patriots fined a billion dollars over what's commonly called deflate gate. i'm sure you know this already. it's tuesday, may 12th 2015 and squawk box begins right now. ♪ >> live from new york where business never sleeps this is squawk box. >> good morning and welcome to squawk box here on cnbc. becky has the day off today. the first pictures from nepal just coming into the newsroom. we have a 7.3 magnitude earthquake hitting earlier this morning, less than three weeks after a squak killed 8,000 people there. the epicenter was close to base camp and at least two other major tremors followed over the course of 30 minutes. two deaths are reported at this point. switching gears this morning we have breaking news on the global markets this morning. check out the futures right now.

a sea of red. dow open 133 points off. s&p 500 off. and nasdaq off 37 points now. let's look at the ten year treasury. the yields hitting the highest level since early december. looking at 2.338 there. and also you should pay attention to the german bund driving a lot of the action in the global bond market lately and especially overnight. >> 2.3? didn't we close yesterday at 2.2? pretty big move. it was a big decline of more than one point yesterday in the ten year. >> and the bund last time it bounced. we couldn't figure it out. remember that morning we were here early. >> this chart is incredible. >> that was the one that went there and the markets were covered. it's going to test the recent

highs in yield. >> it was because the economy was going. >> it's what we talked about that day. we live by the sword, die by the sword. when rates finally start being normalized in europe -- we were staying low. >> let's show everybody what's going on in the european equity markets. there's a big sell off going on this morning. you can see the dax off almost 2%. the cac off at least over a percent and a half. and ftse off 1.7%. >> those are improvements. a lot of them have been off by 2%. >> 2% here is 360 points 1% is 180 points on the dow. >> here are the other big stories. greece making a 750 million euro loan yesterday. a day before it's due. but reuters is reporting athens

tapped emergency reserves at it's holding account to make that crucial debt payment to the fund. so going from one fund to another. greece is close to running out of cash. unclear how much time they have. still hasn't reached a deal with it's international kred tors. goldman sachs says the market should get ready for another oil price dip. crudes rally over the last couple of months derailed the rebalancing of the commodities price and goldman is downgrading it's 2016 production for oil. and bill dudley is saying a rate hike will happen this year speaking at a policy conference in zurich today. he says policy tightening will depend on the u.s. economy. >> morgan stanley is selling it's physical oil business. that unit has attracted some

heavy regulatory scrutiny. reports say the deal is likely valued at slightly more than $1 billion. >> more trouble for lumber liquidators. the company is facing a ton of wall streets and investigations over allegations of high levels of . they have sued nine carriers for breach of contract. >> let's show you the world markets again this morning. it's a pretty big move in a lot of the major markets. the dow would open lower and s&p and nasdaq by 38 points. europe is off of its lows but still weaker. german dax is now lower by more than 2% but france is lower by 1.6%. the ftse is lower by 1.7% and greece is lower by .5%. we did see the nikkei call it

flat. hang seng lower by 1%. the price of oil in the wake of this goldman call oil is higher by nearly 2%. 114. trading just above 66. okay the ten year yield, if you look at the front page of the wall street journal this morning, 2.2%. already we're at 2.34% this morning. so another big back up in yields at this hour as we continue to see a sell off in the bond market and you can see the yields rising sharply to the right there. here's what's going on with currencies. heres going to cost you a buck 12. and the price of gold is higher by half a percent. >> joining us to break down the

economy, bruce i'll start with you. it's the backdrops in the yield and the economy that's the dog here wagging the stock market's tail. what do you see happening in yields in europe and then here? >> we're fading extremes. if we think about what happens we came into the year with a fear doff deflation and came into it with weakest growth globally in this expansion and one of the two or three weakest global quarters we've had outside of recessions the market responded to that. central banks responded to that. fears doff deflation. fears of secular stagnation and as we move through the second quarter we're starting to see more normal outcomes. the one that's clearest is prices prices. inflation was almost 0. commodity prices were moving up. we're starting to see wage pressures in the country that were more advanced. the thing we haven't seen is

whether the growth was rebounding. we do think that's happening although the data is not clear here. we got to extremes in terms of pricing and bonds and fixed income. i'm not sitting here trying to tell you i'm an economist and i can tell you how the market is going to value this specifically but we're unwinding the extremes. >> what is the german bund going to key off of? growth or inflation? >> both. >> so when it got down to almost 0, how wrong was that in terms of where it should have been and now where it is right now? what do you think the real rate should be just based on fundamentals? >> where we are now from a fundamental -- >> 75 basis points is good? >> it's about right. >> really? pretty slow growth isn't it? >> we're in a world of low inflation and where the ecb is buying debt. bond yields will be lower.

>> if you said 3% sequential inflation, 75 basis points makes no sense. >> that's the normalization of oil prices coming back. we're in a world where globally inflation is going to settle somewhere around where it was in the middle of 2014. we're going to make a round trip. we're in a world in which the fed is going to be starting to tighten. they're going to have low inflation but we're taking on the extremes on the low side. >> the stock market is always smart and we have gone sideways since the beginning of the year as if it was like looking at all of these things we're talking about and saying i'm not sure i'm heading higher. >> a agree with what bruce was saying too. it seemed to swing a little bit too much to the negative and now we're seeing the normalization in yields and oil prices so the market has been trying to digest that and they're looking at

earnings because it always comes down to earnings. it was negative at the beginning of first quarter. now it looks like it will squeak by with a positive so the market is trying to digest that. so a little bit too negative and things are coming in good and we're seeing the normalization. >> fairly valued? is this a time where it's really to get another up leg or at this point is it sort of reflecting all of this? >> i think we're going to have another up leg. second quarter again we're seeing negative expectations. i think we'll go higher. i don't think we're going to see a year like we saw last year but i think we could see high single digits. >> 5% earnings growth is what you're talking about. >> anticipation was for negative. >> at the beginning of the year are we looking for 5% year over year growth. >> we get 8%. >> we've been at 8 and then we

go back down and negative and up too. it's been tough -- it habit been last year or the year before for equities. >> right. it has been tough because we saw the higher oil prices and pull back and first quarter gdp was negative or could be negative after we get our trade report so i think that the market is trying to digest that but i think things were a little bit too pessimistic so we'll see better growth in the second quarter and earnings are going to continue to move forward and at the end of the day that moves markets. >> we'll see. the market right now is nervous about interest rates and that's a low number but compared -- we were just at 18 and if it's 26 27, if the german bund gets back over a percentage point i would imagine some investors would say this is it. >> but we've seen that before. it's to their detriment. they're trying to get in and out

and try to get in front of that and really when the economy is getting better earnings are getting better there's no reason to not be in the market. a lot of people try to time the market and they're afraid of bonds. >> what are you make something you build into your model that the ten year yield is where over the next six months? >> above 2.5 but i don't think it's going to go that much more. we have a policy through the rest of the world pulling things back in here. but we will see it go higher and be predicated on better growth. >> will we have the first quarter 2%? what will we do in this quarter? trend higher to be over 3%? running over 3% by the end of the year? >> we don't think so. note that the first quarter looks like it will get revised into negative territory. >> negative territory. >> we'll get better growth but that's not saying much. i think 2.5 feels right.

>> and i think one of the key questions is whether that underlying growth rate is being held back by really weak productivity performance. we're starting to see them tighten in a way that wage pressures are going to come. they're coming against weak secular moves. >> we get up at 3:45. what do you want us to do to increase our productive. >> i have a couple of suggests. >> 3:45. i haven't seen a 48 hours at 10:00 p.m.. much less what's this guy? who is he? is he retiring? if i did stay up that late i would watch johnny carson. >> is he still on? >> i don't know. i don't know.

>> wait a minute leno. >> just think about this. the first quarter of this year was the weakest quarter of the expansion. the strongest quarter globally in terms of employment growth. >> wow. okay. >> all right. >> thanks. lady and gentleman. good to see you. >> thank you. >> among our stocks this morning, shares of pall corp. scoring. they're in the late stages of an auction this week. an estimated price tag is put at well over $10 billion and you can see the huge move in the stock there on premarket trading. shares getting slammed. warning the current quarter estimates will fall. gap reporting same store sales dropped 12% last month. cites also negative effects from foreign exchange. >> another big story we're focused on this morning.

details about the raid that killed osama bin laden. sources telling cnbc -- >> nbc. >> nbc, cnbc. >> why don't you know what you said. think about what you're saying and then you'll know what you said. >> a so-called walking asset from pakistani intelligence told the cia where the most wanted man in the world was hiding. sources also say the government knew where he was hiding all along. john harwood joins us with the news from nbc. >> this is a story by seymour hurst. he wrote in the london review of books. and essentially he stitched together a story that suggested the white house was fabricating the story of how bin laden was discovered and how the raid was pulled off and it involved the

idea that the government knew where he was and intelligence ageneraldy knew where he was and the audis had in effect financed bin laden's exile and the white house pushed back very strongly from this. they said that this story was riddled with inaccuracies. here's josh earnest responding. >> the obama white house is not the only one to observe that the story is riddled with inaccuracies and outright falsehoods. the former deputy of the cia has said that every sentence was wrong. >> so i think that sums up the administration's view and i do think you have to make a distinction between the larger story that is woven together by him and some individual aspects

of it. for example, is it possible that a walk in intelligence asset provided information that helped lead them to bin laden and it wasn't all about tracking the courier who had been delivering things to bin laden. sure it's possible that somebody had information like that and that fuelled their effort to find bin laden and often times intelligence agencies will try to cover the tracks of an asset who is providing them information. is it possible that someone in the pakistani government knew where bin laden was, sure. but does that mean that the u.s. and pakistani governments were in on a conspiracy to spin out a false story about this? i'm skeptical. john you're so soft. nbc news determined not just that the pakistanis knew but

determined that at least two pakistani sources told the united states he was there. so jessica -- all of that -- >> obviously we figured out that he was there. that's why we struck the compound. >> i know. a year before and it wasn't from someone with a cell phone call in the middle of a crowded marketplace and identifying in the car like we saw on zero dark 30. people said wait a second he's a mile away from a pakistani military inflation. now we know that they knew but we also knew that we knew john and the picture in the war room of how is this going to play out, it causes him to question it plus the media gauntlet -- >> this is the perfect story for you joe. >> the media gauntlet was already killing the messenger and then i saw nbc confirm it too and i was like holy spoke

they better take a step back on killing the messenger and totally giving the white house cover on their story of things and then it make mess think the rest of it could be true too. no? >> it's hard to imagine a story that is more perfectly suited to starting your engines joe. >> i saw you retweet someone that he also determined that "mad men" wasn't filmed in the 60s. there you go. undermining him. and let me just ask you one other thing. where's the new york times and the washington post? a on the clinton foundation and everything that we're now seeing that seems at least would raise some questions, where are we on

that and it had to be si hurst that found out that we knew that bin laden was there? are they going to get involved now? either of these great print organizations? are they going to get involved or no? hands off of this administration. >> joe, have you not read the stories that the new york times and washington posts have been doing about the clinton foundation. >> yeah, based on what they read in the book. why didn't they have any information on that before he wrote it. >> you are so full of it this morning. it's unbelievable. >> they did a ton of independent reporting. certainly the new york times did and that's where the biggest sort of earthquake from the book came. >> maybe they'll go and look into some of these things. see if there is a quid quo pro.

>> you're not affair of the fact that they broke the relationshipstory of clinton's relationship four years ago. >> yeah. >> that's the most explosive allegations in the book. so it was -- so you're way off base on in terms of the new york times and the post. >> all right. we'll see how this plays out. >> hold on a second. >> and then the other thing i like is brady won't turnover personal e-mails. >> brady. >> tom brady. >> oh. >> i'm just saying that's pretty bad. to not turnover your personal e-mails during an investigation or any of your phone records. >> but these news organizations are getting him for the same -- >> he's -- she might get a four

game suspension. he can run for president and get the democratic nomination but he can't play in the first four games. >> andrew you can't disentangle all the threads in joe's head. they're too woven together. >> having sat with this man for many years i can. >> you got your work cut out for you. good work. >> let me just say toen cob collude on the bin laden story, i think the new york times and washington post are skeptical of the hurst story and that's -- when you ask why haven't they covered it i think that's why. >> i wish i had been skeptical, remember that time how could he be living so close to the pakistani military for so long but nobody bothered to dig into that? that's a core failure on the part of many news organizations at the time. coming up a big sports story with bigger money attached.

patriot's quarterback tom brady suspended without pay for four games. the team fined a million for deflate gate. first here's a look back at this date in history. ♪

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>> i think their suspension will be reduced. brady will probably serve 2 to 3 games. >> they will go down 2 or 3. >> the 4 i like from a tv perspective. if he serves four he comes back against indianapolis. >> the team that ratted him out apparently. >> do you think when the commissioner hands down a penalty like this it's almost a negotiation with whoever is going to arbitrate the ultimatedyultimate decision. >> so it would have gone down to one. >> i think that comes into the thinking. that's been the history recently. >> i think it always undermines the power of the mission

customer. >> but the reason this was handed down in the first place, look at the last year of what the nfl dealt with. i would be like my case was decided with all of this history in the past year that influenced goodell. >> i think what happened last summer with the ray rice controversy was a seminole moment for him. it was a market correction for nfl discipline. is this also punishment for not cooperating? >> yeah. it's clear. his cell phone.

>> didn't turnover the personal server. >> that was clearly a factor. they made it clear in other investigations they don't like stone walling and this was partially a stone wall by brady. >> bob kraft's response read incredibly harsh. >> considering the relationship between kraft and goodell historically. he has been one of the biggest backers it stood out as being harsh. he said we are prepared to accept just about any discipline but this went even too far for us us. >> does this have impact on brady as a spokesperson? under armour? their image? >> so me that is minimal. in the places he is popular, he's as popular as ever. >> he's hated as much as ever.

we are here in the month of may and it tells me how far ahead they are. >> does that change? the kraft was a great supporter could you see the whole kingdom un unravel? >> it could short-term. >> they're all in on it. they know what both sides need to do. >> >> so you're saying it was -- >> no it's not as board of directors as boxing. at least football and hockey the puck bounces around. you can't plan everything. >> crucial to all of this there's still no doubt that they would have won otherwise, right?

>> there's no doubt about that. >> if that was -- if there had been doubt, if there was any doubt that would have been whoa. >> there's no doubt about that particular game however the fact of the matter is this had been going on for awhile. >> everybody wants him as down -- every quarterback would probably say i want it down to the minimum amount. >> sure. >> but has anyone proven that it is -- it could almost be superstition. is it really easier to hang on to? >> yeah. >> the size of my hands, the smaller the ball the better a spiral i'm going to throw. i think it makes a significant difference. >> but it wasn't half deflated. >> true. >> let me ask you this to finally end on this how many of the great pitchers had a way of having some vaseline here? i don't even think they thought of it as cheating. they thought of it as -- or had

a little file to rub on the ball to get it to break a little bit more. is it that different. >> a lot of them and there's been this gamesmanship in every sport. that's why i like golf. because in golf you call penalties on yourself. >> you can play alone. >> that too. >> no but shot 68 today. i know i didn't shoot 68. so i can cheat as much as i want. >> people call penalties on theps themselves. there's a code of honor. that's the history of these sports. but to your point there's always going to be gamesmanship and people trying to find a way to fudge the rules. >> you're only cheating yourself. you are. >> and you say that on the golf course. that's why you write down the honest number all the time. >> right. like bill clinton used to

shoot -- it only took him 120 strokes to shoot an 80. >> thank you for coming in. >> thank you, appreciate it. >> coming up a picasso masterpiece sells for $175 million at auction setting a world record. joe has it in his bathroom at home. >> i think. >> there's a little bit of nakedness, joe. >> i'm not absolutely sure. >> is that what attracted you to pay that much money -- >> yeah. >> i think that might -- i don't know. >> okay. by the way, before we do that let's take a quick look at the futures. an ugly start to tuesday on wall street. you're looking at a lot of red arrows. squawk box returns in just a moment.

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a world record setting art auction in new york last night. ro robert frank joins us with the amazing details. >> it was the first time two works of art traded for $100 million in a single auction. they were waiting for the sale of this paint chgwhich carried an estimate of $140 million. >> $160 million. it's yours. sold. >> so that hammer price of $160 million works out to a total sale price of $179.4 million. that includes the auction fees

and commissions. this was regarded as one of the best picassos still in private hands. it was paying homage to the 19th century master. it was bought for $212,000 by the american collector. this piece was last sold in 1997 for $31.9 million. so that's up five fold from 1997. much better than the stock market. now another record broken last night was for this piece. a sculpture called man pointing. it went for 140$140 million. this is just the warm up guys. we have post war and contemporary and then christie's again on wednesday. >> any idea who bought this

stuff? >> both anonymous. >> on this picasso there were two bidders left. there were two billionaires that want the same thing. once we got past 140 and 150 it was one guy on the phone and another guy on the phone. we think this was sold by a saudi that bought it in 1997 and had it in his london apartment. we also don't know who bought the other piece. >> how big is it? >> 4 by 5. so for a picasso it's quite large but what today's wealthy love is big paintings with lots of colors. >> they have walls. >> big walls. >> but what's so important about art as an asset class, it is the single asset class who can suck up $170 million in under five feet. you can't do that. there's very little jewelry. art is the only asset class that achieves that.

>> it's portable and secure and all the rich guys that look at this painting say look at what the value of this piece has done since 1997. there's 2,000 billionaires in the world. the number of picassos is shrinking. this is a good store of value overtime until it's not. >> unless you believe it's part of the asset bubble inflation. >> which it clearly is. >> or the zombie apocalypse. >> it's useless. >> all the stuff is useless in the zombie apocalypse. >> there's a couple of hundred people that can. >> probably less than 100 and all it takes is 2. >> all right. coming up the ceo of wayfair. the stock is up 51% this year after getting battered since it's october ipo and later we will reveal the 2015 cnbc disruptor 50 list. another list. the companies changing the

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welcome back to squawk box. it's time for the squawk planner. the labor department will be releasing it's job openings and labor turnover survey at 10:00 eastern time. the data point will give us a good look at if people are quitting jobs. if governor of maryland is to

decide whether to allow tesla to sell in that state. a manufacturer can be licensed as a vehicle dealer if it sells only electric vehicles and the republican national committee is holding it's spring meeting in scottsdale an that's today's squawk planner. >> online furnishing retail giant wayfair says new and returning customer purchases are on the rise. stock is up 30% in the last three months. join us is the co-founder and ceo of wayfair. good to have you here. did i get your first name right? >> i'm not picky so that's close. i love it. you're fairly new to going public and still growing. so we'll talk about when you want to be profitable in a bit. revenue was up 5 %. did you buy something or did you build that? >> it's all organic and to be honest our direct retail business which is the over 80 or 85% of our business is actually up 63%.

we have a legacy piece of our business that's not growing and it's because we offer something that others don offer and online is taking share. >> all modern burch lane wayfair.com. when you say direct sales. >> it's the five brands. it's customers coming directly to those websites and buying directly from us. >> it's advertising that's getting you there or what? >> we're spending a lot on advertising and if you look at repeat metrics customers are coming back more often. >> who is your core customer? >> a woman. household welcome wise. 60 to $100,000. and it's basically a woman that wants her house to be special and unique and frankly is not well served by the other choice out there in terms of access to selection while still being

affordable. >> path to profitability? how soon do you want to be profitable? >> the reason we're losing money is we're aggressively growing. the path to profitability if you look at the sale side research coverage in terms of the 20 people that cover us they all have us getting profitable at the end of next year. >> how tied are you to household formation or the real estate market. >> i don't think we have. on average it's growing 15 to 18%. the overall category at retail is only growing at 2%. the vast majority of the online growth is shifting from brick and mortar to online. >> every single part of the retail market. >> that's exactly it. >> good luck to you. >> thank you. >> nice to see you. >> coming up the major networks hosting up front presentations

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changed the way content is produced and now has its sight set on the future. man nling director anthony joins covers media and the internet. thank you, joe. >> how high can this stock really go? i know you're so bullish on this company so it's hard to get you off of that. at what point does is the stock valuation too high. >> they have more subscribers globally than any other media company. they can effectively pay more for a piece of content and aamortizing is and higher levels of profitability for the enterprise. i think at the very least, they can do $25 of earnings in 2020. i think, ultimately that's going to $50. at least in the median two to three-year term $25 for the 30

times multiple you get to 750 on the stock and that is i would say a bull case. >> do you think they have any pressures to raise prices. they have a very slim margin relative to an hbo, for example. >> i think that speaks to the runway and trajectory of the margins from here. hbo is in the mid-30s. >> meaning hbo will have to reduce its margins to compete or netflix will come up. >> i think as netflix grows in scale, it will drop to the bottom line. if you look at hbo now service, it's priced at $15 a month and i think it's very possible that that is giving netflix a pricing umbrella because the usage is much higher on netflix. the hours per view or the hours per user. >> you don't believe netflix's costs zil to continue to go up as it has to buy more and more programming to try to compete. >> they're getting more surgical on the buys. what the company talks about is when they buy original

programming, the hours per viewer are much higher on those. they see all the data and they know what we're watching and what to spend on. their deals are one or two or three years. when those deals roll off, they know what to buy. smarter about content acquisition and push into originals. >> there is some lousy programming on netflix. once you get past some of the originals. >> i got rid of my subscription because there was nothing to watch. >> a wasteland of -- >> lately any movie, i say, kids, no i haven't seen it. all right, let's get it on netflix. let's set it up. 0 for 10. i hit it up. movies that are similar to "no country for old men." i don't want similar movies. why can't they get it. i'll pay for it. >> you guys are looking for new releases. >> i've seen them on hbo. >> we look up for peter pan.

they have peter pan, they have like a play a play of peter pan. >> they don't have what i need. >> the truth is they've got 59 million globes and they're watching 2 hours a day. that's not just not on the back background. >> how much of it is kids? >> a lot of it is kids. they don't need the, for example -- >> if it's mostly kids, it sounds like it's a very cheap babysitter. >> that makes sense. good quality disney kids' programming that works for parents and that's fine. >> but that's hardly the hbo model which is adults really loving programming and pay for it because i have to see the final episode'. >> i think "house of cards" is a great example of that. "orange is the new black" and now "blood line" is getting a huge amount of buzz. they are absolutely moving into

that premium category. >> weak. >> now, did you see it? >> i haven't. >> you have family down in the keys. is that the family down in florida? >> yeah, weak. i watched one episode and had plenty of it. >> i know this is cable tv. cable tv ratings are down what 10 11 -- >> where does it go? >> no. that's where it's going. >> i know i wrm. >> you're right. that's where a lot of the programming is going. >> in daytime it's not happening either. daytime is up 22%, 23%. you don't have to cover your ears. >> okay good it's not true. >> thank you. >> not this quarter. major global market selloff. check out the futures pretty negative. we'll have a lot more of it covered when "squawk box" comes right back.

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market alert. if you're just waking up brace yourself for red arrows. the latest on a global selloff and a new chapter in the greek debt drama. a new dip in the oil coming. a new report from goldman sachs. details ahead. surprising crash test results for suvs. which models earned a poor rating even as sales ratings picked up speed. the second hour of "squawk box" begins right now. live from the beating heart of business new york city. this is "squawk box."

welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen. look at u.s. equity futures because they are down this morning and down sharply. off 147 points. the dow, s&p 500 would open up about 18 points and nasdaq looks like it would open 80 points. overseas in europe news is not any better. you're looking at the dax over 8% and the cac off by 1.7%. and the ftse off by 1.75%. very big breaking news this morning. verizon announcing that it will buy aol for $50 per share or approximately $4.4 billion in cash. now, aol closed yesterday at 42.59 per share. the price represents a premium of about 17.4%. it will become a wholly owned

subsidiary of verizon once the deal is completed. aol ceo tim armstrong and we'll hear from him here in just a moment. this is huge knews s news in the path of aol. started by steve case and then going part of time warner and being spun off again and now part of verizon. follows a trend, if ayou will of comcast buying nbc. this is about the pipes buying the content. and ott. putting verizon in a place where it can offer programming and programs and web content over multiple screens. i imagine we'll talk to tim armstrong more about this. this has more to do with programmatic advertising. but, you know this is one of the companies when you think about aol, 2009 tim armstrong came to this company and people counted this company out. it was done, over with if you had an aol e-mail address, you

were a has been. he bought huffington post and changed the perception of what this company is and what it is all about and has become a real major media company. when you look by the way, looks like the stock is up about 73% under tim armstrong's tenure. he joined in 2009 and if you remember a period at which he also paid a huge dividend to shareholders after he found a remarkable amount of value in the company. >> in the patents. >> that he sold. >> they had found these patents which nobody had included in the value of the business. >> verizon has the money and use commercial paper for what it doesn't have. aol/time warner one of those companies was valued at $100 billion. so, this went to under a billion dollars and now tim is selling it at $4.4 billion. so, he did bring it back to $4.4 billion. but it's an aol that is maybe

peaking out that at one point was worth, was able to pay $100 billion for another company with time warner right? >> at a different time. >> so it's back. it's back and it's a real company that makes real money and it is worth $4.4 billion. got huffington post. but it wasn't the, i mean there was a movie starring tom hanks and somebody else that we talked about yesterday called "you've got mail." >> at 9:30 when the morning would happen and right near the cnbc post. and every first trade. 10,000 shares just traded. >> there were rabid stock owners that had maybe an odd lot like 60 shares that we branded the aol because if you ever even twitched in not a positive way, they would write in and curse you. they are now in apple and, actually the appleunians. he would add up four dow components and not equal the

market cap of a oorx lol. done a great job. up 70% or whatever. more than that, i think. wasn't it below a billion dollars when he took over? >> i think it might have been below. >> not 70%. >> some of the numbers we were looking at i think he joined in march 2009. one point to watch and we should look for this this morning is other content company and what cable companies and other pipe companies so if you're directv, at&t. >> why does verizon want content? this goes to a longer debate which is are you better being a dumb pipe and collecting effectively -- >> wrote a whole book about that very topic. >> the dump pipe business is a higher margin business than potentially even offering the program. but as brian roberts, you know who runs comcast, parent company of this network says he doesn't want to run it. otherwise you're a utility.

the real value creation is having -- >> very innewative to think, i run a cable company and i want to control the content but now verizon used to be a telephone company. but it, too, is evolving. rethinking of what it is and where television distribution is going. right? >> to that point, then you think to yourself okay, if at&t is trying to buy directv. do they need to own exclusive content. with its ticket the nfl ticket the deal that it's got. butter but other things like that. is netflix more valuable as an independent or a pipe company? >> this is not a transformative deal like a directv and at&t. it almost seems like -- >> the landscape of content players around. who could fit in nicely. >> this is about having something to put on fios.

that simple. >> we should tell you right now somebody who can could answer some of these questions better. >> he probably knew what the stock was when he took over too. >> we have a potential guest. first on cnbc and thrilled to have him just minutes or even second after this crossed the tape. tim armstrong the chairman and ceo of aol who is doing this deal and will remain with the company. tim, good morning to you. >> hey, andrew. how are you? >> let's start we're all surprised. let's go back to the beginning. how did this happen? >> aol has focused in on what are the two largest growth markets in the world which are video and mobile. both of those are projected to be $40 billion each over the next four years. you know, we have built our systems, our talent and the global scale of what we're doing in that direction. verizon has been one of our biggest partner sxsz best partners since i've been at the company. i think there was a natural set of conversations that have happened over time and, you

know, over the last couple months that got more serious. and i think we share a combined vision and this will be one of the largest scale, most exciting, you know biggest platforms for the future of mobile and ott content and video. so in advertising, it's very very powerful platform. >> why sell now? >> i'm sorry. >> why sell now? we're sort of in the golden age of content. are we at the top of the golden age? >> matter of fact, if you look at oorx aol over the last five years. aol is a company we turn the company around and outperform the s&p 500 for the last five years and when you look at where we are today and where we're going. we made aol as big as it can possibly be in today's landscape landscape. if you look forward five years you're going to be in a space where there is massive global scale networks and no better partner for us to go forward than verizon. really not about selling the

company today. it's really about setting up for the next five to ten years. and we've spoken for years about this. our vision has remained consistent. the world is changing and for aol and for our shareholders today is a great day. more importantly for aol's talent and the next five years with verizon. we'll do a lot of meaningful things. >> maybe you should have taken stock. >> you know i'm one of the ceos that invested. i'm highly vested in verizon. i'll be there as one of the executives. >> we don't know about your deal at verizon. are you going to buy verizon stock? >> where will certainly buy verizon stock, the same way i bought aol stock. >> what was your cheapest price on your acquisition of aol? do you remember? >> i was in the 20s, probably. the lowest when i bought stock myself. >> what was it the day you started.

what was the company worth? was it under $1 billion? >> no we had trading that started before we spun out at timewarner, but that was in the low 20s. >> tim, can you speak to this larger issue that we were talking about before you came on. which, actually i know you're on the aol side but speak to the verizon issue. why the pipe business needs to own content now. >> well you know i think i haven't started at verizon yet. the deal announced but not close. i'm not going to comment on anything having to do with verizon untle i'm officially in there. if you look at the mega trend across the industry. companies like verizon that have done an amazing job of building out. verizon has 1.5 billion connected devices in the united states. they touch 75% of the internet traffic in the united states. if you look at what they're able to do from a value add services standpoint. but more premium high quality video and the internet of things

will hit and companies like verizon be in a good position for the future and you'll see that happening across other companies. >> play this out for me. this is michelle good morning. >> good morning. >> i have a verizon phone and a year from now, what can i do on that phone that's related to aol content that i couldn't do before? what does this all mean in terms of the actual customer experience? >> so, i think, you know number one, verizon, i won't speak for them, but the folks at verizon are going to do whatever is in the best interest of the consumer. part of that will be aol content and services for sure. and some of our powerful brands like huffington post and tech boast. verizon has been centered around really making the connection from the home to the phone to the car. you know very easy for content and services. what i think you'll end up with is a much deeper relationship with verizon over time in terms of verizon doing you better

better commerce opportunities and aol will be one piece of that. >> do you expect a lot of your content, huffington post content it be exclusive to verizon or expect it to continue to be open and broadly available. does that limit you? >> you know, andrew, our strategy has been an open strategy at aol and verizon has done a large amount of deals with the nfl. even if you look at the way aol content has been going on other platforms, sponsored by verizon. they have taken an open approach. that won't be done until the deal closes. i think you should aassume that verizon and aol are very open platform approach, by the way. that is very differentiated from some of the larger silicon valley players that have closed businesses. i think taking a big and open approach to this over time. mcadams and the team at verizon have been very forward thinking

in some of the areas and the other deals that they have been doing across the board for the future. we are very excited about today and a very big shared vision between the companies. >> tim now that you've done this deal, maybe we can go back to history and go through your thinking over the past several years. you have long been speculated as a merger candidate with somebody. whether it be yahoo! at certain points whether it be other content companies. to the extent you can, can you walk us through some of the permitations that you and the board have thought about? >> fred reynolds our lead director somebody that i talk to every single week and we've spoken hundreds of times over the course of the years with aol board around closing this deal off. you know really when we spun out of time warner the plan was to basically be really big at content, video and advertising and the it rashzerations at aol have stayed on those pathways and a lot of noise around aol over the

years about mergeens and partnerships and those things. but i think a lot of it comes that we have 4,500 really talented people here and we basically, the wayne gretzky quote of it's not where the puck is it's where the puck is going and aol skated to where the puck is going to be and today is the single best example of why people invested in aol. >> tim, you could have looked around at what was available for you to acquire with your size. and you could have made a decision on wanting aol to stay aol. you made a decision that that wasn't going to be the route to go. i'm going to be part of a much bigger enterprise. that is the main decision you made. >> joe, if you take a step back you say at our size scale and you think about the mobile platform shift happening in ott, you know i've said this on your program before. i mean there is absolutely no doubt in my mind that there are 40 50 companies chasing

probably what is ten seats or so 7 to 15 seats available. this is a chance for us to basically pull up a chair with verizon, you know, at the table. we're starting off at a combined platform that will be scale wise, google facebook size overall. we are in a strong position and my decision as ceo and the board's decision was about shareholders. we outperform the s&p 500 for the last five years. what does it take to go forward? we could go out and acquire companies and the biggest way for us to have shareholders get a return but in our talent to have a bright future was basically get a big chair at a big table and that is what this all about. >> advertising on phones just doesn't pay the same. relying on the business model is the best way to go in firms of a strictly internet platform. >> maybe i have been contrarrian on this over time but i think it worked out. when you think about mobile and

targeted advertising, you know e, your add prices are going to go up the ability to have better ads, more consumers, more timely with better analytics behind it is actually happening today and i think you're going to see things like private market places and programmatic make mobile shine. i'm hoping the shiniest company is the in verizen and aol and both markets video for mobile and mobile advertising are both projected to go at 30% over the next five years and we'll start with the best single combined platform, i think. >> tim armstrong thought about legacy. you came from google. they said, what is he doing? so here the book gets closed. tim armstrong 20 to 50. "new york post" on sunday has the winner and loser thing. so you know, you can peg it at 50 and it's done. you're a winner. you succeeded in turning aol

around and now you can move on. you're a young guy, right? am i right or am i right? >> joe, i spent a lot of time with you over the years. it's about the future. >> and the employees. >> and the employees. joe, listen my wife asked me one question when i took the aol job. >> what are you doing? >> she said that too. do you know what you're doing and do you know that you'll get the people to help turn the company around and i said yes. i think today before i left this morning she said do you guys know what you're going to do in the future? and i said that and i mean it. >> you can always crawl back down to 20. crashed and burned. even from here on out. now, boom 50 you're done. >> mark this moment. no longer a separate listing of aol. something i know from the history of cnbc. we wrote it with you. i don't know in my lifetime it's interesting to have seen it. not going to feel bad and not be listed any more? >> my job is whether or not the

company is listed it's weather or not our talent gets the list in the future. i think this deal will allow the 4,500 people here and plus the people at verizon. >> steve, you have a couple hundred million. steve case owns hawaii and jerry levin has an aroma therapy place out in santa monica and it's all said and done. >> i'm still giving consumers content. >> hey, tim, couple of quick things. help us with this first. was there an auction? give us back story here. meaning, who went to whom? how did this happen? >> you know, basically, this happened in a very natural way and no auction. basically over the course of time i sat down last summer at the sun valley conference and we talked about where the world was going and we have been big partners and we were kind of reviewing what the companies were doing together. that sort of kicked off sort of a natural progression to where we are today. and i think facilitated by nancy

and alan and company and dave ashapiro we were able to basically bring this deal together in a way that i think was incredibly natural. if you look at the two visions on the companies and the platforms and both companies were doing the same thing. >> it's trading slightly above the premium right now. you didn't shop this to anybody else? >> no, i'm committed to doing the deal with verizon and i think that as we chose each other because that's the path we're on. i gave the team at verizon my word that, you know we're in a place where this deal is going to happen and we're excited about it. >> is there a break-up fee? i. >> i'm not going to comment on any deal specifics. >> that will be out in the filings in the next day or two? >> a deal that is a few dishiary well done deal for our shareholders but really this deal has been about putting the vision together with verizon. >> not to push you on it but why not pursue an auction? >> you know andrew i think the

process of where we are as a company right now and the process we went through and knew you guys covered, lots of rumors about aol in general. so, if somebody we have always been a public company and been available. if somebody wanted to come do a deal with us, they would have done it. verizon deal was built around the strategy of where we're going. >> how long do you plan to stick around? >> i signed a document last night. i'll be there for a long period of time. >> is that a year, two years? longer than two years? >> longer. >> longer than two years. >> is verizon, you know for a fact always dpoeg to be comfortable with "huffington post" content. knowing you, were you always comfortable with the "huffington post" content, tim? >> "huffington post" is going to be on more platforms and places along with all the other content that verizon and aol has. >> doesn't offset the bias of the "huffington post."

>> tell me when you called arianna this morning she said marvelous, darling. >> i gave her one message. this is great for "the huffington post" and this is going to be huge. >> what did she say back? >> i can't tell you that. we have a company meeting later today and we'll discuss all of that inside the company. i don't know. joe, were you on "huffington post" this morning. >> you know i'm on ten times a day. >> all right. now that the deal is done you're going to have to increase it to 12 times per day. >> are you a masochist. >> i look at huffington post. >> i get stuck there. they do something with their page that makes it super sticky. it makes me crazy. >> 20 celebrities that have had gentle plastic surgeries or something. or butt implants and i have to look at each single one. kanye, you're kidding! anyway. >> so, joe e, the most important thing out of the huffington post

and tech crunch and all the other content that we own is great content and really sticky. >> tim, before you go, last question just because one of the things we're going to watch for today is whether there becomes more speculation about your rivals and competitors in the space and whether you think other pipes and distributors are going to need and want to buy them as a result of sort of a dominos-like theme here. your sense that that might happen or not? >> i was out with michael powell and kera swisher last week and we were chatting about that. i think the reality is the fog has lifted in this industry and i think the companies that do the best job of both distributing and providing content and services to people are going to win. consumers want a simplified platform and, again, that's why this deal is exciting now. we'll provide a lot of people with a simplified video platform and we're doing it with one of the biggest and best companies in the world. >> tim armstrong of aol.

thank you for joining us first on cnbc. congratulations on the transaction. >> thanks see you soon. coming up, when we return, the latest on the global market selloff. it has continued while we were on with mr. armstrong. we'll talk to a top strategist next. the top changer companies. we'll do that at 7:30 eastern time. plus the prophet is back. marcus lemons is joining us ahead of tonight's season premiere. how he will turn around struggling companies. "squawk box" will return in just a moment.

with xfinity from comcast you can manage your account anytime, anywhere on any device. just sign into my account to pay bills manage service appointments and find answers to your questions. you can even check your connection status on your phone. now it's easier than ever to manage your account. get started at xfinity.com/myaccount

welcome back to "squawk box." if you're waking up, verizon is buying aol. u.s. future equities this morning are reflecting what is happening overnight in europe and yashasia. now down 139 points. greece is making 750 million euro loan repayment to the imf. made it late yesterday. reuters is reporting that athens tapped emergency reserves in its holding account to make that crucial debt payment to the amf. so that's peter and paul peter to pay paul. greece is close to running out of cash. still hasn't reached a deal with its international creditors. plus, the german is back up over

70 basis points and now the ten-year is at multi-month highs. at least it was earlier. >> nearly ten points higher than where it was yesterday. that is a pretty big move. for more on the global market selloff. we are joined by a global market strategist at jpmorgan funds. you like the job number on friday not too hot, not too cold? do you think it sets us up for positive action? not today. >> certainly not today. today as you guys pointed out it's all about the german. even though the number was okay. the job's number was good but not too great. which would bode well for the bond market what really matters right now to the u.s. treasury what is happening in europe. if you look at the moves in the short end of the market you know german moves one way and u.s. treasury moves the other way. if you look at the longer part of the market a very strong and positive correlation. we cannot unshackle ourselves right now. we do care about it and you see

the chart there right now. it is absolutely surged. but i think for that exact reason the selloff in the bund may be over done because too much, too fast. the ceo come june 3rd is not going to like that. >> why is it happening? >> it's happening for several reasons. one of them actual positive one. that is credit growth. credit growth has picked up. if you look at spain and italy the numbers we got a couple weeks ago have been very very positive. it seems like q/e is finally working. the other reason it surge here is a more technical one. too much supply in too short a period of time. for example, for the month of may, we have gotten net issuance that is positive. this is the first time for the entire year. so because there is this technical reason and because it's not going to like it i think that's why it is overdone. today, it is weighing down the european indices. >> you wonder why the public is

not back in the market. you have to watch the german bund what is going on. i thought the german bund was like a cake. what is that? what is that called? >> that's a bunt. >> this is bund. >> there is a t on the bundt cake. >> that's an entirely different thing then. it's just hard for people at home to know what to watch. >> imagine we're teeing off the german bund. >> it was negative for a while. >> that's an easy thing to explain to people. negative interest rates. anyway, thank you. >> thank you for having us. >> you're welcome. coming up we're just minutes away from unveiling cnbc's list of the top 50 disrupters. stick around.

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welcome back to "squawk box." among the stories front and center. verizon buying aol for $50 a

share. about $4.4 billion. it's about a 17% premium to aol closing price yesterday. see the huge move there in the premarket trading. painting by pablo picasso setting a new record. picasso's women selling for $179 million at christie's auction house. u.s. equity futures not selling so well. the dow would open lower by about 145 points. a lot of that has to do with the big selloff in europe. we see long-term interest rates rise. when we come back the top 50 companies changing the business landscape. the disrupter list. we'll unveil the top startps to become billion dollar businesses. we'll do that when "squawk box" returns in just a moment.

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welcome back. time to reveal the 2015 disrupter 50. this is cnbc third annual list of the most disruptive private companies in the world. julia boorstin joins us now from los angeles and she has the big

reveal. >> the most innovative companies revolutionizing the business landscape. this year's list was selected from 400 nominees using qualitative analysis. the 50 companies have raised more than $22 billion and at least 19 are unicorns with a valuation of a billion dollars or more. the upstarts are threatening the status quo and changing the way we do everything. here are the top five. number five airbnb. fighting big legal battles as its users rent lodging in 35,000 cities. it's growing fast in europe where the stronger dollar has american tourists rushing in and europeans looking for extra income. >> this concept has been growing faster there and actually over half of our business is now based in europe. >> number four. uber. also no stranger to regulatory battles. it's raised almost $5 billion

and wreaking havoc on the public transportation landscape. number three. bloom energy. raised $1.1 billion to build self-contained for biggest corporations including walmart, ebay and fedex. >> two, threehree, two, one, liftoff. united launch alliance to bring down the cost of getting into orbit. ceo elon musk is gunning for mars. >> a self-sustaining city on mars. >> this year's number one is moderna pharmaceutic. develops new drugs taking a broad approach and emasing an army of leading scientists moderna has dozens of preclinical programs in the works. ranging from biodefense to heart

disease to cancer treatments. >> those are just the first five. the rest of the list of these innovators along with in-depth coverage and analysis are disrupter50.cnbc.com. >> i have a couple questions before you go. this is important. number 50 on the list and these are in rank order, right? number 50 how can be snapchat is number 50. we have snapchat below things like square. >> yeah it's interesting, andrew, because the ranking changes every year. snapchat is certainly a very disruptive company. the very important thing is that the companies are on the list. but the way that they're ranked is kind of complicated because we have to keep in mind that we're ranking companies like moderna therapeutic that make pharmaceutical drugs against companies like snapchat that do things. we rank with data and analysis and different metrics, many

which the companies provide to us about the size of the market they're disrupting and also different things like competitor competitors and regulatory threats. it's a complicated thing. and i'm not personally responsible for ranking them. it's kind of interesting how these different companies shake out and a different kind of ranking because we're just not ranking companies in their own industry. >> julia a very cool list. thank you for bringing it to us. we'll have lists and we'll tell you about this. heading to spacex headquarters where she'll talk to chief operating officer gwen shotwell and she'll do it at 10:00 a.m. eastern time and then "squawk on the street" and throughout the day more interviews with the executive s executives executives. take a look u.s. equityies

futures weak. up next "the prophet." marcus lemones is back. how much money he is risking this season and how the companies he is already working with are doing since he took over. plus surprising results from new crash tests and why poor safety ratings never seem to put a dent no matter what in one iconic american brand.

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>> fixing the business is hard enough and then throwing that on top -- i would rather just check out. i can't take this. >> what part? >> all of it.

i understand what you're saying and where you're coming from. i'm only human. i'm not a robot. >> i didn't ask you to be like a robot. he doesn't want to hear you say i'm sorry like i feel like i pushed you out. very sorry than saying,er i'm sorry you got pushed out of here. it's very different. >> i understand what you're saying. >> go fix it. i'm not oprah. to think your brother doesn't add some value is asinine. i think he can add something to the business rch that was a sneak peek from tonight's season premiere of "the profit." always dramatic here with us to talk about it. people, process, product and putting his money where his mouth is. of course, host of our hit primetime show. >> is it always dramatic? >> well it is. you know, that you have people crying. >> this is dramatic. >> this is reality. this is real reality. what i call i call it scripted unscripted which is sort of like

the pretend reality. this is real reality. >> this is real. >> there's no crying in baseball. >> there's crying in drama. >> did he know he was being filmed? >> he signs a release. this is cnbc. signing your life away. >> from outside the window. >> i didn't the cameraman did. >> the view doesn't know why. >> i didn't know they were outside. i honestly didn't know. >> it's really unscripted. >> what is neat about the guy is it's a drum company in massachusetts. they make drums real good stuff. they make drum sets for a lot of big band. they make $5,000 $6,000 sets. the average person can't afford that. we changed the entire business model. >> what is the model? >> entry-level drum.

we partner with school of rock and make an intermediate drum and partner with sam ash ask then our custom drum. >> you took control of the company. as you like to do. >> i take control of the company, i didn't buy 51%. people get confused by that. >> you take special shares. what do you mean? >> i document everything. full operational control. i could have 10%. like if you and i do a deal for 10%, i'm still going to -- >> you're running it at 10%. >> shay sign you over because they need your help. >> i would think, still, if that was litigated, would you prevail prevail. >> yes. >> even though own majority. >> really, the votes don't matter at that point. you think about minority share positions a lot of companies have and there are control provisions in any esort of minority shared provisions. >> but him crying. this crying is, i think, em

business is tough. >> this isnist trg because it's two brothers who started the business together that broke off and they're coming back together. and i'm forcing them to come back together and he's upset because he hasn't talked to his brother in three years and they live in the same house. >> better companies this time? >> different. a lot more manufacturing. furniture manufacturing. >> by happenstance, by choice? >> i think the applications have gotten different. when we first started the applications were different. small popcorn and dog place and now they're $10 million $12 million manufacturers. >> i ask you whether you're up on your investments? are you allowed to say how much? >> i have about $24 million invested of my own money. a little scary. i had some gone bad. i lost $1.5 million on deals gone bad. >> do we know which ones they are? >> a brooklyn meat company go bad. i had to litigate with them in new york city over the name and i lost because the court said

i'm sorry, tv, those contracts aren't good enough. >> even with the cameras rolling. >> doesn't matter. "the post" wrote about it. a hand shake, you can film it. the judge said sorry. >> what has been the best? >> the best is probably car, cash and auto. they have grown a lot. >> we have to play a little game with him while we have him here. our turn around expert. i want to go through a couple things. whether a couple things are salvageable, fixable. some publicly traded. radio shack, salvageable? >> in a different form. >> a store in store model would be fine but not self-standing stores. merchandising is terrible. >> bigger and possibly even more challenging, mcdonald's? >> salvageable. >> focus on menu, better relationships with the franchisees franchisees, listen to the franchisees franchisees, i think the breakfast all day is a good idea. >> rental car companies. we talked about them the other

day with phil lebeau. >> how do you distribute the cars at the end of the cycle. it's the remarketing of the cars that is always a challenge. when you go to certain cars today and you can uber it and share rides. >> people still smoke. >> they smoke, but you can take out the carpet. >> i don't see anyone smoking, why do they always smell like someone was just smoking. >> i know. >> this is my favorite and one near me that closed down and i don't think it's reopening. crumbs. this is the cupcake maker. >> i think you'll see, you know i partner would the fisher family out of texas. >> bought it out of bankruptcy. >> i'm a minority partner there. i think you'll see me take a different path. i have a big, big investment in a company called sweet pete's. $5 million invested in that business. there may be something changing. >> maybe some action. >> trying to buy crumbs. >> i like the product.

i have to -- >> the owner is not -- >> i'm concerned about the ability to change the model completely when you don't have control. >> which reality shows do you watch, besides yours? >> i don't actually watch ours. it's like making thanksgiving and you don't eat. which reality shows do i watch? i watch pbs, which is based on -- it's a great show. >> is that jeremy show? is it good? >> it is a fun show. >> takes you back and shows you how a department store was started in london that was based on the marshall field model. >> you know julian is going to have a show on nbc, too. early new york. should be unbelievable. >> i can't wait. >> my daughter finally started watching. once you got past the first episode where mary beds the -- >> don't say anything. just know, by the way --

>> you call that a tease. remember that? >> oh, yeah. >> i mean when that happens. >> very handsome. >> not coming on the air, apparently, for another two years at least because he needs to finish that final season'. >> of dontown abby." >> bitter sweet. >> chocolate cake you can't stop eating. >> one more thing, guys. share the profit we're raising money for small businesses. 85,000 retweets or shares. we get to $100,000. >> i'm on it. >> share the profit. >> market lemones, thank you for being here. the season premiere of "the profit" airs tonight at 10:00 p.m. eastern time and pacific right here on cnbc. we're back in a moment. coming up sales of mid-size suvs are up but safety ratings are down. phil lebeau will have the details right after this quick break.

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surprising crash test results out this morning on mid-size suvs. phil lebeau joins us with the latest. hi phil. >> the insurance institute for highway safety does these type of crash tests where they'll take a bunch of vehicles in a certain segment and do them and look at this video that was provided by the iihs. these are small overlap crash tests where the front corner hits another car or an object at 40 miles per hour. one of the more common front

edge collisions and the results are not good especially for the fiat chrysler brands. of the seven mid-size suvs that were tested. three of them were even marginal or poor from fiat chrysler. the dur ango cherokee and then the lone poor rating came from the dodge journey. here is the head of research for the insurance institute on what this test says. >> well it's a little disappointing. you'd like to see more good andin performance but we are seeing improvement over time and the top performing nissan murano is a good example of the progress being made. >> here is a response from fiat chrysler. no single test determines overall real world vehicle safety. every fca u.s. vehicle subjected to iihs evaluations of four key crash scenarios, all of those

received the highest possible ratings in each. but the bottom line is this guys. these crash tests, they are disturbing. when you watch them and is you see some of the results for some of these models. i don't think it will have an impact on fiat and jeep sales. i've done a number of reports where jeep is either rated near the bottom or at the bottom when it comes to reliability, customer satisfaction and in this case the crash test and look at their sales this year. up 21%. why? the styling is spot on with this market right now and at the end of the day that's what consumers are looking at. they're not looking at crash tests necessarily. it's an interesting test out today. but i'm not sure it's going to have a huge impact on jeep. >> right. yeah. those crash tests. amazing, phil. anyway, thank you. >> you bet. >> we'll see you later. coming up big moves in equity futures and strategists from black rock and bessemer

trust. it's not good. we'll be back.

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ing breaking news on the media

front. >> about setting up for the next five to ten years. >> aol being bought by verizon. another sign in the changing media landscape. the details and street reaction is just ahead. a global market selloff. putting pressures on equity. paul ebner shares his market perspective and where he is putting his money to work for clients. a battle brewing over bottled water. why starbucks is moving its business from the golden state to the keystone state as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york. this is "squawk box." welcome back to cnbc. we're first in business worldwide and this is "squawk box." i'm michelle curusa cabrera. becky is off today. we're about 90 minutes away from the opening bell on wall street. right now the futures indicate a negative open and dow would open

lower by 128 points a lot of that due to what is happening in europe where we're seeing a selloff there. germany lowered by more than 2%. it's about there right now. and we are continuing to see a selloff in the bond markets, particularly the ten-year u.s. treasury along with the german ten-year bund. >> we're joined by joe, president in investment strategist and we had someone on earlier, joe saying it is all about the german bund and at 75 basis points correct me if i'm wrong, it's only got 75 basis points before it goes to zero. i know it can go negative but probably won't do that again. it's got, almost like being short a stock. infuimate amount of moving higher. every time it goes up a quarter of a point, are we going to sell-off here? is that something -- it is not going to stop here at 75 forever. >> it will probably not stop here. i did hear anisetasia comments. you have the asuretmic risk.

i think we're keying off germany. >> how can we go to three -- that's what people said. everybody predicting 2.5% to 3% on the ten-year. once we saw everybody below 2 and below 1. how is the ten-year going to go up to 2.5 or 3. now it can. getting unshackled. >> slowly slowly getting there. i think, of course greece will continue to be in the headlines and keep a lid on interest rates from moving too low. we also have think about what is happening with the fed and all this news creating volatility in the markets. >> is volatility the word for going no where since the beginning of the year? >> i think we're looking at some choppiness. but i suspect between now and the end of the year we'll see interest rates move a little bit higher. keep in mind we have not had a federal reserve raising interest rates in a very long time and i suspect it's going to create some anxiety.

i think you'll see more choppiness and this volatility we're seeing in the market is something we need to get used to. >> we get 5% earnings growth this year and 2% dividend yield. so on december 31st is your average stop going to be up 7% for 2015? >> you know f i look at it from a top down perspective, it's difficult to argue with that logic. overall, you're not going to see a whole lot more multiple expansion. looking at valuations around the world. >> why wouldn't you at least foresee the possibility that the easy money slowly being removed causes some error to come out of something that it shouldn't be where it is already. is that not possible? >> i think it's possible but, really begs the question. are stocks today expensive. would that necessarily justify multiples contracting? i don't think unless you enter a recession you're going to see multiples contract. i don't think you'll get a whole lot multiple expansion from this point.

but multiples hover at these levels and it comes on the back of earnings. >> is there any way, and there is a piece in the journal today, an op-ed piece that says people are looking in the wrong place for invasion because of all the money printing. they were looking in for commodity inflation. which is starting to come back a little with the oil and everything. it was really in assets. you saw the picasso. >> over $170 million for a single piece. that is just one reflection. i mean we had a guy that did, brought in a coin collection that is i don't know it's up 100% in the last three years or something. >> inglaxosmithkline ceo so many deals in pharma. they pay too much because of easy money. >> a function of having very low interest rates for an exceptionally long period of time. my point is i'm not so sure that bubble is in the stock market just yet. i think if you take a look at bonds, we could argue that clear valuations really frothy. >> worldwide bond bubble

probably. i don't know. time will tell i guess. but we were at 666 at the s&p on the lows and we're now -- >> clearly off. >> and would have been better to buy then. >> certainly. >> but you'd still, you'd still put money in the mark isn't? we'd still put money in the markets. domestically, long term, i think the story here still looks very strong. >> europe? >> i suspect that momentum will carry us up a little bit. what i would look at is getting exposure to european assets and hedging out the currency. i suspect you'll see downward pressure on the euro. >> which is another, another hotly debated topic whether the euro has seen any lows. joe, thank you. >> thank you. media in the spotlight this morning. breaking news at 7:00. verizon buying aol in a $4.4 billion deal. tim armstrong joined us first on cnbc just in the last hour. >> if you look forward five

years, you're going to be in a space where there are massive global scale, you know networks. no better partner for us to go forward with than verizon. so it's really not about selling the company today. it's really about setting up for the next five to ten years and we've spoken for years about this. our vision has remained consistent. the world is changing and for aol and our shareholders, today is a great day but more importantly for aol's talent and the next five years with verizon i think we'll do a lot of meaningful things. >> joining nousw to talk about the shift david bank is a media and, guys thank you for being here. let's just start with the big news of the morning, which is the verizon deal. does this make sense to you? >> yeah. well here's what i think. if we look at the thematics coming out of the up fronts and how they tie into the news this

morning. to me, the bridge i think this is less about content than about a lot of these mature media platforms needing kind of ad targeting, new ad tech. i don't think it's about huffington post. >> this is about programmatic advertising. not pipe owners wanting to own content. >> i think it has to be on some level, lutbut i think that's not a powerful enough argument and not enough critical mass in content. it hadss to be more about ad tech. when you're looking at these partnerships what is driving them is not the content as having a platform for programmatic. >> brian, does this make any sense to you? you woke up and you said what to yourself? >> verizon is trying to get bigger in the marketplace and surf ad on video. mobile consumption is huge here and getting bigger with millennial audiences. there is underlying sense to it.

>> you're talking about the ad tech piece of it. two, three years out. what do you think verizon will actually do with this? >> that's a great question. i think to date programmatic is a purely online product, right? or a mobile product. i think if you look at where your own parent company comcast has gone or other companies out there like visible world that are working on set top box targeting. the ability to actually buy audiences using, you know consumer data. i think that's where it all ultimately points. >> is there a dominos-like theme here. meaning, does this deal set off a rush by other pipe owners to say, you know what i need either ad tech like you're talking about or content? >> a lot of ad companies out there trying to sell services and they are of interest. a lot of money bought by comcast or disney or fox. some of that going on in the market for sure. >> you think about a yahoo! or something like that.

does that all of a sudden get taken out? somebody says i want to own net netflix now. go big. >> that's a different can of worms. >> the company that gets overlooked the most in this dialogue is really hulu. you all own a piece of it and it owns a phenomenal ad platform and the right standards for viewability. there is like a whole p you. you focus on the up fronts and the networks say buy us online because we won't make you pay for a single pixel view or a three-second ad and that's the advantage that established media has that hulu brings in. i'm not so sure these other players have that. like do you know you're buying a single pixel ad or not? that's the battle the yahoo!s of the ads will face. >> the hot action here in new york. who are the winners and who are the lose snrz. >> we're going to see. i think everyone would like to be the winner obviously.

intense pressure this year frommed afrom advertisers to cut back prices and i think they have a lot of other options out there from mobile and video. fox, nbc and the rest are going to fight for brand dollars. >> this impression that everybody is a loser because not everybody is watching televisions. >> does that mean that the numbers will be lower? >> the rates are down. do you guys see people watching less cnbc? >> no. >> people watch more cnbc. it's just not being measured i think. that's the bigger issue is that it's harder to monetize what is not being measured in a see through window. >> you say you're worried about, not verizon, but viacom. >> i think the guys that have the biggest struggle in all of this in the long run. if you have your content distributed over a large number of networks where your fees aren't concentrated. >> you don't have enough power. >> we probably would have sat

here two years ago and emerging distribution landscapes. you have to walk in there and negotiate and say i have 20 channels and if you don't play ball with me you're in trouble. i think the irony is the more compact you are and the more passionate the audience is around that compact bundle you're better positioned for this lighter bundle world that appears to be coming your way. >> if i were a media conglomerate, i would be i would be hiring a lot of people for digital, but i just don't think i'd be betting the entire. i think the demise is greatly exaggerated. >> absolutely. >> the demise is massively greatly exaggerated. but i think if you ran a conglomerate conglomerate. i need a position. kind of like what tim was saying. you need to position yourself for a world five to ten years from now and you need a certain technology in the audience over time will migrate. >> at this point, it's still, i mean i use everything. i might go on the internet on my

75 inch screen to watch like netflix, but a lot of the time i'm watching. i'm like an old -- nothing has changed from the way i used to watch. >> people still spend as much time basically as much time watching television as they ever have. >> even young people. >> young people under index. but they still spend like three hours a day watching television. >> a favorite show fan favorites, things that are coming back. the biggest, i assume "empire" is the biggest thing. >> grew this queer, which is unheard of these days. it's a big deal. cbs and super girl. super hero dramas are big right now on cw. i see a lot of that. and neal patrick harris live variety show. >> are you happy about the death of "american idol"? >> the show is still a big draw, but not as big a draw. they have to cut it loose. >> brian david, thank you for coming in. i'm told we owe you a consulting

job. i was listening to this conference call. >> oh, yeah. i'm available. >> he asked. >> we may have to find a role there. >> i'm waiting. i'll be waiting by the phone. i'll be waiting a long time. coming up, u.s. global investor ceo frank talks about airline optimism. he's on the list of the clinton foundation donors who also own shares of uranium one and we'll ask him about that controversy, as well. "squawk box" will be right back. the year. so was the 100% electric e-golf. and the 45 highway mpg tdi clean diesel. and last but not least the high performance gti. looks like we're gonna need a bigger podium. the volkswagen golf family.

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welcome back to "squawk box" this morning. european investment company is offering 50 cents per share for reinsure partner that tops a prior bid and valus the company at $6.8 billion. also we should tell you this morning hertz will be unable to file quarterly report by the deadline without causing undue effort and expense. in the process of exploring year

results. with the index up over 23%. this year alone, u.s. global investors is trying to capitalize on the sweet spot sector. the company launched the only etf in the airline space on april 30th. it trades on the nyse under the ticker jets. frank holmes ceo and cio of u.s. global investors. you have a moniker for that in marketing material. is it green? jets has been used before. maybe you don't live here but you understand that right? >> i'm not joe namath that's for sure. >> no that's right. you don't guarantee returns. past performance is no judge of history. so, what could cause, number one, why do you think the airline industry has finally you know, gotten to be a much healthier industry. and andrew and i have talked about it a lot on how, on how it

has become better and why do you think that's going to continue to the point where you have an etf? >> well first of all, i think the industry went through a tragic times 2011 to 2013 in bankruptcies. and that's all changed now. a new man nlment new focus. a lot of flights were basically shrunk more seats put on planes. the industry has gone through a very significant change. i flew last year 100 times, joe. i have flown the past two years 8 million miles. so with that i stopped complaining about the cost of my flights now and try to say, how can i turn around and provide a good product for investors. there was no etf out there. for my mutual funds, i'm finding it's like being in the taxi cab business. you're being uberized. dramatically changed into etfs and this has been the focus. >> okay. so, oil prices have been at least rebounding or at least

retracing some of that big selloff. that could make this go back to 70 or 80. that might make this not the greatest time to be taking a position in this right? >> well that's really debatable because in 2014 before oil broke, these stocks were already on a tear. a lot because there's just less flights. there's a shortage of pilots to be able to expand greatly with this higher gas flow. in the industry, it was starting to show negative cash flow to a positive $700 million last year in the first quarter to $3.5 billion this year. so many of these airline companies are now hedging thav they've been hedging oil for the last several years. all they're doing in today is locking in their hedge at a lower price. >> all right. hopefully for investors in this the federal government doesn't wake up any time soon to the notion that they're all

monopolies anyway andrew. that is the risk. >> the risk is that long term either theethither the government does something or more activity in the market and someone will try to jump in -- >> called people's express and jetblue. they don't seem to be doing that. >> the other point to consider is we're investors. when you look at this sector had a big difference in p/e and trucks and trains and planes all show up in the transport sector of the economy. and the trains and the trucks trade at 19, 18 times earnings and the planes trade at 9. so you have dividends, buying back stock. the ceo of american airlines say give me my compensation in stock, not cash. there is a real seat change taking place in this industry. etfs make it easy. if you want to bearish go short,

if you want to go long go long. >> you were mentioned in new york times you had stock in some of the uranium companies that benefitted from that buyout. i guess it was a russian company. and you also gave quite a bit of money to the clinton foundation and you say "new york times" should not have mention your name along with others in regard to that. and you need to put the timing into perspective. so when did you buy the uranium stock? when did you give the money to the clinton foundation? >> well, it goes back to 2002 2003. we were very early that whole reserve cycle and many times i was on your program talking about this big secular bull market. we were buying uranium stocks at 20, below cash per share. these things went up 10 and 20 fold. we also in 2003 were buying petro china and that stock doubled in 2003 and 2004 these things start to take off.

the uranium space. we had many stocks in that whole category and we sold and before it became kazicstone that the government got involved and whatever these other dates were. we were long gone before 2008. >> you had uranium one stock. when did you buy it and when did you sell it? >> joe, i bought so many companies. i bought a cluster because in a secular bull market and uranium prices had gone to $10 a pound. >> you don't remember this specific company? >> it was another name. >> you didn't know it when it was acquired by the russians? >> by the, by what the date is. i bought it early and i sold it before 2008. so that's really the whole drama there. and as charitable giving. i give to a lot of companies, in particular orphanages. greater san antonio and sedan

and other places in the world to help poor kids because many of our resource fund are investing and give to the international crisis group which is concerned with conflict high-risk areas. investing in africa for a long time. >> god bless you for doing it. when did you donate what was it, 250, 500, when did you donate to the clinton foundation? what year? >> i think i started like 2006 and giving money to it. i would show up at the annual meeting of the cgi and seen cnbc dollar and becky has been there. i have seen them in the hallways of those events. that is where i really became involve would it. >> the deal wasn't approved by the government until 2010 and you sold the stock in 2008? >> we were gone long before all of that. as our key investment. because we bought a whole

basket. in fact, after that whole event, global x came up with an etf for all the stocks and we thought they were extremely overvalued because as you recall uranium prices went up like oil prices. they're almost in tandem and it went to this peak in a frenzy and we sold many of these things because it became extremely overvalued. >> but the suggestion is that you donated money to a foundation that was connected with the possibility of approval of a deal that you may have benefitted from. is that incorrect? >> no. that's a lot of disinformation. that's just political battle this year and i think came out seven years ago. i think that's a harsh story, especially against frank justra. i mean these guys created a company called silver wheaton. they're west coast venture capitalest

capitalists and in the resource sector and find the best people and the best properties and put capital together and say here's a vision. you think it has the highest cash flow per year on the new york stock exchange per employee. and you have serious fund managers holding big positions and this concept was created by frank justra and ian. >> all of that is very interesting. but, still the question is were you in a position to benefit from approval of this deal at the same time that you were writing checks to the clinton foundation? >> no there's no i had no idea any of those two events. there are two separate events because i've said earlier, i give to many different types of charitable organizations. i have given more to the international crisis group than i've given to clinton's organization. i think boat of them do a great job in helping america look great and helping people and

these other countries look at america in a very positive way. >> when people finish watching this interview, they're going to say, it wasn't unequivocal on your part and that there wasn't a lot of clarity. >> i don't understand. i have no idea what -- you're making -- lots of conjecture. >> i'm giving you the opportunity to be clear. >> it's a political battle between some of the press in new york that do not like the clintons and other people that it involved. and cnbc has had a studio at the cgi event every year. i don't know where all that conflict means. all i do know is that they do a great job in -- >> frank, we have to go. but we'll give you one last shot at it. in a sentence or two, unequivocally, anything you want to say? because right now it's all a big haze for us. and no -- >> there's no haze. i have a global investment company and i invest in many

companies in many different countries and i give to a lot of charitable organizations. >> unfortunately, i don't think it speaks to the answer. we'll leave it there. >> actually i think people are, the clinton foundation itself. i don't know if you saw peggy newman's piece over the weekend. i've seen the pictures of the president over the weekend and better business bureau in 201 say it failed to met the minimum standards in transparency and it's pretty not a great review about the amunt of money that goes out from it and what the actual purpose for the foundation is. but, anyway you're right. we do i think we do have a booth there at times and there is good work done. anyway, frank, thank you. we appreciate it. and we'll be watching the jets maybe the jets will do better than the jets we're familiar with. >> i believe so.

>> okay. all right, coming up crazy stories spreading over the internet in the past 24 hours about elon musk. is it true though? did he really say that to a new father. we're going to bring you the details next. then the global bond market selloff continues. the stock market is looking for capitulation capitulation. where paul ebner is putting money to work for investors right now.

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welcome back to "squawk." here's what's making headlines this morning. the big deal of the day. verizon buying aol for $4.4 billion in cash or $50 per share. 17% premium over yesterday's closing price. we'll have more on this deal in just a few minutes. but it is a biggy. i'm sure a lot of people will be talking about what this all means. by the way, we haven't talked with the idea of what is that culture going to be like? telephone company owning aol. >> we talked a little bit about verizeson a blue chip firm and huffington post is out there. also the european union has restarted the clock on its review of general electric's deal to buy the power business. >> this is still going on.

>> still going on. >> regulators will make a decision by august 21st after saying they received the information they requested from both parties. richard shelby will reportedly introduce a bill today that will increase congressional scrutiny of the federal reserve according to "wall street journal." we'll see what that all means. >> gotten bad in this country, but still worst in europe. a number of catalysts make waves between the passing of greece's latest payment deadline and a crucial read on retail in the u.s. let's get a sense of what this means for u.s. markets. good to see you. >> thank you very much for having me and i love the new studio on the west coast. >> great thank you. and you're up early. stock markets struggled to go anywhere recently and bond yields struggled. what do you think? >> i think the two are related. if you go back to friday. what we saw with the payroll numbers. it's a continuation of what

we're seeing trendless volatility. they're good enough for the fed, probably, to tighten. but not great enough for us to get excited about the u.s. recovery expansion going forward. this is a time when investors are better off in strategies that are contrarrian that just aren't trying to chase the latest trend that worked over the last couple of months. >> we had a guest on earlier today who said everybody's keying off of the german ten-year bund. when you get up and i know you keep east coast hours because you're in the financial markets, even if you're on the west coast. is that what you're doing when you get up in the morning, look at the german bund and the big spike we noticed over the last couple of weeks has been so dramatic. >> a lot of things that i look at. the bund is one of them. interest rates obviously, an important indicator. especially in europe. whether or not people think that qe will do what it is supposed to. what we're seeing today and over the last couple days is really a reevaluation of how effective qe is going to be.

a lot of people have chased that qe trade. we think it has been overpriced for some time. i talked about being overshort europe. you look at the fact that german stocks and french stocks have rallied equally. not nearly as export driven as the economy. people came into europe to chase that qe trade and push up stocks that had no business getting pushed up as much as they are and we're starting to see a reversion of that trend. >> that's what you're dag in europe. what are you doing in the united states? >> in the united states we had been short as much as a couple weeks ago. we've covered that short, but we're not long. within the united states we do like media companies. we like tech specifically, the hardware and semiconductors. >> did you -- >> we do like parts of tech we don't like the internet space. we have been underweight most internet names for some time. we do like more larger traditional media companies. one thing, though that i do want to talk about is the short

that we have on in consumer discretionaries and staples. tomorrow we have retail sales coming out. you heard me talk in the past about using internet search activity to track what people are doing online and what they're likely to consume. we have not seen any indications in the u.s. that the consumer is coming back. something i have been talking about for a couple months. we've seen disappointing retail sales and we expect tomorrow tabe lukewarm and disappointing with the exception of autos where we have seen some demand coming back. some signs of internet search activity increasing for autos. >> we'll watch for those numbers and see if the trade pays off for you. paul, good to see you this morning. >> thanks for having me. a little bit of tesla news this morning. the governor of maryland expected to decide today on whether to allow direct sales of tesla automobiles to consumers in that state. the bill up for signature or veto says it could be licensed as a dealer if it sells only electric or nonfossil fuel

burning vehicles. then this story that you have this morning. elon musk quote spreading like wildfire yesterday on the web. the quote was lifted from an authorized biography of the entrepreneur by ashley vance and was published by "washington post." from an anonymous employee recalling an e-mail from musk after missing an event. the reason he missed the event was to witness the birth of his child. according to the employee, musk e-mailed him, "that is no excuse. i am extremely disappointed. you need to figure out where your priorities are. we're changing the world and changing history and you either commit or you don't." musk however, has thus responded in a tweet that he never, he had never written or said this and vance's book was not independently fact checked and should be taken with a grain of salt. >> this i don't get only because i thought it was an authorized biography. musk, again, tweeted about the quote saying it is total bs and

hurtful to claim that i told the guy to miss his child's birth just to attend a company meeting. i would never do that. the description of the book says it was written with exclusive access to musk his family and friends. vance reportedly spent 30 hours in conversation with musk and interviewed 300 people to write the book. >> that doesn't answer the question. >> it also doesn't mean unauthorized biography is with the permission of the person them also reading it. i mean -- >> it's just like the most, this is minutia and a he said/she said and he said/he said and i'm totally bored with it already. he denied it completely fine. you know -- >> just hot. it was hot for 24 hours on social media. you know. >> you sent me an e-mail three years ago saying that -- i mean i could come up with -- i mean you know what. >> anyway he's elon musk. when we return tv may never be the same.

verizon buying aol. tim armstrong joined us earlier on the program and joined us to talk about the deal. find out what he thinks what the street thinks about the deal and how it can be a game changer for these two media giants. once again, futures right now the real story of the session with elon musk reported e-mail. down 130 points so far this morning. financial noise financial noise financial noise when a moment spontaneously turns romantic why pause to take a pill? and why stop what you're doing to find a bathroom?

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google confirming this might make you nervous. some of its self-driving cars 11 of them have been in traffic accidents since it began experimenting with the technology. 11 different traffic accidents. the accidents were minor and then goes on to say its cars though, were not the ones at fault. >> the humans. >> those other drivers. >> but, you know always humans out there. >> the way that car looks is an accident. >> looks like a golf cart. in the meantime, let's talk about the big deal of the day. verizon to buy aol for $50 per share or about $4.4 billion. the media deal of the morning and aol closed yesterday at 42.59 per share. the price represents a premium of 17.4%. a subsidiary of verizon. once that deal is completed. craig is the senior analyst and now that our studio here you just popped on by on your way to work. you watched tim armstrong this

morning from home and you popped on to say hello. what do you make of this? >> look i think it's actually really interesting. i think the most interesting part of it is to contrast what verizon is doing to what at&t is doing. here's at&t spending $60 billion to buy into old line directv and verizon gets some credit to as wayne gretzky said putting the puck where or skating to where the puck is going to be. so they're trying to put together some -- >> one is transformational and i could argue, how much does this move the needle? >> it's small. aol when this deal is finished -- >> with directv. >> aol with verizon is going to be something like 1% of the enterprise value of verizon. a small transaction. it's not like the directv deal which is a big deal. but they're trying to put together a package of advertising assets and mobile assets for advertisers that are differentiated. if you're trying to reach millennials and reach them on a

platform, verizon will offer people something others won't be able to. remember what aol is. it's not a dial-up company any more. >> content company, isn't it? >> not really. really an ad tech company now. what ververizon what verizeson getting is ad tech. the answer is probably not just driving usage from subscribers because they've been doing that for a long time and it hasn't generated any extra revenue. probably finding a way -- >> do you imagine then verizon tries to spin off things like the huffington post long-term? >> not quickly. maybe. and it could eventually create some regulatory headaches. but for now, probably not. i mean what they're trying to do they're also trying to differentiate their wireless service around better coverage and network quality? into more consumer friendly.

>> a telephone company. can we call them that any more? >> that's a great point. i mean and it's going to be a challenge. i go i'm an old timer. i remember when at&t and/or let's go even further. i remember when 9x the predecessor to verizon had done a deal with sir howard stringer not yet sir. and the clash of cultures between the old line phone company and media. it was very tough. >> further transactions, deal yahoo! had been in the mix. would you put them in the same kind of category or others? >> i don't know. it's certainly possible. but, look, this is not the first deal in ad tech. ad tech has been on fire with m&a. and there were too many of them out there. you're starting to see the ad tech unity start to shrink down a little bit with consolidation. that will probably still happen. >> yahoo! is ten times the size.

>> yahoo! also has a lot more than ad tech. >> you are saying the premise of, the pipe buying the content. that's not really what this is about. >> i don't think that's what this is about. i think this is trying to create a wireless advertising platform. >> so ad tech allows what is that exactly? it allows a company to advertise on mobile. it's a technology company. >> this will give them the ability to do programmatic ad campaigns to lower advertising costs. >> can't do that without aol and verizon. >> look content. aol rolling up the ad tech company itself. >> you know the yahoo! price tag. you had to x out. >> but you'd still have to -- >> jim cramer right after this break. don't move.

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>>. >> let's get down to the new york stock exchange. we were just trying to figure out how much alibaba was worth and how much it cost to buy yahoo. 385 million shares they own and spinning off at $87. 385 times $87. this would be a similar size deal if someone were to buy

yahoo. what do you think of verizon? >> it makes a ton of sense. we'll be watching tv on our hand-held. i think armstrong is developing very strong programming. it's right what moffett said. that last quarter was amazing. there is no way you can stay independent after that last quarter. you had two strong a quarter this. was a very good purchase. i'm not worried about culture. honestly, i think verizon will say you run it. we have nothing to do it. you do it. i am sure tim stays on. i do not think there is another bidder. the stock should not be above 50. i think verizon/aol could do well together. >> could you explain -- and we struggled this morning -- to explain what programmatic advertising is? >> you said a check to whoever

needs the ad. you'll see one ad wow, i can't believe they knew that about me. instead of making big deals to do 1.5 million display buys, you give them a check for 150,000 and your ad is wherever it needs to be. it's a fabulous service for the companies advertising. it's really horrible for the companies doing content. there is a very good article today about facebook and how they are faring for their customers to do regular print-to-digital. programmatic is the way of the future. armstrong and google solved it. this is such a good deal. i knew when the quarter came out, man, this is just what time warner did. fox made a bid. just when armstrong got it right, verizon made a bid. it is brilliant. i think verizon is going to say listen, get me programming. we'll run it on our hand held and it will be perfect. >> thanks. we'll see new a couple of minutes. >> brilliant by armstrong.

>> that's 33.5 billion. >> there's some yahoo japan in that $7 billion left. when we return california's drought forcing starbucks to move its bottled water plant across the country. financial noise financial noise financial noise the network that monitors her health. the secure cloud services that store her genetic data

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a bottled water backlash in california centered around starbucks. jane joins us from california. >> reporter: a lot more than that. they are still churning out millions of bottles of water in this state every day. no one knows how much. nestle owns arrowhead. we are at the distribution center for that now. this is sourced here. crystal geyser is sourced here. starbucks was sourcing its ethos water here and is going to source out of state after mother jones wrote about that. much of the bottled water you drink comes from the lake shasta area. the u.s. geological survey says it really is overall a drop in the bucket because only 1% of water goes from industrial purposes in this state. only a small fraction of that 1% goes into bottled water, but

every drop is under scrutiny. nestle, the largest player in the state, has been targeted for protests in places like sacramento. >> the truth is we don't know how much water they are taking. there are five nestle plants, for example, in the state of california. it's not just nestle. we have over 150 different companies that bottle water. >> reporter: nestle points out that most of the water it bottles in california stays in california, but not all of it. it tells us, "obviously, there is great concern about the drought. we share that concern with all californians and fully support the need for greater oversight." there is no oversight, at least not yet and no mandatory cuts on bottle the water. some of these companies own the water rights to the springs where they get them. it's not clear if they weren't putting it into bottles the water would go somewhere else. back to you. >> i did not know chatsworth was

so big in water. it's known for other things. >> reporter: chatsworth as you know is well known for something else. >> yeah. never mind. 85% of the pornographic content of the world is produced in chatsworth. >> no kidding. >> right over there water and porn. >> every top female talent agency located in chatsworth. every top male talent in the world lives or travels to chatsworth for work. >> you keep a home there? >> every dvd company is in the local chatsworth radius. >> i thought it was an english countryside house. >> and so is jane wells. is there really one right where you are? honestly? >> reporter: yeah. all these warehouses -- chatsworth is filled with warehouses. you can bet inside about every other one there is a little

monkey business going on. now in l.a. you have to use condoms, a lot of business has gone out of chatsworth. >> it was good. it was good. >> thanks, jane. love you. >> join us tomorrow. "squawk on the street" begins right now. good morning and welcome to "squawk on the street," i'm david faber with jim cramer live from the new york stock exchange. carl is on assignment this morning. take a look at futures. they are going to be down. you can see that. that is largely would seem due to backup in yields. we've got a bond market story developing. a continuation of what we saw last week. look at crude oil and the 10-year note yield. crude is up. the 10-year note yield perhaps more of the stor