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, russia

down big on new sanctions from the president yesterday. road map begins with microsoft cutting a massive 18,000 jobs as part of restructuring focused on streamlines operations. >> morgan stanley merely beating the street and blackstone trounss expectations. >> we will break it down for you. >> hug it out. icahn and ackman make up, but the highlights you did not see coming up. >> microsoft announces a restructuring plan in the elimination of 18,000 jobs over the next year as they look to simplify operations and align the recently acquired nokia hand set business with the overall strategy. this is a charch of 1.6 billion in the next four quarters. in an e-mail, the ceo said, quote, as part of mod earnizing the processes, the disciplines change making the decisions to change are difficult, but

necessary. guys, the expectations had been for somewhere between 6 and 12. this is more. >> yeah. >> it's about 18% of the pree nokia work force of 99,000. >> i think why people like this is because what these job cuts are about. it's not just, listen, nokia, we're going to rationalize that. we're a loaded company. we're not prepared for the new salesforce.com world of cloud which does not need as much people. also, i got to tell you, there's irony here. here's bill gates constantly beating the drum for immigration reform, foreign worker visa. what this is saying we have the wrong work es. we have the wrong workers at the wrong place at the wrong time, and the market knows that, which is why you can continue to go higher, amazingly, a multiyear high, for a company people felt was, well, wait a second, i thought windows was done? this is a remarkable run based

on the fact the man came in and said we're not the old microsoft, and people are believing him. >> now, is it enough to simply cut jobs, and how is an investor or you supposed to discern whether the right jobs are cut or whether it is a sign of apportioning resources properly within the company? >> well, i think there's a belief that stevesteve ballmer, the bluster, was actually a kinder, gentler ceo than we thought. this one has no passion for anybody, hit the road. >> 45 and change, a 14 -year high. >> still independenexpensive. >> ten cents from the high bubble. the old days -- >> why not? the company is very cheap. this is the problem with intel. they didn't have the good mobile strategy, but the pc coming back

here. with the enterprise level, i think that microsoft says the same thing when it reports, obviously, apple and ibm tie this, the enterprise spending more, and microsoft in the sweet spot to taker relatively big and move on. if you don't like this, people -- it's a credit card company, hiring like mad, and we are still in a moment where people want to hear firing like mad, not hiring like mad. >> job cuts, you don't see often, hewlett-packard, a while back. >> cisco. another stock. >> microsoft, we talk about activism. i remember that day, april of 2013, when value act took the position. by the way, a position not big as some mutual funds, but a sizable one, resulted in one board seat. nonetheless, woah, that stock

more or less straight up since and had a change in leadership. >> the xbox sales doubling. >> it's so power. great as barbie is bad. this is a revolution. people are not playing barbies or board games, but their xbox. i worry about matel's dividend at this point. it's emblematic of what's going on. just talking about the millions and millions of people who are gamers, this is good news for kpxb xbox. we have to watch the incredible performance of icahn and ackman. they are really very much playing wall street one, saying, listen, the ceos are bozos in cases or resisting. i didn't think they are resisting. one board member? the world changed in the largest company ever seen. >> obviously, when you have an activist like that, often times, they are speaking for a lot more

of the shareholder base than simply their own position. >> right. >> you have other shareholders in microsoft not as likely to get active, so to speak, in the sense we describe it, but, certainly, are making their feelings known either through the activist in the stock who is talking to them or directly with management, although quietly. >> how rewarding is it. look at this microsoft stock. this trades -- >> absolutely, without the big structural changes some argued and still argue for. >> right. remember, go back to brian and smith, a great cfo on the intel conference call saying enterprise spending is back, and you got to revert to my vo soft and intel if you think it's coming back. as much as the bold move, it's a legacy hardware we're looking at in prompt of us that does well when enterprise spending is back. >> away, we'll talk later on in

the program who forecasted the growth over the last year. two financial firms, morgan stanley earnings beated street, performance banking and wealth management banks more than made up for bond trading revenue. blackstone blowing past forecasts as performance fees nearly doubled. morgan stanley, equity revenue, four out of five quarters now beating goldman sachs, no big bank has seen stock go up more than morgan stanley in the last year. >> they saw it coming. wells fargo, stock sold off, john stump an excellent guest on "squawk," saw it coming. the government, just too power. . one of the great themes is recognizing the power of the justice department, recognize the man paul west, of holder. the people in the cross hairs of justice writing checks that are extraordinary, not much goes to

jack lew, but reparations, and gorman recognized, you know what? that part of the business that the federal government does not like, grow the part the federal government does not care about, advisory to individual, and everything works out well. congratulations for seeing the new model much faster than everybody else. >> moving with the full consolidation, that's already been some time now they did that, a change in strategy for citi some time back going a different route. wealth management is key there. not to dismiss banking -- >> no, you're right. >> 26 %. >> over did all the fix stuff, though. >> fixed income -- it's not been good for a long time there, but if they get it okay -- >> real strides, right? >> if you get that chinese bond buy order and jam the chinese a couple basis points, interesting article in the journal today. >> a tax benefit versus a tax loss this year, is that material this to or not?

>> you know, i -- people keep coming to me and say, listen, you know, you got to look through the bank earnings, things like that. no. that's wrong. what you really want to do is just you want to say to yourself, better than expected in a way that is is understandable, not in the way that is the great recession, pregreat recession, and earnings per share company that you can model, therefore, you can give a multiple for saying morgan stanley's too cheap. >> excludeing dva, something else that clouds earnings in terms of the credit spreads and the net discreet tax benefit carl mentioned. that's up 46% versus the prior period and revenues, obviously, also up. >> yeah. >> you know, from, yeah, 8.6 billion. >> things have been surprisingly good here. >> yesterday, bank of america

reported last friday, writing the check, the range 10 to 20 billion, and if they write a 17 billion check, bank of america would be at 16 right now. soundsly ki lridiculous. >> write the check and it goes up? >> you say banks are doing well exfines they are great? >> over a billion dollars a month. >> do i look like the justice department to you? the justice department, they play for -- they play with unlimited capital, and they are actual believers. it's frightening to go against believers, david. they believe. >> talked to one yesterday. >> yeah, and, look, their goal is not to put bank of america out of business. the goal is to say, listen, m america, we got tough with you -- really, it was the shareholders. >> quickly, blackstone k income doubled, high profile sales in the portfolio, going public.

>> this is one of the great stories, what can i say? you know, you just had to be on it the whole way, and whether we see aca coming out, so huge yesterday or the dollar generals, the private equiceequ guys have done a great job, beneficiaries of the federal reserve. >> without a doubt, of course, given on the borrowing side. of course, this last two years about exits more than it seems about new deals, certainly deals of size are not making the headlines like they did in 2006. talk about blackstone, listen, alternative asset management across the board, made it to real estate, a larger portion of the investment portfolio, real estate run by john gray, potentially the man who will take over one day for steve, but they have been executed and saw invest. banking, and they have goodman's distress, it's across the board,

the model put in place, many would say, is the best of that -- >> right, their ritual funds -- >> this was the first to go, and we all remember when they chose to go, should have gone out of the of the public markets when they entered the public markets, when was it? may of 2007? >> look, my hat's off to the guys because they are making money and let you in on it too. you don't have to be one of the investors. you can be in on it too. >> it's murky. >> murky? >> there's not a great deal of transparency. that's what i mean. >> i like that word. we did not do time warper yet. >> we'll do all of that. in the meantime, ackman and icahn making up in case you did not see it. wow, what a hug, that's been analyzed over and over in the past 24 hours, big happenings,

we'll fill you in, and the live interview with the house committee financial chairman, a lot to say about what fed chair yellen said at yesterday's hearing. today encapsulating the economy, a nine-month low and jobless claim at a post recession low. a lot more "squawk on the street" from post nine in a minute. turbo. so why are we so obsessed with turbo? because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. vo: hurry in and you can get a $1,000 turbocharged reward card when you lease a new 2014 passat s for $219 a month.

a lot of big moments in yesterday's delivering alpha conference including carl and bill ack moon on stage hugging, acting like friends. they had a public war, as you know, over herbal life that played out on this network nearly for the past 18 months. interesting to see them back together, but also interesting to hear comments on the nature of activism at large today. herbal life, valiant, a wide ranging discussion. >> a great job yesterday, but going over the transcript, and david, the ceo of allergan is locked in with the bad guys. seems like they were on a high. come in, and basically, look, guys, we know the way, we know the drill, we know who is entrenches themselves, and, you

know, i had pyott last night, and i don't think he's the bad guy he's made out to be. he's not the ceo from wall street where we have gordon saying he's a country club guy. this is a serious businessman trying to get the most for his company, and i just found that, look, i'll say it, cheap shot, cheap shot. i think ackman's done a good job for investors and irgs cahn did a great job. they are not a bunch of jokers. they run great companies trying to get as much money possible to the shareholder bringing me to jeff, trying to get money for the shareholders. he's not going to sell at 85, but capitalism can prevail, say forgot about it, but i'm not going to say these not doing the right thing by being stubborn. >> oh, no, or the board. more on time warner -- >> i started jumping. >> no, of course, you're right.

vail yent and aller garks an wages on. could be for a number of months, conversations i had last week, the idea that, well, we could buy something and everybody scrambling to know what that might or might not be. your observations are fair, jim, that the rhetoric gets much stiches, and there's been many cases where there were bad actors, but this is a fight, no doubt about it, but you can make an argument that al lrg ergan created value along the way, and will end this by doing -- creating more value one way or the other. >> the words that struck me is this is basically -- quoting from the interview yesterday, where he says that what's up usual, which is dangerous, they put in bylaws. well, no, i don't regard that as danger, blackman, but done a

great job, creating a tremendous amount of wealth and trying to create more wealth, and i'm not against that. a rich man not just there -- not playing for dinner, but moving -- >> we could focus on if if you give consent for a special meeting, you have to have the same shares, an amount, to vote them at the special meeting. ackman is at 10 %. >> right, right. >> so you still need 25% to call it, but you're going to need more than that to make sure everybody shows up and votes the shares they need to vote. >> right. >> that will be end up something of -- >> perhaps we focus on when when we get to it. >> not everybody's a bad guy. some have done a great job, american businesses get a bad wrap. >> the best thing to do is to back off. we'll see if that happens. >> which he's done. >> on apple. >> yes. >> worked out well. >> sure did, come on, guys.

don't make the judgment that they are entrenching themselves. some are doing a good thing. >> when we come back, mad dash with cramer, countdown to opening bell, futures, dow posted 15th record of the year, and s&p has not set a record in two weeks. "squawk on the street" is back in a minute. just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review.

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because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. thursday, right? >> yes. >> thursday already, man. >> i feel very inadequate, as do you. >> what a day? >> scrambling to stay ahead of the news.

the stock up the most and down the most. >> we are madly dashing. let's start with that. >> the down beat, finish up. sandisk, a red hot old tech name down badly today. this is flash. you're on a conference call. they say, listen, pricing's not holding up, and i thought pricing was great? this is probably the most mystifying conference call of the era because people felt, wait a second, if disk drives go up, seeing hewlett-packard, and i think the people are trying to figure out how did pricing not get great. now, on the other side, the energy revolution continues. we know bought last year, which is a lot like -- a lot of the different companies that make little bits of parts, okay, in the oil patch. i mean, this company's being rumored to be bought by zeemans.

>> i mentioned value act earlier, they own 6.6 %, a number three holder, filed a 13d in february, jim. >> right. >> only used one name, nov was a scheduled buyer. >> here i was going with larry robins. recommended it last night because of the panel we were on where -- >> with lindsey capital management. >> yes. >> owns about -- well, add 1.2 fkt 1.2percent. >> going up interesting against in a lot of places. this oil patch does not stop, david. >> makes sense for them to potentially acquire these guys? >> boy, they are so pro-shareholder, they would not want to pay up here i don't think. that's a good question. >> all right. >> you can start a lot of rumors when you have a row best m&a

market. >> a magazine i never heard from, worries me, and sud ily i'm in here. it's the smith situation, to not mention is irresponsible, but a great company, came public, people did not like the company, but that was before the energy renaissance. the renaissance is real it keeps making us money. the great bear, which is russia driving up the stocks too. remember russia, didn't they -- >> thought the great bear was stanley -- >> a lot of great bears today. >> a lot of stocks to watch. high stocks already. opening bell above five minutes away. stay with us. [ male announcer ] once, there was a man

who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame.

♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ so the magic shell went back to being a...shell. get live squawks right in your trading platform with thinkorswim from td ameritrade. welcome back to "squawk on the street," i'm mary thompson. i just got off the phone talking about the second quarter where the company beat the street if you take out items that beat 60 cents, and the second quarter called solid, talking about a discreet tax benefit linked to a review of the company's results over the 2006-2008 period reducing its tax rate to 1.6%

for the quarter and expects a normalized rate of 30% in the third quarter. trading activity strong in the portfolio picked up at the end of the second quarter but not heroic. talking about a loan book, a key part of the company's strategy. certainly in the wealth management business said that the loan continued to grow for retail and corporate clients in the second quarter, an on the corporate side, the velocity of deal making continues to increase, and that should benefit both debt and equity underwriting, et cetera, in the quarters ahead. retail client, she said, appear to be pleased with their positions. they are not transacting a lot, although, they are engaging with the financial advisers, and lastly, sanctions right now do not appear to have impact on the deal sale of the commodities unit. carl, back to you. >> good information. >> yes. >> thank you very much. adjusted roe 7 .3.

no quarter's perfect, jim. >> no. >> we have not been handed the perfect quarter yet. ? the headlines of the situations, people move in, but i like the company, the company is undervalued in large part because people are worried about things that kept it down many years ago. i mean, remember when morgan stanley was to be beholding to french banks? >> yes. >> they battled that for a long time, credit default swaps, the concern about holding there. >> oh, minus 5 hedge fund, what was the news later? >> yeah, 0 hedge. >> i don't like to quote anyone. >> yeah, yeah. >> i think there's a twist on it. >> that's what you were doing there, got it. there's the opening bell and s&p largely red at the top of the screen. the big board this morning, celebrating a listing a an independent company, and matthews international designer and manufacturer of bronze and gran it memorials, caskets, and

cremation equipment. hopefully something you do not need soon. >> another company that decided to bring out more value, a real estate investment trust, like plum creek, and the companies are taken for granted. rings the bell, so what. no, continue to do what jeff did, take extraneous businesses, get rid of them, and in the end, you have a valuable company jurnneath, and it just keeps happening, and we take it for granted. >> you mentioned matel in the first half hour of the show. >> yeah. >> three cents misses the 18 cents estimate. barbie down 15, fisher-price down 17. barbie down eight straight quarters in north america, and -- >> yeah. >> they say they are well-positioned for the second half, but tough quarter. >> grand theft auto in, barbie out, right? an american ritual, david. going from -- right, a certain

kind of video game -- morphing into video game people, not barbie. doing something that's structural, which is why xbox is worth so much. i'm not being facetious, but we're not using board games or barbies because people are on their tablet doing amazing things whether you like the games or not. >> my 8-year-old plays with barbie but goes on youtube to watch barbie shows. did you know that? there's a youtube show. i don't know that it's helping sales. >> interesting, google has a youtube show, which i don't think they pay for, right, made for someone, and marissa spends a fortune on premium content. i prefer the google model, your daughter watches something google did not make -- >> we'll get clarity after the bell. i saw google play could out pace the apple store in -- >> there's always a headline. the headline comes out, people send it down because, well,

that's a bad number, and weeks later, it was not bad. that's the pattern. >> interesting to see how many employees they added and the free cash flow numbers, what a cash machine. i'm not passing judgment whether it's hated or loved, but in terms of the business -- >> it's a great business when you have other people making your content. >> it's a great business. that may be funnlly accounted. that's why we come to work every day. >> it's why people love facebook. stocks stalled because they are substantially stressed small biotech -- >> social media first. >> well, i don't know, the aforementioned yahoo! backed off from the low 40s to what is now 3362. alibaba, only thing going for it, i don't know. >> and 40 bad initiatives. >> we have not touched young -- >> did you make that up on the

fly? >> yeah, what do you think? >> china comps up 15. what's going on state side, jim? >> going back and forth with stefanie. my capital trust owns it. it's a pattern. thought it was a china story, but taco bell is not good, pizza hut is not good. it's a constant battle in the restaurant business. i'm not saying these guys are fool -- the stock is up more than the average restaurant chain, but there's a leaky boat everywhere in restaurants, and i got to tell you, when i saw the pizza hut numbers, oh, man, come on, man, you are getting china -- china killed it, and now they are coming back, and every time they put finger in the dike in the restaurant business. it's really hard. i think the mexican business is a good business, mexican food. pizza's a good business, but

pizza hut is down. people are not spending money. what are they doing? how are they eating? >> chick-fil-a has the biggest share of chicken in the states. >> good point. >> doubling sales in ten years. >> it's a shift. sonic had great numbers, for instance. ihop had great numbers. people are going and eating at different places than they did. or sam migual. >> i heard they are eat and drinking there. >> had a big crowd. >> how is the wilime? >> i'm losing money. i'm in there making the guac. >> do you make it? >> unlike the bad yelp review, that's not true. everything is fresh. >> everything is fresh. >> i want it down. >> well, janet yellenmen menwan down. >> oh, the zingers are flying today. >> she should have mentioned me

zinga. >> revenue is -- europe looking okay. their volume down, not down as much as in q 1. >> pm is doing well. you know, look, i just went to europe, come back, and i just want to buy stock of philip morris. if i had hair, it would smell like tobacco. people don't stop smoking. negative article coming out, thought it was a disappointment, but forget about it. they smoke like demons over there. >> been to china? holy cow. >> china, they know how to smoke. >> yes, they do. >> wow. >> when the smoke clears, oh, boy, am i good today. lorilard, reynolds. it's a buy. >> a week where we forget about a $27 billion deal in the tobacco industry. and imperial tobacco hopefully

to be a strong number hence they get antitrust approval, but that is by far not a gauarantee. you heard the ceo when we interviewed her on -- tuesday? >> tuesday. >> tuesday? >> tuesday. >> that they believe the market shares are appropriate to allow antitrust pass through, but others say two and three get together is two and three get together. >> the device is a good way to make money. debt downgrade today, but the tobacco business is not a lot of competition. any time you have not a lot of competition, larry robins yesterday said something interesting that hertz is cutting price and they don't need to because the rental car market consolidated. i don't know how much tobacco costs in the country and how much is tax and thank heavens i don't, but it's not like -- remember the morris friday, cut

prices dramatically? >> yes. >> that's not happening. marlboro friday. wow, are we old. >> thanks for reminding me. >> i remember time warner before it was time warner, but now -- well, who knows what it will become if fox buys it. it's day two of what may be sustained battle between these two companies. of course, yesterday, drama as we heard from fox unveiling publicly, at least, its proposal to acquire time warner, roughly $85 a share, 60% stock, 40% cash. and time warner firing back saying we are not interested at all. there's been no talks other than the initial conversation between chase carrey, ceo of fox and the ceo of time warner and board believes our own strategic plan will create more value than fox

ever could. i'm paraphrasing there. let's get back to what to expect from here. time warner shares up, $100 a share, a number batted around by a number of large holders i had an opportunity to speak with, one they feel is fair and would, depending on what analysts you talk to, potentially acretive. the current bid is 12 times, obviously, move up to a hundred, talking about a higher multiple there. fox's shares down yesterday. time warner may say, you see, currency's coming down. were they down because share shoulders at fox are concerned because some argue will over pay here? were they down because risk arbiters setting it up need to short the acquiring company's currency from 60% that would be stock in the current composition of the offer or down -- and i did pick this up from a number of accounts, because people on fox are selling fox to buy time warner because time warner gives more leverage on the trade and

have the same security in the enanyway. maybe an all three, but one is not indicative of the deal not happening or not believing in fox, necessarily. now, time warner, for its part, hearing from all fronts will fooigt this vigorously. going to, of course, harp on the idea you're exchanging your currency for a family controlled company then going to control time warner's assets that does not have a succession plan in place. will the management team be up to it? everybody argues, though, or admi admits, an excellent operator, but there's question marks they'll raise. what else? expectation to unveil more about the strategic plan in which they make arguments with allergan, if you recall, putting numbers to paper and explain why it could be a hundred dollar stock within, call it a year and a half or so, and that the environment then is better to

sell off of. no one thought jeff is absolutely committed, does not have a control position or anything like that in the company, but i don't mean to sound -- he just got divorced. i mention that because you know what? out from under something,ment w to run the company a few more years. that's what you hear. give me a few more years, deliver on the plan, deliver more value than murdoch can deliver, then i'll sell collection of assets, smaller collection of assets, that we have here. will he be given time to do that is the key question. as for murdoch, what i picked up over the last 24 hours, why not? well, people are sidelined, argue at&t or verizon interested, they are both busy. i don't know. i don't know if those are two viable bidders in the future, but what he cares about is hbo. what he's focused on what i their from numerous

conversations is netflix and taking on netflix, taking it around the world, expanding the hbo foot print through eastern and western europe, using the ip that hbo has saying we're not just going the line track as cable service, but direct to consumer service that hbo is. that's what he sees as the most powerful part of the company. sure tbs and turner are nice. >> right. >> what he believes is netflix going unchallenged. one take away is if he succeeds, watch netflix shares. >> buy netflix. it's not a big company, relatively, pay 30 billion for that? >> don't joke. >> there, it would not be acretive in any sense of the word ever. you could say it's undervalued. >> i didn't know the divorce

angle. he wants to throw himself into work. >> he wants to enjoy himself. >> it's fun to be ceo of a media company. >> new york times art department killing it again putting him on the iron throne, jim? discuss about what kingdom he would be from if he was on "game of thrones," and -- >> look, i watch that with my daughter, try, pornographic, like, embarrassed, like, turn this off, turn this off! >> great story, though. father and sons, mothers and daughters, it's all, oh, it's rough. by the way, fathers and sons plays an important role here as well. what is he going to leave to james and elizabeth too, potentially, what will the company be comprised of? he'll never stop. murdoch only knows one way to go. >> that's a kirk -- at 172 still making hostiles. still making hostiles.

>> dow down 19 points. let's check in on the floor. morning, bob. >> morning, guys, down earlier, but making a come back here. could be positive any moment. who says old tech is dead in it's a great month for old tech, not just microsoft. look at ibm, intel, cisco, biggest gains in the dow, percentage gains, not point gains, are all old stool tech stocks. my point here is every's worried about social media, forget about it. this is the stuff moving markets around like the s&p 500. look at the earnings situation. winners and loser not surprisingly, names reported, impressed with numbers raising guidance in the middle of the year, significantly, 3%, 4%, the stockrentals, not do it yourself rental business, but mostly professionals out there

renting high end equipment from. business is fabulous. they said the rebound in nonresidential construction is continuing to drive up energy and commercial. remember, the concern about the do it yourself market, but not in the professional market. that's doing well. other earnings, losers here, not surprisingly, sandisk was all right, but below expectations. that was a loser today, manel missed notably, also a loser, russian stock market. we know about that, told you about it, u.s. government imposing sanctions on some of the russian companies here. there's the big etf. three russian efts to trade in the united states, but this is the one everyone uses, the big one, rsx, a terrible year, down 10% so far this year including 3% today. look at the big russian stocks. we have a coal producer in serious trouble, rumors they may go bankrupt.

they need financing bad. they are affected by this particular decision to impose new sapgss on them. i want to point out something about effs. there's a company called good harbor, a big, big etf company, asset only manager. twice a month, they reambulance, they have a statement, out of the positions in stocks, very active in core efts like the ivv. they low ered their position in the month and speculated why we were down last week particularly on heavy volume in the core efts was because of activity of the asset managers like good harbor. i don't like drops in the market from an individual source, but people are talking about that. back to you. >> thank you, bob. rick santelli at the cme in chirg. good morning. >> morning. people are talking about geopoliti

geopolitics, little doubt that's having an effect, but there's a rally pushing rates down, whether it's the issues regarding headlines, china's purchases, that's having an effect, and generalized data today, missing on house, claims dropped, and we have the fed yet to come, but down three basis appointment. open the chart up, i like to see the february chart. the left side, important yield to pay attention to at 257, and, only, we are toying with 250. should it close here, that's the lowest close since may 30th. if we continue the may 1st theme, rates go down. you see it on that chart. put up a dollar index. what we learn from places like the u.k. briefly in history in a large way, we should see higher rates if you want a stronger currency. does not work out that way necessarily, but it's on a tear of one-month highs.

this is the biggest chart of the day and pay attention to it. lowest yields in history. mid-1, it's bouncing at 116. today, it really is penetrating a bit. tens and twos fives and 30s. curves flattening, important to pay attention to. carl, you always pay attention, back to you. >> we'll come back to you not long from now. rick santelli. with we return, the man you want to hear from on microsoft. 18,000 job cuts, stock at a 14-year high. back in just a minute. [ male announcer ] we know they're out there.

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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. what a ride it's been for microsoft. new ceo, new cfo, xbox sales doubling, and getting leaner with 18,000 job cuts, a 14-year high, and we'll talk about that later on. when we come back, stock trading with jim when "squawk on the street" continues. ...and a choice take 6 tylenol in a day which is 2 aleve for...

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against russia, well ahead of what the germans want because they are much more alied in business, germany and russia. if you felt sanctions would fake hold, companies hit last time were visa and mastercard. a story comes out, literally, a news cycle, 24 hours, don't worry about us, visa, mastercard, there's hundreds of millions of cards in russia. that's true. they are saying, don't worry, why shouldn't you worry? he talked about making it like venezuela, we'll have our own credit. don't worry about sanctions, but they are more bark than bite. >> energy to worry about, crude up to almost 103. >> bp, regarded to the close to russia company getting hurt. can't reiterate oil companies. mentioning briefly, pumping a lot of oil, just not a place to get it to.

that's why ma jell lan midstream is one of my favorite stocks, have the old pipe when it was in the boom days, think of the movie "giant," you're a james dean fan. >> what's coming up on "mad" tonight? >> look at this. when you see sherwin-williams, we think paint does not do well, but coming on tonight, an you've see the strucks, snap-on, a great american growth story. i try to get people in the stock, it is going higher, anticipating i'm not stopping, okay? >> okay. >> i'm not stopping. >> we'll see if you ever stop. >> on twitter, people think i'm not going to fight themg, out much their minds. >> apparently, they would be. >> thank you. >> consider it a compliment. >> how much fun was the show? >> see you tonight, jim. >> thank you. >> 6:00 p.m. eastern time. we'll look at the plan to cut 8 18,000 jobs, and we'll talk with

rick sherland, and david explains the bullish call on the s&p from earlier in the week keep it right here.

just take a closer look.

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. welcome back to "squawk on the street," and in 15 seconds, we'll have a look at the business index, and for context, high water mark was from september of last year at 20. the best level since march of 11, since then, it's not taken that out. this will be fascinating. here we go. waiting for the number. july, we expect somewhere between 15.5 and 17. 23.9. my number spotters in the currency pit. 23.9, better than expected, unlike the housing data today, and 23.9 is, obviously, better than 20. again, copying back to march of 11 with regard to the philadelphia. at least their version of what's going on in manufacturing, and, of course, we'll continue to monitor things like low yields and ten year boons in the eurozone. all yours. >> thank you very much, rick santelli.

better news there. microsoft announces a plan to result in the elimination of up to 18,000 jobs over the next year. john joins us on set to discussion it, and, john, by most reads it's double what people looked for here. >> yeah, it's a lot. it's a lot. any time you're dealing with job cuts, it's rough for the workers involved. around 12,500 of this is nokia. it's not surprising that you're going to cut that much. i think around 25,000 workers came from nokia. even a company as successful and gets acquired, there's big cuts, nokia was not successful in smart phones, but 5500 of this is not n organize kia, the most interesting part of this to me. i said a couple days ago that it'll be interesting to see whether they take advantage of the moment of cutbacks to not only affect nokia, but the rest of microsoft, putting a stamp on that and what he says in the

note, he wants to restructure the way microsoft does team work, cut out middle managements, and, you know, in the past, microsoft did not do cuts like this, but the types of cuts that microsoft did were back stabbing cuts internal and political. if he can get this cut right and fix the culture so there's less infighting, that could be really good for them going forward. also, important to note here, i think, we have not seen who they elevate management wise and who to bring in from the outside and maybe who might get push out. august, september tend to be the months seeing those executive shuffles, beginning of the fiscal year, historically every year, interesting to see that. that's the most important stamp, i think, he puts on the organization going forward. >> johns stay with us, if you could. microsoft at record highs after

announcing the job represents, rick sher lan, head of technology research, and good morning to you. >> good morning. >> i think you were predicting in advance to the 13,000 job cuts, about 10%, surprising many people, and clearly, as was said, they are going further than that. >> yeah, it's 5% of microsoft's pre-nokia work force reduced and cutting half of nokia. it's not as extreme as cutting 10 % of the pre-nokia work force, but it's a bold move signaling that microsoft is not going to get on a slippery slope with nokia, but trim the structure substantially, and that was something that was worrying investors that this acquisition could dilute earnings going forward. it has an impact, but this mitigates that, i think. >> you know far better than i, can they gain relevance in the

cloud and become as important there as they have been previously with enterprise? i mean, this is what we hear on the conference call next week, moving from software created over many years, many months to a more immediate form where they write and basically patch software in within weeks. that's a different business model for microsoft, can they monetize it? >> yeah, simon, over the past couple years, we talked about it. investors are worried about the impact of microsoft's business with the encroachment of tablets, and i think that has already taken place. half of the consumer market, you know, probably is never going to buy a microsoft product again, i think the business is gone now. the productivity users or the core business, and pc sales are about flat so the core business is not anything to get excited about, but it's less bad. meanwhile, they make a transition to the cloud faster than people think. >> you know, rick, we learned

from the journal today, running apple 80% of the time from an ipad. is it wise to downgrade nokia, having strengths still, at a time when you have apple joining up, clearly, with ibm exclusively to create enterprise apps that can then be used on apple products. in essence, i'm asking you, microsoft's hardware offering good enough for the new generation 1234. >> yeah, they have to focus. clearly, going after apple or the android market in the consumer market is a losing proposition. the memo today was clear. they don't have the budget to do everything. they are going to go after the windows phone market to compliment productivity use. i think that's limiting their role in the market and more productivity users, not the consumer broadly. >> they are pleased with the ai nou announcements, been on a strong

run, and how much upside do you see from here, rick, in the near term until they get to growth in mobile and cloud? >> we raised the target a couple days ago from 45 to 50, but $50 implies about 15 times 2015 earnings a year out. the market would be selling for about 17 times, so, you know, that's if you back out of the cash. there's another lever to pull. that will be, what does he do for share repurchase. that could add a lot to earnings if he chooses to pull the lever. i think he'll do so over time. there's opportunity to get earnings higher, and opportunity for additional multiple expansion just to get to the market multiple. >> do you see the announcement tuesday with the earnings call or is that further off? >> not clear. >> whether he pulls at that time or there may be an am us meeting coming up, and i think the opportunity would exist after a board meeting to make that

announ announcement. >> good to see you, rich sherland. >> dow flirts with the flat line after a record close yesterday, 15th record of the year, and goldman earlier in the week upped the price target on the s&p 2050, 4 % from current levels, and the chief equity strategist joining us exclusi exclusively this morning at post nine. good to see you. >> good to see you, carl, good morning. >> the returns will not be what we have been used to over the past couple years. >> had a terrific bull market, now the environment the market continues to rise, but the story is about earnings growth, not pe expansion, and i think, also, now given the expectation that the fed will be likely to raise rates sometime in the next 12 months, second or third quarter of next year, they focus more on the path of the market in that lead up to -- even though it's a

year out, they focus on more now. >> may not be a year out, but early 2015 story. cooperman on the air yesterday said money managers right now are playing little league baseball the last time the fed hike the rates in 2006, and they are going to overreact. duke that's true? >> well, i started when paul walker was the chairman of the fed, chairman of the analyst, been around for a while, and the market history, look at 1994, look at 1999, look at 2004. we have some experience of how the market trades in advance of fed hikes. in the past, technology consistently been a strong performer, recognized of course, that noo1999 was the peak of th tech bubble, but tech is a strong performer. industrials strong two of the three times. from a strategy perspective, we prefer to recommend clients on technologies and industrial spaces. another characteristic is value. value stocks do well in those

environments. in the year leading up to a hike beginning of a tightening cycle. that's the first observation. the second way to think about is it the year following a vet -- tends to get contraption consistently. the idea of the multiple, should not anticipate this, earnings driven, earnings grow 8%, and that's the kind of trajectory looking at 2015, end of this year, 2100, that's the projection in earnings growth driven. >> capital expenditures, when do woe see investment in striking after stan, yesterday, at delivering alpha said it's 5 huge problem the companies -- calling out ibm -- borrow to buy back stock rather than invest in their businesses. is that going to catch up with us if we do not see this come alive? >> so, when we study the use of cash of corporate america, there is record margins to begin with.

as a result of that, there's a lot of cash that corporations are directing towards purchases, capital spending, rd, payments, et cetera. we have the s&p 500 as an example. 80% of last year's spending, 80% -- guidance begin on that amount, and up 8% this year. >> you know, david -- >> that's strong. >> that's not enough. >> i really value you coming on the program because -- >> thank you. >> as a voice, you stand out in tells us where the market should be on fundamentals and where it's actually at. when you are here, we benchmark that. the truth truth is you raise the estimate because we hit the year end target six months early. we're short on time. you have not raised the targets further out. for the next two and a half years, for the next two and a half years, you only think the market will rise 11 %, and that would be my take away from the conversation.

>> the level of earnings, my forecast, consistent with where they have been before, $116, $125, $123, $138. that's the trajectory with the sales growth, margins, expectations of profits. over time, profits drive the stock market, and the market today, trading 16.5 times earnings, a little over 16 times on consensus. enterprise to sales, price to book, the metrics, free cash flow suggest market trades around fair value. if it trades at fair value, it's rising in conjunction. >> the take away for most people is this market will only rise 11 % for the next two and a half years. that's a real deacceleration on the market gains we've had. people have to understand that's what goldman is saying behind the rhetoric. >> understand that profit margins for corporate america have been stagnant for four years, 201 1, 12, 13, and 14.

hovering under 9%, the question is how fast the economy will grow. economy's expected to grow 3% accelerating to the level next couple years, that's the kind of trajectory of profit growth we see over time. >> wish we had another 10 minutes, david, but come back. >> okay. >> david kostin. >> mary barra set to testify in a senate transportation hearing about the gm recalls, phil lebeau has what to expect at the hearing. over to you. >> reporter: it's begun already, there you see ken feinberg, in charge of the ignition switch recall issue, answering questions for 90 minutes or so, and them the fireworks begin because the senate subcommittee will then be questioning mary barra and gm's legal counsel, michael milgan, at the forefront

of how they handled the ignition switch recall, specifically cases in which general motors had been sued, then settled the cases, sealed the settlement, common in corporate america, but never passed information to the higher ups within the company, therefore, few people knew exactly what was going on, the severity of the problem. in the prepared remarks, michael will be saying that i would have been aware if -- if i would have been aware of what's happening, i would have take an action. look at shares of general motors for a taste of what to expect during the hearing. just a few minutes ago, senator claire mccaskill, from missouri, vocal hon how they dropped the ball here, say it's incomprehensible, how he's kept his job. she'll ask why he was not fired point-blank. those are the questions we'll focus on and that the senate subcommittee will be focusing on a little later on this morning. again, the hearing with mr.

feinberg has begun, and we'll hear from mary and michael. back to you. >> thank you very much. up next, the biggest stock picks and best moments from the delivering alpha conference. later, bringing 3-d printing to the masses, the printers on sale at select home depot stores around the country. the ceo will be live to tell us all about that. do we need 3-d printing in our lives? "squawk on the street" will be right back. five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade.

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>> fresh off defeat at the level, areas plan b just suffered a setback. the copy right office told aera they are not a cable company and does not qualify for license to pass along copyright content. they say internet retransmission is outside the scope of the law that requires broadcasters to grant licenses to cable companies. reached out to aereo for reaction, and we'll let you know when we hear back. another blow to aereo positioning itself as a cable company. >> yeah, that is not going to work. they are closer to shutting the doors there. listen, if they can get the deals with the companies that provide the content as other distributors and get their customers to pay for it because

they like the other parts of the business, the ability to, you know, maybe they can create some sort of a lower price tier, maybe they survive. otherwise -- >> not looking good, yeah. >> in the meantime, it's the morning after the night before. it was a big day at delivering alpha from stock picks to the hug heard around the financial world. kate kelly has more of one of the big investment themes of the day, kate, good morning. >> morning, sigh mop. a big story line from yesterday was energy and hedge fund managers approaching it. production is up in the u.s. thanks in no part to the crude rich shale in north dakota and seeing a lot of growth as well as consolidation in the sector as a result. larry robins is bullish, leon cooperman talked up resources and at least the second year in a row, and john pallson hit on a number of names holing including petroleum and the pepping deal made him a neat profit of nearly

$400 million this week and o asis petroleum. here's paulson talking about the flurry of a way to treat the oil and gas sector. >> these companies are too attractive. they are too attractive to sit there at the current valuation. they are independent. they are in the u.s. they are growing very rapidly. they have enormous reserves, and the cost of harvesting the reserves continues to decline every year, so it's not likely they'll remain -- they may remain as independents for a long period of time. >> of course; some of the names are not new winners for the panelists, one was from coopman who talked about a trip to north africa scoring on atlas energy, a name he still holds today. >> one of my fondest investment days, first two week vacation of my life several days ago,

standing in the valley of the kings in egypt looking at that many thousands year old sta chut, by phone goes off 7:00 a.m. new york time, and atlas was taken over by chevron, up 40%. the atlas people kept the rights of the name, and i think they'll be in act 2 in the next couple years, and the stock's worth 50% more than it's trading for in the market. >> there could be more to play out on that, simon, a story about the benefit of the two-week vacation, the way i read p. >> you bet perfect that that's what he remembers about seeing that sphinx, he remembers the time difference. >> takes two weeks off, makes 40 %. acontinuation, is it not? >> the man is amazing, though, gives us ten stock picks, and eight or nine are up every year. >> yesterday, we had 12.

kate kelly, thank you for running us through them. the strait of new york has a propose regular lagtion on bitc. this comes from the chief financial regulator. the idea of a bit license, out with the proposal, that any company transacted with bitcoin or any concerypto currencies, ap towards the use of bitcoin eliminating some of the fraud and some of the corral activity that we have seen. just want to know here that coming up later in the hour, ben is joining us to go through regulations, how they move the needle for bitcoin and eventually transacting in new york state, the first state -- >> if you're not anonymous, does that hurt others the willingness to participate? >> we'll have to ask him. >> yeah, got to keep a list of the customers that have reserves. we'll ask about a lot of that later on.

when we come back, be the proud owner of your own 3-d printer, they are in home depots across the country. the ceo here on post nine talking about what to print with those machines after a break. she's still the one for you.

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gardeners, plumbers, electricians, some consumers take household projects into their own hands.

with that in mind, 3-d printer, maker baht, taking their printer to consumers across the united states as printers hit the shelf in select home depots. the ceo of makerbot, good to see you. >> great to see you. >> why do i need a 3-d printer in my life? >> it's one of the things if you're an engineer, industrial designer, act tech, it's a no brainer. you can create faster and make things in no time flat. turns out, what we learn from makie ining 3-d printers for th people is they make things for their lives. >> like what? >> i have a cup holder here, that replaces what you have in your cup to keep your hand from getting burned. we're in home depot stores, started out -- just launched in home depot, and 23 you're a contractor, now you can start making -- this is a little model

of a bathroom with all the plumbing, all that kind of stuff. this is really cool for, you know -- it's going to be cool to see what electricians, contractors, and just d irgsiy do. >> interesting you picked home depot and not best buy to lunch your product. >> it's one foot in front of the other. we like to build a good business, and depot gets it in those creative and empowered to make things. >> how expensive are they? >> the new line -- there's three of them, and at the low end, the small is 1375. >> wow. at the top end? >> we have a huge, massive build volume, making things the size of your head. >> right. >> that's 6499. >> that's a big investment for the stuff on set here, those are small items, you have to be passionate about 3-d printing

not just of the process. >> or you like making things that are custom. go to the website and make custom garden sticks, make all, you know, you can make -- say, like lettuce and flowers and all that kind of stuff, make that stuff custom. if you want to make stuff special for you -- >> i don't mean to be rude, but i can do that with a pen, knife -- you don't have to use -- it's not complicated stuff, is it? >> you know, one of the interesting things is as we move into the consumer space, not only have we done this new partnership with home depot, but with ugly dolls and sesame street to get content in people's hands. when they want it, they make it. you're right, the initial investment is 1375, but what you do with it is powerful. everything you make after that, the material is so fooaffordabl it's almost free. >> how many units do they stock,

and is the challenge keeping up with that? >> i love that question. so, we're doing an initial run of 12 stores in the major markets like l.a., chicago, san francisco, here in new york. and we just launched this week, so we stocked them up, and we're going to roll them out. >> we're talking thousands of units or, i mean, how many did they order? can you tell? >> i can't tell you. >> you can't tell us. >> interesting question. we saw the parent company stock rise on the news. give us a sense of how much it's going to move needle in terms of sales for you? one of the numbers i can tell you is the first quarter number this year are 80% larger than first quarter numbers from last year so we're -- >> that is pretty good. >> things are going well. >> how much is a learning curve? don't i need someone to explain to me what i get for 1300 or $14 00 purchase? >> yeah, we thought of that. we were worried.

because for a lot of people this is science fiction technology. we are bringing it to them wanting it to be accessible and friendsly. we have employees in all the stores so they can explain it, and the first day, everybody was, like, wait, what is that? the second day of the project has been a dog pile. >> do you see a world where everyone has a 3-d printer in their home 1234. >> the great thing is when you get this, it turns -- it's like a swiss army knife of manufacturing on your desk top. once you have one, you don't go back to not having one. with every -- it's one of the things that once you have it, you never want to be without it. >> all right. we'll see, taking a step to bring it to a mass audience, thank you for joining us, now in home depot. >> we have breaking news on nat gas. >>ed big story in the pits, natural gas inventory at 107 billion cubic feet, higher than expectations k back in the triple digits here.

prices trading before the report came down, now down under 3.97 at this point. it's a weather-driven story. temperatures across the country are lower than they would be at this time of the year, especially look at new york city today, gorgeous day outside, no humidity. that really means that a lot of people are not using the same amount of natural gas to cool homes they would. demand is down. if we see storage numbers like this, analysts are not worried about the stocks as we head into the winter months, but remember, it could be a hot summer. august can turn up the heat. watch the prices closely, but at 3.97, this is a big move. back to you. >> jackie, thank you very much. straight ahead on the program, microsoft trading new highs on the announcement they are cutting 18,000 jobs. we'll talk to dan niles, he and alpha one own microsoft shares, talking from a shareholder perspective after this quick break.

in a world that's changing faster than ever, we believe outshining 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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offers end july 31st. could help your business didavoid hours of delaynd test caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business. built for business. i'm scott cohen with word of seven arrests in brooklyn. federal authorities say they busted what is allegely a multimillion dollar pump and dump scheme involving penny stocks. heard a lot of this in the news lately. the lead defendant is ang descala, ceo of omniview capital

and in the news of the past, formally married, in kcustody along with six others in the alleged pump and dump scheme involving stocks going back to 2012 incoming stocks known as code mart, cubed -- code smart that is, sorry, skub cubed, star stream entertainment, staffing gro group. it is fairly classic pump and dump scheme. there's a news conference scheduled for noon today. we'll have the information when it comes out. back to you. >> saturday, thank you very much. let's get back to the major news from microsoft, a restructuring plan that eliminates 18,000 jobs, roughly 14% of the work force once you factor in, of course, the nokia acquisition, the largest round of job cuts in microsoft's history. shares, as you can see, up just over 2% having had a strong run

recently. joining us by phone is dan niles, alpha one capital partner, and you know the stock, correct? >> caller: correct, we do. >> what is the reaction to the news which more job cuts than people expected? >> caller: it's great, the next best thing to getting rid of nokia all together in my opinion. that merger, i don't think, was very good, but now there's a new ceo in charge, and i think you're starting to see him put a stamp on the business, and that this fire's about half the people that came over with a nokia acquisitioacquisition, an thought 5 to 10% in terms of job cut, but this is 14% of the 127,000 people microsoft has including nokia. i'm pleased with this. >> what about the core of the business, the race of microsoft to grab custom on the cloud, to persuade people and, in fact, its partners that that is a profitle veable venture and whe

they should be. do you think they move from software inhansment that takes year to a patching on a regular basis move the needle on that? >> i think it will. think of their history, where tech companies are in trouble is under prior management, they were not willing to run office applications, which, you know, pretty much everybody uses on anything other than windows devices, and with the new ceo coming in, what we did, as you probably, hey, look, we're willing to sell office application, that run on the operating apple system. you saw a uptake in demand on that and a big focus on the cloud, where everybody wants things delivered. >> sure. >> caller: i think the negative to that is that he's getting rid of 18,000 workers, but i'm sure there's going to be some of that reinvested into the business to drive the cloud like you talk about. >> but if you get a continue

pasting and redesign of what's going on, do you abandon the big launches? the windows 8 launch, which, of course, drives so much custom, the one off need to buy, and face it, you got 400,000 microsoft partners here that need to buy in, that need to believe this is profitable for them. >> caller: well, don't forget, those two things are separate. one is, do you launch big operating systems? the answer so that is yes. but the second part of that is, how do you deliver that? that's how you get the cloud that comes in. you don't need to have it managers around cnbc running around updating receiver e inin cetera, where this is all delivered from the infrastructure let's say. they will still have big upgrades of the operating systems, but where you're business may be run may not be run in cnbc headquarters, but where microsoft owns to over

simplify the situation. it's important. it's just the application, the delivery of it will be different, and it'll make, you know, companies be able to move a lot faster in the future. >> hey, dan, that sounds great, but at $45, you can't blame anyone for saying, you know what? i'll take it. i will cash out. 14-year high, more than we expected. second best performing dow component of the year. what's wrong with that? >> caller: well, i mean, here's the thing, where you make a lot of money with companies is when you catch them in inflexion points. think about microsoft. it's been in a down swing for over a decade since missing the internet transition back in the turn of the new millennium. look at microsoft today, you got a ceo that's looking at it saying, look, i know what we used to do in the past. you know, i'm throughing that playbook out. if question don't get windows on every personal tab blet, i don'

care, i sell to the office anyway. >> right. >> caller: there's radical change to drive the company going forward. we have had pc units decline for three years in a row with tablets eating their lunch. it's now getting better. >> do you add to your acquisition here? are you that confident? >> caller: well, what i want to see happen is have them report, talk about what the, you know, the forward strategy is in terms of reinvesting this, but the goal is to get bigger so the answer is, yes, but we have good news today, would like to get more information how they plan on reinvesting cost savings. >> i got to cut you off, but we'll see what they say on the conference call tuesday. great to talk to you, dan. >> caller: all right. >> joining us there from alpha 137. >> when we come back, yum took the gamble with the breakfast menu with taco bell. did the waffle taco pay off? stock argues the quarter did not agree with that. coming back in a minute.

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welcome back to "squawk on the street" and check out trw sales, moving higher, could be higher all cash bid for trw for $13 billion or between 110 to 112.50 a share. that's according to a report from bloomberg citing sources familiar. they were in talks about a possible acquisition that valued trw between $11 to $12 billion. the stock spiked up. back to you. >> thank you, dom. another stock in today's session is yum brands down 5%. there you see it, almost 5%. after earnings came out last night, call this morning, and confirm weakness in the united states. when it comes to yum brands, it owns kfc, taco bell, and i want to hieg like the china number. it came in strong. for the second quarter, same

store sales in china up 15%. as you can see, a nice rebound from negative same store sales growth all of last year. they had problems with kfc when it came to food safety, avian flu, other mishap, and has been spending big on marketing, changing menus to win back customers. there was a big question going into the year whether they could do that, and it looks like they are on track to bring back customers to china, butother problems investors focus on with the results. pizza hut, for instance, losing share to papa john's and dominos. pizza hut had a surprised same store negative sales growth in the united states. guys, i don't know if it's a turn around measure, but introduced the pizza hut pizza cookie, which i thought looked good in conjunction with hershey. perhaps that entices customers focused on desserts. chocolate is very in right now. seriously, that's a big focus with pizza hut and taco bell,

there was a lot of talk of introducing breakfast. sales came in pretty nicely, up 2% for the quarter in the united states. positive commentary on the roll out of the new breakfast. i guess people are liking the tacos own burritos in the morning. >> i think they were trading at 19 or 20 times earnings on the expectation of strong china earnings. the market may be about that, but it was factored in. that's where we were before. >> yes. >> hence why we are down. >> yes, but those watching on a m macro level are encouraged by the results, but you're right, the stock is, obviously, down, focused on weakness in pizza hut and kfc in the united states. chick-fil-a just took over a share when it comes to chicken according to many analysts. interesting. do you go to chick-fil-a? >> yes. >> you do? >> have you been?

>> i have not. >> we have to change that. let's go to rick santelli. >> good morning, carl." squawk backseox" had an importa guest on, a respected institution, and what he said really caught my eye -- or my ear i should say. if you exclude housing, the economy is better than than it was during the boom years of 2000 to 2008. i'm sure that he's correct on that. at least base on his interpretation of recent data, but in the end, i say one of the biggest issues, not only people that look at markets, but a huge issue politically, just think corporate taxes, you know, the way things are and the way things could be or we wish them to be, okay, down here, we call that a spread relationship, and in my opinion, this spread is wide. it brings a significant point in, and that's housing is hugely important. if not for housing, we would not have a credit crisis at all. it's important today.

starts and permits, existing home sales are a bigger metric, but spongy data in a time where interest rates cannot be the reason that housing is sputtering as a key part of the strategy to get it going. all right, look at real important things. we have our yields moving lower, and maybe that makes sense to some people. made sense to me. one of the reasons it makes sense is this chart. look at boons. this goes to 2011. boy, we are in record territory, i tell you, at 116, anybody think we will not test 1%? it's drawing it like a magnet. second chart, year to date, this is county inconstitutive, when the yields move down, the dollar index should be spongy, but one-month highs is a better rally of 20 14 likely because of the fed doing in qe. many times markets are not together, so even though thing

do not seem intuitive it's because the market's job is not to be intuitive, but to be price discovery. sometimes they get out of terps. we talked about 5-year and 30-year and look for the curve to flatten. we want rates up on the 5s and not on the 30s. it's not directional. the yield curve can flatten if rates go up or down, but this is important, and there may be more room on the trade. back to you. >> breakdown in correlations, thank you very much, rick santelli. up next, new york state just out with new bitcoin regulations, and ben lawski, superintendent of new york is joining us after the interview right after of but he just can't get out. with the technology of cloud, we change all that. i can sing something into my device, up to the cloud it goes, back down it comes, sounding better. we break down the walls of creation

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nch>> we put out the framework. covers anyone working in the bitcoin space and it's out for a 45-day comment period which is important, because this is complicated stuff. it's new. it's modern, and we need to get it right. already the twitter traffic coming right at us is, you know, what about this? what about that? people deep into the technology here are thinking of things we might have missed. so in a way i'm excited. we've got a new framework. i think it's a great day for the virtual currency industry in terms of the future. at the same time we need to get the regs right, take the comments and try in about 45 days, get the regulations finalized. >> what is the process of getting a bit license in that how does it protect people from the fraud and the problems we've seen, the criminal activity we've seen? >> it's a long regulatory scheme we've put out. the three biggest components, a money laundering, not massive

money larnlding going on in the industry. a big consumer, regular consumers going to exchange bitcoin and do other things, they are going to know what they're getting into clearly, and third, a big cyber security component, because hacking it getting more sophisticated and a big cyber security potential issue in this industry, if you don't address it correctly. >> you should be congratulated for grappling with this. it's a very difficult thing for you and you have to respond in some form. that's what year doing here. the central question is, can you make it safe? at the heart of that, your answer surely has to be, no. bitcoin is just a machine. the bitcoin itself can be bought or attacked or broken. and under your jurisdiction,ite not sure you could have protected and presented the losses of $300 million, $400 million? >> under our rules, could have

prevented that. >> i say a sustained cyber attack, brought the entire platform fo platform. and what was lost. >> a big cyber component in the regulations, for example, we're going to go in and test the cyber security readiness's these firms in new york to make sure they're doing everything they were to prevent that kind of hacking attack nap said, look, you could say that about our entire banking industry, too. wep should be doing it for everyone. this is a larger conversation maybe for another day, but we need to do a lot better as regulators and industries to guard ourselves from these kind of cyber attacks. >> a bitcoin is not the same as a bar of gold, or currency. it can't distribute great. that's the concern. >> there are specific, unique kearns. you'll see, i probably haven't had time yet to go through an extensive regulatory framework. when you look at it you'll see we've tailored it in ways to

deal with the unique characteristics of virtual currency and now a 45-day period to grapple with the industry and get into are we getting these regulations right? but all of your points are totally fair, and there's a lot of risk in this industry. but it's a very powerful technology, and i don't think we know what virtual currency, what it's going to look like in five, ten years but i think a lot of smart people are saying, there will be some form of it as an alternative payment system out there some people will use in different circumstances that could have a lot of benefits. the question, can we get the regs right to make sure you don't have the dark side and down side to it. >> clearly you don't think anonymity should be a part of it? right? >> we think a significant know your customer kyc in the regs. it's clear when people enter into the virtual currency world the firms will have to identify and know where the people they're dealing with are to, you know, a reasonable certainty. the question is, though, once you get into that virtual currency world.

say you identify yourself and you ex-thing that fiat currency for virtual and want to move around in the virtual currency world, buy, sell, transfer things. i don't know if you need to have, once in the world, identified somewhere in the chain, you can benefit still from a lot of the friction lists, more anonymous types transactions as long as there is ultimately a law enforcement problem we can go back to the original transaction saying this with that bitcoin is this person. and law enforcement has what they need. that's the idea here. >> legitimatization? >> we'll see. if they can step up the game and live with these kinds of regs, it can be a really great thing. >> and 3we67best to do it here w york. brand new legislation for bit license in new york state. meantime, "squawk alley" starts right after this short break. ush hour around here starts at 6:30 a.m. - on the nose.

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getting news from the "wall street journal" citing sources alibaba, of course, expected to launch that ipo in early august is now going to wait until after labor day. we'll see what the affects may be on the yahoo! stock. something we'r