Transcripts For CNBC Squawk On The Street 20160713

Coming off of the 1. 51 level yesterday. And the day begins with record highs again, and what could cause this market rally to slow down . General mills shares are up, and the ceo will join us on a first on cnbc interview after he rings the opening biell. And the Prime Minister set to take over for David Cameron and what the change at 10 downing may mean for the futures. And stocks looking to extend the winning streak, and make more history in the process, the dow and the s p hit new highs led by the indiscretionary and the industrials, and the nasdaq in positive territory for the year, and rising to the highest intraday and closing levels of the year, and ten sessions, and 7. 6 of the s p 500, and the best ten days in five years. I used a proprietary oscillator that i use that is so good, and we hit 10 yesterday which is historically when you are supposed to start selling. That is a very high level. 5 is the beginning when you should be worried, but 10, you should be worry and minus 5 is when you have to start cover ing the shorts, and minus 10 you must buy. So i had the touchstones that i used, and this one says that you have to take a little profit. It is long once ever every five time, but it is a proprietary os lay or the i have been doing since 1997, and plus ten, you cant not be bullish. You can not be. You have to sell . You have to trim something. And what is the oscillator doing, and explain to me . Sfwlit is it is the buy pressure, and people are way too bullish, and great way to read the negativity and how much buy versus sell there is, and how much reach versus sell is the way i look at it, and too much reaching. Now it has been wrong. It has been wrong two years ago when we had a rally that would not quit. And what happens when it would not quit and plateaued for a while, and socalled worked off of the oscillator, and that is the ideal thing that the bulls have to hope for. To go into the banks this overbought with one of the banks no doubt screwing up. So if you have not taken anything off of the table, it is okay. And some still argue that lending is up. Credit is trading revenues will benefit from the brexitrelated issues. Yes, and the redemption, and the money on the sideline is big, and im not a bear. I am not a bear, but i am pointing out that this thing that i have used, hey, karen cramer, god love her said when you start to go on tv and plus ten you love it, i have to tell you, count me out. And now, what you will be hearing her is relative valuation, and the yield on the 10year, and call it 1. 50, and what is the corresponding p. E. . Well, at 30 times, im talking about 3. 3, and we are talking about 16, 17 times, and a few weeks ago people said that is a little expensive, but suddenly, it is not as expensive, and for whatever reason the tone on earnings seems to have returned bullish, and is this all selfjustified . No. Look at how coal is really, really good, and we had jim palace on, and this is really, really good quarter. So that is not well, if you are look to hang your hat on something negative for earnings, you have not gotten it. And you have seagate news that put that stock up big, and a couple of the secondaries, and michaels worth looking at, and talking about the winning fang, and diamondback is up 37 , and not the lose fang which is the laggard techs, but look, i am saying that you cant be as bullish as you are after this rally, because it is theoretically not a correct construct. Okay. Lets say that your Favorite Baseball Team has just won ten straight game, and it is okay to think that they will win the 11th, but some say, they are due, cue for a little, and you know, flatness. And meanwhile, q2 is the second biggest quarter ever for the s p repurchases. And some scarcity built in. And General Mills buys back constantly, and we will hear it are from ken as an example of the American Company with earnings made better from the buyback, and i will regard that as legit and not are risk to say that the reason that Cracker Barrel is back because they bought back stock, and the reason that auto zone stocks are up because of the greatest buyback in history, it is. And so what about yesterday the reits and the utilities were we weak, and may have seen some selling, real selling and we have seen well, what did we see . Technology, and autos and obviously, airlines had a good day. And was that a real, and can we believe it is something that is going to be sustained or to a oneday looking at the car sales in europe, you say, i should be buying gm, and maybe you are not paying attention to latin america, but the utilities and the bond selloff was for real, and you will be eventually saying, wait a second, did i pay too much . But right now, you not run into th that. And the reits are the best performing sector in the market, and looking at year after year after year, and the reits are up. And e everyone says amazon has had an unblooelievable run. And the incredible property. And she was kind to drop by my office, and i mean, there was a short attack on alpha and if you said that the malls are in big trouble, and i will short the underlying, youd be crushed. You cant send the pets through amazon. And could they the could you get a pet from amazon . I am sure there is a way. Like shelter. Com. One day, man. Yeah. And the reits have been amazing and the hotel reits are the last takeoffs and the medical property reits are subdued and the reits and the utili utilities and i did an analysis of did you see what the dominion was one of the worst, because it is up midteen, and did you see exelon . When was that excellent . When i paid the bill. And the discretion of the best sector of july. Did you see the numbers there from tyson . They had a fantastical number, and hershey was influenced by mondelez. And jimmy dean. You submitted yesterday that you could not boil water. I did actually boil some water last night and i came home alone and had to make my own dinner. You should have called me, man, i put on a couple of steak s. And i have teflon. We have moved up. But i will go to the chef boy are dee when needed. Oh, no. And soups and canned soup is not where the action s and Campbell Soup while it missed on the quarter is indeed one of the three best performing stocks in the s p, and of the sector. The s p 500 has been collective with the materials and the utilities up so much, and that is amazing. And if only we can get the transports out of corrections. Well, yesterday, a little good news with american air, and we listened to phil lebeau, there is ordering the planes, but not the wide bodies. And the defense orders of news today, and u. S. Arm sales approval of 40 billion. That is right. How did Lockheed Martin go from 200 where they have a decent quarter, and remember they got stuck buying swakorski and you know those orders are coming from companies that you dont even know are ordering arms. And you remember the janes revival with the cruisers. And find out what everybody is up to. Literal. The ships you know, they go around like jfk and the p. T. Boat. And now, later today, the uk is going to have a new leader, and there is a new leader after David Cameron will submit his resignation. And wilfred frost is live outside of 10 down iing. Good morning, wilfred. Yes, we are awaiting outgoing Prime Minister David Camerons departure from 10 downing street, and he had the final appearance in parliament as Prime Minister, and asked questions about brexit, and this is what he said about the importance of staying in the single european market. What we have seen in West Midlands is 173,000 more people in work under this government than we have seen of a manufacturing particularly in the auto the motive sector some of which is in the black country, and it is vital for that industry that we have proper access to the single market, and he is right, this is with one of the things that we have to absolutely focus on. I want automotive and aerospace, and the high Quality Manufacturing firms to go from strength to strength in our country, and making sure that we get the vital access to europe is going to be vital. And of course, keeping the access to single access market is ap top the agenda of the brexit negotiation, and that is an item at the top for the incoming Prime Minister teresa may. She is described as being tough, and margaret thech ser the first female Prime Minister named the iron lady, she is dubbed the steel lady, and she is going to be testing her mettle against the eu ministers. And now, there is also going to be some safe bets for philip ham mand to be Philip Hammond to take toef role take yoefover role of chancellor. And those confirmations wont be until later today, and about 12 00 p. M. Eastern time for Prime Minister David Cameron to leave here and go to buckinghamle palace to the offer the resignation to the queen, and this we will see teresa may. And that is breathtakingly fast. And this morning, the pictures and that have changed there, and that guy is almost that guy. And exceedingly light for the rest of the day. And as for her, pokemon go. And apparently, it is augmented reality, and tungsten and what did she call it new core breaking out. I dont know which one she is, and maybe hot rolled steel which is a hot commodity. And they will make a success of brexit, and she worked at the bank of england before politics. And she is one of the people that i dont know if you remember when Maggie Thatcher came in, and she is a little camera shy, and we will hear from them that is positive and from 1999 until now, uk has outperformed with the retail sales. And she has the wind in her back according to the homeless pokemon guy. Honorable man. And privacy concerns surrounding pokemon go, and u. S. Senator is sounding the alarm. And plus x General Mills as jim said gearing up for the investor, and the days stock is up 24 this year, and we will talk to ken powell after he rings the opening bell in a moment, and take a look at the free market, and the nasdaq is up 9 of 10, and nyse is the longest cyclical bull market. 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And the app has been updateded by closing a privacy hold, but senator al franken is expressing concern about how it collects and shares the users data, and a in letter to the ceo he says that americans have a fundamental right to privacy as the augmented Reality Market evolves, i would like to know how they are addressing user privacy and security and particularly that of the younger players and a classic example of how the policies are trying to keep up with tech. Yeah, i think that really nobody knows what to do with this thing, because it happened so fast, and augmented reality, and nobody knew that it was ready, and as we spoke earlier, David Cameron cannot play, because it is not in the uk yet. And not available there. And we talked about how it is a boon to those developing other augmented reality games, and certainly showing that there is great receptivity amongst the user base potentially for these kinds of games. Look, i think that the thing, and i was waiting for some spots, because it is not going to help the earnings per share, because it is a concept, and i was trying to figure out the relation to t mobile, and sprint, and they helped me out. And john ledger wrote that the since friday, the number of active players 2x and data usage is 4x. That is the way to play it, and t mobile is not as strong as sprint and if you want to play it, aed on thers are lined up, it is not a nutty thing to suggest that there is going to be many more augmented reality games, and this is a huge data hawk. Big data hawk. And others that are i understand. You play the carriers as opposed to developers, and people were sharing the sends of acquisition out to bid on the expectation that you have a new line of gaming available to a lot of them. And look, just, as soon as you start to recommend t mobile on this, and then the concept is like four days. And what about when you have the full full mask around your head, and not necessarily oculus, and Walking Around fully conne connected to the internet, and you are a sort of a semi conscious being who is also run by a computer. That is a lot of band wid. And i will tell you the truth, you are not really here, and i am wear iing something. You are not even here. You look at this, and you are not there. And you know, i have always had what is going to happen . You know what is going to happen. I have been questioning my being for a long time. And you know, he was cutting the price of the cars and raising the price of the cars and producing a bigger number, and reducing the number, and questioning whether you were. Simulation. And it is a master secret plan two. And the pokemon thing is a genuine simulation, and it is not there. It is not there. I mean x i haemean, i have trie rang it to use a term of art a few years ago. I know what boomeranging is, too, and it is australian. Yes. And i want you to see that i did it. Dont do it at the holocaust museum. I mean, come on, guys. Use some discretion. And by the way, we have not talked as much about the company, itself, which is a clearly a winner who developed the pokemon go game, and the anyo nintendo owns a good share of it, and also alsup Louie Partners called me and mr. Jones, but i dont know what happened to mrs. Jones. She has no nintendo going on . And the employees are feeling pretty good about the future right now. And now what about well, right, the other one that gilead bought. Yes. And it is not pharmaceutical. Well, oh, my, brain freeze we will come back to you. And the people on twitter will remind us that it had 19 employees from princeton, and gave them answer on the twitter. Who gets it first. Somebody claim i was not homeless, and talk to ford, i was living in my fairmount, and people say anything on twitter. It does not matter. It is a town square, and there a lot of village idiots. We have not seen the answer. And we will get cramers mad dash, and count down the opening bell, and for the new intraday high, the dow needs 25 point, and the s p needs 3 and we will get it at the open. Back in a minute. Ets you trade , options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. Using 60,000 points from my chase ink card i bought all the fruit. Veggies. And herbs needed to create a popup pickyourown juice bar in the middle of the city, so now everyone knows. We have some of the freshest juice in town. See what the power of points can do for your business. Learn more at chase. Com ink all right 6 1 2 minutes here until the opening bell. We will talk about the pipeline. And no, thank you. We will talk about the williams company, and wnb and a buy recommendation by Goldman Sachs, and cut the dividend, because it is priced in. And may i point out that go back a little bit in time, and there is a gigantic shale plan in marcellus, and the plan was to take the ect to transit, but the pipeline stocks are making a co comeback, and we were talking about how kind redder mo kind morgan is making a comeback, and that is what they are recommending. And the deal with the ete is off, off, and half of the board has resigned and to be fair, the chairman is stepping away for health reasons, but the other five say they dont have confidence in allan armstrong, and we is have asked him to come here, and he has declined. And this is a publicly traded company. I have not heard word that they have replaced the departing dreker to, and the window to nominate the new director is opening monday, and opening very soon which is as i have reported with korvex ceo stepping down, and one wonders if they might come back at the board. And it is a publicly traded company. And it is still not out, but maybe not have calm for a long time. And the 7 compound growth rate which is high for that business. But i like to have a board of directors, and something that i have always felt is important. Unless it is like a pto and moments there in jersey where you have lacked a key financial officer, but those dont trade. No, no. And p. T. A. For the rest of the company, but bto for jersey, because they have to have a board of directors which is something that they like to have, but not williams. Silly, silly. We have to go. We have actually General Mills opening up the bell. There is ken powell. Hey, ken. He is going the join us after he rings it. We are back after this. You are watching cnbcs squawk on the street, and the opening bell is set to ring in a minutes time, and the nikkei was up 2 over the night before some of the reports and socalled helicopter money got knocked down by a cabinet member, and ahead of the the boe, and we are watching what the central bank is sawing. Well, you have to, and one of the things that the market is enjoying is the Central Banks have all been positive for equities, and the people on the network think that it is a terrible thing, but i care about trying to help people make money, and they have been on the side of omoney. And now, the recent bid is not closing quite that high, and the earnings parade will continue after the bell, and get ready for the inflation data go going into the last day friday, and there is the opening bell, and the s p 500 at the big board as we said, and General Mills celebratinging the 150th anniversary, and we will talk to ceo ken powell in a couple of minutes. Over at the nasdaq data and merger and the new brand. That is very smart. On what period on prime day, and the reports of the year on year, and it is about to have a slot for amazon better overseas. And yes, it is people posting the number, and people saying that it is close to 1 billion, and that if we looked at amazon on a 24hour period, and one that they set up, it is going to be leading you astray, and what matters is that they are taking the share away from the retail, and a lot of the ends of the economy, and so dont judge it by the day, and by the mojo. It is marketing, too. That is what it is. Marketing. And we are talking about it, and those thinking about it are unaware of prime, and suddenly may be, and so it is you know. And it is prime, right . Yes. And costco . Yes. And i would not. Would you pay 15 for netflix . Yes, and most surveys say that people would. And there is a survey about netflix out yesterday, and these are the ing hs this they would pay more for and it is amazing that 100 Million People are willing to pay more to have a card to walk into the store c t costco, but it is very just hard for any retailer to compete. And the video offering has gotten better and better, and not the mention the streaming music which i use a lot as well. You do . Yes. And i should start using that . I pay apple you have it in the house, check it out. Okay. S p, 2156 is a new intraday high yet again, and now the dow is above the prior intraday high, and the record highs for multiple times this week. Last time we had a tenday rally this good on the sb and p, the s p, a month later was up another 3 . That is why i say if it could plateau here, it would be fine. I would be trimming some of it. And i would be trimming some of the reits that you mentioned that have had monster run, because that is not where the money is going to go. And the things are Getting Better with the economy, and that not what they want to be in. And not that they are going to be hurt that bad, but not necessarily the place to be on this quarter as they were. And i did want to get briefly to a name that we mentioned many times in the past, allergan and a lot of the investors awaiting the huge deal and roughly 40 billion, and also some news from me, we have been waiting for the deal to close, and the s. E. C. Has been reviewing, reviewing, and the expectations is that the deal will close in what we will call a couple of week, but the company did come out, and amended the agreement slightly extending the potential deadline until end of october, october 26th, should it go that long, a on the other hand u way they expect it to. But they also excluded a couple of drugs frit, so that the Purchase Price produced of 21 million, jim, and separately tet teva reported a very good guidance, and 1. 1 to what had been 1. 16, 1. 20 previously, and with the guidance on the call with the acquisition of the generics business from allergan is a positive for teva which is at one point wanted to buy milan, and so many things that have gone on there. And daytoday, and i understand that the s. E. C. Is not a great place to put the deals through lately, so i think that it is still a daytoday on the allergan. I think that you are right. They expect it almost any day, but it is the case for a while. I have been saying it for months. And allergan gets the money, and the buyback begins quickly, and also puts nit position puts it in position to do other things. And allergan has investors. And we have something great here, and that is me getting pr props, because the man we have on deserves the props and talking about General Mills hosting its 2017 investor day which is going to be fabulous, and 150 years, and ken powell, and fabulous ceo joining us, and we have to go over there, and he is fresh from i am excited because this guy is great. Joining us fresh from General Mills from ceo, and ken, i have here in my hands a eightpack breakfast pack minus the plus 14 cereal pack, and how did you do it . It is a little caught, and nice to see you. We did it by listening, and what we heard from the consumers is that there are things that we didnt want in our gluten, and some artificial sweeteners and colors and glutenfree out of gluten out of cherrios and that business is going from down 3 to 4 to up 5 to the second half of the year, and very big turnaround and getting rid of the artificial, and the no, no, no nos as we call it, and we want more filling breakfast, and granola and that business is growing double digit, and organic, and how about annies, and we will give them that this summer, and we believe it is going to be a success, and cereals that taste good, about how about tiny toast . That is off to the strong start, and the consumers tell us what they want, and we listen, and they are rewarding us. And ken, the Margin Expansion is very remarkable, and what action did you take . To the Foundation Brands and growth brands, and you are only going to be supporting the brands that could have huge growth. Well, jim, we will focus the s support on the brands that we see the highest growth percentage of cereal, organics and these types of thing, and focus the innovation, and r d resou resources there, and the foundational brands are important like pillsbury refrigerated dough is a Good Business for us, and we have the dominant share. We will spend less on the media there and be precise about the trade promotion there, and we have Great Innovation coming on the fresh dough business. Another Foundation Brand progresso food, and less on the consumer promotion, and terrific innovation coming there, and all of the products will use the antibioticfree chicken which is another thing that the consumers want, and we reonly leading brand to do that, and we will continue to do that, and more focused support, and more focus on the higher growth brand, and we believe it is a very good way to allocate the resources. Did you kick the tires on white wave . Well, we are kicking the tires on lots of things constant constantly, and if you want to talk about m a for General Mills looking at what we have done for the scale of snacking and organic, and and any nus has acquiring scale around the world, and yoki in brazil, and brazilian international. And those are the investments that we would see in the future, but the valuation driving the top line through innovashgs around Margin Expansion and get the cash back to the shareholders. And in following up on carls question, when it comes to white wave and, ken, the stock had traded above the bit price, because there was expectation of General Mills growing organi organically is interested and are you saying that you are not, and the ship has sailed with the deal . Well, like i said, we are looking at the deals all of the time, a time, and we evaluate things lots of times, and if we find what is a clear path to value, then we would take the next step, and you know, so we have done the things that we have done, and right now the focus is on the things that i have talked about. How do you work [ laughter ] you know what that answer was . If you could not figure it out. I would follow up that yogurt is not that strong, and the things that greg ingles has done is a natural fit and jump start for you. And plantfree is a very good opportunity, and we are expanding the yogurt business, and annies is off to a strong start, and we will have ra strong push into the organic yogurts, and launching a product called grow big which is a yogurt targeted to teen, and to so a lot of unnovation to the yogurt, and so our focus is going to be on the core brand innovati innovation, and the innovation that wep develop internally with the bolton acquisitions where they make sense. And what about the companies that you have to reacting like amazon, and walmart which is a little tough. How do you deal with them . You are changing the way that you are promoting, and lot of people, the companies are used to General Mills whiting them a check about everything, and you are being smart to allocate the funds. Well, jim, we are focused on evaluating every trade promotion deal that we do, and making sure that there is an roi there, and so we are gaining the traction, and the tools are Getting Better, and if the deal is not profitable, it is that we really have to, we have to cut that trade spending, and the Retail Partners will understand that, and thist is not a wholesale thing, but it is ple sis, and surgical what we are doing, and where we are doing it, it is going be making sense and improve the profitability of the businesses. And ken, it has happened where a ceo comes on and do the Investor Presentation for the future, and news in there, and i want to make sure it is out already . Everything is out . We wont surprise anybody with the guidance or anything. Well, the focus is primarily on the innovation. I have been talking about it, and annies organic cereal, and tiny toast, and go big e yogurt, and more organic yogurt, and Nature Valley snack bars, and haagen dazs, and you know, the expansion there, and the stick ba bar, and the haagen dazs ice cream in europe, we will expand that, and yoplait in beijing will be expanded, and the presentation this morning is going to be on innovation and how to drive growth. You will get questions of how you see brexit, and the election, and the currencies, and the back half. Well, brexit, time will el tell, and it is 3 of the business, and so, you know, in the grand scheme of thing, it is manageable. We will have to see how it shakes out, and more of the uk products are produced in the continental europe, and so for us, manageable given the smaller size of the business. What should be the opt more of organic, and losing green giant, and what we are talking about regarding the tricks of the organic in natural now, and what is the right percentage given that, ken, those numbers are blow away. Well, look, i dont know, but it is what i know is that it is growing rapidly, and more and more consumers are coming into that, and very interested in looking to expand that portfolio, and annies is a terrific acquisition, and great brand vision, and positioning, and we have brought them capability to do things that they could not do on their own, and annies, and cereal, and annies and soup, and more to come, and so it is clearly, it is going to be a 1 billion for us soon. It could go to 2 billion, and you know, hard to the say, but it is going to be a continuing highgrowth part of the portfolio, and we are interest ed in adding to it. And you are a selfeffacing man, and i have known you for many year, and you started out saying how disappointed you are with the yogurt sales, and what happened . Well, i think that the mix of yogurt product that we have right now is not quite right. We are concentrated in one segment of the market which is the traditional core yogurt s segment, and we have got to expand into the other growing segments organic e yogurt is growing fast, and kid yogurts is growing fast. We have a good portfolio there, and we want to expand it and reformulate it. And why not make the deal right now, and give irwin a call. I have the number on my cell. Well, we have to create the numbers and create value for us, and right now, we are better off innovati innovating. And the multiples are high in your business, ken. And the deal for whitewave, and they have big numbers out there in the ebida and does that keep you in the larger numbers in the market . Well, we are disciplined when it comes to the m a and we have to see a clear path to value, and we are looking at a lot of thing a and you see what we have done, and not done, and where we are focusing, and there is a higher return in the path that we are on right now. Including buying your own stock. Yes, including buyinging back our own stock. And we are highly focused as you know getting the cash back to the shareholders either through the dividends or the share buybacks. And one other thing, why did it resonate, and you are my age, but how did you do grewtlutenf and why did that resonate . Well, the heart of it is the people with celiac, and so they have to eat, you know, these products, and this is the only thing they can eat. And then add to that the nonceliac, but medically diagnosed glutenintolerant and 6 of the population and 25 Million People, and lot of people, and then add in their families who are going to be saying, look it, if i am buying the serial, i will do it for the whole family, and so the numbers are coming, and then another 20 who just want to avoid gluten for whatever reason, and the nu numbers are very big very rapidly, and we knew it from the the research we have done. Remember that we did check glutenfree about five years ago and very successful, and we have been a leader, and jim, it fills a deep need and a lot of people who want it. And you know, the success is in the numbers. Very successful. And congratulations with the amazing run, and we have the stocks of the success of General Mills. And guys, thanks a lot. Good to see you. And meanwhile, the dow is perfectly doing well there. Carl . Well, it is a of all fairly mixed market, and i say mixed, because we have an unusual situation with the utilities on the upside, and the telecom is lagging and the stap are also on the flat side, and that is a fairly flat market and gold is up, and oil is up, and the dollar is down on the little bit and not driving the market, and in fact, what is driving the rally . We took the informal poll at the trading desks this morning, and number one far and away, central Bank Liquidity, and who can blame them with the talk of the helicopter money in japan, and the bailouts of the italian bank, and more likely bond buying by the ecb and talks of rate cuts in turks k and the sen pral Bank Liquidity has to be a important part, and two is the improving u. S. Economic data and the fact that money is pouring into the u. S. , and the pouring into the u. S. Stocks and bonds. And finally a much maligned tina, and no alternative to stocks, and people say, of course, there is al teternative cash and gold, but the marginal buyer is looking at the low rates on the treasuries and comparatively high dividends on the stock, and says to himself, well, this is not a bad idea to stay with the stock market. It is going to make some sense. Speaking of the concerns about low rates, and you can see the met life here, and they are down almost 20 this year, an along with other Insurance Companies and still downgraded. And Deutsche Bank on the potential negative impact of the lower rates for longer. And there is the lower rates for longer story, and even though rallies in some Insurance Companies and the financials, and postbrexit, but for the most part of the month, most of the Investment Companies are are to the downside, and met life, and the big guys are all down in the last month. And elsewhere, flat market, and some of the retailers with the luxury retailers not a surprise here. And burberry, and remember, there is a lot of damage to the stocks that is already priced in. And we have a big ipo coming, and we have been talking ate, the dual listing in tokyo and new york listing tomorrow, and 35 million shashgs and that is about 33 and 2 3 of the stock traded in the u. S. , and 1 3 in japan, and talks lit open up higher, and also if you want to know what is going on, they priced it at the high end of the range, and there is a lot of retail interest in this in japan, and there is a gray market in the not u. S. , but in the overseas, a gray market, and the prices are higher, the therd the nikkei is up 7 this week, and it priced monday, but trading on thursday, so there is a threeday gap here, and a market gap on that one as well. So we will be here with tom farley, the head of the New York Stock Exchange right in front of the post tomorrow talking about the line ipo, and guys, i will be back at 11 00 to explain a little bit about the gray market, and the ipos and we do not have this in the united states, but you can have it overseas, and it is impacting the pricing of that app. Now, back to you. Before we get to rick santelli, some video of donald trump, and yvonne ka trivanka t mike pence who has until friday to file for governor in indiana, and donald trump says he needs an attack dog. And some say that he has not solidified the pick, and some say we may get it friday. Okay. Over to the cme with rick san aw top of the range. And if you are looking at the 105s and the 10s and the 5s, and 30 is important, because we have a dozen, 12 billion tlrz auction of 29year, 10month securities straight up, and we have had two spongy auction, and that is important to structure the yields. And looking at the big dividend back a little bit of one week of 30s and you can see there shy of 2. 25 where this thing seems to be buying a little buying pressure. If you are looking at the yeartodate chart of the spreads, like many markets we had a uturn the after the volatilit volatility, and in this case, curve steepening, but it is lost in the flattening as of late. Hey, the dollar versus the yuan, and i dont often show the chart, but it is important to see that we are at the strongest levels of the greenback since september, and it is worth noting that there is definitely a dynamic in the Foreign Exchange markets, and especially with brexit and some of the divorce terms coming up. There is going to be a shakeup in the exporters and the big exporters around the globe continuing to try to mo their currencies in a fashion that deals with capital flows in and or out, and of course, export flows. And lets look at what is going on with the ntf, and this is the muni etf, and last thursday, l alltime highs with the return handle, and like the ltl, and the hyg and to some extend the lqd, and these are find iing th investor interest and splintering the demand in the safe harbor and questionable postbrexit time into the realms that have a little bit more to offer like corporate securities on the spread, and finally, we do want to know one other thing that if you are looking at the 30year auction today, what you want to do is to Pay Attention to some of the large institutions of foreign Central Banks are doing, and carl, back to you. Thank you, rick. When we come back, we will be stock trading with jim, and the dow is in a narrow range, and amazon announcing numbers from prime day yesterday, and we will get that in a moment. You can fly across welce totown in minutes, or across the globe in under an hour. 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If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. Getting some figures from amazon on how big prime day was and Courtney Reagan has that. Hi, carl. It was amazons second prime day and they say it is our biggest day ever, and we do not have the sales figures from amazon, but they say that the orders were up 60 worldwide, and up 50 in the u. S. , and that is orders, and so that is something that is going to be considered items, and again not sales. And amazon said they sold 2 million toys and 1 million pairs of shoes and other funny factoids but those are the most clear, and aint peers a strong day for amazon devices as well sh, and those were among the products with the best discounts as pointed out by many analysts on the street. Carl, back over to you. Than you, courtney. A lot more than theed a vuz ri services suggested. Yes, they turned around the stock, and it was a drag on the market all day yesterday. And carl, interesting, sequoia has sold out of the monster steak of valiant. And that is the reason that the stock was the pressure on the stock a couple of weeks ago. Yes. And the stock of chipotle, and William Blair has a interesting analysis of how chipotle and they have done a survey and it looks like the first time food safety concerns are not as top of mind as they were particularly in the northeast, and predicting 20 negative comps which is how it start starts. It does not start overnight, and we saw that with the taco el bell, and during the scare, and we saw it with the jack in the box, and so i do want to say that those who want to dip their feet into chipotle, i think it is right. I have been saying at the 400 level right for age, and now i feel really good because of the surveyors and typically i dont care about the surveys, but this is a little bit more grav taita and maybe it is because i like the food. And now, what about the Conference Call tonight . Yes, it is driving me crazy that you dont get the Conference Call until later the next day, but we have been doing a lot of the disrupters and it is a series that cnbc has been doing, and this is a disintermediate, and for those who spend money on flowers for peopl people, and maybe this is the opportunity. My flowers are a mistake, you buy a lot of the gold medal flour. No, no. That is what i have been doing wrong when i screw up, buying gold medal flour. And jim, great. Really good. And mad money tonight. And come on, the tricks are not only for kids, but the kids are for geriatrics. He took my tricks holy cow. They are over there. And when we come back, we have more on the recordsetting day for stocks, and dont go away. My name is jamir dixon and im a locate and Mark Fieldman for pg e. Most people in the community recognize the blue trucks as pg e. My truck is something new. Its an 811 truck. When you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you dont hit them when youre digging. 811 is a free service. Im passionate about it because every time i go on the street i think about my own kids. Theyre the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then ill drive it every day of the week. Together, were building a better california. Good wednesday morning and well tom squawk on the street and here with simon hobbs and david faber here on the New York Stock Exchange, and the high settling back where we are at 18348 and oil is not helping this morning, and we will get the inventories in a half hour. And our red map starts with the market, and the stocks are rallying to the new record highs, but is the recordbreaking rally overheating . And plus, amazon hitting l alltime highs, and announcing big time prime number, and we will give you the justreleased results. And it is pokemon mania, and how the pokemon kashg rers are boosting the business 75 . And meanwhile, Robert Caplan is g is going to be speaking the morning at the World Affairs council of the greater houston on the world economy, and Steve Liesman will join with us the latest on that. And did it change the view x steve . No, it does not, simon. We are halfway through the official week of the fed talk, and some of the speeches are repeats, but the answer is that the u. S. Central bank is not in any hurry to raise the rates this summer or the push back against the market view, and some form of the multi month hold on rate hike, and the fed president Robert Caplan saying that the fed is going to have a slow and gradual approach to the rate hikes is appropriate. It is not as accommodativaccomm because the market is sensitive to the strength of the dollar, and he says that the fed is a accommodative as the dual mandates of low unemployment, and the stable inflation are not m met. And the minneapolis fed president said that the fed can be patient in letting the economy heal. That is following three other speakers this week, and the st. Louis fed president jim bullard wants the fed to hike, but then to get to the 63 basis points to stay there for a couple of years, and Loretta Mester said graduate rate hikes necessary over time, and Esther George said support raising rates gradually. So when you are look at the fed talk this week, good for counting it up, about two basis points this week in the fed, in the twoyear yield which is going to say not very much at all. So we are pretty much where we were, the fed in no hurry to hike, and then likely to think about it in jackson hole it will bounce its around in late august and washington later in the summer and fall, and still seven fed speeches to go, and some noise from the fed yet. Simon. And steve, at a point where the bank of england is going to be cutting the rates tomorrow, and who knows simon, i want to throw it to you, and what do you do when the currency is depreciating that much, and creates the opportunity of import inflation a and do you cut the rates into that scenario . Well, people did warn of the possibility of stagflation come into the vote, and higher inflation, and lower growth is a possibility. We will see, steve, on that front, but for the moment, thank you, Steve Liesman, and at the moment, the stocks are at a record high, and the s p is up 2. 5 in one week, and simultaneous surges in the bond market is pushing the yields to record lows. The warnings allow and the ubs is revealing that the record cash balances here in the united states, because 84 believe that the election could wreak havoc on their portfolios, and Jeffrey Gundlach and bill groves saying that it is risky to trace that from here. And to ohave more on that, we have chief fixed asset ceo from blackrock, and also, the head of equities at canter fitzgerald. And bill, as the market is moving higher, have the concerns gone greater or less because of the underpinnings of the market may be changing . Is well, the concerns are still there. You have to look at the big percentage moves. I mean, you know, down 6 after brexit, and now we have rallied back up 8 , and perhaps every percentage point that you are rallying it appears to be late. So we are in a pendulum, and you have heard about the big cash levels that the High Net Worth investors are holding, but there is a concern out there, and perhaps that is why we are pushing higher, and climbing the wall of walls. And looking at the co composition, and the rotation in the market is different, and the you t utilities and the telecoms are up, and they have propelled you to the level, and you have a financials taking over, and the materials building in the course of the week, and this is going to suggest a greater degree of confidence whether it is payrolls or what is happening in the uk and maybe if you dont want to go there, what the election might be doing. And i think that you mentioned the group rotation , e and it is important that some of the groups are going to be go back to break even, and the nasdaq back to break even on the year, and technology is coming back a little bit, and biotech, and the pharma and the Second Health care conference and a lot of focus there in the health care, and opioids getting focus, and other stocks there in that area, but with the election coming up, and lot of question marks two to the three months ou out, and people are taking money off of the table on utilities and telecoms, but as they are selling off 3 to 5 , and yielding 6 , and 10fyear from 170 to 138 to back up to 150 and people are reaching for the yield, and the utilities and the telecoms are attractive on any pullback. And jeff, where are you on the fixed income, and what should people take of gundlach and gross saying that you wont make any money in the fixed income levels, or that it is arg arguably too risky and you could lose if there is a sudden en tr trenchment. Well, we highlighted in the Blackrock Institute midyear outlook piece, there are plenty of opportunities that we are seeing in the fixed income, and inv Investment Grade corporates are at a tracktive area there, and giving you extra yield, but the investors are faced with the scarcity of safe assets, and so hi Higher Quality credit is a sweet spot for those investors who are basing that scarcity as a safe asset. And jeff, of the Bigger Picture here, and arguably a mania that is now e sweeping the world as people are chasing that wherever they may find the dividend and they will chase it around the world, and push the yields lower, and it is becoming illogical, and it will correct in time. What do you think of that broader argument . Well, you have to put that broader argument, and a little bit of the narrative spinning going on there, and remember that the whole point of zero Interest Rates, and bernanke called it the portfolio balance channel is to encourage this type of the behavior, an encourage greater risk taking when you have less yields available. So what we saw over the course of brexit when it comes to the the bond market is that there is a reminder that bonds are more valuable for their insurance policy as balance and diversification as they are rather than the e low yield environment. What brexit is a e reminder of is that yields can go lower, and prices higher, so it is about the diversification of the bonds in the portfolio rather than the levels of income that you can find when we are talking about the riskfree yields in treasuye market. And as the prices are higher it is the negative rates in germany, and it feels like a ticking time bomb. There are more people who say that at some point, it is going to break, and you dont want to be on the wrong side of the, that and do you worry about the blowup in sovereign debt as a result of the distorted moves . Well, you know, i dont. I think that we have to be a little bit careful about that narrative. We have talked about that for a very long time. And that only happened if you have a big shift in the Macro Economic outlook. Low yields are here, because there is a profound lack of nominal growth, and we are missing on the real growth, and most importantly missing on inhaflation, and you dont see the science of significant pressures on you dont see signs of significant pressure on either of the two to spark that, and certainly the market positioning, and the investor positioning can be a major issue, but coming to the sovereign debt market, the sovereign debt markets are greatly influenced by the behavior of Central Banks, and quantitative easing and the negative Interest Rates and the Central Banks are as Steve Liesman was highlights a moment ago, no signs and panic of trying to unwind any of this kind of distortion that you characterize it as those are the policies, and those policies are likely to be with us for a while. And on the equity market, what is the outlook of the next two years . We have the head of goldmans in the u. S. Equity to say that you will get a 2 gain in the equities market, and what is thek . Is there is a strong underpin ing to the fixed assets . Well, you could have big swings to the downside, and we saw it august a year and a half ago, and saw it as recently as this past january and february with brexit, and pockets of down 8, 10, 12, 15 on the s p 500, and not on one stock, and so you may have the upwardly trending market where you eke out 2 to 3 gains but with volatility of the year, and you have to be nimble, and within the last two years, it is with those group, and you have seen the banks down 10, 20 , and other groups up, so with the rising tide, it does not necessarily raise all boats. And so with this latest report, does it say that 84 of to world investors are concerned and the elections, and holding with the Cash Holdings where they have been some time, and would you have sim ympathy for t with a strategy . Well, it depends, because if you get a pullback, can you reenter the market . You can hold on to the cash, and enter the market on the dif which is great if you can execute on the strategy, but away from that, you are sitting on all of the cash that is not going to be happening you when the market isle rallying 8, 10 off of the lows. So as if anything, it depends is the answer, but as we can see, in the last three weeks, the volatility is ticking down, and the vix is down, and the market is overall of the s p 500 looking to break up the new highs, but in the short term a little bit extended, but the market is showing that it can throw the curveball at you at any moment in time. That is for sure. Thank you both for the analysis, bill nichols and jeff rosenberg. David cameron makinging the final appearance in parliament this morning before handing the reins over to teresa may. Our wilfred frost is in london for all of the excitement, and joining us outside of 10 downing street with the latest. Wilfred . Yes, indeed, sarah, the outgoing Prime Minister David Cameron had the final appearance in Parliament Earlier today, and he was given a standing ovation, and albeit only from his side of the political aisle, and despite being the farewell moment, the labor party did not get up on their feet, which highlights the level of division in the british politics right now, and it is the polarized Political Landscape that the incoming Prime Minister teresa may will have to navigate and not just to navigate the country, but in the short term having to unite her party, and so what is on her agenda as he she is coming in, and of course, picking the new cabinet. A lot of thele balancing acts there, and brexiteers and the e remainers and the balance of the continuity of change, and it is thought above all else she is going to be award those who have been loyal throughout. And there is a balancing act of the cabinet post brexit. And so will she be withdrawing from the likes of Angela Merkel and francois hollande, and what type of trade deals with america, and india and china, and that is something for her to decide once she has settled in 10 downing street. And perhaps the most pressing issue is the vote in parliamentment monday. It is a vote on whether the uk should renew the nuclear parent, and it has been shed by Prime Minister David Cameron which will stay in place, and that is going to be a test of whether she can unite the party. And she is going to have monday, the first test of whether she can command the mps to the follow her wishes which is very, very important indeed when britain comes to invoking article 50 down the line. Sarah. Well, it is going to be a tough path no question about it. Thank you, wilfred. When we come back, amazon is soaring alltime highs and the results are n and we will get you those numbers and what it means for the investors in a moment. Thank you, wilfred. As a supervisor at pg e, its my job to protect public safety, keeping the power lines clear, while also protecting the environment. The Natural World is a beautiful thing, the work that we do helps us protect it. Public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. We want to keep the power on for our customers. We want to keep our community safe. This is our community, this is where we live. We need to make sure that we have a beautiful place for our children to live. Together, were building a better california. Amazon revealing some results from the Second Annual prime day, and our Courtney Reagan is going to join us with the details. Hello, carl. Yesterday for prime day was the biggest ever for amazon and customer orders surpassing last years prime day by 65 worldwide, and 50 u. S. , and the businesses and sellers offering deals, and they saw orders triple over last year, and no sales figures were given and just talking orders, but it is a record day on amazon devices which is among the best deals. They said they sold over 2 million toys, and 1 million shoes and 90,000 tvs. C consumers and analysts did say that prime day did have better deals on product, and the only snafu was a Technical Glitch to keep some shoppers from adding some products to the carts. And on hook logic, it says that the nononline retailers saw a 35 rise in traffic compared to a typical day, but far less than the 75 of the nonamazon retailers saw on prime day last ye year. And hopefully the Logic Conversion rates are ak actually purchasing increased 62 versus a typical day, and likely from the Comparison Shopping of the amazon deals. And the conclusion is that it brought more traffic online, and did not take sales away from other sellers. And remember, that walmart is offering Free Shipping this week, and no membership or threshold needed. And last year walmart generated 3. 5 times the average daily revenue, and so in this case, ca carl, amazon may have helped other retailers. Thank you, Courtney Reagan. And for more on how the results may impact the stock, lets bring in are r. J. , consumer strategist over at morning starr, and r. J. , good to have you back. Thank you for having me. And some of the advisers were way too bullish, and were you . Yes, the numbers blew me away, and much higher with the 60 growth rate which is 65 Million Units sold for the year, which is going to be putting the company ahead of prime day last year, and adding 4 million in the incremental sales and talking about the 500 or 600 million range. And the real take away is that the International Markets are adopting prime, and the competing sales of likes of walmart are not impacting amazon at all. And so tell me, walk me through how the model works from this point on, and trying to make assumptions of how many of these buyers are going to to be remaining prime member, and the fly wheel that is going to be adding to grocery, apparel, to media . Yeah, that is the power. That is really what drives the prime day, and a member of the prime adoption, and right now, 70 million prime users globally, and 50 million from the u. S. , and there is a stickiness with the business. Once you have locked in the people, and the network of sellers, there is not an incentive for them to leave the prime membership, and the retention rates is well north of 90 , so that is one of the reasons of growth, and the membership, and the cross selling of categories, and new categories, and grocery and apparel are the places to keep an eye on. And a lot of the analysts on the street say it is hard to find a bear out there, and as a result, it is lofty, the valuation where it is, and do you agree . No, we have a 800 stop, and that is based on the Company Remaining at a high teen top on growth in the next couple off years, and throw on top, the Amazon World Services which is a key engine of the margin of growth over the next couple of year, and it is one of the most dynamic and disruptive stories in the consumer space in the last several decades. And courtney said they had success with the devices, and i saw this when i went on that they promoted the fire tablets, and the echo, and the amazon hardware with less success with than other service, and how important on the prime day to improving the success with the hardware products . Yes, it is going to ease the market share. We have had missteps on the device side, the fire phone in particular was the most notable on, that and this is interesting to see the next generation devices of the Company Unveiling having success. The echo in particular can be very interesting as we are moving into the period of the c connect the home. That is interesting, and give people more walk into the amazon ecosystem, and not going to other retailers, but from the brand standpoint, and easing the market fears, but for the Overall Network of the company, it streng thence it. R. J. , on the footnote, when they splash the prices, who takes the loss on the individual produc products . Amazon, itself, or force it on the suppliers or the partners if you like . Well, honestly, a lot of it is going to be falling on the partners and with the velocity and the transactions that they make up, it is critical for the company to be on there, a one of the advantages of amazon being the largest marketplace, and one of the things that the most of the sellers that we have talked about said they would trade off the margin hit if they make it up in the vie los ti, and that is another advantage to amazon moving to more thirdparty sales over time. And r. J. , any chance that it is pulling forward the back to school demand and black friday demand . It is possible, and certainly the case, but as we are progressing, and one of the interesting things about prime day, it is going to give the Company Insight as to what may happen late in the holiday season, and adjust the product assortment, and so it is going to give them a come ppetitive advantage of what consumers are looking for back to school, and black friday. Than you, r. J. , and thank you so much for your time. Thank you. And coming up, the Biggest Tech Company of the year, and in japan where they are starting to trade, and what you need to nknw about the 1 million valuation after just five years. The lines set to lift in tokyo and u. S. , and the chatline is expected to raise 1 million in the biggest tech ipo of the year. And now we have susan with more. Yes, line is koreanowned and japanesebase and dominant market share in thailand, taiwan and indonesia, and in fact, in those four countries represent 2 3 of the active monthly users with si currently at 213 million, and line app is only around since 2011 and created in aftermath of thethquake in japan when lines were jammed and so there was worry about the interet n but the importance came when it caught on and created the cute cartoon stickers that you can buy and insert into your chats, and in the anime culture of asia, it caught on. The app is evolving throughout the years, and not just a Communications Tool anymore, but it is a lifestyle business platform now, and content is the biggest money maker with content like games, and music and tv, and disney has a partnership with streaming content on the app, and it is a great Marketing Tool where the businesses and the celebrities have been able to use it to promote albums or movies or new products with these messages to the line ecosphere, and this is the future of the platform for all, and so the platform in china has close to 1 million active users and you can use it on the facebook, and bank, and order tickets or hail taxis and maybe it is the future not to have a separate uber or facebooks to deal with. Thank you, susan, and tune in tomorrow for squawk on the street where we will bring you live coverage of the line ipo as it is making the debut here on t the floor of the New York Stock Exchange. We are keeping an eye on the action in stocks that as we head to the break, we want to look at where we are trading on the dow, and the s p 500, and both setting intraday highs at the open, and losing steam, but if they can close higher, it would be the fourth day in the row, and the tenth for the nasdaq in 11 sessions. When we come back, we will tell you where to find some value in the booming market where the s p 500 is near a record high. Much more straight ahead, and you are watching squawk on the street on cnbc. And what an amazing time its been, decade after decade of innovation, inspiration and wonder. So, we say thank you america for a century of trust, for the privilege of flying higher and higher, together. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. 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. Im Courtney Reagan and this is the cnbc news update at the hour. A suicide car bombing hit an iraqi checkpoint killing eight people and injure juring 33 more at a baghdad district that was attacked a day before. Two other bombings in the capital that killed four civilians and wounded 16. A federal Appeals Court has rejected tom bradys attempt to get a new hearing on the deflategate suspension. Brady was asking the full court of appeals to hear the case in april when a threejudge panel affirmed the fourgame suspensio suspension. Another spat involving donald trump last week. Supreme Court Justice Ruth Bader Ginsburg made some critical remarks about him calling him a faker, and trump said that it is dumb, and that she should resign. Nissan is unveiling the new Driver Assistance Technology for singlelane driving called pro pilot, and once activated the car will adjust the speed to maintain a distance a safe distance from the car ahead, and it is also going to keep the car in the center of the lane. That is the cnbc news update for the hour, and lets check in with Jackie Deangelis for the inventory progress. Yes, the department of energy out with the weekly report. The crude saw a surprise build of 2. 2 billion, and to put it in context, a larger drawdown and yet the api saw build, so the numbers were all over the place, and the prices were trading exactly where they were before the report came down out, and that is down 52 cents. I will say this, the globally in terms of the supply, and demand the bearish factors remain and that is why it is to the downside. The fears are easing as well, and opec production is report cli up, and the eia saying in the monthly report there is a global glut out there, and not really new news. Overall, meantime, if you are focused on the fundamentals, the seasonality of the summer driving is in demand for the second half of the year. Will we trade the range, and people are saying probably, and people are going to be bouncing around for 40 to 50 until Something Else changes and a catalyst and black swan or something that we cannot predict at this point, guys. Yes, and wti isdown down a a slide, but what signs should investors be watching to see if the run is going to be stalling out . That is a question or our own very own mike santoly who is join g ing us here on the post e on this overheating watch now. Yes, no doubt that the rally is hot, and we cant say it is clearly overheating, but, here are some things to watch. The tale of the tape, sarah, one of the best tenyear runs in memory, and the gain in the s p 500 over ten day s is the best since 2011, and if you are looking at the amount of Trading Volume to the upside more than 70 over the tenday stretch, and the best since 2009, and before that, you have to go back to the early 90s which is the measures of the buying urgency coming out of the bear market or something that is important tlurs higher, and those things will speak well to the market, and broad and supported by the credit markets, and all of that is sounding good, but it is a steep run. That is why you want to look for the certain signs of overheating. At this point, it is the technical, and the sentiment thing things that you want to keep an eye on, and in terms of the technical things, just exactly how much more upside of the cap index, and if you want to to see the growth proxies such as transports and the small cap stock, and the financials would be nice, too, and sentiment is bu bullish, and you will have the Investors Intelligence news survey twice as many bulls as bear, and it is showing you that the sentiment is heat and the vix is not yet showing the warning signals, and this is monitoring, and also, the wall street strategist, sarah, and the average target is 21. 50, and that is the year end target. So if you are seeing wall street trying to raise the stakes a little bit, maybe that is another sign. But not exactly exuberant. Not at all. On the shortterm trading basis, you can see the speculative activity but not among the longterm. And you say that it feels more cyclical . Yes, the rule of thumb is that if the market goes nowhere for 14 montha and downside buy and used every excuse not to go above a certain level and then breaks above, it is not a fluke. It has the markings of something more important, and at least has to be respected now. Mike, you bring up a number of good points. And stay with us, because we want to bring in samir, a international strategist, and to mikes point, samir, we have to look at what is driving the rally, and what are you seeing driven by fundamentals or the Central Bank Intervention . Well, it is a little bit of both. We are seeing the fundamentals improving and the apparelling improving, and the manufacturing and nonmanufacturing pretty good, and the earnings will rebound in the second half of the year with the oil and the dollar headwind will dissipate, but some good technical factors with the central bank stepping n and people are underpositioned in equities and all of these things are adding up to the equities going over the balance of the year, and you cant get returns in bonds and cash. And it is confusing, samir, because yesterdays session we saw thecyclical stock, and the other stocks moving higher believes it is a better u. S. Economy, and earnings picture, and then today, back to the defenses moving and the utilities and the telecoms, and which is it . Where do you want to be . From the daytoday, there is going to be the volatility, but if you are looking back to february lows wshg e reseeing the cyclical flavor to the market markets of discretionary, and industrials have led the way for the last four to five months, and we believe it is continuing into the balance of the year. And mike, a good quote by jack ablen today saying that the outperformance, and the doubledigit outperformance of the defensive shocks showing that investors are stocking up on canned goods before the storm. And there a feeling that it is so going to be so good that something bad can happen. Or such a mechanical graspp or anything that gave you cash income, so it is not a bubbly activity in the socalled safe stocks, but yes, it seems that they were overvalue and extended, but it is a matter of, well, look, this is what the world is offer meg in the world of cash income, and i have to grab it where i can. And definitely, i think that we could see the rotation in the other direction, and you can see the technical stuff in the catching up, and the stocks, sarah, with the treasury yields going up, and maybe that is going to be leading the indexes without much place to the go. And samir, at some point in time, dont we have to go back to what the valuation of the market is going to be, and whether we are trading that and more, and mike is making the point that we have bumped up again against what is the average call for the end of the year of the s p 500. Yes. And if we hit that what is that likely to tell the market to trade for itself, and all of the hours of work gone into the establishing the yearend price targets . Well, you are making a great point from the absolute standpoint, and if you are looking at the stocks, and the s p 500, and you are trading at 19 time, and that is not cheap by historical measures, but trying to put flit the broad the broader scope of investing of cash and bonds and fixing, and they are lot more expensive than the equities so if you have to liquidate the capital, the equities are the best alternative. Does that works and you say, my god, the central bank have so inflated the fixed income market, you have the buy the equities, because it is a better value, and in a practical sense, is that not like a alice through the Looking Glass tperspective . Well, with could ha shgs , wt for the last four iyears, and i you have done, that you missed out on a lot of good things. And simon, the way to reconcile is that high valuations tell you that you should not expect longterm returns from the levels, but the low bond yield may have told you that, so it is not telling you much about the initial path from where we are going here, but the market is not valued to give you many good returns for year on end. And we had a market analyst saying that the fixed income market is doing what it is supposed to do, and the Central Banks deliberately inflated it to put the people in risk, and if the central banlk is trying to push me into risk should i go there or say hang on, and fundamentally, and back to you, samir, fundamentally the Central Banks are pushing me around, and that is unsus ttainable. Well, i would say to use a multi faceted approach, and when the Central Banks are easing the condition, and the data is improving, and the earnings are bouncing back in the second half, and when all of the things are going in the same direction, those are times when the valuation can be a blunt instrument, anded some of the other factors may be more important in the near term. And the other factor that we may have mentioned is that the companies have been buying their own stock, and that is a driver of the rally, and something that dave coxman of Goldman Sachs comes on to talk about, and how is that e demand el hi . It is healthy, and you have a lot of authorization, and the companies have clearance to buy up a whole lot more of their own stock stocks, but i am a little bit of the skeptic that it is a principle driver of where the market s and they are big numbers of 160 billion in the First Quarter for example and that is not a large percentage of the daily or the week ly or the monthly Trading Volume to be honest at that rate. So yes, it is important, and show yos ths you that the compae doing this arbitrage, but it is not the entire story. And the companies also are not rewarded as much as they were previously. That is right, it has underperformed in the last year. Thank you, and samir, so good to see you as well from wells fargo investment. And when we come back, we will talk to the Small Business owner who is banking the pokemon m monsters for banking him 30 . Stay with us. 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. Steve, other than making im here atme move stuff,rade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. High time to go to chicago for the santelli exchange. Good morning. Good morning, and thank you, simon. Like to welcome in the high yield guest peter schirr. Thank you for faking t taking t thank you, rick. And the bond proxies and what does that mean in english, the dividend stock, and the etfs and the corporate securities, and the high yield, an inves tment grade and all of these things are finding a new following and then you will see the comments of seas by our own feds mester who said that the helicopter money the around the corner, and yes or no to the helicopter money in japan, and how can we escape the notion that the Central Banks have the entire market or all of the markets on a string . Well, it is difficult, and clearly they have made a huge push since the brexit vote to push people back into the risk and i for one say you should pull the risk off, and i dont like the high yields, and all of the yield proxies or the bond proxies and the socalled safe stock, because there is a risk that people could be backed up on them with the lack of the yield on the Central Banks, and the position is so far ahead, and we are not positioned for any lack of faith in the central ban banks. All right. Peter, lets take to a step back, and i have been talking about this for years and as have you and many traders here on the floor, and we have a sense that this is not going to be ending well, but be honest here, i dont see the Game Changing in the near term, and im remiss to come up with a trigger that will cause the events that you and i are most worried about, and so do we keep dancing . Well, for myself, we are contrarian, so i look at the range trading and again, when the people were very, very bullish, and you were looking at the sentimentts bearish, and that is the reason for the pop. But now the bully septemberments are increasing, whether it is the iaa sentiments, and the survey surveys, and you are seeing it bullish, and the people are buying the call options which puts us to susceptible for risk, and one thing that the people need to Pay Attention to is that the companies have been a big part of the market buying back the stocks, and two issue, the stocks are high, and buyback, and plus a quiet period. Over the coming weeks, we are susceptible to a shock, and the downside action is much more severe than people are expecting. Okay. And now, you know, when i look at japan, i see economists from the newspapers that have given them advice in the past, and the fed chairman and trying to reinvent water from the possible permutation, and liquidity, liquidity, and liquidity, and in the end do they not see the handwriting on the wall, and the currency, and the buoy as he is holding out the monetary promises, and geez, 39 and shy of 40,000 in 1989, and look at where the nikkei is, and dont they get it . Your final comment . Again, the policy not working, and people should admit it is not working, and i would like to see someone pull back from the negative rates, because it is hurting the entire system, and dragging the growth down, and the biggest problem that is catching peoples radar screen is that people are fractious, and so you are starting to see the separation, and each country doing what they can for themselves, and ultimately disrupting the Global Economy which is bad. I wish that poom would stop this policy, and let us rationalize and let the investors buy the things they want for the right reasons, and until that happens, we are susceptible to the steep pullbacks like we saw after brexit. Peter sh, thank you for your thoughts as usual. Hobbs, simon hobbs, back to you. Thank you, rick. It is not just a president ial election, but a dozen states are also choosing governors, and we look now at the political implications of this years americas top state for b business. Scott . And as it happens, simon, the president ial race and the governors races are intersecting in a big way potentially as you have been seeing and hearing about all morning on cnbc, and donald trump meeting with potential Vice President ial pick mike pen pence. And he is the governor of indiana, and they met at pences residence, and emerged all smiles, so we will see if that telegraphs the pick of mike pence as the running mate for donald trump, and we have been following mike pence now for a while in the top states for business, and as we said, the 50th governor of indiana, and this is how the state came out this year, and the category is that the instra structure is well developed and the good roads and ports and airports in indianapolis, and also strong for cost of doing business which you may not think of thinking about in the rust belt state or former rust belt state. The worst category is quality of life which has to do with the health of the states resident, but also, remember that mike penls signed the controversial freedom restoration act last year, and huge controversy off, that and we will look at inclusiveness for the quality of life, and that is something that if he is the running mate, that may very welcome up. There are as we said, a dozen states that are electing the governors this year, and look at how they did in the stop states this year. We have delaware at 37th, and indiana as we said 16th, and missouri 31st, and montana, 22nd, andh New Hampshire 26th, and North Carolina number 5, and oregon is 17, and utah which is americas top state for business this year also picking a governor this year, and vermont and washington and west virginia, and you can see all about the study, and look at the governors races as well, at since the pokemon go characters started arriving at his store. Hell join us to explain next. Well be right back with the dow up 10. 5 points. When a moment turns romantic why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. 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. And downloads and some Small Business as well are using it to lure in new customers and rake in the dough including one pizzeria here in new york. Joining us, we have tom blaze. Coowner of the pizza bar. Good to see you. Good morning. Tell us about how you found a Business Opportunity here with pokemon go. Well, a few days ago about five or six days ago i found out that our logo and we dropped a lure in the pizza bar so it would attract pokemon interest and people would come to the pizza bar to capture pokemon and we bought for 10 a lure and ever since that business has been just unbelievable. Its been generating so much interest. Tell us a little bit about what thats been like. How many more people coming through the door and are they actually buying pizza . Theyre buying pizza and theyre coming in. Were a fast casual pizza bar so they can grab a slice and grab a beer and just sit down and play on the pokemon app. They sit in the vegetable garden in the rear. All day long people come in for ten minutes or an hour and a half or two hours and theyre interacting with each other. Its been a great phenomenon so far. How much have you spent total . I would say we have increased business at least 75 . At least 75 in the next several days and its been a flood of people coming through the doors. We also purchased another round of 100 to drop more lures into the establishment to attract more people so right now we have vested 110 total. I have seen a lot of people using it. I havent used it myself. Can you explain what a lure is . What youre buying there so cheaply. Well, a lure, what it does is it attracts pokemon to the establishment and people come in and they look and search for pokemon. Theyll search on our pizza display in our garden, underneath the tables and when they capture pokemon they gain points and this is what its all about and its generating tremendous business for us and i think its fantastic for Small Businesses to get involved in it as well. Everyone is trying to figure out if this is just a fad or if this is here to stay. If were going to see more games like this. What do you think . This is the start of something were going to see a lot more happening because whats happening with this pokemon and nintendo is phenomenal right now and other makers are going to start getting themselves involved in this. This is just the beginning. How are you preventing customers from getting disturbed at the people wandering around trying to catch the characters or whatever theyre called . I tell you, its just been just a great outpour with the community here and people are respecting each other right now. Some people sitting down. Some people Walking Around. We have a nice space. Its very spacious. We have a great garden in the rear. People are going out there as well as the bar and just sitting and playing on the app and grabbing a beer and just hanging out so its been a great positive thing so far. Thank you, tom for joining us to tell us about it. Great business story there off pokemon go. Tom is the owner in long island city. Lets send it to john forte with a look at the next hour on squawk alley. How do i top a pokemon stimulus . I dont know if thats possible. Were going to talk about intel and donald trump. Why that invent at intel ceos home was cancelled several weeks ago having to do with donald trump and also materials on why the entire Semiconductor Sector and materials are looking so good lately and finally does this pokemon trend stay. Well follow many trends in that business. All that and more coming up on squawk alley. You can fly across welcome town in minutes16, or across the globe in under an hour. 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