Skip to main content

tv   Squawk Box  CNBC  July 30, 2013 6:00am-9:01am EDT

6:00 am
this morning. the central bank is widely expected to keep the policy unchanged. of course, the question for the market is will policymakers give any hint as to whether the fed will soon start reducing its $85 billion bond purchases. steve liesman will join us in the next hour with a preview courtesy of the exclusive cnbc fed survey. this is a big question, though. big, big question. we have other economic news as well coming up on today's calendar. the case-shiller home price index. and at 10:00, second quarter housing vacancies. but the fed and that they're going to do, will they taper? >> after looking more closely at the whole piece about who had the best forecast and yellen did because she was so dovish, fisher was third. he's been a total hawk and he goes, yeah, you can be right when you know that all the stuff you're suggesting isn't going to be work.
6:01 am
>> what? >> the accommodation -- all the qe hasn't been working anyway. i can be -- i can say the economy will be terrible too if my tools are totally ineffective and if you've got a fiscal situation and an administration -- >> i didn't see him. >> he did say that. it is pretty easy to be right when you know what you're doing isn't going to work or will be ineffective. >> that possess on sunday about the gender bias for the whole thing that went after, he went after him and said he wasn't fully quoted. he thought they took him out of context for something he said here on "squawk box" because that quote came from his conversation with "squawk". >> good for him. >> they changed it. i was reading margaret sullivan, the times editor who goes through all these things -- >> he's my -- you know, he's smart, and he's kind of good looking, i got a man crush, he's just -- >> you do. >> he's my favorite. not democrat anymore, but used to be a texas democrat.
6:02 am
he may be my favorite, i don't know, former democrat. in earnings news today, we already heard from a number of companies earlier this morning including pfizer, bp, and ubs. other names set to post before the bell include merck, coach, and many more. pfizer's earnings beat the street by a penny. revenue in line. and the drug company did affirm its full year outlook. talked to barbara ryan yesterday and again today. no great surprises. all about managing their patent exploration cliffs for a lot of these companies. barclays, the second quarter results fell short of analyst estimates. the bank announced plans to raise about $9 billion from its shareholders. barclays under pressure from britain's regulators to boost its capital. and ubs posted second quarter results this morning in line with what it had preannounced. the swiss bank says it plans to buy back a fund that was set up during a financial crisis. the firm off loaded some high
6:03 am
risk assets, like a good bank/bad bank thing. ubs says that exercising an option by the so-called stab fund, okay, will boost its capital position. more on barclays and ubs. and news on deutsche bank and bp from our colleagues that are in london in just a few minutes. the fund, in the scary movie series, what was called scream, was called stab. >> you're right. it was. it was. >> i think it was. >> the fake -- the movie of the -- >> the fake movie, yeah. scream was kind of a parody in and of itself, but this was a parody of the scary scream movie called stab zw. >> i had forgot been that. time warner cable subscribers in new york, dallas and los angeles at least at this point will still be able to get the cbs network and show time. the two sides initially announced a blackout late last night after failing to reach an agreement on fees and it wasn't just announcing a blackout.
6:04 am
there was some kind of mean language that went out. then the negotiations continued and a spokesman for time warner says it relented at the request of cbs. julia boorstin will bring us more later this morning. this has gotten very ugly, very quickly. i thought they were off because the last thing i had seen was that, you know, this was done. >> they should be glad that homeland is not -- >> not on right now? >> yeah. >> time warner would have no choice. the u.s. power regulator says jpmorgan manipulated the market, trying to boost profits. the settlement could come as early as this morning. but the bank is expected to pay $400 million to end the investigation. the settlement could include other payments as well. a series of explosions rocked a propane tank servicing plant in central florida late yesterday. the blast lit up the sky, rocked
6:05 am
homes as far as 20 miles away. two dozen workers on the staff had to run for cover. it is called a blue rhino facility. about 30 miles northwest of orlando. northwest. okay. contains about 53,000 20-pound cylinders filled with propane. >> you can see the orange glow from leesburg. >> you could hear the explosion? >> oh, yes. >> what did it sound like? >> real loud booms going off, each time shaking the house. looked outside, big fire, she was from leesburg, we came out of the house, started running. i got no shoes, no phone, took off running, don't know if it was anything close by. >> the extent of the injury is not immediately known. but the officials say all the workers made it out alive. so far, so good. the defense in the fabrice tourre case didn't call any witnesses. so closing arguments set for today. jury deliberations expected to
6:06 am
start tomorrow. the former goldman sachs trader is accused of secretly helping paulson and company construct $2 billion deal that could bet against. good to find clients on both sides of the trade. mary thompson is covering the story and will join us at 8:40 eastern. two stars of the reality show "the housewives of new jersey" will be in court today. federal prosecutors charge them with just being totally obnoxious and unwatchable. no, i'm sorry, with 39 -- and totally irrelevant. no, 39 counts of fraud, alleging they used fake pay stubs, tax returns and w-2s to secure $5 million in loans before trying to declare bankruptcy. the stars, that's who they are. right there. know how to say that? >> teresa and joe giudice. i heard it on npr.
6:07 am
>> 30 years in prison and millions of dollars in fines if convicted. >> problem? sister network. >> pretty good show. really. i don't know about these people. the show is not irrelevant. the show is very good. bravo is -- >> big watchers. >> yeah. >> never mind. >> let's check on the markets -- >> i do that a lot, don't i? we own everything. they can be obnoxious and still be something somebody want to watch. >> "squawk box." >> right. me. if you don't take account into wanting to watch or not. obnoxious and -- >> all right. let's check on the markets this morning. yesterday, you did see the stock markets giving back a little bit of ground. the futures are indicated higher now. the dow futures up by 32 points. yesterday, it wasn't -- the dow
6:08 am
was down by 36 points. the dow transports were down over 1%. they closed at the lowest level since july 10th. the russell 2000 posted the biggest two-day drop since june 20th and june 21st of this year. take a look at oil prices because yesterday crude oil was lower. hit its lowest level since july 9th. this morning, it is down once again, another 66 cents to 103.89. the bigger story is natural gas. yesterday, that was down about 3% to a five-month low. it entered bear market territory. it is now down about 22% from its april 19th high. we'll check on natural gas very quickly. but also you can see right now the ten-year note is sitting at 2.6%. that yield does keep edging slightly higher. the dollar this morning is, well, at this point, it is down against the euro. 1.3264. gold prices right now are down about $7, $1,321.40.
6:09 am
>> did any of them have organized crime ties? >> the housewives of new jersey? >> no? >> not that i'm aware of. >> aren't you a housewife of new jersey? >> i am. >> are you in new york? >> that's coming. that's actually coming. >> housewives of westchester? >> yes. i didn't make the cut, i guess, but, yes, it is. >> wow. >> they're everywhere. >> great shows. >> atlanta, yeah. all over the place. >> fantastic. >> orange county. >> there is someone in my household that -- >> watches them? >> yes, is there an orange county one still? >> i don't know if there still is, but -- >> there was -- i saw last night someone was reporting -- there were two of them back to back and i think they were -- >> it's you. >> there is someone -- it is a friend. a friend that shall remain nameless, someone i know. >> let's get a check on the global markets now. karen tso is standing by in
6:10 am
london. good morning. >> good morning, becky. we're battling a few cross currencies today. earnings are out there, investors trieding ing ttryingh the numbers. there is more red creeping into the charts currently. right at the bottom, the likes of bp, reporting feared spinout today with negative numbers from a tune at chrysler. barclays as well, right at the bottom of the scale, dragging back the overall benchmark, which was tracking in positive territory. you can see we're just slightly below the flat line now. let me show you how the stocks have been faring. ubs had a solid performance in the second quarter. pretax profit of 1 billion swiss franks. you can see the share price, one of the better performers across the banking sector today. up nearly 3%. some of the investors have seized upon the wealth management numbers and also what we saw from the investment bank, this was solid. but a bit of a pop in the stock as well. the company says it is the right time to buy back the toxic for assets fund it offloaded to the snb in 2008. this exit from financial crisis
6:11 am
here at times has been well received by the markets. deutsche bank has posted a miss on its second quarter pretax numbers. analysts were expecting a number of about 1.3 billion euros. number came in at 792 million. miss there on that. barclays, you see the share price down sharply today. this is a negative response to a 17% dip in its second quarter pretax profit from a year ago, but most of the reaction has been about the rights issue, the company aims to raise 5.8 billion pounds and this is a deeply discounted offering today, down 14% on monday's closing price, which is why the share price has taken a big hit today. santander right in the thick of it with the problems in spain, it posted a 29% rise in profit for the first half, compared to a year earlier. this was in line with expectations. the npr is rising across the board and you can see the share price is softer today. let me toss it back to you. >> thank you, karen. >> thanks. as we mentioned yesterday, the
6:12 am
fed's two-day policy setting meeting begins today. joining us to discuss, michelle girouard at rbs and rich steinberg of steinberg global asset management. what did you make of that yesterday? i guess -- i can take it either way, it helps to have an idea where the economy is going to go and be right about it. but when all your tools, you've pulled out all the stops and it still is just as bad as you thought it would be, that doesn't sound like you know what you're doing either. >> right. i think that's true to some extent. i think, you know, we saw -- i was surprised by both the lack of inflation and we have seen absolutely nothing. >> i guess that's the biggest thing. i think that, you know, there has been things that have changed, obviously, and the whole -- whether we're talking about the relationship with gdp and employment, the relationship between the economy and inflation and monetary policy, there has been a lot of shifting and i will say that though i
6:13 am
think the philips curve was disproven long ago, those who follow that appear to be more right than wrong at the moment and that's what -- >> we got a lot of cover from china and europe, though. >> that's what i'm saying. there was a lot of other things going on. and i think it helped the situation. all of these global events play into it. even the eurozone situation, there was an awful lot of things, you know, that i think kind of played into that hand a little bit. unfortunately as i said, i think that we should -- i think the philips curve is the whole idea about growth and inflation, a lot of the premise of what their argument was at the time, unfortunately, this just makes it look all the more right. and i think it is hard to dismiss those, a lot of us, people look back and say, but, see, we didn't get inflation -- we won't know. the problem is we won't ultimately know in my opinion the cost of all of these policies for many years still to
6:14 am
come. so i think we have to kind of see how this all ends up playing out. >> we seem to think that, you know that we have dodged the bullet with all of the qe. >> we have gone through this, really, since 2000, from periods of very accommodative monetary policy and never really get much of the reverse. we have periods where rates get low and back to neutral. we never have periods where rates get high anymore. we keep going from one bubble to the next. we have the stock market bubble, the housing bubble. where does this period of excessive accommodation ultimately lead us? this is the kind of thing we have to ultimately look back on and judge whether minority -- the policies look okay now. we don't know what would have happened without them. that's a big point. >> do you have a preference? >> to me, larry summers will require an awful lot of political capital to get
6:15 am
through. and, but, you know, you've got, let's face it, i think from a regulatory standpoint, my industry -- i think there is -- larry summers is a smart guy. janet yellen, who i don't 100% degree with, some of the markets want, she's been in that spot, to me, that's just such an easier choice that i'm surprised that there is not -- there is still such a conversation about who the next fed chairman will be. >> see who i mentioned yesterday as a possible fed chairman? >> who? >> myers. he said things -- i don't think he can beat the fed chairman with the stuff he said on the air. >> such as? >> just -- he's no -- makes no -- doesn't try to hide his disdain for, like, the republicans in the house and things that all the problems are on the republicans at this point. he would be an overtly -- but so is yellen, yeah.
6:16 am
you're allowed. when you're president, you're allowed to pick the -- >> very similar view. he's very close with our firm. i spent a good deal of time with larry. he's got a real -- >> he's a keynesian freak too. >> true. his model is very similar. he was working with the board. he thinks very similar to the way the current board -- >> there is a lot of keynesians left. why? why? >> because times like this so far have still not disproven -- >> they don't cherry pick history. they only look at things that bolster their -- >> we're still talking about how the whole multiplier thing, exactly how growth was, you know, there was a drag on growth of 1.5%, in the first half of the year, because of fiscal policy, fiscal drag, all the big keynesian multipliers. i'm sorry, i just do not believe that fiscal drag took a percentage of the point and half off the growth in first half. that's why i don't think we'll get 3.5% growth in the second
6:17 am
half. >> multiplies your ineffectiveness. rich, you have a preference? >> well, when i filled out the fed survey for cnbc, i wrote on steve liesman but no one talks about that. >> he's to the left of both of those people. >> he is very far to the left of us, joe. >> he's to the left of yellen and larry myers, i think. we might just print a check and get $50,000 to every man, woman and child in the country. we're allowed to print, right? how about santelli as vice chairman and liesman. that would be fun. those meetings would be good. >> i agree with your other guest, i think the market, especially the equity markets would treat janet yellen a little better than larry summers. >> i guess. the punch bowl gets a little more -- put a little more grain alcohol in it. >> yeah. and, you know, the equity markets will respond. i think the key, even though talk has been in this discussion that we won't know for a long
6:18 am
time how the policies play out, i think for the equity markets, the bond market will be voting machine and, you know, the range of 2.5 to 2.6 or 2.7 will really be the determining factor as how equity -- how equity investors will treat the stock market, if we break out of that range. >> in 155 and people are saying we're in a little bit of a -- maybe the recent rally. that is high, isn't it? we're near the top of the range anyway. >> yes. just to give you some data points, the market s&p is trading at a little over 15 times earnings. the five-year average is 14.7. and people really aren't focusing on 2014 earnings yet. estimates are 15% higher than this year for analysts. that may be a little aggressive. and midcap, the midcap index is trading at 18 times earnings
6:19 am
versus a 17 times five-year average. and small caps which have been the real rippers this year are already trading at 20 times earnings, in line with their estimates, but analysts in that sector are looking for 20% earnings growth year over year. i think all of those could be challenging. i think we could be in this summer range of 1600 to $1700 in the s&p, probably with some support at 1650, roughly the 110 earnings times the almost 15 times for this year. >> all right, rich, all right, thank you. always see that backdrop all the time. wonder, we do everyone on satellites anyway. >> no vote, remember? >> no reason at all. >> thanks. westchester housewife, didn't make the cut. i'm sorry. let me talk to someone. >> let me know. >> i know.
6:20 am
when we come back, it is an exciting day at cnbc. we are set to premier a new reality show called the profit. his millions could save your dying business, but it will cost you. more with marcus in a moment. the man behind it all will join us on set. good morning. have you had your breakfast yet? if not, you better have it now. this is the doctor's orders. a new study finds skipping a morning meal could increase your risk for a heart attack. men who skip breakfast had a 27% greater chance of a heart atack or death from coronary heart disease than men who eat a morning meal breakfast. the skippers were found to smoke and drink more and were less physically active. but, hey, have some breakfast. "squawk box" will be right back. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪
6:21 am
this is the pursuit of perfection. ♪ (announcer) at scottrade, our clto make their money do more.re (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.
6:22 am
6:23 am
welcome back. u.s. equity futures at this hour are for the first time i think this week, only tuesday, fist time in the last couple of sessions, is it only tuesday? you try getting up at 3:00. i think we have three down days in a row? i don't know. it just hasn't been -- you get 100 points down and people say the rally is over. but we're up about 37 points. more results will happen today. what are you doing? >> i want to take a picture of marcus. >> you are. >> et aetna posting quarterly results. beating the street by 11 cents.
6:24 am
revenues a bit shy of expectations. i saw yesterday people were tweeting who had a worse day on monday, there was ackman, there was not michael -- herbalife, someone else had a bad day yesterday. can't remember who it was. shares of herbalife, this was unbelievable yesterday, and i saw early on in our news reads that -- he wa strong report. >> stock up like 6% last night. a bump of 5% now g. >> the outlook was also higher than expected and the battle between ackman and carl icahn has been going on. he's all over the place. talking about him with this and with dell. the recent publicity over the company's business model
6:25 am
apparently did not curb results. sent me some stuff. i tried a few of the things. i don't like mixing the stuff up, the powder. but the little candy bars were good. i liked them. i could use a few more. >> you think they'll send you some. >> they might. maybe they will. let's get the -- >> they can afford it. >> market share there for you. the dow hasn't fallen for two da is in a row since june and yesterday's 17-point drop was the worst since july 2nd. >> really? >> yeah. the worst since -- >> we had it -- really? all right. let's get the national weather forecast from the weather channel's alex wallace. you've been -- i like this weather lately, compared to, like, a week or two ago. keep it up. >> absolutely. and, you know what, you got a nice one coming in today. and end of the week, though, a little iffy. right now we have the wet weather in the middle of the
6:26 am
country. southern plains getting into the midwest. including around st. louis. got wet weather here moving on through with some downpours in the heart of the city. this will quickly move its way to the east, but we still have the risk for more activity as we head into the afternoon. as you were mentioning, the northeast, the radar, it is working. but there is nothing to show. beautiful morning, and the afternoon is going to be great as well. this is all behind the cold front that brought us some of the wet weather over the weekend. now, high pressure is building in. so clearing out, beautiful skies with sunshine, temperatures in the 70s and 80s. one of the best weather days we have seen in a while. but, bit end of the week, here comes the next cold front and with moisture working northward, we see the humidity levels start to climb and that threat for thunderstorm activity, thursday, that will be in place, d.c., baltimore, philly, new york and boston, you'll be contending with that. by friday, that will head up to new england. meanwhile, we have the midwest starting to see temperatures warming up here for the midweek after seeing 60s last week. we're back up to the 80s.
6:27 am
back to you. >> alex, thank you very much. tonight on cnbc prime, the premiere of a brand-new show called the profit with marcus lemonis, called america's number one business turn around artist, fixing failing businesses. let's see him in action. >> we have a difference in philosophy. i like the customer with me during the appraisal. i want the customer to know what i'm doing is fair. if i take them around the car and point out the defects with the car, the imperfections -- >> these lights turn yellow, you can get these replaced. when i give them a number lower than what they thought it would be, their expectations are probably more in line. i would rather ask the questions with them. make sense? >> i like that. >> you too? >> i agree. >> marcus joins us on set this morning. he's the star of the profit and ceo of camping world. it is great to have you here. >> thank you very much. i'm excited to be here. >> you're the real deal. you're a real businessman.
6:28 am
and you're a real investor. and you are taking $2 million of your own money after building your own business and now you're going to try to help other people fix their businesses too. >> not an actor, not a consultant, there is a real $2 million on the line over the course of six episodes. and in most cases what we're trying to do is get small business owners to understand some basic fundamentals. that's probably the biggest challenge. >> these are things you learned yourself. >> things i learned myself. sometimes the hard way through failure. >> you're not even 40 yet? >> 39. >> and camping world, 70 locates? >> 104 -- >> 104. i got old data. you sell how much of the -- >> we sell about 18% of all our holdings in the united states f you looked at an auto nation or another public auto. >> this was started in the '90s, right? >> in the '90s. i got involved in the 2000s,
6:29 am
started going around the country and consolidating mom and pop businesses. >> like a rollup. >> i was an employee of auto nation in the beginning. you learned at the feet of wayne. >> at the feet of wayne and steve briard. one of the original guys. >> and they have done it with so many different business models. wow. >> they have. what happened was lee eiococa st get out of the business. get into the rv and camping space and you'll blaze a trail. >> so to speak. >> you go in here and you got guys trying to run a business and they might be -- you might fire them. how much do you own of their companies when you buy a stake? >> in the case of car cash, 100% of it and they'll become
6:30 am
licensees of mine. then in other cases it is 25%. it just depends. i can't have anything less than financial control. >> are you allowed to tell me whether you're going to make money or not? >> i will make money. one of the things different about the show is we put our own money up, but i do it to make money, not because i'm an altruistic guy about itself. >> you see where they're messing up and not taking opportunities and you know how to do it? >> in most case, joe, there is a very simple plan, three ps. people, process and product. people are always the challenge in this business. in any business. i tell these guys, if you want to be a big business, every big business in this country started as a small business. you want to be a big business, you have follow the principles, not complicated. they miss it. >> how do you find the businesss? how do you decide this is a business i can make work? >> i like retail consumer facing businesses where i can interact
6:31 am
with the customer. i want feedback from them. i think without having the customer feedback, i don't know when we're doing wrong and how to improve the process or the product. i have to like the business. i have to like the concept. >> the ones you own 100% of, will you own 100% when we're done with this? >> i will. at some point in the future i may grow something. i like things that are scaleable, so in the case of tonight's episode, car cash, i probably have 70 locations open by the end of the year and -- >> so this will be your -- >> one location, you're turning this into -- >> this will be your business. >> it will be my business. before any episode airs, the deals are funded and closed. you're not having to wonder. and if the deal falls apart, you'll know it at the end of the episode. in some cases, one episode, i lost $200,000 and it was gone. >> really? >> yeah. >> so we want people to realize i'm a smart guy, but not that smart. >> so the businesses that you get involved with, the people you come in, are they doing this because they're literally about to lose their business?
6:32 am
>> doing it -- they were on death's doorstep. >> that's why they agree to say, you can take 100% of this. >> in some cases it is 25% or 37%. it is the deal you make in the moment, the negotiation is real and raw and sometimes gets agresive. >> you said the hardest part is dealing with some of the people. >> one of the episodes later in the season, a gentleman in los angeles who just could not treat his employees right and at the end of the day, i said you don't deserve to own a business. in this country, for me, it is a privilege, not a right. >> can you tell us about what some of the other businesses are? >> yeah, so there is a high end flower and gift shop in california, there is an ice cream manufacturer out of key port, new jersey, which is fantastic. a big popcorn company that owns a big contract with disney, so there is some -- a number of
6:33 am
things. car cash is tonight. car cash is a single sided transaction where you go in, have your car appraised, you're not obligated to buy a car and they don't sell cars. the pitch is, with he can pe ca more because we're not in the car retailing business. >> this is like a racket for you. all these good ideas come at you -- >> i don't know if you want to go with racket, but it is good. >> you could end up own something neat businesses to add to your portfolio and be like a gazillion nair by the time you're 50. >> that's the plan. >> that is the plan. khalil gib ran was -- but there is a double entendre here. you walked in here and i saw a -- >> like a light? >> yeah, like an aura or something. >> that was the dust. >> we do work hard. >> adopted in an orphanage in
6:34 am
beirut. quick thing. nine months, orphanage in beirut, nine months old, 12 years old i learned a lawn business and had ten kids working for mane today 6,000 employees. >> that's amazing. warren buffett talked about people who are going to be business people, really successful at it, are successful and they have businesses that -- the biggest measure is if you have a business had you're a youngster. >> yeah. >> i was a candy dealer. >> candy dealer. >> i would resell it at school. >> the reviews have been great. i read something from the philadelphia inquirer that said you're the real deal. that's why it is so compelling. you're a real businessman and you know what you're doing. >> i do hope you -- do you slap people around a little if they're really stupid? >> if they're stupid, but not typically. i'm not throwing pots and pans and cutting people's hair. >> like chefs and stuff. >> that's not me. what it is, if i see people mistreat their employees, then i'm going to run them over. >> okay.
6:35 am
all right. >> good way to think about it. >> in a good way. >> can't wait to see it. >> tune in tonight, 10:00 eastern and pacific here on cnbc. i think it has some metaphysical type -- i like it. i like it. busy morning. still to come on "squawk box," global markets with the man who coined the term brick. jim o'neil joins us next. here is a look at yesterday's winners and losers.
6:36 am
a quarter million tweeters musicare tweeting.eamed. and 900 million dollars are changing hands online. that's why the internet needs a new kind of server. one that's 80% smaller.
6:37 am
uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this ...is going to be big. it's time to build a better enterprise. together.
6:38 am
6:39 am
as growth slows in china, fears of a hard landing are starting to pick up steam. calling in now, one of our squawk masters, jim o'neill, former chairman of goldman sachs asset management. great to have you here. i know that you've taken a little bit of a step back, and probably have a better appreciation for broad scale of what is happening. what is your feeling now, just in terms of where we are, some scary numbers coming out of china and scarier is the idea that those numbers are overinflating. >> as you said, becky, i'm quite a bit removed from things. i'm in the country side here in the uk, fist d first day of raio weeks. ways in china for a couple of
6:40 am
days on an interesting trip and i met lots of interesting local business people. and senior policy leaders. i think from their perspective things are going broadly speaking as they feel necessary. and i return thinking perhaps the economy is going to slow even further and maybe even a bit less than all the sort of 7, 7 1/2 numbers. but they believe it is primarily because of things they're doing to improve the quality and long-term sustainability of growth. i found it all pretty persuas e persuasive. >> do you have concerns about what the central banks have been doing and if the fed starts to pull back, would be the it affect china more drastically than the other countries around the globe? >> at some point the fed will pull back and they have gone through the handshake of what it may look like.
6:41 am
we have a little bit of an exponent of what it could be and some of us have been around for a long time, but will never forget '94. when that moment happens, it will affect everybody unless they are strong enough or powerful enough to undertake their own monetary policy operations to not be so dependent on the rest of the world. china is in that position. and part of the problem for them comes with the craze through the dollar. it doesn't have to be that way. among the things they are moving towards is more freedom of currency and more -- much more importantly, much more flexibility of their own interest rate markets which a couple of things -- i think once the fed, i mean, as i said, once the fed goes tighter, will have a consequence, the day when the fed can start to raise interest rates, the same thing is true. >> jim, we had a number of guests recently who have talked about some of the numbers out of china. they say even 7.5% look like it
6:42 am
could be made up numbers at this point. if you really take the numbers that are coming from the major exporters out of china, they say the number looks weaker. if you try to extrapolate china's real gdp from that, how do you how do you calm all of those concerns? >> it baffles to me why people still persist with this notion of china deliberately fiddling its numbers. if that was the case, why would there not be fiddling them to make sure the numbers were above or in line with what they said at the start. >> at some point, that would catch up. >> -- to undertake some of the things i've done years and still trying to do, look at comparable data from many international companies and travel there. i wrote for a british newspaper that the hotel where i staid for years, it was absolutely booming
6:43 am
with people. and so, you can find there is not a lot going on, but you can find out there is plenty going on. much more important than that sort of never-ending and meaningless debate is what the rest of the world should be concerned about and perhaps with the exception of the commodity producer is what china is consuming and what it is -- what the gdp rate is doesn't matter to the rest. if china's gdp slips but the consumption rate is strengthening, that's what matters to the rest of the world, u.s. government, procter & gamble or any other company you can think of trying to do business with these guys. >> any company with the exception of the caterpillar or somebody -- >> right. not so great. my team for 18 months, all about the quality of growth rather than the quantity.
6:44 am
and the winners and losers in china are different than in the past. caterpillar wouldn't be at the front, neither would other heavy industries. that's focused on what china consumes, thing people buy in shops or health care and education offerings, but there are big winners. i find myself thinking that as we creep through time, the u.s. probab probably will be more new winners of the new china. and the details are yet to emerge. there was a bilateral meeting going on involve something of the policy people, just after the meeting between them and people in the u.s. and that looks to me as though the chinese want to do a bit more for the u.s. has to offer. so i think this incessant focus on, whether the chinese gdp numbers are accurate and whether gdp is what matters seems to be misplaced to be honest. >> jim, as always, appreciate your per spective.
6:45 am
>> thanks a lot. good luck. >> thank you. coming up, shares of bp trading lower. we'll talk about the oil giant's results and the outlook for the energy sector next. the earnings story continues. our news maker the next hour, the ceo of ubs on his company's earnings and outlook. your trading to a higher level,g tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550
6:46 am
call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550
6:47 am
6:48 am
it has been an unusual quarter. the bright spots are operationally both of the upstream and the downstream, and the upstream, we have been divesting things, get morgting streamlined, a little smaller, you've seen that in the numbers. we have had 95% utilization on
6:49 am
our refineries. >> bp ceo bob dudley, the company is well prepared for the long legal battle, fighting litigation linked to the gulf of mexico oil spill. joining us now to talk more about that, dan dicker, president at wealth block, a management firm. what is your point? bp has actually been upstanding about this? >> this has been a great story in terms of corporate responsibility, joe. we can contrast this to the exxon valdez where exxon fought everything from start to finish, including the $5 billion they got fined in terms of -- and then fought it all the way to the supreme court. in the end, they got a total bill of about $640 million. here, bp has already put up a fund of $20 billion, that's practically empty now, they got $41 billion they put aside for further litigation and cleanup efforts. they're still using toothbrushes on stones out in the gulf of
6:50 am
mexico. >> how do you compare the -- valdez with this. this is the worst oil spill in history. >> yes, no question. we're talking about 11 million barrels for the exxon valdez, and we found is that the gulf has done what tony hayward said and got fired for saying the gulf of mexico is a pretty big body of water. for the most part, it's been the dispursements that has been the problem and the cleanup effort. not the oil, itself. when the oil was spilled, one of the proactive things they did was put dispursements through the gulf. those chemicals are a lot more harmful in terms of what goes on in the gulf and the biosphere. oil is naturally occurring in the gulf there, leaks inside the gulf of mexico all the tim. that itself not to say this wasn't a horrific spill that
6:51 am
caused tremendous damage. but most of it has been cleaned up and, in fact, a lot of what's going on right now is an open wallet kind of effort for people to sort of grab on to what bp has been taking full responsibility for. you've seen a lot of townships the states. you seen a lot of private people sort of hooking on and putting in all sorts of bills that they're paying now. >> is it true that hal burton has had to 'fess up and admit to destroying evidence. won't that put them on the lean? >> yeah, i think it's interesting water going on with halliburton, in fact, what they destroyed was something that was in bp's favor, you know, it's very interesting. it was about the number of cement blocks. >> six versus 21. >> exactly. it's kind of deep in the weeds. but the point was that halliburton suggested they should do, that their studies showed that six was perfectly adequate opposed to the 21 that they have actually recommended.
6:52 am
so, in fact, it was in favor of bp. in a lot of ways, look, bp has a terrible record of safety going back to the texas city oil refinery fire in '9 5. it should not be told they have a bad safety record and deserves a certain omt of trouble. at this point the 41 billion they put aside, another maybe 17 billion in clean water act fines they are looking at. a whole bunch of civil suits, you got that to ask, when is it enough? when is bp called a fool for owning up? >> they boy into 30. now it's been in the 40s for a while. is eight boy now? >> i think it is. they have you know, i thought that the judge that was taking care of most of these suits. the suit is the huge overhang. that has to clear at some point i thought the judge was looking at them pretty optimistically, now i'm not so sure. they missed by about 30 cents on the calm here. but they have been putting money
6:53 am
in, in the right places, including the gulf of mexico. they're still there. >> thanks, dan. >> okay. >> still to come on "squawk box" this morning, we is have quarterly results from merck and pfizer, lus the exclusive fed survey the outlook for financials, "squawk" will be right back. yeah, i'm married. does it matter? you'd do that for me? really? yeah, i'd like that. who are you talking to? uh, it's jake from state farm. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm? [ jake ] uh... khakis.
6:54 am
she sounds hideous. well she's a guy, so... [ male announcer ] another reason more people stay with state farm. get to a better state. ♪ [ male announcer ] i've seen incredible things.
6:55 am
otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away.
6:56 am
♪ . >> coming up, we will talk expectations with the help of an
6:57 am
exclusive fed survey. ♪ [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time.
6:58 am
6:59 am
7:00 am
. >> good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick. andrew is off today. futures picked up steechl right now the dow futures up 57 points. the subpoena up 6.5 points. in our morning headlines today the fed kicks off a two-day policy meeting with its latest policy statement due tomorrow. investors will be watching for
7:01 am
when the fed might scale back its bond buying program. we have more in just a moment. also, cbs stations were pulled off time table systems in three markets only to be restored a short time later. after several deadline extensions and the preblackout, those talks continued today. also, we have earnings from that are coming in. >> adjusted, a penny above expectations. 11 billion in second quarter sales. the revenue number is 11.217 t. company sees 345 to 355 for the year, 3 frausded is stumtd wanted you got singular sales. and the stock at this point is unclear. they have a pretty widespread.
7:02 am
47200929 out of 49.66. of course, time flies. but i still remember the company dealing with viox and bringing in ken frazier, who was the guy that sort of stood there and said we're not settling any of the stuff. we do case by case. it was a the right strategy. he ended up being the ceo. the stock down at one point with that mess was down in the mid-20s all the way back to almost 50. so that was the right strategy to employ. like i said, anything that you take, there is going to be side effects, like anything, too much dihydrogen oxide. >> too much water. i get it. well, the results we are hearing from merck fit in line with what we have heard from the largest
7:03 am
drug maker pfizer. it boat estimates. beat the street's expectations by a penny. pfizer re-affirmed the guidance. pharma analyst and managing director barbara ryan, she will be joining us later to talk about both those company's results. pfizer and boating by a penny. >> merck is 48.55. it closed at 38.54. is a september taper on its way? i have a stuffed animal. >> tapir? sample i have one of them upstairs. top economists and experts pommed in the recent fed survey weighed in on what wall street can expect as the qe drama continues and steve liesman joins with us more on our exclusive cnbc survey. steve. >> thanks, joe, yes. a tapir is on the way.
7:04 am
wall street is braced and ready for the tapir. let's go to our timeline and see where the tapir begins. the average is now back to okay now. that's probably the right month, because that's when they will actually reduce a tapiring. what is the actual reduction? it's now 19 billion, down a bit from the 22 billion. okay. what about when the fed will stop qe entirely? that's come back from june of 2014. actually pushed ahead a month to july. that's right around the time frame that the fed so far guide. interestingly the guidance that bernanke provided may 22nd remains the guidance of the market despite all of that talk ascent to that may 22nd. how about when the first rate hike? again it remains so far the
7:05 am
second quarter of 2015 when the market expects it. listen to what tony crecenzo wrote in the taip tale of the tapir is tame. the fourth bond buying offset by reductions at issuance of mbs and treasuries. you like that, becky, done you? the tale of the tapir. >> i'm undone. why couldn't you do it like tony? i wanted you to do it in his shois voice. >> joe, can i barely do television. you want me to do imitations of people? >> like an colic, the first thing is foeingthere is a problem. >> i know there is a problem. i'm trying to get the information on television. you want me to read the next screen, joe? are you a tv guy. >> tony crevenzi. >> tony is a smart guy w. rehonored he participates. that may no longer be the case. joe, let's move on now, how much
7:06 am
qe is expected? this is about right. 85 times 12. actually looking for a little more of a stronger tapir in there if you do the math t.qe is expected to continue. we picked this up, first, by the way, 2014. $373 billion is the amount expected in 2014. i just want to move on and take a look at the funds rate and where that is expected. it's interesting. 0.15 in december 13, 0.8, really for the change next year and then you start to get a little bit of fund built in, 0.97. under a percent. interesting. it's a bit more dovish than the average for the federal reserve. the discussion about when the fed tapir misses the point, the power of qe infinity was that it was open ended. most of the damage was priced in when qe infinity became qe for a little while. finally, one more thing from
7:07 am
john riding. a friend from "squawk box" says they are not monetary in nature t. feds should tapir more quickly. guys, i'm back with the deficit a. big change here. is eight problem? is it not a problem? can you read all about the cnbc fed survey on line at cnbc.com. joe. >> you were not around yesterday. >> i was not. you know where i was? >> fishing. >> no? my other passion. >> playing in the band? >> no, saratoga. really fun. >> i didn't get to talk to you, i'm sorry about that. about who was the biggest. you are the greatest predictors of, you know, basically, anyone who was predicting inflation gets cut through, right? >> that's right. >> but i like fisher's point i thought it was great. it was like having all these qeers, qe perpetuals, having them all say the economy is not
7:08 am
going to recover while they're doing all this knowing what they are doing isn't going to help. actually seeing all this stuff is ineffective. that's even worse tan predicting. >> in other words, if you supported qe. >> you knew and you knew it was going to do anything either way. >> so they didn't know it was not going to do anything. >> they were predicting the economy wasn't going to recover. >> they predicted it would be a low inflation environment whereby they would have -- >> they were right about the economy being really weak and tepid even with the most experienced. i just, that's my take. you know, i want -- >> i want to hear. >> i need to arc you with him. >> one of my favorite -- >> joining us to talk, former congress said, oh, that's right. didn't work out for you, did it? you were not far. i think you were worried about that. >> that was one of many issues. >> they knew i was a friend of yours. >> i think those selfies you tweeted out might have been a
7:09 am
problem. those came out, too. former senator jerry craig is current will i -- nothing, you don't put anything past these people now, those -- >> all of this is a step up from the senate. what you have to go through. >> when he was a governor. >> i seetate way. >> you were significant. >> people, you know what, are you from the old school. people love you on both sides of the aisle and respected you. you work together. you are a dying breed. you look great, currently the ceo of the securities industry and financial market association, simply known as sifma. its not fatal. so, listen, about your talking point here, they will pick a woman because this administration is more into political correctness than monetary policy. >> he's not running again. >> it doesn't matter. he's friends with summers. >> he's not friends with yellen. he's got gone sperling is
7:10 am
friends with summers. summers has been very loyal. the president, susan rice, i mean, who would have imagined that after that happened with, you know, not to be the head of the u.n., he makes her even more important because he doesn't care what people think. he might pick summers. >> he might pick summers. both are so totally qualified, why wouldn't he go with somebody that breaks the glass ceiling in one of the most significant jobs in the world? >> because he may have promised larry summers something. he's got tim geithner. he would be good, too. >> geithner is in the talent pool. >> what is it with yellen other than her being a him who, what is his attachment other than her being a woman? >> i strongly supported her when she was put on the fed, i let my confidence get comfortable with her because of the fact that she has the credentials. she understands monetary policy. now, people say she's dovish. she may well be dovish.
7:11 am
that makes the.that she was fairly severe back in the 90s. i suggest she adjusts to the situation. >> she's a massive monetary expert. she has done much of the heavy lifting on the economics of qe. >> you think it will be her? >> i think it can be her and i don't know. >> that's the left disruptive to the market. >> i think the questions you ask are excellent the once about loyalty, that's political f. you ask me, by the way, we asked the street. the street like on a two to 3-1 basis on our survey likes yellen over summers. >> those are economist, right? >> and managers. they've give yellen much higher points for being a monetary expert than summers. >> if you look at your continuum put up there. doesn't exist if summers is picked. nobody knows where summers is. >> that's the whole point.
7:12 am
you don't want them to continue. >> you may not. if you want predictability. that's another reason you would choose her. she clearly agrees with bernanke, who has been in my opinion an exceptional fed chairman. in 28 they set us up for another problem in 2015. >> well, all this argument that there isn't going to be inflation. there will be inflation. you can't put this much money into the system. >> like the others. >> and get it out. some day, not that far away, are you going to have to get this money out. now, when you start to get it out, people will rush to the door on interest rates. i think you will create a very significant economic event. tapering will not be tapering. tapering will be crash landing. inevitably, once people conclude there is so much money. i wasn't around in 1980 when voelker tried to shut down the system. it's a very messy exercise. >> but you do feel like yell
7:13 am
isn't someone who would adjust to the changes as they come? it's like a lot of -- >> i don't think she's dogmatic on monetary policies. i think if she sees inflation as a threat, she will be aggressive. right now, nobody sees it as a threat it appears except for a few people. i think they were very wrong. i think inevitably when you put this much money into a system, the laws of economics tell you, you are going to get inflation at some pointfuls you can physical out how to get it out and nobody has ever figured out how to get it out in a comfortable way. >> at one point. i don't think anybody gets to where yell isn't without an overriding -- in other words to get into the central bank door to get into the club, you like sign the thing that says i care a whole lot about inflation and what we talk about on the side is the degradations to which
7:14 am
they think they can use the mandate or tools to help employment. that's what makes them dovish or hawkish. they're all sort of here on infliegs. is it anybody who is a member of the club that takes 4%? >> there are a couple who think. >> baib ma ib the albanian central bank. >> which is in my opinion, you know, this idea that the fed has a dual charge and fighting, maintaining the strength of the dollar, also fighting to create new jobs. doesn't make a lot of sense. number one is maintaining the dollar. number one and number 17 is trying to address the employment issue. employment is driven by other policies if you have a strong currency of basically a sound currency rather than economic growth. >> summers argued with romer. how to get along with valerie? >> i don't know how well, he got along inside the administration. i think he left a lot of are you familiarled feathers inside there.
7:15 am
he also had a cadre of loyal people. geithner. >> if you get to a point where qe is not what we need, it would be nice tofts someone to respond to any situation. >> you should be if favor of scummers. he spoke against qe. >> aam. are you just figuring that out? why aren't new favor of steve? >> we feed him here. >> we will continue this conversation in just a moment. still to come, ubs reporting better-than-expected earnings. the cfo council member will join us after theic practice. first, though, a deal after community deal, yesterday on cnbc they first reported. we'll be right back. what's your fu . ther
7:16 am
7:17 am
7:18 am
>> ubs switzerland biggest bank reporting a jump in second quarter profit. the bank planning to buy back a fund to shed toxic acids. tom naratil is a member of the cfo council, tom, thank you very much for whereing here today. >> you are welcome, becky. we are very happy with our quarter. >> let's talk a bit about those
7:19 am
results. this is something that you have managed to do, which came as a little bit of a surprise at some people who have been watching it come this quickly. what really drove the earnings this time around? >> we had a great performance, first of all, from all of our businesses, we look at our wealth management divisions, strong money gloet of 13 billion in total for the quarter. 36 billion for the half, up 50% year over year, our investment bank that delivered 38% pre-tax return on attributed equity, universal bank here in switzerland drove pre-tax revenues up 8% year over year, on global asset management, business had a steady performance. all in all, a great performance on the revenue side and the re-tax side. >> you are also continuing to slim down the investment bank. your plan at this is to focus on wealth management? >> well, what we have, if you look at our investment bank when
7:20 am
we changed our strategy back in the third quarter of last year, we moved all the businesses we exited to our non-core and legacy portfolios. and as you sthau quarter, we reduced the rick assets in that group by 17 billion. takes us down below our year-end target for 2013 for both the group and the fawn legacy portfolio. as a result, our investment bank is operating today with its targeting amount of resources, balance sheet assets and is producing great returns. >> you are continuing to bring in new funds, coming into the wealth management in particular. i think 10.1 billion was the number for the second quarter. it's a strong number. it is down from the 15 billion franks you had in the first quarter. i saw some headlines you are expecting some head winds to continue. what are those head winds you think will make it difficult to bring in mu money. >> you are correct, becky $10.1 billion outside the united states, so then flows this
7:21 am
quarter. we also hat 2.8 billion in the united states, that includes the effects of $2.5 billion in tax payments in the month of april. looking at the third quarter, some of the head winds, it's a seasonally slow time period as you know. we think you have some of the underlying issues around, both the fiscal cliff in the u.s. and the european banking system that still gives some of our clients some pause about taking further risks in their portfolios. >> how are you finding the regulatory atmosphere, vis-a-vis the united states and europe. do you see it starting to converge and getting some consensus and overlap, or are they on diverging paths here on how it will affect you? >> yeah, one of the things we're a little concerned about is that, you know post the crisis, you saw concerns against basal 3. it's not helpful to investors or
7:22 am
creditors or to clients to see five different definitions of leverage ratios going around in the regulatory community at this point in time. so we're hopeful that regulatory nationalism will abate and will focus in on some more consistent standard, albeit with some local application across the globe. >> regulatory nationalism. i like that phrase, tom. we will talk more about it. tom, thank you again for joining us today. congratulations on the earnings. >> you are welcome. >> up next, an explosion at a propane plant in florida, rocking several neighborhoods. the latest on this story right after the break. faster than eve, creating new opportunities for those who stand ready to seize them. in a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, our flexible, collaborative approach
7:23 am
helps forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. if then schwab is the placeing your trato trade. higher level, tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550
7:24 am
our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan, unlimited talk and text on smart phones. now, everyone's in the spirit of sharing. hey, can i borrow your boat this weekend?
7:25 am
no. [ male announcer ] share more. save more. at&t mobile share for business. ♪ . >> a series of explosions rocked a servicing tank in central florida late yesterday. those blasts lit up the sky and rocked homes as far as 20 miles away t. two dozen workers on staff had to run for cover. this is a blue rhino facility. it contained 53,000 20-pound cylinders filled with propane. angt people were injured. there were no fatalities, all the workers have now been accounted for. so that is good news. we have much more to come
7:26 am
this morning from our guests sifma joe greg, plus who will replace ben bernanke? janet yellen? larry summers? who they pick for the job. plus the futures giving a little ground back yesterday. you see dow futures up by 55 points. s&p futures up by 6.5. "squawk box" will be right back. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say?
7:27 am
7:28 am
brown: on my third day as principal, i met with the state. students had fallen behind, and morale was low. my first job was getting everyone to believe... that we could turn this around. i needed my staff to see what was possible. turning around a school, is not some, mystical, magical thing. it does take hard, dedicated work each day. i was a chemistry major in college, and then... i joined teach for america. that's the reason i'm here.
7:29 am
. >> welcome back to "squawk box," this morning, we will be getting an update on home sales in 90 minutes. it's expected to show an increase in the year over year prices for the country's largest markets. also, health management associates is being bought by community health systems for $3.9 million in cash and stock. our david faber reported yesterday this deal is imminent. plus, we have been watching shares of herbal life this morning. the nutritional products maker earned $1.31 a share. that was 23 cents better than the street was expected.
7:30 am
the company raised its early forecast. herbal life has been the subject of a high profile dispute between bill ackman who called herbal life a poenz scheme and investor carl icahn who owns this stock. joe, we know who got the upper hand on that yesterday. >> yeah, it was already up. at our delivering alpha conference, you remember he said, he was telling scott that -- >> he changed the way he thought about ackman, anybody that made him a -- >> a quarter billion. i like phil ackman, he made me a quarter of a billion dollar. now it's more than a quarter billion now after the move yesterday in herbal life. all right. generac power system earned 95 cents a share. revenue was above wall street forecast. joining us now, the ceo of
7:31 am
generac, which watched for a while in fairness, i have one, aaron, from my house, in fact, we are thinking it hasn't been the stormiest spring. aaron, just last week or the week before when it was hot, the heat weighs down the power line when there is that much current moving. we lost the power like last week. we didn't lose power because of generac. our neighborhood was down. yeah. will catch up with you eventually. >> you can't match last year, eventually. >> well, the second half our guidance doesn't assume the storm. you are right. they get tougher in the second half of the year. the small portable generators, the home standby category, the products that you guys own, that category has kind of come to life in the last few years.
7:32 am
it's taken off. >> well, when sandy hit, i'm not sure whether new jersey ever gets power lines below ground. i don't know how much infrastructure that would cost, but i think we were down for 19 days and the zwren rater ran for 19 days, aaron, you need to maintain it. but it really works with failure gas and i saw people waiting at the local gas station. 50 people in line, three across with gas requests for their gasoline power generators. so, i mean, you are on to something obviously. you have competition, but it's something that i think gas stations should have. >> yeah, you are seeing more interest. again, you saw the lines at the gas stations. a lot of stations and stores and businesses were out of power for fine days or longer. it impacts the revenue stream and parishable inventoryment we were seeing interest that our guidance is implying.
7:33 am
our commercial business is up, a lot of businesses are making those decisions for the upcoming season. >> it's expensive, obviously. you always want to put it off and see we had sandy one year and the previous one irene, we were down for more than two weeks the previous year so we bit the bullet. >> we did the same thing. >> bit if bullet, right? people always want to put it off. it's not going to happen again. >> you did that, too? >> our power went out for weeks. somebody called the mother's day storm. nobody had to generate it but us, our house became the local bed and breakfast. people came over for dinner. some people stayed there. you show up in the kitchen in the morning. >> that's the downside. >> now, everybody has the generator. they don't want to come over to our house anymore. >> fair enough. i watched the stock was $10 in 2010 or around there and it's 42. why? why isn't, why aren't major corporations starting to make
7:34 am
these things and try to take your business? >> you know, i think part of it, joe, it's still a pretty small market. it's 3% of households that have the product today. it's been accelerating recently. still, we built our 1 millionth generator. it's all we do. we are focused on generators. it's a nichy space. there is a little specialized knowledge you need. i think eventually if the daej continues to grow, if it becomes like central air-conditioning at some point you will see more corporations jump into it. >> now i have fears of some type of i guess back in the 19th century, have you seen the fears some of type of solar activity that shuts down the zbrid. >> solar flair flares. we don't have the stuff that runs the grid. we don't have things to put in if something breaks, right? it takes six months to make the thing or something. >> the big gear the transformers, the switch gear
7:35 am
the lead time on those products are really long. it's hard to upgrade that and take care of that stuff. so it's an area of concern. >> these run on natural gals. what has to happen for these to not actually work? the natural gas line? how does the natural gas get into the generac? is there power there acquired somewhere along the line? >> typically, natural gas infrastructure stays up even in the most severe of conditions. i think the only thing we've ever heard of where natural gas service has been cut is generally if you had an earthquake or something of that nature. usually the devstakes is very different in an earthquake than it is with a hurricane or something leak that. >> you have to make sure when you put the natural gas loin in, it is earthquake proof, too. >> do you have, i mean, is there money to be made in maintenance? have you been hiring people to make sure you can maintain these things in a timely fashion? >> no. i mean, we got a distribution network of over 5,000 contractors that are -- the
7:36 am
maintenance is really their economics in the category. so we different that to them. we actually sell spare parts to those guys. the guys out there turning the wrench, that's where they make their money. >> how many different sizes? they're a lot more expensive for a 5,000 square foot house than a 2,000 square foot house, isn't it? >> you can get into the category. we have small products that start out under $2,000. obviously, you bought the to have them installed. that can be a thousand or $1,500 for a basic installation. obviously, larger homes, if you want to cover everything, 5, 6, 7,000 square photo. that's a larger unit. can you pay upwards of $10,000 for a product like that. >> i thought your stocks would go down. it's not, but there are, when there is some type of -- something happens with like an attack of something, you see all the terrorist-related stocks, they go up after it happens, then they always go back down. yours went up initially on irene
7:37 am
and sandy and it's just kept going. i really don't understand. is there a day of reckoning coming? >> the sales are continuing. >> the sales, they got up to a new level an continued, right? >> yeah, i think the reason why we look at that, obviously, we're a bit bullish on the stock ourselves, obviously with the company. it's an underpenetration story. here you got a category of product. it's relatively new. it's been around since the late 1990s. every 1% of penetration, we're at 3 now, it's a $2 billion market opportunity. so you look at the scale, i don't think people really understand how many homes are out there. this is a pervasive problem. you look at the grid, you mentioned heat waves. you got storms, other types of failure points in the grid. it's a faraj i'll system out there. >> it's another ron behrend stock, too. he is getting rimp an richer on this one, too. >> have you ever been approached by another company who wanted to boy you, an industrial company or something, instead of recreation? >> sure. >> don't lie.
7:38 am
>> we haven't had anybody approach us. we have been private equity the ownership is down to 10%. again, i think as the category grows and people get awareness of this category there is bounds to be additional interest in it at some point in the future. >> thing to is up now. today. most people know about it by now. anyway, we appreciate your time today. a big quarter, 18 cents, 19 krnts above expectation. we'll see you later. thanks. >> thanks a lot, guys. >> take a look at the stock. it's up now. >> well there's another storm. >> it's $4. >> it's 10%. okay. when we come back, smoke signals from the fed could sepe keep markets on hold. we will get a preview of the fed meeting and talk about market reaction right after this. "squawk box" will be right back.
7:39 am
the federal reserve is kicking off aet pooing today. we will get more information from the american enterprise institute and christian willer. the debate starts at 8:00 a.m. eastern. d. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. .s
7:40 am
7:41 am
7:42 am
futures are doing better than they were earlier. merck is up. >> they both beat expectations. >> is now. it's unclear whether it will be up at this point and pfizer is going to be up a little bit. doesn't account for the move we are seeing today in the averages right now. >> the financial markets, obviously, have been in a holding pattern while investors wait to see what the fed's next policy statement will say. joining us is richard peter sen. he is president of capital iq. thanks for being in today. we got through earnings season, a couple say earnings have not been that impressive. there is a lot of blowups. others say these numbers are decent. what is your take? >> the fact that two-thirds through the process when they first reported on april 8th, we
7:43 am
had expectations of 3%. we're at 4.5, if you strip out financials, they have gotten worse with the fact that exfinancials, we were up .81st. now we're at .4%. three sectors has proven growth expectations over that period, those being financials, discretionary and health care. others have seen a decline in expectations for growth. >> consumer discretionary up 16%. things like materials down 11%. maybe there is a big divergence. >> plus, the story here, is the decline in revenues, right now, we see about a .6% decline if revenues for the second quarter. that's right by energy and materials. >> why is energy having such a struggle? >> it's a good question. you know, it may be a function of, you know, things better in the pipeline. it also can be a fung of just maybe the consumer being hurt a bit by the payroll tax holiday
7:44 am
going away, other variables. i think, you know, you can look out in the third and fourth quarter. >> the trends will probably reverse pretty spectacularly in the munts to come. >> that's true, you can make a comparison quarter from a year ago. i think, looking at what we see tomorrow, you talk about the fedex statement, by the time we get the statement, you got the gdp numbers. expectations is for one hand him, 1.1, the consensus to maybe 1.4. which our economist anticipates. it's a question of seeing a shock under 1%. that's the markets saying accomodation has to stay. the pact is if you look at again over the past five quarters, only two quarters have seen better than 1.2% growth in earnings financial. so accommodation, we haven't seen the earnings growth. >> go ahead. >> water holding the economy back? >> a good question. i think the fact is you have a lot of variables, i think obviously, one thing, companies
7:45 am
are very profitable. you have a lot of cash on the balance sheet. the fact is perhaps the employment issue is being, you know, held back by that. by that, i pine, you know, companies, why do we have to hire? if our profits are so high or our cash on the balance sheet is so high, i think, certainly, too, obviously, we didn't know what direction the fed will take, you know, going out in terms of what accommodation will stop. you look at the fork fed survey of primary dealsers, their expectation were for the summer using the $65 billion per month. >> the other things, the financials have completely outperformed every other sector. >> if you talk about hard industries like companies that have international markets, they don't, their market in europe seems to be extremely slow. >> and conversely, china is, people sense that china is overstating its economic growth. maybe the markets aren't there, either.
7:46 am
>> it performs a small cap. it outperforms larger caps riently. >> rich thank you very much for coming in today. >> my pleasure. >> generators are loud. that's the one thing. >> you do get used to it. >> zombie zone. >> they attract the zombies. >> do you have a lot of zombies? >> you would want a quiet generator. >> you'd be dark at night. >> rrr. just wondering, can you make them quieter. is it possible to make a silent generator? is there that technology? maybe they're working on that. i'm going to message, if i can get an e-mail. up next, one of the most respected names covering big pharma will join us to talk about pfizer and merck. barbara ryan of fti consulting is on, we talked to her yesterday. at the top of the hour the fed
7:47 am
kicking off a two-day meeting. we're going to find out again for the thousandth time whether the fed should start tapering sooner or later. christian weller from the center for american progress will join us. "squawk box" is coming right back. .
7:48 am
7:49 am
7:50 am
. >> this was a clip from the new prime time show, mav's marcus who joined us on set. >> idiot, take off the hat. you look ridiculous, take the hat off if you will work for me. don't you think?
7:51 am
>> he was impressive. he was the real deal. he joined us earlier, he earned investments, it's his $2 million he puts into it. he makes money on most of them. the properly of "the profit" the "today show" right now. >> awesome. >> "the profit" is premiering tonight at 10:00 p.m. eastern and pacific only on cnbc prime. >> this first one. >> will he hire you? >> can i start a business and have them give me an app and he gives me money? >> he wants. he will look closely at the financials. yeah. popcorn, things like that. >> merck and phizer were out with earnings early this morning. joining us is barra ryan, manager of fgi consulting. barbara, we saw you yesterday. we talked about both of these reports. anything that surprises you in
7:52 am
either pfizer or merck versus what you said yesterday? >> no, let me go through, if i can, real quickly. was a penny ahead of the street. they did lower revenue guidance for the year by about a billion dollars. pressures of generic competition as we talked about yesterday as well as currency, accelerated purchase programs in the $5 billion announced back in may of a total $15 billion program as well as strong cost controls will allow them to maintain the gains that they had originally given per earnings per share for the year of 3.45 to 3.55 t. market was a little brave. you knew their leading drug for diabetes, they actually beat in the u.s. and came if roughly in line in what they expected a billion-and-a-half. i guess the stock will be down a little. not much news to report there. pfizer did report also in line and maintain every element against guidance.
7:53 am
they have repurchased $8.7 billion worth of stocks yesterday and will purchase mid--teens billion dollars this year. i think after i was on yesterday, they did announce, which was kind of expected, that they are going to split the company into three businesses. one, their innovative core, which would be the info rate issive products and pipeline that we talked about yesterday. the other, their consumer business. the third, their sort of off patent mature brands. >> so out of all the product sales you saw with both companies, januvio was weaker? >> i think people were very worried it would be weak. it actually sort of -- the street's expectation of the quarter. >> anything amiss with pfizer or merck? >> you know, i point out in pfizer's case, they have been introducing a whole number of
7:54 am
new oncology products. business was up 28% and will be a part of this core that the company, you know, will be creating. >> all right. and any updates on any of the pipelines stuff that got your attention? >> nothing new that i saw. you know, that will be as i said yesterday, that's what people are going to focus on, obviously, on the conference call. >> who has the best pipeline, merck or pfizer? >> i think pfizer clearly has the best pipeline in terms of the outlook for both in some oncology business as well as the cardio vascular business and the arthritis business. they just introduced a few product for rheumatoid arthritis, which was just launched on the first oral agent in what has been an objectable market which is about $23 million around the world. also, they've obviously created about $17 billion in incremental
7:55 am
value for their shareholders by spinning off their animal health business. now they're going to break up the company even further. so i think they have been much more aggressive company in terms of not just the pipeline benefits that we're seeing but also just restructuring the company. >> do you think will restructure? >> well, there is certainly a lot of pressure for them to do that. they have been much more married to the diversification and not inclined to do that. i think the question is, you know, given the underperformance of the stock, will they ultimately have to go in that direction? >> all right. barbara, thank you. present it for having us. all right. there are some, we are told there are quieter generators, but they are larger, more expensive. >> you put them at your neighbor's house, you tap into it. >> rrr. >> they are working on, the next generation generators that with
7:56 am
sound abatement, not necessarily -- not just because of the zombie, obviously -- >> it works -- >> you don't want to call attention into it. you know, this is better. i did this the other day, i watched at home. when they do get on, it's the upper lip. it's the upper lip that seems to go. >> information you can only get on "squawk box". >> you go to zombie school, zombie training to be on "walking dead" down in georgia. there is a place. a lot of the zombies have in common is the upper lip. >> you are close. >> it's very thin. >> i think he is very close, don't you? do it. let me see. >> are you a si sf ma person. you have a real job. >> i have a small reputation. my wife would never forgive me. >> you won't? >> i will have lipstick all over my face. for the way.
7:57 am
>> you are our obviously zombie. >> when we come back, the fed kicking off a two-day meeting today. kevin hasset and christian weller will tell you what to expect from tomorrow's policy statement. "squawk box" will be right back. golden opportunity sales event to experience the precision handling .
7:58 am
7:59 am
8:00 am
. >> the central bank kicking off a two-day announcement. >> closing arguments beginning in the fabulous exfab goldman trial. we get a live update outside the courthouse. >> sec o, to watch in our "water working now" series. the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" on cnbc. i'm joe kerrnen. our guest host is judd greg, former senator, former governor,
8:01 am
currently the ceo of sifma, the largest lobbying trade association. more from judd greg. he's a down abby guys, not a "walking dead" guy, i'm both. >> they mixed the two shows. >> there is a natural synergy. >> you know who could come back? the guy that croaked. >> either within of them could come back. >> matthew. >> our zombies coming from the north. over the wall. >> you know, it could be a long winter. it's coming. we will talk more with your lobbyists. you admit. basically, capital profits. >> not a popular place to be in this day and age. >> well, it needs to be. otherwise, this country will not be -- >> so you don't feel bad about lobbying for people that want to earn a profit. not just to do things because they're generous and virtuous. you think a profit incentive
8:02 am
still makes sense? >> i absolutely think this country cannot prosper going 40 unless we have an understanding of our roots. >> we need you. because d.c., there are people that beg to differ. >> there are unfortunately a significant number. >> significant. a powerful place. >> it's sort of french culture. >> judd is our guest host. he will be with us the rest of the morning. merck reported earnings of 84 cents a share. boat estimates by a penny. stock is down about 9 cents right now. pfizer's earnings also beating the street by a penny. the company re-affirmed its full 84 gains of 210 to 220 a share. stock is up by 6 cents right now. in political news, president obama is speaking today at an amazon facility in tennessee. he'll be proposing the grand bargain for middle class jobs. plan would cut the u.s. corporate tax rate and use revenue from an overhaul of
8:03 am
business taxes to fund job creating projects, does that sound like a good plan to you? >> it sounds like a good plan. redirecting the revenues make nos sense at all. one of our biggest problems in this country today is we have a tax law which incentivizes people to invest for the purpose of avoidinging thes rather than getting the best return. >> if the corporate tax overhaul was a part of all this? >> i'm 100% for a corporate overhaul and individual overhaul. we should get our rates to mid-20s at the highest and let people invest to create money and create jobs which makes the economy much more efficient. what was suggested there. >> i don't know the rest of the clip. >> is that we take the revenues and we re-invest them for you and tell you how you create jobs. the government is not very good as creating jobs and productivity. >> a great 350es. you know this guy that talks about renewable energy? >> no, no, he's smart it talks
8:04 am
about how much money was spent in a couple of other europe pine countries on renewables on green fuels and, for example, in one of the countries, german has paid more than $130 billion in solar subsidies. yet the carbon dioxide reductions will only postpone global warming if you believe it by the end of the century by 37 hours. 37 hours it postpones it by 37 hours by the end of the century. it costs $is 30 billion. >> the great irony is. >> let the marks decide. >> the irony is because of that paradigm shift, we will produce energy at a lower cost. >> the saudis are worried we are going to hit our kyoto numbers had we signed on, we will exceed them. we will be much lower than kyoto, europe will be much higher. >> look at the lead story on
8:05 am
"the financial times." u.s. shale threatens saudi, diversify away from oil. >> wit a second, if the president is proposing a corporate tax overhaul, that would go a long way towards meeting what the business community has been clamoring for. >> absolutely a. corporate tax overhaul is absolutely what we should do. it should be tied to an individual overhaul, if you separate the corporate rate from the individual rate. you gat individual rate at 42%. if you are living in new york city, your tax rates are around 60 cents, of every dollar goes to the government. but you said a corporate rate of say 28, 2009%. then you skewed the tax laws again. you got to bring the corporate rate in line with the individual rate and bring them both down and actually simp bobles proposed a plan to do just that. >> that's so dead. >> wait a second, i would think that would be something you jump
8:06 am
behind. >> it was the second part of the sentence that bothered me, redistribute the money. >> i think we should let him do it the way he wants to do it. i think we should just sign off on it. >> that's one of those zombie positions. >> yeah, that will work. how are you going to get, knowing where the two sides are on most of these things, i mean, this, is this a real bonified olive branch right now? >> yes, actually i think it is. i actually think the president has done, made three proposals which are totally legitimate in the area of fiscal policy. one is this corporate tax proposal, which he talked about earlier the second is changing the cpi capitalization, with i is absolutely huge. not in the first ten years, in the second. >> because of entitlements. >> he can't deliver on that. >> he's made a number of suggestions in medicare, which would be very significant shifting to an alpha-based system. unfortunately, now you' ethe house members sort of stepping back from it. they don't want to get drawn into an entitlement agreement
8:07 am
which get killed with in the scene of the accident election. have you to have the senate reach the deal. there is an aggressive -- my cloaks said yesterday they think it is more substantive than in the past. there is opportunity there. it's a long ball. >> what do you make of mccain? he misses the left media wing adulation, doesn't he? he's back there where they're starting to like him. >> john has always marched to his own drum. that's one of the unique things about john. >> they loved him, hated him, starting to love him again. >> it doesn't matter to john mccain. if you know him, he gets up in the morning, he has an idea, sometimes he doesn't -- he goes for it. that's one of the really endearing things about him. >> we vetted julia, she know what is she will say here, time warner cable and cbs battling over fees with no resolution, despite a headline last night.
8:08 am
julia, i said if homeland were actually in its current run right now, this would have never gotten this far, there would have been too much of an uproar i think if people didn't have show time. >> well, there is a lot of question of how much this blackout is that big of a dole. it was during summer when there wasn't as much premier programming. joe, cbs stations temporarily went dark mid-notice eastern for 3 million time warner cable customers in new york, los angeles and dallas. about a half hour later, both side agreed to keep programming on air while the negotiations continue, agreeing to an extension until friday at 5:00 p.m. eastern. be you this time came only after planning accusations in a series of one-hour extensions to the deadline to announce the blackout time, time warner cable issued a statement saying outrageous demands forced time warne cable to remove programs
8:09 am
for the or lineups. cbs' demand are out of loin and unfair. they want time warn tore pay more than others pay for the same programming. it prompted cbs, ceo to say we are at war with time warner cable. during the brophy blackout, cbs accused time warner cable of engage income a public campaign of disinformation, and voodoo mathematic, saying cbs remains resolute in the pursuit of fair compensation, we will make sure time warner cable subscribers are aware of the short hfd sided anti-consumer strategy. at strak the transmission fees, with i that expicture it to quad droup to him a billion dollars by 2016. cbs is looking for roughly double it's current foe t. two sides will eventually co him to an agreement the question is how long it will take, what kind of
8:10 am
price increase they will agree on. so, joe, i guess another question for you is, would it take less time if homeland were on right now? >> you are absolutely right. it's summer, it's not the season for those things. yeah, i think are you right. you know, this is not going to be. >> there are some shows like -- show time has a new show called ray donovan, i don't know if are you a fan of that one. >> good, there are so many. >> wasn't he the labor secretary? >> i knew him. he lived in my neighborhood. it's confusing. >> where do i go to get my rep takes back? >> this isn't the end, julia, that's all i know. >> this isn't the end. >> this is going to keep hang. i don't know the answers. i'm glad comcast is playing both ends of the deal. >> it is not the end of that debate. julyia thank you. it is not the end of this next debate, the fed is kicking off a two-day policy meeting today. joining us right now is christian weller, professor of
8:11 am
public policy boston and a senior fellow at the center for american progress. kevin hasset at the american enterprise institute. kevin, why don't we start things off with you? we know this is the fed policy meeting. we aren't expecting to necessarily hear about tapering immediately. you think this is something we will hear about in year? >> i guess, absolutely. in keeping with the zombie theme the zombie inflation is lurking outside, it hasn't began knocking on the door yet. as soon as we get a strong jobs number, i think it could easily be above 200. then the fed will get veriancy. then they will have the "night of the living dead" when everybody freaks out. it may be september. they can go back, 50 cents, by fewer bond and say they started tapering and manage market expectation. that's ma we are looking at.
8:12 am
the economy is very solid. >> the walking fed, evil fed? anyway have you dead, you can put if fed. >> night of the living fed. is pretty good. >> sorry. sorry. >> do you think we would see something in september? there are some people that said with the lower gdp numbers, that would push things off a little bit? >> i think we will see something happen later than september. i am not quite sure that i share kevin's optimism about the labor numbers. clearly the gdp numbers are coming in tomorrow according to expectations. but i think it takes more than one or two strong months in the labor market for the fed to start talking about tapering. i think at this point the fed is sort of wants to really like send out a yawner in terms of its statement. it wants to be kaumpblts it wants to clarify its position. i think it's in a hold-and-see
8:13 am
pattern of clear an has been a lot of noise and i think they want to get away from that. it's clear from everything we have seen that i think the fed and the board would clearly take a number of months of data before they start talking about tapering in any serious fashion again. >> do you really think the markets are going to allow them to do that? once it sniffs there is serious tapering coming on, or it's coming? isn't there a rush for the door? we saw two months ago, almost a side comment. >> i think that was cautious. i think part of it is i think they will try to be cautious. i think the fed has also always been cautious. that's been a legacy since the greenspan years. >> they've never had this much money invested. >> i think september will be two early before they start talking about it. >> i get the sense they are already talking about this it's a question of what they're willing to tell the outside
8:14 am
world s. that what you think, christian? >> well, i think it's sort of what we do mean by this they have said sort of hedged it, we might do tapering in some form. we will slow to quantitative easing the bond buying in sandstorm form or fashion, if the labor mark improves. so they have left that door opened with the last minutes, but, again, i think it's going to be october before, october/november before we see serious discussions. >> do you think? >> clarification in that. >> do you think the announcement of the chairman, the new chairman affects this? does just the announcement affect it and if it's somebody other than janet yellen, for example, does that affect the market's psychology where the fed is going? >> i don't think so. but, kevin, we have a different position. i think janet yellen will be much more continuation tan larry summers will be because she is
8:15 am
already the fed. but if, for instance tlvgs an announcement larry summers would be the new chair. i think there will be clear statements he will continue the fed's policies of emphasizeing unemployment and job growth at this point keeping close eye on inflation, clearly emphasizing job creation and unemployment at this point. it's more a communication strategy than anything else. >> kevin, who do you think should be the next fed head? >> i think janet yellen is the best kwauchld shows on the inside, if they were to announce mr. summers, they'd have a contentious thing. he has enemies on the left and the right. i think would be a real mess. he might well get confirmed. i think yellen would be a layout. she is extremely qualified and already on the inside and would be a non-partisan for continuity. >> you can't distinguish between
8:16 am
the kin mas kinsian who is more macho? janet yellen or larry summers? i thought she was more dovish. someone sitting here yesterday said larry wanted to do more stimulus he's kinsian on steroids. >> i don't think if they're both markazian. >> than each other. >> if elizabeth warren -- she's got her own, harvard on harvard. >> careful with her. her own little organization will like put on youtube videos. they're crazy. >> christian, guy, thank you very much. by the way the fed's policy statement is scheduled for 2:00 p.m. eastern time tomorrow. cnbc will bring you live coverage an water going on with the mark reaction tattoo. "first" by bright eyes
8:17 am
you're not just looking for a house. you're looking for a place for your life to happen. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments,
8:18 am
and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.
8:19 am
. >> joining us now is ceo of a managing firm. with all the indexing, sometimes
8:20 am
being a great shock pecker it goes in and out of favor. it's the way to go, still? >> i still believe that. more so these days. >> the markets at this point are supported by fed policies or supported by underlying fundamental also? >> i think it's both. it was a fundamental driver since '09, corporate profits are up over 100%. so i think that was the big driver, liquidity, of course, is a big factor. especially this 84. because this year, we're up 19.6 on the s&p and 75% of that gain has come from an expansion of p.e. multiples as opposed to earnings. a lot of that is liquidity driven, low interest rates, the stronger dollar. >> what has been the inability for money managers to beat the averages recently? >> well, you know, i kind of always look at a group of money managers that are mediocre. it's like any other profession.
8:21 am
some of us still can boat the market. i think that the way to do it is act like an owner as opposed to a frenetic trader and actually arbitrage the differences or dislocations that occur by frenetic trading that causes under performance. you know, people are trying to time the market over the short term squiggles as opposed to looking, what's the big picture? which i think, by the way, positive when you look at the economy, the equity marketment i think the runway is a lot longer than most people expect. >> the company that you are investing in now. you've owned them for a while. what are some of your favorites? >> my favorite would be, let me give you the three favorites. one is generics. one is solutions to the big global problem of rising health care and the need for more usage of health care is generic trucks. my two favorite there is are
8:22 am
activist which we originally bought as watson pharmaceutical, right. and milan. both single digit multiples. double digits in the next five years. the second is the world of ecommerce and mobile. mobile penetration is expanding. they are accelerating. ebay is a major turn around story that plays it lou marketplaces and pay pal. so that would be another one. then the third area would be companies that. >> you don't have two in that? >> qualcomm is another one. >> still? how long have you owned that? >> years. >> amazing company. >> amazing company, as you know, 3g, 4g, they benefit from these trends. >> i haven't looked at the market cap lately, it probably would blow my mind. let me see. holy mole, 110 billion.
8:23 am
qualcomm 110 billion. we used to talk about it all the time. you earned it for probably 20 years. >> we got big gains in it. >> as well as all the others. >> what's the third area? >> companies that have benefitted from consolidation, with sun an area i hated for my whole career until recently which is the airlines. so the airlines never made any money. >> wow. >> i think they're in a seminal change to profitability finally as a result of shrinking capacity and cost reductions and restructuring, all the things that have happened over the last decade, now we're down to three major airlines. my play is u.s. air, lcc which will become mmr group. also the car rental industry the same things that happened. we have gone from eight car rental agencys to three. hertz is my play there. the airlines there with is only three major players. >> do you buy them all? >> no.
8:24 am
you know, they're all interesting. they might all move and probably will together positively, but these are my favorites in those sectors. i like the, you know, have a more concentrated type of portfolio, like 30 to 40 names that we know really well and that we think have the best risk reward ratioios. >> may i interrupt quick? we have been talking earlier about j.p. morgan case potentially settling. in fact, it has, j.m. morgan settled. it will be paying $410 million to settle those energy manipulation charges in california in the mid-west. earlier this morning, they had been fighting with the federal energy regulatory commission. they say they will be paying $410 million to settle those charges. >> i mentioned off camera. sass, your company i have known since the 1980s you have $8 billion under management. >> right. a little more than that. >> in separate accounts.
8:25 am
>> we have hedge funds, private equity funds and separate and traditional alternative equities. i manage the hedge fund and a mutual fund we just launched. >> only hedge fund and mutual. i thought you maybe -- when was the last time you were on, five, six years ago? >> it has been a long time. >> we'll see you again soon. we appreciate it. nice to see you. >> coming up, "the profit" he'll do whatever it takes to fix a failing business. the new cnbc prime show premiers at 10:00 p.m. we'll give you a special peek. first, though, eight of the top ten were american. we're going to tell you which company ranked highest next. .
8:26 am
8:27 am
8:28 am
. >> you got a mismax between buyers and sellers. >> you want to advertise, you got to funnel money to facebook. >>. welcome back to "squawk box." insurance company aetna earning $1 spoin 52 a share for the second quarter. that beat the street by 11 cents, it also raised its forecast as a gains revenue from enrollment from its acquisition of rival coventry, also, generator maker generac earning 95 cents per share. the street was looking for 76 cents. revenue also boat by a wide margin, although, the company
8:29 am
warns in comparison to last year, it may become more differently. remember, last year was after sandy. coach earning 89 cents a share tore the fiscal 4th quarter. matched estimates. coach also announced the departure of two executives. north american group president mike tucci and the president, they'll be leaving at the end of the august that. stock is down by about 5.75%. shares of spirit airlines under some pressure today. chairman william franke will resign at the next board meeting. his investment company will sell more than $12 million shares in the airline. keep an eye on pot ash producers, falk sharply after the breakup of one of the largest pot ash partnerships. it pulled out of its ven closure in belarus. it could drop below $3 billion a ton in the second half. >> lock at that. >> down 26%.
8:30 am
ing a griium down so%. the mosaic company down 29%. lots and lots of red ink. >> you could say holy hit did you because it's -- shidzu. topping the brands in china, kfc, you can die if you eat it. millward bloun, different in a positive way. and top of the mind ahead of others. 13 brand on the list were americans, eight in the top ten, including pamperin. crest, apple, mcdonald's, and coca-col coca-cola. >> i get it. >> i get it, too. i'm back to my smithfield foods thing, if they can get an
8:31 am
american brand over there. food safety needs to be worked on. it's paramount. >> they were saying people have been going for baby food infant and stuff. they have been going-on-out and bring it all back in. >> you are trying to feed a million, a billion, 300 million people, you don't have -- >> you are a free trader. >> you got problems. >> should we sell them our biggest pork producer? >> yes. >> we can't buy there. >> well, i'm not sure we want to. who would want to? >> when we come back the fed kicking off a two-day policy meeting, up next, exclusive results from the cnbc survey a. programming note for you. don't miss cnbc's reaction in the marks, that is tomorrow at 2:00 p.m. eastern time. [ male ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space.
8:32 am
yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan, unlimited talk and text on smart phones. now, everyone's in the spirit of sharing. hey, can i borrow your boat this weekend? no. [ male announcer ] share more. save more. at&t mobile share for business. ♪
8:33 am
8:34 am
. >> steve liesman is back with more from cnbc's fed survey. steve. >> hey, we have been asking for a while since the debt services exploded, what wall street thinks about the deficit
8:35 am
problem. i want to show you these striking rules of what's happened. we've asked people, is a deficit plan needed urgently? back in january, 80%. has come steadily down, 52% if april. now it's 40%. how about those who say you know what? we have a little time to do this. check it out. number is now the majority. wall street has chilled on the issue of the deficit. there it is, 52% for the first time, it's a majority saying we have time to do it with a deficit. to those who say we don't need a deficit plan, that's 8%. that's 6-4 of those who say that the deficit is not a major issue. washington not believeing the debt debate will be a big deal. 19% say it will be more contentious than last time. 44% say about the same. we are lucky to have former senator judd greg on with this. what about the probability of default?
8:36 am
more than half say it's not going to happen. there is zero probability that the u.s. when the debt ceiling debate comes ends up defaulting. 28% say it's around 10%. the average ends up being about 6% or so. these are just my thoughts. why has concern over the deficit come down? well the deficit has come down. it's now around 4 or 5% gdp. it had been 10%. it has come down. you have the sequester in place. essentially, have you something, a plan, maybe not the optimum plan. also a concern over reduction in polling we have shown, wall street believes that the sequester and the tax hikes at the beginning of this year were worth about a point to a point-and-a-half of gdp. finally in europe, you can read all about the cnbc survey on cnbc.com. we have more coming up on the mark, how much of taper is built in? so, joe, that itself the story
8:37 am
about what whooet wall street thinks about the deficit. a lot less concern than there has been the beginning of this year. >> you have to talk about fannie and fred difficult. you have to talk about automatic people that sold stuff last year because rates were going to go up. that was a one-shot deal, too, right? they took profits because it will mean higher rates this year. it might be, when we report earnings, are these non-recurring items? >> i think some of it. some of it is definitely true f. you are not adding to it. i think you have the sequester in place. i think it's having a real effect. >> when do they start embracing the sequester in the obama administration? >> within they do that? >> just because it's obviously, they're taking credit for the deficit coming down, be you they still hate the sequester. unless the republicans get credit. >> so far, the obama administration has not embraced the sequester as something that they like. if you talk to jack lew, which i
8:38 am
have done several tiles, he said it is something they would like to change, i go es the correct answer to your question is when it is politically beneficial for them to do so. >> hey, rick, i'm bringing you in with this little factoid. it turns out that i don't know the white house is putting out some balloons about the numbers. just so you know, that has nothing to do with obamacare, it has to do with the sequesters an us a territory. in case you were wondering, i want you to know up front that you are wrong. it has nothing to do with the affordable care act. it's a sequester. >> in the world we live in, it doesn't matter what the facts are. i say, let's do a survey and see what the people say. let's do a survey on the there are to see who doesn't want to pay taxes. let's do a survey of, you know, 18-year-olds, see who wants to raise the speed limit to 100? why do we live in a society where we think just because a
8:39 am
majority of plurality of wall street or any street gives credence to a notion. this whole new political spin on deficits don't matter the anti-us a territory people are winning over stimulus. alls i know is the developed fakes are a bunch of blind mice and they're being led by a bunch of toothless kiddies. >> you don't like our cnbc survey? i got the guy sitting right here, santelli. >> i didn't say apg about the fed survey. steven likened me to the notion. as i was listening, people now don't believe deficits are a problem. who cares? they are a problem. you could get everybody to vote on an issue. it doesn't mean it is or isn't accurate. you know today, reading the newspapers about on one hand the "journal" talking about energy and over here how germany is regretting. on the other hand, i read about the epa. >> i agree with you. >> who crowned these people?
8:40 am
i don't know, checks and balances is out the window. i know we have an expolitician at the table. how can we get rid of lobby. >> he said the president never needs to pass another law because of the way he's handling these actions, right? >> first agree with rick. >> we have people unelected that may clause. >> executive order. >> we don't feed any of them. >> i agree with rick's them more rat view on this. he's absolutely right t. deficit is a major problem. it's not an immediate problem in the sense it will crush our economy or cause a fiscal crisis by having the dollar be under severe stress in the next year, year-and-a-half. but you can't hitch your having a deficit gdp crossing that 100% line, which is where it's headed, if we don't get it under control an expect the currency to survive. at some point you have a huge deficit. so you got to do something on
8:41 am
the deficit. there is actually a, whoing coalition in the senate to try to do that. the white house made legitimate proposals on that issue. i would hope they come to agreement. the next pressure point is the debt ceiling. i think it's 100% we don't default on the debt. it's a hostage you simply can't shoot. it's a point where hopefully the sides can come together and talk about an agreement, which would lead to another step getting it under control by replacing the sequester. >> thank you. that was a them more rat -- temporate and responsive -- rick, thank you. you didn't get too much to add to that. you looking pretty good today. you agree? >> i wasn't really attacking your survey. >> just because wall street says it's not concerned doesn't mean not certain e concerned is right. i'm picking up. >> it's the messenger. >> we will have much more from
8:42 am
our guest host judd greg and ahead the star of the new prime time show "the profit," he is putting $2 million of his own money to turn around businesses. we will give you a sneak peek at one of the firing moments of tonight's premier. to update our status without opening an app. . the new blackberry q10. it's time. [ male announcer ] here at optionsxpress, our clients really seem
8:43 am
to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's top 10 options trades by volume -- and get ideas! yea i have an idea: how about trading that in for a salad? [ male announcer ] so come trade at the place that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-280-0154 now. optionsxpress by charles schwab.
8:44 am
8:45 am
. . >> i'd love to hire them. >> why don't you? >> they pay me a lot for cars. they're honest guys. they're not dishonest. >> it's not about them being dishonest or honest. it's about having a fox in the manhouse. where you make your living off of selling cars and the mar jen between those cars. you buyt for $10,000. you sell it to them for 11. they sell it for 12. they make a spread between you and the next person. >> timeout. in your world, maybe that's how it works. okay. in my world, it's different. okay. this isn't bakersfield, california. this isn't dallas, texas. this isn't chicago. this is new york city. it's my town, okay. i know what goes on here. i know my guys. don't tell me about my guys. >> you don't know anything. have you until the end of the day. they go or i go.
8:46 am
>> it gets a little heated. that was a clip from the new cnbc prime time show "the profit." earlier this morning we spoke to the star of the show mar just le monis. >> i was employed by autonation in the beginning. >> did you learn at the feet of wayne. >> at the feet of wayne, lee icoco a family friend of mine said get out of the car business, you will never make any money. get into this space the rv an caring space, will you blaze a trail. it's been good. up with of the thing that's been different, we put our money in, we do it to make money. not that i'm an altruistic guy myself. people are always the challenge in this business. in any business. i tell these guys, if you want to be a big business. every business in this country started as a big business.
8:47 am
you have to follow these principals. >> that was pretty good. i like that clip. >> he was on with the trumpster. he was on "celebrity apprentice." so that guy that says you got to the end of the day. he probably heard the donald say "you are fired." he probably knows how to do that. >> in this case, marcus is putting up $2 million of his own money. >> i would have fired that guy. he's arguing. >> you have to tune in federal government to find out "the profit" starts at 10:00 p.m. pacific time on cnbc prime. >> are you fired. >> he needs an audience. do you still have that job? we used to have "you are fired." i think we still have it. we got to get that back out. >> in the meantime the city of richmond, california is about to become the first city in the nation to use eminent domain as a way to stop foreclose years. this comes from the front page story in the new york times
8:48 am
today. sifma is one of the first to oppose this move. our guest host from sifma judd greg. eminent domain is where you come take over part of the house or yard to put a rod or a factory through. this is very different situation. >> it's very difficult. it's not foreclosure. it's basically folks whose property value isn't up to the mortgage they have on it. as a result they can't sell it. they're basically paying their mortgage but they can't apoured fear mortgage, so water going to happen is the town is representing a group of people in the town representing they may come in and use eminent domain to take the mortgage and resell it at a lower rate. >> basically, back to the people. >> that seems to me to violate the constitution. the public, eminent domain is for public necessity. that's not an exercise in public necessity, it's if you bought a stock, it wasn't worth what you
8:49 am
paid for it. where does this stop? private property is at the essence of the market system and at the essence of our system that creates prosperity. you are really threatening the concept of private property when you do this. more equally important, you are threatening the price of mortgages for everybody else. because, obviously, whoever is lending in the money is going to have to price in the threat the town fathers may take the mother-in-law out from underneath you and not allow you to recover the money you invested. it will affect those people paying the mortgages. in the end, it's really bad public policy on top of. that plus i think it's bad constitution. >> i can't imagine this would survive court challenges. >> you wouldn't think so. obviously, the folks orchestrateing this, it's a private group selling the concept that you can do as a community can you come in and do this and resell these emergency
8:50 am
at and get actually maybe public guarantees, which it would seem -- >> you are harping on profit again. >> i like that. >> you do to be -- >> you are harping on the profits again. >> yeah, like that. >> you like profits? >> yes. tomorrow it is milton freedman's birthday tomorrow, and should we mention it tomorrow, becky? >> yes, sure. >> because the freedman institute is offering someone who knew milton well or an academic from the foundation to come on. >> and yes. >> and we have one more day with sorkin out the talk about the profits in a good way. >> oh, come on. >> we have one more day, and wednesday would be a good time and andrew timed it to come back after milton freedman's birthday and so he would not be here. >> right. capitalist, too. he is. >> sorkin? >> yes. >> all right. >> he is. >> i can't comment on that, but our economy does not go and the people can't pass on the debt to the kids unless we revive the
8:51 am
economy. >> and now, over in newark, appare apparently, there was the arrival of theresa and joe -- wait a second. that's not -- look at you with the hair. >> there's a look. >> it is coming up on -- oh, man! coming up, closing arguments. put those up. closing arguments in the fabulous fab and ex-goldman sac trust scott cohn is joining us next. coming up on "squawk box" two major points that could move the markets. we will get an early report with the adp private payroll report and a look at the gdp in the second quarter and we will bring you the numbers and the market reaction and instant analysis. you can't afford to miss "squawk box" starting tomorrow at 6:00 a.m. easternch ted . making it easier to try filters and strategies... to get a list of equity options...
8:52 am
evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
8:53 am
8:54 am
an update on the fabulous fab trial and the exgoldman sachs trader is accused of defrauding investors in a mortgage deal and really six years ago? >> yep. >> defense rested yesterday without calling a single witness. scott cohn joins us now with a beat that he loves so much. >> right back here in front of 500 pearl street, joe.
8:55 am
big day as the closing arguments will get under way shortly. fabrice tourre has said that he is out to make a statement about the prosecution of financial fraud and given the burden of proof of the government is lower than in a criminal case, a bit of a gutsy move by the defense not the call a single witness, but she did that and that mean s that the jury will be left with the final live testimony of the man at the heart of the case, fabrice tourre who is accused of intenti intentionally misleading investors of the role of paulson when the housing bubble was about to burst. he spent three days on the stand trying to clear his name arguing that he was a cog in the wheel and not the central figure that the government says he is. he finally got a chance the
8:56 am
defend the e-mail that earned him the nickname, and remember he wrote to his girlfriend and the whole building referred to it that the financial markets are about to collapse any time now, and only potential survivor is the fabulous fab, and standing in the middle of all of the completion, highly leveraged and exotic trades. he said he wrote it in a time of stress and he was not serious, and no, he was not aware of any misleading en formation in that cdo. 2 1/2 hours that each side for closing arguments and the case could go to the jury tomorrow. guys? >> yes. e-mail, evidence mail. don't put it in the the echt mail, scott, okay. talk to me in person if you say something like that. >> all right. and coming up is last word from our guest judd gray.
8:57 am
"first day of my life" by bright eyes you're not just looking for a house. you're looking for a place for your life to happen. uh-oguess what day it is!is??
8:58 am
huh...anybody? julie! hey...guess what day it is?? ah come on, i know you can hear me. mike mike mike mike mike... what day is it mike? ha ha ha ha ha ha! leslie, guess what today is? it's hump day. whoot whoot! ronny, how happy are folks who save hundreds of dollars switching to geico? i'd say happier than a camel on wednesday. hump day!!! yay!! get happy. get geico. fifteen minutes could save you fifteen percent or more. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan, unlimited talk and text on smart phones. now, everyone's in the spirit of sharing. hey, can i borrow your boat this weekend? no. [ male announcer ] share more. save more. at&t mobile share for business. ♪
8:59 am
today a cnbc exclusive. soaring stock, expanding global reach, record ratings on air and in social media, a discovery communications plans to keep growth going fresh from the earnings call 10:30 eastern on "squawk on the street." look at this sector of the day. the fertilizer stock, and what is the name of that dog, becky? >> the pug? >> no. >> golden retriever. >> no, the fertilizer stocks, the shih tzu hitting the fan. i wanted to spread the guilt around and the blame, but you made me say it again, the shih tzu hitting the fan for
9:00 am
fertilizer stocks. that is something that you don't see. because they have huge mark-ups and potash is on a plunge after breaking up with their partners in belarus. thank you, judd, for joining us. now it is time for "squawk on the street." good tuesday morning and welcome to "squawk on the street." i'm carl quintanilla with kelly evans and david faber, jim cramer with the day off. the case-shiller home index is out, and up on the composite, and some cities saw all-time highs going back to the crisis. we will talk to robert shiller in a few moments. meanwhile, retail mers the green,nd

117 Views

info Stream Only

Uploaded by TV Archive on