tv Squawk on the Street CNBC June 29, 2017 9:00am-11:01am EDT
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 okays
dividends and buy backs for all major u.s. banks financials rise ago cross the board in the free market. >> drops it's bid to buy rite aid buying stores instead. rite aid shares are plunging because it's future is called into question. >> blue apron at the low end of a lowered range. the amazon effect and signals for an already slow year for ipos first up though stocks are looking to maintain upward momentum after the nasdaq's best day of the year and the saeps best day since april financials doing their part after the fed approved capital return requests for 34 of the largest u.s. banks a lot of the hikes and capital returns that we saw yesterday mostly above expectations. >> the market just figured this out. it's been so well telegraphed that there's going to be good news but managements and boards and banks themselves were more aggressive on the buy back and
dividend intentions and they all got approved i also think you can't separate it from bond yields. so it's good news on capital return there's already pretty bullish sentiment toward financial stocks and i think you got an extra reason to say they can kind of move even beyond this because yields are going higher and the yield curve popped off of the u.s. and across the world. >> some of these increases are going to be substantial. pay outs that will equal 100% of the year's earnings in part because they can take down the capital buffer which many of the banks argued is far more than they could imagine ever needing. >> well, and the fed kind of ratified that, right so they said we have done our work here. >> we're good for our lifetime >> i do think it's interesting if you looked at city, bank of america, they brought their dividend pay outs up to about a 2% yield based on yesterday's closing price in both cases. now as the stocks go up that
dividend yield is going to go down after a 2.5% yield so they're in the zone of a typical average s&p 500 yield but then with growth going ahead. so as david says basically not just saying well we're going to raise pay outs and buy backs in line westernings we have years worth of accumulated capital that we're going to try to draw down for the benefit of shareholders. >> bond yields, 228 as we said amazing sell off in a couple of days fed funds futures now roughly at a 7 week high. are we going to look back and say 213 was the low for the year >> there's a descent chance that at least we're not going to threaten much below that look, the story has changed so many times right now you had this concerted harmonious voice of central bankers from the u.k., europe, the united states and canada saying get ready we are -- our intentions are
we're bringing grades higher we're going to try to drain away the qe but again within a month's time or three months time conditions change that alter that yeah of course but i think the bond market is trying to say okay maybe this is it and the question is are we in a sweet spot where that's good until it's not good for equities and all the rest of it the dollar is taking it on the chin because the rest of the central banks. the difference in what was expected and what's going to be tell grafd now is more dramatic overseas than in the u.s. >> 2017 lows today. >> yeah, absolutely. the euro had that pull back yesterday when the ecb tried to walk back the draghi comments. >> kind of reaffirmed a little bit. sort of made sure that everybody got his message. so stocks are okay until they're not. thanks for that one. >> i think stocks are okay for the moment the problem is, if the -- if the currency and fixed income noise starts to get too loud and
basically those markets start to have excessive volatility. you knock some things loose in there, that's the question you saw yesterday every one of these three nasdaq sell offs of a percent or more have been a one day blimp and the markets comfort for now saying that's a one day shake out we're going to bet it's not going to be more than that so when do you become overconfident and say that's too much and when do the other sectors not coperiod operate and fill in the gap. >> indeed. meanwhile we have a lot going on in m&a today walgreens, and rite aid cancelled the planned merger instead walgreens will buy almost 2200 rite aid stores. also kanscancels the plan to pharmacy chain fred. and they will pay the termination fee. >> yeah they'll get the termination fee. investors are most focused on
what was a terrible quarter for the company itself and wondering what this company is going to look like post the sell of all the stores to walgreens. i got a lot of paper here because it's been a long time that we have been dealing with this so it's back in october of 2015 that walgreens remembered to buy rite aid for over $17 billion in cash. it was $9 a share. surprised the market and it was an extensive premium at that point but there was always concern on the anti-trust front. that the ftc would force vestitu rerks s. based on the idea that walgreens would be too powerful a competitor and that went on and on and there were different proposals that were viewed and rejected one of them of course involving freds buying those potential stores but perhaps the view being that freds was not going to be enough of a competitor to necessarily be what the ftc
wanted so the total purchase price is 5.2 billion for those but the focus of investors is going to be on rite aid's quarter itself for the quarter they had revenues of $7.8 billion compared to 8.2 billion last year same store sales down over the prior year that was a 5% decrease in pharmacy sales on a 1.5 decrease in front end sales so investors are looking at what's left? what do we get they're not going to be able to get all of their debt. they'll be highly levered but
with that kind of a drop giving up what potentially are the better stores need for capex given the stores they currently have and what will still be about $2 billion in debt people are backing into stock prices that are saying put a multiple on that. >> that trade had a pretty elevated yield there's already built up anxiety about their ability to sustain it. >> you might see further down side we'll see where it settles but there's concern over the six month period that it will take for this deal to close given what is significant erosion in their overall sales base. >> we don't know what moves other players may make in the interim.
whether it's amazon testing pharma plenty of other retail to watch. staples. >> at least in this case you have a dominant player in one category it's not a particular price but it's definitely something that i think a lot of other public players trade below in terms of evaluation i don't know if it puts a floor under the business as a whole but you did have retail as one of the brighter spots as one of the losing sectors that perked up a little bit in spots. >> i can't imagine there's really a growth plan here for staples but to the extend that private equity is looking for a business that can float cash flow fairly well for a number of years and they're locked into a
lot of the small business. you have to walk through the mall and grab customers as they go by. >> and of course don't forget we come back to antitrust that played such an important role in walgreens failure to be able to acquire rite aid they made the argument that amazon was the competitor that there wasn't going to be dominance in office supplies they got challenged and they lost in court. >> right. >> we may hear from nike about whether or not they go for amazon they said we had our chances years ago. we didn't think amazon was well suited for building brands we didn't like the way our products might appear on amazon. apparently those concerns are in the past. >> well, certainly they have been forced. nike was a company that was so careful about staging where the new product showed up and which outlets were good enough for this year's versus last years,
and all the rest of it so they wanted to have micro managed the brand and workout exposure but with all the third party sellers on amazon you can't do it as well anymore >> they're upstairs and around here these impossibly good-looking well-dressed millennials are all happy and the fact that they're priced at the low end of the expectations not dampening the expectations at all or the feelings down here prior to that it was 15 to 17 so this is sort of a down round of
funding valued at below $2 billion but the important thing is pricing is better to have it open right is a lot more important. you don't want to price it at 16 and have it close at $12 price it at 10 and see if it closes at 11:00 or 12:00 >> the line between grocery delivery and meal delivery is a fine one and amazon can easily invade this space. that's a problem also a little bit less profit directory of trajectory for the country. i want to bring your attention to another ipo trying to get out tonight on the nasdaq. they do enterprise storage they help enterprises more effectively manage their cloud applications it was supposed to be trading today. they didn't get through. they're repricing at 8.7 million. here's another company that is
lowering their price my understanding is they will try to get this price tonight and out tomorrow trading on the nasdaq they also potential amazon competitor amazon has a public cloud offering could potentially compete with them. keep an eye on that. the important thing about pricing you might say the ipo market is in trouble the ipo market, the dmaens have gone have done very well this they're saying we don't want to pay the valuations for the people that buy this stuff once it comes public has been better than people anticipate t some unicorns might be worried about the valuations should they have to go public but the investors in the ipo market it's been a goodyear.
we're going to talk to tom farly ceo the man in charge of the new york stock exchange when it begins trading half an hour from now. we'll talk about the ipo market and the strange remarks that he made the other day in testimony about short selling being icky and un-american. i'm going to ask him to clarify those remarks coming up in the next half hour. >> we look forward to that thank you very much. we'll also talk to the founder and ceo of blue apron later on this morning you'll hear from the company we'll see how the opening trade goes meanwhile, billionaire hedge fund manager larry robinsons with a take on the trump agenda and a lot more we're back in a minute (baby crying)
some are stretching it out as early as yesterday you have the bond yield and the banks heavily passed the stress test what i noted yesterday was for weeks we had rotation going on with people going out of the techs into the financials. out of the financials back into the techs. yesterday there's new money coming in. obviously to the upside too.
i do wonder though this rotation has been almost so scripted in a way. and you have to have the numbers come through final quarter in gdp not a big market mover and it's all happening in the absence of evidence that we'll see a second half economically in the u.s. i mean. >> no, that's the part, the so-called trump agenda still has a question mark around it and we'll wait and see also going into a strange seasonal period here. and people start to go away for vacation et cetera we like to keep a bid under the market going into month end and we'll consolidate for a couple of weeks. >> are you getting less sceptical about multiple heights
going into the back half of the year >> no. >> really? >> no, i don't see the data coming in differently. what i'm seeing in the market in europe is impressive even with draghi trying to back down from his point that inflation is no longer a threat by saying he has to keep the easing in place. i have to pay more attention to what's going on there. the economic numbers don't show me the strength that i need to see. >> german inflation at 1.6, that's where we are. it's not that big of a disconnect anymore. >> it's a big deal. >> so you almost got the ten year yields up to .5%. >> how many trillions in negative territory i don't know
a lot, right >> anyone that thinks that they can solve the problems of this world with isolationism and protectionism is making an enormous mistake. >> i wonder who that could be directed at. >> who do you think she's speaking for europe the eu, the rest of the world? >> i'm not entirely sure but let's hope they don't have a merkel trump meeting for another week or two anyway. >> we'll see what the next summit is like when we come back blue apron founder on his company's ipo we'll also bring you the first trade. futures look good. more squawk on the street is straight ahead
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you're watching cnbc squawk on the street. a lot to watch as we start to head into a long weekend for some watching the dollar, watching bonds, the euro, m&a and then blue apron is going to bring the bell here in a few moments >> it's very interesting i mean, obviously look having to reduce the offering price, priced below the level that some of the private venture backers in later stages paid but it's in a spot that so many other big companies covet. millennial, customer based this phase of ipo, the response to them leads with with skepticism there's a sense out there and i'm not saying it's correct that well if you need the public
money how good can you be. there's a sense with this deal -- >> the window for staying private has been extended. >> so oh you really want to do this before july 4th why. that explains why you had to come down in price and then the business model >> city and barclays david some say don't count out goldman. they price these things to work. >> they were aggressive in making sure that they put it at a price where they know it can get done it's rare you get an ipo poll but there was at least some question to where there might be a case and you wonder about a deal at people's homes a lot of data scientists a lot of agricultural scientists that's the company this is. >> it's impressive exactly how virtual this
business is. and the intention for a company. i think that's one of the issues in terms of this scale and network effects that you would get from a business like this. >> that's the opening bell at the nyfc and the s&p at the bottom of your screen as we said meal kit delivery company blue apron celebrating it's ipo today we'll talk to the ceo when the stock opens at the nasdaq. also celebrating an ipo, dova pharmaceuticals focused on treating rare diseases so we have a lot of movers to watch at the open. walgreens, rite aid. and also the banks citigroup opened up almost 4%. 3.7% i think that's a follow through trade. people expected good news from the stress test result, got the good news and were surprised by
the size of dividend and buy back announcements and think this story could run awhile. i push back on the idea that the banks are this orphan neglected hated area because they had this long period after the crisis where nobody wanted to touch them they have outperformed the big banks on the last 1, 2, 3, and 5 years and i do think that you find that professional investors like the group now but doesn't mean they can't still continue to work. >> i should say the winners were bac, jpm and city but at 92.50 that's going to be within a dollar of the high for the year. >> the yield moving up and the yield curve widening out a little bit is going to help there as well. >> no comment yet from warren buffet on his intentions to swap after clearly that's going to be substantial. >> i was just taking a look at shares of berkshire because it should be a beneficial but given
it's ownership stakes in bank of america potentially and it's large ownerships bank and wells fargo both of which are up rather dramatically. on b of a the idea is that buffet would convert this into common as a result of the fact that with a higher dividend you will receive more in dividend payments than in interest payments and therefore become the largest single investor in f and when they to that conversion. >> seems like a no brainer, right? on the other hand you're swapping which means you have down side risk so he's willing to accept if he does this the possibility that the stock goes down where as the preferred is basically solid in terms of the principle. >> correct. >> we'll watch that closely. meanwhile, banks leading the charge almost single handedly. of the top 20 leaders 18 or so are financials beats by 2 cents beer segment up 8.
took some people by surprise and the guidance was definitely a pleasant surprise to the upside. the stock had kind of consolidated, sat around sideways for a couple of months here and now it's blasting to a new high almost $200 a share. maybe trying get up into another high range and it is the beer business and it's at the expense of almost all the other big guys right? this is the one that seems to be winning the market share game in north america. >> they're going to center mostly around technology sales force, broadcom, alphabet, ea, amd, have we hit a point where some people decide these names were too expensive >> yeah, i was joking that those are the bond proxies they were working in a defensive mode when you didn't have anything to get excited about about growth in other areas so if you have financials and transports and industrials that have given you a reason to say
that okay maybe we have an earnings and economics story to play then yeah the stock up 25 and 40% this year to date maybe that's where you back off a little bit so i don't know if it's much more than that. >> although after getting a final q-1 gdp read, people aren't saying enough q-2 is going to be a barnburner. >> they're not maybe in the tracking for second quarter gdp but obviously ternings story is sort of underneath that. that basically you're still coming back from the earnings. what's funny is the first quarter is going to be the best year over year earnings growth because it was coming off such a low. a year ago people were saying you should buy stocks because the first quarter, the rate on change trough for earnings people now aren't saying it's going to add from here back away from the market. it's the way the psychology works. >> as we anticipated at the beginning of the broadcast,
rite aid shares are one of the worst of the day they're no longer in a deal to sell the company to walgreens but do sell 2186 stores. what has investors worried is rite aid establish overall performance that was down dramatically in terms of same store sales and the ability of those stores to generate the company. they were expected to come in somewhere in the 240s versus a year ago where they did 286 million so when you do the math on what the debt is that's going to be left at the company after the proceeds from this sale you still don't get very much on an enterprise value that gets you to a stock price at least according to some, much above $2, or $2.50 a share. >> do you think there's anything to be taken away in terms of antitrust approach that they stood in the way of the walgreens rite aid deal or was
it a unique circumstance >> i don't know. this long predated the trump administration which i still believe has not fully appointed the number of ftc commissioners that they need to. i mean, there's still absences all over the place which is worrisome to others that have pending business coming before them but the staff takes the lead on a lot of these things. the staff doesn't typically change whether it's the doj or the ftc but we still do wonder whether or not there's going to be a change and approach under a so-called jump antitrust administration no signs of it yet but it's a little early to know nothing has been tested that was announced during the trump presidency. >> meanwhile, looks like murdoch's sky bid is getting some resistance in europe. >> i saw that press release.
i'm not quite sure beyond this, as you point out, what is it the u.k. secretary of state for culture media in sports. we got to watch that but, you know, there's been questions as to whether essentially our u.k. version of our fcc would under the proper test allow 21st century fox to acquire what it didn't already own of sky and they'll continue to work constructively with the u.k. authorities. >> fox says they'll make representations to the secretary of state regarding the provisional decisions over sky we haven't pointed out yet today is the 10th anniversary of the iphone going on sale july 29th, 2007 at the time people were calling. didn't have an app store was limited to the at&t network. high powered apple executive
said the business model in year one was a disaster took him awhile to regroup, pivot and obviously broaden the range of apps, the range of providers and now you have a billion of them sold. >> if you remember at the time, people were kind of envolkswagening when the iphone came around was newton, was the palm pilot this idea oh yeah we tried this kind of a touch screen thing before and as you say it was kind of an okay what does it do for me that we don't have already. >> i don't think we saw a time a decade later when people are complaining that apple is nothing but a massive iphone business. >> which is one of the complaints. >> you remind me of the exclusivity with at&t which was a strong property with that company can at the time as it was fighting off verizon that had a much better network back then but it was exclusive for a couple of years before they broadened the ability of all the carriers to actually give it to
their customers. >> of course today is the day you could officially get your hands on one a decade ago but if you recall in january of '07, that's the time jobs officially unveiled the idea of this new thing called the iphone to an audience take a listen to that. >> these are not three separate devices. this is one device and we are calling it iphone today apple is going to reinvent the phone. >> he said we're going to take all these buttons and just make a giant screen which at the time didn't see intuitive to a whole lot of people. >> it wasn't about asking what do you think your phone should look like. the company that is now blackberry was at $66 a share ten years ago. it went up to i think 120 in the
year or two after that because blackberry was still very dom nanlt. >> where was nokia it probably also was it had been dominant >> even before that right? it was even higher before that but now blackberry about $13. >> yeah. >> incredible. services revenue for apple 24 billion and now people turning their attention to what comes next 3-d displays for maps and oled display. ar, ability to manipulate pictures and video with stickers and images. >> the iphone thing has spoiled a lot of people. it creates that well, okay, how are you going to revolutionize the world next as opposed to incremental products people aren't always satisfied with that. >> well, it is is is a recurrent product that has to keep selling although the ecosystem is certainly strong enough to have a recurring sales but, i mean, every year you have to refresh. >> to me that's the explanation for why apple as a stock has
never gotten a big fat premium multiple because the market doesn't know what to do with an $800 billion company that's hit driven and and nokia and hey, hey, hey. on the floor watching that and everything else. and possibly look good to millennials and not you there. but blue apron today and all shareholders all are about to make money here we're waiting for the company and 10 to 12 and early signs and and got put back on the
valuations and we're talking about around $16 and they drop down about 10 or $11. and and 550 and on the under side and great to see that the important thing here is $10 so at $1.9 billion valuation that's a down around fire valuation was roughly 2.2 billion for the company can trying to get back out
and under some pressure here to lower the valuations and that's certainly a fair observation however if you're a buyer of ipos you're doing really well this year. the ipo market, basket of 60 ipo stocks up about 20% this year because the prices had been lower and as a result of that the after market performance of ipos has been significantly better this year than it was last year when we had a low rate of issuance and a lot of ipos blew up in the middle of the year we're waiting for this to open we'll be back shortly back to you. >> thank you for that. let's check in with rick santelli as well good morning, rick. >> good morning, carl. if you're a technician f you're interested in global markets if you're fascinated how central banks are going to thread the needle on a ten year experiment
of ultra accommodation, this has been your week and you should highlight it a lot of moving parts this week. just consider this, bunds are up 20 basis points some of our trading partners in europe you can see what we're talking about. the spanish ten year this is kind of all one market and we want them to be able to thread the need. all i can tell you is the markets are paying a lot of attention and i think some especially mario draghi wishes he would have phrased things different. i'm glad he didn't
there's an end game here and investors are starting to get on board with the notion and finally one week of euro versus the dollar let's see, just a bit under 112. what do i see now? 114.09 enough said. 115, could be an area that will slow down and when it does slow down considering what yields are doing maybe at that point the dollar will take a turn. carl back to you >> thank you very much rick santelli >> it's important to remind people what this process is and it's a mixture of old fashioned outcry and very high-tech book matching going on behind us.
>> right now the indication are 10 to $12? >> these guys standing behind me they saw a problem in the market, they solved it five years ago and they're here today and the market cap of the company is $2 billion. that feels like a pretty good story to me they're having an opportunity to buy this stock so obviously investor versus the potential here as well my point being lower price good for investors. >> as you know i'm not going to opine on the share price but i will point out they're now a public company which is a
socially good thing in that everyone can participate in the ownership of a public company and that's why we're proud of what goes on here. >> where are all the other companies there. you're out there every day your team smarkting to people every day to come public and to get out of that little entrenched group that's sitting out there with the private equity are we going to see anymore of this happening in the next year? is there any more for very high valuations to become public. >> this is our third new york based tech company which is exciting as a new yorker it's also our 50th ipo overall we have raised $19 billion in proceeds as compared to 13 all of last year so we're up 50% on all of last year already and i think people watch an ipo like this frankly like a snap earlier this
year can you clarify what you said there? >> fake news in this country it's easy to villify short sellers and intermediaries herbert hoover blamed the great depression on short sellers so there's this emotional reaction that at times can feel like short sellers aren't helpful in reality the data confirms short sellers are helpful to allocating capital to the appropriate entrepreneurs at the right time however one point that i made on behalf of the list of companies down in washington is greater disclosure of short behavior could be helpful in terms of bringing more. >> how about disclosure of long positions as well rather than wait 90 days let's have more in general
indications on blue apron 10 to 12 do you think snap's performance since it went public is coloring today and is it more about things we would normally consider with another ipo? >> i don't think snap in general is the thing that's in people's minds. snap has spent most of its time trading above it's ipo price we have to keep that in mind even though it came back i do think that even before snap went public as a product as a huge hype cycle it's a preipo, potential investment, there's almost no hype cycle before there's the backlash against here's what can go wrong or here's the flaws in the business model and that same sentiment is greeting a blue apron.
we have seen these companies that are synonymous with a whole new type of commerce and then it becomes very complicated and you look at the numbers and it's really expensive. >> is that going back to facebook or before >> i think facebook had a big role in that >> for a variety of reasons? >> it was a valuation they tried to get they were very fix sated on and the execution was terrible i knew that people are focused on the right things. at a certain number of subscribers of customers can it work or not? and i don't think it's answered right now. it's a business. we don't know. >> certainly on the price action we'll get some answers hopefully within the hour. meanwhile, crude almost back to 45 today and let's get to jackie at the commodities desk. >> good morning to you, carl crude just coming off the $45 level this morning but still higher on the session.
two factors to consider today. in yesterday's eia report u.s. production went down 100,000 barrels a day. when the market digested that that was certainly a swing factor to the support side also goldman no doubt this morning, the title still searching for the equilibrium but they are taking their three month price target down to 47.50 from 55 and $50 barrel is still the longer term anchor it's a little bit more conservative but the price targets could still be a little bloated some people say. the key assumptions in the notes that inventories will continue to draw and demand is going to move up and might open a deeper production cut and it's not going right to keep these prices in line. >> still to come this morning, blue apron's opening trade we'll talk to the ceo as well plus larry robins. his view on investing as we approach the 2nd half of 2017. pretty flat index at the moment.
the first witness taking the stand is being questioned by the government so it's sarah that will be familiar so some folks familiar with the pharmaceutical industry the government questioning her about her ties to the pharmaceutical industry. she was an early investor with his hedge funds so we're hearing those familiar flames the pharmaceutical industry. this of course comes after he arrived here at brooklyn federal court this morning it took a few days to get his
jury in place but that jury finally did get seated yesterday and they moved pretty quickly into opening arguments the government laying out it's case 8 charges of securities fraud, conspiracy to commit securities fraud and conspiracy to committee wire fraud and then really por trag him as an exsen trick boy genius with who investors placed their money is he strange? yes. will you find him weird? yes. he is brilliant beyond words also saying geniuses are sometimes on the other side of crazy. as lady gaga said he was born this way >> can you tell me about the lady gaga defense? do you wish martin had a little
more of a poker face >> i'm happy with martin's face the way it is. thank you. we'll wait to see if we get any more lady gaga references today. he's going to start questioning this witness after they finish we'll bring you all the news and drama. back to you carl. >> that's a great exchange thanks for that. meg covering the trial as she has since the beginning. when we come back, blue apron ceo on his wall street debut we're back in a minute
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rite aid we have details. >> plus banks in rally mode after passing the stress test. share holders benefitting this morning. a round up straight ahead. >> we're aweight the first trade for blue apron the meal kit delivery service. the first go to the go public in the united states. matt is the ceo of blue apron who as we're speaking may actually see the opening trade from this desk great to have you. >> thanks for having me. excited to be here. >> walk us through what happened on pricing why $10? >> well, look, i'm honestly not here to really talk about the pricing of blue apron stock. that's up to the investors to decide blue apron is here because we're excited about the big opportunity that we're going after. we tackling a huge market and we're focused on the long-term and the stock price today whether it's up, down, left or right is really just the beginning of this new chapter in our companies life and we're excited about it. >> no sense of urgency
you didn't want to see this happen sooner rather than later? >> this wasn't a special moment that we needed to go public right now. since the beginning the very first day we wanted diend of company that could be a public company. the kind of caliber company going after a big enough opportunity with a long enough orientation and ambitious enough business plan so that's been the strategy since the earliest days. >> as you have gone through this process of telling investors your story and trying to get them interested and involved for the long-term, what have you had to persuade them of or keep emphasizing? how can you tell them that the business model you have got is going to work? >> it's the performance. we have grown our business ten times over the last two years so demand for what we do has been incredible we have really powerful unit economics in terms of the amount of revenue we generate per customer and we have been incredible in engagement around what we do we're doing things in the food business in terms of creating
economic value to deliver to our customers. they're an end to end supply chain that's allowing us to engage customers in a way that's exciting. >> you talk about those kmis but something else you have is fairly high and that's a concern for a number of the investors i spoke to it costs a lot to get a customer i enjoyed the service but after a few months we stopped using it in my home for a variety of reasons and i would imagine they may apply to any number of people are you on a spinning wheel where you may not get the growth you're talking about in terms of the bottom line because of the problems i'm talking about >> no, the unit economics are really incredible and very strong. >> give them to us. >> yeah. is over a historical period on a three year period we generate between 900 and $1,000 for the average customer over three years compared to a very reasonable customer acquisition cost which if you look at historically based on what we disclose in our s-1 and
elsewhere we return in under 6 months one of the big opportunities for blue apron going forward is to even grow that revenue generation per customer by going to new categories so we can sell more products to the same customers we have already acquired and deliver and develop new products for some of the customers today that we don't currently serve and part of the reason we haven't served everyone is we focused on scale that was absolutely the right decision for us at that time but at this point, you know, as we continue to see opportunities to scale, we're being more thoughtful about designing new products, for new segments of the market that historically we told people we just don't have a product for you yet. >> new products within grocery or beyond. >> yeah so if you think about on recipes there's opportunities
and different price points for customers. so there's a lot there as well and we also have businesses and vertically integrated direct to consumer winery where we sell things like napa burgundy for $10 a bottle. >> we have some upstairs. >> it's incredible wine and value paired with our meals so there's a lot of opportunity to do more with the brand that we built that customers love and care about and the platform that we created from an agricultural perspective and food manufacturing and national distribution perspective. >> what margin expansion can you expect then? having been a customer watching the quality of the food which is high but the delivery cost. >> there's heavy stuff you're delivering every day not to mention customer acquisition how can scaling help those margins? >> if you look at our historical performance, we have grown and improved our margin year over year over year and we have
improved year over year over year and that's because we have been invested. that's for those of us to execute in a higher quality way. we have an on staff team that goes to farms and provides services like free soil testing, crop rotation planning that allows us to invest in their soil help which allows us to reduce the need for pesticides and fertilizers and reduce costs and yields. we're also growing aggregation programs and bill is here with us on the floor today. there's a recent acquisition we did of a company and bill was a founder and he used to, he
found. premium grass fed beef and doing that at disruptive values. >> you talked about the enormous market that you're going after that would include restaurant delivery as well as grocery and meal delivery and all the rest of it. you have to count on a lot of people caring about all of those things you mentioned and give you something that's similar but not the same thing. >> kwaul city the number one thing in our business. people care about quality. that's why online grocery as a share of off line grocery has been a challenging thing historically there's been tons of players trying to bring online grocery penetration up historically that haven't been successful because quality is so important because we run this vertically integrate sudden ply chain and are managing food manufacturing centers and distribution network
is one of the things that allows higher quality food at better price and grow the overall online share of the off line market. >> so speak of that and competition in general what were your thoughts when you heard about amazon-whole foods >> it's an interesting move. in some ways amazon is an ally for us in this fight if you think about one of the biggest challenges that blue apron has had it's convincing people that are traditionalists that go to the grocery store week over week, touch their food, feel their food before they buy it and go home with it. when grow to a website and buy it online it will be fresher and better and a better value and we had a lot of success bringing folks in but in markets where we see higher online penetration we compete more successfully because it's easier to get customers and change that behavior. >> so you're saying they're prim primed. >> amazon has been focused on grocery for a long time and if
they can help accelerate and bring online dollars in and accelerate that transition from off line to online we think that's good for us and good for other players they are looking to buy a company that deals in fresh produce. >> we create prone tear experiences. in a lot of ways it's more similar to a product producer where we produce original products and we manufacture those products then we are like a distributor of other people's products like a grocery store. we have to be great at designing great recipe experiences in a low cost way and having to differentiate ingredients you can't have anywhere else. >> you built an impressive company in a short amount of time with 5200 employees now you have a new constituent sy who care about things like free cash flow and when all the
things you're talk about are actually going to result in positive cash flow when will that day be? >> we're going after a big business opportunity and we see the indefinite future as an opportunity for us to continue to invest in growth. if we were to ever take our foot off the gas with things like marketing and the like and we have been profitable in an adjusted basis today and we think it's in our control in term of when we can be profitable. >> you're going to focus on the top line >> it's such a big opportunity to continue to grow in engagement and new categories and engage our customer with new products because of the emotional and strok brand we built. >> what are you doing with the proceeds from the money raised today? >> as i mentioned we're planning to invest in the future so we're investing in more technology to
help manage our supply chain better and we're investing in more automation in our fulfillment centers. we're going to be investing in marketing to drive adoption. >> with your foot on the gas how far does that $30 million you raised today get you >> we have a fully funded plan with the amount of money that we raised. >> you're not the only ones that are rumored to be thinking about going forward. there's sun basket and green chef was there a sense that you wanted to do this before they did. >> there's no special moment in time that was now. since the beginning of creating the company we wanted to be a public company we're excited about the opportunity to attack the public markets and accelerate our growths and now it's because we were ready we have gotten the processes we need, the resources we need, the great business we have and we're ready in term of building that company and that's why. >> if you had to explain to viewers how apron is different from the other companies i mentioned you would say -- >> well there's a lot of things and we don't have enough time in
the whole show to tell you but also the most important thing is that we have invested heavily in our supply chain and from a direct farming relationship, from a food capabilities manufacturing and national distribution perspective it allows us to do what we do, higher quality fresher food for customers. >> it sounds like you're saying the sourcing is more of a challenge for competition than the actual logistics of being on e-commerce. >> there's chal lengs associated with all of it you require scale on the logistic side because as we refrigerate much of the transit of our distribution network that scale impacts and empowers that so, you know, having fda registered manufacturing centers requires scale and abilities we have developed and requires technical knowledge as well. >> do we have time for one more. there's this unicorn companies right valued at a billion plus in the private market that come public and are valued less than they were in a prior
fund-raising round. >> yeah. >> you're in that category should that be concerning for viewers? >> i think for all ceo it's important to stay focused on the long run and if people are focused on the short-term stock they're focused on the wrong thing. you have to be focused on growing your business and execute yourg plans and short-term valuations takes care of itself. >> do you think your customers, to what degree can you demonstrate that your customers are truly focused on all the things that you talked about the distinguishing factors of blue apron as opposed to i'll try this for now and compare it to something else in three weeks. >> the most important thing is our growth we did about 80 million of net reven revenue. we're continuing to grow and we have tons of customers go check it out on social media. you can see the hundreds of thousands of families out there posting photos of the food they
created and family meal they have been able to provide. >> portion size is still an issue for us i don't know if you ever hear about it growing family of four just wasn't quite enough. >> we don't hear that enough quite frankly. >> we're not fat either, i swear. >> everyone is a little different, you know and every family is different but we're focused on providing more food than is necessary so everyone has the right portion sizes. >> that's a nice way of telling me we eat too much. >> next time come in and we'll do a cooking demo. >> i'd love to do that. >> thank you so much let's get to bob. >> here's the important thing. we do have a new indication. material indications were 10 to 12 and it hasn't moved much. a moment ago it went to 10 to 11 we have been standing here for almost 45 minutes and there's not much of a change in any of the indications but it's still taking a long time what this means is buyers are not aggressively bidding up the price but they're also not
bidding aggressively below the ipo price. the interest is in a fairly tight range. that indicates that the tricky business of pricing this thing, particularly with the amazon competition, these guys may have gotten it right. important thing right now is staying in that range. so right now, i have no idea, it's going to be another 15 or 20 minutes but they'll probably do 3 million shares. that's about 10% that's a very respectable open if they can open between 10 and $11 somewhere as the indications are given the priegs up and down prior, i think also that's a respectable open right now so remember what is going on. the reason this is taking so long is not that the prices have gotten all over the place and nobody can can figure out where they want to pay they want to pay between 10 and 12 and now 10 and 11 there's a lot of interest in doing that and a lot of people keep moving their numbers around but the range is fairly narrow and that's a good sign for where this stock is going to open. i think this is another 15 to 20
minutes away if i had to guess right now. back to you. >> the bid still sits at the ipo price. thanks very much thanks so bob. moving on to financials, bank stocks surging this morning following the second round of stress tests fed approving all capital return plans and that's the biggest share of buy backs ever after that approval. for more on this and the markets let's bring in the chief u.s. equity strategist at city. as it relates to financials as you watch the different sectors taking turns keeping this market going i know your recent client surveys showed that there was kind of a preference for financials in one of the more favored groups do you think this is a place to concentrate for investors now? >> we think so we have been worried about how far the ip sector has gone and people too excited about tech. the relative under performance of financials and industry versus tech is similar to what we saw in t '9, 2000
they have about 5 different things still looking good the capital return story you're talking about was one of the major catalysts. the idea that bond yields are probably going to move higher and this economy gain some strength as fed policy numbers, central banks start to move in that direction as well another positive catalyst we think we'll see a pick up in commercial industrial loan activity given normal lags and changes in the federal board survey for lending standards so there's a number of things that we were looking at in terms of creating that catalyst for the financials and few of them are coming through. >> you mention the move up in yields which you have seen dramatic lay cross the world the past couple of days is that something that you can see continuing and having people absorb the idea that central banks around the world are look for a chance to have the equity markets just seem leslie and without missing a step go right
along with it? >> i think the equity markets want probably economic growth a little bit more than they want low yields in order to sustain the earnings growth patterns you're going to have economic growth domestically and internationally so that's clearly more important. let's give you context on this we talk about this a lot to our clients. the most important factor by not just a country mile but probably several dozens of miles is earnings that is the most closely correlated thing to market movement, noninterest rates and yet people are so obsessed about the ten year yield and to a certain degree that's what happened in the first half of the year for a variety of reasons people started saying okay i'm going to overpay for growth if it's the tech stocks that have phenomenal sector disruptor capacity or even credible growth where you know there's an aging demographic that's going to need more health care so people want to pay more because they were uncertain about growth and that we could see the value base over
here from growth as you start to move higher and some conviction comes back about yields moving higher both from the central bank policy perspective but also from the fact that the fund is still chugging along. >> you had the s&p 500 total return as we get to the half year point in the year up about 10% and close to it do you not think that the market has kind of largely taken account of what we're going to see in terms of earnings improvement for the full year or is there still more to go? >> from an index point of view they need to move forward and away from the things that are working. the stuff that worked in the second half of 2016 didn't work
in the first half of 2017 and it's very likely that the stuff that worked in the first half of 17 won't work in the second half of 2017 so this idea of the rotation below the line, the ducks swimming on the water looks nice and underneath their feet are moving furiously and that's the kind of environment we're probably looking at in the second half. >> speak of things that have been working, does this mean that the europe trade would get a little less crowded? >> so i think the europe trade is very crowded. part of our survey work also showed europe dominating. >> lite of people at the index that's been falling in the u.s., it's actually falling in europe as well and yet people almost ignored that is that just kind of the standard bullishness of the year
where we had it good or do you think people are get too greedy here >> i think they're getting a little too greedy but i don't control the money flow in the markets but my sense is it wasn't just that for example, one of the other statistics we track closely is how much cash they have drop down by quarter or year over year that was the lowest number we ever recorded since we started asking the question back in 2008 people are being dragged into a market going higher and by the way if you buy stocks at 2440 at the s&p then you need it go above 2,500 to make it a good decision so you lean that way and it's the price momentum that i think is dragging people in some what reluctantly but dragging them into the market. you have to be in it to win it. >> there you go. all right. good stuff thank you very much. appreciate it this morning.
>> thank you. >> when we come back, one of the top hedge fund managers $11 billion in assets under management larry robins is with us and we'll get his take on the health care bill and it's impact on his portfolio. eng dupont watching for an opintrade. indication remains 10-11 we'll be right back. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. see options data like never before. with thinkorswim only at td ameritrade.
>> the timing of the spin off and competition in new businesses and need for new leadership he is the founder and ceo of the $11 billion hedge fund. >> thank you for having us. >> you made this public in a letter, your quarterly letter to your own investors. >> yeah. they tend to as some of the others do. essentially saying listen, you said you were going to do certain things at dow dupont when you brought these companies together at least on paper we're still waiting of course but they're not doing it is that your problem
>> first of all it took an elongated period of time we don't hold them responsible for that shareholders have been waiting for this merger to close we believe it will close on august 1st prior to that complaints were the dow was a least common denominator multiple the agricultural business was undervalued because the investments are skating the profitability in chemicals and dow traded at a management discount because of the fact that the people were concerned that the portfolio was being aggregated for half rather than run for shareholder value and the promise for this transaction is dow being valued at 12 times earnings was that all of the discounts were through the combination and generation and redistribution investors including ourselves got nervous when in may the management transition time line was changed. he previously commented that he would be -- >> in fact he said with an interview with me on the day the
deal was announced back in late 2016 that he would most likely be stepping down in the middle of 2017. he did not see himself as the leader of any would be of these businesses. >> that's correct. >> why are you concerned >> i think you'll remember that the day that dow and dupont was announced was the day before the stand still between third point and dow chemical was eliminated so it was almost a compromise solution that we would not only merge these two great companies but we would move forward with the next generation of management six months prior to that transaction dupont replaced it's own ceo bringing in ed green to the delight of the market. the market reacted positively do to the that as well they should while dow chemical underperformed it's peers by half in the market by a third.
we're trying to find management and contacted on his first day he is clearly a architect of this deal so we are appreciative of that. by not only getting a little bit better but optimize. >> were you encouraged by the releast last night perhaps after your concerns came into the public realm they brought in a third party that's widely respected in order to help the board study and there's a committee to do it as soon as the combined board is performed. there's something in their
charter that they do need a 2-thirds majority to taerlt competition of the spin offs so they'll have to get 11 of 16 directors on the same page hopefully through the analysis and joint commitment to maximize value they can get all 16 directors on the same page and we hope so >> well done larry blue apron does open we have spoken with the ceo. there's others ringing the bell. priced at 10 well below what had originally been the range.
which parts are going to be spun when. >> so i think there's a couple of important ones. first is there's no controversy that the two agriculture businesses should be put together and spun off as their own independent company for us that would make them as the first of the three spins but the order isn't that important to us the most important thing is that the specialty businesses get truly grouped with specialty and not be brought down by the least common denominator multiple of materials and within specialty there's really four different independent segments of specialty that given dow dupont are large enough to each stand on their own these companies are spun off four independent companies in the last four years.
that one need mrs. time to figure out what is it in or the ultimate form is it will make sense for the company to take it's time and be in it's result and analysis of what goes into specialty materials and then whether specialty is one company or whether it's several companies out the door that's going to be an important component for the board to review. other than coming on or writing letters there's not an opportunity to apply pressure is there? >> the combined company will have annually elected directors. one of the unique circumstances here is because there was time between the last meeting and the time that the merger closes the question is what would the next annual meeting be and would shareholders in fact have a referendum there is an ability for 25% of
all shareholders to call a special meeting. i hope it doesn't get to that point. i don't think that it needs to the spirit of the release issued last night by dow and due point would indicate that's not going to be a necessary step and the companies and boards are taking the right actions to study these issues seriously we believe they're all on the same side and it may not be a two sided argument maybe companies and investors are all in the same direction and we'll find that out as time goes forward. >> in the few minute wes have left let's talk about health care for many years you have been a significant owner of hmos, for example, humana, anthem, signa represent large decisions as do some of the hospitals. what do you look at when you see what's going on and what it will
mean to those stocks in your portfolio. >> it's important to know that the people that have the most at stake are the individuals effected it's somebody born in east harlem they have a life expectancy 8 years shorter than the east side. there's 2.6 million americans that live in poverty in the 19 states that did not expand medicaid that never got one dollar of assistance there's no subsidies of obamacare and it's most important for them what happens from an investment perspective they're more narrow than the street may expect. you get these wild projections coming out of the cbo that 20 something million people will lose influence. >> 2 million or 23 million depending on the house or senate version. >> exactly. >> we would encourage people not to get caught up in it and the reason is because the hands are
tied in how they can compete things let me give you a couple of examples they used to think there would be 18 million people in the exchanges. it revised that number down as 13 million in the 22 or $23 million number they're still assuming that the baseline today is 18 they didn't update thatbaselin because of what was given to them they assume that all citizens are law abiding which is assuming everybody drives 55 in a 55 maybe a million and a half but not 15 will walk away from insurance. >> the number you feel is not accurately represented in terms of how many will be uninsured versus what otherwise would be. >> a big lever is the
stabilization funds. those in combination with the money given to people to purchase insurance and the money given to states and medicaid we believe that the number of insured will be comparable if not slightly higher as a result of the senate version of the repeal and replace bill verses the affordable care act. the real question for people in terms of the long-term health of the u.s. is after that 2022 period how much will we see the funding get pulled back? this could be like where we get annual increases in these stabilization funds. it could be that we do see a significant degradation in the number of people covered from an investment perspective we think the range of outcomes from the earnings of major public hospital companies or major public care companies are in a plus or minus 10% band. we don't think there's a
draconian situation. >> let's just say they don't manage to get any legislation out of the senate or the house too together and just end up with obamacare. >> we end with obamacare continuing then clearly there's going to be something addressed for the 40% of counts that have one plan and at least provide some stabilization for the exchanges. the biggest losers in that will not be the large scale players in the public health care industry and as well as the small community hospitals in those neighborhoods. and so certainly with them having so much at stake and with hospitals being the second biggest employer in any district hopefully the house and senate will come together and fix that if it comes to it. what's going to happen in the next three weeks in washington, you're guess is as good as mine but the range of outcomes is narrow. >> thank you for your insight. >> thank you for your time.
>> we're happy to have you here. they have the lead book runner very takety pricing right now. 15 to 17, 36 hours ago and then drop it to 10 to 11. obviously concerns about competition from amazon. was that the right price it was all morning we were between 10 and 11 even below that dramatically that means that everyone, the buyers and the sellers had an agreement on the range of the price but the interest level was very high in buying in that particular range and that's why it took so long to open and we opened with nearly 4 million shares out of the 30 million whenever you float more than 10%
of the offering at the open that's a very respectable opening. that means high demand so we had high demand in a very very narrow price range indicating that they got the price right. so we'll see what's going on going to be a little bit of a lull in the next week or so because of the july 4th holiday but after that there's a few others floating out there maybe frontier airlinesor a few others able to talk about that later in the day. right now let's call this one a successful opening sitting near the high, $10.60 for blue apron bachblth to you. >> thank you for that. it's about 38 minutes past the hour let's get to sue and get a news update. >> good morning, everybody james mattis meeting in brussels it comes ahead of a meeting of the alliances defense ministers. he says 15 nations have already pledged to send more troops to afghanist afghanistan. >> our military authorities requested a few thousand more
troops for the mission in afghanistan. and today i can confirm that we will increase our presence in afghanistan. >> after 11 aborted attempts nasa finally launched it's rocket it will track the movement of particles in earth's ionosphere. colorful clouds could be seen from new york to north carolina. pope francis marking the roman holiday of the feast of st. peter and st. paul the service comes on the same day one of his top advisers in australia. >> i'll send it over for the inventory report. >> the department of energy reporting a 46 billion cubic feet increase injection in natural gas stocks and you can sthee prices turned on that and
$10.10 at the moment also a little bit less and prices will go up and at the same time while demand is strong in the west coast demand on the east coast has been tepid and that's why we're in a holding pattern here but we're back over the $3 threshold if the injections continue to decrease as we go on through the weeks you can see the prices go higher carl back to you >> thank you very much when we come back this morning, the big banks getting that green light from the fed shareholders benefitting this morning. we'll talk about the round up of buy backs, hikes and stock moves. and with the dow down 41 usaa gives me the peace of mind and the security just like the marines did. the process through usaa is so effortless,
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kayla joins us with more and 100% of net investors and began announcing yesterday and in some cases in record amounts. take for instance jp morgan. unveiling the largest buy back ever by a bank $19.4 billion, citigroup with a $15.6 billion buy back both of those topping the previous records set by city in 2005 before the financial crisis. 2 dozen announced increases to their pay outs by about 17% on average. and according to goldman sachs half of those banks exceeded that ratio and senior fed officials now expect to reach and all plans and a sign of the administrations efforts to be more hospitable to banks the fed is paying closer attention to balances. and it's slim passing after a second submission.
but one conditional pass that the fed did have and that was for capital one it said it has concerns about capital planning at the bank and the way it assesses risks in one of its most material businesses capital one has to resubmit it's plan by the end of the year and in the meantime it's lowering it's by back ban and it's worth noting while analysts across the board. and expectations are low and regulated sector and despite those huge increases carl they're still below prerecession levels >> fascinating story today when you couple that with the ten year kayla getting close to 23 thank you very much. speaking of the big banks don't miss an exclusive interview with morgan stanley ceo james gorman at 4:00 p.m. eastern time. plus former omb director on the senate gop health care bill and
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welcome back we want to get to our john fort who is from the aspen festival. >> peter orszag talked about health care and how really we're not solving the core problem with the election that is trying to make its way through congress take a listen. >> the big shame of the fact that this is taking even longer
in addition to the problems with the bill itself is that whole agenda has been put on the back burner and it is unlikely that we're going to see any significant movement towards a, you know, a morrow bust value based payment system while policymakers are consumed with what's happening to medicaid and what's happening to the exchanges it just takes up all the oxygen in the room. >> so what can happen in between now and whenever we actually get a vote on this do they tip the scales in the direction of actually solving the problem? >> nothing good. again, the problem here is we're creating a huge amount of uncertainty both on the exchanges for how insurance companies are going to price their plans but then again, the whole more or bigger agenda of how do we move the entire health care system towards a value-based payment methodology? that just is not going to happen while we're debating these coverage things. and that's a shame
while medicaid and the exchanges are important, the vast majority of americans get their coverage through their employer and what matters for them is are we improving the cost and quality tradeoff which right now just not very good. >> so no matter what we end up with, the costs are going to be out of whack is what you're saying >> there's a huge opportunity to improve value and health care. we're not capturing it right now because we're consumed with this other debate >> little too consumed with politics, he is saying, not solving the core problem we'll see if we get any movement on that, a shift in the direction of solving that cost problem. but peter orszag not too optimistic >> interesting, especially on the heels of what larry robins just told us a few moments ago what else is coming up >> we're going to have walter isaacson, president of the aspen institute coming up. we also have tom wilson, the ceo
of all state and nut chair for the past year of the u.s. chamber of commerce. going to talk the economy, talk about artificial intelligence and some of those big issues that are being discussed here at the aspen ideas festival >> all right thank you very much. we'll be with you. as we head to a quick break, let's take a look at what stocks are doing this hour. sitting on small losses. dow down about 30 points financials are the standout to the upside they remain the leading group. we also have wti crude above $45 a barrel and energy is catching a bit. there the s&p 500 not quite .3% down and nasdaq is actually again the underperformer, down 54 points 6179
rite aid they are paying $5.2 billion for the stores the deal also cancels a planned sale of rooid rite aid stores to pharmacy chain freds or overall company freds. the focus of investors and the reason why rite aid shares ro r. losing a quarter of the market val sue also because of poor performance at the company same-store sales were down 3.9%. 5% decrease in pharmacy sales at that company and the number came in well short of what had been the expectations the analyst who's follow rite aid. so there is concern with the $2.5 billion in proceeds to come in to reduce the debt load, when you add $2 billion in debt left to any market value left given the declines, you don't get much of a stock price hence rite aid getting crushed mike >> all right coming up, the president and ceo of all state, thomas wilson joins john fort from aspen his take on the gop health care bill and impact on his company's
welcome back to ""squawk on the street." food maker conagra standing out as one of the worst performing stocks in the fourth quarter revenues did beat forecast the company set said portfolio changes allowed it continue to crease profit margins. the refrigerated and frozen segment did decline 5% as consumers focus on the healthier options. the shares are down 7% year to date also, dragging down the consumer staple sector. now one of the worst performing sectors in trading so far today. again, one of the worst performers there as well we'll keep an eye on consumer staples and the rest of the
dividend paying sectors. that does it for this hour of ""squawk on the street". we send it downtown for "squawk alley. >> thank you for that good morning. it is 9:00 a.m. in aspen, colorado it's 11:00 a.m. on wall street and "squawk alley is live. good thursday morning. welcome to "squawk alley." joining me, john fort from the aspen ideas festival with special guests later in the hour watching the markets here, down 43 the big stor