Transcripts For CNBC Squawk On The Street 20170728

Decelerate a wild week on wall street and all the major indices in jeopardy we take a look at whats to expect next week. Amazon falling in premarkets. And we lost a title after a few hours when the stock of course did drop after that report also star bucks shares falling on earnings receiving two analyst downgrades well talk to johnson later in the hour first up stocks were on a record run. The nasdaq sliding mid yesterday and it comes in about where economists were looking and big Energy Earnings today. Exxon shares are down. Profits double and chevron flat of revenue beat. Royal dutch shell made comments as if theyre preparing for lower forever. He wants to get down to the oil business lower forever on going to buy an electric car yeah it would be fabulous if they switched to first solar and you cant do that. They basically said listen our business is coal they did that was the only way to understand it and the coal business other than President Trump very much involved in coal was a shocking and its the talk of everybody where theres an oil rally going on the only guy really standing in its way is the ceo of royal dutch. Back of 49 this morning shares did take a hit after reporting earnings revenue top forecast and outlook for the Current Quarter disappoints. And 46 is more than microsoft and google combined. I think we can look at the earnings number. We can look at the line of the number of people recruited to be Amazon Web Services clients. Their Cloud Business is remarkable there are some people that will say you know what, this was not the destruction of brick and mortar that we thought for retail so theyll rotate into a macys or a kohls its a Conference Call thats a stock and trade amazon Conference Call. Which is basically we love ya, were spending a lot they dont literally love it. They share with you the basics and then the rest of it is just highlights things like we introduce the new Alexa Smart Home capability for customers and you can turn your ikea spotlights on and off. I was waiting in the middle of the quarter that says dont forget at 9 30 alexa buy amazon stock. This thing when you read the quarter it was like a press release that you would read for a team saying listen wait until next quarter this was not our quarter its useless except for the list of clients that they got. Amazon web services is such an important component of their profitability and generates so much and mark for example did ask hey listen aws Revenue Growth shared almost no change and a double us operating margin is lower than we have seen in six quarters or Something Like that. The cfo said the biggest impact that youre seeing is 71 increase in assets required under capital releases and stepped up to match large usage growth and marketing as well. Yeah i sat there and i said can i make a call on this morning show that azure is starting to do better. Is there a price car going on. No, theres no. There was a little bit of margin pressure wasnt there a tiny bit. Theres a question as to whether price as good getting more competitive among amazon. Microsoft and google. Dont forget ibm would love to be in that mix. I think that theres two groups of people that are selling this morning. Theres people that are saying okay the nasdaq did some sort of reversal on the tech goolg stuff. Theres other people that are making with amazon prime theyre going to make more money. And the people are going to read through. Maybe they want to take away their clients. Because the cloud wars are starting aws margin is 2622 in two quarters. Now quitely the toughest man out there and hes a warrior he never tells you that hes in the war. And i think that walmart is plague a role. How so . Walmart doesnt want his suppliers to use Amazon Web Services this valely something people have to watch. Now could walmart get in trouble for saying to people we dont want you to use our competitors web service . Not if azure is offering a different price. The broader notion that microsoft is so ingrained with corporate i. T. To begin with such a great quarter. You have ibm will ibm break price in order to keep it. You did on the alphabet call have them say were going to be aggressive theyre talking about being the king of the cloud. Its growing so quickly its funny how were talk sog much about this as opposed to the rest of the business but 16 billion right now. 82 margin on that is not bad. Notice theres a lot of Health Care Companies moving to the cloud. Thats early i am not going to call the cloud dead i am saying that the Conference Call, the questions which are far more important than answer thes on that Conference Call indicate that people are going to say there is a margin compression. You can say wait a second this is still the greatest story ever told talking about the greatest story ever told facebook yesterday reported net income of almost 3. 9 billion gap. Amazon net income 197 million. Roughly the same market caps a few billion between them facebook has 20,000 employees. Amazon is hiring another 50,000, up to another 130,000. Whats the greatest story ever told the idea of the moving off premises moving in cloud. But i thought from an investment perspective rather youd rather own a company with 3. 9 million in net. I thought facebook when it opened up 7 and didnt go down despite the reversal, i heard that term 17 times yesterday. I urge people at home, thats a technical term that usually means the open is going to be down dont forget the cannon ball even though its raining the cannon ball plus the fact that President Trump is landing on long island will have many people exiting today if the weather were better than then the trading would really come to a halt today i am saying that amazon down 39 is not the first price id like to buy. Speaking of the president and politics as you know by now Senate Republicans failed to repeal obamacare in a dramatic late night vote on capitol hill. Three Republican Sen tors broke ranks and voted against it including john mccain. The president tweeted three republicans and 48 dem kratz let the people down. And also out of washington, dropping the controversial tax from the revamp of their tax reform plan. They want to do this better than they did health care. One of the saving graces yesterd yesterday. Alphabet is used overseas. Where are we in tax reform are we moving to tax reform now that they have not failed in health care. Is it finally really over its got to be double over. Its got to be double over and triple over. They Start Talking about on monday its different. But there is a little bit of disarray in the white house. Can you play that tape i have it ringing in my ears. Its somewhere. Ill be saying no, so i have his voice in my head. Did you consider that dissension that was like it used to be going on there. Theres other references that i dont think were quite accurate in terms of block things he could have used different anthony is and im sure you he will call in. Because he called in on cnn. This morning hes going to dramatically pair back his exposure to journalists. Dramatically. That would still mean 18 hours instead of 24. I dont know the disarray means i wanted to hear from the white house today okay were going to now approach tax reform today but instead i got that kind of i dont know, ban nongymnastic references a big new york mets fan. Its been a very emotional time for us. I think he does know actually what about the revenue raising part of the border adjustment tax . Are you going to have deficit hawks that dont come on board and face a similar situation when you have conservatives and moderates in the Republican Party that were unable to come together on health care. I think you are and thats why the president would say lets go repatriation because thats revenue positive. It would be viewed as fabulous. You would be happy to see that selfcontained . Yes if they wanted to do that. I guess hes saying its, hes speaking in that third person which always tells you youre in charge they need very much to take up something. They need a win. So the win would be repatriation because thats immediate money. What do you think of that i think many of us believe that you end up with a cut and repatriation deal. Dont think you can come here. Such an important component of revenue raising unless they do something thats going to blow up the deficit. I didnt get a lot of positive news over the last 24 hours. People dont seem to trust that. I need a starbucks. Its been a challenging week in some ways when we come back, were going to talk about starbucks. Stocks down almost 8 in the premarket. Expected sales lowering the forecast, the ceo is with us to discuss the quarter. Well talk to Kevin Johnson after a break. If you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go . Expedia. [ intense music playing ] ] its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the e300 for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Starbucks ceo Kevin Johnson, thank you for joining us. Good morning, jim. Okay. Lets get to what i think a lot of people are concerned about. You obviously had some terrific numbers. A 5 comp. Thats what we should be talking about that a lot of problems have been solved but yet the tenor of the research this morning has come like what he has said cut to hold, ability decreases investment likely to increase. Talking about a reset where youll say that its not going to be a goodyear id love to hear your side of this commentary. Well, jim, first of all, were very proud of the fact that we posted a 5 comp in our largest market in the u. S. 1 growth in transaction. I challenge any other food and beverage margin of our scale with a 5 comp and 1 transaction. Its a Strong Performance and great result second as we saw in the back half of last quarter we saw Industry Data around away from home food and beverage that prompted us to take a cautionary postuer for q4. Keep in mind we are three weeks into a 13 week quarter and a lot can happen youll have Strong Performance but the big story is also china. The 7 comp we posted in china and the acquisition we announced yesterday to make all of Mainland China unify that around a Company Operated model we think having two major growths in u. S. And china is going to fuel the company forward. My Charitable Trust owned starbucks forever. At the same time i try to figure out why i suddenly have to worry about data away from starbucks were talking one of the great growth engines of our time i didnt think it might continue and causing your numbers to come down why didnt you take them down last night instead of adding a full quarter knowing thats going to happen last time. I understand jim. We factor that into our q4 guidance were in the middle of our physical year planning process including the acquisition of east china and so as we land those strategic actions as we put this aop together well be very clear about our guidance were three weeks into a 13 week quarter. And took precautionary guidance and a lot can happen you talk about retail disruption on the call everybody understands that but you also talk about on going macro pressures that some people wonder you got Consumer Confidence doing blowout numbers. Is this not an environment where the consumer spends comfortable spending a few dollars on a cup of coffee at starbucks thats great question the data we look at has to do with u. S. Data of thousands of restaurants that serve customers that are away from home food and beverage and, you know, over time that number just continues to grow and it has some ebbs and flows and what we see here in the last quarter say little bit of softening in that that indicates that consumers are spending their money on other things right now that caused that number to slow. Were proud of the fact thooechb with the slowing growth of the macro number we posted a 5 comp in the u. S we out performed what we see happening in the industry. This is a near term phenomenon nothing to be concerned about longterm. Nobodyquibble with that they downgraded their rating this morning and they said that starbucks has struggled to unlock the next meaningful sales driving Initiative Digital they say has been the most meaningful same store sales driver in recent years it appears to have slowed and the brand has struggled to drive meaningful traffic growth outside of your loyalty base is that a fair criticism look, i think certainly the reward program and what we have done with our Digital Mobile relationship with customers has been a big driver of our growth. That is absolutely true. In fact this last quarter we grew the number of active rewards numbers 8 we saw average spend per reward number go up 8 so the opportunity before us is how do we expand a connection of customers around our digitalmobile relationship. We announced the things that were working on last night on our call that are going to roll out early in calendar year 18 but were going to start to open up our mobile order and pay for customers that have not joined the rewards program and allow them to do some of the things that have been reserved for reward members so clearly the opportunity for us to continue to build on the strength we have in our digital relationship with customers and expand the apiture with that is a real opportunity. Im wary of being too negative with my question with the stock down 4. 49 it sends the wrong message but trying to suggest to people is this an opportunity. I do want to give you a chance to talk about the idea that china should be a needle mover and well stop obsessing on a week to week basis through the United States. First of all, i think our u. S. Business continues to perform well, a 5 comp and as we talked about yesterday, china is our second largest and Fastest Growing market now we have been in china nearly 18 years now and we have laid the foundation for a longterm growth agenda for starbucks. We now have 2,800 stores throughout china 130 cities in china. You think about what Consumer Brands have a stronger brand affinity and awareness than starbucks. And respectful way to take care of our partners and work closely with our partners and the supply chain and all of that created this foundation for us and make unifying all of Mainland China around a company on ratd market that creates a longterm Significant Growth opportunity and were going to continue to build 500 new stores in china and i would expect that number to accelerate overtime china would be larger than the u. S. Market. Your company has been a longterm success over the last two years the Company Stock has not done much as we know thats impier cal and in the previous quarter we talk about that and the socalled mosh pit global ordering problem. Thats something we got from him. We all admire from what he has done at panera they could lead to the next quarter together thats why i was surprised for the down beat nature of you as the quarter went on. Even reminded us that maybe were being too negative about the u. S. And our question. Last quarter we saw growth and certainly the morning day part is a very important one for us we saw increases and we saw overall growth and we are making Great Strides in not only improving the customer situation and also increasing group play at that moment when those mobile orders come in mobile orders pay and the number of mobile orders is 9 in the u. S. And that number continues to grow. Finally kevin you say you made efforts to reverse the trend through creative merchandising and new store designs what does that say to any other retailer that is leveraged highly to the american mall and their attempts to do the same certainly carl, the data are clear that, you know, mall traffic is on the decline and clearly every retailer has to be focused on being a Retail Destination and finding ways to create a connection with customers. Unfortunately the teavana mall based stores faced that head wind and with all the work we have done to reinvent the store it couldnt overcome that. We sell 1. 6 billion of teavana teas in starbucks and with our partnership we have a huge opportunity ahead with teavana. All right well, kevin, carl david and i thank you for coming on. Its always good to speak to you. Kevin johnson, ceo of starbucks, thank you so much. Thank you well get the opening bell after isre my experience with usaa has been excellent. They always refer to me as master sergeant. They really appreciate the military family, and it really shows. Weve got auto insurance, homeowners insurance. Had an accident with a vehicle, i actually called usaa before we called the police. Usaa was there handson very quick very prompt. I feel like were being handled as people that actually have a genuine need. Were the webber family and we are usaa members for life. Usaa, get your insurance quote today. The opening bell in about 45 seconds here we take stock overnight. The deal fails to pass the American People would say wait a second things are really bad down there whether the ag issue would turn into something in the stock market last night was the first night when i said okay if its going to be this bad, you know, maybe i just have to be a little upbeat i mean, this was really bad. I think that. Were getting nothing done a few days ago theres the opening bell on the s p at the bottom of your screen this media companynarrative fo celebrating the 20th anniversary of the launch of all recipes. Com. At the nasdaq its Residential Real Estate brokerage website doing the honors we have not touched intel yet. Theres a couple of things i liked about intel. One is it was a big number raised the desktop was very strong but i wish they had played up more but they cant because its still too early. Im a big Autonomous Car guy in terms of use for internet of things and what it means and a lot of people feel that brian overpaid and when you deal with companies that are involved with cars and im way involved with this because i think sit the future mobile eye is not to be trifled with its entirely possible that by q4 you will see a line in their numbers which has a lot to do with autonomous. A good quarter and certainly something to write home about but at the same time, the world is last to think this is derby and in faang, no, its netflix its a good quarter and not going to get credit but intel is not an extensive stock ill buy some intel. Headed for the worst two day drop of the month. For awhile, the worst day down on the month you mention the reversal you got that howard marks memo warning about the markets. You have five month put options on the s p are you turning as well . No, im not i put out a game plan last night. This is in day two of the sell off. The nasdaq names get hit the hardest. Thats what happens. And in at 245 we get an indication and big decline of 245. If youre a hedge fund maybe you want to play that game i think this say garden variety nasdaq sell off. Theyre ambitious king of the market remains facebook that was an amazing quarter. You see that thing take out. Its low yesterday but youll be concerned that this move has a little more strength to it so i watch facebook i do not watch amazon as much because amazon is going to be proven to be very difficult battleground stock. Watch intel, watch microsoft, lower valuation. Watch facebook. Yesterday we were watching verizon very closely simply helped to power the dow that was a big one up. We were waiting for sprint we havent heard from them yet down a little bit. Some people wondering is there something going on in telecom in terms of the low rates that we have seen from all three of the companies that reported thus far. He went after john ledger yesterday and he came back and responded on twitter in terms of his view of the quarters and when he calls dumb and dumber and smart and smarter these days, jim but may simply be people waiting to change their Service Provide we are the iphone 8 i dont have an answer. I do think that you have to give verizon credit but even if theres more dropped calls that was very impressive. Tmobile is still killing it but notice the tmobile stock is down trying to explain to john back and forth that in the end, im trying to not talk about the growth as much as im saying that the cash flow for at t and verizon make me feel better and you can throw a dividend and is the empire strike back. It had such a very strong quarter. Their Cable Services and sort of referred to the skinny bundle and its not serving the needs of a lot of consumers. We didnt get to it. I want to mention it because the market cap approached 100 billion. 100 billion. It got caught up in the nasdaq had a very strong quarter. Cable is good i just find that periodically getting to these moments, between march 15 and april 17 of 2000, the year 2000, you had a move where the nasdaq was down dramatically and the s p held its own and a lot of the people that yesterday when the dow was up and the nasdaq rolled over, they want to use that analog that i just mentioned. Im urging people not to use that analog. The companies that rolled over were almost all very suspect and the companies that are rolling over now are actually doing quite well so im going to deviate from those that say, you know what, the world is over. And theres really good opportunities. Sold 22 billion in debt include a 41 year bond. I know. Should do that 15 year bond that im talking about. Talked a lot about it you keep talking he maybe pushing for it you never know. Were referencing scaramucci because hes top of mind right now. Hes his own news cycle. My daughter was over for dinner and i said did you read his comments and everyone was crimson. No, i understand. But look i think that theyre out and they havent done anything but other than go up i was on the call last night and they make the Semiconductor Equipment for all of the big Flash Companies and there is still a shortage of equipment out there. Dont think things will be overwhelmed. His company had a big up size surprise all im trying to do is determine when its going to stop going down as opposed to the people that came on air and said the world is over be careful david do you want to i got a text i need to respond to you just go ahead. You just go ahead. Still a little transport. Charters market cap has been above 100 billion for awhile. Things that arent necessarily incorporated in the market cap number. Thats happened before its happened with discovery as well where theres a large preferred discoveries market cap well above the 10 billion they have. Im good now. I just took care of it. Watch the empire striking back on brick and mortar because amazon, like a home depot. Ones that are supposed to be destroyed by amazon they come back first and we even talked to, i was going to do a cramer report on nordstrom. Yeah. Just a cramer report. A cramer report midday, nordstrom on nordstrom came out and said listen people want to do the deal. Well there was a report from reuters saying they were approaching prime equity routers likes to talk about a lot of takeovers david. Yeah. Charter is that new house equity same with by the way discovery they earn a lot of stuff we dont talk about the new house family very much. And the transports, youre right. The transports, i say that is my biggest worry in this market were off 6 from the july 14th. They were so beautiful. American today not a bad number. You really want an airline. That wasnt so good. Union pacific. You keep going back to that. Because he was so negative and i didnt like that because he had a great quarter but it made me feel like he lasted great quarters Union Pacific another stock to watch. Mainly others. I like that quarter. It didnt seem to matter. Disney is up again a little bit after a big move yesterday. Reuters isnt saying anything this idea that verizon, just stop that. Its not happening. Going to put a nail in that coffin. I dont think its possible for me to put a nail in it the market wants to believe somehow. Is there another explanation. None whatsoever none i dont think disney is going to do anything strategic and i think this idol chatter about disney going up is part that i dont like that i thought would have ended today after yesterdays antimove between 12 and 4 but disney has a life of its own. Lets look at the sectors. They have days pointing guidance i want to concentrate on exxon we have been talking about it all week and they kept cutting the numbers and still got it wrong. It came in below expectations at 78 cents i want to emphasize how unusual these declines had been. On april 1st we had estimates of 99 cents for the earnings. It went down to 89 by july 1st and even through july they kept cutting the numbers to 84 cents and still miss at 78 so we have almost a 22 decline for the quarter. Its true numbers do tend to come down for most companies but this is a very big decline and illustrates that nobody can get the numbers right because nobody can get oil prices right we have been emphasizing that as well everyone was confident that oil was going to go to 60 this year wrong oil went to 42 and its still creeping around that 45 to 50 range. The average price in july which is 45 the s p 500 is the green line. Production growth has been very flat in fact, their production down 1 thats an issue. Capital expenditures is the other big issue. Well see how they do and how disciplined they are with spending the third issue is the dividends. They appear to be safe they insist that they are. Exxon 3. 8 chevron 4. 1 and thats kept people interested in these companies for a long time. The question is is it enough Going Forward . What they really need is a production increase overall. The s p 500 again 2 right now we have to have projects that are resilient. Thats the mind set and that was around on the desk pretty much yesterday. So dont call them apocalyptic comments but remember the volvo ceo saying the internal Combustion Engine is dead. Oil forever lower. Those are startling statements that really get peoples attention. Like a slap in the side of the head we have one on the nasdaq today. Brokerage, there you are 9. 2 different hares. A three year note like a two year note. We chart up one basis point. Its up 7 basis points on the week i would show you at 30 but it looks like the tens with computerized scaling and really a question and we can only answer when we dont see the Federal Reserve not repurchase its run off and how the market reacts. Bunds are up about 6 basis points on the week right around christmas time 2015 it gives you a clear view that were still hovering under 60 basis points but were still flirting with deals we havent had in a while its right at the beginning of 2016 lets switch gears to Foreign Exchange i think that the key story is the euro zone hovering at the lowest level since june of 2016. Yesterday and last friday dollar index closed about the same price. 9385 were flirting with a new low close here so pay close attention and finally when you see this calmness and just like stock, low volatility in the Options Market and the fixed income side the hyg high yield etf also finds more love its now flirting with the best levels in about two years. The administration is focused on making America Great again. Joining us first in a cnbc interview is the director of the office of management and budget that wrote in the journal about that very topic a few days ago good to have you back. Welcome. Thanks as always for having me. Obviously the news of the morning is what happened last night on health care how does that effect the agenda and tax reform and everything else. Obviously everyone is disappointed built into obamacare is an even left leaning think tanks put this out a disincentive to work and everything has to be going in the same direction to build gdp growth we have to get rid of obamacare in order to get that additional 0. 1 gdp growth. They do tie in together. I think that the Health Care Discussion is very much alive despite the vote. Alive in what sense what would happen next they have to find something they can pass. Not too long ago i was an elected official and i dont know, i talked to some of my friends this morning in the house for example, they dont know how they go home. The house is going home this evening. They dont know what theyre going to say to the folks back home that said we gave you the white house, we gave you the house, we gave you the senate. You voted in the house to get rid of obamacare but they didnt do it in the senate. I dont think the senate can go home without doing something. Tax reform obviously is one of the reasons i assume youre joining us this morning and seems to be next up on the docket but tell me about the timing dont you need a fiscal 18 budget resolution first . And are you going to get it in your expectation given that if you dont you need 60 votes. You cant do reconciliation with tax reform. Short version of a long story. If we can get a budget passed through the house and the senate we can pass tax reform with 50 votes. If we cant get that budget passed the same budgets through both the houses we need 60 votes to pass the tax reform bill. Clearly one that requires democrat support looks different than a tax reform bill you can pass with just 60 republican votes. Do i think well get a budget yes. Do we need a budget . Yes. But again everybody understands that on the hill and the big news yesterday was when this supposed big six press release came out what youre see as good that house republicans, Senate Republicans and the white house are on the same page. The exclusion now of the border adjustment tax that seemed to be a key part of raising revenue, what is that going to mean in terms of the debate when it comes to whether or not youre going to pass a tax reform bill if you pass one that is largely considered revenue neutral. There seems to be a lot of debate. How big is the tax reform going to be . How big are the tax reductions going to be . What you have seen the white house say from the very beginning is we want the biggest most graeszive tax reform t biggest most aggressive tax reductions that can pass but we want the biggest package that can actually become law the one thing that they all come back to is instant jobs from repatriation if youre going to make it part of the larger picture youll fail. Why do you say that. Because what david just said because without some sort of tax theyre going to want revenue neutral and its not going to happen lets be hypothetical about it lets say it sounds like that, how about a win and a win for the American People. The stocks are high wed like to put people to work how about a win . We break that away and just make that revenue positive. You come back with a win before holiday season, how great would that be . It would be great which is why i think it should be included in part of the larger package. Im disappointed to hear you say that maybe i misheard you that if we include repatriation it would kill the tax reform bill. You dont want to do it in one piece. Im afraid it would lose because the democrats might just attack you guys but if you just do this one thing separate president bush did it. It would be so great i dont mean to go on too long about that but thats what theyre all saying. I like to think that the democrats wouldnt attack us for doing anything that was right. But theyll probably attack us regardless of what we do theres so much more that we can do theres so much more that we need to do, why settle for just rep repatriation we have that discussion down the road but why settle for that we can do much better. As were talking the president is tweeting if republicans are going to pass great future legislation in the senate they Must Immediately go to a 51 vote majority. Does that make sense to you after a vote that came that was 4951. Youre asking a house guy about senate rules i never understood it. I do understand it i understand that we could have a long political philosophical conversation about the senate rul rules. I do respect the rights of the minority theres a middle ground to have to work and talk and filibuster. Thats the way it used to be you would go to the floor of the senate and talk and talk and talk thats what the filibuster is supposed to be now for convenience sake they sign a piece of paper and pretend like theyre talk. Theres ways to protect the minority in the senate both republicans and democrats in the future but theres also a way to get back to a senate that functions. And people dont understand it. At 2 00 a. M. This morning the president writes let obamacare implode and then deal. Does that help you get to 3 gdp . Repealing obamacare helps us get to 3 gdp. Doing tax reform what you saw is reality. Obamacare is imploding if you live in a town where you dont have any coverage right now you see it if you live in a state like i do where i only have one provider you see it its not working were trying to stop that by putting forth better ideas repeal replace but inevitably obamacare will implode its not healthy but thats why were working hard to undo it. So much to talk about and so little time. Let me end on timing here. We can talk gdp if you want to but thats okay we had great numbers this morning. We can talk about that another day as well. Our audience, to jims point, tax reform is a key. You need a budget resolution you have to raise the debt ceiling. When are we going to see a plan from your white house that has more than one number in it give me a sense of your expectation in timing and getting tax reform passed. I think by tend of the year if not sooner. Where we are today and how many days are left that congress is actually here in washington d. C. The end of the year is absolutely doable. I dont think were getting nearly enough credit for what you saw yesterday. People are saying theres no details in what the big six put out. What you see is republicans in the house, the senate and the white house together on a basic set of principles. Thats something by the way that we could argue that we have not had during our discussions of repeal and replace baobamacare o were ahead of the curve to get all the republicans on the same page on a basic set of principles is a major piece of news and tremendous move in the right direction. Next come the details but thats the way the process is supposed to work. Really quick, do you expect those that make more than 5 million a year to have a tax report with the forehandle ill say the same thing i have said, what gets us to 3 growth the idea is sustained 3 Economic Growth and that tax reform package has to be something that moves us in that direction. So i have heard the discussion and the debate all i can tell you is what will be laid out this week say set of common principles and well move forward as we continue our discussions with the hill on tax reform. Really appreciate your time this morning thank you for coming on. Thanks, yall. Jim whats going to be on mad money tonight. Personal finance because i feel people got to settle down theres way too much people in panic. Just bothers me. You got to slow down and stop trading stocks back and forth. Just take a little longer term view im sorry. People come on and theyll say listen its over theyre doing a disservice to people at home and not that im war reason buffet but its a disservice to them we hate it when you get quite. I dont want people to come on and panic and say holy cow its all over. These are Great American companies. If we got anything he said, youll be selling right before we get to the Promised Land although when you raised your issue about the revenue neutral. Well see. Theres lite to come. A lot of space between cup and lip as they say. I dont mean to be glum but do get tired of people coming on our air and people havent made a lot of money for many years saying wow just fold up your tent im not folding up my tent. Jim well see you tonight mad money. Quite a week with jim cramerment when we come back a lot more on this market. Dow down 30. Dont go anywhere. [brother] any last words . [boy] karma, danny. Karma [vo] progress is seizing the moment. Your summer moment awaits you, now that the summer of audi sales event is here. Audi will cover your first months lease payment on select models during the summer of audi sales event. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. We get a peak within the white house. First up lets get to rick san te santelli. 93. 1 was our read new read 93. 4. Not really all that good so it is a little better than the number we throw out which means that the actual previous number for june was 95. 1 you have to go back to one month before the election. And its a lot lower at 97. 2 because once we hit november these numbers just ramped up and its been dripping a bit 2. 6 is the one year inflation outlook down from 2. 7 with the 5 to 10 year inflation outlook in the survey we want to watch how the markets go at the weekend. Back to you. Thank you very much starbucks out with results yesterday beating estimates but lowering their profit forecast for the rest of the year stocks down 7 this morning. We talk to Kevin Johnson the krerks ceo. Heres what he said. The data has to do with the u. S. Data. Thousands of restaurants that serve customers away from home food and beverage and you know over time that number just continues to grow but it has some ebbs and flows and what we have seen here in the last quarter is a little bit of softening in that which indicates that consumers are spending their money on other things right now and that caused that number to slow. We were very proud of the fact though that even with that slowing growth of that macro number we posted a 5 comp in the u. S. We dramatically outperformed what we see happening in the industry this is a near term phenomenon nothing to be concerned about longterm. Johnson also talked about starbucks efforts to double down in china. China is our second largest and Fastest Growing market now we have been in china nearly 18 years now and we have laid the foundation for a longterm growth agenda for starbucks. We now have 2800 stores throughout china 130 cities in china. Talking about how one day guys, china might be the share of this business its big but apparently not big enough in this country to keep teavana alive. It sounds like it wont be that long before china, its already the growth engine. Thats the bull case. The bear case is 3 to 4 sales growth worldwide, same store sales growth for starbucks is less than its been and less than starbucks or target is it less than the industry not really its actually best in class. The retail restaurants, consumer right now but its a little bit of an adjustment of expectations for this in particular and the only other data point i wanted to mention is the rewards membership that growth and its the reason its caught one technology and ordering and everything like that. Were going to watch starbucks. 5 comps top of tax reform goes to the top of the agenda. Group chief investment strategist and wells fargo Global Quantitative strategist we find ourselves wondering again just what is priced in in terms of trump policies. We did get a statement from a group of congressional and administration negotiators maybe that was some momentum on tax reform what say you. I guess i think the market is pricing virtually nothing in for the trump agenda it went from High Expectations to where now theres virtually no expectation and i would argue that if they dont get anything done its par for the course and we have already decided to move on and if they do get something done it will be a positive surprise now for the markets, sarah, overall but i think theres Better Things to focus on. We tended to take a conserve tiff view becau conservative view. Washington has a tendency because for awhile we said physical spending and tax reform and health care all of these things will be much harder to accomplish than some of the incoming officials initially suggested. We also take review but that doesnt take away from a very solid economy with a very Solid Earnings growth. What about the Economic Growth jim you have been waiting for new signals to see whether Earnings Growth can continue against the backdrop 2. 6 for Second Quarter. Thats a nice rebound from the first quarter. Is it enough to get it done though for this market i just think the environment was good here. We have economy with solid job creation rising wages and rising profitability. Strong conference movers among consumers and businesses and its a good backdrop i would stay the course. Markets got higher and yields have to go higher. You dont see any overheat pressure the first to usually sell off its been a global phenomenon and certainly theres sectors ahead of themselves. And Energy Stocks come back to light i think the rotating nature of leadership t broadness of the leadership overtime is keeping this ball alive. Do you think that investor should be aware of the high flying names and netflix. Just because of how much a representative within the broader s p. From a valuation standpoint its nothing that would concern us except for a few hand full of stock but that doesnt mean that you shouldnt be neutral you already have a sector that was 25 or 26 of the s p at this level. Thats where we see Earnings Growth and also where we see probably the most positive time. And that will lead us in the second half. Optimism. Thank you. Big earnings story of the morning the shares are down 3 act of the earnings miss last night. The quarterly drops 77 . Even a sales jump. The stock up 30 for the year. Lets bring in Scott Galloway and managing director of Capital Markets. Happy friday guys. Good morning. Well see if its a happy friday for amazon and the whole thing is being framed in this, in this way that people know about growth aspirations and today is the day they come to term with the Price Associated with the aspirations is that how you see it amazon is one of the leading if not the leading Growth Company across retail and technology but ultimately this is one of these very typical type investment cycles it can go on for many quarters and we think ultimately were not seeing the earnings catalyst that we would be looking for to get more constructive on the stock. Earlier this morning, scott, jim said azure declared war quitely on aws and thats leading to margin compression and capex. How bloody could this get . Everyone has been looking for something not to like about the amazon release and everyone is zeroing in on the fact that their growth in cloud slowed to 41 so theyre the number one market share leader and their growth is 40 . Its probably the most profitable Fastest Growing part of technology. They all seem to declare war on each other so well see what happens. A lot of momentum but amazon right now i would argue is the most dominant company in the world and maybe the most dominant company at this point weve ever seen. If you look at the overlap of where theyre competing against apple, facebook, microsoft, theyre winning where ever theyre competing against any of the other big tech titans so this company feels like it has more momentum than any other company. I dont know if you agree. Its weird that the stock is down 3. 5 . Have investors learned anything from following amazon over the last decade or so . Its growing capture market share and dominate retail and cloud so all of a sudden do you think jeff besos is going to wake up and prioritize profits amazon has learned that profits to the market are like crack cocaine to an addict and that once you give that crack cocaine to the addict he or she gets upset if you take eightwit. Amazon decide never to provide that substance to the marketplace. Why would you selfimpose a tax when you dont need to when the Company Keeps going up with the benefit of never being profitable for amazon to go profitable would be a selfinflicted wound every time they make the mistake of reporting positive earnings, calls the Management Team and says you screwed up, now green light everything and were about to enter a more interesting dialogue and thats what does it mean is it good for society when a company can get to a half trillion dollars in market cap without having paid any taxes along the way. Thats the conversation. When you say any taxes, what do you mean . How much Corporate Income tax . Very little because they cut very little profit. Some guys from walmart the other day i said every month you should announce how much taxes youre paying. Or maybe theyre lob big fbyo the washington post. Also to your point they get a pass when it comes to actually having to make money unlike walmart which would argue that were actually judged by a different standard let me turn to you though. Were talking about top line growth that any company would be envious of book made 3. 9 billion in net income last quarter. Why do you think though investors are not going to be focused on the continued top line to the point that scott is making. Ultimately investors arent focused on top line but if you look back last year when you have a Strong Performance in the stock you have basically consensus estimates that are too low and youre in this cycle of seeing robust sales growth and seeing the profitability growth. Were on the other side of that for now. No doubt the profitability will come back at some point but ultimately we believe thats the best for a stock and that seeing those profitability estimates move higher. Is that in your model we did take down our estimates today. We go through these phases of higher profitability thats a very profitable business but at least in the short to medium term certainly with last night dont expect that profitability. You mention the task i wonder if this is something well be talk about more. Beyond taxes what about antitrust. This company eventually is going to run into some regulatory issue. I dont know that were having the conversation yet on the u. S. Side of things but is this ultimately going to be a risk for investors . I believe it will be. Today the vup is whatever is good for consumers is good for america and amazon is starting to create the fear that it might not be good for society. Whats going to happen is a District Attorney is going to wake up one morning and look in the mirror and say good morning mr. And mrs. Governor and see that the fastest blue line pass is to connect the dots between job and investors in a company that may not be successful in every category but one thing for sure and is going to go after amazon. Is going to strike a populous tone and its going to turn. Were already starting to see the rhetoric. Yeah of course there was a piece out of Yale Law School as well it would be a different approach to make it clear. Questioning a fundamental we have a society that says they come second and workers come third and were beginning to question that rumor. Consumers may feel like amazon works for them. Thats a fair point. People love it. It has a relationship with 58 million. You realize that more people have a relationship. A recurring revenue relationship with amazon more people and and more and more are going to say i used to have a good job with Health Benefits and now im a uber driver. Were moving toward a society where we have this utopia circling and people are going to start to blame amazon. Some of the Regulatory Risk snk its not something that you can build into your models but you have been following the company. How prepared are they for these types of fights . With the exception of books theyre not in position in any of the other categories but theyre talking about how many people they are imemploying. Tact car leng tactical and longterm guys. Senate republicans failing to repeal obamacare in a dramatic late night vote on capitol hill. Kayla joins us from washington with more on the story. A midnight cbo score a vote that started at 1 30 a. M. That ended in a surprise defeat two republicans voting against this vote earlier in the week but it was john mccain that returned from his cancer diagnosis earlier this week effectively ending the effort and shocking the floor when he did so among the issues the cbo saying 16 Million People would lose insurance premiums a focus of conservatives that would rise 20 . The senate ruls process but his Political Capital is being questioned after hosting luncheons and making official speeches and threatening to with hold sources from law makers that still after all of that decided to vote no and the dollar is sliding overnight. Add to that the chaos breaking out between west wing officials and now impending dead the lines raise the debt ceiling and pass a budget isi groupsays its back writin quote spending and debt ceiling deals happen should not be read to me that they will be accomplished cleanly, easily or without partisan no official words on next steps. The house is leaving on recess the senate is adjourning until monday afternoon and you heard him saying last hour conversations are still happening but Majority Leader Mitch Mcconnell ended last night saying its time to move on. David. Yeah and moving on they may do on to tax reform perhaps thank you. Also out of washington, the white house gop leadership dropping the Controversial Border adjustment tax from that potential revamp of tax reform we havent gotten the full plan yet. She gives tus lateus the latest developments. This at least allows the white house and gop leadership to start negotiating on the same page and thats because as we know the fight over the border adjustment tax sexual load up t swallowed up the broader debate over tax reform theyre going to put that aside to move on what came out of that joint statement from the socalled big six they say the goals are lower rates, permanent reforms and unprecedented capital expensing. Now it will be up to republican law makers to sell those goals back home as they leave here today for recess at least on the house side you can expect that tax reform will be one of their key talking points they want to try to show momentum on at least some issue as they face their constituents. For white house that pivot will come on monday the press secretary will be speaking to two conservative groups that are affiliated with the koch brothers. Americans for prosperities and freedom partners spending millions of dollars over the next several months. They ordered tax reform across the state. They say theyre going to be doing phone banking, digital ad buys and organizing grass roots efforts. Already they are targeting 10 senators who they say have supported overhauling the tax code in the past starting with red state democrat senator joe mansion of West Virginia theyre not the only ones the business round table will also be coming out with a new Campaign Spending lots of money there to support tax reforms so guys is the type of political pressure you can expect to see on law makers over the next couple of months. Its going to be a heck of a recess thats for sure thank you very much. When we come back expedia hits an all time high today after reporting earnings stocks up almost 3 . Well talk with the ceo exclusively. Take a look at stocks this morning. Dow continues to be in a p wnorte dn a t23ndhe s do me than 9 hey youve gotta see this. Cmon. No. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Down to 4 and well try to bring you more comments from the commissioner as soon as we get them back to you. Susan lee thank you very much meanwhile, expedia reporting earnings after the close that Beat Estimates on revenue falling short on earnings expectations the stock did hit an all time high today its simple more and more people are coming online and how that translated in our results is that its very healthy which resulted in healthy Revenue Growth its i dont know a normal time seasonality. These are big macro factors first of all travel is a great business to be in. We are seeing more globally removing so the travel business is on big map for trend and will continue to be a higher percentage of gdp and booking online and searching and finding the travel experiences online is just much, much easier and then you have Companies Like ourselves who are investing very aggressively in both technology and marketing which again makes us in a position where we can grow actually faster than our already fast growing market so theres a lot of growth ahead of us and obviously youre seeing it right now. It looks like specifically youre investing in home away and that segment of the business put up 31 Revenue Growth. What are you doing there to compete with airbnb . 31 Revenue Growth and 42 growth in terms of stay. I view it as necessarily competition with airbnb as a new category of product. Vacation rentals, apartments, more and more are coming online. We have over 1. 5 million online Bookable Properties now and that ever increasing properties on expedia available as well. So cannot only look to search at hotels and can also stay in Vacation Rentals which they love so this is a category thats going to grow for us and its going to grow for airbnb and other players inside the category and we want to make sure that were a leader and home away is one of the best brands out there along with our brand portfolio. Got to ask you about some currencies what a run the euro had in recent weeks how is that driving traffic to europe versus the u. S. And was that reflected in this quarter or was it more of a Current Quarter thing . Its more of a Current Quarter thing but were certainly seeing signs and first of all its good for u. S. Travel were seeing european volumes into the u. S. Improve a little bit and travel especially in the u. S. Means jobs. Travel is the second largest export we have here in this country and the weakness of the u. S. Dollar definitely needs that incoming travel is going to be stronger. We were worried about that at the beginning of the year. That said, u. S. Travel into europe continues to be strong as well thats because air faires are getting cheap. Its probably 25 cheaper to go to iceland the environment is good going both ways. How would you characterize the consumer right now healthy obviously theyre spending on travel and theyre spending on experiences. One of the things that we discount is we have been in the states and its been this long recovery thats been more gradual than any of us might have wanted but the fact that the european consumer hasnt felt that good for years and years and years so we think that europe is going to be a significant area of strength for multinationals like ourselves. You put that together we merging economies, for example we announce that 350 Million Investment in one of the leaders in Southeast Asia as far as it goes and very Significant Growth effects. We have been trying to monitor some of President Trumps policies including the travel ban that did get further implemented and enforced over the last quarter do you see fall out from that . We dont see fall out as it relates to our businesses. We heard partners talk about businesses as it relates to the middle east and u. S. Its the same thing as far as mexico to the u. S. What we observe is that while there are local disturbances one point of sale or one market into another market consumers continue to travel but the fact is they are not going to give up on that summer vacation. Theyre going to go some place that they dont come to the u. S. Theyll go to spain, theyll go to italy, theyll go to france or some place in asia. Theyre going on their summer vacation. Thats quite a picture of the Global Travel environment. Good morning, heres whats happening at this hour the u. S. Will have to cut its diplomatic staff in russia by 2 to 300 people after moscow retaliated against washington over new u. S. Sanctions. The diplomats have about a month to leave and russia will seize u. S. Diplomatic property as well the pakastani vice minister stepped down after the countrys Supreme Court disqualified him from holding office. Follows allegations of corruption against him and his family the court also ruled he can no longer serve as a member of the national assembly. A powerful lower house. A commuter train crashed into barcelonas station injuring at least 54 people. The force of the crash hit the front of the train at least 19 of the injured were taken to the hospital. A new study says depression doubles the death rate among Heart Disease patients the reason could be that those that were depressed may be less likely to adhere to their Heart Disease treatment plan and thats the news update at this hour. Sarah back downtown to you. Sue, thank you. When we come back the boycott that wasnt. Jim stewart takes on united in last column. He joins us next Big Energy Companies reporting today exxon and chevron both out this morning. Actually energy is one of the few positive sectors in the s p right now. Jackie has been digging for the reports and joins us good morning. Good morning to you sarah the Second Quarter was challenging for Oil Producers because of the wide range we saw. We started near the mid 50s but by june prices had dropped all the way to the low 40s that prompted analysts to adjust expectations they lowered their numbers to compensate when you see an estimate like exxon the street does get a little bit concern exxons earnings were 6 cents high revenues were a light beat in the Second Quarter last Year Oil Prices were in the mid 30s so last year it was worse on a relative basis thats why this is also being emphasized upstream they were about 1. 2 billion versus 1. 6 billion in expectation downstream the numbers were stronger but they saw some weakness here in the United States chevron beat on the top line with almost 34. 5 billion in revenue. The bottom line, 77 cents. Or 91 cents without compared to 87 cents the stock is trading higher. Its going to be key for both companies here how they proceed Going Forward with oil trading just under 50 barrel do they keep drill something theres a temptation there or do they pair back and allow prices to stabilize here just a little bit . Back to you. Okay. Ill take it jackie, thank you United Airlines working overtime to rebuild its brand image which took a hit in april. Remember this video . Im sure you do. The passenger was forcibly removed from his seat. We even know his name at this point. Despite the pr missteps the company had our next guest says that for investors united have weathered the storm. Joining us now here at post 9, jim stewart, writer of many best selling books as well but apparently not enough to get you out. Well, you know, it might have been premium i got some kind of upgrade. You had a good experience. I had a very good experience and i got back and then i sauternings last week i was amazed at it he realized the intensity of the feelings poured out after that adm adm admitably horrible experience and the boycott didnt happen and i think my experience explains some of why that is happening. First of all, i went to book a flight San Francisco to newark there isnt a lot of choices anymore given the consolidation in the industry especially where united has a dominant share so it has the lowest faeres and mot depar tu dep departures but it was super nice it was nice. It was clean it landed on time. So i was thinking maybe the best time to fly, Something Like united is in the immediate aftermath of a horrible incident where everybody is going to be on their best behavior but they have done a lot and i think it seems to be work. Sorry, stocks gone from 81 to 67 these nice things cost money. They do the flip side for investors is the nicer you are to the customer the lower the margins get or potentially get they warned about the upcoming quarter. Thats mostly because theyre expanding especially on the transcontinental routes. Theyre upgrading service. Even getting meals in premium coach on a lot of them that does cost money and i think the thing is especially interesting because that actually is the form of competition. That will put some pressure on prices it will mean more. Theyll deliver more choice for consumers and the Justice Department has been inve investigating them. This is actually healthy for consumers and investors dont like that. Its about prices and about which one is flying at the time you want to fly. What evidence do you have that theres actually a direct consumer take away from publicity pricing. Airline must have spent money. Theres not a lot all the Research Suggests its the convenien convenience. It is the consumer. In the meantime theres a series of nasty incidents on every other airline too and went off on delta and yeah because i think people are shrugging and saying well, you know, theyre all about it so its hard to say one is really better than the other. In competitive markets you do see a lot of competition and mostly for the premium segment again, as i was walking through this they have a whole new layout and its a little like, they really upgraded that on the International Routes too theres heavy competition for that premium i think or something yes. Unfortunately it can only widen the perception because most of the competition has been in the competitive segment. Moving on to other topics such as tax reform you spent a great deal of time examining the tax code particularly on your own personal rate. Which is high. What are your expectations here given health cares failure at this point we had the omb director join us. He believes theres a chance to get this done by the end of the year. Everybody i talk to in washington and outside are saying yes this is going to happen. We have got to do it even more than health care this is the signature republican. This is their expertise, i talk to former congressman last week and they have spent, now they can calculate the hours. There is a tremendous amount being done and theres a lot of people working within these committees that know what to do about that. The problem is the rhetoric coming from the white house is very hard to square with the reality. All this statement they made yesterday, yes were going to do it progrowth, probusiness, fast write offs, no border tax, Everybody Loves that but how do you pay for it that is going to be the real problem. Theres fewer details in that in the one paper they put out earlier. A few months ago. President trump reiterated the 15 corporate rate and the Small Business individual rate that is super expensive. How do you get to 15 without blowing up the budget is one of the great conundrums of our time and im dying to see it. Still sticking to that 15 in our interview. Thank you. When we come back a lot more is tax reform. Dow up less than a point. Back in a minute [vo] progress is seizing the moment. Your summer moment awaits you now that the summer of audi sales event is here. Audi will cover your first months lease payment on select models during the summer of audi sales event. Rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Lets get to the cme group this morning get to rick santelli. Hi carl its funny how sometimes you have the perfect guest on the perfect day i have the cbo director, doug, thanks for taking the time. My pleasure. Repeal i want to get to that. You know a lot about these things but first you did something fast nating in dc this week tell the audience what you did you testified. I testified at a House Judiciary Committee hearing on a balance Budget Amendment to the constitution. All right and heres the irony here i said all along the way we got to 20 trillion in debt and the reason the fed had its Balance Sheet and the reason we had so many problems is the fed programs allowed the government to misbehave and issue boat load of debt that the fed was eager to buy who was the person sitting next to you that was opposed to the balance Budget Amendment. Alan blinder and also one of my former professors in graduate school. Enough said i think that sometimes you can just have something there. Now even the constitution wasnt perfect. It had 27 amendments although the first 10 were something that they dont count so we add 17 changes. They couldnt pass repeal last night. There is nothing perfect your thoughts on the outcome i think collectively its a big failure for republicans. Thats pretty obvious. The bigger problem is its in place the current laws under the Affordable Care act which are visibly failing around the country so i still think that doing nothing is not an option i was both the American Health care act and the better care reconciliation they did the things we needed to do from a broader perspective. They cut taxes and regulations they did fiscal reforms. Two big title reforms. Those are necessary steps. They were in those bills so i was days pointisappointed to se knock it over the finish line. Lets drill down the epicenter of your knowledge. All the studies by the cbo always give us a number of who and how many are going to be insured. I get it they make a lot of assumptions and i get it assumptions are a wildcard in terms of accuracy but have they ever done a baseline for the current environment were in what i never saw was in its current form just because you have an insurance card for obamacare doesnt mean you have insurance. Do we know that baseline number . Isnt that the only way that we can really see in any of these changes that didnt pass would have been better than the Current Situation of nothing i think thats a really important point, rick. When you do the scoring of these things you compare the law to the baseline its market, the cbo anticipates that 30 more people will be in the individual market over the next ten years i think thats an optimistic assumption the bigger piece of optimism is by law they have to assume that medicate is ju medicaid is just fine and can continue to grow at 1, 2, 3 faster than the economy and never change that is completely unrealistic i think if there is a realistic set of choices presented to congress this medicaid reform versus another one in the future, this individual market versus one that is not going to grow, it is going to decline, they might think about it differently. Now, listen, doug, if you were king for a day dont tempt me, rick. What would you do now that the repeal was repelled . What would the next step be in your opinion i just dont think theyre going to Forget Health care, Something Else is going to curve what do you think that will be what do you think it should be i think it will be whatever the politics dictate you and i both know that republicans need to put health care debates behind them so they can move on to tax reform and infrastructure program, pro growth elements going into next year the question is when they go home for the august recess, are they going to meet their constituents and say whats up you said for seven years youre going to get rid of this and you didnt go back and try again. Or will there be a resignation and in the end theyll try to patch it up on a stopgap basis for one more year. I dont know thats going to be the key decision you know, real quick, im out of time. Im going to get in trouble. Did you see anything in the fed statement or have any notions about ultimate Balance Sheet reduction and how the markets have behaved up to this point . Anything youd like to throw out in your final comment . I guess the one thing im disappointed by is not a clear statement that will be desirable to get out of the nbss as quickly as possible and stop distorting the Capital Markets treasuries are one thing picking a particular nontreasury invest ment vehicle is always a mistake. Excellent, excellent point, doug thanks for taking the time last best guestst week now were going to go back to squawk on the street. All right good to see you. Thank you very much, rick. Got to watch the tobacco names. Lets get back to susan lee with the f. D. A. s decision to cut nicotine levels in cigarettes. Tobacco stocks are tumbling today after the fda announced a plan to cut nicotine levels in cigarettes to nonaddictive levels fda commissioner Scott Gottlieb talked about the proposal at a News Conference a short time ago. Nicotine in cigarettes is not directly responsible for the cancer, the lung disease, the Heart Disease that kill hundreds of thousands of americans every year yes, it got them all addicted and it kept them addicted for the long term. And it got most of them addicted when they were still teenagers but its the other chemical compounds in tobacco and in the smoke create bid setting tobacco on fire that directly and primarily cause the illness and death not the nicotine not surprisingly, stocks publicly traded Tobacco Companies getting hit pretty hard on this news. British American Tobacco were down to the actually, the worst day that weve seen in 20 years. Bti selling the lucky strike brand of cigarettes among others altria is lower and Imperial Brands which is down 6. 5 . The fda says that theyll still take public inputs on this proposal Going Forward back to you. All right well continue to watch those stocks which are getting hammered in todays session in reaction sticking with washington, new White House Communications director Anthony Scaramucci giving an explitive laced interview to the new yorker and that certainly raising eyebrows. In the interview he once again threatens to fire the entire White House Communications staff. Though im not sure that was the main headline. Our john harwood joins us now. John, we all made you go through all of the main headlines. Thank you its all over social media. Talk to us about the fallout from this sort of thing in a normal administration and in this current administration. Well, in a normal administration, Anthony Scaramucci would have been fired by now fwhut but this is not normal in any way. All year long the Trump White House has been driven by factions, its been dysfunctional. Youve got a president who is distracted from the issues, whos on his phone, whos zra s distracted by the russia investigation, he fired the fbi director and had people like bannon and priebus and spicer all at cross purposes in various combinations over time and now that he is getting more and more anxious about whethre e russia investigation is going and his agenda and we saw the repeal replace effort die last night in health care and Anthony Scaramucci detests Reince Priebus and the feeling is mutual. And for him to call a reporter and issue this profane rant against Reince Priebus and say hes going to go get him and then President Trump doesnt do anything about it, you have a situation where the chief of staff has no power whatsoever. Hes a figurehead. And nobody knows exactly what scaramucci is doing because Communications Director is not supposed to make himself the center of the storey hes supposed to be plotting the white house message. Right now the white house doesnt have a message real quick, john. What about bannon . Given that comment i mean hes got power, doesnt he bannon has power in part by virtue of the fact that he actually cares about some issues and ideas. Thats different from some others in the white house. Anthony scaramucci doesnt have a policy agenda. But bannon does. He opposed scaramucci and i think the fact that scaramucci is in difficulty right now is an indication that bannon is his position strengthened a bit. His deal still needs to go through. Its not like the firm sky bridge and that has to pass which goes through the treasury. Still outstanding. Quite first week though on the job for the Communications Director john harwood, thank you. When we come back, well get a lot more on amazons big ocdoings no, sir day stk wn 3. 5 and the dow is down 15. Are you ok . What happened . Dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac 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. Welcome back to squawk on the street. Markets are lower as tech stocks outperform it took a sharp decline after the fda announced plans to cut nicotine levels in cigarettes to nonaddictive levels. Tobacco stocks are sinking on the back of this news. Altria group and Philip Morris lower in todays trading session so far altria plunging 18 . It is down 10 or so with that, i send it back downtown for the start of squawk alley. Carl, over to you. Susan, thank you very much. Good morning, 8 00 a. M. At Amazon Headquarters out west 11 00 a. M. On wall street. Squawk alley is live