tv Squawk Box CNBC June 29, 2017 6:00am-9:01am EDT
"squawk box. good morning welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and michelle caruso-cabrera joe is off today let's look at the u.s. equity futures. we are poised to open higher, at least for the dow and s&p 500. looks like the dow is up by 24 points after big gains yesterday. the s&p had the best day in more than two months yesterday. it's indicated up by 3.5 points. the nasdaq had the biggest one-day gain since november 7th. this morning slightly negative financials look to be big gainers this morning after gaining yesterday. we will talk more about that the nikkei looks like it closed up by almost half a percentage point. the hang seng up by 1.1% the hang high up by a half
percent. in europe also seeing a bit of a mixed picture. the ftse is higher, up by 0.3 points in france, the cac is under pressure in germany, the stocks are weaker crude oil prices up yesterday for the sixth session in a row this morning up once again up 21 cents to 44.96 >> blue apron pricing an ipo last night, $10 a share. that's the low end of the reduced range the company announced yesterday, well below the estimates of $15 to $17 a share. blue apron raised $300 million ahead of its debut on the new york stock exchange later today. that's a third less than it had hoped. staples going private. they are being bought basic moth by sycamore partners they will pay $10.25 a stair r.
share f share for strappal staples the buyout comes two years after a federal judge blocked staples planned merger with office depot on antitrust grounds. >> there was a deal when it came to supermarkets, would supermarkets now be in a stronger vthanks to amazon >> let's talk banking. the fed clearing capital plans for 34 of america's biggest banks. the move prompting many of them to announce new dividend increases in buybacks. citi doubling its quarterly dividend to 32 cents a share announcing a $15.6 billion stock buyback program. jpmorgan also announcing its
biggest buyback ever at $19.4 billion. morgan stanley announcing plans to raise its dividends by 25%. 25 cents a share bank of america announcing a $1 billion buyback. shares of the big banks, everything up, up. citi group up 3% it's all up with the exception of jpmorgan, which is not up as much >> if you look at the charts yesterday, they were up through the session yesterday, every one of these spibking in the after hours. this is jpmorgan as michelle pointing out, rising through the day. some coming from negative territory. after the bell is when you saw the spikes it's obviously something we'll talk about throughout the morning. >> what is curious, we had on a bank analyst yesterday on "power lunch," i said what percentage of your coverage universe will raise dividends because of this
he said 100% maybe the numbers are bigger than people expected >> the u.s. unveiling some enhanced security measures for flights into the country designed to prevent expanding a ban on laptops and carry-on bags there will be increased trace detection and better screenings of passengers. also higher security around planes and expanded k9 screening. the wait times at security could get longer the new measures could take effect in three weeks. if airports and airlines agree to the standards, it would mean you could take laptops on the plane. the trump administration's travel restrictions taking effect today eamon javers has more on this and some of the other top political stories. >> good morning. the associated press got ahold of a state department cable
laying out the new travel restrictions earlier this week, we had a supreme court decision that allowed part of the president's travel ban to go forward until the supreme court hears a case relating that later this year. in the meantime the state department and various branch executive agencies have to come up with new rules for travelers. so as of right now the state department putting out these new rules for travelers from the six muslim majority nations. the supreme court allowed the ban for travelers who lacked bonafied relationship with any person or entity in the united states the applicants must prove a relationship one issue here is whether what counts as bonafied in terms of a family relationship. we're told what doesn't count as bonafied are grandparents, grandchildren, aunts, uncles, nieces, nephews, cousins, brothers in law and sisters in law. so your brothers and sisters in law may feel bonafied, despite that they're not entitled to the
waiver under this travel ban as it is being implemented today. also we have the visit today at the white house of the south korean leader. he's coming to talk about north korea and some difficulties there. moon jae-inwill have a working dinner with the president. they're calling it a working visit not really a state visit so some issues the white house expects to come up today include north korea, the nuclear threat there. but china, trade and sanctions also on the agenda the president of south korea, president moon, will lay a wreath at korean war memorial he told a very heart felt story yesterday about the fact his parents had been rescued by united states marines during the korean war in an event he called the christmas miracle. he said he wouldn't be here without those marines. he paid his respects to the marines yesterday. we're expecting that tone to
continue through the day today at the white house with president trump. >> eamon javers, thank you >> you bet on today's agenda weekly jobless claims are out at 8:30 a.m. eastern time. that comes along with th third and final estimate on first quarter gdp. growth expected to remain unchanged at 1.2%. james bullard will speak this afternoon in london. on the earnings front, walgreens, along with conagra and constellation brands after the close, micron and nike will be the big ones back to the broader markets. joining us is julian emanuel, u.s. director for u.s. equity at ubs, and brit schutte from northwestern wealth manmanageme. the banks, huge news coming out about this you knew you would see some increase in dividends and
buybacks stocks are up significantly. is it more than people anticipated? >> possibly, i think you moved into a market that's more reactive they trade on that day based on the news of the day. >> so there's less advanced trading on some of this news >> i think so. a lot of people moved away from fundamental analysis >> that seems like a good time to be in fundamental analysis. >> absolutely. >> what do you see that maybe the algorithms have not seen yet? what is your best yet? >> we are in the bank stocks, we like value stocks over growth stocks we have moved money towards the international markets the past few years because they're cheaper. >> are you talk europe or emerging markets >> we have a position in the eurozone and emerging markets. they're cheaper and their economies are getting better i don't see michelle reporting from greece any longer, or not as much.
i was thinking this morning i haven't mentioned greece so long they have a debt payment coming up, but they papered that thing over with taxpayer money so we can all relax. >> i think the event risk coming down has been a big part of what's happening in the eurozone >> when you say it's cheap, give me your definition you're looking at a forward pe multiple there -- >> forward pe. one comment i get is that the trailing 12-month pe doesn't look that cheap relative to the u.s. i say do you realize eurozone earnings are half of what they were in 2007 >> suggesting a reversion to the mean is possible they have to go up >> no, they don't have to go up, but remember the eurozone unemployment did not peak until 2013 they are further behind in the cycle than we are. there's room in the tank for the u.s. economy to move forward in general, eurozone is much further behind >> how about you, julian let's start with the financials again what do you think about thenys news we heard yesterday?
>> very encouraging. the biggest thing aside from the news yesterday is that the investors were uncomfortable with the yield curve flattening. it's like the thesis coming into the year was discarded for us that was really a bit overdone what you have seen this week is the central bank rhetoric that actually many may have thought would affect the front end of the curve, but basically it's actually affecting the long end, that's where the length in the market is and this whole idea that central bankers believe that inflation is still out there and is something that needs to be considered >> you think the yield curve is basically not an indication that we're looking at a potential recession coming down the pike >> no, no. our work shows you have to get the 210 relationship going flat, where we're nowhere near there i look back to last year when the yield curve wases
becausically wher was basically where it is now. they were not concerned about the shape of the yield curve but the level of interest rates. that's now a tailwind. in fact, you know, it does seem to be once again this setup where you have had financials underperform it's a very good entry point >> you think yields are definitely coming up >> not massive rise. but definitely gently. we're looking for 2.40 in the ten-year at the end of this year 2.65 next year nothing great. but that's going to be supportive for financials. >> you say a greatme entry point so don't worry about a dip, put money to work in the equity market >> you have to be selective. there's no question about it if you look at the broad market there are lots of pockets that are high valued. for us technology has been an area where people have showed
discomfort we think that's going to be an ongoing transition, leadership away from technology over the course of the summer it's not a permanent thing it's just a cooling off. but financials have been forgotten. and we think -- >> when i look at the one-year, some of these stocks are 50%, 80%, they're not forgotten >> they have been. you had that initial rush off the election, and think about where we are in terms of ten-year rolleds from where we were one year ago. we were basically trading at 1.4% in the ten-year that's a major change. >> did you not think yesterday would happen the way it did? >> the numbers are better. >> meaningfully better >> meaningfully better there was no question that the general outcome was expected >> you mean the capital ratios by the fed meaning you translate that to bigger dividends than you already expected >> exactly again the stocks are reflecting that investors have been sour on this
space for the last three, four months >> are there particular banks that you like or go ahead and buy across the board >> this is one of these situations where, you know, keeping it simple is probably the right way to think about it. the monsters seem best to us the issue with the regionals they have moved quite a bit, and they, to a certain extent will be dependent on potential policy reforms, infrastructure spending to boost lending we have not seen that come through as much yet. the monster banks, the one complaining about a lack of volatility in the market in terms of asset prices and trading revenues, we think that's likely to change. >> brent, how about you. i know you are focused more internationally. you like those markets better. what about our equity market as a whole? >> sure. broadly speaking going forward, the u.s. equity market is more towards range bound largely because evaluations are high i know they're not a great
short-term timing tool, but they matter to magnitudes longer term one thing i can tell you is that the u.s. economy has gas left in the tank i don't think we're in danger of overheating or recession is imminent typically keeping it simple, if the economy is higher a year or two from now the equity markets are higher >> especially if you're looking at incredibly low yields in the bond market. >> julian is right on when you said draghi spoke, buzz letting yielwas letting yields move higher if you remember, people were trading financials off of what happened in the ten-year treasury on any given day. >> do you think that's the case, do you think draghi will let yields go significantly -- >> he walked it back >> big time. >> at some point we're towards the end, we crossed the tipping point of where central banks have -- will be buying less bonds in the future.
the fed will let the balance sheet roll off the ecb at some point announces tapering the bank of japan at some point has to follow suit they had a big impact on the end of the curvement. >> itwhen interest rates are gon higher, they say buy financials. but we're not about the overall market because the overall market may not look like a great value. every time financials go up, other areas we're not sure about is there a way they can rise overtime >> longer term the economy moves forward. in the shorter term you have a push/pull, yields moving higher because the stock market maybe on an absolute basis doesn't look attractive. so i think the stock market marks time longer-term, i define longer term one to three to five years, the u.s. economy pushing forward will take equities with it
i think that is largely what the fed would like to have happen. that's why they talked down the market a bit they have a lot of mandates. >> they were talking boun t inge stock market doesn't that make you worried? >> when we used the phrase irrational exuberance, what happened the market ripped for the next three years. >> to be early is to be wrong, right? >> yeah. >> gentlemen, thank you very much we appreciate it >> thank you coming up, meal kit delivery service blue apron priced at the bottom end of the ipo range last night hours after lowering that range by 38% we'll talk about the appetite for ipos get it it wouldn't be cable if we didn't have puns the importance of timing and going public next.
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the ipo priced at $10 a share. the low end of the range it will trade under the taker aprn, joining us is kathleen smith, founder and manager of the ipo focused etfs renaissance capital. good morning to you. >> good morning. >> what do you think would you buy this thing >> we think this pricing for blue apron is good for ipo investors. the ipo market is doing its job of price discovery >> so going down was the right decision >> it discovered a better price for blue apron >> meaning more accurate >> we think this will help the ipo trade well today it needed this discount. >> the larger question, should companies like blue apron even be going public? what does this say about wr here we are in the cycle? we see no reason why blue apron should go public, but the real
issue is evaluativaluation, andn companies are in the pipeline. so valuation is the issue. the ipo market is absorb a company what's not earning money, but if you're not earning money you shouldn't get a premium. >> how mauch has to do with competition and then whole foods and amazon to me, it looks like there was competition before >> that howhole amazon whole fos issue did not help, and also what they're spending on marketing and soj of the treme s didn't look good if you believe the home kit meal delivery is important, then blue apron is a leader in the space we'll see. there's a lot of competition,
with all these companies there's tremendous competition >> look at screen now. if we can bring that back so she could see it woi. wow i knew there were a lot. there's double the number i thought. >> doesn't that make you think this whole thing is not really -- partially you look at the screen and think there's a big industry there you also partially look at it and think, man, maybe there's nothing there. right? >> that's the proverbial issue will you have with the stock today. >> what do you make of the private -- so many companies that held off for so long that are desperately waiting. they're all on the tarmac waiting to take off. there's a lot of delays. >> there's a lot, because in the private market there's excess capital as seen by so many
companies trying to battle out to do the same thing because of that there's excessive valuations, and the ipo market has some rational players in it. the ipo investor will not accept those companies at those evaluations. valuations >> is that a harbinger of things to come when you think of uber or lyft? is every one of these a different case >> you want to look at them one by one, but it is a harbinger of things to come we think some of the reason is the ipo market -- returns have been good for investors in the ipo market the issue is that the ipo market now is different than it's been in past cycles right now the overall stock markets are trading at all-time highs. yet the ipo market is a fairly
rational place why is that? we think it's because individual investors and advisers have abandoned investing in stocks. they are investing in indices. so that the retail investor who might have been a part of the irrational exuberance that can build up in the ipo market is not there. we have a set of investors in the ipo market who are the smart players, institutions. >> have you looked at uber and seen what the market right now values it at, the private equity market versus what you think it would be worth if it went public now? >> the last round for uber was about 70 billion >> close to 70 billion >> we know shares have trade well below that when they had these issues from an ipo perspective, i think lyft should move forward. >> you think lyft hshould go first? >> i think they would be smart
to do that >> and i would because of the lower valuation >> the uniqueness of the business, i think investors are very interested in what's happening with the ridesharing economy. they believe there is such a business >> first to get to market will have an advantage? >> we think should that's typically the case in the ipo market you get the best price >> the idea that the retail investor islooking at indexes. is it fair to say there's not dumb money on the street anymore? sefsh a smarter investor >> yes that's a very good point i hate to say there's dumb money, but it's true when you look at the ipo market, if you jump in and put in orders at the open -- >> valuation >> it's a better thing for the ipo market we see it in our etf products have performed well because we think the pricing has been good. one interesting example is so far this year the average first
day pop of the 72 ipos done this year, less than 9% during the internet bubble those first day pops were between 0% a 50% and 70%. >> a perfectly priced ipo does what >> goes up a little every day. >> not so much in a day? >> you have to figure out demand >> you talk about investors getting smarter, but what about the leaders of the company going public getting smarter you look back at internet stocks, the pops, you say that ceo was stupid, you left so much money on the table i look at facebook, they sucked money forward the way it traded after it went public that is the smartest thing they could have done. >> it's smart to do, but it's
hard to do when you have a market of irrational exuberance. >> they could have priced those ipos higher. after the first couple they could have, but the banks were trying to reward their biggest clients and get them something cheap that they could flip >> we're in a particular ket now where that after-market buying is not affecting that fast flip. >> we have the lock up on snapchat coming up that will be fascinating >> thanks. when we come back, president trump will be looking for cooperation on north korea and china later today when he meets with the president of south korea. we'll tell you what to expect next and later the president's push to open energy production in the united states. we have an interview with the
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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk box" on cnbc look at u.s. equity futures at this hour. the dow looking like it would open 21 points higher. the s&p 500 up by 3 points nasdaq off about 9 points as we get ready for the blue apron
ipo. president trump will meet with the south korean president today. at the top of the agenda north korea and china. joining us is james stravitas, dean of the tufts fletcher school of business and an nbc news analyst he has a new book "sea power: the history and geopolitics of the world's ocean. great to have you here >> wonderful to be with everybody. >> the u.s. has a new president, south korea has a new president. this south korean president is on the opposite side with how to deal with a lot of things with the united states, how will this meeting go >> we should consider how this new south korean president got into office. it was a watergate like event. the previous president is incarcerated president moon kind of walked to a challenging domestic situation, trying to bring the country back together. that impacts the meeting with
president trump in that moon needs to project strength, we have an alpha male president, he will be trying to project strength though disagree on some policy approaches to north korea. it will be a challenging meeting. >> when you say he came into the office because of the watergate-like situation, do i perceive you saying that this guy got evicted because it was an anti-vote against what was happening on the other side, when it comes to policy the koreans themselves are more attuned to the way the u.s. would handle china not at all the south koreans want a diplomatic, economic approach to the north koreans. the americans, president trump, general mattis, secretary of defense are more interested in a very aggressive approach
there's gobbing to a concept in how dwwe do that >> i'm surprised the south koreans are not more concerned i think we're concerned because what we've been trying has not worked >> that's right. but the south koreans, it's like ham and eggs the chicken is engaged the pig is committed if you're south korean, the missiles come flying and hit your country, so you really don't want to get in a shooting war. >> you want anything to resolve this >> yes so they are -- >> because it's a binary situation. >> for them it really is all the polling, 80% of the polls in south korea say the south koreans want diplomacy, economics, engagement. >> that makes sense. they've been in this position of being in imminent danger for a long time. it's just coming to the point of being imminent danger for us
>> now that it hit the u.s. screens of the u.s. decisionmakers, those decisionmakers are a bit up against each other >> president trump expressed unhappiness with china's performance relative to north korea. is he right to do that >> he is china has not just walked the walk they talked the talk given us the verbal signals and diplomatic signals that they will put pressure on north korea, and they have all the levers to do that. >> why don't they? the ultimate objective is to keep the pa indianapoleninsula d they don't want to see korea unified. they're afraid if they put pressure on this young leader, kim jong-un, he'll fold and they'll wind up with a unified korean peninsula, which from a chinese perspective is not a win. >> why >> because they're concerned
about a mras sieve economic miracle, like we saw in germany. think of what happened when east germany and west germany came together you create a juggernaut in europe >> the chinese do not want a strong korea >> correct historically they dominated that peninsula. they're concerned about a luge free market economy next to them over time -- >> they're so much bigger in every single way don't you have a strong region >> it is, but think about how china pushes on the smaller, weaker neighbors, including vietnam, the pill phonehilippins the chinese are playing the long game >> if you're playing the long game, why not worry about somebody being a nuclear power outside your border. i'm shocked more people in the region are not concerned about
that >> indeed. again, chinese says to themselves is how can we be the broker in this region? how can we control the 80% of slippi in shipping that flows through. >> we hear about the importance of saving face i would think when they see what the north koreans constantly thumb their nose at everybody, including the chinese, that they're not embarrassed by their inability to contain this guy. >> no, because they have fundamental geopolitical objectives here which are different than those of the united states. it's the divided peninsula you want to focus on >> people have come in here saying i like keyian stocks. i think you buy them now because it's binary. nobody can allow this to happen. if the worst case scenario doesn't happen, everything looks cheap. >> i agree with that i think that the election of president moon adds to that theory significantly >> so what should the u.s. do
right now in terms of foreign policy >> we should started with china. the administration is doing that we have to get china in the game secondly we have to get president moon on board with taking an aggressive economic policy thirdly, we need to hedge against something dramatically bad happening. that's missile defense, putting in the thaad missile system in the south. >> he doesn't want those things. >> he objected to the fact they were put in place without his department of defense telling him about it. >> i think you'll see coming out of the meeting today, he will discuss comfort with the deployment of thaad. that's the third critical thing we should do there >> thank you >> thank i coming up, pat toomey will have an update on the healthcare reform bill. we' and bank stocks jumping after the fed approved plans to buy
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welcome back to "squawk box. opening arguments began yesterday in the fraud trial of pharma bro martin shkreli in court. his lawyer, ben brafman, said shkreli may be crazy, but he's definitely innocent. he also quoted lady gaga saying though he is odd, he was born this way meg tirrell asked him about that reference. >> can you tell us about the lady gaga defense in there >> no, i think i said what i wanted to say in the courtroom >> why quote her so many times >> the quotes fit. >> with all of these lady gaga references, do you risch martin
had more of a poker face >> i'm happy with martin's face exactly the way it is. thank you. >> did you see his face? >> yes he smiled. >> he liked the joke >> by the way, any of the courtroom drawings that meg has shown from these things, they have him drawn with a huge smile on his face. >> yep >> brafman has done a lot of work for interesting people. including michael jackson. that was one of his clients. we will get a live report from the courthouse later in the show time for the executive edge. the white house and republican leadership have been insistent that tax reform must be comprehensive. washington's speak for changes to both individual and corporate taxes. that has companies like tiaa and t.rowe price and consumer groups worried that insent tcentives te for retirement might get
chopped. ylan mui has more. >> retirement savings are worth about 5$584 billion in federal revenue through 2020 former representative jim mccurie said piggie bank is hard for lawmakers to resist. >> retirement security pot of money is pretty big in the united states. so if policymakers are looking for revenue to do revenue neutral tax bill, for example, it's a lodge wagical place for t look >> he's with the save our savings coalition, that includes consumer groups and financial companies you mentioned earlier. they're odd bedfellows but making their case today to lawmakers on capitol hill. among the proposals they're worried about, limiting deductions for 401(k)s and ira, limiting the cap how many one can contribute and creating a
new after tax universal savings account. the white house said it would preserve the 401(k) deduction, but they are concerned there is wiggle room in those promises. 75% of workers in the private sector have access to a retirement plan so lots of people could be affected by any changes to the system. back over to you >> yeah. the ainbility to reduce the amon of taxable income you have because you can divert it to a 401(k) is a reason people do it. >> larry fink and others raised the issue that we're not saving enough if you took tax policy away, i don't know what that would do. >> disincentivize people to save and make them more reliant on other forms of savings which are questionable on whether they will survive >> at the same time, you lower
the rate enough, people save -- >> it comes down to the idea whether the government should be using tax policy to incentivize. >> anything. >> on any level. >> thanks. >> thank you. when we come back, senate gop leadership will be spending the independence day break trying to convince colleagues to sign on to the healthcare reform bill pat toomey who is in favor of the legislation, he will be joining us next to talk about the changes that might be necessary to try to get the bill through. right now as we head to a break, a quick check of what's happening in the european markets. the ftse is up the cac is down by three quarters of a percent. that's extending the losses we saw a bit ago. the dax is down by a third of a percentage point "sawbo is ing quk x"goto be right back
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plans to close their merger in august they also announced plans to spin off parts of the company, combine the company within 18 months of the deal closing this despite what we heard from one activist investor who says he doesn't want that to happen shares of pier 1 tumbling after the company announced a major miss they had revenues it of $409 million last quarter, $12 million short of expectations. the stock is getting hammered. h&m posting a 10% increase in pretax profits, the company saying positive results thanks to continued expansion and tighter cost controls. that stock is higher by 1% president trump expressing confidence that republicans will get the votes needed to pass their much anticipated healthcare legislation joan jo joining us is republican senator pat toomey who worked on the legislation and is firmly behind it thank you for joining us today
>> thanks for having me. >> you have been surprised by your colleagues reaction to the legislation? >> not terribly surprised. we've been having this discussion several times a day every day for many, many weeks now. i think we know wher everybody is no big surprises in that sense, but it has revealed what i think is a path forward. so hopefully we'll find a way to get this done. >> to those of us on the outside, it looks like the effort has been more and more splintered the more people hear about it, the more they read it, the more they get the cbo score so if you see a path to getting there, can you kind of fill us in on how that happens >> yeah, first of all, the cbo, we've discovered increasingly what nonsense it is. for one, they're using a base line that's a standard of comparison and a set of assumptions that come from march of 2016, when we know so much has changed in the insurance world since then it's extremely inaccurate. but putting that aside, here's what i think is the path forward. our moderate members are concerned that we're not going to spend quite as much money on
medicaid as obamacare did and they would like to see us spend more money well, one area where there's a pretty broad consensus that we could spend some more money is addiction treatment. because it's hitting so many areas of our country so badly. on the other end of the spectrum, our conservative members want to see fewer regulations and more freedom, so that we can have a more competitive, lower-price market place for individual insurance and i think there are some reforms that could still find their ways into this bill that will achieve that. so, look, i'm not pretending this is easiest. if it were easy, we would have been done many weeks ago, but i do think there's a path forward. >> we heard from mitch mcconnell, who -- the day before yesterday laid out, made some remarks at the white house who said, look, we have two choices. we can either come together as a party and pass this legislation or we can do it the other way, which is to sit down with the democrats and try and come up with a bipartisan approach on that he thinks that, obviously, the gop would be in a less of a
pulled position to be negotiating some of the things it wants to see happen in that situation. was this an olive branch to the democrats or more of a threat to the gop senators who don't sign off? >> i think it's an honest warning, but it's much worse than the way you just characterized it, because obamacare is completely failing. the individual markets are in a free fall. in my state of pennsylvania, 40% of pennsylvanians on the individual market have a grand total of one choice. increasingly, there are counties across america where there are no choices so this is failing we can let it completely collapse and let people lose their insurance, so if we can't get this done, we're going to have to turn to the democrats and they're going to insist on an obamacare bailout throw a whole lot of money at it, no reforms, nutting medicare on a sustainable path, and that would be a terrible outcome.
and a failure for the republican party. we've made a commitment we're going to get this job done, move health care in a consumer-driven direction instead of a government-controlled direction and we owe it to the american people to follow through >> are you frustrated, senator, that republicans are not more interested in dealing with medicaid i mean, when you look at entitlement spending in the united states, most agree that this is where the problem lies when it comes to dealing with the budget down the road and the republicans have been championing that that is where we really need to control spend. so it seems very counterintuitive that that side of the aisle is now fighting for more medicaid spending >> look, it is frustrating you're absolutely right. there's no honest person disputdisput s that all of our budget problems come from the big mandatory entitlement spending programs medicaid is now the biggest net spender on that list, growing at a completely unsustainable pace. and you know what we're doing is we're doing this in the most
gentle and responsible way possible no one loses eligibility, no one gets thrown off, no money gets gutted from this program we slightly slow down the rate at which it grows eight years from now that's the right way to do it. >> but there is a limit to states for medicaid for the first time >> but becky, you're absolutely right. but for the first eight years, that limit is allowed to grow so much that it's very unlikely a stay would bump up against it. it's only after eight years when we curb the rate at which it can grow, that we're modestly bringing this under control. and we have to the alternative is a complete fiscal disaster. >> so if this pushes off any of those curbs, is there a chance that this legislation passes and that eight years from now, or six years from now, as that deadline looms, that congress picks it up again and says, wait a second, we can't have these severe cuts coming in right now. >> they're not severe cuts, it's a slight reduction in the way the program grows.
>> but if they're bumping up against those limits and the state says, we don't have the money to fund that stuff >> is there a danger this gets unwound? absolutely there's always that risk and that's why guys like me who are fighting to make this a sustainable program, we're taking the risk that we'll be able to hold on to these reforms for eight years when, let's face it, everyone -- you know, every governor wants more money. it's great, free money coming from washington that he gets to spend. so all the pressure will be going the other direction. >> senator, if this doesn't get passed, at what point do you wash your hands of it and try to move straight to taxes >> i don't know. i haven't thought about that yet. ting there's still a path forward. and i think, by the way, virtually every member of our conference wants to get to yes obviously, it's much harder for some folks than others but we certainly haven't given up >> senator toomey, i want to thank you very much for your time >> thanks for having me. coming up, big u.s. banks passing the second part of the fed's stress test, gaining approval for stock buybacks and
book and tell us all about his false arrest experience. the second hour of "squawk box" starts right now >> announcer: live from the beating heart of business, new york city, this is "squawk bo.". good morning welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in new york city new york city joe's got the day off. take a look at futures right now. dow is up, as is the s&p 500 nasdaq looking off a little bit this morning dow up almost 28 points. s&p 500, a little over 4 points. and nasdaq off about three points let's get you caught up on what's making headlines at this hour president trump's travel ban taking effect today, amid some uncertainty over exactly how it's going to be implemented that ban allowed to go ahead on a temporary basis after the supreme court agreed to hear the white house's appeal of lower court rejections
the ban applies to travelers from six predominantly muslim countries, but exempts those who have a relationship with a person or entity in the united states speaking of travel, enhanced security at airlines measures taking effect today or actually rather within the next three weeks. according to u.s. and european officials, they will apply to flights arriving in the u.s. from 105 countries the measures do not expand the ban on laptop computers. a lot of people talking about that, but will involve more extensive passenger screenings and if you've got a dollar and a dream, don't bother to pursue it in illinois. because an ongoing budget dispute, the illinois lottery has now stopped selling powerball tickets because it wouldn't be allowed to pay out prize money. if no deal is cut today, the state's lottery will have to stop selling tickets for another multi-state game, mega millions. so if joe is here, he would say, you're never supposed to play anyway becky and i like to play -- >> because if you're not in it, you can't win. >> thank you exactly! and you've got to have a dream got to have a dream. >> speaking of dreams, blue
apron pricing its ipo at $10 a share last night that'ses the low end of the reduced range and well below the estimates of $15 to $17 a share. blue apron is valued at about $1.9 billion just two years ago, the company was valued at $2 billion in a private fund-raising round analysts say potential investors were concerned about blue apron's marketing costs and possible customer turnover the company will trade on the new york stock exchange under the ticker aprn. i think last hour's discussion with renaissance capital was very interesting she think this trades pretty well because they finally got it down to a price -- >> more reasonable have you tried munchery. >> i love munchery and use it several times a week >> but that's not like blue apron, because they bring you the food munchery -- >> it's already cooked and you can order two hours in van blue apron i found was very unflexible you have to cancel
it's a subscription model, not a per-meal model and you had to cancel way too far in advance based on our lifestyle of you never know what's going to happen >> i still got to figure out which is the one that has the tom brady diet tom brady/gisele diet -- >> i'm sure google knows >> i will ask google or alexa. where's alexa when you need her. >> purple carrot >> the control room -- >> dave rooney coming up with purple carrot. let's get you caught up also on a big courtroom drama taking place downtown opening arguments began yesterday in the fraud trial of pharma broth, martin shkreli in court, his lawyer says, shkreli may be crazy, but definitely innocent. he also quoted lady gaga, saying that even though he's yodd, he have born this way >> can you tell us about the lady gaga defense in there >> i think i said what i wanted to say in the courtroom. >> reporter: why quote her so many times
>> i think the quotes fit. >> reporter: with all of these lady gaga references, do you wish martin had a little bit more of a poker face >> i am happy with martin's face exactly the way it is. okay thank you. >> we're going to have a lot more throughout the day on that case its own soap opera taking place -- it's a reality show >> in the morning, people are getting ready, they may not be looking at the screen, the next time we play that video, you should look, because what happens to martin shkreli's face as he asks that question about poker face, he obviously doesn't have one he starts to grin in a big way it's funny >> prior to this, he represented jared kushner's father, michael jackson, puff daddy. is puff daddy still called puff daddy? >> i don't know. salvatore sammy the bull so he's got a real list there of controversial individuals. >> controversial individuals >> breaking news just out from
walgreens and riteaid. the two sides have replaced their merger agreement with a new pac that involves walgreens buying 22 hurkz stores from riteaid. walgreens will pay 22 billion in cash from those stores cancels a divestment to exchange riteaid stores to fred's this is the week we were expecting an ftc decision. fred's was going to be buying 850 stores, because they would be required to divest 1,200 riteaid stores in order to get this deal done that was already the expectation going into this. there had been questions as to whether or not fred's would be able to come up with the $950 million in cash. fred's just wednesday put a short-term shareholder poison pill plan in place to try to thwart any takeover events whale this thing was happening that stock is now down 10% again, this would have made fred's the third biggest of the pharmacy companies that are out there. so this is going to be really
interesting to watch action in this stock today and action around the other two, as well it comes as a bit of a surprise. the ones they're going to be buying are mostly in the northeast, the mid-atlantic and then in the southeast. so up and down the eastern seaboard those will be the properties the that walgreens is picking up under this alliance. they say that they expect it to be accomplished rather soon. and they expect it to be accretive to walgreens let's see, they expect it to be accretive in the full first year after the closing, in terms of adjusted earnings per share. >> got it. in the meantime, 34 of the nation's largest banks are getting the green light for buybacks and dividends kayla tausche joins us now with the financial stress relief and some big gains for many of these banks as a result, kayla >> and for many of these companies, a longtime company. this is the first time the fed did not object to one of those capital plans since the financial crisis the fed saying seven years after these stress tests were put in
place, the banks now finally is have sufficient capital and can give all the money they earn back to shareholders there was one bank the fed did find some issues with. capital one passed conditionally, meaning it has to resubmit its plan to the fed by the year end to show improvement in its risk management, but it can go ahead with its plans in the meantime for that reason, capital one was conservative in its announcement it said it would lower its buyback plan and keep its dividend unchanged that was the only one. jpmorgan announcing a $19.4 billion stock buyback program. that's the largest by a bank on record and it edged out a record that had been set yesterday, just minutes earlier by citigroup, when citi said it plaped to repurchase $15.6 million in shares. and and and citi doubled its dividend. but it's still below the payout before the financial crisis happened the 34 banks announced capital plans that represented large
rises. of the companies that announced specific rises, about 28% on average. a senior fed official said banks will now be able to pay 100% of net earnings to shareholders that compares to 65% last year so becky, for investors that were waiting for those payouts, they waited with bated breath, yesterday's announcement must have made them happy, although there are critics who say perhaps this isn't the right piece of capital we'll see. >> in the meantime, we've been looking at these stocks and they do look like they are significantly higher once again this morning kayla, thank you so much, kayla tausche. on today's agenda, there are a pair of economic reports and plenty of big-name earnings, as well weekly jobless claims are out at 8:30 a.m. eastern time that comes along with the third and final estimate on first quarter gdp. groe growth is expected to remain unchanged. also, st. louis fed president james bullard is speaking this afternoon in london. >> and joining us now to talk
markets and how the bank's capital plans could play out for stocks, joining us is hands olsen, the head of financial strategy at stifel and steve reece is here, global head of equity strategy at jpmorgan private bank good morning to you. >> good morning. >> help us did you think that the stocks were going to rally the way they did? and did you think the capital plans were going to be as aggressive as they are >> well, there's been some talk that the fed was going to be taking -- the regulators were going to be taking a much more accommodative position towards the banks, give them some relief and that kind of relief, i think it would manifest itself in a good move in the sector. >> right >> i guess the larger question is, where are we in the cycle? >> so is this the move has the move been made or is there -- >> no, banks still lag on a year-to-date basis we had very high expectations for the ccar heading into it we upgraded the sector back in march and we were pleasantly surprised to the upside. you had companies doubling the dividend, doing record buybacks. and the stocks, they've
recovered in the last week, but they've still lagged on a year-to-date basis >> so how much more movement do they have? >> it really comes down to the erp earnings, and the earnings will be driven by interest rates, driven by deregulation, and you have the capital return that's going to reduce the buybacks and your dividend. so i think we'll see banks opening up to income investors you've got yields now at 2%, 3%. that's going to sort of open up a new buying base. it really comes down to the earnings growth -- >> hands has me worried we're towards the end of the cycle here, though is that what your trying to suggest? >> i think the thing is, when you look over what, the last 72 hours or so, you've had the ecb, the bank of england, and certainly, the ongoing narrative from the federal reserve is suggesting twha ining that we ae beginning of sort of a more unified monetary pivot, from much more accommodative policy to the beginning of normalized policy and you certainly get that with shrinking the balance sheet. if this continues to play out, right? if it's not a feint,
traditionally, we're about eight years into this rory, this is the third longest on record, you know, it's getting long in the tooth. and one has to start, you know, being -- you have to be on the front foot and you have to start thinking about the cycle basically turning. >> it sounds like, don't fight the fed, in other words. >> yeah, don't fight the fed all over the world, basically. >> right, you were in a sea of liquidity. the tide seems to be going down, now. >> but the economic imbalances aren't there valuations are a little high, but they're not stretched, and the earnings growth, we're going to kick off the second quarter earnings season, i think it's going to be really good. plus, you still have the benefit from potential tax reform in 2008, which we're not giving up on i think it's too early to step away from u.s. markets yes, i think we've got most of the return we've expected for the year, but look at financials, look at technology, look at health care. there are still pockets of value and there's still an upside case >> so just because you see future strength in the financials, you know, historically you look at the financials as, they're one of the leaders of the market.
if the financials are moving higher, the overall market moves higher >> and people have forgot the effect of higher interest rates. we haven't seen that in years. >> decades >> we haven't seen deregulation. we haven't seen a real pickup in growth globally. so i still think there is that upside case to earnings, which is really how you have to play the market here with the valuations where they are. >> it is interesting to note, this notion about regulations is just fascinating, because that's where the real relief can come if you look at productivity in the united states, if you look at capital investment, and you lay that over the growth in the cfr, which is the code of federal regulations, it's compelling cumulatively, you're looking at $1.4 million regulations sitting on top of the commercial landscape. that has a depressing effect on productivity if you get any relief -- >> we are getting relief the ccar, which are rolling back without anything from the white
house. they have done 17 different votes in congress which have reduced thousands -- >> and i think you're going to hear that from companies when they start to report in the next year you'll hear a positive tone coming from the banking sector and a relieved tone coming from the income sector. >> but then your case that we're towards the end of a cycle would suggest maybe we have some more room to run. >> which is the larger point is how do you get the economy back to, closer to a #3% growth rate and the conversations revolve around population growth, revolves around investment and the like but the core of it is, if you make it difficult for companies to invest to capital reform, to commit the capital, because they don't know the rules or the rules are too onerous, they don't do it, right they buy back their stock and pay off the dividend and that comes at a cost and the cost is growth >> thank you, guys >> great to see it >> cra is the congressional review act there's nothing better on a hot summer's day than a cold beer, right? landon dowdy has the story
behind the beer stocks and the summer sizzle. >> good morning. the saying goes, sell in may and go away. but now may may be the tame to buy ahead of a july 4th holiday. at our partners with kensho, we found historically beer stocks sizzle from june 1st through the end of september, far outpacing the s&p 500. constellation brands soaring at 17% on average molson coors serving up an average return of 10%. both of those trading positive 100% of the time boston beer gaining more than 6% on average ab up 4% and all of those compared to the s&p 500, up a little less than 2% on average. and a large part of it is the significant seasonality of beer sales with the summer months contributing an outsized portion of beer volume for the year. the summer months are also a way to get good visibility into a company's jourunderlying busine, particularly the track of
popularity or new or seasonal launches so, michelle, as you stock up your fridge for the fourth, it may be the perfect time to stock up your portfolio with the same. guys, back over to you >> landon, cheers. thanks when we come back this morning with morning, the importance of diversity and business organization at 7:30 this morning, american petroleum institute ceo ja jack gerard will be meeting us from washington. and later, pro tennis player james blake is out with a new book we'll talk about athletes and activism and his own personal experience in isth arena stay tuned you're watching "squawk box" right here on cnbc
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this morning take a look at the futures right now. dow and s&p 500 looking up and the nasdaq has turned itself around as well nasdaq had been in the red a little bit earlier today and the dow looks like it's move higher as well about 37 points higher and s&p 500 looking to open about six points higher. this morning kicks off morgan stanley's multi-cultural leader conference. the vice chairman of wealth management and senior client adviser at morgan stanley joins me now you're starting something called things morgan stanley multicultural innovation lab >> yes >> what is that? >> i'm very excited about that this is an accelerator for multi-cultural entrepreneurs and women entrepreneurs, wales you need to be multicultural, a woman, the founder or co-founder or cto we've identified a huge market inefficiency less than 3% of intercapital dollars going to multicultural
entrepreneurs. we want to provide capital, content and connections to help accelerate their growth. >> why do you think they've been overlooked >> they traditionally have not been in some of the traditional circles it takes to get into vc. and they have not had access to the angel networks with sob part of it is a lack of visibility. part of it is a lack of having those networks and if you can raise the level of visibility, hopefully you can attract the capital to these entrepreneurs. >> what do you think of what happened at uber >> well, i don't want to make a comment on that, because i think there are lots of things that happened there but i think with respect to these entrepreneurs, they have high-growth ideas, very good ideas. people say all the time, they can't find 'em and with very little effort, going out on the market without broad marketing, we found well over 100 entrepreneurs in five spots. so that argument that you can't find 'em doesn't exist so, for example, i don't want to say which companies we've chosen, but there's a great
company that focuses on facial recognition. there's a great company that focuses on plain language with respect to how it impacts your ability to invest. there's a great company that will revolutionize the way we develop, as women, in corporate vir environments, at your fingertips, for example. so great companies >> carla, do you think the end result is still who you know and how you move up in the world >> i think who you know does matter, but that's a huge reason we want to play in this space. given our global reach, we know a lot of people. institutional networks, family, offices, high net worth individuals. so we can help the who you know problem. because, yeah, that's certainly part of the issue, becky >> when you say it's the who you know thing, but why do you think it's not the who you know. to the extent, is it a -- it's not a skills gap, be what i was going to say on the who you know piece is how do you actually get to know them just through this network? >> part of it is our reach and who we know with respect to
who we know institutionally and who we know as individuals and i think that we've been able to tap into that market, because we do have a focus on multi-culture clients and multi-cultural strategy. because we have those relationships and networks, we can reach there and find those entrepreneurs. >> i think people do it digitally. >> and you will be able to do it digitally. in fact, one of the companies that we've looked at will give you that capability going forward. and today, one of the things we're going to do is present a pan of multi-cultural entrepreneurs, which was the hit of the conference last year. you asked me about that, andrew, last year. i told you i would report on it. and i'll tell you, that was one of the top panels that we had. and in fact, there were corporates in the audience that ended up doing business with some of these multi-cultural entrepreneurs. therefore, scaling their business now, you have to ask the question, would they have been exposed to these entrepreneurs, had it not been for their attendance at this conference last year? i'm really excited about the business that could come out of today's conference >> marks are at new highs. how are your wealth management
clients feeling? positive they ought to be in a good move. >> people are feeling pretty good about the market environment. there's nothing to tell you that there's going to be any interruption of corporate performance, really. clearly, there's still some uncertainty in the market, but overall, i think people are positively constructive, let me say that >> and so what are they deciding when it comes to allocation and the opportunities that you provide? are they going u.s. equities, going overseas what are they doing? >> we certainly have been recommending continued involvement in the u.s. market, as well as the european market in particular. that's certainly what our economists and our strategists are recommending >> are they as interested in alternatives, like uber, which you guys helped out with >> i would say they're interested in the u.s. equity markets, michelle. as well as the european markets. and europe in particular, looks as if it is positioned for, you know, a good run here. >> yeah, we had a guest on earlier this morning who suggested the exact same thing so -- >> well, carla, it's great to
have you on. really appreciate it >> thank you we're excited about it >> and a quick programming note. melissa lee will sit down for an exclusive interview with morgan stanley chairman and ceo james gorman at the company's multicultural conference on the "closing bell" today, 4:00 p.m. eastern time okay, coming up when we return, acpa's energy secretary jack gerard in washington today. take a look at oil at this hour. we'll show you some wti crude right now at 45.21 as we head to a break, take a look at u.s. equities future we are in the green across the board. back in a moment
what do you think she's reading? reading down on times square on a lovely morning good morning welcome back to "squawk box" here on cnbc we're live at "the new york times" market site the merger between walgreens and riteaid has been called off. now instead walgreens is going to buy about 2200 riteaid stores the cancellation of that deal negates the sale of rite aid stores to another chain, fred's. the stock option is much more conservative than the knee-jerk reaction we first saw. fred's is down by 23% this morning. that's because fred's was set up to buy 865 stores. ed after this, that would have been had to be divested. they were going to have to divest about 1,200 riteaid stores fred's was planning on buying that with $950 million in cash there were questions about whether they could come up with that amount of cash.
in the meantime, they put in a poison pill yesterday to prevent a takeover, because they said they knew there would be some stock volatility around any decisions like this. but that is a pretty swift setup for this >> and clearly the divestitures that were going to have to be done because of what they perceived to be issues with the doj, which goes back to the whole thing we've been talking about, the way the doj looks at retail, is it antiquated are we going to look back at this and say, they should have done it. >> and amazon is going to come in and be providing so much of what these others do because the way it was set up. walgreens, number one, riteaid number two fred's was set up to be number three. but it would be really interesting to see what market share amazon has out of something like this. >> and when you read -- >> or even walmart >> and when you read the op-ed page today of the "wall street journal," they point out that the intervention of the doj did when it came to the supermarket sector and it's now the supermarket sector weakened, and therefore a
very strong amazon able to exert so much more power, because of divestitures that were forced within the supermarket industry, as well. >> so -- >> does whole foods have any drugstores >> does whole foods have any drugstores >> not the once i've been in >> i don't think so, right >> i'm just thinking whether these folks are all about to be amazoned when this is all over >> the drugstores? >> i think so, yeah! look, they do so much of the same sales -- the stuff in the drugstore, they're making a lot of money on is a lot of times the front end of the drugstore >> i'm wondering if you get the pharmaceuticals going, what happens? >> amazon wants to sell everything to everybody, so it wouldn't surprise me if they move there >> that's complicated trying to do prescriptions via the mail. >> think about the opioid problems we're having, how we're talking about how that's a massive problem. if you're sending drugs through the mail >> my pbm has almost essentially forced me to move to mail. >> and there's a company in new york city now that is just one big messenger service.
that just brings it directly from -- >> yeah, in an hour or two, they'll bring you the pharmaceuticals. >> is that cvs caremark that's forced you into -- >> these are not drug dealers. >> when you look at the structure of the way you eventually -- >> you want to pay more if you want to show up -- you can go to a cvs and get it, but if it's a long-term -- >> yeah, exactly, 90 days and blah, blah, blah >> i'll get to name that company in just a second but in the meantime, a key earnings report ahead this morning with dow component nike is going to be reporting after the bell here's what's expected nike to report profit of 50 cents a share on revenue of more than $8.6 billion. those are the numbers to beat. nike shares have languished over the past year and made some concerns about increasing competition. and we can't get away from it. amazon has announced it's going to hold its third annual prime day on july 11th the event begins at 6:00 p.m. the prior evening. expanded to 13 countries this year, adding china, india, and mexico part of a push to get more
people to sign up for prime. the company offering free trials of the service for that day. the fed clearing capital plans for 34 of america's biggest banks. the move prompting many of them to immediately announce new dividend increases and buybacks. among the highlights, citi doubling its quarterly dividend to 32 cents a share and announcing its biggest buyback ever jpmorgan announcing its biggest buyback ever and morgan stanley announce plans to raise its dividend 25% to 25 cents a share. bank of america announce a $12 buyback. shares of all the big banks moving higher. this is pre-market trade, so gains of 3 and 2% across the board there. i want to show you what's going on with the euro, as well, which is now at $1.14. it's been a pretty sharp mover the last two days, as a result of what mario draghi said two days ago and even though there were leaks from the european straggle bank, trying to walk it bag, you still see the euro powering higher at this point president trump set to speak
today on what the administration is calling u.s. energy dominance. his energy and interior secretaries and the epa administrator writing this week that includes getting government money out of the way and pushing for an all of the above energy strategy joining us right now the jack gerard, the president and ceo of the american petroleum institute. jack, what does this mean in layman's terms what should we expect? >> what i expect today as the president promotes energy once again, as you mentioned, he uses the word dominance he wants to take advantage of the renaissance we've experienced 19 last decade here in the united states and i expect today he's going to touch on our even greater potential to export both lng and crude exports since 2010, we have doubled our exports in the united states and the real value here is we create domestic jobs, these are high-paying jobs we build domestic infrastructure and we're allowed to capture the global market. so we're optimistic with the president's leadership as he
makes energy a centerpiece of his economic recovery program that we're going to have some ore opportunities. so we're angst to hear what he has to say today >> jack, are we actually importing -- how much oil do we import in barrels per day? >> it's down significantly, down to less than 30% overall there is still some import taking place, but export wide, we set a record in february of this year with over 1 million barrels a day of crude oil and that's unique, as you know, it was only a couple of years ago that we were allowed to do that, after the congress with great wisdom looked forward and said let's lift this wan on exports. this allows us to not only impact the global markets, but allows us to create those jobs here at home as we find new markets for our product in a cos cost-competitive way >> let's talk about that the reason we banned the export of crude is because we wanted to make sure we were using everything we could ourselves
rather than being reliant on the middle east or anywhere else to try to bring our energy needs in we wanted to make sure that we had more of an america first sort of policy for a that perspective. it's interesting to see how that has kind of changed. can you do those things, national security and self-determination and also have exports going out at the same time >> absolutely. in fact, what it allows us to do is opens up a freer market object global scale. all you have to do is look at the gee owe politics around the world today. you watch what opec has been doing, watch what other producing nations have been doing, and thaey're having to react to our ability here in the u.s. it was really driven by our technological advancements with fracking and drilling where many people will be surprised to know the u.s. is the number one oil and natural gas producer in the world. and it's changed those geopolitics such that it benefits our national security,
it benefits our domestic economy and and now we have many friends and allies around the world saying, you know, we would like to wean ourselves off those other nations that have been providing this energy and we would like to work with the united states. it was just announced recently, gary cohn, the national economic adviser to the president said one of the first shipment went into poland. and as the president travels over to europe and around, there are many nations saying, look, give us your energy. let's work out our energy relationship and i believe it will help secure us from a national security perspective well into the future >> i guess the goal is to do two things first of all, to not artificially hold back energy prices you don't want to see the spread between wti and brent get too broad. and that way it allows us to produce more without the prices coming down so significantly that we have to cap some of the wells. is that the whole point? >> yeah, that's the hope and expectation. as the market becomes more free on a global scale, you'll see that spread continue to close.
and it's closed significantly, as you know, over the past half a dozen years since we've been producing so much here in the united states. but in the global context, once again, the real beneficiary here are customers. look at the united states today, aaa estimates the average consumer saves over $550 a year at the gas pump because that vast supply has put downward pressure on a gallon of gasoline it's also estimated, the experts say, that every family now saves over $1,300 a year just in their home heating and cooling costs so you couple that with job creation, opportunity to build infrastructure, recent studies shows in our industry alone, over the next dozen years, there's a potential trillion dollars, that's a "t," $1 trillion in private investment, just to build energy infrastructure so as the president focuses on this and he gets rid of the unnecessary barriers, if you will, to freeing up our
economy,ic we're going to see some great things happen in energy and it's a great benefit to the american people, to american industry it's bringing our manufacturers home it's a win, win, win all the way around so we're pleased his focus has been on energy we look forward to hearing great things today >> hey, jack, thank you for joik us oday. >> thank you, becky, always good to visit with you. coming up, retailers are having a tough year. now it looks like some budget cuts proposed by the trump administration could make it even tougher for the sector. details up after the break and later, athletes and activism former tennis pro james blake out with a new book on why athletes take on social causes this after he was tackled by a police officer he will join us in just a bit. "squawk box" right back. now for today's aflac trivia question which three presidents died on ly 4th the answer when cnbc's "squawk box" continues
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welcome back to "squawk box" this morning a couple retail stocks to watch this morning shares of pier one tumbling after the retailer announced a major miss a full $12 million short of expectations and stamples is going private, being bought by sycamore partners for $6.9 million. it's the largest leveraged buyout this year i wish we could show a stock chart of staples for a longer period, because they're almost getting it on sale it's a bit of a discount, if you know what i mean it's been a long, sort of tortured story becky? >> as if retail wasn't having a hard enough year, the trump administration budget proposes big cuts to s.n.a.p. or the food stamp program sale a number of retailers, grocers, and other stores count on. courtney reagan joins us with a look at how the retailers could be hit by this >> the retailers are relieved the tax adjustment may be off the table. but the budget includes a bigger
ten-year $190 billion cut to the food stamp benefits, and that should make food-selling retailers a little nervous retailers don't normally divulge the food stamp sales, but alex partners has some estimates given exclusively to cnbc so we can quantify it. the retail consultancy says the proposed cuts could result in a collective $70.7 billion sales declines in over a decade. superstores and supermarkets account for over 80% of all the redemptions. that's the group that's the most vulnerable, standing to lose $57.5 billion, especially the biggest super center of them all. alex partners says walmart gets 18% of the food stamp redemptions. so at the current rate, walmart would see a $7 billion hit to sales over seven years funding redemptions will hit target second hardest. the biggest grocer to get hit is low-priced german player, aldi
alex partners estimates a $4.4 to $4.9 billion hit to its annual sales kroger will see a sales loss of $3.6 to $3.9 billion and sears-owned kmart will see a hit of $1.9 billion. some other disposable income will get diverted to pay for food, so there are ripple effects beyond retail. >> the retailer have definitely had a tough time but $70 billion is a lot of money. i don't dispute that over ten years. but it's a little bit of a relief that it actually isn't that much. u.s. retail sales in just one month, $473 billion, in a month. so $70 billion spread over ten years doesn't sound -- like, walmart, $12.7 billion over ten years. they did $485 billion last year, right? so the percentages are pretty small. >> that's excellent context. i think the one thing that some are a little worried about is
what if we go into an inflationary environment what if gas prices go higher and then there are other hits. what if health care costs go up. and those are some other compounding worries to the situation, but the context is important. >> the interesting part, stuff from other things will get diverted if these are core staples, that money might get replenished, but it's the other discretionary income that gets taken away. >> that's right. when we spoke to people about it, consultants said it's really hard to know exactly which categories get pulled out of it. it's often a little bit from everything so you could see some ripple effects that are maybe harder for us to put our finger on, but something to watch over time >> thanks, courtney. >> thanks. the trump budget plan putting a spotlight on the food stamps program joining us now is rebecca valles with american progress good to have you here. >> thanks for having me. >> tell us what you think about the proposed cuts when you look at the two competing versions of the gop plans?
>> well, i feel like some great points have just been made i think a lot of people have focused how important nutrition assistance programs like food stamps are for struggling families when wages aren't enough or when they lose a job but it's also a significant part of retailers' bottom line, which is something worth keeping in mind when we think of impacts not just on families but also on the economy. and a big part of why that is is because every dollar spent on food stamps actually translates into almost $2 in economic activity, when families are spending their food stamps dollars in stores and their communities, they're putting that money right back into the local economy. we'll see if these food stamp cuts that trump has proposed, which is equivalent to almost a third of the entire program, really massive cuts, we're going to see families not just stretched even further, trying to put food on the table, but also to the economy. >> the multiplier effect you cite, rebecca, is one that's almost always applied to any kind of government spending.
when people want to cut the defense budget, people say, what about all of those defense jobs and the multiplier effect there? what federal government spending does for a particular business isn't really necessarily relevant to the underlying question of whether that dollar should be spent in the first place as part of government outlays, right the second order of consequence on a retailer lake waike walmar shouldn't necessarily be part of your thinking. is the s.n.a.p. program effective? >> the s.n.a.p. program is incredibly effective not only does it promote poverty cuts in the short-term and it mitigates hardship for families who are struggling when wages aren't enough or when they lose a job, it also promotes economic mobility in the long-term. it helps kids' cognitive development, helps them thrive at school, and it also promotes improved employment outcome in adulthood. it's incredibly important in the short-term and in the long-term.
>> it's a conundrum we have discussed on the show a lot, which is, there is a high correlation between poverty and obesity for some reason pch and there's a high correlation between s.n.a.p. program participants and obesity, higher than the regular population, than the rest of the population. do you want to subsidize food when obesity is the problem? it's a question we've grappled with here. what do you think? >> it's such a great question, and it really plays on actually sort of a myth that's out there, that somehow, poverty is about bad choices or that people who are receiving nutrition assistance are making bad choices with the food. actually, a study by the u.s. department of agriculture makes very clear that families that turn to nutrition assistance don't make choices with their food budgets that are all that different from families that don't need to turn to nutrition
assistance so actually, research shows that if what we're interested in is helping families make healthier food choices and helping families be healthier -- >> i read that same study. and i agree with you, the general conclusion is that it's very similar, but the second most purchased item was sweetened beverages, which was a big overindexing on the part of people who are in s.n.a.p. versus people who are not. i mean, we're talking about limiting how much soda you can buy in new york city for the last couple of years would it be better to say, you know, you can't buy alcohol, you can't buy tobacco, maybe you can't buy sweetened soda when you're on s.n.a.p. >> the study we're both referring to actually found that sweetened beverages were a large part of not just what was purchased by families who turned to nutrition assistance, but also other households, as well so not a difference there. but i think it's important to know that research finds that actually, boosting nutrition assistance benefit s for familis is the best way to help them
make healthier food choices, because healthier food can often be more expensive than junk food that can be a lot cheaper and that can lead to that obesity that you're talking about. >> rebecca, thanks for joining us >> thanks for having me. >> okay. coming up, when we return, a false arrest inspired former tennis player james blake to pen a book about athletes and activism he's going to join us right after the break to discuss and then at the top of the hour, secretary of the interior, ryan zin zinke will join us to discuss the administration's energy etg thomofheeoofeck woo's meinwi se t cs the nation's biggest energy companies. "squawk box" returns in just a moment flexshares etfs are built around the way investors think. with objectives like building capital for the future, managing portfolio risk and liquidity and generating income. that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing
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xfinity mobile. welcome back to a busy times square this morning. james blake is here. his false arrest in 2015 made national headlines, shining a light on the issue of excessive force and providing inspiration for his new book we want to bring him into the conversation right now james blake, former pro tennis player, who is now author of "ways of grace: stories of activism, adversity and how sports can bring us together." james, we want to thank you for being here >> pleasure. thanks for having me >> let's talk about how this book came about and those headlines. >> yeah, obviously, it was an unfortunate day, i never would have thought something like that would have happened to me or should happen. and that is what got me thinking about it, was, i don't want this to happen to anyone else an athlete, you try to kind of brush things off and say, i'm
tough, i can take it so i wanted to not think about it but i thought about, what if this happened to someone i love, someone i cared about. and i wanted to stop it and speak up for those who don't have the same voice i had. i was fortunate to have a lawyer who could help me, an agent who could help me find out who these officers were and luckily, there was a video. if there wasn't a voob wiideo, n this whole case would have been much different >> you were standing there waiting for a ride to the u.s. open >> yeah, which seemed as basic as could be with the story they told and luckily the video showed that i was telling the truth and the cops had said that there was -- i wasn't in cuffs and it happened in less than two minutes and they were investigating whether there was excessive force, got shown to be inaccurate but if it wasn't for the video, they probably would have stuck to that story and i wouldn't have -- as credible as i am, against five cops. >> you resolved the claim. >> resolved it, yeah, just last week >> are you happy how it was
resol resolved >> i'm very happy with how turned out with the city of the networks they started a fellowship. there'll be two three-year fellows who will help try these cases coming out of law school so more than 50% of these kind of cases, last year, didn't reach conclusion so people lost interest, didn't have the funds to hire a lawyer or whatever happened >> did they try to fight you how did you get to that settlement how hard was it? >> there was compromise and it took two years, which from what i'm told, dealing with a bureaucracy in a city as big as new york, is actually quick. how quick something happened in two years. but on the other front, we were fighting to get a disciplinary hearing from the officer himself. >> that has not happened >> that happened without as much success. i never found out what happened. they kept adjourning the hearings when i was trying to come here, i was going to fly from california to be at the hearings and they kept adjourning them and made a settlement and haven't told me what happened. >> did you try to hold out in
terms of your own settlement relating to that, though >> no, i was just trying to get that done and accomplished as quickly as possible. i wanted to get a settlement because i never had any intention of suing the city, of getting -- of personal gain out of this incident i'm fortunate enough to have made a living doing something i love, so i didn't feel like it was appropriate for me to try to increase my net worth on something that was -- that i can use to help others instead of helping myself >> how did you go about finding and talking about the people in this story you've written a memoir before, but this is different. >> it was a totally different book writing experience than before it was writing about myself and my story and about other stories that inspired me and inspired so many others, and talking about the landscape of activism and how much athletes can make a difference in society. and how they can make a difference for a positive effect and there's so many stories, negative stories about athletes these days and i wanted to show, there's a lot of positive stories. there are a lot of ways that athletes can do the right thing
in this world. it was just something that meant a lot to me. and i kind of interwove a few of the stories about myself >> and billie jean king. >> probably my most inspiring to speak to in this i've known her for a long time, but i learned even more just talking to her about this book it was interesting to interview someone like her and find out how much of a difference she really made on women's tennis and tennis in general. she's such a trailblazer >> james blake, the book is "ways of gce tnkra,"ha you >> thank you >> when we come back, scott sperling is joining us for the hour utensils, even made custom donut cutters. wow! all with points. that's how i created the ripple: the doughnut in a doughnut in a doughnut. suddenly it's everywhere. i mean, it really took off. what will you create with your points? learn more about the ink business preferred card.
the energy agenda. president trump pushes america first policies in the industry a first on cnbc interview with interior secretary, ryan sizink, straight ahead blue apron pricing its ipo at the bottom end of the range plus, a milestone for the iphone -- >> today apple is going to reinvent the phone >> it's been ten years since apple's flagship product hit the shelves. we'll talk about what's ahead for the tech giant, as the final hour of "squawk box" begins right now.
>> announcer: live from the most powerful city in the world, new york, this is "squawk box. good morning welcome back to "squawk box. we're live as the nasdaq market site in times square i'm back with becky quick and michelle caruso-cabrera. joe is off this morning mr. sperling is joining us first, a quick check on the markets. the futures right now are in the green on the dow and s&p 500 the nasdaq has slipped into the red again. it's sort of waffled back and forth. dow looks like it would open up about 44 points higher s&p 500 up close to seven points higher but the nasdaq down about four points it had been up about four points, it was down four points. and that's where we are. today's top corporate story, the merger agreement between
drugstore chain walgreens and riteaid has been called ff instead, walgreens will buy riteaid stores for about $5.2 billion. the cancellation of the deal negates the planned sale of some riteaid stores to another chain, fred's, which is off by a whopping 20% riteaid is off about 21% and walgreens is higher by 4.5%. joining us on the squawk news line is john ransom. good to have you here. first, tell us what happened why do they have to do this? >> well, this deal first got announced nokt of 2015 so the ftc has been torturing them for going on two years. and it was pretty clear for all the rumors and all the late requests for information that they were going to sue to block it so i think walgreens beat a tactical retreat and likely focused on the stores that wouldn't be in dispute >> okay, so clearly, the to companies thought they were better together, and now they're not going to be. so what does this mean for a
walgreens boot stock or a riteaid stock that's getting hammered by 21%. keep in mind, it's only a $3 stock, so a decline of 84 cents is meaningful. >> on a scale of 1 to 10 for a walgreens, this is a 2, a 3, it's less than 5% of earnings accretion. my guess when you layer in the snr synergies, they're paying about 6.4 times eebitda. for riteaid, it's thermo nuclear war. if you look at their numbers, their ebitda is declining in their store base and if you look other than walgreens retail, i cover a lot of sectors, retail drug is the toughest sector i cover. the average company's ebitda is down like 20% this year. and look at rite aid, their gross margins were down. so they've got to entrench and figure out a way to grow this business and right now only walgreens is figuring out how to grow this business
>> and it's a.m. allso looking e thermo nuclear war for fred's. when you look at how difficult this sector is and when you look at what's happening amazon and whole foods, do you think it's proper for the ftc to torture the company like they did? >> well, i don't want to get an audit, so i'll be tempered in my comments, but, yeah, i think this was pretty irresponsible to take this long just to say no. you know, i used to get told no a lot quicker. >> should they have said yes >> well, here's the thing. what they did, and not to bla belabor this, but what they did is they didn't let the potential buyers look at this as script files. they made them think about it as retail drugstores. and there were potential buyers, but they probably wanted to close a bunch of stores and move the scripts into some other locations. that's the rumors we had heard but they took a very narrow reading of this and they just took forever so, again, the biggest victim was riteaid, because they were
kind of on a shelf for almost two years while the ftc -- >> but john, five years from now, when the world is completely and utterly amazoned, are we going to look back at this the way we looked back at some of the -- we can talk about staples, which is also in the news, and that transaction with office depot, which in retrospect a lot of people think should have happened >> i had some experience in other deals with the ftc we edowngraded the stock the summer before the deal my experience it's going to take twice as long as people think, and they don't like horizontal mergers. under the prior administration, they didn't like horizontal mergers. it's not something we spent a ton of time on but let me make one quick point. i think the amazon threat is overstated, because it's hard to get into the drug business but i'll make one unsourced prediction completely out of my head i do think that these companies, and in my guess, it's going to be walgreens, because they're the most creative right now, they are find a different answer
for the front end, andrew, and it will be probably some combination of home delivery, of both prescriptions and that snicker bar. >> john, real quick, and we were tweeting about it with some people earlier this morning, there's a couple of these companies now, alto is one of them, casper in new york is another. these are basically just messenger delivery services for pharmaceuticals. do you think that they ultimately get bought out and taken over and folks like walgreens basically take them on >> yeah, it's a classic -- that's a great point it's the classic guys in the garage this is what people want, and i think the drugstores are going to be dragg eged kicking and screaming and doing some type of home delivery. remember, their average customer is -- their most profitable customer is a medicare customer who's on six or seven meds they still go into the store so because of regulation and because the customer wabase is older, this is not going to move as fast as a teen retailer or something like that. but i think they will have to
find some answer for home delivery my question is, can you really do that and make more money? or is it just a defensive move and you end up making less money deep the same sales? i don't think that's clear but teaming up with an uber or -- but, yeah, and i'll tell you the other thing, just real quick. the biggest problem in this industry is not really the front end. that's only about 30% sales. the biggest problem front end the combination of high co-pays and high drug paces. and you do have start-ups like blake who in some cases, you could have insurance and end up paying more money than if you didn't have insurance. so the biggest problem is, we've got to solve this -- >> yep, very good points >> -- but for the small group of people who are on expensiv branded drugs, the combination of high co-pays and a high deductibles is a real problem -- >> it sounds like you saw yesterday's show, john thanks so much for calling in on the breaking news, john ransom folks, it is energy week at the white house. the trump administration continuing to push its push to
make america energy dominant joining us right now is the secretary of the interior, ryan zinke. mr. secretary, thank you for being with us today. >> good morning. beautiful day in washington. >> it is it's a beautiful day here in new york city, too i know the focus is on making america energy dominant. we're already the number one producer of both oil and natural gas, so what needs to happen in order for us to be energy dominant >> a lot of it is infrastructure and in the department of interior, researches, if you go back to 2008, we're about $18 billion a year just in offshore. last year we were $2.6 billion that's a drop of $15.5 billion in perspective, i'm also the keeper of our nation's national parks. we're about $11.5 billion behind in infrastructure. and when you drop $15.5 billion a year in revenue, that affects negatively, obviously, your ability to fund infrastructure to our parksand so, everyone love ours nation's parks, certainly i do, and we want to make sure energy is part of that >> what does that mean by allowing drilling on public
lands that will be a way of funding the national parks and making sure they stay afloat >> well, it's certainly part of it and when you put 94% of our nation's offshore holdings off-limits, the signals from the market are, in the first six months of this year, compared to a previous year, the last year the obama administration did about $11.5 billion in onshore or $1 million. this year leases were $146 million. so the market understands that our -- some of our public lands, particularly offshore and some onshore blm lands are important for making energy more accessible but, look, you know, i'm a former military officer, too i can tell you, i would rather not see our sons can daughters go to war. i've seen it, and certainly not being held hostage by foreign entities for our energy needs is positive environmentally, i can guarantee, it's better to
produce energy here in this country under reasonable regulations than what gets produced in countries that don't have any regulatory framework, middle east and africa, to name a few. >> let's break that down into a couple of different pieces first of all, american security is certainly a huge issue that people have been focused on for a very long time that's why so many have cheered the increased production that we've seen in both oil and natural gas. but, you can talk about how we can eventually become energy independent by doing those things, or you can do something else, which is to export oil and natural gas at a higher pace, in which case, we're not necessarily producing it for ourselves. i know that those numbers we import have come down pretty significant, something like 30% over the last seven years or so, or have come down to 30% of what we're importing. but if we export more, won't that mean in turn we're still going to be relying on others to make sure we can meet our daily needs for energy >> no, just the opposite but it does take infrastructure to do that not only can we be energy
independent, but the term, energy dominance is what the president has said he allows us to look at, for instance, iran iran's launching icbms, we should be concerned. there's two approaches military or economic economic is energy same thing with putting pressure against russia to subplant liquid natural gas in eastern and central europe >> meaning that we go ahead and export our liquid natural gas to those european countries, so they can no longer be cut off by the russians every time they get upset with them? >> absolutely. but we need ability to do so and this is a national decision, but certainly, infrastructure, making sure we produce energy wisely, responsibly. i'm a boy scout. i want to make sure our campground is left in the same or better condition we find it, as the steward of our public lands, that's my charter but certainly, having energy production, an energy infrastructure, doing it right is part of not only the domestic policy, but national policy, as
well >> secretary zinke, isn't it kind of interesting that when all of these things happen, you can release all the regulations and allow more drilling. eventually, what's going to settle it are market prices, themselves we've been looking at wti below $45 a barrel and just this week, we spoke with harold ham from continent continental. i know he's been there talking to the white house, too. he says if the u.s. drillers spend a lot more on binge drilling, it's going to put us in a tough position, because he says below $40 a barrel, it just doesn't make sense, financially, for them to be drilling. >> well, a great point and the trump administration does not pick and choose winners. we don't favor any energy source over another, but certainly having energy that's abundant, cost competitive, is certainly a part of it you know, energy prices have stabilized i pay attention to the markets, but that doesn't drive, you know, our policy ic regulations we need to streamline, simplify, and in
some cases, strengthen and when regulations are arbitrary, then it doesn't give the right signals to the market, whether they can proceed forward. because having a regulation that's arbitrary can put you in somewhat of a quagmire, if your sitting on the sidelines and want to invest or decide not to. >> mr. secretary, the impact of energy pricing goes well beyond the industry itself. it obviously goes to the competitiveness of u.s. manufacturing and our ability to offset higher labor rates with much lower energy costs. >> absolutely. swl >> so i'm fully supportive of drill, drill, drill and all of the above for energy the question is, once we've unlocked the ability to export, is what happens if prices start to rise again, well above 50 or 55, that the natural gas market equalizes across the world so we
lose our competitive edge there. can you see a scenario where we once again clamp down on the amount of exports to keep prices in this country, particularly for natural gas, advantaged? >> i'm a former geologist, and i say former, because i graduated in 1983 in geology but things have changed, even since ten years ago. fr fracking is a game changer it turns out, not only do we have energy, but we have the most potential energy, and i have about 20% of our holdings offshore and we have more energy potential than any ore region or country. a lot of it has been from fracking but i don't see it as a disadvantage i see it building infrastructure and having the ability to export is important i think prices are stabilized, but you're absolutely right that having energy that's reliable, abundant, and cost effective keeps us competitive, as far as
a manufacturing sector so the outlook is very, very good i think we'll have a reasonably low competitive energy if we use our assets wisely. >> thank you >> secretary, there have been many questions about the parks that you've been talking about and the monument designations that have been made, and two in particular bear's ears in utah and the north maine woods, those monument designations. do you plan to keep those monument designations for those areas or is that something that will be let go >> certainly in bear's ears, my recommendation was made. maine, we looked at, we're pretty comfortable what our r s recommendation is going to be. and monuments over time have been an enormous positive step to keep our treasures in -- you know, as they are. but there are limitations. and it's the smallest area kpat nl and occasionally, you do need
to look at the executive powers to make sure they're not being abused, to make sure they're appropriate. the monument review, i look at three things does it follow the law does the local community, did they have a say? did they have a voice? and is changing the proclamation or change in the best interest of the public and our country? i think we're pretty comfortable on where we're heading the recommendation in bear's ears, which was, by the way, all federal land to begin, had a monument, has a forest service holding in it, has a wilderness area in it it was all mostly a federal land and we made a recommendation for congress to do their part and look at lands within that to see whether they were better suited in a different class but overall, i think we looked at it very thoughtfully and have a very step by step approach >> secretary zinke, i want to thank you for your time this morning. we appreciate it >> me pleasure have a great day >> you too coming up next, pharma bro,
martin shkreli, a high-profile trial and lady gaga. one of these things is not like the other. there's a story there, really, and you do want to eso isee it blue apron will make its debut later this morning competition in the kitchen is hot, hot, hot. we'll talk to the ceo of plated, another meal kit company looking to dominate the industry don't move [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock. ♪
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>> well, finally getting a jury yesterday in the martin shkreli trial, almost after three whole days of the selection process. after that, opening arguments got underway fairly quickly. the government started by laying out its case, essentially running through the eight counts of conspiracy fraud, conspiracy to fit wire fraud, to which he's pleaded not guilty then the defense started its opening argument not focusing on, of course, these -- they did focus on the charges, but really focusing a lot on martin shkreli's personality. ben graphman telling the jury, quote, once, is he strange yes. will you find him weird? yes. martin shkreli is brilliant behind words also saying, "geniuses are sometimes just on the other side of crazy" and, "as lady gaga said, he was born this way." we ended up catching up with them outside the courthouse yesterday. take a listen to what they told us can you tell us about the lady gaga defense in there? >> no, i think i said what i wanted to say in the courtroom >> why quote her so many times
>> because i think quotes fit. >> with all of these lady gaga references, do you think martin had a little bit more of a poker face >> i am happy with martin's face exactly the way it is, okay? thank you. >> reporter: so, of course, martin shkreli known for his facial expressions in places like congress, where he pleaded the fifth when he was supposed to testify last year so we're expecting a lot more drama today. the trial is going to get underway in just a few minutes this morning shkreli and his lawyer really should be arriving any moment here we'll bring you anymore news >> meg, the look on his face, he liked your face. he did he cracked a smile >> no poker face there >> reporter: it's possible, although social media indicates he doesn't >> no poker face there see you, meg thanks our guest host this morning is scott sperling, also a madison square garden board member good morning to you. we've been talking a lot there's been some deals. there's been a little bit of
deal activity recently >> there's deal activity >> we have this walgreens riteaid deal which broke apart, but now they're buying some of these things we have amazon, whole foods, which seems to be upending the blue apron ipo, to some degree what do you think's happening in retail right now >> i think what you've seen is the growth coming out of the bricks and mortar retailers, because of the obvious movement towards ecommerce. we have to recognize that ecommerce, if you add up across the entirety of the retail sector, still in the 10 to 12% penetration range. so i don't think that's going to slow down. i think that's going to accelerate we can argue that things are going to stabilize, but i think it's difficult for a lot of sectors in the retail side, particularly when you have highly competitive businesses. i don't think grocery stores are going away, by any means i think the market may have overreacted, to some extent, in terms of the pricing of some of these large retailers, particularly when you look at the scale of whole foods but whole foods is a great acquisition for amazon
it gives them the logistics and distribution capabilities that they were lacking in a lot -- >> should the entire supermarket industry be in fear? >> i think every industry should be in fear i'm a big believer that we should all run afraid on any business >> in fear of amazon >> i think everyone's afraid of amazon and you know, you saw the staples deal announced and tom always used to say that amazon, single handedly, destroyed what was a fantastic retail business in staples, because they were able to price in a way that didn't result in profitability in that sector, and the market loved it and therefore, it's very hard to combat so i think there are issues. amazon has this incredible weapon in aws. aws is one of the most profitable, greatest businesses out there. >> the cloud business. >> the cloud business. and it gives them great flexibility to suffer very low margins on the retail side, and funds everything
so, i think amazon will continue to have the ability and the flexibility, stock market support for engaging -- >> to the extent that regulators have looked at office depot or staples in a particular way or looked at this walgreens riteaid in a particular way, everything within the amazon world on a straight true anti-trust basis would go through, because they own small parts of the market. however, given what you just talked about with aws and its ability to use that to fund other things, should the thinking about all of this be different? >> i think we need to take a step back in all of this anti-trust regulated, government regulated, whether it's fcc or the ftc and doj, and recognize that the traditional ways of looking at competition no longer work so whether or not it's an fcc-regulated business, where it traditionally looked at all the
legacy kind of media companies, the reality is, we have thousands of new outlets of information and you need to take that into account. if you look on the things like the retail side of the world walgreens, rite aid, clearly the big threat comes from ecommerce for many of these businesses it is true that pharmaceuticals may not be as easily distributed through the web, but i ordered band-aids the other day from amazon i could go to my local cvs, which i would normally do, but i was buying something else, and i bought band-aids so i think that you need to relook at how we evaluate anti-trust in the context of the reality of technology -- >> we are going to continue this conversation with scott in just a little bit i want to thank you for being here and hanging out with us for the hour in the meantime, we have some breaking economic news coming in just a moment. two key reports about to hit the table. we'll bring you those numbers. and later, war of words reportedly escalating between
walmart and amazon what the retail giant told thhekers about doing business wi t ecommerce company stay tuned "squawk box" will be right back. can we at least analyze customer traffic? can we push the offer online? legacy technology can handcuff any company. but "yes" is here. you're saying the new app will go live monday?
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welcome back to "squawk box. we have some important data coming up. it's almost the end of the second quarter, which means we'll be getting our last look at the first quarter on gdp. we're expecting the number at 1.2. a little bonus today, about 2/10 worth. up 1.4, 1.4. and if we look at the personal consumption aspect, 1.1, almost double the 0.6 last look, the price index, 1.9, that eased back from 2.2 and personal expenditure quarter over quarter is up 2%, 1/10 on the light side jobless claims moved up 2,000 from a slightly revised 224,000.
and 1.942 is last week 1.984 million this week. it's up just a smidge. maybe the biggest news, outside of the fact that q1 is a little better than expected, is that boon yields are up 20 basis points on the week mario draghi spoke, the retraction happened, the market looked passed it that's very important. think about it market participants like having a benefactor, what they don't like is having to deal with more of a financial reality but it certainly seems as though there's something about the condition of r fed in europe and the central banks around the globe that is changing, and you better stay tuned to cnbc to stay tuned with those changes. back to you. >> important watershed, potentially, moments, rick pointing that out. rick santelli. all right, randy anderson is griffin capital chief economist. he joins us now on the phone any thoughts on the economic data that rick pointed out before we move on though that
bigger issue we're talking about when it comes to what's going on with central banks >> this is great news. i think the market will react it and react favorably to it. we expected q1 numbers to come in a little bit better they came in a lot more consistent with this revision than we thought earlier. you know, but we're still looking for a gdp that's around 2 to 2 1/2 for the year. we're going to have good, solid growth i think we're range bound in that 2.2 to 2.4 for the year >> okay. what about the sell-off going on in the european bond market that rick just pointed out? yes, the yield has gone up for the german ten-year. but that just means it's far less negative than it used to be what are the implications for the u.s. fixed income market >> we're still in a really low environment. rates don't always rise in a rising rate environment. i think we're seeing a lot of reaction to a little bit of noise around the country saying, listen, everybody in europe now has taken a little more or a little less dovish position, but i think given where we are with economic growth, the u.s. kind of range bound in the 2% range for the year, relatively
moderate growth, although strengthening growth in europe i'm still looking for a relatively low interest rate environment as we make our way through 2018 >> all right, randy, thanks so much >> thanks for having me. >> let's back to our guest host, scott sperling scott, wii want to pick up wher we left off. we continued this conversation through the break. the idea of how the government looks at anti-trust may be antiquated there are all kinds of changes afoot, where you could see broader interpretations of how this comes down, if you have a populous president or you could see narrower definitions and you could say, look, competition is just different today very different and so we've got to start looking at it differently. >> and as we were talking about, the power that technology has unleashed that is broadly held in terms of the ability of individuals to express opinions and news and to influence is much greater than it was >> and that's in relation to the
fcc. >> that's in relation to the fcc, for example the power of controlling commerce has now been concentrated in other hands. so google, facebook, amazon, three major players who have done spectacular jobs of building businesses that truly exhibit dominance in their areas. and they have been building on that dominance and have created the business models that are dramatically more profitable, particularly in the google and facebook situation, than much more conventional businesses that do similar sorts of things. and so the way to look at competition, whether it's on the retail side or the media side of the world or lots of other industries, should have taken into account this evolution that has in many cases become revolutionary in terms of the nature of the business models. we look very closely when we try to explore the direction that industries and subsectors will take on the impact of technology on those business models over
both near and longer term. long-term, it's kind of hard one of the things that we often say, over the last few years, maybe you haven't seen a lot of change, but these technological changes often inch up on you and you get this false comfort and all of a sudden, you fall off the cliff in terms of the nature of the business model and the profitability of that business model and so identifying areas where we're going to see technology working for you is an incredibly important area of our business and looking for ways to overlay technology as a tool to help companies get to the next level of performance is also an important area so it's a very different world today in lots of different aspects than it was in the regulatory authority's need to really catch up with that. >> you know, i hear your point you can think of amazon and how originally, not just amazon, but all online retailers were told they didn't have to collect sales tax. it's been hugely in the news
about whether they're doing. amazon will be picking up sales tax in nearly every state in the very near future but what you just said, your ability to predict the future, see around corners on some of these things, what do you see as the next big thing that we haven't figured out yet? >> well, if i knew that, i would probably be on an island some place in the south pacific >> tell us potential -- >> but i will tell you that what we look at is -- and we've focused a lot of effort on things that enable, are broad enablers of these trends so looking at businesses that can help ecommerce occur i can't tell you -- in fact, i suspect that most ecommerce players will fail or not be very profitable however, they're growing enormously in terms of both the quantity and also the dollar volume of what their doing and even if an individual company doesn't succeed, being able to be infrastructure for those companies, whether it's software, creating the facilities needed to enable the
actual delivery of goods and services, the fulfillment side, these are areas that we think are incredibly interesting and are somewhat agnostic as to the economics of specific ecommerce -- >> logistics >> logistics is a big area for us >> can i throw you a curveball >> sure. >> if you were on the board of uber, would you fire travis kalanick >> ohh, i don't know enough about the specifics. clearly, the culture that was created there seems from the outside to be reasonably toxic in a number of ways. and i think the board did -- was very appropriately aggressive with somebody who was actually a controlling shareholder. >> by the way, who was not gone. who is still on the board because of that controlling share. >> right and that's not going to change and you know, you can attribute a lot of success of uber to the same characteristics that make
him a very difficult ceo -- >> which is why i ask the question >> right that's clearly the conundrum, because he basically thumbed his nose at almost every law and regulation that had constrained that form of transportation. and i'm not sure -- >> anybody else would have done that >> exactly >> so let me ask you a different question, which is, at least in the valley, but you deal with it all the time, too, there has been a move over the past decade towards these dual class structures that give somebody like a travis kalanick remarkable power do you think that that changes now? meaning, if you're a venture capitalist or private equity person who's involved in some of these earlier and mid-stage companies, do you say, you know what, i can't do it this way anymore? >> yeah, we're not really supportive of that form of governance, that concentration of power, that -- where the shareholders who put up all the money really don't have the ability to influence >> this is true of so many
>> exactly on the other hand, if you're in the start-up world, i think that's a rule you play by in order to get into some of the most interesting companies so luckily, we don't deal with that we don't, in our end of the private equity world and i can easily say, we don't support it but any lived in that same start-up world where i'm trying to get into that really hot company, where you have this brilliant individual come up with the idea or execute the idea in a really effective way, maybe you just have to play by those rules. >> okay. scott, stick around. we've got a lot more to talk about today. >> when we return, dinner is shipped. blue apron goes public today it's one of many, many meal kit companies trying to be number one. we're dwogoing that to talk to ceo of plated, a competitor, right after the break. and blue apron ceo math salzberg will be on "squawk on the street" today after the company starts trade
♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average?
welcome back, everybody. walmart is reportedly escalating its war of words with amazon words and actions, potentially, too. this is according to the "new york post. the retail giant is sending veiled messages to trucking companies that haul its merchandise from distribution centers and stores, telling them that if they do business with amazon, walmart may not want to
work with them this after walmart told vendors to stop using amazon's web services or it could lose walmart's businesses but you can imagine the competitive juices are flowing >> if it's true, what are they doing? >> i don't know. i don't know maybe it's just a hypothetical, theoretical, right >> maybe blue apron is going to hit the big board today. among the chief concerns about the company, the competition heating up in the meal by mail industry or by shipping it includes major players like amazon joining us is josh hicks, ceo and cofounder of plated, a meal delivery company good to have you here. >> thank you >> the blue apron ipo, they had to low terrier their offering p because there was so much skepticism among investors there's so many of you, you're just one example how competitive is the landscape and can you survive? >> yeah. so i don't think it's actually as competitive as people think not to say there aren't
competitors out there, but you know, today's an exciting day for the industry, right? i think, full stop, it's the first big company going public people clearly want the product. i know you're a user >> yep >> you see the grocery trends going down, right? somebody shared with me recently that 2015 was the first time in history that more grocery shoppers used the sort of hand baskets than the push buggies. and i think that tells you a lot about what's happening in the grocery industry >> that's a fantastic data point. >> and people aren't going to stop eating, so it's got to go somewhere. >> all right so i get -- let's bring up that wall screen i have the reason there are so many companies doing this is that people want this kind of product. but how do you survive against all of those players if people are home watching, they can look at their screen, look at all of those companies doing what you do. >> so not all of those companies do quite what we do. and i think that is really our view on how to be successful in
the food market. you have to understand who your customer is. and serve them well. some of those companies do prepared food delivery, which ourcustomers use also. we think that customers today want to have a weekly routine that includes going to restaurants, right, we all like doing that once or twice or depend on who you are. they want to use takeout, right? prepared food in some form or fashion. and they want to cook. the problem is that people don't know how to cook, necessarily or the grocery store is a lot of time and a lot of effort and they really hate the portions they get from a grocery store. >> but long-term, the cooking piece of it is going to get squeezed i mean, i recognize there are people who like to cook, but prepared food, people like prepared foods you can just directionally see how it's going the amount of time people have to actually do all of this stuff. >> have you thought about broadening your product line >> one day right now, focus is really important for us and yes, people are cooking
less, but they don't want to not cook at all, right i know a lot of 25-year-olds, first out of college, they do use, you know, takeout, saleless or others, seven nights a week but people don't want to do that forever. they like cooking. not seven nights a week. we think those days are behind us culturally, but people do want to cook >> so if the ipo had gone better, i mean, let's see how it trades today, but if it had been able to price higher, you're not cheering on that it's not doing well you would prefer blue apron to have done better would be better for your valuations, i think. >> of course and we want them to succeed. they're a different business, serving a different consumer than us. and it's really the first day. you look at all the grocery trends you guys know all the ecommerce data and grocery data. >> are you afraid of amazon and whole foods? >> right now >> so you saw that cross the tape, swallow hard, what happens? >> on blue apron
>> no, on amazon and whole foods. what did you say, who did you call >> i thought it was great. >> you did >> yeah. >> because >> that first off was a validation that either can't or won't build everything they've been in grocery for ten years and they're buying a grocery store. this is them telling everyone that they must buy some stuff, they can't build everything, or at least they won't, right and we thought that it was a validation of, you know, omnichannel, right food is not like all things. it's not going to be totally online and it's a validation that the grocery industry is being disrupted, right all of which are positive for us and they don't really do what we do and i would never underestimate amazon that's a crazy thing to do but they're not doing what we do and, yet, they've got a lot of o work to do to integrate whole foods. >> meaning somebody like you might get bought for a big price, because it's hard to put this together. >> we're not trying to sell the company, but that's certainly a possibility. and they might buy somebody.
i think they've got a lot of work in front of them to properly integrate whole foods it's a big deal, even for them and a lot to integrate so i think, one cday, perhaps >> wish you the best of luck >> we do >> josh hix. >> thank you >> and matt salzberg will join "squawk on the street" after the day start trading. >> when we return, ed beg was one of the first people to get hihas t ogil smartphone he'll join us next with that very phone at johnson's we care about safety as much as you do. that's why we meet or exceed 15 global regulations for baby products. and where standards differ, we always go with the toughest.
way we do today. >> no. >> i have it here. >> cracked screen. we still crack them today. no i mean, you'll recall there was enormous type around this thing. steve jobs of course showed it off six months earlier at mac world and then june goes on sale and everybody around the block it was nuts so there was certain interest in it but did i expect them to sell 1 billion phones and get to where we are today, i couldn't predict that. >> that seemed like an amazing piece of innovation. >> yeah. >> today people say, you know, how can you innovate the phone that much more you keep putting a new processor and you sell it for a little better, is there a major jump set to come? >> well, you would like to think so but you're right. the fact is that phones today whether it's iphone, whether it's many android phones are really, really good. we get to a point, we've hit that wall so what comes next maybe we'll see true wireless
charging not putting it on a pad. >> like we just walk around and it's charging all the time this company is work on that i'm not going to suggest that's around the corner but efforts are underway there certainly apple has already announced its intention to go big on augmented reality the idea that the digital blend with the physical. that will be real. we'll see some innovations and design you'll see an edge to edge iphone like we have already seen with samsung and others but it's hard to like change the world. they change the world. you can argue they changed the world with this phone. it's not that easy to do otherwise we would be doing it all the time. >> they're coming out with this new he echo like alexa speaker i don't like to say it too many times because people have them at home and they're on right now. is that an innovation to you. >> it's probably a very nice product, the people that heard the early version sounds good
but siri needs to catch up to alexa and microsoft and then google assistant google has done good work with google home. >> do you think that's a better product? which is the better product right now? >> well, right now you could argue google because guess what is behind it, google you can search for anything by google on voice and that's nice but i'm also a fan of echo and alexa. >> thank you it's good to see you. >> you too. >> come on back. i can't believe you have that thing. does it still work >> it does actually a battery just died that's something i'd like to see improve. >> this is the actual phone. with not something to protect it. >> yeah. >> but it's heavy but, you know. >> it's small. >> yeah. >> 3.5 inch display. now have the big plus version. very different but, you know, little chunky but surprisingly not that heavy, you know. >> ten years ago. >> thank you. >> sure. >> up next, scott spurlings call
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record size. >> that was in '06, '07. >> so what does this say about the transformation -- then by the way you have soft bank with around $100 billion. >> 10 billion. >> saudi money. >> so what has happened to this business >> so, you know, look we go through these cycles the apalo guys we, very smart guys they do a broad range of things and prepare themselves for downturns and they'll be looking for different ways to put that money to work i do think particularly given the general frothiness that we sense in the marketplace for trying to buy private company which is is a reflection of some
of the valuation me tricks being used in the public market it may be hard to put those kinds of dollars to work without striving for returns or achieving returns that are well below the 20% targeted returns that -- >> is it going to be consolidation? are they going to squeeze everybody else out is that what is happening here >> i think there are clearly large asset gatherers that are great firms that have decided that the model is to be able to deploy very large amounts of capitol, achieve returns that are hopefully 3 to 500 basis points higher than what the expectation for the s&p would be and that's a great business model and you have smart folks out there like apollo and black stone and gou good-byes through the list of all the public companies and then the industry will still have a lot of firms looking to deploy smaller amounts of capital
fewer deals but being able to deploy them perhaps against, you know, as we do, middle market companies where you can still apply in that 20% net return available. >> great to have you. >> thank you. >> nice to see you. >> good to see you. >> michelle thank you. later today too. >> everyone have a great 4th. >> happy 4th of july everybody make sure you join us tomorrow first. right now it's time for squawk on the street. ♪ >> good thursday morning welcome to squawk on the street. the euro at a 14 month high and the bond sell off continues. ten year yield is up 15 basis points the banks, the fed o