opening stores in california. i'm, like -- that's really profound, really? dunkin? move to california, the growth spot? >> go west, man. ? no wonder you're a ceo. that's a good idea. open some stores. they got out and now going back. >> great to see everybody. join us tomorrow. right now it's time for "squawk on the street." good tuesday morning, welcome to "squawk on the street," and i hope you had a great long weekend, guys back together, it's nice. i'm carl quintanilla, david faber, and jim cramer. as we set up for the fall season, ism this week, ecb meeting, nato summit, and jobs number on friday. the road map beginning with the markets and s&p, 3,000, a bullish call to kick off the first trading day of the month. >> family dollar, 80 bucks a

share, trying to address antitrust risk. enough to derail the dollar tree deal? updates on garden and norweigan. >> what partnerships with credit card companies, and, of course, the icloud leak, what's it mean for the stock? >> tesla $400 a share, going west, and upgrade to musk. >> first trading day of september after a hot august for stocks. s&p up 3.8% for the month, record high for the 32nd time this year, dow closed up 3.2. there's a lot of data from ism, construction spending due out in an hour, and big august jobs report coming friday, jim, and ewe crepe, the nato summit thursday and friday will be interesting too. >> right m i think we have to keep it in front of ourselves that it's a market that is going

with the flow of jobs created, more wealth, lower gasoline. we have companies based here that are international. a rally like today, they punk out. they punk out because of ukraine and russia and because of the fact we're, you know, nato. talking about nay doe reaction force, can't oblivious to the idea that the president is going to an area in dispute that's now in nato territory. we get excited, and we start selling the international stocks and retreat domestic. >> can you blame people for doing that? >> not a bit. >> not at all. what point, if any, do geopolitical risks do they -- as they get higher -- start to affect domestic? >> what's interesting, dow stocks. you see it already. do the consumers react to it? i don't think so. when you try to deal with international sales, when you're

a technology company in europe, by the way, it's not just -- we don't -- it's a three-front war here. be careful. you know, china, defending japan against china, there's a terror wor in the middle east. >> a war of our own with china, a trade war and a cyber war, by the way. interesting story about a solar company trying to get trade sanctions against china for stealing the trade secrets. >> if you're a domestic company, sitting there at chipolte, not thinking, wow, i'm inned goo shape. look at the stock business, look at it's domestic. i like that. i don't have to worry about europe or asia. that's the fear factor. anything going back is 2012. as long as i don't go overseas, i make money. >> volatility worth month in two years, gold at 1269, oil 94.

where is the worry? where is the worry? >> i think that the worry, you know, what i see is the worry is with a company like boeing, the companies that people indirectly believe will have orders cancelled. when you have orders cancelled. look at europe, and, by the way, the other area, strong dollar. look at the consumer packaged good stocks, the numbers, estimates too high. that's what -- i see something like a steep upgrade in tesla, i see fortd suck at 17. why? ford is an asian, european, and latin american company, countries under siege. the possible chinese effort. tesla, looking 59 the language of the upgrade, it's a niche position, meaning an american position. america first is back. hate to see it because a lot of

the rally going up -- i called it pre-soch irgs and after-sochi. you were there. >> incredible. looking in the looking glass. looks nothing like each other. >> high fiving, right, and now it's, like, wow. nato reaction? does nato -- when was the last time anyone spent on nato? if you look at the stocks of lockheed martin, they predicted a reacceleration of defense budget. you have to do that. nato is largely the u.s. the action force, are you kidding me? russians building divisions trying to get a partition to go to crimea. russians and ukrainians on the other side, ukraine sides with germany. >> yep. >> and more things change. >> the more things change, and that was the battle for dollar

regime or dollar general's battle for family dollar, raised the bid for family dollar to offer 830 bucks a share in cash, comparing to the first bid of 78.50 in august. dollar general will divest up to 1500 stores by antitrust regulators, offering a $500 million reverse breakup fee to family dollar if the deal does not happy. family dollar received the revised proposal, reviews it, and will not change the recommendation at this point, of course. we'll see what the board chooses to do. as reported many times, the key here is not the price, but the idea that it could lead to its proposal, and the antitrust questions that at least the family dollar board seems to have about a dollar general bid. >> two very divergent opinions here in terms of what the antitrust review would look like. on the dollar general side, we believe -- this is not a grocery

store transaction saying it's just me, urgs and family dollar and take a look at where the two locations are, very close, what the pricing looks like if we disappear. do that, you end with up thousands of stores near each're with a potential divestiture that at least from what i hear people close to family dollar be in the thousands, hence the board's reluctance, perhaps, we're not moving ahead because we think the deal will get stopped by the antitrust regulators. on the other side, walmart is the competitor. we think, in fact, speaking to rick this morning, the ceo of dollar general, he said, listen, i'm of the belief that 700 or less is the number. is, you know, below 700 stores. why? they go into the detail in the press release today because it's not a grocery store transaction. it's viewed as including walmart, right-aid, oom other

kpaebs or stores. there's the key to it. >> they are throwing it out there saying, hey, you're looking at it much differently than we are. of course, the question becomes what is the board going to say now? you also have to remember that this requires a vote of family dollar shareholders, making it harder and harder to vote for 74 when they know there's at least 80 from dollar general, although, albeit, antitrust. >> they'll go to every store within a mile. it's not like you put up a family dollar and then a dollar regime appears. i think that what dollar general is doing is saying, okay, preemptive. you know, you pick 1500. i don't believe there's that much overlap after 1500. >> you don't. >> no, i don't. >> despite everything you talk

about being oversotored? >> i want to be the company that gets 15 00. that's the winner. saw that over and over again. constellation brands. >> in this case, it could be, perhaps, could be walmart. i'll temperature you know -- >> speculation by you? >> okay, it's speculation. >> purely speculation. >> the only real growth in walmart is the -- >> that's pure speculation. >> i like it. >> i'll come back to the 1500 number, which, you know, people close to family dollar, i think, in the reporting expect the number to be higher. 2,000 or 2500. they don't know the number. there's divergent views on what the ftc in this case will actually want from the companies. why not go hell or high water and say we'll take all the risk, dollar general. that puts them in a position with no leverage with the ftc.

going in, they know, you're not taking them to court. there's nothing. here, whatever is close, you have to close the store. >> do this. how about if they say, okay, listen, here's the number that are dollar tree next to family dollar. >> only 250, not much as all. >> no. >> and different pricing models too. >> well, everything -- when i go to dollar general it's different from family dollar. >> dollar general, family dollar, stuff above a dollar, where dollar tree sells stuff only for a dollar. >> i like dollar tree. it's cleaner and better. have you been to a faux dollar store? i will not name it, but you need a mask from chinese plastic. you can barely breathe in the stores. >> dollar general stock is up this morning to point out. every time it raises, all cash, no dollar general shares, it's rewarded for having done so. we'll see the next it ration and following it. >> this is amazing.

when i saw 1500, that's almost my number. i mean, be -- dollar general has not got to california, expanding in california, not a lot of competition there. i believe this is a -- i think they could pay 90. >> they're not going to. >> not going to? like when time warner would pay 90, and you said fox won't pay it. i said they can. i think they pay 90. you said, no. i was like, okay, all right, what else we talking about? >> maybe low 80s. >> nice. >> maybe reverse the fee. >> you knee more than others and jeff. >> i don't know about that. he had hopes. kept hopes alive. >> when we come back, getting to the apple news, of course, the icloud hack over the weekend, what that means to the stock even as piper raises the target to 120. voted out of congress, eric cantor heads to wall street. telling you about that, and kevin miles, ceo of zoe's

kitchen, up 95% since april. look at the first premarket of september and fall season resetting the take here on "squawk on the street" don't go away. kid: hey dad, who was that man? dad: he's our broker. he helps looks after all our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back?

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apple investigating reports that intimate photos of celebrities were hacked through its icloud service. apple says it takes privacy

matters very sleeeriously. striking deals with mastercard and visa to turn the next iphone into a mobile wallet. it's expected to be unveiled in an apple event scheduled a week from today. people arguing, though, that the icloud news, obviously, the drudge over the weekend, could not have been more poorly timed. >> why i like the deal, apple is a secure system, felt that perhaps that's the advantage over blackberry. blackberry, the -- samsung and blackberry are targets. i would point out i thought this -- i know the i6, the numbers coming from piper were big. this mobile payments, i've been waiting for a company to crowd visa and mastercard because this is it. if you do this, we are -- this is the new wallet. i've been waiting for this. that's the news coming out here. i know that the j-lo news is big

-- >> j-law. >> law. i'm looking at that stuff. i have kids. i have kids, for heaven's sake. >> yes, you do. >> they are older, grown up. >> never mooin. what i care about is there's somebody in it who says, see? see? this is easier to crack than you think. >> all right. here i am thinking mobile payments and my phone, and the -- we're going to be living in a cyber hacking world -- >> get a password. >> by the way, the banks' security, ibm focused on security, a great business if you can succeed. >> if ibm says, this icloud, under control, and people buying fire eye, give me a break. we don't know who does it. the jpmorgan hack because companies have not updated. i think they have -- you have to spend billions to be ahead of the bad guys. there's going to be a change in

passwords m i think that, you know, there's -- >> to factor awe thept kauthent. >> we'll look back and think, what we were thinking about? bad guys have machines that generate. we'll get away from pass words, it's going to be thumb, finger, and eye. whoever has that makes it so we're not thinking about pass words. pass words don't work. >> depends what you need if you have a mobile payment system from the phone. >> we're done with pass words. that's all today. >> reports whether they are working with ammex. chase them today or at all over the next week? >> the travel trust likes express. i think express is cheap. visa and mastercard hidden issues like russia, russia has hundreds of millions of cards. i remember asking someone from visa, how do they have hundreds of millions? russians do what people in this country do. visa, mastercard, whatever. i think that express is still

down from the great quarter. my worry about all the companies, the yield curve. >> right. >> we forget about the strong -- did you see spanish yields this weekend? >> yeah. not to mention the french yes are negative, right? germany and france. crazy. >> who is going to buy that spanish fifth year? there's paper for you. >> look at that, look at that ten year. that's spain. >> go by dollars, bonds. >> up employment rate is 27%? >> same unemployment in 1932 in this country. >> what a great buy they were two years ago. >> well, buy them, november, november of 2011, no one felt -- >> people joke about corzine being right early. >> had the right idea. great trade ever. what happens when he went bust, had a spike in yields.

>> maybe so. >> we'll never find out. >> i don't -- your credit card now is not secure at all when you hand it someone either. >> no. >> clearly, might be an upgrade in security as well. >> look, people, you know, every day, i don't know about you guys, but i get a money things, if i click on them, i'm sending them $4.80 to whoever. some eastern european gang. i think that's all password. >> you're compromised. >> i am. i did not look at jennifer lawrence. i'm a fan. who else was i to look at? >> we'll talk in the break. >> there was somebody es. >> cramer's mad dash, a look at the premarket on this first trading day of september. be right back. act i. scene 3. open port twenty-two-oh-one-seven on the firewall for customer db access.

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it's a tuesday, but first trading day of the week. we'll start off on the mad dash with regeneron. >> a new anticholesterol drug taken with others if you can't take staten, this is alternative. reducing heart risk and stroke risk. done with their partner sanifee. the breakout, all-time move, waiting for this drug, better than i thought, stoke goes to 400, create says 436, a big win

for regenron. >> no one wanted it, and there was a drug, only had to shoot yourself in the eye 12 times a year rather than 52 times. that was a breakthrough. this is bigger. this could be a multi, multi, multibillion drug. a lot of people helped immediately. good numbers this week on a heart failure drug. let's take the bad side, cons. remember, we had best buy, talking with carl, and best buy reports a bad number, two days later, stock up. conn's reports -- it's the release i hate. it starts off with the terrific news, and then you get to a figure of credit worries. that's right. credit worries responsible for miss 340 was the raise, now 280

to $3. when was the last time we heard about bad debts? >> customers not paying them back in terms of -- >> this is, again, the achilles heel of retail, electronics business. best buy was bouncing back. what people want is retailers, as we know from macy's missing the number and them the all-time high. they don't want russian and asian risk. this is a domestic retailer, they are not all created equal. do not presume -- >> it's not a demand based problem more than an inability to pay problem. >> yes. i don't have kpaebs that did double digit same store sales. >> not at all. >> what's working from last week? ross stores. the examinations were low. kohl's because the expectations were low. this one, expectations were high because they continually beat numbers, had a disappointment, said it was one-time only, no

the company it troubled. people want out badly. >> an ugly loss for the stock. >> yes. >> we'll check others, and the opening bell is five minutes away. stay with us. we're right back on "squawk on the street. tesla hitting new highs, what could put the brakes on the road [bell rings]

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you're watching cnbc's "squawk on the street" live from the financial capital of the world. opening bell in a couple minutes kicking off september, which, historically, has not been good. although, a lot of people, jim, discussing the s&p up four out of five septembers, eight out of ten septembers, it's just when they are bad, they are really, really bad like 2011 and 2008. >> look, i think that people say, well, something's going to come from out of the blue. you know what? i disagree with that. it's typically what happens is overwhelmed by supply at the same time there's a bad news background. you do have a nato situation. i'm calling it nato now because the government wants to call it nato, coupled with what i think is a massive supply of ipos. you can't talk about it enough. we -- you know, keep doing run

throughs of alibaba. imagine uber, the drop box, the amount of supply that's going to hit us will be like a ton of bricks. watch supply. supply could cause september to be weak. >> supply comes out in the form of m&a. >> that's important. yes. i think you have to take it out as fast as possible. i think that that's happening. there's a dramatic decline in the amount of stock, but, david, when you fry to figure out a home for billions, you have to sell billions. i mean, i saw linkedin number of target by merrill. it's been red hot. sell linkedin to buy alibaba. >> comcast, do something with that money too. >> good point. it's a push when september comes out okay. look at supply. i don't want to overlook the

fact there's so many equity offers someone. someone has to raise capital. maybe it comes from deals. >> whether it's nato, alibaba, apple, net neutrality, september will be chock full of news. >> august was important. >> there's the opening bell, s&p at the top of the screen. down at the big board this morning, global x funds celebrating the launch of the mlp and energy struck etf. nasdaq, marvel technology group doing the honors there. alibaba, a big piece in the journal today as jeff looks to change the culture here by undoing much of what john over the years. >> thought they were -- both were trying to create a world in, look, deal with people. that's why you should be on the -- not go on the nasdaq. you need people. this -- to me, this is an attempt to monetize a building where real estate values go up

downtown. >> enormous. of course, it is a landmark building, but only so much you can do, i suppose. >> can you do apartments in the land mark building at the top? >> so much work to get done to do anything really. they do a lot of tv shows. >> get married here, you know. >> you're not joking. >> been there, done that. thank you. >> me too, but that does not keep you. >> retail today, you talked about it minutes ago, gap will be something to watch. stern makes it the top retail pick, jim. second half of the year. >> looking at gap over the weekend. gap, again, think of gap, what do you have? you have a company that does not have a lot of operations, just a domestic play. quarter was good. it was good. people like good retail quarters. again, judging from macy's, not a great quarter, just didn't matter. the only one that really was hit was nordstrom. it seems to me to be an

opportunity to be able to say, okay, here's one that's overlooked that jwn can go higher. >> talking of deals, speaking of them as well, norweigan cruise. >> oh, geez. >> it's a point made over and over, how often the acquirer stock goes up. giving confidence to those doing the deals and parts confidence to those doing the deal because if you keep it in strategy, you get rewarded. in this case, norweigan rewarded for spending dollars, rest in cash to buy prestige. >> when i saw the deal, i said to myself, the winners in this group have -- this has been a big winner, carnival's been stuck here the whole time. amazing. >> right, the giant. >> good, but carnival -- they

never really recovered from a series of very negative news events. i would have allowed it to recover by now, but norweigan is is a win, viewed as an inexpensive veighuatiacation. it costs a lot of money for the great middle class in the country to take a vacation. >> yep. this is a large deal for them. >> yes. >> a company with a $7 million market value prior to the deal spending over $3 billion in cash and stock. >> a huge deal. the group has been -- one of the great growth stocks of all time, has not been ail to get the tranks that it needs. meanwhile, norweigan is strong. brilliant move. rationalization in the industry, smart. >> comcast with a buy, verizon with a buy, and dish with a conviction buy and target of 78.

>> that's got to be a deal. >> that's the most interesting part of this, terms of talking on convergence, everything else. so many questions, few answers about what it is charlie will choose to do. a great deal of optionalty. the fact that sprint and t-mo did not get together preserves a possibility there. >> how is that odyssey coming along? >> it's good. >> really? >> maybe it is, i don't know. interesting. they say they are out there searching for potential partners, that being to make a higher bid for t-mobile than perhaps its parent, deutsche telecom look favorable on. >> looks like it's more and more done so you don't take that risk out. >> i think it's still -- until it's done, there's risk, right? >> well -- >> they've never seemed

concerned about it for whatever reason. >> that's true. >> tesla, a record high, mentioned last half hour, up to a buy, $400 target. they say a couple things. one is that tesla's rivals guys are not jumping in. >> no, they are not. >> brand is resilient against every negative story, whether it's a fire or negative report, this gives them more cost advantage. >> look -- >> quite the short interest. >> you talked about this with our friend. this is one of the best run stocks ever seen. great run stock. some people know how to manage stocks. there's always good data points coming out, something that says, you know, this upgrade, turns out, it's good. i think one of the trades going to be distinguished between now and end of 2014 is i had to cover the tesla short. i had to cover.

too much an -- >> where? at 276? >> it's an animal. remember they said, well, it's bigger than ford? one day ford's production -- no one cares. ford sells in the wrong places, and i like ford. look at that stock against tesla stock. look at ford stock versus tesla's stock. one is flat line at the other is trajectory. worse than i thought. good graphics by our guys. thank you, guys. >> unbelievable. the data there, bought -- >> bravo. showing you, again, if you're for sale, a deal gets done. right? >> in this environment. >> in this environment. >> it does. >> a lot of assets. >> i think it was.

>> dollar tree going up? riddle me that. >> why is dollar tree going up? >> what is that about? >> not dollar general? dollar tree. i can't -- >> my spending at the hampton's dollar tree, exciting, by the way, hampton base. >> better than the bridge hampton k-mart. >> you never miss an opportunity to hit a dollar store. >> no, i will not miss the opportunity because the dollar true -- you can get ray bay like sunglasses at dollar tree. i fooled people with those. >> ray ban like sunglasses for a dollar? >> for a dollar. >> s&p 2,000, at 2,006. >> it's a shift. biotech. how much is it up today? oh, there you go, up 54 cents. there's a lot driving things.

cvs, not the channel 2 kind, but the health care, the domestic health care plays have been remarkable in terms of the s&p. meanwhi meanwhile, the dow, filled with companies that people associate with ukraine. >> good point. >> they can't get up. >> good point. dow negative, s&p up. >> keeps happening. >> mary thompson. >> good morning, carl. mixed and muted open for the markets, september, we are seeing strength in the nasdaq, up ten. s&p, as mentioned, continuing the march into record territory finishing at the 32nd high friday. there are energy stocks, also, and semiconductors hug flat line and drug stocks under pressure today. mentioned, let's look at the s&p 500, a record close again on friday above 2,000 mark, and going into september, which, on average, down 1.02% for the markets in the month of

september. one note out today from andrew berkley, technical analyst notes, september is a difficult month for the s&p, there is a positive into the month. that being in august, it closed above 200-day moving average when finishing out the month of august, and typically that suggests a positive on september for the s&p 500 on average gaining 4/10 of a percent for the moving day arch in august. we are expecting a lot of supply because of the ipos due out in the month of september. that could be a negative for the markets in september. plus side, though, they lacked performance, could be making up for that, providing a catalyst for the marketings along with central bank actions, continued to or expected to continue to be favoring easing money policy in the months ahead. outliers are geopolitical tensions, russia, ukraine, and

isis as well. those are things to watch this month. today, commodities group. weakness there. couple reasons, dollar putting pressure on commodities today and opec reports that it's been increasing production putting pressure on brent crude and energy sector today in general. we're looking at the gaming group today because gaming revenues in macow down, putting pressure on a number of operates today. wynn receives 50% of revenues and they are under pressure, and mgm a third, decline less that. lastly, the retearer conn's. the company had a disappointing quarter not because of sales but because of the credit operations and lowering full year outlook down 27% this morning. a mixed picture, carl, dow's off 30 point. back to you. >> thank you. rick santelli at the cme, good

morning, rick. >> good morning. you know something's up with the curve steepened a bit. look at fives to 30s, everything should include fives. look at twos, and many do, but the fives the fulcrum, you know, influenced by the fed, but left to its own market devices. this steepened about three or four basis points. it's a three-day weekend, but that's large. it's still virtuely flattest in six years going back to january of 2009. look at what's going on quarter to date starting in july. so you can really see the yield curve in action if you look at a quarter beginning five year, you see. so first the ten-year. it's a much less developed. i will tell you as long as the curve is starting to steepen, dollar continues to be anchored, whether it's because other central banks do the same things we did years ago, maybe markets's handicapping the results, could be turns here.

real key with the central banks meeting thursday including the ecb, watch the value trade, back to bunds. lowest yield settlement ever, basically while we were gone, 88 basis points, and it's a hand full higher now. that's the influence we were welcomed to this morning. foreign exchange for the final two charts. look at the dollar-yen, that says everything. we can say what's going on with the year row is weakening trade, and we can say the qe and all the things japan's doing are hurting their currency, but, boy, we are on the brink. we really are on the brink of levels not seen since object of 2008. very close. the dollar index, which, of course, is highly, highly attributable to the euro trade, it's hovering at the highest in 13-plus months. back to you. >> thank you. nike wins a war keeping kevin durant.

a big splash of their own this morning, who they just signed moments ago. also ahead, what a mobile wall let in the iphone 6 affects apple and how the icloud hack may affect the stock when "squawk on the street" continues. you probably know xerox as the company that's all about printing. but did you know we also support hospitals using electronic health records for more than 30 million patients? or that our software helps over 20 million smartphone users remotely configure e-mail every month? or how about processing nearly $5 billion in electronic toll payments a year? in fact, today's xerox is working in surprising ways

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score one for nike, they are resign kevin durant, plushed reports say it's worth $350 million, and durant was pursued by nike competitors. on sunday, durant tweeted, quote, excited and humbled to sign back with the swoosh, and you can imagine why. means, guys, that nike hangs on to michael jordan and lebron james, and maintain prowess on

endorsements. >> i know kevin's competitor, but the three, i mean, their shoes sell. kevin durant, by the way, this weekend, had a gathering of people, and people quoted the mvp speech still. >> absolutely. >> a great moment in sports where everything is put in perspective. the man is a genius. i think that was done off the cuff, that speech, and everybody, it's online if you want to watch it. >> oh, yeah. >> a hero to many, and would be wearing his shoes if i played. sorryings kevin. i love kevin. kevin have a response? >> lost on durant, but signed gisele. listen to this. ♪

>> gisele joining tom brady, part of the new women's campaign, about 30% of the business is women's apparel, kicked off last month, includes lindsey vaughn, and gisele is the highest earning model for years. >> protect this house. her house. i mean, protect -- no? >> protect her husband. >> no. >> that line is going -- >> i got to tell you, guys look good. how -- might change the draft order tonight. >> really? don't take the chance. >> always tough. >> good new england. win 12 games. >> you probably like the jets. >> of course. >> they advertise it, but eagles, it's like a 40-year waiting list for a ticket. i can see a jets' game tomorrow. >> you can.

they'll play right here. >> right here? >> just for you. meantime, months after the loss to the college professor, eric cantor heading to wall street to join investment bank, vice chairman, managing director, elected to the board to provide council to the corporate and institutional clients on key issues, i think, expanding their presence, guys, into the d.c. area. >> rather than working for any investment bank, he picked one bang. wow. >> that's true. >> obviously, not that long ago, went public, a different strategy, not a boutique, not the biggest players. they do a lot of -- not the deal, not the huge print deals, but deals not talked about as much, but that can be lucrative to advice on. >> i'm been facetious, admittedly. i think he was regarded too close to wall street at the time

you don't want to be close to wall street, and turns out he's closer than i ever thought. not that i thought he would join the peace corp. >> memente menwants to make mon. >> well, listen -- >> worse things to do. >> tim geithner i thought was a great valued public service goes to private equity. >> geithner was always a public servant. never had a particularly high salary. >> he talked about how people thought he worked at goldman sachs. >> including people in congress, right? >> oh, yeah. he did not work at goldman sachs. >> no, nine weeks to the midterms, will be more political. >> yes, it will. we'll have to talk about it. i think one of the things is defense budget. >> i just don't think you can have a three fronted war and maintain that sequester. that's why lockheed martin's been great. that's why you, you know, look at the general dynamics, look at

a ray -- >> ex-boeing. >> i think they are doing a great job, but right now, if you look at the transports, stalled, it is stalled by the commercial airlines, not by the rails. >> that's right. take savings in medicare and send it over to defense. you have seen the cbo estimates, right? >> yes. deductals rose for people the way you take pension and run it themselves. i think it's one of the great untold stories. martin was on this morning, paychex, there's not a lot of business formation because obamacare is hard to understand. it's hard. i tried to understand. it's very hard. >> yeah, hard to know when the rules keep changing too. >> yes, and how many people, wait, see how it plays out. >> court challenges. >> so difficult to understand. >> right. >> we'll get stop trading with jim in a moment.

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>> time for cramer in stop trading. >> listen. we have to focus on security. it doesn't stop, right? whether it be jennifer lawrence, whether it's chinese hacking, whether it's jpmorgan. look, there's one company ahead of the posse. and that's palo alto networks. it is by far my favorite, it's $88. hard to see how the stock does not go to a hundred, and hard to see how banks don't write checks to them because the big hacks are the ones that have not been noticed yet. you know, the ones where they take $47 from your account, don't see it, see the bill, oh, i don't see anything. look at the statement. there are guy, literally, all over the world, trying to take $39 from you. palo alto's networks saves. i like it. >> people argue that a lot are russian, and it's like a hornet's nest right now.

>> it is. it sure is. i have to tell you, do you look at the statement closely? we should, right? we should, but the hackers -- the ones you heard are the failures. the success stories are never going to be in the paper. palo alto networks would tell you that. the smartest man in the world, in the world right now, in terms of anti-hacking. >> we'll deal with cyber issues in so many ways, complicated issues, nato. right now, if one member of nato is cyber attacked -- >> is that an attack on -- >> we respond. >> article 5, whatever it is? >> definitely. and xpi, another one, the company downgraded by goldman, a big mistake. anything involved with identification, identifiers is big, all right? go to the cell phone, go into the pc. this password thing is -- we'll look back, did i like the name of my dog place the name of my daughter plus 2, you know?

>> people are going to start working on that. >> the name of my daughter plus 01. is that going to stop anybody? >> what's the 30 secs we have tonight? >> draft an ideal team, quarterbacks, be there, and our commissioner is going to get blown away by who i draft tonight in the number 10 position. >> that's coming from the champ two years running. >> going for three-peat. >> espn, help me. >> that's tonight "mad money." data points, construction spending in just a minute. opinions. there's no shortage in this world. who do you trust? whose analysis is accurate? how do you make sense of it all? a simple, unbiased stock score consolidated from the opinions of independent analysts...

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welcome back to "squawk on the street," breaking news. construction spending for the month of july up almost twice what was expected, up 1.78, and last month's revision sliced in half. ism august read expecting 57 and change. 59.0, 59, and 59 is the best read, wow. going all the way back to july of 2004 when we had a 59.9 run,

prices paid, 58 even, less than expected, well below our last look at 59.5, considering it's a jobs week, what's the employment index look like? 58.1, down one-tenth, and new orders rose from 58.4 from 66.7. like surveys? you'll like this one. carl, sarah, back to you. >> thank you very much, rick, what a solid number, first trading day in september. looking at how u.s. stocks are starting off the month, mixed to monthly positive, and s&p 500 flat up. the dow only down 26 points. let's bring in the chief equity strategist, and michael, the chief u.s. economist with jpm i jpmorgan. ism manufacturing, 59, are the numbers which continue to appointment to a strengthening

u.s. economy sustainable? normal levels? >> look, everything we're seeing in manufacturing now looks really solid. we had very strong auto vehicle production, and it looks like capital spending is picking up. i don't know that we'll see 59 persist indefinitely, but feels like the second half is off to a good start. so we like what we see in the numbers so far. >> and, bob, can we be in a world with u.s. equities where good news for the u.s. economy is taken as good news? this is the back and forth don't. if it's too good, there's concern the feds raise rates sooner. >> yeah, we still have an economy that's doing better, but not everything is doing better. i think that's the great news for the stock market because we don't have to worry about the fed. we're not seeing inflationary concerns, keep your eyes on that. fact is the economy is going to the robust sustainable for now, 3%. that differential is great for

corporate earnings growth. >> i want to look at how the treasury market is reacting to the news. i mean, what we have seen is consistent and per sis tent buying of u.s. government dealt. yields higher. 240 on the ten year, michael, any sense this historic rally is bottoming? do you feel that? sense that at all? >> we think so, but, you know, puzzled by the behavior this year. that is getting pretty low, and as you mentioned, all indications that the rate normalization is on track for sometime in the middle of the year the process begins. we expect treasury yields to move up from here, though. it's been a puzzle how low they've gotten thus far. >> bob, as an equity bull, you ignore what the bond market is telling you right now? >> well, i think the bond market is -- has a literally of cross currents as michael point out like the low yields in europe in particular, and, you know,

weakness overseas led to lower oil prices, a stronger dollar, some of these are good news for the u.s., and i think it's part of the irony, the fact that the u.s. is benefitting from the weakness elsewhere. >> hey, bob, a lot of chatter on the street out of this morgan stanley call this morning saying the s&p can go to 3,000 in the long term, that we're in a period where the length of expansions we don't understand y yet, capital spending not stretched, management hubris not stretched. is this talked about at all? >> i think you're right on to what i should say they are right on, carl, and that is the fact that we are only in the middle of the cycle even though we're five-plus years into it. that's how slow the recovery's been. it's not out of the question we could see it last longer since the excesses don't yet exist. i'm not sure stocks can triple again as they have off the bottom, but they can go higher, and i guess when you goat to 2,000, next you welcome at is

3,000, why not? >> the wall of worry is there, michael, and there's a lot of event risk to talk about this week with u.s. jobs, big ecb meeting, a lot of anticipation. in terms of what could go wrong, of the major worries, geopoli c geopoliti geopolitics, higher rights, and disappointment from the ecb. which are you worried about? >> i would say geopolitics now, and, certainly, we're not worry about interest rates being a problem. i think it's a sign of return to health. if that's in context of up employment rate falling rapidly in spite of disappoint growth, that's negative about the longer term supply side of the u.s. economy, but in terms of the next 12 months, i think the bigger risk is geopolitics, not the weak supply side. >> bob, the stronger u.s. dollar is moving against the yen, going to hurt corporate profits down

the road? >> it certainly, if it continues at the recent pace, will put a nick into things. i think the way you approach that is make sure you have plenty earnings coming from inside the u.s. after all, the economy is a bit stronger and broadening here. you don't have the currency contentions. that's what is dominating what i do in the portfolios in order to benefit from the u.s. pick up. >> yeah, cramer was talked that up as well. gentlemen, good to see you both on tuesday morning, first trading day of september, bob and mike. a big week for jobs, and jobs number could change the outlook for the fed, of course. the senior economics reporter, good morning, steve. >> if they go the way the ism numbers go, it's a big deal. looking for continued strength in the market with the eye towards the level of growth or whether it looks like the gains are accelerating. fed chair general yelp's words,

if improvements are rapid, the fed could move up the table for rate hikes. wednesday, adp, 215, jobless claims down at the low level, down at 300,000, and nonforeign payrolls down, that in a sect, and 220, unemployment ticked down, 6.1%, and hourly average wages changed from the same to.2%. rapid pace, the labor force increasing at at 200,000 monthly pace, part-time for economic reasons, on the way up, real wages up, not a missing print, just .02%. yellen said this pattern of wage gains could suggest they rise quickly without any meaningful upward pressure on inflation. she thinks there's room to run. the thing the fed is doing in

jackson hole, the new fed indicator, a bunch of researchers at the fed put 19 indicators into one index to rule them all right here. you see it's on the upswing, but not as strong as it's been, something yellen says unemployment rate overstates the labor market. what's interesting 1 risk as to whether or not the fed moves faster or as anticipated by the marke markets, june, summer of next year. the futures market, reflecting none of that risk out there. .71 is expected for the feds' fund rate in 2015. a year ago, it was up to 1.2, 120 points, and that number has not changed while the jobs numbers are better, that's perhaps reflecting europe, the fixed income market, but, sarah, it's interesting how complacent

the fixed income markets are, and especially this area with the most to lose by the fed if it were to accelerate and add another quarter or half or 50 basis points in the 2015 rate hike. >> interesting. just curious here, steve, read on the u.s. consumer now? go back and look during the past earnings season, yes, backwards in the second quarter, unless you were in the jewelry business or home improvement, it's been a struggle when it comes to consumer spending, wondering going forward if signs are better? >> there's hopes for back-to-school spending. heard good stuff from the retailers about expectations for back-to-school, but no doubt there was a pause in the summer time. some of that was from the idea they brought a lot of automobiles. another piece of it was that utilities spending was down. still, we're on, i think, it was a 1.5% annual rate for consumer spenting in the third quarter, not as much as expected, not as good as could be, and i think there were expectations that picks up in the fall now.

>> yep, we'll see. thank you very much, steve. >> sure. >> good to see you, let's go over to dom for a market flash. >> good morning, the debacle of the day is exelixis, losing half the value after the potential treatment for prostate kaerns failed in the late stage. they will cut it by 160 employees. there was a cap of 800 million dollars before the fall. it begins twice normal trading volume, stock down 51 % in the trade, carl, a rough day for the shareholders. back to you. >> thanks a lot. a week away from the apple's up vailing, and there's record highs. >> you. >> one analyst says it will be the most exciting product launch in years. we'll get the take on apple and how the icloud hack could affect

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for over 60,000 extra curricular activities help provide a sense of identity and a path to success. joining the soccer team. getting help with math. going to prom. i want to learn to swim. it's hard to feel normal, when you can't do the normal things. to help, sleep train is collecting donations for the extra activities that, for most kids, are a normal part of growing up. not everyone can be a foster parent... but anyone can help a foster child. just one week until expected iphone6 announcement and more apple seeing gains in the market hitting a new intraday record, new al time levels seen since ipo in december 1980. unbelie unbelievable. bringing in brian white, so i guess you and investors are not concerned about safety of icloud

with the new picks? >> yeah, i mean, there's a lot of issues with the cloud, so it's still early stages, so, really, it does not change our thesis on apple. you know, i think we're all focused on september 9th, big announcements. >> we will talk about what you expect, but is that appropriate here because apparently the hackers used a big open vulnerability and you can use your password no matter how many times it fails. seemingly basic things that suggests that this could be a bigger problem. >> well, i think just, again, like a lot of the companies that offer cloud solutions, as they see vulnerabilities, they change overtime. i don't think it'll damage apple in the long run. but in the near term, they have changes. >> i don't know, to me, it's disconcerning, especially on a day learning that apple's partnering with visa and mastercard to get the payments. that means all our credit card

data in the cloud. is that an optimistic thing for you? >> i think nfc provides security around payments, and so we don't know exactly how amx or the other credit cards are delivered, but nfc provides security around them. >> expectations next week, what do we see? >> i think we'll see both new iphones, 4.7 and the 5.5. there a bigger, prod broader, m conflicted launch seen. there is reports that 5.5 comes out next year. >> some say it's too big. >> china will be a home run. >> why? >> the consumer in china wants at least a 5-inch phone. it's unfolded over two and a half year, and their phones that are 7 inches, but almost every one that i notice, if they have a smart phone, it's over 5 inches. 4.7 will not do it in china. you need 5 preponderate 5.

will it be unveiled next week? we think it will with the 4.7. >> what about a wearable or invite to a wearable event this fall? they say it's 50/50. not going out on a limb at all. >> we think we'll see it next week, okay? >> the actual device? >> unveiling, an announcement, would be surprised if it's available right away. go back to history. iphone, ipad, there's a delay between the announcement of the launch of a new product calculate goir. >> how do you trade the stock given anticipation, up 30% this year, much on anticipation of the product, when does it peak? how does momentum keep going? >> great question. what is there afterwards? so when i think about apple,

number one, you know, last summer, we were bullish on it. you couldn't -- i mean, it was unbelievele that -- it's really shifted, and it's from an undervalued state, 11 and a half times cash, and if you look how it trades around events, outperforms s&p ahead of the event, and.7 points from the event and release and next month, under performs the s&p by one or two points. that's historical. this time, there's a new product category. >> people remember you from the 11/11 price target, now it's 1, 2, 3? >> that's the target. >> do you have one that's not a novelty, ever? >> this is 14 times next year's earning plus the gap. very reasonable. all price targets are reasonable relative to the market. >> i just back to the wearables with the iwatch. i mean, has there been a successful introduction at this point of a wearable technology?

>> no. exactly right. there's nothing out there that's been successful. i think just like there were tab bets out there, by ipad made it a success. i think apple can make this category cool. they've got the infrastructure to support it. they got the esthetics, and i think it takes apple to make it a car goir. if they couldn't, i don't think anyone can. >> thank you for joining us, brian white. when we come back, zoe's kitchen doubling since the ipo in april as the rest of the restaurant industry faces serious head winds. can zoe's keep it going? the ceo joins us live for an exclusive after the break. when fixed income experts

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while fast casual strupts struggle, zoe's kitchen is a strong performer going public on the ncse in april, shares up more than 90 %. here is the ceo, kevin miles, joining us from dallas. good morning to you. >> good morning, and thank you for having me. >> an interesting summer. investers in the restaurant business would love to see mid single digit comps like yours. how long does it continue? what are you doing that's different? >> well, we hope it comets on vm. what is different is we are lifestyle, a brand that connects to the consumers' emotions and attitudes, resinating kroogs the better for you options, lean protei proteins, fresh vegetables in a fast casual environment, really

resinating. >> are you seeing signs you've been able to steal share from -- throwing names out there -- outback, a chain with a tough year or two? >> i think as far as zoe's goes, our consumers look for opportunities to get in, better for you option, mediterranean experience that zoe's offers. we are getting shares from players out there, but it's about getting in, controlling the time and environment and feeling good about what you eat. >> curious on the strategy you learned from the fellow fast casu casual companies. how do you follow in chipolte's footstep and avoid what pot belly's did after the ipo? >> sure. zoe's is about a long term growth strategy for us, about finding great talent, great realize, talent and culture is most important to us. we want to make sure we continue to focus on that, and that's

really what is resinating with our team, and most importantly, our customer in feeling good about that. >> when you say "talent," what do you mean? who is talent? >> management team delivering the food every day with a warm, southern smile, inviting customers into the locations. >> how long does it take to create the culture? does that mitigate ability to expand quickly? >> no, absolutely not. last year, opened 27 locations, this year, 29 to 30 locations. it's a focus for us. assets for us is the team and culture and we don't dilute that. we spend a lot of time, energy, and effort on building and nurturing talent along the way. we are confident in the growth strategy and believe we can continue to add talent needed to continue our growth. >> what do you think of burger king buying tim horton's relocating to canada? does that worry you make you

think you're in another calculate goir? burger king is trying to create yum brands or something you want to join? >> you know, i, again, focus on i don't know a lot about the workings with burger king today and hortonst. for us, it's long term growth strategy, focus on what we need to focus on and deliver long term shareholder value and deliver results is what we are focused on. >> kevin, talk prices power. beginning to see some clues that when it comes to the war between eating at home and eating out, it's a little less expensive to take your family out for dinner rather than buy groceries. how are you finding the pricing environment? >> pricing continues and will be for the consumer looking for value. our consumers are no different than any other consumer out there. we feel like we're priced right, and as long as we deliver value for the consumers, you know, and that better for you option, consumers today are looking for

better products in a better environment. i think at zoe's we deliver on that very well. >> we'll keep an eye out. the stock is something people are watching too. kevin, appreciate the time. please come back. >> thank you for having me. >> kevin miles, ceo of zoe's kitchen joining us from dallas. straight ahead, durant signs with nike, what the deal means for the swoosh, and dollar general sweetens the bid for family dollar, but does it make sense? david faber has all the details on that one. we'll be right back. exhale. aflac! and a gentle wavelike motion... aahhh- ahhhhhh. liberate your spine, ahhh-ahhhhhh aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? yep. find out how fast aflac can pay you,

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>> about an hour into trading. this is what we're watching. s&p 500 losers at this hour. energy names here. wynn resorts at the top of the list. we have resources, sankick, some of the research companies as commodities urn pressure under the stronger u.s. dollarment gape gainers today, delta monster beverage continuing its run, cut back a bit, but still gaining off the coke deal. regenron's ceo on "squawk box"

ear earlier. >> found a drug that could cut the risk of heart attacks and strokes in half. taking the sweep from 340 to 400 on a stock cramer highlighted in the last lauhour. nike resigning reigning nba mvp kevin durant. the figure espn cites now is 20 years, $350 million. a new endorsement with gisele. the campaign with the i will what i want. i went to the women's event slogan, also includes skier lindsey vaughn, and they got a ballerina. they are trying to make end roads with women, obviously, men's basketball shoes, the kevin durant a valuable one, he said, what, number two in the nba to lebron james? up there.

>> who has the mvp. >> is 25 years old, valuable from an advertiser's perspective. nike had the opportunity to match, widely considered he was going to do that anyway, so i think it's interesting that underarianmour, a gainer, got gisele, the highest grossing model. >> has been for eight straight years making more than brady last year. >> her husband. >> yes. >> and he's with under armour person too. he's also handsome. >> yes, he is. yes, he is. i agree. >> do you have the latest on dollars and cents? >> i do. moving from tom brady and gisele to the war of the dollar stores. we have major news from dollar general increasing the offer for family dollar to $80 a share, previous bid at $78.50 and cash and current $80 offer is all cash.

perhaps more importantly, it is trying now in its attempts to get an engagement going with the family dollar board to deal with antitrust concerns about a potential link up of family dollar and dollar general saying they are willing now to divest 1500 stores and instituted a $500 million reverse breakup fee payable one year after anything didn't close, and now after tax, that's probably three bucks a share, but, again, all this designed to try to get that board and its management team to the table to open up discussion. speaking this morning with the ceo, chairman and ceo of dollar general, he said, hey, we put a come pepping offer on the table. we want a chance to engage. asking about the 1500 stores in terms of divestitures, he said, listen, we believe the divestiture number will be below 700 stores. that, of course, i reported a

number of times now, is not the belief of family dollar. those who are advising the board, and they actually are looking at the antitrust argument, in a way it seems, when there's a family dollar and dollar general near each one, one goes away, pricing goes up. they believe the way the ftc looks at the potential combination. there's thousands of examples in which they are within miles of each other, hence their belief, perhaps, it takes more than 1500 stores to be divested to be able to pass antitrust opposition that may be there. different, though, from what dollar general and antitrust advisers believe. they are focused on this not being a traditional grocery store merger. they said this morning announcing the bid and inclusion, of course, of the $500 million reverse breakup fee. maybe they are analyzing this

potential merger, they say, utilizing data telling the story different than dollar regime's documents and data. they say this transaction is not a traditional grocery store merger, don't believe they take the approach, hence walmart, rite-aid, a number of competitors, will be taken into account when the ftc reviews what the implications mean for the consumer. one thing that they may use against dollar general rick's comments not long ago asking about competition from walmart, expressed format that's small, said, i know they are working on that. tell you, they opened up several against us, and we've taken on less than kpps when family dollar opens up. that from a call not long ago. we'll see where it goes at this point, of course, the family

dollar board for its part not responded. they have greatly concern as reported in the past about the an antitrust implications. at the same time, moving up, trying to deal with them, and want question is where you end up or whether they are willing to engauge at this point or whether it takes more from dollar general to get the engagement it is seeking. >> no word from dollar tree? >> right. glad you mentioned dollar tree, 74.50 is the accepted offer from dollar tree. >> can they afford higher? >> they are leveraged high. the thought is they could go a bit higher, and, of course, key question is whether there's any hope family dollar gets its shareholders to approve the deal. the shareholder vote needed to approve it with the higher price even though, again, there's antitrust concerns. >> no questions, a big story. you'll be watching this week. it is a big week also for the economy, the jobs report on friday, everyone including the federal reserve watching for progress on wages, long term

unemployment, part-time workers, bu it's a bigger risk here and actual new report in time for labor day joining us from 30 rock to share details. why are you raising concerns now, john, about a labor shortage given the fact most people are worried about getting a job? >> well, we have not seen the impact of this yet, but we complete ed of u.s. and global labor markets and the u.s. will experience significant tightening in the labor market by the middle of next year, by mid-2015. we think unemployment will drop in the u.s. to 5.5% at that time, considered to be full employment. >> that could be a big risk to corporate profits if they are not getting the workers that they need and productivity that they need and skills they need, this could be a big risk. >> i think it is a risk to corporate profits. we saw in the 1990s a significant hit to corporate profits when the labor markets

tightened, and i think the point maid about the connection to productivity and innovation is critical. main action ceos take in the face of labor market shortages is to focus even further on innovation and productivity. >> what's your time frame here? talking about in the next several years? >> no, mid-2015 we think impacts will be felt. that's when unemployment will hit 5.5%. >> john, walk us through why there's no slack? what is prohibiting someone who's been out of the market for a while from coming back in? >> month-to-month, nothing. this is a 15-year trend we're looking out from next year until 2030 and the fundamental force driving the united states is demographics. the baby boomer impact has started. it's been softened by the recession, but now we're out of

the recession and baby boomers take hold. labor market growth rates in ten to 15 years below four-tenths of 1%, the lowest rate seen in the last 30 or 40 years. >> it's been softened, but does not mean households that survived recession are beginning to have enough money to sit back, retire, and not work again, right? >> there is -- the labor markets are complicated, obviously, and labor market participation is one key factor, but we think that the demographics are such a big shift that's going to be in greater force and we'll see the labor markets tighten. >> which industries feel it most acutely, john? >> health care is most -- probably most acute, and that's a double whammy as baby boomers get older, we need more health care with fewer to provide it. certain skilled labor

occupations, transportation, construction. stem occupations will experience some tightness, but not as much, perhaps, as people have thought because there's a lot of people entering in stem fields, last work over the ten years have taken hold. there's immigrants entering into the fields as well. >> while we have you in the final moment here, conference board, your organization, well-known for doing consumer confidence which you recently recorded at a seven-year high. why is that not trickling into consumer spending and retail sales needed to get this economy going? >> consumer spending was soft over the last couple months. small part of that has to do with the weather, cooler than expected, people's utility bills did not go up. look at that carefully over the next couple months. it is a bit softer than consumer confidence suggests. >> thank you for joining us, the bran new survey out for labor day on the coming labor shortage.

the ceo of the conference board. >> thank you. zbln when we come back, shares of gap up nearly 20% this year, handedly outperforming the brotder retail sector and named the top retail pick for the second half. talk to the analyst who made that call when "squawk on the street" comes right back. dad,thank you mom for said this oftprotecting my future.you. thank you for being my hero and my dad. military families are uniquely thankful for many things, the legacy of usaa auto insurance could 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." check out the stock moving higher on a barren's article over the weekend saying fingerprint id technology in smart phones could boost the company's shares. a long time leader in touch screens, a significant player in fingerprint id when it bought validity sensors last year. shares up five and a quarter percent, carl, on the day's trade. back over to you. >> thanks a lot. retailer, the gap, outpacing the

broader retail index, up 20 % this year, not bad. named top pick for retails second half noting comps and easy drivers for improved operating performance. bringing in the senior research analyst over at stern from new york joining us this morning. >> thank you for having me. >> interesting call. talk about the gap brand revival, leaner inventories, doesn't feel like a stellar call, but it is the top pick. >> no, i mean, it's not, but if you look at retail across the board, it's been a muddle along, lack laster six or nine months. what we learn in the last month, august, retail stocks outperformed the broader market. that's not happened all year. investors are looking at retailers as investments so gap, the business is getting better, comps positive in july, likely because of back to school. inventory leanest in a year and a half. near term catalyst with the gap

brand turned around in september, and you got initiatives like cotton costs coming down and supply chain investments to benefit margins as well. it's compelling. >> why make the top pick a name that's appreciated in value over the year, why not take a flier on some of the names that have truly been challenged from the valuation standpoint? >> sure. well, to be fair, gap, for our coverage of the stocks we look at in the specialty universe, it is the cheapest name we cover at 13 times the out year. it's not lagged, but, again, i don't want to take shots and say buy the rally, buy everything. i want to buy something with visibili visibility. the fact that cotton costs are off 20% now, the estimate is that adds a hundred points or 25 cents next year not in the model now. i want that earnings and multiple. >> i remember hearing, this is a couple years ago when cotton was going crazy, but isn't gap

leveraged to cotton prices more than any other retailer? >> they are. that was a bad thing when cotton costs were up 122% years ago, but down 35% year over year, that's a good thing, so investers are looking at some viz the to give them upside on the gross margin line over the next nine or 12 months, and gap is a large liquid retailer to play that. >> yeah, but we just heard from retailers in the last few weeks, and themes you hear consistently pronotional environment. some call it a permanently promotional environment. not spoofed by what that does to margins? the fact we continue to see consumers hooked to deep discounts? >> agreed, agreed. promotions are not where we want to see to get super bullish on retail across the board. what i say is that when you look at retailers who just ended q 2, inventories are leaner across the board against q 1 and q2,

and same at gap. we wrote in the monthly retail note today, promotions we track was the leanest seen in over 14 months, so it's still high, but on the margins, things are starting to get better, which i think is a function of demand picking up a little for back to school and tightly controlled. >> why is old navy better than banana republic and gap? execution or tale of two consumer income stories? >> old nif veigh's doing well, banana republic has done fairly as well as old navy, a women's business, lagged for two years, turned the corner. banana's okay, core gap comping down now, and they called out some product asourcements mistakes made early in the year saying don't judge us on fall and summer -- excuse me, don't judge us on summer, but new assortment in spring when our merchant works closely with the creative designer.

that's the catalyst we play nfo there. >> i only go to gap when i get a coupon, which is every other day. is holiday going to be less promotional than it is now? >> not really. it's hard. we had three easy compares the last three holidays. i'm not going to bet the farm we'll see a lot more full price selling. i think what the businesses -- especially in the soft line space -- need to do to make stocks work, manage expenses, work on the supply chain, and invest in initiatives. gap is doing all those things. you know, soft lines is a tough place, deflation their, competition, but they are doing the best job they can do. >> good to talk to you, thank you so much for the time. >> thank you. >> talking gap there, top pick for the second half today. still ahead, amidst growth, runway has a new survey. think netflix meets fashion at the runway. cofounder and ceo joins "squawk

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let's get to the cme and check in with rick santelli. >> good morning, carl.

we had a nice three-day weekend, getting in the back half of the third quarter. i look at thursday, all of the central banks meeting, and when i think of how the dollar acted when we embarked on qe, how the yen's acting as they go full throttle or qe and now you have mario draghi who's going to supposedly get into qe. i can only think of two words that describe how well central bankers have done given that they have to pile on the strategies questionable at best. that is abject failure. >> coming to thursday's meeting. tell you what, i will be 100% surprised if they'll be a qe program coming out of the ecb. more likely more of the asset backed security program. >> which they'd outsourced somebody to create. my question to you is, like tesla, are we betting what's down the road? to do qe right you need a lot of things to buy. it isn't developed. even if you come up with the process you need years to create a market where there's enough issuance to make a difference. don't you?

>> don't effect, the ecb -- under the ecb, they cannot buy sovereign debt in the primary market. the ones buying the debt, everybody asking the question, why are europe pine rates so low? they're so low in the sovereign debt market because it's all the individual regional banks and local banks in europe buying their own debt. spanish -- >> stop there. keep it easy. spain buying their debt. when they buy it, end up getting a valuation from their central bank. here's a pile of ten years in spain i'm holding as the central bank. whether or not you think they're worth the price, full collateral benefits at the ecb? can't they? >> no -- >> who's the next end up owning this stuff? >> the ecb will eventually have to -- >> is that a good thing? >> there has to be a cosigner. somebody to give credit to make that doable. >> let's say that all of the people that aren't kicking the tires on central banks being in the twilight zone, at some point

say they win. we have 4.5 trillion in treasuries. ecb has trillions of dollars of asset backs and win. inflate or die. inflation goes up. what happens to all of those interest rates? >> the flation only comes from the -- if the reserves start circulating in the system, so -- >> and velocity and inflation picks up. what would rates do? >> go higher. >> if rates go higher, how are these countries going to afford to service their debt once successful at manipulating it? >> we've seen it. >> they'll have to do more manipulation to keep rates down after they succeed. is this all humanly possible? >> when everybody was talking about that book, talked a two, three period of 5%, 6% inflation so that we would have the threat of deflation. since the time of paul volckers you and i discussed, the issue, central banks operate on an

asymmetric model. the threat and fear of deflation scares the hell out of them and they don't think it's easy to stop as japan has shown. >> what scares the heck out of me, as a citizen of the u.s. can't vote out. people that run the central banks. we're out of time. >> that inflation is easier to fight than deflation. we are on this road. >> we're on this road, all right. sara, back to you. >> all right, i have to say, as you're talking, the dollar yen hit 105. another big level. strong dollar, weak end ahead for the bank of japan organization ever to jon fortt. what's coming up on "squawk alley." talking about the dollar yen? >> i'm not sure about, sara. a ton coming up. you don't want to miss it. celebrity photo hack seems to have come from the cloud. can you trust that? and legislature, surprise, surprise, fails to pass tax incentives for tesla.

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months after his stunning

gop primary loss former house majority leader eric cantor is heading to wall street joining the investment bank company at vice charmin and managing director. cantor will be elected to its board of directors and proceed strategic counsel to clients on key issues. sara, reading through the files that announced this, because he is a board member, 2.4 million what i added up to be about cash and stock he'll get in this year and then $1 million worth of restricted stock vest as is typical on wall street over the next five years. not bad compensation. i remember a lot of the bankers, though, made a lot more. >> when you compare it to -- >> no doubt about that. >> obviously, does well. probably a lot more waiting. >> you'll hear a lot more about the revolving door between wall street and washington. he wasn't -- always had a wall street -- >> a big supporter of wall street. >> one of the big stories today. with that hand it over to carl for "squawk alley." >> thanks. good morning it is 8:00 a.m. at apple headquarters in cupertino.

11:00 a.m. here on wall street, and "squawk alley" is live. ♪ and welcome to "squawk alley." joining us this morning at post nine, mike span toli. senior columnist at yahoo! finance, and with me, as always, jon fortt, kayla tausche. a lot to work on. first up, apple is activity invoef gating reports nude and revealing pictures of celebrities including jennifer lawrence and kate upton hacked through the i cloucloud saying takes user privacy very seriously. jon fortt has new i