Drinks, cocoa la looks to the new normal. The last day of the trading week, overshadowing tension at the ukraine border. Jcpenney, a reversal, jcp, higher sales, better margins, and shares up nicely in the premarket, david. A story breaking yesterday, cocacola required a stake in monster beverage for 2. 2 million in cash. Under the agreement they have two directors on monsters board and transmit business to monster, and they transfer nonenergy business like hansons natural sodas, peace tea to coke, and theres a new Distribution Agreement between the two. This is what cramer said about the mellow drama last night on mad money. I took a lot of heat a month ago recommends you buy monster because i thought cocacola was acquiring it. Not just on the heels, they downgraded the thing. Tonight, they paid 2. 1 billion for a 16. 6 stake in the company, sending it soaring. My man, jim, on july 10th, had a detailed recommendation in speculating perhaps coke was interested. That speculation has been around for quite some time. Whats interesting is coke chose with the last two deals, cocacola, company easily bought Green Mountain or monster if it wanted to, maybe not in the case of monster, hostile, but took the roots of significant stakes with partnership agreements, already bought more of green excuse me, Green Mountain, and they can go up to 25 here with monster. Interesting way to capture upside without taking all the risk of the accusation for a company with the wherewithal to do it. Remember april 2012 . Late stage discussions with monster . The journ reported it was near a deal, i didnt get the sense it was close, but at the time, monster stock price shot up 20 , and it was only at 65 then. Look at yesterday after market, nearly 900 a share, you wonder should coke bought them outright with the chance at a lower price before the market got to where it is. Obviously, it wants those more ogranic brands. It does not necessarily want the entree into the Energy Market like monster would have provided if you bought the whole thing, but its interesting this is now cokes new normal. Bringing the portfolio to a certain extent, distribution is important, and benefit if, in fact, theres increased sales of the energy drink, seemingly going only one way. I dont know if you use the drinks at all . I would literally have a heart attack. I could not, no. Cocacolas in the money on the deal. Do the math, right . 16. 7 for 2. 15 billion values them under 13 billion. Market cap before open just under 12. Theoretically, the stock should be at 13 billion. With the move today, a market cap will be at 15 or higher billion dollars so either the market is adding more value simply because coke is involved or cocacola is just bought a nice premium for itself. Right. Benefitting there as you see the shares, thats not insignificant given the talk of the company with 403 billion shares outstanding, Something Like that. Providing a Reliability Source of profits. They negotiated and previously, coke distributed half of monsters product, and analyst said it could be that monster was responsible for up to, you know, a quarter, 15 to 20 of cokes operating profit by next year. Yep. This is a very important strategic relationship for coke before the deal happened so making sure that you have that profit captive Going Forward when this speculation around who would eventually buy the company is rampant. Making sure coke has that is important. A lot of cash now at monster. Interesting. People noted they stopped buying back stock in the last quarter, and they noted that because typically they do, and inside r stopped selling as, hey, pay close attention, a deal of some kind is coming. They have cash there including the 2. 1 billion they took in. Unclear what theyll do. Happiest man in the world today. Owner the red bull. Thats whats that Company Worth . We dont know, its private. Think about the valuation how this values his company. Hes got wings today. Thats for sure. Not just from red bull. The dog days of august not proving rough for stocks. We dont care about what happened, but what is likely to happen. Lets bring in the chief economist of Deutsche Bank and, guys, welcome. We like to talk about exciting, sexy, shiny, and pretty. Boring, according to your research, is the new sexy in the stock market. Explain. Look back two years ago, exactly two years ago, we began really a risk on market, and that coincided with not surprisingly, the beginning of the latest round of qe. If you take the standard and poors 500, take the most risky, highest beta stock, they are up more than 70 . Take the safest route, boring stocks, those are up 30 . You have this risk on market for two years now. Thats going to switch now, obviously . Well, it runs in cycles. You dont have risk on, risk off go on forever, and we are coming into the second part of the year here where the fed is now going to wind down qe. Qe was what contributed to the environment, perhaps the end of qe and two years running now, higher valuations, might mean that this is off. Before the segment, i ran a search, 14 s p 500 stocks trade at more than a hundred times trailing earnings. I know thats trailing earnings. How worried is Deutsche Bank about the market . No. Were not worried. Weve been constructive for a long time. In fact, simon was giving us a hard time with s p around 1250. Youre not the first person to tell me that. I had to give him a zing because hes not here to defend himself. The economy is improving, growth should accelerate, feds not raising rates yet, supportive for higher equity multiples, stocks are rich, but its the case in all these markets that the broad market ps look good. Companies like macys and walmart warning about the consumer thats not spending money despite credit, and data like today, the Empire Manufacturing index fall when it was expected to rise, arent there some data points in the market not going in the direction that support that thes thesis . Sure, thats always the case. The growth to 50, highest reading in over a year. Theres pockets of strengths and weaknesses. Even when you have strong economic growth, we just had moderate growth. Its not unusual. So what do we do then, kevin, the last quarter of the year, last couple months of the year, what do you advice clients to do . Were overweight equities, because like joe, the data we see it moving in the right direction, but we are cautious about linking the calls strictly to multiple expansion or say that in english, please. In the long run, its about the economy, the economys growth rate drives stocks. Look at the economy, its doing fine. We expect positive returns, but weve moved the market, i think, moved a little bit ahead of the itself. Multiple at a premium compared to where it has been over ten years. We could see a pull back, volatility to your end. We have to be careful. Great quality companies, excellent Balance Sheets, reasonable price, stick with that, you do fine. . Bias to the u. S. , though . Seems like every time we had volatility, expected the fed, but its come from tensions abroad, and so even while people say growth in europe could come back, well, no, not yesterday. Emerging market, no, tensions in russia and ukraine. Does this make you think just stay in the u. S. . Stay in u. S. Equities for the long haul . Our call has been to focus on the u. S. As we go into a period of time where the fed begins to raise Interest Rates, that would bode well for the u. S. Also, im cautious to say abandon emerging markets all together because they have under performed the last couple years, and look around for value, its one of the few places you can find value. Joe, talking about the rest of the world, i mean, europe may be going into another recession. I dont know, maybe overstating it, but things are not great, japanese down, and contraction in terms of credit in china. Not to mention, 1 Interest Rates in germany, 2 here, and speculation moves in as people look for yield, and thats getting more worrisomisomworris. That give you pause . For sure. Theres a handful of stocks in the s p that are rich, but 317 bond yields is insane. Buicks economy is on track to generate best job growth since 1999, Unemployment Rate 1 half a point above the trailing average. Its moving down. The u. S. Remains an oasis of prosperity, and the overvaluations when the fed pulls back, people say we are doomed. Back in 1994, we fell 9 when we fell 9 back in 1999 when they hiked, and well have a 7 to 9 correction at worst, and stocks will benefit from the inflow from treasuries or bonds in general into stocks. We have had 4 trillion of inflow in the bond market in eight or nine years. Its unbelievele. To be clear, though, you anticipate a fed led pullback at some point of course, yes. Ultimately a buying opportunity. Absolutely. Steve agrees with that . I think its fair. We look at the broad set of Economic Data, and what you have as a problem is you got the fed looking at the Economic Data determines what to do with monetary policy. At the same time, you got the economy that is cueing monetary and how it proceeds. You have circumstance lal logic going on here, and the market will have a tough time figuring it out, and the fed will have a tough time. Interesting 12 months. When fed moves, rates up, financial engineering, companies have to spend more, which is long term bullish, fed pulls back, initially its a scare, that, i think, is bullish for Risk Appetite investor of main street confidence. All right. Thanks, guys, very much appreciate it. Sorry i didnt wear the pink pants. Next time. I like the tie, though. Thank you, i toned it down a bit. Have a great weekend. Jcpenney posting better than expected results. Should you buy into the turn around . The battle for teslas giga factory, pulling out all the stops to land it in his state. We have more squawk on the street live from post nine coming back right after this. A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com 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. July Industrial Production capacity out up four tenths on Industrial Production. Were expecting about that. Last look was doubled from. 2 to. 4, and utilization rates, 7 preponderate 2. This is significant. 79. 21 the highest rate going back to june of 2006, which was the comp with our 79. 1 last month unrevised because the june number is 79. 3. We continue to operate at a very intense rate. These numbers on the production side and the manufacturing side, on the mining side are pretty sol solid. Back to you. Continued a mix bag for data, but for now, thanks, rick. Second Quarter Results beat estimates, and the managing director and Senior Research analyst at Piper Jaffrey gives it a 12 price tag. Good morning. Good morning. In your note today, you called jcpenney a rose among thorns, cash flow positives, margins improving, comp sales up 6 . Anything not to like in yesterdays report . I have to tell you things moving forward on jcpennye, its about the turn around, it looks good, so goes back to school tend to go holiday. Were really encouraged by the double digit increase closing out the quarter and headed into back to school. But how much is due to the fact on a relative basis last years comps were really weak. Its competitors in the space havent posted good numbers so jcpenney by comparison looks strong, but do you feel bullish by the margin crush and Fourth Quarter so important to the company . We do. We believe their floor today is filled with the product their customer wants from them. That was not the case a year ago. Even though it looks a little bit better among a weaker environment in overall comparative sets, the consumers going to vote. Theyll vote for jcpenney. You know sorry we talked about macys getting jcpenney d, a verb we invented an hour ago, because the numbers looked terrible, but how far are they willing to go, or are they going to be smart . Well, so far with Gross Margins up 150 basis points ahead of where the street was for q 2 and indications of the same for q3, they are winning the business with better margin, but, you know, it is hard to ignore facts. At macys, womens and mens apparel did poorly, but we think the market share shift is underway. Totally random note here, reading the ceo of jcpenney had surgery this morning for what he dealt with for 20 years, do you know what thats about . You know, we dont. We do wish mike the best in a speedy recovery. You know, this company still, obviously, dealing with the fallout from the disastrous reign of ron johnson, short it may have been, did an enormous amount of damage, but if he gets back to where they were before that, were not still talking about a great growth story by any means, not as if things were going well before johnson made them worse. Its fair to make that assessment, although keep in mind, they lost 6 billion in revenues in a very short time frame. Our bullish stance, and we are one of the few bulls, were only looking for recovery of about a billion seven out of the six through the end of 2016. Theres a lot of trajectory for upward momentum. In the process, they took on a lot of debt, expensive debt at that, and they are still trying to pay it down. They are finally cash flow positive and expect to be cash flow positive next year, but do you get the sense theyll be able to keep the debt in order and continue to pay it down in a fashion that it should . We do. They were able to rework their revolver not too long ago, and that was favorable for them. We think that overall the Bond Investors are waking up to an improving company, and the investors will follow through. How much, and you may not want to answer because youre physically right next door and probably see them at the local for lawn bowling. How much has to do with targets problems . You know, i really cant speak to target specifically, covered by my colleague, but what i can say is its clear within the Department Store sector, like i mentioned, the womens and mens apparel underperforming at macys, that seems to be spot on overlap competition. That seems to be where the shift is. For you, leaving it there, and you van overweight rating, significant upside from here, and well continue to watch, but for nowing have a great weekend. Thanks, you too. Seven years ago, it was a 60. We remember that. Up next, what is on art cashins mind creeping to the fall . Well find out. 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Tdd 18003452550 open an account and earn 300 commissionfree online trades. Call 18886282419 to learn more. Tdd 18003452550 so you can take charge of your trading. All right. Were six and a half minutes before opening bell, bringing in art cashin, director of floor operations of ubs. Happy friday. Volume came down as you would expect for the second or thinker week of august. Its. Quiet, has it not . Stunningly so. Yesterday, by my records, slowest trading day of the year, wall street journal debates with me saying its the second slowest. I go with you. I thank you, sir. What do we need to know going in the day ending the week thats been quiet in terms of volume, but not without the news or some concerns, clearly, abroad, especially whether its europe yeah, i think it is an exploration day, affecting the opening, and again on the close, and right now, its not going to get in the way of the opening, and we still hear cooling noises from mr. Putin, and so thats probably going to allow us to get the s p out of the resistance bend and possibly above the 1960 level. That would allow technically for a target of trying to hit the old highs again, maybe as early as next week. We had a discussion earlier in the show about whether risk is back on. You had the ten year at 4, and yesterday in the prior week, money trickled back into junk bonds given the chase for yield. Do you see risk from a macro picture back on . Well, i think its lurking in the background, and to extend my ignorance even further because i will not just pick the s p, the yield on the 10year should have support problems around the 2. 36 level, so if we can get below that, then we should be in great shape. Look at also the competition over in europe, the bunds, the very low german yields, they are closer to a recession than we are. Two year went negative yesterday. Two year negative. Pay them to hold your money. It but they are very close or closer than we are to a recession, so rates will stay lower longer. They are closer than we are to deflati deflation, and then lastly, in perhaps most importantly, the ecb said were going to charge you for excess reserves, lend them out. They have nobody to lend them to, so they buy sovereign bonds. Up 3. 5 this week rath