Transcripts For CNBC Squawk On The Street 20160705

Oil is back below 48. Our roadmap begins with more volatility after last weeks postbrexit rally easing capital requirements. Plus, tesla deliveries come up short. The stock is down 4 . And the u. S. Are passing sued i arabia and russia in oil reserves, and falling below 50 even in the wake of those terrorist attacks in saudi arabia. Both oil stocks and futures moving slower than Economic Growth after the u. S. Equity markets posted their best weekly of the year. The dow and the s p gained 3 . Last week we used the term roller coaster a lot. And i dont know if you noticed, europe is having a banking crisis. Ground zero is italy, theyve had some issues again with month i depashi, and theyre not dramatically lower, and the situation and what triheyre gog to do with the recapitalization. They could hurt a lot of individual bond holders. Crisis is the right word . Italy is having a banking crisis. Many of their banks are bankrupt. The question is how. January 1, all the rules change. You have to do a bail in, where you eat through the whole capital wall of the bank, and heres the one data point you need to know, 1 3 are all italian bank bonds are held by mom and pop investors. It is a absolutely a political crisis. How do you think referendum on constitutional is going to go in the fall. And not to talk about the percentage of loans that are bad. 17, way above we ever got in the depth of our crisis. And monte depashi, he was told yesterday we want you to get your epls down to 20 . Are you kidding me . Its horrific. Politicized lending is their problem. Well talk about that as the morning goes on. For more, lets bring in ernosto ramos, and mike moran, head of currently Economic Research at standard and charter. Good morning to you both. Good morning. Michelle was saying how long can we coexist with whats happening with italy, and the disconnect between this tenure yield. This has been on the burner for a long period of time. Its been able to be prolonged because the ecb has done everything, and global Central Banks in general, which has allowed this to go on for quite sometime. I think the ownusa on europe, and weve seen the stress on the financial side. Offshore, out of europe, has been well contained. If i was to tell that you a ftse would have rallied as much as it did in the event of a brexit vote two thursdays ago, you would have told me to leave and lets not come back for a while. So, i think there is this i think theres kind of yield grab going on. Outside of europe, europe is ground zero in that sense, and its going to be really tough to work through. If you look outside of merging markets in particular, i think the news has been quite a much more positive one, because it all comes back down to Central Banks. The trade is about Central Banks. Is the fed going to raise Interest Rates. Is that why yields are solo . Why are we looking at 10. 4 are people terrified of something, or is that when the swisse 50year bond is in negative territory . Is that for ernesto . You have marginal demands for japanese investors where ten year yields are both negative so they have to go to the u. S. Market and that keeps driving our yields down and its making stocks relatively attractive especially in the u. S. , relative to bonds because also relative to european and other types of stocks. So we are were constructive on the u. S. Market on the u. S. Equity market and we see Earnings Growth coming back over the next 12 months maybe at levels of 10 to 12 , so thats constructive for the u. S. Market. Those are mostly not out in the u. S. So were constructive in the u. S. Eck wid equity market. How do earnings come back four quarters down, the longest recession since the crisis . Yes, carl, that is back in the rear view mirror. As we go forward, we maybe get another negative quarter, but three strong quarters mostly driven by oil Company Earnings as Oil Companies have rebounded from 30 to 50. Youre going to see oil earnings coming back into the s p 500, and thats going to be one of the main drivers of ernies recovery into the u. S. Market. For a long time, the narrative was earnings would face a fading headwind in the dollar, right . When the dollar was starting to lose some of its strength. Is that still alive . I still we are still very cautious about what the profits outlook is going to look like. Outside of the s p 500, looking across the broader economy, we are seeing the growth rates and corporate profitability slow down. This is going to take i think a little bit more time to kind of play out, but its not really good news, and you know you look at it on a historical perspective, that is often been a sign or an indicator of tougher times ahead. So were very cautious of what the outlook actually is. I think going back to your point, im not sure if its pure kind of risk off, safehaven demand. Fear . Driving treasure yields low. Look at em credit spreads. They havent widened as much as you would have expected, if this is a liquidity credit crunch. Its forcing your benchmarks, g 7 benchmarks in response to what the outlook is going to look like for Interest Rates. When the credit spreads in the market theyre pretty tight. Is there any way emerging markets trade expect for u. S. Interest rates . It seems em gets hammered when u. S. Interest rates raise, and all the fundamentals dont seem to matter much. Is that simple . Youre going to count down. One of the most important, sensitive drivers for em, the fed outlook has been number one. Think about to january, february, that was about the feds delivering more hikes, and remember we had the china issue. Where is china really in their growth cycle. Our view is weve seen depreciation on a very gradual basis, and that kind of is quite good from a stable standpoint. But i think china is the next issue to kind of keep an eye out in terms of em. Ernesto, i was surprised to not even see oil move in the wakes of saudi arabia. Weve had so many terror ifist attacks and markets dont even budge anymore. Weve named half a doesezen. Like anything else we get used to a constant barrage of news flow and it stops becoming a surprise, so the move in oil has been significant, and speaking of the earnings in general, if you look at individual stocks, you can find some very interesting Earnings Growths Like Digital Realty trusts, which is one we earn in our large cap growth portfolio, and theres individual stocks out there that are very strong growth regardless of what the overall Market Growth is. So its a stock breakers market in a low yield environment, but still a stockpickers market. Not every vote will rise at the same rate as the tied goes. Finally we began with barons trying to argue their relative value. If you look versus the s p on a historical basis. Do you buy that given the Interest Rate we were just talking about . We were positioning ourselves into a little bit more financials up until brexit. Brexit upended things into a very conservative agree, as risk became the norm, risk came off the table. Interest rate hikes completely came off the table and thats going to keep the Net Interest Margin under pressure for a more considerable length of time. We are rethinking that. They are cheap. Most banks or very many banks in the u. S. Are trading under book value, which is unusual, but given the financial conditions in the u. S. , its not surprising given that its interest margins, and pressure. So its a bit of a value trap in my opinion right now. Ernesto ramos, good to see you both. When we return, teslas latest numbers disappointing the crowds, and taking another look at the futures, the doe would open by 78 points, and the s p 500, 21, more from the ncy when we return. We return. Theyre your customers. And by blending physical with digital, cognizant is helping 8 of the 10 largest u. S. Retailers meet their demands with more responsive retail models. Ones that transcend channels and locations, anticipate expectations. Creating new ways to engage at every imaginable touchpoint. Its a new day in retail, and together, were building the store of the future. Digital works for retail. Lets talk about how digital works for your business. Herthey work hard. Ade, wow, that was random. Random . No. Its all about understanding patterns. Like the mail guy at 3 12pm every day or jerry getting dumped every third tuesday. Jerry every third tuesday. We have Pattern Recognition Technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. Td ameritrade. Tesla shares are down sharply after the electric carmaker missed its delivery target for a second consecutive quarter. Phil is in chicago with more. Tesla has long said thats when our production will be at what we consider the full production for this year where they are right now and thats when we expect to hit the target. Lets remind everybody what the full year target is for everybody for tesla to deliver between 80,090,0000, and 90,000 vehicles. Thatten mys theyre going to have to increase deliveries in the second half of this year by more than 50,000 vehicles, at an increase of 74 . Second quarter deliveries a total of 13,370, and tesla says we had about 5,000 that were in transit so we couldnt fully book those as deliveries. T twothirds being model ss, and means theyre behind pace, unless theres something in this report for the haters and lovers of tesla unless you buy into teslas projection it will hit deliveries of 2,200 vehicles per week this the third and 2,200 in the fourth quarter, thats why you look at shares as people are saying do you know what, i didnt expect them to miss delivery guidance for the Second Quarter or delivery expectations, because there really wasnt specific guidance, but analysts were expecting deliveries closer to 17,000. Guys . The debate continues regarding this fatal crash back in early may. Yep. Does are questions raised in your mind about the testing that company did in advance of this technology . Not so much about the testing. About whether or not this vehicle, the auto pilot platform should have been rolled out as a beta platform. Its still in beta test mode and even though they make it explicitly kpleclear to people have to stay engaged and you cant turn off your mind and start tweeting or reading or taking a nap, that you have to stay engaged. There are questions about whether or not this should have been rolled out to this degree. Now, tesla may be able to come back when they sit down with investigators and say heres all of our data, because we monitor all of the vehicles. We get that back and this is what were showing. Was this an anomaly, or was this an example of, heres the problem when you have a system that people are not going to be fully engaged with, or potentially may not be fully engaged with, thats the big question here. One more thing to consider, after a crazy month of news for that company, as we all know, solar city, the crash. Not just right, solar city and that deal not being particularly well received. So many directors have had to e recu recuse themselves, whether direct or otherwise. Thats still on the table, and of course the crash and this lack of deliveries, carl. But the stock itself, phil seems to always holed d up pretty wel. Theyll say its nothing more than a cold stock and got real true believers who will always be their to cushion the blow. And the true believers can look at this on deliveries and say we always knew that second half of the year would be when they have to deliver, so who cares about the Second Quarter. Haters will come back and say, you expected most on wall street expected 17,000 in deliveries and they werent close to that. Theres something for the haters and lovers in that report. You have to believe hes like a jeff basos, that hes some kind of tremendous change agent of the era changing so many Different Industries just like jeff basos, and keep giving them a pass on issues. Yeah. And basos track record, people say, well, someone is doing it. Maybe musk will be next. Phil lebau. Finding dori generated over 50 million, bringing the domestic call to about 380 million, but spielberg adaptati adaptation of the childrens book, 22 million, the film cost about 140 million to produce. Ouch. This is hollywoods model to swing big and sometimes you get it over the fence, and sometimes you dont. Do you have kids . Did you see it . Either one . We saw dori. My kids are not with me. Theyre enjoying the summer in main. Did they see it . No, they did not see it before they left for summer camp. Party time at davids house. And my wife and i havent seen it either, i should add. That goes without saying. Tim adams, the ceo of institute for the center of if i na fa nance, well take another look at the market. That would be the first five day win streak since the beginning of march. Back in a minute. Ah the freedom to watch your directv with unlimited data from at t. The steady stream of entertainment. Your favorite shows. Streaming on. You can just keep streaming. And streaming. Hello jim. So much streaming, but id really like to go home now. My arms are very tired. Seize the data get our best unlimited plan ever so you can stream and surf all you want with unlimited data from at t. A good car has to maneuver quickly. Thats also true of a good car company. People have always bought cars. But we saw an opportunity in sharing cars. So we moved fast and launched car2go in 29 cities, all around the world. Doing that required dozens of data centers, designed for speed and performance. We built our business on the ibm cloud. Because thats what the ibm cloud is built for. Some members of the United States navy ringing the opening bell on this day after the fourth of july, as is tradition here on the floor getting a big round of applause as they make their way. Love seeing that. As we said, about eight minutes to the bell. Oneal securities. I hope you had a great forth. Its the best holiday, although i still like christmas. Where are we after did you expect last week the way we recovered . Its funny. Talking with bond and gold markets, and the stock markets it was a contraindicator. By no means do i think its going to collapse, but im not surprised at the weakness. It was so violent, the market needs to churn again. It broke every tactical support, and it bounced right back so that churn has got to happen. Whats the biggest driver at this point . Listen, its going to continue to be brexit, but also be what every central bank is going to do. We heard from bank of england, from the fed on wednesday, so all of that stuff will hold the market inne check. I dont think anything will drive the market until early next week. Why were people buying both stocks and bonds . That was the confusion, right. I think we said last week to bill griffith, it was counter intuitive, it was that safety, kind of fear not sure the market was telling you what was really going to happen, so i think a lot of the reaction in stocks was just that boom rangers kind of overreaction after we had gotten whipsawed down, and it bounced right back. Today well see kind of stocks react a little bit differently, kind of pull back a little bit differently and churn. We all remember the disaster that was the jobs number last month. Do people are they putting stock into this 180 estimate . Is it 180 or 167 . I think theyd like to see a b 180. If it is a real strong number, then theyre easily going to say last month was really an aboration, it was an out lilier. I think the fed and every other bank has made it clear rates arent going anywhere until we figure out the impact of this brexit and what the economics are going to look like. Theres a lot of complaceancy in a sense. We bounce back certainly on our markets prior to brexit. Obviously the ftse, the 250 is different, we should make that point. It seems to be the move down was so out of line and the market did, you hit the nail on the head, it bounced back to where we were. Now its going to focus on the economics and earnings which start next week. Earnings arent expected to be so great. Energy expected to get slammed this quarter so theres going to be this realization that economics are not maybe as strong as the market would lead you to believe. And thats where you think youll see some pullback. I wouldnt see it pullback and tested levels again. Kenny, good to see you again. And you. Opening bell, just about four and a half minutes away. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. But we mean so much more. We mean how can we help . We mean what can we do . We mean its our turn. To do our part. To serve you, for all youve done to serve us. Youre watching cnbc squawk on the street, live from the Financial Capital of the world, the opening bell in 90 seconds on a busy holidayshort ended week. A lot of data coming our way. Jobs number on friday, although adp will be a day later because of the july fourth holiday. And the same kind of thursday preview that wed like to train around. Oh, so accurate. Worth pondering. Michelle has declared italy faces a banking crisis, as that is getting an out sized amount f attention, as the Italian Government considers some capit capital objections. And could be a little bit to focus on, but they definitely have to figure out what theyre going to do. They were having this problem prior to brexit. Oh, yes. And you can always continue to kick the proverbial can down the road as long as possible. And the stress test for italy coming out in a couple weeks. That may be the next catalyst that force some decisionmaking. Meanwhile, as you know by now, the dow has recovered 93 of its brexit losses. S p about 90 , nasdaq about 85 . July lane down thas been down t generally a positive month by as much as 5 in some cases. So we continue with the kickoff to the third quarter. Theres the opening bell and the s p at the bottom of your screen. The big board, the u. S. Navy represented by captain gregory davis, and commander demetil demetilo pastrini, and their recent ipo, earlier this month, so now its a matter of waiting for some of the data and of course the jobs the earnings as they come in, and no ones expecting great things particularly from some of these financials, david. The financials of course had been extremely weak last week. There was a bit of a rebound, but not particularly great followthrough there. Even after they came through are the capital plans very well and announced all the buybacks and additional buybacks. Some of the concern is some of the Software Companies in particular that make sales oftentimes at the very end of the quarter. They may have gotten clipped by brexit a little bit. If everybody gets paralyzed in europe, we could just as well wait. That that could hacould have soe tech companies. Some companies thought we had a big order, and they didnt. And the question is what is the longer term impoccasion lic brexit . Michelle, you can understand why businesses may say hold off for a few weeks but what happens . Neidem is down grograding netflix. We worry brexit decelerating gdp growth will accelerate churn of netfl Netflix Subscriber growth. If the uk plays it right, they could become an even more competitive economy than the eu. That would be easily done because theres so many things about the eu that are so not competitive and they could tell me, i think, be far better off as a result of having left the eu. The shortterm, theres this indecision, but at some point, people start to look at a uk economy, which is fairly competitive and the rest of the eu, and look how were talking about italy as a perfect example. Theres still a question about whether or not this ultimately has become the big flashing warning sign of a threat for the eu, do they survive brexit, and i dont think we know the answer to that yet. We wont. And to your point, to prove the uk economy hasnt proved of the decision to exit, and still may not take place for two years, its conceivably, its going to be a while before anybody can make that judgment. But already you have senior uk officials talking about lets lower the tax rate dramatically. Its already pretty low, as we pointed out may be times, the number of aavergence, some end p in ireland, and the uk. Taxes is not an issue. Thats not about taxes is it . No, but think of it as a signal of their efforts to try to become more competitive, visavis, the european union. I and i thought the a versions was intellectual properties when it comes to drug companies. Theyve been doing that. Apple, in terms of ireland, its a u. S. Company, but its not incorporated but can you move your intellectual property offshore and generate a lot of the taxable earnings over there. Ireland is a perfect example. The eu loves to beat up ireland, your taxes are too low, your taxes are too low. Ireland has fought back and i think that battle is emblomatic of some of the issues the eu faces. Although Northern Ireland want to get out of the eu. I think theyre using static analysis. As time goes on, they may think, do you know what, maybe its not so good over there. We just need time to see exactly. You did mention apple, along with donate life america, youll be able to sign up to donate organs, tissue or eyes on your phone using the ios 10 software. Interesting, but you can see apple is in the red. How do you do it now with a drivers license . When you go get your drivers license, yet. You mentioned brexit concerns. Barnons did have a positive concern over the weekend, in part because they say southwest has a lack of exposure. Airlines have had a particularly hard time dealing with some of these brexit concerns. And they had already suffered so much as a result of the paris attacks. Nearly all the American Airlines rationaled capacity in the wake of that. You know its going to get a lot cheaper to go to london is a bargain right now. A lot of people choosing not to go over seas and instead going to other areas in the u. S. That are a lot more crowded as a result. Delta, by the way, reporting their financial and operating performance for june. It does look like theyre cutting their q 2 guidance after some june softness. Love to take cramers temperatures on some of these airlines which hes been constructive on for most of the year. Generally. They are producing free cash flow. Thats been a story for a while now. Still a surprise to hear actually earning about their cost of capital, the airlines. Youre not used to that . No, not used to that still. Theyve had a rough go. Delta q 2 margin of 17 below the 21 to 23 they had given after putting june to bed. I assume also the rise in oil prices while still low yes. Has hurt fuel prices. Fuel cost averaging 1. 95 a gallon. Predicti prediction was 1. 48. Did they buy the refinery finally . I believe they may have. That was a while ago, i think. But to carls point, stock down almost 4 , and along with some of the others went down about 12 over the half 12 months and 25 over the last three months is delta. Didnt want to hit hershey. Of course we spent an awful lot of time talking about hersheher made public after it was a bid 107, half cash, half stock. It was very quickly dismissed by hershey. Remember the letter with said bid, it was received the week prior and they responded with that on slot of news we were bringing you, perhaps it could get the Hershey Trust to go on promises. No such luck with the hershey board. The question now are we going to hear back from andoles. Made a number of calls this morning, dont expect were going to necessarily hearing some today, or even soon from in terms of either publicly affirming its bid,erati raising bid, confirming the statement they had even made a bid. Normally, after a three day weekend, no sympathy for bankers. They have to work. You would think this would be the weekend there was an expectation on the people coming in today wed seeing some from mondelez. Its still a lot of questions unanswered including, as i reported, these two companies were in a conversation that went on over months, on and off, as is typical. One has to wonder, didnt you ever get to price, because that kind of rejection from hershey indicates perhaps they really did never get to price. That can happen you and i can talk about a deal and all the things involved but we dont really want to deal with the main issue and you may give me some sense. That 1 seven was just sent out the door so fast. But you know, no means maybe. It meant maybe, but its even more complicated as weve said so many times because of the trust. Because the number is big enough, you at least get the board of the company to pass it up to the trust. You do, so why not start with a bigger number is the question. Now theyll say listen, it does include that kitkat business, and it contributes a lot of ebitda, and as much as 3 billion in their company, but well see. Again dont expect to hear anything, at least it doesnt seem from mondelez today. I remember being so agast the attorney general squashed it. Back in 02. Screw the shareholder and said stuff it. And hershey has lacked to take over premium because of that because they knew of so many hurdles. Theres the Pennsylvania Attorney general if they get to that point. Speaking of thinks that are delicious, hostess agreeing to sell a majority stake to gores holdings, an affiliate of apollo. But what a story that has been. Im happy to say wonder bread is now widely available in the wake of a deal, some of the factories have stopped and im a big and if of wonder bread. Big fan, really . In august, on to mate o sama sandwiches. Last year was a tough summer. This year, no problem. I tweet about it, instagram about it. Can we talk about Deutsche Bank . Lets see if its coming back today. This is another problem basic, that at some point we think theres going to be some kind of decision made about what theyre going to do if we see the shareholder erode here. Ive made it a number of times if you look at the Balance Sheet, the Social Security ofiz market value is miniscule. Its below 20 billion, roughly a 2 trillion Balance Sheet and theyve been taking it from all sides not from the u. S. Operations where they were both, but really you guys are not getting it done, but the imf, really unhappy with them. One of the biggest systemic. Whats in that derivative book. Theres no way theyre going to let that thing go. The italians would quickly invoke Deutsche Bank. Speaking of which, the banks are leading the dow lower. Lets get to bob on the floor. Reporter a little worse in europe. I want to show you something very interesting. If you look in europe, if you look at the ftse 100, the trade over in europe, its trading the upside. Wait a minute, the ftse 250, which is mostly domestic uk, down 2. 1 . This has been a huge disparity domestic, versus trade in london, germany, weak, italy down a little bit, and greece, down 1. 8 . Brexit continues to fall. Weve talked about Standard Life investments, in its uk fund, notably lower. You heard michelle talking about the italian bank system, too much debt, they need to recapitalize the italian Banking System. Theres too many banks and branchs but theres not a lot of political will to do that and take the losses necessary, for corporations, as well as individuals holding that debt. Well have this constitutional referendum in october. It would reduce the power of the upper house, the senate, make it easier to get things done, perhaps lead to fewer number of political parties. Theres been ten in italy. They dont need that many a lot of people feel. This is what mario drage is talking about. Fiscal algae reforms, of this c europe reform itself issue, thats why this is very much worth taking paying attention to. Carl is right in the u. S. , sectors in the u. S. , banks are notably on the weak side. Energy is down a little bit, as well as the dollar has been up a bit here today. You there see Standard Life here today, we mentioned that earlier suspending all trade in its uk real estate fund. Banks down 2. 3 , and telecom, a lot of people talking about the fact that the Interest Rate sensitive sectors have been leading the way here. If you look at the overall market internals from my point of view, the market is holding up really well. The advance decline line at the New York Stock Exchange hit new highs. Weve had the most individual new highs in 18 months on friday and thursday. Utilities telecom, leading the way people complain about that, but nine of ten sectors of above the 200 day move average. These are pretty good market internals. So everybody keeps talking about there is no alternative. Foreign money keeps pouring into the United States, and take a look at new highs here. Johnson johnson, almost 23 times forward earnings. At t, verizon, these are all sensitiverate stocks on the lower end of the none of them are cheap, but people are buying that stability. The Consumer Staples leading the way. Also, homebuilders doing good on top of that market. Michelle back to you down 92. To the bond pits where theres tremendous amount of a recollection, Rick Santelli, he grew up in chicago, where yields just keep going lower and lower. Rick rickster. Theres a lot of gravity in the fixedincome market, with regard to nervousness about banks, and gravity pulling down yields. I know Central Banks say lower for longer, but theyre preaching to the choir in terms of the proactive side of the market around the globe for the most part. Lets look at twos in the u. S. When was the last time we were this far under 60 basis points, around halloween of 2015. The five year . Five basis points under 1 , youre talking about spring, may of 2013 as you see on that chart. Lets look at the two day of tens, why . The low yield around 137. Open the chart up to july of 2012, youll see that alltime lowyearo low yield was a tenth of a basis point under 139. Lets see where we close in terms of 30year bonds, ill show you a 20 year charts, 216, we took out the 222s, that was the extreme. Now tens minus boones, yes, at the low ends of a range starting not that long ago, but what you want to Pay Attention is the notion its kind of steady. Theres your gravity. Everybody is coming down together. Fundamentals aside, and pound versus dollar, there is no end insight, and the equity market is doing better. That variable is something weve seen better. Hopefully the uk will do better than some of the markets that have had that weak equity markets. Rick santelli in chicago. When we come back, a Senior Energy strategist will tell us what he seeing for crude and big oil stocks. Dow down, a quick 109, back after a break. Got some weakness in oil prices. Lets get over to jacky deangelis. Oil prices certainly starting the week on a down note here. A new study out this morning showing the u. S. Now holds more oil reserves than ausaudi arabi and russia. This is a great thing for u. S. Energy independence, but the saudis, and it is russians are the worlds greatest eexporters and also were not seeing demand tick up in accordance with supply and people are concerned about china and Global Growth concerns so thats always adding to the downward pressure, so the dollar index over 95 isnt helping out either. At the same time in the medals complex were seeing that safe haven trade, gold is getting a nice bid and silver at a nice two year high. It shows you the fears were seeing in the oil trade are not over just yet, People Holding on to those metals. Back to you. Lets talk about oils move below 48 a year. Lets bring in ophiemer, senior strategist. Good morning. When you see this data about the u. S. Having the largest reserves, is that why when you have three suicide bombers inar move in oil . Supply and demand are not really strong enough. We have oversupply. We are still have oversupply. The u. S. Threat count has increased for three consecutive weeks, that means more oil will come, or the decline right is not going to be as steep as many people have thought, and also Global Demand could get weaker, and weaker, with the uk exit and all of these sort of things that. Picture on the demand side, whether the supply side is suffering from very high level of inventory. We have gasoline at alltime high in terms of storage and that would put pressure on oil prices. We have to recognize oil prices are likely to remain lower for longer than expected but what is that, 48 . Is that 35 . What is that . You know, we have to recognize that only a few months ago, oil prices were 26. It almost doubled in about a little bit over eight or nine weeks. Oil prices should not have been as low as they were, but it is what it is. And oil prices are rebounding from unusually low levels. Going forward, however, the 40 oil, or the 50 oil is insufficient capital in order for supply and demand to balance. We are still are unable to provide additional volume, if you will, in order for us to meet Global Demand. And i dont know if youre speaking of Global Demand, i dont know if you heard out of delta this morning, i wonder if that speaks to the bigger issue that youre talking about, just not enough demand out there for the amount of supply that weve got . I mean, it would depend, we are still use 93 Million Barrels a day. The question is will demand growth be as expected . The answer is no the growth rate in demand would continue to be weaker than expected because of the environmental, because of government policy, because of okay. Prices. So there are a lot of things. But for us to think that oil prices will remain around 40, or 50, i dont think its very logical, because at the end of the day, we are going to see percentages drop in supply and the market will balance. The question is if the market will balance. Its when and how much the oil prices will rise. An internal question, fad fadel gheit, thanks so much. Bob peck is next on how you should play the second sector, and the dow is down 106, s p 500, 116. 500, 116. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Airlines in focus this morning, delta is down almost 5 , as they cut projections for q2, on higher fuel cost, unit revenue down 5 versus the 2. 5, versus the painful rise in fuel. Citys tobias levokvich is next. Dont go away. Dont go away. Good tuesday morning. Welcome back to squawk on the street, im carl quintanilla, and michelle cabrera, some weakness to stock, the holiday short ended week, the dow is down, and some breaking economic, michelle, david. Factory orders coming out. Rick santelli with the cme numbers. Good morning. Down 1 on factory orders, and down 1 means three out of five are negative numbers, and down 1 is the weakest insaugust sin of 2015. On the headline number, minus 2. 3. Now the midread was minus 2. 2, so barn close. 2. 3 means we have two out of five months negative for this particular metrics and the last time we had a bigger metric was february and minus 3. 3. And extransportation, it was down threetenth. Once you pull out the planes youre losing a little bit of the horsepower. Maybe the most important. Investment by business on the spending side, so capital goods orders, nondefense, exaircraft, down fourtenth, and 1, 2, 3, so we also have three out of five negative in this one and thats kind of our ccorn for the future. Really no good way to spend this data right now and of course we continue to toy with the long end, looking at Interest Rates we havent seen in modern times. Carl, back to you. All right. Rick, thank you very much. Rick santelli. Markets obviously tepid this morning in hopes of a postbrexit bounce back fading around italian banks, the price of oil, and the uk economy. Were joined by tobias, the chief analyst. This initial post brexit today prove weve passed some test or not . I think people got a little bit freaked out on the brexit vote. You saw a lot of people start shorten the market and you have the bounceback as the short coverings occurring. A lot of people are struggling, even the u. S. Economy, where we just saw the factory orders. On the other side, the most recent ism numbers, was the fifth month in a row, we had new orders rising, and that always leads production, always has, if you go back over the last 50, 60 years, and would suggest ism orders be moving higher. So the numbers that just came out, not that much of a concern . If you really kind of sit there and look at what are the factors driving Industrial Production, you have home durables, autos those are part of it. We just looked over 700 companies, exenergy, youre talking about a 5 increase in capital spending, and thats better than february, at 4 . So its accelerated a little bit, not decelerated. Whats the history of following through when you do these kinds of surveys . Is it fairly strong or things like brexit hold people in place . Brexit will hold people in back, do we do Clinton Manchester versus terin. If youve got a major investment in tecrms of technology. Only 4 pe is ten times the num of gdp coming from energy development. Im stunned. Much more meaningful. It is, yeah. So people focus on the energy stuff, and its legitimate, but they kind of forget about the fact that almost a third of all Capitol Investment today is technology. We had a guest who argued maybe this is in the vein of what youre saying the earnings recession would be over, youll start to see growth. The two things that focus on are the dollar and energy being less dragged in the second half in fact, energy being some sort of a positive in the fourth quarter. The third leg and this is what i was talking about before, is industrial activity. If ism industrial leads new orders, its a little bit technical, but its mang eariag accounting. Im not sure of the acronym. Its something that isnt well understood. This goes back to carl, in my old days when i used to cover industrials and you did, as well, and you kind of understood how the operating leverage in a business is generated, and its not the kind of thing most people get into the nittygritty, why arent you more constructive than you are on equities . I think the concerns in the market are still there. Theres probably one data point im probably most concerned about. Nfib survey for hiring intentions tends to be a lead ibdica indicator for the unemployment rate. They survey Small Businesses and account for about 85 of new job creation. Its the only statistic that has me unnerved. If i look at some evaluation data, thats pretty supportive, and on sentiment, and the top 50 names like market cap and the s p 500, if they trade in a correlated way in the past 20 trading sessions, you have 81 trading correlation, everything is kind of moving together up or down. Its usually where markets are selling off, people sell the good and the bad of the proverbial babies of the bathwater, thats when you want to buy in the market. Everybody feels theyre confident to pick the perfect stocks. You mentioned valuation. Im just curious why things are looking good, as to michelles points, the markets seem to be stroke, and we have a low ten year, and 30 year rate. Wealculation, we take the schiller pe, and five forward swap contacts to normalize the bond yield, not to use the current yield which may move around. In five years okay likely well be worried about Something Else. Will it smooth it out . It brings you to a level it its only happened 57 weeks like this in the last 45 years, and every single time that weve been at these levels, the markets has been up a year later. Whats the all right. Whats the thing that were looking at here . Im not supposed to talk about standard deviations. I got yelled at once for speaking about that. Youre simplifying. You simply saying the valuation based on what you present sied is compelling. You supplied bond yield, you subtract the one divided by the p. Im just saying as an individual investor, i can buy the ten year at 1. 3 and i can buy a huge percentage of the s p 500 thatll yield me much more. Why wouldnt i buy the stock instead . Right . People are doing that, but theyre buying it in what we think are more extended areas like Consumer Staples, theyre trying to get that extended year old. Instead of buying a very inflated ten year. I dont agree. If it turns around . I dont agree. They stop being defensive when you stop paying multiples for them. Id already be looking at companies that have the ability to raise their dividends, necessarily the ones who have nice dividends today. Id be looking at not chasing growth today. Theres some really good value names people have kind of ignored in this run, and if were right and again, we might be wrong. My wife tells me im wrong regularly. But if were right, and Industrial Production goes up with earnings pulling it higher, its going to be more in those industrial and economically sensitive areas youre going to be making money. This idea stocks are the new bonds, people buy them f foryearofoyield and they buy bonds for gains i think the idea for buying stocks for income, which started in oppression, in the 1960s or late 50s they saw an a version, where bonds started yielding more than stocks, that was the wrong call. Its going to be somebodys dup deeper value for investors. Tobias levokvich from cit. Well take a look at shares, from tesla, after announcing shares are falling over the weekend, and Hillary Clinton, and president Obama Holding their First Joint Campaign appearance later on today. Much more ahead. Stay with us. Us. President obama hitting the campaign trail with Presumptive Democratic president ial nominee Hillary Clinton. The two will speak in Charlotte North Carolina today. John harwood joins us with what to expect. Its a significant moment in the campaign. Let take stock of where we are just post fourth of july. You can see from these poll numbers, donald trump remains around 40 , hillary is in the mid40s with a modest lead there, but still shes got some democrats that she hasnt consolidated. She has not gotten endorsement from Bernie Sanders. Guess who can help with that, president obama who has been at or slightly above 50 in his personal Approval Ratings over the level several months, hes at more than 80 approval with Bernie Sanders voters. The two of them, Hillary Clinton and barack obama are going to be on the road together in north carolina, a state he carried in 2008, and the demographic trends, as well as political contributions will be able to carry her. Weve got one wild card, which is come less than an hour, we expect to hear from james comey. We do not know the subject of what hes going to say when he faces the press. Could be the resolution of the email case. Of course Hillary Clinton sat for a three and a half hour interview with investigators over the fourth of july weekend. Could be Something Else, could be terrorism. Well have to wait and see, but well know within an hour and thatll set the table for their appearance this afternoon, guys. Well definitely stay tuned for that. Comey at the top of the hour. Lets get over to dominick. Reporter were watching Airline Stocks holding out as one of the worstperforming Industry Groups trending today. If you look at united, continen continen continental, Alaska Airlines being led lower by the heels of delta saying it expected a smaller profit margin for the quarter just ended, as well as revenue guidance, those among the worstperformers in the index today, although all 20 members we should point out are trading lower in trading today. Back over to you guys. Dominick chou, thanks so much. And another month of midlengmid midling performance, well get some of those numbers after a short break. Short break. Im only in my 60s. 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. 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[ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement Insurance Plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement Insurance Plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. 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. Hedge Fund Industry performing the latest industry numbers from last month. Kate kelly joins us with the results. Michelle, hedge funds did soso with some benefitting from their brexit position only to face losses, and others fighting negative returns the whole way. Third point, leading the pack so far, but not with particularly stunning figures. Its offshore fund was up fr fractionally up, and 2. 1. Its founder, could be a washout for the industry. And David Einhorn with minor setbacks, nipping it to overall performance, at about 80 points, and in terrible shape, no thanks to valiant pharmaceuticals, down 21. 1 , and Jana Partners down nearly 6 an a tough year to date rather after a tough month. And into the brexit volitivity, doing well, the fund in london, up about 2 according to an invertor, and up a mere 50 basis points suggesting it had some negative territory to make up ahead of the referendum, and saba capitol, benefitting from long volatility, from what i was told, but Market Conditions afterward were such its down a bit from its midmonth appearance of about 14 , leaving it up by a bit less than that right now. Saba is still a huge outperformer by market standards. Kate, they had a bad year last year didnt they . They did. Do you know what, david, in the last five years theyve had some negative years for sure, and i think they turn it around certainly this year. I cant remember whether last year was positive or negative, vice versa, but youre right theyve had some volatility, and notable this litigation with the Canadian Pension Fund over some i illliquid assets and the pension fund wanted to redeem things earlier than that. So that was a bit of a black eye at the time. Its been an interesting year, thus far. For first time, ive heard flows funding are heading out and managers seem willing to potentially cut fees. I was just going to ask, are they still charging that ive heard in a long time. I dont know what your experience has been. I think anecdotely, that is happening. Something like tutor comes to mind, lowering fees a month or two ago in some of his funds. The caveat was he was far above the 2020 threshold and still is. I do think managed accounts, sort of large stickytype investors like Pension Funds and endo y endowmentes are getting bower fee deals. Whether the average investor is getting numbers better than that, youve seen sort of a clammer for that, and weve heard people say, the performance is too low, were out of the hedge fund investments. Why weve seen lowering of those fees, i havent heard and im sure the hedge funds are going to hold the line lo, wouldnt y agree . 2 for doing nothing . I mean, give me a break. You said it. This is definitely going to be a difficult year for them, these performance figures theyre putting up, not inspiring, and you know, in other ways theyre struggling, too, i mean weve heard steve cohen, and not running a hedge fund per se anymore, although that could change in 2018. But i think its just a tough time in the industry. Those that perform well are pretty well inscanced, might still be making two in 20. They may fight that two in 20 all the way down to 0 returns and have their returns forced. Thank you, kelly. Choppy trade in currencies today, the pound at a new 31 year low, hitting now 1. 30, the bank of england moving to ease when it comes to the breck ixit vote. And elsa and amelia bordeaux, joins us now. I was surprise today took this long for the pound to get down to 1. 30. Where does it go from here, do you think . I think were going to see it lower. I think it moved pretty quickly in my estimation, but were going to get down to i think 1. 20. Well see some support at this lower level, and at 1. 25. Theres still so much Economic Uncertainty theyll go into recession, and companies are going to preempt the actual leaving of the european union, theyre going to pull investment out of the uk to preempt that. Talk to me about the technical situation with the chinese. Their currency used to be fixed against the dollar, now its fixed against a backskit. The pound is in that basket. Theyre quite literally defending the pound under is e certain circumstances. I think one of the reasons the pound is taking its time to go lower and people are underestimating how long this is all going to take, when the initial vote to result came out, a lot of people were surprised particularly outside the uk, and now people are slowly coming to realize how long the whole process of brexit could take. Even now people are under estimating this could take up to a decade in order to see the final exit. So amelia talks about 1. 20, do you agree with that . I think it could go even lower. Our eventual tropugh, is 1. 15. Sellings are a small part of that basket and if this is a independent sterling weakness story, then its not something any one central bank is going to defend against. That weaker sterling is mart of the transmission mechanism that needs to be dealt with. Where does the yen go with . If im running the yank bank of japan, i dont bother anymore . The yen strengthens, why bother, right . Its all risk aversion. Yen is a safe haven uncertainty, and any time any country goes to the polls theres surprise result. We have an italian constitutional referendum, and of course the u. S. Election coming up, so the yen will stay strong, and it did break that 100 the night of the brexit vote. Basic of japan jawboning it a little bit, but not doing much, not stepping in and intervening. I think its going to go lower, like to 95 cen . 95, but its go be tough to fight that. Theres so much uncertainty out there. Elsea, 101 yen, what do you think . Similar direction, but were even more aggressive, so weve got an eventual target for yen of 92. And its not so much the risk aversion, its were seeing a lot of domestic buying of yen from japan, and the fed, which was expected to hike rates, is in the absence of high u. S. Rates driving up the cost of emi hedging ends up into a selling story of the yen. Ladies, that was nice. Three ladies. That was nice. No men. Well be over here. Not this time. When we come back, brexit hitting the italian banking sector. When we come back, tim adams in just a minute. My mom loves giving me advice. She even gives me advice. About my toothpaste and mouthwash. But shes a dentist so. I kind of have to listen. She said jen, go pro with crest prohealth advanced. Advance to healthier gums. And stronger teeth from day one. Using crest toothpaste and mouthwash makes my. Whole mouth feel awesome. And my teeth are stronger too. Crestpro health advanced. Is superior to colgate total. In these 5 areas dentists check. This check up . So good. Go pro with crest prohealth advanced. Moms right. Again great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Good morning, everyone, im sue herrera. Here is your cnbc update. After four years in bankruptcy, apallo management, selling the majority of the company to gores holdings, valued at 2. 3 billion holding 58 stake. Flash flood triggered by heavy raining killing at least 28 people in northern pakistan while praying at a mosque. Army troops conducting relief and rescue missions. Another deadly day of terror outside one of islams holiest sites in saudi arabia outside the mask grounds where the prof prof profit muhammad is buried. It is the third in that country. And nasa released a short video, with jupiter and its orbiting moons by juno, which went into orbit after a five year flight, that cost 1. 1 billion. Amazing. That is the cnbc news update this hour, michelle, back down to you. Sounds cheap considering what we spend money on. Exactly. I couldnt agree with you more. Something were taking a closer look at, the italian banking sector, if you look at the ftse all share index, down 56 year to date. The one month, down 27 . The vast majority happening in the wake of the brexit vote as that situation raised concern about the future of the european union, and now the most recent catalyst is, yesterday the oldest bank in the world, monte depashi admitted theyre being forced to do even more with their npls, nonperforming loans, across the entire italian Banking System, and heres the key thing, there are many, many mom and pop individual bond holders of subordnated debt, junior debt innite italy, and a of people will lose money if they do what theyre supposed to. Politically, its going to be very, very tough, which leads to the Prime Minister saying they need to do something that would get them out of the rules so they dont cause a banking crisis they think would use as systemi systemic. Not that easy. Easier said than done. And we are talking about stillwood is also, what, the Third Largest bond market in italy . For sure, in terms of the country. Just overall. Theres the u. S. , japan, and then theres italy, but the italian debt to gdp is very, very bad with japan and greece, as well. To your point, the Italian Government doesnt have a lot of money on its own to do the recap, but they would prefer to use tax money and defend individual bond holders for political reasons obviously. Right. In if they could. Talk about a collective action problem. Oh, yeah. Angry italians. Could be tough. Joining us now with more from washington is former secretary tim adams, the president and ceo of international finance. Why dont we start on the european banks. Im curious, its ten days after brexit, here we are, its certainly unclear what the future holds in terms of the impact of that. What is your take on its significance for the european Banking Systems . Thanks and good morning. Thanks for having us on. What an exciting and interesting time to be in the banking business. Obviously it just creates industrial uncertainty for an industry thats been buffeted by a whole risk of factors. Crushing regulatory changes and a cost of capitol, which is really pretty high. The industry is going through some tough times. Its being reinvested if you will, to a new business model, which is what regulators say they want. Its not clear what those new Business Models are going to look like. Its not clear what a lot of things will look like. Well ask all of our guests and ill ask what is your sense to what things will look like post the uk no longer being a part of the eu. When are we going to get any clarity in terms of what that future is going to look like . I wish i could tell you it was going to be coming soon but i dont think so. This is going to be a long complex divorce. We dont even have leadership in the uk and wont know who is running for another month or two. Well have elections across europe next year. Weve got referendum in italy later this month, so theres enormous uncertainty just with respect to political leadership, let alone all the thousands of technical details. I think this is going to be a long slog. What do you make of that situation and when it comes to the u. S. Banks, is there any issue of counterparty risk, which is always what were generally concerned at or most certainly concerned about when it comes to a shareholder in a u. S. Bank . Sure. As we saw last week in the stress test, u. S. Banks are in really great shape. They have plenty of capitol. J. P. Morgan alone has 5 billion of equity capitol, and are quote, bullet proof, quote jamie diamond. As you pointed out leading into this interview, the prime maybi minister has a great challenge. The reule makers are going to have a great challenge. I think they need to be seen as problem solvers rather than problem creators. Whats creative . Youve advised secretary of treasurers in the past, a couple of them. What would be a creative solution in your opinion . Well have ways to price these assets, get them out into some sort of Asset Management vehicle and get them repriced in the market. Theres hard because of bankruptcy rules. Its controversial but in times like this you have to looks for Creative Solutions and i think renzi will push the envelope, and given whats happened with the brexit referendum, this is no time to be sticklers to rules. What about Deutsche Bank in the wake of the brexit . They may face so much issues, profit abili profitabili profitability, et cetera, what do you think happen there is . I think hes really got a vision for where he wants to take that institution. I have enormous confidence john and his Leadership Team will produce what they need to produce for deutche, and a number of institutions. Take time. What are we eight years past the crisis at this point . You know, our banks kind of to our credit we had stress tests early, we dealt with the issues. We instilled some confidence. They had stress tests years ago, nobody believed them. Hasnt there been enough time . Youre absolutely right about the u. S. Kudos to hank paulson, who took action at the time. The eu couldnt act with the same sort of force and focus at the time, theyre trying to do Banking Union at the same time, which is not finished. I think whats what we need to see is a fullscale program across europe, we need fiscal, structure support, and the bcb needs to think about how effective their Monetary Policy is with respect to rates and what it means for bank prof profitabili profitability. It hurts them a lot. How much time do they have . Despite every day, when a share price moves lower, thats capital walking out the door. At sometime, you cry uncle. Time is ticking. We need to see leadership in europe and we need a vision for what the Banking System should look like and we need to have supportive policies, fiscal, and structure support, questioning whether the ecbs policies are damaging to the banking sector, irrespective with respect to rates. Well, well see. I guess final questions sort of you know, michelle was making the argument i think eventually the uk will benefit from having exited, do you agree . Maybe a decade or 15 years from now, they can come to singapore, the north atlantic, but i think negative territoneg through this exit will hit the economy in a shortterm. Ku di kudos to the bank of england, and mark. Hes a brilliant leader. I think the shortterm, mediumterm, theres challenges. Theres an opportunity to reinvent the uk, but its going to have losses of downsides and uncertainties. Appreciate your time, tim adams. Tim adams from the National Institute of finance. Do you know what say about europe . So many leaderships, so many leaders. Some job openings for trade negotiato negotiators. Its been a bumpy road to rio. Less than 30 days to go. Will rio be ready for the summer olympics . Weve got the latest next. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Everyone talks about what happens when you turn sixtyfive. But, really, its what you do before that counts. See, medicare doesnt cover everything. Only about eighty percent of part b medical costs. The rest is on you. Consider an aarp Medicare Supplement Insurance Plan insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement Insurance Plans, it could really save you in outofpocket medical costs. So, call now and request this free decision guide. Discover how an aarp Medicare Supplement plan could go long™ for you. Do you want to choose your doctors . Avoid networks . What about referrals . All plans like these let you visit any doctor or hospital that accepts medicare patients, with no networks and virtually no referrals needed. So, call now, request your free guide, and explore the range of aarp Medicare Supplement plans. Sixtyfive may get all the attention, but now is a good time to start thinking about how you want things to be. Go long™. Whats ahead for markets . We asked wharton professor jeremy segal. More squawk on the street coming up. Coming up. The count down beginning to wrap up, less than 30 days to go until the summer olympics kickoff, will rio be ready . Were joined with the latest on brazil, erik . Reporter new hurdles on o olympic organizers, a rise in crime, and budget short falls, have warned they cannot protect tourists during the games and scientists discovered a drug resistant super bacteria off some of the most popular beaches, normally found in hospitals. And ahead of xochitol, they all have the same theme, will they be ready . Tv cameras will focus on the athletes, events and their facilities, despite many construction problems the main supporting venues are on schedule, and complete. Its the still of rio that declared a state of emergency so they could get loans but the majority of projects are funded by the city of rio or private companies. Crime, pollution, visitor safety are harder to quantify, and remain unknown until the games start and end. Weve seen the high being jaing of a truck taering hacarrying h Million Dollars worth of equipment for a brazilian tv station, and body parts washing up on the shore, and as far as zika goes, the stats suggest youre more likely to be mugged than get the virus. Only one major u. S. Athlete has claimed zika for pulling out of the games. It might be the worst has already priced in, the stock market is up 40 since january lows and the currency is up 25 . Back to you. But other than that, ms. Lincoln, how was the play . Its going to be interesting. This reminds me of greece back in 04. And lets get to the cme group, Rick Santelli with the cme exchange. Rickster. Reporter youre so smart when it comes to the markets and credit, so it ira harris, my guest today. You look at the italian banks and you think, you have germany in this pickle, the uk in brexit, im still contending once we get the divorce terms from germany, whenever that is, and i think the timeline for this stuff is all shorter, then well know. Maybe the markets react, but the markets react to whats going on within the other countries, specifically italy. Whats your feeling about this . Weve talked about this for a long time. Anybody who read about it, will understand it, and if you havent, youre remiss. And who wrote it . Bernard connolly. Playing out stepbystep. But most important, mario dragich is the most dangerous man in europe, and why, because hes trying to pile on all this debt on to the Balance Sheet of the ecb. I went to see the other night he was in chicago, jerome poll, the fomc governor, and i asked him this question in a very open forum, i said number one who grab te guarantees the ecb, and should sovereign debt be a 0risk weighted asset. He says is a 0risk asset, and i said who guarantees ecb, he said they have a Printing Press. They have a Printing Press as long as they have the credit card of the citizens of germany. So brexit is nothing. Its a side show, it means nothing. The real issue will be, as th k angela merkel, when germany wakes up, and says, hey, no more, no more, i cant take this anymore, was theyll say, then get out of the dmark go back to the dmark. That was always my answer. Yra and i always debate this all the time. You have an euro currency, in trouble for the weaker economy, and calibrates to the strongest credit, and the benchmark credit for the eur ozone. You have the brits still on the pound, the rest of the countries could go to the euro, would it solve a lot of problems. And when we go to the necb meeting, watch, im willing to bet, mario raises the buying amount to 100 billion euros, because hes in a manner to hurry. And you have to change the negative threshold to find the paper. Hes in a hurry to the threat of the ecb. What movie did you say this reminds you of . The bronx tales, when they say to the mafia guys, and theyre wise guys and the mafia guys say please get out, get out, and the motorcycle guys are, no, were not getting out. So now they lock the doors and they say you cant leave, and thats what mario drage is hoping to the germans. If they go to the precession, in a preverse sort of way, he may be happy because that you are in the supine way any way. And to give them credibility to what he believes is the stimulus program. Our final thought if youre an italian bank, how stimulative is it to have all of these banks . Germany has been the austerity. If germany slides, theyll get off the of the austerity bandwagon. This is much less about the people running, its more about the people voting for the next people running. You know, thats where were at, and the ecb has far too much power and theyve never been elected to anything and thats the biggest source no taxation without representation. Absolutely right. And we had who did we have on last week . Thats his famous line, all right, carl, back to you, yra, thank you. Very nice, rick and yra, thank you. And big disappoint at the box office. Well break down what it takes to be hate, and the fbi director comey makes a statement at the top of the hour. When he does, well take you live. Dow is down 91. Is down 91. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. It was another banner weekend for find the dory. Now on track to become the studios top grossing film of the year and to overtake toy story 3. The Holiday Weekend wasnt all fire week for disney. The adaptation of the bfg posting disappointing numbers. Joining us at post 9 is fandangos managing editor eric davis. Good to have you back. Thanks for having me. Was this an error in marketing . Yeah, i think the Brand Recognition for the bfg is that as strong domestically, and theres kind of a glut of family movies, this was sandwiched between find the dory and the secret life of pets. Theres a lot of options for people. Its the number two ticket seller on fandango, so i think audiences are warming up to it. Im surprised. If you had said from the guy who brought you willie wonka and the chocolate factory, you would think that they could ride that halo. They could have said that more. From the folks who brought you e. T. This is the same screenwrit screenwriter, but it doesnt have the emotion alternate depth of e. T. Visually its spectacular. Spielberg still knows what hes doing. Its a really fun move to watch. Alternates one note, not as exciting as, say the jung the book. He knows how to tell a story, though, usually not just entertain you with beautiful screens. He does. He still has it. I really liked bridge of spice. The next one will tap into 80s nostalgia. I think hell do well. Bfg, yeah, just didnt hit with audiences, but i see it word of mouth, especially internationally than here. Sure. It was a big deal when he came to disney. Of course, theres more to come, not ready player one, but this could make up for a lot ofs did disappointment here, dont you think . Yes, he has another Indiana Jones movie coming out for disney. Spielberg is okay. I think hes going to be all right. I think hes still on the top tier of filmmakers working today. I do remember one quarter where i did a whole discussion about disney earnings, and they didnt have one flop, not one that quarter, and everything was like, have they finally institutionalized the moviemaking process because you can have a great writer, a great director, great actors, great voices in this case, and still have a flop. Yeah. Not a lot of that power, either, for the bfg. Brand recognition is just not as strong here, but disney is doing okay. I think were looking at three billiondollar money makers. In september could be four. So theyre okay. Last year the top winners, so to speak were split between universal and disney. Is it more evenly distributed this year . Yeah, i think so. Warner bros. , bat man, superman, i think suicide squad will do well. But disney is out ahead. Universal cities has jason bourne, the secret life of pets. The back end of summer, between jason bourne, secret life of pets s. Star trek bejoined, suicide squad, i like the purge elegislation year too, i think the smartest man in hollywood right now is jason blum, in three days it tripled its production budget and it made more than the second one, which we rarely ever see, so look for hollywood to tap into those lowerbudgeted genres. Blum has been sort of boxed in as a neesh player, cant to lower cost, make an easy profit, but i still love the blockbusters. They love the blockbusters, but i think theres something there. Loon at the conjuring 2 a lower budget, studio movie, but i think its those films not so much driven by star power, but maybe driven by a hook, driven by a twist. I think that hollywood should look at those, look at Something Likes the shallows with blake lively. Its got a nice hook to it, and audiences are liking that. But overall a back end loaded summer, the bigger stuff at the end before we can judge how it was . Yeah. If you look at this weekend, the top 12 movies grossed Something Like 214 million compared to last year which was 128 million, so exponentially better than last year, and i think the movies that are coming, especially jason bourne, and suicide squad. I have seen secret life of pets its adorable. Now youre talking about home territory. Yeah, i want to see it. Matt damon is back. You love the jason bourne series. I cant wait. Eric, thanks so much. Eric davis with fandango. A few moments from now, james comey is set to make a statement. Well take you to washington in just a moment. Just a moment. Images, videos, social updates. We call it dark data. 80 is invisible to most businesses. The ibm cloud has tools that can help see dark data and put it to work. Hello, my name is watson. Working with watson in the ibm cloud, we can help an Energy Company predict pipeline corrosion. And help a startup to use social data to predict market trends. Now businesses can get more out of their data. Thats what the ibm cloud is built for. Welcome to squawk alley for is a tuesday morning. Im here with jon fortt. Any moment now james comey is set to our john harwood joins us this morning with more. Were going to wait and see whether this is in fact the culmination and the announcement of the results of the fbi investigation of Hillary Clintons email practices, or summer its Something Else like terrorism. They have given us very few clues about whats going to happen. We hear that james comey, who will come out in less than two minutes, we just got the two minute warning, will speaking for 15 minutes. Anyone can draw their own conclusion about what that signal is about the content. But james comey is someone of high inte