close. >> he makes walter money. we thank walter for being here, a great two hours, good luck with the book and hope to see you soon. >> october 7th. >> well have you back around then. join us tomorrow and "squawk on the street" begins right now. good wednesday morning, welcome to "squawk on the street, i'm carl quintanilla with sarah and the s&p closed above 2,000 for the first time yesterday. the dow is 80 points away from waking august the best month of the year. road map begins with another record all-time high, the best august for the s&p in 14 years, but can it hold? >> tiffany's continues the hot streak. earnings blow away estimates raising the full year outlook,

no funk for the consumer. >> targeted at $6 billion, snap chat with 0 billion in revenue, raising a new height this morning. >> facebook's first downgrade since march of this year, and the growth will slow in 2015. for the first time, the targets open with the s&p above 2,000 coming off the 30th record close of the year and dow hit new intraday highs in tuesday session, and nasdaq at a fresh 14 and a half year high, up 4.5%. interesting action so far. we have a cease fire in gaza, meeting how the geopolitical story reversed and markets like that. >> lack of news is good news for the market. the bullish momentum continues. milestone after milestone, but momentum is a keyword to talk about and whether it continues the 30th record close for stocks? the action is in the currency market.

overnight, the year row hit the lowest level in a year, ramped up hopes, right, simon, for more action and weak economic data fuelling the fire. >> i think one. most interesting barometers this morning is the major right on where the markets are for the financial times and the "wall street journal" takes the same path, where we are at a thousand and people are conflicted. people want to be in the market, fear they would miss out, and at the same time, they are worried it's under pinned. they should do more or less exactly the same thing. >> interesting to not the sentiment. we talk about a lull of worry. you mention concerns, and people are worried about the 4 % economic growth, whether that's sustainable. yes, we have consumer confidence at a 2007 high yesterday, you we saw it before, the start of the recovery and the overseas concerns. >> and also, i mean, most importantly, two brutal bear markets. you gained a thousand and then

were bought back twice meaning the average return each year is just over 6%. people are mindful of being burned so badly, obviously. >> with more on this, we have two on set to discuss, steve wood at russell investment, and chad morganlander, portfolio manager. what about this day after day and record after record, will we will propelled to the summer? >> you'll see higher highs and lower lows, so look for at 5 to 7% in the s&p year end. this is on the back of better than expected economic growth -- >> 5 to 7% on top of an already 8% growth? >> sure. you'll see better than expected numbers from the united states, and you'll see earnings better than expected, not only on the profit margin side, but also on top line, and get this, you are

going to see central bank intervention by the ecb. that's going to gin up all markets zblp what -- why do you have a crystal ball that says earnings are better than expected, and growth will be getter than expected? >> i think credit expands here in the united states. business investment also is going to get better over the course of the next six months from the preers six months. >> we've been promised that for 18 months now. >> and now you are seeing it in the earnings numbers last quarter, better than expected. hey, look, i used to be bearish because i thought credit was going to be, you know, was not functioning well or getting into the real economy, but you are starting to see that. now, we're not out of the woods yet. we do have an unemployment rate, under employment rate, which is somewhat higher than the 30-year average. you do is other issues on the economy, but we're starting to slowly improve. watch, i'm telling you, watch the central bank intervention by the ecb. that will propel markets higher

overseas as well as you're going to get the euro below 130. >> that phrase, "i used to be bearish," that's what people are looking for, right? conversion of people from pessimism to optimism, but you're not there yet, or are you? >> we are where we forecasted the market to be. that year end makes sense. if you're up, the russell 1,000 up 9%, action in small caps, russell 2 up 1.5% in the last couple days. it's a broe broadening market a there's a lot of chop. it's range for u.s. equities. there could be stuff coming out in a year, and i think draghi is, what, six years late and 3 trillion sthorhort, but the eurn central bank has to get short. there's a lot of sovereign debt in europe, a lot of opportunities there, a stock selection market, security by security in fixed and equity space. it's a security selection market. >> pointing out banks like

jpmori gap and deutsche bank suggestings there's a private qe next week in europe. do you not find symmetry in that that things are so bad in europe that europe is stalling as the major economy in the world that the central bank has to apgt, but don't worry because the stock market will rally on that, even though things are bad, draghi had to move. >> gooz news is bad news. it was sick languishing, and the doctors are now going to treat it, it being draghi. >> inflate assets? doesn't mean underpinning is good. >> means the medicine, the stimulus from the european central bank will have winners, medium and longer term losers, but beneficiaries to the policy. what will be interesting is the qe in europe will be less straightforward. in the united states -- >> they can't find assets to buy. >> exactly. in the united states, if the fed wants qe, they buy bonds and u.s. debt. it's tricky. >> the ten-year is below 240.

again, chad, you paint a rosy picture of the economy. why is the u.s. trashily bond market not responding to the positive data in the way you think it would? >> competing, germany and japan at 1 %. spanish debt at 240, and 18 months ago, the world was going to implode over there. what happens to ten-year? looks like a bargain, right? you ask anyone on the street who is buying german debt, and, oh, we're not buying it, but people are. we believe there's a sovereign debt bubble on the peripheral side which will have its time where it's going to implode. it will be a matter of time. over the course of the next six months, we don't believe it will happen, you want to be in risk assets. >> is there a return? i'm assuming volume goes up in september from august. these people come back from vacation, do they look at the

summer and say, wow, i missed out, i better catch up? or this is well, i'll ease out of the market? >> yeah, this has to be one of the least loved if not thee least loved bull markets in five and a half years. solid returns. we think there's a security selection, looking globally, multiasset strategies, they are global in nature. disinflation and deflation is priced in in europe. in the u.s., you have a healthy debate. the u.s. is managing a recovery and managing the taper in the qe exit, but dr. yellen is the voice that matters the most looking at slack in labor markets, slack in wages, slacks in the economy, so it's going to be a little bit longer in -- >> tell us -- >> than what's priced in now. >> comes faster and more aggressively than the ecb and bank of japan which is why the dollar strength ps. bottom line is can this equity market sustain a world of higher

interest rates or at least starting to price that in? >> i don't think so. >> for the time being until you see the 10-year go above 3%. >> you have an armageddon scenario down the line. sovereign debt collapses and there's a rush for the exits. >> there could be -- when spanish debt moves higher, the markets, equity markets -- don't be delusional about it -- will trade off. that does not mean the u.s. economy's derailed or earnings over the long run three to five years from now. >> a bubble bursting on sovereign debt, and you don't think the u.s. economy will be impacted? >> no, i don't think the u.s. is impacted by that. >> wow. >> if the spanish debt goes from 2 % to 5%, does it matter to people in the united states or the economy? the answer is absolutely not. >> you're a fear monger today. >> today? >> today. delusional. it's okay. >> back to him what he said, he was the one who said there was a

sovereign debt bubble that would burst. the implications of the statement are vast. >> fixed income is a lot too. it's not just sovereign debt. there's current strategies, and when you look at global credit, there's a lot to be done to generate value. >> guys, we have to leave it there. focus on the positive today because we'll continue the record run. chad, steven, good to see you both. >> thank you. tiffany reporting up to 96 cents a share beating estimates. the retailer sees a higher growth margin and 7% increase in worldwide net sales, particularly in the americas and asian pacific regions suffering decline in japan. we'll talk about this a number of times during the course of the morning. what's interesting is gross margin element whether the ceo is selling more product at lower price points. this is atlas jewelry range. >> fashion jewelry. >> with a higher margin, lower

price points that are giving us better than expected earnings. >> yeah, margins up, american comps up 8. not bad. europe is the question in the conference call right now. europe comps, i think, down -- softer than expected, down 8 on a constant currency basis. >> asian pacific was strong. >> is luxury back? kors trading up? tiffany is a troubled name for a long time. >> tiffany's in the rejuvenation phase at the moment. notably, you got a new ceo about to take over, and, also, it's interesting that you have a new female head of design, been there a year, and now they are beginning to put it out there to tell the story. in fact, there's a huge article in "elle" magazine. we'll talk about that later. >> oliver chen with an eye for style, a lot of thoughts on the new design chief, important for tiffany's. i like the good global barometer

for luxury spending and the pieces came together in the quarter other than japan, a notable weak spot. >> which we know. >> after the consumption tax hike. >> the facebook downgrade, a contraryian call going to neutral on facebook, one of the first down grades for the stock in a very long time. when we come back, though, this morning, a lot more "squawk on the street" sarah's exclusive with u william lauder, stock at an all-time high, and one more look at the premarket today starting the morning above 2,000 for the first time. a lot more "squawk on the street" live from post nine in just a moment. [ woman ] the cadillac summer collection is here.

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sources say that providers square is worth $6 billion on rising capital. square led by the twitter founder. it was valued at $5 billion this year, and snap chap, per kips investing in the company at valuation of close to $10 billion. snap chat turned down a $3 billion takeover bid from facebook in the year. journal says perkins $20 million

for less than 1%. people laughed at snap chat at three, and now they'll see $10 billion. >> hard to value the companies. we don't know the business model yet, and that's pointed out. there's talks to moptize, for them to -- single, 24 years old, the ceo, to talk about ways to bring advertisers in, but it remind me of yo, the other startup, valued for what? $10 million. >> it did cost -- the tweet this morning about snap chat, it's not absurd, crazy growth, clear monthization path. >> they have growth. i think 33% of kids in the country are using it. it's a human phenomena. can you actually monetize it is the biggest question. they need much more fancy and innovative with the ads so they do more than on facebook and twitter did it's going to physically work. i would say take the money. take the money! >> they have a hundred million users a month, and i guess you can stack that up for what app selling for $19 billion, with

more than 600 million users, and twitter has 300 million? >> bolting on another business like ali ba ba. that's where it's more than arguably independent. >> i don't know, burger king bought tim horton's for 11 million with 4,000 outlets all over the world. that's how you value company, but who knows. >> a facebook real estate footprint is not large, and they are worth more than that. >> and advertising revenue is more than so many tv networks combine. let's talk about the future. facebook downgraded. downgraded by the stock this morning, and citing valuation head winds, deaccelerating growth closer to the new year, but maintaining his price target of $82.50. tony joins us now on the cnbc news line. good morning to you, tony.

why the move? >> it's a name where it's better to stay on the sidelines. you see a natural growth deseller ration. they have to work in the valuation that's not too dissimilar seen in google, ultimately, going public, stalling out at $200, and really what it comes down to is take a 6300% growth rate to a 35% growth rate, and uniques are starting to mature in the business as you expect that to happen. >> isn't the growth going to be lumpy? reading the note here, you talk about tremendous monetizing, through new online assets like instagram, and the payments could be a wild card? >> it's one that's under valued. you search, it's discussed add

naz nauseam, and, in fact, what you are seeing is the company continuing to beat earnings by 30-plus percent, really, the stock is not acting proportioned to the upside help validating what wee are saying, but what's right that's not picked up it a payments opportunity. i said that could be as big as the ad market for the company, however, i think payments is something that does not happen imminently but more a year down the road. >> if you put the books down and you any about the way in which we transact in society, thee big breakthrough has to be able to transfer cash or credit between us in a social media way. more than bitcopy, more than your visa card. that surely is the future, and therefore what you need is a social media connection that basically links everybody, and that is facebook. >> pay attention to the fact they are rid of facebook credits, linking to paypal.

there's credit card integration to the facebook profile and connected to a million merchants on the other side of the line. the bigger opportunity is offline world. how do you bridge that? it's something that's a large opportunity they cannot overlook it. the thing that's clear, though, is they are still going to stay focused on the core facebook experience today, and they will not rush to market with a payment product inside the next year. >> tony, walk us through the multiples, what do owe keep our eye on? >> we felt they clustered around, and the google historical chart, and that validates the point looking at the names today, they chuser around that, so facebook, i think, sustains this very high price to sales growth rate, you know, multiple, but, again, as the growth rate comes down from 60% to 35% and they sustain that multiple, basically, the valuation works against the company. >> you are getting some heat for keeping the fair value at 82. why not move it down?

>> because we really think that, you know, the fundamentals are in tact to where we are at. you know, the stock's moved up a lot year to date relative to the market. the fundamental story's in tact, using the same valuation approach before, but we say now let's take a risk-reward approach to the company with not as much upside to the company versus a twitter which we recommend relative to the mobile space. >> tony, good to hear from you, thank you for joining us on short notice. >> sure thing. >> up next, someone who has seen the fair share of wall street milestones. art cashin's take on this opening bell. take a look at futures. ahead of the open right now, looks like we are set to continue the games with the dow looking set to open up 26 points. more "squawk on the street" from the new york stock exchange straight ahead. you want to be the best investor you can be. you want to cut through the noise of an overwhelming amount of analysis.

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let's bring in art cashin, joining us this morning at post nine. good to see you, art. >> good to be here. >> record highs, clean volume, what's it worth? >> jason at sun dial research put out a paper overnight talking about getting to new highs and low volume particularly with the month of september coming up. and, unfortunately, history gives us a muted picture of it. if you have high volume, you get

follow through easily. low volume into september, we only had big carry through a few times. now, we're in unusual times these days and wait to see if mr. draghi delivers. we're at the where's the beef stage, and we'll see what happens. >> certainly expectations are rising. what do you think of the cross asset correlation break down? that is, lower yields, higher stocks, stronger dollar? what does that signal? >> well, you have to remember that some of that gets static from geopolitical turns. talks in ukraine. yesterday, we saw a reversal, went in sowning hardlined, came out sounding like they might get a cease fire which is interesting because the ukrai ukrainians want to proceed, but mr. putin got his way and a cease fire is coming. as to the divergences, i think i'm going to keep watch iing th

yield on the 10-year and see where stocks go. i think you can have to going on. the yields in europe so low you'll have u.s. buying of u.s. bonds. >> art, thanks for that. good to see you. opening bell four minutes away. c for a while... but now that we have the adjustable base, it's even better. male speaker 2: when i put my feet up on this bed, my stress just goes away. i go up, hey... female speaker: our tempur-pedic is the best thing in our house, except for my husband. wait...wait... where are you going? female announcer 1: discover how tempur-pedic can move you.

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[ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. >> you're watching "squawk on the street," the opening bell in 60 seconds here, and what a run it's been in these dog days of august. the nasdaq up nine out of ten, and the dow up six out of seven. the s&p up six out of seven, and if you want to make august the best month of the entire year? dow needs 80 point, and s&p needs 7 points. >> to beat the february gain. >> the august-february contest. >> the intraday record yesterday, did not close above it, looks like gains are continuing. >> all right. with that, we have some minor economic data. sarah said it's a dry day for

data, but mortgage apps up 2.8. watching the 10-year come in, and that may be a reason why the refi index at a two-month high today as people take advantage of the lower ratings. there's the opening bell, big board, celebrating the 50th anniversary of listing, and it's 155th anniversary of founding. over at the nasdaq, mass challenge, a startup accelerator helping entrepreneurs succeed. with that, alibaba with updated numbers ahead of the ipo in september. revenue up 46% in the fiscal first quarter, slower than all of last year, but the china based online retailer saw earnings triple from a year earlier. shares of yahoo! of course, owning the 22 % stake, and in every incremental bit of information from this company leads some to more discovery about the ipo. >> well, that's how you play it. >> second top gain set on the

s&p at the moment, making it a flat open. top gainer is tiffany in the wake of the results straight out of the gate with the gain at 3%. the margin mix there, talking about that, carl, throughout the rest of the show. >> 95 cents beats by 11 cents, beat and a raise. tiffany sees 4 20 to 430 prior to the 425. some called for a turn around in the name. >> oh, yeah. >> looks like it could be happening. >> a strong quarter and stands in contrast to the other more smaller retailers reporting this morning. express one of them, a disappointment, and chicos in trouble despite the strength. interesting to go into the retail outlets to see who is strong and who is not. white house black market -- >> do you spend a lot of time at chicos? >> i have not lately or express who targets the younger generation.

>> express has a strong opening, just to repeat there, eight cents a share, beating estimates for what wall street expected and raised full year forecast above estimates, profit margins are improving in a difficult environment. 13% gain there on the open. >> yeah. tiffany, express, and michael's 15 cents a share beating by 7 cents, and revenue above. interesting, of course, one of the deans of retail research on "squawk box" this morning saying there's a change going on, and the change is it's less worse as we are beginning to see some -- >> for retail? >> seeing the income numbers and labor numbers reflect themselves in spending. >> well, remember, kate, that huge mover, kate spade, reporting earnings, spiked 10 % and down 20%? since then, back up 15 %. we have to mention after you saw that earnings miss. reassessing the retail trade -- another one i watch is lulu lemon, actually. it's gaining, and the chatter

here is that it's based in canada, and people are taking a close hard look at where the companies are domiciled because inversions are all the rage, just stocks to watch. check where the company's bassed. >> we have breaking news. steve leisman block rock is an ecb consul tapt for abs purchases, for program of abs purchase. we don't know if they are the only consultant or fired up potentially to start buying in the market, but it comes into context of increased chatter about these european central bank potentially next week embarking on a private qe. it won't buy at this stage, and speculation from deutsche bank is they buy asset backed securities, assets that are hard to find and match and hard to buy evenly in proportion, but be awear this is another piece of evidence we are moving towards more action from the european

central bank on thursday. ? trade on this is the euro and those low bond yields across europe. the year row is on the move, lowest point against the dollar in a year. >> people said, why move interest rates lower in europe at the moment when they are at record lows again today, record lows in germany, france, italy, and spain. it's partly because they believe you bring interest rates down further, believe it or not, yes, in spain, but specifically to sarah's point if you bring the rates down, you make the euro less attractive and you enter a currency war with the dollar pushing down, would do a lot of good for the european. >> it moved down, and it's going to be interesting because u.s. companies now are going to be struggling with a stronger dollar, a weaker dollar in the last year, a tail wind. we'll see if we get market chatter from the big multinationals. that depends on sales and stronger dollar cuts the profits. >> the downgrade appears to have impact.

again, going to neutral. one of the first downgrades for facebook at least in the past few months, although keeping fair value. he was on the phone and larger point is the stock is reacting less to upsides surprise and that the natural deacceleration of the met tricks weighs on the valuation in 2015. time warner cable, a story for the morning, pretty much a nationwide outage appears to have begun somewhere at 3:00 a.m. eastern time. the company tweeted saying they were working on it, and the tweets would be delayed for a while. it appears most of it has been largely restored. they blame it on maintenance issues, but for a while there, maps were circulating on twitter looking at the out amg, huge swaths of the west and east coast. >> strange you have a glitch that wipes out the network. that's -- maybe that's just the interpret protocol and the way it works. >> investors are not concerned. tivo reports after the bell, watching this, and surprisingly good numbers in terms of the

quarterly profit and revenues, strong growth, shared under pressure on the outlook. interesting after aereo, tivo launched a digital recorder for people who do not pay for cable or for satellite. they get it on air and pay and stream or record netflix. they call it, simple, and they call it legal. trying to move into the market share of people that cannot use aereo anymore. >> next it will be twitch or something. >> no, netflix as well. >> just go to the beginning of the program with netflix, don't record it. it's not live. >> i guess so. >> i guess. no, am i stupid? >> itch no idea what you're talking about. smith and wegs son a big disappointment, 26 beat by a penny, revenue shy, and we heard from dick's sporting goods about the weakness in golf and hunting, looks like the weakness was in long rifles, basically hunting rifles, blaming some

inventory, higher inventory levels. >> isn't that because of the serge after the high profile shootings and expectation that congress might move? you got the high serge of demand and the inventory called bag, now that the stock is empty and demand on the inventory side? >> once people realized congress was not doing anything about this issue -- >> on anything. >> that demand waned. that's the story. they blamed higher inventories and slow seasonality. turns out, it's not a hot time for gun buying. did not know that. >> comp is higher, nas ddaq up five consecutive days. unbelievable. >> i was going to mention the nasdaq index, despite the slump from february to april, it's climbing back from a 2 1 % drop. >> sorry, yellen, bad call. >> not a good stock, exactly.

>> bob is on the floor. good morning, bob. >> trouble getting over that significantly, but we are to the upside on that. i know you mentioned it, but we're waiting for terms. we don't have it. we got an update, an f 1 a, an update this morning, they did increase -- the revenues showed up for the second quarter up 46%, that's nice, but where's the price? where is the size? we don't have terms yet for the ipo. everyone's expecting the ipo to be happening september 15th or september 22. if you think that's beginning to happen, we need to get the terms, the terms wildfire the next week. we need the road shows starting next week or perhaps the week of september 8 th at the very, very lat latesest. if this happens in mid-september, we have to get the prize in size, and that was not in anything this morning. it's a tight schedule to make the mid-september idea here. meantime, have you noticed the

global rally we've been seeing? toll you yesterday there's been heavy activity in some emerging market etfs recently. they were heavy yesterday on a light volume day. brazil a new high, thailand, india, brazil, mexico, emerging markets doing well. europe's not at a new high, lagging a bit, but there's the e, m, the biggest of the emm emerging market, three-year high here, so the rally is broadening out. that's the key point i want to make. why does the market keep rising? we talked about it yesterday, but there's several reasons. the key one is the low interest rate scenario, low oil prices, improving economy, record earnings, and u.s. the best place to put money, it's not a cliche, but believed on the street here. emphasized, number one. the inverse rapid rise in rates, above exception economic numbers, for example, change in

the fed outlook, or significant deteriorationmargins. get higher input costs, higher commodity or labor costs, that erodes profit margins, and corporations need to raise prices. that would be difficult in this environment. there's your two issues that would kill the stock market rally. i just want to note, the scc, after a year of discussion, has finally announced a proposal for a pilot program for trading small cap stocks, some, in increments other than a penny. for years, people have debated what's the right place to trade stocks. we traded on pennies on everything for 14 years now. some small cap stocks have just languished doing nothing because they get little volume. hope is perhaps allowing some of them to trade in increments other than a penny of one and five cents increases volume, it's controversial, some don't want to do it, but it's a pilot

program for a few hundred stocks trading between a nickel and penny to increase the volume. is it going to? i'm not clear some of the stocks, small cap stocks could trade at more than a penny now. there's no law to prevent them from doing so, but the trading community is worried about the low volume we've been seeing, simon, not just in small cap stocksings but in big cap stocks. right now, the volume better pick up in september or october or there's layoffs on the sell side. friends on the street now are worried about the light volume we are seeing. it's not just summer, we had light volume going back to april. back to you. >> okay, box, thank you very much. up to the nasdaq market side and check in with the action there. good morning. >> good morning, simon. five days of gains for the nasdaq composite. today, the bulls are in charge hitting a fresh 14.5 year high. they are talking about the resilience of the naz tack, tech-heavy index powering to new

multiyear highs, nasdaq same story to the upside having to do with apple on a tear over the past couple months. reports today that apple plans to roll out a new larger version of the ipad in 20 15. that stock is moving today. take a look at social media, the so-called momentum debate striking concern of investors. facebook downgraded. the firm saying facebook would begin to face valuation head winds in 2015. we've seen a recovery over the last month, still shows that there is concern on the street regarding valuations and whether these social media stocks are over valued. la lastly, aruba networks reporting better than expected earnings and revenue for the fourth quarter announcing they would cut 3.7% of the work force. cost cutting is something that the aruba networks do that, up

7% in today's trade. carl? >> all right, i'll pick it up, thank you very much. euro is rebounding from overnight loss. let's go to the bond pits with rick santelli in chicago. good morning, rick. >> morning, sarah. a few ventured tens, we are three points lower on the day, but three points higher than the lowest yield close back in june. opening up the chart, a week ago friday. pairings, not win pairings, but bond pair position. look at introdays and 20 years from lowest to highest yield. bund, 20 -chart, never saw it before. france, 123. never saw it before. spain, 210, never been there before. my charts go back just 20 years, not 200, and italy, 235, not only is it the lowest yield, but

it is now a couple basis points below the u.s. 10-year, and i know the relative value trade, but there's a currency issue there. the currency is higher than ours, and get the coupon payments, they are in euros. factor that in a bit. the dollar-yen for the foreign exchange trade, year to date trade chart, usurped for the first time since january, but could not hold it because it's toying in the levels. the gang, back to you. >> one thing, rick, when you compare those, in addition to what you said is the fact you have inflation in the country on those yields. you have 0 inflation in europe, and deflation in some of the countries. >> at least based on the government's metrics, and you know, simon, they'll keep pushing that argument because it gives them recourse, but you understand better than most. without lower prices, southern europe's never going to be competitive.

>> we'll see. the cost of getting competitive could be as naum call. >> when we come back, the stock at new 52-week highs, how to play the jewelry retailers now. speaking of retail, we have a live and exclusive interview with william lauder, the company looking to capitalize on emerging markets. dow's up 3 points, s&p at 2,000. "squawk on the street" will be right back. [ male announcer ] it's one of the most amazing things we build and it doesn't even fly. we build it in classrooms and exhibit halls, mentoring tomorrow's innovators. we build it raising roofs, preserving habitats and serving america's veterans. every day, thousands of boeing volunteers help make their communities the best they can be. building something better for all of us. ♪

shares up at tiffany, fresh 52-week high, q2 results beat estimates raising their full year guidance. let's bring in the retail ammist with morning star and a retail ammist with capital markets. morning to you both. >> good morning. >> good morning. >> good action in americas, but europe, notes from the call, softer than expected, and the translation effects of the pound

and euro against the dollar are getting notice. what do you think about this? >> don't forget tiffany early in the growth stage in europe, in the a big part of the sales, but you're right. they benefitted from europe being strong. that will reverse as the dollar strengthens and fed reverses, the dollar strengthens, and that should also, you know, run through the european sales. >> is that going to more than offset the americas or americas will more than company sates for that? >> correct. americas is strong, and it's over 40 % of the business, but the thing is america's benefitting from european and asian tourists. i'm saying, though, that diamond prices actually have really benefitted the company. we've seen this sicycle beforemt we're in the middle of it. eventually, it will reverse. >> so you said on the conference call that they thought -- the

evolution of the atlas clegsz was the most important thing that happened to them since fall of last year. this is the cheaper priced silver items below $500 with higher margin. is testifiny doing well at the moment because they are effectively selling more at lower price points if anything taking the company slightly down market? >> well, not really. in fact, thaf been head winded in silver for a while. they've been saying that the high end was not the case, and the low end fraud is something thigh have trying to reverse really since the recession. they maybe have a leg up to go there, but, again, i'm saying that gross margins are, you know, in a sickle where they are climbing, but the long run average is in the middle. bet the stock is overvalued right now. >> how 1 the leadership transition going? sigh mop mentioned the ceo will retire. is that smooth? anything it worry about there?

>> could potentially be one of the more seamless management transitions seen in our coverage. they brought on fred willing to help globalize the business, done a great job doing that, and so we think this is a very seamless, orderly transition. one that people expected for some time. >> could it be more than that? i was taken by the article about the new -- the first ever female design director. put a front and center in "elle" this month, franciso, edgy if you look the the education in london at a time when they are trying to open stores in the united arab emirates. what difference will this woman and profile she's making do for investers, you think? >> the heart and soul is new york city.

>> we continue to like luxury. the high end consumer continues to spend. you know, some of the names you named are more kind of luxury/upper middle. the water is a little bit tougher there within those names. we like kate spade. >> if you go this way, go to the ultra ultrahigh end? >> absolutely. they continue to spend and benefitting from their assets rising. middle income we see continued pressures. >> paul, interesting story. appreciate the time this morning. thanks, guys. >> thank you. >> thank you. >> more color from the call engagements and wedding band category was strong led by solitary diamonds. >> hotels marching on the airlines now tacking on fees and surcharges. a closer look at the growing trend and what it means for you

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zplnchts welcome back to "squawk on the street," we have the energy prices moving higher this morning ahead of the weekly invenn story numbers due out at 10:30 a.m. europe. there's a draw down of crude yesterday after the close, just over 1 million barrels, and people are watching the invenn stories, a delivery hub, rose again yesterday with the implication we'll see a draw down actually back. we'll see if that confirmed. meantime, gasoline inventories are dropping more than expected, and we're also watching natural gas. the futures contract expires today, and it's very close to $4. a lot of folks say that's the real resistance area with heat on the forecast here and in the midwest, that could make a run for that this week. back to you. >> all right, thank you so much, a reminder, too, gas prices, tiffany and consumer spending,

average 3 preponderate 48 the low of the year, unbelievable. >> a sprazi isurprising tail en. in light of the number last month, people hoped for a pickup. mixed bag with retail earnings. >> absolutely. speaking of which on a day of retail news, sarah has an exclusive with william lauder, a great interview, talking china and more in just a few minutes. [ woman ] the cadillac summer collection is here. ♪ ♪

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welcome back, breaking news from the scc today, underlying issues contributing to the financial crisis, they are in d.c. with all the details. good morning. >> good morning, carl. we have details now of what the fcc is voting on later today, two issues as you say that were at the absolute heart of the financial crisis back in 2008. it's taken some years now for this to work through the process, but they are going to be talking about credit rating agencies and asset backed securities today at the fcc reforms on the table for both areas. let me go through a couple details for you in each area. first on credit rating agencies, talking about strengthening internal controls at how the ratings are executed and talking

about stronger conflict of interest requirements regulating who exactly it is who is involved in the sales and marketing of ratings opposed to the actual execution of the ratings, and they are talking about enhanced look back reviews to go and see whether the prospects of future employment affected ratings agencies' decisions about what they say on a particular security. moving on to asset-backed securities, a couple proposals there on the table today incoming requiring specific loan level disclosure for securitizations. you know, that's the issue we go back to the heart of the financial crisis on, investors not knowing what was in the securities they are buying. also, reforms to expedited fcc procedures known as shelf offerings, and finally, expanding disclosure of the transaction parties and other details. all those issues back in the crash, carl. >> amazing how long it took to make the policy. interesting today, thank you for that. meantime, stocks pairing back, dow's down 12 points, all three

averages in the red, and the question is, can the highs continue? let's bring in the management group and rod smith, chief investment strategist with river front investment group. good morning to you. >> morning. >> morning. >> rod, another morning talking about draghi among the most important topics, and there is a question of how long u.s. markets can continue to distance themselves from the policy mistakes in europe. >> i would turn it the other way around a little bit and say what is the prospect for europe to learn the lesson, the very, very clear lesson of the policy successes in the u.s., and, indeed, of the haunting sector of the policy mistakes made by japan, and i think one of the encouraging things from draghi's speech last week is that he clearly recognizes the mistakes that japan made. i think from our perspective, it's the question is whether

the -- his colleagues have the stubbornness, the desire, or the ability to prevent him doing what he wants, clearly, a more u.s.-like policy. >> all right. the gap between u.s. and nonu.s. markets, you think, not likely to wide en and close in? >> the key to that is a stage in the cycle and earnings, and the bear case is that europe becomes japan, there's no growth, and, certainly, i would say that the gap that the u.s. opened up thus far is entirely justified. look at the last quarters earnings, you got the u.s. growing along nicely, europe clearly in the state, and european companies are out earns u.s. companies. that's an encouraging sign for the gap to be able to close, but i think that you have to be hedged. the currency's beginning to weaken. if you're going to get the benefits of a europe recovery, you don't want to be in the euro. >> okay. bill, let me pick up that point.

one of the asset classes, one of the instruments that's shifted since the beginning of july is the u.s. dollar which continues to climb. partly, obviously, as a repard -- even though trash ri yields are lower, you see the dollar climbing. you see it now in tiffany's earnings, beginning to talking about how that is beginning to affect the currency moves. if that dollar continues to gain, does that under mind the bullish case for stocks? >> i don't think it does -- >> for bill. >> i don't think it does. look at history, there's a good u.s. market at times with the strong u.s. dollar, and, you know, i think the case for the fact that maybe multinational earnings fall apart when the dollar strengthens. you know, i think it's under minded by looking at japan, in terms of the exports from the yen depreciating a bunch. i think it makes u.s. assets

more attractive when the u.s. dollar goes up. >> bill, what's the view coming out of jackson hole and yellen, the debate rages on, and lockhart says we duke is out about whether the risks of staying too long, out too early, which is greater? are you satisfied with the level of the debate at least? >> yeah, i think i am. i don't think it changed any of our mind about, you know, how it plays out. i think it is very fair to say sounds like a cop out, but i think it's fair to say it's very data dependent in terms of what they do, and that's really what i think you should want. when we think of the markets, though, what i take it to is say, well, in the short run, it doesn't seem to me there's going to be a quote-on-quote fed indeuced pull back in the market because the market does not pull back until one or two months prior to the first hike, and anything i hear, the earliest you look for a hike is, you know, first end of the first

quarter of the next year, and we don't think it happens until the second half anyway. >> yeah. that's going to be the debate we're going to have at least for the next few months. thank you so much for your time. good to see you. >> thanks. >> thank you. >> over to sarah, meantime, on the floor. sarah? >> watching shares of estee lauder, lower, but the stock at a 52-week high, hit that on the back of the solid fourth quarter and positive outlook for next year. here on the floor, cnbc exclusive, william lauder, executive chairman of the estee lauder company. we got words from tiffany, strong results on luxury sector. is that the story with estee lauder and why you out perform your peers? >> we are seeing luxury, aspirational, higher income brands and retail environments doing better for us. the higher, the better. >> higher end. that's a story of incomes? >> higher end brands, higher end

retail, and higher end consumer with income. that's matching up. they have income and comfortable spending it and spending it wherever she is in the world, not only at home, but also we see the travel retail sector, the most income insensitive to the consumer. they have the wealth. they spend a lot also. >> a pickup in global demand across the kbloglobe. how big a part of the story is that in the growth? >> travel retail is a big part of the growth in the last 10 to 12 years, increased travels of consumers, most certainly the chinese consumer traveling abroad and traveling brazilian consumers to north america and some to europe, and european and middle eastern travel have been strong contributors to the retail business. another channel seen tripling now over the last five years in total absolute value is the online business. >> online? >> continues to grow significantly. it's a relatively small percent -- >> 5% of sales? >> a little more, but it's

growing at three or four times the rate of our normal retail business. >> and i want to ask about the normal retail business, department store traffic is down. you depend on that. how -- >> in north america, which is about 30-something percent of the business, the department store traffic is an important part of what we do, but, again, we are seeing the better retail environment than nordstrom, the ma ma macy's -- >> the higher end. >> higher end are doing better and luxury oriented brand in the segment are doing better. again, evidence the wealthier consumer has comfort in spending money than consumers lower. >> are you optimistic about the united states? a lot of competitors, not just in beauty, but household products are struggling with sales growth in the country. >> we are comfortable for the next year. fastest growing mark in the world? no, but it's the most mature, growing market, highest penetration of share in the world, the u.k., a market we've

been in the longest. we have extraordinary opportunity for share gain and faster growing markets like asia, like the middle east, like africa, and all the emerging markets. we've been investing a great deal of time, money, and energy over the last 15 to 20 years in fast emerging markets. >> china? >> it's the third largest market in the world where ten years ago, it was not in the top 20. >> do you see double digit sales growth in china continuing? >> for now, we absolutely do. we saw a slow down in the velocity, but for example, we just education up and doxpanded cities in china. the numbers boggle the mind, 25 cities with populations of over 10 million people. >> do you make specialized products for china? >> for the region that's influenced much by the chinese consumer and agency consumer in taste. for example, there's a category of treatments called watery

lotion. they are not a creamy lotion, but the consumer loves it, uses it a lot, and we developed that for the asian consumer. >> interesting. i want to ask about m&a. it's been years since you made a big acquisition. are you on the lookout? >> always. we never stop looking. we are one of the first calls made when new companies are looking for a change in pace, and we are just disciplined about what kinds of brands we're looking for to add. >> trok tor and gamble has brands on the block. they are struggling in beauty. any brands interesting there? >> they have wonderful brands, but we stick to the high end aspirational beauty business. i'm not certain they have any brands that fit well into our portfolio and mission. >> would you buy a brand, relocate abroad for tax purposes? >> you know, i'm not certain that works because the biggest assets we have in our company are our brands and our people, and we got extraordinary

talented people who run our brands mostly living here in new york city, not one of the least exceptive tax markets to work in the world, but that talent is not movele. >> you're not going to invert any time soon? >> no. >> william lauder, good to catch up. >> thank you very much. >> thank you very much for the global chat there, executive chairman of the estee lauder company. simon? >> great interview. airlines nickel and dime us, but what about hotels? they are getting in on the fee culture from early departure fees to telephone surcharges, all things now showing up on hotel bills. find out what you need to know the next time you check in when "squawk on the street" comes right back. 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

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welcome back to "squawk on the street," see what's happening with chicos stock, it's moving lower as the second quarter profit fell a higher than expected 31 % as price cuts to unload system merchandise squeezed the profit margins. the stock off the session low by 5%. simon, on the day's trade. back to you. >> thank you. we are used to fees for flying, but what about a safe in a hotel or early check-in? hotels may be charging you for those without you noticing. john hanson is professor at new york's universities school of professional studies, come out with figures. made a lot of headlines this

week with the sort of estimates you coming out with how prevalent that is in the industry. give us figures. >> about 2.25 billion in fees and surcharges, a year ago, it was half a billion dollars. it's a new and accelerating trend. >> to be clear, it's been for some time? >> right. the first report i did was in 1987. >> yes. yet there's acceleration. why is there acceleration on what they seek to charge and customers willing to pay it? >> guests are focused on room rate, $2 moves market share for hotels. with guests so focused on the room rate, hotels are trying to find a way for lower room rate and generate revenue in other ways. >> the power of the online travel agencies? you see this -- the value proposition is everything in airlines. arguably, ripped the heart and soul out of them and put fees on. same happen in hotels?

>> it is happening. hotels started before the airlines did, but, again, they focus on the room rate, and the fees and surcharges, some mandatory paid for by guests, but most are based on the use of the service. >> for example? >> so, for example, room service, in the past, maybe there was an automatic gratuity added, now a service charge and a tray charge, three charges now. that's based on the room service. for most resort guests these days, there's a resort fee and all guests pay that whether they use the amenities or not. >> you know the industry inside out, you are called a special witness in court cases and critical of the big launching brands. who is to blame for this. is this the marriots of the world or hotel owner? >> it's really the brands and management making the decision. the owners are much more passive this day than they've been in the past. major brands generally do not

own real estate of the hotels so they are the owner's represent is making the decisions. one of the other reasons this is difficult for travelers is this is not a brand wide practice. one might stay at a hotel on the east side of manhattan affiliated with a specific brand one night, and the fees and surcharges would be one list, and stay on the same brand on the west side the next night, and the fees and surcharges could be different. >> that's sneaky. to me, that's nickel and diming, and as a customer of a hotel, i would be angry. it's strange as to why because when the airlines did this, that was out of the fact they were struggling with profitability, needed additional stream, and the hotel industry, as i understand, is doing well. >> good point. >> the industry will generate according to smith travel research record profits this year. the number was 4 11 billion last year, should be 46 billion this year. adjusting for the number of rooms, this is the first year

since 2007 there's an increase in profits per room. the industry's doing well, but it's not as good maybe as everyone thinks it is. the other thing is some of the costs are significant. for example, a typical hotel in 2014 spent about $40,000 a year increasing the bandwidth for high spee internet access. there's a cost, and, yes, maybe it's cover in the room rates, but, again, guests are sensitive to rates, they charge separately for the internet access. >> i want to change subjects lightly. hotel lodging stocks are cyclical. at the moment, everything is great. the cycle will turn. as an objective view on this, not actually associated with the lodging industry and paid by the lodging industry, when do stocks fall snt sector? >> hard to see it happening for the next few years. >> okay. >> the indicator up 7.5% this year compared to long term 3 .1, up 6.5% this year. another couple years.

>> thank you. professor at new york university school of professional studies. >> reigniting the debate on tax inversions. we heard from a democratic congressman saying the companies take advantage of the laws, that's the problem. we'll get a gop response when we come back. cute little guy, huh?

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>> standards and poors putting burger king on notice for a downgrade following the chain to move to buy, facing tax

inversions scrutiny. joining us this morning is the north carolina republican, house financial services member, congressman, good morning to you. >> good morning. good to be with you. >> this story has real legs as we see in the news business, although, a lot of people not convinced it's going to spur congress to do anything substantial. can you convince me otherwise? >> well, the truth for congress and executive branch to look seriously at lowering the corporate tax rate. companies do what they must do to survive. look at the enormous burden they have with the regulatory environment. look at the cost of the up affordable health care act and the costs they bear with that. plus, highest corporate rate in the entire world. companies are trying to compete if world markets. they have accountabilities back to the markets. they have accountabilities back

to the employees. they have accountabilities back to try to expand their businesses. so is it any wopper they are doing whatever they must do? you know, when i was in the north carolina senate, we had in north carolina, at the time, a decade ago, the highest corporate in marge yal rates of any state in the southeast. we were losing by default to tennessee and south carolina. i fought hard trying to make this issue clear to the business community, to the legislature. we fought hard because we were, frankly, faced with a democrat legislature that's been in place since reconstruction. we timely prevailed, and today, north carolina can compete. should we have criticized companies to go to other states? no, don't do that. >> you're not in favor of boycotting burger king like the colleagues are? >> no, sir. i would never boycott burger king, but should be driven by a competitive market, shame on us

for having the highest corporate tax rate in the entire world. we cannot blame a company for trying to expand markets and trying to compete. >> right. there have been efforts, of course, baucus camp trying to fix taxes here in this country. it's not amounted to much. why is it different in the next session? >> we couldn't even lower our overall tax burden to be revenue neutral. max baucus and kemp worked hard on this. not a perfect plan, but a good one to lower rates for everyone created millions more jobs, but that didn't happen. you know why? senator reid and obama said we knee a trillion more dollars in new revenue. we couldn't have a revenue neutral plan to change our tax code. that doesn't make sense. we need to compete in world markets. we need to realize that the high tax burden we have today is impeding that growth.

ronald reagan understood it. he understood he cut the regulatory burden, cut the tax burden in the 80s. what happened? the economy took off creating 300,000, 400,000 and 500,000 jobs a month. one month, a million jobs because we credited an environment for growth. that's what we need to be doing now. >> congressman -- >> now companies are burdened down with the regulatory environment, tax burden, and now obamacare. >> both parties do agree that something needs to be done to reform the tax code. i understand you're blaming the democrats, and the democrats, interestingly enough, are blaming companies. i just want to play for you a piece of sound. we interviewed congressman pascrell yesterday. i asked why nothing was done on tax reform. listen to what he said. >> science of the matter is it's not you or me that makes the tax koe most of the time, not even as a member of congress of it's those folks who steer the tax

code to changes that benefit their corporation. the fact is that you cannot get a reconciliation where people keep on saying no. until they get guts and stands up to the characters and doesn't let them steer the boat, we're not going to get change in the tax code. >> there's plenty of blame going around, congressman, but the point is it's shame on you for no action and the fact that the republicans have not put a comprehensive plan together forward to move this forward to get some type of action. >> well, we have a plan. as i said, senator reid and president obama nixed the plan. it was a good bipartisan plan. >> it has to be a plan both sides can come to. >> it was. senator baucus is the democratic chair of the banking committee and he and the congressman kemp agreed on it, laid it out, but the push back was from the democrats on trying to revise

the tax code to make a revenue neutral. they would not allow us to do that. i would say to the congressman that, you know, what we've done is -- the law is set by congress. yes, there are loopholes, special privileges, and opportunities carved out by folks in washington representing the special interests. we dealt with that in this tax code. that should be addressed. we should lower the rates for everybody, and we can do that and should do that. right now, the corporations, the point of focus today, they have to make the decisions under duress. the duress -- >> oh, please, oh, please, congressman, forbe give me, just a as a matter of fact i object to the idea that corporations are victims in the country. the proportion of gdp made in profits by corporations has never been higherment look specifically at what you're talking about, the burger king business, it's doubled the operation margins to 52% in the

last 12 months of the these are highly profitable businesses stealing on everyone. my question to you would be, and i'm a guest in your country, i'm a foreigner, why is nothing done about it lumt ultimately? why a smoke screen of disagreeme disagreement? is it -- this is a question -- they funded the campaigns, private equity, whatever it is, people in congress, it's effect ily as people say they have been bought off? >> sir, i concur, we need a fair and simpler tax koetd. there's carveouts for many companies. they have people in washington, d.c. they are knocking on the doors. the tax codes are 70,000 pages. it's that large because of the special carveouts. i'm against that. we shouldn't have that. we need a tax burden fair for everyone. today, it's a disincentive to have the highest rate in the

entire world. they have to compete in the world market. look at the world picture on this. i'm for reforming the tax code to make it fair and clean and not get special carve outs. at the same time, we can't look out and say, well, the highest corporate rate does not matter. sure it matters. we got to be responsible an understand the role. >> sure. >> they look at the future and we have to compete in future markets. >> great to have you, thank you for the time. >> great to be with you. thank you. >> let's get back to the markets check, where we are at the new york merck with breaking news on crude oil. >> simon, we got weekly inventory numbers, government reporting that crude oil stockpiles fell more than 2 million barrels last week. gasoline fell 1 million barrels. fuels rose 1.3 million barrels. that was a bit of a surprise in terms of just how big that

increase in the fuels, including diesel, overall. we are seeing prices move higher here, but a number of traders say we're hemmed in because where we are now at 360 million barrels of crude, that is the highest inventory level seen coming out of the summer since 1990. there is a continued sense we are a wash in crude because we now produce so much here, carl? >> all right. i'll pick it up, thank you very much for the breaking news on inventory. straight ahead, a battle of the ski resorts, vail versus park city. we are covering that live in utah, jane? >> reporter: well, if you like skiing in park city, hold off on the reservations. in court as a major standoff over who is king of the mountain involving a publicly traded company, a billionaire not rolling over, and a town in the middl middle. an amazing story when we come back. when you run a business, you can't settle for slow.

that's why i always choose the fastest intern. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. >> an hour into trading, take a look at where stocks and stoiris we are watching. s&p winners, best buy interesting after reporting results, good year, pinnacle, west, and frontier communications, guys, best buy notable after reporting yesterday, we talked a little bit, but disappointment on same store sales growth. we spoke to the ceo who said he was not too worried about it

because of the idea of showrooming, which they are battling against so much by matching low prices and everything is working in reverse. the comments were interesting maybe investors agree, and that is people researching on line, and then coming into that best buy and buying. we'll see. jury's out on whether that company can turn itself around. >> got hurt yesterday, didn't it? >> it did, on the sales number. let's look at the losers on today's session. facebook on the list, garmin, pioneeral rach, and haliburton. >> if you remember, they added the focus list essentially, not a consensus view right now, and now with the facebook, we have not seen a downgrade on facebook i think since march, a new tr , neutral, evaluation issues in 20 15 setting up the winners for

the next year. >> facebook stock down 1.5%. a report from the verge, uber, shocking people all over on twitter, using burner phones and reams of credit cards to get a leg up on the competition. they call it operation slog. using outside contractors requesting rides from lyft and other competitors to recruit drivers and takes recautions to avoid detection including cancelling thousands of rides. aggressive. weighs into the privacy. >> illegal i would think. >> i don't know about that. they are waging for regulatory battle. we are there. >> trying to upend entrenched industries in various cities around the country and world, but it's like, you know, would yo go in -- if you worked for the gap, would you go to j. crew and recruit from someone behind the counter? >> probably not. >> that's what they are doing essentially.

you might be asked to leave the store, though? that's what lyft says, stop using our cars to convince our driver to work for you. >> i wonder if it is working. >> i think the vigorous 5,000 cancelled rides at the moment, that's a dirty trick. if you are presumably making fake accounts, making the booking, and cancelling. that's like going in the gap -- what is is is that like? taking the merchandise and returning it, i don't know. >> it wouldn't, it wouldn't. points to just how bloodthirsty the war is. >> isn't uber way ahead? >> in terms of valuation, sure. they have a head start here. >> on the google investors in that, do no harm, major investors now in uber, isn't that the deal? >> we looked at that with the google ipo. interesting. it's aggressive, slog is what they are calling it. >> operation slog. fall is about to be upon us as well as see season, but a

battle could halt the season before it starts. lucky jane in park city, utah with more. hi, jane. >> reporter: what a pretty spot. you know, this is a story about big money and white powder in a community concerned about its livelihood. here's the deal. park city's most popular ski resort is a mountain divided. bottom of the mountain is owned by john humming. the top owned by a company out of canada. they used to pay $155,000 a year for access to the top, but the lease left. he found vail resorts tenant willing to pay 160 times more rent, $25 million a year to lease not just the top of the resort but the canyons resort. problem is, the bottom of the mountain sueded to have access to the top. it lost. they are appealing. a jouj ordered mediation, but there may be no ski season this

year, and that is horrible news for a town that counts on it. >> if the resort does not open, there's real damage. i don't know how there could not be. look, park city mountain resort is an extremely popular resort, most popular in america. >> it is unsettling. it makes people nervous. not just the people who have businesses right in tthe vicinif the resort, they are not sleeping right now. the whole town, we know. we built it. >> they don't care who wins. they just want ski season open. they say, quote, our goal is and has been to keep the resort open for the 2014-15 season and beyond, but unfortunately, that might not happen if a reasonable agreement is not reached. this situation is not good for anyone. the opponents say everyone is working hard in mediation, quote, we understand the legal process created unnecessary uncertainty, but we remain confidence in all parties doing the right thing.

ideally, they want to buy kruming out, but the price has to be right, but today a judge decides what bond need to be put up to continue operating in appeal. you might just rip out the lift to put a winter sports park in the bottom. that means vail might need a work around. back to you. >> just in time for the season of the there's brutal corporate battles going on today. thanks so much, jane. jane wells in park city. >> reporter: you bet. tiffany shining after second quarter results, stronger sales, and serge in profit. consumers spending money on luxury brands rather than the discounters? that's coming up.

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sturm ruger as well. they lowered to from a buy rating. simon, back to you. >> thank you very much. tiffany's earnings out shining, raising guidance despite softness in the overall retail environment. what's interesting 1 tiffany was up strongly at the open, but fallen back, and for more on the retail market, let's bring in oliver chen and women's wear daily editor james fallon. starting with you from the wall street angle, what do you think of what they reported? what's the advice to shareholders? >> we are excited about tiffany's. we like unit and pricing growth. we like the product and people's story, a new ceo, better visual merchandising, a more commercial approach, and products that are really designed for a product that she wants, not just a

product your boyfriend or other significant other wants to give you. there's continued momentum in comp store sales. the americas' number impressed us a lot, and we like the design collections for holiday as well. >> atlas is a hot seller in terms of the numbers. what do you see out of tiffany in terms of keeping up with the trends, getting ahead of them, and really appealing to the luxury consumer right now? >> i think what's happening is they brought in a new creative designer, and i think what they are doing is really modernizing the collections, trying to move beyond simply the picasso-type of collections, and they are injecting newness into the brand, which is very excited. which coincides with the time women are switching a lot of the spending from fashion into hard goods like jewelry. >> part of the -- i would think the balancing act they have to walk here is that part of the tiffany is that classic style, the fact that that tag bracelet

i had since i was 15 years old, and people still buy them because they like the tiffany brand and chaszic styles. how do they do that while innovating and appealing new customers? >> you hit the nail on the head. yes, the teenager buys the classic tiffany bracelet at 15. the difficulty they faced was did she go back at 25 and 30 because there was not that much new in? what they bring in now is new collections that still have the tiffany stamp of classic design, but in a more modern and new way. they get them at 15, but they get them at 25, 35, and 45 to buy because there's something new in the store. >> oliver, the call to tiffany earlier in the year, i can't remember the analyst, but they said the store has to be something more than the place where guys go to buy their girlfriend's engagement ring. is this a path towards that? making progress on that? >> yes, they are.

you know, that's our view. we would own it in the quarter, and what's happening with the product innovation, they are looking for share they lost from department stores and other channels where jewelry is a fashion item. you can mix and match it. tiffany tea collection is a good example of the product, which should attract all kinds of demographics in the modern way of reinterpreting testi ining t the new generation and for going global. it's a free cash flow story, 400 million in the free cash flow, attractive yield, net cash position, and networks capital opportunity as the cfo managing inventory more tightly. >> yes. james, let me just pick up the point you made earlier about the first ever female design director. will not escape you, of course, as you mentioned, been profiled in "ell" magazine. they do not put the ceo forward to interview.

leaving after 25 years, maybe the in one will. what does it say they put her out there in this way, in "elle," can she move the needle, do you think, on appealing to women? it's -- yes, she's a traditionalist, but cutting edge if you see the resume. >> she's cutting edge. i've known her since 18. she's a sculptor, an artist, and a talented designer. what they are trying to begin to do in the tiffany way, and i put quotes around those words, is definitely modernize the brand and put a face on the brand. as you said, michael never gave interviews, very behind the scenes as a ceo. i think now in the modern world of fashion, they need an identifiable person with tiffany, and that's going to be her, and she's talented enough to do that, and at least give a woman female customer an

identifiable face to identify with the approach in the store. >> color diamonds, trend here to stay? >> yes, i think it's here to stay as well as all kinds of diamonds. there's trends in everything in fashion today and colored diamonds is one. >> i would go for a purple one myself. >> i'll try to buy you one. >> oh, lord. james oliver, thank you. >> thank you. >> all right. still ahead, walt speaking to apple's ceo, tim cook, about the future of the ipad. find out exactly what cook said about it later. that's coming up on "squawk alley," we'll be right back. 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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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. let's get to the cme and rick santelli. >> good morning. louis hill, thanks for taking time to be with us. >> glad to be here. >> i like your writings. one in particular, specifically addressing the "wall street journal" op-ed by university chicago professor john cochran entitled "a few things the fed has done right" and you take exception to several of those things. concentrate on one. the difference between capital and reserves with regard to the fed 4.4 trillion dollar balance sheet. tell us. >> well, the federal reserve was created to supply liquidity to

solvent institutions in a crisis. solvency is a function of capital not of reserves which are the deposit accounts the bank has with the fed itself. so pumping the system full of reserves doesn't add anything to bank sayy or bank solvency. >> very fascinating. now, everybody is talking about the exit, and many underscore that with zero interest rate policy, it's going to be a bit tricky if the velocity of money picks up. it's going to be more than just doing math sales like the old days. maybe you could tell us your thoughts on when the fed has to start raising rates with particularly close attention to the ior. interest on reserves aspect? >> well, it's not clear to me, at least, that the fed can raise interest rates as long as they're paying interest on reserves. if you see a red dot, that's when the fed gave the economy a heart attack by putting a clot

in the circulatory system. interest on reserves stopped the flow of money in the economy. interest on reserves was supposed to provide a floor under short-term interest rates. it hasn't. the fed funds rate has been -- it's been 15 basis points, the ior rate is 25. and the 90-day t bill is 2. so raising that, the ior rate, it's not clear it will do anything. >> in your opinion, put in charge of the fed for our last 50 seconds, how would you normalize policy? >> stop paying interest on reserves. tell the open market desk to bring down the balance sheet while targeting the crb index, and then i would put the fed on automatic pilot and keep the crb index constant. >> now, we still have a little -- you're very short and sweet, which i like. let's say the velocity of money

picks up more than you thought and you're system head of the federal reserve. how could you combat that, of course, it's going to end up in inflation? >> if you keep the crb index constant there can't be inflation or deflation. >> got you. your governor, so to speak. thank you very much for taking the time for a bit of an alternative viewpoint. carl and the gang, back to you. >> rick, thank you very much. heading towards linking in with kayla tausche and what's on the cards. >> simon, are tablet sales crashing, tumbling or just taking a pause? tim cook weighs in. also, snapchat, square, facebook, alibaba, alarms sounding on valuations. roger mcnamee, the legendary investor weighs in on what's ahead for those companies. and why apps are the new perfumes. every company wants in. that's all up next on "squawk

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who would have thought masterthree cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. are you type e*? i want to mention a headline out from presumably frank fforr. quantitative easing likely at

next week's meeting unless there's significant deterioration in the inflation data coming out friday. it will be extremely rare for a spokesman for the ecb to put himself in this position if that is what is happening behind the scenes, and an ind dags perhaps everything is getting even from that vantage point of not on the governing council, a civil servant for the whole thing a little giddy. maybe we're not going to get the qe next week. come out and said, look, you know -- >> we saw the euro reacting coming off the low. still speculation that may come down the road. economists writing about it on wall street. with that check, markets flat. euro stronger. over to you, carl, for "squawk alley." good morning. almost 8:00 a.m. at snapchat headquarters in venice beach, 11:00 a.m. on the street, and "squawk alley" is live. ♪

welcome to "squawk alley" nor a wednesday morning. joining us this morning, roger mcnamee joining us from out west. as always, jon fortt and kayla tausche here at post 9:0nine. good morning to you all. kleiner perkins investings 20ds million in snapchat valuing the company at a whopping $10 billion after records alibaba was interested in its own investment in snapchat. here's the ceo evan spiegel with us last year. >> we're not making money right now, but fortunate to have a role model in ten cent. huge build in china. we've seen they've been able to