President obamas new round of sanctions, warning that measures would back fire and bring u. S. Russian relation toes a dead end, causing serious damage. As for the russian market reactions, take a look. Stocks in moscow were down sharply in early trading. You can see theyre down by 4. 3 . Later in the show, senator bob corker will be joining us. He is a member of the Foreign Relations committee. Hes been calling for tougher sanctions on russia. Well have more of that coming up. Right now, lets get over to andrew with more of todays corporate stories. Good morning, becky. Ge, former parent of this network, reportedly seeking buyers for appliance unit. It tried to do this back in 2008. It scrapped those plans, though, given the financial environment at the time. Ges Ceo Jeff Immelt promised investors to divert interests that arent seen as core. The company is set to post quart ily results before the bell toll. Well bring thou to you. If you have a dishwasher or a washing machine or you know . Its theyre not going to do that any more . Theyve been trying to get out of this for a while. I know. I know. Its not profitable. Its low margin. Its an old american iconic brand. Like westing hois. Ge isnt in lighting any more. Remember ge, we bring good things to i know. Its just that they people know they want to get out and so i dont think theyve ever gotten they never feel like they can get the right prior to price. Someone could do something. Weve seen it, whirlpool and those manufacturers. Someone could its a global im sorry. You could sell it anywhere and its a pretty good business. Is it haier . Yonl. I winner wish we could put something together and, you know, rationalize the operations, stream line some things and do some advertising marketing. I bet you we could make a go of it, ge appliances. You know, its hard service. Service is hard. Service is really hard, warranties and getting people there. The may tag man, he didnt really exist. I dont think there was ever a ghie waiting for you to call. But what if it goes with the taxes . Is that going to be a problem, if they sell it to their foreign buyers . One of our viewers wrote in saying he was disappointed in andrew saying basically youre calling 47 of the country that doesnt pay taxes they cant be patriotic. So half the country is unpatriotic. Thats sad. Isnt there some other way they can be patriotic . Isnt there can they salute the flag . Can they sing the starspangled banner . Is there any way you can be patriotic without paying taxes . I thought it was very clever. Someone wrote it is very it is very clever. That andrew has put 47 in the country in the unpatriotic thank you. Lets talk about ge. Doing a reset there and microsoft now set to announce 6,000 job cuts today. The companys new ceo nardella outlined plans for a leaner business in a public memo last week. Many of the cuts are expected to come from the newly acquired media business. Liberty says it doesnt intend to make an offer for the rest of it, air to commercial broadcaster, itv best known for broadcasting britain has talent and joes favorite, downton abby. Shares rising this morning. And then, k, there is Rupert Murdoch. We broke the story here first on squawk box. Time warner has rebuffed its 80 billion takeover bid. There are no talks under way, but murdoch is unlikely to walk away anytime soon. I dont know if you saw it, jeff put out a video prompt to the proposal. So, you know, they actually videotaped jeff yesterday, i believe at Time Warner Center saying we dont want to do this, weve decided against it. But most importantly, he said we believe our empty growth plan is better than anything that fox would ever basically be in a position to offer. Theres not enough money in the world for you to buy us. Theres the makeup girl and then theres the guy going, take three, jeff. And time warner, but its a media company. So its like they so the response that they actually gave to fox was a couple of tersly written ride. But the shareholders actually, i believe the video was made for internal purposes. That makes sense. If its for employees, you get that. Now theyre going to run it on cnn as a reality show. That would be good, couldnt it . They are not sure what to do, so murdoch puts time warner on wish list by Andrew Ross Sorkin. Can you summarize i dont feel like reading this. You wrote it. Can you tell me, is there anything in here that you dont know that i havent tell us. I would as you would love to know, we broke all of this news on squawk box. No, its every single you should not go there. You called it exclusive. Anyway, im already upset about that. We wait all this time for you to timely break a big one and then we dont get credit. Page b8, what do i need to know about this . Im just trying to no longer. Blooper, i would like to see that. God, would i love that. But so we need to say a couple of things. Tell me whats in here. The two big issues, the nonvoting stock seems to be something that most of the shareholders do seem to care about, which i was surprised by given that 70 already own it. Because of the you think if i like rupert stock, why do i care . Thats is a big issue. And theyre saying its a big issue. Why wouldnt you accept the if you chose to put that am of money, and you also say to yourself, Rupert Murdoch may not be around forever and what does that Company Look Like after and, therefore, the controlling shareholder. Is that a negotiable point . I dont believe it is. I dont believe it is. And i can for better or worse, price will win out on anything. So the bigger issue is can they get to 100 . Most of the investors i get to yesterday said give me 100. Ill give you a deal. What if they dont care about the voting any more . A little less interesting. I think the price is going to be more interesting. Most important is watching the stock with 21st century fox. That went down yesterday. And so the extent that that stock can hold up or goes higher, that makes others a lot easier. For them, for this to actual happen, fox has to come to the table. And the question is what they have to offer just to get to the table to at least negotiate. In part because while they threw out that number of 1 billion, they believe theres a lot more if they can see whats going on. Of course with due diligence, you mean . If youre time warner, you dont want to let them david makes a very interesting point. We talked about this with jerry on yesterday. Jerry levin. Former ceo of the company and he talked about this as being a backwards deal. David said how technology is impacting all of this and where google is. By the way, if youre jeff beszos and you want to be in the content game, do you want to buy this . Say fox really needs time warner and them it doesnt. The media has no idea. They just write every possible angle and story and conclusion on both sides. Weve covered it all by now. We dont know whats happening and what is the end result. What is the bottom line . Does fox needs to do this and does rupert always get his man . I say rupert always gets his man. I suspect something happened. Billions of dollars. Billions in synergies, right . Probably. And if you decide youre shutting down down, one thing that is so interesting, she at least comes to the additional differently, to the point all the different creative pieces. If you do saturday go r gettel those things. This has caused a val owation for cnbc. I saw six to ten. After or before . Did you add that to the 80 or is it included in the 80 . Its included in the 80. And hbo is worth 20 billion. 25 billion if you consider the future revenue of billions. Yeah. That sort of pressured the deal to compete with that. Showtime with Andrew Ross Sorkin and the executive producer, everything has to compete. United health is a dow component. Nike, Goldman Sachs what else . Visa. Is kraft dow or kraft youve got to quit changing these things so much. Is westinghouse out . Okay. Chef ron . Mobile . Anyway, outlook quarterly results, at least google and apple are in there. Earnings of 1. 40 a share. Obviously you put them in. Beating the streets estimate of 1. 26, revenue topping consensus and the company is raising its full Year Revenue Guidance above the street. And lots of big moments during yesterdays delivering alpha conference, thinking any miss reguests. Then he brought out bill ackman. Timeless moments. The two had, as you know, a very public war over herbalife. I started to say it correctly and i had to quickly say it incorrectly. For the last 18 months, its been 18 months that youve seen it basically every day. At least we talked about it at one point. They hugged it out on stage acting like old friends. And ta was interesting. To me, it looks like icahn thought ackman had a mouth and it looks like ackman thought or looked like he had head lies. Although they said a lot of nice things about each other. Oh, look, i dont want to touch your lip. Bill went for the hug. I think carl was a little more reluctant. I think seriously . Sometimes thats awkward. Wow, two guys like that in a situation like that . Now theyve made up. Ill tell you, ackman is a good looking dude. Especially with the what is it . Stuff in the eyelashes . I love his eyelashes. Its natural. Hes even luckier. His eyebrows, your eyebrows are to his eyelashes as those are the i mean your hair . To my hair. Meanwhile, i sat down with stan druckenmiller. He warned the audience that said policy should have us worried. To face fed policy since not only unnecessary, but fraught with unappreciated risk, when ben bernanke and his colleagues instituted qe1 in 20309, financial conditions and the real economy were in a dysfunctional meltdown. The policy was brilliantly perceived and a nobrainer from rafk reward perspective. But the current policy make no sense from a risk reward perspective. Five years into an economic and Balance Sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. Now lets get to kate kelly with some of the other big highlights from delivering alpha. And the first thing stan said when he took the stage was how great the conference has become. I know. I was amazed at his stature. He made some similar comments before the financial crisis, a couple of years before. About the fed, not about cnbc. We have a clip, for sure. Big time. There are clips everywhere. So that was nice. Yeah, no, it was a great clip. And on the record saying but you know, he warned not to get too excited because its not systemic. But its registered at this point back in 2008, what caused all the problems systemwide. At this point, its not systemic. And you know what i thought was interesting about what he said was the longer we go on with quantitative easing, even if were tapering, the greater the Downside Risk is. What it is or how advanced it is. Right. And it was galvanizing. I think all the debate about the lower Interest Rate regime and what it might mean in the future, that was one of the most interesting story lines yesterday. And my question was the demand whole from this once in a lifetime or once in a century financial well, not one in the century, but this huge collapse warned that even to this point right. The fed maintains it. And he thinks its past the point of futility. But at a point where the downside is obviously some day may come back to haunt us. Yeah, no, absolutely. Can i talk about a couple of other key moments. Let me be the judge of that. Ken griffin on 2008 and youre not doing the hug again, are you . Cooperman and christie. Lee was amazing. She didnt see Chris Christie. You missed one of my favorite moments of the day. Multiple moments, really. But john was tough. John can be very tough. Sometimes not quite as john harwood, right . I dont think hes quite as tough when the president copped a fly and he went oh, mied go, youre wonderful. He kept the equal lyilibrium. He said you were obnoxious enough to ask me again. But it was a very good matchup. Anyway, one of my favorite moments of the day was ken griffin talking about how citadel came back from the brink. In 2008, they lost millions of dollars in a matter of weeks. And they managed, interestingly enough, not only to sole advantage the business in general, but to make back their High Water Mark and their hedge funds four years later. Here is his recollection of what happened at that time. That was a very dark moment for us. As a firm, we had gone through almost 20 years of never experiencing a loss and as youre well aware, in 2008, we lost about half our Equity Capital in 16 weeks. Cnbc had the van parked outside of building trying to get the bankruptcy footage if we had failed in 2008. What a dark moment, you know, overall. And just the cnbc van being a galvanizing symbol, im sure. But that was interesting, i thought. And he sort of talked about taking stock of what needed to be fixed in the business. One thing they did was they slipped it into level one assets. They got out of level two and three assets, things that were too ill liquid and too complex in their view to have on their Balance Sheet. I also enjoyed hearing from lee cooperman, who is sort of an eternal optimist. And faber called him on that and said when was the last time that you were bearish on the markets . He did acknowledge that we were going through a series of cycles. Here is where he thinks we might stand today. Bull markets are born in pessimism, they grow in skepticism, and they mature in optimism and in euphoria. So weve passed pessimism, weve the past skepticism. I think were in the stage of optimism, but i dont think were in euphoria. So, interesting what he says there, right . Because janet yellen, obviously, the other day talked about overly high valuations in biotech or tech echoing what some Hedge Fund Managers have said, as well. David einhorn, david loeb. He was asked about that yedz and he said what does the fed know . I just heard from different people that her staff argued to put that in there and that she wasnt so sure about it. I guess they thought if these things pull back. I said at what time is the buy, sell or hold segment that yellen is conducting. I have a couple of stocks that i was to ask about. That is thats a to me, its a rookie mistake. And dont ever do that again. Even greenspan came under pressure talking about the whole marketist. But to talk about individual sectors of the market . Are you kidding me . Nobody cares what she thinks. We care what shes going to do. She thinks. Spooking of valuations, i thought if thats what she thinks, is this an argument to be pulling back . Right. That was enough, you know . Okay. Dont you think . So its an indication shes going to raise rates more quickly than we thought . You dont think it was an indication of that . I do, yeah. I think it was cover. I think it was cover if something blows up. I thought one moment was druckenmiller. He said its sort of get to go be nerveracking in some of those markets. We see high pollutant valuations. There are about eight charts and every one of them, charts go from low on the left to and every one of them was way up here. Hes like, were at zero and everything is up here. Right. Right. Exactly. Every ounce of his intuition tells him yeah, that was a good quote, too. Kate, thank you. It was great. Thanks to you guys for bringing great coverage. When we return, the shock wave in the media industry. Will Rupert Murdoch up the antifor time warper . Can a mega risk like this get done in todays environment. On this day in 1955, the expansion of magical empire. Disney land opens to the public for the first time and the rest, these, is history. Squawk box returns in just a moment. Time warner is the latest in an industry that has seen its share of consolidation. We have george, International Business editor at the hollywood reporter. Hey, guys, thank you for joining us. The big question, is the antitrust component, some folks ive talked to on the time warner side, people close to the matter trying to suggest that theyre going to be making a big issue of that. Do you think it is a real issue, george . Well, i think, you know, there are no official rules in terms of Box Office Market share, things like that. But combining two big studio versions alone, thats faced some concerns with a time of industry people. And i think youll hear those concerns echoing in washington, as well. The same is probably true on the tv network side. Some people will say and producers have a tough end in the future, selling the program to a bigger type. So we do expect quite a few people to make a big market move. Andre, you can be the judge. I think thats right. I think theres a number of issued raised by the transaction. The antitrust agencies will be concern, the fcc will be concerned. And the way the antitrust agencies work is they identify relevant lines of commerce where the two Companies Compete and you have the issue of cnn and fox news, you have the issue of cnn and fox, take them out of it. I think youre right, thats a hot button and i think fox has decided lets not even go this. But to the extent studios are an issue, do you think there is that much overlap . There is. There is overlap and theres going to be concern. With movie studios, were talking about i guess theres six major movie studios and acts of acquisition to be reduced down to five media studios. So its a concern. Under the antitrust laws, one aspect of it is theres a couple of anticompetitive theories that are used in the antitrust. And one is the latest in conclusion or coordination. So something less than outrate colusion. But potential for coordination going on in the future. I understand when youre going from four to three, six to five, is that a bit of a stretch . That is correct. 4 3, a big problem. 6 5, normally not as big of a problem. But under the antitrust law, its still an issue and a concern that the agencies will i think the same thing goes with tv networks, as well, because the most five major tv networks, competition would be reduced there, as well. Andre, what does this mean for all the other consolidation thats taking place in the market . Comcast, the parent of this network is obviously trying to do the deal with Time Warner Cable. Thats an issue about type, directv has its own transaction with at t. Thats on the table. The scc is going to have to look at those and justice is going to have to look at those deals. Now you add this to the pile if, in fact, there would be some form of an agreed deal. Does that say that the pile deals anyone who was worried about contend and power before, do us look, these guys are going to be getting bigger, too . How do you look at that . I think thats exactly right. I think this is the response to the distributors, combining at t. Directv, comcast and Time Warner Cable, they can merge and have more Bargaining Power against the content providerses. Content providers have a lot of leverage as it is because the distributors need to content. Obviously, the content provided distributors to get to that american household. When they say comcast, Time Warner Cable merging together, going to have a lot of pipes, all these households around the country controlling, you know, nearly 20 out of the 25 major metropolitan markets. I think this is a response to that saying that if the antitrust agencies and s. E. C. Are going to allow that consolidation to happen, then i think this response here is this should be allowed, as well. George, culture question. Most of the people that i know that i spoke to yesterday that live in and around the world of time warner, culturally, say they are averse to working for Rupert Murdoch. What do you make of that . Well, i think its an individual and neutral decision. But i think in general they talk about any deals with fox, the issue of Rupert Murdoch always comes up. I think one of the tags and i lead with those concerns is because of chase carrie, who has a good relationship. I think he could play a big role behind the scenes that are in keeping investors and the other people looking at the deal, confidence and focus on proper business in our decisions. And, you know, they could take a little bit of the heat on the political side off the review here. So you were you were able to detect some type of media chasing or animosity towards someone perceived to be conservative . Are you serious . The Mainstream Media seems to be pushing back on maybe having a boss . Where did you pick that up . Really . Now youre implying that maybe the Mainstream Media may have a im not talking about the cnn component. No, i know. I know. He talked about i talked about everybody. I said most of the people at time warner think rupert is either a devil or a close friend of the devil. Im curious, the hollywood folks who work for right. They hold their noses and go to check their paychecks. Is that what yes. Unless youre mel gibson or something or join voigt, willis, adam sandler. I know theres like six of them and a couple other jessica simpson, i think, and you have to go way down after. Okay. Theres like eight of them total. Just 16,000. Were going to thank george and andre for helping us through in this morning. I appreciate that. Well continue the conversation here. Becky, youre going to go to that, but given our conversation yesterday, this is mandatory for you and for any viewer thats interested. Jack lews free america plan, its basically talking about if we dont fix the tax system, if we make it illegal to do these things and what the unintended consequences will be, mr. Lew doesnt know much about economics. Treasury secretary, it just came out. Asking no push to do it. The economics say the real thing that has to happen is the tax law has to be changed. Hes not going to do it in the next few years and this is going to continue to happen. But if we did make it impossible for them to be done, wouldnt Foreign Corporations buy more of them here . We need capital to be attractive here. Well talk more about that when we come back. Also, the dow hitting a 15year high. Where investors should be looking for value right now. Squawk box will be right back. 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There is that big of a myth. Stockton not necessarily affected. It looks like a big moon there, but the chart goes from 28. 75 to 2 39. 75. If you were wondering about how that stock has been trading in a dollar range, there you see it, its been up and down based on a dollar. Did you know barbie has four friends you can buy . Ken. Who . Piper. Stacey. Stacey is a friend . Yes. And who is the one with the brown hair, the brunette . T. I dont know. And theres only one guy, ken . Theres a dark haired guy, too, but i dont know his name. Ken is the blond and then theres another one. Barbie sales have been uneven. Thats been part of the problem with mattel. How do you update well, did you know that they have a barbie news caster . Theyve been trying to give her different jobs along the way . Plus they have holiday barbie sales which are pretty hot. For christmas. Korea. Theyre collectibles. Its like 50 bucks. You know a lot about this. I know because of the girls. They like the holiday barbies. But the oh, with the big hair, yeah. Anyway, another record close for the dow yesterday. Boosted by m a news and quarterly earnings, our next guest says stock valuations are stretched and vulnerable to even bad news. Russ is the global chief investment strategist at blackrock. I want to be careful with what youre saying. You think things are getting expensive, but you like stocks better than anything else, right . I think thats fair. Our view right now is stocks are no longer cheap. Theyre particularly stretched in the united states, but theyre not so stretched that these valuations in and of itself are indicative of a market top. Now, that said, if what youre worried about is more of a garden variety correction, then yes, i do think stocks are vulnerable, not just because of valuations, but because volatility at these levels tells me theres not a lot of bad news discounted into the price at least not as of today. Whats a garden variety protection . Is that 8 , 10 . Its been so long, i think weve forgotten what it looks like. Historically, its about 10 . So you would not be at all surprised by a 10 pullback, but at the same time, if somebody is trying to figure out what to do with their money today, youd say go ahead and try to allocate the stocks . We would. Again, we think the stocks will be the better value for longterm versus bonds and cash. But i think you want to pick your spot. Within the u. S. , the large cap, the mega cap, the cyclical name looked to be the best value. The other point is that when you look outside of the united states, the valuations are not nearly as stretched. So we do think that there are actually some bargains still to be had in both developed asia and in emerging markets. Are you talking japan or beyond japan . We are talking about japan. Japan has just pointed yeartodate was a very crowded trade coming into 2014. Everyone loved it. Its underperformed for the year. But this is one of the few, maybe the only chief market left in the developed world. Its trading about 1. 2 times value. Its a 55 discount in the united states. Now, japan for a variety of reasons should be cheap. Its not clear to be this cheap. When you talked about some of the things that you think are getting lofty, a little pricey, you look at some of the segments janet yellen pointed out this week, right . We have. Janet yellen was trying to get at making a clear point which is we get it, we being the fed, that we know that there is some impact of having for long. We think its justified. But yes, there are parts of the market based on equities and credit that feel stretched and arguably, theyre stretched because theyve been in this period of very unusual monetary policy. So the grand sum with all of these things, what do you think about bond prices at this point . Bond price res clearly expensive. This is one of the reasons we still stick with stocks. But i think it depends on what part of the bond market youre looking at. In particular, it was the short end thats the most vulnerable. Thats the part of the market that will react as investors start to discount that first rate hike, which is likely to happen sometime in 2015. Russ, thanks a lot. Great talking to you. Thanks again. Coming up, how does the nations largest homeland review the Housing Market right now . Thats one of the big topics for our 7 00 a. M. Guest host. Wells fargo chairman and ceo john stumpf is going to be here. Were back in just a moment. What would happen. If energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Tdd 18003452550 can take you in many directions. Spark your curiosity tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. 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Some people calling it fresh highs and suv. I dont know if its fresh. It is. It is the 15th high this year. But a new high says it all. Theres no fresh highs or roton highs or brand new high. Single best idea. Next, checking into the Luxury Hotel Business from the plaza in new york to the savoy in london. Fairmont has more than 80 locations worldwide. We have to Pay Attention here, andrew. I dont think this is not you have not utilized like a swiss hotel have you necessarily or a fairmont . This is another luxury chain to consider. The fairmont . Yes. Love it. Which one have you been ive been in many over the years. Not surprised. Jennifer fox will join us right after the break. And we are waiting on Morgan Stanley to roll out results. Should happen during the next hour of squawk box. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. Once there was a girl who even in her laundry room. Ry. With downy unstoppables, she matched her one of a kind style with one of a kind scents. Downy unstoppables in wash scent boosters wash in the wow. Summer vacation season is in full swing. Weve already conducted the interview with this next guest. During the commercial break. Fairmont hotels has more than 80 locations worldwide from the beaches of barbados and bermuda to the heart of new york city. With us on set, jennifer foxx, president of Fairmont Hotels and resorts and International President of Parent Company frhi. Jennifer, not i needed to just get up to speed on all the different brands that are under the fairmont umbrella. What are they . I havent been to a rappels. Havent been to one rote. Thats your ultrahigh end luxury. In asia, right . Absolutely. Fhi specializes in the luxury upscale segment and weve got three greats brand, our super luxury brand, then the fairmont and the swiss hotel brands which are our Luxury Brands. So we really specialize in that high end Luxury Travel. Which includes, i guess, its services is a very top of the list of all these things, right . Service where you cant even youre not even expecting, butlers and things like that . Absolutely. Absolutely. Many of our hotels we have butlers, particularly the savoy in london which is renowned for its butler service. But we specialize in highend travel experience for that Luxury Traveler that wants Something Different and unique and is willing to pay for that experience. So we really do specialize in the high end. And are you in an expansion phase now, or a phase where you redo all your hotels . Where are you right now . What makes sense given the future that you see in the world . Now is the time to be in the Luxury Travel business. Consumers now, theyre really willing to pay for luxury. Theres been pent up demand for people to travel to these unique destinations. So were very much in a growth phase as a company. Were currently at 110 hotels around the world today, going in the next five years to about 170. So weve got about 60 hotels under various stages of development all around the world. So very much in a growth phase looking for destinations that really appeal to the Luxury Traveler. So that we can satisfy their travel needs wherever they go in the world. When we have more midscale or mid to upper scale people that run these hotels we talk about occupancy, and the rebound from 2008, and 2009. Take really long to ask this question, as we picture do you even are those metrics that you follow with rev down at one point, was occupancy down and now are you full again . Oh, yeah. Its come back all the way . Are we at a ten out of ten . No absolutely. Certainly during the financial crisis the Hotel Business is very cyclical so we suffered just like any other market suffers. But the great news is theres only good news in the travel business right now. And business has rebounded very, very strongly. Particularly that luxury consumer. Theyve got a high disposable income and they dont want to spend it on jewelry and they dont want to spend it on new cars because theyve got all of that. What they really want to spend it on is unique experience and travel experiences and multigenerational travel experiences so in the luxury set now, weve experienced great growth, great occupancies so the world has really come back. And were getting to enjoy that right now. What were you doing during the financial crisis . Did it stop all construction and expansion or did you expand even though you were suffering in terms of customers . Look, really slowed down. It didnt stop completely. You know, actually, you know, that old saying never waste a good crisis. There was some owners and some developers that continued to develop their product. Some projects went on hold but the great news now is all those projects that went on hold are now have all started up again so weve got 13 Hotels Opening in our system over the next 12 months. The next 15 months. So weve got just, you know, massive growth right now, because, you know, the markets about to get strong again. Raffles first of september. In september, andrew. I think we should do the show from there. Id love that. Well good about that. Feel positive. Move everybody over there . The elections done. I think someone told me to wait for the election to make sure everything is okay. Whats great about istanbul, its now one of the real hot destinations. Europe is always hot for north american travelers. Paris, you know, where weve got raffles, london where weve got the savoy. Americans just love to go to europe. But istanbul is the hot new market. And weve got a swiss hotel already operating there. This fantastic gorgeous raffles opening on the 1st of september, and then early next year were opening a fairmont hotel. So raffles istanbul is going to be one of the hottest new hotels. Was it an existing building or did you go from the ground up . This is a brandnew building. Its a fabulous new building in a center where youve got Performing Arts Center and great restaurants and amazing shops. All the top Luxury Brands are there. So, its really going to be quite unique. And were actually opening with very strong occupancy. Which is great. You keep files on who comes and what they like. Thats what all luxury is doing now, too. If you come back theyll greet you when youre checking in and know you and know your tastes and everything, right . What were finding is one of the big trends in the industry today is personalizations. You know, you want to be treated different and your needs are different than my needs. So what we want to do is identify what those unique needs are. And then satisfy our guests on a really, really personal level. Really making that personal connection with them so that we know them and they know us. And then when they stay with us around the world, you know, we satisfy their needs wherever they stay in our brand. Okay. So youve got all her personal Contact Information . You can send ill send it her way. Email that over to me. Because youve got that when you sat down, it was so youll send that to me . During the commercial break. Done. Thank you. I would be delighted to be your travel adviser any time, anywhere in the world. Thank you for coming in. Its my pleasure. Thank you for having me. When we return, more highlights from the delivering alpha conference. Also, wells fargo chairman and ceo john stumpf is on his way to the set. He is our guest host for the next hour of squawk box. Well be right back. The cadillac summer collection is here. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. water dripping and dont juspipes clanging ncisco. Visit tripadvisor san francisco. soothing sound of a shower with millions of reviews, tripadvisor makes any destination better. But ive managed. I got to be pretty good at managing my symptoms, except that managing my symptoms was all i was doing. When i finally told my doctor, he said my crohns was not under control. He said humira is for adults like me who have tried other medications but still experience the symptoms of moderate to severe crohns disease. 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Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Welcome back to squawk box. 24 hours ago, a shockwave went through the media industry. Time warner has officially rejected an 80 billion formal offer that they received last month from 21st century fox. Rupert murdochs company. Both sides have weighed in. What are the chances Rupert Murdoch gets his hands on time warner . A squawk exclusive. Wells fargo chairman and ceo john stumpf is todays special guest host. The head of the nations largest home lender unveils his outlook for the Housing Market and the economy. And the finale of delivering alpha. Hey, good carl icahn on the set with bill ackman. The second hour of squawk box begins right now. Good morning, and welcome to squawk box on cnbc, im joe kernen along with becky quick and Andrew Ross Sorkin. The futures are down this morning. Im not sure what were down 83 points on the dow. Were finished now with yellen speak. Im not sure what weve finally decided after a couple of days of that. After anything is new or old. The ten year threatening to go under 2. 50. I heard from mark grant this morning saying look out for 2 on the ten year. And i dont know how to i have no idea what that means. We did our pimco friend, they have a new term called the new neutral. That is that the rate without the fed on fed funds globally is going to be very low for years to come according to them. I dont know why. He thinks when the fed actually starts raising rates theyre only going to go to about 2 instead of 4 or 5 . For years and years and years. Lets get to some of our head lines this morning. It is a busy day for economic numbers. At 8 30 eastern time well be getting june Housing Starts and the weekly report on initial jobless claims. Housing starts are expected to post a 1. 4 increase. Jobless claims are seen rising by 6,000 to 310,000. At 10 00 eastern time, the monthly philly fed survey will be out. And dow component United Health beating the streets estimates with its latest earnings. Also raising revenue forecasts for the year. The Health Insurance insurers results were helped by a jump in membership for its Health Care Plans as well as growth in its Pharmacy Services division. Delivering alpha concluded last night with a hug on the stage. Carl icahn and william ackman, they are friends again, hugging it out. Billionaire investors whove been at odds over nutrition and diet considerable herbal ive made up yesterday. Scott the judge wapner presided over the truce. Andrew, amazing that 18 months ago ackman and icahn were yelling at each other on the phone. Right here live on cnbc. Yesterday, they shared the stage at our own delivering alpha conference and talked with carl. Then, theres bill. Bill came out. Theres the hug seen round the world. I asked both of these guys how they were able to put all of the bad blood behind them. Heres what they said. They called an assistant picked un, he wasnt in the office. I said tell carl im calling to forgive him. And it was a true story. And she said oh, you know, i think hell really like that. Okay. So he called me later that afternoon, and we chatted for 45 minutes, and you know, what we talked about, we would be on herbalife in about 30 seconds. I do respect bill. And you know, i was thinking about it before bill called i said, you know, its almost crazy that were at these loggerheads, because ive heard you say Different Things about different companies, and you are one of the few guys that really does speak out. If you dont like the guy there arent too many guys that can do that. I respect what he said here and there. What the hell am i fighting so much for . And then you called and i said hey, great. I called him back. Said its blessed to forgive. You know. Thats how we left it. So ironically, maybe these guys who hat first seemed so different, its not activism old school and activism new school, maybe these guys are sort of from the same school. Their m. O. S are a little bit different, but theyre after the same thing, andrew, becky, joe, at the end of the day. Which is . Trying to get what they want the same money you cant just say money . Of course its money. But, you know, i think as carl said it is more than that. They keep score. They definitely keep score. The money is a score card. Joining the score card. Did you ever see the two of them teaming up . Ive been surprised by i dont think its out of the realm of possibility. Theyre both in fannie and freddie now. Which is interesting. I dont think i wouldnt put it past them. Carl complimented among the valeant structure thats really what started it all. Carl did an interview with david faber, at a conference i think, and carl was complimentary of bill in the Valeant Allergan thing. At a time when everybody else was seemingly really critical of how that whole thing came together. Bill saw that. And reached out. Made the first phone call. And here we were yesterday. Kind of cool. Carls like whoa, you can do that . I can buy that . And right. We have a ceo here. I actually want to ask him what he thinks of that but well get to that wait a minute i build this big position up and this is awesome man. This is woohoo carl would enjoy it wasnt done exactly like that. I dont think he bought it and then went to but did raise a few eyebrows. A lot of eyebrows. Right . Perfectly legal. Will it remain that way . Thats the question. A year from now will it still be . I dont know. I would say probably still will be. I mean its two private equity firms decide to collaborate on acquiring a company and making a bid for a company, is that so different than a Hedge Fund Guy and a you just wonder if all i mean the vote theyre just but i mean all the criticism that came up after it, if thats going to influence any sort of new regulation, or whatever with the s. E. C. On how these things are constructed. All right. Scott, thank you. All right, thanks, guys. Our guest host this morning is at the helm of the nations largest mortgage lender. Also its most valuable bank. John stumpf is the chairman, president and ceo of wells fargo. Great to have you here. Thank you. Nice to be here. Wells fargo has been on a tear for a very long time. You just came out with earnings, and this is a little bit of a crazy point, but for the first time in 17 quarters you didnt actually beat expectations. You came in right in line with expectations. And after a track record of 17 quarters in a row of beats that had some people kind of scratching their heads. Jpmorgan came out, downgraded the stock. I guess the question becomes, is it can you continue to have this kind of growth that youve seen to this point . Yeah, we really had a good quarter. And were proud of the 17 you met expectations. Exactly. And we had a terrific quarter and sometimes, you know, the numbers are what they are. And we thought they were pretty spectacular. If you look through the numbers, you know, growth in loans of 8 or 9 , deposit growth 9 , fee income, both fee and non Net Interest Income growth. So we thought it was a strong quarter. And you know, the economy continues to improve. And where we are in the economy, the real economy, you know, things are going, you know, actually quite well. So were optimistic about the future. I mean the stock check says it all, too. That stock again has been on a run. But if you look at the mortgage revenue it was down 39 . Obviously a lot of that is from weak financing. Correct. Kind of blend through. Maybe everybody in america who wanted to refinance has . 75 of originations in the Second Quarter were purchase money. 25 were refinances. So, you know, thats almost the flip from a year or two ago. So youre right, i think mortgage is a little bit disappointing in this regard. We didnt have as much volume as we had hoped going into the Second Quarter. Still a quarter that was good. 10 billion more than the First Quarter. But theres lots of Different Things going on in housing that i think are holding us back a bit. Like what . Well, later household formation. Theres this view that credits not as available. Which is true. In some cases theres lack of inventory. Other cases, theres borrowers cant qualify student debt has some influence. So, Little Things add up to be big things. Even though housing is up, you know, 8 year over year, probably not as strong a selling season as we would have hoped but were still quite bull, on housing. I always think of wells fargo as being such a great read on whats been happening with housing. I know youve been doing some Different Things with the bank. Should we look at you as a competitor to jpmorgan and others down the road . Well, i think we were a real economy company. So if you think about, you know, people think of us as mortgage and were proud of that business. We love that business. But theres 89 other businesses. Were the largest auto lender. We do more commercial real estate. More energy. More middle market. More small business. So were in lots of those spaces. So, the extent that others are involved, though, sure were going to be there. But think of us as real economy. What can you tell us about the real economy right now . How does it look . I actually think its stronger than people think. You know, obviously were all surprised with the First Quarter gdp. Who knows what Second Quarter will be. I think it will surprise on the upside. So i think things are better. If you take the boom years, socalled boom years from 2000, 2008, and separate and take out of that the excess what happened in housing, the rest of the Economy Today is better than it was then. I mean look at the sectors. Energy is booming. Way better than what it was then. You know, autos, they might sell 17 million new vehicles this year. I mean, thats the best year weve had in six or eight years. Manufacturings coming back. Ags doing pretty well. Commercial real estate. I mean every place i was in atlanta yesterday. You think there was a crane convention there. I mean, you go to almost any city, its cranes everywhere. You just said, you know, credits available to most people now. And we have this weird bifurcated notion, at least just in recent weeks ive started to think this way, that not everybody can get credit but now im hearing that because of the feds low Interest Rate environment that they pushed out the risk curve, pushed a lot of people out there, and that theres a lot of lending similar to what was done before the crisis to businesses that arent that are like b at best. Brated, and that you know the banks have been induced to give people that dont really deserve credit at this point, and business this was a druckenmiller report yesterday. So which is it . Credit is too available to people that dont deserve it . Or its not available to people that want to get it . I think you need to talk about the asset class. So if you look at home lending. Because of still the unknowing of whether theres putback lists. When a loan transfers, the risk transfers, most originators have some credit overlay, and what that means is, fannie, freddie, fha will guarantee loans down to a certain fico credit score. Most banks are saying we wont go down that low because were not sure about that being put back to us. So, i think theres some more work to be done there. So the small guy really still cant get Mortgage Loans but the big guys may be getting loans that they shouldnt be getting that could come back so the next time that theres a big mess, its not going to be in the Housing Market, its going to be in Business Loans . Well, im not sure that Business Loans i wouldnt say that surely its competitive. And where its most competitive is where theres the most available lenders to a situation. If you have a 5 million cni loan, industrial loan of some type, you have large banks, medium sized banks, small banks, nonbanks, everybody can do that. And wants to do that. Surely theres a lot of competition there. We were hoping that that sector would come back, by the way. Now that its coming back people are saying its kind of i dont think its over the edge. You dont . I dont see that. Its not because were at zero i think it has nothing to do with Interest Rates. I mean, if someone wants credit, and needs credit and can use it whether its priced at 1 or 2 or 3 theyre going to get it . Theyre going to get it. And theyre going to want that. But, i dont see us going that far. This is well talk more about whether you think the fed is doing something somewhere that shouldnt have been juiced. I mean no . Im not a big fan of qe. At this late in the game im happy theyre tapering and i think we should have rates normalized to what the economy is. Theres a difference between it not doing any good and it doing some horrific that comes back to haunt us. I think youre more in the benefits are eliminated. You dont know if its going to come back the benefits are limited. And also 10,000 people retire a day in america. They never they need savings. What kind of risks are they taking or others taking to try and get a return. So i think there is some inherent risk in that. Fortunately johns with us for the rest of the hour. Weve got a lot more to talk about. Absolutely. When we return, Digital Security is a big issue for the financial sector. Next the president of mcafee tells us the measures and new innovations being used 20 protect corporations and the consumer. First bullish quarter for private equity firm blackstone just out with its Second Quarter results. Take a look at this. Blackstones results were helped by a jump in performance fees which nearly doubled and Investment Income which was up 81 . Youd like that in one quarter right. The stock jumping in premarket trading after that release. You can see it right there up about 3 in the premarket well talk about that when we return in a moment as well. In india we have 400 Million People who dont have electricity and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. All right. Welcome back, everybody. Morgan stanley just out with its earnings and its continuing this pace of banks that are beating expectations by a long shot. Youve got Morgan Stanley coming in with 94 cents a share versus the 55 the street was looking for. Revenue better than expected 8. 6 billion versus 8. 1 billion. This continues the trend we had seen earlier this week with jpmorgan and others who beat by quite a bit. Take a look at that stock. Probably went up already on some of the other numbers. Its a bad market today in terms of overall. But it is indicated now up 33 cents or so. I dont think theres anything wrong with those. The beat on the fixed income side which we think is such a mess. Lower you know, probably lowered expectations on fixed income. A billion dollars actual versus 9. 63 and on the banking side 1. 4 actual versus 1. 2 estimate. Lets talk about Cyber Attacks because its a topic increasingly disturbing a lot of people. Speaking at delivering alpha yesterday treasury secretary jack lieu called on Business Leaders to take the Security Threat seriously. Look at how much of our life we conduct through our ipad, iphone, smart device or our computer. Its our banking, its our basic utilities, its a lot of our personal information, our health records. There is a very high level of concern that we should all have that cybersecurity, cyber hygiene is taken seriously by all of the providers that we do business with. For more on this issue were joined now by mike deceaser, president of mcafee which is now part of intel security they just renamed it and leading Security Technology provider. Do we not even talk about mcafee anymore . One second real quickly. Can i correct that . Morgan stanley 60 cents versus 55 cents. Because you had to take out the positive dva, and subtract the discreet tax benefit of 31 cents that came with it. So its a nickel beat, not a mile beat. Got it. All this math makes it so much more complicated. Lets talk about security. It scared the heck out of us for a second. How many attacks do you think we dont know about that are legitimately a problem . You know, i think its interesting. When you see the news of a stuxnet or one of the more high profile attacks in most cases those those attackers have been in the organization for an extended period of time. And when you finally realize theyre there that becomes the event that we know about. But theres the technical sophisticate of the Threat Landscape these days has green for sure. How much do you how often are you attacked . I think constantly. In fact, its one of the big risks in the company were investing a ton of money, were working closely within the industry, with government, and we actually have, you know, groups that we hire to actually try to benefit probe its a big area. Jack lew yesterday said banks and others, a lot 6 other Companies Need to do a lot more. But banks in particular i thought were doing so much at the forefront. I think were doing a lot. But you never know if enough is enough. How much does it cost you, jpmorgans laid out like a huge chunk of money. Its millions. I mean many millions. Were hiring people and our boards very involved in this. So this is a big this is a big area. Big area of risk. What is the most susceptible part of the sort of Technology Value chain right now . Either by industry or if youre a ceo watching this program you should actually say to yourself, i got to Pay Attention . I think when you look out there, all corporations are trying to become part of this connected world. And they want to do business online. Your consumers expect to be able to transact. I cant remember the last time i went into the bank, im a big customer and use the bank every day. I just use it online. I think as people come online with that comes, you know, the Security Threats that go along with it. What is the threshold for going public . Meaning, if there was a breach of ten people, ten accounts, do you say anything . Does it have to be a breach of 100,000 accounts to at what point do you do you go public . I unfortunately you go public when the customers know that they have been breached. Because in most cases you look at target most recently. You have to notify your customers their credit card information has been breached. Right. So you know, its again, as we do more and more business online, and your Financial Information is exchanged online freely, it becomes very obvious when you havent been breached. A good answer to that is you err on the early side and on the low side. In other words you want people to know, and you want to be as open and honest as possible. Public policy question for you. Yep. There is a big issue about how much information businesses should be sharing with the government. Yep. And how much information the government should be sharing with business about security, and who should be responsible for all of this, right . We have police that ostensibly police the streets. Businesses basically have to have their own security guards at the moment. Yep. Well i think whats the right answer . There needs to be more here. I mean you look at big corporations like wells fargo that have your own research departments, and that you know when youre being attacked and the rest. Then you have Security Companies like us, and we have our own research departments. Then you move in to washington, d. C. And you see the three letter agencies and theyve got their own research and the ability for us all to come together, there needs to be a better and Stronger Public private partnership here. The ability, if we can share freely what we know about attacks environments we can do a much better job of preventing those attacks from happening. I actually agree with that. The other thing is third parties. Thats a big area of risk. So, you know, third parties have access. We do business with them. Access to the system. People, you know, bad people get in through that avenue so this is a big, you know, school of thought and discussion at work these days. We got to go. Selfless question what kind of phone do you use and email outside of work . I use iphone and apples email. Safe, you think . Theres no platform that is 100 safe. You just need to take precautions on ill give one piece of advice. If theres one thing that you do change the account number on your bank often. Change the account number on your bank . The password the credit card is an example. If they send the same number to you and they change one code the bad guys get very good at how to just keep searching new codes. You want a new number periodically. A new reset periodically. Use the same password for everything in your life but change it on your money. You have to ask for that . You do. You have to ask for that. Thats an additional cost for your business. Okay. Are you talking your account number, your user number . Your credit card numbers. The numbers that are on either on your atm card or the numbers that are on your credit card. Not the actual account number. Oh, okay. That makes sense. Okay. Okay. Thank you. Appreciate it. When we come back we have much more with our guest host today, wells fargo chairman and ceo john stumpf. 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Get a complete vehicle checkup only at your ford dealer. When squawk returns weve got much more with our special guest host wells fargo chief john stumpf. And auto nation trading near an alltime high. See how mike jackson hes been rolling out quarterly results. Were going to do that in the next half hour. Back in a moment. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. Share your summer moments in your mercedesbenz with us. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Welcome back to squawk box, everyone. Earnings central is in full swing this morning. Dow component United Healths earnings and revenue both beating the street. The company also raised its fullyear revenue forecast. Morgan stanley reporting Second Quarter earnings of 60 cents a share. That is a nickel better than had been expected. Revenue also topping consensus. That stock is up by just over 1 . And blackstone shares also getting a boost this morning after the private equity firms results were helped by a jump in performance fees which nearly doubled Investment Income was up by 81 . That stock is up by 2. 7 . Thats amazing. 81 in a quarter. Separately lets talk about the tax system. Under fire from new Jersey Governor Chris Christie yesterday at the delivering alpha conference. We have a wretched tax system in this country, both federally, on the individual and corporate levels, and at the state based level in lots of places, including my own state. Which disincentivized growth, which disincentivized entrepreneurial job creation. And which make us less competitive with the rest of the world. Way have to get around the table and redo this tax system. Lets talk tax reform and more with our guest host john stumpf chairman and ceo of wells fargo the nations largest mortgage lender. You agree with Chris Christie . Well, i think the tax system was need some review. And wells fargos case, 97 of our revenues in the u. S. , 97 of our people are here, and we are one of the nations largest taxpayers. Our tax rate in the Second Quarter was 33. 2 or Something Like that. So we, you know, so were paying a lot of taxes. Im you know, i think theres a lot of debate around this issue. Whatever the case is i want to make sure that we incent companies to do business here. Right. And create jobs here. Thats the end game. You know, the other person that we had at this conference yesterday was jack lew who has been talking about tax invers n inversions. Where do you stand on what we should do about that . Well, again, we should have a tax code that is proamerica and progrowth. So, whatever that means, let the policy people decide that, but it does not help american families, american economies, and so forth, to have jobs leave here, or companies leave here. When you think about his business, though. Hes in a different business. Youre not going youre a u. S. Correct. You cant do any of these things. The problem is because people move over there for cheaper labor. Theres a lot of reasons to have facilities or if theyre satisfying customers in another part of the world. It makes sense to build this stuff over there sometimes. I mean theres a lot. But we shouldnt make it the tax code shouldnt be adding to all the other pressures to move offshore. Joe, thats exactly the case. Thank you, john. Thank you. Talk to address him. Talk to me. Its okay. Because then youre going to be talking to the hand if you talk to him. I think we all agree, dont we all agree that we want america to be successful . Yes. And to grow jobs, and to have a vibrant economy here. And whatever that takes, i think heres the thing realistic to want to be more successful than some of the other countries in the world. Thats the question i have about tax reform and i want tax reform, i want to make sure these Companies Stay here and they want to stay here. Not because theyre being blocked from staying here or anything like that. Though frankly i might to me there is a patriotic thing going on here. Oh, please. That is no, i find it very disturbing that we have companies that are leaving our shores to go abroad, even though frankly theyre not really going abroad, because the ceo is still living here, to me if you have a drug company and youre going to move to the netherlands, as i was saying yesterday, want to move to the netherlands, great, but sell us the drugs in the united states, all the medicare payments that were going to pay, sell us the drugs in the same rate youre going to pay sell them in the netherlands. Apples, oranges and cucumbers all mixed in here. But if you do apples, oranges and cucumbers in the netherlands theres price control over there. Theres no drug innovation over there. You want price controls here . Corporate tax rates over there are very low. Bus guess what . The individual rate over there is much higher than it is here. Thats what druckenmiller said yesterday. Saying that youre not taxing corporations, youre taxing both the playees and the shareholders more of the corporations. All youre doing is freeing up corporations to compete globally by lower being taxes. People will pay as it passes through have those people pay. But the sort of the immediate practical question on the inversion issue is let me say the immediate question on the reform issue is what is the right number. Right . Ultimately thats what this becomes a debate about. And i keep using the issue of mylan, top right 35 . You say you pay 33 . Her effective tax rate being the ceo of that company shes paying 25 . Youre talking Corporate Taxes now. Corporate taxes. People at you know, obamas, his top rate is 28 manufacturing, 25 , hes proposing two different rates you talked about 20 . She thinks that she can get her company down into the teens. And then the question is, is 20 does 20 become the right number . And then what do you do . You wouldnt move a company for three points. I think its more than what the rate is. Its what makes it up . So i mean there are some people who have some benefits, you know, theres acceleration of whatever. Right. And when you Start Talking about rate, thats only one part of the debate. Because, thats why its so hard. This is very difficult to do. Think how many times in this country weve gone through tax reform. And what was it, 86 the last time . These are very hard things. And took a couple of years to get it together from 1986. It didnt happen overnight. Youd need a very engaged president committed to doing this. This is not his priority. Its not going to happen in the next two years. You need true tax reform leadership and thats not something that seems to be the most important. The lobbyists getting involved thats why you need the leadership. Its going to be hard to do. You need both sides and youre going to rip out all the loopholes and everyones going to jump in. Right. Needs to be done, though. I dont disagree if you go lower you have to also get rid of all of the other stuff. And thats where the tough thing is. Right. We all can agree on a rate. Both sides have to agree to do it. You say keep research and development special, keep xyz special. Even manufacturing. And every industry is going to have very compelling arguments why the real estate guys have their own thing. The energy guys the world has somehow done it and theyve figured out that to attract business you cant be the highest, you know, tax rate in we see it, if you want to look at it i think its apples and oranges. I look at the nethserlands and ireland, they have their own issues and own problems. Theyre bringing certain corporations revenue in but theyre cant you look at the states though and realize that states that dont disincentivize businesses have all the businesses coming into those states. No. I would argue that texas longterm is going to run into some Serious Problems because they havent actually created they wont create enough revenue to actually be able to maintain some of the social programs that theyre going to have to promise ultimately. But its a longer story. You may disagree with me on that. We do. We do business in all those states. And ive lived in texas, and now i live in california. And yes, there is a different view. But, both states are doing, you know, texas is doing exceedingly well. Extrooply well. And energy has a big part to do that. Reform and Everything Else its an easier place to do business. Theres no question about that. But we also love california. Okay. Were going to continue our conversation with the ceo of wells forgo in just a little bit. Auto nation ceo mike jackson on the companys quarterly results. Well also ask him about the possibility of a tieup between volkswagen and fiat. Yeeks. And at the top of the hour, media in the spot light. John malones Liberty Global buying a 6 stake in itv. Rupert murdoch pushing to get his hands on time warner. Two great media names join us at the top of the hour. We actually wont have rupert, and john malone. But two other great media names to discuss the recent wave of activity in the sector. Its estimated that 30 of the traffic in a city is caused by people looking for parking. Thats remarkable that so much energy is, is wasted. Streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. We wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then theres a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. The collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. Citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. So the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. So tell me about that at t bestever family pricing thing. Its ten gigs of data to share with unlimited talk and text, and for a family of four, its 160 a month. 160 a month . Sign us up. Um, maybe we sign you up at the store after this. Right, cause this is the. Food court, yeah. Its the food court. At ts bestever family pricing. For instance, a family of four gets 10 gigs of data, with unlimited talk text, for 160 dollars a month. He cadillac summer collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Making some head lines key corp buying tech focus Investment Banking Capital Markets firm Pacific Crest securities terms not disclosed on that deal. The transaction expected to close, though, in the third quarter. Becky . Auto nation the countrys largest dealer reports its second fiscal quarter this morning. Earnings of 83 cents a share ex items. That misses the street by four cents. Revenue came in roughly in line. Mike jackson is the chairman and ceo of autonation. He joins us right now with the results. Mike, good morning. What happened . Well, becky, good morning. Great to see you. What happened, im very happy to report that this Second Quarter is an alltime record for us. 83 cents. Up 14 . And by the way, that is our 15th consecutive quarter of double digit increase. As far as youre referring to what happened with the analysts, we did meet the revenue expectations. As you know, becky, as we discussed were in a major investment period in our brand in digital capabilities. We have not given analysts any visibility as to exactly when the cost of those investments will fall in our reports. So, from time to time were going to have a disconnect with the analysts on a quarterly basis. I would observe over the last four years for the full year weve exceeded analyst expectations. You know, mike, you actually said 100 million. So if they had been paying attention they could have figured it was coming. But you know, why dont you help these guys . Theyre not that good anyway at what they do. You said youre going to do 100 million. And then they dont factor it in. So then you blame them that it would be easier just to tell you give no guidance. Why dont you tell them, were doing some of these investing in digital that we told you about. Why dont you factor that, instead of yelling at them after they say you missed by four. Give them more visibility. First, joe, first, joe, i think they do a very good job. Second, im not yelling at them. You brought up the subject, i didnt. But, i will say the reason why we dont give guidance is when you do, you give up a lot of flexibility as to how you do certain things. Right. And i dont want to be nailed on the cross on the quarterly basis that every decision i make i says well whats that going to do this quarter. But then you in which case you you open yourself up to this kind of thing, charts that make it look like it was below. But the 100 million. What does 100 Million Dollars represent total in pennies per share, mike, just so youre spreading it over what do you think, how many years or quarter . Yeah, oh, thats thats well over a dollar. It is . Earnings per share. See what i mean . Over the next several years. So it is a significant number for the company, but youre just going to see im not going to give you any more insight as to exactly which quarter occurs. Hopefully analysts are watching, theyre seeing that its a dollar over a couple of years so theres going to be times are you sure it makes sense to make these investments what are they actually going to accomplish, mike . Well, were ahead of schedule with the where we thought wed be with the brand launch of autonation. And i think the evidence is in in unifying the company under one brand from coast to coast has worked extremely well. But it cost money. Particularly the Inflection Point was in our digital capabilities. And what we see, what the consumer expects in the future from a company, especially a retailer is one seamless experience. Not an online experience. And an instore experience. One experience. That they can move seamlessly back and forth between their digital efforts and being in the start. Both are still relevant. Today theres a big disconnect as to you lose a lot of what theyre doing in the digital work when they enter the store world and were going to bridge that gap. And we will launch our transactional digital website at the end of this year which will be a big step forward for this company. It is good to see a company that is making investments in the future, too. Mike, we have been talking this morning a lot about auto loans and whats been going on, because john stumpf is our guest host today from wells fargo. They do a lot of auto loans. Hes talked about the healthy side of the business. Youve seen some pretty good numbers in terms of consumers buying, too. First id like to say, good morning, to john. His team at wells fargo does an absolute fantastic job, particularly in the auto auto business. Its our number one banking relationship for financing, our customers. Well, thank you, mike. We appreciate that. And extremely professionally capable. I was listening to john earlier today and we basically have the same view on the u. S. Economy that there are, and i, you know, weve been talking about this for years, there are bright spots that we didnt have back in 08 or anine, whether thats energy, autos, housing, that are giving an underpinning of strength to this economy. Certainly the financing we have available in auto lending today is the best of my entire career a lot of that is because during the great crash everyone saw that the car payment went to number one in the household. There was no major defaults or fault lap around auto lending, so, im not making a moral judgment to pay for your car before you pay for your house. Your childrens education. Its the right thing to do. But from a business point of view, lenders see the attractiveness of the auto business, and its very supportive of todays business. Hey, mike, you know, when we you look at the growth rate of the company, and theres a reason the stock is at 60 now, i dont know, five bucks or something a couple of years ago. But its at 60. But we do count on you, you know, if it goes from 298 to 340 to 385 thats what people are looking for. We figure out what the growth rate for earnings per share is on the company is that 340 for the year can you make up this four cents are you going to i know you wont give any guidance but thats how we assign a multiple to what to sell your stock at. Are you going to continue to grow in the way longterm that because youre at probably 20 times earnings right now. So, im not going to give forward guidance. So ill just make some observations about the past. 15 consecutive quarters of double digit growth. The last four years we have exceeded the analyst guidance when we fall out of favor for whatever reason and the stock is down, we thought it aggressively i will observe i repurchased over 7 billion worth of stock at just over 17 a share over my tenure here, where stock is now trading at 60 so im not losing sleep over from time to time. The stock goes down, thats the days the buying opportunity because they have great confidence in the future. Its a commentary on trying to gauge these things quarter by quarter and ceos that try and do that doesnt make any sense to do it quarter by quarter. Its commentary on the way its done were building a Great Company for the longterm, and those shareholders who have stayed with us for the longterm have done extremely well. Whether its Eddie Lampert or Michael Larson with investing bill gates money. Theyre two pretty smart cookies. Its worked out well for them. We have this Business Model where we make money no matter how difficult the environment is. We have Investment Grade Balance Sheet. The only one in the auto retail space, and when the stock is out of favor we buy it back aggressively if i just look at the Second Quarter. You know, again, we spent over 65 million on share repurchase. So if youre longterm if youre living quarter to quarter maybe were not the company for you. But, again, just look at the past four or five years. I think our track record speaks volumes. Mikes a terrific leader. Autonation is a Great Company. Thank you for those nice comments mike. Were really bullish on autos. I think this will be the best auto year in the next eight or nine years. There may be 17 million vehicles sold this year and autonation is one of the great names in the space. Jackson can tell you to the auto how many were going to sell. Between 16 and 17 isnt it . Well even break down which model. Between 16. 4, 16. 5 for this year, Something Like that. All right. Were the nations largest lender in this space and we love that space. Mike, thank you very, very much. Great seeing you. Well talk to you again soon. Coming up we have more from wells fargo ceo john stumpf on the state of financials in the mortgage industry and at the top of the hour we talk media deals with activate cofounder and former mtv executive michael wolf. Also New York Times columnist jim stewart. Later in the program we have senator bob corker reacting to new russian sanctions, tax inversions and volkswagens job expansion in his home state. Squawk box will be right back. [ male announcer ] the mercedesbenz summer event is here. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. [ tires screech ] but you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end july 31st. Share your summer moments in your mercedesbenz with us. Lets get back to our guest host for some more thoughts. John stumpf is chairman and ceo of wells fargo. Im not going to talk about wells fargo specifically. But im reading, you know, some of these major banks that are, you know, so far apart. I think bank america, what they offered 13 or something, and thats not enough. When is this period over where the federal government becomes part of the solution, really, rather than i dont know, trying for punitive measures to punish a industry because of i dont know, Public Opinion . Well, its hard for me to make. You know you think youre doing a great job. You love them all and regulators are your favorite people, right . I wouldnt say theyre my favorite people. But theyre surely part of our life. And its hard for me to spectate, and i wont, really, on somebody elses activity. What was citigroup . Seven or eight . Whats going to happen with bank america . Theyre at 13 and theyre arguing, right . Theyre arguing. 13 is not enough apparently. And then but where have we decided where does the money oh, yes i did some research. You did . Basically the money just goes back to the treasury. Its not theres no it doesnt go to some doj budget or somebody else. You might say this is patriotic for its almost like taxes. Yeah. This is almost like john might have a different view i dont believe that. You dont believe it . You dont believe shaking down the industry is patriotic . Shake down is not patriotic. You know, i think one thing people should remember not all Mortgage Companies are the same. Did the same things. I mean i think about our company back in the gogo years of 2000 to 2008. There was a time when we were the largest mortgage company, 2002 or three, and someone else said i want to be largest. And im going to do x, y and z and we said were not going to do that. Were not going to do negative am loans. We gave up millions of profits. So you know theres different but some of these companies, john, speaking of patriotism, some people would call it patriotic that they help the federal government when the federal government needed help by bringing these companies with problems under the fold, and rationalizing the operations and helping the government devolve some of these really big problems. Now whos going to do it next time . Whos going to be there next time we step up to the plate i think thats a legitimate issue. So i think needs to be balanced. But again you think they think about this eric holder, you think any of these people think about i dont know what he thinks. I dont even know him. But you know, again, its really hard for me to comment or speculate on whats going on there. I mostly am concerned whats happening in our shop, with our team, and thats how we go forward. So far so good with wells fargo. All right, so in terms of the Federal Reserve, where would you like to be . When woo you tell janet yellen to first raise the fed funds rate . Would you say early 2015 . Well i dont think i would tell her anything but i like the fact that she has talked about when shell be out of the bond buying business. Can you believe that were even acting like this is something that were actually gratified that were finally going to stop this extraordinary thing. It became qe infinity. Remember they first announced a couple of discreet purchases. Then they went to qe infinity and were actually gratified that theyre ending that. Thats where we are in life . Im happy were ending it. Im not a big qe fan. This imagine its six years since the downturn and five years since the recovery started, and 10,000 people retire a day in america at rates that they never thought theyd have. All right. I like to see more normal activity where rates reflect the strength of the economy. And be higher. John, thank you. Thank you very much. Come back soon. Great to have you. We believeg the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Who dont have electricity 400 Million People and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. At every ford dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Rupert murdoch is on the hunt. The fight for content is heating up. We talk winners, losers, and future players with former mtv coo michael wolf. And Pulitzer Prize winning author and New York Times columnist James Stewart. Plus jack lew, pushing congress to crack down on tax inversions. We need to act on this question of inversions and we need to do it now. Senator bob corker responds, and talks jobs in america. The fight against the deadly consequences of diabetes. Squawk makes a ceo call to drugmaker novo nordisk as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide im joe kernen along with becky quick and Andrew Ross Sorkin. Here in studio with buddy Austin Goldsby the economics professor and former chair of economic advisers. My gids know him. They mentioned adam smith to you. They tried. Joe. They tell me you arent getting your vegetables and its been a tough morning. Am i not regular enough . I dont know it seems like youre grumpy. So i brought this apple and id like you to eat that. Theres a worm hole in that apple. Thats nice, thank you. It came from your green room. Did it really . That was for you then. Here. Here. Try it. Is there a label on the other side of that . Its delicious. All right lets tell you about some of the corporate earnings dominating todays top stories. United Health Beating the treat on the top and the bottom line. Revenue rose by 7 . It was boosted by membership increases that stock is up by about 1 . Morgan stanley beating the street as profit more than doubled. As expected revenue from bond trading declined, some positive comments coming from james gorman on the Conference Call and that stock is up 1. 8 . Also shares of blackstone trading higher this morning. Earnings more than doubling after the firm turned in some big gains from sales from its private equity portfolio into the rising stock market. Performance fees nearly doubled. Investment income up by 81 . That stock is up by close to 3 . Lets talk about the deal story of day two now. Though rejected the surprise bid by Rupert Murdoch or rival time warner underscores that a large media company, theyre in the mood for some major consolidations, begging the question, what does the future of media actually look like . Joining us is michael wolf, managing director cofounder of activate, former president and kroo of mtv networks and former yahoo board member also James Stewart columnist at the New York Times and a cnbc contributor. Good morning to both of you. Good morning. Im going to start with michael because he said something to me during the commercial break which surprised me. He said this deal is happening, or this consolization is happening but for a different reason than you think. What would the reason that we are not thinking about . The argument that everyones making is you got to be bigger to deal with the consolidating cable industry. I think that theres another piece of this. Which is actually being bigger to take advantage of all the new outlets into the homes. So, yeah, were having some big cable offers. Comcast is going to be a national operator. We got a whole bunch of other people coming along, verizon, sprint, netflix, and and by the way an international. So theres a huge amount of community that a big company can take advantage of. James, your jim. Jim, james, we could do both. Great to see you. Your sense of the cultural distinction between time warner and fox and how much of a friction and disconnect that is going to create or be . Well, i think we saw with the takeover of dow jones that murdochs style here is to kind of let things going on their own for awhile. Then he moves in and puts his own people in and he puts his own stamp on things. So i think thats probably what we could expect here. By the way, if hes the owner, you know, who could blame him. He wants his people. He wants his philosophy. He wants people he likes doing the business. But i would expect pretty soon everybody at time warner is going to be replaced. Michael, is this a fait accompli . I mean, the disclosure of the talks unto themselves, does this now mean that time warner gets taken over by Rupert Murdoch . Does it mean somebody else comes in . Is it possible in three months from now we could they would have made an offer, decline the offer and that would be the end of it . Its not clear. I mean theres a history of Media Companies making offers for other companies and deals not getting consummated. Remember the comcast deal they made a bid for disney and that never got done. Later on they bought nbc universal. Where we are today. But i think that theres i dont know. I mean its going to see whether time warners going to be in place. And other companies. Do you buy the argument for why theyre saying we think were worth more as a Standalone Company no matter what the dollar on the table is . Is that a strong argument or does that get whittled away at some point . Theres certainly going to be opportunities for Larger Companies in this business. They can create a lot of value on their own. And especially given the muchwatched programming that they have. Sports is very important. And thats what a lot of people want to watch today. But, it is clear that there is a lot of a lot of synergy thats going to happen between these companies. Jim, jump in. Yeah, well, you know, i think strategically this makes total sense for all the reasons that michael has mentioned and probably some others. But i think there are going to be some big regulatory hurdles. These companies are direct competitors in almost every one of their businesses. Competition is going to go down. I dont know that the market share thing is going to fly by the usual antitrust rules. But youre not talking about cementmakers here. Were talking about content creators, news providers, people who shape the intellectual debate. Thats going to be a big issue. And having murdoch control all of that or having any one company control all of that is going to be a huge flashpoint. I dont think regulatory this is going to be easy. I think its an historic parallel which is after the telecom collapse in 2000, theres a huge effort to consolidate, and basically it was a game of musical chairs. They allowed a series of huge mergers, and then the department of justice finally said, whoa, wait a minute, this is too consolidated. We wont let it continue. So well see if they let them all go through. Jim, you were reading about antitrust issues for a very long time. Wed be going from basically going from like six to five. Maybe five to four in certain places in terms of the competition. No . And isnt that different than going from four to three or three to two . Its different. But these are these are two of the biggest just looking at the movie studios these are two of the biggest movie 1250ud yos. I dont think if you just use the strict numerical approach like i said were talking something here thats very culturally sensitive, its very important. All the very visible authors, writers, stars, theyre going to be up in arms about this. This is taking away competitor, its going to make it tougher for them. Thats part of the scale argument for doing the deal. What makes this a really great deal is whats also going to make it a very difficult thing to put together and get by the regulators. Michael explain this in terms of the dominoes that would happen from here, or what this forces others to think about, what does disney do . Where is google . Is jeff bezos and amazon who claim they want to be in the content business, do they matter in this . What does i mean sort of just play it out for us. Well, if you look at all the entertainment companies, the place that theyre earning most of their revenue, and their profits, is coming out of cable programming. And at the same time, theyre getting a huge amount of revenue out of netflix and now out of amazon. So we shouldnt be surprised to see other companies, viacom, discovery, all getting in the mix, either being sold, or buying something else. Disney is now huge. Disney has lots of different revenue streams, including sports. And disney monetizes better than anybody else. Were at a point now where he who monetizes the best owns the rest. Disney is owning all the big film franchises. Just real quick. You know sumner redstone. Yes. When he heard this news what do you think he thought at this point . Probably like whats the next deal i can do . And is there but is there a deal for them to do, either viacom or cbs . There are going to be deals for everybody to do. The question about what happens to cnn jim, when bezos you mentioned him when he bought the Washington Post i remember some columnists, one was for fortune but i read this piece and i just had to laugh but it side, bezos has expressed some libertarian sentiments. Before hes allowed to buy the Washington Post, he needs to declare politically where he stands. Whats that guys name, allen oh, my god. Anyway, how much of what youre saying now, and you just said who i like well, it was the most preposterous it was so sanctimonious and pompous. But how much of this right now is about working under someone perceived to be perhaps too conservative for hollywood . Too conservative . Youre looking at antitrust or are you really looking at a conservative guy having so much clout . Well, i think thats going to be an issue. How can it not be . I mean should it be an issue . I dont think we should have a political litmus test for who can own companies or run companies. But the fact of the matter is, murdoch is a very controversial figure. He is politically conservative and theres the whole hacking thing. The nine out of ten of the other ceos running all these other Media Companies that are rubber stamp liberals in the first place nobody asked them for their credentials. I guess to join the liberal club you got to declare yourself. Thats what youre saying. Look, this is going to end up in washington. Washington is a political culture. The regulatory bodies are influenced by politics. Ee cannot pretend that politics is not going to ultimately play a role. I think sloan wanted to say declare yourself as a liberal or you cant buy Washington Post because were going to keep it going the way its always been run and you better be liberal or youre not going to own this paper. Wait a minute. He does own it. You know murdoch owns a lot. I dont know that all this noise on the political front has really stopped murdoch from getting to do what he wants. But well see. But the journal has not disappointed you has it, jim . No. Its still a pretty good paper. Its a terrific paper and i think there are a lot of people worried that he would destroy it essentially and that hasnt happened. He is an investor. He needs to make money. He knows that quality sells and i think hes done a pretty good job. We need the New York Post to offset the daily news anyway and the New York Times. Right . But this goes to the whole issue that you know you need many outlets. You need many providers of content to have a healthy, vigorous, political culture in this company. Thats why Media Companies are not the same as cement producers. Dont view this as murdoch is conservative. Look, fox business and fox news, theyre more conservative, but lets remember the fox network really pushes the edge in terms of programming. Thank you. There you go. Michael, thank you. Jim, thank you. Sure. Talk to you guys when we come back, our guest host Austan Goolsbee on jobs, the company and much more. Later treasury secretary jack lew calling on lawmakers to stop tax inversion. Senator bob corker is going to join us, also to talk about jobs in his home state thanks to volkswagen. Check out the squawk box market indicator. You can see the dow futures down by about 50 points. S p futures down by just over 9. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. Share your summer moments in your mercedesbenz with us. Offers end july 31st. You wouldnt have it she any other way. Our toes. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. 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The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Breaking news for you. We have been waiting to hear what microsofts plans are under its new ceo. Finally an announcement comes. He is talking about simplifying the operations and hes going to be eliminating about 1800 positions. 18,000 positions over the next year. Of the total, 12,500 professional and factory positions will be eliminated through what theyre calling the synergies and Strategic Alignment of the Nokia Devices and Services Business that they acquired back in april. They say that these layoffs will be mostly complete by december 31st of this year. Fully completed by june 30th of next year as a result the company will be taking some pretax charges of somewhere between 1. 1, to 1. 6 billion dollars over the next four quarters. That includes 750 million to 850 million for severance and related benefit costs and about 350 million to 800 million of asset related charges. Again weve been waiting to see what had happened in recent days he talked about how he does like xbox, how that is there to stay. There had been so many rumors floating through the company. 18,000 positions will be eliminated over the next year and thats coming through what happened over the Nokia Devices andselveses business was acquired. Also, treasury secretary jack lew making head lines at yesterdays delivering alpha conference. Jim cramer asked him about fed chair Janet Yellens comments on valuations. Is it ever right for a federal official to comment on substantially stretched valuations of stocks . Whether they be small cap, or whether they be security, or whether they be social media . Jim i think it is appropriate for us to comment on policies and trends. It is not appropriate for us to comment on individual market movements. So you dont think necessarily that the smaller biotechs and the smaller social media stocks are overvalued or do you think thats just none of your business . I think there are a lot of people in this room who ought to be making sensible judgments about proper evaluations. Our guest host this morning is Austan Goolsbee. That was jim making a reference to what janet yellen had said where she talked about how biotechs and even junk bonds concerned her and were overvalued at that point. What do you think about this . This is a big deal to have a fed official about her saying that . Look when i saw it it looked to me like it was a, not a throwaway line, but just an example. That she was saying, fundamentally, the overall market doesnt seem overheated. There might be a couple of little areas, maybe biotech, maybe this, i do think, because the fed chair said it everybodys just kind of putting their glass what . What did she say . Did she say about biotech . And you know what, given im not going to say anything about all of our parade of guests on cnbc, but, im not convinced that yellen is any less qualified than half the people we have on here. No, youre right. Youre right. She might even be better. She might im saying that shes not less qualified than these people that we have on. Hes trashing the rest of our guests. Oh, okay, you had too many negatives. You got to you know you got to start listening. You didnt understand your presumption was because shes a fed chair im not saying shes any less qualified than any of these other clowns. If youre the fed chair you shouldnt be i stepped in it many times. We lower level than we remember. Than the fed chair that we pointed that out. We pointed that out. Whatever she said, she could say some industry if she say wow, it seems like a lot of people are driving new cars people would be like, what does that mean . Shes saying autos are overvalued. Got in trouble for saying he didnt like broccoli. Right. And it was not a rookie mistake but shell learn maybe sometimes its better not to comment on a lot of Different Things. Its probably true though her basic point was perfectly valid where she was saying what we should look at is the overall. Dont just select one little sector and say oh, that one looks like its overheated or frothy and therefore the whole market is a bubble. There are a lot of people focusing on what shes doing right now. The other comment that, you know, the fed also noted that if things continue to improve at a faster pace than theyve been expecting, they may have to raise rights faster, too. And, that is maybe something that i think hasnt gotten nearly enough attention. Thats probably true, though i dont think that will come to pass. I think the fed has rather established over the last four years that they continually say next year its going to be even better than we think it doesnt come in and happen that way. Because i think theyre counting a little too much on Consumer Spending and housing rebounds. Particularly when you look at the Unemployment Rate. Thats come down faster than they expected. Thats true. Though a lot of it joe will tell you is from dropping out of the labor force, and low labor force participation. It is true, maybe the summary would be if you start to see sustained inflation, the fed will act. Its the number one its in their legal mandate. Its the number one thing in the mind of central bankers. Right now what allows us to be in the environment were in is that theres very little sign of sustained inflation, and so there thats because they think theres big output gap and theyre trying to address it. I like your spit take by the way. Austins going to be with us for the rest of the hour. When we come back, senator bob corker on new sanctions against russia, tax inversions and jobs. And later what can congress do to help those with diabetes afford health care . The ceo of november vo nordisk is here to talk about the Affordable Care act at why he says it isnt so affordable for those with this disease. Squawk box will be right back. Just take a closer look. It works how you want to work. So affordable for those with this disease. Squawk box will be right back. Of your fidelity greenline. Call or come in today for a free oneonone review. Your studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. The thought of your baby girl driving around all by herself was. You just werent ready. But she did pass. cause shes your baby girl. And now youre proud. A bundle of nerves proud. But proud. 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Among the newsmakers nelson peltz the activist investor hinting at a possible proxy fight at pepsi arguing the stock has moved not because of whats gone on at the company but because of suggestion for corporate improvements. I give them no credit, because the stock was supposed to, according to them, earn 5 in 2012. They missed a little bit and they earned 4. 10. Last year they were giving high fives because they got to about 4. 34 in 2013. So, the stock is not moving because of earnings when the company should have been earning 5 two years ago. The stock is moving because people, shareholders, see the wisdom of what were saying. And peltz told us he most definitely still wants to break up that company, splitting it in two. I know, joe, you think that salty snacks go with soda. He comes out on the other side of that debate. I dont understand Investment Banking and synergies and rationalizations and stuff. But, you know, salty snacks, drinks, you eat the salty snack. You drink you know it just seems to me. That one i get. Cokes done very well. Coke has done well. How about when this when smucker bought the peanut butter. You thought that was genius. You know, does it make sense to you if i agreed with your first thing that you dont understand Investment Banking synergies and all that. You cant see when smucker bought jiffy you didnt think that made sense . All i know is the fact that youre watching tv while youre eating salty snacks doesnt mean the tv company should get bought by the pea net people. That may be true. Seems like its a little more complicat complicated. The guys do make a compelling case for pepsi staying together. I even think it may be we had he actually went he owns coke and he went after buffet on the stage yesterday, saying, he said you asked buffet about this buffet said he said you tell us always tell us the conflicts of all the analysts who come on and all the investors, you dont say when he said that that hes the biggest shareholder of coke, of course he didnt. But his argument was of course they want to keep pepsi together because he wants because it worked too well. That was his argument. Thats crazy. Its cute though. Thats good. Must have been a good moment. I was exhausted. I didnt see was it on tv . It was on tv. But you were also on tv with stan druckenmiller. Yeah, profited handsomely from the financial crisis, has one of the best track records over the past three decades. Yesterday he told me that the feds decision to keep rates so low for so long is bothersome. To say his fed policy seems not only unnecessary but fraught with unappreciated risk. When ben bernanke and his colleagues instituted qe1 in 2009 financial conditions, and the real economy, were in a dysfunctional meltdown. The policy was brilliantly conceived, and a no brainer from a risk reward perspective. But the current policy makes no sense from a risk reward perspective. Five years into an economic and Balance Sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. And thats the key thing there, austan, is that if its just diminished returns, but youre not doing any damage, i can see that, do everything you can, congress is gridlocked. You know, if you get help the employment rate at all. But if there are dislocations somewhere, where all of this is going, where people are doing things they shouldnt be doing, i can see his point. I can see his point. And i dont think hes wrong in the direction that as the Unemployment Rate is coming down, and as the economy is getting better, the risks of a very aggressive posture go up. But i dont think thats a secret to the fed. I mean, youve seen the fed governors themselves saying that. Austan, well talk to you in just a minute. Well have senator bob corker when we return. June Housing Starts, boy thats ill tell you, this is a miss. 893,000. Were looking for a one handle. 1 million. Last month, we also had a disappointment on the revision. We lost the one handle. Literally, a whisker over 1 million originally released. And now 985,000. So, even with the lower revision, the 985 compared to 893 is a miss if we look at the initial jobless claims, theyre 302,000. So that is a drop of 3,000 because there was a subtle revision putting it at 305,000. All right, lets look at permits. Permits, boy lets see here. Permits, month over month, 963,000. I had to look twice. Those are two misses. Now granted the permits gives you a maybe better glimpse down the road, so 963,000 is a miss from the 1. We were looking for a million 35,000 and last month actually was the one positive in all this data last month was upgraded and didnt grab the million handle, originally released at 991, only a bit away from a million. Now its a bit over a million. So thats down 4 . Yields, yields are going to crack 250 here. A handful of basis points away from challenging our recent low yields. Many will point to geopolitics. Chinese buying. Id point to all of the above. Back to you, Andrew Ross Sorkin. Rick were also talking about microsoft this morning. They Just Announced job cuts a short time ago, and on the phone to talk about it, 18,000 jobs. What were you expecting. Thats clearly much higher than what we were expecting. We were like most people thinking about 5,000 to 6,000. This is a pretty significant cut, and i think it tells you that sachen is trying to put his own stamp on the company and hes not going to let nokia become a quagmire in terms of dragging down the potential efficiencies in the business and driving some margin expansion. In retrospect does the nokia deal make sense or not . I think it still makes sense in terms of microsofts goal in this platform and productivity strategy that he has put out there. It still makes sense to have as many windows powered devices as possible. But i think what he said in the letter, which i think was telling in retrospect, was the fact that he said responsibly were going to market Windows Phone responsibly. And i think what hes done here is say that we can do that without having to spend, perhaps, as much money as people originally spent. Whats the breakdown this morning in terms of factory jobs versus, you might describe as professional jobs . It looks like its about twothirds coming from the nokia and factory side and about a third coming from, i guess, what you would call core microsoft. So i think thats about what youd have expected but clearly this is on a much sort of grander scale. Do you worry that theres talent that will get lost in all of this . Theres always a chance of that happening. But microsoft ran very that might not be but bloated a good word for it for a long time. Theres been a sense with investors for a long time that this, you know, that this was coming down the pike. And so i think, theres always some risk that you lose some very good people in this kind of transition. But if youre going to move to mobile first doing it now and getting it out of the way at the beginning final question for you we talked earlier this week about the ibm apple app deal. How does that relate to whats going on at microsoft these days . I dont think thats going to have too much of an impact on it. Microsofts already putting office on apple devices. I think the fact that apples in the enterprise sort of coming through the back door of the enterprise microsofts well aware of that kirk whats more interesting, if we put intel over microsoft, the wintel juggernaut is back. It came back when no one thought there was any chance. Suddenly intel is up 50 and microsofts up 50 in the last year. Yeah, well i think with microsoft youve had two things. I think one people have finally recognized that most of the earnings power from microsoft is coming from the corporate businesses. Its not just about the device side and the pc side. So that recognitions been positive. Look at that. And having a change agent at the head of the organization has obviously been important and having people just come back and look at the company dpen. This thing went flat or sideways for ten years so the fact that you now have someone who is driving the business in the direction where the secular trends are going has been really important just in terms of bringing new investors or old investors that have ignored it back to the table. All right. Thank you. Thanks a lot. Tax inversions were a hot issue at the delivering alpha conference yesterday. Also, we had jack lew, secretary lew also sent a letter to dave camp and its a subject of a huge piece oped piece in the journal which just nails it, that depends on where you sit. Where you stand on where you sit. Joining us now is republican senator bob corker from tennessee hes a member of the Senate Banking housing and urban Affairs Committee and Austan Goolsbee is here senator and off camera i had a conversation with austan just saying begging him that if he had any influence there that if the president would just lead on tax reform, that everybody would be helped. If we made this country the place that treated capital best again and stopped disincentivizing Companies Wed get job all the stuff that he wants to happen will happen. Austan told me theres not a man on the planet right now that could do this. That could get tax reform done right now. Its impossible to do. Well i disagree. I love austan. It looked like he had written the oped. Now that hes out of here hes even saner than he was while he was here. He was a great Public Servant its a little bit. I noticed that, too. Theres hope with him. Now look, our nation desperately needs leadership. And its not just leadership at the white house, although that is the most important. Its in congress. Were going through a period of time right now where some of the most you adishsly stupid things are happening. What happened in the house yesterday with the highway bill is just incredible, what probably is going to happen with the veterans bill in the next couple weeks. But this effort to create a hotel, california, if you will, for corporations when all theyre doing is seeking their own rational, theyre taking rational steps what we need to do obviously is lower our corporate rates and have a territory cal system, and we know that that would generate tremendous growth and it just pains me to know that the solutions are so commonsensical and yet somehow we cannot do it. Joe im hoping that maybe, maybe by it the 2016 election americans will be demanding people in office who offer Commonsense Solutions that make our country stronger. Right now, theres so much pandering that takes place. I know. And its just its painful to watch. Austan can give you his reasons. Because hes right about a lot of them. Every single sacred cow that each individual corporation has that they want, whether its r d, whether its this, whether its depreciation, whatever it is, theyre all going to be squawking on the right, the left doesnt want to do it anyway. Yeah. The president would have to lead but that means hed have to make friends with people that he cant stand in congress which hell never do. So, you know, but austan is saying even if he did it wouldnt work. Let austan tell you that its hopeless. Look it should be clear. I am friends, and a big fan of senator corker and i wish there were more people on both sides that had this kind of sensibility. My argument is, the president has tried to lead on this issue. The treasury released a pretty good plan that would get the corporate rate down and you close a lot of deductions. The problem is, its not really loopholes. If you want to get the rate down to 25 , you have to go take some flesh out of depreciation r d, a bunch of things that then the corporate sector itself says wait a minute, thats not the kind of corporate reform we want to do, and if the corporate sector is not for Corporate Tax reform it cant go anywhere. Nobody can lead it if theres nobody following. Yeah. Look heres this is i dont make political statements, heres my hope. I think there is a chance that republicans will win the senate. I said the same thing to the president the other day, who called about another topic. That is if that occurs, austan, then republicans have to be responsible. In other words, republicans would control the house, and the senate, and could not point at democrats. On the other hand, the president would have to then be responsible. And what im hoping is for the good of our nation, that over the course of the next two years, should that occur, the two parties like happened back in the mid 90s, would have to come together and both take ownership over things where sacred cows as you mentioned are taken on. I really feel something is happening in our nation where more and more people do want to see responsible problem solving. I dont think its reached yet that critical moment. But for the good of our nation, and for the good of the people that we represent, for the good of our children, i hope somehow, austan, the 2016 race something happens where we become people who act in the best interest of our nation and not just looking towards the next election. Senator do you take you dont take any umbrage that companies, u. S. Companies who have long been beneficiaries of being based here and often depending on taxpayers to pay them to leave the country . Well they have a fiduciary responsibility to the people that invest in their countries. And states all over our nation have recognized that if they can create an environment that can attract Companies Like we just did in tennessee with volkswagen im not talking about states. Im saying leaving the country. I got it. But the point is these are global companies, and the patriotic thing for us to do is to create a system in this nation that encourages growth here. Agreed. So its difficult for me to say when you have a Global Operation thats operating obviously all over the world, and we, ourselves, our policymakers, have created a situation which incents them to leave. In other words were telling them to leave our nation and go to ireland, or go to some other place, its difficult for me to blame them for doing what is rational relative to the stock holders that they represent. Youre basically making the argument that individuals if they dont believe tax rates are higher they should just write a check that you dont do things that if corporations want to be global competitively, they have to do it they have to do they dont decide im going to be a much less competitive corporation but im going to feel good about bound to what the corporate rate is around the world. Exactly. You go to the islands of i think theres no taxes of any kind there. Heres what say always going to be theres been criticism that the private sector is being hampered by all this stuff. And people say not really. And thats not hurting the recession and businesses are treated fine. Now, its gotten to the point theyre actually leaving and were going to lose tax revenue. Its gotten now to the point where its so important that you finally sit up and take i dont understand why nobody here is taking umbrage of the fact that walgreens because its a riddiiculous point theyre taking our Medicare Part d money. Are you listening to this senator . We pay fair market rates where other countries do not. Its a completely different story. No. To oppose this preventing the inversions is going to run into a thing that makes people really upset. It combines everything they hate about the tax code. Leg lobbying for big corporations. Moving stuff overseas, perceived unpatriotism of i think bizarre things to talk about. I agree as a fiduciary theyre not relevant. But the world is the world. We got to ask the senator about volkswagen. Whats the situation, senator . What do you want to say . Huge very try. We not only were able to attract the 1350 jobs, which were on the table from day one, but after the election certification on april 21st, we in earnest began talks on april 24th, and not only were able to get the 1350 jobs, but 650 more jobs, and the first, the First Research and Development Facility for an auto manufacture in the south. So it was a huge victory. Our governor and the Economic Team he has did a great job. I was, you know, privileged to be able to help see it through. And its a huge win. 2000 jobs directly impacting chattanoogaens and tennesseans and again establishing tennessee as the place of auto manufacturing in our nation. So it was a sweet victory. And the path we took while i know the nation watched and you know it was a little bit controversial, joe there was no other way to get to this place without taking the path that we took. So, very gratified and very happy for those 2,000 families that are going to be so directly affected. Senator before we let you go, russia has fallen off of the sfront pages over the last three weeks or so, weve forgotten some about ukraine but today we hear these new sanctions that are out against russian companies. Yeah. Also hear that russia hacked into the nasdaq at one point and i just wonder do you consider russia a bigger potential foe or china . Well i mean you know first of all on the sanctions, becky, hallelujah. Weve been pushing for this for months. Ive got to give the administration an attaboy when they do something good. This is outstanding. The stock market was up 33 in russia since march. Now were actually doing something thats going to impact them and try to change behavior. But, both are problems, becky, so we have this issue of the middle east, which is a totally different issue. And then we have these two countries, which you know we cannot accept a bitter peace with russia. We cannot allow them to act in the way they are just to continue to do business with them, as many in europe want to do. So, im thankful that these sanctions were put in place. If they dont change their behavior a whole more will be put in place i think that putin has found himself in a really terrible place where he stoked this nationalism within the country and at the same time in doing so has to continue to support the rebels in reern ukraine and as damaging as country. So hopefully hell figure out some way of being sane again. But we need to help him with that with sanctions being put in place if he doesnt change his behavior. All right, senator. Thank you. I hear the music. Austan, we love you. I miss you, senator. I wish you were back here. We need some sanity, hopefully well see you again. Thanks a lot. See you later. Its just liberals want these utopian that well never have its like asking a fish to fly. Or asking a bird to swim. Its not going to happen that way. There are zero percent tax rates so youre saying dont do it because of the rates at the bottom. The fastest intern. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Reward card withu a new volkswagen turturbo. Ged so why are we so obsessed with turbo . Because theres nothing more exhilarating than a powerful ride. And you can get that in places you might not expect. Like the passat. And also in the funtodrive jetta. In fact, volkswagen has sold more turbos than any other brand over the last ten years. That is a lot of turbo. Vo hurry in and you can get a 1,000 turbocharged reward card when you lease a new 2014 passat s for 219 a month. Developers are all about speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. The ibm cloud is the cloud for business. With more than a half a billion people expected to be living with diabetes by 2035, novo nordisk, which is the worlds biggest insulin maker is saying the Affordable Care act isnt actually affordable for people with diabetes. Joining us now to talk about the growing pandemic is lars sorensen, ceo of novo nordisk. In what way . What does the aca do that isnt up to par as far as youre concerned, lars . Well, good morning. What our concern is, that the individuals that have now signed on for the exchanges will be waking up to a situation where they will, in some instances, be faced with deductibles before their insurance kicks in. And that is perhaps going to change their behavior in terms of continuation of their medication. And their willingness to seek medical services, and that is concerning when you have a chronic disease like diabetes. But of course we need more facts. It is early days for aca, and we are just cautioning that there might be some pushback on the ability of the individuals to get the care they need. I wonder how many other chronic diseases that are going to be facing the same situation under the aca, i mean did i know we didnt know what was in it till we were going to pass it, then we were going to read it. I know all that. But did anyone talk about this beforehand . I think we tried to raise tre issue. Many other fapharmaceutical companies, patient organizations did the same. This accounts for all chronic diseases like asthma, like chronic heart disease, all chronic illnesses where individuals need constant medication and monitoring and medical services, but, of course, i mean, were raising a flag, and you could see this in the article also in the Washington Post this morning that its an issue, but we need more facts on the table. And you need to convince people that, i mean, an ounce of prevention is whatever a pound a cure. Will be more expensive. Its a pennywise pound foolish solution because it comes back to haunt you. Absolutely, absolutely. The issue that diabetes is a disease which, in fact, for most parts could be prevented all together, but when it occurs, good treatment, constant monitoring, access to good medical services is important to avoid the late complications which is debilitating for the individual, which is costing the u. S. Health system 10 of the overall costs. Right. We have to decide what is appropriate for the federal government or for the aca to cover and what is affordable and then figure out, you know, i mean, the really necessary stuff should be covered, but there should be other things to figure out a different way because its just not going to work this way. Isnt that the case . The Affordable Care act was criticized by its critics for putting too much emphasis on preventative care, chronic disease management, and that it was too generous. This is the argument on the opposite side, right . Its saying lets invest more in Preventive Care so people dont have to pay out of pocket so they get their Blood Pressure check and stuff like that. Correct, correct. In doing so, we can prevent late complications of diabetes, prevent premature death that occurs with stroke and heart attacks, and so it, to me, makes a lot of sense in trying to think how we could fix the system and the insurance schemes such that it does not prevent individuals from getting the continuous care they need. Appreciate your time today, thank you. Thank you, thanks for having us, thanks. When we come back, we have jim cramer on the earnings of the morning. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Lets get down to the New York Stock Exchange where jim cramer joins us now. You were there a long time yesterday, jim, on a lot of panels including secretary what did we finally decide that did he know about yellens comments . Did you tell him about it . Im not sure he knew where you were going with that at first, do you know . Im not sure myself. He had a face about it, and if he knew someone commented that maybe who shouldnt have commented, but at the same time, you just dont know because im not sure where he was beforehand, and remember, it was not yellen saying it in the senate, but in a Federal Reserve report. Either way, i thought he made a lot of sense. Thats me coming from the stock side saying why were those particular groups picked on . To say, listen, were tough on inflation . If thats the case, the world would say, wait a second, it aint twitter. Right. I finally decided shes a great economist, qualified as the people we have on here, they have. Wrong for five years saying the markets too excepensive. Give it a shot. She gets a pass. She doesnt need to. We grill them. True. I love the yesterday, what hes saying, feds off their game. I want to hear what the fed has to say about that than whether the fed likes the new anticholesterol drug. We came out of yellen into i thought that was just really perfect timing, juxtaposition of everything. Anyway, Morgan Stanley looks good, jim, i think, yeah . Yes. John stump is to banking as gorman is to Investment Banking. Simple models, not a lot of risk. We have to go again, jim. See you in a few minutes. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. I want to thank austin for being here today, great talking to you. Great seeing you guys. Join us here tomorrow and its time for squawk on the street. Good thursday morning. Welcome to squawk on the street, im Carl Quintanilla with jim cramer and david faber back from delivering alpha. The news flow not letting up, job cuts at microsoft, last wave of bank earnings, time warner day 2, covering it all, a spill at the open after three Straight Days of intraday highs. Bond action, 10year back at 2. 5, europe in the red
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