and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm barack obama along with joe kernen and andrew ross sorkin. president obama slapping russia with some of the toughest sanctions yet in response to russia's involvement with ukraine. targeting now countries like russia's oil prizes rosnet and gazprom. those are close allies to russia's vladimir putin. >> we are blocking new financing of some of russia's most important banks and energy companies. these sanctions are significant, but they are also targeted. designed to have a maximum impact on russia, while limiting a spill over effect on american companies for those of our allies. >> putin quickly respond to go

president obama's new round of sanctions, warning that measures would back fire and bring u.s. russian relation toes a dead end, causing serious damage. as for the russian market reactions, take a look. stocks in moscow were down sharply in early trading. you can see they're down by 4.3%. later in the show, senator bob corker will be joining us. he is a member of the foreign relations committee. he's been calling for tougher sanctions on russia. we'll have more of that coming up. right now, let's get over to andrew with more of today's corporate stories. >> good morning, becky. ge, former parent of this network, reportedly seeking buyers for appliance unit. it tried to do this back in 2008. it scrapped those plans, though, given the financial environment at the time. ge's ceo jeff immelt promised investors to divert interests that aren't seen as core. the company is set to post quart ily results before the bell

toll. we'll bring thou to you. if you have a dishwasher or a washing machine or -- you know? it's -- they're not going to do that any more? >> they've been trying to get out of this for a while. >> i know. i know. >> it's not profitable. it's low margin. >> it's an old american iconic brand. >> like westing hois. ge isn't in lighting any more. remember ge, we bring good things to -- >> i know. >> it's just that they -- people know they want to get out and so i don't think they've ever gotten -- >> they never feel like they can get the right prior to price. >> someone could do something. we've seen it, whirlpool and those manufacturers. someone could -- it's a global -- i'm sorry. you could sell it anywhere and it's a pretty good business.

>> is it haier? >> yonl. i winner wish we could put something together and, you know, rationalize the operations, stream line some things and do some advertising marketing. i bet you we could make a go of it, ge appliances. you know, it's hard service. >> service is hard. >> service is really hard, warranties and getting people there. the may tag man, he didn't really exist. >> i don't think there was ever a ghie waiting for you to call. but what if it goes with the taxes? is that going to be a problem, if they sell it to their foreign buyers? one of our viewers wrote in saying he was disappointed in andrew saying basically you're calling 47% of the country that doesn't pay taxes they can't be

patriotic. so half the country is unpatriotic. that's sad. >> isn't there some other way they can be patriotic? isn't there -- can they salute the flag? can they sing the star-spangled banner? is there any way you can be patriotic without paying taxes? >> i thought it was very clever. someone wrote it is very -- >> it is very clever. >> that andrew has put 47% in the country in the unpatriotic -- >> thank you. >> let's talk about ge. doing a reset there and microsoft now set to announce 6,000 job cuts today. the company's new ceo nardella outlined plans for a leaner business in a public memo last week. many of the cuts are expected to

come from the newly acquired media business. liberty says it doesn't intend to make an offer for the rest of it, air to commercial broadcaster, itv best known for broadcasting britain has talent and joe's favorite, downton abby. >> shares rising this morning. >> and then, k, there is rupert murdoch. we broke the story here first on "squawk box." time warner has rebuffed its $80 billion takeover bid. there are no talks under way, but murdoch is unlikely to walk away anytime soon. i don't know if you saw it, jeff put out a video prompt to the proposal. so, you know, they actually videotaped jeff yesterday, i believe at time warner center saying we don't want to do this,

we've decided against it. but most importantly, he said we believe our empty growth plan is better than anything that fox would ever basically be in a position to offer. >> there's not enough money in the world for you to buy us. there's the makeup girl and then there's the guy going, take three, jeff. and time warner, but it's a media company. so it's like they -- >> so the response that they actually gave to fox was a couple of tersly written -- >> ride. >> but the shareholders -- actually, i believe the video was made for internal purposes. >> that makes sense. if it's for employees, you get that. now they're going to run it on cnn as a reality show. that would be good, couldn't it? they are not sure what to do, so -- murdoch puts time warner

on wish list by andrew ross sorkin. can you summarize -- i don't feel like reading this. you wrote it. can you tell me, is there anything in here that you don't know that i haven't -- tell us. >> i would -- >> as you would love to know, we broke all of this news on "squawk box." >> no, it's every single -- >> you should not go there. you called it exclusive. >> anyway, i'm already upset about that. >> we wait all this time for you to timely break a big one and then we don't get credit. page b-8, what do i need to know about this? >> i'm just trying to -- >> no longer. >> blooper, i would like to see that. god, would i love that. but -- >> so we need to say a couple of things. >> tell me what's in here. >> the two big issues, the

nonvoting stock seems to be something that most of the shareholders do seem to care about, which i was surprised by given that 70% already own it. because of the -- you think if i like rupert stock, why do i care? that's is a big issue. and they're saying it's a big issue. >> why wouldn't you accept the -- >> if you chose to put that am of money, and you also say to yourself, rupert murdoch may not be around forever and what does that company look like after and, therefore, the controlling shareholder. >> is that a negotiable point? >> i don't believe it is. i don't believe it is. and i can for better or worse, price will win out on anything. so the bigger issue is can they get to $100? most of the investors i get to yesterday said give me $100. i'll give you a deal. >> what if they don't care about the voting any more? >> a little less interesting.

i think the price is going to be more interesting. most important is watching the stock with 21st century fox. that went down yesterday. and so the extent that that stock can hold up or goes higher, that makes others a lot easier. for them, for this to actual happen, fox has to come to the table. and the question is what they have to offer just to get to the table to at least negotiate. in part because while they threw out that number of $1 billion, they believe there's a lot more if they can see what's going on. of course -- >> with due diligence, you mean? >> if you're time warner, you don't want to let them -- >> david makes a very interesting point. we talked about this with jerry on yesterday. >> jerry levin. >> former ceo of the company and he talked about this as being a backwards deal. david said how technology is impacting all of this and where google is.

by the way, if you're jeff beszos and you want to be in the content game, do you want to buy this? >> say fox really needs time warner and them it doesn't. the media has no idea. they just write every possible angle and story and conclusion on both sides. we've covered it all by now. we don't know what's happening and what is the end result. what is the bottom line? does fox needs to do this and does rupert always get his man? >> i say rupert always gets his man. i suspect something happened. >> billions of dollars. billions in synergies, right? >> probably. and if you decide you're shutting down down, one thing that is so interesting, she at least comes to the additional

differently, to the point all the different creative pieces. if you do saturday go r gettel those things. >> this has caused a val owation for cnbc. >> i saw six to ten. >> after or before? did you add that to the 80 or is it included in the 80? >> it's included in the 80. >> and hbo is worth $20 billion. 25 billion if you consider the future revenue of billions. >> yeah. >> that sort of pressured the deal to compete with that. showtime with andrew ross sorkin and the executive producer, everything has to compete. united health is a dow component. nike, goldman sachs -- what else? visa. >> is kraft dow or -- >> kraft -- >> you've got to quit changing

these things so much. is westinghouse out? okay. chef ron? mobile? >> anyway, outlook quarterly results, at least google and apple are in there. earnings of $1.40 a share. obviously you put them in. beating the street's estimate of $1.26, revenue topping consensus and the company is raising its full year revenue guidance above the street. and lots of big moments during yesterday's delivering alpha conference, thinking any miss reguests. then he brought out bill ackman. >> timeless moments. the two had, as you know, a very public war over herbalife.

i started to say it correctly and i had to quickly say it incorrectly. for the last 18 months, it's been 18 months that you've seen it basically every day. at least we talked about it at one point. they hugged it out on stage acting like old friends. and ta was interesting. to me, it looks like icahn thought ackman had a mouth -- and it looks like ackman thought -- or looked like he had head lies. >> although they said a lot of nice things about each other. >> oh, look, i don't want to touch your lip. >> bill went for the hug. i think carl was a little more reluctant. i think -- seriously? >> sometimes that's awkward. >> wow, two guys like that in a situation like that? >> now they've made up. i'll tell you, ackman is a good looking dude. especially with the -- what is

it? stuff in the eyelashes? i love his eyelashes. >> it's natural. >> he's even luckier. his eyebrows, your eyebrows are to his eyelashes as -- those are the -- i mean -- >> your hair? >> to my hair. meanwhile, i sat down with stan druckenmiller. he warned the audience that said policy should have us worried. >> to face fed policy since not only unnecessary, but fraught with unappreciated risk, when ben bernanke and his colleagues instituted qe1 in 20309, financial conditions and the real economy were in a dysfunctional meltdown. the policy was brilliantly perceived and a no-brainer from rafk/reward perspective. but the current policy make no sense from a risk/reward

perspective. five years into an economic and balance sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. >> now let's get to kate kelly with some of the other big highlights from delivering alpha. and the first thing stan said when he took the stage was how great the conference has become. >> i know. i was amazed at his stature. >> he made some similar comments before the financial crisis, a couple of years before. >> about the fed, not about cnbc. >> we have a clip, for sure. >> big time. there are clips everywhere. so that was nice. >> yeah, no, it was a great clip. >> and on the record saying -- but you know, he warned not to get too excited because it's not

systemic. but it's registered at this point back in 2008, what caused all the problems systemwide. at this point, it's not systemic. >> and you know what i thought was interesting about what he said was the longer we go on with quantitative easing, even if we're tapering, the greater the downside risk is. >> what it is or how advanced it is. >> right. and it was galvanizing. i think all the debate about the lower interest rate regime and what it might mean in the future, that was one of the most interesting story lines yesterday. >> and my question was the demand whole from this once in a lifetime or once in a century financial -- well, not one in the century, but this huge collapse warned that even to this point -- >> right. >> the fed maintains it. >> and he thinks it's past the point of futility. >> but at a point where the downside is obviously some day may come back to haunt us. >> yeah, no, absolutely.

can i talk about a couple of other key moments. let me be the judge of that. >> ken griffin on 2008 and -- >> you're not doing the hug again, are you? >> cooperman and christie. >> lee was amazing. she didn't see chris christie. >> you missed one of my favorite moments of the day. multiple moments, really. >> but john was tough. john can be very tough. sometimes not quite as -- >> john harwood, right? >> i don't think he's quite as tough when the president copped a fly and he went oh, mied go, you're wonderful. >> he kept the equal lyilibrium. he said you were obnoxious enough to ask me again. but it was a very good matchup. anyway, one of my favorite moments of the day was ken griffin talking about how citadel came back from the brink. in 2008, they lost millions of dollars in a matter of weeks.

and they managed, interestingly enough, not only to sole advantage the business in general, but to make back their high water mark and their hedge funds four years later. here is his recollection of what happened at that time. >> that was a very dark moment for us. as a firm, we had gone through almost 20 years of never experiencing a loss and as you're well aware, in 2008, we lost about half our equity capital in 16 weeks. cnbc had the van parked outside of building trying to get the bankruptcy footage if we had failed in 2008. >> what a dark moment, you know, overall. and just the cnbc van being a galvanizing symbol, i'm sure. but that was interesting, i thought. and he sort of talked about taking stock of what needed to be fixed in the business. one thing they did was they slipped it into level one assets. they got out of level two and three assets, things that were too ill liquid and too complex in their view to have on their

balance sheet. i also enjoyed hearing from lee cooperman, who is sort of an eternal optimist. and faber called him on that and said when was the last time that you were bearish on the markets? he did acknowledge that we were going through a series of cycles. here is where he thinks we might stand today. >> bull markets are born in pessimism, they grow in skepticism, and they mature in optimism and -- in euphoria. so we've passed pessimism, we've -- the past skepticism. i think we're in the stage of optimism, but i don't think we're in euphoria. >> so, interesting what he says there, right? because janet yellen, obviously, the other day talked about overly high valuations in biotech or tech echoing what some hedge fund managers have said, as well. david einhorn, david loeb.

>> he was asked about that yedz and he said what does the fed know? >> i just heard from different people that her staff argued to put that in there and that she wasn't so sure about it. i guess they thought if these things pull back. >> i said at what time is the buy, sell or hold segment that yellen is conducting. i have a couple of stocks that i was to ask about. that is -- that's a -- to me, it's a rookie mistake. and don't ever do that again. even greenspan came under pressure talking about the whole marketist. but to talk about individual sectors of the market? are you kidding me? nobody cares what she thinks. we care what she's going to do. >> she thinks.

>> spooking of valuations, i thought -- if that's what she thinks, is this an argument to be pulling back? >> right. that was enough, you know? >> okay. >> don't you think? so it's an indication she's going to raise rates more quickly than we thought? >> you don't think it was an indication of that? >> i do, yeah. >> i think it was cover. i think it was cover if something blows up. >> i thought one moment was druckenmiller. he said it's sort of get to go be nerve-racking in some of those markets. we see high pollutant valuations. >> there are about eight charts and every one of them, charts go from low on the left to -- and every one of them was way up here. he's like, we're at zero and everything is up here. >> right. right. exactly. >> every ounce of his intuition tells him -- yeah, that was a good quote, too.

>> kate, thank you. >> it was great. thanks to you guys for bringing great coverage. >> when we return, the shock wave in the media industry. will rupert murdoch up the antifor time warper? can a mega risk like this get done in today's environment. on this day in 1955, the expansion of magical empire. disney land opens to the public for the first time and the rest, these, is history. "squawk box" returns in just a moment.

time warner is the latest in an industry that has seen its share of consolidation. we have george, international business editor at the hollywood reporter. hey, guys, thank you for joining us. the big question, is the anti-trust component, some folks i've talked to on the time warner side, people close to the matter trying to suggest that they're going to be making a big issue of that. do you think it is a real issue, george? >> well, i think, you know, there are no official rules in terms of box office market share, things like that. but combining two big studio

versions alone, that's faced some concerns with a time of industry people. and i think you'll hear those concerns echoing in washington, as well. the same is probably true on the tv network side. some people will say and producers have a tough end in the future, selling the program to a bigger type. so we do expect quite a few people to make a big market move. >> andre, you can be the judge. >> i think that's right. i think there's a number of issued raised by the transaction. the anti-trust agencies will be concern, the fcc will be concerned. and the way the anti-trust agencies work is they identify relevant lines of commerce where the two companies compete and you have the issue of cnn and fox news, you have the issue of -- >> cnn and fox, take them out of it. i think you're right, that's a hot button and i think fox has decided let's not even go this. but to the extent studios are an

issue, do you think there is that much overlap? >> there is. there is overlap and there's going to be concern. with movie studios, we're talking about -- i guess there's six major movie studios and acts of acquisition to be reduced down to five media studios. so it's a concern. under the anti-trust laws, one aspect of it is -- there's a couple of anti-competitive theories that are used in the anti-trust. and one is the latest in conclusion or coordination. so something less than outrate colusion. but potential for coordination going on in the future. >> i understand when you're going from four to three, six to five, is that a bit of a stretch? >> that is correct. 4/3, a big problem. 6/5, normally not as big of a problem. but under the anti-trust law, it's still an issue and a

concern that the agencies will -- i think the same thing goes with tv networks, as well, because the most five major tv networks, competition would be reduced there, as well. >> andre, what does this mean for all the other consolidation that's taking place in the market? comcast, the parent of this network is obviously trying to do the deal with time warner cable. that's an issue about type, directv has its own transaction with at&t. that's on the table. the scc is going to have to look at those and justice is going to have to look at those deals. now you add this to the pile if, in fact, there would be some form of an agreed deal. does that say that the pile deals -- anyone who was worried about contend and power before, do us look, these guys are going to be getting bigger, too? how do you look at that? >> i think that's exactly right. i think this is the response to the distributors, combining at&t.directv, comcast and time

warner cable, they can merge and have more bargaining power against the content providerses. content providers have a lot of leverage as it is because the distributors need to content. obviously, the content provided distributors to get to that american household. when they say comcast, time warner cable merging together, going to have a lot of pipes, all these households around the country controlling, you know, nearly 20 out of the 25 major metropolitan markets. i think this is a response to that saying that if the anti-trust agencies and s.e.c. are going to allow that consolidation to happen, then i think this response here is -- this should be allowed, as well. >> george, culture question. most of the people that i know that i spoke to yesterday that live in and around the world of time warner, culturally, say they are averse to working for rupert murdoch. what do you make of that? >> well, i think it's an individual and neutral decision.

but i think in general they talk about any deals with fox, the issue of rupert murdoch always comes up. i think one of the tags and i lead with those concerns is because of chase carrie, who has a good relationship. i think he could play a big role behind the scenes that are in keeping investors and the other people looking at the deal, confidence and focus on proper business in our decisions. and, you know, they could take a little bit of the heat on the political side off the review here. >> so you were -- you were able to detect some type of media chasing or animosity towards someone perceived to be conservative? are you serious? the mainstream media seems to be pushing back on maybe having a -- boss? where did you pick that up? really? >> now you're implying that maybe the mainstream media may

have a -- >> i'm not talking about the cnn component. >> no, i know. i know. >> he talked about -- >> i talked about everybody. i said most of the people at time warner think rupert is either a devil or a close friend of the devil. >> i'm curious, the hollywood folks who work for -- >> right. they hold their noses and go to check their paychecks. >> is that what -- >> yes. unless you're mel gibson or something or join voigt, willis, adam sandler. i know there's like six of them and a couple other -- jessica simpson, i think, and you have to go way down after. >> okay. >> there's like eight of them total. just 16,000. >> we're going to thank george and andre for helping us through in this morning. i appreciate that. we'll continue the conversation here. >> becky, you're going to go to that, but given our conversation yesterday, this is mandatory for

you and for any viewer that's interested. >> jack lew's free america plan, it's basically talking about if we don't fix the tax system, if we make it illegal to do these things and what the unintended consequences will be, mr. lew doesn't know much about economics. treasury secretary, it just came out. asking no push to do it. >> the economics say the real thing that has to happen is the tax law has to be changed. >> he's not going to do it in the next few years and this is

going to continue to happen. but if we did make it impossible for them to be done, wouldn't foreign corporations buy more of them here? we need capital to be attractive here. >> we'll talk more about that when we come back. also, the dow hitting a 15-year high. where investors should be looking for value right now. "squawk box" will be right back. ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us. offers end july 31st. you wouldn't have it she any other way.our toes. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready.

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welcome back to "squawk box." dow component united health reporting 16 cents ahead of the $1.26 estimate. it boosted its full year revenue forecast. toymaker mattel ends three cents

a share of the quarter. estimates below 18 cents. ceo brian stockton says mattel is now positioned for better performance in the second half of the year. and beyond. that's weird. there is that big of a myth. stockton not necessarily affected. it looks like a big moon there, but the chart goes from 28.75 to 2 39.75. if you were wondering about how that stock has been trading in a dollar range, there you see it, it's been up and down based on a dollar. did you know barbie has four friends you can buy? >> ken. >> who? >> piper. >> stacey. >> stacey is a friend? >> yes. >> and who is the one with the brown hair, the brunette?

t. >> i don't know. >> and there's only one guy, ken? >> there's a dark haired guy, too, but i don't know his name. ken is the blond and then there's another one. >> barbie sales have been uneven. that's been part of the problem with mattel. how do you update -- >> well, did you know that they have a barbie news caster? they've been trying to give her different jobs along the way? plus they have holiday barbie sales which are pretty hot. >> for christmas. >> korea. they're collectibles. it's like 50 bucks. >> you know a lot about this. >> i know because of the girls. they like the holiday barbies. >> but the -- >> oh, with the big hair, yeah. >> anyway, another record close for the dow yesterday. boosted by m&a news and quarterly earnings, our next guest says stock valuations are stretched and vulnerable to even bad news. russ is the global chief

investment strategist at blackrock. i want to be careful with what you're saying. you think things are getting expensive, but you like stocks better than anything else, right? >> i think that's fair. our view right now is stocks are no longer cheap. they're particularly stretched in the united states, but they're not so stretched that these valuations in and of itself are indicative of a market top. now, that said, if what you're worried about is more of a garden variety correction, then yes, i do think stocks are vulnerable, not just because of valuations, but because volatility at these levels tells me there's not a lot of bad news discounted into the price at least not as of today. >> what's a garden variety protection? is that 8%, 10%? >> it's been so long, i think we've forgotten what it looks like. historically, it's about 10%. >> so you would not be at all surprised by a 10% pullback, but at the same time, if somebody is trying to figure out what to do with their money today, you'd

say go ahead and try to allocate the stocks? >> we would. again, we think the stocks will be the better value for long-term versus bonds and cash. but i think you want to pick your spot. within the u.s., the large cap, the mega cap, the cyclical name looked to be the best value. the other point is that when you look outside of the united states, the valuations are not nearly as stretched. so we do think that there are actually some bargains still to be had in both developed asia and in emerging markets. >> are you talking japan or beyond japan? >> we are talking about japan. japan has just pointed year-to-date was a very crowded trade coming into 2014. everyone loved it. it's underperformed for the year. but this is one of the few, maybe the only chief market left in the developed world. it's trading about 1.2 times value. it's a 55% discount in the united states. now, japan for a variety of reasons should be cheap. it's not clear to be this cheap. >> when you talked about some of

the things that you think are getting lofty, a little pricey, you look at some of the segments janet yellen pointed out this week, right? >> we have. janet yellen was trying to get at making a clear point which is we get it, we being the fed, that we know that there is some impact of having -- for long. we think it's justified. but yes, there are parts of the market based on equities and credit that feel stretched and arguably, they're stretched because they've been in this period of very unusual monetary policy. >> so the grand sum with all of these things, what do you think about bond prices at this point? >> bond price res clearly expensive. this is one of the reasons we still stick with stocks. but i think it depends on what part of the bond market you're looking at.

in particular, it was the short end that's the most vulnerable. that's the part of the market that will react as investors start to discount that first rate hike, which is likely to happen sometime in 2015. >> russ, thanks a lot. great talking to you. >> thanks again. coming up, how does the nation's largest homeland review the housing market right now? that's one of the big topics for our 7:00 a.m. guest host. wells fargo chairman and ceo john stumpf is going to be here. we're back in just a moment. what would happen... if energy could come from anything? or if power could go anywhere? or if light could seek out the dark?

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welcome back. u.s. equity futures at this hour are indicated down significantly this morning, although 17,138. right near -- is this another high? >> getting close. >> some people calling it fresh highs and suv. i don't know if it's fresh. >> it is. it is the 15th high this year. >> but a new high says it all. there's no fresh highs or roton highs or -- brand new high. >> single best idea. next, checking into the luxury hotel business from the plaza in new york to the savoy in london. fairmont has more than 80 locations worldwide. we have to pay attention here, andrew. i don't think -- this is not -- you have not utilized like a swiss hotel have you necessarily or a fairmont? this is another luxury chain to consider. >> the fairmont?

>> yes. >> love it. >> which one have you been -- >> i've been in many over the years. >> not surprised. jennifer fox will join us right after the break. and we are waiting on morgan stanley to roll out results. should happen during the next hour of "squawk box." ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening. they don't want to just see what's happening, they want to know and understand why it's happening. anybody can just put data up, but we want to get a reaction, make it far more interactive.

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summer vacation season is in full swing. we've already conducted the interview with this next guest.

>> during the commercial break. >> fairmont hotels has more than 80 locations worldwide from the beaches of barbados and bermuda to the heart of new york city. with us on set, jennifer foxx, president of fairmont hotels and resorts and international president of parent company frhi. jennifer, not -- i needed to just get up to speed on all the different brands that are under the fairmont umbrella. what are they? i haven't been to a -- >> rappels. >> haven't been to one rote. >> that's your ultrahigh end luxury. >> in asia, right? >> absolutely. fhi specializes in the luxury upscale segment and we've got three greats brand, our super luxury brand, then the fairmont and the swiss hotel brands which are our luxury brands. so we really specialize in that high end luxury travel. >> which includes, i guess, it's services is a very top of the list of all these things, right? service where you can't even --

you're not even expecting, butlers and things like that? >> absolutely. absolutely. many of our hotels we have butlers, particularly the savoy in london which is renowned for its butler service. but we specialize in high-end travel experience for that luxury traveler that wants something different and unique and is willing to pay for that experience. so we really do specialize in the high end. >> and are you in an expansion phase now, or a phase where you redo all your hotels? where are you right now? what makes sense given the future that you see in the world? >> now is the time to be in the luxury travel business. consumers now, they're really willing to pay for luxury. there's been pent up demand for people to travel to these unique destinations. so we're very much in a growth phase as a company. we're currently at 110 hotels around the world today, going in the next five years to about 170. so we've got about 60 hotels under various stages of development all around the world. so very much in a growth phase looking for destinations that really appeal to the luxury traveler. so that we can satisfy their travel needs wherever they go in the world.

>> when we have more midscale or mid to upper scale people that run these hotels we talk about occupancy, and the rebound from 2008, and 2009. take really long to ask this question, as we picture -- do you even -- are those metrics that you follow with rev down at one point, was occupancy down and now are you full again? >> oh, yeah. >> it's come back all the way? are we at a ten out of ten? >> no absolutely. certainly during the financial crisis the hotel business is very cyclical so we suffered just like any other market suffers. but the great news is there's only good news in the travel business right now. and business has rebounded very, very strongly. particularly that luxury consumer. they've got a high disposable income and they don't want to spend it on jewelry and they don't want to spend it on new cars because they've got all of that. what they really want to spend it on is unique experience and travel experiences and multigenerational travel

experiences so in the luxury set now, we've experienced great growth, great occupancies so the world has really come back. and we're getting to enjoy that right now. >> what were you doing during the financial crisis? did it stop all construction and expansion or did you expand even though you were suffering in terms of customers? >> look, really slowed down. it didn't stop completely. you know, actually, you know, that old saying never waste a good crisis. there was some owners and some developers that continued to develop their product. some projects went on hold but the great news now is all those projects that went on hold are now -- have all started up again so we've got 13 hotels opening in our system over the next 12 months. the next 15 months. so we've got just, you know, massive growth right now, because, you know, the market's about to get strong again. >> raffles -- >> first of september. >> in september, andrew. >> i think we should do the show from there. >> i'd love that. >> we'll good about that. feel positive. >> move everybody over there? >> the election's done. i think -- someone told me to

wait for the election to make sure everything is okay. >> what's great about istanbul, it's now one of the real hot destinations. europe is always hot for north american travelers. paris, you know, where we've got raffles, london where we've got the savoy. americans just love to go to europe. but istanbul is the hot new market. and we've got a swiss hotel already operating there. this fantastic gorgeous raffles opening on the 1st of september, and then early next year we're opening a fairmont hotel. so raffles istanbul is going to be one of the hottest new hotels. >> was it an existing building or did you go from the ground up? >> this is a brand-new building. it's a fabulous new building in a center where you've got performing arts center and great restaurants and amazing shops. all the top luxury brands are there. so, it's really going to be quite unique. and we're actually opening with very strong occupancy. which is great. >> you keep files on who comes and what they like. that's what all luxury is doing now, too. if you come back they'll greet you when you're checking in and know you and know your tastes

and everything, right? >> what we're finding is one of the big trends in the industry today is personalizations. you know, you want to be treated different and your needs are different than my needs. so what we want to do is identify what those unique needs are. and then satisfy our guests on a really, really personal level. really making that personal connection with them so that we know them and they know us. and then when they stay with us around the world, you know, we satisfy their needs wherever they stay in our brand. >> okay. so you've got all her personal contact information? you can send -- >> i'll send it her way. >> e-mail that over to me. because you've got that -- when you sat down, it was -- so you'll send that to me? >> during the commercial break. done. >> thank you. >> i would be delighted to be your travel adviser any time, anywhere in the world. >> thank you for coming in. >> it's my pleasure. thank you for having me. >> when we return, more highlights from the delivering alpha conference. also, wells fargo chairman and ceo john stumpf is on his way to the set. he is our guest host for the next hour of "squawk box." we'll be right back. the cadillac summer collection is here. ♪

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welcome back to "squawk box." 24 hours ago, a shockwave went through the media industry. >> time warner has officially rejected an $80 billion formal offer that they received last month from 21st century fox. rupert murdoch's company. >> both sides have weighed in. what are the chances rupert murdoch gets his hands on time warner? a "squawk" exclusive. wells fargo chairman and ceo john stumpf is today's special guest host. the head of the nation's largest home lender unveils his outlook for the housing market and the economy. and the finale of delivering alpha. >> hey, good!

>> carl icahn on the set with bill ackman. the second hour of "squawk box" begins right now. good morning, and welcome to "squawk box" on cnbc, i'm joe kernen along with becky quick and andrew ross sorkin. the futures are down this morning. i'm not sure what -- we're down 83 points on the dow. we're finished now with yellen speak. i'm not sure what we've finally decided after a couple of days of that. after anything is new or old. the ten year threatening to go under 2.50. >> i heard from mark grant this morning saying look out for 2% on the ten year. >> and i don't know how to -- i have no idea what that means. we did our pimco friend, they

have a new term called the new neutral. that is that the rate without the fed on fed funds globally is going to be very low for years to come according to them. i don't know why. >> he thinks when the fed actually starts raising rates they're only going to go to about 2% instead of 4% or 5%. >> for years and years and years. >> let's get to some of our head lines this morning. it is a busy day for economic numbers. at 8:30 eastern time we'll be getting june housing starts and the weekly report on initial jobless claims. housing starts are expected to post a 1.4% increase. jobless claims are seen rising by 6,000 to 310,000. at 10:00 eastern time, the monthly philly fed survey will be out. and dow component united health beating the street's estimates with its latest earnings. also raising revenue forecasts for the year. the health insurance -- insurer's results were helped by a jump in membership for its health care plans as well as growth in its pharmacy services division. >> delivering alpha concluded last night with a hug on the stage. carl icahn and william ackman,

they are friends again, hugging it out. billionaire investors who've been at odds over nutrition and diet considerable herbal i've made up yesterday. scott the judge wapner presided over the truce. >> andrew, amazing that 18 months ago ackman and icahn were yelling at each other on the phone. right here live on cnbc. yesterday, they shared the stage at our own delivering alpha conference and talked with carl. then, there's bill. bill came out. there's the hug seen round the world. i asked both of these guys how they were able to put all of the bad blood behind them. here's what they said. >> they called an assistant picked un, he wasn't in the office. i said tell carl i'm calling to forgive him. and it was a true story. and she said oh, you know, i think he'll really like that. okay. so he called me later that afternoon, and we chatted for 45 minutes, and you know, what we

talked about, we would be on herbalife in about 30 seconds. >> i do respect bill. and you know, i was thinking about it before bill called i said, you know, it's almost crazy that we're at these loggerheads, because i've heard you say different things about different companies, and you are one of the few guys that really does speak out. if you don't like the guy -- there aren't too many guys that can do that. i respect what he said here and there. what the hell am i fighting so much for? and then you called and i said hey, great. i called him back. said it's blessed to forgive. you know. that's how we left it. >> so ironically, maybe these guys who hat first seemed so different, it's not activism old school and activism new school, maybe these guys are sort of from the same school. their m.o.s are a little bit different, but they're after the same thing, andrew, becky, joe, at the end of the day. >> which is? >> trying to get what they want -- >> the same money -- >> you can't just say money? >> of course it's money.

but, you know, i think as carl said -- >> it is more than that. >> they keep score. >> they definitely keep score. >> the money is a score card. >> joining the score card. >> did you ever see the two of them teaming up? i've been surprised by -- >> i don't think it's out of the realm of possibility. they're both in fannie and freddie now. which is interesting. i don't think -- i wouldn't put it past them. >> carl complimented among the valeant structure -- >> that's really what started it all. carl did an interview with david faber, at a conference i think, and carl was complimentary of bill in the valeant/allergan thing. at a time when everybody else was seemingly really critical of how that whole thing came together. bill saw that. and reached out. made the first phone call. and here we were yesterday. >> kind of cool. carl's like whoa, you can do that? i can buy that? and -- >> right. >> we have a ceo here. i actually want to ask him what he thinks of that but we'll get to that --

>> wait a minute i build this big position up -- and this is awesome man. this is woo-hoo! carl would enjoy -- it wasn't done exactly like that. i don't think he bought it and then went to -- but did raise a few eyebrows. >> a lot of eyebrows. right? >> perfectly legal. >> will it remain that way? that's the question. a year from now will it still be? i don't know. >> i would say probably still will be. i mean it's two private equity firms decide to collaborate on acquiring a company and making a bid for a company, is that so different than a hedge fund guy and a -- >> you just wonder if all -- >> i mean the vote -- they're just -- >> but i mean all the criticism that came up after it, if that's going to influence any sort of new regulation, or whatever with the s.e.c. on how these things are constructed. >> all right. >> scott, thank you. >> all right, thanks, guys. >> our guest host this morning is at the helm of the nation's largest mortgage lender. also its most valuable bank. john stumpf is the chairman, president and ceo of wells fargo. great to have you here.

>> thank you. nice to be here. >> wells fargo has been on a tear for a very long time. you just came out with earnings, and this is a little bit of a crazy point, but for the first time in 17 quarters you didn't actually beat expectations. you came in right in line with expectations. and after a track record of 17 quarters in a row of beats that had some people kind of scratching their heads. jpmorgan came out, downgraded the stock. i guess the question becomes, is it -- can you continue to have this kind of growth that you've seen to this point? >> yeah, we really had a good quarter. and we're proud of the 17 -- >> you met expectations. >> exactly. and we had a terrific quarter and sometimes, you know, the numbers are what they are. and we thought they were pretty spectacular. if you look through the numbers, you know, growth in loans of 8% or 9%, deposit growth 9%, fee income, both fee and non -- net interest income growth. so we thought it was a strong quarter. and you know, the economy continues to improve. and where we are in the economy, the real economy, you know, things are going, you know,

actually quite well. so we're optimistic about the future. >> i mean the stock check says it all, too. that stock again has been on a run. but if you look at the mortgage revenue it was down 39%. obviously a lot of that is from weak financing. >> correct. >> kind of blend through. maybe everybody in america who wanted to refinance has? >> 75% of originations in the second quarter were purchase money. 25% were refinances. so, you know, that's almost the flip from a year or two ago. so you're right, i think mortgage is a little bit disappointing in this regard. we didn't have as much volume as we had hoped going into the second quarter. still a quarter that was good. $10 billion more than the first quarter. but there's lots of different things going on in housing that i think are holding us back a bit. >> like what? >> well, later household formation. there's this view that credit's not as available. which is true. in some cases there's lack of inventory. other cases, there's borrowers can't qualify student debt has some influence. so, little things add up to be

big things. even though housing is up, you know, 8% year over year, probably not as strong a selling season as we would have hoped but we're still quite bull, on housing. >> i always think of wells fargo as being such a great read on what's been happening with housing. i know you've been doing some different things with the bank. should we look at you as a competitor to jpmorgan and others down the road? >> well, i think we -- we're a real economy company. so if you think about, you know, people think of us as mortgage and we're proud of that business. we love that business. but there's 89 other businesses. we're the largest auto lender. we do more commercial real estate. more energy. more middle market. more small business. so we're in lots of those spaces. so, the extent that others are involved, though, sure we're going to be there. but think of us as real economy. >> what can you tell us about the real economy right now? how does it look? >> i actually think it's stronger than people think. you know, obviously we're all surprised with the first quarter gdp. who knows what second quarter will be. i think it will surprise on the upside.

so i think things are better. if you take the boom years, so-called boom years from 2000, 2008, and separate and take out of that the excess what happened in housing, the rest of the economy today is better than it was then. i mean look at the sectors. energy is booming. way better than what it was then. you know, autos, they might sell 17 million new vehicles this year. i mean, that's the best year we've had in six or eight years. manufacturing's coming back. ag's doing pretty well. commercial real estate. i mean every place -- i was in atlanta yesterday. you think there was a crane convention there. i mean, you go to almost any city, it's cranes everywhere. >> you just said, you know, credit's available to most people now. and we have this weird bifurcated notion, at least just in recent weeks i've started to think this way, that not everybody can get credit but now i'm hearing that because of the fed's low interest rate environment that they pushed out the risk curve, pushed a lot of people out there, and that there's a lot of lending similar

to what was done before the crisis to businesses that aren't -- that are like "b" at best. "b"-rated, and that you know the banks have been induced to give people that don't really deserve credit at this point, and business this was a druckenmiller report yesterday. so which is it? credit is too available to people that don't deserve it? or it's not available to people that want to get it? >> i think you need to talk about the asset class. so if you look at home lending. because of still the unknowing of whether there's put-back lists. when a loan transfers, the risk transfers, most originators have some credit overlay, and what that means is, fannie, freddie, fha will guarantee loans down to a certain fico credit score. most banks are saying we won't go down that low because we're not sure about that being put back to us. so, i think there's some more work to be done there. >> so the small guy really still can't get mortgage loans but the

big guys may be getting loans that they shouldn't be getting that could come back -- so the next time that there's a big mess, it's not going to be in the housing market, it's going to be in business loans? >> well, i'm not sure that business loans -- i wouldn't say that surely it's competitive. and where it's most competitive is where there's the most available lenders to a situation. if you have a $5 million cni loan, industrial loan of some type, you have large banks, medium sized banks, small banks, non-banks, everybody can do that. and wants to do that. surely there's a lot of competition there. >> we were hoping that that sector would come back, by the way. now that it's coming back people are saying it's kind of -- >> i don't think it's over the edge. >> you don't? >> i don't see that. >> it's not because we're at zero -- >> i think it has nothing to do with interest rates. i mean, if someone wants credit, and needs credit and can use it whether it's priced at 1% or 2%

or 3% -- >> they're going to get it? >> they're going to get it. and they're going to want that. but, i don't see us going that far. >> this is -- >> we'll talk more about whether you think the fed is doing something somewhere that shouldn't have been juiced. i mean no? >> i'm not a big fan of qe. at this late in the game i'm happy they're tapering and i think we should have rates normalized to what the economy is. >> there's a difference between it not doing any good and it doing some horrific that comes back to haunt us. i think you're more in the benefits are eliminated. you don't know if it's going to come back -- >> the benefits are limited. and also 10,000 people retire a day in america. they never -- >> they need savings. >> what kind of risks are they taking or others taking to try and get a return. so i think there is some inherent risk in that. >> fortunately john's with us for the rest of the hour. we've got a lot more to talk about. >> absolutely. when we return, digital security is a big issue for the financial sector. next the president of mcafee tells us the measures and new

innovations being used 20 protect corporations and the consumer. first bullish quarter for private equity firm blackstone just out with its second quarter results. take a look at this. blackstone's results were helped by a jump in performance fees which nearly doubled and investment income which was up 81%. you'd like that in one quarter right. the stock jumping in premarket trading after that release. you can see it right there up about 3% in the premarket we'll talk about that when we return in a moment as well. in india we have 400 million people who don't have electricity and i just figured that it's time i do something about it. what we're doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. i think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when it's needed by the consumer. a smarter energy system is made with the ibm cloud. the ibm cloud is the cloud for business.

all right. welcome back, everybody. morgan stanley just out with its earnings and it's continuing this pace of banks that are beating expectations by a long shot. you've got morgan stanley coming in with 94 cents a share versus the 55 the street was looking for. revenue better than expected $8.6 billion versus $8.1 billion. this continues the trend we had seen earlier this week with jpmorgan and others who beat by quite a bit. take a look at that stock. >> probably went up already on some of the other numbers. it's a bad market today in terms of overall. but it is indicated now up 33 cents or so. i don't think there's anything wrong with those. >> the beat on the fixed income side which we think is such a mess. >> lower -- you know, probably lowered expectations on fixed income. >> a billion dollars actual

versus 9.63 and on the banking side 1.4 actual versus 1.2 estimate. let's talk about cyber attacks because it's a topic increasingly disturbing a lot of people. speaking at delivering alpha yesterday treasury secretary jack lieu called on business leaders to take the security threat seriously. >> look at how much of our life we conduct through our ipad, iphone, smart device or our computer. it's our banking, it's our basic utilities, it's a lot of our personal information, our health records. there is a very high level of concern that we should all have that cybersecurity, cyber hygiene is taken seriously by all of the providers that we do business with. >> for more on this issue we're joined now by mike deceaser, president of mcafee which is now part of intel security they just renamed it and leading security technology provider. do we not even talk about mcafee anymore? >> one second real quickly. can i correct that? morgan stanley 60 cents versus 55 cents. because you had to take out the

positive dva, and subtract the discreet tax benefit of 31 cents that came with it. so it's a nickel beat, not a mile beat. >> got it. all this math makes it so much more complicated. let's talk about security. it scared the heck out of us for a second. how many attacks do you think we don't know about that are legitimately a problem? >> you know, i think it's interesting. when you see the news of a stuxnet or one of the more high profile attacks in most cases those -- those attackers have been in the organization for an extended period of time. and when you finally realize they're there that becomes the event that we know about. but there's -- the technical sophisticate of the threat landscape these days has green for sure. >> how much do you -- how often are you attacked? >> i think constantly. in fact, it's one of the big risks in the company we're investing a ton of money, we're working closely within the industry, with government, and we actually have, you know,

groups that we hire to actually try to benefit probe -- it's a big area. >> jack lew yesterday said banks and others, a lot 6 other companies need to do a lot more. but banks in particular i thought were doing so much at the forefront. >> i think we're doing a lot. but you never know if enough is enough. >> how much does it cost you, jpmorgan's laid out like a huge chunk of money. >> it's millions. i mean many millions. we're hiring people and our board's very involved in this. so this is a big -- this is a big area. big area of risk. >> what is the most susceptible part of the sort of technology value chain right now? either by industry or if you're a ceo watching this program you should actually say to yourself, i got to pay attention? >> i think when you look out there, all corporations are trying to become part of this connected world. and they want to do business online. your consumers expect to be able to transact. i can't remember the last time i went into the bank, i'm a big customer and use the bank every day. i just use it online. i think as people come online

with that comes, you know, the security threats that go along with it. >> what is the threshold for going public? meaning, if there was a breach of ten people, ten accounts, do you say anything? does it have to be a breach of 100,000 accounts to -- at what point do you -- do you go public? >> i unfortunately you go public when the customers know that they have been breached. because in most cases you look at target most recently. you have to notify your customers their credit card information has been breached. >> right. >> so you know, it's again, as we do more and more business online, and your financial information is exchanged online freely, it becomes very obvious when you haven't been breached. >> a good answer to that is you err on the early side and on the low side. in other words you want people to know, and you want to be as open and honest as possible. >> public policy question for you. >> yep. >> there is a big issue about how much information businesses

should be sharing with the government. >> yep. >> and how much information the government should be sharing with business about security, and who should be responsible for all of this, right? we have police that ostensibly police the streets. businesses basically have to have their own security guards at the moment. >> yep. well i think -- >> what's the right answer? >> there needs to be more here. i mean you look at big corporations like wells fargo that have your own research departments, and that you know when you're being attacked and the rest. then you have security companies like us, and we have our own research departments. then you move in to washington, d.c. and you see the three letter agencies and they've got their own research and the ability for us all to come together, there needs to be a better and stronger public/private partnership here. the ability, if we can share freely what we know about attacks environments we can do a much better job of preventing those attacks from happening. >> i actually agree with that. the other thing is third parties. that's a big area of risk. so, you know, third parties have access. we do business with them.

access to the system. people, you know, bad people get in through that avenue so this is a big, you know, school of thought and discussion at work these days. >> we got to go. self-less question what kind of phone do you use and e-mail outside of work? >> i use iphone and apple's e-mail. >> safe, you think? >> there's no platform that is 100% safe. you just need to take precautions on -- i'll give one piece of advice. if there's one thing that you do change the account number on your bank often. >> change the account number on your bank? >> the password -- the credit card is an example. if they send the same number to you and they change one code the bad guys get very good at how to just keep searching new codes. you want a new number periodically. a new reset periodically. use the same password for everything in your life but change it on your money. >> you have to ask for that? >> you do. you have to ask for that. >> that's an additional cost for your business. >> okay. >> are you talking your account

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when "squawk" returns we've got much more with our special guest host wells fargo chief john stumpf. and auto nation trading near an all-time high. see how mike jackson he's been rolling out quarterly results. we're going to do that in the next half hour. back in a moment. ♪ ♪

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welcome back to "squawk box," everyone. earnings central is in full swing this morning. dow component united health's earnings and revenue both beating the street. the company also raised its full-year revenue forecast. morgan stanley reporting second quarter earnings of 60 cents a share. that is a nickel better than had been expected. revenue also topping consensus. that stock is up by just over 1%. and blackstone shares also getting a boost this morning after the private equity firm's results were helped by a jump in performance fees which nearly doubled investment income was up by 81%. that stock is up by 2.7%. >> that's amazing. 81% in a quarter.

separately let's talk about the tax system. under fire from new jersey governor chris christie yesterday at the delivering alpha conference. >> we have a wretched tax system in this country, both federally, on the individual and corporate levels, and at the state based level in lots of places, including my own state. which disincentivized growth, which disincentivized entrepreneurial job creation. and which make us less competitive with the rest of the world. way have to get around the table and redo this tax system. >> let's talk tax reform and more with our guest host john stumpf chairman and ceo of wells fargo the nation's largest mortgage lender. you agree with chris christie? >> well, i think the tax system was need some review. and wells fargo's case, 97% of our revenues in the u.s., 97% of our people are here, and we are one of the nation's largest taxpayers. our tax rate in the second quarter was 33.2 or something

like that. so we, you know, so we're paying a lot of taxes. i'm -- you know, i think there's a lot of debate around this issue. whatever the case is i want to make sure that we incent companies to do business here. >> right. >> and create jobs here. that's the end game. >> you know, the other person that we had at this conference yesterday was jack lew who has been talking about tax invers n inversions. where do you stand on what we should do about that? >> well, again, we should have a tax code that is pro-america and pro-growth. so, whatever that means, let the policy people decide that, but it does not help american families, american economies, and so forth, to have jobs leave here, or companies leave here. >> when you think about his business, though. >> he's in a different business. >> you're not going -- you're a u.s. -- >> correct. >> you can't do any of these things. >> the problem is because people move over there for cheaper labor. there's a lot of reasons to have facilities --

>> or if they're satisfying customers in another part of the world. it makes sense to build this stuff over there sometimes. i mean there's a lot. but we shouldn't make it the tax code shouldn't be adding to all the other pressures to move offshore. >> joe, that's exactly the case. >> thank you, john. thank you. >> talk to -- address him. >> talk to me. it's okay. >> because then you're going to be talking to the hand if you talk to him. >> i think we all agree, don't we all agree that we want america to be successful? >> yes. >> and to grow jobs, and to have a vibrant economy here. and whatever that takes, i think -- >> here's the thing -- >> -- realistic to want to be more successful than some of the other countries in the world. >> that's -- the question i have about tax reform and i want tax reform, i want to make sure these companies stay here and they want to stay here. not because they're being blocked from staying here or anything like that. though frankly i might -- to me there is a patriotic thing going on here. >> oh, please. that is -- >> no, i find it very disturbing that we have companies that are

leaving our shores to go abroad, even though frankly they're not really going abroad, because the ceo is still living here, to me if you have a drug company and you're going to move to the netherlands, as i was saying yesterday, want to move to the netherlands, great, but sell us the drugs in the united states, all the medicare payments that we're going to pay, sell us the drugs in the same rate you're going to pay sell them in the netherlands. >> apples, oranges and cucumbers all mixed in here. >> but if you do apples, oranges and cucumbers in the netherlands -- >> there's price control over there. there's no drug innovation over there. you want price controls here? >> corporate tax rates over there are very low. bus guess what? the individual rate over there is much higher than it is here. >> that's what druckenmiller said yesterday. saying that you're not taxing corporations, you're taxing both the playees and the shareholders more of the corporations. all you're doing is freeing up corporations to compete globally by lower being taxes. people will pay as it passes through have those people pay. >> but the sort of the immediate practical question on the

inversion issue is -- let me say the immediate question on the reform issue is what is the right number. right? ultimately that's what this becomes a debate about. and i keep using the issue of mylan, top right 35%. you say you pay 33%. her effective tax rate being the ceo of that company she's paying 25%. >> you're talking corporate taxes now. >> corporate taxes. people at you know, obama's, his top rate is 28% manufacturing, 25%, he's proposing two different rates you talked about 20%. she thinks that she can get her company down into the teens. and then the question is, is 20% -- does 20% become the right number? and then what do you do? >> you wouldn't move a company for three points. >> i think it's more than what the rate is. it's what makes it up? so i mean there are some people who have some benefits, you know, there's acceleration of whatever. right. and when you start talking about rate, that's only one part of the debate. because, -- >> that's why it's so hard. >> this is very difficult to do.

think how many times in this country we've gone through tax reform. and what was it, 86 the last time? these are very hard things. >> and took a couple of years to get it together from 1986. it didn't happen overnight. >> you'd need a very engaged president committed to doing this. this is not his priority. it's not going to happen in the next two years. you need true tax reform leadership and that's not something that seems to be the most important. >> the lobbyists getting involved -- >> that's why you need the leadership. it's going to be hard to do. >> you need both sides -- >> and you're going to rip out all the loopholes and everyone's going to jump in. >> right. >> needs to be done, though. >> i don't disagree -- >> if you go lower you have to also get rid of all of the other stuff. and that's where the tough thing is. >> right. >> we all can agree on a rate. >> both sides have to agree to do it. >> you say keep research and development special, keep xyz special. even manufacturing. >> and every industry is going

to have very compelling arguments why -- >> the real estate guys have their own thing. the energy guys -- >> the world has somehow done it and they've figured out that to attract business you can't be the highest, you know, tax rate in -- we see it, if you want to look at it -- >> i think it's apples and oranges. i look at the nethserlands and ireland, they have their own issues and own problems. they're bringing certain corporations revenue in but they're -- >> can't you look at the states though and realize that states that don't disincentivize businesses have all the businesses coming into those states. >> no. i would argue that texas long-term is going to run into some serious problems because they haven't actually created -- they won't create enough revenue to actually be able to maintain some of the social programs that they're going to have to promise ultimately. but it's a longer story. you may disagree with me on that. >> we do. >> we do business in all those states. and i've lived in texas, and now i live in california. and yes, there is a different view. but, both states are doing, you know, texas is doing exceedingly

well. >> extrooply well. >> and energy has a big part to do that. >> -- reform and everything else -- >> it's an easier place to do business. there's no question about that. but we also love california. >> okay. >> we're going to continue our conversation with the ceo of wells forgo in just a little bit. >> auto nation ceo mike jackson on the company's quarterly results. we'll also ask him about the possibility of a tie-up between volkswagen and fiat. yeeks. and at the top of the hour, media in the spot light. john malone's liberty global buying a 6% stake in itv. rupert murdoch pushing to get his hands on time warner. two great media names join us at the top of the hour. we actually won't have rupert, and john malone. but two other great media names to discuss the recent wave of activity in the sector. it's estimated that 30% of the traffic in a city

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morning. earnings of 83 cents a share ex items. that misses the street by four cents. revenue came in roughly in line. mike jackson is the chairman and ceo of autonation. he joins us right now with the results. mike, good morning. what happened? >> well, becky, good morning. great to see you. what happened, i'm very happy to report that this second quarter is an all-time record for us. 83 cents. up 14%. and by the way, that is our 15th consecutive quarter of double digit increase. as far as you're referring to what happened with the analysts, we did meet the revenue expectations. as you know, becky, as we discussed we're in a major investment period in our brand in digital capabilities. we have not given analysts any visibility as to exactly when the cost of those investments will fall in our reports. so, from time to time we're going to have a disconnect with the analysts on a quarterly basis. i would observe over the last four years for the full year we've exceeded analyst

expectations. >> you know, mike, you actually said 100 million. so if they had been paying attention they could have figured it was coming. but you know, why don't you help these guys? they're not that good anyway at what they do. you said you're going to do 100 million. and then they don't factor it in. so then you blame them that it would be easier just to tell -- you give no guidance. why don't you tell them, we're doing some of these investing in digital that we told you about. why don't you factor that, instead of yelling at them after they say you missed by four. give them more visibility. >> first, joe, first, joe, i think they do a very good job. second, i'm not yelling at them. you brought up the subject, i didn't. but, i will say the reason why we don't give guidance is when you do, you give up a lot of flexibility as to how you do certain things. >> right. >> and i don't want to be nailed on the cross on the quarterly basis that every decision i make i says well what's that going to do this quarter. >> but then you --

>> in which case you -- >> you open yourself up to this kind of thing, charts that make it look like it was below. but the 100 million. what does 100 million dollars represent total in pennies per share, mike, just so you're spreading it over what do you think, how many years or quarter? >> yeah, oh, that's -- that's well over a dollar. >> it is? >> earnings per share. >> see what i mean? >> over the next several years. so it is a significant number for the company, but -- >> you're just going to see -- >> i'm not going to give you any more insight as to exactly which quarter occurs. >> hopefully analysts are watching, they're seeing that it's a dollar over a couple of years so there's going to be times -- are you sure it makes sense to make these investments >> what are they actually going to accomplish, mike? >> well, we're ahead of schedule with the where we thought we'd be with the brand launch of autonation. and i think the evidence is in in unifying the company under one brand from coast to coast has worked extremely well.

>> but it cost money. >> particularly the inflection point was in our digital capabilities. and what we see, what the consumer expects in the future from a company, especially a retailer is one seamless experience. not an online experience. and an instore experience. one experience. that they can move seamlessly back and forth between their digital efforts and being in the start. both are still relevant. today there's a big disconnect as to you lose a lot of what they're doing in the digital work when they enter the store world and we're going to bridge that gap. and we will launch our transactional digital website at the end of this year which will be a big step forward for this company. >> it is good to see a company that is making investments in the future, too. mike, we have been talking this morning a lot about auto loans and what's been going on, because john stumpf is our guest host today from wells fargo. they do a lot of auto loans. he's talked about the healthy side of the business. you've seen some pretty good

numbers in terms of consumers buying, too. >> first i'd like to say, good morning, to john. his team at wells fargo does an absolute fantastic job, particularly in the auto -- auto business. it's our number one banking relationship for financing, our customers. >> well, thank you, mike. we appreciate that. >> and extremely professionally capable. i was listening to john earlier today and we basically have the same view on the u.s. economy that there are, and i, you know, we've been talking about this for years, there are bright spots that we didn't have back in '08 or anine, whether that's energy, autos, housing, that are giving an underpinning of strength to this economy. certainly the financing we have available in auto lending today is the best of my entire career a lot of that is because during the great crash everyone saw that the car payment went to number one in the household. there was no major defaults or

fault lap around auto lending, so, i'm not making a moral judgment to pay for your car before you pay for your house. your children's education. it's the right thing to do. but from a business point of view, lenders see the attractiveness of the auto business, and it's very supportive of today's business. >> hey, mike, you know, when we -- you look at the growth rate of the company, and there's a reason the stock is at $60 now, i don't know, five bucks or something a couple of years ago. but it's at $60. but we do count on you, you know, if it goes from $298 to $340 to $385 that's what people are looking for. we figure out what the growth rate for earnings per share is on the company is that 340 for the year can you make up this four cents are you going to -- i know you won't give any guidance but that's how we assign a multiple to what to sell your stock at. are you going to continue to grow in the way long-term that because you're at probably 20

times earnings right now. >> so, i'm not going to give forward guidance. so i'll just make some observations about the past. 15 consecutive quarters of double digit growth. the last four years we have exceeded the analyst guidance when we fall out of favor for whatever reason and the stock is down, we thought it aggressively i will observe i repurchased over $7 billion worth of stock at just over 17 a share over my tenure here, where stock is now trading at 60 so i'm not losing sleep over -- from time to time. the stock goes down, that's the days the buying opportunity because they have great confidence in the future. >> it's a commentary on trying to gauge these things quarter by quarter and ceos that try and do that doesn't make any sense to do it quarter by quarter. it's commentary on the way it's done -- >> we're building a great company for the long-term, and

those shareholders who have stayed with us for the long-term have done extremely well. whether it's eddie lampert or michael larson with investing bill gates' money. they're two pretty smart cookies. it's worked out well for them. we have this business model where we make money no matter how difficult the environment is. we have investment grade balance sheet. the only one in the auto retail space, and when the stock is out of favor we buy it back aggressively if i just look at the second quarter. you know, again, we spent over $65 million on share repurchase. so if you're long-term -- if you're living quarter to quarter maybe we're not the company for you. but, again, just look at the past four or five years. i think our track record speaks volumes. >> mike's a terrific leader. autonation is a great company. thank you for those nice comments mike. we're really bullish on autos. i think this will be the best

auto year in the next eight or nine years. there may be 17 million vehicles sold this year and autonation is one of the great names in the space. >> jackson can tell you to the auto how many we're going to sell. >> between 16 and 17 isn't it? >> we'll even break down which model. >> between 16.4, 16.5 for this year, something like that. >> all right. >> we're the nation's largest lender in this space and we love that space. >> mike, thank you very, very much. >> great seeing you. >> we'll talk to you again soon. coming up we have more from wells fargo ceo john stumpf on the state of financials in the mortgage industry and at the top of the hour we talk media deals with activate co-founder and former mtv executive michael wolf. also "new york times" columnist jim stewart. later in the program we have senator bob corker reacting to new russian sanctions, tax inversions and volkswagen's job expansion in his home state. "squawk box" will be right back. [ male announcer ] the mercedes-benz summer event is here.

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let's get back to our guest host for some more thoughts. john stumpf is chairman and ceo of wells fargo. i'm not going to talk about wells fargo specifically. but i'm reading, you know, some of these major banks that are, you know, so far apart. i think bank america, what they offered 13 or something, and that's not enough. when is this period over where the federal government becomes part of the solution, really, rather than i don't know, trying for punitive measures to punish a industry because of i don't know, public opinion? >> well, it's hard for me to make. you know -- >> you think you're doing a

great job. you love them all and regulators are your favorite people, right? >> i wouldn't say they're my favorite people. but they're surely part of our life. and it's hard for me to spectate, and i won't, really, on somebody else's activity. >> what was citigroup? seven or eight? what's going to happen with bank america? they're at 13 and they're arguing, right? >> they're arguing. >> 13 is not enough apparently. and then -- but where have we decided where does the money -- >> oh, yes i did some research. >> you did? >> basically the money just goes back to the treasury. it's not -- there's no -- it doesn't go to some doj budget or somebody else. >> you might say this is patriotic for -- >> it's almost like taxes. >> yeah. >> this is almost like john might have a different view -- >> i don't believe that. >> you don't believe it? you don't believe shaking down the industry is patriotic? >> shake down is not patriotic. >> you know, i think -- >> one thing -- >> people should remember not all mortgage companies are the same. did the same things. i mean i think about our company

back in the go-go years of 2000 to 2008. there was a time when we were the largest mortgage company, 2002 or three, and someone else said i want to be largest. and i'm going to do "x," "y" and "z" and we said we're not going to do that. we're not going to do negative am loans. we gave up millions of profits. so you know there's different -- >> but some of these companies, john, speaking of patriotism, some people would call it patriotic that they help the federal government when the federal government needed help by bringing these companies with problems under the fold, and rationalizing the operations and helping the government devolve some of these really big problems. now who's going to do it next time? who's going to be there next time we step up to the plate -- >> i think that's a legitimate issue. so i think needs to be balanced. but again -- >> you think they think about this eric holder, you think any of these people think about -- >> i don't know what he thinks.

i don't even know him. but you know, again, it's really hard for me to comment or speculate on what's going on there. i mostly am concerned what's happening in our shop, with our team, and that's how we go forward. >> so far so good with wells fargo. all right, so in terms of the federal reserve, where would you like to be? when woo you tell janet yellen to first raise the fed funds rate? would you say early 2015? >> well i don't think i would tell her anything but i like the fact that she has talked about when she'll be out of the bond buying business. >> can you believe that we're even -- >> acting like this is something that we're -- actually gratified that we're finally going to stop this extraordinary thing. it became qe infinity. remember they first announced a couple of discreet purchases. then they went to qe infinity and we're actually gratified that they're ending that. that's where we are in life?

>> i'm happy we're ending it. i'm not a big qe fan. this -- imagine it's six years since the downturn and five years since the recovery started, and 10,000 people retire a day in america at rates that they never thought they'd have. >> all right. >> i like to see more normal activity where rates reflect the strength of the economy. and be higher. >> john, thank you. >> thank you very much. >> come back soon. >> great to have you. we believeg the competition tomorrow requires challenging your business inside and out today. 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.

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rupert murdoch is on the hunt. the fight for content is heating up. we talk winners, losers, and future players with former mtv coo michael wolf. and pulitzer prize winning author and "new york times" columnist james stewart. plus jack lew, pushing congress to crack down on tax inversions. >> we need to act on this question of inversions and we need to do it now. >> senator bob corker responds, and talks jobs in america. the fight against the deadly consequences of diabetes. "squawk" makes a ceo call to drugmaker novo nordisk as the final hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide i'm joe kernen along with becky quick and andrew ross sorkin. here in studio with buddy austin goldsby the economics professor and former chair of economic advisers. my gids know him. they mentioned adam smith to you. they tried. >> joe. they tell me you aren't getting your vegetables and it's been a tough morning. >> am i not regular enough? >> i don't know it seems like you're grumpy. so i brought this apple and i'd like you to eat that. >> there's a worm hole in that apple. >> that's nice, thank you. >> it came from your green room. >> did it really? that was for you then. here. here. try it. is there a label on the other side of that? >> it's delicious. >> all right let's tell you about some of the corporate earnings dominating today's top stories.

united health beating the treat on the top and the bottom line. revenue rose by 7%. it was boosted by membership increases that stock is up by about 1%. morgan stanley beating the street as profit more than doubled. as expected revenue from bond trading declined, some positive comments coming from james gorman on the conference call and that stock is up 1.8%. also shares of blackstone trading higher this morning. earnings more than doubling after the firm turned in some big gains from sales from its private equity portfolio into the rising stock market. performance fees nearly doubled. investment income up by 81%. that stock is up by close to 3%. >> let's talk about the deal story of -- day two now. though rejected the surprise bid by rupert murdoch or rival time warner underscores that a large media company, they're in the mood for some major consolidations, begging the question, what does the future of media actually look like? joining us is michael wolf, managing director co-founder of activate, former president and

kroo of mtv networks and former yahoo board member also james stewart columnist at the "new york times" and a cnbc contributor. good morning to both of you. >> good morning. >> i'm going to start with michael because he said something to me during the commercial break which surprised me. he said this deal is happening, or this consolization is happening but for a different reason than you think. what would the reason that we are not thinking about? >> the argument that everyone's making is you got to be bigger to deal with the consolidating cable industry. i think that there's another piece of this. which is actually being bigger to take advantage of all the new outlets into the homes. so, yeah, we're having some big cable offers. comcast is going to be a national operator. we got a whole bunch of other people coming along, verizon, sprint, netflix, and -- and by the way an international. so there's a huge amount of community that a big company can take advantage of. >> james, your -- jim. jim, james, we could do both. great to see you. your sense of the cultural

distinction between time warner and fox and how much of a friction and disconnect that is going to create or be? >> well, i think we saw with the takeover of dow jones that murdoch's style here is to kind of let things going on their own for awhile. then he moves in and puts his own people in and he puts his own stamp on things. so i think that's probably what we could expect here. by the way, if he's the owner, you know, who could blame him. he wants his people. he wants his philosophy. he wants people he likes doing the business. but i would expect pretty soon everybody at time warner is going to be replaced. >> michael, is this a fait accompli? i mean, the disclosure of the talks unto themselves, does this now mean that time warner gets taken over by rupert murdoch? does it mean somebody else comes in? is it possible in three months from now we could -- they would have made an offer, decline the offer and that would be the end of it? >> it's not clear. i mean there's a history of media companies making offers for other companies and deals not getting consummated. remember the comcast deal they

made a bid for disney and that never got done. later on they bought nbc universal. where we are today. but i think that there's -- i don't know. i mean it's going to see whether time warner's going to be in place. and other companies. >> do you buy the argument for why they're saying we think we're worth more as a standalone company no matter what the dollar on the table is? is that a strong argument or does that get whittled away at some point? >> there's certainly going to be opportunities for larger companies in this business. they can create a lot of value on their own. and especially given the much-watched programming that they have. sports is very important. and that's what a lot of people want to watch today. but, it is clear that there is a lot of -- a lot of synergy that's going to happen between these companies. >> jim, jump in. >> yeah, well, you know, i think strategically this makes total sense for all the reasons that michael has mentioned and probably some others. but i think there are going to be some big regulatory hurdles. these companies are direct

competitors in almost every one of their businesses. competition is going to go down. i don't know that the market share thing is going to fly by the usual antitrust rules. but you're not talking about cementmakers here. we're talking about content creators, news providers, people who shape the intellectual debate. that's going to be a big issue. and having murdoch control all of that or having any one company control all of that is going to be a huge flashpoint. i don't think regulatory this is going to be easy. >> i think it's an historic parallel which is after the telecom collapse in 2000, there's a huge effort to consolidate, and basically it was a game of musical chairs. they allowed a series of huge mergers, and then the department of justice finally said, whoa, wait a minute, this is too consolidated. we won't let it continue. so we'll see if they let them all go through. >> jim, you were reading about antitrust issues for a very long time. we'd be going from basically -- going from like six to five. maybe five to four in certain places in terms of the competition. no? and isn't that different than going from four to three or three to two? >> it's different. but these are -- these are two

of the biggest -- just looking at the movie studios these are two of the biggest movie 1250ud yos. i don't think if you just use the strict numerical approach like i said we're talking something here that's very culturally sensitive, it's very important. all the very visible authors, writers, stars, they're going to be up in arms about this. this is taking away competitor, it's going to make it tougher for them. that's part of the scale argument for doing the deal. what makes this a really great deal is what's also going to make it a very difficult thing to put together and get by the regulators. >> michael explain this in terms of the dominoes that would happen from here, or what this forces others to think about, what does disney do? where is google? is jeff bezos and amazon who claim they want to be in the content business, do they matter in this? what does -- i mean sort of just play it out for us. >> well, if you look at all the entertainment companies, the place that they're earning most of their revenue, and their profits, is coming out of cable programming. and at the same time, they're getting a huge amount of revenue out of netflix and now out of

amazon. so we shouldn't be surprised to see other companies, viacom, discovery, all getting in the mix, either being sold, or buying something else. disney is now huge. disney has lots of different revenue streams, including sports. and disney monetizes better than anybody else. we're at a point now where he who monetizes the best owns the rest. disney is owning all the big film franchises. >> just real quick. you know sumner redstone. >> yes. >> when he heard this news what do you think he thought at this point? >> probably like what's the next deal i can do? >> and is there -- but is there a deal for them to do, either viacom or cbs? >> there are going to be deals for everybody to do. the question about what happens to cnn -- >> jim, when bezos you mentioned him when he bought "the washington post" i remember some columnists, one was for fortune but i read this piece and i just had to laugh but it side, bezos has expressed some libertarian

sentiments. before he's allowed to buy "the washington post," he needs to declare politically where he stands. what's that guy's name, allen -- oh, my god. anyway, how much of what you're saying now, and you just said -- >> -- who i like -- >> well, it was the most preposterous -- it was so sanctimonious and pompous. but how much of this right now is about working under someone perceived to be perhaps too conservative for hollywood? too conservative? you're looking at antitrust or are you really looking at a conservative guy having so much clout? >> well, i think that's going to be an issue. how can it not be? i mean should it be an issue? i don't think we should have a political litmus test for who can own companies or run companies. but the fact of the matter is, murdoch is a very controversial figure. he is politically conservative and there's the whole hacking thing. >> the nine out of ten of the other ceos running all these other media companies that are rubber stamp liberals in the

first place nobody asked them for their credentials. i guess to join the liberal club you got to declare yourself. that's what you're saying. >> look, this is going to end up in washington. washington is a political culture. the regulatory bodies are influenced by politics. ee cannot pretend that politics is not going to ultimately play a role. >> i think sloan wanted to say declare yourself as a liberal or you can't buy "washington post" because we're going to keep it going the way it's always been run and you better be liberal or you're not going to own this paper. >> wait a minute. he does own it. you know murdoch owns a lot. i don't know that all this noise on the political front has really stopped murdoch from getting to do what he wants. but we'll see. >> but the "journal" has not disappointed you has it, jim? >> no. >> it's still a pretty good paper. >> it's a terrific paper and i think there are a lot of people worried that he would destroy it essentially and that hasn't happened. he is an investor. he needs to make money. he knows that quality sells and i think he's done a pretty good job. >> we need "the new york post" to offset the daily news anyway and "the new york times." right? >> but this goes to the whole issue that you know you need

many outlets. you need many providers of content to have a healthy, vigorous, political culture in this company. that's why media companies are not the same as cement producers. >> don't view this as murdoch is conservative. look, fox business and fox news, they're more conservative, but let's remember the fox network really pushes the edge in terms of programming. >> thank you. >> there you go. >> michael, thank you. jim, thank you. >> sure. >> talk to you guys -- >> when we come back, our guest host austan goolsbee on jobs, the company and much more. later treasury secretary jack lew calling on lawmakers to stop tax inversion. senator bob corker is going to join us, also to talk about jobs in his home state thanks to volkswagen. check out the "squawk box" market indicator. you can see the dow futures down by about 50 points. s&p futures down by just over 9. ♪ ♪

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switch to comcast business internet and get the fastest wifi included. comcast business. built for business. breaking news for you. we have been waiting to hear what microsoft's plans are under its new ceo. finally an announcement comes. he is talking about simplifying the operations and he's going to be eliminating about 1800

positions. 18,000 positions over the next year. of the total, 12,500 professional and factory positions will be eliminated through what they're calling the synergies and strategic alignment of the nokia devices and services business that they acquired back in april. they say that these layoffs will be mostly complete by december 31st of this year. fully completed by june 30th of next year as a result the company will be taking some pretax charges of somewhere between 1.1, to 1.6 billion dollars over the next four quarters. that includes 750 million to 850 million for severance and related benefit costs and about 350 million to 800 million of asset related charges. again we've been waiting to see what had happened in recent days he talked about how he does like xbox, how that is there to stay. there had been so many rumors floating through the company. 18,000 positions will be eliminated over the next year and that's coming through what happened over the nokia devices andselveses business was acquired. also, treasury secretary jack lew making head lines at

yesterday's delivering alpha conference. jim cramer asked him about fed chair janet yellen's comments on valuations. >> 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 biotechs and the smaller social media stocks are overvalued or do you think that's just none of your business? >> i think there are a lot of people in this room who ought to be making sensible judgments about proper evaluations. >> our guest host this morning is austan goolsbee. that was jim making a reference to what janet yellen had said where she talked about how biotechs and even junk bonds concerned her and were overvalued at that point.

what do you think about this? this is a big deal to have a fed official -- >> about her saying that? look when i saw it it looked to me like it was a, not a throwaway line, but just an example. that she was saying, fundamentally, the overall market doesn't seem overheated. there might be a couple of little areas, maybe biotech, maybe this, i do think, because the fed chair said it everybody's just kind of putting their glass -- what? what did she say? did she say about biotech? >> and you know what, given -- i'm not going to say anything about all of our parade of guests on cnbc, but, i'm not convinced that yellen is any less qualified than half the people we have on here. >> no, you're right. you're right. >> she might even be better. she might -- >> i'm saying that she's not less qualified than these people that we have on. >> he's trashing the rest of our guests. >> oh, okay, you had too many negatives. >> you got to -- you know you

got to start listening. you didn't understand -- >> your presumption was -- because she's a fed chair i'm not saying she's any less qualified than any of these other clowns. >> if you're the fed chair -- >> you shouldn't be -- >> i stepped in it many times. >> we -- >> lower level than we remember. >> than the fed chair that- >> we pointed that out. we pointed that out. >> whatever she said, she could say some industry if she say wow, it seems like a lot of people are driving new cars people would be like, what does that mean? she's saying autos are overvalued. >> -- got in trouble for saying he didn't like broccoli. >> right. and it was not a rookie mistake but she'll learn maybe sometimes it's better not to comment on a lot of different things. >> it's probably true though her basic point was perfectly valid where she was saying what we should look at is the overall. don't just select one little sector and say oh, that one looks like it's overheated or frothy and therefore the whole market is a bubble. >> there are a lot of people focusing on what she's doing right now. the other comment that, you know, the fed also noted that if

things continue to improve at a faster pace than they've been expecting, they may have to raise rights faster, too. and, that is maybe something that i think hasn't gotten nearly enough attention. >> that's probably true, though i don't think that will come to pass. i think the fed has rather established over the last four years that they continually say next year it's going to be even better than we think it doesn't come in and happen that way. because i think they're counting a little too much on consumer spending and housing rebounds. >> particularly when you look at the unemployment rate. that's come down faster than they expected. >> that's true. though a lot of it joe will tell you is from dropping out of the labor force, and low labor force participation. it is true, maybe the summary would be if you start to see sustained inflation, the fed will act. it's the number one -- it's in their legal mandate. it's the number one thing in the mind of central bankers. right now what allows us to be in the environment we're in is

that there's very little sign of sustained inflation, and so there that's because they think there's big output gap and they're trying to address it. >> i like your spit take by the way. austin's going to be with us for the rest of the hour. when we come back, senator bob corker on new sanctions against russia, tax inversions and jobs. and later what can congress do to help those with diabetes afford health care? the ceo of november vo nordisk is here to talk about the affordable care act at why he says it isn't so affordable for those with this disease. "squawk box" will be right back. just take a closer look. it works how you want to work. so affordable for those with this disease. "squawk box" will be right back. of your fidelity greenline.

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we're still buzzing this morning about the highlights of yesterday's delivering alpha conference. among the newsmakers nelson peltz the activist investor hinting at a possible proxy fight at pepsi arguing the stock has moved not because of what's gone on at the company but because of suggestion for corporate improvements. >> i give them no credit, because the stock was supposed to, according to them, earn $5 in 2012. they missed a little bit and they earned $4.10. last year they were giving high fives because they got to about $4.34 in 2013. so, the stock is not moving because of earnings when the company should have been earning

$5 two years ago. the stock is moving because people, shareholders, see the wisdom of what we're saying. >> and peltz told us he most definitely still wants to break up that company, splitting it in two. i know, joe, you think that salty snacks go with soda. he comes out on the other side of that debate. >> i don't understand investment banking and synergies and rationalizations and stuff. but, you know, salty snacks, drinks, you eat the salty snack. you drink -- you know it just seems to me. that one i get. >> coke's done very well. >> coke has done well. how about when this -- when smucker bought the peanut butter. >> you thought that was genius. >> you know, does it make sense to you if -- >> i agreed with your first thing that you don't understand investment banking synergies and all that. >> you can't see when smucker bought jiffy you didn't think that made sense? >> all i know is the fact that you're watching tv while you're eating salty snacks doesn't mean the tv company should get bought

by the pea net people. >> that may be true. >> seems like it's a little more complicat complicated. >> the guys do make a compelling case for pepsi staying together. i even think it may be -- >> we had -- >> he actually went -- >> he owns coke and he went after buffet on the stage yesterday, saying, he said you asked buffet about this -- >> buffet said -- >> he said you tell us -- always tell us the conflicts of all the analysts who come on and all the investors, you don't say when he said that that he's the biggest shareholder of coke, of course he didn't. but his argument was of course they want to keep pepsi together because he wants -- >> because it worked too well. >> that was his argument. >> that's crazy. >> it's cute though. that's good. must have been a good moment. i was exhausted. i didn't see -- was it on tv? >> it was on tv. but you were also on tv with stan druckenmiller. >> yeah, profited handsomely from the financial crisis, has one of the best track records over the past three decades. yesterday he told me that the fed's decision to keep rates so low for so long is bothersome.

>> to say his fed policy seems not only unnecessary but fraught with unappreciated risk. when ben bernanke and his colleagues instituted qe-1 in 2009 financial conditions, and the real economy, were in a dysfunctional meltdown. the policy was brilliantly conceived, and a no brainer from a risk/reward perspective. but the current policy makes no sense from a risk/reward perspective. five years into an economic and balance sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. >> and that's the key thing there, austan, is that if it's just diminished returns, but you're not doing any damage, i can see that, do everything you can, congress is gridlocked. you know, if you get -- help the employment rate at all. but if there are dislocations

somewhere, where all of this is going, where people are doing things they shouldn't be doing, i can see his point. >> i can see his point. and i don't think he's wrong in the direction that as the unemployment rate is coming down, and as the economy is getting better, the risks of a very aggressive posture go up. but i don't think that's a secret to the fed. i mean, you've seen the fed governors themselves saying that. >> austan, we'll talk to you in just a minute. we'll have senator bob corker when we return.

june housing starts, boy that's -- i'll tell you, this is a miss. 893,000. we're looking for a one handle. 1 million. last month, we also had a disappointment on the revision. we lost the one handle. literally, a whisker over 1 million originally released. and now 985,000. so, even with the lower revision, the 985 compared to 893 is a miss if we look at the initial jobless claims, they're 302,000. so that is a drop of 3,000 because there was a subtle revision putting it at 305,000. all right, let's look at permits. permits, boy let's see here.

permits, month over month, 963,000. i had to look twice. those are two misses. now granted the permits gives you a maybe better glimpse down the road, so 963,000 is a miss from the 1. -- we were looking for a million 35,000 and last month actually was the one positive in all this data last month was upgraded and didn't grab the million handle, originally released at 991, only a bit away from a million. now it's a bit over a million. so that's down 4%. yields, yields are going to crack 250 here. a handful of basis points away from challenging our recent low yields. many will point to geopolitics. chinese buying. i'd point to all of the above. back to you, andrew ross sorkin. >> rick we're also talking about microsoft this morning. they just announced job cuts a short time ago, and on the phone to talk about it, 18,000 jobs. what were you expecting. >> that's clearly much higher than what we were expecting.

we were like most people thinking about 5,000 to 6,000. this is a pretty significant cut, and i think it tells you that sachen is trying to put his own stamp on the company and he's not going to let nokia become a quagmire in terms of dragging down the potential efficiencies in the business and driving some margin expansion. >> in retrospect does the nokia deal make sense or not? >> i think it still makes sense in terms of microsoft's goal in this platform and productivity strategy that he has put out there. it still makes sense to have as many windows powered devices as possible. but i think what he said in the letter, which i think was telling in retrospect, was the fact that he said responsibly we're going to market windows phone responsibly. and i think what he's done here is say that we can do that without having to spend, perhaps, as much money as people originally spent. >> what's the breakdown this morning in terms of factory jobs versus, you might describe as professional jobs? >> it looks like it's about two-thirds coming from the nokia

and factory side and about a third coming from, i guess, what you would call core microsoft. so i think that's about what you'd have expected but clearly this is on a much sort of grander scale. >> do you worry that there's talent that will get lost in all of this? >> there's always a chance of that happening. but microsoft ran very -- that might not be -- but bloated a good word for it for a long time. there's been a sense with investors for a long time that this, you know, that this was coming down the pike. and so i think, there's always some risk that you lose some very good people in this kind of transition. but if you're going to move to mobile first doing it now and getting it out of the way at the beginning -- >> final question for you we talked earlier this week about the ibm apple app deal. how does that relate to what's going on at microsoft these days? >> i don't think that's going to have too much of an impact on it. microsoft's already putting office on apple devices. i think the fact that apple's in the enterprise sort of coming

through the back door of the enterprise microsoft's well aware of that -- >> kirk what's more interesting, if we put intel over microsoft, the wintel juggernaut is back. it came back when no one thought there was any chance. suddenly intel is up 50% and microsoft's up 50% in the last year. >> yeah, well i think with microsoft you've had two things. i think one people have finally recognized that most of the earnings power from microsoft is coming from the corporate businesses. it's not just about the device side and the pc side. so that recognition's been positive. >> look at that. >> and having a change agent at the head of the organization has obviously been important and having people just come back and look at the company dpen. this thing went flat or sideways for ten years so the fact that you now have someone who is driving the business in the direction where the secular trends are going has been really important just in terms of bringing new investors or old investors that have ignored it back to the table. >> all right. thank you. >> thanks a lot. >> tax inversions were a hot issue at the delivering alpha

conference yesterday. also, we had jack lew, secretary lew also sent a letter to dave camp and it's a subject of a huge piece op-ed piece in the journal which just nails it, that depends on where you sit. where you stand on where you sit. joining us now is republican senator bob corker from tennessee he's a member of the senate banking housing and urban affairs committee and austan goolsbee is here senator and off camera i had a conversation with austan just saying begging him that if he had any influence there that if the president would just lead on tax reform, that everybody would be helped. if we made this country the place that treated capital best again and stopped disincentivizing companies we'd get job -- all the stuff that he wants to happen will happen. austan told me there's not a man on the planet right now that could do this. that could get tax reform done right now. it's impossible to do. >> well i disagree.

i love austan. it looked like he had written the op-ed. now that he's out of here he's even saner than he was while he was here. he was a great public servant -- >> it's a little bit. i noticed that, too. there's hope with him. >> now look, our nation desperately needs leadership. and it's not just leadership at the white house, although that is the most important. it's in congress. we're going through a period of time right now where some of the most you adishsly stupid things are happening. what happened in the house yesterday with the highway bill is just incredible, what probably is going to happen with the veterans bill in the next couple weeks. but this effort to create a hotel, california, if you will, for corporations when all they're doing is seeking their own rational, they're taking rational steps what we need to do obviously is lower our corporate rates and have a territory cal system, and we know that that would generate

tremendous growth and it just pains me to know that the solutions are so commonsensical and yet somehow we cannot do it. joe i'm hoping that maybe, maybe by it the 2016 election americans will be demanding people in office who offer commonsense solutions that make our country stronger. right now, there's so much pandering that takes place. >> i know. >> and it's just -- it's painful to watch. >> austan can give you his reasons. because he's right about a lot of them. every single sacred cow that each individual corporation has that they want, whether it's r&d, whether it's this, whether it's depreciation, whatever it is, they're all going to be squawking on the right, the left doesn't want to do it anyway. >> yeah. >> the president would have to lead but that means he'd have to make friends with people that he can't stand in congress which he'll never do. so, you know, but austan is saying even if he did it wouldn't work. >> let austan tell you that it's hopeless. >> look it should be clear. i am friends, and a big fan of

senator corker and i wish there were more people on both sides that had this kind of sensibility. my argument is, the president has tried to lead on this issue. the treasury released a pretty good plan that would get the corporate rate down and you close a lot of deductions. the problem is, it's not really loopholes. if you want to get the rate down to 25%, you have to go take some flesh out of depreciation r&d, a bunch of things that then the corporate sector itself says wait a minute, that's not the kind of corporate reform we want to do, and if the corporate sector is not for corporate tax reform it can't go anywhere. nobody can lead it if there's nobody following. >> yeah. look here's this is i don't make political statements, here's my hope. i think there is a chance that

republicans will win the senate. i said the same thing to the president the other day, who called about another topic. that is if that occurs, austan, then republicans have to be responsible. in other words, republicans would control the house, and the senate, and could not point at democrats. on the other hand, the president would have to then be responsible. and what i'm hoping is for the good of our nation, that over the course of the next two years, should that occur, the two parties like happened back in the mid '90s, would have to come together and both take ownership over things where sacred cows as you mentioned are taken on. i really feel something is happening in our nation where more and more people do want to see responsible problem solving. i don't think it's reached yet that critical moment. but for the good of our nation, and for the good of the people that we represent, for the good

of our children, i hope somehow, austan, the 2016 race something happens where we become people who act in the best interest of our nation and not just looking towards the next election. >> senator do you take -- you don't take any umbrage that companies, u.s. companies who have long been beneficiaries of being based here and often depending on taxpayers to pay them to leave the country? >> well they have a fiduciary responsibility to the people that invest in their countries. and states all over our nation have recognized that if they can create an environment that can attract companies like we just did in tennessee with volkswagen -- >> i'm not talking about states. i'm saying leaving the country. >> i got it. but the point is these are global companies, and the patriotic thing for us to do is to create a system in this nation that encourages growth here. >> agreed. >> so it's difficult for me to say when you have a global

operation that's operating obviously all over the world, and we, ourselves, our policymakers, have created a situation which incents them to leave. in other words we're telling them to leave our nation and go to ireland, or go to some other place, it's difficult for me to blame them for doing what is rational relative to the stock holders that they represent. >> you're basically making the argument that individuals if they don't believe tax rates are higher they should just write a check that you don't do things that if corporations want to be global competitively, they have to do it they have to do -- they don't decide i'm going to be a much less competitive corporation but i'm going to feel good about -- >> -- bound to what the corporate rate is around the world. >> exactly. >> you go to the islands of -- i think there's no taxes of any kind there. >> here's what say -- >> always going to be -- >> there's been criticism that the private sector is being hampered by all this stuff. and people say not really. and that's not hurting the

recession and businesses are treated fine. now, it's gotten to the point they're actually leaving and we're going to lose tax revenue. it's gotten now to the point where it's so important that you finally sit up and take -- >> i don't understand why nobody here is taking umbrage of the fact that walgreens -- >> because it's a riddiiculous point -- >> they're taking our medicare part "d" money. >> are you listening to this senator? >> we pay fair market rates where other countries do not. it's a completely different story. >> no. to oppose this preventing the inversions is going to run into a thing that makes people really upset. it combines everything they hate about the tax code. leg lobbying for big corporations. moving stuff overseas, perceived unpatriotism of -- >> i think -- bizarre things to talk about. >> i agree as a fiduciary they're not relevant. but the world is the world.

>> we got to ask the senator about volkswagen. what's the situation, senator? what do you want to say? >> huge very try. we not only were able to attract the 1350 jobs, which were on the table from day one, but after the election certification on april 21st, we in earnest began talks on april 24th, and not only were able to get the 1350 jobs, but 650 more jobs, and the first, the first research and development facility for an auto manufacture in the south. so it was a huge victory. our governor and the economic team he has did a great job. i was, you know, privileged to be able to help see it through. and it's a huge win. 2000 jobs directly impacting chattanoogaens and tennesseans and again establishing tennessee as the place of auto manufacturing in our nation. so it was a sweet victory.

and the path we took while i know the nation watched and you know it was a little bit controversial, joe there was no other way to get to this place without taking the path that we took. so, very gratified and very happy for those 2,000 families that are going to be so directly affected. >> senator before we let you go, russia has fallen off of the sfront pages over the last three weeks or so, we've forgotten some about ukraine but today we hear these new sanctions that are out against russian companies. >> yeah. >> also hear that russia hacked into the nasdaq at one point and i just wonder do you consider russia a bigger potential foe or china? >> well i mean you know first of all on the sanctions, becky, hallelujah. we've been pushing for this for months. i've got to give the administration an attaboy when they do something good. this is outstanding. the stock market was up 33% in russia since march. now we're actually doing something that's going to impact them and try to change behavior. but, both are problems, becky, so we have this issue of the

middle east, which is a totally different issue. and then we have these two countries, which you know we cannot accept a bitter peace with russia. we cannot allow them to act in the way they are just to continue to do business with them, as many in europe want to do. so, i'm thankful that these sanctions were put in place. if they don't change their behavior a whole more will be put in place i think that putin has found himself in a really terrible place where he stoked this nationalism within the country and at the same time in doing so has to continue to support the rebels in reern ukraine and as damaging as country. so hopefully he'll figure out some way of being sane again. but we need to help him with that with sanctions being put in place if he doesn't change his behavior. >> all right, senator. >> thank you. >> i hear the music. >> austan, we love you. >> i miss you, senator. >> i wish you were back here. we need some sanity, hopefully we'll see you again. thanks a lot. see you later. >> it's just liberals want these

utopian that we'll never have it's like asking a fish to fly. or asking a bird to swim. it's not going to happen that way. >> there are zero percent tax rates so -- >> you're saying don't do it because of the rates at the bottom. the fastest intern. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business.

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you can make anybody happy. speed is made with the ibm cloud. the ibm cloud is the cloud for business. with more than a half a billion people expected to be living with diabetes by 2035, novo nordisk, which is the world's biggest insulin maker is saying the affordable care act isn't actually affordable for people with diabetes. joining us now to talk about the

growing pandemic is lars sorensen, ceo of novo nordisk. in what way? what does the aca do that isn't up to par as far as you're concerned, lars? >> well, good morning. what our concern is, that the individuals that have now signed on for the exchanges will be waking up to a situation where they will, in some instances, be faced with deductibles before their insurance kicks in. and that is perhaps going to change their behavior in terms of continuation of their medication. and their willingness to seek medical services, and that is concerning when you have a chronic disease like diabetes. but of course we need more facts. it is early days for aca, and we are just cautioning that there might be some pushback on the ability of the individuals to get the care they need. >> i wonder how many other chronic diseases that are going to be facing the same situation under the aca, i mean did -- i

know we didn't know what was in it till we were going to pass it, then we were going to read it. i know all that. but did anyone talk about this beforehand? >> i think we tried to raise tre issue. many other fapharmaceutical companies, patient organizations did the same. this accounts for all chronic diseases like asthma, like chronic heart disease, all chronic illnesses where individuals need constant medication and monitoring and medical services, but, of course, i mean, we're raising a flag, and you could see this in the article also in the "washington post" this morning that it's an issue, but we need more facts on the table. >> and you need to convince people that, i mean, an ounce of prevention is -- whatever -- a pound a cure. will be more expensive. it's a pennywise pound foolish solution because it comes back to haunt you.

>> absolutely, absolutely. the issue that diabetes is a disease which, in fact, for most parts could be prevented all together, but when it occurs, good treatment, constant monitoring, access to good medical services is important to avoid the late complications which is debilitating for the individual, which is costing the u.s. health system 10% of the overall costs. >> right. we have to decide what is appropriate for the federal government or for the aca to cover and what is affordable and then figure out, you know, i mean, the really necessary stuff should be covered, but there should be other things to figure out a different way because it's just not going to work this way. >> isn't that the case? the affordable care act was criticized by its critics for putting too much emphasis on preventative care, chronic disease management, and that it was too generous. this is the argument on the opposite side, right? it's saying let's invest more in

preventive care so people don't have to pay out of pocket so they get their blood pressure check and stuff like that. >> correct, correct. in doing so, we can prevent late complications of diabetes, prevent premature death that occurs with stroke and heart attacks, and so it, to me, makes a lot of sense in trying to think how we could fix the system and the insurance schemes such that it does not prevent individuals from getting the continuous care they need. >> appreciate your time today, thank you. >> thank you, thanks for having us, thanks. when we come back, we have jim cramer on the earnings of the morning.

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maybe who shouldn't have commented, but at the same time, you just don't know because i'm not sure where he was beforehand, and remember, it was not yellen saying it in the senate, but in a federal reserve report. either way, i thought he made a lot of sense. that's me coming from the stock side saying why were those particular groups picked on? to say, listen, we're tough on inflation? if that's the case, the world would say, wait a second, it ain't twitter. >> right. i finally decided she's a great economist, qualified as the people we have on here, they have. wrong for five years saying the market's too excepensive. give it a shot. >> she gets a pass. she doesn't need to. we grill them. >> true. >> i love the -- yesterday, what he's saying, feds' off their game. i want to hear what the fed has to say about that than whether

the fed likes the new anticholesterol drug. >> we came out of yellen into -- i thought that was just really perfect timing, juxtaposition of everything. anyway, morgan stanley looks good, jim, i think, yeah? >> yes. john stump is to banking as gorman is to investment banking. simple models, not a lot of risk. >> we have to go again, jim. see you in a few minutes. ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style.

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i want to thank austin for being here today, great talking to you. >> great seeing you guys. >> join us here tomorrow and it's time for "squawk on the street." good thursday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber back from delivering alpha. the news flow not letting up, job cuts at microsoft, last wave of bank earnings, time warner day 2, covering it all, a spill at the open after three straight days of intraday highs. bond action, 10-year back at 2 .5, europe in the red