good morning, it is 11:00 a.m. at blackberry headquarters in waterloo ontario. squawk alley is live.

welcome to squawk alley. we have a shark onset today. kevin o'leary, chairman of o'leary funds and star of shark tank is here with us for much of the morning. apple, first of all, is going all out to disprove claims that the iphone 6 plus is prone to bending. a lot of the up roar started after this video showing a guy bending a 6 plus went viral. yesterday apple invited media to its test facility saying the iphone 6 is the most tested product in apple history. the company also reiterating a claim that only 9 customers total complained about those phones bending. looking at this video it does seem there is some pretty rigorous testing that goes on. but give some of these complaints away to social media

and we see what happens. >> what happens with this stuff, we are talking a multimillion dollar launch apple does and there are a lot of people and companies with a stake in it not going well. so there are questions even about this original video. it's interesting when he's bending the phone there is a certain time on it. 2:20 something. and when he shows it bent the time is earlier. a lot of people online are raising the question. is the video faked? did they bend multiple phones and the video of the apple's testing facility is legit because we went in there. nine people complaining isn't that many. >> why do people want to do this so much. is it that apple is often is force on reckoned with? or do want to make sure the phone is justified. >> they want to make sure it is going to work. a lot of consumers have this idea that a new technology is something that should be waited

to be used. i don't think it is really that big an issue and i must say as an apple shareholders, aim blaming john because he got the focus on this really going. >> you can't blame john. >> it's okay. >> i contacted my son saying is this for real? he said yeah there is a video running around. but even he questioned it. he's foot got would have be he's got one of these things. i actually think the press apple is getting from this incredible bend gate story is actually accruing for the benefit of it. it is all over the press. people want this phone. just look right here in manhattan still lining up for it and still screaming for the large plus you can't get it. >> no one is saying my blackberry passport or my galaxy bends. no one takes the fascination on everyone else's profits.

>> i'm the last one using a the blackberry and i'm still pounding the table because it is great for e-mail enterprise and i'm hopeful this company that elected to go it alone can make it. i'm going to try it for no question about it. even having to learn a new operating system. some things on the blackberry are still better than any other smart phone. >> we're going talk to john later on. but kevin your thoughts on the overall quarter. still less than 1% for blackberry and now we're seeing revenue and software falling. >> i'm worried from to two perspectives. have to know the company can get to 5% share essentially. secondarily, seeing software revenues which are a highest margin aspect soften, i know the ceo is freaking out about that. >> what if, what if they have just stabilized expenses, they actually don't have to cut that much more. they stabilize phone sales so they don't go down too much.

it is enough to sustain them and then they actually grow the services business through bez ten, bez 12. and manage to make a pretty high margin growth business even if they don't get phone share. >> that is the story the company is spinning but if i am an investor, which i'm not currently i want to see a more likely scenario. stabilize, stop losing money. sell it for a 20% premium to somebody. that is on the mind of institutional shareholders. that's why they are staying in a at 7 to $10 range. and that has to be the strategy. and even for the management team that would be putting them out of their misery if this doesn't work out. >> so investors will have to wait a little if that is the end strategy. we're going talk more blackberry. john chen, you will interview him this morning. and stick around because we will have a full report of the apple's iphone test facility later on in the show. finally mark andreesen joining

the chorus of those worried about risk in the tech center. and he took the twitter warning in a series of fiery tweets start-ups are taking on too much risk and burning too much cash. newfounders in the last ten years have only been in an environment where money is always easy to raise at higher valuations. that will not last. when the market turns, and it will turn, we will find out who has been swimming out trunks on. many high burn rates will vaporize in all caps. his final message to the tech industry, worry. wow quite a moment. >> this is interesting coming from mark andreesen. because over the past year he's often criticized those who were out there saying the valuations of certain companies are too high. i'm sure he would make a distinction between certain companies he viewss as being particularly strong and strong founders and strong growth

prospects versus what he's saying now. but he's been a bull on this trend and so him turning is interesting. >> i had a back and forth with him earlier this year when i said i was having conversations with bankers and they were worried that valuations were driven up simply by the supply of money. more mutual funds and more private equity companies willing to get in a later stage, hedge fends even. and he said no. i think companies are worried because they have fewer to take public. and they are staying private longer. and he said you are going to like that money from the hedge fund until a couple years down the road the hedge fund owns 80% of your company. when you see all of this money chasing. what worrious? >> here is the other side of the coin against this argument. if you talk to the actual entrepreneurs themselves. and i'll give you an example. at least five thon season's shark down. valuations just north of $10 million. they have been told by investor

base don't worry about profits. get subscribers. acquire customers on at any cost. you can always turn on the cash flow when you have thousands of. so don't worry about profitability. so it's not really fair to say they should be worried. the fact is the street and the institution aal investor wants e growth more than anything else. that is what they covet. i don't agree but i'm telling you. ask any ceos, if they want to raise doe, talk about subscriber growth, not profitability. >> an ordinary amount of the panic is normal. rab it is time to remember fad.com which pursued a high growth strategy that was too risky and they kind of fell off a cliff. >> if anybody, if you are only sitting with 50,000 subscribers and you are not profitable you are not going to raise money until you can show viral growth. that is the whole story.

and there are a whole generation taught don't make money. get top line growth and that is what he's saying and i agree with that. >> he takes it's not just valuation. hiring is people is easy. layoffs are the devastating. hiring for start-ups is effectively a oneway street. change you can't change once you have that many people. don't move into a shiny new office and that have that we've made it feeling. that's when you will lose the reason you started had company in the first place. i a lot of those lessons could be applied across the board. >> but it has been easy money for a decade. and something else, you talk to these young entrepreneurs they don't want to go public. they want to sell to a strategic at an early stage so they don't have to gou there the manifestations you have to go through today. it's a much easier path. some think a single cell amoeba frankly. and they want to avoid that whole story.

>> and he talks about. when the market turns nobody will want to buy your cash incinerating start-up. >> and there is going to be a lot of officeture on sale. >> great discussion. kevin we'll see you later in the hour and thank you for joining us to talk through some of this stuff. we want to talk about the markets too. you are looking at the dow that is up 83 points. s&p up by 7. nasdaq is up by 19 points. dow is holding steadily above 17,000. of course we did get a positive read on consumer sentiment. gdp for the second quarter revised to 4.6%, up just 1/10 of one percent. but that is enough to lead people to buy the dips yet again. of course there is also the news that shocked the bond market this morning that bill gross is leaving pimco to join janice capital. that has led to some dislocation, shall we say, in the bond market, especially where pimco's total return fund

is concerned. that was down about a third of a percent but janice capital where growth is going is up about by a percent. risk isn't the only problem in the tech center. our next guest says tech companies are also losing the edge in innovation. and then shares of blackberry in the green even though the company posted more than $200 million in losses in the latest quarter. we'll have more on blackberry in an exclusive interview with ceo john chen all coming up on squawk alley. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier.

it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.

check out shares of micron tech knowlednology after they b earnings last night. up around 6%. posting earnings and sales results above analyst estimates plus the company gave strong revenue guidance as well. so one of the stronger performers in tech the micron. >> quite a move for that stock. we told you about mike andreesen's alarm on the tech sector. saying they are takingich too much risk and burning too much

cash. i want to bring in randy, inventure investorser. you are coming from sunny nantucket just north of here and i appreciate you wearing your shades this morning. i manage it is very bright there. >> it is very bright. thanks for having me. >> good to see you. we've had a growing chorus of vc investors sounding the alarm. last week. now mark andreesen saying start-ups may be growing too quickly and have always lived in an environment being able to raise more capital at higher valuation. what do you see from where you sit and what duke the real is issue for the valuations in the tech seshlgt right now. >> it's interesting to hear mark now talk about the market being bearish rather than pullish. he is been one of the biggest bulls in the market for the last few years and his investing is

been the sorts that he's now criticizing. clearly hooesz been concerned and i see concerns getting ahead on valuations and seeing an excess of capital driving up the valuations and i don't think the risk is being priced properly. >> and why? do you think this is all because of the quantitative easing because some of this later stage money doesn't have anywhere else to go? >> i this is part of it. part is clearly too much capital and few places to invest it. part is the game in venture capital has been the mega winners and the mega winners while low probability have had such great returns that they tend to be the best bets that the markets made in silicon valley in the last decade. so consequently that sort of investing, very high probability of failure but very, very extraordinary returns on the winners drive people to take

risks differently. >> but you know as well as anyone that you often times have one big winner that gives you a hundred times your money that often times has to make up for other portfolio companies that doesn't have quite the same performance. so do you think that there will be a time when the tide goes out and some of these fund managers will really take losses here? >> well there is a very high latency on accountability in the venture capital industry. that is the unfortunate thing. so there is a lot of players who stay longer than they should. the accountability on capital is slow. i do believe though that we will see accountability in the marketplace over the longer term. and i think we are seeing a trend right now for people to second guess whether or not they are going to be able to raise the follow on capital at the right prices to sustain the larger plays. >> i know one of your largest plays randy in the last year and most successful recently was nest, which you invested on very

early, sold to google for over $3 billion. what are some of the winners that you are seeing right now, some of the winning sectors and companies? and wh which companies do you think will be the most aacquisitive from the large cap stage as well. >> clearly the most acquisitive are the ones with big balance sheets and very large capital value such as google, apple, twitter, microsoft. al bah babb is now coming in. looks like interesting player. so there is lots of capital look for growth and innovation. the sectors that are important continue to be the interesting sectors that we've been investing in for a while. mobile obviously. but also we're going to be to see the internet of things areas where sensors and ambient information become important. we're beginning to see an interesting sector emerge in digital health. very interesting sectors emerge

in things like new forms of aviation and transportation. so there is a lot of areas of the innovation out there. choosing the winners of course is a difficult job. >> randy, you mention alibaba. we're just one week of the alibaba ipo. it has quite a war chest of capital but pretty amazing to see a home grown company out of china. entrepreneurial company, 15 years old. does that get the valley wondering whether there is more competition from abroad and does that worry investors from the valley as well? >> i think alibaba is a great story. and i think that the valley should always be worried. we're always looking out with a healthy level of paranoia as what is going on not just europe but in asia and now in place loosic south america. so it is not as if the valley has ever sort of gotten complacent but the best news is that in the valley today you still have the best and

brightest coming to build businesses. one of the easiest places to build a business and raise capital. that is not always going to be the case but it is right now. >> randy we appreciate your perspective this morning. enjoy your time in nantucket. looks like it is going to be a beautiful weekend. >> thank you very much. >> randy komisar. let's go back to headquarters and get breaking news from dom chu. >> with regard to the pimco front, dow jones is reporting that the current deputy chief investment officer at pimco, dan i'veson is likely to take over management and pimco. that's according to services for a dow jones report. it is unclear according to the report whether he will take over the total return fund. so dan iveson is likely to take over portfolio management at pimco. this is a man who is currently

part of the executive management team and is the head of the mortgage credit portfolio team at pimco. so again dan iveson likely to take over the portfolio management dutiy ies according dow jones sources. >> interesting news there. up next shares of blackberry in rally mode. up more than 6 and a half percent after earnings beat estimates and we'll talk with an ceo john chen in a moment. and cnbc getting a the exclusive look at the apple's iphone testing lab and what we found out later this hour. one day, machines will be sprayed to be made. and making something stronger... will mean making it lighter. one day, factories will work with the cloud. one day...

is today. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours.

"hello. you can go ahead and "have a nice flight."re." ♪ music plays ♪ music plays traveling can feel like one big mystery. you're never quite sure what is coming your way. but when you've got an entire company who knows that the fewest cancellations and the most on-time flights are nothing if we can't get your things there, too.

it's no wonder more people choose delta than any other airline. blackberry out with earnings today. beating on the bottom line by

sales up. the stock up nicely. the company seen over 200,000 preorders of its passport device or at least requests from its kpa channel since its unveil. john chen the ceo joins us now. good to see you. investors seem happy about what you are doing on the bottom line. your cost controls. my first question has to do with hardwa hardware. your hardware revenue is actually up quarter over quarter. but latin america revenue down. aipac down 7. strong in north america. how long do you expect the hardware numbers to hold up? if you are optimistic about the passport sales coming down the line? and then if you are conservative. >> hi john. good morning. i'm always conservative. but i do expect to see -- i do expect to see the hardware revenue to continue to up tick.

especially because of the passport and as you pointed out, are very well received. and in a couple months we are going to have the -- out. and there is a lot of demand on the classic. >> my main focus of course and i think many investors is on the enterprise side on bez 10 and bez 12. you said blackberry enterprise server 12, you are behind the scenes is going to be out in mid november. i believe you also said by the end of last quarter you had 3.4 million licenses issued on your enterprise server. is it time now to say that you have definitively traction and you are confident that this business is going to grow or do we still have to wait and see how bez 12 buzz. >> first of all the bes 12 we're going to come out in november 13. we're going make that announcement and launch on that day. i'm very confident with the

software business. the product is very solid. customers sees it, i'm getting a lot of requests. so i'm pretty sure we'll grow. and next year we're going to be hopefully a very good year for us in software. >> john, there are investors who will say, look, really the only realistic play is for blackberry to sell the company, despite even everything that you have done up to this point. there are still people who say that. do you have any requests or any interest in to buy the company at this point? >> no i -- first of all john you know i can't comment. especially on your program here. but i am very focused in operating. we are doing pretty good in terms of product roll out and managing of the cash. our cash burn is now to extremely manageable positions cash position is very strong, 3.1 billion. and there is a lot of value in

our business. we should still explore that. so i'm very focussed on operation right now. >> you are doing some acquisitions. you aid a acquired have virtual sim technology company in the past couple months. tell me what your play is there. how much are you really interested in working with other device, other platforms that aren't made by blackberry in beyond blackberry enterprise server. >> that is a great question. it is the idea is really to make the software available on any of the major devices out there. whether android based or ios based, windows based and blackberry based and we'd like to take it not only through the enterprise side but a distribution according the carriers. i spoken to them in the last 45 days. lots of interest. i think this will do well for us. >> is your cash flow going to

continue to grow significantly? do you see any chopness going forward as you make certain investments or depending on how hardware rollouts go? what should investors expect? >> they should expect we deliver what we said all along. we will get cash flow break even or positive from operation, from our normal operations by the end of this fiscal year which is this quarter and the next one. and then we are going to see growing cash position going forward as the company gets into growth and profitability in the next fiscal year. so i'm comfortable in restating that commitment. and it looks like we are making good head way. >> okay. and you are planning to stay in the ceo role there, which a lot of people are excited about. for how long? are you in this for the long haul? >> as long as it takes to get this company doing well. >> well you say it's doing well now. >> and yes i am for the long

haul. >> okay. >> well no no. we still need to turn the profit and we still have a lot of growth. so i'll be here. >> congratulations on the stock pop and thanks for joining us once again. >> great stuff. thanks for bringing us that john. to simon hobbs. european close in a few seconds. hey simon. >> i'm going to say it anyway, i never thought i would say this. the resignation of one man seems to achanged the appearance of western europe. most markets are green. the second largest germany is actually negative overall. and one of the major reasons is because pimco's bosses have seen their market cap come down from about 80 billion dollars to $75 bel. as a result of gross deciding to leave pimco, it is one reason why germany is negative on the

session overall because it is a big cap within the frankfurt market. if we look broadly at europe we will see basically one month lows for the european market. the united states has actually done worse over the month. we're down one and a half percent on this side of the atlantic. the major reason europe is outperforms is because the euro is coming down. that is going to artificially boost the profits of european companies and that is what a lot of people are talking about. let's not forget the euro for the summer is down about 8 and a half percent against the dollar. i want to underline why you have the euro moving down. this as 10-year chart of the extra that you get to hold treasuries above german bonds and you will see the difference between the two is rising. in fact it's risen to a 15 year high. that is why people are moving into the dollar and us

treasurely suppressing the yields here. why have you achieved that? basically buzz the central european bank has crushed yields with all the talk of qe without actually embarking upon it. and there are questions for draghi as for whether that move in the euro is enough. i will tell you they will move to broad based bond buying, sovereign qe within the next six month because they say that is the only way to increase the balance sheet by 1 trillion euros which is the stated claim and drive the currency forward. >> who says one man can't make a difference. >> extraordinary. >> up next iphone's testal lab has been a big secret until now. we'll give you an inside look and see if the 6 plus really does have a bending problem in a moment. and the ray rice video for the financial sector, which i think is inappropriate but one map's

opinion. compliance between the fed and goldman soox. we're back in a minute. and people are relying on it more than ever. we cover more than 99% of all americans. i know, i can't imagine living without it. it's a place where people can come share knowledge and ideas. it's beautiful. that's deep charlie. my selfie just hit a hundred likes...(gasps) a hundred! at&t is building you a better network.

sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

as bend gate seems to be winding down apple gave rare access to the testing facility where as recode puttis apples are bent all day long.

lauren, what did you see in there that might be relevant to whether this phone bending issue is really that much of an issue at all. apple says nine phones are total. are those maybe defective units or is it just maybe an edge case if someone sits on the phone, laura. >> what we saw in the facility were basically four tests that the company puts its products through. and the company of course said that it goes through many more tests beyond these. we didn't see things like drop tests or, you know, display tests or water resistance tests and that sort of thing. we saw tests that were specific to this bending issue that some users are reporting. now the company wouldn't say whether or not the phones that have been reported bent are necessarily defective. but we did see through the tour and in the lab that the phones do bend.

it's just whether or not an unusual amount of weight or force is applied and whether or not the phones bounce back after being bent which seems to be the issue. >> because they are aluminum. and i think what was said if they are bent past a certain point they might not regain shape. so i'm wondering, what is apple going to do for people who might experience this issue? maybe they sit on their phone by accident. it is an honest mistake. what does apple do for them? >> it seems as though the company is going to take it on a case by case scenario. i think, you know, if you are making youtube videos and bending your phone purposely and saying look i bent my phone just as you might with anything else you might not necessarily be the type of consumer they are going to say great, well here a brand new phone. i this i if your phone is under warrant and seems as though you have been putting it through normal use cases or wear and tear and yet the phone is still bending, the company will address it on a case by case.

i should note too this is the first test facility i personally have ever been in. but a lot of company, a lot of smart phone makers specifically putting their phones through similar tests. bending them, twisting them. putting them through torsion and sit tests and that sort of thing. and you see smart phones break if you put them -- apply enough force to them. >> lauren, one thing that struck me about this is the speed that apple went to to actually open up it's testing facility and make comments about the this. if i recall four years ago when we antenna gate and they last let people in, it took them a few days to decide to do this. steve jobs flew back from hawaii. what do you make of this kind of speedy response. >> you bring up a the point. i think it shows the apple pr machine is in full force.

as small as this was they wanted to address it as quickly as possible. it's tough to say whether or not anything has really changed because as you said a few journalists were brought inside in 2010 after antenna gate too. so it seems as though the same approach was taken here. there seems to be question about the mechanics of the device. we're going to open the lab up and say look we really do test these things. we test a lot of them. and the company at this point is probably hoping this all goes away. but let's see. >> i've still got questions and matt over at wired said his review unit actually ended up bent. not sure if it was bent when he or it what happened there. and i know consumer reports is doing a third party test that a lot of people will be watching. thanks lauren. >> thanks john. >> kevin o'leary, your quick take on apple and what you just saw? >> you know, i think all of this is all for the benefit of

shareholders and consumers. it is free advertising and more of it. most people are not going to stop their desire to purchase one of these devices because they think somebody's put a video out there that bent it between two phone books. and frankly the phone is getting rave reviews from actual users. that matters more than anything else. look online. i haven't seen any bad user feedback. all i see is gushing glow, how much i love it. it is beyond good. this is a 12 million unit rollout. with i think over 30% for the large format which is a huge surprise. john you never thought that would happen. >> no, not necessarily. and they pay a dividend. >> it is the only reason i even talk about the stock. that's it. >> that's why we love you kevin. when we come back, michael lewis is calling it the ray rice video for the financial sector. secret conversations between the new york fed and goldman sachs. we'll talk to want the reporter who broke this story that you don't want to miss in a few

minutes. first rick santelli in chicago, what is an your radar? >> oh man this bending thing's got me going. all your bmw owners take a knee. see if you can make a bend in the door. does that mean you don't want to buy it? come on, grow up people. talking about the big number today, 43. the other thing, hey why didn't treasury yield go down more yesterday when you are down almost 300 points. pond they are and we'll come back and ponder it together after the break. of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure.

do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. it's in this spirit that ingu u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement.

but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running.

coming up at the top of the hour, the bill gross effect. the fallout across wall treat right now. some of the pimco's closed net funds are getting hammered. are they a buy today? what is the effect your honor portfolio. and nike shares. and halftime's hottest trade of the year is on the move today. we're going reveal that name and whether traders are sticking with it. >> now let's get over to chicago and rick santelli. i haven't really seen any bmw owners submitting youtube videos of dented doors but we'll wait. >> we still have drive ins out in my neck of the woods. and people sit on the roofs and the hoods and the metal gets dented. what can you do? you just need to know your

product and use it the way it's meant to be use. same is true for markets. yesterday was fascinating for your fixed income junkies out there. buzz when we were having a big down day it seemed like the ten year couldn't get under 250. so is there a breakup in the relationship that exists between equities and the fixed income? arguably no. and look at the year to date chart of tens. we ended last year and start at 3%. and look at what stocks did. still 2, 4, and 7,% from the dow the s&p and the nasdaq in terms how much they are up on the year. and i know there is dividends. total return still blows that away. the point is at the beginning of the year we were at a level that was a little too lofty in terms of rates and equities couldn't get mojo going and that relationship is always there anybody who lived and traded

through '87 weak equities deliver a good out sized bond buying performance. what was yesterday? i think the treasury market still is the smartest adult in the room because it senses the stock market isn't ready to rollover. there is volatility. as far as today, 43 is the big number. because bill gross, 1971, 43 years. and i hear all these words thrown outlet about him. and i'll just say this. being at drexel, i worked with some of the biggest bond traders ever. ever. and you know what? they were always a passionate somewhat tightly wound group. you don't invest with the likes of him for 43 because he's an even keel steady kind of guy. and maybe he is, maybe he isn't. but to be fair one thing he is, one of the greatest bond investors. everybody has a bad year. my guess is bill gross will still stack many good ones in front of him at janus.

back to you. >> for more, david faber is back on set with a legal pad full of notes here. >> i'm trying to get more background in terms of what went on in pimco before the unexpected, at least widely unexpected resignation of bill gross. and it does appear there was a good amount of the tum ult at the firm. it does appear a couple of weeks back he wanted a senior executive at the firm to be fired. that didn't take place. mr. gross was very much unhappy with that and then five executives who there isened to quit if mr. gross was not fired by pimco. all of which then led mr. gross to start to consider his own options knowing that more or less he was not going to be at the firm for much longer and those options apparently

included as well meeting with jeffrey gunlock, frequent guest here. found ore it have double line capital. he would not go into detail but did confirm they had a meeting in which they discussed had possibility of mr. gross joining double line in some capacity. that didn't happen. one can imagine why. well given his expertise at mr. gross's and certainly with gu gundlack. instead he goes to janus. but it does give more insight into what was going on at the firm, the blow ups some have referred to that were taking place and the either them or -- either him or us kind of thing that faced alions in its

succession where they were planning on announcing his resignation or firing if you will tomorrow. but he beat them to it heading out to doo to janus. >> of course he does have a relationship with the current ceo of janus. so potentially they had been talking for some time. >> they had been. yes. and that was one of a number of options he was exploring. as it does appear he knew the handwriting was on the wall. and apparently threatened to quit a number of times as well. we haven't heard from mr. gross to be fair. so there is certainly going to be a lot of charges back and forth here in this very interesting story. and then we'll have to wait and see what pimco announces later today. we've started to see some services and other news reports of who will be running the total return fund. 290 billion dollars down to 220 billion but still a massive fund one has to expect will see significant redemptions. >> it is interesting what happens with these powerful businessmen when they hit 70

years old. last we're layer ellison handing over the reigns to two deputies at oracle. and now bill gross bond king going out in a different manner at pimco. >> you could argue this could have been handled more aftfully. perhaps back when they brought muhammed in 7 or so years ago. >> and alion saying he didn't ever even consider working part time. what do you make of this? >> my question would be what makes you think if you're such a polarizing figure within the existing environment he left

that it will be dmimpbt different in janus. and knowing now it is a $5 billion delta as a result of 12 hours of his departure, do you think the el-erians board would reconsider? that is a lot. there is more to this story. i can't wait to hear what it is. >> no doubt it will come out. kevin we appreciate you joining us. >> when we come back this video could be bad for the new york fed, bad for goldman sachs as well. author michael lewis has already weighed in calling this the ray rice video for the financial sector. he'll join us next on squawk alley. if energy could come from anything?. or if power could go anywhere?

or if light could seek out the dark? what would happen if that happens? anything. this guy could take down your entire company.h? stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon.

why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. "hello. you can go ahead and "have a nice flight."re." ♪ music plays ♪ music plays traveling can feel like one big mystery. you're never quite sure what is coming your way. but when you've got an entire company who knows that the fewest cancellations

and the most on-time flights are nothing if we can't get your things there, too. it's no wonder more people choose delta than any other airline. the big banks and the fed quite possibly bracing themselves for what may be revealed in a jaw-dropping story about wall street regulation on the radio program "this american life "set to air over the weekend. michael lewis calling it the ray rice video for the financial sector. different conversations between

goldman sachs and executives at the bank. joining us is the execute they've broke the story. jake bern stein. and also steve leaseman who will talk about the fed angle as well. jake, let's start with you. this is stunning. 47 and a half hours of taped content, basically that, that harmon segara of the new york fed recorded while she was inside and working in an examination role at goldman sachs. >> she started hearing things and seeing things that disturbed her. people were questioning the things she was seeing and her analysis. so she felt like she needed a record to document what she was seeing so there would be an objective thing. and that is why she started recording. she was fired after seven months. >> and there were two instances that were featured prominently in your story that was published this morning. one involved a deal to have gold

man help santaner the spanish bank raise capital. and the second was a big deal, kinder morgan was concerned seven years ago. what did you find in terms of any wrong doing potentially that were raised in the audio tapes. >> it wasn't so much wrong doing. what it showed us was the new york fed sort of treated goldman sachs with kick gloves. they were reluctant to push the bank too hard for information. and the examiner carmen, alleges she found real problems with goldm goldman's compliance program, particularly with conflicts of interest and them trying to pressure her to change them. >> i was going to ask squakjake question. ive been reading this carefully.

there is one thing i want to establish first. there's nothing in here that's been published that gets at the systemic risk issues that people worried about. like the conflict of interest rule is fascinating and the culture issue is fascinating. is there anything in the tapes in which the regulators are overlooking a london whale type deal, anything substantial when it comes to the types of trading that led to the financial crisis. >> no you are right steve. there isn't anything -- what it shows is that they were struggling with how to regulate or supervise a bank that was systemically important like that. but there isn't anything specific to that issue. so they did actually miss the london whale as well. >> right. so the upshot here which is interesting to me is one should take a -- what i took away from this, was if a london whale did come across their desk these supervisors would not be the kinds of people you would rely upon to stop it because of the

culture inside the fed a culture of consensus, where ultimately they have a hard time saying no to the banks. >> it raises the question of whether they are up to being able to do that for sure. >> is that a surprise? i'm not surprised. i'm not a banking guy or a fed guy but i know goldman sachs has a lot of power. is this shocking. >> after so many years of the financial crisis you would hope they would be doing better. i'm a little surprised. obviously we were primed for these kind of failures after 2008 but it's been a number of years. they should be much further along. >> i want to say quickly my conclusion from this was that the fed needs to be publicly audited on the supervisory thing. >> absolutely. >> for reasons that are obvious. it is confidential the conclusions but the process itself needs to be public disclosure and scrutiny. you did a good job making this public here. >> thank you. and independent report after the fed, after the crisis indicated there were some cultural things

that led to these loopholes. we did reach out to goldman sachs, they responded refuting the notion there was no conflict of interest policy at goldman which was reported in the tapes. also directing us to a quote from a new york fed official detailing that just that and also highlighting that ms. nogueira has -- we are looking forward to hearing the full extent of the story but fantastic reporting on this company. thank you so much for bringing that to us today. finally two tech wearables battling head to head. ella moon and up against the mota. you voted and with 58% of the vote, mota's smart ring is this week's leader. congratulations. john, quite a volatile week in

the stock market. we are ending up buying the dips again. dow up 59, s&p and nasdaq in the green as well. seal see what next week brings. >> blackberry up almost 5% today. good for them. and i guess that is all for squawk alley? >> that is. back to hq and the halftime report. more on the markets and this stunning development at pimco. >> welcome to the halftime report. pete and john. jim elev jim. -- kayla mentioned wall street sure is buzzing about the bomb king's move. and how it could impact your portfolio. we have all of those angles covered for you. coming up next