tv Squawk on the Street CNBC June 30, 2015 9:00am-11:01am EDT
whole thing can be hacked, right? talk about hacking the grid. >> you can't be scared of that stuff. >> he's a good ceo. see why he makes money? >> you can continue this conversation offset. >> thank you. that does it for us today. make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ >> good morning and welcome to "squawk on the street." we are live from the new york stock exchange. the latest s&p case shiller price report has been released. you can see the results at the bottom of the screen. let's look at futures this morning. we are looking for a positive open after that hit yesterday. it got worse as the day went on. how about the ten-year note yield. yields coming down as there was a flight to so-called quality.
that also picked up during the day. we're talking about a ten-year note yield that was 2.45 at the end of last week. there's the dollar index nature that was surprising yesterday. overseas in europe. let's look at the markets there. we may take our lead from them. for the most part let's call it even on the sessions over there. germany dax and france up a bit. our road map this morning starts with the end of the quarter. after that massive sell off yesterday, we are seeing green arrows. as greece readies to miss its repayment to the imf, it could be another volatile day ahead. it is not all about greece. puerto rico urged of bankruptcy in a tv address last evening. and a merger. an all stock deal with an
interesting component. i know jim has some thoughts on the fundamentals of the transaction. futures are rising and first half of the year. the s&p is negative as of year to date. stocks are at their worse session of the year. the country's finance minister in greece confirming it will not send a payment today but he adds he still hopes they will reach a deal with creditors. yesterday, jim, you put on the old hedge fund manager hat and looked at the market and said i'm not a buyer here. don't go for the first dip and it did get worse as the say went on although many arguments that greece is important but puerto rico had as much impact and china was up. >> the chinese government intervened. that market seems phony. i got up the market was up at
5. the government said we're having a communist party. turn that thing around. up 60%, down 20%? come on. chutes and ladders. >> people could have said the same thing about our market from '96 to 2000. >> they're not just using margins from brokerage. they're margining everything. it's kind of like when president bush said you can manage your own 401. everyone is managing their own money but they have never bought stock. i don't think they're buying something like verizon. alibaba has been hurt by this. there's a whole new class of destitute people. >> that's terrible. china up today. >> where we are going is more important in some ways. >> why? >> puerto rico everybody had it. rich people had puerto rico mutual funds had puerto rico.
a it turned out to be not so great and now everyone is scrambling about whether mbi is going to guarantee and what does it mean to not have interest payments for years. >> the critics there have pointed to the loss of population certainly working. you have over 12% unemployment in the commonwealth. it only was going in the wrong direction in terms of their ability to meet their interest payments and not to mention when it was '06 when some of the great tax abatements that allowed pharmaceutical countries to manufacture there. any number of reasons to be concerned but it was a shock yesterday when he came out and said yes, it's just math. >> we thought the federal government might say listen, we can lend a hand. it didn't happen. >> $72 billion in debt is more than any state in the nation. >> and it's here.
it's not in greece, and it's not like puerto rico can go turn to a chinese lifeline. they're not going to call putin the way tsipras did. i mean yesterday was a confusing day but i think we would have been down a percent off of puerto rico. >> and as for greece, we'll have to live with whatever is going to happen this week as we head toward a referendum. >> when we talk about things there was no widening the spreads. euro was up yesterday. mario track gi trumped everybody. i don't like the optimism of this up opening because the greeks have been completely intransigent. did they just wake up? they need 7 days where the atms don't work. not one day. that does not make it so the people are upset and remember,
what you're voting on is different. people think that in germany they're voting on you know what -- >> they're going to exit but the greeks are being told we can have a better negotiating position. >> it's not about -- i think tsipras finally didn't have the drachma and the russian back stock. he should have done this atm a week ago. now there's no money around. the imf was matter and the futures are up. terrific. well that's great. puerto ricoen government says good-bye to $35 million but the chinese market was up. europe is up. our market is up. our market is up why? because of conagra spinning off? >> a lot of corporate news to discuss. >> i think the markets should be flat. i wish it were down. what would our conversation be like? let's see who else is the next
june know or halo. >> did you see emerson today? >> it's the crown jewel. >> i know. we've got to talk about a lot of corporate news. we do want to get more on greece. and we want to go to our chief international correspondent for that on the ground in athens to bring us up to date on what's happening. good morning michelle. >> reporter: the puerto rico of europe incredibly similar places. big bloated public sectors, very uncompetitive economies relative to all the economies around them and both stuck in a currency union in which they cannot print their own money and therefore, their lack of competitiveness kills them. and then there's all the debt and everything else. so there's a lot of comparison here. no word on whether the prime minister is going to accept the last minute offer from the european commission which would give him an off ramp to see he's
one concession ahead of the referendum. that kind of news would be important. we'll watch to see what he says if anything. an update from the last 20 minutes. on greek television we saw they are reporting that some atms are no longer able to give the withdrawal limit of 60 euro. they can only give 50 because there is a shortage of tens and 20s. we'll see if that continues and what the situation is, but that's being reported by greek television. we're also really beginning to see the impact of the capital controls on businesses. the inability to get transactions done, overseas transactions, move your money around. it's really tough. we spoke with a 37-year-old guy who helps run his father's business that's a clothing manufacturer. started back in the 1970s in greece. he is a graduate of boston university. that's where he got his mba. we spent a lot of time talking
to him this morning talking about how he's been impacted. he supplies hundreds of stores in greece with brands of their clothing. he said orders have come to a screeching halt. there's one guy with 12 stores on athens and on monday they sold a total of 100 euros worth of clothing and then when it comes to getting any kind of trade transaction completed, it's impossible right now. >> yesterday i was informed that our orders were cancelled. >> by your bank? >> by the banks, yes. >> because? >> because they don't trust the greece banks. they said in order to continue it we need confirmation from your bank, but the banks are closed so i don't have anything to do. >> reporter: an lc is a letter of credit. it's important when it comes to
moving shipments around the world. >> michelle, thank you. interesting to see. that is the key here. what is going to happen to that economy. down 30% from the highs not that long ago from recent days. 11 million people. it's a struggle on the ground in greece. let's get to corporate news. willis group and towers watten have watson have agreed to merge. they are going to get shares and there will be a one time dividend. the combined company will be called willis towers watson. i looked at this this morning and i saw towers watson is bigger than watson. >> that's right. it membership inversion. >> you got it. willis is an irish company. now towers can convert.
it is interesting to know that towers is willing to take essentially a discount. it trades at the higher multiple. it's taking a discount on the value in order to be able to invert. if it was the other way around, which it would have dictated given the sizes -- >> there is driven by taxes deal. >> it is i'm told as much as $2 a share will result from the tax savings alone. the fundamentals are what i'll turn to you about. >> i've always felt there's too much capacity in the industry. these are companies that cover different accounts. you get europe covered, united states covered. they can do a lot of cross sale. i think it's a fantastic deal. >> benefits hr consults whereas willis is more risk management services but they're consulting to the same companies, i guess, although middle market clients are also going to be able to
migrate as well or perhaps offer a real benefit there in terms of potential growth into the future. >> but i think it's a powerful combination. you get the dividend. i don't know why you don't just buy towers watson up. even up as much as it is, it's a fantastic deal. >> it is an inversion. if you're thinking i thought treasury did something. they made it difficult but not 49.51. 80/20 where the combined company is only 20% from the inverted company, you can't do that anymore. or it makes it very difficult. >> towers does exchange solutions. towers does human a capital. willis does investment risk and reassurance. this is an opaque area to people who have never had to buy corporate insurance but this will be a very big competitor wow, i don't know. good companies.
suddenly we're up against a big one. >> and value act is on over 10 shares. >> they do a lot of things. >> they do. >> they also do a great job working the inversions. >> when are they going to bring them on? >> i brought jeff on a number of times. he's great. >> i know you brought him on. i was just hoping you could get today. >> he's promoting. coming up a strategy announcement from conagra giving shares of the food company a lift. jim is going to have some thoughts on that. and a former imf senior economist on the road map for sunday's expected greek referendum and what investors may be able to expect between now and that vote. here's another look at futures. we're looking far higheror a higher open after yesterday's significant
down doe.ay. a lot more on "squawk on the street" after this. by the time police arrive on a crime scene they could have little to go on. a vague description. a single piece of evidence. a partial plate number. with an app from ibm officers can now access over a billion police documents to find hidden connections and identify potential suspects. ibm analytics helps one hundred thousand officers work smarter every day.
exit the private label business. the ceo saying as i have intensely studied the situation over the last few month, it's become clear the time and energy the company is devoting to private brands require a suboptimal use of our resources. we're pursuing the -- the review of the private brands operations -- that's basically the key parts of it. >> i got to tell you, david. we don't talk enough about bad acquisitions. this acquisition from rol corp. and your buddy gary. >> my buddy? i often do that to you. >> you do. >> the wife's friend. you haven't tried that angle yesterday. i was going over how rol corp. was doing on this. they were doing $1 billion a quarter and here i see the private brands of conagra going
$1 billion a quarter. that number was helped 7 pgt by an extra week. in other words, this business had been not good and they made it worse and that's why ths, they could be very good. >> and there's an expectations i think if you take a look at tree house shares there's an expectation this will end up at tree house. maybe you can spin it but take a look at tree house shares up 3% before we get going. >> i begged them to come on air. they have a couple times. they just quietly make all that stuff you buy that you think is made by the store, and they'll do something with this but this was a disaster. by the way, it's not like conagra was natural and organic. conagra is brands. i don't know if you still use pam at home. >> i think we may. the stuff you spray on the --? >> you still use it?
>> yeah. >> applegate, hormel. that was a curious mixture. >> that's true. but your point is a good one in terms of bad acquisition. and roll corp. way to get out of it. >> in the m&a world, that's called a pantings. and we should point out the ceo is no longer. bad deal. see you later. >> pay the price. >> not always. in fact, rarely. >> how about the snapple deal? >> that wasn't a good deal. >> time warner aol? microsoft, i would give my whole video to aol. >> we have to talk about that. general therapeutics after
celgene agreed to invest in the company. this morning on "squawk box" the ceo spoke about the benefits of this transaction. >> i think this deal does two things broadly. it allows us to invest even more in developing our pipeline expanding the reach of the pipeline starting trials in other parts of the world and i think that's going to accelerate the speed at which we can get drugs approved, and secondly it allows us to go after other things in parallel. that will give us a number of advantages. >> he left out the third. >> which is? >> makes them rich. this is an incredible deal. celgene is going to pay $1 billion. 9.1 million shares. 93. >> stock closed yesterday.
>> stock was up 20 after hours. this is a new kind of -- >> you know celgene as well as anybody. you've spent a great deal of time. does it make sense to you? they're paying up here. >> this is maybe the best of this immune know therapy. celgene has stakes in companies. this is one as they've anointed june know and i think a lot of people feel it was an overpay but you need a chip in personalized cancer. that is the future. gene sequencing. >> up $14 right now. we'll keep a close eye on those. coming up we have jim's mad dash. let's look at the futures.
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to get up to 50% romantic-er romantic sunsets. making it the place to find a place for summer escapes. go and smell the roses. ♪ >> time for the mad dash now on this tuesday. you want to talk about the transports specifically the rails. >> one of the reasons why i haven't liked the setup and i don't like these up openings. they have produced so much heart ache.
the rails have been terrible. preannouncement risk for union pacific and david coal is going away. >> eve within yesterday's -- >> the nation is being krisz crossed. there's an important opening that's going to take natural gas and ship it west. coal plants are such a disadvantage versus mar seles and natural gas which is basically can go given away. coal is going away. david, coal is what norfolk southern is about. when you look at the cargoes, coal coal coal has always been the swing factor. coal is going away. >> what are they going to replace it with, oil? >> i don't know. maybe passengers. oil is going down because the pipes are being crisscrossed for oil. >> pipelines are getting done. >> yeah. that's one of the reasons why the stocks keep going down because there's too many of them
too. >> i thought we had areas where we had a glut where we couldn't get stuff out like pushing. >> remember the rig count is down a lot so there's not a lot of new oil coming out of the ground but the rails are a challenge. you can't make it up in timber or ag was ag is not that good. intermobile is good. that's why i think union pacific at some point might be a buy. >> when it comes to the market, we're going to see how it opens this morning. the bell is just a few minutes away.
you're watching "squawk on the street" live from the financial capital of the world. the opening bell in about 40 seconds. not much time to get to the key of the market which is? >> you cut me to the quick, my friend. all right. i'm going to say -- >> yesterday you said the banks. >> lows. because my friend wayne hood who was close to this company went
hold the buy today. you watch lowes. if lowe's works, that's the beginning of the domestic trade that makes us so we don't think about greece for about 36 hours. >> that would be nice. there it is. as we listen to the opening bell, back at hq, there's a look at the realtime exchange which has a lot of green as it composing itself. >> what a chance to sell david. what a chance. >> here at the big board, it was top build, a distributor and installer of inhalation celebrating the spin off. and at the nasdaq green plains. >> they're around the town. >> okay business. i don't know. i don't want to be
it's so hard. it's a thin market. we have that employment number on thursday. you know a fed governor between him and them will say question need to tighten. i'm just saying be careful. if you had too much stock, then i think that you know this might be a little bit of an opportunity. i see chutes. i don't like it up open like this. >> there are people who had taken risk off basically
multiples are high. m&a which i've said is going gang busters but feels a bit topee. earnings, there are questions. you bring them up all the time. >> encouraging people to come in and buy on top of this. this is a big game. up after being down 2%. are we only going to be down 1.3%? i'm waiting for a little bit of a pullback and i don't think we got it yesterday. i have 401 k money. i would like to do something with it but yesterday was -- let's get a little better chance. am i too bearish by saying caution? >> i don't think you're being bearish. let's talk a few of the other corporate stories we didn't get to. emerson electric shares up 1.5%.
the company saying that it is going to spin off its network power business. it will be the world's leading stand alone provider of thermal mapgt. ac and dc power. for the data center and telecommunications industries. network power, they expect the spin not to take place until 2016. that's a big deal and they go onto say they're exploring strategic tri. they'll conduct a complete review and assessment of corporate structures to bring them into alignment with the smaller scale and sharper focus. shrink to grow. remember that one? >> dave far is really expressing some urgency here. he's the ceo. decisive action. the quarters have been miserable. the orders, they've been terrible. people just kind of say, this
doesn't matter. i think that's a mistake. i still think emerson is a great american company and if far is going to do what he has to do to get this stock going. it's amazing to do shrink to grow. take him at his word. there's some value in this company but the quarter is going to be bad. but there's value. i was surprised by this. >> again, creating a new publicly traded company. >> it is shrink to grow but the vision is very good. that's -- data centers need power converters and emerson is the king. i thought this was more of an important but i know that you have earnings risk and it's not like greece is making it so there's less earnings risk. greece is slow. i felt it deserved the better move than this. >> it's at 2%. microsoft announcing a deal with aol. you referenced it earlier. it's funny. the whole press elise is aol, aol. it is verizon.
aol is verizon. aol does not exist anymore. they don't even they we're owned by verizon. the news itself -- >> is it okay to mention it? they can call it vaol. >> any time you want to talk i'm ready. they announced a global enterprise management partnership. there are. basically all the important market, many of the important markets in the world, they'll represent aol they'll inventory from microsoft's suite of leading brands. if aol were a publicly traded security it would be up. it's not going to impact verizon. >> david, this display add business is oh ho ren douse. it's not even a business. it loses its cacher every quarter, but the video business
is very good for verizon. i'm not afraid to call aol verizon. >> no. >> and i think that that was a win. it's also a coupe. there's so much money in this business. i mean, it was clipper like. >> they paid huge multiples. >> huge. >> huge premiums for a couple of the smaller deals. >> they moved everywhere bad. >> 6 billion for an adage. >> it was whatever was not hot they went into and whatever was really good they stayed away from. it was remarkable. sat which a has maybe not as good a hand. look at me. a buddy. amy hood i know cfo, but it was like i give up when it comes to display and armstrong of verizon picks up a video business that people feel can be monetized.
hasn't been as well as i would have liked yet. but that was a big piece of financial use that would have at one time said the death of display is here. which it is. >> pentair shares are up. flow control things of that nature. train taking a position in the company. the company fairly constructive is tryann here. they seem to be aligned with management in terms of wanting them to pursue deals not to sell but to buy. you don't always hear that. by the way, i will be jointed by the principal of trian. we'll have an opportunity to talk about it. the first time we've heard from them after losing with dupont. >> saying if this thing and that had gone right and that and this
and that had gone right, they could have made the quarter. >> now, pentair had already said they wanted to make technology solutions acquisitions in m&a and also what are quality systems platform in when i see water quality, i wonder if that's not what per kin elmer has. the perken elmer, i want to make this deal and they never say yes to this. pentair would be wise to saying yes to werken elmer. i think that's a match made in heaven. i just made it. >> finally wanted to hit kwal come qualcomm. jana the big activist fund wanting qualcomm to explore whether to split off the whip business. its chairman paul jacobs in a
presentation i believe it was in seoul korea said there's no plan to spin off the chip business at present. he said that in korea. going onto say we've had that discussion for a long time. many years the board has looked at it but we still think the synergies of having the companies together outweighs the dissynergies. that according to reuters. >> people feel they need to make an acquisition. the name is sky works. people feel they have to buy the avagos of the world. avago is a good company and they are roll up and the roll ups are working. roll ups are working. >> roll ups are working and avago is one of those, very aggressive. we've seen a lot of them but i argue that's a little poppy. it feels a little topee.
all the roll ups and throwing out stock wherever they can or borrowing it cheaply. to what end? >> we don't like the setup. i want a little bit of a wish wash. we talk about the crescendo of sell off. did we have it? maybe. look, maybe this is the greatest rally and i have one of these scenarios that say the germans blink, the greeks get together and it's all fabulous, but it hasn't really worked out so far yet like that but fairy tales do some true. they could happen to you. >> let's go to bob with more on what's moving this morning. >> 100 points back in the 300 point loss. take a look at the rallies. a tough time yesterday as we saw a decline in rates. energy also rallying. industrials and materials over in europe europe is a little on the bixed side. we don't know what the state of
negotiations are. things have been bouncing around. some in positive. some in negative territory. shanghai is the amazing one today. shanghai again today moved 10% on an intraday basis. that's the lunch period over there. they have two periods. this is the second day in a row there has been a 10% intraday swing. this time it ended up positive f. the other day was on the downside. this is remarkable moves as nobody is quite sure what china should be doing right now. the first half is ending. i want to take a look at how we did and even though the s&p is only 2% off of highs, it's been a very schizophrenic first half of the year. some winners and losers. we've been talking about the banks benefitting from higher rates. health care has been a winner. right across the board with pharma doing well and doi tech and hmos and the hospitals doing well dwardtoward the ruling on the
supreme court ruling. a good example here home construction. we have great numbers on housing. lennar had great numbers but there's real affordable concernings. there's concerns about higher rates and that's weighing on us. this sector is fading. retail has been all over the place. i've never seen such diverseity. penny is up 30%. macy's is a modest winner. nordstrom has been a disappoint. . target has had a nice recovery for the year but walmart has been a disappointment and most of the apparel, they're all losers for the year. let's just call it generally clearly starting to fade on the retail side overall here. and then there are the groups in a down trend. transimportant transports, a lot of hand ringing. energy extreme enthusiasm in the first quarter trying to buy
the bottom in january and every rally has failed in energy as everyone realizes that the u.s. energy sector is not going to recover in the second half and they're taking down numbers for 2016. utilities and reits are also under pressure. here's where we stand. generally earnings are flat on the year. that will go up as we get numbers for the second quarter. sales is the real problem. that's what we need. if you want to ask yourself one question, what do we need to kick start to rally in the second half? have to have more sales growth. less buybacks and less cost cutting. we'll talk more about the seconds half tomorrow. back to you. >> great thinking. that's right. that's what gets us out. this housing and spending. i think we should keep in mind don't be too negative. that can occur. also don't get excited like buying stocks up when you could get a better chance. it's a long day. it's a long day. >> thankfully perhaps not the longest. >> no.
the other day was the longest. >> it was. >> see the sun rise yesterday? thing a beauty. >> i did not. rick santelli is in chicago. let's go to him. >> ten-year note yields are up this morning. shouldn't be any surprise. the reasons why it moved lower yesterday were really quite under debate. if you look at quarter to date charts and all the rest of the charts start at the end of the first quarter, you can see ten-year note yields are up close to 50 basis sounds. look at bund yields they're up maybe more than 70 basis points. ten minus twos. we talked about still coming out from the fed that they're going to raise rates. i'm not sure that the motivation for that is an imminent tightening in the minds of investors. dollar index is mostly down. not in a huge way. stocks are easy. goose egg. basically s&p is unchanged on
the year and hyj continues to make shoe lows. and now back to david. >> we'll be right back to you then, rick. >> i'm worried. the transports. this piece comes out and it's negative. they're all up. let some of them go. >> you mentioned the transports in the mad dash. >> and i think you have a chance. >> yesterday the key of the market was financials. today they're up. yesterday they got hit. >> we needed to see that yield curve. got to get better. we're coming into earnings season. that should be my favorite group but we cannot have the dollar go higher. we need the rates to stay the same. there's so many different variables going into the quarter. alcoa, they made an announcement. they have to close the deal to be able to come less aluminum more other metals. but look, i'm not happy, not sad. >> what does that make you?
>> there, a clown. >> let's get back to rick for the numbers. >> 49.4 is our june read on chicago purchasing managing survey. it's supposed to have correlation to the national number and then the domestic economy. but i will tell you this. that's under 50. you had february march, may, and now june under 50 for 2015 thus far. 49 .4 is the best number since it was above 50 which was in april. interest rates have climbed a little bit on that number. i'm not sure exactly why. we'll continue to monitor and update. jim, david, back to you. >> thank you very much. a test of new service. we'll be right back.
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>> reporter: good morning to you. we are seeing oil prices moving higher along with the equity markets. $0.57 higher right now. the low this morning was under $58 which was technically significant. we are bucking the trend of a stronger dollar but probably because oil shed more than 3.5% in the last week yesterday so you have traders coming here at this time. relatively at the low end of the range. where we stand right now. the products heating oil and gasoline are higher as well. that usually drives crude up and we're keeping our eye on the nuclear talks with iran. the deadline is tonight but the market wouldn't be surprised if these talks extend for the rest of the week. back to you. >> thank you. any thoughts on greece before --? >> this is ongoing. >> there's a lot of new headlines. they want a two-year deal. it's unclear. >> it will not be over until we see the drachma. the continues will continue until the drachma sings.
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two eco systems. rbc with a positive piece about fitbit. this is an eco system. they're talking about grabbing an evolving market. they're talking about far thr units shipping than i thought. i've been a bull on fitbit and then apple. this worldwide connect they have where you can talk to artists the fact that the taylor swift album that we all want is exclusively available on apple. >> with the three months are the beginning of the testing music service for apple. >> and i don't know about you but my kids are all traveling. they're pandora and spotify and they're excited. they're taylor swift oriented. i think this is meaningful. >> you do? you think there's more to it?
>> possibly, yeah, but i think the main thing is that apple is a stock that people are giving up on rapidly and i suggest that that's premature. >> it has been premature in the past to have given up on apple. it's $125 a share right now. >> and then it does nothing for a long time and then it has good phone sales. i think the apple radio is being underestimated. i think it's important. >> what's on mad money tonight? >> i'm going over these ipos. there were 13 last week. that's nonsense. i'm looking at ten of them and i'm going to tell you some of them need to be sold like yesterday. >> so the quality of ipos is strained? >> the quality of ipos bothers me. it's not over until the drachma is printed but i don't like the fact that there were 13 ipos. a lot of them are things i don't want you to touch.
not that their puerto ricoen mutinies. >> get out? >> it's not going to be one of those rosy scenarios where you're going to finish the show and say wow, cramer is bullish as i'll get out. it's not going to happen. >> coming up you and i are never going to break up. no. >> i told the wife that's never going to happen. >> good. >> we are v breaking news on consumer confidence at the top of the hour. and then ed garden coming up.
♪ good morning and welcome back to "squawk on the street." i'm simon hobbs along with sara eisen and david faber. let's look at the markets. positive session. some news coming through from greece. we've managed to break four consecutive days of losses with the s&p where it is we're negative for q 2. >> greece turns out not the only
debt crisis worrying investors. puerto rico heading toward an historic default. plus downgrading greece and puerto ricoen in the last half hours. we'll discuss which one could be a bigger threat to the global economy and apple music launching today. find out if you should be buying the stock. >> we have breaking news with rick santelli an consumer confidence. >> we have a june read and triple digits. 101.4. the reason 101.4 is interesting, first of all, it's only the third triple digit we've had going all the way back to the summer of 2007. what's more, it's exactly the same number that we had in march measure 101.4. and the high water mark was january at 101.8 which goes back to the summer of '07.
it's a solid read as it has been all along as the s&p had traded unchanged on the year. >> consumers are confident. thank you very much, rick. >> okay. let's get some analysis on where we are. last trading day of the month and of the quarter. u.s. stocks stabilizing after yesterday's selloffs. investor still eyeing things in greece. let's bring in european's chief european -- welcome to the program. let me kick off with a strong read that we've got here on consumer confidence as rick santelli was pointing out, the third time in triple digits since 2007. you were hopeful we'd accelerate in the markets based on growth. do you see it now. >> absolutely. you're seeing housing starts and
sales start to pick up. you're starting to see consumer confidence improve and initial jobless claims at low levels. wage gains are coming back. these are all really important things to keep track of and greece and puerto rico are smoke screens and we encourage people to look past them. >> you can see that but let's look at the reality. if we end negative for the quarter today and that's a real possibility, that is the first negative quarter for the s&p in well over two years. so what went wrong in the three-month period and if you're so optimistic why is the market not rising in anticipation? >> i'm not sure it initially went wrong. we've been waiting for a pullback in a long time. even in bull markets, you get pullback and we haven't had one. we've talked about when the pullback comes, it's not on news you like and greece is a great example of that. what i'm saying is that the s&p
will probably take a little bit of a breather but if you start to look six to 18 months out, we should be higher. >> interesting -- it looks to me as if the market is relatively immune from greece unless it's kind of a shadowy hand that's kept it suppressed. >> i think it would cause more volatility but if people look at earnings and look at where valuations are, you're right in that there's a lot of positive things going on. i think you're seeing a lot of volatility but you want to focus on the trend which is much higher. >> we are about to get to the depths of earnings season. if that is what you think will drive the market higher what are your expectations for earnings versus where the market is expecting the earnings to come in? >> we think consensus is probably a little too negative. they've started to turn higher. probably very probably a little too bear herb with the weather and they were probably a little
too bearish on energy and the dollar. some of those affects will start to lessen as you go throughout the year. >> and which sectors would you see that? how do you trade that? >> for us it's still all about cyclical sectors. consumers start to resume their spending and gas prices are now down year over year. you saw the consumer is back, if you will. technology continuing to do well as people find more efficient ways to do things and then industrials is a little bit of a cyclical play for us. if growth starts to pick up you'll see a lot of that start to do well. >> stay with us. let's bring in morgan stanley's chief european economist. you're aware there are breaking news. there appears to be an 11th hour offer from the greeks to the rest of the eurozone that they should be able to access funds for the next two years.
how do you judge when push comes to shove, the situation in europe at the moment? >> i think it's very difficult to reach any agreement before midnight today when the current bailout expires, so based on news that we have from other european capitals it's not very likely that this last-minute proposal by the greek government is likely to be negotiated at all today. >> is it your fundamental view that greece stays within the eurozone and a deal is done or do things get messy with perhaps a no vote on sunday? >> i think it's very messy already. once the current bailout expires and obviously with the banks being under very strict deposit controls and with capital controls coming on shortly, it would get a lot more messy with a no vote on sunday but it doesn't get much better with a yes vote either and as a
result we have now a probability of grease exiting the euro of 60%. >> i want to ask you something important. a lot of people are focussed on why the euro rallied and there is an argument out there that it's about the chain. if you lose the weak e link the chain is stronger. it's a dangerous argument. it may be leading some into a false sense of security. some are suggesting that as greece erupts, they cash out some of their euro carried trades which perversely sends the euro higher. can you help us out with that discussion? >> yeah. there are several cross currents, and you mentioned, i think the most important ones. so at the end of the day, it could well be that with also other asset markets not taking a key direction from the greek situation apart from a material
increase in volatility as was mentioned earlier, it's difficult for the currency to find a clear direction on the back of the events in greece. that might change. longer term we would see the currency weakening, and if issue, indeed, we have the ecb come in and step in to contain some containage to the qe program, that might reinforce the trend but for the moment, as you said the currency is pushed back and forth between different cross currents. >> thank you both. >> let's go straight to athens now. what can you tell us about the latest in the conversations between the greek government and the europeans? >> reporter: well the, the greek government is saying they offered a counterproposal. all of it seems like a
nonstarter at this point because they'd have to get the whole eurozone commission back together again to actually have a discussion. i mean the hopes that anything would get done by tonight seems pretty unrealistic at this point. i think we're headed to -- inevitable nonpayment to the imf has they've made clear an an expiration of the program which is far more problematic for them and raises issues about what's going to happen with their banking system. there were a lot of hopes put in between tsipras and jean claude junker. but it hasn't materialized to anything concrete. we've always ended up having someone come in and crush expectations that something would get done. >> michelle, you played for us the clip of the prime minister on television last night. i mean, clearly saying do not vote on this referendum for this
bailout package. they're not going to kick us out of the euro and now there's talk he could change his position on the referendum. do you see that likely and does it matter where his position comes down with respect to where the greek vote goes? >> reporter: well the rumors were he had been offered this proposal of some kind but one of the pieces of conditions was that he would have to support the referendum. we kept waiting to hear what he was going to do and now a statement came out from the government saying he's still telling everyone to vote no so apparently that rumor is incorrect and he's still standing by it at this point. if he supported the referendum i think he's more likely to get a yes than a no but now it's unclear. >> and still not clear from the polls either. we'll continue to check back with now. greece not the only place facing a debt crisis. puerto rico facing a debt.
up next, we'll get a live report from sawn juann juan and an interview with the former governor of puerto rico. all of that when "squawk on the street" comes back. the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.
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help save the island from default. we are live with the details. good morning. >> reporter: good morning, sara. i'm in front of the capital building in puerto rico where folks are sorting through some bomb shell remarks made by the governor on monday in the new york times as well as in a televised speech last night where he said the country's economy was running into the ground as supported by government- government-commissioned economic report and that drastic action was needed. the urgency? is fact that some $1.9 million in debt payments are due tomorrow according to to someone i spoke to this morning across a range of bonds issued by puerto ricoen authorities of various types. much of that is from an electric authority but that $2 billion figure includes obligation
bonds. there's a lot of backlash against the governor. the local congressman and some market participants this is the same thing we've heard for a while. the government hasn't done enough to cut expenses and there's a process that needs to be honored but isn't. at the same time the governor is saying there needs to be len yen leniency from creditors. there's a number of hedge funds, including paulson and company n and fir tree to name a few out of the dozens. the u.s. so far seems to be shrugging this off this morning as well. and this morning in an interview, likesomeone likened the situation to detroit. >> this is the interesting thing. it's similar to detroit. we have are now facing what was once held as a contract, but when there's no money to pay, there's no money to pay.
>> >> reporter: we'll just have to wait and see how it plays out from here. >> thank you for running us through the latest details. and now we're joined by the former governor of puerto rico luis fortuno. thanks for joining us. >> pleasure. >> as kate just eluded to the political backlash people say this crisis is the result of government mismanagement of puerto rico's finances not focusing enough on the budget instead, focusing on borrowing money from the markets. you were in power until 2013. how do you respond to that? >> well, there have been different fiscal policies implemented. in my case on year one we cut expenses by 20%. we had a massive layoffs of government employees. that is not politically attractive but it's the right
thing today. by the same token, all the other measures further transparency and controls in the management of not just expenses but the management in general has to occur, again, additionally. there were major changes made. the private partnership program was ended years ago that was allowing to pay off some of the debt that have been incurred for decades but the bottom line is that for over a decade, puerto rico's economy has underperformed with the exception of tepid growth puerto rico's economy has been under recession for a balance of the ten years. >> when the current governor says the debt isn't payable. it's math and not politics, is he right?
is the commonwealth barrelling toward a default? >> i would look at credits differently. you were talking earlier in the report about the power authority and the authorities and other instruments, and they have their own income stream. and then you have the general obligations and the sales tax bonds. and those have their own income stream, and i would say that it is incorrect to say that it is impossible to pay any of the bonds. you have to look at the credits differently. each bond is different. and i would say that i was surprised. i thought that the announcement was going to be that there was going to be a process for some of this. public corporations are instrumentalities to restructure the debts but i think the bonds would remain untouched. there is a constitutional provision at the state level that actually protects go payments.
i envision that unless this has solved quickly, legal action could take place. >> where are you on the fact that the reside are not like detroit because it's not a municipality and whether or not washington would allow that so to the happen? what is the process and what view do you take? >> puerto rico is a u.s. territory and all the bankruptcy code applies in the same fashion as the 50 states with the exception of chapter 9. it permits municipalityies across the country to go brumt, but territories are excluded from chapter nine thus puerto rico does not have a process. even if chapter nine were to be enacted the puerto rico gos would not be covered because in the same way that detroit could go bankrupt but michigan could
not, that's why i encyst we ought -- insist we should be looking at different ways here. i believe that congress has has been looking at it. of course, after yesterday's announcement by the governor this may be more difficult but i was optimistic up until yesterday that chapter nine was going to be taken up by congress. >> the reason everybody is so worried about this in this country is of the size of municipal bonds and the fact that it has been a convenient and tax effective way for u.s. pensioners and u.s. retirees to be holding detd. what would happen if they had to default? >> i can tell you at the beginning of my tenure in '09, we were in a financial crisis globally. and what is happening now should have happened back then had it
not been for slashing costs 20%. it came at tremendous cost politically and other ways. we since then, we have seen detroit and counties and my feeling is that the market believes and a lot of people in washington believe that that systemic risk is not there. it remains to be seen of course. >> wow. all right. down playing some of the concerns there. this would be a bigger one than detroit or stockton or any of the other bankrupt cities. thank you for joining us, the former governor of puerto rico luis fortuno. >> up next on the show, trian announcing a big stake in pentair. ed garden will join us for an
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shares of pentair are up this morning after a fund taking more than a 7% stake in the country which makes various pumps and valves and things of that nature. joining us on the joan is ed garden. always good to have you, even if it's on the phone. why pentair? >> good morning. good to be here. why pentair? we think in a market that is near all time highs, we found a great value. we have a company that is a leader in its businesses, great brand names, great market shares strong balance sheet. generates a ton of cash and we bought it at a very attractive valuation. call that roughly 14 times cash epf. so in a relatively froth yi market, we're really thrilled
about the ability to become one of the largest shareholders in what we think is a great business. >> it's interesting you say relatively froth yi market? why do you think that's what it is right now? >> valuations are reasonably high but in this case david, we bought a company that as i said, is trading at about 14 times cash eps. let me just spend a minute on that. the company has a fair amount of intangible amortization. that's a noncash expense, and, therefore, gap epf understates the real free cash flow in this business, so we look at it on a cash epf basis similar to say, a valeant or cvs health who also tend to be valued on a cash eps metric, and we think that
increasingly the market will look at it that way as well. and we'll be encouraging management to talk about cash eps as they announce their earnings in the future. so as i said a prolific free cash flow generator that we bought at, you know a great valuation, basically about a 8% free cash flow yield and in this kind of market i think that's real value. >> the language not combatic. you talk about constructive discussions with members of the senior management team and the company seems to be describing this as a mutually beneficial arrangement, or relationship at this point. i'm curious, then, why even bother coming public? in other words, leaking to the journal or coming on with me not that i'm not unhappy to have you. why take a public stance at all if this is so friendly? >> well first of all, we're over 5% so we need to file a 13
d. >> right, but you could file a d and just be quiet. >> we need to state our intentions and that's precisely what we're doing and as we've made it clear, we intend to help the company be in the industry con solcon sol day or the. five or six of the top players make up about 25% of the market. this is a very fragmented business, and in pentair, we have a management team that is proven with regard to being able to buy companies and integrate. they did a great job with the tyco valves and controls acquisitions. the synergies in these types of acquisitions are very material. think about somewhere in the 5%
to 10% of sales being the synergies number. i think in the dana hur paul transaction, as we're talking they're talking about 12% synergies, and then on top of all that we have an advantaged corporate structure. this is a uk tax resident, pentair, when you add up the proven management team great synergies and an advantaged corporate structure, we believe that pentair can be the prudent industry con solsolidation and do very good things. >> we have to do but you spent a lot of time over the past year an dudupont. the stock is down from 80 to pbt 64 right now. why do you still own this thing?
>> david, we're long-term shareholders. we will be, as we said monitoring dupont very very closely. and you know what's interesting about dupont and pentair? if you think about dupont it was really a philosophical debate about how to run a multi-business. we were contending that management had failed to optimize scale and instead had become bureaucratic and bloated at the holding company's structure and that there was no accountability in the lines of business. at pentair, just the opposite. randy hogan, and the others have done a very good job of optimize optimizing scale and finding expenses that they can leverage like payroll or hr or legal, but without becoming bureaucratic or losing the accountability in the
lines of business. so they've done a very good job finding that balance between the lines of business in a multi-industry business and the parent company. and that's something else that we appreciate about pentair. with regard to dupont you know more to come there. their earnings are july 28th and we'll see what happens. >> okay. well done in taking it from dupont back to pentair. appreciate you joining us. >> good to be with you. >> next time we'll get you on camera again. >> i did a dupont interview last night to that point. greece and pr getting hit with downgrades with s&p. which one is the big eger threat and why. which has the bigger opportunity? ♪ i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one.
here is your cbnb update. president obama says more american workers should be paid for working overtime. he's proposing that any salaried employee paid up to $970 a week should be eligible for overtime pay. right now only salaried employees making less than $455 receive it. and more talks on the iran nuclear program. diplomats say they will confirm
that iran has met a key stipulation. the supreme agreeing to take up a case that could weaken public sector unions. it involves ten nonunion schoolteachers. and two uber france managers have been ordered to stand trial on charges including deceptive commercial practices linked to the service. they were taken into custody yesterday and will appear in a paris court september 30th. that is your news update this hour. let's get back to squawk. >> default watches continuing today. in both the u.s. and europe after the downgrade of greece and puerto rico. which one has the potential for
a bigger blowup. joining us is the head of ratings and standard. which one has the potential to be a bigger systemic threat? >> we have a similar rating on both. we think the potential fallout from greece is fairly contained because this is a crisis that's been going on for a couple of years. you'll remember in 2012 greece defaulted twice and that most of their creditors now, 80% of their creditors are official creditors, mainly the imf, the efsf and the ecb, and those entities can absorb the hit. in the case of puerto rico of course the creditors are investors in the municipal bond market and some hedge fujds. >> right. let's talk about greece. you guys put out a note yesterday that say the chances of greece kpiting the euro is
now 50%. i think that surprised a lot of people an wall street the odds being so high. with k can you walk us through where you came up with that and the finance minister is now confirming they're not going to pay the payment today. >> the situation is extremely fluid. and we think that the likelihood of greaseece defaulting on the imf payment is very high almost a certainty. however, at this very moment the headlines coming out of brussels is that greece may be seeking a new program that the government officials have put forward a proposal for a two-year package that would be funded and not include the imff. we have to see with the details include, but the situation is very fluid. in terms of the 50/50 chance that they leave the eurozone the government officials, at least as of yesterday, had
called for a referendum this weekend for a yes or no vote on whether or not to accept the package that has since been withdrawn by the creditors, and that is being interpreted by many including their creditors, as a plea to side on the eu. if they lost complete access to their funding, particularly the ecb funding, the banks would not be able to be reopened and that would lead to economic distress. >> just in a practical sense, to clear a couple of things up. if they don't pay the imf bill tonight, which they're clearly not going to pay, that is not a default. that's more an arrears on a private debt. we can kind of mush that to one side. people are saying that the bigger issue is to the point you're making july 20th when they actually owe the ecb money
and if they don't pay the ecb money at that stage, the ecb is kind of forced by the hawks on the governing council to say that's it for the banks. is that accurate? >> the money to the imf, that could be a missed payment, like a missed payment on anything else. and they would go and there's a series of steps that ensue from having missed that payment that become more and more severe in terms of the relationship with the international monetary fund but our ratings which right now are at rock bottom speak to the ability of them to pay their commercial debt. the next bond is i think the 14th of july. now, the ecb has been keeping their banks on life support. they have something like $89 billion of ela that come through the bank of greece and more that comes from the ecb. they can turn that off at any time. and if there was a missed payment to the ecb, they would
be forced pretty much to call these loans and that would make the banks insolvent. >> let's say this vote goes no on greece in sunday. do you have to look at the credit rating of some of the other weaker members on the precedent that would set? >> i don't think so. so far the market reaction has been fairly muted. as muted as anyone could have hoped for. we think the channels of contagion have been addressed by establishing the omt that can be put in action at the ecb. we think the europeans, have at least for now enough tools to keep the contagion contains. >> thanks for joining us. >> thank you. >> we'll see what happens. the head of sovereign ratings from standard em pores. >> for more on that let's bring in a view from ben steel who's
from the counsel on foreign relations. welcome. that was a big statement. effectively, investors in this country don't need to worry. was he right? >> i think he is. the prime minister's best friend in these negotiations is market chaos, and we're not seeing this. peripheral bonds in europe have stabilized. this strengthens the hands of the euro group creditors. >> right, and what do you think of how the greek prooimgsime minister has played his hand. >> he had a lot of sympathy and roam and he dissipated all his good will. i really think that he's mucked this up very seriously. >> do you think he'll be the prime minister by the end of the year? >> i don't. i think the referendum is going to come down with a yes vote. at this point the euro group creditors are going to put him in a corner. they're going to force him to resign or make him look like a
hostage. >> you said last night on television, i think the expression was, he wasn't wedded to the chair. he's hinting that he would go. in many senses this is about him and the control of greece. >> i think he's going to have to go otherwise he's going to be a hostage reading statements written by his creditors, but there's a game that comes after that. are we going to get an immediate new tech government? they can say we want to stay in the euro but we still want -- >> some people say they can have it both? >> americans want to lose weight and eat cheese burgers. >> is there any way to know what happens if there's a no vote? how messy is the process, really? >> it's really messy. i think the crisis with the ecb comes before the 20th. if there's a no vote on sunday the ecb has no political fig
leaf anymore for continuing with emergency liquidity assistance. the banks are asphyxiated and the greek governments will need ious. >> thank you for joining us. ben steele from the council on foreign relations. >> and when we come back apple music. we'll get a first look at the service coming up a little bit later.
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>> nine of the 5 s&p sectors. energy standing out at as the top performer. among the leaders, va ler ro energy. and phillips, the refining locks up by 3% or more. the energy sector we'll keep that in mind. interesting point here, energy that sector overall, the best performing sector on average for the month of july over the last ten years. back over to you. >> that is a good step. let's get over to chicago. the cme group with rick santelli. >> i have the san telly exchange and i have the woman that represents the group that put out the information for chicago pmi. a mixed bag. let's hit the highlights. 49.4 was the headline number. four out of six months below 50
for 2015. employment lowest since november of 2009 minus 2.3. >> this is what you get when you have production and new orders hovering around the break even level. you need to take your unemployment levs down here. we're hearing this is mostly part-time. >> this is fascinating to you and for viewers not familiar with your data set backlogs, why should we be concerned it's at the lowest level? >> this is your ganguge of future business. this has been below even. this is the big key for me. inventories down 46 .9. i ken vision that purchasers can take these down to the high 30s, three 40s area before they feel
underinventories that they don't have enough stuff to get out. this number being down i'm concerned it's going to go down next back. >> let's rewind. what happened about a year ago now? inventory bills were going crazy and everybody was excited and we saw a jump in the economy but this is a nice forward indicator, is it not? >> it could be but i'm not sure that we're going to get the bump. >> i'm looking at it the opposite. the last time we had the big bump it didn't pan out to sustainable growth. >> let's look at where we are right now. we're 49 .4. a year ago here's where we were. >> these were last quarter of 2014 versus where we are now. go through it. >> this is a year ago. we're 62.6. right now we're at the barometer at 49.4. pumping along a year ago in the high. high 60s. high 50s. we're just not there. the big problem here is we're lacking big orders. i'm hearing from a lot of
different companies. small companies, big companies. we have a lot of small orders. we're missing the big orders that require workers and require us to build our inventory. >> let me come up with something whether you agree or not. if we were going into recession in the next 12 to 16 months how would chicago pmi look? >> it would resemble this but what we like to see is the barometer down three months in a three. >> down sequentially three out of six months in a row. >> that would show us going into recession in about nine months. >> final comment, what should we pay most attention to in regard to future investing? >> i think you want to watch for inventories. what i'm hearing from purchasers is they're going to start to build about mid july. >> what word did they use? you said there was one word that kept showing up. >> hopeful. >> i will end it there.
alice, and the pmi respondents are hopeful. i don't know how to price that but the fed might have missed the window maybe it was last year. back to simon. >> rick thank you very much for that up. up next june was not a good month for apple. the stock falling more than 3% with apple music debuting today. we talk to an analyst who thinks it's got 50% upside from here. plus, he's the former prime minister of greece. as was his father and his grandfather, george papandreau will join us for a live interview on the continuing crisis in his country.
apple throwing its hat into the music streaming ring. can apple leverage its hundreds of millions of i-tune customers to become more or less instantly the front-runner against spotify? here with more is dan ives technology expert at sbc capital markets. to explain, now you'll be able to users can stream songs and albums on demand that they choose. and or they could have 50 radio
stations do it for $9.99 a month or $14.99. >> this is significant, it's been a sea change for am it shows them going more moo streaming. we view streaming music, we believe streaming tv comes out late they are year into nicks year. this is about apple looking in the mirror cook and county realizing it's not just about the hardware it's about the software, that next generation and even iphone growth in app in china is the core growth right now, it's about building it out for 2016 and 2017. >> we believe the single greatest opportunity for profit growth notwithstanding the launch of new device categories is the ability to leverage of the closed ecosystem. the call for you is $60 upside on the stock, 50% more or less. >> we continue to view it as a trillion-dollar market cap.
i view it as stuck in the mud. apple as investors need to have comfort in that growth for next year the iphone 6 growth and china is the story. it is about hardware sales then? >> in the near-term, it's about hardware. building out the software will be the next leg of growth. >> if i'm a spotify user which many, many people are and that's the dominant player why would i swip to apple other than taylor swift and "1989" which convenient enough for me. but for other people? >> this has been apple's golden touch. it's about the ecosystem. it's about them adding more content. and really it's about them tapping into the billion ios devices sold to date. i think you're going to see them get more aggressive on content. this is the tip of the iceberg. >> when you say aggressive on content, what does it mean? >> they're going to continue to
add talent proprietary music. they're going to significantly invest in this area as software streaming, wearables, that's the next little piece of growth. and this this trial period is going to be significant. which is why they did the turn-around with the taylor swift because they need to show adoption for the next few months to show that this is going to be key. >> good to see you. dan ives from fbr capital markets. let's send it turnover jon fortt with a look at what's coming up. >> we'll be live from greece with the former prime minister george papandreau. and it's launch hour for apple music. coming up right at 11:00 eastern we'll have a review of the beginnings of that service and uber. it's losing money, it's growing fast. what dot latest numbers mean if we'll cover all that and more coming up on squawk alley.
♪ ♪ good tuesday morning and thanks for joining us on "squawk alley," carl is out, but simon hobbs is here for the whole hour. jon fortt is here as well. we have a lot going on this morning. first, let's check in on the markets which are holding in positive territory. right now all three major averages are positive. by just about a third of 1%. it comes as the eurozone is set to discuss the latest proposal from greece in a conference call that will take place at 1:00 p.m. eastern. former greek prime minister george papandreau will be with us live to break it down in just a few minutes. we'r