you feel bullish by the margin crush and Fourth Quarter so important to the company . We do. We believe their floor today is filled with the product their customer wants from them. That was not the case a year ago. Even though it looks a little bit better among a weaker environment in overall comparative sets, the consumers going to vote. Theyll vote for jcpenney. You know sorry we talked about macys getting jcpenney d, a verb we invented an hour ago, because the numbers looked terrible, but how far are they willing to go, or are they going to be smart . Well, so far with Gross Margins up 150 basis points ahead of where the street was for q 2 and indications of the same for q3, they are winning the business with better margin, but, you know, it is hard to ignore facts. At macys, womens and mens apparel did poorly, but we think the market share shift is underway. Totally random note here, reading the ceo of jcpenney had surgery this morning for what he dealt with for 20 years, do you know what thats about . You know, we dont. We do wish mike the best in a speedy recovery. You know, this company still, obviously, dealing with the fallout from the disastrous reign of ron johnson, short it may have been, did an enormous amount of damage, but if he gets back to where they were before that, were not still talking about a great growth story by any means, not as if things were going well before johnson made them worse. Its fair to make that assessment, although keep in mind, they lost 6 billion in revenues in a very short time frame. Our bullish stance, and we are one of the few bulls, were only looking for recovery of about a billion seven out of the six through the end of 2016. Theres a lot of trajectory for upward momentum. In the process, they took on a lot of debt, expensive debt at that, and they are still trying to pay it down. They are finally cash flow positive and expect to be cash flow positive next year, but do you get the sense theyll be able to keep the debt in order and continue to pay it down in a fashion that it should . We do. They were able to rework their revolver not too long ago, and that was favorable for them. We think that overall the Bond Investors are waking up to an improving company, and the investors will follow through. How much, and you may not want to answer because youre physically right next door and probably see them at the local for lawn bowling. How much has to do with targets problems . You know, i really cant speak to target specifically, covered by my colleague, but what i can say is its clear within the Department Store sector, like i mentioned, the womens and mens apparel underperforming at macys, that seems to be spot on overlap competition. That seems to be where the shift is. For you, leaving it there, and you van overweight rating, significant upside from here, and well continue to watch, but for nowing have a great weekend. Thanks, you too. Seven years ago, it was a 60. We remember that. Up next, what is on art cashins mind creeping to the fall . Well find out. 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Tdd 18003452550 open an account and earn 300 commissionfree online trades. Call 18886282419 to learn more. Tdd 18003452550 so you can take charge of your trading. All right. Were six and a half minutes before opening bell, bringing in art cashin, director of floor operations of ubs. Happy friday. Volume came down as you would expect for the second or thinker week of august. Its. Quiet, has it not . Stunningly so. Yesterday, by my records, slowest trading day of the year, wall street journal debates with me saying its the second slowest. I go with you. I thank you, sir. What do we need to know going in the day ending the week thats been quiet in terms of volume, but not without the news or some concerns, clearly, abroad, especially whether its europe yeah, i think it is an exploration day, affecting the opening, and again on the close, and right now, its not going to get in the way of the opening, and we still hear cooling noises from mr. Putin, and so thats probably going to allow us to get the s p out of the resistance bend and possibly above the 1960 level. That would allow technically for a target of trying to hit the old highs again, maybe as early as next week. We had a discussion earlier in the show about whether risk is back on. You had the ten year at 4, and yesterday in the prior week, money trickled back into junk bonds given the chase for yield. Do you see risk from a macro picture back on . Well, i think its lurking in the background, and to extend my ignorance even further because i will not just pick the s p, the yield on the 10year should have support problems around the 2. 36 level, so if we can get below that, then we should be in great shape. Look at also the competition over in europe, the bunds, the very low german yields, they are closer to a recession than we are. Two year went negative yesterday. Two year negative. Pay them to hold your money. It but they are very close or closer than we are to a recession, so rates will stay lower longer. They are closer than we are to deflati deflation, and then lastly, in perhaps most importantly, the ecb said were going to charge you for excess reserves, lend them out. They have nobody to lend them to, so they buy sovereign bonds. Up 3. 5 this week rather quietly, how much confidence do you have peace prevails . Wounderous to think peace can break out, but his people believe hes not making a move. He can disprove me readily, but i think we want to tiptoe into the weekend, brian, and if we can get to the higher levels, see if its a selffulfilli ini prophesy. Thank you. Thanks, art. Opening bell, three minutes away. Stay with us right here on squawk on the street. Today, the ultimate tech crowd contest, a pair of 3d printed products, one heated competition. Which would you fund . The votes are in. See who wins. 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Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Youre watching cnbcs squawk on the street live from the Financial Capital of the world, opening bell ringing in 30 seconds or so. Interesting week, quiet one as art said, but nonetheless not without events and certainly continued focus on ukraine and geopolitical events, although they have not impacted too much this week. We have not had a lot of data this week until today. Today will be a block buster today even though a lot of people are on vacation. That Consumer Confidence number, that sentiment number, back in an hours time, that will be very important in light of what weve seen from the retailers reporting, and just the strength of the overall economy, trying to find some sort of signal where the summer is. You heard the bell, trading, of course, has begun here. Looking back at our headquarters there, the realtime exchange, you can see a lot more green at this point as it gets itself ready as well for the beginning of the trading day. The big board, the Foundation Supporting research and improving treatment for kidney disease, ringing the bell, and nasdaq, ip systems, provider of Machine Solutions for tracking vehicles and cargo. You want to talk a little while watching . There was news after the bell yesterday, of course, these filings are delayed. These are holdings as of 40 days later. As of the end of june, right . The sea world stuff broke yesterday, a big holding, sold every share we have of that, and the stock, of course, of sea world, theres a disaster. Ngzing the space, allocating the killer whale. Doubling the tanks. Sea world has been one yeah, there it is, up a bit. 37 down year to date. After attendance was disastrous, and, they obviously, gave poor guidance as well. A lot of hedge funds in allergan. Im going to do more on whats been going on in terms of the change of share base very shortly. Theres been support. I find it funny, though, we focus on Hedge Fund Managers performances not particularly good as though they hold the key because so many deals fell apart. Key to the future, all smart guys, and cooperman performed well, but we are breathless sometimes on that stuff. Yes, interesting stuff by icahn. He wants the company to split itself. They did. Already. Appears he got in the stock with the intention of forcing them to split, and they beat him to it. Its the piggy back to end all. The board retained advisers to evaluate a split this spring. Of course, tribune looked at it, news corp. Did it first, two years ago, and so this would seem to be low langing fruit to say the least for him to get in, and now he still wants to meet with the company to discuss the proposed plan to split the company. They knew they were at the gate already. Right. It was not something that was foreign to them at all that their Shareholder Base was potentially in support of. Whats interesting is how Many Companies went into old media new media. If you want to beat on the traditional, go to the new york times, dow jones, news corp. , you can now tribune, there are no shortage of pure play hate the use of old media, but trying to reinvent. Traditional age media. Can you say traditional . Dare you change the joke, what is black and white and green all over . The media stocks. Up 6 yesterday on this close sure. This is too close to home because of what we do and somebody in iowa is, like, i dont care, but well mention it because we are here, you talk about buying into the washington post, owns part of business insider, what we read, theres a lot of new media companies, people say that kills the old media, but you both are the deal folks, doesnt the investment in this, the voxes of the world, doesnt that place a premium on content regardless of where it comes from . Like to think so. Like to think so. Like to believe it. Helps for future planning services. Income streams are healthy. Exactly. To say the least. I didnt mention time inc, another pure play in traditional media. Capital structures of the companies, though, probably the most important detail, whether you value content or dont, theres a big difference in news corp. Giving in murdoch giving cash and Digital Properties with the broadcast side of things and taking that from bolstering dead on, obviously, but a good amount of cash flow still. The oil wells in the sense they got decent cash flow. Problem is, they are kind of coming down unless they create an event. Spending on innovation. Switch to monster quick. I hope my math is right because its on twitter to the world. Coke bought onesixth of the company, multiply that out, values the company at 13 billion. With this trade this morning, monsters up 28 , and this, then, values, based on shares outstanding, to 15. 1 billion, so instantly, coke has made and monster, 2 billion in added value just off the trade today. Where is that added value coming from, david . We just chatted, and you seem to think its on optimism people value cokes help to get monster in more stores. The markets, i want to know exactly what the number was. I have not figured it out, that coke bought the stake out, essentially, back into the same number, figuring out what the market cap is they bought it at. Although, i have not seen that number. You know, clearly, theres a belief that both companies are going to benefit. Coke also if one sixth is 1. 5 billion, say thats okay, thats 12. 9 billion is the value. I hope the math is right. Theres a tiny takeover premium. Not an outright deal, but coke owns a quarter of the company, and coke coronow coke owns a qun mountain. They have to keep it off the market from anyone else. When is 50 cent on . He made most of the money off of vitamin water. Right. Right. Which coke bought for 4 billion. Interesting to hear what he has to say about this deal and how it values vitamin water. Interesting. Im not on the 11 00, so throwing that out there. Im not either. Youll have to ask. Make i will. Sounds good. Its friday, baby. Really is. You have a show later, though, could be interesting. 6 00. Lets get to the floor, more on whats moving this morning. Good morning. Good morning, dave, a summer friday on the floor, so far, so good, up 45 points for the average, and the u. S. Is not the only rally were seeing today. Everyones rallying around the world, putin saying, look, i done want a confrontation with the west, but investers are, seeing Global Indexes higher from france, germany, and shanghai, really around the world. European yields hover near record lows as many believe the ecb will come in and ease further. We got that disappointing number of the gdp out of germany, a surprise, and were seeing these rates hover near record lows again continuing to watch whats going on around the world, and, of course, talk about retail earnings in the consumers, really been in focus this week over the last 12 hours, a number of reports from jcpenney, and they have smaller loss than expected. Sales okay. Cash flow positive, and disappointing, however, and nordstrom, delusion going on for the full year, disappointing investors, and Department Stores this week, down 8 , and bond time down 4, and holdings down 5 . Macys down 3 . We got a lot going on here in retail, and its not over yet. Next week, were going to hear from the teen retailers, back to school commentary is para mount, but theres not a lot of hope in the sector either. Back to you. All right, thanks so much for that. Well watch retail throughout the day, stunning chart of the movers this week. Meantime, heading uptown and at the nasdaq. Good morning. Well, as tensions put to the side, we are seeing markets gaining momentum here, nasdaq up half a percent for the week. A lot of activity in the consumer space with coke taking a stake in monster beverage, shares out perform and soda stream shares moving in sympathy, and poyo loco, active since going public on the nasdaq in july. Chinese internet another sector to watch, and cena with better than expected earnings, due to ad sales that grew, and reporting earnings a jump in revenue that came from the user growth, but heres a story. Monthly active users up 30 year over year, user growth did slow quarter over quarter so thats probably why youre seeing shared under perform in todays trade. Jb. Com, referred to the amazon of china, reporting earnings, and its net loss widened despite the surge in user growth. Back to you. Thanks so much for that. As david alluded to earlier, youre going to talk allergan. Worth looking at, and, of course, a story im following closely here. We talked about it, and, n. , how aggressive its been in sowing doubts, and thats translated sb a loss of faith, and shareholders willing to sell the stock sending it further down that hurt its chances of acquiring allergan, no doubt about it. Better up in the 1 10s 120s, excuse me, opposed to the lows of 107, but its moved up. Lets not forget the other side of the story here which is tiply you get a significant change in the underlying share base of the company thats being sought. In this case, that is allergan, and, june 30th, thats taken place. The likes that owned over 18 million shares of the company owns nothing. It sold all it it, and long holders exit, perhaps not to the extent of selling all shares, but a good amount. Jennison selling half. And tiacref cutting its stake, and montag, 1. 3 million shares, and the numbers go on. You see top holders cut the stake from what represented 42 of the outstanding shares to 23 , replaced, as often the case, funds focused on events whether its paulson or well any number of them, york, go through the names that added to the alle began position or created new ones, and its all driven funds you expect then are in favor of the potential sale of the company. That gets to an important moment, which may not be that far away. Namely the ability of shareholders to call a meeting with 25 of the votes. Bill owns 9. 7 of the stock and need 15plus percent to call the meeting. What i hear at this point, likely to receive 30 or more of the shares needed to call a special meeting, and we may, in fact, see that in the not too distant future. That does not mean the meeting will take place soon. In fact, its likely to take place late in the year. Perhaps december, and so allegan has time to continue to sew doubts, and attack, and consider acquisition of its own that uses up the Balance Sheet capacity, as much as 10 billion. Hearing as well while its looking at potential candidates, it has not yet focused on one solely at this point, and nothing is imminent. Remember that. This battle rages, but always interesting, of course, how the share base changes. Who are they fighting for and against . Those, of course, continue to be key questions as we watch this, not to mention the sac now involved, a lot of other things going on here as the two compani companies trade lawsuits. Lets head to the bond pits. We are joined by Rick Santelli in chicago. Rick . Happy friday. Thanks, david. Starting out with the european scene. Remember, its like the u. S. Now. Fundamentals take a backseat to market action, and, of course, referencing the spongy data from europe, germany, france in familiar, and so look at the bond over there, the bund, twoday, whats going on . Couldnt breach the 1 . Today, it did, obviously, yesterday, intraday, pay attention. Remember, germany, two and three year instruments are in negative rate territory. Look at the dax, look at the gdp comes out, it goes from 9150 to over 9300. Intuitive. Look at the five year back to the u. S. Markets, look at the five year, the fulcrum of the yield curve, june 1st of this year, breaching levels on a closing yield basis, some of the lowest yield since may of this year. Look at may of last year for 10 s and 30s, and we see its a closing basis, lowest yield closes since june for the 10year, may for the third year, and twoday of the euro versus the dollar, same dynamic of the stock market in germany. Euro currency is buoyant considering the data, but above 134 two days in a row, its a stopper. Watch that on a closing basis. The last chart, if you are trading the encorrelation with the market, thats game is over. The dollars moving higher, rates lower, brian, back to you. Rick, thank you very much, sir. All right, check out the action now in the commodities market on this friday, jackie, blocks away, what are you watching this friday . Happy friday to you as well. Headlines in the pits is easing of tensions, sending gold prices under 1300, and crude price, while up slightly today, declined overnight. We are seeing a weaker dollar push crude up and buying on the dip mentality. Wti trading at 96 a barrel, and next level to the downside to watch is 95. 79. Meantime, this is a supplydemand story right now absent geopolitics. Euro demand slipping, seasonal demand in the u. S. Weak, and chinas demand declining as well. Thats what people are focusing on. The brent price over 102 a barrel. September expired yesterday, and we want to point out the spread between the two is coming in so it shows you that brent is out of favor right now. Back to you. Thank you so much, jackie. When we come back, a cruel summer for nations restaurants and shareholders. Whats wrong and what it takes for the chains to snap out of their funk. Zblmpl later, heading into the weekend with weed, if thats your style, hempfest in oregon for the First Time Since Recreational Marijuana became legal. Squawk on the street will be right back. [ male announcer ] ours was the first modern airliner, revolutionary by every standard. And that became our passion. To always build something better, airplanes that fly cleaner and farther on less fuel. That redefine comfort and connect the world like never before. After all, you cant turn dreams into airplanes unless your passion for innovation is nonstop. Unless your passion for innovation is nonstop. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com ready . Go jim cramer accepting the ice bucket challenge for als, bringing awareness to the nation about fighting the terrible disease. The Als Association says since july 29th, the chapters received 9. 5 million compared to 1. 6 million in the same period a year ago. That was a suit he wanted to get rid of, kara swisher is taking the challenge this morning on squawk alley at 11 00. He did not like that rascoff did it in a tshirt and shorts, but do it in your normal attire. Jim did. He was tired of the suit, so just saying. And, listen, donations to als are up big according to data,d, either donate 50 bucks or get water on your head. Everybody throwing water on their head, we need to make sure they are also donating the money. It shouldnt be out there in america, like, oh, dump water on my head, rather than giving 50 bucks. First of all, do both anybody on cnbc can afford to do both. And they have, but the people that you dont see posting videos are the people who donated and not done there. Thats a lot of money coming in, but its nots viral right now. All right. Were getting back to the markets, theres a food fight between shareholders and fast kas wall restaurant stocks, a number of them slumping as sales are short. Jane wells has a look at the sector overall. Whats going on, good morning. Stocks of fast casual chains act like they dumped a bucket of ice on them, not for a good cause. They are working on new items because americans want interesting food at a good price. Stocks have fallen. So many of them. Look at pot belly there. The winner is economy pchipolte. They raised prices and still saw more traffic. Bobby flay talked about fast casual, and noted the segment was on fire, growing double digits year after year, quote, if youre a restaurant professional, why not get into that segment . Going public is another matter. When you see a company go public, a lot of times that passion gets dispersed throughout a bunch of people and theres false money allowing you to expand quicker than maybe you should, and you lose quality and choose that over sales, and eventually, that bites you back. Dont get caught up in the hype. This is food. Look whats behind the curtain and see who is making the decisions and cooking the food. Are there too many burger joints . Smash burger, five guys, bobby flay says, no. Burgers were always and will always be big in america, but tim love says ethnic con cements will have faster sales growth in the short term. Why investers have been loco over pollo loco in the one month its been training. Back to you. Were going out next time were out there. Oh, no were not. Miss you too. Oh, i miss you. All right, up next, breaking news on consumer sentiment. We are going to keep it here on squawk on the street on a beautiful friday morning in new york. Were back right after this. Tr, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Welcome back to squawk on the street, and if youre looking for the ninth university of Michigan Survey sentiment number over 80, youll be disappointed, 79. 2. 79. 2, the lowest level since last year when it was 75. 1. Since then, every number has been over 80. I do want to acknowledge that this is a preliminary august read so the number can change in the final roadwead. The last read at 81. 8, third best number back to 2007, so well continue, of course, to monitor exactly what respondents are fearful of, maybe it was that glitch in equity markets in the survey period. David, back to you. All right, thank you very much, Rick Santelli, well, coming up, the california lawmaker trying to bring tesla 5 billion dollar giga factory to his state, and shares up better than expected amid the retail function, a bit of a reversal in fortune. That storys next. 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 welcome back to quack on the street, a busy friday, but the road map starts with jcp. Reporting higher sales and bett better margins, but the stock is volatile. Find out what you should do with it now. Coke a boost, up 2 , in fact, a stake in monster beverage, what it means for the rest of the beverage industry. And california doing everything it can to woo tesla and its new factory. The state senator leading the charge and joining us live on what california is willing to do. Beginning with jcp, trading down, even after posting a narrower than expected loss in the Second Quarter. Michael, a retail analyst at ubs, neutral rating on jcpenney, a 10 price target, improving 0 upside. Theres a lot of bullish commentary out there on jcp this morning. Are you surprised by it . Is it off base . Well, they had a really good quarter this quarter. They had comp sales up 6 , and they improved growth margins by 6 00 basis points, good by any standard in the retail world. This is a situation where the stock and company will decouple because the stock ran up on the future of what theyll be doing. There are people looking for a change, and traffic is negative for a company that lost business. What does that mean . Can sales keep going unless they bring in new customers . We dont have evidence on that yet. You know, i understand what youre saying, still lost 75 cents a share, almost 200 million. How is that a good quarter . Its more about where they are headed too. They brought it back. This is a company that had 20 billion in sales at one point and went down to 12 billion, coming back from a big, big hole, doing a nice job of turning the business around. They have a 400 million Interest Payment to make every year because they refilled the bank account to get the turn around going, competitors over the next few years reinvest in making stores look beautiful and ecommerce businesses, they pay interest, and thats going to hold them back a bit is the feeling. Theres a couple competing forces there, even though theres a very good trajectory going on, people look ahead and where they will be in the next few years. Stock down 2 today, yesterday, spiked over the close, was thought to be a short squeeze, third of the shares on borrow now, thinking the stock will go down, down 44 from the 52 46 week high. Theres a lot of people who are nay sayers for the company. I wonder if you think the company has long term viability, how do you identify Long Term Strategy . What would you say that is . Today, they are doing everything correctly. You know, getting back into brands customer wants to see, advertising correctly, promoting, giving the consumer stimulus to come in via coupons. They do everything they k. They are in a perfectly competitive segment. Theres nothing but alternatives to jcpenney, always has been, so they took a big leg back under a bad strategy, rebilling some of it, but the consumer has nothing but choices, and now more and more choices online that they dont need to go to the store. To assume they get back to historical level is very difficult when the competitive set change out from under them. Okay. Last question, if they are gaining share back, who are they gaining share back from . Right now, they you know, kohls had negative comps, macys slightly positive. Well see. We have a lot of retailers in the middle of the mall retailers experiencing negative photographic now. They will fry to convert to higher tirkts and gain share. Well see. They have earnings over the next few weeks. Keep an eye on the middle of the mall, and keep an eye on off mall like t. J. Maxx, competitive as well. All right, appreciate the time. Thanks a lot. Thank you. On pace for the best gains since the first week of july, but the next guest interviewed a board member warning about potential volatility in the wings. Here on set, jim stuart, columnist with the new york times, Pulitzer Prize winner. Good morning. We want to look at your column thats coming up this weekend, dealing with jackson hole, the meeting next week. Big gathering of economists and the big topic is is there too little volatility . Would something a little, maybe a correction, be a healthy thing for markets . I think especially the bond market. Talked to jeremy stein at harvard, left the fed board, fascinates me because tes a democrat, but hawkish because he worries about access, and his voice now is taken up by a lot of commentators, but raising questions about the fact that we have really not had any significant pull back now for over five years, and while far be it for me to see markets go down, its a back and forth thats healthy, and i think the bond market is especially worrisome to economists now. Carl posted on tumblr, and shares a view many people hold, question whether prices in the asset markets are over heated, and you talked to people on the topic. What do they say . I dont want to use the word bobble, because thats too far, but the question is the decline in long term Interest Rates as the fed said over and over again, were tapering, we know they are doing, and well raise Interest Rates next year. Figure that out. I talked to another economist at princeton, really interesting theory nobodimeny menimeny meni the first out of the room, and watch closely, the minute they see someone else go, well get out then. The interesting phenomena, i think you saw that, 317 point drop, recent plunge in junk bonds, but turns out, no, it was not the opening of the door, cattle are not running out of the barn, and everybody is on nervously awaiting to see when the correction is going to come. We do make a mistake in the sense we act like theres two asset classes, bonds and stocks. There was a lot of money in cash, right . David . You reported that many times. Maybe that is just the bond influx just the people that were even more nervous before. Bonds are a risk move. Thats true. Also what professor stein point the out is markets are made by the marginal buyers so people buying long term treasuries with the low yields are just fringe super optimists on the bond market and distort the fact everyone feels that way. They have been right every single year. We started the year saying, well, long bonds, got to be a short, got to be. The ten year, come on, how can we stay at 25 . Could have said that four years ago. It doesnt happen. Thats why the phenomena of People Holding back, they dont want to sell or get out because they think things are overvalued, the market has not confirmed that. Cant just be right about something. Everybody has to agree with you, or youre not going to make money in the market, heck, leave it on the table. Talk about an environment where lending to germany for ten years gets you 1 . 1 , a year. I mean, on the face of it t does not seem rational, but, again, another thing is that research now shows that only about 20 of the asset price can be attributed to fundamental factors, and 80 is 20 . 80 are things economist do not understand, including purely psychological factors. I mean, we have huge buyers, maybe economists are one of them, just march in and buy, not looking at fundamentals. How do you factor this . Tough for the fed. Watch close ly while the fed feels its way in the unprecedented situation. Volatility around the corner. You see soros increasing the short position by 606 quarter over quarter. Is that over doing it . To me, it would be. Years ago, i bought one of the short bonds i got killed. Killed. Never going near that again. Average investor trying to short the market is tricky. Market timing is tricky, but what im trying to say what professor stein is saying, volatility is likely and actually healthy, better to have small pullbacks than a big crash so when it comes, no reason to panic, but be prepared for it. Jim, good to see you. See you next week. Good to see you. Prime minister stepping down yesterday clearing the way for a new prime minister, expansion of u. S. Military assistance. We are live in iraq with the latest. Whats the state of iraq right now . Reporter good morning, brian. Stepping down after months of uncertainty, and the United States and countries in the region now hoping this can be the beginning of finding a longer term political solution in the fight against isis. Maliki spoke for 12 minutes saying he wanted no more blood to be shed, stepping aside for the man he called his brother. The appointment has been broadly welcomed across the political spectrum, but hearing of clashes between supporters and the police north of baghdad. The other countries around the world now hoping this can be the beginning of finding a government much more inclusive and representative of sunni, kurds, and shites. The United Nations says the zic situation is just had to take hundreds of thousands of refugees, same for the United States and Great Britain should do more. Back to you. All right, thank you so much for the report. When squawk on the street comes back, california pulling out all stops to woo tesla. Everything from hundreds of millions of dollars in potential tax breaks to actually speeding up the construction of the factory. The state senator spearheading that effort, ted gaines will join us live after the break in just a moment. Welcome back to squawk on the street, and fapharmaceutics move higher after the Company Reported promising results from the hep titus c drug, a hot sector nowadays. The stock trading up, surging over 9 , and gilliad sciences rise after the panel ruled in its favor regarding its drug, and rejecting Rich Holdings patent claims, and gilead moving higher by 2 . Thank you so much for that read, we appreciate it. Earlier, tesla hit an alltime high thanks in part to the aggressive quest to find a home for the 10 million square foot giga factory. Street fight between five states vying for the factory halted until california recently introduced a bipartisan bill intended to woo tesla back to the golden state. The state senator is the coauthor of the bill, joining us this morning exclusively. Senator, good to see you. Good to see you, how are you . Were doing well, thanks, hope you are too. Walk us through the legislation. Tesla said it was not in the mission of the company to basically ask you to bend the law to let it have the perks needed to build there, so why do it anyway . Well, we want to be competitive. We texas is in the game, nevadas in the game. Got to remember that tesla was founded in the state of california, and we want to fight for 6500 jobs and a 500 billion investment. At what cost . The bill, as it stands, offers up to 500 Million Dollars worth of tax breaks and potentially more Going Forward. Im just wondering, even if you pass this and tesla does not come to the table to california with this factory, how much of a black eye would that be, and how much more would you guys be willing to put on the tail to get it . Were familiar with this. We just did it for lockheed, 420 million deal, and i think we can do it again for tesla, tax credit, employee training, great opportunity for a Multiplier Effect too, and you hire that many people, think of the amount of revenue that goes into the treasury. Senator, nevada, i thought, was in the lead here. What kind of a chance do you think you have . Nevadas not in session. The legislature is not, and they got to pull some sort of package together. We are in session. We are ready to go. We are putting the final touches on our bill package. Your session ends, though, in two weeks, get the support for this before then . Im hoping so, working diligently. Spoke to the governor days ago, and were trying to pull it together. How do you characterize, senator, the communication with tesla . Seems to be running the process behind the scenes, and there was a profile contrasting the negotiating styles of the governors in nevada and texas, some hard charging, some behind the scenes. How confident do you feel about californias negotiating tactics, communication with the company, any sign this is going to work . Im very confident. Remember, tesla was founded here, innovators come to california because of the uniqueness, its diverse. Now we need to look at chapter 2, and that is the building of the giga factory in california and creation of thousands of jobs. This would be a great boost for the state. It would be, senator, but what is the chances that you guys trip over yourselves to offer incentives this it never pays itself back . Weve seen that happen over and over and over again. Yeah, but investment tax credits do not occur until somethings created. This is an opportunity to create something new right here in the state of california, jobs, and believe me, our treasury will see the benefit of that even with the tax credits. But were looking right now, senator, at some of the facts. Its expected to begin production by 2020, costs 5 billion to create it, creates jobs like you said, but extre extremely expensive, will not see fruit born from the effort for quite some time, and politicians passing the laws will be out of office by that point. Do you worry that this effort will not pay off . I dont. I believe in tesla, doing a great job, interesting to watch the battery technology, how its Getting Better and better, longer range, quicker charging time frames, and you may see a paradigm shift occurring. If they choose another state in the sun belt, senator, as we know many are still in contention for this, would you seek another factory from another Industrial Company to try to reaccuracy that job growth . Musk is wise k looking at a number of states simultaneously. He wants the states, i think, to compete against one another, and we want to be in the game. I think this is just an incredible opportunity. To send the message around the world that californias open for business, and open for manufacturing. Senator, we will leave it there for now. Of course, no word from tesla and who is in the lead, but thats big news when it gets decided. Thank you. Staying on the car story because up next, this is called the woodstock for car collector, celebrities, and billionaires, wealthy ones, by the way, gathering all in california to get their hands on some spectacular cars. Well take you live to the pebble beach auto show with the most expensive ferrari thats ever sold. With all the opinios about stocks out there, 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. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. 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And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Last night, a ferrari 250, a hot car, most expensive car sold at auction, and robert frank got the gig again in pebble beach and has the usual and unusual auction offerings to show us. Robert, how much excitement and surprise was there around the gto, a hot car, but 38 million, man, a lot of money. A lot of money. Some expected it to go for more. These four days are about the auctions, product launches, and parties. The awards on sunday, and rather than show you another ferrari, this is your speed. Were going to take you on the wild side of car collecting to awards instead of the this concord bizarre. This is the award for the most jolly car. This is a fiat jolly, 28 horsepower, and the color, car men own a golf cart, itd look like this, yours for 45,000. The ugliest celebrity car is this john wayne modified pontiac station wagon. He design the batmobile, has a moon roof, eight track tape deck, and my word for the hardest car to get into is this bmw, the ultimate driving machine. Yes, they made this, opening from the front end and Steering Wheel hinges out so you fit in. I barely got in, but it was cool. Hardest car to get out of . This monster truck, this almost sprined my ankle, but it was cool. The fastest car at the auction that i could find, mclaren f1, record of 240 Miles Per Hour in a track in Great Britain. T engine, lined with gold to keep it cool. Thats cool. The car with the best fake flower arrangement was this vw bus. Now vw bus is now becoming really hot in the auction world selling for over a hundred thousand dollars. This has a camper on the back and a sink, you need if camping. The award for my favorite car, the car i think is hands down thee most beautiful in the collectible world is the jaguar etype. Ferrari said this is the most beautiful car made, and this is known as the car in the museum of modern art. Now, unfortunately, given that jaguar is 300,000 to 400,000, the jolly is at my budget for over 75,000. I dont think ill buy it though. Back to you. Fun segment. Well see the hot cars later. I like that bmw, though, really good for parallel parking in new york city. And that red car that he stood in front of is a radical sr8, and ive driven that. Its a radical, is it not . It is. Indeed. The bmw, whats interesting about the car is that bmw, you know, we all talk about fuel economy and hybrids, i mean, that was 50 years old, and bmw was ahead of its time thinking about microcars before the smart car and mini cooper, but, again, you know, we like to talk about the ferraris, but a real wide range of cars, and as jay leno said, you dont need millions of dollars for a cool car, 50,000 gets you a cool american car, 40,000, you can get cool old cars. That might be a ferrari. That looks like a ferrari based on the prancing horse. Oh, the first car, yeah, thats a ferrari, 680horsepower ferrari, well over 200, and thats about an 800,000 car. Beyond my price range. Its about ferraris right now. Theres 105 for sale just this weekend. Far and away, more than in any other time. Well go later looking at the mercedes and what theyve done. Huge prices and some not so huge prices. The inaugural frankie awords. Well continue throughout the day, but for you, leaving it there. When we come back, what giants like dan lobe, carl icahn, and george soros have in their portfolio. Well go wail whaching next on squawk on the street. Developers are all about speeds and feeds. 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. 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Your big deal of the day, cocacola buying a stake in monster beverage, but is the deal good in the long run, or does coke need to do something more innovative . Joining us on the news line, jeff cioletti, and hes focused on the world of beverages. Jeff, whats the reaction to the deal . I mean, i think it makes a lot of sense in the long run for coke, especially for this market. Carbonated soft drinks, that category has been on a downward decline for a decade now, you know, falling in the low to mid Single Digits. Energy drinks consistently have been growing, and, you know, mid Single Digits to low double digits, and that seems like itll continue, and monster is a very, very successful player in the space. Energy drinks is a top heavy markets, theres red bowl and monster, and so it really makes sense for coke to get involved with such a huge and Successful Company as monster, and as the company diversifies its portfolio well beyond just its trademark, carbonated soft drinks. Jeff, what are the odds we reached peak energy drink, if you will . The Big Companies seem to buy in when things are already past the primary growth point. Well, you know, its interesting. A few years back, it looked like Energy Drinks were starting to flatten out, but that turned out to be primarily due to the recession, you know, people were not spending like they were, and suddenly, after the deepest trough of the recession, probably 2009, around 20102011, the numbers started to pick up again jumping into the double digits. Last year, in 20 1313, it dips down in the single digit growth again, but all indications show its probably going to perk back up into that low double digits, so, you know, Energy Drinks have been written off before, but they really seem to be chugging along. Jeff, is there anything read into in cokes recent decisions, at least, to not buy companies outright, but in the case of Green Mountain coffee and now monster, by significant equity stakes and enter into Partnership Arrangements . Again, rather than perhaps buying the entire company, which certainly is within its ability to do. Yeah, no, its been par for the course with coke. Remember with honest tea, bought a stake in it, and three years later, bought the company outright. That seems to be the mo. Theres a division called venturing and emerging brand, an incuba incubator, sometimes buying the company outright or sometimes just buy a stake, and then ultimately, they really just test the waters, play around with the brand in the market place, see how it is doing, kind of keep options open, see how its doing, and them buy it. I think it is a smart move by then, dont go all in. Remember, they went all in with vitamin water seven years ago, and thats really the last keep of significant outright buy that they did, so now its sort of like putting a tow in the water and then, you know, ultimately, if it looks like its working out for them, theyll buy the company outright a few years down the road. Jeff, weve. Talking about the distribution benefits that coke could provide monster, but looking at some of the headlines that executives talk about on the call this morning, and they were saying that coke can help them enter china, complex Regulatory Environment to crack, and now that they have a partner, they can do that. Whats the partner in Energy Drinks in china, is that a value play here . I think so. Just by the sheer number of people in china, even if its like a couple Percentage Points of growth, youre talking hundreds of millions of people there, you know, in those small Percentage Points, so i think chinas a huge market for everybody where its beer, whether its soft drinks, and i think Energy Drinks, theres just such a huge opportunity there with a lot of opportunity for growth. Any growth there, talking millions and millions of dollars so i think it makes sense. Jeff cioletti, appreciate it, jeff, have a great weekend. You too, thanks a lot. Have a good one. Revealing a bearish position on the market as we discussed a hiblt earlier in the show, and back in hq with details on that. You crunched numbers, what did you find . The fund management, Family Office that manages the assets of George Sorros disclosed a bearish position suggesting he may think the market is in for a big drop. According to the recent filings, the fund company put puts on the spider etf totaling 11. 29 billion at the end of the quarter at the time they were fighting about the state of the target. That amount was a recent high for the Family Office which has had spider put position for most of the last several years, and based on very simple math, we dont know if he owns them or if were in the money, assume he does and are, it could have a notional value of 2. 2 billion. Its har to read into the figure begin a spider put is a popular hedge and hes long quite a few stocks as well, positions he may be trying to counterbalance. Those, of course, include the ypf, teva pharmaceuticals, tibco software, and a popular stock for us, herbal life. He has calls or bullish bets on spider and outright spiders which would be regarded potentially as bullish. If he were feeling bearish at the moment, he would not be alone, though. Other seasoned managers are seeing downturns in the long stock positions this month im told, or as in the case of steven cohen, expecting the downturn in the near future, and david tepper years after qe started, made a boat load of money in the process, pulled back on the spider etf position last quarter, a period dubbed nervous time in a hemg Fund Conference in may. Kate, its david. You referred to the Family Office, an important dwipgs. Others run the bets, but with sorros, its hit or miss in how involve hes making the decisions. Great point, david, right. He has a team of Hedge Fund Managers making decisions for him. Steve cohen is very much in the game, but sac is now a Family Office as well. I agree. Important to make that note. Hes daytoday on top of the portfolio still. Sorros is removed. Ask him the names, and i dont know he could give an answer. He has a lot of other things to worry about. Thats right. I asked this morning for color, do people get the sense hes bearish from talking to him or the portfolio managers, and they do not take strong directional views. This is probably mostly a hedge, but it is interesting that the paper value of it, at least, based on what we know, has risen so substantially quarter over quarter. No doubt. Kate, thank you. Thank you. Kate kelly. Back to a story with allergan and valiant, namely, of course, the attempt by valiant and persing square, its partner in the bid for allegan to call a special meeting. They need 25 of the shareholders or shares to do so. 9. 7 already held by mr. Ackman, although allergan is fighting hard in court in california and in other ways to try to, perhaps they wont be successful, but to try to disallow him from voting the shares. When i reported earlier from sources close to the situation is they are getting very close and expect to have at least 30 of the shares in favor of holding that special meeting. That, of course, above the 25 required. That does not mean it happens soon, but they have another 60 days to get more, so you may see something in the not too distant future to announce that. As for the special meeting itself, dont expect to see that any time soon. It may be, perhaps, as late as december, of course, valiant dealing with at least this scc i dont want to call it a probe, but looking at inquiry maybe . Inquiry, thank you, that we heard about yesterday from dow jones, and they are fieging, of course, allergan, sued in California Court saying that it is Insider Trading on the part of persing. They december put that, had it well lawyered into that, but as for the special meeting, close to 30 of the votes. Few jobs securer than a lawyer. Is that true . General growth. Counsel at persing is busy. Has been there for a while. All right. Still ahead, a huge weekend for pot in washington state. Hempfest 2014 kicks off, and for the first time ever, people can buy legal rekragsal weed. The director joining us later on. Plus, kara swisher gets soaked. Called out, and she will take the ice bucket challenge live on our air. You do not want to miss that. Back with with more squawk on the street right after this. A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back to squawk on the street, dillards stock moves lower after Second Quarter earnings fell, weaker than expected 3 eed 5 , the latest rr with weaker margins. Thats the theme here. They are hit by better than 5 on the day. Back over to you. All right. Thank you very much. And now lets get back to the cme group, and Rick Santelli with the exchange, rick . Thanks, and id like to welcome andy back, andy brener, of course, one of our more outspoken, kind of International Trading types, thank you for taking the time this friday morning. Thanks for having me, always a pleasure. All right, look at the landscape, be octobbjective. Many talk about geopolitics, but thats not whats moving markets. Ba data from europe, gdp, france, germany, other data points seen, lets see, gone from 9150 to 9300 and change on the dax, Euro Currency flirting with 134, euro rates for one year, two year, and three year floating in negative territory, and multiply the yield on a fiveyear bund, 22 base points by seven to get up to where our five year is trading. Explain that all to me, would you, andy . Rick, absolutely absurd. What you have here is Central Banks on fire. Everyone is looking for lower and lower rates, and i mean, you even have the spanish fiveyear at 92 basis points when i walked in, and the 10year trading to our 10year. You know, the inmates are running the asylum, makes no sense at all, and yet the absurdity is theres still calling, again, for more quantitative easing or for quantitative easing in europe. For what reason . What are you trying to achieve . You already have rates down pretty darn low, you will not get them lower. Good point. In jackson hole, do you think theres going to be any conversations that would proceed like this . Wow, from the u. S. Side, why do all this . Why do we need 0 Interest Rate policy . Why keep penalizing savers, raise rates 50 points to see how that gets taken by the economy because whats going on in the world is doing the tough lifting. All of these issues outside the u. S. Are keeping rates low. Cant they see this, andy . They can see it, rick, but, unfortunately, everyone is looking at a dovish speech by janet yellen a week from today around this time, and everyone is going to take Interest Rates to the u. S. Even lower, and youre probably going to set a new year to date record on the lows, probably break the 235 we saw last friday on 10years, ending up in the 228 range by the time she stocks, and long bonds down to 3 between now and then. Okay. Now, heres my big question, and its the last question. Were out of time. When is the catalyst going to be to wake up, whether its the traders or the market place, to the notion that sooner or later, fundamentals have to square everything going on in the global economy. Rick, i dont see it in the near future, but september is bad for equities, and i dont think that spurs bonds to reverse itself any time soon, and i think when a few good changes, you know, i dont have a catalyst for you, rick, im sorry. Well, thanks, andy, were out of time, and in the next santelli exchange, ill talk about the fact that tick data was the worst on record. Now were going to go back to kayla. Thank you so much for that, rick. Yeah, talking Interest Rates and markets later this hour. Were now seeing the dow go negative by 10 points, nasdaq and s p cooling off as well, and well get you more on whats causing the move there, but when we come back, the milliondollar homes challenge is back. This time, the houses and the prices are bigger and better than ever. Stay tuned to vote, which home is the best bang for your buck . Place your vote for the winning home, go to cnbc. Com vote right now and get ready to start voting. When you run a business, you cant settle for slow. Thats why i always choose the fastest intern. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. A market downturn. Dow off 80 points from its recent high of a few minutes ago. The reason, headlines crossing from a variety of News Services. Dow jones industrial reporting Russian Troops or a convoy, not the humanitarian convoy, which weve reported on this week, but other vehicles may have moved into ukraine. Youve also get separate headlines crossing on news wires suggesting that perhaps ukrainians forces have shelled some Russian Troops. So theres concern about reescalation, either russians moving into ukrainian territory, or the ukrainians shelling Russian Troops both, which sent stocking tumbling. Just a couple of headlines. Couch it. A lot of misreporting coming out of that region but moving markets now. Art cashin said, see this . Not moving the ten year. You pointed out, a war zone. Never easy to determine whats going on. 10 34 was the first i saw something. No Broad Movement in the market, but more headlines accumulated on various News Services of, as you say. Keeping a close eye on it. Art cashin earlier in the show said there was resistance at 236. Clearly, it broke through that on these headlines. Regardless whether these pan out to be exactly accurate, you can see the affect it has on the market and the stability trade, treasury prices going up as people are piling into that on the back of these headlines. Add one more report now. Reuters, usually fairly good on overseas things. Ukrainian spokesman, ukraine engaged russian armor on ukrainian soil and part no longer exists. Some hostility has taken place. When we get the full story, that would be important context to have. On the other side the break, more on the market moves and news out of ukraine and potentially an escalation of tensions. Stick with squawk on the street. All right, folks. Get to Million Dollar homes in a second. The dow, 68 points. Up, what, 60 or 70 points. A dramatic turn. Headlines crossing out of ukraine. Ukrainian military spokesman saying ukrainian troops did indeed engage Russian Troops and an armored column no longer exists. A reescalation sending stocks down. Cnbcs popular Million Dollar homes competition is back, but with a twist. Michelle carusocabrera has more on this breaking news. May be confusing to people. Weve talked about a humanitarian aid convoy of 280 trucks. At the same time, two british journalists said while accompanying that humanitarian aid convoy they saw an Armed Russian convoy cross into ukraine. We saw those reports early this morning. The british expressed concerns about that. Those reports coming from the guardian and telegraph, by the way. Waiting to see what would happen, because, according to the ukrainians, to months now russian armor has been crossing into ukraine, and the question was, should they show restraint against that . What should they do . They have obviously theyre saying they have engaged with this armored transport. As result, youre seeing, not just in the u. S. Averages. The european averages, all sharply lower. Levels we havent seen since june of 2013. Uk ten year yields to levels we havent seen since the summer of 2003. A market response across the board. Which goes to show you the risk that you face when you do things like, one week ago today, run the market up very, very high, because the foreign minister of russia says that the military exercises are over and then one week later what do we know . The military has never left and there are issues left to be dealt with in the situation there, and this also raises the whole point. Everyone was quite worried about this convoy of humanitarian aid. Was it some kind of trojan horse to get russian equipment into ukraine or was this going to be used as some kind of excuse to raise tensions with ukraine, because ukraine said were not letting you in unless we get the International Red cross to examine everything. So what a lot of people predicted could happen appears to be happening right now. Well see how it plays out i. Think i saw the tweets yesterday for the two guys. Yes. Witnessing these Russian Troops. Yes, you did. I was interested. It didnt seem to get a lot of play. If its true, markets will go down. Almost as if the market did not believe those tweets it saw . I think the reason it didnt, is because there had been many reports coming out of the ukrainians for months in fact this had been happening all along, just not seen by any western journalists that we trust. Right . When the telegraph are and the guardian report it, then you have independent journalists and the ground, you start to believe it. Happening for months, is it an issue or not . Right now it appears to be an issue. And if, indeed, reports are true, as the Ukrainian Military spokesman has said, indeed, ukrainian troops blew up an Armored Division of Russian Troops what does russia do back, if anything . I think thats why were seeing stocks now down 80 points. Absolutely ten minutes ago that is absolutely the question, and i think what is key here is they are berting, making a strategic choice they think russia wont do anything, because this is what they in donetsk recently. Ukrainians making advance, russians calling, saying there should be a ceasefire. Kept pushing trying to call russias bluff. Just the opposite of what theyd done several months ago when the u. S. Was urging ukraine to show restraint. Dont give the russians an excuse to invade or protect the russian speakers in the area. They use add very different strategy. It worked in donetsk, they may be doing it again with this convoy. Ukrainian troops cant be expected to let an armored russian convoy drive into its territory, if, indeed thats what happened. It appears it did. These reports still coming out of ukraine. The day has taken a dramatic change in tone. Kayla tausche screaming for art cashin. I understand hes on set with you . He has. Thank you. Good to see you. Well take from here on this side of squawk alley with art cash rn. Looking at the ct markets. Dow down 50. Had been up as high as in the 70point range. S p now down 4. Nasdaq down just a fraction of one point. It was slated to be the best week for the s p in four months. Best week for the nasdaq since early february, but you can see what some of that escalation intentions in recrane has done to the markets. Every headline like the one we are getting this morning has the potential to move the markets like this. So we want to put context behind this. You just h