remarkable. >> earned success. >> pardon me, but thank you for being here. >> thank you. >> great to talk to you. >> make sure you join us tomorrow on toss it down to the yes mep on "squawk on the street" because that's next. good morning, welcome to "squawk on the street," i'm carl quintanilla with david faber and jim cramer. we have giant earnings, most beat, but high profile disappoinments, ackman, and 10-year yield under 2.5, and cpi about the same as may, up 2 .1 year over year. the russian separatists handed over the bodies and block boxes. road map begins with a deluge of

sectors including the consumer from mcdonalds to chipolte. >> breaking down verizon, dupont, and, of course, netflix. >> we sit down with the ceo, the presentation on the company slated for later this morning. first up, food and drink in the earnings parade. mcdonalds misses with the second kwaurtd numbers, and flat with the period, up sharply on stronger than expected q 2 results and then there's coke with a slight earnings beat and revenue miss for q2, unit case volume up 3% globally, but flat in north america. the ceo was asked about results in the region earlier this morning on "squawk." >> we were pleased with our north american results, first because coca-cola grew. secondly, because our pricing was very strong in this second quarter that just passed in north america.

our price makes sparkle beverages up 3%, three points. i think when you take the totality where we are in north america, i think we're making steady progress. >> thank goodness for china and india, up 9, 10%. they call it a low quality beat because of the tax rate. >> i think that's true. i think coca-cola's a challenge the company because they make a product people are moving away from. i think they move away from first in the united states, go overseas, and it's a product that is really our parents' product or my generation's product, and younger people are not drinking it. there's a demographic change we're seeing in companies, and coca-cola is not popular with younger people as it used to be. >> brands within that coca-cola umbrella with the capacity to figure out ways to meet wherever consumer demand or taste is going, don't they? >> when are they going to do that? >> i just think that -- when i look at coca-cola, listen, a great executive, but, you know,

i'm not going to be satisfied with no growth. companies are growing like mad. i know chipolte is a small company, but 17% growth, that means the customer knows something. they like natural and ogranic. beef, this quarter, they made adjustments and trade down with the chicken, but i think when you look at chipolte and coca-cola and mcdonalds, you can't say, you know, they are doing well. i mean, this is not why you invest. you don't invest in order to have big buybacks and dividends boost. >> sure. i just said they almost had to report back-to-back, mcdonalds's chipolte because of the story it tells, the innovators dilemma, father and son. mcdonalds, second earnings miss in a row. three consecutives misses in a row, jup down 3.5, and the yield, jim, not so much a shield

when you have the prospect of higher rates. >> they are one of the lucky companies out there because the interest rates stayed in the 10-year 2.5%. by the way, first of all, when you go through mcdonald's and coca-cola's release, people at home say, wow, terrific. sales decreased 1.5%. these are done with mirrors people. this is not what you want. you want to see scores in double digits. we didn't get that other than chipolte, but they have something people want. mcdonald's does not. i think that's seminal. that's not going to change. you're not going to get a tofu big mac. >> not any time soon. >> right. so freda had 3.5% -- i don't know if you had freda, but it's a total tofu dish for vegans, and it's growing like mad at

chipolte. people prefer -- and it tastes quite good, by the way. look, i go to mcdonalds. i admit i happen to love -- you know, the mcmuffin, i love it. i have not had a diet coke since my resolution was not to have a diet coke. i have not had one, no indict dew, my loep vice, i know, ha-ha, but i feel great. >> really? just because of that? >> yeah. >> good. >> that an the gopro on my dog's head. >> here we go again with the gopro. do you buy chipolte here, i don't know what the multiple is? >> i don't know. >> buy up 10%? >> boy, they bought stock cheaply themselves. it's not my style, an international event makes it go down, thinly traded. viewers say, please split it. tim cook didn't agree with the split, and next time, he's

focussed on create product, and chipolte, go over the quarter, the comparables are different. food with integrity beat the information, you know, the farm bureau's information. remember the international foreign international bureau. farmed and dangerous, which is the -- they did videos, the scarecrow videos, those worked. they don't spend a lot of money on advertising. they give the customer what they want. teen males, this is important. i remember being picked up by the police in springfield county. why? because i overstayed the curfew at mcdonalds. what a metaphor for when you're 16. now, those teens, they go to chipolte. i don't know about the curfew thing, but -- >> all the generational things you mention. the mall, right? >> the mall.

>> chipolte's mcdonald's the greecy food equivalent of kors and coach. >> oh, i like that. >> not the only names by a long shot. >> no. >> netflix, talk about that, how could we not, earnings more than doubled as global subscriptions beat expectations surpassing the 50 million mark. u.s. membership grew to 36 .2 million, thanks to "orange is the new black," and they expect more vub scribers, and subgrowth was fine, but, really, you know, the international is where they are showing significant traction, spending a great deal of money, but many believe the trajectory is positive for them. there had been concern as they raised prices. you know, people are on and off net fl netflix. if you are off, you have to pay more because you're grandfathered in at the lower

rate if you keep it. people thought that would bring the churn down. international is what they wanted to spend time talking about. >> yeah, versailles, what? noir. you know, the joke about international, and people are kind of -- they have a form of their -- they release substantive numbers what they are looking for, and they have a q&a. this time it was reid hastings with doug amith and what i think came out on this quarter was, okay, look, international's got to be really great, but maybe the growth domestic peaked, and i think a lot of people worried about that little number there, 7.7 billion dollars in obligations. when you watch netflix, and i think netflix is basically utility, you are amazed how few streaming movies they have. >> right. it's not a streaming movie service. in fact, if you want the old movies, you have to keep the

mail service. >> netflix denzel. they have three denzel movies. isn't that the problem? it's a metaphor. you do not have -- they have a great index, hit them on, oh, that's not on, that's not on. how much does it cost to have all the things? the movie studios are wise to the fact you don't give it to netflix, what will that cost? >> a lot. >> right, that's why people are worried about the obligation. the stock's not up. i think it's seminal that the stock is not up, people said on the network it's going up. turned out not to be. >> you've been talking about the fact that people focus on sub growth which does not look bad. are they changing focus? >> i think 50 million was the whisp whisper, and you had to do more than that. i think in the end, the -- there was a smugness. there was smugness on the call. i don't like that. chipolte had humility on the call. the linebackers, people --

throughput they got eight additional people per hour. >> that's been a big number. >> there's no hubris on the chipolte call, okay? there was hubris on the netflix call. >> chipolte didn't get 31 emmy nominations. >> true. >> interesting that -- >> i'm on record. >> global is increasingly making its way into other parts of the business original content now, this marco polo project is aim at demographics outside of north america and physical gift cards giving people a chance to hop on as a gift. >> that's true. i mean, new -- certainly -- absolutely new venues to sell. you know, i also -- here's a little -- this is the kind of thing i'm -- hubris. at 7 00 million broadband households is the market. when i see that thing. when i see that there's 8

billion people in the world, well, that's the total -- i don't -- i get uncomfortable with that. the total adjustme menmentble m not every person in the world takes netflix. they are saying broadband. i like netflix as a service. they need more streaming content, spend more to get streaming content. >> you want matel in stock, and when an analyst upgrades and does not move up or down, that's tough. this is conceivably a day to look back on or look with importance that begin they delivered and the stock is not higher? >> i'm going to say yes to that. >> you are? >> yes. when i was going through the call, i said, okay, they did that, makinging a joke about france, france likes movie, and marco polo, i'm thinking, i don't want to see that. orange is new black, that's hot as you can get. you know what i think of marco? you swim a lot. >> marco.

>> polo. >> you don't play marco polo? >> i'd like to. >> i have a vision of you and all the guys at the club playing marco. >> thanks for that vision. >> as bill ackman prepares to blast the company, john desimone defending the maker. we'll talk to him next on a first cnbc interview. a look at futures, and the s&p has not had four straight down days this year. up believable. >> now, come on. what a great stat. >> thanks to steve at dow jones. more "squawk on the street" from the nyse in a minute. we started zya with the thought

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because everyone deserves a great night's sleep. know better sleep with sleep number. this morning in new york, persing square's bill ackman says will expose incredible fraud and why the company will collapse. herballife is fighting back. we are at hq with the cfo on a first cnbc interview. >> john desimone is with me. good to see you. >> thank you. >> more than 500 people are in a theater in downtown manhattan, bill is preparing to give his latest presentation, and they are watching the interview live. he says, in his words, he'll expose incredible fraud at herballife today. what do you expect many. >> this is always the -- the bark is worse than the bite.

he likes to, you know, i really don't want to talk too much about bill ackman, but the sub staps of this. >> we have to frame the event, and similar to events he's had. everything is a got-you until it's not anymore. he made 435 accusations over the last 18 months, each one is the lathest and greatest until it's prooup not to be. he's we want after belgium when it was in his favre, but in our favr favor, he discredited it. he did everything in his power to clear the audit, went public and said how can people invest when there's no audit, and when it was, it was not important anymore. >> he claims today he has hundreds of hours of video, audio, documents to support his

claims. on some level you must be worried about what happens today, aren't you? >> i'm not worried about the substance of what he has. you know, there's no doubt that he's missing the real animal jis and research. it's propaganda base. i don't know that he understands clubs, but we'll listen. what he is missing that fundamentally we have millions of customers that enjoy the product, use the pruk, and that's indisputable. we had a release today from a former ftc economist that concluded, in fact, we are a beneficial multilevel markets company, and that former economist had access to all our data base, access to all of the studies, created their own studies to have that conclusion. >> a study you commissioned? >> a study we commissioned, but an independent with no ties to herbal life until we commissioned it, but we did so the economist looks at the business in the light similar to how the ftc would look at it. >> so you say ackman made

unstanuated claims and put misinformation out there among other things, the company is invis gaited by the ftc. at least one state that we know of, a u.s. senator wrote a letter to regulators asking them to look at your business model. are we to believe, given all that swirling around herballife, that the company is operating as it is supposed to be operating urn the law? >> absolutely. we have complete confidence in. >> i think the inquiry puts this behind us, a lot of misinformation there in the marketplace, and bill ackman, actually, when he presents o unopposed, he sounds compelling, very confident, you know, comes across as though he knows the facts, and it can be scary. having a regulatory body that's objective looking at the company benefits us. >> well, unopposed, i mean,

look, be honest, you're sitting here today, but michael johnson, the, has been virtually silent on the issue for 18 months. you've let bill ackman control the knavetive, haven't you? >> our key role is to deliver results. that's what we focus on. when bill came out 18 months ago, we divided the company into teams and decided michael, that walter, the president, the coo just focus on performance. that's michael's job. i think that we gave mr. ackman too much of the podium. that will change. there's an ogranic drive in the company. we have 550,000 districters and members in the u.s., and there's an ogranic drive within that group for us to tell the truth about herbal life. >> there's been instances, and i'm sure you'll readily admit where distributors of herbal life made claims about the product that may not have been

true, have said things that you, as a company, had wished they hadn't. you started retraining people as a result. correct? >> so let's put it in context because we have a four-prong approach to compliance. it's integrated. the first -- so we have 550 members in the u.s. we have more than 3.5 globally. within the group, the overwhelming vast majority want to behave with the rules. first prong, educate and train so they know how to behave. secondly, those who cut corners, we have to detect and detour that behavior. we do that very well. we have some cutting edge technology that we use on word recogniti recognition, voice recognition of videos that help us get better, but the reality is, 3.5 million people is a big city. with that many people, the police does not always know what's going on. >> you had to reprimend people.

>> we have. detour and detect, but when somebody signs up, we have a voice with them. we can't be on every phone call to someone they recruit. we make sure we communicate with each new member. used to be pushing the materials, but we pull them to the materials where they have to acknowledge they are aware of it. most important fail safe is no matter what somebody's expectations are coming in, we have the protections to give them the money-back guarantee, we have a 90-day 100% pay nor return shipping on the starter kit, and if any time a member wishes to leave because it did not work, we buy back 100% and pay for the shipping of the products they did not sell. it's low risk. >> we expect he talks about the nutrition clubs, and the critics of the clubs ask questions such as why are there so many?

why are they located in a tremendous amount in very concentrated areas? why are they unmarked on the outside? why are they secretive? that's what the critics say. how do you respond to that? you heard that before. >> it's not secretive, but there's foundation to be discussed first so people up understand what is club is and how it operates. it's from a consumer and operator point. it started in people's homes. no different than avon, tuperware, pampered chef. it's a product that helps them lose weight because social support and encouragement helps people lose weight. picture a dining room where people are gathering. because weight loss requires consistent use of the product, they took that model, and they moved it -- think of picking up that living room and moving it to a commercial location. it's nothing more than a living room or dining room of one or two members working together to

create a social network to help people lose weight. when you think of multiple locations, it's people's living rooms now in a commercial establishment. why there's no signage? that's an important point that's misunderstood. indirect selling. it's protecting the opportunity for the second sale. this is channel protection. for, scott, if you were to sell herbal life, when you sell it the first time, you want the opportunity for the second sale. if you knew your customer could go to walmart and buy the product, you are demotivated, right? people who offer direct selling do not offer through mass. avon failed, they tried through target, fails. we have 5,000 clubs. majority of the members do not do clubs. to protect their business, there has to be a level playing field, can't appear as though there's 35 clubs in a state. we make it it's a person's

living room, a person-to-person selling. >> it's channel protection only. >> right. i mentioned it's a busy morning on the earnings front, and we have to leave it there. john desimone, i appreciate the time, and if you want to come back later today on the halftime show to respond or refute he says in the room today, we'd like to have you back. >> great, well thank you. >> carl? >> scot, thank you so much for that great stuff. ackman a half hour away says by his own words, jim, most important presentation of his career. >> i thought this gentleman made good points. i mean, there were -- we said there was many objections to herbal life as there were congress people? >> 435, i think that's where we are in the house of representatives. >> at a certain point, if ackman comes on the network and basically calls something a fraud -- i called a company a fraud on tv, and fcc came after me immediately, and the company

was out of business by the time -- this is 1999, and -- >> i remember. >> remember that? >> yeah, i do. >> i won't mention names for fear -- >> no, no. >> the fcc said, look, you can't call a company a fraud. interesting how times have changed. i was not short the company. i had no interest in the company at all. just went out of business. now a guy on tv says it's a fraud, fcc says that's okay. do what you want now. >> up 7 % the past couple years when ackman started getting short. >> say it's a fraud. people want to sell the stock. i don't want to own a stock people say is a fraud. >> opening bell in a moment, and look at the premarket. more "squawk on the street" in just a second.

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before the opening bell, the mad dash and to the bell. no commercial break. another billion dollar activist position. it's not emc today. it's apache. you have. talking about this, and you did a great segment a couple weeks ago. >> thank you. i recommended it really hard saying this is the company most undervalued. why? because they've done $800 billion. they've executed $8 billion in asset sales, got much more u.s., remarkable things reducing egyptian exposure. it's amazing. steve ferris absolutely incredible. what i feel badly is janis should not try to rattle here. no one is trying to get up the valuation faster. i'm not saying this is fox taking advantage of it, but they drive at 1.5 times book value, and anadarko, and they have done everything right. the stock is going dramatically

higher. undervalued, but give ferris a chance. all i'm saying is give it a chance. >> and with that, there's the opening bell, and a look at the s&p at the top of the screen. down here at the big board, celebrating a recent listing, and at the nasdaq, investar, a bank in louisiana. so many names we've not gotten to. big giants on the s&p and dow. >> start with verizon, or where do you think? >> yeah. >> that stock is up. a decent quarter on verizon. you may recall in an interview with ckayla from sun valley a week or two ago, we got a preview, and they were weighted towards tablets, and that, in fact, was the case in terms of tablets being a big part of what their retail ads were in

wireless tablets driving that, again, as i said. might want to make sure -- 1.4 million, all postpaid, and that was better than expected, of course, but driven by record tablet sales, 1.15 million, that's what i was looking for there. the wireline business group, for the first time -- >> that's the company's opening. >> i don't know. >> that's business formation. >> business formation. that's right. not a wired phone at home, those who still have them, including me -- >> i thought -- glad you brought that. >> talking businesses, a key point, wire line, business formation, you need a wire line, and that is up for the first time. what was it? in many years. >> 3.5% growth, eighth consecutive quarter of growth. they are a big fios number too. that, to me, the stand out. i know people complain about wireless margins down 180 basis

points so leave on the stock, but i think verizon is a growth stock. >> it is a growth stock? >> parts of the business do mirror that of what you expect from the growth companies, that's true. 1 10 billion in debt, by the way, which is fine, but it's a big number. they are still in the process of deleveraging, all this nonsense about being interested in time warner or might have. and fox is taking advantage. there may be a list, but verizon is not on the list. >> you can take this with a grain of salt, but they had excellent operating cash flow. said that in the break, but a fantastic number. >> up 20%. nbc -- 16 in broadcast, 6 in cable, 5 in theme parks, and, of course, best second quarter for video and high speed in six years. >> it was a great cash flow -- my operating -- >> we lost -- 14400 video customers, net loss. that's been -- been fewer of

losses. >> second quarter result in six years. >> as you pointed out, data ads better than expected. anticipation is you offer more and more services, you slow. they slowed the loss overall on video subs, but they lose them. we have not got a chance to listen to the call, and importantly, remember, talking about a potential close, saying year end. that's not going to happen. i don't know where we are first quarter leading into the second quarter of next year, but remember the big buyback that people thought you would get juiced. once there's a vote from time warner's shareholders, but we have not seen a proxy yet frustrate shareholders to vote. people are focused on that. that's why you think of comcast when the fines of the enormous deal still from the process of trying to get approval. >> look at the dow stocks in the red, dupont which met. travelers, coke and mcdons the worse. >> travelers a terrible story,

the miss there, takes your breath aware. bernstein with the note saying it's catastrophic writing of insurance, but three passing peak in property casualty, and there was a remarkable drop in business there for property casualty, and it took my breath away. this was -- pricing is slowing plus 3 to 4%. this was a bad quarter. >> yeah. >> now, they bought back half the company in the last eight years. >> really? >> yeah. >> faster than ibm's done it. >> any time you think of selling travelers, look what fishers does. for a great american company with the best company, but understand that the buyback will be in there, but these were not good numbers. i say it kind of -- i don't like the company not doing numbers because they are such a good company. >> right. >> you mentioned stocks of our parents' generation like coke

and mcdonalds. hog beats by 16 cents and revenue beats, but take down guidance on shipments. dealers flat and the supply chain looks bloated. >> yeah, there's a frequent guest on mad money, the chairman and officer of polaris. if you see that company, that stock up huge. what do they make with the offroad vehicle and motorcycles, and they are doing share gains, share gain, share gain. they have the indian motorcycle business. i have -- i don't know if you have been on one of these, but it's one of the most fun things in the world, polaris. >> is that true? >> up 21% with a big guide up. polaris is the winner and hog the loser. we have this situation where one guy does better than the other, and up $9 up from 137 basis. >> yeah. >> that's interesting. >> on the research front, amazon shares down this morning.

not enormously, but down against, of course, as you may be seeing already, a very positive open here for many stocks including the pier group, citi downgrades the stock, talking about operating margins or overall about the lack thereof. previous thoughts were consolidating operating income margins would increase year over year, but price cuts and web services increased, obviously, as we know in terms of the distribution network here in the states, but also the move into china. pressuring those so now they have a different view on margins in terms of when they come back or if they are going to come back. >> you spend a lot of time with them, david. do they care -- >> no, no, no! >> there you go. >> they don't care about the stinking margins. >> exactly. >> until they need to care. >> they don't need no stinking

margins. that's an homage to who? eli wallich was mexican in real life now jewish. >> comps up 77, that's the best quarter internationally in two years, jim. >> you know what? i have doyle -- last time he was on, there was a down beat thing. i say, cheer up. i say that to dave cody. come on, man, a great number. it's a franchise model. let's put it this way, i think dominos is a good quarter, last time down because they had good things in a conference, and this looks like a terrific quarter for dominos. it is a giant user of social media and has the greatest ad. you never speak to them if you don't want to, and i love it. i have the baseball app on my pc. david, when it comes, you don't even need to deal with the tip. you put it right on the computer. >> what's a pc?

>> what's a pc? >> politically correct? >> what's a pc? >> i'm not familiar with that term. >> there's only four of them on our desk right here. >> oh, these things. >> did you have the app on your cell phone? you can. what about your tablet? what about your clam shell sm. >> speaking of which, apple is asking suppliers for as much as 80 million large screen iphones. at the same time, apple insider has the leak, an illustration of what they are saying was a patent for the iwatch called the itime. >> i want to go over it again. ibm didn't deal with the cell phone, okay, a 20 2015 business, take out blackberry, you want an imac. i just think that 2015 is the year, and people, if they are focused only on the next quarter and how many cell phones, i think that's a mistake. i think it's a bigger story than that. i know that this is a "what have

you done for me lately" business, but take a deep breath, do some pilates, come back, work on your core, get inner strength, meditate, use the four pillars, you know, four agreements, and buy something. >> all right. dow's hanging in there despite high profile misses this morning, and bob's on the floor. hey, bob. >> despite the misses, the dow up 38 points right now. i wrote many times about the big global industrial companies, the rands of the world, united technologies of the world. i watch them carefully. they make all the stuff behind the walls and the industrial machinery and aerospace stuff around the world. good companies to watch for global industrial trends. ingersol rand, heating and air-conditioning installation, that's the core of the business, good growth, 3 .4%, heating

cooling around the world strong, thermal king with good growth, core bookings respectable. climate solutions, the heating ventilation air-conditioning business, that's respectable at 6 %. there's another business, technology, power tools, pumps, things like that. that's more modest. there you see less impressive growth at 2 %. same with united technologies, earnings topped estimates, the companies raised the full year guidance, not just talking about heating and air-conditioning, but otis elevators, helicopters, an aerospace component. sales up 7%, raised the low end of the guidance as well. bottom line with all these major global industrial company, only a few reported, modest growth, but certain sectors better than others like heating, ventilat n ventilation, and air-conditioning. one important point, all the

companies, big buyback programs providing a backstop to the companies, so rand has a 1.4 billion-dollar buy back. that's impressive. united technologies, one and a quarter billion, not as impressive, a market cap company, but you get the point. they are continuely, every day, in the market buying their shares back. look at the earnings elsewhere. also in the aerospace area, lockheed martin with excellent numbers, verizon disappointing, coke fell 3%, and travelers impacted by higher catastrophe losses this. a lot of discussion overnight. major e-mail discussions about the under performance of the russell 2,000 so far. this is an unusually wide divergence. small caps down 1.5, and big caps 7 % on the year. people think this means we go defensive all the suddenment i watch this carefully, and so far, i don't see it. yes, i see solar stocks, biotech

stocks, social media stocks under performing, but cyclical stocks so far this year, the utxs i talk about, had a great year, consumerstaples, defensive names not a great yearment final year me . we had a great discussion, ratings analyst, i love the idea, it's fantastic. hope to hear more of it. watch netflix, disappointing on the earnings, but there was an analyst this morning raising the full year target for web bush to 245 to netflix 245 from 215. guys, it's a $430 stock. this is why you get analysts' opinions all over the map. i love this idea. tipranks.com is the company. back to you. >> thank you very much, bob. we noticed shares of netflix down 5%, and that brings me to time warner, thereto news. in fact, the news came out after the bell yesterday, but it is important the market is

digesting it as well as stock time warner. we talked both it in hands not necessarily ones to use, call a special share meetings of 15% of the voting to hold a special meeting and no stagger board. forget about special meetings. by the way, that would not have been able to happen until february were it to have been something they wanted to tried to do at fox. by the way, what i hear is that was never something fox would have done in its pursuit of time warner, but something shareholders wanted to pursue, those with an activist bend, there's vikings, hedge funds in the shares. by virtue of what they did yesterday, changing the by laws to eliminate the ability to call a special meeting with 15%, you are left with the annual meeting in june conceivably being your so-called proxy on management and the board. the entire board still up at

that point, and so we'll give them a couple more quarters to deliver on their strategic plan which time warner gives every indication of it believes will deliver more value than, well, if you recall, from the initial press release any, any offer that fox could possibly make at all. actually, let me quote that properly. >> yeah. >> it will be superior to any proposal that 221st century fox is willing to offer. i have to commit that to memory. we'll see it in writing when we get it. four months to judge us, but what this also has the effect of doing, this may take a long time. i mean, start thinking june. now, fox, obviously, may not want to think june, and there's any number of things they can do to potentially move the timeline up, of course, ngincludes makin another bid higher than the first bid. they are in the mode of price

discovery, having conversations with shareholder, how much would it change at all based on this news. unclear, but hedge funds in the stock prior to the bade say, wii out of here. you remove likelihood of act viss in the shares, but we'll see. price discovery continues. where that ends up, of course, continues to be a key question mark, and you'll have a debate whether the board is doing a duty to the shareholders or actually not allowing them or giving them more of a voice here by changing these bylaws. do they expect it at fox? oh, not really, but, again, they were not necessarily looking, jim, for that to be a path that they would follow. my expectation is this will not go to june. one way or another, we'll get a resolution either with a bid higher and accepted or get in and identify a lot more in potential sipper jis that --

sinner jies that lead to a higher number. or they'll come back again to fight another die. >> there's great research this morning -- >> do you think that's a real number? $10 -- allergan we're talking about. >> a lot has to go right. air gas, the air products business -- ultimately three investment bankers said that air gas can do a bigger number, and they went dramatically above it. it is possible. >> it is possible. in this case with time warner, a $5 out there, will you see a 20 multiple on that stock? >> i don't know. i don't know. >> right. >> we'll have more on time warner. >> speaking of badges, bogart here to moderate, you i don't feel that -- -- i do not think that the time warner -- i am coming down of doing a lot of work, bucus may have numbers that are better.

>> we will see. rick santelli is at the cme group in chicago. >> thank you. it was not cool, and the treasury market paid attention for 20 minutes. it paid attention to broader concepts throughout the globe and rates came down. this looks to be the 11th trading session when we close between a 245 and a 255 yield. open to june, this is what you see, we are close -- close to the lowest yield closes at one year except for one day, may 28 th, 244 was the low yield close, intraday have not closed below it. that would give us momentum, so say the charts and technicians. look at the yield curve, fives ands. two-day, yesterday traded under 160. has not closed under 160 in five and a half years, jan 2009.

boons, lowest close ever, rebounded two basis points. look to europe and kind of the turkeyish economy is what everyone talks about. we have not had the euro to the dollar since turkey day 20 13. david, jim, back to you. >> oh, thank you so much. the cost of food continues to rise. we heard that on the chipolte call, and steak peaked in may. hanes announced the strategic acquisition. joining us for exclusive interview since the chairman of the group, irwin, this looks like you are buying the rest of a company that reminds me of a hillshire brands was. people want protein, developing nations want protein. this is a division not talk about on "mad money," it's changing. >> jim, in 2005, we started to acquire protein businesses, and, you know, we acquire free bird, and then 2006, we acquired, you

know, plainville. we started from scratch. today it's well over $200 million business. we grew it and developed it, waiting for the consumer to catch on to want ogranic protein. you saw chipolte's numbers in plainville. they go in there because they want to buy, you know, food that is good for you, and they want protein where the whole thing with animal welfare, but don't want antibiotics or nitrates in the protein today. >> you put up a number last time. the stock is heavy, campbell's soup had a bad number, general mills bad number, nobody seems to care. is there a sense you're tied in with the weakness in whole foods as you're an arms supplier to everybody? >> so, good questions, and, listen, whole foods is a great customer, you know, we're one of the biggest vendors, but healthy eating is spreading across the

world today. we have a big operation in europe, the u.k., just opened up an office in india, the middle east, and, you know, listen, you heard them talk about coke's numbers today, consumption, mcdom mcdonald's numbers, it's not just whole foods who sells natural products today. as i walk here -- amazing, not been down here in six to nine months, but all the restaurants opening up today are fast food outlets, notchatural ogranic fo. >> sometimes they run into inventory management. is there something about the sector where it's harder to source or those risks are elevated? >> so, you come back, listen, hane ended the year at 1 .7 billion-plus dollars. ogranic growth is at $2.5 billion company. we're the largest ogranic

personal care company in the world from the source stand point and invenn story and supply always happens, but way we have today is scale, distribution, and brands, and more important, we have the consumer who wants to buy more and more products out there, and if you look back and choose, fresh pressed juice, everybody thought it was a fad, a trend. >> what's that retail for? >> so this, david, retails for $10, okay? >> people buying that? >> david, if you look at this as ogranic, there's $21 of produce in there. if you went to the store to buy this, okay, this is a meal. this is a meal replacement or if you want a jugice, i tell you, it's amazing what's going on. you see the juice stows in the city, so hane jumped into juice, greek yogurt, the snack business, it's flying. again, being the head, being in front, that's something that we continue to do.

>> stock stays here, i need natural ogranic. i call irwin, 120, i need your company. what do you say? cancel the meeting, hold it, i'll attack general mills because they are not good, or do you say, you know what? thank you? >> listen, i started the wiz 20 years ago, and back then $1.20 sounded good, okay? if you come back and look at where the trend grows today, campbells had a meeting, where the move to come out to a hundred new products geared towards kids. we sell food to infants and toddlers, introduced to the first food. i come back, look at the big food companies, and where they didn't see the trends moving to -- >> they didn't. >> not only natural ograniogrant taking sugar and salt out of the product, no stabilizers or -- it's changing times. >> what is going on there? what in the world do you have going on there? >> david, i travel a lot,

whether it's india, africa, just come back from greece, you know, all these places, i buy a bracelet, you know, and not your typical ceo that wears bracelets. >> no, you're not. that's what coca-cola's ceo should wear that. >> hey, whatever, thank you to irwin simon, president of the ceo hanes celestial group, great to talk to you. >> we'll get stock trading with jim in just a minute. ♪ the last four hours have seen... one child fail to get to the air sickness bag in time. another left his shoes on the plane... his shoes! and a third simply doesn't want to be here. ♪ until now... until right booking now. ♪

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time for cramer in stop trading, jim. >> another company i like so, so microphone, kimberly-clark, so fabulous. it's a miss, guide down. careful selling the stock. there's a health care spinoff coming up 2in october. give it little, buy it back, it keeping delivery, goes down when they report, and goes up, do not get rid of kimberly-clark.

it's good. >> dpz tonight? >> dominos is packed. i have to tell you, pat, bring your game, not that dog face, or i'll give you the darn gopro, and ipg, a company i really like, this is one that i think is going so many things right, and we'll find out about social media, advertising versus the upfrontings, so fired up for today and tonight. thank you, guys. >> we'll see you tonight, jim. >> wow. >> "mad money" at 6:00 p.m. existing homes after the break, don't go away. but her knee pain returns... that's two more pills. the evening's event brings laughter, joy, and more pain... when jamie says... what's that like six pills today? yeah... i can take 2 aleve for all day relief. really, and... and that's it. this is kathleen... for my arthritis pain, i now choose aleve.

get all day arthritis pain relief with an easy-open cap. habeing able to pay as we goo rawas crucial for a start up.s. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again

on the ibm cloud. the ibm cloud is the cloud for business. yyyup. with xfinity internet soyour family can use all their devices at once. works anywhere in the house. even in the garage. max what's going on? we're doing a tech startup. we're going public! [cheering] the fastest in-home wifi for your entire family. only from xfinit that's why i always choose the fastest intern.r slow. 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. welcome back to "squawk on street," breaking news from the realtors, existing home sales in june up 2.6% to a annual adjusted rate from an upwardly revised may figure. that's right along with expectations, but home sales in june still down 2.3% from june of 2013. now, the realtors note it's the first time we crossed the 5 million mark on that annualized rate since last object, october of last year. that bodes well, three months

had gains month-to-month. sales northeast, 3.2%. in the midwest, up 6. % up month to month. in the south barely up. 5%, and in the west, up.27%, and prices are still gaining the most out west. looking at the median home price, $223,000 to $400,000. that's up year over year, but the slowest price gain year over year since march of 2012. invenn sto invenn story low by gaining, .3 million homes for sale, the highest since august of 2012, up 6.5%. they say we are getting more balance in the inventory and sales area, but antedotely, people feel like there's a shormg shortage of homes for sale.

that could be due to a rise of pocket listings. we'll talk about that on cnbc.com. watch for that. distressed sales 11% all cash still amazing at one-third of the market. simon? >> some relief after last week's starts data. thank you very much. equity market, call it a tale of two fast food stocks, shares of mcdonald's trade lower after missing estimates, and shares of chipolte mexican grill, biggest gain on the s&p 500 today ser serging after sec quarter earnings blue by analysts' expectations. we have a market perform rating on mcdonald's and out perform on chipolte. i think you raised your target. good morning. >> good morning. >> this is an extraordinary result from economy polil they o come through with same store sales up over 178% at a time

they raise prices by 6.5%. this must cheer shareholders to a great extent. >> that over 17% includes 2.5% pricing that flowed through the quarter. we get 6.5% next quarter, and clearly, their culinary types, diets of the day, protein, and that brand with millennials works for that particular brand. >> how much further can the stock run as things stand at the moment? you got 77 now on the new price target, 11, 12% from here? >> yeah, you know, the stock came a long way from last spring. one of the things, you know, the early stage move from the 300s was the sales acceleration on a one and two-year basis. that's not quite over yet, and what's now happening is the eps

revisions. if it gets into the 700s, where's the upside from there? they may be over, but we'll have to see. we don't know how food costs go from here, how price's going to go, and bottom line, there's digital which help them drive throughput, and they are doing amazing job on moving that line, even during peak season, comping up double digits in peak hours, remarkable operation achievement for chipolte. >> a huge disappointment to the rest of the industry. mcdonald's same store growth is negative, and it's not just mcdons, but 17% number, compare that with what you have in the industry, and you wonder when the ceos come out and blame the sluggishness of the consumer at the lower end, which i poll they is not seeing that at all. >> well, economy pchipolte is t of nature here, outpacing the

panera breads of the world. the other fas casual concepts have a hard time versus chipolte and those are more complex having a hard time doing the types of things these guys do on the line in customer satisfaction. that aside, the entire industry up half a percent on same-store sales. it's not getting better. the recovery in restaurant is not happening, and in the case of casual dining, it's actually negative, down a few percent on a traffic basis. dismal trends. >> nonetheless, mcdonalds's same store sales in the united states down 3.5%. worse than many expected. of course, it is bigger an chipolte. mcdonald's has 35,000 worldwide. do you believe what the ceo is doing, and therefore, a buying opportunity? if you turn them around, you

make a lot of money. >> yeah, well, no question the valuation is there. there's going to be support in the 930s levels with the 3 .5% yield for a brand like this. kus costs, stabilize earnings even as they do, the negative comps they expect to do in the near term. beyond that, one of the things they do right now is trying to improve their operations and simplify thing and set the table, perhaps, for digital initiatives in 15. that's when i think things get interesting for mcdonald's because clearly digital and mobile payment work, but the big brands are not finding the returns on tv advertising that they used to. >> david, is that the solution? look at chipolte, and it's about the offering, the ogranic nature, healthy content, is it right for mcdonalds to go back to service delivery, advertising, and sprucing up the restaurants? is that the answer to the problem? >> well, them going to an

ingredient route of value energying that way, putting value in the food is a route they could go, and a lot of food companies deal with that same question right now, but that's a long process, and doing it the scare of mcdonalds is difficult. >> quickly, what we didn't see in the result because it was breaking this week, food safety scares in china. what does that mean because it's not seeing it here in the u.s.? >> you know, that's a bigger deal -- first of all, what you are talking about there is a recall some dated meat that was, by one supplier to almost all of the players out there in china including kfc, pizza hut, and mcdonalds. that's a bigger deal for yum because it's a bigger bisz for the business for them, but we don't know for mcdonalds. the key to figure out does the

public react to that? >> having said that, is there one stock that is is the chipolte of tomorrow you pick out? >> well, you know, we don't cover panera here so an easy choice, but our names include economy policy, starbucks, and yum brands. >> thank you. david palmer joining us. >> thank you. >> well, those consumer taste changes we talk about were on full display in coca-cola's earnings this morning. earnings came in better on bottom wlien, but sales missed the mark raising questions about the quality of the quarter and, look, no secret people are not drinking soda like they used to, so coke spends on new ads. perhaps the share a coke campaign, personalized coke cans with your name on it. also, they spent big sponsoring the world cup. that helped a little bit because sew dal volumes rose 2 % and

came back from a negative number, the previous quarter, but that was driven by overseas growth. volumes were flat. it's something the ceo tried to down play this morning earlier on cnbc. >> we were pleased with our north american results, fi because bank of coca-cola grew. secondly because our pricing was very strong in the second quarter that just passed in north america. the price mix in sparkling beverages was up three points. take the totality where we are in north america, i think we're making steady progress. >> so trying to talk about the positives there, which are pricing, growing profitability and market share. consumers, we know, our ditching diets, ditching soda, don't want artificial sweetener in europe and around the world. juices were even hit. that's why coke is emphasizing

sparkling water, which is growing. higher prices to improve profits, and expectations grow for a new drink. coca-cola launches coke life this fall in the united states, a naturally sweetened cola with steevia. it's out in argentina. look at coke's stock, underperforming the broader market up 2 % and s&p 500 is up 8 %. carl? >> thank you. a quick market flash, dow up 78. hey, dom. >> good morning to you. a health insurer moves higher after a 24% jump in quarterly profits beating the street for the sixth straigt quarter. raise rising to 54 billion, 7 % in the trade. rivals move higher as well. united health recall moving higher add vis the ripple effects of the reporter. >> thanks a lot. european union phenomenon

ministers threaten with sanctions after the separatists shot down the plane in eastern ukraine last week. met by action? we are in moscow this morning. good morning, jim. >> hi, carl, well, there was tough talk. brita britain, france, and germany took the lead saying europe should be ready to ratchet up sanctions in russian's defense -- excuse me -- energy and other sectors and talks of an arms embargo, but it did not h help the french president said they with go ahead with the delivery of a new helicopter carrier to russia. they got a boost from the netherlands who, of course, lost 200 -- at least -- almost 2 00 citizens in the mh-17 crash. said today they would have a change of heart and impose further sanctions on russia.

putin, meanwhile, on the defensive speaking at a security meeting today warning the west not to meddle in russian's foreign affairs and beefing up russian military capabilities to deal with the steady movement of nato towards russia's borders. oblique reference, i guess, to ukraine. the pressure on putin, carl, is clearly mounting. if he chooses to double down on rebels in ukraine, he could be the leader of a praia state, but if he cuts ties with the rebel, he'll look weak and defeated in the eyes of other ethnic russians here around the region and here at home. one analyst in moscow summed it up today. the kremlin reduced to choosing from bad and worse. >> okay. jim, thank you very much there live in moscow. meanwhile, closer to home, bill ackman's presentation on herbal

life exposing incredible fraud. kate kelly has more from the presentation in a hotel in midtown. kate? >> hey, thank you so much, simon. he started on too many at 10:00 a.m., and he started almost without much introduction noting it was the largest presentation he had ever made, 480 people in the auditorium, people in the overflow room and skipped the safe harbor commentary wanting to get to the material. it's not exactly clear why he's going yet, but talking about the corporate time line at herbal life, fact that michael johnson's arrival as ceo in 2003 was a game changer, not clear for better or worse, but i presume for worse because she's short this stock. now talking about ways in which in his view it targets the poor, such poor people around the world for those who make an average of $2. i believe that was the mets trick. he showed app pyramid of wealth around the world ironic and made a note of it accusing the

company for operating a pyramid scheme that they deny, talking in ways they moved into emerging markets, and some of the poorest in the country, as a matter of fact, emerging markets. finally, an indication where he's going with this, talking about the classic pop-and-drop phenomena that herbal life experienced with sales entering new markets. in other words, things did well for a while, and the market, the penetration is maxed out, guys, and they would have to move to other geographies. interesting table settings, no clear what the bomb sell is yet. >> yes, plenty to mull over. when we come back, former deputy national security adviser, former u.s. ambassador to iraq and turkey weighs in. will u.s. and u.n. officials hold fighting between israel and gaza? dow up 71 points and back in just a minute.

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u.s. secretary of state kerry in the middle east this morning trying to work a cease fire between israel and hamas militants, but officials tell cnbc no lasting serious fire is on the horizon. what can they use to calm tensions? with insight, former deputy security adviser, jim jeffrey, now a visiting fellow with the washington institute.

good to see you. >> good to see you, thank you. >> can john kerry do? a different situation than 2012 where there was a cease fire not too long after and prevent the ground invasion? >> that's true, but right now a ground invasion is jurnway and clear the israelis have, as president obama eluded to yesterday, strategic concepts to carry out, taking away hamas' ability to launch rockets and unleash raids through tunnels into israeli territory. that's extremely important consideration for the israeli government. hamas, on the other hand, says they will fight on until it demands to have prisoners released seized in the last few months, and its check points with egypt opened for commerce and to and fro of trade, and the

israelis, under no circumstances, will do this. you.coop have the prek reck sits. >> what are the state of the relationship between the obama administration and specially kerry and benjamin netanyahu administration after the collapsed peace talks in april? >> secretary kerry had a point in trying to pursue talks because absent talks, such conflicts slip out of control like now. the israelis have a close military and intelligence working relationship with the united states. the united states support them in various ways. the u.s. has more influence with raise real than hamas at this point. >> something important here, the lead article in the new york times this morning talks about the die help that israel faces with realtime choices about whether to advance targets against casualties and kick back they get. but way you're saying, and this

is important. they have objectives, military objectives, the tunnels have to go. they will complete that. the israeli defense ministers says within days. tom what way. no negotiation to be had? >> in that sense yes, they have a military objective similar to ours to dwooifr sue dam out of crew wait. they have the morse forces, the exper seize to do it. as we see on the news, this is at a high cost and civilians as well as continued rocket attacks into israeli communities, and we shouldn't disregard that. that's very important as well. there's a huge cross of civilians on both sides they pay as fieging continues. >> european foreign ministers meeting right now. what action do you x. out of them if any given this relationship between russia and europe is much more important, third biggest trading partner with europe.

>> it is. it's some hundreds of billions of dollars a year with europe, and we're talking about a $15 trillion european economy. it's 2 or 3%. what's important, however, is the gas trade. againing on the country, it's 25 to 30% of the natural gas imports. that that's important. nups, europe is getting ready for tough action. if they do so, depends on how flektble tes. flexible to supporting the u.n. rez rug resolution, but he's in it to stabilize eastern ukraine, if not the whole country. have not seen the last of his tricks yet. >> the lead article -- apparently, the editorial in tod today's post said they have been too tactical and tolerant and time to treat him as the dangerous outlaw regime that needs tamed.

they suggest actually arming the rump of the ewe can craukraine s at the moment. >> it's not that putin arm the rebels with the sophisticated, dangerous weapons systems, but what happened after the news came out that the plane was shot down. rather than rahe made a mistake they upped the anti, accusing the government of everything, and then supported the stalin tactics of the rebels for days as we are now hearing, were able to remove incriminating evidence. this is flying in the face of european sense thes, becausically of the whole world and thinks he had get away with it. >> valuable perspective on difficult issues. thank you. >> thank you. up next, verizon reporting largest growth in a year and a half thanks to rises in wireless and home net sales.

what's that mean for the stock? we'll break it down straight after this break. the cnbc realtime exchange market snapshot is sponsored by interactive brokers. >> interactive brockers, the professionals' gateway to the world's markets.

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max what's going on? we're doing a tech startup. we're streamlining an algorithm. we're going public! [cheering] the fastest in-home wifi for your entire family. the x-1 entertainment operating system. only from xfinity. welcome back, a highly anticipated ruling on the so-called case involving the affordable care act, known as obama care, suing the government saying that subsidies given to people on exchanges built by the federal government violated the law. under the law itself according to the ruling, the law said that those subsidied could only be applied at exchanges build by states themselves. this effects 36 exchanges, state exchanges that were built and run by the federal government. a u.s. appeals court has thrown out the irs regulation that

implements that key health insurance subsidy and throwing did back down to the lower court. it continues, but a big ruling against the obama administration and impacts some 5.5 million people who received those subsidies. we'll see what happens as we go into next year's open enrollment that begins on november 15th. >> thank you, bertha, trying to track the rulings involving the aca is a beating against itself. talking of beats, verizon this morning did beat the street with its earnings. the stock has been not doing much of anything. you see up now, had been down a bit, but up one-third of 1% right now. what was key about the quarter? well, the revenue number was fairly strong. not just wireless subscriber growth, and a lot of the growth, which we already got a preview

of on an interview on cnbc a couple weeks back, the growth came as a result of tablets being activated, and they are not as profitable or high an average revenue per user as are the smart phones. tablets, 1.15 million tablet sales, a big number, but strangely enough, the wire line business side of verizon. it's not your home, but business formation, reflective of the stronger economy as well. the wire line business showing an uptick for the first time in quite a long time. we go through some of the key things for you in terms of wireless subscribers, net ads, postpaid phone at 300,000, as i said, tablets, look at that number there as we look at churn and average revenue per device or however they talk about it these days. overall, a good number from

verizon. of course, it is still digesting the acquisiticcusation purchase vodafone and debt added to the balance sheet, coming down marketedly. moving on to our parent company, no fun to talk about. if you're too positive, you're a ho homer, and if you don't, who knows, right? comcast looked good. the stock up, so much of this, though, a focus not on the metrics of the business itself, largely positive, but on the time warner cable transaction of when that will be completed. i mean, as for the metrics, video net ads down, lost 144 subscribers, up 137,000, and data ads, particularly, well regarded there in terms of the company overall, and when you're

talking about operating cash flow, revenues in particular margins throughout many. businesses including our own, they were strong. as i said, time warner cable the close, and when's the vote for shareholders? once that vote takes place, it will institute a $2.5 billion buy back. investors on the conference call focused on that. i have a quick read from the cfo on it. at this point, we believe a reasonable estimate for the timing of the vote will be in the fall. this does not have any impact on the continued review, of course, by the fcc. they say fcc -- the department of justice not expected to impact timing of the closing the deal, but we'll buy $2.5 billion worth of shares with approval. a lot of questions on that, and there's the answer. >> we all await that. all right. round up of media earnings. apple betting on big

screens. lure customers away from the likes of samsung? we'll discuss that ahead of apple earnings right after the break. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. 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.

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about. existing home sales for june better than expected rising 2.6 % to a rate of 0 .54 unites. shares of cit group up 10%, business lender agreeing to buy privately held 1 west bank. harley davidson down 6% despite better than expected earnings, company lowered t eed full year guidance for motorcycle shipments. wo wonder when the electric harleys come out. >> soon, soon. apple's weakest year, ahead of the launch of iphone6, and josh lipton is live with what we should watch for this afternoon. hi, josh. >> reporter: hey, simon, yeah, today after the close, certainly, all eyes on apple.

expectations are high here for the tech titan. now, wall street wants to see eps of 1.23 on revenue of 38 billion. that would represent year over year growth of 8 % on the top line. drilling into the different product categories, now, analysts want to see apple sell 35 million iphones in the quarter, and in the conference call, investors want clarity on how many phones apple sold versus shipped, and what is demand like in china? how strong, how consistent. iphone salesing the for 50% of the total revenue with an impact on appapple's closely watched margin or the profit they keep after paying manufacturing cost. ipadsing t ipads account for 20 % of the revenue. the ipad in april a disappointment, missed by 3 348 units. this time, they think apple sold 14 million ipads, education a

key market for the ipad. they'll see how demand in the market holds up, and finally, mac sales, ammists think they moved 4 million macs, 13 % of the total revenue. excitement about the pipeline, a new phone, wearable, or both. if that's true, you could see apple give more conservative guidance to underestimate than overestimate and risk disappointing the street and investors with the forecast. carl, back to you. >> will be a heck of a print no matter what. thank you. bringing in rob. good morning to you. >> good morning. >> we can go through what josh talked about, but the main event, as you put it, is the 6th. what do you think the timing will be? >> i'm looking for the 4.7 inch larger screen to ship last week

of september. similar to the past couple cycle, and there's a 5.5 inch, a larger, larger screen, which may come shortly after that. i think, though, what matters is if you look at the high end of the smart phone market, where apple plays, customers want larger screens. there's pent up demand there. >> do you believe the 80 million number in the journal today? >> i think that's sporty, but i think we could see iphones all in iphones approaching 60 million units in the september quarter. 80 would be great, but not holding my breath yet. >> they think there's upside to margins because of what analysts believe the mix will be like. i look at a potential for 40% margins on the watch. do you buy all that? >> i think 40% on a watch or iband, whatever the heck it's going to be called, is not out of the question. i mean, gross margins stabilized

over the last couple quarters which is important because they had fallen last year, than really weighed on the stock so i think as long as gross margins stabilize in that high 30s range, that's find. i don't know they necessarily go back up again. it's just they stabilize. >> rob, just to take you back to the journal article today where they identify there may be a production problem with the 5 .5-inch careen becauscreen be lighter and there's a suggestion here because of the production problems in the failure rate of the screens, they may be asking component manufacturers to make 40 or 50 million units more to cope with that failure. that would seem to be a margin problem or am i misreading? is that normal in a proux process? >> well, what's normal is apple asks their manufacturers to get

ready to make, you know, more -- i mean, they buffer what they -- you know ask for more than they think they need. always ask suppliers to be ready to supply more. i mean, we've heard in writing about that 5.5 inch iphone seemed like there's yield issues on the screen, which is why i think it comes a month or so after the 4.7 inch. i think the 4.7 inch is the flag ship, it does the bulk of the units anyway, and that's the phone to expect at the end of the september. >> not 15 times forward earnings. doing they get back to a market multiple? >> market multiple i think is justified. they have an amazing brand. they are showing that they really can still grow against the law of large numbers. back out cash, not close to a market multiple. we are bumping up or getting towards the all-time high.

i don't see a reason why we couldn't go higher. i see a $115 price target. doable to me. >> they've been on that wagon the past five days, all the other -- either upgrades or target increases in the last five days. make you nervous? >> no. i mean, if you look at the wagon it was negative not even a year ago, six months ago. nobody thought apple could do anything right. now maybe people think they can't do any wrong, but the stock is only pricing in, you know, modest growth at that. it's far from expensive, i think. >> let me point out, goldman said it's the most significantly underweighted stock amongst the large fund cap managers. room to run, rob, if they buy back into the growth story rather than value. >> right. from a waiting standpoint, apple is so big if you don't own a ton of it, you are underweight.

i think if you don't own the stock, and it does well, you really have to explain yourself. >> well, pour yourself an extra coffee at 4:00, rob, see what they say. >> right. thanks for having me. >> an appeals court ruling on obamacare and subsidies, a big defeat for the legislation. more on that after the break. thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life.

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welcome back to "squawk on the street," a u.s. appealing court threw out federal regulation that implements key subsidies vital to president obama's healthcare reform, also known as obamacare. a d.c. court of appeals accepted one of the main challenges to the policy by conservatives who were exposed to expansion of the federal government. you see they are up on the

session. the question then becomes whether or not there are any ramifications to the insurers because of this policy. remember, guys, the main part of the challenge was the federal government now cannot implement tax credits and subsidies for obamacare. that's what made these policies so affordable for certain families. the question remains whether those families with still afford that coverage, guys. back to you. >> though the subsidy eligible on a state exchange, dom. >> yes, but, again, until they can both be joined, if you will, if the policies can be made, if states can still have their exchanges implemented, this policy will stay in effect. you can't just put one versus the other in terms of subsidies, guys. that's what the ruling is essentially saying. >> a huge ruling, dom, more on that in minutes ahead on the program. still ahead, the first crowd funded hoe it wi eed hotel.

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street on the cnbc newsline covering health care policy and the health care companies. ipsita, i'd think a big share of people need the subsidies, how big a blow is this to the president's health care legislation, obamacare? >> caller: absolutely. of the 8 million covered individual, 5.4 million came through the federal exchange. it's a big, big chunk. now, while this is a blow to obamacare, remember that the appeals process has yet to play out, so nothing is effective immediately, okay? and when folks go to the exchanges in november, november 15 th for open enrollment for 2015, have access to subsidies whether you're from the federal exchange or the state exchange, so it's sort of status quo while the appeals process plays out. >> how do you expect it to go?

expect it will be overturned? >> caller: well, if the white house goes for the en banc decision, which would be a ruling from the entire district because it stacked democratic, it could go their way, absolutely. regardless, confusion is going to ensue among the insured, and i think hospitals are probably rattled and health plans, too. not in a big way, but because of the long, drawn out process, it could go to the supreme court. >> speaking to you now, looking at health insurers, which have actually risen so far. not what you might expect them to do. >> agreed. i think because this was such a highly anticipated decision, there's probably a bit of relief that, hey, it's finally out there. that would be my guess. so maybe it's a bit of a relief

rally for now, but, again, confusion and uncertainty is never a good thing, and we do have the appeals process, and potentially supreme court consideration, which takes you to june of next year. 2015. >> meantime, of course, it's hard to forget the hobby lobby decision that was a scotus decision. is it your sense that the legislation is slowly being hollowed out here? >> i don't think so. this is the law of the land. i think there's going to be efforts to dismantle it. but i really don't think that this is the beginning of the end. you can't take coverage away from 8 million people in the exchanges and almost 7 million in the medicaid expansion. it's really, really tough to do. i think it could get changed and modified, but not going away. >> simon mentioned, the stocks of insurers up. would membership not be at risk if really upheld? >> if it were upheld, meaning, if this sticks, yes.

definitely a bad thing for the aca, and for obamacare, but i think we just don't know how it's going to play out, to be honest. >> yeah. unclear for the insurers, perhaps as well. thanks for joining us last minute on the newsline, ipsita. and pass it over to the cme group and rick santelli with the santelli exchange. >> thanks, simon. i'd like to welcome dan the man saysich. i like to tie things up. no rules followed. rule-based is out the window. whether it's the case just outlined now, where subsidies, laws written, need to come from the federal, not the state. >> right. >> everybody knew this. just like everybody knows the federal reserve is kind of righting this as they go. is this one of the reasons yield curve is flattening? one of the reasons, long end can't get traction for higher rates? because it sees this landscape is not conducive to anything. from health care to business, to

banks? >> well, they're certainly putting a lot of doubt in people's minds what's going to go forward, because you would think in a growing economy we'd see longer term rates start going up the ten year, pushing towards 3%. we're nort seeing it. is it geopolitical? uncertainty? a combination. >> geopolitical and weather, i'll stop you. always where everybody wants to shovel all question about call because it's easy to deal with. what do you see in the energy market now? on their all-time highs? >> no. but higher than three, four weeks ago. and i'll use the geopolitical, not the weather thing. you still have -- russia and iraq and israel, that's all kind of pushed to the back burner, but it's something that needs to be watched. there's a bit of a risk premium and flight to safety. >> stop you there. forget all the issues with military. because nobody nows how that turns out. do you think any you mentioned is good for business? >> certainly not good for business and that gets back to your original point of uncertainty going forward. what will we have?

you have 2.5 in ten year now. until we see certainty with the economy and rulings. >> i get into a lot of discussions about inflation, and in every business blog, think there's is no inflation, but everybody who reads that thinks what? >> most legitimatechb definitel. go to the gas pump, you see inflati inflation. >> stop you there. over numbers, including or not fruit and energy or the thresholds we haven't seen in a couple years. one thing jumped out at me. electricity month over month up over 5%. we flow why. we're closing coal, electricity generation. is the government in the form of all of its agencies just against the middle class? are they just slopping them and cutting them right off at the ankles or what? >> the got would the say they're for the middle class. >> for which middle class? >> just use middle class. >> the middle class that doesn't use electricity?

>> i'm just being, giving a point here. they're not -- not realistic in their assumptions answe s and d things that are harming the middle class. you're absolutely correct. >> the goldmans are getting out of certain forms of business. close to $60 billion worth. look at the other metrics, i see a tight repo, even though serve getting out of the repo business. final word on that? >> i think you're not getting the profitability that you had in these other ones. that's their excuse. >> thank you. >> back to you. >> thanks for the lively conversation, as always, rick. over to kayla tausche with a look what's coming up next on "squawk alley." kayla? >> sara, arguably the most important week for tech earnings. we'll get you realtime reaction on netflix. why that stock is down. even though profits doubled. after the bell today, of course, we have apple. first report from that company since that stock split last month. what does that product pipeline look like that is apparently the

best in 259 ye years? a preview. and finally, amazon, tough love from wall street. a down great. questions over margins. how much coverage going into its earnings? talking all of that and more when "squawk alley" comes up, next. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier.

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a check on the broader markets here as we speak, the dow up about 64 points. seeing a rally as well for the s&p and the nasdaq which is actually in the lead ahead of a bunch of tech earnings. chipotle, star performer in the s&p 500, knocking it ouch the park. >> nice surprise. and from apple and microsoft tonight that could change market direction po lepotentially. big day for tech. >> thank you so much, guys. interesting market day. the worst dow performer this morning, the companies that reported today and missed. the rest of the components holding it up 63 points. it is almost 8:00 a.m. in cupertino. 11:00 a.m. on the east coast. "squawk alley" is live. ♪

welcome to "squawk alley." we begin the hour taking you to the white house set to react in a few moments to this federal appeals court ruling that just crossed in the past 20 minutes or so. regarding the federal subsidies under obamacare. the appeals court ruling that at the federal level at least they are illegal, and the subsidies have to go through various state exchanges. it's characterized in the early going as a blow to obamacare, but we will see what the official white house responses is in a few minutes from josh earnest. meantime, "squawk alley." and what a night in