Transcripts For CNBC Squawk On The Street 20160706

Our 10year near record low yields and oil closer to 46 than 47. Our road map begins with netflix under pressure in the premarket after an underperform initiation. Plus as you just heard, being added to comcast settop boxes. Well dig in on the stock down 15 this year. U. S. Oncology company medhivation it is now for sale perhaps to sanofi. The details on a potential deal of 11 billion. Gold hitting its highest level since march of 2014. Upgrading its expectations for the precious metal. Well talk to a Portfolio Manager how hes playing it. Stocks poised to open lower amid more concerns about brexit fallout and slowing Global Growth after three major indices snapped the foursession winning streak and gold at a twoyear high and as we said the pound trying to recover from that fresh 31year low at one point dipping below 128. Mike, youre watching the yields as you call them, which are collectively now larger than the banks. Yields and dividend paying stocks, exactly. If you look at the yield sectors, utility, Consumer Staples and telecom, about 17 of the s p 500 because theyve outperformed by so much. Financials are less than 16 . In a strange way the u. S. Stock market has become a little more bond friendly. In other words when bonds rally, stocks can rally a little bit more and, of course, financials lower bond yield toxic for them. That kind of helps to explain why the big u. S. Stock market has been feeling the effects of these huge macro moves across the world, but, you know, to me its kind of like, you know, theres a hurricane off the coast, its over bermuda, really bad and here all we get is kind of rough surf. Thats whats going on in the u. S. Stock market. What is the last yesterday and now apparently this morning, say about last week . Right . Why are we chipping away at the best week we had of the year. One way of looking at it that immediate decline after the brexit vote and also the violent rebound, were at least initially, about positioning. It was about people leaning one way, having to come back the other way. And really, i think you can look at that chart of the u. S. Stock market and say, well, were consolidating, one of the best weeks weve had this year. Were pulling back, oil is down a little bit and were testing to see if theres real buyers at these levels. Its also been a very wellbehaved stock market, meaning round numbers, it stops. The areas everyone is looking at, 2100 in the s p and then it stops and tries to figure out the next story line. The technicians have had an easy go of it lately. In the equity market is the bond market world wide. Negative rates, people bandy about the statistics, cant prove theyre true but as many as 10 trillion in bonds with a negative yield. I mean think about the entire japanese bond market, and more or less the entire german bond market, what youve got, the bund now in negative, lets call it 0. 19, somewhere in there. Its just stunning. When i speak to people who manage money for a living, whether they run credit funds or equity funds they stop and dont know what to make of it. Obviously you have this entire investment complex around the world built around the you know, meeting some kind of return objective and the math just you cant get there with negative yields anchored this way. So either you adjust your expectations, you save more, which kind of is going against the purposes of these stimulati stimulative Central Bank Policies and thats what the market is trying to figure out, how do you back out of this if you do. Theres concern Monetary Policy has run its course and what do we do if we need a jolt . Where can we go when were dealing with negative rates and a 10year the likes of which weve never seen. The markets are with negative yields in low rates are begging governments for fiscal stimulus. Begging the governments around the world to say, borrow heavily, spend, do Something Else, that you havent quite tried yet. Thats political as opposed to central bank related. Were sort of handicapped for the time being, given the state of our election cycle. Joining us with their outlooks this morning for the markets, william nick kolgs the Senior Business Development Head at cantor and emad is a Portfolio Manager at blackrock. Good morning to you both. Good morning. Uk property funds, italian banks the action . Gold today, everything weve just discussed what is the outlook for the near term . Listen, i mean its clearly enormous amounts of uncertainty and terror risk at this point developing in the developed world, right, whether its the europe Financial Markets, the political transition in britain. Apparent slowdown of Global Growth, downside risk, and the u. S. Election. So theres enormous amounts of instability and vulnerability. In my own sandbox which is emerging markets, intriguingly, there is an oasis of stability at this stage and the significant value in em. Youre getting a complicated situation where volatility and terrorists in the emerging world and how do you trade that. Thats a tough place to be. Goldman today, renewing their call for what theyre calling a sharp drop, 10 or so, even though they maintain their 2100 target for year end, do you see the summer being volatile . Weve seen volatility over the last week and a half so more volatility later in the summer is, you know, should be expected as well. I think the velocity of the snapback rally surprised everyone, so now, perhaps further downside. Well see. The u. S. Has been outperforming. A safe haven. Look at u. S. Performance relative to europe, you know, certainly money is both going into the bond market and the stock market in the u. S. Relative to the rest of the world. You know, i guess one thing that investors are struggling with, they can see the downside risk, a lot of political stuff seems scary, but whats the bull case . You have full valuations, hard to see growth getting away from us on the upside. If you talk to clients what are the bullish ones saying the case for stocks right now . Its sector by sector. You were talking about it. The safe havens are utilities, real estate, consumer products. Youre chasing extended valuations. Theres real divergence in the marketplace. Groups up 20 year to date and other groups that are down 15 to 20 as well. So while the market is, you know, basically flat, youve got huge divergence within the market. So safe havens are a group by group, i think i agree with mohammad el hair yans comments buy Good Companies on dips and one that works over a long period of time as well. In the marketplace theres the market if youre trading indexes where, perhaps, you say more in cash and look to buy on a significant dips down 4 or 5 from here and individual names, perhaps you would lighten up if youre longer term in the extended groups but theres still safe havens and that way for a reason. Amer, china, today everybody is watching the yun and the level at 2010. Does that remain a card in the pockets of the bears . As it should be, right. Listen, sort of stepping backwards in china for a second, what are we seeing . Were seeing economic stability. At levels, but growth deceleration, sharp contraction were worried about seems to have stopped for the time being. Enormous amounts of policy stimulus that seems to have created a bit of a recovery. That seems to have opened the space for them to weaken the currency, without generating capital outflows. This is an interesting junction with that. Were seeing the thing that scared us in august and january but without the impact of capital outflows and financial stress. My worry i dont know how far they can play that game without creating one more time. For the time being we seem to be safe but watching it very carefully and that is clear vulnerability and downside risk. You mentioned the em rally which you believe has legs. What countries will drive that rally to the extent it does exist . In a world in which the instability is enormous elsewhere, you have to go up, you have to be in the high quality countries. The ones where you feel comfortable that the institutional strength, the Balance Sheet strength. In the meantime what is value. Rates, local rates in particular, are high compared to the quarter rates. So think places like indonesia a place weve been interested in and very engaged in, increasingly in india, certainly in mexico despite the issues, brazil is a place going through an interesting transition and becoming increasingly optimistic about, so Higher Quality countries with value in local markets and rates, relative to the quarter is what were playing in. Amer, william, a lot to digest in the near and medium term. Thanks, guys. Appreciate it very much. Thank you. Meanwhile were watching netflix, down in the premarket. Jefferies assumes coverage of the stock with underperform and a price target of 80. The firm sees domestic subgrowth flatter than the current markets expectations and the slowing u. S. Market will pressure the stocks multiple. Initiating coverage here moderating subgrowth, international more challenging in the near term, and the landscape more competitive over the next five plus years. All that first strike advantage not with standing. Here in the states the offering of the overthetop packages not to mention slimmer bundles that eventually will make their way into the marketplace with your loebl cable company, so to speak, conceivably will pressure or at least offer alternatives, whether in amazonled package or hululed package or you name it, one being hulu actually combines a lot of the content companies but those will represent a competitive threat not to mention, of course, those who sell netflix content may be a bit more wary of doing so or more selective. International is the key area for growth anyway. First of all a pretty opportunistic call, stock up from 87 to 98 in a week. Its struggled, trading well below last years highs or the early year highs this year. It seems like one of those stocks that it gave you an opportunity to lighten up on it in this round. That was key, the idea that first mover advantage is something that is waning a little bit over time. I actually think of the thought experime experiment, what if itunes was a separate Startup Company as opposed to apple when it came out. So revolutionary and huge initially but then it became a little bit crowded with other offerings. Maybe youre looking at something similar even if the originals keep netflix in the front of the pack its not necessarily alone. Yeah. Second negative call on netflix this week after kneedams call yesterday. When we come back the latest on a potential deal between sanafy and meadowvation. And blackstone vice chairman buy yon wien what is worrying Portfolio Managers in this market. Take another look at the premarket. Dow had triple digit moves in seven of the last eight sessions. More squawk on the street from post nine in a moment. As a supervisor at pg e, its my job to protect public safety, keeping the power lines clear, while also protecting the environment. The Natural World is a beautiful thing, the work that we do helps us protect it. Public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. We want to keep the power on for our customers. We want to keep our community safe. This is our community, this is where we live. We need to make sure that we have a beautiful place for our children to live. Together, were building a better california. After the close yesterday, Oncology Company medivation essentially putting itself up for sale after rejecting a raised offer from sanofi which, of course, has been seeking to acquire the company and had been soliciting written consent throughout the board. Thats no longer the case. While 58 was rejected by the company that also included by the way a 3 contingent value or something theyre saying is worth 3, probably worth a lot less than that. Medivation did go on to say and sign a nondisclosure agreement with not just sanofi but with two other potential suitors those according to people familiar with the situation are pfizer and celgene. Setting up it would seem at least the possibility of an auction of the company with three potential bidders. Well see. We simply dont know the level of interest of pfizer or celgene on occasion, of course, you will see other Companies Sign to take a look and get a better understanding of the companys business. Pfizer no stranger to trying to take a look at and making a move on other companies that were focused on oncology as is the case at medivation. Its key drug for Prostate Cancer doing about 2. 2 billion worth of annual sales. The expectation is that will continue to grow. Theyre looking for new indications as well. And they also have something that was at least a beneficiary of phase 3 data last week from a different company, called te sara, you may have seen that stock rocket last week, that same compound is not quite as far along at medivation, but conceivably, given the very positive results seen in phase 3 by tee sar ra for its what they call compound, again an oncology drug for Ovarian Cancer might bode well for the future here. Well see what actually happens. Sanofi for its part did end up bidding against itself but at least to the end of getting medivation as weve said for so long here, to face up to the music and put itself up for sale. Whats interesting in terms of how this sale process might go, is medivation stock traded briefly around 70 early last year. In the huge biotech rally as it was finishing up in the spring of last year. I guess the question is, does that serve as some kind of magnet for potential offers or at least for medivations point of view. Thats right. They would certainly and many of their holders would love to see something that starts with a 7. That, perhaps, may be somewhat unlikely again. It comes down to whether there is a full auction here, whether you really do get bids from the likes of pfizer and celgene. We know sanofi wants to own this company. What i cant share is, at least a great deal of insight on, how badly pfizer or celgene really are looking at this. Celgene bought recep toes not long ago a 7 billion price tag. They dont have as much cash on hand as does pfizer, which has been fairly aggressive. Well see how this plays out. Lets call it by labor day, perhaps, we may get something in terms of a result here from medivation and sanofi as i said has agreed to a standstill. Theyve stopped trying to get written consents to solicit written consents and sit for six months. In the offhand chance that company rejects at a certain price and doesnt sell itself, they could choose to come back, weve had a pace of m a. This has been going on for some time. The others out there, mondelez hershey, dont have a lot to offer on either one this morning or other outstanding situations. Big Stable Companies looking to do something with the cash earning zero. Right. When we come back art cashin from what to expect from todays Market Action and some of the these Research Calls on airlines, news on tesla, and what youll pay for a 30year mort again this week in a moment. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Just about eight minutes to the opening bell. Art cashin, director of floor operations from ubs who joins us at post nine. Heck of a lot of news for a week in july. It certainly is. Whats at the top of your radar . All of the fireworks didnt stop on july 4th apparently. So weve got a lot of things going. First of all i think the viewers want to take a careful look at oil. Gossip around has been that the China Strategic Petroleum reserve may have topped out in late june. If thats the case, that could be a substantial difference in demand. Its roo rumored they were putting hundreds of thousands of barrels away every day, so if you continue to see pressure on oil that could be a good part of it. Obviously, the geopolitics in europe are important. Ramsey has a problem with the italian banks later in the year he will have his own referendum on rearranging the government. So if mom and pop over there get into a little bit of a problem hes going to have a problem. The interpretation or reinterpretation of what mr. Comey meant to do with the press conference yesterday. It was highly unusual. Do you think the market was focused on that in terms of implications for the election or just sort of a general feel about how things will play out for the summer or just a water cooler thing . I think the market was not obsessed with it, but you could see the reaction. As he opened the press conference and began running down the negatives, the market began to sell off. And then when he said no indictment, they came back. I dont think that means that theyre rooting for hillary, as much as they didnt want to see potential chaos. Yeah. Burst upon the scene with the uncertainty thats there. But i do think there may be more there than meets the eye. Many traders think that, you know, the rumors had been that they would investigate, Justice Department would not indict, and then disgruntled fbi agents would begin to leak bits of the negatives. Here he calls a press conference and gets all the negatives out, in the first 15 minutes. Well see how they feel about mr. Comey as things go on. Yeah. Meanwhile, these fed minutes this afternoon, nonevent or is there any chance we know where you stand on the cycle, but is there any chance they keep the idea alive . If fisher has any opportunity he will try to. But i think what you want to look and see how much reference there was to brexit because for all the, you know, looks like as passing fad, it looks like the bank of england is going to possibly cut rates twice again and maybe come in with a round of qe. I dont see theres any possibility, as ive been saying, for the fed to do anything. Art, one reason we love to talk to you, youve been doing this a long time and you have an incredible memory and so i would ask, in your extensive experience, have you ever seen a fixed income world like the one were in where, 10 trillion in bonds is negative rates and were at 1. 3 on our own treasury. Our mutual friend Rick Santelli pointed out in sydney homers book the 5,000 year history of Interest Rates you dont really mention negative rates. They only used to come up in switzerland when they were trying to get people not to give them money because they were having a problem. And now, theyre all over the place and they are disruptive. The only youve only seen the parallel opposite of this. Back in the 80s, when rates were going through the sky rather than the other way. But it was disruptive then and this is disruptive now. In both cases in some sense, rates, lower than inflation, right . Absolutely. In some cases. That will remain the case. I dont think once you get velocity and money we can worry about inflation. Its not there. People are terrified and pick up the helicopter money and they put it in the garage. September 1981, 10year at 15. 8. You remember that. Sure do. Art cashin here at post nine. Well get the opening bell in four minutes. Dont go away. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell in 40 seconds as we wait for ism services at the top of the hour, fed minutes this afternoon, but everybody is paying attention to the low yields on the 10year. Gold now the highest since march of 2014. Ubs says its on the cusp of a new bull run, 1400 near term. Record low treasury yields and gold pushing higher. Thats going back to 2011 and 12. That was the dynamic then if you remember. The sovereign debt crisis. Kind of a rerun in performance. Theres the opening bell and look at the s p at the bottom of our screen. At the big board, gold royalties a canadian Precious Metals Mining Company celebrating its first day of trading. The mission continues, a nonprofit helping veterans adjusting life through community work. Wba on the docket. 1. 18 beats by 4 cents, revenue a little shy but raise the bottom end of their fiscal 16 eps forecast. Analysts apparently didnt ask about it. Nothing much on ta front. It really seemed to be really a medicare prescription type story. If you looked at the front of the house so to speak, the real consumer part of walgreens, comps were up just fractionally, 0. 1 . Sort of remains a struggle outside of the pharmacy, but, you know, this is kind of slow growth, somewhat global story i think its pretty much intact with that. The rite aid deal to complete and run by a very aggressive italian gentleman, mr. Stefano pa seen no. No real road blocks ahead for the rite aid deal for regulators. See how that goes. The large move they made over the last year at this point for walgreens. Stock down about 1 in line i guess. We have s p only down right now by 0. 4 . Yeah. Airlines getting hammered today by credit suisse. They take aal from an outperform to an underperform. They take uals target from 64 to 42. She calls cash flow at american abysmal. Right. And fuel costs going in the wrong direction. I think tactically if you looked at this call it with you a little bit of it was a little bit of taking care of a stale price target. There wasupgrade . January of american. The market has been hurt on these. A rough story for the big airlines and part of this whole paradox with consumers seeming like in good shape but the consumer leverage stocks have been poor, autos, airlines, retailers. Apple, of course, continues to make news. Citi cut their estimates yesterday, citing in part brexit concerns and macro uncertainty, but also today, they will be doing away with the 16 gig entrylevel storage. If you buy the new iphone you will start at 32 and then you can upgrade from there. People saying thats good news for qrvo. Consumers have a lot more to store on their phones. They do. Wasnt the standard take that it was kind of a, you know, kind of a joke to have that entrylevel phone when you kind of practically speaking needed something more. But it seems to me, too, i mean just expectations being curtailed all around for whats going to be as part of the new iphone launch, and by the way, by this point in the iphone 6 cycle you knew what was going to be in that phone. Its not a lot of mystery anymore. Twitter has an interesting morning. Not only did they add a new board member, brett taylor the former cto of facebook but as of this morning, you can live stream wimbledon on twitter. You actually see a video product of the tennis match on your left and then streaming tweets on your right. Lot of discussion about it being the new chapter in the evolution of twitter which things they hope to do with the nfl come fall. Yeah. Whats the arrangement . In other words, in terms of the rights . Espn is all over the map. Yeah. Got it. To be able to fire up twitter and watch a live sporting event is something weve not seen yet. It goes to the earlier conversation about netflix or those who would consider eventually cutting the cords. Sports is so much an important part of that. But if you have the opportunity to have your tv on the wall in some way be able to get that sporting event, they love their bells here. Its as though people have never rung a bell before. Its like anchoring from a zoo, a nice zoo. Sometimes the calls from the traders themselves are yes. Juniper in the red. Deutsch cuts it to a hold. Profit margins they say the routing business to come under pressure. Certainly some others in that space with a lot of International Exposure will be subject to the same kinds of scrutiny weve gotten lately. I was making a list of the brexitrelated either downgrades or negative comments. Apple, netflix, and there were a couple others, but were starting to see it seep into the sell side commentary. Absolutely. You wonder if its one of those things its a relatively convenient way to say look, our numbers look too high, seems like theres this one added bit of macro uncertainty. To me business spending is the place where maybe its more likely to take hold as opposed to, you know, consumers. And i guess companies very leveraged through the uk, you know, domestic market where it seems theres been a capitol hill. We also continue a chill. The reaction to the banks to what is historic lows in Interest Rates around the globe, not just here where we hit 1. 32 i think at our lowest yield on the 10year treasury, japan is negative at the 20year mark for the first time, japanese rates, if you lend your money to the japanese government for 20 years, you get nothing. And the banks, mike, are taking it on the chin again. Bank of america down 2 and the complex lets call it of the big banks down between 1 and 2 . Thats not a new story. Yeah. But it has not been a good year and many of them off 25 or so for the year. Its also not the market being incredibly pressured and clever. Its kind of clocking the flattening of the yield curve. Every day it gets flatter is a day where the interest spread is less and book values accrues less. Its not a lot of mystery as to why it happens and i guess theres no counterweight of a positive story in terms of how theyre going to grow other parts of the business right now, although huge surge in refi applications for in the Mortgage Business because now we are at near historic lows in mortgage rates. When you have jpms yield, 2. 3 on jpmorgan one would think that might be enough to sustain it. To be fair it is only down 12 this year versus some of the competitors which down a lot more. Thats where they keep it simple investor says jpmorgan is trading at book value at 3. Something percent yield, manage to grow several percent a year i can live with that. Thats your bull case for jpmorgan. A lot of attention this week to Consumer Staples. Look at the green, campbells, smucker, hormel, kroger, tyson, paychecks. If you were writing the old column what would you be saying about these valuations . First of all, im uncomfortable that everyone is saying right now people are overpaying for safety or overpaying for perceived safety which what is those things are. Whats interesting, it seems to me, is that last weeks hersheys bid, i think almost got people catalyzed even more so than they were. Wow, maybe theres even an m a or costcutting story or 3g kraft heinz deal. Im not saying thats going to happen but its interesting people are retrofitting a rationale for why it makes sense to buy these. By the way, on paper it kind of does make sense. If you dont really care about the mark to market of the stock price if we have a rough market and goes down 10 , all you care about is collecting the dividend yield thats probably going to grow over time there are worse things to do with your money, i guess. Those wondering if were going to get news in terms of mondelezs pursuit of hershey, you can see the stock at 110. They rejected the 107 a share bid, half cash, half stock. It may be a few more days but it doesnt appear that mondelez is yet done, but it is interesting the silence at this point thats come from the mondelez camp. Its interesting about this from my perspective trying to really understand the relationship between the board of directors at hershey and the tenperson trust that runs the hershey trust. They have different objectives, of course, in terms of what they do, but that relationship, which has been dysfunctional in the past, could end up being a key here if mondelez does keep trying. Finally, one note on mortgage rates, have you seen the number, the average 30year fixed, 3. 66 is the lowest since may of 2013. Probably come down a bit more as the week goes on. But refis up 21 this week. Diana olick this morning said refis year on year up 113 . So the rush to restructure your housing debt. Do you buy home depot on that . Thats the question. Will people spend the savings on the Interest Payment or not. Youre preeblly refinancing from a relatively low rate. Right. So you wonder if the cash bonanza is what it used to be. Dow down 84. Check in with bob pisani on the floor. And damage, but still comparatively minor, particularly whats going on over in japan and europe. Want to show you some of the japanese automakers again today. The yen strength has been killer here. Nissan up a bit but toyota and honda down. The yen is near 100 to the dollar here. Its rallied 16 this year and the damage to the exporters and im talking about the automakers is rather severe. Look what were doing for honda, toyota and nissan for the year. Honda down 36 , toyota down 32, nissan down 28 . We talk about the european banks. This is the same kind of damage the european banks have been seeing year to date. Speaking of them, another tough day, Deutsche Bank, Deutsche Bank has been cut in half. 50 drop in 2016. It was in the 20s just a while ago. Royal bank of scott lan and ubs to the downside. So people have been asking and trying to figure out the brexit fallout. We can see it already, its obvious a week and a half after. Much tighter financial continues, in the uk and europe and the United States, and weve had a lot of currency adjustments here. Obviously thats going to affect trade and i believe its going to see an impact on the earnings situation which will get under way in a little more than a week here. Since the fallout, since the brexit, minimal fallout in the u. S. With the s p only down 1 , but uk stocks, the ftse 250, down 10 , the british pound has been weaker down 13 , eurozone banks down 22 . Theres very obvious impacts and a flight, of course, to safety with u. S. Treasure prices up about 4 . Your brexit fallout right now. Here in the u. S. , well, very typical day whenever we see europe under pressure, in the last week and a half, we see bank stocks down. Theres your contagion. Tech is down. A lot of impact of technology and sales potential over in europe. Energy is usually down a little bit and then Consumer Staples and utilities tend to outperform and what were seeing once again today. Stop me if youve seen the new high list before. Seems to be a new law that the dow could be down 500 points but clorox has to hit a new 5 week high, up 52week high. Along with the Standard Group of large utilities like southern and duke and the usual gold big cap gold names like new month and four or five of the biggest cap reits like kimco, Simon Property groups sitting near 52week highs. One other question about brexit and i dont have an answer because i think its not clear right now, the impact the Foreign Direct Investment in the United States. The uk is the single largest foreign investor in the United States as of 2014. Still waiting for the 2015 numbers. But half a trillion dollars directly invested in the United States from the uk in 2014. That is 20 of all Foreign Direct Investment holdings. The question im asking is what impact is that going to have, another potential knock on effect. We dont know the answer right now, but i think you can say theres going to be some kind of effect. The dow down 81 points. Back to you. Thanks so much, bob pisani. Rick santelli, celebrating a special day today in chicago. Hey, rick. Good morning, carl. I will tell you, you know, i love talking technicals, people on the floor are into charts. How low will yields go . The problem it isnt only technicals or fundamentals and both might be a small proportion and you get the ideas through the charts. Greater forces at work here. You see a twoday of 10s and they traded down to 1. 31 yield. Were back up a bit. On a closing basis there have been violations of the july 2012 alltime low whisker under 1. 39. 10year and all the fixed income, like double tops and bottoms so we still want to Pay Attention to this. Look at one month charts. Heres the other force i was talking about. Of course look at the bund. 10year bund, minus 18 basis points. But, the most negative instrument on the euro curve is the 3year note. Minus 70 basis points. Now its eased off a couple basis points. French twoyear, minus 61 basis points. The uk 10, its positive. But its under 80, trading 76. Consider david was talking about the japanese curve. It is negative. Out to 15 year. But consider this, the one year, two year, three year, four year, five year all the way out to the nine year, that whole block, is in the minus 30s. Their curve is flat as a pancake and trades by employment. How can you do a good chart on that . Nobody really has a gps on these markets. Except for drawinggy, core rhoda, abe, janet yellen, stan fisher and that isnt the kind of direction we or guidance that we can really use trading. Finally the dollar index. Its been sputtering all Things Considered and how counterintuitive. Rates dropped to historic lows you look at a twoday chart it is making a bit of a comeback. Carl, back to you. All right. Rick santelli in chicago, rick, thanks. Check in with Jackie Deangelis as well at the nymex watching energy go lower. Good morning to you, carl. Thats right. Continuing yesterdays decline in Energy Commodities were seeing oil prices after the 5 bump down a little lower today. So the selling is measured, but we did take out that 46 level that was a key technical level. Traders call it mushy under there. 45. 92 the session low. Supply fears abroad are starting to ease a little bit. Seems like the domestic outages fears about those are easing as well that supply is coming back online and the demand picture right now is bleak and thats the problem when it comes to the oil trade. Now traders will be watching for the fed minutes today and, of course, theyre going to be cautious ahead of the jobs number on friday as well. They will be watching the action in equities as they decide what they want to do with oil too. Remember, the department of energy usually releases its inventory number on wednesday because of the fourth of july holiday, that will be tomorrow at 11 00. Meantime the bright spot in commodities, gold prices more than twoyear high, carl, 1377. 5 was the session high. Back to you. Thanks. When we come back a Portfolio Managers take on the best ways to ride the rally in those gold stocks. Dow is down 85. Were about 15 minutes away from ism services. Dont go away. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. 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I have a lifetime of experience. So i know how important that is. But we mean so much more. We mean how can we help . We mean what can we do . We mean its our turn. To do our part. To serve you, for all youve done to serve us. Welcome back. Gold surging this morning to its highest level in more than two years. Silver on the move, trading near fresh twoyear highs around 20 an ounce. My next guest is betting on gold stocks and says theres more room to run. Vanek precious Portfolio Manager and street strategist for the gold fund joe foster. Joe, good morning. Seems like you run a gold fund and think its always a good time for gold, but right now if gold moves on political instability, questions about other currencies and very low nom my nall Interest Rates i guess pretty much everything is working in golds favor tactically here . Yeah. Theres a lot of financial risk in the system right now, not just brexit. Its the fact that the fed is unable to normalize Interest Rates, the Central Banks radical or unconventional monetary policies, looks like the stock market in the u. S. Is topping out, a lot of financial risk that investors are seeing driving them to gold. I think it can continue. Were calling this the beginning of a new bull market for gold. If its a new bull market for gold we basically had a bear market begins about three years ago, i guess. What is it going to take for gold, if you even think it could get back to those old highs around 1800 an ounce . Well, gold thrives on financial risk. When people look for a story of value, a currency hedge, way to protect their wealth they go to gold. And again, when you look at some of the geopolitical and financial events that were seeing and we look at the monetary and fiscal policies that have been pro mull gaited over the last five, seven years theres a lot of financial risk and i think thats what people are starting to recognize. Even ubs had some bullish comments today about gold, kind of reupping the call for still higher prices although they do acknowledge that on a shortterm basis it seems as if investors are leaning heavily to the bullish side. In other words, maybe its gotten a little bit overlogged in the short term. Is that a concern for you . At some point we will have a correction. We always do. Okay. But weve gone through 1300 a lot faster than we thought we would. Were seeing a lot of activity in the silver market, so this gold market, the Precious Metals market has gone from strength to strength all year and so i think it can continue for the remainder of the year. You know, joe, its easy for investors at home to buy gold directly these days as it has been for years and other vehicles, why buy gold stocks which are, of course, what you do through your funds . Well, theres several reasons. One is gold stocks can give you leverage to gold, so they tend to outperform gold in a positive market. Which is what we have. These Gold Companies have done a tremendous job of turning their business around. Theyre much better managed companies than they were a few years ago. So as just businessic business propositions they look more attractive today than a few years ago. As you evaluate those names whats the most important thing to watch . Cost to production, more complicated than that . Yeah. I mean mining its risky business. Theres a lot that goes into it. You really have to dig into these companies and look first the first stop is to look at their costs, their Balance Sheet, and then, you know, we really dig into the minds and we analyze these companies on a mine by mine basis. The quality of their assets and what their Growth Potential is, what kind of Development Properties theyre working on, all these things go into our stock selection. All right. You dig into the mines. I like that. Thanks very much. Joe foster from vanek. Thank you. The unique sell, chipotle firing at its rivals when squawk on the street continues. Andrea sikon. Medical doctor from cleveland clinic, watson, lets review the Electronic Medical record of the next patient. No problem. Its a pretty huge file. Done. Sorry for the wait. That was quick. As part of our research, i also compared lab results with notes about prior treatments, then cross referenced it with thousands of medical journals. And i get the benefit of much more data, and a lot more time to plan the best treatments. I stay focused 24 7 and never sleep. You sound like a lot of medical students i know. Thank you. I stay focused 24 7 and never sleep. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Chipotle taking aim at rivals in a short film that features two juice stand owners who use new menu items and Price Promotions to attract guests after using processed ingredients the owners decide thats the wrong course to take and team up to create a food stand offering fresh ingredients. The film seems to go after rivals like mcdonalds and yum. The latest attempt by chipotle to move beyond weak sales following that outbreak of e. Coli. Whether or not it can move the stock off of these call it a threeyear low. Yeah. Bet 50 down off its highs. Seemingly not so far. But you have to believe that chipotle feels like what do they have in the way of reinforcing what their brand stands for and the idea that theyre against Big Industrial food i suppose. Yum is not having i wonder if thats thrown into sort of a kroger, hormel universe . It does get in. I think mcdonalds more so. Mcdonalds has been the favorite yield stock there and you have the cover story of a new ceo revival and Everything Else. Those stocks without a doubt they get put in there. They are typically kind of the Consumer Staples area. Interesting. Fast Food Industry sales look a little slower in q2 than they did in q1. Well see when we start getting those earnings. When we come back, blackstones byron wien, dow is down 65 points. Dont go away. I good wednesday morning. Welcome back to squawk on the street. Im carl quintanilla. With sara eisen and david faber. Continued weakness as we move further near the holiday shortened week. Dow down about 70 points. Breaking Economic News and we will gee to Rick Santelli in chicago. Rick . Were looking for our june read on ism nonmanufacturing. The Service Sector, the biggest swath of the u. S. Economy. Looking for 53 and change. Add 3 points. 56. 5. 56. 5. Much stronger than we were expecting. And thats the best read since november of last year which was 56. 6. Considering its employment week, lets go through the Employment Index. The Employment Index moved back above expansion of 50, from 49. 7 to 52. 7. New orders, they got very close, as close as you can get to 60 without actually overtaking it, 59. 9. So that was a nice jump from 54. 2. So weve had some spotty data. The Service Sector seems to be at least based on this measurement doing better. And yields, hovering around 1. 37, 1. 38, about the same place they were in july of 2012 and other than those two places you have to go to the Eisenhower Administration to find lower yields. Sara eisen, back to you. Yep. History making bond moves. Thank you. Despite the better data in services the skittish move continues on wall street. Investors selling stocks the dow down 38 points off the lows but still money pouring into safe haven government bonds sending yields to record lows from the u. S. To germany to japan and the british pound, continues to get pummeled postbrexit. Joining us to discuss the markets on a tuesday is dan, head of north american fx strategy at bmp paraban. Sounds like stocks are a side show compared to whats happening with the strong yen, weaker british pound and weaker chinese ewan. What is the deal to you . Sterling is the biggest mover over the past month and we think its premature to say its moved enough. Big questions for the pound stretching out over the next few years. Uk runs a current account deficit thats been funded by direct investment and the real question mark now is, whether youre going to get direct investment on a pace that will allow the uk to run a current account deficit like that. Sterling needs to weaken to a point where uk assets seem to be cheap or where uk can begin to run less large trade deficit. So weve already seen, what, almost 15 move lower in a matter of sessions. How much lower can the pound go here . Well, we thought 1. 30 was an initial target in the aftermath of the vote. Weve reached that level. As we noted in our publications its premature to say thats the bottom. The market looking for a new equilibrium the bank of england is able to add qe and all those should weigh on the currency. Is thats whats driving the rush into global safe haven bonds, the fact that we are about to enter another wave of central bank easing or Something Else, something darker that is happening with the Global Economy driving it . Well definitely seems as if the market is taking out any possibility of u. S. Tightening and thats pushed u. S. Yields down across the curve and were markets are expecting more easing from other g10 Central Banks. Bank of japan is one to watch. With the yen strengthening the way it has been and Inflation Expectations falling in japan makes sense to look for more boj action if not at the meeting yet at the meeting at the end of this month if not sooner. We would watch for a currency action. Dollar yen has faun repeatedly. Better data in the u. S. May help it bounce a bit but if that doesnt happen, you know, watch out for the ministry of finance to keep risk more twoway in dollar yen. Daniel, sara mentioned stocks seem here. More stock market people look at the u. S. Dollar index as a read for when they should maybe worry about the u. S. Dollar getting too strong and acting as financial tightening globally. The u. S. Dollar index has been range bound. A lot of these moves youre talking about seem to be canceling one another out. Does that mean we dont have to be concerned about the dollar getting too strong . Its true. Because of the way euro structure of balance of payments is set up, the euro a lot of people think it would fall sharply following the uk referendum, it didnt, and thats because europe has the large current account surplus during times of Global Market stress euro investors tend to keep money at home or cautious like investors everywhere else and the euro has this unexpected stability. It doesnt weaken as much as people expect. Thats why that dxy is so stable. Dollar yen as i noted is falling. That also contributes to dxy staying stable and, you know, i think from the u. S. Economy standpoint maybe thats one thing that we should be maybe relieved about or less concerned about, the strong dollar was a real risk to the outlook six or seven months ago and thats really quieted down a bit in terms of being a factor for the u. S. Outlook. Is the Market Action, dan, telling you, telling us, that this is going to be an isolated uk story, that the impact is going to be felt there, or do you see bigger risks lying in europe . The euro has been pretty stable. Yeah. I think right now the price action is telling you that world is World Markets are concerned that the uk result could have broader implications. You see during asia hours overnight when sterling was breaking down, we also saw pressure on Global Equity markets, Global Markets seem to be focused on the uk. I think as we move forward this will be increasingly viewed as a ukspecific issue. Definitely a big question marks for the uk economy and sterling, but maybe less implications for other Financial Markets globally. The euro is a close proxy for sterling but as i noted you have the current account surplus which means even though people will get bearish on the euro after the vote its difficult for the euro to go down in an environment where Global Markets are more cautious. On this yield move were seeing, everyone noting the flatter yield curve which usually predicts a recession. Theres a debate whether that is signaling potential recession in the u. S. Or as mohammad el ereyan argues today a tell of whats happening in japan and in europe and you cant look at it traditionally like you normally would. Well, i think theres no obvious correct answer to the question. People will take different views on what it means. One thing thats clear is the market is not prisds for any real scope for fed tightening in the near term. Normally that would be bad news for the dollar, but with Everything Else going on, overseas, theres sort of offsetting penalties. And we wind up with maybe less net movement in the dollar than you might expect even though theres a fair amount of volatility in the market. Dan, thank you. Dan good to see you, head of north american fx strategy for bnp parabass. Meanwhile in politics fbi director james comey recommending no charges against Hillary Clinton for her handling of classified information on the private elon mu private email servers. John harwood joins us with the latest. Exactly as expected the Republican National committee and Trump Campaign are out today with videos capitalizing on that sharp criticism that fbi director comey had for Hillary Clinton and her handling of classified information yesterday. The videos are different, but they both use a very simple technique. Lay james comeys words next to Hillary Clintons. A 52 email chains have been determined by the owning agency to contain classified information at the time they were sent or received. I did not email any classified material to anyone on my email. 110 emails in 52 email chains have been determined by the owning agency to contain classified information. Now, of course, Hillary Clinton is going to take solace in the fact that james comey did not recommend criminal charges. Shes also going to bask in the support from president obama. He campaigned with her in charlotte yesterday and vouched for her judgment. North carolina, my faith in Hillary Clinton has always been rewarded. I have had a front row seat to her judgment and her toughness and her commitment to diplomacy. Now Hillary Clinton herself is going to try to change the subject today. Shes going to be speaking in Atlantic City and trying to call attention to Donald Trumps Business Practices and the demise of his businesses in Atlantic City but shes got a big problem thats going to continue. Carl . All right. John harwood in washington, thanks very much. Appreciate it. Coming up, takeover target. Medivation saying its opening the door to takeover talks with sanofi. You see the two stocks there. Medivation getting a little bid. Well break down the possibilities next. Plus, later in the hour, byron wien, blackstone Advisory Partners vice chairman, why he says populism may hurt markets. Much more ahead. Stay with us. Live shot of the roosevelt room the president expected to deliver a statement on afghanistan around 10 25 a. M. Eastern time. Joined by the secretary of defense and chairman of joint chiefs. Well bring it to you live. We seem to be getting perhaps close to a large deal in the biotech industry. Medivation, when sanofi came calling for that company at 52. 50 a share i reported it was likely given the weak defenses at medivation. It would eventually be forced to move into socalled auction mode. The company at this point may not want to term it that, but that more or less is what medivation seems to have decided. This after receiving a higher bid from sanofi which if you recall was also soliciting written consents to try to row place the board of directors. The 58 a share bid along with a socalled contingent value worth they say 3 a share was rejected by medivation but it did decide to sign confidentiality agreements, not just with sanofi, but as well sources tell me with pfizer and celgene, all of this designed to see exactly what price it can actually get. Those potential buyers to pay for the company. Key drug being an oncology a Prostate Cancer drug that does about 2. 2 billion or is expected to do as much as 2. 2 billion in annual sales. They do split that by the way in the u. S. With es stel has. But there is also hope that a something called a inhibitor for breast cancer, we wont know Clinical Trials for quite some time, could also present a significant revenue stream many years down the road. As for what the price will be here, its very much unclear. You can see medivation holding in the low 60 range and it moved up to that range last week, actually, on very positive results for another inhibitor from competitor te sair ro. Well see where we get at this point. Sanofi has agreed to stand still for six months. Its dropped its written Consent Solicitation at this point. And whether or not there is real interest from pfizer or celgene, perhaps, will be a key as to what the price ends up being. Analysts kind of all over the map here. Some will say high 50s or low 60s is an appropriate price, others want to go far higher on the promise for extended indication of exstanedy and what they believe will be a vibrant auction. It would appear at the very least we are going to see a deal done at some point perhaps as soon as labor day. David, thanks. Meanwhile the british pound as you know hitting its lowest level against the dollar in more than three decades. Global stocks extending their losses as investors continue to talk about the fallout from the brexit vote. Joining us this morning byron wien the vice chairman of blackrocks multiasset investment group. Its good to see you again. Good morning. Yeah, carl, its blackstone, not blackrock. Apologies. I might have read that wrong or it might have been typed wrong. Thank you, byron. I should know that. You went to london in june, amsterd amsterdam, paris, geneva, zurich, i didnt find anyone who was enthusiastic about any asset class. Thats right. Where does that leave us . I think you have a great period of uncertainty and the brexit vote just added to it. And the markets are in turmoil and the only asset that seems to be working right now is gold. Does this does this seem to be something that is systemic . Is this a fundamental shift in the way we think about Asset Classes or what we went through with greece, cypress and other examples . I think people are going to try to figure out what brexit really means. Remember, people are i mean, the European Union is still intact. The uk has not left yet. Britain is still importing tremendous amount of goods from the continent. And they havent even invoked article 50 of the lisbon treaty. For the next two years, its going to be pretty much business as usual. But the market is treating it as if britain is cut off as of now, and thats an overreaction i think. You think actually that the separation could happen a lot sooner than we think, that the eu might want to move this along. Why . Well the only reason the eu would want to move this along is to punish the uk and to prevent other defections from other countries. You elections taking place all over, but happily, the spanish vote on the sunday after the brexit vote, went in favor of the establishment party. So my view is that the turmoil thats being described in the decline ins asset prices is exaggerated. You mentioned one of the only assets thats working is gold, byron. Does that mean youre not a buyer of swiss government bonds or German Government bonds with negative returns . Im not i dont believe in negative Interest Rates. I believe that the borrower should be paying the lender for the capital thats being provided . Well you could always go to the high yielding u. S. Treasury. I think the 10year is 133 right now. Right. That looks good compared to almost Everything Else. But i think theres some real bargains in the high yield market. I think mortgages are attractive, leveraged loans are attractive. You have to go into the riskier end of the credit markets in order to find value, but there is value there. You know, byron, you mentioned that every investor around the world wants to know how to get the doubledigit returns, even most high yield Corporate Bonds dont get you there in terms of coupon for double digit returns. Is it something that investment professionals will have to abandon this idea that you can achieve that without taking on a lot of leverage or additional risk . Well, as i said in my essay, i mean there are two points i made. One, i think that most institutions of sovereign wealth funds are looking for very high singledigit returns, if not 10 , something close to it, and i think thats too optimistic. I think that the returns are going to be closer to 5 than 10 . And thats what the target should be focused on. But you can still get doubledigit returns in real estate and private equity. Two key areas that blackstone operates in, if im not mistaken. Yeah, yeah. I guess i have to throw in the caveat im talking my own book here. Thats all right, byron. Im wondering, though, generally you dont seem particularly positive. I mean what if there were another recession, you mentioned you dont believe in negative Interest Rates but it would seem that Central Banks may be out of bullets to do much with Monetary Policy if the World Economy were to falter. What happens . I think we dont have ive looked in the toolbox. The recession toolbox. Whats in there . Theres usually only two tools, monetary and fiscal policy. Weve already gone about as far as we can go with Monetary Policy. On fiscal policy, i doubt with conservative governments in europe and the republican congress, were going to get very far in the u. S. So we dont have the tools to deal with the recession. If we get into one. And so the best policy is to try to prevent one from occurring. On the other hand, the signs that usually appear before recession arent there. We dont have an inverted yield curve, we dont have a lofty price earnings ratios, we dont have heavy inventory overhangs so i dont think a recession is close, but i think weve got to do everything we can do to avoid one because we dont have the tools to get ourselves out of it. Ordinarily you would have fiscal spending an the feds would lower Interest Rates but with Interest Rates already near zero theres not a lot the fed could do. Finally, byron, i wonder if the rise of populism this year is something you flagged in your surprises, if you have been surprised by it and if you think its efemoral even over the medium or long term . I think its here to stay. I think people are dissatisfied with what the government has been able to accomplish. Most people, i would say, that maybe the top 20 of the population, feels that theyre gaining from the economy. The middle 60 feel theyre holding their own. The bottom 20 feel theyre losing ground. So i think that thats given rise to populist candidates and why donald trump is the republican nominee and thats why Bernie Sanders did as well as he did in the democratic primaries. So i think populism is the reigning philosophy. I think people who are disadvantaged feel the system is rigged against them and they want a candidate thats going to change that. And thats going to be a dominant theme in the president ial elections this fall. Byron, its always good having you back on the show. Thanks again. Thanks for having me. Byron wien of blackstone. Dow down about 99 points. Sara . Were awaiting a statement this hour from president obama on afghanistan. Well bring it to you live as soon as he takes the podium. Well be right back. If in a few moments to the roosevelt room in the white house where the president is expected to deliver a statement on afghanistan. Troop levels appear to be at least one of the things hell discuss. John harwood is here to set that up. John . Carl, were expecting the president to announce a slowdown in the pace of withdrawals he had previously discussed. Remember, the war in afghanistan is our longest war, claimed 2365 american lives. President obama had planned to remove almost all troops by the end of his presidency. The last plan that he had issued called for about 5500. The Associated Press is now reporting that hes going to announce that 8400 troops would remain. It, of course, has been a year of violence in afghanistan. Just a few days ago 33 People Killed in an attack on a convoy of bus containing police cadets. A military review going on of our troop levels and it is expected hes going to conclude that review with the announcement that more troops will stay behind. Of course the president has been criticized for not leaving troops behind in iraq and leading to the rise of isis and the Islamic State throughout the region. That is one thing weighing on the president s mind. And, of course, you cant help but note how remarkable, carl, this is occurring, the president s a statement on a day when a British Commission has come out very strongly criticized the previous british Prime Minister tony blair for his alliance with george w. Bush on the war. Tony blair has been standing out and refuting the attacks on his judgment, but barack obama is somebody who criticized that war from the beginning and on the very day that blair is being criticized for the decision to go to war, this president is going to slow down the removal of troops from afghanistan. Indeed. That report essentially arguing that the administration in the uk went to war with an urgency that wasnt justified. Meanwhile, john, the president will go to this nato summit in poland and i have to assume that troop levels in afghanistan and other countries will be high on the agenda. Thats right. Nato, of course, our partner in the war, has also indicated that it is going to provide extended support for the afghan military. The hope had been to transition to a situation where the Afghan Government could protect its own power and protect its people. That has not proven adequate. The taliban have not submitted to engaging in peace talks ant so these attacks and so these attacks have continued leading to the decision today. Here is the president. Good morning, everybody. More than 14 years ago, after al qaeda attacked our nation on 9 11, the United States went to war in afghanistan against these terrorists and the taliban that harbored them. Over the years, and thanks heroic efforts by our military, our intelligence community, our diplomats, and our Development Professionals we pushed al qaeda out of its camps, helped the Afghan People topple the taliban, and helped them establish a democratic government. We dealt crippling blows to the al qaeda leadership. We delivered justice to osama bin laden. And we trained Afghan Forces to take responsibility for their own security. Given that progress, a year and a half ago, in december of 2014, americas combat mission in afghanistan came to a responsible end. Compared to the 100,000 troops we once had there, today, fewer than 10,000 remain. And compared to their previous mission, helping to lead the fight, our forces are now focussed on two narrow missions, training and advising Afghan Forces and supporting counterterrorist operations against the remnants of al qaeda as well as other terrorist groups, including isil. In short, even as weve maintained a relentless, you know, case against those who are threatening us, we are no longer engaged in a major ground war in afghanistan. But, even these narrow missions, continue to be dangerous. Over the past year and a half, 38 americans, military and civilian, have lost their lives in afghanistan on behalf of our security. And we honor their sacrifice. We stand with their families in their grief and pride. We resolve to carry on the mission for which they gave their last full measure of tee voe devotion. This is not Americas Mission alone. In afghanistan were joined by 41 allies and partners, a coalition that contributes more than 6,000 troops of their own. We have a partner in the Afghan Government in the Afghan People, who support a longterm Strategic Partnership with the United States. And, in fact, afghans continue to step up. For the second year now, Afghan Forces are fully responsible for their own security. Every day, nearly 320,000 Afghan Soldiers and police are serving and fighting. And many are giving their lives to defend their country. To their credit and in the face of a continued taliban insurgency and terrorist networks, Afghan Forces remain in control of all the major population centers, provencal capitals, major transit routes and most district centers. The Afghan Forces have beaten back attacks and pushed the taliban out of some areas. Meanwhile, in another milestone, we recently removed the leader of the taliban acthar mohammad mon mun sour. Nevertheless the security situation in afghanistan remains precarious. Even as they improve Afghan Security forces are still not as strong as they need to be. With our help, theyre still working to improve critical capabilities such as intelligence, logistics, aviation, and command and control. At the same time, the taliban remains a threat. Theyve gained ground in some cases, and continued attacks and suicide bombings, including in kabul, because the taliban deliberately target innocent civilians, more afghan men, women and children are dying. And often overlooked in the global refugee crisis, millions of afghans have fled their homes and many have been fleeing their country. Now, as president and commander in chief, ive made it clear that i will not allow afghanistan to be used as safehaven for Terrorists Attack our nation again and thats why i constantly review our strategy with my National Security team, including our commanders in afghanistan. In all these reviews were guided by the facts, whats happening on the ground, to determine whats working and what needs to be changed. And thats why at times ive made a adjustments, for example, by slowing the draw down of our forces and more recently giving u. S. Forces more flexibility to support Afghan Forces on the ground and in the air. And i strongly believe that it is in our National Security interest, especially after all the blood and treasure weve invested in afghanistan over the years, that we give our afghan partners the very best opportunity to succeed. Upon taking command of collisaln forces this spring general nicholson conducted a row view of the security situation in afghanistan and our military posture. It was good to get a fresh set of eyes. And basds on the recommendation of general nicholson as well as secretary carter and chairman dunford and following extensive consultations with my National Security team as well as congress and the Afghan Government and our international partners, im announcing an additional adjustment to our posture. Instead of going down to 5500 troops by the end of this year, the United States will maintain approximately 8400 troops in afghanistan into next year, through the end of my administration. The narrow missions assigned to our forces will not change. They remain focussed on supporting Afghan Forces and going after terrorists, but maintaining our forces at this specific level, based on our assessment of the security conditions and the strength of Afghan Forces, will allow us to continue to provide tailored support to help Afghan Forces continue to improve. From coalition bases in jalalabad and kandahar we will be able to continue supporting Afghan Forces on the ground and in the air and we continue supporting critical counterterrorism operations. Im reaffirming the enduring commitment of the United States to afghanistan and its people the decision im making today can help our allies and partners align their own commitments as you know, tomorrow i depart for the nato summit in warsaw where ill meet with our Coalition Partners and afghan president ghani and chief executive abdullah. Many of our allies and partners have stepped forward with commitments of troops and funding so that we can keep strengthening Afghan Forces through the end of this decade. The nato summit will be an opportunity for more allies and partners to affirm their contributions and im confident they will, because all of us have a vital interest in the security and interest in afghanistan. My decision today also sends a message to the taliban and all those who have opposed afghanistans progress. You have now been waging war against the Afghan People for many years. Youve been unable to prevail. Afghan Security Forces continue to grow stronger and the commitment of the international community, including the United States to afghanistan and its people, will endure. I will say it again. The only way to end this conflict and to achieve a full draw down of Foreign Forces from afghanistan, is through a lasting political settlement between the Afghan Government and the taliban. Thats the only way. And that is why the United States will continue to strongly support an afghanled reconciliation process and why we call on all countries in the region to end safe havens for militants and terrorists. Finally, todays decision best positions my successor to make future decisions about our presence in afghanistan. In january, the next u. S. President will assume the most solemn responsibility of the commander in chief. The security of the United States and the safety of the american people. The decision im making today ensures that my successor has a Solid Foundation for continued progress in afghanistan, as well as the flexibility to address the threat of terrorism as it evolves. So in closing i want to address directly what i know is on the minds of many americans, especially our troops and their families who have borne a heavy burden for our security. When we first sent our forces into afghanistan 14 years ago, few americans imagined we would be there in any capacity this long. As president , i focused our strategy on training and building up Afghan Forces. It has been continually my belief that it is up to afghans to defend their country. Because we have emphasized training their capabilities, weve been able to end our major ground war there and bring 90 of our troops back home. But even as we work for peace, we have to deal with the realities of the world as it is. We cant forget whats at stake in afghanistan. This is where al qaeda is trying to regroup, this is where isil continues to try to expand its presence. If these terrorists succeed in regaining areas in camps where they can train and plot they will attempt more attacks against us. And we cannot allow that to happen. I will not allow that to happen. This september will mark 15 years since the attacks of 9 11. And once more well pause to remember the lives we lost. Americans and peoples from around the world will stand with their families who still grieve, will stand with survivors who still bear the scars of that day, will thank the First Responders who rush to save others and perhaps most importantly will salute our men and women in uniform, our 9 11 generation, who have served in afghanistan and beyond for our security. Well honor the memory of those who made the ultimate sacrifice, including more than 2200 american patriots who have given their lives in afghanistan. As we do lets never forget the progress their service has made possible. Afghanistan is not a perfect place. It remains one of the poorest countries in the world. It is going it it continue to take time for them to build up military capacity that we sometimes take for granted. And given the enormous challenges they face, the Afghan People will need the partnership of the world led by the United States for many years to come. But with our support, afghanistan is a better place than it once was. Millions of afghan children, boys and girls, are in school, dramatic improvements in Public Health have saved the lives of mothers and children. Afghans have cast their ballots in democratic elections an seen the first democratic transfer of power in their countrys history. The Current National unity government continues to pursue reforms, including record revenues last year to strengthen their country. And over time, helped decrease the need for international support. That government is a Strong Partner with us in combatting terrorism. Thats the progress weve helped make possible. Thats the prog progress our troops have helped make possible and our diplomats and our development personnel. Thats the progress that we can help sustain in partnership with the Afghan People and our Coalition Partners. And so i firmly believe that the decision im announcing today is the right thing to do for afghan, for the United States and for the world. May god bless our troops and all who serve to protect us, may god bless the United States of america. That is the president having to adjust once again to the situation in afghanistan, which he called precarious, arguing that Afghan Security forces are not up to speed. He will leave 8400 troops in afghanistan at the end of his term, thats about 3,000 more than he had planned earlier. Our john harwood has some reaction in washington. John . Carl, he emphasized that the active combat mission was over. This is a point that hes made before. He ipds katsds that our troops were providing various kinds of assistance to afghans who have the principle responsibility for their own defense. He indicated that our nato allies and others are stepping up with us to sustain support, given the deterioration and the security situation, so what he was trying to do is, in effect, explain and justify why he is doing something that the arc of his career before he came to the presidency, would have suggested he would not do. That is to say, leave troops in for the duration of his presidency, leave 8400 for his successor. You know, this has been controversial topic for him from the beginning when he first took office in 2009 at the behest of u. S. Commanders. He surged troops in more than 30,000, but provided a plan at that time that was much krits side for withdraws and the withdraws were supposed to have concluded by the end of his presidency. As you indicated hes adjusted that plan more than once, going from 5500 to 8400 and his successor will determine from there. He didnt take any questions but Hillary Clinton is still on all the front pages this morning and everyone is talking about that. Do you expect anything further from the administration from president obama after he campaigned with her yesterday, it was not mentioned, obviously, but the reaction is coming fast and furious here. It is coming fast and furi s furious. As a matter of fact, speaker ryan just a few minutes ago had a press conference which he sharply criticized Hillary Clinton. Lets take a listen to what the speaker had to say. The dni, clapper, should deny Hillary Clinton access to classified information during this campaign, given how she so recklessly handled classified information. Thats point one. Point two, director comeys presentation shredded the claims that secretary clinton made throughout the year with respect to this issue. So you see there speaker ryan moving to capitalize on james comeys stinging indictment of the administration. Of course without criminal charges. A criticism nevertheless of how she handled classified information. I would expect that we will hear either from the president or through his spokesman that those briefings will in fact take place, that Hillary Clinton will not be denied access to classified information, and the question for republicans is do they have a nominee who can take advantage of this fact. Hillary clinton has made the argument against donald trump that he lacks the judgment to be commander in chief and now he has a comeback in the words of the fbi director this is going to be a back and forth we see throughout the rest of the campaign to november, guys. All right. John, thank you very much for summarizing it for us. John harwood in washington. Dow has lost steam down more than 90 points. To the cme, Rick Santelli has the sapntelli exchange as alway. Thank you. Good morning. I would like to welcome my guest this morning, mark. Thanks for taking the time. My pleasure, rick. Okay. If i look at what 30year returns have been, currently, year to date, 30year, 21. 5 . Thats principle and interest. If i look at a 5year annualized return, 12. 5 . Youre talking about the stock market, right . No. The 30year bond. Isnt that amazing. Yeah. Listen, mark, im looking up there and see 2. 14 on a 30year bond now. What are your thoughts in this era of super low rates, Central Banks gone wild and negative rates to the tune of 12 trillion plus around the globe . Is this still where youre advocating investing or do you have some other alternatives . I got out of bonds several years ago. I thought the top had been reached. But, obviously, i was wrong. And look, you could have done just as well in the stock market if not better. There are al iter natives to the bond market andhave to look at where the puck is headed, not where its at. With the fed engaging in dramatic increases of money supply, they are like you, just looking at the price of money. The supply of money is growing at 8 or 9 if you look at m 2. I think they are working overtime to bring inflation back and gold, gold, which is finally moving, is the best indicator of inflation of future inflation. So we may see a return of inflation here if the gold market continues to rise. So thats what im looking at more than the bond market. You know, you bring up a really good point. Ive been trying to talk about the pricing issues in a bit of a different way, considering brexit, some of the issues with hillarys email, central bankers, this antiestablishment trend, of course, is paired up with more of an isolationist view of the world. Shouldnt the reverse of globalization bring higher pricing pressures, as countries regroup . Yeah. I think thats what could possibly be an outcome and why the gold price is moving higher. The fact that bond prices are extremely low is taking into account that Hillary Clinton is probably going to be our next president , which means more kind of a sluggish economy and not a lot happening. No dramatic changes in government policy. Its more of the same that weve had over the last eight years. Its a little bit unfortunate, i think, for our country because we need to get strong Economic Growth and were just not seeing it if we have a continuation of what we have seen over the last eight years. You know, mark, were out of time. I would like to press your buttons a bit on why youre drawing a conclusion that anything in the marketplace means that Hillary Clinton is going to win. I have no thoughts as to who is going to win, but ill tell you one thing, with all the uncertainty involved in both candidates, i find it hard to believe that the markets could focus on something that i think is just not discernible, but thank you for spending the time today. All right. Sara, back to you. I have a feeling well be talking a lot more about the election and markets, rick. Thank you. Keeping an eye on the selloff, down about a half a percent. Health care is the only positive sector. Much more ahead on squawk on the street. Stay with us. A new ad targeting the fast food competition. Its called a food love story. Its the first ad since a series of noro virus outbreaks this year. Jessica, good morning, thanks for being here. Sure, happy to do it. So wall street is expecting sales to slide 7 this year. Do you think this animated ad will help it all . Well its hard to say. Theres no way that an animated add is going to help reverse sales that dramatic but it will help remind people what they used to love about chipotle and now that time has passed maybe theyre more willing to give it another shot. Theres some criticism that its an attack on the competition for not using fresh ingredients. Your competitor ad week wonders if its an actual cry for help. They didnt go into a mea culpa or apologize or anything like that for the ad. Do you think it could backfire . Well, the reality is that the animated ad was being produced well before the companys food issues came out. So i think it sounds like they stuck with the original plan and the way that theyre marketing it now theres a lot more at stake. But its the same menu and a same technique and stays away and its the main things that people think of when they think of fast food and thats at the core. Thats not going to change. And jessica, chipotle grew to the size its gotten to without being very much of an advertising driven fast food story and in contrast to its competitors its a grass roots thing and became very popular on its own. Did they actually have to be a little bit more aggressive and careful in how they project some kind of an image through advertising . The image is very interesting right now. Obviously they dont do the mainstream advertising that you would think of. They dont do Television Commercials for example and they have a edgy voice particularly on social media and they think that that appeals to millennials and others that are willing to give it another shot. However it does turn off some people as well and recently they had something for nurses and they had a burrito with a stethoscope in the image. That might not be the image people want to see when they think about people getting sick eating at chipotle. Well see the reaction. Thank you for jumping on the phone. Meantime, a Spanish Court sentenced soccer star lionel messi to prison for tax fraud. Lionel messi will likely avoid jail time and pay a 2 million fine but the worlds second highest athlete has taken a big hit to his image. He and his father defrauded spanish tax authorities of more than 4 Million Euros between 2007 and 2008 and the fraud involves Companies Used to hide his income from his image rights. Now messi and his father denied knowledge of the fraud saying they signed tax documents without knowing what they were signing. Prosecutors said even a 10yearold knows you have to pay taxes on your income. Messi will pay a 2 million fine but he can afford it since he was the second highest paid athlete in the world last year with 81 million and hes not likely to go to jail since in spain first time offenders can avoid ste avoid sentences of 2 years. Now his employer says it continues to be at the disposal of messi and his family to support him in defense of his honesty and legal interest. Back to you. Thank you very much. Over now to john fort with a look now at whats coming up next on squawk alley. Good morning. Well take a look at netflix. It has recent downgrades but also recent upgrades. Whats going to determine the direction of the stock Going Forward . Also were all in the flood of data. Whether its data on our phones or messaging services but help might be on the way. Well attack that from a couple of different angles and finally tesla. Should they change the name from auto pilot to Something Else . All that and more coming up on squawk alley. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Welcome into squawk alley on a wednesday morning. The gang is back at post nine. Dow is down 63 points. All the usual suspects today. Even oil closer to 46 than 47. Netflix one of our top stories. Shares falling after getting downgrade to under perform at jeffreys. Longterm growth should be flatter than current expectations. Stocks down about 7 this year after jumping 140 in 2015. They go through sort of the general narrative thats being built which is first strike advantage. Theyve had the sand box to themselves for a long time but over the top is going to make it crowded and more competitive over the next five or so years. One of the core arguments is that the broadband penetration rate that would be necessary for netflix to get to the level where investors wanted to be, it isnt likely to get there by 2020. A lot of policy considerations there. Hillary clinton wants everybody to have broadbay band by 2020