tv Squawk on the Street CNBC August 26, 2016 9:00am-11:01am EDT
never -- they could never deliberately commit a sin. i know this for a fact. they're amazing. celebrate the day celebrates all breeds whether poor or mixed that encourages awareness of the number of dogs that need to be rescued each year. hopefully fewer and fewer don't get rescued because they're man's best friend, someone once said. joins us -- >> your best friend. >> i have three of them that are my best friend. make sure you join us on monday. "squawk on the street" is coming up next. ♪ >> good friday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli at the new york stock exchange. we have made it to friday and most importantly, yellen's speech in about an hour whether you're fan or -- of the fed or critic, widely anticipated futures holding their cards close to the vest in advance.
europe's largely flat, same for the 10-year as revised q2 gdp is largely in line. >> it is all about the fed today. janet yellen speaking in jackson hole. 10:00 a.m. eastern time. and right here, you will hear from former fed governors randy crosser in, fred mishkin and former -- and current vice chair of the federal reserve stanley fischer at 11:00 a.m. eastern time in reaction to janet yellen's speech. >> to our man on the ground steve liesman, good morning, steve. >> can't get over the dress. the clothes. that's all right. it's -- we're waiting at about an hour now less than an hour now for janet yellen's much anticipated speech, but in the meantime we've had really interesting fed speak this morning right here on cnbc. most of the fed folks we're talking to see rates going up. not willing to be necessarily nailed down to a timetable but loretta mester did say just
about a half hour ago, that she sees the u.s. economy improving enough for the fed to raise rates. >> i think we'll have some strengthening in the second half of the year, yes. i think the economy is on a good track. i think the employment numbers show that. the inflation numbers are coming up slowly and below our target still but moving in the right direction. >> so jim bullard also sees improvement in the economy but he has a different foreca. mester sees rates going up and, you know, about maybe a couple hundred basis points of tightening over the horizon. jim bullard wants to raise points one quarter point and leave it there for 2, 2 1/2 years until the situation clarifies. we'll see if janet yellen gives us any hint at all about whether or not we're going to have a rate rise, at least some time this year. i doubt we'll hear specific guidance to september. also what framework she uses to decide how to raise rates. and that's another question we'll hopefully be able to put to stan fisher the fed vice chair, with he'll have him on live from here and exclusively at 11:30 and his thoughts on
the fed chair speech. >> good stuff this morning. i know you have to go but we'll talk later in the morning. steve liesman, of course, in jackson hole. as steve said, we're going to be looking for color and character here. after bullard today, george today, kaplan, dudley, does she back up any of this notion that september, december is live so to speak? >> i think the betting is she will definitely echo the sense that the economy has come a long way, you can't declare victory but we are close to our goals, but i think the punch line that comes after that is what's not really known. in other words does that mean your pea in a hurry -- mean you're in a hurry to get to the next rate increase or where there's this period that there isn't much urgency to get there. the markets are in a neutral going into this. she's hawkish and the dollar surge but everything is right in the middle of its range. >> why there's so much anticipation because it's been
such a cat la list-free, directionless kind of market in light trading there's a lot of hype around the speech and when you go through the economist notes they say, don't expect any meaningful details in terms of when the fed is going to hike interest rates. the best guesses come unbalanced. balance is the key word that economists are expecting for her, potentially short term hawkish, suggesting the economy continues to make progress but longer term, a little more dovish, perhaps, this idea that the fed still has tools to fight weakness as it comes up. joining us to discuss the question of the moment is randy kroszner, economics professional at the university of chicago booth school of business at jackson hole and will be moderating or discussing in a panel tomorrow. good morning. >> great to see you. >> so what's your best guess as to what sort of message janet yellen will convey today? >> so i think she's going to be talking more broadly about the
tool kit and about the various things that the fed can do if something may go wrong, not talking about the immediate issues of well are we going to raise rates in september versus december. i think she will leave that for the fomc discussion when more data comes in. >> but you know the markets will parse every word. >> of course. >> even if she doesn't say september or december or this year they will read into how she characterizes the strength of the economic recovery, how do you characterize that given what we've seen in terms of better jobs numbers but sort of lumpy and noisy everything else? >> so we've seen reasonably good job growth. we've seen reasonably robust consumption. we've seen reasonably not so good investment. both the productivity investments and the payoff from it and the amount of investment has not been very strong, and it's one of the key challenges and key issues that fed will be
thinking about. if they start raising rates does that make it more difficult to get investment and make it more challenging to have more investment going forward. or is the economy sufficiently robust that we got to get going. >> you know, one reason that i think a lot of folks in the market are maybe frustrated or at least confused and tired of this process is simply because the data can be played either way. you can basically say we've just about reached full employment and we're on our way to perhaps our inflation sghools sugoals a there. >> sure. >> people saying nominal gdp 2.5% in the last four quarters what's the rush and the risks of going too soon are greater than those of waiting. so how does the fed come down on this exactly? >> well i think you've described the different camps that are around the table and i think janet tries to build a consensus. i think it's clear that fed broadly is in a movement up mode. the speed is something that
they're debating. it's likely they will move by the end of the year but for some sort of calamity that occurs globally, but i think they are in a path but it's going to be a very gentle path. i think the extent that janet does tip her hand at all it's going to be that any rate rises will be very gentle, very gradual, not to upset the economic apple cart. >> randy, bullard did a nice job this morning expanding on his framework trying to separate us from history in a sense, sort of set aside this space we're in. and talk about policy for this block of time that exists right now. is -- does that carry a lot of water in this year's jackson hole? >> i haven't heard a lot of discussion of it yet. maybe it will come up during the formal sessions going forward. i think that's jim's approach. i'm not sure others have taken to it yet. >> how much are you hearing about fed credibility, randy?
this increasing awareness it seems like on the part of the federal reserve it is having trouble meeting its mandate and its goal on inflation and that there's a lot of discussion about what data dependence means and whether their communication policy and central bank policy is effective? >> well, the question about meeting inflation goals has been one that hearing in lots of discussions for people around the world because most central banks are not meeting their inflation goals and having great challenges doing that. the -- certainly the ecb, the bank of japan are examples of that. so certainly there's a lot of discussion i think there will be a lot of discussion over the next few days what tools will be effective for the -- for the central banks to get to their goals. one, what should be those goals, certainly on the table are do we have the right goal of 2% inflation and second, how do we achieve that. this will probably be one of the things that janet yellen will
touch on, what are the tools that allow us to get to the particular goals. >> randy, if she is thinking and if the federal reserve is moving toward raising interest rates, given the progress we've seen in the economy, as early as september or december, doesn't she need to be more explicit today on that kind of maybe not time frame, but setting the markets up for that given that there's only a 50% chance priced into the bond market for december? >> well, i think they want to see a little more data before making a strong commitment and i think that's not unreasonable. i also think that it's not just the traditional aspects of data but concerns about having interest rates low for so long, that there could be some unintended consequences. we're seeing frothiness in commercial real estate markets and some people will be making an argument not just based on inflation and employment but also on some of the financial stability issues. >> well, it's an interesting point, how the market are
basically priced after the long period of very low interest rates. do you actually think that the fed is going to want to drag investors' attention in that direction as they tried seemingly to do back in the spring and keep the markets back on their heaels and we're worrid about froth in these areas and yet haven't delivered the policy rate increase except once this whole cycle? >> and so that's why there are these different camps some people put more emphasis on, the froth, some people put more emphasis on the low inflation, some people say well, we really need to be much more worried about the potential for inflation because the labor markets are so tight. unfortunately, this is unchartered territory and reasonable people can disagree and certainly we will be seeing a lot of disagreement here. there's mostly reasonable people here. >> thank you for joining us in
jackson hole, and your panel, central bank balance sheets and stability. the former federal reserve governor. >> thanks a lot. >> when we come back, of course, we'll be on top of janet yellen's jackson hole speech throughout the morning after she delivers her remarks stay tuned for an interview with fed chairman stanley fischer. first bill ackman's comments about herbalife taking a toll on the stock. another look at the premarket as we are now 34 days without a 1% move. does that change after 10:00? more "squawk on the street" from post nine in a minute. ♪
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bill ackman, carl icahn back in the news regarding herbal life, his short taking a surprising twist. kate kelly joins us live from 30 rock. what a story this morning. >> i know, carl. andrew and i talking about it on set in the 6:00 hour scratching our heads because "the wall street journal" had written a story suggesting ackman was going to at least partly buy out carl icahn. i talked to ackman and he called the show. he essentially said here's what happened. jefferies was working on icahn's behalf to help him sell out of his 17 million share plus position which by the way makes
him the top shareholder in herbalife and they asked ackman if he would be interested. he said absolutely not. they came back to him a second time and said, we're trying to put together a group of buyers are you in, and ackman said on second thought i would be willing to buy a few million shares if only to help get carl out. i'm going to flip it the very next day because i'm still very, very short this stock and i think it's going way down. here's what he had to say about the signal that carl icahn's potential block sale sends to the market about herbalife. take a listen. >> carl, i would say is the lea leader of what creates the confidence in the company. with carl exiting it's over and over quickly. the sooner he sells the better. >> so, obviously, very negative terms coming from ackman about what the icahn sale could mean and he said that some of the major long holders it was his belief at least were on their way to getting out including fidelity and also bill steerits.
we have calls to find out if that's the case. f if it is it has not shown up in the securities filings yet. we know that ackman is very, very short the stock. it's been famously called the billion dollar short. he does not dispute. however it would cost him potentially money to buy icahn's shares even if he were going to flip them in a day. here's when he said about the economic of that. take as listen. >> if i bought 3 million shares at 55 and i told them at 45, you know, i'll lose $30 million but we've got more than a billion dollar short position and getting carl out would help. i would spend $30 million to get carl out. i would spend more. >> so carl, you can see why this might make economic sense to ackman. it's an interesting and ironic new twist to what, of course, is a very long running story about two titans of investment on opposite sides of this herbalife trade. >> very curious, i wonder and
we've got sara and mike here as well, what carl must be thinking about jefferies at this point. >> yeah. i mean his long-time broker, have to feel they want to survey everybody. in theory if bill ackman had an interest in closing his short position, this is an efficient way to do that. actually. it would be at a loss. unlikely given what he's been saying about herbalife but you to survey the street and this what kate points out here is interesting, if ackman would have seen this as a mechanism to unlock a huge chunk of supply of herbalife stock and put pressure on the shares it makes backdoor sense. >> right. i mean i think that was the logic. when you see the story it seems bizarre because ackman within the last few weeks certainly since the ftc settlement on july 15th with herbalife for $200 million of course sent some negative signals about the company's business model but stopped short of calling it a pyramid scheme. ackman has said i'm short this stock, not bailing out of this
investment thesis. i think earnings are going to erode once the company has to abide by the terms of the ftc settlement and it may take a little longer but the shares are still going down. however, it's not shocking necessarily to think that he could be changing his mind, given that they didn't call it a pyramid scheme and you don't see a clear and quick path to the stock going to zero as he long predicted. >> the opposite, kate. the stock has gone in icahn's favor since he disclosed it back in february of 2013. double digits higher? >> sure. sara, that's a good point. ackman made a hat tip to icahn. if you bought with carl at that time, you did well. if you sold with him now you would do well. i think icahn bought in the low 30s and more recently north of 60. fair point there. >> great story. interesting wrinkle we will watch this. kate kelly at 30 rock. carl icahn is back at delivering alpha this year along with other titans including jack lew and
paul singer who has been making news the past couple weeks that a takes place on september 13th. >> yesterday we saw the dollar stores taking a hit. this morning, different type of retailer is slumping. which one why and what it says about the consumer when we return. a look at futures as we count you down to the opening bell and to fed chair janet yellen's jackson hole speech. we are seeing futures up 27. s&p up 3. more "squawk on the street" live from the nyse straight ahead. wats, let'revi the ectric micecor ofhe bl.t paent.. was qui. as pt ur r rearch, i so cd lab sususuwithnotes abo, was qui. i the benefi of much mo data, and a t time toplanhe best tres i stayocused 24/7 never sle yod like lot o mecal studts ino i stayocused 24/7 never sle
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gamestop down sharply in the premarket. the video game retailer posting a quarterly revenue miss, comps down 11, gamestop citing a lack of new titles and decline in hardware sales. some discussion about console redesign and is that why hardware was down 33. that's going to get some attention today. >> the idea that customers are waiting for the next wave of upgrades. you know, in a sense the reaction to gamestop's results goes a little against trend. this retail reporting season it's been the favorite areas like home improvement, like, you know, off price clothing like, tjx. when everyone loved an area or dollar stores and they reported okay results they sold off. the structurally challenged one like best buy and department stores rallied because people said not so bad, these are cheap stocks. this is a cheap stock backing off. people are not sure how long they have. >> and they root for the shorts. >> to make it works. >> wedbush came out and reiterated their overweight positive call and see it as a second half story around some of the upgrades.
they see catalysts like the new playstation, september 7th, playstation neo, october 13, playstation vr and then some new games coming out. but we'll see. i mean that's hardware, software was a drag. e-commerce was strong for the quarter. and that's going to be the play, whether they can shift to digital. >> sure. >> and get more revenues out of that. i will say, this sort of demise of the physical gaming and video games, has been called for for a long time, has been a heavily shorted position and yet doesn't go away. interesting to see how the company continues to evolve and whether it can do so. >> and that trades under eight times this year's earnings. it's kind of priced for slow decline at least, maybe rapid decline, and, you know, that -- they've been cheating death as you say for a long time in a sense that, you know, the kind of data richness of the games is going up and not as easy to have it displaced by on-line versions. >> you mentioned loved names.
ul ta, the beat and raise, com ups up 14.4, beats a 12.7 estimate. although the beat people argue not as big as it has been in recent quarters. we all know about the valuation. if cramer were here how it fits into his thesis of people wanting to look good all the time in a selfie camera world. >> it's worked perfectly the stock double pds in two years, it's up, 60 or 70% going into this number so the fact that it's down a couple of percent off an okay report, their guidance for this year in terms of top line was basically matching the street, so maybe they're being a little conservative here. people still like to snipe at the company. you know that there's not really anything particularly special about the concept and inventory is kind of get to be a problem once in a while. >> what about two-year chart, wow. >> exactly. >> good-looking chart. >> we will talk about the other movers this morning. yellen of course, and the opening bell a couple minutes away.
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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just about two minutes here as we await janet yellen in jackson hole at the top of the hour. the speech is called "the federal reserve's monetary policy tool kit." we'll take anything right now to fig out what she might say. >> that sounds good. >> try to read into that what it might mean. >> seems like she wants to or has the job of bridging the camps that say the cycle should kind of start to act like the ones we've become used to or entirely different. it's secular stagnation and we need to sort of do more novel things. she probably is going to try to split the middle on that a little bit but acknowledge things are not entirely operating as they have. >> we got the second read on second quarter gdp. 1.1%. that is what economists were looking for. lower than what was initially recorded and the big question is going to be, are we going to see a growth pick-up in the second half of the year, the atlanta fed a good predictor is tracking
3% plus, loretta mester the cleveland fed president is on board with that view, we can get to 3%. a lot will depend on the consumer, can they keep spending and on business, can they start spending. business profits down again in the second quarter report. >> fascinating thing going into it, the september prospects for rate hike, the market is pricing it around 30% right now. little more than a coin flip for december. but to me, the way that this whole cycle has played out, almost four months between now and december is an eternity in fed time. the story has changed so often within a couple months in terms of what we're expecting i don't think they will be in a hurry to price in any certainty about december. >> not seeing it in the bond or currency market. the dollar 5% off the highs of the year, it's been weakening, continues to be weak again today. against currencies like the euro. that's the first plagce to look after yellen. >> bears ahead of bulls this week in terms of sentiment.
many pointed out not something you see a lot this close to all-time highs. only a handful since 2000. has that ratio been off balance to that degree this close. >> it sort of conflict house people are positioned. i think this month where the market has done nothing, people use it as an opportunity to get anxious and hedged and nervous. >> a look at the s&p at the bottom of your screen. at the big board, carolyn maloney celebrating women's equality day, member of the joint economic committee, at the nasdaq, apertour and the humane society celebrating rescue me. portraits of dogs up for adoption on national dog day. >> forget national day. women's equality day. much more important cause there. i would just point out that carl, going into today, s&p is down about half a percentage point for the week, but health care, has been the story. that sector down 2% for the week
tracking its worst week since april. see how stocks like mylan and the group perform now that political pressure is back on this group. >> it was interesting yesterday, mylan opened a bit higher, the ceo getting out and trying to share some of the blame or the harsh public opinion on this, was going to be effective. over the course of the day, the stock continued to trade heavy it was clear this was not going to dissipate that way. >> we'll watch myl after sarah jessica parker removes herself from associating with the company. a lot of research to get to in retail. dollar general we talked about the weakness there yesterday, but jpmorgan takes it to neutral. credit suisse takes it to neutral. telsey cuts burlington, burl to market perform. people are probably taking stock of the run these names have had since the middle of may, i'm guessing. >> nike another one that got a downgrade which is a rare thing actually for nike.
b. reilly the company. i mention it because nike is the worst performer right now in the opening trade here on the dow. the firm cited some weakness in running that offset some of the improvement in basketball. also citing the valuation when it comes to nike. target 62 which is still higher than the price that nike trades right now. >> worth mentioning rack space going to be taken private by apollo in an lbo. modest premium over where the stock traded. $32 a share. stock, you know, closed yesterday a bit over 30. and, in fact, the stock has been well higher since its ipo about eight years ago. it's actually traded, you know, well up above 70. so maybe some maturity in the cloud hosting business. interesting to see how the other names in the group might react to that. >> yeah. apollo has been aggressive i guess you could argue in trying to do some turnaround stories. >> trying. absolutely. it's definitely a value buyer
history in distress. this isn't a distress play but interesting lbos have been largely absent relative to what you would expect in this environment with m&a in general pretty strong, junk bond markets kind of returning to health. it just has not -- they haven't been able to make the numbers work that well to be honest. i think that's why it is. >> meanwhile, splunk, speaking of the cloud, bookings up 200%. interesting as we looked at workday earlier in the week, just looking at some of the research on here. as someone said, not all beats and raises are created equally. we'll watch splunk later today down 6%. >> big lots one of the earnings performer this morning. interested to see how this one opens because profit came in a lot better than analysts were expecting. that was a big beat. comp store sales always important came in light. big lot shares are higher almost 4%. the comp store sales number 0.3% on the low end of the company's projected range but they did
raise guidance on profit margins higher. this continues to be a better cost management sort of story until they can get sales back on track. and it also follows the dollar general and dollar trees of the world which reported similar kind of weakness. >> similar weakness so the market theoretically more praised for it. kind of a similar customer so at the mercy of some of those macro factors that the dollar stores were citing yesterday. i was going to mention pure storage as an earnings mover as well from yesterday. looks like the stock up about 10%. this is a relatively recent ipo that has not done very well, been in a mostly down trend but revived lately and it seems as if people did not actually expect something as good from the quarter as they got. >> viacom we will talk to jim stewart of the "new york times" this morning about his column addressing why exactly dauman chose this time to concede to the redstone camp. telsey cuts it to market perform.
a, the hard work begins, fundamentals are lagging virtually every other media company, the risk of a credit downgrade, the way to get out of that may be cutting the dividend and recent weakness at paramount. ben herr not looking like a success, star trek beyond looks challenged. a lot of headwinds. >> great -- you can celebrate the fact that you don't have this conflict going on anymore. we have some kind of resolution. but you're right fundamentally, the perception is the studio is broken, the cable networks are, you know, badly positioned, and it's going to take a while to turn them and you have the debt. it's not a great balance sheet relative to others in the industry. it's interesting because a lot of people look at it and say wow it trades cheap and the stock looks cheaper than the peers but when you build that in it's hard to get excited. everyone thinks there could be a deal. >> more on that with jim. watching oil flipping positive. it was down all morning long. wti, 47.36.
it's up a little bit. but worth watching the energy shares. oil has been all over the map with eyes on next month's meeting of opec producers, whether they'll freeze production or not. but looks like we're in the opening trades. financials in the lead worth watching on a day where janet yellen is going to take the stage. we'll see that rate reaction desperately hoping for higher rates, can financials make a move higher if we see that. >> meanwhile, these crowded trades, a lot of discussion about how many there are, what they tend to give you, months afterwards. as we see as i said earlier, 34 days without a 1% move, the longest streak since 2014 when we had 62 which is kind of hard to imagine. two straight months of sub-1% moving. >> only a handful of periods in time, a few in the early '90s, little in the mid 2000s when you
had the market sit here for extended periods of time. another little wrinkle, s&p was down the past two days. we haven't had a three-day losing streak in i believe 50 trading sessions. >> wow. >> essentially, the market has just been this self-correcting offsetting mechanism where whatever bad news comes in one sector it's made up somewhere else and we have this kind of volatility freeze. >> technology in particular and the nasdaq has been very resilient and, in fact, yesterday logged the nasdaq's first back-to-back loss in two months. >> there you go. >> tells you something and the longest losing streak at that in years. >> so, dow is up 70, of course a lot still to get to in the next 20 minutes. bob pisani is on the floor. hey bob. >> good morning, guys. sort of a quiet opening waiting for yellen. crude is behaving itself for once not smacking the markets around. all ten sectors are to the upside. 3 to 1 advancing to declining stocks. even though we don't have big moves up in the market, it's generally been a positive open
so far. so the most important thing the market wants is some clarity on interest rates. with that said, the risk really still is to the downside. i'll explain why. if she is in any way hawkish, obviously, we're going to see the vix move up and stocks will probably move down. how much depends on exactly how hawkish she sounds. had ears the problem. the real worry is if she actually ends up saying nothing about near term path, talking about the fed tool kit and what they might be able to use in the future. in the event of saying nothing, the market will believe that september is essentially off of the table. if that happens, the vix could go lower from here and the problem is if you're a bull on the stock market most feel there would only be modest upside because we're at new highs. the risk is to the downside ultimately in that what she says, if it's anywhere hawkish, would definitely move the market more than if she simply avoids the topic altogether. let's talk about the vix and the
vix, of course, everybody has been complaining about it but remember august is traditionally a month where not a lot of happens. vix looks out 30 days. we keep emphasizing you don't look at the vix here. you look at the vix futures. you want to look at the october, the november, the december futures contracts. here you're out 17 an 18, up 50, 60% from where the vix is right now. obviously the election is a major issue. obviously any concerns about the fed. those are already being reflected here in the vix futures. the market is anticipating more volatility moving forward. now, you don't have to be an expert in pattern recognition to figure out what's been going on by and large. not only is the s&p 500 flat or the dow but the broadest measure of the stock market that i use which is the russell 3,000, has been flat for the month. this is a big complaint for everybody but the important thing is, that there's been sector rotation that's been going on. so my take on this is the market
has really been very, very healthy overall because number one, we have a very clear market leader that has emerged this quarter since earnings and that is technology stocks. so that leadership ta we've seen from technology is impact. banks, which had a nice start and then fell back again on rate concerns, had been improving recently, as have materials, partly, this is on the weaker dollar, but there's another sort of subgroup showing real improvement. industrials, we've seen deere, illinois tool works, dover, the big global industrials all out performing. what's not performing? the defensive names, utilities and telecom stocks for the most part are down 2 to 4%. this is classic rotation. out of defense into cyclical if you want but the bottom line it shows no sign of deterioration in the market. and that's why we need to hear where yellen feels about things right now. the dow up 79 points. back to you. >> thank you. let's see how the bond market is
set up for janet yellen's speech later this morning. just about 20 minutes. rick santelli at the cme group in chicago. good morning, rick. >> good morning. sara, much of the same dynamic in the last 48 hours, you know, the short end is somewhat hot, you can see on a two-day of 2 year but if you want to see why it's hotter, these are the highest yield closes right under 80 going back to 6-6-16. triple sixes. see the two-year note rather aggressive. with a tighter time frame instead of june, let's go back to august 1st. you can clearly see the long end of the curve is not as hot, hence your flattening dynamic. these all start on the 1st of august. 10-year and then a tight range, look at the right side compared to the right side on that two-year. the 30-year, the right side drops even more. what's very similar to the 30-year which has been somewhat buoyant is what's going on with the dollar index.
it's down about a fifth of a cent today but that chart shows that doesn't look like the market that looking for the hawkish comments to be delivered on. they could be talked about but it's whether they are actually delivered on. people down here have a different synopsis and think the hypothesis is wrong. is there no risk to waiting? that's where the argument is. the yield curve, 10s minus 2s, that's a one-year chart but the money ball trade on flattening is 30s minus 5s. we talked about it many times. flat since early march of 2015 making fresh flats as we speak. carl, back to you. >> all right. rick don't go far away. rick santelli. when we come back former fed governor frederick mish can will react to the speech, that big event set to begin at the top of the hour. in the mean time, despite flattish futures dow up 78. we're back in a minute.
in a few moments. kate warn, strategist at edwards jones and joseph, be chief u.s. economist at deutsche bank securities join us. good morning to both of you. >> good morning. >> joe, after getting bullard and george and kaplan and dudley and now lockhart in the past couple minutes does she in your guess lean into or away from that commentary suggesting a hike this year is still likely? >> she'll leave the option open for a hike this year if the data continues to evolve as they expect. so she will try to straddle both the hawkish and dovish approaches, leave that option open for a hike. i do not expect her to be hawkish. i don't think she will be as hawkish as stan fisher, kaplan or george. those people are on the other side of the spectrum than yellen, but she'll want to leave her optionality open to go.
>> and kate, how would the market react to such a thing given there's so much hype and attention and seems like investors are craving a catalyst right now no. >> i do think investors are looking for a catalyst. i don't think she'll provide it. that could lead to a little d disappointment but probably to the a lot. i think that janet yellen is comfortable with where the market currently expects the interest rate hikes to come, not so much in september, a little more in december, maybe in 2017. and if she leaves it there everyone wants more certainty and also not much change that suggests not much market reaction. >> gee, just to that point, does janet yellen need to make the case more to the people who say let's get on with it or to those people who say, the conditions haven't changed very much, the economy is not running away for us let's wait? which way does she have to make her argument? >> mike, she'll, i think err on
the side of the latter. that's been her pattern. the hawks have been valently trying to get the fed to move for a long time now. they've clearly been in the losing position. i don't think the economy is particularly robust. we had growth in the first half of the year averaging only around 1%. this quarter growth may be better. that's the risk. but i don't think this economy is getting away from us. i think the fed should have raised rates a long time ago. they missed their window. i don't see them getting rates very much higher and my guess is, again, she'll err on the side of caution and she's the one controlling the committee. >> bottom line, kate, we're parsing the language and hints and clues and short-term vision and long-term vision. what is the investment climate look like for you for the rest of the year right now, given we continue to see a rebound broadly in the u.s. economy. it's not perfect. but it does continue to take shape and the market is now at a record high?
what do you do from here? >> we think we're he likely to continue to see modest gains in stocks supported by the modest economic growth and the economy should be a little stronger in the second half of the year. i think we're seeing that in the data and from companies talking about how their business looks a little bit better. so we think what you want to own are companies that have diversified businesses, that pay dividends but not high yielders. we are seeing the rotation away from those. and have the potential for dividend growth. the reason is these are companies that have been able to grow their earnings even in really tough environments. we think the environment is tough but still a good environment for investors especially in stocks that have the potential to grow over time due to their diversified businesses. >> does that include financials? where do they fit in your thesis overall? >> i do think that the financials can grow. i think they're continuing to struggle with the low interest rate envirms and certainly with
the flattening yield curve. the flatter the yield curve is the harder it is for them to show earnings growth. i think they managed through it pretty well now, but certainly anything that raise interest rates would be good news for the financials. the continual expectation that we'll see one more rate hike is good news for financials. i would be adding them. but i think they're better opportunities in other sectors right now. >> joe, it seems as if the treasury market is really going to want to see, you know, the whites of the fed's eyes when it comes to whether or not they lift the short interest rate up here before moving. does the 10-year yield have to go up a little bit in anticipation of the rate hike? does victim to steepp before the fed feels comfortable making a move even if in december. >> the fed just looks at fed funds future and their record is woeful unless the market has priced a high probability of the fed moving at that meeting somewhere close to 70%, the fed
does not buck the market trend. and what the treasure market is telling us now, and this is true globally and yes, part of it is because of zero and negative rate and the quantitative easing, what we're seeing globally are flat yield curves, rates remaining depressed at the long end, seeing inflation expectations remain low. this is just not a global economy and a global financial marketplace telling us inflation pressure is a problem and that fed can get very far along on these rate hikes. it would be interesting if yellen backs away from their forecast of the terminal rate which is still very high. >> there's a look at fisher and yellen making their way into -- >> this is the famous walk. >> the walk. >> we've been waiting all year long. >> everything short of the briefcase. >> this is the patio, right outside of the conference room where they actually hold the meetings which are closed door to the press and we're not actually going to get her -- to see her deliver that meeting. we see her walk into the room. there she is with her two
lieutenants looking cheerful i would say. >> they stop for the red carpet photos. >> the casual look, be that's generally how the dress code goes at jackson hole. >> oh, yeah. all fleeces and fishing wear and -- >> yeah. a lot of discussion. >> hoodies. >> finally, joe, i wonder, whether you expect anything substantive on this idea of a lower neutral rate and whether or not that is an eventual constraint on normalization? >> oh, as carl, certainly it's an eventful restraint on the fed and we've written about this. i mean the terminal growth rate the potential growth rate in the economy is significantly lower. much of the work larry summers i don't know if it's exactly right but certainly felt right for the last few years. i don't see the fed being able to move very far. the problem is the fed has got these dots and this transparency and saying their terminal rate is around 3. the market is saying it's around 1. the fed still has a major
communication problem and i would argue they don't have a lot of credibility with the markets. >> i'm loving this shot of the three most powerful central bankers in this country just enjoying the view. >> it is a gorgeous shot. i think it was [ inaudible ] that tweeted that shot of the tetons and said america the beautiful. just an amazing -- >> can we read anything into their body language about what she's going to say and hint. >> red, white and blue. >> is dudley in black? >> thanks so much. kate warren and joe, setting us up for yellen's speech in about 6:30. guys have a great weekend. when we come back, we'll talk more about what we're about to hear with the dow up 69.
it's been a long week trying to fill the space between mnds and yellen's speech -- monday and yellen's speech. a few moments away from the remarks as they are made public. we saw janet yellen with fisher and dudley in jackson hole. setting up for an event, i mean, a summer where we've been lacking events i think you would agree. >> without a doubt. the economist at merle ril lynch pointed out that jackson hole hasn't been a market mover since
2010 but i think this time there's a greater chance we can get something here because the suspense has been building so long. >> we do not want to be late for this. janet yellen's remarks after the break. you all day d ghslp stays with withleepiqmb beds tenology give you you all day d ghslp stays with the knowledge to
good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli. awaiting comments from janet yellen in jackson hole. those should be coming in any moment. the dow as you can see up about a quarter of a percent. to steve liesman. >> thanks very much. fed chair janet yellen saying the case for a rate hike has strengthened in recent months. the u.s. economy is reaching mack mum employment and price stability the two goals of the federal reserve. the u.s. economy continues to expand and that solid growth in household spending. had solid growth in household spending. long talk about what the fed would do in the next recession that is actually the subject of the speech beyond the comments on the near term outlook. she said the fed needs to retain the new tools it gained from the crisis and has the tools to fight the next recession even if the funds rate rises to just 3%. those tools include interest on
excess reserves they'll play a key role she says for years to come and the possibility she talks about this model of potentially using two $2 trillion of additional quantitative easing in order to fight the next recession. doesn't say that's what they'll do but says there's a model out there and that would be helpful in context of it. couple more context on the current economy. the dollar appreciation is restraining exports and growth is sufficient to improve current labor markets and the fed fomc as it's said in its statement, gradual rate hikes over time. back to the idea of fighting the next recession the fed may want to consider broader asset purchases and the fed should research this idea that's been out there, this controversial idea from the san francisco fed president williams of raising its inflation target or the price level target. a different way of approaching the fight to raise inflation and finally, said something that a lot of central bankers have been talking about greater fiscal responsibility could be used in the next recession. i want to go back to what i said
at the tops the comment by fed chair janet yellen where she talks about what the fomc says, about raitt raising rates and i believe the case for an increase in the federal funds rates has strengthened in recent months. that's a new addition to what the fed chair has said before. of course we will be able to ask fed vice chair stan fisher all of this in an exclusive interview at 11:30 eastern. carl? >> in a market that's been hungry for news, steve, dinner is served. we'll get back to you in a little bit. steve liesman in jackson hole for reaction to rick santelli quickly at the cme in chicago. rick? >> traders don't get to read transcripts but operating off quick headlines. what do the headline response show us, the word strengthening recently pushed the dollar index from negative down a quarter of a cent up to about 0.6. the dollar/yen closer to 1.01. the dynamic down and easy. if you look at the yield curve
the same thing. technically more hawkish, two-year note rising. the 2s, 78 up to 81. look at the 5s up close to 120 from 114, 115. the 10-year, still in the 150s at the boundary of 159. we know this could be the 20th day in a row, 19 for sure, that we settled in the 150s. and the 30-year the further down the curve the less reaction. i'll tell you what, the knee-jerk reaction isn't where the action is at. see if they believe the words and as the conference goes on and she gets up at the podium because i will tell you, doesn't hold water in strengthening. we could have said this in q2 and q3 of 2014. q3 we had 5% gdp. what does recently mean? we had better employment numbers but they're choppy. you got to take longer term view, janet yellen, and company, but the market is acting predict little bit off the headlines seen just far.
>> on that note, no timetable it looks like in the speech as well. rick santelli thank you. let's get the stock reaction. bob pisani on the floor, what do you see? >> well, case for rate hike has strengthened in recent months. that's modestly aggressive. but doesn't answer the question whether september is on the table. you can see that in the reaction to the markets. let's look at the s&p. 2178. that's where we were going in, 2179 where we are right now. that's a pretty modest reaction i would say that's statistically not terribly important. look at the banks, banks will move on any kind of potential hint of a rate increase. you saw a modest rate from 33 to 33.60. they're pricing in a higher probability down the road of some kind of rate hike. again, still doesn't mean september. take a look at another interest rate sensitive vehicle utilities which will move down when you have talk of rate hikes. you see the 253 where we were
at, 254 and that's moved down about a point. there is some indication that they're strgts to price in rate hike. down the road. it it you look at the vix, trying to figure out where the volatility is, 1346 where we were. volatility is down a little bit. what this is saying is that short term the market is not anticipating volatility, a lot more volatility, in the next 30 days. however as we keep pointing out it's not about now, it's about looking out well into october and november and if you look at the vix futures see if they moved up, we were at 17, these are modest moves here. even to the downside for the day here. but you can see in october, and november and december, they are higher than where they are right now but even here right now in reaction to the fed announcement there's not significant moves to the upside. they're down slightly right now. so the bottom line, economy is clearly doing better. she has clearly signaled the potential that every meeting is still live. she did not say that but that's clearly the implication.
not enough of the clear tip of the hat that september is truly on the table. i think significantly to sway the markets. back to you. >> we will watch that. bob, thank you very much. bob pisani. stay with the comments from yellen. joining us on cnbc frederick mishkin, former federal reserve governor columbia university economics professor. great to have you back. thanks for joining us. >> my pleasure. >> i'm curious, what do you see that's particularly new here? >> i don't see anything that's really that new. that is really keeping their options open. the way i think about what they're doing is they're very much data dependent and that they really want to react to how the data comes in and if the data says that the economy is strong and the inflation, they have confidence in inflation [ inaudible ] then they'll go. and the other hand if the data doesn't come in as strong they won't raise rates and [ inaudible ] so it's possibly they lower rates back down
again. i don't think that's [ inaudible ]. but it's an option. [ inaudible ]. >> we're going to work on this. frederick, we're going to work on the skype connection in a moment and hope to talk to you in a couple minutes. on that note, though, i think people are sort of warming to this idea that it's not groundbreaking speech but puts the onus now on data that we're about to see. this puts the jobs number in sharp relief that we're about to get. >> reminding the market that a rate hike is coming and you're seeing that reaction slightly in the bond market. the two-year yield the highest since june, the 10 year out of 160. these aren't incredibly dramatic moves but a reaction there. >> compared to august, it feels dramatic. >> and stocks are holding their gains here. the dollar flipped into positive territory with those higher yields. and financials stay on top of the heat. you have a little bit of a rate hike is coming trade, but she didn't give a time frame and
continued to say that we were data dependent and the bulk of the speech focuses on what to do if the economy starts to weaken again. >> ifs this doesn't work here's what we're going to try. >> exactly. >> definitely snugs up the expectations that the threshold for them moving is lower slightly. september is still theoretically a live meeting. but it does not sara, as you say radically change the perceived timetable and i do think that basically the market -- it's kind of as we thought, echos what bill dudley has been saying roughly, probably somewhat like what stan fisher has recently spoken about as well. >> i would just wonder, how sensitive and vulnerable this market is going to be, to any interest rate shock or to any interest rate hike if it comes in september or december. because as of now, and as of before janet yellen's speech, we were only pricing if in, the bond market, a little more than 50% chance it happened. we got the latest fund flow data from bank of america and merrill
lynch, 6 million more funds flowed into bond funds and outflows out of equity funds. the lower for longer trade continues to persist in the markets and wonder how that sets us up in case the fed does move. >> the bond market probably, you know, if it had feelings would feel that it's been burned a couple of times when it has over anticipated a fed move, right. first with the taper tantrum and then think back to the spring, the fed seemed very intent on just lifting the market's probabilities for a move in the summer. but really maybe wasn't intending to do anything in the summer. wanted to knock the market back on its heels a little bit and i think the bond market is like we're not going to go along with that yet. >> if the bond market had feelings it would be rick santelli. >> i think rick has feelings. >> i'm saying he is the -- >> he would channel the feelings perhaps. >> good to get stan fisher to react to this speech and let us know how close the fed is to raising interest rates. also kuroda speaks tomorrow. that should be some interesting headlines. i think we have fred mishkin to
respond as well. >> are you there? >> i am. >> recap what you were saying. big takeaway as far as yellen saying that economy is strengthening and a rate hike coming but not giving clues as to when. >> so i think that the fed has had a big problem in terms of advertising future rate increases and then frequently finding the data is not sufficiently strong and backing off and that hurts the fed's credibility. i think it's bad way for them to communicate. so what janet has done here is describing the data, she is giving you an indication of the fact that the economy is looking better which makes rate hikes more likely, however, there's no commitment. and i think that's exactly the right thing for her to do. the key way of thinking about this is that instead of making time commitments saying we're going to raise x number of times or certain meetings, it's more important to make commitments about what the data is going to tell you and then how you'll react to the data. and as we've seen the data has
been better lately but, you know, it can go either way. remember we had the terrible jobs report in may and then it came back very strong in june and july. so the issue is, how strong is the data? the data is strong we're ready to go and if the data is not strong we're not ready to go. >> so in your view, is the market under pricing the risk that the fed raise rates in september? >> well, i felt actually that the market did under price a little bit, although i think this is really making it much more likely there will be a november move and that -- in fact, i did think that the market underpriced that. i do think the situation is more favorable to them raising rates. if it were me i would not raise rates right now for reasons that i don't think that the inflation rate is moving sufficiently in the direction we need to see it move, but on the other hand that's a judgment call. >> do you assign any significance to the fact that janet yellen did not say that
they're actively considering any of these new tools that have been suggested, for example, raising the stated inflation target or is that pretty much as expected. >> yeah. that's as expected. talking about doing anything in terms of raising inflation targets and so forth, would be a very long discussion for federal reserve. my view is that i would actually advocate that the federal reserve temporarily shoot for a higher than 2% target. why? because they've been under shooting so much. but on the other hand, that kind of discussion is one that they would take a long time to do, the fed is very conservative about changing their overall strategy, you can see this, teflds have communication -- they would have communication committees and 18 months later come up with something and certainly changing the inflation target would be a huge, huge move for them. and would not be done lightly. >> and you know, of course, the rejoineder to that idea is that the fed is having trouble meeting its current inflation target why would lifting the target somehow make it more achievable or favorable as an
outcome? >> it would be consistent with indicating the fed should be raising rates slower than it otherwise would. even to the exit ent that it's difficult to get inflation up and, in fact, i consider that the biggest problem for central bankers right now, is that we're in a world where getting inflation high enough is difficult to do. but even if that's true, it's still true if you commit to aiming for a higher inflation rate than 2%, i would think temporarily would be a reasonable thing to do, then in that case you're also committing, also indicating you're not going to react as quickly to data coming in as strong. in fact, what you will do is tend to keep rates low and i think that's certainly an appropriate thing for them to do. as i say, i think that them changing the basic communication strategy since 2012, is something that would be -- take a long time, very big discussion and will not occur in the near future. >> that said, bullard this
morning, frederick, said he thought they had hurt their credibility with so-called bad guidance. he said he would consider banning the word stimulus because it's conditioned the market to think about what's coming in the next quarter or two. are you that harsh a critic? >> no. but i am a critic of the fact i've been quite a big critic of the nature of the forward guidance they've been doing, that i would -- a member of a team that wrote a paper for the u.s. monetary policy forum in february which was very critical of the fed using forward guidance in terms of dates. what i don't think is helpful when they say we're going to raise rates twice during the year or four times during the year whatever, i think that this has been very damaging and seriously hurt the credibility and, in fact, the market's view of fed communication strategy right now is that it's very weak. so in that sense i agree with bullard but on the other hand, the fed should describe what data they think is going to come
in, what their forecasts are, but most importantly, then how they will react to it. so i think that's completely fine thing to do. white not hurt the credibility. it would give information to the market that the markets need and would actually produce much better monetary policy. but i think that it's absolutely correct that fed should stop, cease cease and desist from giving calendar rates when they might raise rates. >> finally for those who want to argue that day is now over, because we have the speech, how important is whatever cleanup fisher bets in a few hours? >> i don't know. that's something i can't speculate on. i think that certainly that the vice chair is in no way going to contradict whatever the chairperson has said. and so that i think he will be there to help clarify but i don't think there will be much cleanup here.
pushed to give more specific information as to what the speech, janet's speech means in terms of the future fed actions but i think that he's not going to change the view the speech was intended to give. >> we are eager to hear from him in a little over an hour. fred, thank you for being with usp. >> my pleasure. sorry about the skype. >> it's fine. we're glad to have you on the phone to help interpret the fed speak. fred mishkin former governor at the federal reserve. when we come back another top story we are following today. what is next for herbalife as you can see shares are struggling down more than 6%. after bill ackman's interview this morning here on cnbc. and let's give you another check of the markets in reaction to janet yellen's speech in jackson hole. it looks like we're at the highs of the sergs session. dow up 101 points. s&p 500 is up about 0.6%. the nasdaq is the highest of the group, financials and technology
rallying. much more "squawk on the street" coming up. o, pdent ofhe north fe, are working thetoty ts, let'gir . watson, what if itai?ts, let'gir theris jusa 3%hance of rain, flee fe rm dolotiacke rfect choice wson. wonder our cuomer loyalty flee fe rm numbkeeplimbing.ke belie can do even br. wonder our cuomer loyalty flee fe rm i likehe w you tnk. ers a lot of places you never wanto see "$7.95." [ beep ] but you'llglad to seere. fidelity -- where smarter instors wi always w onle gns we as obvious when u trad smarter eny anexit points
following after bill ackman told cnbc he was approached by jeffreys to buy a stake in the company. kate kelly spoke with ackman and joins us with more. >> another day another twist in the carl icahn versus bill ackman herbalife saga. the news that jefferies and company approached ackman the noted short seller about having carl icahn step out of his 17 million share long position in herbalife this month. incredible as it seems, ackman told cnbc this morning he briefly considered doing it, if only as a means to an end. icahn's sale, ackman argued is indicative of the bearish around the company since the ftc settlement july 15th. icahn has made good money here ackman noted so made sense for him to consider selling. >> first of all he's made a bunch of average, average cost is like 32, sell at 60 bucks almost double his money and
great for carl and he doesn't have to worry about what happens to the company when they're required to, you know, change completely change the business model. i think he knows this thing is toast. >> this thing is toast. powerful words. ackman if he participated he only would have bought a few million shares of the 17 million share block that jefferies was apparently looking to sell. he wanted other people to fill out that buying consortium and told me he would have sold the shares the next day. ackman, of course, has lost money since his infa mitt short was put on around may of 2012. later that same year, icahn began buying shares that have risen tremendously since this apparent attempt to sell in recent weeks, guys. now couple of quick updates here, we reached out to jefferies to talk about what they were aiming for here and what their version is of events. fidelity, which bill ackman told us was also selling its position, a sale not on record so far, that may be updated in the coming quarters if it's
true, has declined to comment. we have reached out to carl icahn to see if he wants to come on air and give his point of view. no word yet. >> kate kelly thank you very much. speaking of ackman and icahn who could forget that moment when they hugged it out on stage at delivering alpha. our conference two years ago after their epic brawl on cnbc before that. icahn will be back at the delivering alpha conference september 13th in new york city. for more details go to deliveringalpha.c deliveringalpha.com. we turn to the continuing outrage over mylan's epi pen price increases. doesn't seem to be going away any time soon. meg terrell at hq with the latest, looks like the stock is up but tough week for those shareholders of mylan this week. >> yeah. very tough week for mylan shareholders. the pressure may be coming off today probably what heather bresch the ceo of mylan was aiming for yesterday when she pointed the finger at the middle men in the drug supply chain. this, of course, bringing pharmacy benefits managers and
drug distributors into light seeing express description and skrshgs vs and [ inaudible ] all of them sort of rebounding today but yesterday was a tough day for them. we actually talked with express scripps chief medical officer about whether there should be more transparency in the whole system. here what's he said. >> we love transparency for our patients. patients should know what they're going to pay when they go to the pharmacy counter. we love transparency for our clients. they can come in and audit their contracts, they know exactly what they're going to be required to pay for our -- the products we help them adjudicate. what we don't want is transparency for our competitors. >> now express scripts steve miller saying the case for competition has been for hepatitis c drugs. going back to mylan here the supply chain graphic they put out yesterday claimed that more than half of the actual revenue from the drug the money coming
in around epipen was going to the middle men. well now you're seeing the analysts covering the pbns and other folks in the supply chain coming out against that. evercorp in mylan's case saying the case they argued was over preliminary simm plyfycation the supply chain is not earning more than half the economic profits not even close and it's an over simplification of the true issue at hand. that is the argument right now. the supply chain versus the drug companies and likely to see this only continue to heat up. back to you. >> absolutely. we'll be tracking it. thanks very much. and when we come back, how philippe dauman lost the battle of viacom. .
want to get more of the herbalife story. scott wapner on the phone with another player getting involved in talking to you. good morning, scott. >> hey, carl. good morning to you. you know, there has been i guess a lot of question in the marketplace over the last weeks since the herbalife settlement, what some of the largest shareholders were going to be doing with their shares and certainly on this news that "the
wall street journal" broke that carl icahn and jeffreyrs were shopping his position. i spoke with bill, the chairman of post holdings long one of herbalife's largest individual shareholders. he told me he still holds shares of herbalife, quote has a lot of confidence in carl icahn, believes in herbalife's business still, thinks it's positive for society. the reason i reached out to him, bill ackman mentioned on "squawk box" this morning, that fidelity had been cutting its position in herbalife which is a fact, they paired their position down, and maybe people like bill would be looking to do the same. i can tell you in a conversation i had a few moments ago with mr. sterritz he still holds shares of herbalife and would not characterize the size of his position, whether he has sold any of those shares just saying that he believes in carl icahn and he continues to believe in the herbalife business. it's another little piece of the
story as we continue to follow these large holders of herbalife and what they may be trying to do with their positions, carl icahn and bill stir ritz included. >> how long until we get icahn's reaction to ackman saying i think he knows it's toast? >> maybe when the alarm clock goes off. i think we're still -- we're still waiting. look, i've tried to get in touch with carl as much as probably the rest of the free world has this morning, if i hear back i'll certainly let you know. maybe you'll hear before that. i would like to hear from carl and what he thinks about the whole thing. >> amazing how the back and forth continues to happen in a public realm. more so than a lot of other stock sagas. thank you for adding color to it. we hope to talk to you later in the morning. scott wapner working when he should be resting. when he come back markets reacting to yellen's speech in
good morning, everyone. i'm sue herera. here is your cnbc news update at this hour. the death toll now stands at 267 from the devastating earthquake that hit italy on wednesday. the area still suffering after shocks while the recovery efforts continue. a french court has overturneds the controversial ban on bur kinneys. the full body swimsuits worn by some muslim women. france's muslim federation says the ban seems to flame religious tensions. sarah jessica parker who was the face of mylan's epi pen says she's quitting her role as the spokesperson over the company's price take hike on that product.
olympic swimmer ryan lochte has a new sponsor all four of his sponsors dropped him earlier following the controversy in brazil by fabricating an armed robbery incident. he has signed a deal with pine brothers throat drops. the theme of the campaign, forgiving your throat. that's the cnbc news update this hour. sara, back to you. >> well, it certainly got them a lot of press attention. >> it did. i thought -- >> everyone sponsoring him now. >> i thought it would be a liquor company. i didn't figure out throat drops but what the heck. there you go. >> forgiving on your throat. thank you. >> sure. >> keeping an eye on the market reaction here from comments from fed chair janet yellen at jackson hole at the top of the hour. dow up 106 points and joining us is megan green chief economist at man new life and brian jacobson from wells fargo funds. good morning. >> good morning. >> so megan, actually if you look at the reaction, it's come back a lot. yields popped higher coming back down.
the dollar strengthened. it's now weaker. and stocks are back near the highs of the session. did we learn anything new from janet yellen? >> yeah. i think we learned very little in terms of policy. you know, this was the most dovish/hawkish speech we could possibly have expected from yellen and as you highlight the markets haven't moved. seems like the markets haven't bought janet yellen's insistence that actually the evidence supports a rate hike more now than it did a couple months ago. she also highlighted that it would all be data dependent, though, and i think that's what we could have expected. janet yellen never paints herself into a corner when she doesn't need to. and she once again said that a little bit of something for everyone here suggesting that maybe if data continues to improve there will be a rate hike. but it's not clear and it's not predetermined. >> as i mentioned we're seeing a nice market rally with the dow up 105 and the s&p up 0.6, is that good enough to pacify the markets from what was a widely
anticipated policy speech here? >> yeah. i have to admit that when i was coming into the speech i was afraid that 14e68ds she would come across as being less dove ir than in the past and wasn't sure how equities might respond. it was more because i was concerned about interest rate sensitive parts of the equity market like the dividend payers and such. i was enkourlging people to think about being more cyclical as a form of defense going into the speech and that's worked out so far. however, i think that there's also a history here that we have to look at which is that often times you get this reaction in the markets that's often times unwound either by the end of the day or in subsequent trading days. so i wouldn't get too emotional over this initial reaction in the market. i would just encourage people to kind of thing about the long-term here. she's basically said she thinks that evidence could support a rate hike. it's better now than what it looked like a few months ago which is stating the obvious, however that initial reaction with the 10-year treasury to 1.59% i think that's actually more correct for the long term
than the retreat back down to around 1.53 or wherever we're trading right now. >> megan, let's get to the point, i think there's a little uncertainty over how the 10-year yield might respond if it believes a short-term rate increase is becoming more likely. would we expect to see in a more hawkish and less dovish environment or a commentary from the fed, will that 10-year yield finally budge higher or are we going to be in for a treasury curve flat snng. >>enning. >> i expect a further flattening. when the fed hiked in december we saw the 10-year drop a little bit. i don't think we'll see a drop this time around but i do think that we will continue to see it increase very, very slowly. much more slowly than the short end of the yield curve. we will see a flattening of the yield curve which eats into bank profits and does provide a headwind for the economy. >> i'm just reading from the speech right now, brian, here's a line on the current economic
conditions. of course she says, our decisions always depend on the degree to which incoming data continues to confirm the committee's outlook. clearly stressing the data dependency. what if we get a poor jobs report or step back in inflation between now and december. does that mean a rate hike is off the table for a year? >> well, i'm not sure if it's for the entire year. i think it's close if it would be for the entire year if we get a bad report, let's say this upcoming week, we have data as far as pce and the employment situation report. if those are bad yes, i do think that rate hike is off for the year. however, my expectation is that those are going to be pretty good. my expectation for the employment situation report is that we could actually have something in excess of 250,000 again. and that i think would create another reprising of rate hike expectations where people could be thinking well, maybe september, november or december or all three of them are back on the table. >> speaking of inflation expectations, megan, i don't know if you saw the japanese cpi number overnight, core inflation
in july in japan, weakening. it just highlights the struggle that global central bankers have right now in pushing up inflation. it's also a reminder that central bankers around the world are very much in easing mode and i wonder at a conference like this with kuroda speaking tomorrow how that complicates the picture for janet yellen? >> it does complicate the picture. the fed can only hike so much while every other major central bank is easing really aggressively. and i think the bank of japan and probably the ecb will end up engaging in full-on helicopter money over the next 12 months. so that will have implication for the u.s. dollar and, therefore, the u.s. economy. on the other hand, inflation actually will look a little bit different in the u.s. at the end of this year. oil prices are actually rising year on year now and so i think we will see inflation look closer to the fed's target but that will be because of statistical reasons, base effects, not because of structural reasons. when we get the jobs report next week the headline figure might
be great. i tend to ignore the headline figure and look at wage data instead. that suggests what's going on in terms of structural pressures of inflation and there i don't think we'll see any change. we might get better inflation data at the end of this year. the hawks on the fomc might get really excited about that, but it won't be sustained and that's worth keeping in mind. >> all right. guys, good discussion. thank you for joining us after the yellen speech. megan green, brian jacobson, thank you very much. plenty more on the fed. a reminder our interview is coming up with the fed vice chair, the number two, stanley fischer, cnbc exclusive, sits down with steve liesman in jackson hole right after janet yellen's speech. that's in the next hour. 11:30 a.m. >> when we come back, the behind the scenes story of philippe dauman's ouster from viacom. next on "squawk on the street." b le trading desk you that thinkorswi tradinplatrm wrever i
fidelity -whe smarter vests wi. lawyers for sumner redstone heading back to court to try to get his granddaughter's lawsuit thrown out that seeks review of recent settlement with former viacom ceo philippe dauman and whether the media mogul was mentally economy tent to oust him. our next guest says there's no doubt that dauman lost the sentiment of his board. joining us is cnbc contributor jim stewart joins us as he does on friday. curious as to why he threw in the towel? >> i was mystified. he had big court wins in massachusetts and delaware. he had been fighting this bitterly maintaining that chaot
we can't run a company under these circumstances. i think to the credit especially of the lead independent director said look, this is -- this can't be a personal fight anymorep a lot of money at stake. the shareholders saying we have to stand up and put an end to this. >> and i guess where does this leave the company? we know where it leaves it with an interim ceo and a mess strategically where to move on from here? >> mess is a go ahead wrds for it. they haven't really solved the problem yet. dauman is out. that's step one. tom dooley has been put in as the interim ceo. he's only got until september 30th before they make a decision on this. that's up for grabs. i don't know how someone can prove themselves in a short period of time.
we'll see. i've been saying the leadership the studio which has been horrendous, you know, is -- i would say that's going to be something that will be examined closely as they said in the proxy it would be. i think you will see a lot of change happening there. by the way it's long overdue. >> a lot of people look toless moonves as potentially a white knight if the companies combine here. is that a realistic scenario? >> i'm hearing he doesn't want do it. he does agree they're better off separate. some saying is that a negotiating tactic to make you look harder to get. not from what i'm hearing. i think the question is, i think dooleycontinuity. he has the support of some of the existing directors some of whom will be kept on after the change in command here, so he definitely has solid support. whether he has the support of shari redstone, that remains to be seen. shari redstone is the victor. she isn't want to be the chairman but she is the new
media mogul in town. she is really calling the shots and i think it will be up to her what direction we see the company go in. >> the new york post reports that redstone favors removing the interim from dooley's interim title but i wonder -- >> sumner himself. >> that's the post today. >> one of the questions we still don't understand what does sumner really want? i mean ta was the big question in all these lawsuits and i don't know who knows the answer to that. >> would you expect strategic change from dooley when he was so closely partnered with dauman over time? >> no. >> he's nice, people like him, morale has gone up, a lot to be said for him, but he has been there. can you really reenvision a company from the inside. that would be tough for anyone. >> but the other question who is the bench out there in the media world. i was talking to investment bankers saying where is the next generation of these people, who are they?
it's not a very long list. >> and that extends beyond viacom. >> we have a lot of aging leaders out there. >> yeah. i was just going to say, you can't say that philippe dauman didn't get anything. he got paid pretty well over the last ten years. >> i look at it, astonishing almost $500 over the last ten years for a company the stock price is down 46% in the last two years. what's wrong with that picture? that goes to the general issue of compensation and corporate governance. two tier stock, sumner redstone ruled with an iron fist, paid people whatever he wanted to also getting $72 million to leave, can i get a job like that. apparently not. >> i don't think when you leave the times it will be that package. >> no one has ever paid me to grow anywhere. -- go anywhere. >> what would you like to see them do? do they need to buy someone big? can this be changed from within given that much thought? >> i think there's a lot of low
hanging fruit here. the studio could be doing a lot better and take all their exists operations and do better with some, you know, frankly some reexamination of management. but they face the same problems everyone does. disney, fox, they're all looking at the aging audiences and the need to move into this digital era and nobody has yet quite come up with the answer for that. i think they have to get some really fresh thinking young people in there. i think it can be done but that is a long-term project. >> the times does today argue that the music video is relevant again. >> yeah. i saw that. >> because of beyonce. that's a start for mtv. >> it's a start of whether people watch them. >> exwill i. >> that's the problem. >> youtube. >> google could run away with that. >> always good to see you. >> good to see you. thank you. >> jim stewart. >> up next we'll talk to the company that's trying to make private jet travel cheaper for the general public. plus another check on the marketings here. post-janet yellen, market is in rally mode. the nasdaq is up the most, up
and doesn't say when and looks like the bond market is buying it. after a pop in kweelds we saw it fall down. back and we are seeing the two year, the short interest rate that tracks the fed movement on the day. we'll continue to monitor this market reaction. now it is looking to change the way people fly private. this morning, the private jet booking app launching it's first transatlantic flight from new york to london. boasting a celebrity client list that includes jamie foxx and kim kardashian welcome to squawk on the street. good to see you. >> thank you for having me. >> i think about this a little bit. like an uber for private jet travel. tell us how it works and how much it costs? >> so we're the largest private
jet marketplace in the world then you can find an existing flight that's going and that's included on your membership and you hop an a seat. like new york to london or new york to miami or you can get a flight by the seat or the whole aircraft. >> does the cost again for the membership fees and i assume that's where you're making your money if you're not on the actual flights. >> first year is $15,000 and then $10,000 a year and when members create flights or bring companions a lot goes into the system. if you hop on a flight included in your membership or you want to create a light on your own time you obviously have to pay to initiate a flight.
>> do the nighiers have to be very flexible in order to pay the cheaper membership fees and hop on a plight? seems like you would have to book that very last minute. >> yeah. so you can book with as little as one day notice all the way to two months notice on our flights that are already gone so the flights are flexible toward the consumer and ultimate flexibility comes when you can create your own flight. from new york to florida for as little as $2,000 in your own time and it's flexible toward the passenger. the balance gets offered to the community. >> so you create a flight. that's your own cost for yourself and then others can join in? >> absolutely. it depends on how you want to use the system. if you need to leave at 9:00 a.m. if you have a meeting in miami you pay the $2,000 for yourself and you're guaranteed
to fly. >> you got that from the saudi royal family. how did you get such high profile names. and we raise $56 million and and a lot of investors came from being consumers. a lot of those were strategic investors highly involved from a brand perspective and usage perspective and there's nothing else comparable in terms of apples to apples. isn't flying first class comparable. i guess you have to go through security. >> we like to say we're making flying fun again. not that we love it but we have to get to the end destination and we changed the psychology completely. you enjoy the journey as much as the investigation. the people you meet in the
process were worth more than the flight. so the value proposition is different and a category of its own. >> we'll keep an eye on it. thank you for joining us to talk us through the company. and let's send it over now to john fort with a look at what's coming up next on squawk alley. >> big day for fed news. we have vice chair of the fed stanley fisher that's going to join us. lots of questions about the direction of interest rate and state of the city. also we have kara swisher and a movie about patent trolls? the latest on that is all coming up on squawk alley. std firm