>> good morning, everybody and welcome to squawk box here on cnpc. i'm becky quick with joe kernen and andrew ross sorkin. apple revolutionized the way people to listen to music in 2003 an now it's trying to change consumer habits once again. this time its targeting spotify and other services. we'll have details on apple's $10 a month service coming up later this hour. but first as joe mentioned european stocks are selling off right now. take a look at what's happening here. the dax is down by 1% t.cac is down by 0.6%. this came after data showed that euro zone inflation was higher than photograph in may. sit bleeding over to u.s. equity futures as well. you can see that right now the dow is down by more than 90 points.

s&p futures down by 10.5 and the nasdaq down by 28. >> let's also talk about a couple of other stories this morning. india central bank cutting interest rates for the third time this year. forecasters questioned whether the economy there is doing as well as the latest growth suggests. also angela merkel holding an emergency summit last night. and ecb head were among the officials to attend what has been described as a secret gathering. michelle will join us with more in a few minutes and opec ministers will meet in vienna later this week. iran plans to persuade the cartel to implemented the gap. delicates note a potential nuclear deal could see the sanctions lifted. >> on today's agenda one other economic report of note april factory orders will hit the tape

at 10:00 eastern and the auto makers will report may sales today today. potentially defective takata air bags. they said absolutely not. >> they said we absolutely should. >> they said that 30,000 people get killed in car wrecks and six total people are killed by the air bags. >> more likely to happen in areas where it's high humidity. in some places in humid areas they were taking cars in and

having them disconnect them in the meantime while they were waiting. they went to the humid areas first and in some cases were doing that. >> well the one i thought the report said do not disconnect. don't give people bad advice. >> they did it originally. this may be before you were waiting years to do it but they did it in humid areas. that's why they were replacing the air bags first. that's where they think it's much more likely to happen. we should tell you about a developing story this morning. the acting head of the transportation security administration is out. this comes after an eternal investigation after they found security failures at dozens of the nation's busiest airports. undercover investigators were able to smuggle them through

them. they were doing this at will. we'll have the story from tom costello later at this hour. a horrible story out of china this morning. 458 people or on board and rescuers brought 6 people out alive including a 65-year-old woman pulled out more than 12 hours after the accident. most of the passengers were elderly tourists. search teams heard people calling out from inside of the hole. there are five confirmed deaths but hundreds still missing. >> we have a couple of other bits of news this morning. u.s. prosecutors believe sepp sepp blatters top aid made $10 million in bank transactions. the secretary general is the unidentified high ranking official in the indictment that transferred to fellow fifa official jack warner in 2008. the secretary general is not

named as a defendant or accused of any wrong doing. warner is among those charged. this story keeps getting worse and worse i feel like. >> let's check on the markets this morning -- actually i one going to bring up john oliver but he's talking about if you can get this guy america will be the most beloved country in the world. >> really? >> yeah. months ago he was railing about fifa and the corruption and that -- >> which has been fairly widely speculated. >> he's kind of tongue and cheek. what's the word --, snarky.

>> that's the volatility in the early hours. >> we can see if europe improved it as well. i'm going to get a chart made. i saw something that mark put out. twitter is good for something. >> looks like we're following european markets down by 1% today. >> i saw michelle here and i'm going to have comments on that. let's look at asia quickly. that's mixed with shanghai rebounding a little from that kind of scary week last week. not much of a story recently because now it is. it's up 2.21. so the dollar i saw at 109 yesterday versus the euro and

still at 109 today and finally gold. it's below 1200 again. late night meeting in berlin trying to resolve greece's financial crisis. michelle -- no that was the correspondent. please don't get another name. >> good morning. >> hold on. i thought you'd be over there. here's the thing, i think if our suits thought that greece was not going to workout, they would have sent you over. >> right. >> so because you're here means we're sort of imlying that we believe a deal is going to get done which scares me. >> headline is not this week at least. >> which scares me because in a contrary con contrarian way if we believe a deal is going to get done we're

most likely wrong. >> he decides. >> then i take it back. a deal will probably get done. >> i don't know if it will get done but it doesn't matter yet. we're not there yet. >> we don't know when to go. >> i have certain metrics that this is when we get on a plane and why. >> viewers shouldn't draw any conclusions that you being here it's not an important week for greece. >> when i'm there things are bad. i think there they think they're bad but they're not bad yet. >> if i see you running out of here i should sell all of my stock. >> no, i would be worried about the greece. >> i should sell my greek stock. >> yeah all the ones that you have. big meeting in berlin merkel

draghi draghi, juncker. up until now the creditors have been waiting for greece to come forward with their own reform proposal. the greeks have claimed for months they have done this. they have put forward very long documents. long on verbiage and details incredibly vague. despite you have one particular guest that thinks the contrary i'm sure you'll hear from him. regardless. so last night was about all of these creditors getting together and putting together a sample suggested program for the greeks to follow. that's the first goal. the second goal was for them to resolve their internal differences. the imf wanted to be tougher and the european commission has wanted to be easier. but make no mistake t greatest differences is between the greeks and the creditors. this is about bringing something to them. now you'll read i have been told my sources say, this was

not put forward as a take it or leave it proposal. they do not want to be seen as imposeing their will on the greeks. they want them to own the program. however when you read the way the whole thing is struck toured it's going to look like a take it or leave it propoelz insalproposal. >> they put it together without any greek representation in the room. this is what it would take. >> exactly. >> you guys decide to how you come to that on your own but this is what you have to do. >> exactly. the way it works is simple. it's like an excel spreadsheet. this is your funding gap. >> privatizations. >> right. the end number has to get to here so you do what you want with all of those other things. thus far the greeks have not done any of that. >> the problem is going to be that while there seems hike he is softening behind the scenes he will then have to go back and

sell this with his party in some way shape or form if he goes away with any of these ideas. >> i believe nothing coming out of the greek side at this point but keep in mind for months the greeks have said we're close, we're close, we're close. and they were never close. not ever. so it's voices coming out of greece, to your point, the deep left the left left the super left, but until they actually decide to have a vote in parliament to say we're going to do all of these things that meet the creditor's criteria. today we will wait to see what is in finally that sample program. how lenient were they on a budge surplus. that kind of thing. >> we have been waiting for a deadline and waiting and waiting. >> waiting and waiting. >> the signs that would signal to you that we're reaching the absolute -- >> so there's a lot of focus on this 300 million euro payment to the imf on friday.

i don't think that's that meaningful. it's not a huge number number one. there's not a lot of consequences if you don't pay the imf. what's a much bigger deal is the fact that they have 3 billion due in july and 3.5 billion due in august. those are really big payments. those are far more consequential. that's when the ecb may have to say we can no longer support your banks. >> so theoretically elon musk -- >> yes. >> based on how we bailed out tesla we could bailout greece. we have given more money to elon musk to feel good about our greenness and renewables. >> well it's just one payment on friday. there's 1.5 billion worth this month. >> but that's only a third of the 4.9 we have given him. >> if you want to talk small numbers they're fighting over 7

billion euros which gets them to september and then we start all over again where it's estimated they -- >> what are the payments after september? >> oh it's not even about the payments. it's about funding the government. they're going to need another 50 billion euros. that's a whole other program. >> gina sanchez -- will you stay. >> sure. >> if you run i'm going to have to call my broker. >> i have a class at 6:45 up the street. >> really? >> keep it quick. >> gina sanchez is chief executive officer and a cnbc contributor. hopefully you were able to hear some of that. do you agree or do you have things to add? should michelle pack her bags? >> michelle did a lovely job of summing up the situation and it's exactly that. you have the germans and the imf and the french really looking

for a whole lot of things. the imf wants a budge surplus and austerity to get to it. the germans want the assets and reform of the labor market and social security system. those are all big asks so then on the other side you have mario dragi that does not want the ecb to default. they have the capability to remove a cap, a collateral cap they have. they're the only buyers of t-bill so that would allow them to borrow more and then they're very concerned if the greeks were to exit that would be a slippery slope because the euro is supposed to be irresponsible. so if one country exits that makes it reversible. so this is a problem. >> irreversible until it's not.

you can keep saying it's irreversible until it isn't. >> absolutely. nobody really wants the greeks to exit except the greeks know that nobody wants them to exit and they're playing the game as long as they can. i side with michelle. you can believe a word that they say right now because there's absolutely no credibility behind any words they say. they have been very philosophical for sure and in some cases literary but not really actionable and that's the concern. now a lot of people will tell you that a greek exit doesn't have any massive ramifications but it would be very messy. it would certainly at least cause massive runs on greek banks. it would effect any corporate with any debt in euros. they would get destroyed so it's not as though it's without

repercussions. it's just that you know 83% of that debt is held externally. many of those have written that down. from that point of view it doesn't have the same impact in 2010 and 2012. so it doesn't have to be a revisit of that but it will cause a significant sell off in assets. that could be an interesting buying opportunity for european equity. >> you don't think it -- >> it could be a short lived sell off. >> but you said we were kidding about it but there are people that think our equity markets right now maybe are not as cheap as at one time. >> i wonder if it makes us. stocks look better. >> but we also have the other

guy and the debt double right now, last week were we blowing the horns, the guy said it's much bigger than sub prime. this is systemic. another guy says we have the biggest short trade. >> it was the short trade guy. >> see i think far more consequential is quantitative easing. why are they down? not because of greece but the inflation data came down. they got inflation. they have been dying. they have been desperate. they finally get it and now the market sells off because of less quantitative easing because of that. >> they're getting it from us. >> but i think ultimately qe is -- look if greece leaves it could be volatile. could there be a short-term sell

off? for sure. ultimately the euro would get stronger. >> they deval and we could go over there. >> hotels are still relatively expensive. >> then you would make the decision to go over there. you're making it yourself. >> i get on a plane when there are capital controls. >> or the weather gets good this summer. >> the weather should be nice. >> they can't devalue. >> so they're playing chicken still. >> for sure. >> 8 legged chickens or 2 legged chickens. >> i'm going to talk about 8 legged chickens. >> i heard you talking about it. i'm going to spare myself the pictures. >> i looked up the pictures. i'm not going to show any of the pictures. that would short chicken. no one would ever eat another chicken. >> those aren't real pictures. >> maybe it was just one that came out that way but do you want to see it.

>> do they have it at the spin class. >> coming up good-bye bruce, hello caitlyn. vanity fair revealing the first look at caitlyn jenner and the story is exploding on social media. the record setting tweets next. but first here's a look back at this day in history. ♪

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>> it's supposed to rain until like 4:00. caitlyn jenner has broken a big social media record. took some satisfaction in this because obama just set the record like a week ago. the quickest to 1 million becoming the fastest twitter handle to reach 1 million followers. vanity fair tweeted out this photo of its next cover. the former bruce jenner reached the 1 millionth follower in four hours and three minutes beating

the previous record held by vpt president obama. as of this morning caitlyn jenner has 4.9 million followers. >> do you see how unoriginal this is. it's the covers of the covers. >> right and they both -- >> when you have something that is that buzzy. >> and have a look at it yesterday. >> did you read the stories in great story. >> in vanity fair. >> great story. >> it's a two hour special. >> two hour special. >> are you going to watch the e reality show? >> i'm not a big reality show person. i was glad i saw the two hours so i understand exactly what she was feeling for her entire life and i think i benefitted from that and people that didn't see it that i talked to about it

that have views of things should have seen it i think. >> i thought it was amazing and the piece was amazing. >> i did see that. >> cross dressing from when he was doing and talks about that a little bit. >> so you can read this online. >> you can read most of it online. >> even though the magazine is not out. >> it's a tease. >> how do they make money? this is not a good business model. >> you read it for free. >> i read it for free. >> not a good business model. >> but there's adversetiseing on the site. >> if you ran out and bought everything you saw advertised there. >> let's tell you about things going on this morning. a developing story this morning, this one, i don't know the acting head of the transportation security administration, the tsa is now out. this word coming after an

alarming lapse involving those charged with protecting the planes we fly on. tom costello reports. >> the tests were conducted by homeland security read teams charged with probing tsa checkpoints nationwide. nbc news confirms they failed to detect smuggled weapons in 67 out of 70 attempts. a 95% failure rate. in one case an alarm sounded but even during a pat down they failed to detect a fake plastic explosive taped to an undercover agents back. he calls them super terrorists because they know the tsa's weaknesses going in. >> plus they have the benefits of being able to construct it. >> orders the tsa to take immediate steps to address the

lapses. today homeland security said the numbers in these reports never look good out of context but they're a critical element in the continued evolution of our aviation security. >> i'm glad they found this today because i would rather have the good guys find this than have the bad guys figure it out. >> red teams have been testing tsa checkpoints for 13 years. often times successfully getting weapons past airport screeners but the threat he insists remains very real. >> there's continuing drum beat of interest by terrorist groups whether al qaeda or affiliates to try to bring down a western special u.s. bound aircraft. >> crazy story. are you convinced? i always thought of this as security theater when you go to the airport. >> hearing results like this absolutely. this was intended to ease people's minds. the idea of the creation of the tsa but to get results like that. 95% failure.

>> former tsa chief john pistol i've heard that and i went seriously? his name is john pistol. and they didn't find any apparently. 95% of the pistols got through. somehow that? it's just too weird. >> but here's the question would you do away with some of the security? >> no. >> you've never worry about because i have nothing to fear. >> nothing to hide. >> i'm telling you if you try to do something and there's all of these people around -- one time we took green beans and we were taking green beans to canada because my son only eats certain things and we got busted with

these green beans and they took us in a room and whose idea was the green beans. >> i gave you the chocolate swiss army knives. >> they pulled me out of the line too. >> i'm just saying that when you know you're going to get checked you might not do it. >> yes and i do. i continue to be stepped up to make sure that they can catch more. >> is it the training or do you think what they need to do is dare i say do some of the things they do in israel. >> there's ways to do this. >> they do that but they don't talk about it. >> they do it. my parents get flagged every time for the precheck. >> my 4-year-old son was pulled to the side literally like two weeks ago. >> when i travel with my parents and my son, my 3-year-old son the three of them get automatic pre-check and i don't. they fit the profiles that they're allowing many people to o go through. >> my wife my parents and everybody was fine except for my

4-year-old. who knows. anyway henry is -- well coming up kfc suing chinese companies over alleged 8 legged chicken rumors. this is joe's favorite story. we'll talk about it after the break. first as we head to that break, take a look at yesterday's s&p 500 winners and losers. we're back in a moment.

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here in the chairs and we've had smith on many times from buffalo wild wings and it was my idea repeatedly that it would be more humane since chicken wings are so popular for sporting events you only get two wings per chicken. there's a way that you could gmo 12 wing chicken and one chicken you get 12 wings. i wasn't really that serious. i would package the name but someone got my idea in china and started circulating rumors on social media that kfc's chicken in china had eight legs. eight legged chickens. that's what three different companies alleged. >> these were companies saying this. not just people. >> three chinese media

companies. kfc is suing them for 1.5 million for each company and they want an apology and an end to the alleged practices. defamation on china's internet is very common. >> you have to remember the pain that kfc has gone through because of the supplier issues. >> i was going to say what does an 8 legged chicken look like. four on each other. they also said they had six wings. so they really did rip off my idea because eight legs and six wings. it's a good idea theoretically. if you like dark meat and wings and i looked it up. >> wings are white meat. >> anyway eight legged chickens. there's one that looks about six days old. >> it's not real. it can't be real. >> it's real but it looks like something in a jar that you'd see at like a carnival. and it looks like it's walking like a crab almost. i may not eat chicken for awhile

now because of this. but rare for a western company to sue somebody in china. >> but they have suffered already. >> chickens are creepy enough. have you ever seen angel heart? he had a thing for chickens. eight legged ones i guarantee you if you don't have that feeling with chickens you'll have it after google images. >> you have to show me this picture. >> there's a bunch of them. >> i got a much more serious story to talk about and sad story. >> this was serious. >> that was serious but this is serious in a different way. this is my column this week. >> oh god. >> but this is a very serious story. a young man, a 24-year-old first year analyst at goldman sachs who was one like so many that worked 100 hours a week in

march he goes to goldman sachs and said i can't do it anymore i have to quit this is not good for me. under pressure prehaps from his father perhaps from his family comes back to work a week later asks for his job back. unclear. anyway, they say we'll put you on a reduced schedule. you have to see a counselor, all of that. he ends up calling his dad, business gets pizbusy again. starts working again and calls his father at 12:30 at night and says it's too much. i have a client meeting tomorrow morning. have to complete a presentation and father says take 15 days and come home and he says i won't allow it. the next morning 6:40 in the morning, san francisco found dead in the parking lot next to his apartment. and it's just one of those terrible -- >> how was he found dead. >> he had -- >> he jumped. >> it's been inconclusive thus far but you can make your own

views about what happened but it's one of those terrible stories that you hear and you know we just had this other -- we had a suicide just a week ago from one of these investment bankers 29 years old. the father there said that the kid had been overworked and look unexpected deaths and suicide are always one of those situations where there could be mental illness and other issues. >> a predisposition. >> there's always things but one thing i wonder is whether not this industry by the way, oddly predisposed. i didn't know this. i looked at the statistics. after doctors veterinarians and dentists. >> dentists. >> the financial services industry. >> psychiatrists too. >> and over the past couple of years we've seen more of them. and it's the individuals responsibility ultimately but at the same time because you have

these huge classes of kids and by the way, two weeks from now, huge intern classes coming into wall street what responsibility do the firms have to make sure. >> it's high expectations from his parents you have to figure into this too. >> there's lots of issues. but anyway that's what i read about this week and i got me thinking. >> it's a good column. >> it was tough to write. i will say. >> very quickly. i will tell you there's a story on the front page of the wall street journal that caught my attention. we wondered about the deflationary environment that has the fed so confused. this lays out an explanation that i hadn't thought of and that's the chinese factories out there, how they have been knocking out products everything from tires and beyond and because of the excess capacity that they ramped up to get ready for the chinese consumers, now that that has fallen off they're exporting all

the goods and that's part of what's weighing on worldwide deflationary pressures. >> dumping? >> both. dumping massive exports and that's part of why you have seen this deflation. we have tried to figure out why it happened. this is an interesting explanation i hnadn't thought of. >> if it turns on a dime we'll all be caught. >> in a bad position. >> with our pants -- >> not up. >> not pulled up as tightly as they should be. coming up, kelly king and then later a real estate tycoon and nfl owner. he actually only owns one team. he owns the miami dolphins. plus a bold new call from jeremy siegel. different. wow. stay tuned. squawk box will be right back live from the heart of midtown manhattan.

one of the company's main focuses is growing through acquisitions. buying bank of kentucky financial as the starting point in ohio. they're lagging the peer group up 38% in the last three years compared to the regional banking index up over 65% but the stock was recently updated to a buy from neutral. bb&t's chairman and ceo is with us this morning. thank you for coming in. >> glad to be here. nice to be in your new facilities. >> thank you.

let's talk about your moves and the mover you're making into show show. >> >> it's probably the most important step in the whole career. >> you didn't do this just because you knew i was from there. >> no but it was an important model. >> so we were in kentucky. number four market share in kentucky and this bank is primary northern kentucky and the whole cincinnati area so it moved us to number 2 in kentucky and gave us that there in cincinnati. it's a fantastic market. >> it is. big renaissance. >> a lot going on. let's talk about the acquisitions though. we heard for awhile that small regional banks wouldn't exist anymore. is that part of what you see happening too? >> well i do. we're in a new world of banking. it is dramatically different in

term of the infrastructure costs involved in complying with the new regulatory requirements. remember dodd frank requires new rules and they already rolled out 300 and it's already massive. so it requires huge amounts of investments in bank room infrastructure, products processes, systems and therefore scale becomes much more important today than it ever has in our business. so, you know you can grow organically but this is a relatively slow economy so what we're trying to do is put together a combination strategy of good solid organic growth and really good acquisition growth to build the scale we need and continue to expand our franchise on a good strategic basis. >> what's the outlook at this point? you said it's much more difficult but if you build that scale. >> it's very good. now everybody has their own size number. with our recent acquisition it

will be $210 billion. we're the tenth u.s. bank but we're up against banks $400 billion and a trillion and 2 trillion so we need more scale but only if it makes us better. so like when we expand down in kentucky or we just announced a really fantastic acquisition in pennsylvania. $18.5 billion company. great organization. just won number one j.d. power service quality in mid-atlantic region. we can combine with great companies like that and you get the scale it's win-win. >> how big do you think you can get before the fed says it can't get any bigger? >> the largest banks are clearly getting smaller. they're undergoing intense pressure in terms of getting their size and scope down because the perception is right or wrong, i don't totally agree with it but the perception is that will make them less risky

but we're in a really good place. most regulators probably wouldn't say publicly but probably up to 4 or $500 billion is a good place. they don't really care about how small. smaller is fine for them. the problem with being smaller is can you make a good deal for your shareholders. >> sure. >> too large becomes difficult from a regulator point of view. but we can double in a good place. >> what you see in terms of the economy, the demand from businesses and demand from consumers when it comes to the loan. >> it's interesting becky, i thought a lot about this and i'm concerned about an important part of the economy. we had a relatively tepid recovery. we're still growing. but the larger companies have actually done very well. particularly until recently with

the streng the strengthening of the dollar. large companies were doing well but main street america has still been struggling. they have not had the benefit of international trade substantially. so they're relying on basic day-to-day consumption. the consumers are saying we're not buying as much as they have massive increases in regulation so when you talk to small business people and fortunately the way we do business i talk to them a lot of the time. they will tell you it's really hard. they're okay. they're making money. better than 7 or 8 years ago but to go forward and invest because of regulation and health care so as you know small business makes up about 50% of the gdp. create twos third create 2-thirds of the jobs. people say why is the economy not doing better? half of the economy has not yet caught on fire and we are really going to need to see small business take off at a faster rate to have this economy grow

at above 2%. >> that's what i've heard from some small business owners here. we juan to thank you for coming in today. >> good to be with you. >> shares of starbucks trading near an all time high dating back to its ipo. we'll ask an analyst what is perking her interest in the coffee chain coming up next on squawk box. push your enterprise and you can move the world. but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come.

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starbucks jumping to all-time highs soaring nearly 14,000% since its ipo. the driving forces behind the coffee giant is nicole piper, you love this stock and you think it can go even higher. tell us why? >> i think investors are seeking quality. when you look at starbucks a couple things. technology, you can practically eat online in terms of their mobile app order and pay. also some concern with investors about restaurant sales and here you can go through the grocery aisle and pick up coffee and bring it home. finally, people are worried about the avian flu and they're selling coffee. >> you look at the stock, though, dare i try to make puns and say could it be frothy. the question is how do you keep up the same-store sales and you

talk about the technology and where does the technology take them. they are getting into delivery service. i guess the larger question is you know can they keep this up? >> i think so. and there's just a lot of levers they can pull. in terms of the u.s. comp they have food they have delivery they have mobile order and they have new product and ltos. extremely successful and also grow earnings with their balance sheet. you know this is a company that can and should do massive share repurchase. >> right. if you worry about this company, you'd worry about what? >> i would worry more about investors' concerns. sometimes the expectations get ahead of the stock. i would worry about the perceptions from time to time due to that. >> you look at some of the margins. do you think there is margin compression over time given the competition that may be increasing from others right

now? >> i think you have to look by areas of the world. in the u.s. it's maxed out. it's a fantastic margin but it's maxed out. you look at an area of the world where they're absolutely looking at driving the top line and cutting costs and improving margins. each region is different. >> you're talking on that stock now. >> yes. and also about, you know yeah the overall consolidated margin. also don't forget cpg. it's grocery sales and that operating margin is that of a store. >> just to clarify your target for that stock. >> i'm sorry, the target. i'm sorry. just looking for the stock. we had it as a top pick and we had to be raising our target throughout the year and we think they'll do great things. >> is there a number you want to put on that? >> we'll always be working, you know rbs givenp again that there has been a flight to quality and

the stock works. sometimes we vehave to chase it from time time. >> nicole appreciate it. going to get a starbucks right now. this morning's top stories and bob hormats from geopolitics. a world of topics to cover with him. check out the futures now just 39 and down 29. stay tuned, "squawk box" will be right back.

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market alert. u.s. investors taking investors on a wild ride this morning. what is driving that volatility ahead of the opening bell. the head of the tsa is out

after shocking security lapses. smuggled weapons only 5% of the time in a recent test. what the government plans to do about it. apple putting its subscription tv launch on hold. why it is getting pushed back. second hour of "squawk box" begins right now. >> announcer: live from the beating heart of business, new york city. this is "squawk box." welcome back to "squawk box" i'm joe kernen along with becky quick. down 110 points at one point. they actually turned positive in the last hour and now they're back slightly negative and even lesser negative than two seconds ago. now down 16 points on the dow jones. down about 4 and the s&p and the

nasdaq down about 280. that was the strongest average yesterday with the big intel, altera news. stocks in europe also rebounding from the lows of the day. the initial move down came after data showed the euro zone inflation was higher than forecast in may. in fact it was the first positive number. 0.3. first and six months and that's being taken positively fundamentally but maybe negatively by the market because it means maybe qe is not going to go on as long as people thought. >> it's back to the same thing that our market is looking at. >> they learned this from us. from all the trading pits. in the meantime let's tell you about the top stories at this hour. a deadly accident in china. a tourist ship capsized and there were 458 people onboard and rescuers have now brought at least 14 people out alive. most of the passengers were elderly tourists. search teams heard people calling out from inside the partially submerged hull.

five confirmed deaths but hundreds are still missing. and in washington, a house panel will hold a hearing on the record-setting recall of nearly 34 million vehicles with defective airbags. 11 automakers are involved. they have been linked to six deaths and more than 100 injuries. we have an update on greece. the greek prime minister said sent the governor new reform proposal last night that came after talks yesterday that were unexpected joined by christine lagard. now greece faces a friday deadline to repay 300 million euro to the imf. totaling 1 1.6 billion euros. we have 50 billion euros that need to get figured out. >> bob is here and we're talkinggoing to talk about that. in the meantime a shocking lapse at the tsa. undercover testers successfully smuggled weapons through airport security 67 out of 70 times.

that is the success rate of just 5%. the tests were conducted by so-called red teams from homeland security charged with probing tsa checkpoints. the acting head has been reassigned and screening procedures are being revised. we'll have more on this story coming up at the bottom of the hour. >> that's crazy. a lot of ground to cover with our next guest. everything from the diplomatic fallout from john kerry's bike injury and land grab in the south china seas. and also the expiration of spying provisions of the patriot act. let's get to it. bob is also former state department undersecretary for economic growth and energy and environment and he's also the former goldman sachs international vice chairman. bob, great to see you. >> great to be back. >> let's start with the greek situation. how concerning is it at this point? we know the deadline is moving and we also know that these are

very large numbers we are dealing with. numbers and they are building in greece doesn't have the money to repay them. the problem is who is going to blink and how much? the greek government came in on a platform of resisting pressures from inimf and commission from the central bank and that's what its constinch waens wants it to do. >> they also don't want to leave the euro. >> they want to have it both ways. they don't want to leave the euro but reluctant to do the kind of things that they want them to do to put their economy in better order and be in a position "a," to start over time repaying their money, not necessarily all of it right away. but, in particular to do the kind of things that other countries in europe have done to make their economies more competitive and cut back on these big fiscal deficits. >> things like cutting pensions and things like privatizing.

>> privatizing. cutting pensions. in general, cutting social services and cutting back the number of government employees. not only not cut them it added a number of government employees. >> it was a lot, too. >> a lot, yes. >> it's like a number you say it and people don't believe it. like 40% or something. >> a lot of employees in greece are employed by the government. this is the problem, they don't want to leave. it's not impossible that they could default or do something and not necessarily leave the euro. in 1841 eight american states defaulted. they still stayed in the dollar. so, it's possible that the question is, could they do that? could they do these defaults and stay in the euro or would the other europeans allow them? so there are gray areas where they can do a number of things that europe didn't like but not necessarily stay in the euro but, of course they wouldn't get a lot of money because the europeans and the central bank and the imf wouldn't provide money. >> would they back their banks?

continue to back their banks. the real deadline will be later in july. >> they would try, but, of course, they need money from the european central bank to do that. that would be very difficult to do. they would have an awfully difficult time economically if they were to default simply because they wouldn't get the money they need to sustain the government. they have to engage in some dramatic austerity. on the other hand, if they left the euro, then they would have to revalue and affect all their debt from euros into probably the old name of the currency. >> maybe they should bring it back. i'll go over and be 50% cheaper and we'd all go to greece and they'd have all our money. quickly in europe, this chart, i saw it on twitter. twitter actually is useful in certain ways. >> for charts and certain things. >> just to see. i would not have seen that. mark says here is the loan to deposit ratio in europe over the last 15 years. banks are still not lending, consumers are still not

spending. so, we're all the way down to 90% or whatever. he says it's hard to get a sustainable recovery. you saw the 0.3% inflation in europe and we think things are better because of qe. it says the money is just laying here like it's laying here a lot of the times. >> that's part of the problem with credit market in europe. europe depends more heavily than we do on banks for credit. we depend mostly on capital markets. they depend mostly on banks. if the banks are not functioning properly the capital markets aren't working through the banks, the ecb is trying to get the banks to lend more. >> really important that europe recovers, bob. then our dollar doesn't get stronger. >> absolutely. >> joe, and it's important in terms of us if the dollar continues to strengthen. it weakens us. but also important geopolitically. a weak europe is a weaker economy. >> greece better. >> they could deal with greece and ukraine better and a

stronger resister to what putin is doing. they lost a lot of self-confidence and undermines their government and strengthens these right wing and left-wing extremist parties that don't like europe and don't like cooperation with the u.s. want to make some deals with the russians. this economic issue is harmful to them and harmful to us. >> let's talk more about putin. what happens in that situation? i mean this has gotten progressively worse over the last couple of years. >> absolutely. of course, the european union has do decide soon whether it wants to renew the sanks s sanctions or up them or dilute them somewhat. my guess is while the agreement that was reached to try to cool things down has held to a degree there's still a lot of foiting fighting going on and now they caught a couple regular russian forces in ukraine. they're questioning them. it's clear that the russians are involved in stirring things up and it's probably also true, at

least the evidence demonstrates it that there are russians there supporting these rebels in the eastern part of ukraine. >> do you think the eventual situation is tense as a result? will they be diluted? >> the europeans have not agreed amongst themselves. i don't think they'll be diluted nor i do i think they will be diluted. whether you can up the sanctions remains to be seen. if the u.s. can do this and they could and you don't have support in europe and there are a number of european governments who don't want to do it. italy and greece trade a lot with russia and other governments, you want to dilute them and the eastern europeans are afraid if the west isn't resolute it gives sgives putin the wrong signal. one of the problems is he's just not betting on russian strength and he is obviously pushing the

envelope as far as he can in ukraine and could push it more. a number of people think in the summer he will make another effort to push it more. he's also betting on western weakness. he's betting that europe won't cohere around tougher sanctions and better in effect that the u.s. and europe won't do anything really tough if he decides to make more incursions in ukraine and he sees a lot of descent within europe because these new parties are saying we don't want a more unified europe and we certainly don't want tougher sanctions. it's hard for the european governments given the left wing right wing populous pressures against unities. >> you know about diplomacy, right? you've been a diplomat. you got this guy kerry. we need this deal by the end of june. so he breaks his leg and he has exited the talks. he's expected back in six weeks. i mean how -- is it his staff

that is in there doing the ground work and things will progress? he doesn't need to be there. can he be on a conference call? i read that i was shocked. listen guys. i know this seems important. i have to leave for six weeks. seriously? >> he broke his leg. >> i know that. but we're right at crunch time. the most important thing for barack obama this iran deal. this is unbelievable. >> this is it. >> how can this happen? riding a bike and then he's gone for six weeks. >> riding a bike, i don't know. he does that a lot. he rides wherever he goes. >> helmet is for your head. >> they are very confident people in the united states working on this. they can negotiate. >> he doesn't need to be -- >> he doesn't really need tabe there, let's face it. a lot of very good people working on this. he may need to be there to make the final deal and there are telephones and cables and all sorts of ways. >> there is teleconferencing now, too. >> sure. there's teleconferencing.

he can be in there through teleconferencing. whether he's there or not is really not the critical thing. the critical thing is whether the issues can be worked out and that's still problematic because still a number of issues that are not working. >> bob, the thing that scares me the most when you start talking about putin and his stretch for power, and you look at china and its grab for power by building islands in these disputed territories. you start thinking about isis running amuck in places where entire borders have fallen apart. that's the types of changes on a global scale we haven't seen since the last time we had world wars. what does this add up to? >> i think they see a more reluctant u.s. a more reluctant u.s. in terms of its degree of involvement. let's take the middle east. very good point. the president makes a statement. he wants to destroy and degrade isis. well, what's happening? isis is making gains in syria. making gains in iraq as we've

seen. incidents of isis attacks even in the northeastern part of saudi arabia. there is sort of a growing recruitment effort by isis that is proved to be very successful and doesn't seem to be any ability of the iraqis who are really the primary resisters, at least within their territory. they cut and run our secretary of defense, ash carter made this point. 30,000 iraqi troops were defeated by say 2,000 or 3,000 isis troops. could they come back? yes. iraqi troops with american support and iranian support still couldn't do this. then we have all these problems in yemen where you have the iranian supporting and the americans now having negotiations in oman to try to free an american hostage and calm things down. we have very complement diplomats and the question is

how much we involved the saudis in this and do they see us doing this in their behalf or sort of our own play to sort of calm things down? that whole area is roiled up and it's not going to come up calm down soon. al qaeda and the arabian peninsula we don't talk about that much. they're very dangerous. the other thing we don't talk about much at all is that these foreign fighters who were there are from all over and many of them when they leave, come back to europe and we're going to see as a result of these battle hardened fanatics when they do come pack to where they came from they're from all over europe and some from here. some from china. chinese are worried. these people are going to perpetrate all sorts of terrible things or at least try. we have to be much more resolved to deal with these issues. a much more unstable place, because the people who come from other places who are now fighting fanatically for isis

and get ingrained with this ideology. >> not a very optimistic outlook but realism at this point setting in. >> we have to be realistic. it demonstrates one thing. we have to work together with our friends and allies in a very resolute way to create more stability. in the middle east we've got to work with countries that are friendly towards us. we is to do something to strengthen the relations with europe and certainly pass tpp. in asia we have to demonstrate. we have a proactive set of approaches, too. we just can't sit on the sidelines. we have to be proactive and demonstrate and we want to have a presence and be effective. >> you turned into kissinger. either you left your party or your party left you, one or the other. what happened? >> i've always been myself. >> just don't go biking and break legs. stay off the bicycles please. coming up tesla ceo fighting back that his company was built

on government subsidies. the man who put big advances in space flight is turning his attention to the world of finance. peter joins us to talk expunancial change on that one. teev steven ross is going to be here. the company is not ready for private investments just yet. we're back in a moment. financial noise financial noise financial noise

welcome back to "squawk box" this morning. a new regulatory filing from fit fitbit this morning. plans an ipo of 30 million shares planning in a range of $13 to $14 a share. jawtop bone i used to wear. >> yeah what happened? >> you know i don't know. i think it was too much information. tmi. tmi. >> yeah. >> i have one. i mean, i like it. i should probably put it back on. i think the battery went out. >> i put something here. >> just while you're running, right? >> yeah while i'm doing stuff.

>> not like you're sitting here on stuff with us. >> it's 130 now right now after hormats. let's talk about tesla ceo elon musk. a report that his companies have been built on government subsidies. phil lebeau spoke to musk and he has the report. >> after the report in the morning of "l.a. times" laying out $4.9 billion in government incentives subsidies, tax abatements that have been given to three of the elon musk companies. tesla, as well as space-x and according to "l.a. times" you add up all the incentives and it comes out to $4.9 billion. when we reached out to tesla yesterday for a comment we talked with elon musk live on the air and he's not too happy about the portrayal of his company simply being built on

incentive incentives. >> by adding up everything that has ever happened and including things that will take the next 20 years to happen and then summing that into a single number and playing it today. it makes it sound as though my company is getting some huge check, which is fundamentally false. >> now, we should point out that we reached out to "l.a. times" and business editor came on later in the day and look what we're doing is adding up all the incentives that are out there. you draw your own conclusions out there whether there that tesla has received. if you look at shares of tesla which are trading around that 250 mark. keep in mind one of the focus or a focus of this article was the factory in nevada. guys, remember $1.3 billion in tax incentive and abatements part of the deal that the state of nevada put together to land that gigafactory. elon said look we'll bring

6,000 jobs there and the economic benefit will outweigh over the next 20 years. that is at the heart of this debate about how much in incentives these companies have received and whether or not they are going to be repaying the different government entities over time in term of economic benefit. auto sale comes out today. the numbers you'll see from the different automakers might be up a couple percent and down a couple percent. don't focus on that. focus on the sales rate for the month of may which is expected to come in at 17.3 or 17.4 million. guys, we are expecting very strong auto sales for the month of may. >> i'm glad the "l.a. times" did it. just great to talk about, phil. i don't know how you really analyze it. i try to figure out, if you added up total profits to date from those three companies, it isn't even a profit. it might be a profit with the subsidies, i guess.

i don't know how to compare apples to apples. you know what i mean? they would have definitely lost $4.9 billion basically. but then you say, look -- >> i don't have the final numbers, joe. i understand what you're saying. what elon musk is saying let's look at the giga factor. that $1.3 billion. you break it down over 20 years and then factor in the 6,000 jobs and the economic benefit. and, by the way, some of those incentives for nevada they don't get those unless they hit a certain threshold in terms of economic development. >> i was going to go on to say that fledgling industries that have a great future it's not a ridiculous thought to think the government should have some. we always want public private partnerships that work and that are beneficial long term. versus a pure government waste of you know what was sulinder or something? if i had to pick one or the other, i would take this

obviously. >> actually would be interested in looking at other companies, too. tesla is not alone in getting handouts from the government. >> at least something good might come out of this. >> keep in mind, guys, as you were well aware. as you guys are well aware, within the manufacturing complex it is not uncommon for companies to get tax incentives and abate abatement abatements. >> look at amazon with its warehouses. not a company that builds a distribution center without getting at least some sort of benefit. >> what is capitalism without croneyism. it's like it'sless useless. >> sometimes you need the government to make these kind of investments. >> you need al gore to invent the internet and then the government to fund it. >> thanks, phil. coming up the fall out from the plunge in oil prices is pushing alaska towards a government shutdown. that story next.

seven out of ten power outages in the us are caused by weather. but utilities can now predict where the power will go out,

within a few city blocks. working with ibm they're combining micro weather forecasts with detailed data from local sensors. to predict where outages are likely to occur. and send crews exactly where they're needed, when they're needed. ibm analytics from the internet of things is making energy smarter every day. alaska headed for a government shutdown. governor bill walker issued warning a partial government shutdown will begin july 1st unless state lawmakers can agree

on a budget for the next fiscal year. it's been hurt as you can imagine, by the plunge in oil prices. coming up the finance industry is on the brink of expunancial change according to peter, the man who helped fund change in space flight and cell therapy. coming up next he will tell us what banking will look like in ten years from now. as we head to a break, take a look at u.s. equity futures. dow off about 30 points.

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welcome back to "squawk box," everybody. among the stories that are front and center this morning. in washington today, a house panel will hold a hearing on the record-setting recall of nearly 34 million vehicles with potentially defective tacada airbags. linked to six deaths. three tobacco companies are appealing a canadian court ruling that awarded $12 billion.

apple will push back the launch of its subscription service. the sticking point, apparently licensing deals. the launch could be delayed until later this year or next year while apple finalizes technology and money issues. >> the issue the entire time getting the content guys onboard. a developing story this morning, the acting head of the tsa is now out. this coming after an internal government investigation on security failures at dozens of the nation's busiest airports. what crazy/scary story. >> that's right, andrew. the news breaking yesterday that homeland security secretary jay johnson has redesigned the acting head of the tsa this following reports that screeners at airports across the country failed to detect mock explosives and weapons 95% of the time that

undercover tests attempted to get them through airport screening checkpoints. one agent set off the alarms but screeners failed to find a fake explosive taped to his back during a pat down. the president has appointed a permanent head of the tsa and jay johnson is urging the senate to confirm that person has head of the tsa. but the acting head melvin caraway is being reassigned and tsa and homeland security is saying they're going to have additional training and new procedures for tsa agents guys. >> thank you very much. >> you bet. all right, what time is it? 7:30. peter, i'm going to blow out the rest of the show. we're going to talk until 9:00. probably not. i wish we could. cnbc are co-sponsing the finance conference. a two-day event examining how rapid, technological change is reinventing, in this case the financial industry.

that's where cnbc is involved. peter diamandus executive chairman and peerspear headed in the past. you might remember, what was it? >> the x-prize. >> x-prize for flight therapy and in this case i like because of cnbc i am glad we have an alliance with you and singilarity university to look at how it's all going to affect the financial industry. but we're talk about accelerating quantum computing and digital currencies and robotics, and we're talking about finance, but the bigger thing is what i'm even more excited about and that's the singilarity, itself policiy in our lifetime. hopefully, if we live. >> we'll take the next 90 minutes to discuss this. >> we need 90 minutes and i started off by saying andrew worries a lot.

you have malthusium worries about american dream and nfl will go away and about food and what you're saying is that 25 years from now will be an age of abundance. >> if you look, i mean if you look at the data over the last 100 years has been extraordinary for humanity. we doubled the human life span. we tripled the income for every nation on this planet. the cost of food has dropped 13 fold and energy has dropped 20 fold and we are living the most peaceful time ever in human history by the numbers. you wouldn't know that by watching the news. because every murder is brought into our living room. >> it bleeds it leads. >> we haven't gotten smart over the last 100 years. they have been a function of technology. the technologies that entrepreneurs have today are those only available.

the world's biggest problems and the world's biggest business opportunities. more entrepreneurs trying to solve these problems to create new businesses which create a better world. if you think about it today, teen teenager in mumbai has better -- that is the world's information. >> maybe you'll get excited about the eighth thing is that some type of bit coin is going to be prevalent. i mean he's all, he's totally with you on the future of virtual currency. >> and difficult block chain technology. >> so let me just ask you a different question, though. when you look at a lot of these new technologies and the question is what are people who are less educated going to do in developed countries? so i don't, i completely agree that over the next 20 30 years globally things will get better and i'm not saying the pizza pie is one size and it can't get better for everybody on the

margin, but it's clear that you can get better for developing countries than developed countries and in many developed countries, i would argue from an employment perspective, it will get more challenging. >> what i see our cost of living substantially reducing. what do i mean by that? today we spent a lot of money on health care and education and cars and just taking those three examples. we're just about ready to have the winner of the qualcomm, paul jacobs put up $10 million and we had 330 teams developing a handheld mobile device for a mom or dad to be your diagnostician. they will come in and help us reduce health care costs. today it sucks. you know the medical system needs disrupting. education the same thing. we'll have a leveling of the playing field where the billionaire son and the poorest child son in the united states has access to the best education provided. >> that's spectacular. >> haven't thought of that. >> cars that will reduce in

costs. it is going to be ten times cheaper to own a car. you don't own a car, you own access to a car. a lot of things we spend our money on are going to be dereggial izedereg yl dereggial dereggialized. >> i heard a story this morning about the doctors you can get either on the phone or through a video chat that texas is looking to stop that because they want to make sure you actually see a doctor and that they defend these practices. all of those advances will be met head on by regulators who are trying to stem some of those and protect other industries. in some cases, make sure that you really do see a doctor. >> of course. listen, safety is important. but the fact is the government's job is stability. right? and people don't want to people like waking up in the morning and knowing the world is the same as it was when i went to sleep the night before. we do like change if it's ten times better. so, while the taxi driver and limousine drivers may not like uber the rest of us who can get

around cheaper and faster do. this is history just at the rate of change is increasing. you know the only constant right now is change and the rate of change is increase. it will include everything including the finance world. 40% of today's fortune 500 companies will not exist. richard foster at yale did a study. if you join the s&p 500 in the 1920s an average run rate. today if you join the s&p 500, it's 15 years. >> what happens to banks? jpmorgan, morgan stanley, these are names that have been around for a century. >> they do go away we saw that in 2008082008. they change. one thing that is happening with technology, we are getting rid of the middle man. we are going directly to the consumer. and so i think we're going to start to see banking change. i'm just back from south africa. i was there three days ago with bar

barclays because we'll see 3 to 5 billion consumers coming on. elon musk who is on my board you just had on the show here. richard branson are all planning global constuilations. satellites drones balloons. that will connect everybody in the plant with a mega bit per second. those people are going to need banking. and, so, you're not going to build branches of banks. they're going to have apps. it's going to be complete virtual. >> so we had, right now we have three or four branches literally of banks, physically around us. and i said to him, will these still be here and he said absolutely. he said people physically want to go in. >> it's timing. i know it's about financeple okay, eight things in 2025. singular university only looked

up, but you do think $1,000 human brain. in ten years you will be able to have something the equivalent speed of a human brain that costs $1,000. >> joe's brain or mine? >> yeah exactly. a trillion sensor economy. perfect knowledge, which you were just talking about where everybody on the planet will have the ability to know something almost instantaneously, if it can be known. how many people are going to be connected. eded 8 billion people. health care gets disrupted. i want to believe all this. do you believe the chart while it goes back 4 billion years and the organization of molecules and dna and have things getting organized. do you believe that 2040 2045 number? >> i do. it's, we are in the midst of a rapid period of evolution. and we're humans co-evolving

with the technology we created. you can look at the numbers. computers over the last 100 years from electric mechanical computers have been you know today the average computer is calculating at 10 to 13 cycles per second. it's in your when you throw away your iphone 5 to get an iphone 6, you're throwing away more power than the u.s. government had throughout the entire '70s and '80s. we think nothing about it. our brains we know how fast our brains calculate for video and audio pattern recognition and we can look at the chart and yours will have a tenth to the 16th cycle for 1,000 bucks. >> when computers get to the point or machines good teat the point where they have billion times the sum total of all human knowledge, we don't know that's why it's called a singilarity. we don't know what comes after that because we have no idea what they'll be able to design. i just hope they like us at that point.

are you assuming that they will be ambivalent towards us? >> getting ready to launch an ai human collaboration prize. it is partnerred with ted, the organization. my expectation is that we're co-evolving with technology. always have. when we're driving on the streets at 50 miles an hour and plying an airplane at 600 miles per hour. our evolution with technology does that. just what we're doing here in this amazing studio. your ability to broadcast to a billion people. i mean that is the viewership here, right? >> within a few. >> just below a billion, but, yeah pretty close. >> we're certain of tens of dozens. but, no it's scientific notation. we need to use that for the morning ratings. like i said i wish we had until 9:00. please, come back up. how did we partner up with you? >> well it's a number of different folks, but lynn who is part of cnbc family. >> you should definitely be

doing this. optimistic view point. you worry about disruption and there are people -- >> over five years in the early 1930s. cars will be gone anda tonmous autonomous cars will be here. >> when is that? >> within ten years. >> you're young. >> eat my wheaties. >> thank you for joining us. when we come back this morning, miami dolphins owner steven ross will join us to talk real estate, the economy, his trip to cuba and much more. stick around, "squawk box" will be right back.

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you wouldn't take medicine without checking the side effects. hey honey.

huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck? check your broker with brokercheck. welcome back to "squawk box." our next guest just got back from cuba. stephen ross is the founder and chairman of eareilated companies and joins us with more. legislateened in the real estate business and now in the sports business, too. great to see you. just tell us about cuba. you went thinking you'd make some investments.

>> we went to see what it was like. you hear a lot about cuba and you hear people talking about what opportunities there might be in cuba. i didn't really find to see there were a lot of great opportunities. it was like going back in time. you talk about change you listen to peter talk about change in the last segment. you won't see that in cuba. you need a government that really wants to change. wants business and really wants to see growth. you really don't have any of that feeling at all. i mean when your highest earning people are artists, you know, that says a lot about what the economy and what the opportunities are. >> so, curiosity as a tourtistist it was freight to see, but as a real estate developer, forget about it. >> is there a whole army of people trying to sell you something? >> no we went strictly to see and it was interesting from that standpoint. but you talk to people and they

really do want change. the young people want change. they're fed up. it's been so long and why go to school or why really do things when there aren't any jobs when they get out. they can't earn any more money. the best thing they can do is drive a cab. it doesant give youn't give you a lot. >> couldn't you have taken bernie sanders down there for a looksie? don't you think that would have been helpful for his world view? >> he already shows you what the government can really do and impact people. >> be very happy that artists are the highest paid people in the business. >> but there's our human experiment for socialism, right there. you can look right at it and see it. everything is 50 years old. nothing has happened in 50 years. >> great to see the old cars. that's good news. >> let me ask you about real estate in new york and an update on hudson yards, but perhaps more importantly, just the real estate market here seems to be booming. we keep hearing about the

newskyscrapers that are going up to the sky at remarkable prices. >> that's what people want to focus on. but there is a lot of activity in that area. i think a lot of people are going to be a little disappointed because the people are coming to spend, you know $8,000 to $10,000 a foot aren't going to be your typical new yorker. they're looking to the russians and to the overseas market and that certainly has slowed down dramatically. >> too much inventory then. >> way too much inventory at that price range. >> you can be convinced of rule of law and property rights, you'd buy the entire coast of cuba if you could be convinced you could hang on to it. >> long term things turn around. >> if you could, if there was rule of law like there is here and property rights would you not develop the coastline of cuba? >> havana was a great city. you can see it. >> that's all i think of holding you back it's still a communist

government, right? you cannot be protected in terms of investment because you don't know if anything that you do whether you're going to be able to hang on to it. >> absolutely. that's what's holding it back. until they have a different government you know nothing. >> i hope that we decided to do this to sort of inspire and hopefully move the process forward for them instead of just, you know being aligned with them on certain issues. >> it's them. don't forget you have people that are there. they're there for their lifetime. and they're not going anywhere. so, how change happens. >> maybe we should have asked for koppel things before we just opened up and maybe some reform down there before we just threw the doors open. i don't know. >> well i think people go down there going there. won't make the decision to invest there. there's no question. >> how are we really helping?

maybe it's just starting the baby steps to liberalization. >> what do you think has happened with the nfl in terms of the new punishment handed out? >> well it was an unfortunate situation. hopefully it's behind us. bob kraft has accepted what happened. i think it's the best thing to put it behind us and i think people are really anticipating the new season. football is at an all-time high in popularity and i think it will continue to grow. >> what would you have done as an owner if you were the owner of that team. if you were kraft? >> i would like to say i would get rid of belichick, but that's -- >> yeah that will. your record versus belichick pretty good there, steve. exactly. yeah. you would get rid i'd get rid of brady, too. come on back. i still want to talk about new

york real estate and there are all sorts of things going on with you. >> i think it's a tragedy because brady won't be there on a thursday night game against the steelers that we're broadcasting. >> it's unfortunate. >> it is. coming up this morning's big movers movers. we have the list of stocks to watch ahead of the opening bell.

welcome back. one stock we're going to be

watching. upgraded from buy to neutral. the change reflects what it sees as imminent consolidation in the beer industry, even more than a lot. coming up when we return. jeremy siegel will join us. he has some what am i saying? as soon as the fed hikes rates, the rally, he says is on. i thought he could change his view. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.

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a phone call from a big-time bull jeremy siegel said to tell you why you and your money should be begging the fed to raise rates now. plus how safe are the skies? a disturbing investigation at the tsa showing security agents missed explosives and weapons at an alarming rate. the latest on what's being done to fix the problem, coming up. and flip this penthouse. trophy apartments in new york now being bought for big money. over $10 million and being sold for even bigger bucks just a year or two later. trip inside the numbers. 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 "squawk box" here on cnbc first in business worldwide. along with bill kernen and becky quick. take a look at the futures right now. we got some red arrows. dow looks like it will open off and nasdaq off marginally by eight points. i don't know if we'll attribute this to all what is going on in greece or where we want to lay the blame this morning. checking out markets in europe right now at this hour again, we have a red picture, not terrible. but not great either. we should also say that opec ministers will meet in vienna later this week. we're looking at crude at $60.97. here are some of the stories investors will be talking about today. german chancellor angela merkel

holding an emergency summit on greece and christine lagard and mario among the officials to attend the secret gathering that is now not so secret. here's what bob hormats told us about it in the last hour. >> there are very large numbers and them building in greece simply doesn't have the money to repay them. the problem is who is going to blink and how much? can they do the defaults and stay in the your or will the other europeans allow them. other gray areas where they could do a number of things that europe didn't like, but not necessarily stay in europe. in other global market news euro zone inflation data came in 0.3% in may. that's what started some of this global selloff. you saw people concerned. good news on the economic front, but concerned that that might mean qe might end sooner than expected in europe. also india central bank cutting interest rates for a third time this year.

forecasters have questioned whether the economy there is doing as well as the latest growth numbers suggest. the acting head of the transportation security administration the tsa, has been reassigned. the move comes after an internal investigation found security failures at dozens of the nation's busiest airports. i'm sure ours were weren't they? newark. >> i would guess. they are certainly the busiest airports out there. some of them i should say. nbc news has confirmed that tsa screening officers failed to detect smug ldzgled weapons. they tried 77 times and they failed 67 out of 70. in one case an alarm sounded on a magnetometer. but even during the pat down that followed that the screening officer failed to detect a fake plastic explosive that was taped right in the middle of an undercover agent's back and didn't feel right in the middle of the back.

nbc tom costello will be with us in just minutes with more on this alarming lapse and what is being done to correct it. it is amazing nothing has happened in a really long time. it's amazing that every single person gets screened. that that's what we have to do when you're looking for it. >> we talked about it earlier whether we would like to see this continue or not. personally i would like to see it continue. the training sessions to step up. look this is an important deterrent. >> let's say you're someone who is considering trying to do something, this makes -- >> emboldens you. >> accept it once you bring it up and you shine a light on it then people now you think, now they see. i can't put it in the middle of my back, they can't put it there. i was thinking maybe you shouldn't give people ideas, but we should let people know you're on to you now and hopefully we'll beef up our -- are you surprised that a government agency isn't confident?

>> every year or two we hear these horrible reports on how they put these dummy bombs and they get through. >> i'm worried. a box cutter is all they had last time. we had marshals on. another transportation story that was nerve racking and horrible. heading to the hill today to answer questions about last month's deadly accident outside of philadelphia. lawmakers want to know why technology to slow trains that are going too fast was not in place at the time. investigators say the train was going 106 miles per hour just before derailing on a curve with a 50 miles per hour speed limit. amtrak is going to install cameras inside locomotives and look into having two engineers onboard. a few stocks on the move this morning. medtronic above street expectation but the full-year forecast was slightly below estimates as it increased the projected negative impact of a stronger dollar, but you can see the stock is higher. pvh topping profit estimates.

this is the maker of calvin klein and other aparableparel brands. announcing stock buyback and a nice move today. a mixed quarter for dollar general. earnings beat by 3 cents. but revenue was slightly below what wasll street was looking for. stock is up $2. our next guest wants the fed to raise rates and now. why? he argues it's the best thing for your portfolio. jeremy siegel professor of finance. when did you decide that this was important, jeremy? i'm sure that you thought for a while maybe it was time, right? >> well i would not say just now. in fact, i think if they go in june, which i think is a very low probability event, that won't be good. but i think if they go in september, i think the fourth quarter might be the very best quarter for stocks this entire year. because every one is positioned

to say, oh, don't buy stocks before the fed raises rate. hold off before the fed raises rates. when they raise a quarter percent and sees the world does not end, they say, you know what, this wasn't so bad after all. so i think the anticipation of the raising rates is worse than the actual act of raising rates. but, no i don't think they should go early. i don't think there is any reason for them to do it now. but i'm saying when they do it later this year which i'm pretty sure they will we could have a very very good fourth quarter. >> the feds whole rationale through all of this has it been to try to engender some animal spearts and spirits and get the wealth effect to work so it eventually causes the economy to catch up where the markets already are. do you feel like the underlying economy is warrants stock prices where they are right now. in the state that it is in right

now? >> yes. it is definitely true. we are selling a little rich compared to historical archlverages on price earning ratios or 18 times earnings. but in a very low interest rate environment. and, joe, even when the fed raises and even if we look through 2016 and 2017 we're going to have low interest rates for many years, if not, if not a decade or longer. and in that very low rate environment, 18, 19 and even 20 times earnings is not at all excessive to the market. so i don't believe that we have an overvaluation on the stock market. i think interest rates are going to rise but not very much. and that that is basically going to be good for stocks. >> jeremy, are you saying that you don't think we'll see a correction for the next ten years or longer? >> no no. i don't say that.

certainly, what i'm saying is that i see interest rates being relatively low compared to what we were used to for the next ten years. yes, certainly there will be a correction in the market but i think we're going to vacillate between 15 and 20 times earnings, maybe even 15 21 22 instead of between, let's say, 12 and 17, which has been most of the historical post world war ii period. with a lower interest rate base that raises the general valuation. >> jeremy, do you have any anxiety about technology stocks. we talk oftentimes about the private market and the ubers and the like and the unicorns out there and without that may be doing to the public market? any concern there? >> well, i mean, two things. first of all, in the technology sector that is in the s&p 500, there is no overvaluation. i think the pe of the tech ratio is something like 17.

it's even a little less than the overall market which is really quite remarkable because s&p predicts it will be the fastest growing sector. certainly in the new issues or the potential issues, we've got a lot of excitement. there certainly is going to be some of those that is overvalued. the broader question that i see is our regulations making it difficult for firms to go public. in terms of the costs. they would rather be bought by someone else or stay private. we all know that willsure 5,000 can't fill 5,000 stocks any more because there aren't enough stocks to actually make the average. we have a decrease in the number of stocks trading and i personally think it can be directly aattributed to regulation. >> the bull markets and expansion, economic expansions don't die of old age. that's the old expression. something usually kills them.

it sounds like i mean if you're right about interest rates, that means that inflation doesn't you know doesn't get out of control and that means that we don't see the normal way that an economic expansion is killed, if you will. so, what could kill it in the next three, four five years? what could bring on the next recession? we know one is coming. you have any idea? anything? it's unknowable. but what do you think it can be? >> yeah. i mean you're absolutely right. it could be a terrorist strike of major magnitudes that scares people. after 9/11 -- >> a lot of debt trouble ingingengend engendered by the central banks? >> i don't think as long as interest rates don't rise to the six, seven, eight and i see no way that could happen. the debt level is serviceable at the time. the debt gdp of the government is really not scheduled to rise until 2030 2035.

i don't see a problem there. >> i want to maybe margin my house and buy some s&ps. are you with me andrew? >> no. >> all right. all right. thanks, jeremy. you with me? >> that's a little risky for my taste. coming up can vimeo take on netflix. i ask myself that a lot. the company releasing a new paid prescription for producers. we'll talk to the ceo about the future of the paid video model. as we head to break. check out what's coming up later this hour. "squawk box" will be right back. push your enterprise and you can move the world. but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless

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welcome back to "squawk box." the online video race is heating up and vimeo is upping the ante with a new paid prescription tool for subscribers. here with us for an exclusive interview about this new tool. good morning to you. >> good morning. >> just so we are clear, you're

not trying to become netflix, per se. >> not at the outset. this allows any creator to launch a subscription of their own. as opposed to one single sibscription to vimeo it is us offering a platform for any creator to own their own netflix-like. >> do you imagine creators will try to make multiple series and create their own channel like that? how do you see this? >> we actually think it is a combination of all those flavors. vimeo on demand which we launched two years ago is allowing creators to sell content and the the market has been incredibly exciting. where they can charge a monthly recurring fee. one of the most interesting things is creators experimenting with different approaches. they may offer content ala carte for purchase and for rental with different prices and then offer in addition a subscription

bundle around that. >> what is the most successful program or group of creators thus far? >> actually our most successful program is our first vimeo original series called "high maintenance" which we launched on the platform early last year. >> that went to hbo. >> yeah it did. in terms of the model. tell us about the economics for vimeo and then tell us about the economics for the creator. >> the way it works our open platform we take 10% of every sale. that's available to any creator. and, obviously, a far better revenue share than they might get from youtube who is taking 45% of revenue and itunes or amazon is taking 30% of the revenue. that's a great benefit to creators. we're able to do that because we can do it at scale and it's an open access self-serve platform. in cases where we're investing in content, sometimes different participation in that straight 90/10. >> that program -- something you invested in that program.

>> we're investing to create content and investing in advance of exclusive programming. >> that's a massive difference that you're only taking 10%. why dozen everybody who put stuff on youtube put it on vimeo. >> that's what we're starting to see happen in this sense. it's the primary difference between ad-based and selling. one of the most powerful things about selling. where in an ad-based model you'll make $2 per thousand views. it might take you 50 million views to generate $100,000 in revenue. where you're selling content. if you sell a piece for $10, it would take you 10,000 sales. >> it has to be that they think they'll get more views on youtube and therefore a bigger revenue pie. >> that's absolutely right. when you talk about an order of magnitude difference like that. if i were challenged would you rather try to get 11,000 people around the world or rather get 50 million streams for free.

i would take the 11,000 sales per day. this is a new model for the internet. >> you don't sell advertising on vimeo. >> we do not. >> do you prevent creators having embedded within their programming. >> some programs have sponsors. for instance action sports films. like skiing or snowboarding. equipment sponsors are part of the providing that provided some of the funding for the film. >> like a go-pro or burton or a ski company and that's a very natural integration and that's something that we allow. >> kerry, we'll leave it there. >> thank you. so much for having me. breaking news. okay. an internal investigation at the tsa revealing airport screeners failed to detect explosives. let's get right now to nbc tom costello who has more on this. tom? >> hey, i got a break for just a second here because we have breaking news. i want to bring to you right now and that is, joe, we have reports of multiple bomb threats

against aircraft in the air at this very moment. one of them we are told is on the ground in philadelphia. i'm breaking from the script about the tsa. but here's why, joe. this is kind of similar to what we had, you may recall last week. in which we had multiple reports of bomb threats phoned in and affecting aircraft nationwide and the caller was saying at the time that there was a chemical weapon onboard. that as a result affected planes that were inbound into the united states. multiple planes you may recall last week. we now have four to five other aircraft at this very moment that are being affected by this report of new threats phoned in to aircraft. one of them is in philadelphia. one of them is headed to san francisco and two more pardon me while i do this live on the air. that is the breaking news we're bringing you before anybody else and tsa and homeland security and the fbi are on this case trying to determine whether this is anything to be overtly concerned about. you may recall last week that they determined these were all

fake claims and some speculation that an isis lone wolf involved in all of this. they have not yet determined who was responsible for those and now we have more planes being affected today. the other major story of the day, this morning, joe, is that the head of the tsa, the acting head is out. melvin caraway an 11-year veteran is out after the scathing report that came out yesterday which indicated these internal teams from homeland security that are supposed to probe checkpoint to look for any availabilities were able to smuggle mock weapons by the screeners 95% of the time. 95% of the time. as rault of that as a result of that, the chief is ordering immediate changes that tsa. the acting head is out. that's the vice admiral from the coast guard we're expecting that will eventually take over if he's confirmed. but this all now, of course

dove tails rather nicely today on this day when we are waiting for a new tsa chief in which the day in which the tsa is under fire for failing to find these mock explosives and now more planes affected today by threats that have been called to various airlines. joe? >> on the same day we hear they fail 95% and then we hear of potential bomb threats. the futures have been a little skiddish all morning. they have recovered from down 90 to 10. right when you started talking, they were back down 75 or 80 and now down 53. so, just as you said you're bringing it to us first and immediately affected things. >> joe, i do want to stress though. we have had these reports over the past couple of weeks. and i'll say this one more time in which there were multiple bomb threats called in for incoming planes coming from out of the united states into the united states and every one of those was found to be fake. now today more of these. >> tom, i don't know if you can

help clarify this. the nbc affiliate in pennsylvania, channel 10 reporting that that flight that landed in philadelphia was coming from san francisco. a couple other reports suggesting that that flight was coming in from san diego. flight 648. i don't know eif youif you have the distinction or not. >> i don't have it in front of me. a philadelphia plane and a san francisco plane and i believe two others, i don't have the exec specks on that. zspecs on it. >> again, this is a situation we'll continue to monitor. as tom was just telling us this is breaking news that there have been bomb threats made against planes that are in the air. these are inside the united states. you mentioned one in philadelphia and another he believed in san francisco, but these developments are just happening as we are bringing all of this to you. again, this is very reminiscent of what we just saw a week or two ago when there were planes coming into the united states. these bomb threats were made against. at that point, remember all of

those bomb threats were fake. there was nothing that came from any of that. a very concerning situation and one we will be monitoring very closely. when we return today, we'll talk more about a shocking situation for a police officer in mississippi. we have the details and the video right after the break. and then jobs in america. we hear from paycheck ceo on the state of hiring among small business. stay right here, "squawk box" will be right back.

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check this out, everyone. a powerful lightning strike in mississippi was too close for comfort for a police officer who happened to catch this amazing act of mother nature on his dash cam video. the only sign of damage left by the lightning strike was a missing chunk that fell off of the bridge. the officer, thankfully enough was unharmed. when we come back this morning, marty mucci. the company's latest small business index. it's out. we have the details first here on cnbc. then revolutionizing the way that contractors manage their fleet of bulldozers and more. making rentals so easy that caterpillar is an investor in the company. the ceo will join us in just a little bit. ent when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant

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welcome back to "squawk box" this morning. here's what's making headlines. the nation automakers analysts projecting they will remain above an annual rate of 17 million vehicles.

fitbit planning to rise $58 million in an ipo selling 22.4 million share business between $14 and $16 per share. and then sales of samsung d 6 smart smartphone. it project sales at $50 million by the end of the year. paychex just out with its monthly small business jobs index. the company reporting that employment growth slowed in the month of may, bringing the index to the lowest level so far this year. let's go inside the numbers with marty mucci. the ceo of paychex. this is our first data point. we see this on what is today? tuesday. then we see wednesday adp and claims on thursday and big number on friday. so, does this 0.7% doesn't seem like a lot and still above 100, isn't it? >> yes, it is. joe, we're still seeing growth but seems to be like the rest of the economy indicators.

it's moderate. but it's inconsistent. >> yeah so it's right in line with our overall sort of feeling. moderate, not, you know not stall speed, but maybe just above stall speed, which has been sort of par for the course for more than a few years now. where were the top regions for employment this time around? small business employment? >> yeah. central, central, the central regions are still the strongest and the east north central. kind of that michigan indiana seems to be the strongest. but all the central regions are still the highest level of growth. they're all over 101 in the index. but, every region saw some tamper down of the growth rate. kind of across the board. >> the states, we have talked about the indiana outperformance and, you know we talked to

what's our friend's name now at purdue. mitch daniels. did indiana and the steps that it took is there a reason that they continue to be in the top position? top ranked state with the best one month and 12-month growth rates? what do you attribute that to? >> what we see as construction. there is some construction that generally is kind of come down in the month of may. indiana continued to be pretty good in construction. the other piece we see is financial services. so some things going on in indiana from a small business perspective around construction and some of the financial services structure ss positions. and i think on the pacific, we're still seeing construction up. so, i think housing is good in certain areas, but generally across the u.s. things have quieted back down a little bit, at least in may. >> texas is already pretty good but the growth has been slowing, but the top metro area was still dallas for the eighth

consecutive month. but then number two, again, i say maybe it does make a difference what you do. detroit, it was in the second position. and i think dan gilbert and other people that have really made an effort to bring detroit back and it looks like it's bearing some fruit. >> yeah i think that's right. you know detroit, remember this is an index based off of 2004 as a base year. i think detroit was in a recession before the recession. so they've seen a nice bounce back and, like you said they're right in that top three. and then dallas has continued to be strong. i think, again, around construction and housing andin dallas. houston has suffered but texas overall okay. dallas the strongest and houston probably because of energy prices has dropped a little bit. >> so i guess if we take what you're telling us then these numbers later this week do you guys know what meh. >> just meh. >> my son -- >> you never heard of meh.

>> i hear it now. are you not finishing your words? something in your mouth? anyway. marty, what i'm saying is maybe we are expoekting meh numbers. >> i'd say lackluster probably. >> lackluster. why can't people speak? speak. thanks marty. in the meantime another story to talk about. some 3 million pieces of construction equipment in the united states, but these machines are typically idle for more than 75% of their working time. one start up trying to find an opportunity in an industry. yard club connects heavy equipment owners with contactors and construction giants and caterpillar announcing an investment earlier this month. joining us now to talk about this and the latest in all of this is colin who is the ceo and founder of yard club. would it be unfair to describe you as the b & b of heavy

equipment? >> that is a fair description. but we don't describe ourselves as that. >> so how does it work? as we said 75% of this equipment sits idle. we see it on the streets sitting idle and you are trying to put peers together in a way, but it sounds like this industry always worked like that sort of without the technology behind it. >> that's right. peer to peer has existed in the industry for many decades but often contractors going to one or two other sources that they know in an informal handshake and, you know often over the phone and in a very tedious fashion before they find what they're looking for. what we are doing here at yard club is putting some formality to the system using technology to make the process really easy and high quality. and then extending that network to much more broadly than the one or two folks that a contractor might know. so they can always find what they're looking for. >> how do the economics work for you? >> so, like most market places we take a transaction fee.

it varies a little bit with volume, but really enables our start up to be revenue positive right from the beginning. >> and the one thing i can't figure out is i'm not sure that this service is going to be great for the manufacturers of some of this heavy equipment because i would think that if you succeed, we'll need less of it. am i wrong? >> well the thing about caterpillar is they always take the customer point of view on this stuff. and to maximize the roy for their customers on the equipment that they purchase whether it's a cap product or a noncap product is huge. and it drives a lot of loyalty to their dealerships and it drives a lot of loyalty to the manufacturer. it's important to know that this has been going on in the industry for, you know decades already. and, so, what we're doing is really just putting some formality into it and involving caterpillar is a huge win for us. >> we're talking about these machines being unused 75% of the time. i assume if you succeed, you want to get that down to what?

>> i'm not sure that's 75% number is accurate. but we are hoping that contractors just improve the roy on the equipment that they purchase and what we've noticed at least in the tests that we've run in the bay area that contractors are willing to purchase more equipment because they have the certainty if they're not using it they can rent it out to other folks and continue to earn income on it. >> you talk about using it in the bay area, how far have you expanded? >> we've been in the bay area for a little over a year. 200 million in assets and in conjunction with caterpillar we'll expand to other regions in the u.s. and canada in conjunction with their cat dealers. they'll have the ability to put their own inventory and rental assets on the platform as well. they can come to the site look at a wide variety of high-quality assets whether that's the dealer rental fleet or peer-to-peer and find exactly what they're looking for in a

very smooth eco system. >> before we go in terms of making your business defendable from others who may try to copy cat. is there a network effect to the whole thing the same way there is with air b & b and uber? >> the highest contractors as well as the highest quality assets, it will be very hard to break that eco system down the road. it's up to us to expand as quickly as we can across the u.s. and canada and eventually internationally to build those ecosystems before anybody else. >> okay, we appreciate it. thank you so much. >> thank you. >> in the meantime you have some news i think. >> let's go back to what tom costello first reported here about ten minutes ago. he told us bomb threats made against four to five planes in the united states. some of those planes in the air. we're still looking into information and still trying to get information on this. but in the case of the plane that is on the ground in philadelphia. it looks like that threat in particular, was a hoax. we're going back and looking at

what the philadelphia nbc affiliate have been reporting on this. there was a call that was made to a plane that had taken off from california at 10:35 p.m. pacific daylight time and landed at philadelphia this morning at 6:15 a.m. and that plane out of an abundance of caution was taken to the side. the passengers were taken off of the plane and bomb dogs were taken on and they're now saying that that was a hoax and they are attributing that to a police chief inspector joe sullivan. the tsa operation center in washington, d.c., got a phone call saying there was an explosive device on that plane. >> just to clarify for family and friends who are worried about this. we had in the earlier report there was an indication that the flight was coming from san francisco, it was a flight coming from san diego. the flight number was 648. 88 passengers onboard, five crew. >> this is reminiscent of what we saw just over a week ago when there were threats against several planes that were on their way from international locations to the united states. one of those planes was escorted

by fighter jets when they couldn't rouse some of the operations of the headquarters there. this is what we saw last week. but it looks like at this point that the plane on the ground in philadelphia, there are reports that that was a hoax and we'll continue to follow up with other details. >> this is just one instance that we know about and, obviously, tom costello reporting that there may be other instances or at least other examples of planes that are still in the air that are being investigated. there we have that. we'll come back with more information on that. when we return seems to be a new trend in luxury apartments flipping them. robert frank joins us with a preview of what is to come after the break. >> we'll show you a penthouse that sold for 58 million last year. now, back on the market for $70 million. penthouse flipping gone wild coming up right up. leave early go roam sleep in sleep out star gaze

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back to "squawk box" this morning. we did have some red arrows earlier and dow looks like it will open up 25 points and s&p 500 off five points and nasdaq off about seven points. some worries about greece. we had this report just moments ago about planes in the air and calls in that there might be bombs on them. but we're still looking into all of that. in the meantime fiat chrysler reporting may sales were up 4% topping estimates.

seems to be a new trend in luxury apartments. flipping them. robert frank joins us right now with some big-time listings. robert? >> penthouse flipping has reached an entirely new level in manhattan the apartments that sold just a year or two ago are now back on the market for up a to 50% more. start with a penthouse and it broke the record for the most expensive apartment downtown when it sold last year for $51 million. it's around 6,000 square feet and five bedrooms five baths and great views and it's back on the market for $70 million. a price jump of $19 million in just one year. the broker tells me there's been absolutely no work done no improvements to this apartment. and move now to a penthouse in soho that sold for $10 million two years ago. two bedrooms two baths and now back on the market for $19.8 million. basically double the price of just two years ago. even rupert murdoch has joined the flipping game. he bought the top four floors of

one madison for $57 million last year. putting three floors back on the market. the price, $72 million. now, he's done a lot of work on the place and his neighbors include tom brady, but that's a price hike of 15 mrldz for a smaller apartment that works out to be $9,500 per square foot. >> wow. >> robert come on over and we'll talk more about this. let's bring in ryan to the conversation. real estate broker with nest seekers international. ryan, thank you so much for being here today. >> thanks for having me. this is a real thing. penthouse apartment flipping. >> yeah. robert's not making it up. it's very real. >> how does this work and what does it tell us about the potential for a bubble here? >> i don't think there's a bubble. where the numbers have come out recently for the first quarter, you see the bottom of the market and the very top of the market are still elbow to elbow. it's the middle of the market where people have either bought

already or they're looking at value propositions. so, if you have the ability to pay $50 million for an apartment, why not try to esee if if there's somebody out there for strength in the dollar to put $70 million into the market. knowing where they're putting product right up the street at over $10,000 a foot. some of these, i know it's crazy, actually look like good deals. >> i've been surprised by this especially lately just because i've heard from high-end real estate people who told me that when it comes to new york it's harder to find foreign buyers because of the strength of the dollar. that is where you would generally see some of these crazy purchase prices coming. >> yes. absolutely. where the foreign buyer has slowly dropped off this year the domestic buyer picks up. it's new york city. it's always a safe investment. so, when the russian buyer breaks off and doesn't want to buy the penthouse, then i buy it. i actually just bought one. i don't know if i should have said that but it's true. >> you bought it for?

>> i bought it for just under $4 million. maybe i should flip it for 8. >> when you look at the first quarter we saw that overall luxury sales were down but luxury inventory is coming way up. when you look at the pipeline of $10 million plus apartments about to come on the market doesn't that scare you a little bit? >> oh, yeah absolutely. and my team does a lot of new development. we have 19 projects in the pipeline right now, which is a lot. but we're pushing everybody to do smaller units and more aggressive pricing just because there's a bigger buyer pool. i mean if foreign purchases completely drop off, god forbid that ever happens. how many people living in new york city can afford a $6 million three bedroom on top of the monthly common charges, the maintenance, the taxes. what school costs, what uber costs. things are getting very, very expensive. >> have you seen prices drop off in the past? i don't follow the high-end market closely enough. but what happened during 2008

2009 and 2010? >> the reason you have all the large apartments now and the reason you have all these developments doing high price per unit the high luxury market was the safest market to be in. somebody who could afford north of $70 million, that person is for the most part going to be okay. >> it was the safest but those prices didn't climb like you're seeing right now. >> also didn't drop off, right? they basically estayed stag eded stagnant unless somebody needed to sell. somebody who needed to live by their monthly payments. >> we had stephen ross on earlier and he made the observation that a lot of construction going on in the city and he was at least nervous, i don't think he was worried about hudson yards, but worried broadly that some of these develops may not get their money back at least as quickly as they expect. >> sure. i think all developers just have to be safe and have to be

cautious and have to have an exit plan and have to hire me. >> but to break even for a lot of tease developers. the break even is $5,000 per square foot which means you have to build a massive luxury apartment, which is driven all of the new construction. it's very tough. >> he was talking about 8,000 and 10,000 square foot construction and where the foreign buyers are coming. >> russia has fallen off and china has slowed down as he talked about. when your break even is $5,000 square foot somebody is going to be disappointed down the road. not you. going to be the developer, not the broker. >> you know i think it's important to note too, that a lot of these big money sales, these big tickets that everybody talks about, you know the big penthouse. >> $100 million sale. >> these aren't and i'll go on the record here. these aren't sales that are in the sales office where someone gets off a plane with briefcases full of cash and says i'm looking to spend somewhere between 80 and $100 million. these are deals when it's a

contract four or five years ago as equity deals in place of a unit and a small return on the profit of the net sales. so if best way to do it now because you can is early, early on. >> brian, thank you for join us today. >> thank you for having me. >> thank you. >> one madison. >> they're in the same building. it's $72 million to be neighbors with tom and gisele. >> brady's apartment is inflated. >> exactly. >> when we return jim cramer from the new york stock exchange. we'll talk markets and more. financial noise financial noise

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welcome back to "squawk box." five different flights affected by bomb threats yet again. all four of the five are on the ground. american flight 648 san diego to philly is on the ground. delta 55 which was los angeles to atlanta on the ground. united 995 san francisco to chicago is on the ground.

korean air flight 23 seoul into san francisco is still in flight. these threats are deemed not to be credible. so south korea told that airline to continue flying on to san francisco. korean air 23 is still in flight. lastly, valeri flight 939, portland oregon to mexico that flight was affected. the government determining these threats are likely not credible. they are similar to threats we had the last couple of weeks which planes were forced to land because of threats against them and all deemed to be hoaxes. we'll follow it throughout the day. tom costello in washington. let's now get down to the new york stock exchange back to business here with jim cramer. that news at first hit airline stocks, hit the futures a little bit. earlier, you noted it was things happening in europe. i didn't know whether it was greece or they got inflation. that was seen as ending qe too early for people over there i

couldn't tell why the markets were down initially. >> i know anything that sends the euro higher is going to help us. right now we are getting pbh reporting numbers. the numbers are fabulous. when you have the translation, the numbers are terrible. i think that what we all need to see is that euro stronger. dualing plans issued by greece and germany, that's positive. a little inflation is positive. anything right now is good for the strength in europe regardless of qe is going to be regarded as good for us. our companies can't take this strong euro -- i mean we can't take a strong euro. you can't make sense of any of the numbers. pbh numbers were fabulous and they looked horrible because of the stupid strong dollar. freakish dollar. >> mark mobius had a chart out.

it made him say it's slow going in europe. maybe they need qe. they need to start pulling their weight. >> i think they can do both. deutsche bank came out with good comments. all we need to see is growth there. therefore, the dollar stops going higher. we get better numbers quarter to quarter. we can say by the end of the year a lot of numbers will be better. this market wants to go higher, but it can't as long as the euro is weak. >> there is the chart. >> that needs some lift. absolutely. >> they need to start lending over there. we haven't lent as much here. >> okay. see you later. >> when we return more of this

morning's stocks to watch. join us tomorrow. another big lineup again. steve miller will join us with autonation's ceo mike jackson.

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finally. shares of pvh, going to close out with a boost. beating the street raising its outlook and announcing a stock buyback. join us tomorrow. "squawk on the street" begins right now. >> good tuesday morning. i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. futures volatile as the greek deadline's proeches. auto sales set to hit. oil steady just's bofb 60 and ten year just below 224. first up fiat chrysler posting its best sales for may at 4%. the