Transcripts For CNBC Squawk On The Street 20160824

Deadly earthquake fallout in central italy. Oil inventory on the way pfr our road map with elon musks need for speed. Tesla announcing new models with a longer range. The epi pen controversy at myland. Details about executive pay there. Today is the oneyear anniversary of the 1,000 point drop in the dow. A look back at what was a dramatic session. Speaking of which, jim, on that day, the vix posted its biggest oneday spike ever even as now a year later its 40 below the 10year average. We remember that day well. There was a lot of disorganization and a lot of fear. There were stocks trading, i remember celgene down 20 bucks. There was no news on celgene. That friday we had gotten james bull yard, an interview on sirius satellite, making a case for a rate hike while making a case for china. I think what an opportunity the market down 1,000 and rallied to be down 100 and finished down 588. Turned out to be the max numb fear moment. China did grow at 6 , not 7. The fed didnt raise. Oil at 40 turned out not to be as scary and remember could you have only bought that opening you would be sitting pretty right now. We hear from viewers who say they did and are proud of it. We were telling people, look this makes no sense. I had been on the flash crash with my friend erin burnett and it was like Procter Gamble down 30. Thats ridiculous. A year later, how ten new was, stable is the recovery that the fed largely has built . Yes. Thats true. I would tell you that at the time and its always been exogenous whether the german, italian and french banks and february decline, whether brexit or then in this particular instance it was china and the communist party put in some i call them the communist because they call themselves the communist. They put in some structures that managed to executing egregious short sellers if they could find them and a lot of people laughed and said theres no way a government is bigger than a market. They met their match. The market met its match with the Totalitarian Society where every aspect and apparatus of the government, thank you, michael, from jpmorgan, putting this together for me, there isnt anything that the communist party doesnt rule and they mandated that the decline stop and it changed the world. Yeah. Interesting. On that note today, the pboc doing reverse repos, some are trying to read into that, maybe theyre more interested in adding funds than cutting rates . You know what, i think that theyve got housing no longer on fire, which i think helps them. They are still its still case by kay case. Strong auto market. Auto market is really strong there. I think theyve tried to get the consumer to do better. Yum would say theyre doing better. Starbucks would say theyre doing better. Overall i think china is in a position where they could do a lot of stimulus if they want to, infrastructure spend. People just always talk about what a joke our infrastructure is. They have 100yearold sewer system in the major citys. Their pollution is killing a Million People a year. So they are trying very hard to become more clean energy. Theres a lot they could do still to help the economy. Back home today, some discussion and hand wringing about september. Its the historically the weakest month. Journal points out more 5 declines than any month since like 1945. Well, september has been historically a tough month. Not at the beginning. People come in with 401 k contributions, teachers, get el crated at the beginning and goes down. Its been a period where the Technology Companies kind of reel, because they disclose their book of business and you see that europe was soft, because europe tends to go on vacati vacation. If you look at the map, february marks the peak of tech, thank you Goldman Sachs and september the bottom as we get preannouncements. September has been a preannouncement month. Its much more based on earnings and that, therefore, is worrisome. Im not as concerned this time, if only because if you remember from brexit a lot of the individual investors have kind of fled and theyre the ones who are most scared, unfortunately, when we should be they should be the ones the greatest youre not looking for an air pocket the way some said august would bring. I think that i hate to have to pin it on yell on friday, but i think how about this, if we get a [ inaudible ] park it, not unlike the february, the brexit air pocket and the pocket at the top of the show. It wont be as relevant. The consumer is much stronger than we realize. The Housing Market holy cow, back to 10 years. Really some amazing calls. The toll brother call is required reading for anyone scared of the economy. Dallas call and denver strong. These are areas that have been hurt by oil. Theres a lot thats good and im not afraid to say it. Yeah. Were not afraid. Existing homes today but the new homes number yesterday extraordinary. Till 8 belot quarter century average. When bob toll said that and i think people have to recognize something carol toemay said in her call, the cfo of home depot, 3. 4 million households created if we went back to the household formation of the 2000s. Unnatural to have so many live with their parents and, you know, look, i think were in a new world not like my days when we got out your parents kicked you out. Get married have a kid and buy a house. Living with well i was happy to leave. It was mutual decision. But i do think that if we get back to that period well know it. Bob toll about how were not back in a speculative period. We have 4 , fourmonth supply of homes. Thats not enough. And so youre getting a lot of home value appreciation which therefore means if we buy stuff at home depot we improve the value of our house, the toll brothers, talk about 850, 860,000 homes up very big from the year before. 16 . If all thats true, we talked yesterday about people buying appliances at yeah. Best buy. Retailers. Explain lzb or express today. Okay. I dont i dont want to be critical of particular management because i happen to think the guys that run express are nice people but they dont have the right apparel mix at all. And they dont. You dont have such a gigantic draw. You dont get a minus 8 comp physicals you are a said disappointed with Second Quarter performance. They dont have the right merchandise and lazyboy. Dont look. Its like walking dead, both of them. Walking dead two and fear walking dead. What i would point out if you go on the jc penney call where they talk about their ashley line of furniture thats strong. Mattress firm, the bid from steinhoff, south africa, at home putting up good news. Eaten allen. Lazy boy is the exception. Ethan allen doing well here. Express, the guidance, 9 to 15 cents versus 32 cents i told one of my staff to buy some of the close there, so you can find out how ugly he are. Everyone else is selling clothes people like. Anthropology, Urban Outfitters in wedding outfits. You have to get an appointment. The journal points out since mid may, urban up 40 some odd, aeo, ross, tjx, all double digit or close to double dij it. The ross call was really exceptional and still have a lot of room to expand in the midwest. I thought the urban call the fact that flugship store was very good, the fact the they talk about regular pricing in fashion. Express has the wrong fashion. Fashion is a subjective thing, but, you know, you can be very wrong on fashion, thank you, mickey drexler, for explaining that. I think express has the wrong fashion. I have pvh on tonight, and i think manny will give us the full story. Do you think back to school has been priced in, a strong back to school . I think theres more room. Manny will explain. The best pvh, this is a pvh tie. I like it. So its got that added advantage. Yes. I do think that youre going to hear that the inventories were so lean coming into back to school that the ordering was that good, which therefore, means that the Holiday Season could be good. I like whats happened. Got it. Lets do tesla quick here. Elon musk as you know, announcing the electric automakers amped up battery. The packs should power the model s cars 0 to 60 in 2. 5 seconds. Musk said about the battery on teslas Conference Call, take a listen. With this you will be able to travel, assuming its not a super hot day or something, and you dont and you maintain a reasonable speed, youll be able to travel nonstop from l. A. To San Francisco. Theyre calling it the fastest production car in the world. Someone said, if tesla could now make cars faster, meaning make them more quickly. Look, it is a production issue. Every time i criticize the guy i think about jay leno saying who else has made this number of cars other than ford, gm, really. Chrysler. This he is a remarkable guy and they always theyre doing fundraising for solar city and hes in on that. I dont know. I dont doubt him. I want the car. I just dont the stock is a cult stock. People who jim stewart came here, the great New York Times writer said something that was sounded oxymoronic, shareholders of tesla like their stock. They never part with it. That was brilliant. First i said, come on, jim, how about genuine home spun wisdom. They like their stock and dont part with it. Like a share of disney. Share of tesla. We will watch to see how that develops today. We also want to Pay Attention to italy. This major earthquake rocking several towns in central italy leaving at least 39 dead. Nbcs lucy carvefanoften. Good morning. Good morning. The scene here is just unbelievable. This is the epicenter of the earthquake that struck at about 3 35 a. M. Local time. So powerful was the quake that i felt it about 100 miles away in rome. As we were driving up the hill, we saw rescue workers driving to the scene, people bringing bulldozers to help get to those trapped beneath the rubble and the scene is incredible. Buildings flattened, holes within walls. You can see the side of buildings completely collapsed. Bathrooms, living rooms, peeking out. People were sleeping in their beds when the quake took place. No time to get your things together and to get out. Weve been able to confirm at least 17 casualties, but it is still early on and those numbers are unfortunately likely to rise. We have seen where im standing, in fact, there are rescue crews, they have been racing against the clock to get to those people who might still be trapped beneath the rubble. There are several locations. Its a dangerous task. We have been feeling aftershocks. We havent seen more structures collapse but it is possible that things could get worse before better. This is one of the worst earthquakes italy has seen since 2009 the devastating quake, at least 300 people were killed in that one. The town now remains a ghost town. What this will do to the economy, the industry here in center italy remains to be answered. We appreciate your report so much. I daughter just got back from right there last two weeks ago. Just terrible. Yeah. One of the most beautiful parts of the world. Really. And, you know, you just read of these terrible sad. When we come back the epi pen price countntroversy and what Martin Shkreli is saying about it. Brad smith, the companys guidance weighing on that stock. The premarket as we within range of new records. See if we got them like yesterday. More squawk on the street from post nine in a minute. Look at you. Youre at the top of your game. Youre unstoppable. Nothing can throw you off track. Wait, is that your car . Uh oh yeah, i saw that coming. That will throw you off track. Youre looking at around ten grand in fines, legal fees, and increased insurance rates. Lets try this again. Smart move. Because buzzed driving is drunk driving. Mylan feeling heat over the price of the epi pen drug up more than 400 since 07. When the Company Acquired the rights to the treatment for people with lifethreatening allergic reactions. Senators on capitol hill want answers from the ceo and calling for an ftc investigator, but former ceo Martin Shkreli known for a 4,000 drug price hike at that company defended mylan in an interview with cbs news. Mylan has one product where theyre starting to make money and everyone is going crazy over it. All right. So were back here again. Jim . Talking about the morality around drug pricing. Well, look, that guy is a tough guy to root for. But i do think that theres this dilemma and i ask all the drug ceos who come on mad money what kind of price increases have you put through and they basically know that if they put through more than inflation, that theyre going to be in trouble. And what i call what i think is most interesting is dont forget that valeant has a committee to determine what theyve moved up too much. They have that new cfo and joe papa came from perrigo and im waiting to see what they roll back. When you stick your head up like this in an Election Year you will have to roll back. Thats one of the reasons mylan stock has been weak. Especially dealing with a product that is largely solves problems with children. Right. And we all know about the explosion in allergic diagnoses in this country over the past 20 years. Right. Its a mainstream consumer story now. On nightly news last night. I always carry a version of it. Because i had i had antifa lactic shock on mad money, my Blood Pressure dropped 80 over 50 and i had to go to the hospital and they require i carry it. Im a person of means and able to afford it but yeah, this is something if you dont have it, and it, you know, you need to carry it with you at all times. Yes. And this is something that i think that there should be some compassionate use for. The idea that they should have a subsidy for this thing. Its seconds, seconds and you have to know how to use it. The one i have is you have to know how to use it and should not just be for rich people. We will watch the mylan story as it develops along with pfizer and the yaz stra zen ka antibiotic division, talk about going on a buying spree this week. And then disposes its Nuclear Imaging business to become more of a drug company. Theres so many things bubbling up. Celgene study coming on. A lot of stocks bounce right now because theres a lot of shuffling in the portfolio. A lot has come from the medivation deal. You cant stress enough, if david were here, i think we would be talking about sanofi was outbid by pfizer and so theres a lot of money around. A lot of bankers had raised a lot of money to go after medivati medivation. Whos next. Or will gilead break up into a slow and fast. Abbott has done a lot of acquisitions. A piece about medtronic. How they have everybody covered. You want to compete against medtronic you have to buy other companies. The action in health care is why this market is so we will talk to bill george later in the morning. The company he created but they he will be the first to tell you they made great acquisitions. Medtronic is a powerhouse. I cannot believe how strong this company is. Industry is filled with strong companies. Edwards life science, abbott. Somebody said its a good time to be a midsized biotech company. It sure is. Look, for its been a year and a half its been horrendous. Just very good bargains where theyre selling through the price of traditional pharma. When we come back we will get cramers mad dash and count down to the opening bell. Bunch of names we have not taken a look at one. More look at the premarket. More squawk on the street from the nyse in a moment. Theres no one road out there. No one surface. No one speed. No one way of driving on each and every road. But there is one car that can conquer them all. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. Lease the c300 for 369 a month at your local mercedesbenz dealer. Its what the National Debt could do to our economy. If we dont solve our debt problem 19 trillion and growing money for programs like education will shrink. In just 8 years, interest on the debt will be our Third Largest federal program. Bad news for Small Businesses. The good news . Theres still time for a solution. Ask the candidates for a plan to secure our future. Whmade plastics that tmake them lighter . Rs the lubricants that improved fuel economy. Even technology to make engines more efficient. What company does all this . Exxonmobil, thats who. Were working on all these things to make cars better and use less fuel. Helping you save money and reduce emissions. And you thought we just made the gas. Energy lives here. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade wednesday morning, about 7 30 to the bell. Jim watching pioneer today. Something amazing going on in oil. Now, you understand weve been trying to figure out was goldman going to be right, down to 40, the rumors of an opec freeze, i dont believe in that. Not in their interest. Meanwhile underneath, pioneer natural and another Company Called pdc, paul David Charlie energy have been acquiring energy in the permian, a part of texas with the great infrastructure weve forgotten about it but makes a huge amount of money at 48 a barrel. So every time one of these companies does an acquisition, pdc bought for 1. 5 billion, 57,000 net acres, thats 30,000 an acre, between 20 and 30,000 in this area and going to make a lot of money off it. Do equity deals. Pioneer the chart is amazing. Two equity deals and each equity deal has been tecrrific. Companies going to the right ache cadge are doing well and the right acreage, in texas. These inventories last night, i dont know how they come up with consensus. Biggest build in four months when looking for a draw . Theres a gigantic glut, thank rb energy. A gigantic glut of gasoline. Even in the east coast where theres usually not enough gasoline. Its forcing down all the prices of oil. So i think oil is manipulated higher here by rumors and by chatter. But theres a glut. And the glut is getting worse because of the no place to put the gasoline anywhere. China doesnt want more gasoline, europe is filled up with gasoline, mexico is taking all the gasoline, we dont have any place to put our gasoline. If you can make oil, pull oil out of the ground, two, three, four bucks actually all in probably 18, its worth it to buy this acreage from the private companies. We have to go there. Who is selling here . In this, we never hear, we dont know who these companies are. This is, you know, another private company that i kemridge energy, before this, pioneer bought from company, reliance. These are private companies that we dont know if they need funding or not but theyre so thrilled to get money. And then the market loves to buy the stocks of these companies that they had bought the good acreage. Sm the old st. Marys bought ache rate down there and the stock had been like this. Colorado. And then boom, as soon as it bought in the permian. Everyone knows infrastructure in, price cheap, boy, we got to go back there. Boom town again for the second time in the last decade. Sounds like were taking shows to texas. I would love to. Brian sullivan has been down there. Its a great area. Beautiful sunsets. Absolutely true. Well get the opening bell in a few moments. Dont go away. Im just a guy who wants to b speaking japanese oh watson, your japanese is very good. Thank you. speaking japanese exactly. I can understand nuance, context and idiom in seven languages to help companies all over the world with everything from retail solutions, to banking, to cyber security. speaking japanese ein streetlegal form. G lexus performance get great offers at the lexus golden opportunity sales event. Get up to 5,000 customer cash on select 2016 models. Ends september 5th. See your lexus dealer. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just under two minutes on this wednesday morning. Got german gdp, but, obviously, everything continues to lead to yellen on friday. Interestingly, people are talking about the resistance at 2193. Weve been rebuffed a couple times. All my good friends keep talking about it. No, we got to punch through. So so some technicians argued the formation has an upward bias but nothing matters other than what she says on friday. See, i dont want to put it like that because i know that what that does is make it so that on monday, if were down, people will be scared and i dont want to have that position. If she says september is on the table, well adjust to it. These things do cause the market to go down, but when i listen to a lot of the Conference Calls im on, particularly the retailers doing well, its not going to be as impactful. Mortgage rates by the way, more important the credit is available because credit is available, you can have the rates go up a little bit. One of the themes in the toll call, better credit availability. They didnt spell it out perfectly no one wants to say theyre giving away money because its too reminiscent of the old days and its not the case. You have to have a high fico score but its getting loser and thats positive into. The opening bell, remember a year ago, weve sat here on crazy mornings. Oh, boy have we ever. But a year ago today that thousand point drop in the dow, something i think we remember like it was last week. Oh, and it was like geez, the machines must be wrong. Wait a second, what is i mean, ge i think traded below 20 and had been at 26. And it was like thats a big company. Yeah. Not a small cap company, not pharma. At the big board this morning, dkms a nonprofit dedicated to fighting blood cancer marking its 25th anniversary. At the nasdaq hope bankcorp created by a merger. We havent touched on intuit. High on your list of things to watch. Yeah. I have to tell you, i was on the call, i happen to like brad smith, going to be a great guest, cerebral guy and done a lot of great stuff, stuff for charity, doesnt like to talk about it, but i do. I was on the call and liked it. I actually liked it. Congratulations gentlemen quarter. Guiding down because frankly theyre spending more to be able to build up the consumer franchise. Not a bad idea right now. So those who want to sell on the idea that this company is going to grow, and theyre spending too much to grow they dont know brad. And i hope that he will put it in the perspective that the press reports didnt. Because i thought it was a good quarter and hes doing the right thing. I would not be a seller of intuit. We are going to talk to him in the 10 00 or 11 00. Thats one to watch. Were going to get pvh tonight and you talked to last night. That was a good interview. Workday as well tonight. Workday, boy, a guy who downgraded it on monday, guy who upgraded it yesterday. Workday has a deal with ibm. Bushry a dog fight against oracle. Oracle on the Conference Call references really basically i would say toto i would call it, turning off the oxygen of workday but workday still alive and kicking and elle may, good housing story. Manny chirico has his pulse on everything. Whether Tommy Hilfiger or calvin klein, has the denim business, or the shirts and ties, you cant d you go into a macys macys is pvh. I like the company very much big move off the bottom. 50 for the year. People had given up on a, a heavily [ inaudible ] name. Europe is strong. If they do calvin klein big in china it will be amazing. When it was a bad quarter he came on and he basically said listen en we had a really bad quarter. Cheer up partner. Dont get down like that. Basically like we on camera . Were on camera. Hes such a straight shooter. I cant wait to hear what he has to say. By the way, jc penney has been a bright spot for him. He was the beginning, thats when first found out that pennys coming back. Hes not afraid to say whos doing well and give us a wait i cannot wait. General mills, he got rid of i thought when they got rid of the color and artificial sweetening of trix, trix would be bad. Trix are for everybody now. That chart, obviously, proves. What a gain, 23 gain. Inflationary Food Environment too. That was a talk of the town, buy on weakness of kroger. I defer to my friend sara eisen, kroger, because its where shes from. But shes from krogerville. One of the biggest retailers in the country. And cleveland we have a show coming up. Oh, thats very good. Very exciting. Fitbit in the news, jawbone has failed in the legal bid to block fitbit from operating in this country. Yeah. You know what, you tried so hard to get a read on the best buy quarter. You always want them want to say could you tell me how fitbit is. Wearables were stronger. I was concerned fitbit may not have the right goods for the Holiday Season. I know gopro does. Someone today was saying [ inaudible ] off gopro is going to have a good quarter, its possible. Apple watch refresh is going to play a big role this year. I think the apple watch refresh will be important to watch. Five years, tim cook, scattered to be the only socalled new product like this isnt exciting. Do i have to get the 7 . Havent seen it yet. Right. But you never we went through that phase where it was brightling apple watch, you went back and forth. Now you just wear the apple watch. The brightling, that was a knockoff. Just kidding. My father had like a knockoff from canal street. Fooling everyone. I love my brightling. Tim cook mute me, i love my brightling. The wife loves the brightling. But i got the new soft ware upgrade, its fabulous by the way. Yes. I send the smiley face to my kids constantly, dad its the apple watch. One of them says let me call right back. Press the button. At least type it in. They know me and my game. Look at this, mark benioff on the cover of forbes magazine, got that. Changing engines of a 747 midflight. Trying to figure out what explains the strength of starbucks today in a quiet tape but it is the s p gainer. Such an interesting question. I actually tweeted a picture of the starbucks in front of the exchange, line out the door. Apparently people have been saying theyve been going around telling people dont expect a big resurnce in domestic stores. We say this in an action alert bulletin for the travel trust. Yet, the stock has been sticking at the 55 level. Its funny, nike and starbucks have traced up similar patterns. People gave up on nike and giving up on starbucks. Its never been right to give up on phil knight, mark parker and never right to give up on howard schultz. Amazon, i mean, ive always said we need to do a show from the pacific northwest. Oh, i tried. I did one there and it was so exciting, but amazon is reclusive. Zillow. That was one of those times when zillow wasnt here on the set. Zillow had a good quarter but i do think that when you are dealing directly with starbucks out there, you got to go to the rose street which i what i keep hoping i can do my show from a brooklyn roastry. Your point on starbucks is, even with all of the warnings about travel and quick serve in q2, we know its been rough. Right. You think starbucks might this move i dont get. I mean honestly, the stock, the stock had a bad week last week, traded to 54. Starbucks is not about the preannouncement and expected quarter i know. Certainly. But it does have that same feel as nike which is that these are these great Growth Stocks that have lagged. People are desperate for laggards at this point. Witness best buy. But i dont think will nike give you better news. Probably because foot locker was so great. Will starbucks give you better news . I dont know. The domestic numbers i felt were certainly hit by the changeover in their card and by a difficult introdru introduction of a drink and china is very strong for them. For all we talked yesterday about people staying home, not eating out as much. Right. But dpz. I mean that is the outlier with another close to record high today. I had the no cheese pizza, thats what my kids do, sing that, i dont know why, on sunday night and comes we order it. They love it because they cant speak on the phone. They dont know how. Its interesting, you press this button and talk bought thats too hard for 20yearolds. Technology company. We just order it and saw it coming and were all set. You can pay by i like to throw cash at the guys because its great when they come quickly. Get me extra marinara sauce this week. Its true they have done a fantastic job. And then the 10year, give us the 10year on gzp if you can. Straight line. Doesnt show you the special dividend they thrown in, recapitalization. Patty doyle, unsung. The first ads he had it taste likes cardboard. Thats crazy. I love their pizza. No cheese but phon are my veg tare a yan daughters. Sure you dont want cheese . I insisted he put this button in. India. Has been their big move. Brick might be back. Sands. Like that from philadelphia. Sands the sea. Because brazil, you just came back, better. Russia good articles in the paper, market red hot, india seeing dramatic expansion and the dominos india market is off the charts. Its the second best market after the United States. I was seeing some commentary about india presence. Apple look, i had American Tower on. Thats the biggest market. They will have 12. 4 billion people by the end of 2020 and they only have 2 g. This doesnt work right now on their phones. My executive producer with something. Doesnt work right now. It will. This is going to drive sales. Tim cook is going to do good things. You know, again, fifth year and people just that guy i know rich people like lennen said if theyre unhappy its their own fault. Can i say hes doing a good job beating the s p by 12 well 105. Anniversary, yeah. Santoli tweeted this morning, it doesnt feel like its been five years. He still feels like a new ceo. Yeah. I know. You go out, still got hes quite reverendal. I think hes done a very good job in a very i was listening to dominic chu this morning. Not an easy situation, come in, have maybe the worlds greatest executive in history and then youre his his successor. I happened to feel strongly have hes doing a terrific job. On starbucks, my colleague scott berman saying cowan meant with a management dream. Thats important. The last quarter was disappointing thank you scott from action alert team. It does matter. Theres a fiveyear of apple which has doubled. But, you know, but what a bum down 44 cents. This business is worse than like a new york sports guy. Like the mets lose, what a bunch of idiots. Its down 47 cents. Hes a bum, throw him out. Whos the next guy. How about that guy johnny whatever, get him in there. The thing down 45 cents. Crazy. Lets get to bob pisani, dow down 15, good morning bob. Good morning, carl. Mixed open. Energy stocks are weak, mater l materials are weak, probably because of disappointment with glen cor down in trading over in london. We are sitting at new highs and not seeing big breakouts. Lots of new stocks hitting new highs. Right now only about 6 of the s p 500 yesterday closed at a new at least 52week highs. But about one fourth of the entire s p is only 2 from a new high. Thats essentially two days trading. So my point is, just a little higher and were going to see enormous numbers of breakouts when you see technicians really Start Talking about the markets. But weve been knocking on this door for a while and havent hit it. Meantime you see express look at that down 23 . The numbers are kind of ugly here. Comps down 8 . Revenue is down 5. 7 . Overall. There were two specific problems. They did talk about weak merchandise. That is a Company Specific issue. Of course theres a lot of fickle Customer Base when dealing with the kind of merchandise they have. But the weak traffic that they specifically cited, we have seen this throughout the entire quarter for the comments here. Look at the companies that have mentioned weak traffic so far. Target, michael kors, coach, fossil, l brands p pier 1, gap, ralph lauren. I could go on and on. The point being that major issue is that people are shopping more mobilely and the weak traffic numbers are showing up throughout the entire industry here. So they are not alone. Finally, you mentioned august 24th, one year ago, the mini flash crash. The day the chi these devalued the yuan, a fall and the reasons why the markets down there. The dow dropped more than 1,000 points at the open. In addition we had Market Structure problems. There were a number of delayed openings. Only half the s p was open by 9 35 and over 1200 trading halts in stocks as well as etfs. These were major problems. They were a big issue for the industry. Theres been changes made in the last year. And some more of them are coming. First they have tried to reduce the delays in opening stocks overall. So theres new rules. Particularly at the nyse. That allow them to automate the opening if they need to. That has dramatically reduced the amount of delays in the openings. And you can also see this in the reduced trading halts. We have these single stock Circuit Breakers and they have tweaked these single stock Circuit Breakers to make it less likely that there would be trading halts on the floor. And you can see, this when you see what happened on brexit, this was the only other day we had a big volatility day. Remember june 24th the day the brexit vote was counted. August 24, 1200 trading halts. June 24th similar volatility, dow opened down 600 but only 68 trading halts and almost all stocks opened promptly particularly down here at the new york stock exchange. So guys, brexit im not saying there wasnt a big down day, there was, but it was much more orderly. Didnt see the trading halts, didnt see the big delays, the industry is trying to address this issue. Theyve already issued joint press releases. You will hear more about that in the near future. Guys, back to you. All right. Bob, thank you very much. Lets get to the bond pits. Rick santelli at the cme in chicago. Good morning, rick. Good morning, carl. You know i like what bob is talking about because as we look at today, and a long spat of very comfortable at home in the ranges in markets, its interesting to think about flash crashes and what we used to call in the old days, discontinuous volatility. Believe me you havent seen the end of it. The more we coil, the more were going to see large moves. We dont know when. Yesterday i used the analogy like air traffic control. Hours of order surrounded by moments of terror. Its going to be out there. Weve changed the piping and gone from 4 inch piping to 1 inch piping and theres very little trading pressure. Look at a one week of 5s, an auction today. Its consolidated. What i find fascinating not only the flattening of the yield curve, but just the distance traveled for the month of august based on closes. If you look at a twoyear pretty tight range, low to high yield closes the entire month 11 basis points. Five is the winner. You can see how these short maturities are up towards the top of the ranges. 5s, 13 basis points low to high, 103 to 116 i believe. 10s only 9 basis points, 1. 50 to 1. 59. I dont see any way we will not continue to flatten with respect to the dollar and the pound, look at a may 1st start to the dollar, its a very small turn but traders say it looks like its holding but dont look for a huge bounce whereas you contrast that with the pound versus the dollar and its reactionary Double Bottom postbrexit volatility one of the big trades on this trading floor. Carl, back to you. All right. Rick, thank you very much for that. Rick santelli. Oil will be something to watch in about 45 minutes. Jackie is at the nymex. Hey, good morning to you, carl. Prices are lower this morning after the api reported a surprise inventory build in crude last night of 4. 5 Million Barrels. They were looking for a number around 200,000. So big difference there. Meantime the gasoline numbers in that 10 30 report will be key as well. A draw is expected of 1. 6 Million Barrels, but refinery utilization could be impacted by the flooding that we saw in louisiana. So thats a wild card. Now if crude builds but gas draws, that could kind of offset each other within the wti price, but wti is trading right in that sweet spot right now, between 45 and 50 at about 47. 50. Stronger dollar that Rick Santelli mentioned could impact these prices today to the downside as well. Its all going to hinge on what we hear from the department of energy at 10 30. Jackie, thank you very much. When we come back the former ceo of converse technology, has a court date this morning. Our scott cohen is outside the courthouse in brooklyn. And it is a court date, carl, that is ten years in the making. The indicted ceo of converse technology. Kobe alexander, returning to the u. S. From africa in fbi custody, to plead guilty. If youre the judge in this case, do you let him go free on bond . Well tell you why his lawyers say yes. And why they may have a case. When squawk on the street returns. Announcer when they test you, stand firm and move only when you hear the seatbelt click that says theyre buckled in for the drive. Never give up till they buckle up. Everyone talks about what happens when you turn sixtyfive. But, really, its what you do before that counts. See, medicare doesnt cover everything. Only about eighty percent of part b medical costs. The rest is on you. Consider an aarp Medicare Supplement Insurance Plan insured by Unitedhealthcare Insurance Company. Like all standardized Medicare Supplement Insurance Plans, it could really save you in outofpocket medical costs. So, call now and request this free decision guide. Discover how an aarp Medicare Supplement plan could go long™ for you. Do you want to choose your doctors . Avoid networks . What about referrals . All plans like these let you visit any doctor or hospital that accepts medicare patients, with no networks and virtually no referrals needed. So, call now, request your free guide, and explore the range of aarp Medicare Supplement plans. Sixtyfive may get all the attention, but now is a good time to start thinking about how you want things to be. Go long™. Technology chairman and ceo Kobi Alexander has agreed to come back to the u. S. To face charges after being indicted in a wide ranging Stock Options scandal a decade ago. Scott cohen joins us from the u. S. District courthouse in brooklyn on a story he has covered from the beginning. Good morning, scott. Absolutely, carl. Yeah, this is a day that Kobi Alexander has been resisting for ten years, when we caught up with him in namibia in 2007, he was fighting tooth and nail against extradition tots u. S. On 35 criminal counts in a wideranging Stock Options backdating scheme. Now he has agreed to come back, plead guilty to a single count of securities fraud, in a plea agreement, and after he does that his attorneys will argue he should be set free pending his sentencing on 25 million bond. They say he is not a flight risk. It would be pointless for mr. Alexander to come to the United States after spending ten years in namibia to plead guilty and only then to flee. His attorney Benjamin Bratman said on monday. The government will oppose that request, but the defense will argue that Kobi Alexander fought his extradition in good faith. He didnt violate any court orders when he went to namibia because he hadnt been indicted and did charitable good works and settled every civil suit including paying 53. 5 million to the securities and Exchange Commission one of the largest ever. Of course the government is looking at someone who left, did not face the charges at a time when the government was trying to crack down on this type of thing, now Kobi Alexander coming back to face the music but wants a little more freedom at least for now. Carl . Scott, thats going to be something to watch. Well be checking in with you throughout the day. Scott cohen. We will get stop trading with jim in a moment, dow in a narrow range down 28. Dont go away. Mary buys a little lamb. 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. Ask time for cramer and stop trading. You know, theres been a stock that people just keep thinking is going to roll over which is garr min. A lot of companies have these this is an old fitness play. Fitness outdoor segment has been stronger and goldman takes it to a sell and a well reasoned piece. Garrmin, anyone who has a boat, 17 foot boston whaler its great but the goldman piece is the reason why you should sell it. Some people were asking about when i did the we when we ask our mad dash if its true that its the refineries squeezed by gas by margins of gasoline, people should be worried about a phillips, but mostly valero, had a bounce, 4 yield. I dont recommend shorting it. Those are the companies that will get had hurt because if you going to repress gasoline markets its the refiners that get hurt not the pure Exploration Production companies. Right. And as far as overall crude production goes you warn people to take these iraq headlines with a grain of salt. None of these companies interest to be able to actually talk down oil. They want to make more money. They cant freeze. They all want market share. Saudi arabia has been very aggressive in trying to get market share back to the United States. You know, you cant do that if youre offering expensive crude. Talk it up and make extra money but theres a glut. This freeze talk should be discounted. Any time you hear it. Saw the intraday move yesterday. We heard some talk about, you know, that theres going to be a freeze. Stop believing the freeze. Dont believe the freeze. Its not in any companys interest. Yeah. Whats on mad tonight . Okay. Ive got workday reports after the bell, pvh, pvh phillips but primary hilfiger and calvin klein and then a company ive never had on before, ellemae. So you can close your house a deal on your house faster. Which if david were here he would say jim you can buy more houses. Not true. I know youre watching. The do you ask chirico about ryan lochte and speedo . Thats a good question. I think you have to ask people about endorsements a and clotheses. You know what, its one of those topics that people want to dont really want to delve into, but yeah, i think that why not. Yeah. Well see. Well be watching tonight. Mad money, 6 00 p. M. Eastern. When we come back intuit one of the biggest decliners on the s p, an exclusive with brad smith on the companys results and outlook, former medtronic ceo bill george will talk about the epi pen price controversy at mylan. When squawk on the street comes back. Get funky with your chicken. On average, one in 6 americans will get a foodborne illness this year. So, learn the right temperature to cook each type of meat. Keep your family safe at foodsafety. Gov. Good wednesday morning. Welcome back to squawk on the street. Carl with sara ion eisen and mike santoli. Ahead of yellen on jackson hole on friday, fortunately enough including reretail misses, oil news, housing data coming out any moment. Just crossing the wires right now. Lets get to diana olick with existing home sales in washington. Diana . July existing home sales, down 3. 2 . Month to month to a seasonally adjusted annualized rate of 5. 39 million units. Thats a miss, folks. The street was looking for 5. 52 million and june unrevised so that number is real. Sales in july down 1. 6 year over year and thats only the Second Annual decline in nearly two years. Now, a lot of folks will say okay, there were too fewer Business Days this july than last july but i asked the rae realtors and they factored that into the equation. 1. 6 drop is real. Nothing to buy. 2. 13 million homes for sale at the end of july, down 5. 8 . Year over year. So were seeing no inventory relief at all. Home are flying off the shelves in 36 days on average. Thats down from 42 days a year ago. Median existing home price in july, 244,100, up 5. 3 year over year. A lot of you may be saying, okay, well why were sales of newly built homes that were released yesterday in july up so high to that high since 2007 . Well, 2007 was not a banner year for the builders. Also, that number was based on a surge in the south where builders are making the most homes and selling them the cheapest and builders are benefiting from the low supply of existing homes. Back to you. Putting it in perspective for us, thank you. Lets look at the broader markets here hovering around record highs. What is keeping markets at these levels . As investors watch jackson hole and chairman yellen speech on friday . Tony is Portfolio Manager at Blackrock Equity Dividend Fund and mark is the ceo and cio of morgan creek capital management. Good morning to you both. Good morning, sara. Mark, ill start with you. On this question about the slow creep to record highs, does it set the market up to be vulnerable for any surprise or even little hint of an Interest Rate rate hike from janet yellen this week . Yeah. You i think the market is vulnerable and dont know its so much to Interest Rates as things like earnings disappointments and growth slowdowns. But clearly, any hint of an Interest Rate hike will be trouble. And Perfect Question to you, on these dividend stocks that you invest in, the big worry i guess is after theyve been so strong, that they, too, are pretty vulnerable to talk or move from the fed on rate hikes . Yes. The way we manage money is kind of good old common sense investing and we focus much more on a competitive yield with superior Dividend Growth than on a high current yield. Look at it historically high dividend growers have done better than the markets actually. Can you give us examples there . I prefer not to give can specific examples, my Compliance Department asked me not to, but look at a long stream of data going back historically they do outperform on average. Are you talking about names that are outside the favorite utilities, telecom, stape snls. Absolutely. Ill give you an example, large cap banks, this is one of the few industries out there where they would actually benefit from a rise in rates, yet their valuations, theyre trading at low prices and they have good dividend yields. Mark, you actually like some of these relatively high valued Dividend Paying Companies and sectors . I noticed you like utilities and staples, why . Well, we just think that this is a time to play defense, rather than offense. So the bonds, utilities, gold and staples has been a good place to try out. Were not super enthusiastic about those areas. Were more enthusiastic about commodities and real things. We think rising rates would be a sign of potential increase inflation and that will feed through to rising price in commodities. So we want to play defense in the high dividend yield stocks and things like gold, but we think opening things over the next couple years will be the big play. Tony, the idea of trying to find those companies that are going to be growing their dividends over time, definitely has worked a lot in the past. Also, though, it seems like its become popular. Vanguard closed its Dividend Fund because of the rush of cash into there. Do you have any particular edge in determining over a long period of time which companies are going to be those dividend growers aside from the record they have of being a big dividend grower. One, i think you have to distinguish between high yielders and dividend growers. Those valuations are different. Dividend growers are trading one standard deviation cheaper than historical averages. Lots of good opportunities remaining in the Dividend Growth camp. When looking for dividend growers you have to do an assessment of the quality of the business. We want good quality franchises with strong Balance Sheets and good earnings trends because thats whats going to provide the fuel for the Dividend Growth and we try to do all that at a good price, good valuation. Considering the s p 500 companies are already kind of seemingly many of them stretching to make their current dividends . Yeah. Thats actually a fallacy. Look at the dividend payout ratio of the s p 500, just under 40 . Up from the recent but if you look at longterm historical averages thats not a problem. We certainly look askance at companies with high payout ratios because that will be a limit on Dividend Growth in the future. Mark, any guesses as to what yellen says on friday or the character of her speech . Yeah. Look, we said at the beginning of the year in january that there would be no hikes this year as one of our big surprises. I think shes going to stay true that. I think shes going to make a lot of noise and not say much of anything. So i think there will be a lot of sound, very little fury and they will be on hold until after the election. All right. Well see what happens. Thank you for being with us to you both. Mark and tony. Here at post nine. Thank you. A major earthquake rocking several towns in central italy this morning. Leaving at least 39 people dead. Nbcs lucy camnorv is in amatrice with more. Im in the center of amatrice, the town one of the most devastated by the earthquake in italy this morning. You can see here a car completely crushed. This building in shambles. You can barely see, but a toilet, someones bathroom, through those broken walls. Residents were asleep in their beds. It was about 3 30 a. M. Local time. When this earthquake hit. I felt it as far away as 100 miles away in rome. Now, in this town alone officials have confirmed at least 17 people killed. Those numbers are likely to change. And rescue workers have been racing against the clock to try to rescue those who are still trapped beneath the rubble. There have been rescue dogs here trying to smell any potential people who are trapped beneath workers coming in, officials pleading for rescue supplies, blood donations, food, water, medicine, anything that needs to be brought up to these small towns. It is the worst possible time for an earthquake here in italy. Tourist season. People coming here to visit relatives and loved ones. And so when these earthquakes struck, these unassuming people many of them were completely caught unaware, devastating day for italy and definitely a devastating here day here in amatrice. Back to you. When we come back intuit shares are slipping despite beading on revenue. The company did issue First Quarter guidance below estimates and the ceo will join us in a cnbc exclusive. Then the mylan story under fire after outrage over the nearly 500 price hike of epi pens. How does Something Like this happen . Former medtronics ceo bill george will break it down in a moment. Energy is a complex challenge. People want power. And power plants account for more than a third of energyrelated carbon emissions. The challenge is to capture the emissions before theyre released into the atmosphere. Exxonmobil is a leader in carbon capture. Our team is working to make this technology better, more affordable so it can reduce emissions around the world. Thats what were working on right now. Energy lives here. I am a First Responder tor and iemergencies 24 hours a day, everyday of the year. My children and my family are on my mind when im working all the time. My neighbors are here, my friends and family live here, so its important for me to respond as quickly as possible and get the power back on. Its an amazing feeling turning those lights back on. Be informed about outages in your area. Sign up for outage alerts at pge. Com outagealerts. Together, were building a better california. Lets go to San Francisco where jon fortt has a special guest this morning. Hey, jon. Carl, yes, intuit ceo brad smith, joins us just after reporting earnings after the bell that beat on the top and bottom lines but guidance for the Current Quarter that some found a little bit wanting and granted you got to understand with intuit, tax season is what its all about. Some interesting insights on the cloud. Brad, good morning, thanks for joining us. Good morning, jon. Thanks for having me. I want to talk about Small Business here because a lot of interesting stats that you brought up and some that will help people understand whats happening in the cloud. I believe you added somewhere around 400,000 quick books online subscribers for the year, but what are you learning about Small Business when it comes to Cloud Adoption . It seems like theres one Smaller Group of Small Businesses that dont want to go to the cloud for whatever reason. Is there anything that they have in common demographically, whether its geographical thing or perhaps types of Small Business industry . You know, jon, first i would say that majority are leaning to the cloud. Weve seen the Tipping Point just about two years ago, it was 50 50, cloud versus desktop and now its 70 30 leading to the cloud and increases every quarter. Those who arent moving to the cloud tend to be more established businesses, tend to be product based businesses and they tend to already be happy with their accounting solution which typically is quick books. We have them as cust customers on our desktop products and they arent ready to move to the cloud. Were working with them to get them comfortable and their accountants and its just a matter of time. Now, one group that certainly is moving to the cloud pretty quickly, is the selfemployed. Youve had uber and lyft drivers signing up for this program for just over a year, i believe, and youve more than tripled the number who are on this platform from 25,000 to over 85,000 now. What can you tell us about the amount of money theyre making, is it growing, and the kinds of challenges that they have actually running their selfemployed businesses . Jon, this is an amazing new phenomenon. Weve seen it coming for some time but its exploded in the recent years, referred to as the gig economy and we know about these individuals who end up being sole proprietors, get jobs driving for uber or lyft or task rabbit. One of the things they dont rellize the government considers them to be a Small Business. They have to file a different kind of tax. What we have with quick books selfemployed, you swipe ride, if its a business expen, left if its a personal expense. Tax time downloads into turbo tax and well file your taxes for you, saving the individual about 3500 a year in tax savings and so its a real win for them and a very simple app and we have really good adoption going on with this product. Now, there is some countries internationally where you are gearing up france and brazil you mentioned and we got a lot of coverage out of brazil with the olympics. We see some of the opportunities and challenges presented there. But what are you seeing thats different about the way the cloud is being adopted whether through desktop first or through mobile, that maybe other businesses should know about as they look to expand internationally through technology . Well, were seeing similar phenomenon to what were seeing in the u. S. The Tipping Point has been reached in terms of adopting the cloud and some countries its actually faster than the United States. Au stral craze a mobile first and a cloud first market. So we see really strong adoption there and same things happening in the uk and in france and brazil right now is back on its feet and its moving in the right direction and so were seeing Cloud Adoption being universal and each country you tend to see a little more of a mobile adoption happening faster and another country we see it look like the United States. Hey, brad, its sara eisen in new york. Wanted to ask you about taxes. Which is, obviously, core to your business with turbo tax and quick books. What do you make of some of the ideas floated on the campaign trail . Clearly donald trump and Hillary Clinton have different visions for how the tax code should change in this country. Do you approve of either of them would either be better for your business . You know, sara, weve been in business for 33 years. Weve seen a lot of election cycles, heard a lot of great ideas, at the end of the day we remain stedfast we are for tax simplificatio simplification, for voluntary compliance, which is individuals being able to decide what they believe they owe the government and keeping as much money in the pocket of the individual citizen as we can. We help them find maximum deductions. Its hard to sort through which of the two candidates have a Better Program that will address those needs but i a assure you we will be there to support which ever one wins and our job is to help the taxpayer keep the most money in their pocket. Brad, give us a sense of the state of Small Business in the economy right now. A couple questions about it on the call last night and talked mostly about the opportunities that you have despite the overall economy for growth in cloud, but what are Small Businesses facing now in terms of the environment. How tough is it and can you compare it to any other recent period . Jon, we can. We have a unique insight. Today we have about 25 of the u. S. Gross domestic product flows through quick books. 2. 9 trillion of payments and 1 in 16 americans with our payroll service. We dont rely on confident surveys. We look and see are consumers shopping. Are the merchant fees increasing month over month with the Small Businesses and are they having enough confidence to hire an employee. And what i can tell you is our charge volume on credit cards was up about 15 this last quarter which is healthy. And we also have seen an increasing willingness of Small Businesses to hire. So while its not robust, its in that 1. 5 to 2 growth range which is sort of where the gdp is now. It definitely is moving in the right direction. We like the signs. We think its positive for the future. Overall, doesnt sound so bad but, of course, we like to see Growth Numbers a bit better than that for Small Business overall. Intuits growth looking pretty good. Thank you, brad smith, for joining us after earnings that beat on the top and bottom lines. Thank you, jon. All right. Jon, thanks. Appreciate that. Up next, where apple stands after five years under tim cook. A top rated apple analystedow j us live when squawk on the street comes right back. Approaching medicare eligibility . Dont put off checking out your Medicare Options until 65. Now is a good time to get the ball rolling. Medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement Insurance Plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement Insurance Plans, they could help save you in outofpocket medical costs. Taking informed steps really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide and explore the range of aarp Medicare Supplement plans. All plans like these let you choose any doctor or hospital that accepts medicare patients. These are the only Medicare Supplement Insurance Plans endorsed by aarp. Call now and request your free decision guide. And start gathering the information you need to help you go long™. It was five years ago today that tim cook took the helm at apple and today the Largest Company by market cap up over 100 since cook took the rapeei. Questions remain around apples future as innovation lags peers like facebook. Weighing in is tony at bernstein. Good to see you this morning. My pleasure to join. We love anniversaries to talk not just about the share price but about how hes moved it to a service model, r d emphasis, whats your grade . Look i would say overall have have been pluses and minu minuses. The stock price has doubled but s p has almost doubled. So you know, the stock has been fine on a relative basis. I would say on a positive basis, tim has done a good job of retake Key Executives and done a good job of extracting external talent, head of stores, capable executives and i think hes instilled a really strong and attractive culture for employees to work at in apple. In terms of areas for improveme improvement, i think the real question since tim took over is, will apple be able to continue to bring world changing market products to the marketplace . And i think that remains a real question. In the last five years the watch is really the only new incremental product and its success to date has been relatively modest. The iphone has continue to do well but that was a product that was launched before tim became ceo. And so i think the question of innovation and is apple driving innovation, remains the central question as investors think about the stock and tim cooks tenure. I assume you believe five years is enough time for him to demonstrate that . Well, i think so. But you know, to tims credit, r d spending at apple is low versus peers as a percentage of total. Now hes done a good job in recent years in increasing that. And so the fruits of that ramped up r d are probably still not yet felt. So, five years is a good metric and i think the grade on product and Service Development is probably mid. That could change significantly over the next three to five years potentially. Tony, you do note that apples appetite for acquisitions is actually far behind similarly sized tech companies, other ones. What should apple be doing in that regard in terms of size, type of acquisitions, and just a general orientation toward importing other cultures, other companies. Yeah. So i think at a high level, you know, apple is at 200 plus billion Dollar Company and, you know, five years ago, the company was about a quarter of the size. And so if the thinking was apple needed a great product every three years and the company is five times bigger it needs one or two great products every year if its really going to sustain the same kind of pace of growth or impact on the marketplace. And so in light of that, i do think that apples r d level is organic investment, needs to be higher. Its dramatically lower than its large cap peers on percentage of revenue. If you look at the top 50 Technology Companies, apple is Second Lowest as a percentage of dollar spent on r d over tim cooks tenure. On the acquisition side, similarly if you benchmark top Technology Companies spend about 25 of their cash flow on acquisitions. Apple spent only about 2 . So if apple does need to bring more new products and more new services to marketplace, our belief is that both organic and inorganic investment are important. It doesnt mean apple has to run out and buy a huge company. But i think weve seen Great Companies like amazon and google make lots of different bets and investments. And i would certainly like to see apple take a page out of their books in terms of diversifying their and broadening their investment bets. Well, certainly were going to learn a lot more this fall and maybe next fall. Tony, its interesting to take stock in this term. Thanks so much. My pleasure. Make sure you tune in tonight by the way, cleveland hustles from executive producer lebron james premiers here on cnbc. The show gives Business Owners a chance to open permanent storefronts in a cleveland neighborhood. And then compete against each other. Heres a sneak peek. Whats in there . Flour and our secret recipe. If i invest in you do i get to know anything about that secret. Probably not. How many bagels do you put out of this . We put out a couple hundred a week. We could crank out thousands a day. Something to see these two guys hand making bagels. Thats a cleveland work ethic something i look up to quite a bit. When you get your own space what percentage of the space will be production and retail . 75 production, 25 retail. Simple place to serve sandwiches. No cocktail list . No. Isnt that where the money is. True. But theres money in bagels. We will have a flask behind the counter. I like alan because hes a lunatic and gets things done. Cleveland hustles premiers at 10 00 p. M. On cnbc. Bagel destination, cleveland, ohio. When we come back, controversial pharma voice Martin Shkreli. Heres what he told cbs about mylans major price hike of epi pens. Mylan is a good guy. One product theyre finally starting to make a little money and everyone is going crazy over it. Former medtronic ceo bill george has a solution to the price hike problem. He will join us when squawk on the street comes right back. Sym for whenever anything happens in the market. But thinkorswim already lets you create custom alerts for all the things that are important to you. I guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at Td Ameritrade. Farm fresh ingredients, stepbystep recipes, delivered to your door for less than 9 a meal. Get 30 off your first delivery blueapron. Com cook. Your Business Needs better technologywho wants to buy tha to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Good morning. Im sue her roo ra. Heres your cnbc news update. Two earthquakes striking oversize. A magnitude 6. 2 rocked italy this morning killing 73 people, hundreds more were injured as rescuers raced to dig out survivors. The town of amatrice was among the hardest hit and a powerful magnitude 6. 8 earthquake shook myanmar and thats basically damaging scores of ancient buddhist pagodas in the foreign capital of bagone, a major tourist attraction, centered 15 miles west of chalk with a depth of 52 miles. No reports of deaths or fatalities in that earthquake. Turkish tanks cross into syria to free a border town held by isis. It marks the countrys most significant military involvement so far in the syrian conflict. That incursion occurring hours before Vice President joe biden arrived in the turkish capital and met with the countrys Prime Minister where they discussed the syrian situation and cleric guillen who turkey blames for leading the failed coup last month. You are up to date. The news update this hour. Back down to you. All right. Sue, thank you very much. It is 10 30 on a wednesday. Eastern. That means time to get to Jackie Deangelis at the nymex with some breaking inventory news . Hi there, sara. Thats right if its wednesday its inventory day and the department of Energy Reporting a build of 2. 5 Million Barrels in crude oil inventory. This is a little less than we saw from the api last night, but still a relatively big build for this time of year. Traders were not expecting a number like this. Only estimating 200,000 barrel build. The gasoline number here is really key today as well. I dont have that yet for you. But that could be impacted by the floods that we saw in louisiana. So traders are going to try to balance these two numbers together in terms of how it impacts wti. You can see 47. 17 trading lower than before. 47 is the sweet spot in the middle of the range right now. But if we start to, you know, break through those Technical Levels we could see more pressure to the downside. The dollar is also a piece of this. A little bit of strength today. Adding pressure as well. Guys, back to you. All right. Jackie deangelis thanks very much. Meanwhile more fallout from mylans epi pen price hike. Meg terrell at hq with the latest. This has been hurting mylan stock this week, taking a breather from the epi pen pressure today. However the focus really is turning now to ceo Heather Bresh with multiple profiles coming out overnight looking into her background and in particular, her connections to congress. The daughter of West Virginia senator joe manchin whose colleagues in the senate many of whom are asking to look more deeply into the epi pen price increases from senator blumenthal yesterday calling for federal inquiries to senator Chuck Grassley who sent a letter to bresh asking whats gone into the price increases of epi pen. Also asking for more inquiries. Another focus today is looking at Heather Breshs compensation. Today show piece this morning, juxtaposed the increase in her compensation with the increase in the epi pen price, of course. That has gone up what senators have quoted more than 400 since mylan acquired the drug. I did reach out to mylan to see if they had a comment op specifically the story about breshs xep sayings and juxtaposition with the prices and they responded no. Analysts are trying to gauge the impact that this focus on epi pen is going have on mylan. Overnight, bank of america putting out a note, saying that while this could contribute negatively to Investor Sentiment and valuation as weve seen, epi pen contributes about 10 of their discounted cash flow per value of share for 70 for mylan and the 8 pullback since epi pen pricing came back into the spotlight last week creates a Good Opportunity for risk tolerant investors. Sara, back to you. Meg, thank you for setting that up. Clearly the drug price gouging debate is back on the table and former pharmaceutical ceo Martin Shkreli defending the Drugmaker Mylan in an interview with cbs news. Listen to this. I think that, you know, on one hand we all want someone to blame and the drug Company Seems its the easiest group to blame. The blame is a little different in this situation. Mylan is not, you know, this company thats making a ton of money, surprisingly. Theyre a generics company. They sell generic drugs at low prices, 90 off sometimes. Joining us to discuss all of this is bill george, Harvard Business School Professor and former medtronic chairman and ceo, also a cnbc contributor, uniquely positioned, bill, to talk about this as a former ceo of medical device maker and export on corporate governance, welcome. Thank you very much. So im not sure it helps mylan to have the poster child for drug price hikes out defending this company. They did put out a statement defending themselves but do they need to be more visible here as the bad press continues to pile up . I sure wouldnt want Martin Shkreli defending me, i will tell you that, as the bad boy of the pharma industry. Heather bresh stirred up a hornets nest and she should know better growing up in a political family to push this thing with consumers to raise prices 150 in the last year alone. And that if you get an epi pen set of four pens thats 600. And consumers cant afford that. And a lot of it theyre paying for on copays. And i think shes made a big mistake pressing her luck. You have to look deeper at the reason she did it. Big part is because their generic drug business is way below expectations. And shes trying to keep the stock price up because they warded off a takeover attempt from teva and as you mentioned her compensation is way up. But i just think shes pushed her luck way too far and is asking for trouble here. Youve got senators on the, you know, on the republican side and Chuck Grassley my former he is a tough cookie and very strong on these kind of issues. Amy clo bashar, very thoughtful on issues and i can tell you, that shes asking for big trouble and really, risking the whole industry when she pushes her luck like this. When you say shes pushing her luck what do you mean . What should the company be doing. Mylan gets singled out and epi pens are popular and popular during the backtoschool season something parents can relate to but its not like its an only mylan phenomenon. This happens across American Drug prices and Drug Companies. Thats exactly whats at risk here. If you go back to 2010 when the obama care bill was being negotiated it was obamas chief of staff, rahm emanuel, and democratic senator max baucus, who cut this deal with the Pharma Companies and they agreed to put in 70 billion to pay for obama care and back the bill in exchange for which, in is there competitive pricing. The government accounts for a lot of purchases, more than half of the drug purchases, can not push back on pricing. They can price whatever they want and Heather Bresh is pricing that way because he can get away with it. This is going to put at risk after a new administration comes in whether or not they will continue this. I think the Drug Companies need to show a lot more restraint and stop pushing up prices so rapidly because theyre harming the American Consumer and some say well the system that picks it up. No with copays today and high deductible plans these are impacting the consumer and people who cant afford that need the epi pen for their children need the adrenaline support for children with allergies in this fall season, cant afford it and putting it at great harm and making a big mistake. Miss bresh was on cnbc in may before the epi pen story blew up, but high drug prices and drugmakers raising these prices was certainly a topic de jur. Heres how she weighed in may. Listen. I think theres ban lot of confusion between washington and wall street talking about drug prices. When you look at turning or the valeants those werent generic drugs. Those were Specialty Pharmaceuticals that partook in abusive practices. And i think that, you know, as with anything theres loopholes and can be abuses. I think the system overall if you look at the generic industry we represent 88 of the volume in this country, have saved 1. 6 trillion over the last ten years. So, you know, i would say that the system works. And its about i think really now taking a harder look company by company, and our profiles and what makes us different. So bill, she certainly was not stepping to touring and shkrelis defense. Does hers hold up now. No. Because shes done exactly what shes criticizing them for. And yes, its not generics thats true, these are specialty pharma products that are very old products. They didnt create this product. They bought it from merck of germany. And this is taking advantage of the system. You know, this is not like gilead coming out with a break through drug with hepatitis c, they spent billions to develop this. They didnt spend billions to develop the epi pen and theyre taking advantage of it. She ought to take her own medicine. Shes made a big mistake here in pushing her luck and its going to have negative consequences not just for mylan but the whole industry and i think the industry as a whole has to come together and put some restraint, some, you know, they cant you cant have price fixing but certainly restrain themselves in ways they havent done. Otherwise, youre going to have the congress particularly with a new administration coming in january is going to be jumping down them. I think the public is going to be a big problem here. Just, i wonder they better if you can quickly give us an insiders view as to how pricing decisions are made. I assume the salesforce comes to the suite and says we think we can get this. Any idea how these decisions come to pass inhouse . Well, in the case of mylan, it starts at the suite, carl. Its not the sales force. They force the sales force to get higher prices. At medtronic back 25 years ago we put in a policy of no price increases but reduced our costs and brought on Innovative New products and offset inflation tendencies. But all Pharma Companies increase prices and its become a norm but im saying when you inns crease them like this from 100 to 600 youve just pushed it beyond the pale and if this starts at the suite and you cant separate it from her compensation from the stock price, from the takeover attempts and stock is down 30 in the last since last summer and i think they got to they really have to rethink their strategy and if theyre going to have specialty pharma maybe they should develop products and be innovative like the leaders in the industry like a merck or Johnson Johnson or amgen or medtronic coming out with new products all the time. Thats where the investment should go not just increasing prices. All right. Just a taste of the scrutiny, bill george, thank you for weighing in, on this hot topic of mylan. Bill george, from Harvard Business school. When we come back, as the fed meets in jackson hole this week the outlook for stocks continues to improve among many. Look at what wall street is expecting for the rest of the year in a moment. Miles per hour. Eling over 200 to win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. According to an investment strategist at bernstein passive investing is, quote, worse than marxism. Does he have a point . Well find out at tradingnation. Cnbc. Com. More squawk on the street coming up. 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. As we look to Janet Yellens speech in jackson hole friday, what does wall street think the markets are headed the rest of the year . Steve liesman is live in jackson hole already and has more on that. Hello, steve. Hey, mike. Yeah waiting for Janet Yellens speech on friday. Well have several interviews with fed officials that ill talk about in a minute. And our cnbc fed survey showing that the market believes the fed will act later than they had previously. This is the cnbc fed survey special jackson hole edition. Now lets look at where they think the market will be. And you need to think about this in two ways. The first when you look at where we are right now, on the s p, seen rising a little bit for the rest of the year, less than about a half a percentage point and then maybe another 4 through 2017. So not a lot of upside viewed by our 39 respondents to our survey in august. But then look at it, it all occurs in a context of low Interest Rates. The 10year yield seen rising to 176. Call that about 20 bit from where we are right now and 226 in 2017. So Interest Rates stay down, stocks stay high but dont rise much further. Art hogan from august says the market has crossed the rubicon and ready for rate normalization. Good news is good news in the economy the fed should take advantage of that. I will point out most of our respondents dont see the fed acting until january 2017 though some see a possibility of a rate hike this year. Now what do they expect from the mountains, will they be hawkish or dovish. 54 say its going to be neutral, but if its a risk the fed is a little more hawkish, 14 saying dovish. John carter writes in and says, a hawkish tone at jackson hole would be a surprise but i expect yl janet yellen to focus on a rate hike in the intermediate term likely in december. Jim paulsen has an interesting question not sure but points out since economic end diseases are rising about the globe could a hawkish fed leave a jackson hole legacy of a bottom in global bond yield. That bottom in global bond yields has been called repeatedly and not come through. Easter george tomorrow from kansas city and Robert Caplan live at 10 00 a. M. From jackson hole and if youre wondering where the tetons are, joe kernen this morning thought they were gone, i think theyre still there but we have a fire 30 miles north blowing smoke down the valley and dont have the tetons at least not so far. Mike . All right. Steve, well i guess cue the blowing smoke, jokes when it comes to it looks beautiful. Steve, thanks a lot. You cka could also point out tetons are clouded like fed communication policy according to a bunch of our respondents. Good one, steve, well be talking to you a lot more over the next couple days. In the meantime to the cme and the aforementioned Rick Santelli. Hey, rick. Hi. Forget it, im going with all the smoke be stories. The mirrors are on their way to jackson hole as we speak. I would like to welcome my special guest peter bookfar. Thanks for taking the time this morning, peter. Always good to be with you, rick. You know, i was going to keep jackson hole until last but nice thing about live tv is im switching it around. Lets start out with jackson hole. I really do think theres going to be a lot of smoke and mirrors there, but it doesnt matter. Were talking off camera and your comment was, jackson hole is going to have a big potential to move the markets. Explain. Well, if yellen is very dovish, then we can say okay, fisher and dudley now disagree with yellen. If shes hawkish, and sets us up for a september rate hike, well the market, obviously, will take that very poorly because its certainly not set up for a september rate hike. And then fast forward to september, if she actually doesnt follow through, well then whatever shred of credibility the fed has, theyre going to lose. Theres a small needle for her to thread. Unfortunately, shes put herself in the position of having to thread that. But thats the situation were in. Right. Of course while all of that occurs that you aptly went through, it doesnt change where gdp is. It doesnt change the unemployment rate, doesnt change the employed rate, doesnt change the participation rate, it doesnt change the fundamentals. But, maybe if we called it reform instead of normalization we would get somewhere. Lets go to that. You noticed liebore, shortterm rates, commercial paper, what was the issue when commercial paper rose during the credit crisis . Do you remember how that played out . It buwas messy, no bank want to do business with another bank. Shortterm money markets froze up. This is different that its a regulatory change. Regardless of what the reason is, lie bore is up 52 basis points year over year everything. You could look at all the libor. Exactly. So this is a tightening and i dont see the market falling apart, i dont see the firms like the ges of the world, you know, their cost to borrow has gone up as you pointed out more than a tightening would have caused. The world didnt come to an end, did it . The market has tightened. Regardless of what yellen says or does on friday or in september, shortterm libor markets have tightened policy by an additional 25 basis points. You know, peter, im going to go on record and ive been on record, theres only one thing that can happen right now and thats a flatter yield curve. I dont see any other way around it. Real quickly, with around it. Were out of time. What do you think of that comment . I agree because Global Growth continues to slow. But, i do believe that the long end of the yield curve central bankers are losing some control and i do expect the inflation statistic to start to move higher over the next 12 months which leads to a rise of longer term Interest Rates. Well definitely see. Thanks for your time. Back to you. Rick santelli, thank you. Up next, finally the investigative business story behind the very popular and very useful Squatty Potty weve been waiting for. Right . No flatter yield curve here. A lot of people kill time on the throne trying to figure out how to get rich. One utah mother of five figured out a very simple product which has made her extremely richer. All american story when we come back. Use to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in Blood Pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card finally the piece weve all been waiting forks the full business story behind the break out product, the Squatty Potty. Jane is live in los angeles with an inside look on what has become, jane, a cult favorite. Reporter it has, sara. Its an incredibly simple and now famous product which made millionaires out of one utah family all because mom was concity participated. The cult of the Squatty Potty has been growing for years. What your going to buy . A Squatty Potty for my gi issues. Reporter even people playing the lottery dream of owning one. Squatty potty has been seen on shark tank, talked about by howard stern and dr. Oz and launched a viral video seen over 100 million times. You know who sucks at pooping do you. Reporter it started with this mom who had a problem pooping. I was let on to it by a friend who was an avid squatter and talked about the benefits and oh, yeah its great. I thought he was crazy. Reporter the theory is that squatting opens up a kink in your colon for better evacuation. My world has totally changed. In 2011 the edwards took 35,000 and created a company, first year sales were 17 grand. Last year 19 million. This year 30 million with new line of products for children or traveling. Were you embarrassed to talk about it at first . Absolutely. Still embarrassed to talk about it. Now everyone is like why didnt i think of that . I mean i have proven a lot of people wrong and its felt really good. Reporter more behind the scene details, including how their core demographic has changed. Back to you. I wonder, you interviewed a lot of women, whether men find it useful as well . Reporter oh, yes. These whole average squatting who knew there was such a thing is mostly young males and its their biggest demo. All right. Jane wells not sitting on a toilet. Its an interesting business story and one that has blown up. Lets send it over to john with a look at whats coming up next on squawk alley from out west. Well, it could be a big end of the year for virtual reality, sony is one of the players involved. Were going to talk to one of their executives about that. Also uber drivers are planning for retirement too and they got a new tool to do it. Finally, how to land a job at google in 15 weeks. You dont want to miss it. All that and more coming up on squawk alley. Good morning. It is 8 00 a. M. At tesla headquarters in palo alto, california. Squawk alley is live. Six full days so many ways im aching out im aching out welcome to squawk alley. This morning joining us former apple chief evangelist guy okay with kawasaki. Tim cook throwing