you could try to get your way in a legislative battle. >> how about doing something like this. in objecctober is supposed to s the bond buying program. there's nothing we can do to fund treasury while they do that on the long term basis. once they are done, you know what the market is looking for, mr. secretary? 30-year paper and 50-year paper. what about a $300 billion 50-year once the fed is done buying? >> we have the deepest, most liquid bond market in the world. we worked over a long time to develop that, and part of it is that we keep our maturities spread in a pretty normal way, don't make big decisions to move radically and dramatically and stay abreast of what the market is interested in it terms of maturities. we've seen a gradual lengthening of maturities in recent years, which is a good thing in terms

of the current interest rate environment, but we don't try to time our decisions based on capitalizing on interest rates at the moment. i think for the long term, maintaining the deep and liquid u.s. treasury markets is something that's very important to u.s. economic security. >> you don't need to time it. look at the deals apple and verizon did for multiple billions and know it's better paper, i believe, than apple. >> i think we have the best paper in the world. and i think that the markets around the world refleblcted th. there's a reason the dollar is the world's reserve currency, why the appetite for u.s. treasury debt is to high. i think, you know, as you look at the way we've created new products, it's really reflected the evolution of market appetite for different kinds of products, and we'll continue to try to be innovative in terms of introducing products that help to keep the deep liquid markets

that we have, but i think any attempt to try and design our products to capitalize on an interest rate at the moment would be short sided. >> at the same time, this trajectory is not a false one, right? 70 billion is a month you take in a lot, but you have to be heartened we are far more ahead -- back to 2008 levels, and we're going lower, and yet i don't hear a lot of talk as i did last year at this time that the deficit may be closing. >> you know, jim, we have made enormous progress reducing our deficit and getting our fiscal house in order. look at where we were when the administration took office, we were in the middle of the economic crisis, two wars on the credit card, seeing the debt rising, and we had to intervene to get the economy moving again to prevent a depression. we then took decisive action working with congress. we had several pieces of legislation, the affordable care act helped control health care

spending. we had the budget control act which brought discretionary spending under control and a tax bill at the end of 2013 that rose revenues needed to close the gap. we're on the path to bring deficit 3% below gdp in ten years in a sustainable place. we know that we have a longer term challenge as we deal, and i think the attention in washington needs to shift a bit. right now, the challenge is not immediately deficit reduction. would be great to deal with all issues so devicive, but right now, we need to get beyond devisive poll sicks and do what we need to do today. we need to rebuild infrastructure. we cannot have a competitive u.s. economy in 50 years if our ports, bridge, and roads are crumb crumbling. we have to deal with immigration reform, difficult as it is because we know it's important to the economy. there's a whole bunch of issues.

worker training. that's an area where i believe that there's bipartisan bill that is going to come to the president for a signature. there are things that even in this difficult, political environment that we can do to make progress. if we get points on the board doing those things, there's time to deal with the longer term fiscal challenges. i think it would be a mistake to put the long term fiscal challenges ahead of what i described. that's a foundation making it easier to deal with the long term fiscal challenges. >> understood. mr. secretary, earlier this week, the house cut 13% of the budget from the irs. supposed it was to be 20,000 -- if there's a 13% decline in the irs, no way you can enforce the affordable care act. >> we've made clear that if the house funding levels pass, there's no way we can do all the thingsment irs has to do to end force tax laws effectively and be at the level we should.

it is a mistake to short fun the irs. it costs money to short fund the irs. ultimately, you are taking enforcement actions down, and it means you're lowering the bar for people to get away with cheating on their taxes. that's bad not just for the money involved. obviously, it's not good to lose revenue or fair to people who pay taxes. we depend on a system of voluntary compliance, and it's terrible if congress says, you know, you can get away with it. >> okay. mr. secretary, in the room, there's literally several trillion dollars of hedge fund assets. when i was a manager, i had the right to be able to pay far less tax than the average american who is now burdened. why not just -- where are you on carried interest tax yourself? >> look, my view is that carried interest provision is used inappropriately. not to be a way of converting

what is normal income into an enterprise income. it has been. we have a proposal out there t cutting back on it. >> okay. you were in china, and part of your job is to take a look at trade agreements. is there a trade agreement done in the last 20 years where the united states has a surplus? >> jim, look overall at trade agreements, the evolution of trade agreements, they are better and better in termings of raising standards to a high level. look at the conversation we're having with china bilaterally and more broadly with our pacific countries in the transpacific partnership, we're trying to drive world standards to a higher level helping u.s. businesses and the global economy and the u.s. economy. my discussions with china are about how important it is to the u.s. economy and also to the chinese economy. if they that wants to sit as a

major economic power, they have to play by the same rules that major economic powers play by, open market to u.s. goods and services and international goods and services and to investment by foreign firms. i think we're making progress, slower than i'd like in the conversations we had this week. you know, we agreed that we will, at the beginning of next year have china present the next phase many our bilart ral treaty negotiations to make progress there. it's a good thing for the u.s. and china for us to include a bilateral investment treaty. >> i understand there's carrot for both of us, for china, for the united states, but what's the stick? would you consider a moratorium on anything china until they go with a -- comply with world trade organization, comply with currency, no many manipulation. what do we have to be able to compel them, and do you think

that maybe they're a paper tiger? maybe they are not powerful as we think. >> you know, jim, there's no denying china is an enormous economy. depending how you measure it, it's up there as one of the two largest economies in the world, and i think we ought to build a relationship with china where our economic relationship is part of what strengthens the ties making it easier to deal, frankly, with the strategic issues, important for economic and our security positions. we are very tough in enforcing unfair trade laws, and that's not always an easy thing talking to the chie naez counterparts. we bring action against them when there is an actionable event for us to respond to. while we do that, we say the right thing to do is to enter into agreements and enforce the agreements so that does not ham

in the future. i think for the global economy, bringing china up to the standard that would reflect would be an important thing. you know, the world is getting to be a smaller and smaller place. it is impossible to imagine doing business just within the boundaries of one country. i think the ghoebl economy depends on a good u.s.-china relationship, and that's why i work so hard to try to build that while being tough on issues like currency. i could not be more clear with the chinese counterparts on need for them to step back from intervention and move towards a market determined exchange rate and be much more transparent about their actions, and we, frankly, got them to concede important points 07 that just last week. >> i would never take stocks with you. you talked about target, the third party venn tors, and palo alto network is trying to get involved. they are a speculative stock. some people say it's maybe one of these substantially stretched

valuation stocks. is it ever right for a federal official to comment on substantially stretched valuations of stocks, whether they be small cap or whether they be security or whether they be social media? >> jim, i think it is appropriate for us to comment on policies and trends. it is not appropriate for us to comment on individual market movements. >> so you don't think necessarily that the smaller bioteches and social media stocks are over valued, or none of your business? >> i think there's a lot of people in this room who ought to be making sense bble judgments about proper valuations. >> maybe better qualified than some in the government. you talked hedge funds in cyber security. who monitors whether they are doing it right? >> that's a very good yes. i think, in general, we have growing parts of the financial

landscape relatively more lig s lightly regulated and more and more activity stream through those keep of business, and it is important to have voluntary standards for those institutions to kind of step up on things like cyber security. you know, i think the reputational issue that i mentioned, i'm sure that that's legitimate concern. no one companimeny menwants to exposed more than others. it's shoulder to shoulder, something we all have to do, the more you do it collectively, the more it reduces the reputational risk and raises overall level of defense. >> excellent. well, mr. secretary, cnbc, institutional investor, thank you, thank you and best of luck to you, sir. >> good to be with you, jim, thank you. >> jim cramer with the treasury secretary, jack lew.

good morning, i'm carl quintanilla, faber and cramer at the alpha conference in new york. getting to them shortly. in the meantime, time warner rejecting the takeover bid from 21st century fox, earnings from intel, apple, ibm partner up, futures looking good as well. cramer wrapped up with jack lew. he said everything from economic patriotism, steve, to inversions, corporate tax, cyber security. ran the gamet. >> yeah, carl, work with me on this, did lew throw the fed under the bus here? >> sounded like it. >> glad i was not the only one who heard it. cramer asked, is it appropriate for the government to comment on valuations and applause from the audience, i point out, and lew said it's appropriate for the government to comment on trends and policies, and by implications not valuations.

i don't know if he thought he was responding directly to what happened with the fed and what it was yesterday with the fed calling biostocks and social media to be overstretched. that created controversy. what does the fed know about valuations? this is an important question. we'll see if janet yellen talks about it later today. there's an interesting question whether or not there's divergence between fed and treasury. by the way, importantly here, lew is the chairman of the oversight stability committee involved with monitoring the economy and markets for financial stability. >> all right, steve, we'll get to what he said regarding economic tax inversions. steve, thank you for that. interesting, will continue to divest whether or not the secretary knew what jim referred to. it's unknown. big news on the m&a front as well. >> big as it gets in terms of potentially reshaping the media

landscape, carl. our own colleague this morning breaking the news of an offer that was made by fox to acquire time warner. we have since had a lot of developments as you would imagine, and we have been reporting vigorously on the story since brought to us at 7:00 a.m. eastern. shares of time warner are, as you expect, trading up sharply. let's bring you up to date. in fact, latest news we have is 5 rejx jex from time warner or at least a statement from them reiterating rejection they gave to the company when et cetera board voted, i'm told, back 3 r of july, to reject an offer made in writing made on the 24th of june coming from a proposal that was tweej a conversation of the ceo of 21st century fox and the ceo of time warner. that was on the 8th of june, 24th, proposal made in writing, 4, and 3rd, time warner rejects.

today it's public, pressure on time warner in a public way. fox go hostile in will it require that? those, of course, question, i don't have the answer to at this point. i will say murdoch has a history of trying to give things a shot, sometimes winning, oftentimes winning, and sometimes not winning. we're going to have more time warner in a minute. i want to get to rick santelli with industrial production for us, carl. >> june industrial production, what we see is a bit of a miss. up 2/10 on the top line, looking for more than that, and last month downgraded and saw a miss on the utilization rate, 79.1 is unchanged, lower than expected, and, of course, people are talking about the ppi jump,

four-tenths, and last but not least, top of the air, we had trash ri international capital flows and tick data is sfaz nating, although pos sieve on all metrics significantly laesz than we look at last month on total, and look at revisions, foreign investors, worked aggressive on financial dollar assets as they have been. carl, david, back to you. >> pick up where we left off in terms of time warn before we get to jim and everybody else and other news. the offer was 1.53. this could be an important component of the defense for time warner along with $32.42 in cash. 40% cash. if you're time warner, you may want to say, hey, listen, you're going to take nonvoting shares

to give voting control to our company whose gentleman's family inherits control of the those are some of the things they can do. they don't have actual defenses. 15 % to call a special meeting, although, not until next year. they do not have a stacked board. what they are coming back to is the plans saying they believe the plan they've been following for some time is going to deliver far more value than $835 a share. in a sampling this morning, they certainly seem to be congregating around a number of a hundred dollars a share. we shag see. savings, of course, that come from the combination is significant. there would not be potential challenges on antifront trust to combine the studios. they start every year with market share. they would be willing to divest cnn, seemingly an antitrust impediment. where it goes is uncertain. there's a lot of things to come to the floor here. my argument would be there's a 7 70% overlap of shareholder base

of fox and time warner. that's a weapon in fox's hands, however, time warner has the ability to fight here effectively, certainly, if they can elaborate on, articulate, and show their plan is a viable one to deliver more in value than delivering shares of theirs for nonvoting shares in a company that will then be controlled. carl, back to you. >> david, don't go anywhere. jim is geeting seated talking to the secretary. and kayla is here making her way from sun valley where it was topic of conversation. >> it was. it's a potential breeding ground for deals, and we went into the conference thinking univision, the hispanic television network, that's been prime, and scripts network, and by the end of the conference, every single executive said we're talking about time warner. who is buying time warner?

who is interested in it? who rivals the other for it? it's unclear whether there's real talk about this bid when all executives were congregated there. murdoch there, the ceo of fox there, and the man of few words especially with reporters, quick as always is, but, of course, rejecting that bid before the conference, you have to think he made clear to the executives that he was not willing to entertain that while there. >> jim, you're take on all this, congratulations on a great session with the treasury secretary, you know, people this morning are, obviously, surprised by the news, impressed by the news, but can't separate themselves with the baggage with m&a and time warner. does this signal any kind? >> it's an outright steal if you get the company for 85 if you're fox. why? because it's a situation where i would pay a huge, hugely higher

multiple for fox if they get time warner. i love the consistent revenue that they put together. david, look at time warner, we know this is the annuity stream, even more than cbs. the annuity stream media property. if you were to fit this into the glove of fox, the hand into the glove, you would have, by far, the most valuable lucrative media franchise ever. >> yeah, as i reported a number of times and hearing and believing time warner is not interested, clearly, they are not, not clear on how interest there was, but it's a cash cow, a presence globally, as you say, that annuity, if you will. that is where he's focused. you get a studio, you cut costs if you combine them, and get cable networks, cnn not amongst them to add to the stable of

significant networks fox already has. no doubt about the logic of the potential deal. however, there is certainly going to be a great deal of debate about whether, in fact, time warner should sell at all, whether it delivers on merits of its on combination at this point of those businesses. it is the best of time warner and time inc and got out of aol some time ago. moves made urn the watch, ori n originally put into place, but he wants runway and see what he can do with this company, time, of course, only recently p recently spun off. >> time warner had the three most aggressive buybacks of the major companies in the country. what's amazing is every time time warner goes up, he's there underneath buying the stock back, clearly he thinks this stock is dramatically lower than

should be or wouldn't be. why not go to disney and say give me a hundred bucks. >> disney's not going food it. i don't see it in the cards at this point, but it's an interesting point, time warner go out and do an acquisition after some point. >> right. >> i investigated the idea are they looking at something got wind of and moved when they did? don't forget the backdrop of this is the consolidation amongst distributors, our parent company comcast, of course; and its deal to acquire time warner cable, a unit of time warner, and the at&t deal. the question is valid in the sense of what does cbs choose to do, if anything at this point. they are a valid combination. you have to have redstone make a big decision, unclear whether there's anything conceivably transpire there, that is different for time warner if they want to remain independent.

>> how defensive -- >> bigger than cbs. >> we heard the parent company of the network, c or mcast, 10 powerful, hearing the concentration of cable, so powerful. is this a push back? here's what we control. we're the number one news. we're the number one in sports. which, conceivably, they could be bigger in sports with this deal. is this trying to get the balance of power shifted back to content? >> the conversations i've had so much with the people aware of what's going on here, certainly, that figures into it. no doubt. what's changed? right, well, we have an incredibly m&a market where animal spirit is reigning. we have low cost of debt, which certainly is a great time to take advantage of and may one day move up, although, we said that for a long time, but what changed are two large deals and balance of power is a question mark. that said, cbs believes strongly he'll win out because, as he says, great content wins out

regardless of size, so to speak. >> this is not an inversion. >> no. >> well, good point, jim. >> yeah. >> good point, and i want to get to that before we go to the bell. you talked about jack lew on tax inversions, and the tax code in the country. here's what he said. >> you say that congress should enact legislation immediately, make it retroactive to may 2014 to shut down the abuse of the tax system. i regard this as a ratchet up by your office to get this nipped in the bud, true? >> well, jim, let me be clear. we want our tax code to have incentives for investing in the united states and disinvesting outside the united states. on the question of inversion, i used language that's strong. we should have patriotism here, it's not right to take an american firm to benefit from all the things we do in the united states to make it a safe place to do business and say i don't want to pay taxes here,

shift my corporate address overseas for a lower tax rate or no taxes. >> jim, economic patriotism sparked it among our viewers on twitter today. >> it's funny. very recently, you had the former fcc head, christopher cox, saying it's the duty of companies. it's the duty of companies, basically, to invert. we have people like sandy cutler from the city of cleveland saying, listen, i'm from cleveland, but, yes, we're from dublin. i was trying to see if the secretary was aggrieved as a lot of us feel, but, frankly, there's not a lot of emotionalism about this. >> you asked about tax rates, even if we get down to the 20s, is it going to make a difference at 12.5% in ireland. we seemed to believe it was, bue

there. >> if you get away with it, you got to get away with it. look, you know from the deals crafted right now, yes, there is a consensus that if the legislation's made active, a deal can be broken, but med tronic will be one company by the time any legislation occurs, no? >> without a doubt. >> it's toothless. >> well, did he give sense, get anything out of him? where you below there's action in the near term in. >> i don't think it's up to him. if i was a hedge fund or listing, i'd say i'm going to gain the secretary of treasury because i know the republicans hate him and his party so much they can't do it. game on inversion. no change. >> jim you asked about yellen

and whether it was appropriate, i don't know that you used the name, but appropriate to comment on valuations. what were you referring to? >> well, i think, obviously, i don't interfere with what the fed chief yellen said, but as the conversation went on, the secretary realized i was referring to overstretched valuations in small by yo teches and social media. what's important is he said it's not the place of people in government to comment on these things, and, well -- ? >> although it's -- carl, are we certain she wrote that or the staff? >> that's another unknown. absolutely right. certainly her name was attached to it all day yesterday, and jim had choice words for her on "mad money," right, jim? >> rational exuberance, a run for three years, and alan greenspan raised rates to cool

the market. we see where that went. there was a time when twitter was at 70, an overvalue stock. there was a time when some of the smaller teches that were not cut down by 50%, that maybe there was a place for this. i thought the fed chief was grappling for something for the bears to say, i see over valuation. a speech better in march than in the second week of july. >> guys, let's get to earnings before the bell here. intel 55 cents beating by three, big buyback increase, raising views, looking for 66% gross mar gyps, jim? >> we talked about the idea they preannounced, there's room, and there's major guidance from the preannouncement not long ago. two sides to this. the street is going crazy over the numbers. i think so, look, there's a lot to say because this is about personal computer doing better and apple against, frankly,

intel, whether hay win business if it's at the cost of the system. there's a great job in the finances, stress test balance street, by back the stock, $20 billion. the personal computer, people are bullish, but sbrer surprise enterprise, but the most moments on the call -- >> a billion dollar operating loss. >> like yahoo! elephant in the room, mobile, trying to monetize mobile. you know what? i think the property, it's cheap still, but without a mobile strategy, by the way, a terrible moment in the conference call. brian, whom i'm fond of goes, we also believe we can be in the mobile space and make money, but our products there, i mean, hello, can be mobile? you better be mobile or you die.

>> with all that, we'll get the opening bell in a second, guys. let's get this market day started. we'll get back to the numbers. there is the bell. a look at the s&p at the top of the screen. here at the big board. clips resources, oil and natural gas exploration and production company celebrating its recent ipo. the nasdaq, magellan health care company doing the honors. david, maybe you want to look at time warner to revisit the story for a moment. >> sure, carl. listen, stock up sharply on the news, of course, broken here on cnbc, that a bid was made for the company by 21st century fox. that bid received in writing on the 24th of june -- my own reporting at this point -- rejected by the board of time warner on the 3rd, comes public today. the stock up sharply as you see. shareholders i spoke with do not

believe that that bid, which, by the way, comprised of 1.3 1 shares of 21st century fox, nonvoting, and 32.42 in cash, not believing that was sufficient. the first bid is informer the final bid. question is where is fox willing to go if they engaged in talks, able to, as we hear from companies, identify potential futures synergies and cost savings leading tome this raise their bid. on the other side, a big overlap in the share holler bases, should be a weapon that is used no try to pressure time warner, coming public with the offer is the main way to pressure them. that said, time warner rebutted this morning saying the board is unanimous in rejecting 85. it has full belief the plan they follow delivers value far in excess of that number, and i've talked to people who have seep the numbers saying i know we can

cothis. we'll see whether that factors to be the case, and they have a strong rebut ttal one says, oka you give up voting control, and we'll be a family controlled company where you got an 83 -- how old is he? the children taking control. there's 5 contract lasting for another 18 months, less than two years. those are things we're dealing with. ro rupert is not afraid to fail, but you want to let it play out, resinate with shareholders, get this them in conversations with the board and see if they are willing, if anything, what to do here if sueded. >> a settle winner, carl. you know who the winner is? yahoo!. we didn't have too talk about that miserable quarter and how bad it was. >> do it now, man. >> 37 cents, misses by a penny, "usa today" headline is "q2 not

worth shouting about" saying, quote, we can and will do better. here's sound from the call last night. >> in the case of yahoo! i stated in the past we believe a transformation of this size and scale takes multiple years, and we continue to believe that's the case today. even so, given our long term sustainable growth, we are not satisfied with the results this past quarter. >> yeah. >> what do they need to do, jim? >> going premium content, expensive to produce, and they are not able to monetize it. this is not a growth company. they need to take the alibab money and do a terrific acquisition. you know the deal. there's a lot of -- i have to say they have to take some of the money, think the opening -- the ipo's going to be in the hole or there would be more. it's about monthly average users higher, but not monetizing them.

this is no facebook. no grade schooling. i did not see upside to the stock other than the fact -- >> they and own more after the apo than previously, moving down from 280 million to 240 million. shaur hold shareholders embrace it because what's left you use in a more tax efficient matter than what you sell in the ipo. many believe alibaba continues in that course bringing more value. she has not -- how long it been? >> couple years. >> how many more years do you give her? >> the clock hardly starts, but five years ago, there was 1 hadn't 4 billion, and now there's 1 billion. david, take the clock away. just take the company private at this pace. >> yeah. you end up with the shares in some sort of business.

>> like palm. you don't have to worry about the monization if you're not public. >> we have not mentioned bank of america, bucking the trend, fixed income trading higher rather than lower. >> yeah. you know, not a bad quarter. >> reporting friday, stock would be up 30 cents. put back the last -- rnbss are gone, aig, august of 2011, wrote a story saying we that on the hook for $10 billion. stock plunged. how much did they pay? 600 million bucks. >> a little more than that? >> maybe 650 million. >> that being said, anything in the quarter, jim, that gives you pause or encouragement? >> they build capital. i feel they could afford a 15 kbl settlement, i don't think that's going to happen. they could do it, and i feel

good about the august review that allows bank of america to join the counsel of banks that we regard as being on the mend. >> time warner by far the biggest gainer, david. what's close behind is diska, others might be next in line in a consolidation trend. make sense to you? >> well, possible. of course, discovery more or less controlled by john malone. you see it there. the possibility is with time warner conceivably doing it. make no mistake. it's a possible reordering of the landscape in media. now, it's not as though we have not been discussing this as a possibility, although, frankly, one i thought would come over a period of years, perhaps, in response to the consolidation of the distributors. we still have to wait until after that moves through regulatory channels. you know, the comcast deal may

not close until the first quarter of next year, but things with this now move more quickly and companies consider things perhaps they thought they might not have to consider immediately. it's not as though they don't have long term strategic plans. fox is thinking about this for a long time. why do you think they do the satellite deals they've done? why do you think they spun off? you know, these are things out there. you know they are out there. time warner is the only non-family controlled big media company really. disney's too big. can't do that. >> they did that years ago. >> comcast tried. think about it, if you're at home, look at the fish, think about what to do. put viacom and cbs back together? i don't know. feel like you can do nothing, but malone, everybody thinking about what to do. doesn't mean fox will be successful here. very well may not be successful in buying time warner, but it's

out there now. >> how incredible is it we don't have to talk antitrust because there's so many networks. there was a time -- >> you got to spin cnn. >> they'll do that and get blessing. >> that could happen at cbs. >> they have not blocked a lot of deals. combi combined, 27% of domestic box office and almost 30% domestic able ad rev new, that's ex-cnn, that's not a problem? >> no. a few years ago, this came around when i was following these more closely, and the idea of studio ya consolidation was a nonstarter on antitrust fron front, but this has changed. they start fresh, you have the box office to come, and very few people seem to be given pause by the idea of putting together the

fox studio and warner studio. it is more on the cable consolidation, perhaps, you would see antitrust and, glen, cnn may or may not solve that. >> where are we on the just say no? we stay here, carl, all day we talk about the idea that, look, it's a sitting duck to a hospital. what do they have here? how can he stop it? what if fox says, listen, 95. when do you say, sold? >> am some appointment the board of director says it's a fair price begin the stock component. fox ariani iargues you have thes of the combination. they are not there yet, tell you that much. in fact, what i picked up, at least they are ready to fight. you always do that. a hundred bucks, could they get to that number? the relative value between the companies, don't forget. this is not dow jones where news corp. is larger with a $60

number. people say, you can't ever walk away from that. this is different. >> stock should be up, not down, crazy. >> going to the google board at 68 on the audit committee showing just how important the car's going to be to the internet of things, jim. >> well, i got to tell you, first of all, 68, very young man against the people talking about red stones, but murdoch is, like, hey, a spring chicken. google ventures, i don't know if you saw this, guy named meris says uber is worth 200 million. >> who? >> google ventures has a stake in uber. >> that's worth what alibaba worth. >> here's ford motor, a company saved, worth billions, but nowhere near a company that buys fords and worth $200 billion --

>> absurd, by the way. >> 17 billion seems nuts. >> maybe there was a typo. >> finally, guys, we have not mentioned apple and ibm. >> right. >> oh, my god. >> teaming up to build -- at the start at least, a hundred business apps to attack the enterprise together. he's sound of tim cook from last night. >> it's landmark. it takes the best of apple and the best of ibm and puts those together, no overlap, no competition, totally complime complimentary and focuses on the enterprise customer. it's all about transforming enterprise, reinvent r enterprise, taking big data analytics down to the finger tips of people so they spend time making complex decisions, not running around getting data. >> incredible. >> former enemies in pcs, now

one's in mobile, the other in the cloud. perfect marriage, jim? >> yeah, go to the it department, i'm an apple person, and they said, so what, man, we're hewlett-packard and dell, get out of here. no more excuses. well, listen, we like the iphone, no, we're a blackberry house. that's over. my question is, david, you know hew little pack card and dell better than anybody. if i give away pcs because i want the back end, does it really matter if ibm says you have to buy apple? will apple go to subsidyings? makes verizon and at&t pay. why would any corporation say i'll pay to have an apple mac. no. listen, it, ibm, hundred thousand people come in, how do you convince corporate america we love apple and don't want our hps. >> this is not about pc, but

mobile devices. >> that's why blk berry is -- >> i had a chance to speak with her yesterday, with tim cook who you heard from, and i asked the question people think. they are great announcements, but after the announcement, how often have we seen partnerships fade into nothingness and never hear from them again. they both seemed, judging from the comments on air and in my conversation with her as well, pumped up on this and very much committed to it for whatever that means, not that they are not going to be, certainly onements that to be the case, but it's about mobile, cloud, security issue all things that jenni keeps hitting on as ibm strategy. >> they've been the gate keeper, whole time. >> some forgot cook worked at ibm for a decade some time ago. down 4% on that news today, guys. with that, covered a lot, third day, dow intraday high on

transports and industrials, third consecutive day of the naz third consecutive high. bob has more. >> tech and consumer discreti discretionary lead the way. bank earnings, getting to the part i like, and that's the regional banks. look, for example, at pnc. i like regional banks because they are mixes of retail banking and corporate banking. that's the case with pnc, a nice mix, own black rock as well, earnings above expectations. they had a great run. one of the problems is loan growth is fairly anemic, 1.9% quart over quart. we have to do better than that. they are not better or worse than anybody else, but fairly anemic. another regional in minneapolis, earnings generally better than expected, but they make fun charging fees, nearly half of the revenues are fees. money in mortgage banking up in charging fees on that, big in the merchant processing

business, respectable gains. the problem is loan growth is, oh, 1.9% and overall loan growth, here's the problem i see. these banks are expensive. pnc is 12 to 13 times earnings. coamerica 16. this is the multiples they tried on in 2006 and 2007. yet, we're paying a lot more for less. getting less on a dollar-to-dollar basis because they are not back to the old numbers in 2006 even though we pay nigh prices for them. that's the biggest problem. what do we need? simple. we need the fundamentals it catch up with the valuations, and you do that two ways, number one, loan growth. they report 4 to 6 % growth. forget it. we need 9%, 10% loan growth on a year over year basis, quarter over quarter. we are not close to that. we need loan growth -- i mean, real loan growth. we need real interest rates move up on the shorter end of the curve to keep adjustable rate

mortgages. that's how they keep money. nobody is keeping a 4% 30-year mortgage on the books, nobody. they need higher interest rates. moving on it talk about other things moving, intel at the 1046 year high, there it goes. excellent growth in the pc upgrade cycle for corporations, exactly what everybody wanted to hear about intel. when is the last time you saw that stock up 6%. fektron huge in aerospace and defense, bell helicopters, cesna, good numbers overall, 27 % year over year increase in their numbers. finally, take a look at the media stocks. you see time warner up 16% a real shocker. you're not going to see it everywhere else, but discovery up 4.5%. that was a surprise. guys, dow up 50 points, back to

you. >> with that, nasdaq 100 intraday high, but it's a 14-year high seen repeated time and time again. jim, david, one thing we've not mentioned, which is going to get buried in the wave of news is hershey rising prices 8%, first time in years, but they have sales in the low end, jim, 5 to 7%. >> most hobbled group in the market is food, hershey big commodity cost increase. general mills delivered not a great quarter. campbells, a hold to sell. they need acquisitions. you understand why tyson had to buy hillshire brands. there is not growth in the food business. >> all right. i want to get back to our conference here. that is, of course, the reason we're there right now, fourth annual delivering conference. we're on stage now for a rare interview with the world's largest alternative asset

managers and security founder, also, i think, a big holder of time warner and fox. let's listen in. >> that said, story's not over yet. you own both stocks, curious your take on the attempt of a deal and whether it comes through? >> i think it's a great deal. time warner great assets, hbo, warner, studios, content is king. both assets have great content. the deal makes a lot of sense for fox. makes a lot of sense for time warner's shareholders. >> except for the fact they said no. >> i think we'll get to yes. >> all right. how? murdoch is a tireless negotiator, known to pay in the past what people consider to be silly premium for assets he wants. will you see the characteristics at play here? what would you do next 1234. >> one of the dynamics time warner faces is there's no

controlling shareholder, and, therefore, the company is in play, and unless they have a great option for the shareholders, this deal looks like the highest way to a security for value in the shareholders, and it's here and no. >> tough to say no? >> tough to say no, and murdoch has the history to go the extra mile to get deals done important to him. >> okay. i'm curious of the media space in general, a game changer this morning. more assets could be in play as a result. do you expect to see more consolidation? >> again, the issue of controlling shareholders is key. because so many of the assets have a controlling hair sholer, the decision to merge is in the hands of the individualings. what makes the time warner asset so attractive is without a share holder in a controlling pox, it's shareholders as a whole in the m&a process to make a decision where to take the transaction. >> so we need to look to the investor community for guidance in terms of what people would

like to see and what other deals take shape? >> you have to look to the controlling shareholders, what are their agendas with the assets they control. whereas with time warner, there's no controlling shareholder, this comes down to, in a sense, vote of every institutional and individual investor when said and done. >> could be a litmus test for future deals in that respect? >> not a litmus test for future deals, but this deal represents what happens when you don't have a controlling shareholder, when the share hollers, in a sense have a chance to vote on what they want the outcome to be. >> right, right. i wop nder, looking forward, though, whether there's lessons whether the deal is ripe for more?synergies in media today, and as they become more global -- murdoch's assets are well positioned in

the global growth story doing a great job of maximizing global revenue growth, so in a global world, there's a lot of tractions to m&a in the space, but, again, you have to get back to the fundamental question, which assets can be bought begin the nature of the assets being controlled by a small group or individual shareholder. >> right, right. let's talk about what's been a thorn in your side this year, michael louis, flash boys. debate over high frequency trading. you testified about the topic last week, what you do now, what you've done historically, and i know from the remarks from the day ewe feel what happened in recent years is good for investors that vast technology improved ore fills for everybody, that the old boys network of the floor brokerage firms and so on have been upended in a constructive way. that said, there's interesting details in louis's book about

payment for order flow, for example. what's the rationale for payment for order flow? do you guys do it, and why? >> payment for order flow is where a large brokerage house, generally the online brokers, are able to negotiate de minimis payments when the time and order is executed on behalf of the retail investor. it's one-tenth percent of a share is typical flow number for the industry. it's a practice that has a long history. it has replaced a variety of business relationships that used to exist. it's replaced internalization. if you go back just 15 years ago, a huge portion of our retail orders in the united states was internalized by the exiting broker. >> an early version of dark pools. >> i wouldn't say it's an early version of dark pools, but where the markets were 125 years ago. what happened is the market has, like, in the economy, separated into areas of excellence, the

large market makers catering to the on line community. >> delivering at alpha owning time warner and 20th century fox. a high, and three times the 30-day average, jim, your take? >> the company's going to get sold. i believe that. it's hard to fight a guy with unlimited fire power. >> i don't know if it's unlimited fire power. >> really? >> he has a balance sheet of a similar size to time warner. not unlimited. always limits b he has votiing control and shareholders. carl, what's interesting is what you heard from griffin will be heard from others, what they are hoping for, own both stocks, leave a combination therefore that makes sense because they benefit on both sides, overlap of the shares, shares by 70% is what the advisers to fox say, a

very significant, potential weapon. one thing to leave you with on this, in the press release, failed to note this, the board of time warner says that if believes its plan to create strategic value, its plan to create value for its stockholders is superior to any proposal that 2 1st century fox is in a position to offer, any. that gives you some sense to where we are here. >> that's a good one. jim, you know, someone said this morning that this whole thing is a comment on at least murdoch's view of the economy. is that true, or is this a function of low rates and low growth environment? >> don't do the deal unless you thought advertising on tv would be robust and don't do the deal if people are not going to cut the cord. i think that it's an optimistic view. have we seen murdoch not be optimistic? has it ever not made him money?

amazing thing about optimism is it made him into the richest people in the world, right far more than he's been wrong. >> david? you want to take us to stock trading? >> absolutely. let's do it, man. it's been all week. we have not done a mad dash. >> we didn't do igt, but i have a good bid. >> do stock trading. >> why didn't small biotech and social media get hit after being taken aim? a couple words. one is ie den ticks, paying more, a triple because you own this company with hep c. i felt like yellen when they got that bid by gilliad. on the other side, social media. facebook is selling at 22 times 2016 earnings with a 30% growth. maybe twitter is over valued.

you know what? if you think there's too much speculation in the world, ms. yellen raised -- i don't think there is. people have a right to speculate with their money and lose money if they want to. >> yesterday, carl and i tried to figure out what small means. is it yelp? it's not facebook. >> what an opportunity. google would love yelp, zillow? there it is. >> jim, what's on "mad money" tonight? >> i'll continue to do this oil theme, finding out whether it's breaking 90 and going back to 110. i have an oil distributor to give us help. >> can't wait for that, jim. >> thank you. >> a lot to cover at delivering alpha. that was aed good hour, guys. we miss you here. talk to you soon. david faber and jim cramer delivering alpha for us. a lot to cover including more on time warner's rejection from

fox, and back on the hill for part two of the testimony on monetary policy and the economy. this time facing the republican-led house financial services committee, and we will bring you the q&a session. dow up 48 points, another all-time intraday high for the transports and industrials. keep it right here. [ male announcer ] we know they're out there.

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welcome back to "squawk on the street," breaking news from the national association of home builders, their monthly sentiment index gauging confidence among builders jumping four points to 53. that is the first time it's crossed the 50 line into positive territory since january of this year. up four points to 53. the expectation for a one-point gain. better than expected, obviously. the builders cite an improving jobs picture saying people feel better about their employment and buying more homes. the three components, current sales rose four points to 57. future sales expectations jumped six points to 54. buyer traffic at 39, still in the negative territory, and

another report from credit suite this week cited buyer traffic as falling saying the nation's home builders said there was sticker shock on price right now, why buying was falling again. important to note this index does not incorporate the largest publicly traded home builders. regionally though, up one and two points in the northeast and midwest. up two points in the south. up four points to 53, first time in positive territory for builder confidence since january. back to you guys. >> yep, you want to see that, building confidence in the home builders. the house financial services committee is about to hear from fed chair janet yellen, there she is preparing for her testimony and around a questions. our senior economics reporter here on what to expect, steve, more stock tips from janet yellen? >> a controversial out there, can you hear me?

that's part of the controversy that's out there, janet yellen, the report of the federal reserve that the economy testimony making comments, and that came to criticism this morning. leon cooperman this morning on "squawk becomes" what does the fed know on valuation? the question to whether secretary lew followed that comment and said he thought government should be commenting on policies and trend. just real quick, data we got this morning, industrial production up a tick lower than expectations with the lower manufacturing, and them, of course, we had ppi, a buy on the federal reserve, consumer price inflation up more than expected on the headlines, and the core up 0.2%. one question as to whether or not yellen wanted more uncertainty, she noted labor numbers have improved. the question whether or not she wants the market to maybe not be

quite so certain about a june 2015 takeoff when it comes to interest rates. something to follow today. we have more to be pressed again on when that lift off may happen, what a the trajectory may be, steep or a shallow one, and the issue should the fe be involved, of course, in ultimately picking out different sectors of the market for over valuation. carl? >> i imagine, steve, do you expect her to be asked about that today? >> i think so. it was controversial enough, and my take on this is, obviously, in the post financial crisis world, the fed, obviously, needs to be more involved in monitoring markets for final stability. that's very important. but the question is, what is the metric? what is over valuation? what is the litmus test for the fed commenting on a market? my take had been that the fed was concerned when the market was overvalued and had risk

concerns. it's not clear to me that small cap biotech creates risk. i say that only half sarcastically in the sense that remember in 2001, the entire nasdaq bubble blew up and had a shallow economic effect, a shallow effect on overall systemic risk and financial stability. the key issue what we learned from the 2008 crisis is debt, and if there's not a lot of debt under valuations, the question is how concerned should the fed be? >> excellent point. there's enough sarcasm going around as it is. we'll see what she answers if she, in fact, is asked. thank you. >> sure. >> reporting time warner rejected an $80 billion offer from 2 1st century fox and andrew and david join us this morning from delivering alpha. morning, guys. >> morning. >> you brought us the news at 7:00 a.m., and you got statements from both sides, fox confirms at least an offer made

and time warner coming back with a strong statement. you know, andrew, interesting, love your reaction to this because in their statement, they do say they believe that their execution of the plan creates significantly more value for the company than its stockholders, quote, superior than any proposal that 21st century is in a position to offer. >> that is the surprising part. it's been suggested there's a deal to be done here, and the question, of course, what is the price of the deal? is $85 or given where the stocks are, slightly higher than that, is that enough? the number i keep hearing, david -- >> hundred, right? >> a hundred. >> that's what i heard too. >> get me a hundred, and maybe we can talk. think about the synergies, you said it earlier, 70% of the shareholders overlap the top five, the same top five, if you take a billion dollars of synergies and get to the table, the people i talk to suggest if

you get to the table, there's more synergies and billion dollar could be a billion-five or more and then it gets interesting. my sources say murdoch is determined, not hostile yet, but he wants this thing, and we see what happens when he says he wants something. >> no doubt. he is will to give things a shot and sometimes fail as well, but strong willed if nothing else and a lot of other things. we heard from ken griffin here a few moments ago. he may be on stage with kate kelly, and one of the shareholder whose fund owns both, 21st century fox and time warn er warner, and he's if favor of the combination. that's the. they have in the arsenal, perhaps the question weapon. that said, time warner will come back with a lot of things, including, all right, you get voting control, relative size, we give shares to them, controlling it, children will run it one day, and who knows

how long he'll be here. >> why would you do that? >> chase is a contract running through 2016. >> right. >> that's important. >> 18 months left. >> be there at min pulmofor the transition. i think time warner is challenged to make the argument about the dual class shares given their own shareholder already own fox. you can make the argument all day, you know, only want to take nonvoting shares. i get that. only want voting shares. that might be a winning argument to some extent, but becomes much more challenged given the shareholder base. >> it's not like there's a multiple disparity either. i think news corp. said it was higher multiple although it is a controlled company. >> arguably, i looked, they traded closer with 13 times, the other guys at seven and eight. >> of course, synergies -- >> if they go higher. >> i think it's 7%, 8 %, we're not talking about incredible growth, but committed to their

plan, and, andrew, at least on what i hear, they are going to fight. >> right. >> you always fight to get the high a price as you can. difficult for us to figure out if they fight to the end or just for the higher price. >> right. what i also find fascinating is google, do somebody in tech say it's time -- >> we're going to do it now. >> yeah, this is it, this is a jewel. there's not many of them. i think there's -- we could see that. obviously, if they are going to spin off or sell cnn, you know, just does cbs want to buy that? disney want to buy that? univision out there, could you create that? what happens to discovery? they've been sort of in the mix of things. >> at the very least, having this now public, reorders -- certainly, foremost in every single executive who runs a media company is thinking and conceivably has the power to

reorder the landscape. >> i argue, by the way, it reimagines the way regulators think about the pipe deals, the distribution deals. comcast, time warner cable, parent company of our network, if you thought the deals did not go through because there was not enough power to fight them, this will be considered example a of why that deal should go through and so you might see more dominos. >> yep. we're going to be following all of them. of course, he breaks the big story and moves on to other things. he has screen plays to write, but i'll follow day-to-day. back to you. >> thank you to both of you. we'll stick here on "squawk on the street" to the big story of the morning, and joining us from canada, rich greenfield, a media and technology analyst at btig, wrote a lot about both of the companies. so, rich, your thoughts, murdoch says to andrew, sources tell andrew he's determined to get the deal done.

do you see it happening? >> caller: well, look, you have moguls wants to be moguls with a quest for size, and when you go back to, you know, the mid-90s, really, every time there's been a movement in terms of consolidation from the distributors, we've seen a lock step move from the content creators and the programmers, and so i think from that sand point, consolidation certainly makese using history as a guide. what makes sense of the transaction is it's hard to program a general entertainment network. fox just i want barked on creating fsx, doing a great job, but they are trying to program fsx, struggling to program the core fox network, trying to fill the schedule of fox sports 1 with great programming, and in the midst of that, they have to program tbs, tnt, cartoon network, et cetera.

it just is a lot of programming networks. >> sure. >> caller: you have to program them. there's synergies, and there's a lot of stress in terms of programming this many entertainment networks as a channel means less and less to everyone watching the show right now. >> they also have to get to the right price. 80 billion was the last one thrown out. andrew mentioned a hundred. where do you see this getting done? >> caller: i don't know. look, there's obviously comparisons looking at netflix's valuation relative to hbo's, and i think looking at what hbo is and what it could become if it did go direct to consumer and looking at its global profile, no reason why hbo is not substantially undervalued within time warn ear. the question is spending substantially more than what's talked about in terms of what andrew, the prices he was throwing out, the challenge is, you know, right now, you have a bunch of cable networks on the time warner front that are not doing well on the ratings. you know, time warner has both

tbs and tnt that i put in the category of, you know, struggling ratings-wise. you pay a lot of money for networks that are not doing terribly well, and in which certainly, you know, you're paying as if they are fixed, and you have not fixed them yet. i think that's where it becomes the challenge. obviously, from a tv studio standpoint, this looks very smart. combining two tv and film studios assuming the government allows it, creating a jauger naught for content creation. you have to think about does this give opportunities to create a cable network angle like hulu. fox is an investor, but does it position you to have an over -- a direct to consumer strategy the way netflix has had? can you do that combining the fox cable asset and time warner cable assets, the big things i'm thinking about. >> yeah, a lot of serious questions there, rich, looking at time warper shares up 17.5%.

david faber, are you with us? >> sure am. rich, you think differently about things sometimes, and at the very least, regardless how the battle, and it will be a battle, plays out, every's got to be thinking of the reorder of the landscape. give me your best guess if you run a media company right now, what are you thinking about and whether we see technology companies like google, perhaps get involved, go down that road now that we have this front and center? >> great question, david. what are the moving pieces? first of all, in terms of other bidders, i have a hard time believing big companies want to stick their neck out to one specific companies. companies like youtube could create over the top video services, bundles of over the top video services, but one bundle of content does not help tech companies so i'd be surprised if we saw something from outside the traditional industry on this transaction, especially just begin the size of the numbers we are talking about and the fact that none of the players have the synergies we're talking about.

the more interesting and difficult question is way are the other dominos that could fall based on this? i think that really centers on or turns on whether this is happening because murdochments access to hbo and studio assets or happening because he wants more cable network leverage? if he wants leverage, obviously, that's going to focus on all of the other networks from the discovery to scripts to amcx to viacom. the challenge with that may be that i don't think any of the turner networks were must-watch live or must-watch now, and i think they were all at risk of challenging viewership. i think this is about unique access and krcredible brands li hbo and maybe it's more about brands and the movie brands that disney is using from its studio to basically -- or from the

studio side of the business and marvel to power the cable network side. maybe there's more of that in terms of what they see in warner brothers than the cable network story. in this case, maybe there's no other deals that should happen. >> rich, valuable perspective as always. we'll continue to check in with you on this one to see how it unfolds. rich grooepfield from btig. see you in a bit. >> jim cramer talked to jack lew this morning, mr. secretary made interesting comments about ca t companies and tax inversionings. take a listen. >> on the question of inversions, i used language in the letter that's strong. i said, we should have economic patriotism here. it's not right to take an american firm, to benefit from all of the things that we do in the united states to make it a safe place to do business, but then say, i don't want to pay taxes here, shift my corporate address overseas to pay a lower tax rate or no taxes.

>> he asked lew on comments of the fed yesterday on stocks being overvalued. >> is it ever right for a federal official to comment on substantially stretched valuations of stocks whether they be small cap or whether they be security or whether they be social media? >> jim, i think it is appropriate for us to comment on policies and trend. it is not appropriate for us to comment on individual market movements. >> so you don't think necessarily that the small teches and social media teches are overvalued, or none of your business? >> i think there's a lot of people in this room who ought to make sensible judgments about proper evaluations. >> great conversations and applause in the room, never mentioned the fed chair's name. explicitly, but everybody knows who they are talking about. >> called her out a bit saying stick to policies and focus. interesting to hear if any the congressman address the question

today. it's not clear whether that came from her because she was asked about the markets yesterday in the testimony. she did not mention social media, but the bond market. >> more specific today in front of the house, and if so, hopefully we catch it when we go live in a few minutes. >> yes. >> the landmark deal between ibm and apple, what the ceos of both companies said about the partnership when "squawk on the street" continues. the dow is up almost 52 points. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs.

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welcome back to "squawk on the street," check out hca holdings, raising the guidance for the second quarter full year. the company citing strength in koer operations where operations increased. the stock trades up 7.5%. rivals moving up as well. carl, back to you. >> thank you so much. apple and ibm announce a partnership to collaborate on ios devices. we spoke with the ceos about the partnership, and we have more on that. josh, congratulations. >> well, carl, you know, 30 years ago, this partnership would have been impossible to imagine, but today, it is a reality. apple and ibm joining forces, the tech titans announcing the exclusive partnership to create new business apps bringing ibm's

data analytics to apple's iphones and tab bets. as part of the agreement, they will sell dab lets to clients around the world. we talked about what the deal really means for the companies and their customers. >> it takes the best of apple and ibm and puts them together because there's no overlap or competition because they are complimentary and focuses on the customer. this is all about transforming enterprise, reinventing enterpri enterprise, taking big data analytics down to the fingertips of people to spend time making complex decisions rather than running around getting data. >> the industry is reordering itself. reordering itself around the trend of big data analytics, around cloud, around engagement, which is mobility with security, and this goes at the convergence of the trends, so it's a bold move that just further

accelerates our growth initiatives as i know for tim accelerates his. >> now, apple and ibm specifically mentioned retail, health care, banking, telecom, travel, and transportation as industries they target with the apps which will be available starting in the fall. financial terms of the deal not disclosed, but both really ex excited about the business opportunity. for appapple, a new way to get ipads into the offices, and ibm, a new solution to offer their corporate clients. we'll look at who loses if apple and ibm win. back to you. >> yeah, we saw shares of back berry take a tumble after the jews. josh lipton, thank you very much, great interview. two big names with quarterly results, intel beat on revenues increasing the share buyback program by $20 billion. yahoo! fell short of estimates issuing a light third quarter

revenue forecast. and john fort joins us on set to talk about the names. start with ip tell. that be a lot to lift moods about this stock. >> yeah, intel, a big beat, on the bottom line, but top line quite nice too. here's the asterisk, though. it's how long the enterprise pc refresh lasts. at least through the end of the year, but they have not done the forecast for next year, and there's a number of trends against them. the core question is, what happens first? does intel solve mobile or mobile players solve productivity and really start to impact intel's core business? we see the apple-ibm news, you know, if they figure that out, people don't need pcs as much to run ibm apps in the enterprise with a screeching halt to the reflesh. granted, it takes ibm a while to write apps and enterprise has to test them, so these things take a while to play out, but those

kinds of questions make intel's long jeft on the boom they have. >> a lot of discussion on who needs who more, right? apple needs help in enterprise. ibm needs just growth period. do you have an answer on that? >> here are my thoughts. the impact for apple of this deal, it gives them the equivalent of the apple store in the enterprise. they service devices, go into enterprises, and if you're a pharmaceutical company, i was talking to an analyst following these things closely, and you got that data on your devices, you don't want those in an apple store to get them fixed, but want somebody to service them. ibm does that. they are a channel to buy them, perhaps at good prices in volume also, so that's good for apple. for ibm, now, they wanted to do that anyway, and the pressure is going to be on them from apple's side to write apps, but what ibm needs to do is grow their business and to grow their

business, they have to offer more than just ios devices, but ann droid, windows, if customers want that. they have competing loyalties to solve her. >> i know you will talk about yahoo! as well on "squawk alley," and they could use a deal like this. well, they have alibaba that's helping. >> yahoo!'s results were poor at the core, and, of course, alibaba looks good for them, but when you believed in yahoo! before nothing happened here, that makes you not believe in marissa who has more ammunition now to play out the vision, but it will be a while. >> that's a nonconsensus view. >> it is. >> up next here on "squawk on the street," most well-known names in business gather at today's delivering alpha conference, where the industries's biggest investors find opportunities in today's ever-changing global market. we'll be right back.

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you saw yellen talking yesterday, and today, she's on the house side, house financial services committee, a different tone you sometimes get from congressmen and senators. this is republican led, and the big question is whether she's asked about the comment in the filing yesterday about the valuation on social media stocks, biotech stocks. you have to imagine some congressmen are familiar with the story and may try to pin her down to get specifics. if so, stocks could move today. >> hopefully they saw the news yesterday and stocks sold sharply. the dow up 50 points, strength across the board from the nasdaq

and s&p 500, up three tenths of a percent as well, and, obviously, everyone wants to know what she said about the economy, the growth trajectory, the economic data painted a picture of the an improved economy, and whether the comments on that, we'll see. >> let's get oil inventorienven hey, jackie. >> the department of energy released the report on crude oil, down, actually, 7.5 million barrels, more significant than expected. we were looking for a drop of about 3 million barrels. you can see the prices here, up 75 cents, now up a dollar right now. looking at the price at 194 at this point. this was more significant, again, thagai again, than traders were thinking, but run rates expected to increase here meaning we use more crude oil to make products and, actually, looking at the gasoline numbers here, while there's little disconnect there, up 200,000 when we were expected to see a build of 1.2 million.

will be interesting to break the numbers down and see what's happening. crude urn a hundred dollars a barrel. traders say what we see is technical action, but the prices could stay supported from here. guys, back to you. >> thank you very much, jackie delangeles. kelly evans spoke with a group of world class investors on the global stage of delivering alpha. we have highlights for us, and you spoke with jpmorgan and others. >> absolutely. we had a great panel. we had mary, talked to maverick, paul marshall of marshall waste and talked to jane madillo, outgoing ceo of harvards endowme endowment. that represents the investing landscape over five years if you look at it in the following way. they under performed and made a historic u.s. stock market rally. exposure to u.s. stocks has been

incredibly low, 11% of the portfolio. i asked jane whether that strategy is one of the reasons for her departure at year end and if she has regrets. take a listen. >> if you look over the long term, the value that's been added from a diversified portfolio of ill-liquid and liquid assets and global asset allocation is significant, 300 to 400 basis point as year over the last 20 years against a 60/40 stock bond portfolio translating to billions of dollars in the har vord portfolio today that wouldn't have been there. >> no regrets then? >> no regrets. >> now, i asked jane separately what her plans are after she leaves harvard. she's been in the endowment business for 30 years and wants to be friends with her friends again, personal friends. in other words, she's not going to jump into another professional endowment opportunity right away or resist, but, look, this is the point, guys, no regrets. you can argue that perhaps she and the asset management

industry broadly are doubling down on this strat i ji. it was interesting to note the panel i spoke with despite this theme continue to maintain over evaluation on u.s. stocks, bonds, and credit as a bigger risk going forward, guys. it's a theme we hear every successive year and suspect this is not the last year, carl. >> good point, kelly. a lot more from you later today. kelly evans at delivering alpha. we have a live shot of yellen finishing prepared remarks in front of the house financial services committee. q&a begins in a second. kelly brings up delivering al a alpha, and i was struck by cooperman this morning saying, we don't have, in his view, accelerating inflation, jobless claims, sales to inventory ratios getting worse, and as a result, in his words, only argument now is how high is high? he does not believe we're in a euphoric state yet in terms of m&a and markets, but things like

time warner tend to get us there. we'll hear more about that, i'm sure, later on thaoday. >> praising that deal, murdoch getting deals done, would invest with im. we want to go to the fed chair. >> yesterday, before senate banking, you opined that under this legislation the fed would not have had flexibility to take actions that it took during the financial crisis. i would commend for your review section 2e subsection c page 7 of the legislation entitled "changing market conditions" reading in part, nothing in this act shall be con viewed to require plans with respect to the systematic quantitative adjustment of the policy instrument target described under subsection c be implemented if the federal open

market committee determines such plans cannot or should not be achieved due to changing market conditions. i personally don't believe the language could have been any clearer. it is not the intent of the legislation. would certainly welcome any policy feedback from your experts to assure that it achieves that purpose, but i believe the language is about as clear as the language could possibly be. chair yellen, let's talk a little bit about independence. larry summers in a famous paper in the journal on money, credit, and banking on central bank independence measures independence as, quote, the institutional relationship between the central bank and the

executive. the procedure to nominate and dismiss the head of the central bank. the role of the officials on the central bank board and frequency of contacts between the executive and the bank. do you agree or disagree with his characterization of federal reserve independence? >> i see federal reserve independence -- of course, we are a creature of congress. we have a responsibility to report to congress and you use the term "executive branch," i think in the material? >> well, i used the term that larry summers used in the paper, yes. >> so i see us ased needing to report regularly to congress about our conduct of monetary policy in the economy. >> let me ask you this question, chair yellen. i think it is well established, under the impression, again, required to appear before our committee and senate banking on

a semiannual basis. is it true there's a weekly meeting between you and the secretary of treasury? >> many weeks -- i mean, it's not -- >> most weeks? >> it's not every week, but many weeks we get together and confer about matters of mutual concern, but we're completely independent from the executive branch in the context of policy. >> speaking of mutual concern and independence, i'm not interested in a transcript of a private lunch chon, but would you be willing to report to the committee on the matters of mutual concern discussed in any agreements reached between treasury and the federal reserve? >> i'm not willing to report on a regular basis in private conversations that i have, but any agreements that were reached, certainly, would be in the public domain, but our

conversations -- >> how would they get into the public domain? >> well, if -- >> if you don't report them, how do they get in the public domain? agreements between the federal reserve and treasury. >> i mean, there was, for example, during the financial crisis a question as to what is the appropriate role of the federal reserve in lending programs and when does the treasury need to be involved? when is there a fiscal component, and those discussions led to a formal agreement between the treasury and federal reserve. >> my time is winding down, if i could, another matter, on page 3 of your testimony, it read, quote, even after the committee ends these purchases -- so we're speaking of tapering -- quote, longer securities help maintain

accommodative financial conditions thus supporting further progress in return employment and inflation to mandate consistent levels. is there any current plan or any current commitment to reduce the feds' balance sheets to historic levels, and i'm not speaking of what you may want to do or what you might do, but is there any current commitment or plan to reduce the feds's balance sheet to historic levels? >> well, the fomc stated in 2012, i believe, we issued a set of exit principles in which the principles were overtime we sought to normalize the size of our balance sheet and bring it down to the smallest level consistent with the efficient and effective conduct of mop te

monetary policy. >> do you call that a current plan or commitment to reduce feds's balance sheet to historic lows. >> it's a current plan, discussing principles for normalization of policy, and as i ktindicated in my testimony, expect we'll be able to give more complete guidance when -- later this year when those discussions are complete, and i fully expect that we would reiterate an intention over time to reduce the size of our balance sheet. >> thank you. the chair now recognizes the ranking member. >> thank you very much. legislation offered by the republicans in our committee last week would require the federal reserve's federal open market committee to issue a rule to dictate the course of monetary policy.

in your view, how feasible would it be to design a rule that would act as an appropriate substitute for independent judgment and discretion in the determination of monetary policy? do you expect that such a rule could adequately respond to the range of economic data that affect the economy on any given day? >> i feel, congressman, that it would be a grave mistake for the fed to commit to conduct monetary policy according to a mathematical rule. no central bank does that, and i believe that although under legislation we could depart from that rule, the level of short term scrutiny that would be brought on the fed in realtime reviews of our policy decisions

would essentially undermind central bank independence in the conduct of monetary policy and i believe that global experience is shown that we have better macroeconomic performance when central banks are removed from short term political pressures and given independence in which a frame work of goals clear and in our case those are specified by congress, given operational independence to decide how to conduct monetary policy. the federal reserve is the most transparent central bank to my knowledge in the world, and we have made clear how we interpret our mandate and objectives and provide extensive commentary end guidance on how we go about making monetary policy

decisions. we do, i should say, routine ly consult rules on thinking of monetary policy, and i've indica indicated previously in speeches i've made they can be useful starting places or guides to policy, so i'm not a hundred percent negative on using rules in thinking through what we should do. i think it's a very important to understand that had we followed in the aftermath of the financial crisis, the recommendations of any of the simple rules that are widely discussed, the outcomes would have been more disappointing than what we experience. with the federal reserve's conduct of policy departing very substantially from what those rules would have recommended, we

have had a long, slow grind to get this economy recovering. now, we actually could not have followed the recommendations of the simple rule. they -- almost every rule would have called during, for example, 2011 and 2012 for negative interest rates, something that's impossible, and that is one reason that we began to buy asset purchases. we needed a further tool. given the fact that we have h unusual head winds straining recovery, i believe it's utterly necessary for us to provide more monetary policy accommodation than those simple rules would have suggested, and i think history would show that following any of the simple rules would have given us very

much worse performance, so i feel it would be a mistake, although the rules sometimes do have merit in normal times during the great moderation when they were relatively few shots. in the federal reserve's behavior, did -- was rule-like. it corresponded to the rules, and they can work well, but not always, and we can't be mathematically bound to simple formula. >> i'd like to thank you for that explanation. you could not be clearer. you could not have explain better to this committee why you could not operate with some cookie-cutter rule, when, in fact, as you explain the head winds you were confronted with that feds confront with are required discretion, absolutely

required that you have the flexibility to deal with unforeseen circumstances in making your decisions, and i want to thank you very much. i yield back the balance of my time. >> the chair recognizes the chairman from michigan. >> thank you, mr. chairman. i have a question question, chair yellen, have you read my bill? >> i have looked at the bill. >> you have looked at it? >> okay. >> well, that's good news. i will, then, refresh your memory and address my colleague from california. we anticipate that's a concern of yours. on page 8, under the bill, the gao approval of the update. we're not getting into whether there should be or shouldn't be the rule or does the rule go far enough, et cetera, et cetera,

however it does say upon determining the plans described in paragraph one should not or could not be achieved. the committee shall submit an explanation for the determination, an updated version of the directive policy rule to the controller of the united states and appropriate congressional committees. it goes on to say that then if they determine you're not in compliance with the new rule, then you -- then you get audited, all right. it does not say that you cannot change the rule. what it says that you have to notify us and note my them. i'm a history buff, all right? went back, did some history. we got to where we are today because of the employment act of 1946 where congress felt it needed to lay out what that policy was. in the 70s, they felt congress, congress, my colleagues, felt it was too vague, and therefore created a bill that would strengthen and clarify the 1946

act. it actually had three goal, not two. it's not a dual mandate, but a trimandate by congress, stable prices, maximize employment, and moderate long term interest rates, okay? so on page 3 of your testimony, you're talking about, and i'm going to quote -- second paragraph down -- even after they end purchases, help maintain accommodative financial conditions, supporting further progress in returning employment and inflation to mandate consistent levels. where in the humphries-hawkins act -- sorry, my colleagues, by jimmy carter in 1978 after democrats in the house and senate passed the bill, where in the act do we lay out a 2% inflation rate? do we do that? >> you do not make specific in the legislation -- >> do we lay out exactly what employment rates or unemployment

rates should be? >> the fomc has -- >> no, no, i'm sorry, congress, the bill passed by democrats in the house and senate signed by jimmy carter, does that mandate what the employment rate should be? >> the bill uses the term, as you said, maximize employment and price stability. >> we don't straigictly say 2%. >> it's obviously with language of the type that's in the legislation. we need to -- >> do we lay it out? >> you do not. >> okay. all right. there we go. all right. so i'm curious how us requesting a rule, a simple step in most people's view, a simple rules-based policy, how is that different than the mandate, the trimandate laid out and defended every single day by others in

the committee? how, when we're asking for what the rule is -- not telling you what the rule is, not being say rule and then let us know, so that we can have oversight. i hear, reference my rant on oversight to my colleaguing who can go back and watch on youtube if they weren't in the committee room. so if we can get as detailed as the humphrey-hawkins act, or lack of detail, why can't we have a rule and have you all at the fed accept that? and if you're not willing to accept it because you're concerned about your independence, is that one -- i don't want it put words in your mouth. is that one of your reasons why you don't want to sign on to the garrett-hig garrett-highsinga bill? >> i'm not aware of any literature that establishes that adopting a central bank, whether it marks it public or not,

adopting a rule is the most desirable way to run monetary policy, and i would say that many -- >> might want to talk to europeans about that and a lot of our economists as well. >> well, what the europeans do is the ecb has been given a great freedom, and the they have defined a price stability objective -- >> all right. >> -- and certainly do not -- >> my last request. if the garrett-highsinga bill isn't enough i would like to know when the fed are will call for a -- >> the tonight of the questioning is a little more energetic today obviously from congressman hieissinga, grilled by the house services committee talking more an independence. we'll bring it to you. meantime, dow is up almost 30 points and we're back after a break. so, your site gave me this "credit report card" thing.

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right out of the gate, q&a of janet yellen in front of the house financial services committee challenging her on fed independence and her relationship with treasury. we'll monitor that and bring you headlines as they come. in the meantime, something rick santelli no doubt had opinions

on. good morning, rick. >> not only an opinion, tomorrow, a special guest. tell you what, i've seen a lot of these testimonies over the last 35 years, and this one's pretty exciting, and a lot of it is based on the federal reserve accountability and transparency acts of 2014. it's a house piece of legislation. of course, the congressional leaders in that room understand it pretty well, because they wrote it. i guess we could debate the whole notion of counterfactual, but usually when conservatives come up with counterfactual arguments to try to look at things through a different prism, regarding some of the programs and things question after the credit crisis, it's always pretty much thrown out. if really was a big line of against, and janet yellen defending what she called operational independence. and i'll tell what you, operational independence, to me, sounds as though, you know, we will do what we want, when we

want, how we want, and basically that's that. so i think it's very fascinating that this is a form of discussion. and with regard to independence, boy, that is a really fascinating topic. consider if we look at the relationship between the treasury and the federal reserve on issuing debt and buying debt and, of course, the owner of the debt, the federal reserve, is the largest owner of the debt in the world now. surpassing china and japan, of course. just think if that was a private sector. a private sector issuer that was having regular communications with the biggest purchaser. i think it's a great discussion to have. and on the rules based, i don't know, take the highway system. take all the signs down, left turn, straight -- one-way streets, speed limits. i think rules-based is one of the main stays of, 200 years this country's done more than any other country. predictable, fair rules. but, you know, if you don't want rules, what you want is your own

full discretion. that would be called operational independence. another thing, exit fees. i'd like to see exit fees come up. january yellen kind of domped the question in the past. in the end, it bugging me a bit when you see the treasury prices have fallen, risen in many ways due to what the federal reserve is doing with regard to its holdings. so to think that exit fees, being charged basically to get at your own money, because it's in a place that was strategic in the federal reserve's accumulation of treasuries and they're nervous how that unwinds doesn't kwipt seem fair. quickly, show the china gdp chart. cause to celebrate. 7.4. by the looks of the chart if that was a stock, i don't know if i'd buy it. back to you. >> ending on china, rick santelli, thanks very much. lee on cooperman, larry robins, all talking about best ideas in today's delivering alpha conference. dominic chu monitoring details. how are the ideas for us? dom? >> right.

mike novagrass, microplays what's happening. look at his theme, all about investing in regime change. talked how last year it was india and japan, india recenter with this change. now talking a be brazil and argentina as well. saying that brazil is so bad it's good. saying that he thinks the president there will lose the upcoming election in brazil and that will be positive for brazilian equities. also mentioning that the same kind of situation is going to happen with argentina as well, with the president there. he says forecast to lose the presidential election in argentina. so as she goes out, argentina may also be an opportunity to buy up some of that exposure, if you're looking for that regime trade play. so, again, an interesting concept. what we know, mike no virginiag

saying arg taentina could be th next bing thing. that's what he's looking for and pitching at delivering alpha on the best ideas panel. back to you. >> thank you very much. brazil and argentina. more ideas coming at you from delivering al 235. coming up on the show, the co-founder of elevation partners joining "squawk alley" live to weigh in on apple's partnership with ibm and, of course, the idea of media consolidation front and center today. also, keeping an eye capitol hill, where fed chairman janet yellen is taking questions from members. house financial services committee. we'll see if they let her answer those questions. we're back after a quick break. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and e-trade. i'm monica santiago of fidelity investments,

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