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tv   Squawk Box  CNBC  August 14, 2015 6:00am-9:01am EDT

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>> live from new york where business never sleeps, this is squawk box. >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with andrew ross sorkin. joe is on vacation today. our guest this morning is peter. good to see you. thank you for coming in. >> thank you for having me today. >> history set to be made in cuba for the first time in more than 50 years. the american flag will fly above a u.s. embassy in havana. john kerry will be there for the ceremony. michelle is there as well and will be joining us with a live report later in the show. but first let's get to the markets. yesterday the markets finished essentially unchanged for the second day in a row. this morning you're looking at modest decline with the dow futures to open down by 19 points. s&p futures off by 3 points and nasdaq down by 7. >> a couple of big stories this morning. a number of big stories right now. china central bank trying to sooth fear again overnight
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sticking with the argument that there's no basis for continued currency depreciation. now ending the three day devaluations streak when it set the midpoint range today. meantime in europe early this morning greece's parliament approving the draft of a third bailo bailout. nearly a third of those in his party oppose the bill. reports say tsipras will call for a confidence vote in parliament after greece makes a debt payment on august 20th. that could lead to a snap election and mean more delays and we'll have more from our colleagues on all of this in a minute. here's what's going on. jack lew is making a push for congress to approve the iran deal this morning. the deal offers a long-term solution to one of the most urgent threats in modern times. he argues rejecting the opinion
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of other countries involved and tougher sanctions would result in cutting off allies from the u.s. dollar and financial system. so he's making a financial argument. he warns in his words, we would set off extensive financial hemorrhaging. not just in our partner countries but in the united states as well. >> that may be the case that arguing finances when you're talking about the issue of security doesn't read well. i'm interested in hearing the argument but i don't know that it's going to sway anybody and how they think about things. >> at this point, everyone has their views. >> he's not really arguing. >> this is the secondary argument. they're on the merits of whether it's a good deal or a bad deal and then the secondary element of how do we look if we don't do the deal. >> particularly because there's
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people that come down on how they feel about this and i don't think anyone is going to be swayed by a financial argument beyond that. >> let's hope. >> goldman sachs is buying ge capital banks. u.s. online deposits. financial terms were not disclosed. shake shack options will be trading today for the first time since they went public. this has been trading everywhere between $34.64 and all the way up to $97 since the at a beau. that should help boost at the hand for options. also a mixed quarter for applied materials. earnings in line but revenue was like. nordstrom beat the street on the top and bottom line. interesting. same store sales here noah rising by nearly 4% in the latest quarter. that stock was up by about 5%. >> what are they doing right? >> high end? i don't know. >> customer is in a different
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situation. >> you think they're a cut above the macy's. >> they're also less reliant on foreign buyers than macy's is. >> they're all selling the same stuff but at different price points and that's the main difference. >> maybe different label. >> different labels, exactly. >> we should also tell you about el pollo logo missing the mark. dropping for the first time since the company went public last year. they're now cutting the comp sales forecast. that stock looks down about 14.5%. we have seen massive swings when you look at the stock reaction. just about any news that comes in earnings things look like they're reacting and this is one of those cases. king digital posting better than expected earnings and revenue but the company reported a 13% drop in gross bookings figures. that's the number that panicked the street a little bit.
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did put pressure on the stock in extended trading. it was down by about 9%. >> let's check on the market this morning. here's what's going on here in the united states. triggering a lot of what's going on abroad. we'll get to those numbers in a moment. nasdaq would open off about 6 points as well. s&p 500 down about 3 points but all of this is coming in part as a result of what's going on in europe when it comes to greece and part of what's going on in china. in europe it's a marginal story. hinges are a mixed picture. almost nothing to say about that. >> flat like the markets here over the last couple of days. >> and then asia is a bit of a similar story. looks flat now for the first time in quite awhile. let's take a look at the oil boards right now. talk about what's happening there. that's the other big major story of the day. wti crude under $42 a share. we're at $41.97 and that's
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something we'll be talking about over the next couple of hours and then we'll tell you what's going on with the ten year and then the dollar, 2.171 on the ten year note right now and then on the dollar, you know, again, we got boris here, we're going to talk currency in just a minute. it's a mixed picture and then finally gold, warren buffet's most hated commodity, investment right there, you're looking at $1,117.30. now let's go over to london and see what's going on there. seema has more about what's going on about greece this morning and the political implications for the market. seema. >> good morning. that's right. greek parliament passed a third bailout deal with 222 votes to 64. the yes vote came after a tense alabama night debate during which prime minister alexis tsipras told lawmakers the option of a bridge loan instead of securing the agreement would
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send greece back into crisis. euro zone finance ministers must now approve the deal to be dispursed suggesting the european commission is still protecting bridge loans in case it's not ready to make their august 20th payment to the ecp. this comes as they suggest tsipras could call a confidence vote as soon as next week in response to a deepening divide in his party. a new poll in the german newspaper suggests more than half of germans are opposed to a third bailout for greece and do not believe they'll implemented economic reforms and i can tell you the main concern from market participants is that greece is agreeing to the period top reforms but will they be implemented? the euro group head saying moments ago a check up on greece's progress on reforms could come in september or october. >> now, seema, correct me if i'm wrong, it's six days now that the rest of the parliament have to approve this at this point
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too? >> yeah, absolutely. that's the time line and of course the big thing to put on the calendar is august 20th. >> thank you very much. we appreciate it and obviously this one is very likely going to be another one that comes right down to the wire. back here in the united states there's been plenty of concerns about china and the slide in crude oil keeping the equity markets here in check. right now we'll bring in boris of bk asset management and our guest host to talk more about it. boris, we have gone back and forth about the devaluing of the yuan this week. depending on who you talk to they'll say this is massive currency manipulation or this is china trying to be a good citizen of the globe and allow it's markets to fluctuate more. >> it's a necessity for them because i think they're in sere krousse trouble. the much more interesting thing here is they created a much more
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market oriented exchange rate mechanism and the interesting thing is what happens when the bad news comes out. the next print misses and the market really tries to push the yuan lower, will they let the yuan float or try to come back and put the genie back in the botel. >> they already said don't believe the 10% decline. >> once you let it operate we all know it's going to push the yuan around. it will be interesting to see how the reaction is going to happen. it's harder to control. >> don't we have to put this into context? it's bare the brunt of fed qe. ecb qe. bank of japan, bank of england and they finally said enough is enough and we need to weaken it and let it float. but they're just following what
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everybody else has done. >> absolutely. it was a necessary step but they want to try to do it in a gradual way as the chinese always do. they could overshoot the other side and that could create more complications. >> although look if china doesn't want to be pushed it won't be. they have a lot of money and they have played both sides of the trade. >> they do. >> but it's is the same story. >> don't fight? when you try to let the market memorial service nichl work the policy makers don't have nearly as much control as they think they do. >> it's probably the case with what we're watching with all the central banks not only in europe but here as well. we're getting a taste of that. peter has raised a lot of questions about what the fed will do in response. do you think they push and raise rates in september because mostly economic numbers we're seeing here are good. >> if you're the fed and we've
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already gotten hints, i thought we saw the first in the last fomc statement. you've had lockhart comments and supposed hawk. >> i was convinced until we saw this move by the pboc. i wonder if that gives them pause or not. >> if you wanted to raise in september and you were planning on doing so before this news, a 2 to 4% depreciation in the yuan, that would join a long list of excuses on the part of the fed not to raise rates. i don't think they go for it. i think they do raise in september but i think it will be the last one for awhile but i do not think this changes their calculus. they still raise in september. >> goldman has a note out today about how the yuan's devaluations is going to wreak continued havoc. >> i think so. i don't think this story is over by any stretch of the imagination. i always believe it's actually very true there's going to be a lot more continuation. even if the fed does raise, i
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think the statement is going to be we'll raise the rates but we're going to keep them permanantly low for the foreseeable future which actually probably could create a decline in the dollar because the market would probably be disappointed in that move. >> you think that the market -- >> in other words, if the fed -- >> the equity markets will be upset about that? the equity market is going to love that. >> currency market will hate it. the dollar is starting to have doubts as to how serious the fed is in tightening monetary policy. even if they do it will be an anticlimactic event. some may raise rates by 10 basis points to make a symbolish gesture but the point is either way the market is unconvinced that this is the beginning of normalization. it's more of a symbolic act rather than a true statement that the u.s. economy is deserving of a rate hike. that's what you start to see in
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the markets. >> thank you for being here today and peter will be with us for the rest of the hour. have a great weekend. >> coming up, how do you get to sesame street. one of my favorite stories. there's so much different angles to it. it now involves a little help from our friends at hbo. you know those letters. we'll talk about that story when we come back but first a look back at this date in history. ♪
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welcome back to squawk box, among the stories trending this morning, a major change for a show treasured across the generations. big bird and the sesame street gang are getting new neighbors. kevin reports. ♪ >> fans of the beloved children's series will be taking a detour to get to sesame street. from pbs where it's been a staple for 45 years to hbo, better known as the home of tony soprano and game of thrones. sesame street already parody that with game of chairs. if you ever wanted to know how
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valuable the sesame street brand is to the toddlers of america. interview one. >> who's your favorite sesame street character? >> or at least try. 2-year-old david enjoys breakfast with his favorite character. >> what's a cookie monster waffle taste like? despite it's popularity sesame street needs the money from hbo. in exchange, new episodes will air first on hbo. nine months later for free on pbs. >> kermit the frog was a big character in our house. it's fun to pass that on to the next generation. >> these were friends i could go back to day after day. as for fans young and old, we all want the sail thing. >> i want cookies. >> i want cookies.
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>> cookie! >> nbc news, chicago. >> we all want cookies and more sesame street. when i first heard the news yesterday i was horrified of the idea that it was going to paid television because this was supposed to be the sort of nursery school for the disadvantaged. that's why it was on pbs and why it was free. when i found out it was going to be nine months later i was like okay great. as long as they're going to be on free television i don't think anybody cares and they'll be doubling the number of episodes. >> huge game changer for hbo first of all on the pay side of the conversation for hbo trying to play against netflix and they didn't have kids programming. so have sesame street total game changer. brilliant on their side. >> takes it off of netflix and amazon. >> genius on all sides from a business perspective. >> and it's still as popular as ever. >> it's still as popular as ever and then there's the major
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benefit which is you finally get more original programming. my kids stopped watching it because it's repeats. this bumps up to 35 plus they'll be able to create two other original series so that's the good news. the bad news the two-fold. one is pbs will get this nine months later and that's true but the problem is most kids today are now watching this kind of stuff streaming. it will not appear on any type of -- >> why they had such problems. >> that became the problem. used to be we would buy the dvds. kyle grew up watching it on youtube and the on demand stuff they had. >> it creates a huge problem for pbs because of the way people watch tv. >> it's going to be stale by that point. it does create a divide. >> i don't think it ever gets stale. that's why i don't mind watching it nine months later. >> there's going to be kids that watch it nine months earlier and kids that watch it nine months later and they won't be watching
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it in a streaming capacity and the other thing people are forgetting about is this is terrible for pbs. could not be worse for pbs. when there's a huge conversation going on in the philanthropic community yesterday. we contributed money to pbs over the years because of our grand belief in sesame street. if you now think that sesame workshop is a commercial enterprise. but are you going to contribute to sesame workshop? i think it creates very interesting optical issues. great in terms of new programming. >> they were not enough. we were going to see sesame street off the air if they didn't deal with the changes and i'm part of the problem. we watched on youtube. >> the secondary issue even beyond is there whether this is
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model. people have not made money on pbs. it's either been a break even or non-profit. >> but as long as the programming still appears on pbs even with a delay i don't have a problem with it. >> there's a market demand issue. if you can't create the programming you're right long-term it maybe doesn't matter. the question i guess longer term is does the pbs model even work. in this new age. >> this will be the test case. >> as long as the programming is still there. if they don't have to make money on it. if they're practically giving it away there, if they made their money elsewhere, what surprised me is that the licensing deals for elmo and everything aren't enough. >> it's a large part of the function of the fact that they lost the dvd sales and that's where so much of the money came from. >> you think selling elmo stuffed animals alone could sustain that. >> i look at the amount of sesame street products we bought. and we digit buy the dvds. >> the programming is
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remarkable. now that i'm involved with some of this tv stuff, the physical cost of putting together even one episode is astronomical. >> they had no choice. >> in the end though i'm glad because it means it's sticking around and we'll see more episodes and that's good. >> that's a good thing. >> yeah. >> in the meantime, we'll turn our attention to the smartphone wars. probably be able to watch sesame street on your smartphones in the future if not already. samsung rolling out two new smartphones and launching samsung pay. the new product taking direct aim at the competition and making a splash before apple's next event. let's talk about their next act with the senior editor at recode. >> good morning. >> good morning to you. the samsung phones do they matter in the grand scheme? is this a big event? >> yes for samsung and definitely people who are contemplating a switch to another brand. >> we've always had the
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situation where samsung tries to come out about a month before the new apple phone. >> yeah. >> when you think about the cycles, apple is on the tap cycle. >> yeah. >> so does that mean this is the year samsung wins the game? >> there's no reason that samsung wouldn't consider this an opportunity to try to take some of apple's thunder. that's what they have historically tried to do and we've got this moment right now. i have an iphone 5s and i'm sitting here thinking i realized in may why would i bother with a 6 when there will be a 6s in a few months. >> are you an upgrader? >> i'm part of that 27% that tim cook talked about the other day that hasn't upgraded yet. >> there's a new report out about apple tv and the plan to launch apple tv or a new apple tv box in september but the original plan was to have a live programming component. sort of a slim bundle of sorts,
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if you will and sounds like it's pushed out to 2016. >> this has been rumored and part of the grand narrative around apple tv for quite awhile and we've known it was coming. we've known there was going to be an apple tv part of this announcement. so looks like there's going to be new hardware getting a little dusty and stale and now we're looking at -- >> but the hardware is not the issue. it's the service that's the issue. but they can't get a deal with the cable operators which is what the issue is. i shouldn't say cable operators. >> the content companies and a lot of them are innocent but what's been interest as good that i have the apple tv and it's been really extraordinary to watch how many things were on it now versus when i bought -- i bought it in 2012 and it's gotten a lot of stuff on it now. they've got that part worked out. >> the word is that the price point -- they're trying to create a skinny bundle i'm told at about $40 which is about half
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of what a true cable bill really is. so the question is what's in that skinny bundle and what the margin is going to be. >> and the cable companies and con tentd providers is how they're going to react to these cord cutters. there's a lot of them waiting to grow and so, you know, i think you'll be seeing them being more willing than a couple of years ago. that's what is going to be so interesting but i don't think, you know, the word we have is that there's not going to be this -- they don't have news. they do have cnbc. you can watch it live on an apple tv and other networks. >> you have to be authenticated. >> you do. >> so you have to have a cable package. >> you do but there's probably going to be some way to authenticate. if you're a paid customer you can subscribe to hbo now and watch sesame street starting
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next year. and i think it will workout. >> it's probably the most important piece to the bottom line of apple and that's china. the phone, what is your sense? >> yeah, we've seen all the tech companies deal with currency situation. one thing cook has basically said don't worry quite so much. partially because they know how to hedge some of that. they can manage part of that. they're good at managing their cash. they probably have to raise prices. that might hurt them in china. >> thank you for coming in. >> great to see you on this friday in august. very nice of you to be here. >> i live right nearby so it's no problem. >> thanks. when we come back this morning, exposing the gender pay gap. a new opinion piece getting a lot of buzz. she will join us to talk about it next. first though as we head to a
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break take a look at yesterday's s&p 500 winners and losers.
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welcome back. the sec requiring public companies to expose the pay gap. it promises greater transparency but significant gaps remain between the pay of men and women and sometimes among those with
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the exact same job and exact same experience. joann joins us. she is a new york times contributor. she had a piece called let's expose the gender gap that ran yesterday. it caught a lot of people's attention. your point is a good one. this is a modest proposal. we'll be talk about the differences between chief executives and average employees. why not talk about the differences between men and women at companies too. >> exactly. when i saw the proposal which took five years to get through, you know ceos make more than the rest of us. why not publish the gender wage gap? we know it's been more than 50 years since the equal pay act was passed and there's a lot of new research that looks at
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apples to apples comparisons and what do surgeons make. >> women don't stay in the work force for as long. they drop out to have children. >> that's right. >> but the apples to apples shows you what really happens. >> that's exactly right. you see it in every occupation and tons of research that shows you this. my point is why not put that number out there, right? it's not that crazy because in the u.k. they're already doing it. >> they are. >> they're starting to do it. >> i would argue that what you're talking about which i think makes a lot of sense would have a bigger impact than the ceo -- i don't think that the ceo ratio is going to have. but on this issue it really would embarrass people in a different way. >> right. >> i've spoken with one ceo who when all the stuff came out said let's sit down and look at our own books and figured out that
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he was paying men more. he was embarrassed by it and changed the salaries immediately because a lot of times these are executives that say we would never agree with discrimination along those lines but they're doing it. >> these are not people intentionally discriminating. i'm speaking to these male executives. they're good guys and don't think they're discriminating. so once you put out in public that figure it gives you the basis to close it. i spoke with pwc and they talked about they put out in public their figure in the u.k. and even though they knew internally what that figure was, simply saying it outloud in public gave them the ability to say let's look. why do we have this gap. >> the answer wasn't that they then just raised all of the wages for women. it was sort of just change in terms of how they were thinking
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about hiring. >> when they did this analysis, first they did the broad overview which was a 15.1% gap and then what they did is drilled down and what they found was, okay, most of the gap comes because there are too few women in senior positions. they have 30% of women prepartnership level but only half of those people got promoted partnership. so they said are they promoting fairly? the second thing they noticed is when people were passed over for partnership, men virtually always were given a retention bonus to keep them from quitting. women were not. >> >> now you look into a lot of reasons for this. women tend to not ask for some of the same things too, right? >> correct. there's lots of research that women don't ask. men are four times more likely to ask for a raise.
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but it goes beyond that. it really does. >> do you buy the argument that companies with more women on the board or senior ranks do better? if you're a shareholder and this is a completely market based conversation, there's research on all sides of this. >> there's actually -- the research is pretty clear so when you have more women in leadership companies do better. it's not clear when you have quot quotas. that's not at all clear that forcing people to increase the number to a certain percentage is going to help. >> did you ever think that shareholders would be the ones to put the pressure on them to do this as opposed to mandating this a government rule. >> i'd like to see shareholders put pressure in the u.k.
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it was initially voluntary and five companies stepped up but when my piece came out yesterday i heard from a lot of executives that said i like this idea. i'm thinking about doing it. i heard from the ceo of go daddy that said just last week we skied we're going to do this. we're crunching the numbers and they're going to release their gender pay gap. it's fantastic. >> it would be interesting to see go daddy leading the way given their advertising campaigns. >> well, they're trying to change things up with a new ceo and it's a really interesting way to go but i do think this is the way to change the gender gap. put it out and there's so much argument around this it's fighting words, why not make it transparent because then we'll see, right? >> right. >> then those that argue there's no gap, well, you put the numbers out there and you'll see it. >> right. j joann, thank you.
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>> are there people that argue there's no gap? >> there's people that say the 22% gap, that that's the broad gap, that the census figures show, there's people that argue because women are in lower paying entries and because women take maternity leave that that's the gap. so the importance of all of this new research is it shows apples to apples there's a difference in every profession when you put in education, hours and experience. >> great story. fascinating conversation. >> thanks. >> when we come back we'll talk about greece because greece is approving a new bailout plan but why do some fear the drama is just the beginning? we have that story when we return. ♪ can it make a dentist appointment when my teeth are ready? ♪ can it tell the doctor how long you have to wear this thing? ♪ can it tell the flight attendant to please not wake me this time? ♪
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welcome back to squawk box this morning. among today's stories greek lawmakers are approving a third bailout. gina sanchez is the chief executive author and cnbc contributor and we have peter at the table. i'm going to go to gina first in l.a. you're in l.a. this morning, right? i thought you were in l.a. time difference is not good for you to be figuring out what's going on in greece right now. it does look like we have a deal but the big question this morning is whether this deal is going to hold up because the party may get overthrown eventually. >> that's always a possibility. with the greeks you can't really call anything out. i think that, you know, there's still a lot of questions as to whether or not the parliaments are going to sign off even after this vote is done through greek parliament and it's still going to -- there's still a little bit of wood to chop before this gets put to bed and that matters to
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the outlook for european stocks. there's a lot of people watching this to see what happens in greece. everyone is really, really looking forward to this being under the table or done, i should say. august 20th is a big deadline so i think we're probably going to come down to the wire. it's not -- this is the way it was before. it's probably going to happen that way again. i do think this goes right down to the wire. >> gina when we have folks come on the program, at least for the past couple of weeks the conventional wisdom is put more money into europe. that, you know, in term of returns in the u.s. it's going to be flat and maybe marginally up but if you want a real return you have to go to europe. is that right? >> it depends on how you look at it. european fundamentals are more mixed than u.s. mufundamentals. if you look at sales growth it's been abismal. but the expectations are that the area is going to continue to
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stabilize. we've seen expectations as high as 1.5% in terms of the consensus for gdp growth. that would be very positive. even if they came in at 1% which is the lower end of what we're expecting that's still going to be very positive for europe on a marginal basis in terms of where they're coming from and where they're going. earnings trends are stabilizing. a lot of the downward revisions have now come to a halt and they have stabilize and we're seeing margins starting to expand in european companies. it's difficult in the sense that these aren't solidly performing companies today but they have a lot more room to go in term of future profitability where as in the u.s. these companies have been, while still anemic mostly positive in terms of their growth. >> this is greek bailout 3.0. why will this be any different than the previous two?
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>> i don't necessarily think it's going to be any different. i think that the greeks have looked down the abyss and literally put themselves into a corner where they thought they were going to get something and now they're going to get something even worse. if you look at the way the arguments are happening in parliament it's clear this isn't going to be easy although i read this vote could pass with a comfortable margin. >> even from the german perspective or european perspective, why do they think this is going to be any different? why do they keep shoveling money toward greece? >> i don't think that you're getting the germans rolling over. if anything you see them holding out they were holding out for sometime in terms of being supportive of this. they're not exactly rolling out the red carpet at this point. europe is being more and more
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points higher l politicized over this issue. it's going to be a painful overhaul and i do think this is challenging. we can't expect necessarily them to go singing into austerity. >> we have to leave the conversation there. we appreciate your perspective this morning all the way from the west coast. thank you so much. >> when we come back this morning, tesla pricing it's secondary offering. electric car maker as it ramps up production. but first check out the price of oil this morning. it was actually below $42. $ $42.11 this morning. stick around. squawk box will be right back.
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electric car maker tesla reving up it's cash pile. it will be priced at $242 a share. ceo elon musk intends to buy up to $20 million of the stock that would add to his 22% stake in the company. joining us is the director . it's a way to make sure that it has enough cash on hand and the
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shares create higher. what's the thought process behind that? >> thanks for having me and good morning. number one we're in a catalyst phase for tesla. they're ramping of the model x launch, ahead of the giga factory coming online and will celebrate the model 3. so, you know, as everybody sort of focused on cash burn, this is an opportune time to take advantage of the markets and goodwill i think they have built up with investors as it relates to future products, and as well the tesla energy storage side. there's quite a bit of optimism i think building. so it's almost like they're forgiven for making these investments so why not do this now. >> james, look, let's talk about the cash burn bury quickly. $1.9 billion on cash on hand at the end of the year and dropped to $1.15 million.
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elan musk said it might be worth it for raising cash. do you think these shares are worth $4 million a piece. worth more than we thought yesterday, $.1 million shares, $242 a share, it seems like tesla is leaving a lot of money on the table, giving those shares away for cheap. wouldn't you think? >> well, i think that's a great point. and as you think about sort of the cash burn, remember their peak investment phase of any auto manufacturer is right before comes to launch. they're effectively bringing on an entirely new model assembly line and the paint and, again, sort of the general assembly expenditures don't happen until right before the vehicle hits. as it relates to the dill using, you're right, $2.7 million includes the underwriters, additional location as we understand from yesterday. but nevertheless, $400 is also
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based on a fully baked model s launch to the degree we feel more comfortable and they're achieving that rate and they have the cash flow to support the investments there. i would say this is net net a positive. and i think that's how some investors are viewing it, particularly yesterday as the stock was higher. >> again, tesla itself must not be convinced its stock is going higher if they're willing to issue this much at this price. >> and elon musk is increasing up to $20 million. >> isn't that pocket lynch for him? >> in the filing he has said he will purchase up to $20 million worth in the filing, it's got no fixed price, no set amount he will be filing. >> understood, completely. but pocket change or not, $20 million and 22% existing ownership stake. if you look at the proxy, he is a established set of hurdles to
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achieve in order to receive the remaining sort of compensation that he has set up with the board. >> sure. but i would argue elan musk does this not as an investment but labor of love. he truly believes in this, loves what he does, doesn't until care where the stock goes. >> well, i'm not sure i would go that far. and by the way, there are more ceos like elon musk in many ways. i think we're missing the for rest through the trees here. the long-term trajectory, they can reduce 500 units a year. they can invest and spend money and we need to give some benefit of the doubt considering where they have come in three years with just the model s. so this is one sort of the mosaic approach and understanding the fundamentals of the story. i don't think it derails or detracts from the optimism we have for shares looking ahead in
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the next 12 months. >> james, thank you so much for your time today. >> thanks for having me. >> our guest host this hour, peter bookfar. before you leave us, leave us with a little bit of sense of what to do in the last couple weeks of august. >> we're in this vacuum of information, china actually killed it this week. you have to let the market talk to you. it's not saying much and actually saying negative things with the internal diversion. >> would you take money off the table? do you think there's some major down turn coming? do you think that being flat this whole year was the effective down turn of correction? >> there is a talking process going on in this market. there are more than 60% of new york stock exchanges. more and more stocks dropping out of the bull market. looking at thein turnls, people
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should be more defensive. >> you don't look at that as an opportunity. warren buffett says everything is on sale all of a sudden. >> this was year two in the bull market, i would say yes. now we're into year seven. unfortunately, we're at the latter stages. >> okay. your book we appreciate. great to see you. thank you very much. coming up this morning's top stories, talking about china, breaking its devaluation streak and greece approving another bailout. of we welcome another news maker. richard fisher. everything going on in the global markets now. what's going on in the actual room now. plus his advice to janet yellen. first, check out the futures now, looking to open 22 points lower. s&p 500 off about 3.5 points. you're watching "squawk box," first in business worldwide.
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♪ breaking overnight, greek lawmakers approving a bailout expected to face a confidence vote. details straight ahead. >> china markets stabilizing after three straight days of currency devaluation. has the damage already been done? we will ask former dallas fed president richard fisher if the september rate hike is still on the table. >> the u.s. secretary of state in havana. cuba's message to america. >> show me the money. >> fidel castro saying the u.s. owes cuba millions of dollars. we'll tell you why as the second
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hour of "squawk box" begins now. ♪ it's not about the money money money ♪ ♪ we don't need your money money money ♪ ♪ we just want to make the world taste ♪ >> this is "squawk box." >> up to change. >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick a. joe is on vacation today. history set to be made in cuba this morning. the american flag will fly above a u.s. embassy in havana. secretary of state john kerry will be at the capital. we have fidel castro celebrating its 89 birthday, recelebrating his assertion. cast castro didn't mention the relations. we'll be joined in 20 minutes. obviously, both sides still have a litany of complaints. the u.s. still looking for
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property to be returned to cube j an exiles. still a lot to talk about here. >> let's tell you about some of the top stories. news breaking early this morning that greece's parliament has approved a draft of its third bailout. eu eurozone finance ministers will meet in brussels. reports now say that tsipras will call a confidence vote in parliament after greece makes a debt payment august 20th meaning it could lead to a snap election and more delays and who knows whether any of this will really happen. you're looking at the european equity markets across the board. let's call it marginally down. u.s. equity markets. also what's going on in asia. nasdaq off 8 points and s&p 100 off 8.5 points.
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china central bank trying to soothe fears sticking with its argument there is no basis for currency depreciation. ending its devaluation streak. and we are also watching the price of oil this morning. we had dropped under $42 a barrel earlier today we're up a little bit, 42.11 is the current price. trading levels not seen since market 2009. >> our guest host for the show is john like lighter, president, shm and ceo of john lily. >> great to be on the show. >> we get to talk to you remotely, but here onset, we appreciate you coming on. why don't we start talking about what has been the devilling in the markets over the last several days. the chinese move to devalue the yuan. in the global equity markets.
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a big deal for multinationals yourself. you talked about how the strong dollar has really been a head wind and something you have had to deal with. what does this added pressure mean and what do you think is happening? >> that's right. first of all to put into perspective, our sales today are modest in terms of global sales. the world's largest market for health care emerging. we have a significant investment. we have r & d, sales, clinical trials in china. we're watching this closely. i think there is no question that as china moves down the path of economic reform and there is a commitment to that on the part of the government, i expect we see things move in times as fits and starts and we've got to keep our eye on the longer term picture, the opportunity in china and the
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strength of the market long term, i don't think has changed baste on these recent events. >> let's talk about currency year all, a significant headwind. dealing with the dollar rising and rising, the expectation that the fed will raise rates next month means you're not going to see a weaker daughter any time soon. >> there's a certain things you can do apart from hedging. so in a second quarter, we reported minus 4% top line on a nongap basis. if you take currency out, plus 4%. that's a big swing. we tend to obviously control costs but also to look at the underlying business. are we growing volume, are we growing share, are we positioning ourselves well with our key brands and markets. currency, it's difficult to change your business strategy. so it's taken that long term
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view that matters. >> let's talk about your business. you have a lot to crow about. you are coming through a period where there have been patent expirations and you have drugs for alzheimer's and cardio vascul vascular. can you tell us where those stand? >> sure. we went through a period where we lost the pants on our four biggest products. we lose the revenue almost overnight so we had to rebuild our pipeline. now we're seeing launches starting last year and positive data readouts and what you refer to as a alzheimer's drug. we'll get the data from that study. and we have an oral pill type cardio vascular medicine in development and at this time next year we will know the study of that product in the cardio vascular medicine we hope would
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thrive additional benefit on top of a staten which many people take in the form of a generic. >> how does this work? >> it works in the different way than the statins. it lowers bad chalz, what we call ldl. also tends to raise hdl, so-called good cholesterol. and the mechanism involved is one we hope will result in good long term outcomes for patients. and that means fewer heart attacks, fewer hospitalizations, et cetera. >> because it takes long to develop drugs, drug expects have looked to the biotech sector to bring drugs that are already well on their way, kind of in. but you talked on the earnings call a little bit about how there is maybe a biotech bubble. >> i think that's good news and bad news. investors are looking at our
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sector, biotech and pharmaceuticals with fresh eyes. a few years ago, we saw a slow down in drug approvals. now many companies are able to harvest the science and translate that into new products, whether for hepatitis, heart disease, cancer, so investors are buying into our space for a good reason. my comments were made in the context of m & a. and would we -- are we hot on the pur soul of buying a biotech ack which session. and a lot of these companies are too expensive. we boat inclone in 2008. and we took a lot of heat. i think the credit markets shut down. we could get as many as three products based on what they had at that point in time.
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>> when you think about r & d versus m & a, there is sort of like the valiant theory. your budget should be an acquisition budget. let everybody else take the risk. if we buy a premium, that's a cost of doing business. on the flip side, the more traditional budget. where do you stand? >> first of all, they're equally valid points of view. i think our belief is that we can be successful with a focused in-house research effort, complimented by deals, by external partnerships and relationships. andrew, it's interesting the number of times when we could go to a partner and work with anyone, but they know we're an expert. so having strong science on the inside makes us a more
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attractive partner. so i think there is some synergies there that can't be ignored. >> if the biotechs are in a bubble, what pops it? >> i think there is a lot of price pressure now in the market price. i think drug prices are in the headlines. we should expect that given we have another political cycle coming up here. you have seen some new medicines interested for treating diseases that could not be treated with the past. that's a high price tag that obscures the fact there is competition actually in our world that prices do get discounted in return for formulary access. so i think that that's something that any investor has to be watching, particularly for a smaller biotech that may be dependent on one or two products. with lily, we have enough diversity within the products we
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have that i don't think any pricing scenario is likely to cause our future trajectory to be altered significantly. >> pricing for cancer drugs has been a huge issue not just from political candidates but from express scripps. it's interesting to watch over the past year as benefits managers are taking the role that pharmacy managers are used to taking. these prices are too high, they've got to come down and we're not going to pay for these prices. i can understand a cancer family who has a cancer patient who can't pay the price of the drug. how do you justify that as we are getting the political cycle. >> first of all, for those of us in this country who take medicines and that's probably
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most of us, four out of five or greater than four out of five prescriptions today are filled by low-cost generics, okay? and i remind people, those are our leg asee, there is no generic prozac today. secondly, the cost of illness is almost always greater than the cost of medicine. medicines today, even though you see in the news, this one has a high price or you hear these stories, medicines today still amount to a fraction of what we pay for health care overall. but for the consumer can represent up to 40% of what's been paid out of pocket. that's why we have been arguing for insurance coverage that recognizes the importance of medicines, coverage that doesn't pen allize medicines. so they don't take their medicines at all. >> we're going to continue this
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conversation. thank you for being here with us for the hour. much more to come. here's what's been going on. we ask how today's inflation data could move the markets. and richard fisher here talking about the currency moves and what it means today fed. and he runs the biggest nonprofit charitable organization in the world. stick around.
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welcome back to "squawk box." it's whale-watching day, the day when so-called 13 f filing is out this morning. first one coming out, jana partners. the activist has taken a stake in time warner cable, raised in qualcomm to just under 29 million shares and upping to 42 million shares. so a couple stocks to watch this morning. there has been a lot of drama from china's growth concerns and the wild reaction in the global stock markets. we're joined by the chief
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investment strategist at raymond james. i said we're going to ask where we're going from here. so where are we going from here? >> i said on the show back in the first week of july that our geshts measurements were totally used up and we were likely going into a period of contraction that would last into the august 18th time frame. i still feel that way. i think we're going to sink a low and trade back up. >> very specific. usually we have a lot of people who say i ask the question and they go, andrew, no market timing. you're giving us exacts dates. what time of day should we see the bottom come, jeff? >> i have no idea. but the timing model he two months suggested somewhere between august 13th and august 18th. we'll see if it proves right. >> so right now, if you're sitting at home and you're
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trying to figure out -- you have cash on the sideline, you're waiting for another week. or would you put it now? >> no, we talked about buying the you're idiom because the spacex rocket blow up. you have a 6.3% yield. my fundamental analyst has a strong buy. we think two years down the road a huge cash flow story. >> give us broader thinking. you think, for example, since we talk about the fed and what they're going to do, september is still the time frame for you or no? >> i think it's the wrong question, andrew. it's not the -- the right question is the peace at which the federal reserve will raise rates, not when the federal reserve will raise rates. and we think the pace will be slow slow. >> and when you think about
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china and europe, you think the overhands, it doesn't matter to you. >> i don't believe it. i think longer term they're following the same business model that brazil used where they figured out that a manufacturing export economy was not sustainable so they raised interest rates. the economy slowed, but didn't stop. that's the exact same biz model and i think it's to become a major player in the financial world. i think they want to be in the imf and i think they want to be able to draw on the sdrs. >> in terms of if you had a dollar today would you put in the u.s., europe or asia? >> i think i would put it in the u.s. we're still the best place to invest. >> and pure alpha, a fallacy?
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>> europe is cheaper if you look at it on a price it to earnings basis. we think the economy is going to ack is sell rate here. i think i would make the architect argument that the economy is stronger. we think you're at a 3% gdp growth rate now. >> jeff, we leave it there. we appreciate your sunny, almost rosie outlooks. >> you bet. >> i like the specificity. august 13th to 18th. not many people willing to put a finger on it. we like that. >> when we come back on "squawk box," a landmark day. the flag raised for the first time since the 196s. michelle extra bruceo extra
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braa. >> which new york city bloke is block is most expensive to live on? aflac! i thought you said this guy was the best? oh, he's a horrible stylist. gah? but he's the best at paying claims fast! really... mmhmm. paid mine in just one day. one day? yea. aaaflaaaac! in just one day, we approve and pay. one day pay, only from aflac. why should over two hundred years of citi history matter to you? well, because it tells us something powerful about progress: that whether times are good or bad, people and their ideas will continue to move the world forward. as long as they have someone to believe in them. citi financed the transatlantic cable that connected continents. and the panama canal, that made our world a smaller place.
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. now the answer to today's aft
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afteraflac trivia question. what new york city block is the most expensive to live on? the answer, 5th street. >> i know some people who live on that street. welcome back to "squawk box." emirates airline is launching the longest nonstop flight beginning in february. the trip from dubai to panama city expected to take 17 hours and 35 minutes. previously the longest take nearly 17 hours. a 19-hour flight, i remember this was the longest before. a 19-hour flight between singapore and new york was stopped due to high fuel prices. you've got to go through frankfurt now, i think. out of new york. but i don't know, unless you're in the front of the bus, that's a long plane ride. >> the american flag will be raised in havana today for the nirt first time in over half a
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century. michelle, i guess we should call this a historic day. >> certainly it is, becky. u.s. secretary of state has not visited cuba since 1945. a flag has not been raised at the building you see mind me since 1931. the flag to go up around 10:00. this is the u.s. embassy you see behind me. the building has been here for more than 50 years, been called the intersection. it has been a sight of enormous tension here in cuba throughout the decades. i am not talking about the missile crisis when americans went to sleep thinking they might die because of the missiles being housed by the russians but subsequent years, even under presidents trying to improve reese's. i want to take you back to a moment in time, may 5th, 1980. >> the american marines broke out the glass from the main
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window. >> that's john alpert, former nbc news correspondent here, in havana, filing for "nbc nightly news." you can see cubans rushing the door trying to get visas. this is where cubans come when they try to get to the united states. marines broke out the window, 300 cubans inside already. they were struggling to get in there, there were protesters outside, fighting could be seen, scuffles, et cetera. it was one of the more violent moments in history. jimmy carter was trying to improve relations. he had relaxed travel restrictions. that led to increased tension here, because the cubans were to desperate seeing the cubans from the united states coming looking far more prosperous. things are looking different now and president obama is trying to set a very different tone and have constructive engagement
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with this country. we'll see when it comes to human rights and commercial trade. this is still very much a command economy, guys. the expectations for american business for this place, my opinion, are way too high. keep in mind, the people who started this revolution, this communist revolution in this country, are still in power. it would be like less than none still running russia at this point and deep control of this the economy, even though there have been some tiny, tiny market reforms. back to you. >> michelle, i know that people in cuba have seen this as a huge potential positive change in the way their lives are led. do you think that will be the case? >> so cuban exiles will be able to send more money home and they have been. that's going to help for reconstruction. now cubans are allowed to actually improve their homes, et cetera, things that were very, very difficult to do before. so i think, yes. and there's been some sense that
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perhaps the reason there are new wi-fi hot spots, the cuban government is under pressure to provide more from the young people in the country and two, they don't want to be seen as dictatorial. but still, when it comes to the way the economy functions here, guys, it is top-down complete control nearly all the way to the bottom. >> michelle, thank you very much. we will see more of michelle in the next hour. >> great light in havana there. anyway. coming up, the squawk reserve in session. richard fisher is here. we'll ask the about the currency turmoil in china and the time line. we're back with that and more in a moment. in fact, the number of mris has increased by ten percent a year. and a radiologist might view a thousand images to find one tiny abnormality in shape, contrast or movement. because it's so challenging,
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♪ welcome back to "squawk box" here on cnbc, first in business worldwide. among the stories front and center, the u.s. government reporting that china keeps growing with nearly 1 million
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people joining the ranks after official enrollment season ended. the share of uninsured americans has dropped below 10%. we should talk about that. also, tesla increasing its share sale saying it will offer about 2.7 million shares to $242 per share. a slight discount to yesterday's close. mr. musk planning to throw $20 million into the pile. we think. >> potentially. >> potentially. also general motors is reportedly boosting production of its highly profitable large suvs and trucks, reuters saying it could result in 48,000 to 06,000 additional vehicles for the 2016 model year. that's a lot. billionaire steven cohen will host a fund-raiser for chris christie on saturday. reuters is reporting the luncheon will cost $2,700 a person. he and his wife have contributed $1 million to the political action committee. >> very complicated. i don't really understand that.
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his firm was convicted or he pled guilty -- his firm pled guilty to insider trading. he didn't personally. and so then to have a fund-raiser at his house, i think that will show up in commercials later. if there is an opponent. don't you think? that's my -- my thought at the moment. anyway, currency devaluation in china causing a global disturbance in the market. will it push back any plans the fed may have brewing for september? richard fisher joins us now, former president of the dallas federal reserve bank and also, of course, a cnbc contributor. tell us what's going on in the room right about now. >> first, they're not meeting in the room. they're -- in the field, enjoying their summer. >> conference calls. what's being said? >> let's put this in perspective. the mexican pesos is off year-to-date 24% against the u.s. dollar. the canadian is off 20. the japanese yen is off somewhere in between those two. even the british pound is off more than 4% that now the
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japanese is depreciating against the dollar. and the euro is off significantly more, multiples of that. we have a strong dollar. we push the chinese to become more market-oar oriented. they take a slight step in direction, and chuck schumer raves, here they go again, depreciating against the dollar. we have a strong dollar, period. that's the way it is. does this retard the effort to try to somewhat begin the process of normalizing monetary policy? it has an impact. but remember, 14% of our gdp or gmp is exports, 13% is imports. actually, the other way around. it doesn't stop the economy. we have had some pretty good numbers come out of the economy recently. so the real issue is still inflation and employment. >> but you know the personalities on the phone. >> i do. >> who are -- who are pretty do havish or have been thus far. >> the hyper doves may use this
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an excuse. i would look at what stan fisher has, very good, the vice chairman, spells his name wrong, but a great guy. >> always confuses me when they say fisher from the fed. >> he's the one that counts. and dennis lockhart and then john williams and jay powell. it's very important for a governor to speak out as he spoke out several months ago. clearly they want to move in the direction of beginning to lift off. it doesn't mean they have sequenceal quarter point movements. i think it's an awkward spot now. >> fisher's last comments, i thought, wow, they are going to raise in september. but that was hours before the chinese government. >> becky, don't count on a single event. and keep this in perspective. the two biggest trading partners we have, canada and mexico, their currencies are off between 18 and 20% against the dollar. this is a 4% move. >> i agree. >> i think this is much ado
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about nothing. >> i think we're there, but i do worry that the counter argument i've heard, the one that makes sense to me. is that, look, you don't want to raise rates ask then have the global economy tank and feel like you have to go back to zero. so that's the biggest question i have. if they are doing this move because of drastic slowing in the chinese economy, even more than we thought, how much does that in turn slow down europe and the rest of the globe and catch up with us. >> first of all, this is not a surprise the chinese economy has slowed. you can see it in terms of real activity, electric activity. the numbers are always suspect in the case of china. you have to give credit to the federal reserve and their staff. these people watch this stuff nonstop. there is nothing new here. and i think this is something that just caught people's attention at a slow time in the summer. but again, keep it in perspective. now, whether this impacts the exact timing, whether it's september or maybe october, which is odd, because it's not really a press conference or december when the markets are thin, that will decide.
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but i think they have cast their dye in that direction. and remember, as stan fisher has said, the other fisher has said, we'll still have hyper accommodative monetary policy. one more thing. every banker i know, whether they're giant bankers, a little community banker, want to have some interest margin. >> right. as do retirees. >> and most corporate ceos i know do not feel a quarter point on fed funds will destroy the economy. maybe you have a different view. but the point is, there's no net interest margin for banks. the bankers and i know, including the 12 bankers that serve on the advisory committee, one from each federal reserve district, unanimously want to see some movement so they can start having some incentive to lend. there's no incentive to lend right now. >> john, what do you think, from your perspective, what would you rather see happen? >> well, i think that the economy that's most -- greatest interest to lily is what impact is interest -- raising interest rate or not going to have on the
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larger economy. in terms of the impact it's going to have on our company, you know, a slight rise in interest rates is not going to have a material impact on us. but i think the concern is, with the global economy still somewhat fragile in my view, what's the longer-term impact starting to raise rates. and it may be psychological more than anything else. >> i think psychology is very, very important here. north america is number one. we are the epicenter of economic growth in the world. i would rather be there than not be there. how is that? >> i would agree completely with that. john, where is the economy in the united states from what you can see in your business lines? >> well, i think -- there's no doubt, you know, employment numbers are better. but it's not clear that every sector we're seeing the average wage rise. so are the jobs we're creating, are they as good as the jobs we left behind before the
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recession? we need to continue to do the things and encourage the creation of good paying jobs. of course, that means educational attainment is incredibly important. we hear about jobs that we can't match people to. today. so this is why, in our sector, as we think about our focus as a company in terms of corporate social responsibility, we're focused on education. we know the biotech industry, which employs a few million people in this country, depends on people getting that high-quality education. >> can i just add one thing, john. i'm on the board of at&t. enormous emphasis on education. they even created their own graduate degree programs or study programs with georgia tech and other universities. however, this has nothing to do with monetary policy. key point. >> can you both weigh in on a debate -- i think it says something about the economy. the buyback debate that's going on in this country around corporations, pursuing lots of
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buybacks. and what that says about the corner office or boardroom view of how the economy really is. >> let's turn to the real corner office guy. >> so capital allocation you're asking about. and i think the discussions i hear about share of buybacks tend to put it in black and white. are you in favor of buybacks or not. we view buybacks currently as part of our capital allocation strategy. we do not see buybacks as an excuse for not reinvesting, doing deals, buying companies and all of that. having said that, we have shareholders. they need to see a return. we have a few channels, including buybacks to provide them that kind of return. so i think the thing needs to be kept in balance. i don't think it's a good or evil. i think there's -- there may be better times than not for buybacks. i know there's been lots of economic studies that show, you know, sometimes these things don't work out. maybe many times they don't work
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out. but we're trying to take a measured approach at lilly and for us that's the right approach. >> i just wonder whether right now what's going on when you look at the pure trillion-dollar number of buybacks that we have seen, that's a function of the fact you say, i can either build a new factory or give some money back. and you say to yourself, if i build a factory, i don't know if there's customers. that's the question, is whether -- and maybe the equation you're saying is not as black and white. >> what you're talking about is the kind of certainty that gives corporate leaders confidence to make those investments. i think that's a little bit independent of the -- i don't think that that's -- the buyback or build a factory is usually -- i think it's build a factory or not. whether you build that factory has to do with your confidence. and as ceos, confidence -- a certain amount of confidence comes from predictability. you know, we -- what is it that lies ahead, what can we expect. and when you feel like you have
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a better sense of that, you're more willing to make those investments. >> and, you know, i've argued for the longest time, becky, one of the things that affects predictability is the fact we have no fiscal policy, no idea what the tax regime will look like, no idea what spending pattern is going to look like. we have massive overregulation in every sector, additive, not subtractive. you know we have accommodate active monetary policy. but even if they raise 25 basis points or whatever it is -- >> and you're walking into an election year. >> i think john is right. it is a decision you have to make. really great certainty -- >> less certainty, yeah. >> and greater amounts of cap x. one of the great things about what happened with monetary policy over this period is that we allowed american corporations or encouraged them to redo their balance sheets and strengthen their financial position. and you know, i've said andrew a million times, american businesses are more muscular and more fit and more taught and more ready. now we need the incentive to
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come from the fiscal authorities to encourage john and good people like him to make these kind of cap x commitments. and -- >> unfortunately, that's not going to happen for another year until after the elections. and right now, your choices lib donald trump or bernie sanders. so it's very, very -- >> big fans of the fed, by the way. >> richard fisher, thank you for being here this morning. >> thanks for having me. >> a lot of fun. we should tell you about corporate news this morning. target announcing its merchandising executive, jose barra, is leaving. the retailer says it will look for a new person for the role. and is evaluating outside candidates. take a look at the stock, up 14 cents this morning. $79.13. when we come back on "squawk box," united way is the world's largest nonprofit, raising more than $5 billion a year to tackle problems facing global community. our guest host is chairman of the board and united way's ceo will join us right after this. ♪ it's a fact. kind of like mute buttons equal danger. ...that sound good?
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today, will the summer swoon keep the heat on your portfolio i can't? streak moves to keep your cool. and put the odds in your favor. of ♪ welcome back, everybody. united way is the world's
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largest privately funded nonprofit, raising more than $5 billion a year. the organization has partnerships with nearly 300 of the fortune 500 companies and more than 45,000 companies in total. joining us right now is brian gallacher, president and ceo of united way worldwide. our guest host today, john like lighter is chairman of the worldwide board of trustees and thank you much for coming in today, brian. >> happy to be here. >> this is a hugely important organization. i'm stunned to hear some of the numbers that are associated with it. but what are the primary goals and targets of the united way? what do you do with all that capital? >> so we're -- the world shifted a lot. when the economy shifted, jobs shifted and therefore social problems we focus on shifted. and we got big, because we're small. we're 1,800 local united ways in over 40 countries so we're like a franchise nonprofit. we work with corporations and employees, $5 billion coming from companies and employees. we focus on the building blocks
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of life. good education, income that allows you to be self sustaining and access to health care. >> so what are the biggest challenges in the places you're having success? >> the biggest challenge is, you know, to say it at a macro level and dive down done creately is the kind of jobs that are created in the u.s. are different than when i grew up. so i grew up in northwest indiana, u.s. steel, inland steel. and these -- there were 30,000 jobs there. they're not there anymore. so today's jobs require more training, more education. and so this idea that, you know, the education system can be on its own, and job training and companies can be on their own, that's what's changed. and so the biggest challenge is getting everybody to work together. >> you know, we thought that maybe the energy boom would be the new place you would be seeing these important jobs that are sometimes six-figure jobs. that are being paid to people who have a high school degree. but watching oil prices plunge,
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that's kind of driven out a lot of those jobs, and raise that hope. where do you find the new -- is it all about education or is there going to be a way that you have the -- what used to be the steel jobs, what used to be the manufacturing jobs? how do you replace that? >> well, you know, john and i were talking about this the other day. you know are the cost of energy and manufacturing and so forth is important. but what sustains is education and training. and richard was talking about at&t before your previous guest. and what we're seeing is companies more and more doing it themselves. and nonprofits and smart, local and state government are connecting their job training programs to companies and jobs. >> is that always going to be an engineering degree, like at&t or the trades, where you're training people like you used to have the with apprenticeship programs? >> it's both. so, you know, the thing that's tough for us is to make something like this work at scale, it's more complicated than people want to hear. but at the end of the day, you want engineers. but you need early childhood
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education, so the pipeline gets filled. you need reading at grade level, transition at middle school, graduate kids from high school, ready for job, ready for college. and it's the handoffs that get messed up. you know, so you hear about head start, does it work, not work. it works when there is a good handoff into primary schools. it doesn't work when kids are put into a lousy situation, and so it is engineering, and high-tech and skilled jobs. but it's also filling the pipe. >> what do you think about the minimum wage debate? is that the right answer? >> above my pay grade in terms of economic policy. we -- wage stagnation for us is a big challenge. a big issue. so if you look at charitable giving in the u.s., it is -- we have been raising -- before the recession and after the recession, raising more money in the u.s. from fewer people. and it's high net worth individuals. if you look at the chan family gift to harvard of $350 million, private money going into private foundations and giving it out is
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what's driving giving in the u.s. right now. what we need -- our view, is more good middle income jobs that pay enough that allow people to sustain themselves. minimum wage in and of itself isn't going to do that. it's -- it's matching the -- i think the labor supply, underskilled, in many cases, some not graduating high school, to the jobs that are unfilled in the u.s. now. >> the minimum wage debate, if that's your perspective, does that almost mask the real potential -- we're not focusing our energies in the right place if we're having this debate about minimum wage. >> it's -- for me, minimum wage is a stepped part of the conversation. if it gets us into what does it cost to live in america, and what do you have to earn, it's not a bad thing to have done. the other thing, no one has created it. but there's -- the erosion of the middle class and the
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creation of the underclass, there are millions and millions of people working at 8 and $9, so for that population, yeah. >> so philosophical question. do we applaud the big gifts. >> i do. >> you do. >> i do. >> but when you think about how -- did the big gifts come at the expense of the middle class? that becomes the philosophical question. >> so here's how i answered that when you're on panels and you have opportunities. so the robber barrons of the industrial age, those names are on every biggest philanthropy in america now. it's a matter of timing. so is it good that there's a concentration of wealth and people have taken advantage of a disrupted economy and global economy and technology? i think, yes. but it takes society -- if you read history, 15, 20 years to catch up with it. and so you are going to be villainized. the question is, what happens with that -- with those large gifts. we can't continue to have fewer
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people in the u.s. we can't have the concentration of giving. >> i just saw a precursor, about 100 years. as we think about corporate social responsibility and we think about impact, not just giving money away, but really having an impact on education, income, health, say, in our head quarter city. as the thinking has gone from philanthropy to getting things done through corporate responsibility, united way has evolved and morphed as well. and today is a more valuable partner than ever. >> great. brian, we want to thank you so much for coming in. >> thanks for coming in. graerveths to be here. thanks. >> we should tell you news. jcpenney reporting its latest quarterly results, losing 41 cents per share but that was narrower than expected. revenue was above street forecast, and sales improved
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during the quarter, slightly better than the consensus expectations and a bit better than some of the other retailers we have heard from recently. jcpenney coming off a much lower base. much more from our guest host, the chairman and ceo of eli lilly for a little longer. looking forward to that. back in a moment. this summer, challenge your preconceptions and experience a cadillac for yourself. ♪ the 2015 cadillac srx. lease this from around $339 per month, or purchase with 0% apr financing.
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looking forward to that.
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welcome back. time for a quick final thought from our guest host. john lechleiter is the chairman and ceo of eli lilly. the question i have for you real quick, all of the consolidation
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among the insurance company, what does that mean to you guys? >> i think it's hard to say. we've got two deals pending. will they go through, will the ftc allow these deals to be consummat consummated. whether they are consummated or not, the trends we see today, it's still a fairly concentrated industry today and you'll continue to see insurancers look for value, scrutinizing every input to see, does that investment in this medicine, for example, really help the patient that i'm insuring and does it save the system money. so i don't think that's -- that's not going to change. i think if the consolidations happen, it's not going to be a sea change for our industry, but certainly something we're watching. >> okay. thank you for coming on the show. >> my pleasure. >> come on back. >> any time. >> this was terrific. thank you. >> thank you very much. when we return this morning, we do have some economic data on tap. we'll be getting a read on inflation with the july producer price index. and colin gillis weighs in on apple's slide.
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he'll tell us why he's keeping his price target of $115 with a hold on the stock. stick around.
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♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. and colin gillis weighs in can a business have a mind?
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a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? markets under pressure ahead of the open on wall street.
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greece takes center stage as we get ready for the final trading day of the week. we break down each and tell what it means for your money. social insecurity. a call for reform on the program's 820th birthday. can a shortfall be thwarted. one economics professor says he has the answer to fix it. that interview, straight ahead. and a big weekend in pebble beach and not about golf. a record number of classic cars hitting the auction block. which will bring in the highest bidders and is there a bubble in the classic car market? a report live from the west coast is just ahead as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york. this is "squawk box." welcome back to "squawk box," everyone. this is cnbc, first in business worldwide. i'm becky quick along with andrew ross sorkin. 90 minutes away from the opening bell on wall street. after two days of calm where you
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basically end flat for two days back-to-back, looking at modest declines this morning. dow futures looking like they would open down 23 points. s&p indicated down by 3.5 and the nasdaq off by 8.5. europe, a similar story. the dax is down by .4 a%. and greece is the biggest loser, down by 2.5%. other stories this morning. china's central bank ending its three day devaluation streak. in europe, early this morning, also we have greece's parliament approving the draft of a third bailout. but country's prime minister is facing growing opposition from his own party and eurozone finance ministers meet in brussels later today. the question is whether that party will get thrown out and whether any of this will matter. tesla increasing its share of sales, saying it will offer 2.7 million shares at $242 per share. a slight discount to yesterday's close, and mr. musk indicating
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he will throw in $20 million, maybe. >> maybe. in washington news, a key day for u.s.-cuba relations. for the first time in over 50 years, the american flag will fly above a u.s. embassy in havana. secretary of state john kerry will be in the cuban capital for the ceremony. our very own michelle caruso cabrera joining us in the next half hour. treasury secretary jack lew is making a push to improve the iran deal. he says, quote, the deal offers a long-term solution to one of the most urgent threats in modern times. he argues rejecting the opinion of other countries involved in the accord and introducing tougher sanctions would result in cutting off allies from the u.s. dollar and financial system. he warns, in his words, we would set off extensive financial hemorrhaging in the united states, as well. we spoke about this earlier this morning. look, i think people who come down on this, whether you are in favor of this deal or opposed to
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it, you do think that whatever your opinion is, is going to help us from a security perspective. you think that is the best path forward, for u.s. security. adding in the financial component i don't think will change anybody's mind. >> it's the secondary argument. >> almost cheapens argument. >>it's the same argument about our standing in the world with our allies. that's a secondary issue to the merits of what you actually think the deal is worth or not. in the meantime, let's tell you about a couple stocks to watch this morning. we talked about it earlier. jcpenney eating a big boost, earnings revenues and same-store sales beating the street. nordstroms topping estimates. same-store sales rising by nearly 4% during the latest quarter, and you put that up against, for example, what's going on with macy's, and looks pretty good. also, el pollo locato missing the marks, the tacos, i don't know. customer traffic at the restaurant chain dropped for the
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first time since the company wept public last year. the restaurant chain now cutting its full-year sales forecast. i was at chipotle yesterday. king digital posting better -- i was -- better than expected earnings. the company behind the candy crush game reported a 13% drop in gross bookings, figures, rather, and that's what put pressure on the stock. global markets remain on edge following this week's currency actions in china. in the last hour, eli lilly ceo john lechleiter shared his thoughts about doing business in china. >> question that as china moves down the path of economic reform, and i think there is a commitment to that, on the part of the government, i expect we're going to see things move at times in fits and starts. and i believe as a business person, we've got to keep our eye on the longer-term picture there. the opportunity in china, and
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the strength of the market long-term, i don't think, has changed based on these recent events. >> joining us now with their view of the markets is rebecca patterson, managing director and chief investment officer. she's also a cnbc contributor. and chris letler is fund manager of the small cap growth fund and manager of needham growth fund. let's talk about this. rebecca, this was a huge shock to the markets this week. we had people tell us, yes, it should be seen as a shock. other people tell us, look, this is china's way of doing things ham handedly and get used to it. this is what's there. >> if we go back to 1998 or '97 and '98, the asian financial crisis, a huge shock, pegged currencies that didn't move. china is doing a mini version of this. it's taking this largely managed exchange rate and slowly making it more freely floating. i think following kind of a singapore model.
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and i think that eli lilly ceo put it beautifully. you want confidence and predictability. and what china did was screw up our predictability. is it going to support the stock market or not. is it going to devalue the currency 3% or 10% over what period of time. i think that's the angst in the markets right now. i don't think people's view of china's economy has materially changed. everyone knows a structural slow down is occurring and going to continue to occur. and that's normal. the economy is getting bigger more mature. it's going to have a slower pace of growth. >> chris, do you agree with that? >> i do. i think what ultimately is going to benefit our economy is they're going to still need to buy our high technology. you're looking at companies with good technological modes, good business advantages. they're going to succeed, whether the currency is devalued or not. and i think that china is moving towards that. they're trying to buy a company like micron, trying to get into higher-tech businesses. i think ultimately, if a long-term investor wants to be looking at it, look at capital equipment companies that would be buying -- selling products
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into china and i think that's a great strategy. >> we had a guest who joined us in the last hour who said he thinks these markets will bottom between august 13th, which was yesterday, and august 18th. >> very specific. >> very specific time frame. but does he have a point, in that thinking, okay, first of all, seasonally, you tend to have very strong numbers if you look over the last few years, if you were to invest now. by november, you would have made quite a bit of money. and if you're just looking at all this turmoil and chaos, do you see that he could be right on something like that. >> he certainly could be. you know, earnings season is almost over. cisco was not bad this become, gave us confidence that things are chugging along. and congress is out of session. that's always a good thing. we don't have a lot of bad news coming out of there. they will be back in session in the fall so careful there. but volatility is in the marketplace, the volumes on the market are quite low. so i don't think you can get too excited about these gyrations. but again, look for good companies that are value prices. i think you'll do fine long-term. >> i think when you have
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volatility around the world, the place people will stay, if they want to be invested in equities is the u.s. and the data we got this week -- very bifurcated with oil pulling down manufacturing, but great retail sales, good jobs data. the gm news this morning boosting production to meet demand, the u.s. is doing not great, but it's doing okay. >> european equities fan. >> well, we're slightly over the u.s., slightly over europe, slightly over japan. what i hate is emerging markets, in part for the currency. so i am a fan of european equities and i think this fall in oil helps europe more than the u.s. so i'm happy to stay in europe. i can like both. >> will you take that trade? >> i would. i'm in the going to ever bet against america. it's a great place, capitalism,in no aggravates, can cure itself. the energy market is a perfect example. nobody bailed out like the mortgage markets. it's healing itself. ultimately it will find a bottom and that will give resurgence to the economy.
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>> oil prices yesterday fell below $42 for the first time since 2009. that was because the entire global economy was headed into a massive recession. this time around, it's more about supply, i guess, that has something to do with the strong dollar. man, this is a head-scratcher. >> a lot of cheap capital punching holes in the ground, that's what they were paid for. they have ruined their balance sheets, many of them. fixing that with the equity markets. that process is still occurring to work itself out. i don't think we're going to bottom yet. the service businesses are still under pressure. but they are taking parts off their existing equipment, so ultimately, it cures itself. when it happens, i think it's a little bit longer out. but that's capitalism. that's why it works. >> yeah. same thing. we're underweight energy, in our portfolios, very underweight commodities, we're being patient 679 we do think we're going to see a bottom and it's going to come back because projects are being delayed and will affect supply later. and opec, you've got to watch saud saudis. issued debt last week for the first time in a long time. why? because they're now having a
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fiscal deficit. they can't keep stability in that country without handouts. oil goes down, they're under more and more pressure. eventually, if the market doesn't heal itself, they're going to have to crack and go after price instead of market share again. >> chris, thank you for coming into today. great to see you. >> thank you. appreciate it. rebecca is our guest host and will be with us the rest of the hour. when we return, social security turning 80 years old today and the program showing its age with more than 90 million rerecipients projected over the next decade. why now may be the time for a massive overhaul. and apple's presence in china, sitting just off a three-month low now. let cent move to devalue the yuan likely to hit production costs. is there more down side ahead? we hear from an analyst in a bit. "squawk box" returns in a moment.
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an advertising coup for adidas, signing james harden. harden had been with nike for six years. adidas paying a cool $15.38 million per year, not the whole deal, per year. a signature shoe and apparel line. nike passed on the opportunity to match adidas' offer.
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adidas, we should say, has left out in the cold in the nba land because the jerseys will now have nikki swooshes on them and underarmor got in with a shoe deal for the junior nba. so adidas, which had been a big part of the nba is now -- this is their way back in. i think. let's take a look at the futures this morning. we've been showing some red arrows this morning. dow futures down by less than 20 points now. s&p futures down by 3 or 3.5 points. remember, yesterday the markets ended essentially flat, just like they did on wednesday. this came after two steep days of declines monday and tuesday. one where we were down by as much as 277 points before rebounding. you know, watching through what's been happening this week, rebecca, it has people on edge. part of that is there's a lot of people on vacation. it's hard to watch this from afar and see what's happening too. but it's got a lot of people wondering if we are ready for a big correction. and what do you tell people? >> i don't think we are.
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in fact, we had a conference call for clients yesterday to talk about china and equity markets, and it's hard to see the fed changing the landscape, because it is at least largely, not wholly, but priced in that we get one big hike this year. big deal. china, i don't think the economy materially changes on the back of the yuan devaluation. all the money since the crisis has gone into bonds and valuations are a little above average. but for the market overall, it's not extreme. so what gets us this big correction? i just don't see it. i don't see it. >> all right. again, rebecca is our guest host and we'll have more with her today. when we come back, though, more of the stories that have you buzzing this morning. what are you squawking about on this friday morning? we're reading your tweets and facebook comments in just a bit. if you are sending us a story, something that's caught your attention, remember to make sure you use the #keepsquawking. s-q-u-a-w-k-i-n-g. stick around. "squawk box" will be right back.
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>> well done. >> you're watching "squawk box" on cnbc. first in business worldwide. ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. with at&t,
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♪ a historic day for cuba and the united states. in just hours, the american flag will fly at its embassy there for the first time in over half a century.
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michelle caruso cabrera joins us from there. we are watching and waiting. >> reporter: a scene-setter here. we know the ceremony begins approximately 9:45. an incredible amount of activity here at what is now once again the u.s. embassy of the united states of america here in havana, cuba. you can see all the chairs have been set up, flagpoles in the front, crowds starting to gather. the pool press is up on the roof that they just filed yesterday. that way they would be able to be standing where you see them today. out in front, three vintage 1950s era american cars have been put there. my understanding, it's been placed there by the americans and not cubans who see them as a symbol of the embargo still. we saw earlier in the water scuba divers doing what we believe is a security check. if you move to the right along this long sidewalk on the ocean, we have seen cubanses starting
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to arrive. of people familiar with the way things work here in cuba, suggest everybody here at 6:00 in the morning is likely part of security and a large portion of those people will be members of cuban security. there is -- you can see big crowds down here, as well. we believe them to be as well members of security, out here since very early. alex, are we showing the flags here? let's show this. there is a sea here of flag poles. 50, 75. why do they exist? because for a long time, the u.s. intersection, when it was called that, had a news ticker going by on the building. and the cuban government didn't like that. so they put up all these flag poles, cuban flags so nobody could see the news ticker. move to the right. there is a huge kind of stage set up. that was constructed in the year 2000 on purpose for the return of elian gonzalez. remember, that was one of the many crises between cuba and the
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united states when elia'n was rescued at sea when his family was trying to escape the island, you couldn't travel back and forth between the country. the cuban government did not permit cubans to leave so they would escape on rickety rafts. elian gonzalez rescued at sea, his father is here, his mother died at sea. what do they do? send him back here and there is a huge ceremony with this stage constructed purposely to have his welcome back ceremony held in front of the u.s. embassy. so everything here speaks to all the politics, and the tension between the two countries over the last more than 50 years. there's still tension today. there's an improvement in relations, certainly, diplomatic relations reestablished. but when you start talking to people about what is actually happening between the two countries, cuban government still feels there is more that president obama could do when it comes to doing executive orders that would get closer to lifting the embargo, the cuban still insist they want a full lifting
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of the embargo. that's going to be incredibly difficult to do at this point, politically. so we're not there yet. but that's the situation here on the ground. 9:45 is when we think the ceremony is approximately set to start. flag goes up for the first time since 1961. at approximately 10:00. the three marines who lowered it have been returned here to cuba in order to raise it later on today. back to you guys. >> hey, michelle. i know you mentioned the tensions that still exist between the two governments. and we've heard, obviously, about fidel castro putting up that column he ran in yesterday's newspaper saying the u.s. still owes millions of dollars because of the damage done from that embargo. when you talk to average citizens, do they feel the same animosity, or is this really just something that's taking place on a much higher level in the government? >> reporter: so they don't talk about it much. because there's still issues and there's still -- i get the sense of a little bit of fear. but there is this sense that i think a lot of americans feel,
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which is it's been 50 years, cubans here have so much family in the united states and now that they can travel back and forth and now because of the wi-fi hot spots they have been able in some cases to be able to talk to them via skype-like apps, there is this sense that, okay, things are -- this is the way at least it should be or step towards the way things should be when you talk to the actual people on the ground. >> michelle, real quick, i remember seeing those flags several years ago. i thought there were black flags in addition. >> reporter: yeah, with the white star. >> are the poles coming down too? >> reporter: i doubt it. and it's really difficult to ask anybody anything here. like, actually getting a response and information is nearly impossible. i mean, to find out how many hotel rooms there are in the country yesterday took hours. >> got it. okay. thank you, michelle. i would think they would keep them there -- >> as a symbol.
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>> no preemptively, in case they need to put the flags back up. let's hope they don't. el nino is a weather event that happens every few years when shifting winds cause warmer than average water in the pacific and affects weather worldwide, typically bringing winter rain to much of the southern and eastern u.s. meteorologists have nicknamed this year's el nino "bruce lee." it's the second strongest on record for this time of the year. now they're saying it could be one of the most potent weather changers of the past 65 years. but they caution that california and other drought-stricken areas won't be able to count an el nino to provide relief. so -- >> from the broader drought problem. >> yes. our friends at the weather channel. when we return, breaking economic news on the state of inflation. plus, fixing social security. one economics professor says he has the answer to this conundrum and joins us in a bit. as we head to a break, take a look at u.s. equity futures.
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welcome back to "squawk box," everybody. here's what's in our headlines this morning. the july producer price index is out in moments, one of several economic reports that we're getting today. at 9:15 eastern time, the government is out with july industrial production. that's expected to have risen by .4 of 1%. at 10:00 eastern time, the university of michigan's preliminary consumer sentiment index expected to rise slightly. and video game industry sales rose 5% last month. mostly from the game software led by lego jurassic world game. dupont updated, saying despite a preponderance of negative factors, shares are undervalued. other high-quality agricultural
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companies. kinder morgan added to the conviction buy list at goldman sachs. the firm bases the move on a 6% dividend yield and diverse portfolio of energy assets. and then shake shack. we have been helping them recently as a family. shake shack options begin trading today for the first time since that company went public. this has been a volatile stock trading between $38.64 and up to $96.75 since their january debut. strategists say that should help boost demand for options. and finally, a mixed quarter in line but revenue a little light. we are just a few seconds away from the producer price index. we have been watching the markets ahead of that and you have seen the futures on pressure today. probably most interesting to be watching is crude oil. you can see now the dow futures down by 30 points. s&p futures off by 4. wti, yesterday trading below $42
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for the first time since 2009, just before or just in the midst of that great recession. right now it's at $42.25. rick santelli standing by at the cme in chicago. we get those ppi numbers coming out just momentarily. and rick, go ahead and take it away. >> reporter: all right. a litany of numbers starting right now. headline ppi for the month of july, up .2. hotter than most were expecting. strip out the all-important food and energy, hotter, hotter, hotter, up .3. if we look at some of the year over year numbers, x food and energy up .6, also hotter than we are expecting. so no matter how you slice this number, it's definitely a bit on the hot side. and if you take that ppix food and energy on a trade basis up, .9. here's the fascinating thing, becky, no revisions at all. last month's headline at .4 stands. x food and energy up .3 stands.
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all of this continues to be a driver. there is one number that you might want to play with in your brain a little bit and that was the final demand year over year, we're expecting down .9, down .8 following down revised .7. the best way to synthesize that is to look at the marketplace. and yields, you know, we could argue they have crept up a basis point or two as i think they should. preopening equities are pretty darn close to the low of the day on the future. 17.323 on the dow futures. we want to continue to monitor this. one of the big talks today on the floor is the dax under 11,000. so we want to continue to monitor that. there has been intraday toying with that level. but trading, you know, looks as though we're going to stay underneath it at this point. of course, past utilization coming out, that's important. you talked about industrial production, michigan. yesterday that big drop in prices had an energy aspect to it. and energy in china will continue to get debated along
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with the chicago cubs. back to you. >> hey, rick, that is fantastic. have a great weekend and we'll see you next week, okay? >> thank you very much. have a good weekend, as well. >> okay. in the meantime, let's get reaction to those numbers. we now have lindsey see agoa, fixed incomes chief economist. good morning to you. what do you make of the numbers? >> good morning. well, certainly stronger than expected. which would bolster the hawkish argument for a near-term rate increase. when we look back and look at this on an annual basis, the ppi is still very much in negative territory, as it has been now for the seventh consecutive month. so still no signs of upward pressure necessarily on prices. and remember, we're going to be waiting for that all-important cpi number, as well, which will reflect a very benign july month of commodity prices continuing to decline. so i think overall from an inflationary standpoint, again, one month slightly stronger than expected. but still no upward pressure.
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no immediacy for the fed to react to this figure. >> what's your take, by the way, on what's going on with china and its impact on commodities right now? >> oh, i think this is going to have a significant impact on not only the fed policy, but certainly on prices. longer term -- >> you think it is going to -- when you say it's going to impact fed policy, you think that september is no longer on the table then? >> actually, remember, september has never really been on the table for us. we maintain our call that liftoff will occur in 2016. much longer than the market anticipates. given the fact that the labor market has not shown really any upward momentum, so more of the same is not necessarily the needed improvement. and again, looking at the inflationary numbers, whether it's the pce, cpi or ppi, we're not seeing any upward pressure on prices, on wages, and the fed also added international developments to the list of policy considerations back at the beginning part of the year. so they're certainly taking a look at one of the largest economies showing a very
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significant slow down, continuing to put downward pressure on import prices already off 10% in the last year. and that will translate into an even more benign inflationary environment here at home. >> okay. we've got to leave the conversation there. we really appreciate your perspective on it. we've got another topic we're going to transition to. promoted a little bit earlier, which is social security. critics say that economic issues were not addressed enough in last week's gop debate, and the he wielephant in the room is th future of social security. social security turning 80 years old today, the subject of an op-ed on listen up, candidates, social security is broken. in the piece, the author writes, the hard truth, which not one of today's presidential candidates will admit, is this. our country is bankrupt. it's not bankrupt in 50 years or 30 years or 20 years or 10 years. it is bankrupt today. and the longer we wait to change policy, the more we let ourselves off the hook and the more we put our kids on it.
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lauren is the professor of economics, and joins us this morning. let's first clear up some of the math. you say we're bankrupt now and the program is bankrupt now. from what i understand, they're still paying the checks. still sending out the checks. so explain. >> well, detroit was paying out its checks right before it declared bankruptcy. you can be paying money at a trickle relatively speaking to your long-term obligations and still be totally broke. if you look at table 6-f1 in the most recent trustees' report of social security released in july, it shows, if you can read the fine print, and they hid this whole thing deep in the appendix, but shows the system has a $26 trillion unfunded liability. $25.8 trillion, and so the trustees themselves should read their own report because they present a very benign picture of the systems' finances.
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but the actuaries, people responsible for the numbers, actually put in the truth about the system. it's $26 trillion in the red. and it's 32% underfinanced in terms of needing a 32% immediate and permanent tax hike. so think about it. think about paying 4 cents per dollar for everybody who is working from now until the end of time, we need 4 cents more per dollar to pay for the benefits that have been promised, scheduled to be paid through time. according to social security's actuaries, and we're not going to get a penny more for those extra 4 cents per dollar that we pay. so and that's if we do it today. if we don't adjusted to, it's going to be an even bigger burden for our kids. it will be 5 cents, 6 cents, 10 cents. so this is just part of a bigger generational theft that we're engaged in. the entire country is not 32% underfinanced and doesn't have a $26 trillion problem. it's 58% underfinanced, all the
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finances together of the government, and it's $210 trillion in the red. >> so lawrence -- sorry to interrupt. it's rebecca patterson. thanks so much for coming on, and i think this is a issue that's been burning for decades now. do you think there's any hope it gets addressed by politicians now anymore than it has been in the past with any likelihood of getting through? i mean, you put out a very specific proposal, one way to fix it. we know it's not just a matter of the math. you have a lot of voters who like their checks, who might not want any change. do you think with an election season gearing up we can actually get something done in the short term. >> well, i think -- you know, if we look at what i'm proposing, it doesn't touch the checks of anybody who is now retired, and it pays off everything that you and i and everybody else have accrued up to this point. it just freezes the current system in place, puts a new
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system in place at the margin, which is rational. i mean, this system is not only broke, but it's the most user-unfriendly complicated thing ever made by man. i've -- i worked in russia, i worked in other countries, i've never seen such bureaucracy. and it is driving people crazy. the most ardent supporters of social security should actually have to deal every day with the kinds of problems that people are seeing because of the way the system has been set up. so we can fix this. and you know, i'm trying to get the attention of some of the candidates. i know john kasich quite well, i haven't talked to him about this. but i know there are people out there, i know chris christie was talking about social security the other day. but they need to understand the dimension of the problem. it's not something that can be fixed by a gradual increase in the retirement age, as governor christie was suggesting. it's far too little too late. we have a slowly growing cancer
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that's been growing for many, many years, decades, and it's going to eat up an organ. >> walk us through the plan, though. so everybody understands exactly what you think needs to happen. your fix. >> okay. it's really simple. it's only got six provisions compared to hundreds of thousands of rules in the current system. which is you freeze what we have in place. you make everybody who is working contribute 8% of their pay to a personal account. this may start sounding like george bush's plan, but it's not. the money is split 50/50 between spouses. so each spouse, if they get divorced can walk away with the same size account. and then the government kicks in extra money on behalf of the poor, the disabled, the unemployed. so we have progressivety. everybody wants that, i think. then all that money is put into one pot, and invested by a single computer into the global marketplace in terms of stocks, bonds and real estate. and that's now obviously a risky investment. but the government would guarantee that each cohort, when
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they reach retirement -- everybody when they reach retirement age would have at least what they put in adjusted for inflation. so the government would guarantee a zero real return. and then that same computer would take each cohort -- everybody who was born in a given month, take all their account balances and starting at 58, and for the next ten years, gradually sell them off in the marketplace, buy in exchange an inflation index bond, u.s. treasury tips as you know they're called, and then use those funds to provide inflation-protected pensions. now that's a system with six rules, and it actually would be fully funded. that's not going to deal with the liability of the system. we need to have a much broader, more sensible tax system so there's another tax -- >> professor -- >> yeah. >> before we get past that. these are now accounts that i own and that i can pass the money on to my heirs? i'm confused by that. >> the payout would not -- if
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you passed away before you reach full retirement age, you could leave money to your heirs. but if you want the money to be anu advertised, these are single life annuities and not bequeathable, just like the current social security checks. >> you're asking people to put aside 8%. that is certainly something that some people do. i also know there are -- >> this country is saving -- >> paycheck to paycheck, and 8% -- we're talking about trying to raise minimum wage for people now who are living paycheck to paycheck. i don't know how you take 8%. >> no, i'm with you. but that's not the only reform i'm talking about. i'm talking about a tax reform. i think we need a form of a negative income tax, and we need to have some major redistribution in the country to protect people -- >> the plan became more complicated than the six points, lawrence. >> if you go to the purple, there's seven or eight plans, each is postcard lengths. we need to fix taxes and banking for good. for real.
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and we need to fix the health care. and we need to fix social security. and this is what economists think needs to be done. because these plans have been endorsed by nobel laureates and top economists. i'm not just one of a zillion people with a zillion ideas. this is carefully thought out not just by me by other economists. >> we appreciate you coming on and talking about this, and i imagine we'll be talking more about it throughout the year. still to come when we return -- >> any time. >> excuse me? >> thank you. >> still to come, the yuan's devaluation could mean higher production costs for apple. how will china's move play into the stocks. you'll hear from analysts. he's at $115 a share. but up next, more than $400 million worth of classic cars for sale this week at pebble beach. that's where we'll find a special friend of ours, robert frank.
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the biggest test for the car market is happening this weekend. it's happening in pebble beach, where more than $400 million worth of cars are expected to be sold. cnbc's robert frank joins us now with more. good morning, robert. >> good morning, andrew. to show you just how crazy prices have gotten, i want to show you two cars. this is a 1958 porsche 356-a. look at the rust and dust on this car. and right next to it is a 2003 pristine ferrari. this car is less than 14 hundred miles. this ferrari will sell for 150 grand. this porsche, thrust rusty porsche, for $300,000 for this car. and by the way, these two cars are bargains. last night we saw the most expensive single collection ever sold at auction, so by $67 million.
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and the pope's ferrari, given to pope john paul, that sold for $6 million. and mclaren f1 lm. the question is whether all this stock market volatility and this slowing wealth creation overseas will affect sales. >> in the past, when the stock market has been particularly volatile, it has actually had a positive effect on the car market. i'm not saying i necessarily predict that this time. but i think that certainly in 2008 when we saw a lot of volatility, the car market saw a spike. there was a flight toward hard assets, and you know, i think that could happen again. >> now, collectors telling me that price growth is bound to slow, because values for top classic cars have more than doubled since 2012, and they have been the best performing collectible investment for the past year, and the past ten years. andrew, i know you're a thrifty
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guy. so i looked around for some bargains here at pebble beach and i found one. it's a ferrari testa rosa child's toy car, will sell for $25,000. maybe that's a little expensive for your two boys. that is the cheapest car i could find here at pebble beach, and, again, a lot of questions about whether this broader market uncertainty is going to affect values. judging from last night, we are still seeing these price increases holding up. back to you. >> okay, robert. i could drive that down broadway on my way in the morning, right? >> becky, you've got a birthday party tomorrow morning, right? >> i don't think he's getting that one, though. robert, back it up. go back to the pope mobile. did the pope actually drive that car? i can't imagine pope francis signing off on something like that. >> no, it was pope john paul. and it was the last enzo produced. he did not drive it. he gave it directly to charity. the money at that time went
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directly to the vatican. these are two italian institutions. we are told there was an italian buyer, the pope and ferrari coming together in one sale. that's a $6 million trade. but no, the pope did not drive that ferrari. >> robert, thank you. we'll see you soon. >> thanks, guys. when we come back this morning, investors have been watching shares of apple slide over the last few weeks. is there more down side to come, or is the worst behind the company? we'll hear from an analyst who thinks not, right after this.
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welcome back. investors have seen apple shares slide about 17 % just sirns the end of july. the stock right now is sitting at near a three-month low. china playing a big part in the move lower. economic data showing not many more phones being sold there. joining us right now is a senior technology analyst at bgc financial. he has a price target of $115 and a hold on apple shares. you made the low price target on the street. >> yeah. >> and it's china. it's concerns but you have much bigger concerns? >> it's the dependency on the physical sale of the iphone.
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and when you look at the potential length thenning cycle for smart phones, you see what's happened to the tablet market and the pc market, it's a natural realization that the smart phone cycle is going to extend and lengthen as you start to see the price points, continuing to be born more by the consumers. >> you're looking at what verizon did to say no more recycle program. >> it might get you a -- there's still a big percentage of users who want to move up to the iphone 6, but once you get that, are you going to be as quick to upgrade your phone? do you really care about the difference between the processer? >> i don't but right now you're talking about an innovation challenge. one of the things that's been remarkable over the past couple
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of years. i used to think once you got to a glass screen, there's not much you can do. but this inbetween cycle has never -- i've never been enamored with jumping out but oftentimes whether it's the size or force touch, you don't think there's an extra innovation. i pads have not had that. >> i want it just for the better camera. >> they're already marketing the camera right now as a prime selling point. force touch is likely not a driver for results. what you want to see is building up the services layer. you look out at google, they have five different products with over 1 billion users each. that's a nice recurring revenue treatment. and apple spent $90 billion of the domestic cash buying back stock. it's all overseas money they can't do much with. >> with china, if the fears
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stabilize. >> that's only a small piece of it. >> and china growth, what about the economy? >> that's a bigger piece. china has been a major growth engine. it was north of 100% last quarter. 70% the two quarters behind that. that growth is going to tap down. >> why? >> because what you're going to see, and it's a fantastic question but the expectation is that the demand for the phones is going to tap down because there's growing competition from lower-priced domestic suppliers. >> thanks so much for joining us. >> thank you. >> when we come back, the stories that have you squawking this morning, including elmo. i can help you choose the right portfolio. monitor it. and even rebalance it. i've been called innovative. revolutionary.
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and just plain smart. i'd blush at the compliment if i could. but i can't. so. i won't. say hello at
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because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. this morning we asked you to send us the stories that have you buzzing. now it's time for us to share some of the responses. we're starting with elmo and friends. sesame striking a deal with hbo for it to air first. one says what we think is
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irrelevant, who will watch it and how is the question we had to debate about what this means for the future of pbs, whether this is a model for others and whether people will give do nations to pbs anymore. this became like an inequality story of whether people will get to see elmo first. >> i didn't realize they were losing so much money because people weren't buying dvds. now i know i'm part of the problem. i'm glad to see them continue. >> we're going to see a lot more in all sorts of different ways but it worries me if more and more content korcreators who do stuff for pbs, have to look somewhere else. >> i want to give a shout out to a young "squawk box" viewer. it's kyle's happy birthday. i had to leave before he got up this morning, so i just want to
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sea hap say happy birthday. >> and now he can watch sesame street on hbo. >> have a great weekend. we know you have a lot to focus on. "squawk on the street" is here next. they'll talk you all the market news as we head to the opening bell. have a great weekend. ♪ ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber and sara eisen. jim is off today. we close out a dramatic week with the dow higher on the week by 34 points but the premarket is lower as european gdp disappoints. july core ppi runs hot, the highest of the year. ten-year creeping back and oil hit $41.35 this that is the lowest since the depth of the recession back


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