Transcripts For CNBC Squawk On The Street 20160719

1. 6 level. And the headlines are on your screen. Our road man begins with a slew of estimates beating goldman and j and j. Netflix, subscriber numbers come up short, stock down 13 in the premarket. And the latest out of the gop convention, over plaguerism and what to expect today. First up though as stocks aim for more record highs, we have four dow components, j and j, ask gold m and goldman. Despite the uncertainty created by brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and managing our business efficiently. One thing weatility is an environment they can operate in. We had very good quarters at bank of america, jpmorgan, sp spectacul spectacular, and city, really good quarter. Goldman, we found out fixedincome trading bank of america had good fixedincome trading. Tell me something i dont know. Goldman doesnt have any equity business to speak of in terms of ipos. It suffers by comparison to a bunch of other companies i did not regard as fixedneck trade companies. The book value disparity is rather shocking as it is for bank of america, as it is for citi. This is goldman. It means the companys generating no real results, thats untrue. But i just caution what youre seeing is the stock that ran up in association with the other banks so it may not be spectacular. Down 96 k. I tell youall of these banks, people say how did the average wage go down last month . Given the fact that employments so good. A lot of white collared jobs were really lost in this business. When you look at all the branches that bank of america closed. We look at the compensation of goldman. Youre worried about your yeah. I dont want to say relative paycheck. People are still wealthy. A lot of this gets figured out in the Fourth Quarter . Yes. So you can look at 42 is where they are in terms of comp ratio, unchanged with 15, but that can change dramatically. Total staffdecreasing, 5 fewer workers at Goldman Sachs. Some of that was due to the lack of litigation expense, which weve seen finally starting to to stop. Right, bank of america, the mortgage issues going away, citi holdings, which had been all legacy. This was the quarter a lot of these banks put behind them the great recession, but in front of them s this notion that you just dont make as much money in banking. This is that kind of thing you get together with younger people and they dont want to go to these firms. Theyd rather go to a startup, or get a job with via, to name one. I thought it was via . No, i think its via. And help develop, you know, their Growth Outlook as opposed to, well work at Goldman Sachs. A lot of people get their news from nic, there was a Goldman Sachs guy left to create a successful start up. Its a changed time. When i got out of school, you wanted to be a lawyer because the business at goldman in brokerages was too crazed where you had bear markets going 81. Here, you had this incredible run these banks have had, and now you still make good money but its harder to get the job. Right. For them, the key is always attracting talent. Another key, before we move on, is buying back stock. 11. 1 million shares, average price, 1. 56. Of course is the key theme throughout corporate america. Look at the book. It helps earnings per share, too. And youll see bank of america in there buying aggressively. You saw a lot of banks buying yesterday, that reported last week, and i just think the Banking Group itself was very hated going into the quarter so its not as bad as we thought. Again, goldman had a run. Lloyd blank doesnt like to play trader. They just buy. Theyre not trying to get in there and figure out the best price. Weve still got to get through Morgan Stanley, amex. Amex was disappointing last time. Morgan sta Morgan Stanley was not a good quarter versus the previous quarter. That stock has been down, lisa, since the settlement was thrown out with mastercard. I think that this is visas the best of those. Morgan stanley really should try this could be a quarter where Morgan Stanley comes back. I think theyll improve from last quarter. Well vote tomorrow. Netflix is down sharply in the premarket. Company announced it added 1. 7 million new subs below its expectations over 2 1 2 million. On the earnings webcast last night, Reed Hastings talked about the impact of price increases on subgrowth. People dont like price increases. We know that. Its a necessary phase for us to get through, and then with theip creas creased revenue, were continuing to invest in better and better content. Thats what makes us feel very positive about the longterm and this is a shortterm phenomena. Apologized on that webcast for some of the volatility. He said its not easy on anyone. Volatility is never about good. Its always about bad, right . Its true. This was a baffling call. They talked about ungrandfathering, which is a word if you check that, that they created last night. Any time you know, of course we ungrandfathered him. Spell check wouldnt let me have it. This was when i say baffling, the people who didnt reup, were people who were it was people who were afraid of the price increase. Now, what this says is, ive always felt theres costco, amazon, you pay for the prime. People didnt pay for netflix going on. Right, they had more churn than may have been participated and they added fewer subscribers domestical domestically, and internationally, and as importantly, their guidance below the Current Quarter is below what much of the street and the investors anticipated. Its toriberrible. In terms of u. S. And economic. Us 160,000, and guiding 300 more . Next quarter is bad, too. I think people are looking for half a million. Customer loyalty, thing, fpr used that, rbc, multiple negative catalyst. Come on, when Reed Hastings says everyone the big picture is everyone is using internet video, Internet Television more and more, the rise of virtual mpd, which is streaming, all of these things building out the internet ecosystem, in ten or 20 years from now, every household will subscribe in netflix. Thats true. When a Conference Call starts when this was a disappointing quarter, im not going to say, nah, it was a good quarter, because it was a disappointing quarter, and im reacting to the fact they were, i felt themselves, not really understanding of why of the ungrandfathered of why people didnt take t. I think they didnt know. It was kind of like these retailers said there was a slowdown in may, i dont know why. I thought this was a quizical call. I think they are trying to figure out what went wrong here, i really do. So with the 60 to 90, u. S. To longterm goal is that still within reach . I think doable. Something happened here that people decided the content wasnt worth paying for. I dont know i agree with them youre grandfatherered at the lower price and you say, im done or youre ungrandfathered and youre, like, im done. I dont get it. I think its great. I would never in a million years say, im not paying the additional couple. How could you i mean, i dont get it. Its like imagine if costco, if everybody just said, theyre raising the prices, im not going to costco anymore. Would you do that . Bernstein today, competitive threats are more severe and Pricing Power is less than you think. Target, 62. Whoa. 62 . Thats aggressive, wow. Look, i i didnt like the growing pains as the thing, because, like, thats not growing pains. You really miss very big. Right. Then i start saying, okay, was content not what people wanted . Is it no longer cool . Its just about subadds right now, very similar to amazon, to a certain extent, and about obtaining future cash flows. They didnt have subgrowth. The adam sandler movies. They didnt have it or maybe with respect to there was nothing we talked about i did not, like, say to you, this quarter, did you see narcos . Im wondering if theres less buzz because i have to tell you, i was on that i went through the call twice, remember they do a letter then the q a. I read through it twice and the first time i said, i must be missing something. I have to go ask my kids about ungrandfathered. And then i realized when you make up a term to describe something that is a fear of like i was waiting for them to quote roosevelt. They had nothing to fear but price increases themselves. Thank you for that. You like that . I will yep, im going to go with that. A think a of people will use that as their mantra. I feel like copying a president. Speaking of political catch phrases, the rnc goes into day two. A lot of buzz under surrounding last night, including this controversy surrounding Melania Trumps speech. Good morning. Good morning. There were a lot of speeches at the republican convention, but Melania Trumps was the mostimportant one, because donald trump has a problem in particular, he wanted to use his wife to try to reach out, softens edges. It began the way they intended in theatrical style. Donald trump walks out in a haze of smoke, and introduces his wife and delivers a series of lines about the virtues of her husband as a family man. There is a great deal of love in the trump family. That is our bond and that is our strength. When considering the president of the United States. Barack and i now, it is true Melania Trump did not provide telling the kind of things only a wife can say about a husband in the performance. The problem arose later when people compared sidebyside, her speech with that of Michelle Obama and saw there were passages that had been lifted. Take a look at this clip. Barack and i were raised with so many of the same values, like you work hard for what you want in life that your word is your bond, that do you what you say youre going to do, that you treat people with dignity and respect. From a young age, my parents impressed on me the values that you work hard for what you want in life. That your word is your bond, and you do what you say and keep your promise. That you treat people with respect. Now, of course, passages like that arent terribly important. Melania trump is not a candidate. Unfortunate unfortunately, for the Trump Campaign, they have made it worse by insisting she hadnt borrowed those passages at all. Its almost wordforword from Michelle Obama. The republicans are hoping to get past this today, and shifting to the economy. The theme tonight is make america work again employ we. Well see if they can make some headway to make day two better than day one. Mcconnell, christie, well talk to john harwood in cleveland. When we come back, the latest for yahoo, and the chief economist will join us in the next hour, dow is going for eight straight, hasnt done that since a tenday run three years ago. More squawk on the street from post nine in just a minute. Dow shares seem to be down a bit. The Company Posted earnings nine cents a share, a bit shy of some forecast revenue above consensus. No great signs there of a turnaround at the core business. Bids for which were due yesterday after the earnings were reported. But make no mistake, speaking to people familiar with this process, the bidders themselves were well aware of the quarter and had incorporated their bids to account for what they already knew in terms of looking at the numbers from yahoo. And i can tell you, guy, at this point, five bidders did show up in the final round for yahoos core business. Now, it remains to be seen what the numbers will be, and as weve talked about so many times, real estate and patents may be part of one bid, not part of another. It remains somewhat unclear whether theyre going to end up perhaps picking a higher bid for core that does not include business for those and selling those separately. But there are five bidders, which is a good sign when you head into the final round of an auction, and trying to maximize the value youre going to receive. So well have to wait and see how that unfolds over the next seven to ten days. The team that is dealing with this, would love to have august to do other things. Right. To relax. And so i think thats going to be their mantra, to try and get this done by the end of july, lets call it, and then may move on from there on a lot more complexity, in terms of the steak we talked about as being the muchmore component of this. Every billion dollars for the yahoo core only amounts to lets call it about 70 cents a share, but the discount once the baba shares are traded at, once they are segregated specifically on their own, is much more important to the overall value being given to yahoo shareholders. What did you think about the number of layoffs . This company is a very small company. I know, its a small company. 8,800 employees. The tumbler acquisition, 365 million. I remember when carl did the original interview. They had high hopes for tumbler. There were times where, over shadowing yahoo, as the success story. Turned out to be far from the case. I think the businesses were hurt obviously by the auction. But i combat the subtext as facebook is a great company. Facebook is a great company. And you want to buy them. Because i think they e vis rated this company, and, mobile business, native, social. It is they went up against virtual buzz saw. At one point they talk about how the internet. If cheryl seedburg and g galfont, i think you would say, what is she talking about . Shes a very humble person. She wouldnt put it like that. Look sometimes you go up against a superior opponent and you lose. Well see. Now those bidders may see its been an undermanaged aboubusine and perhaps well give them an opportunity. There could be an opportunity there. It was kind of like a defeated team in the locker room Conference Calls. And you know, the cfo told a good story. They did a great job with the cash but they just got beat. Its okay. Sometimes you just get beat. Happens. Not the only news in social today. Twitter and the nba putting together a new partnership. Well get cramers mad dash and count down to the opening belgium. O one look at the premarket on this tuesday. Dont go away. Hello prashant bhuyan. Cofounder of the Fintech Services startup. Hello watson. Your analysis of social media and conversations on various trading floors, helps us uncover insights. Insights that help investors predict market closes, well before markets close. You know, your analysis has helped us improve our predictive accuracy by over 500 . 550. 2, to be precise, but we can always do better. I like your attitude watson. 550. 2, to be precise, but we can always do better. This is my new alert system for whenever anything happens in the market. But thinkorswim already lets you create custom alerts for all the things that are important to you. I guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. All right. Weve got six minutes until the opening bell. We had earnings from a Company Called ibm, another one called j j. Lets talk about that. This company is a small cab company. I say that because it has small cap growth for the largest one of the largest, greatest companies on earth. David, this was the kind of quarter that actually justified this move, and what theyre doing is theyre doing it through sheer intellectual firepower. A drug is working incredibly well for certainly malitigate nancys. And zerelco, a anticoagulant, and darzolex, amazing drug youre talking about these are thats for diabetes. Theres just drug, after drug, after drug, and ive got to tell you, when i look at this call and i see the number of people eye want i want to be sure about that darzolex. Multiple myeloma. Alex starofsky has been able to deliver on highgrowth pharma. Its up 25 of the year. Is it a bigcap Growth Company . Is that how you think about it . Yes, because these all combined, worldwide pharma represents an 8. 9 increase. Operational increase of 9. 7. Im sorry to read but i dont want to get these numbers wrong. Ive got to tell you, david, when you look at any other largecap pharma, including bristol meyers, theyre an excellent anticancer franchise. Embrovica is an amazing drug. The tylenol business Getting Better. Orthopedic, Getting Better than i expected. Now, can the stocks sustain this run . I think that when the smoke clears, this is going to be absolutely a terrific stock. Were going to take a look at earnings from ibm and United Healthcare among other very big caps when we come back with the opening bell. U recommend synthec over cedar . Super food . Is that a real thing . Its a great school, but is it the right the one for her . Is this really any better than the one you got last year . If we consolidate suppliers whats the savings there . So should we go with the 467 horsepower . Or is a 423 enough . Good question. You ask a lot of good questions. I think we should move you into our new fund. Ok. Sure. But are you asking enough about how your wealth is managed . Wealth management, at charles schwab. Announcer theyll test you. Try to break your will. But however loud the loudness gets. However many cheese puffs may fly. Youre the driver. The one in control. Stand firm. Just wait. [click] and move only when you hear the click that says theyre buckled in for the drive. Never give up till they buckle up. Youre watching cnbc squawk on the street, live from the Financial Capital of the world on a busy day tuesday of the rnc. A lot of big names coming in with earnings. Attention turns to the political and economic fallout in turkey as they cut Interest Rates. Housing starts down year on year, but no too bad. Im still looking for the days when we got bet not necessarily 2 million where we were during the bubble, but 1. 5, when we had half as many people in the country, and that says something about credit and moving out, getting your own house. Theres the opening bell and a look at the s p at the bottom of your screen. Empire, realty trust doing the honors over at the nasdaq, its bio therapeutics focusing on Rare Diseases and cancer. Interesting to point out j j developed these anticancer franchises themselves. I think thats important. A lot of companies bought franchises themselves. You mentioned j j and their decent strong guidance. Unh, raised their guidance, as well. Yeah, excellent quarter. Remember u and h dropped out of the places in the exchanges where they felt that business account be that good and they have this technology kind of just really a Genius Company within a company, about keeping costs down in healthcare. But united health, you talk positive about them, people say, theyre like my provider, whatever. All i can tell sutheyre a very good provider. The stock has had a monster run, so maybe it doesnt react. But aetna and sigma, theyre afraid of dropping out. This is a big week when you mention the hmos. We expect to hear from the department of justice whether or not it is going to try to block both the anthem sigma deal, and the human a deal. What are you hear something. Its possible both deals will be blocked. Blocked . Yes, both will go to court. Anthem is certainly thought of to be more blocked humana where theres really a feeling that government has a much more difficult case to prove. David, that would be a very but well see. Shocking i know the stocks are not and you jest canust cant gu these things. We may know what theyre thinking by the end of the week. That would be not what the i know the stocks are well away from where they would be if there were deals. Youre going to go from five potentially to three in terms of your big providers of health insurance. I had hope the government would not go with this, just looking at the pattern, how a gre aggressive the government has done. Rite aid, and cvs, what is the story there . Jim, i dont really have a great sense on that one, so i wouldnt want to venture a guess. I think people are concerned the government ever since fi phiser, people are, like, i dont know where people are going to go. Fizer had nothing to do with antitrust. Weve said many times it was clearly done despite the comments from jack lu clearly done to stop the deal. Right. But it wasnt antitrust. Absolutely. Slumberj. Staples odp, see you later. Cisco, us foods. I just i just feel like these ftcs, dragged its feet on the walgreens there. This combination would be so positive for these companies. The aetna, humana theyll get mad at me that i said that. Conflicting calls on chipolte. Target, h460. They say they have a hall pass on 2016 earnings. Stocks doing okay. I thought that was a very interesting call. It was a is to a buis to a buy. Ive been saying, buy it to the company and 430. I like this more than the other side trade, but the wells was cauti cautionary. Loyalty program kicking in. Ive been eating throughout this whole ive been eating i just do obviously im anecdotal. I see people going to chipotle again. I do. Im sure you do. Im sure you do. Youve done did you just get an eye roll . Why you say me, too . You say, im sure you do. Let me be honest no, let me be dishonest. Let me fool you. I mean, what am i trying to do . I have no idea what youre trying to do. Every day i sit here trying to figure it out. Have you ever eaten chipotle . Yes, i think twice. Ive been twice. I feel your pain. Id love to get your sense though on something else, which is ibm, which youve followed closely for sometime. Martin schroeder, the Conference Call is up, although after hours it looked a bit more they continue to focus all of us, of course in the media, and the press and among their investor on their growth businesses and the growth theyre outpacing, i guess ill call for lack of a better term, legacy businesses. I would agree with that. Strategic business, plus, 12 every year, 38 of the entire revenue, ahead of plan, ahead of where they said theyd be, but the analyst, the number one analyst on it, he called it a modest step backward, organic growth decelerating, and does not grow as fast and does not think he can make the earnings for the second half and his question kind of brought down the room. Software sales were not that good. The denominator getting smaller so that when you have the amount of cognitive and special, it looks bigger . No the denominator was good, which is why the base business was not as bad as saganegi, which is why the stock is up. They cant split. Its not like you they cant split. Right. You killed humana. Say again . You killed humana. Nothing anybody else doesnt already know or hasnt already been concerned about. Theres very strong case to be made the government shouldnt move there. It just doesnt move they wont on humana. Im watching the stock on humana. Well know the expectation on all of these companies by the wendys end of this week, well have an answer and theyre all going to court. Lets talk about lockheed martin. Lets talk about lockheed martin. This is the story of the f35 and how you have to arm yourself if y youre a country and you write a check to lockheed martin. Thats what you do. Hey, listen, is the world theres coups, theres fights, wars. What are you going to fight with . Lockheed martin. Yeah, you want to make sure to bridge a gng a gun to a gun not a knife. So true. Yes, thank you. Twitter continuing to try to march back to 20, announcing an expansion with the nba in which theyre going to launch an exclusive pregame show on twitter, via periscope. Right. They do a lot of exclusives. Twitter. I did a piece last night about square. Dont you wish somebody would just buy twitter already . Why so we dont have to talk about it . Yes. I dont think people do things because they dont want favor talking to us. I did a piece for mad money, and this is one where jack dorsey has to choose. Cant run two companies . You cant. You have to choose. I remember people on the board saying theres no way. Were going to make him choose before the square i uppo square is a smallbusiness lender. Thats a tough business. Well hear from amex. And at least theyve got somebody in that role who has a significant position. Theres only so many hours in the day and i ought to know it, man. I watched the convention and the trainer comes at 4 00 a. M. And im doing im not ceo of two companies. You do two shows. Maybe you should continue between mad money and squawk on the street. Maybe its time of. Your loyalties are all over the place. And on, these are both he loves the comradery. I do its so lonely on that side. Jack has to do it because his stuffs not working. I think our stuff works. Is his stuff work something square . No, twitter . Nice come back. Right on the nose. So you want twitter and yahoo to be bought so you dont have to talk about them anymore . Yes, please. Yes. Remember you got tired of talking apple . Nobody yeah. Lets talk about shoe dog. Shoe dog . Its the most un i told mark parker this is the greatest book ive had in years. He is a fabulous writer. Theres some ohare, theres hemingway. It is a novel thats true. Wow, thats a heck of a review. On monsano, just to get the news out, the squawk team did it this morning, but theyve come out and said the 125 buyer raised their bid from 122, to one 25 is still inadequate. The board of directors of m monsanta, addressed that and added a reverse break feed of 1. 5 billion, i think that was, from their last bid, a lot of questions, will they or wont they sign an nda i confidentiality agreement. At some point one may expect theyre going to do that, but taking a long time to figure that out t. Sti. It turns out, its still unclear in terms of talking to monsanto, and there you see almost every food Company Comes on the shows on opposed to the facade im in right now and they all say gmo. Monsanto is when you listen to the album by neil young, monsantos public enemy number one, and two companies in europe want it and theyre far more antigmo. This is a Bio Tech Company that makes seeds and the zike guys wouldnt indicate that you have two bidders. Thats remarkable. Lets get to j j. Important thing is a modest pull back today. This is the important sectors. This is not at all unexpected. Weve been up upon out of the last ten days on the s p. Almost 90 of the s p 500 is above its first day moving average. Thats a lot, and thank you to ka Katy Stockton at btig. Banks Still Holding up pretty well. All the major banks have generally beat on earnings expectations and more than most people had anticipated, that is one of the pleasant surprises for earning seasons. If you take a look, were looking at materials a little bit weaker. The dollar got strong as soon as the june housing numbers came out, although may was revised downward. Some of these material names have had a good side, as well. Speaking of home builders, theres big question of how much demand has been met. Theyre generally traded to the upside but theyve had a fantastic run this month. Some of big names are up doubledigits, for example like besers up double digits, havnanian. I think there is a legitimate question about how much upside there is. You mentioned earnings, and the big names coming out this week, the good news is theyre all beating pretty well. Johnson johnson raised its guidance. Lockheed and lockheed, 260 for lockheed. Goldman sachs. Now, the cynical part about Goldman Sachs are saying about a third of the beat was a lower tax rate, and novartis slightly to the downside. Let me talk about european banks because they are a little bit weakef. There was an Eu Court Ruling which backed guidelines for bailing out stricken lenders, because italy might do a direct bailout, so stocks like uni credit, well keep an eye on that. We talked about active management, versus passive management. Big outflows from active manage funds like fidelity, and franklin, templeton, and big inflows to passively manage funds that are usually attached to indexes, as well. This has been a trend thats been going on for a long, long time. Look at the one year flows, you can see big flows overall from the big outflows from the big funds and big inflows into passively managed funds, i anticipate this trend will it be. Right now, the dow down 12 points. Guys back to you. Thanks so much, bob. Rick santelli is at the c and e in chicago. Good morning, rick. Good morning, carl. If you look at the day of 10s, we definitely moved higher. Maybe it was the headline on todays housing but there were negative revisions. All things being equal, it really wasnt that powerful, and if you look at the one week chart what jumps out is weve been flirting with the 160 level. Here we sit at 156, lower by a couple basis points and if you open up to a few sessions below that, february 11th, 166, what had been the closing yield for much of the year until about midjune, you can clearly see that is a key area well be testing along with the midjune which was 157. So 157 to o166 is where traders think well have consolidation. Lets look at bund, to 007, taking three decimals, well call it zero. Important chart to Pay Attention to. The dollar index did move up on the numbers at 830. When you look at all the other markets, its probably more of our time zone type rally. Were up against all the major currencies. If you look from march of this year, thats the last time we were closing at these yields and one of the markets that many traders are paying close attention to is the pound versus the dollar. You can see the brexit trade, you can see where it stabilized and even though we are stable t really wasnt much of a bounce and many traders are putting that back on the radar screen for a possible sale once again. Carl, back to you. Thank you so much, Rick Santelli. When we co youll hear what house of car cards producer, and which media stock the producer would short right now. The first stock index musicwas createdughout over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. The Second Season of cnbcs birc binge is streaming now. Now the studio chief of relativity, and hes a former broker, so we talked about some entertain stocks. Take a listen to this. You are a former stockbroker. You got your brokers license . Uhhuh. Which media names would you trade, short and long . Gosh. [ laughter ] im long right now on cbs, even though the craziness thats happening with that. Im long on disney, even though the craziness on that, and im buying those because of that craziness. Short, netflix. Obviously the man who brought netflixs first big hit, short the name, in large part because he argues they dont have the sandbox to themselves anymore and its a matter of time before apple, or facebook, or some unknown player gets big into original content. And thats one obviously they tried to rebut that on the call. They bring up the competition is there. Whether amazon or hulu. And obviously hbo. Theres always room for everybody. The fact is there were a lot of people who just decided, do you know what, we just dont need this, and maybe they feel they can get it everywhere, i dont know. People there always seems to be time for Everything Else, many sites to read. This was like i said, it was baffling, and i im going to talk about that on mad money. I dont think they really know. Those who in the household using it a bunch of times, and theyre not anymore. There was no clear answer. They its this ungrandfathering thing, i was very uncomfortable with that term because it just didnt res innate. The people who decided not to take a price increase. Netflix did not regard it as a price increase. They were saying you got a big break and the break is ending. Youre staying at the price for this amount of time and that ends. I just think about amazon prime. Costco raised the price a couple times. Theres, like, 80 million people. So what. Amazon prime. So what. People said, cramer, you were poor, you dont know what one dollar increase. I lived in my car. Theres not a great time. Its not like a suboptimal place to live. The underwear back here, and the clear corduroy jacket. I went to kmart. I be what a dollar means. People still believe that story. They ought to just i they believe look, no one wants to end up in their car for heavens sake. Better to start there than end there. No, you dont want to be in your car. 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Time for cramer and stop trading. I want to go back to ibm. Bernste bernstein, ive known him for years, tony staganeli, he really did not give you any comfort about the quarter in this note. He was very respectful in his questions. Some times he was rebellious, but hes saying the growth decelerated and hes the reason why i believe the stock is down because a lot of people felt that maybe he would change his mind because some of things that were happening that were better. So the stock is going down. Theres a lot of people involved in ibm. I want to solute him. His work has been great and he is very rigorous and hes hurting the stock. Theres absolutely nothing going on other than the rigor of the work telling him they cant make the suggested haecond half. Do i disagree withton m tony . He does more work than i do. Mad money tonight . We had a guy that rallied whole to see if the rally is still or not. If you look at the bank stocks, its still on. If you look at Everything Else, no i love this show. And by the way, david faber and i are friends. Yes, i would say thats even if you destroyed thats an underestimate. Well flash that on the screen every time you guys talk. Theyre friends. Thank you from twitter saying that you like me. I said love. Thats why we cant engage with each other. That was hiyperbole. This is a big week. Okay. Well see you tonight. I got caught up in the moment of love. Mad money, 6 00 p. M. Eastern. Were back in a minute. Youve wished upon it all year, and now its finally here. The mercedesbenz summer event is back, with incredible offers on the mercedesbenz youve always longed for. But hurry, these shooting stars fly by fast. Lease the cla250 for 299 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Good tuesday morning, welcome back to squawk on the street. Im carl quintanilla, with sarah eiserer, and jim cramer. Goldman sachs, johnson johnson, ibm and netflix, oil, as well, down just a touch. Not helping much, dow is down 14. Heres is the next roadmap in 60 minutes. The imf is cutting its growth out again on the brexit vote on the world economy. Well speak to the chief economist soon on cnbc. Plus, the rnc kicking off with controversy over charges of plagiarism. Weve got the latest and what to expect on day two. Also ahead on the show, netflix plunging as subscriber growth slows drastically, what it means for investors now ahead on the show. Coming up, the Vice President of the european commission, his thoughts on brexit and if turkey could become a member of the eu. Plus, the former u. S. Ambassador to turkey, Robert Pearson will join us with his view on the coup. And we have a slew of speakers, including Donald Trumps wife melania and what is ahead for day two. Were joined by john from cleveland. Reporter good morning, carl t. Started out well enough, the Melania Trump speech. The showman donald trump, walked in, with a haze of smoke, and introduced her. The problem came from passages in the speech that were lifted from Michelle Obamas 2008 convention speech. Take a listen okay. Im told we do not have the sound comparing Melania Trump with Michelle Obama but that generated some controversy, complaints this shows the thing staffing of the Trump Campaign. Paul ma Paul Mantafort gave a press briefing, and says its no big deal, being kpad rated by the media. It was make america safe again, law and order, protect the nation, national security. Capped by rudy giuliani, the former new york city mayor. Take a listen to giuliani. The vast majority of americans today do not feel safe. They fear for their children. They fear for themselves. Who would trust Hillary Clinton to protect them . I wouldnt. Would you . Now, tonight, theyre shifting focus to discussion of the economy, the theme is make america work again. Well hear from House Speaker paul ryan, and ben carson, formal rival of donald trump, and Donald Trumps campaign has got to hope they have a smoother day today than they did yesterday when they not only had the controversy over melania, being extended today through the discussion of it, and the denial by the Trump Campaign the lifting of passages had even happened with the boisterous demonstration you demonstrati demonstration you had on the floor. Tonight, i must mention, donald trump will have a roll call vote and be nominated by the republican party. In the meantime, its a flat open for Goldman Sachs, despite they opened on the bottom line. Kate joins us with details. Good morning. I just hoped off a call with Harvey Schwartz during the q a. People were fork cusing on the brexit outcome. Check out earnings in particular. They were expecting see about 3 a share. The firm delivered 3. 72, and thats much higher than a year ago where we saw 1. 98. On the revenue side, a beat of expectations delivering 7. 93 billion over expected roughly 7 point six million dollars. Still thats a decline from last year where you saw about 9. 69 billion. Highlight it i highligh highlights, fixed incomes and commodities, that shows if theyre making money in terms of market volatility, up about 20 yearoveryear, so people are focusing on that equally, as well. They saved quite a bit of money as far as expense cuts. Schwartz saying they were able to save over 700 million during the first two quarters, one aspect, compensation costs. That said, some discussion about brexit. Schwartz said client activity was muted heading into the brexit vote on june 23rd and although goldman prepared heavily they didnt expect leave to prevail. Take a listen about the general comments. As we approach june, the market became increasingly focused on brexit. The focus was on the Economic Uncertainty surrounding the potential outcome, and the potential economic implications are leaving the eu. These concerns negotiation lively impacted sentiment, and appetite levels into the vote. That was into the vote. Out of the vote, market activity was incredibly high. In many of their businesses, they saw peak activity, close to peak, or even surpassing prior peak, so clearly that ended up being lucrative for them. The other thick is when they talk to their investment bankers, folks expect this to be an e vofrling situation, and over a period of time they dont expect major head winds unless it comes to specific transactions that are affected, for example by currently moves and so on, simon. Some interesting context around brexit there. Theyre very much taking a waitandsee attitude. Thank you so much with the goldman report. And the Economic Fund cutting its global outcome today siting brexit. Now, expects the Global Economy to grow 3. 1 , and that is down. 1 from back in april. Joining us now from washington, first on cnbc, chief economist and author of the report at the imm, we imf, and steve liesman, as well. I noted the day before the referendum, you were prepared to upgrade your Global Growth forecast for 2016 and 2017, but brexit, you say, has thrown a panner in t spanner in the works. Are you surprised stocks are at higher levels than they were before brexit . Well, the brexit effects are going to play out over a long period of many months as the eu 27 and the uk renegotiate a new agreement. So, you know, i think one is always surprised by what stock markets do, but theyre also responding to other things, for example, the prospect that Central Banks maintain Interest Rates lower for longer as a result of the brexit vote. I think based on the data we have, its just too early to tell how this will play out. What are you worried about specifically when it comes to the global spillover . Because when you talk to economists ahead of the vote, the big worry was a seizure in Financial Markets more sort of disruption in Financial Market conditions, which, as i mentioned, we havent really seen. Its a small chunk of Global Exports and trade. So what specifically are you concerned about . Well, our baseline scenario to be absolutely clear, is a fairly be ninign one, consistenn which markets are behaving. The eu 27 and the uk transit to a new mutually beneficial relationship. There are a number of preexisting risks and for fragilities in the economy, this brexit gets superimposed on and the fear is if things go badly if we see incoming more negative data than we expect on the uk or the eu, markets may react strongly, and theres the reality of negative feedback, and particularly weak banking systems. I know its hart to put thd e things together. Right now, the Economic Data seems to be going the other way. In july, youre looking at the surprise index from the u. S. To deeply positive. What is the risk to your forecast . I know youve got the two scenarios, i call them worse and worser when, it comes to brexit, but what is the risk to your forecast . Is it possible youre really lowballing here where the Global Economy could be . Steve, in our baseline forecast, the u. S. Of the not affected at all by brexit, so i think what we would be looking for would be the High Frequency data from the uk, from europe. You know, we dont have that yet. We do have some anecdotal evidence from the uk of, you know, big plays, postponements, capital expenditure, but we wont know until more or less a month, five weeks from now, as we see significant pieces of data come in. Maurice, our viewers are looking at investments right now, and you have some interesting comments and forecasts when it comes to the emerging market economies. Its really a tale of two different types of countries, ones that are really tied to the weakens in the advance to comedies and expected to be better. Which of the good ones when it looks at the emergiing economie. The general picture we see is of you know, emerging markets doing a little bit better, and on the whole, low income economies had the whole meaning on average doing worse, but theres a lot of diversity. Right. In the lowincome group, nig nig nig nigeria, south africa, weigh heavily on that average. In emerging markets we see positive developments surprising from the standpoint of the last forecast in russia and brazil. You know, all of that is simply you know, our outlook. Were not certainly telling anyone to go invest one place or another. While you dont giv give investment advice. Steve mentioned the Economic Data in the u. S. Appears to be better and it looks like you expect to pick up for the Second Quarter and the rest of year. Is it safe to start raising Interest Rates again . Well, the fed is going to have to weigh their data, dependent approach against the you know, international risks as they have been doing. I think theyve been right here cautious, but you know, as they get signals from the jobs market or from the price level data in the u. S. , they will be reacting to that appropriately, i think. Again, hard to say whats going to happen down the road even a few months. And what about europe . You did say that Growth Outlook would have gone higher for europe, if not for brexit. What kind of economic spillover are you seeing and do you see the potential for more easing action from the ecb . L eurowell, europe had a pre good first half, but brexit is going to weigh on europe, weighing most heavily on the countries that trade a lot with the uk, for example, germany, france, poland. Poland may suffer because it receives structure funds that uk contributes and those are likely to be reduced some what. To the extent activity slows, to the extent theres more do you understand ward pressure on prices i would expect the ecb to step in and meet its mandate. Well see the impact in the next few months. Thank you for joining us with the revised Global Economic outfit. Our thanks to our guests. Netflix disappoints as a price increase has people signing off. Whats ahead for the company, tr its investors, ill break it down in a minute. I asked my dentist if an electric toothbrush was going to clean better than a manual. He said sure. But dont get just any one. Get one inspired by dentists, with a round brush head. Go pro with oralb. Oralbs rounded brush head cups your teeth to break up plaque and rotates to sweep it away. And oralb delivers a clinically proven superior clean versus sonicare diamondclean. My mouth feels super clean oralb. Know youre getting a superior clean. Im never going back to a manual brush. Netflix announced a 1 price rise, two dollars for some, slowed subscribers to 160,000 because many people canceled. The coa p apologiziapologizing,e big picture is still intact. People dont like price increases. Its a necessary phase for us to get through and with the increased revenue, were continuing to invest in better and better content. So thats what makes us feel very strong and positive about the longterm and this is a shortterm phenomena. The internet media analyst, mark mahaney, joins us. Laura, do you think hastings is right this is a temporary flip. . We just got finished to the listening to the imf gentleman talk about growth downwards for the whole eu economy, and i think that International Growth is really why netflix trades at 40 times ebitda. I think its optimistic subscriber growth offshore will end up being better next year than it was this year. What about the price rises though though . Would you expect thats a oneoff phenomenon or expecting something different, laura . Are you asking about the u. S. . Yes. So are the u. S. , i think they said that peak ungrand fathering will happen in the Third Quarter and the olympics will hurt the Third Quarter. I think it will get worse for them in the u. S. In the Third Quarter there whats your tak. They were delayed, of course, now half a billion extra in revenue as a result . Which must relay some concerns about content costs . Yes, i think so. First, this was a very big surprise to bulls like myself on the stock. I was very surprised by this. We didnt see this coming. Second, they still have some Pricing Power, but not as much Pricing Power as we assumed. You know because youre seeing acceleration growth despite almost a 25 price increase, so thats probably the everyday idu need, and these problems for what fixable, and the more content they spend theyre going to spend five billion dollars this year, 6 billion next year. Nobody is out there with a lower price point, at least at the low end. We are still think thats an attractive market and think its dead money but we like it for the longterm outlook. Presumably a market that amazon would launch to the point it makes in more european countries, and at home theres the chance amazon rebrands and becomes a stronger proposition, that has to cut into netflix, potentially . Thats the singlebiggest risk weve been focusing on with netflix. If theres one company, its amazon that could upset the apple card. Amazon came up with theirs the 8. 99, and what it tells you is for amazon, the real golden ring here is monthly shipping service is not a standalone Video Service and if you max it two, netflix is bet or price and content. So we think thats we havent seen that issue yet. You know, laura, mark says he was a bull, and yet its dead money for three months. What do you think of the stock . , i think the u. S. Is stabilized and theyve projected only a 300,000 growth in the u. S. This quarter, so i think its possible theyre not going to hit their 60, 80, 90 million subs here. I think thats an open question now. And internationally, its possible theyll run up against data caps for developing countries and the first world, which is 20 of their revenue owing into the imf, than u. S. Subs. China is kicking disney and apple out so theres no china market, so the tam just got smaller by the china models so it feels more cautious to me than marks outlook, i would suggest. Two very contracting views. Thank you, both. Well hear from the Vice President of the eu, why he says the response in turkey not failed coup this weekend is raise something serious red flags about the countrys ambitions to join the eu. Stay with us. Youre watching stock on the street as the dow is positive up 90 points. Approaching medicare eligibility . 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The eu prohibits this penalty, and no country can become a member of the eu if it has this penalty. What is the status of those negotiations with turkey joining the eu . As you know, those negotiations are ongoing for many years and this has been a very slowgoing process, and during the last year, one can say there has been some reactivation of the annexation process, new chapters of negotiations were opened, but of course now we have certain concerns as regards to the state of democracy in turkey, as regards to rule of the law, and more recently, questions related to this very, as i said, heavyhanded response to the attempt to the coup. The on you knsubject of eu membership, we talked about britain and its vote to leave the eu, just what those negiatine negotiations would look like. I asked him what would be the most contentious part, hes what he said. Whether it wants to remain within eu internal market, or to move outside the internal market because there is the possibility for the countries which are outside of the eu, to be part of eu internal market, to give an example of norway. But, it comes with certain conditions, like respect to the four freedoms, Free Movement of goods, services, capital, and labor, financial contribution to the eu, and respect of eu rules and regulations. And this is a strategic choice, which uk government needs to make, whether it would aim for remaining part of eu sbsinterna market, or it would move outside of the intern market. The key there, that norway option is still on the table. Interesting comments from the former latvian Prime Minister, also in charge of Financial Regulation for the eu, here to meet with chairman lu and elen. He did say with respect to some of the problems theyre dealing with, there is solution within the framework to figure out how to recapitalize the italian banks, if thats what it comes to. Certainly on the longerterm issues, going to be years before we have any finality on this. On brexit . Yes. And i asked how long it would take for article 50, he said that would be months. But the brit issue donish doo do that until the new year. Things are moving all the time. You could see pressure from the european countries. As we take a break, check on where the markets are trading. Dow, and vicks lower than expected. Stay with us. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. 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, im sue herera. The Islamic State claiming responsibility for an ax and knife attack on a german train that left at least five people injured, monday night. Authorities say that it appears the 17yearold afghan immigrant who was shot and killed by police was self radicalized and had no direct link to the terrorist group. Secretary of state john kerry meeting with newly appointed Prime Minister, theresa may, after, whoops there he goes, he hit his head after opposing for photographies outside 10 downing street. He said basic clear he was amazed how quickly britain changed leaders. Joe biden meeting with the australian Prime Minister, as he boosts the asia pacific region, and maintains its status as a specific power, and met troops aboard a navy ship. And pippa middleton, and james matthews, hedge fund manager, saying they plan to marry in 2017. Icate middleton, and her husband said they were absolutely delighted by the news. Thats the cnbc news update this hour, carl, back to you. Congratulations to them, sue, thank you so much. Absolutely. Another wedding of the century, i think. Thats right. Tv will love it. Meanwhile, republican delegates in cleveland expect to officially nominate donald trump as the gops candidate for president today, after Convention Organizers held back efforts from the Nevertrump Movement to force a roll call vote on the Convention Rules yesterday. Joining us from the rnc, john mcnabb who just retired as chairman and ceo of the engineering and construction form, the willgroves group. Good to have you with us. Good morning, carl. Happy to be here. What did you make of little episode on the floor and the apparent confusion on the stage . You know, i dont make much of that at all. Mr. Trump is going to be our nomp nominee, so people can express their own opinions and very few people expressed them, but the deals done. We got security as the theme last night. Its turn to the economy tonight, although for now im sure youre aware the media is running with ms. Trumps speech. What do you need to hear to get this convention on the track you think it should be on . Well, carl, first of all, i travel a lot overseas, work overseas, i spend a lot of time in texas where i have a farm, a town of 90 people. I spent a lot of time moving around the country. Im from West Virginia and of course that state has been hit very, very hard by coal and with the flooding. So i talked to the people, and the people are worried about the country. Theyre worried about the future of america. So what people want to hear is jobs. Getting rid of regulations. Job ki jobkilling regulations, and doing away with the antijobs, antibusiness rhetoric of the Obama Administration. People also want to know what is going on with terrorism. Thats not a threat anymore. We have terrorism in this country. And carl, at the end of the day, we cant call it Workplace Violence anymore. Certainly as this moves on, its moving father and farther away from that. You mentioned coal. We got some rail traffic. Coal volume is down 30 . Do you see a real path for a Trump Administration to bring back that kind of Energy Production . So we are in the middle of im a policy guy, as far as the Trump Administrations concerned. Myself and a number of other seniors around the country are working with the trump leadership to develop policy, which mr. Trump will use one hes elected president. So as i can talk a bit about our energy policy, however its a work in process, and im not going to go into a lot of detail because its not published yet, but what we want to do what the Trump Presidencys going to do is put all Domestic Energy sources on the same page and coal will be part of that. So i would love to see clean coal burned. I would love to see and hopefully part of our platform will be opening federal lands to oil and gas exploration. I would like to see a levelplaying field for all sources which means were going to have to incent everybody the same way with energy wind, et cetera, or take all of those incentives all the table. So i think you can look for the Trump Administration to be very forthcoming in trying to make us Energy Independent, and mr. Hamm has talked about that for a number of years, and its happening. But i want to be Energy Independent with just more than oil and gas. What about the trade policy . And weve talked about it many times, this idea of putting tariffs on chinese import to this country, but it repeatedly comes up from Business Leaders we talk to as their main concern about trumps economic agenda. Are you not concerned about that hurting jobs, hurting exports and the economy . Sarah, thanks. Thats a really good question. Actually, i am concerned about trade, but im concerned about trade when i took over wilbros, it was a fortune five country and one of the top Energy Contractors over the world so we worked all over the world. What we ought to start from is a position of lets just equal things out. And im not going do get into details about tpp or nafta, but i would say i would like to have a levelplaying field, and without getting into a lot of detail again, id like to see better negotiating of trade agreements with for instance china, and this iran agreement, what i skbelieve is a total disaster, and isnt helping our country and our jobs. Mr. Mcnabb, people who vote for trump will be voting for the country to change in some way or many ways. What do you say to those who are concerned but because mr. Trump doesnt have experience of this sort of political office, he will be unable potentially to grab the leaver leavvers, or to. The melania speech last night is an embarrassment for many people and they would say he cant apparently organize on speech writer to put his wife on a good light. All of those serious concerns about the competency and the resources of the Team Moving Forward . Simon, thats a good question. I saw the melania speech was great, and very emotional and by the heart, and thats noise to me. I care more about, you know, making america strong again and so does mr. Trump. What i would say is, if i look back at the Obama Administration and who he put into his leadership roles, youre going to see a very different situation when mr. Trump becomes president. Youre going to see a difference in his cabinet and who works at the white house with him, very seasoned people. And the thing thats interesting is i didnt see mr. Obama reach out to anybody in business when he took Office Almost eight years ago. The total difference is, with mr. Trump, he has reached out to very Senior Business people in very Different Industries threw out america to aid him in policy developments. So i see this as very, very different. Finally, john. We had harold ham on the program a few days ago. He said these markets the last few days are the markets getting comfortable with trump as president. Are you understanding that . Yes, me and mr. Hamm were colleagues and im not going to is disagree with him on that however, i do believe that. I do believe as i go around the country, people are scared of terrorism, losing their jobs, a stagnation in this country, theyre scare body musid about american dream. I believe were seeing already initial imp initial input from our people in america, that this Trump Presidency could be very, very special. John mcnabb, thank you so much for your time. Hope to talk to you again soon at the rnc in cleveland. My pleasure. When we return, well be joined by former u. S. A. M. Bass door ahead on cnbc. Could oil give stocks a new reason to rally . Well discuss that at tradingnation. Cnbc. Com. Right now more squawk on the street. Welcome back to squawk on the streets. Off the markets, early trading, lose something steve, coming off the lowest, but standing out as one of the lowest performers after hitting a 52week high, the sector is on pace to break its nine day winning streak. Some names dragging the sector down, mcmoran, and owen, and alcoa, in early trading, materials are one of the best trading, and double digits so far to date. Back over to you guys. Thank you very much, the president of turkey, meanwhile, is using that failed coup attempt to personal knowledge thousands of his opponents, and demanding this country extradite a former ally living in exile in pennsylvania, who the president erdogan blames for masterminding against his government. Joining usa bob pearson former ambassador to turkey. How are you . Good, how are you. Does the fact the president let flights resume from isis against turkey bases trump Everything Else . Well, i think that its a very good sign that operations resumed very quickly after the coup attempt was put down. So i think that does actually display some measure of confidence both from the government and with respect to the coordination and celebration between the two militaries, the u. S. And turkish. Is turny sokey is somebody t United States should be proud of as an ally, given we watchedjudg taken down and other things going on in the country, should be be turkey is our ally . I think everybody is worried about how far that crack down is going to go, so were going to have to wait and see where it ends and one of the things that worries me is that the president and the Prime Minister have set no limits on the round ups. So, if i understand it correctly, there may be 18 or 19,000 people who have been taken into custody. Obviously, there cant be adequate evidence again most of those people, so i think the u. S. And frankly every other member of nato thats a friend of turkeys is worried about how far this things going to go. John kerry of course over the weekend denied this country was behind the coup in any sense and challenged those making that acquisition to come up with some evidence. What would be the rationale for this country being behind such an operation . Is there one . I cant think of one. In fact, i understand the coup plotters listed as one of their demands the turkish army and Armed Forces Pull out of Northern Iraq and pull out of cooperation with the u. S. , so frankly, what they seem to have been demanding would have been very detrimental to what we in turkey are trying to accomplish in syria, which is to Work Together to defeat isis and to try to engineer the removal of asaad from government. Clearly turkey is a fastgrowing emerging market and Global Investors are paying attention, but more importantly, and the reason theyre paying very close attention is the strategic, geopolitical importance of this country. You can elaborate and describe how unstable if at all this country is and what sort of ripple effects that could have on the rest of the world . Well, i think if you look at the economy, start there, there are going to be some impacts. Turkey is a middleincome country that has promoted its growth until now on the basis of farm kids moving to cities and taking jobs in factories and thats either about to end or has ended and what turkey needs now is capital and foreign direct capital in the direct years has fallen to a level that share that goes to turkey is back to 1994 levels. The turkish economy has grown in the last six or serven years at about half the rate than the first six or seven years. W wages are stagnant in turkey. Their percentage of highquality products as a total percentage of their exports is still 2 , which is what it was in 2002. So in terms of branding, research, marketing, design, those are arealess that turkey really needs to work on, and for that a need money and access to the Global Economy, and this the aftermath of the coup, as well as the coup, is going to damage that effort. Finally, mr. Ambassador, the instability in turkey, how much worse does it make the migrant crisis in europe, if in fact it makes it worse at all . Thats a very big question. One of the things that hasnt happened, one of the silences in this whole scenario has been the impact on any refugee movements to europe. Since it hasnt happened, im concluding that for the moment its stable, and that turkey is still interested in working out the deal with europe to get visafree travel in exchange for managing the refugee crisis in turkey with european money. That seems to still be on the table, so thats one good point in this whole mess that i think people can breathe a sigh of relief on. The problem is, ambassador, of course, there have been further terrorist attacks within europe, as everybody is aware, and turk seey is threatening t e reimpose the Death Penalty. Right. A lot of them are going to resist that. What would your advice be to both sides then when the crunch comes on that and turkey considers whether to pull back and stop warehousing the refugees . Well, i think everybodys worried about the statement about reimposition of the Death Penalty, which appeared in a crowd chant in a group that erdogan was talking to and he made the statement that what the people want, theyre entitled to get, so frankly i think that issue has to be moved aside and otherwise youre absolutely, i dont see any prospect that europe would grant turkey its visafree entry if theyre facing this kind of crack facing this crackdown for a long time. Akra will frankly have to sort through their interests appeared how theyll manage their relationship with europe. Thank you very much. Bob pearson there, former u. S. Ambassador to turkey. As we head to break, a quick check on the markets, modest declines, the dow is down six points. Goldman sachs is currently the biggest loser oregon, s p 500 down about most of the sectors there red, industrials have a bright spot. The nasdaq down 0. 4. Much more ahead on the markets. 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. The stocks taking a pause here. Lets get to Rick Santelli at the cme group. Thank you, sara. Welcome mark hansen, my guest this morning. Thanks for taking the time, mark. Youre welcome. Thanks for having me. Wheer a whisker under 1. 2 million in starts, the alltime high in 06. Permits 1. 1 million versus the 05 alltime high. What do you think the state of housing is, and put it in the context of supply, demand and price. The data this morning is just at the end of a long list of a series of data that proves that the street is offsides against with this years durable recovery with the escape very locality call that comes about every 18 months when rates plunge to historical lows. The problem is every time rates plunge to New Historical lows, housing gets less bang for the buck, so here we sit with sales and starts and permits. Well, for example, this mornings starts numbers, if you strip out all the machinations of the bubble 1. 0, were at 1982 levels, recession 1982 levels, right . So every time rates plunge, you get less bang for the buck, and were sitting here with starts and permits and sales, half of that of which is normal, with prices at 110 above a 1. 0. I dont think thats sustainable. You have generational high prices and generational weak demand. Something has to give. Whats going to give . Is the end user shelter buyer after eight years of 0 Interest Rates suddenly going to start buying houses to replace all of the demand from starwood and blackstone and this unorthodox demand . Ill take the under on that. All right. Lets switch gears a bit. From a housing perspective, what about the business size . What about housing stocks . Any thoughts there, mark . Well, theres been a lot of bearish bets for the next 30 to ha days. We have earnings coming out with a couple key companies, key highend highfrequency housing data due out oakes of next 7 to so days. Im under the impression where we have a fullforward season, where a confluence of certainly tailwinds line up pretty perfectly to end the year, to pull all sorts of demands leading to an airplane pocket or a hole of demand through the end of the year. At the same time prices are hitting generational highs, and supply is going through the roof in many key regions in the United States. I think were past our peak. Were going to have to leave it there, but its always been low rates been good for housing. Its not bad for housing. Ill left it for that. No, its not. Thanks. Back to you. Lets find out whats coming up on squawk alley, to the bestdressed man in television. Jon . Well see about that. Well have a post mortem on some of the earnings, twitter ha an nba streaming deal, but it doesnt include the games, and then Melania Trump was yesterday. What comes today . All of that and more on squawk alley. Is this just got interesting. Why pause to take a pill . Or stop to find a bathroom . 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Come to the lexus golden opportunity sales event this is the pursuit of perfection. Good morning. It is 8 00 a. M. At twitter headquarters in the west, and squawk alley is live. Welcome to squawk alley for a tuesday morning. Jon fortt, kayla tausche, and me, and here at post 9 evernote