this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew sorkin and brian sullivan. joe is off today. we are monitoring a developing story out of ferguson, missouri. protests marking one year since the death of michael brown were interrupted by gunfire late last night. at least one person was shot by police is in critical condition. a st. louis county police chief said there were two other shootings which did not involve officers early this morning. we will continue to bring you the story and updates as they develop. right now to the markets, take a look at what's happening with u.s. equity futures. there are green arrows. dow futures up 31 points. s&p up by 5.5 and the nasdaq up to close to 15. here are stories we're watching on this monday morning. greek leaders negotiating with international creditors over the

weekend. greece wants the bailout talks to be done by early tomorrow at the latest. the key date to watch, folks, august 20th that is when greece has a repayment due to the ecb. and gloomy data on trait inflation. investors show that beijing is about to roll out more stimulus. and watching oil. prices falling for six straight weeks. oil slightly low again. the latest lundberg survey shows gas prices down 11 cents over the past two weeks. that puts the national average for a regular gallon of gasoline at $2.71. gas down 81 cents a gallon from last year. the dow and oil have gone in the exact same direction so that's why stock investors should care about oil. >> you know, it's interesting because we've talked so much

about how this is a huge tax cut for consumers. you just mentioned prices at the pumps down 11 cents at the pump over the last few weeks. you keep wondering when that payoff hits. we know what it's done for high-paying jobs but it's been less likely to show up in some of the weaker sales. >> with all due respect to many of our colleagues that we find ourselves in, the whole gas price helping to spark prices. i mean, i've got buddies of mine, my wife works in retail. we talked about it, people pay off credit card debt and they drive more. restaurants benefit. >> restaurants, dining how has been. >> that's a big one. no one's going to say, even if you look at the numbers, you say the average american using about 1,000 gallons of gasoline. that's $300 in savings, that's n not insignificant, but is that enough for someone to say let's

go buy that new house in myrtle, we saved 300 in gas. that's not going to happen. >> there's that silver lining. >> anybody on the roads this weekend, shall we say, has realized that, too. let's get to today's top corporate story, berkshire hathaway nearing a deal to buy precision castparts. it's currently one of the largest showerholders. precision castparts makes parts for aerospace and energy industry. most of that come it's in aerospace industry, 70, 75% is directly in the aerospace vee. but if you take a look at that chart precision castparts, it sold off because of problems they've seen with oil and energy as well. that's eye woo ywhy you see the down. the company had a market

capitalization of $7.6 billion. >> and one quick comment with precision, they themselves are sort of buffett-like, they make acquisitions like crazy. i think one of the reasons if you're buffett, and you want to own this company, it's acquisitions. it's one of those companies where if you actually can get real capital behind it, you can totally change the game. i would argue it has the moat, defensive moat. >> every plane uses these guys. >> nobody else in the business. >> it's not a company that the viewers know about because there's no consumer products. >> it's not a company i've ever paid attention to. >> it's the second biggest highest company behind nike. it's a big company. when i saw the deal, i thought is this buffett maybe putting a floor under the oil business,

too? >> i wondering the same thing. but then again, he's somebody that has long-term strategies, i don't think he'd necessarily have something changing in the sex six months or two years. pearson reportedly to announce its stake in the publisher of economist. pearson has acquired the 50% stake along with the financial times. they sell the titles to the japanese publisher. likely to go to the guys who own the other 50%. the italian family. they tried to talk a couple others, bloomberg and others, but can't get them. i don't think. we'll see what happens here. all right. let's get a check on monday markets this morning. here we go, the stock futures are down.

if anything we've got a slightly higher open that we're looking at. the dow futures indicating a couple points to the upside at best. that would be a change, folks, because we are coming into this morning, if you were on vacation last week, with seven straight losing sessions. so, today, you know, if we go down, it will be eight straight down days for the dow. minor losses for the index there. the big story is in asia. china stocks posting their gains, up 5% in shanghai. optimism the government may have to step in with stimulus. we just talked about it, watched oil, a six-year low. oil is down a couple cents. but the number you want to watch, 43.35, that's the closing low we hit back on st. patrick's day 2015. and gold has been a disaster this year, $1,093 per ounce.

>> probably because of the strong dollar. >> and also gold just doesn't go anywhere. >> right, over time. >> it's heavy. in the meantime, let's get the to our monday morning strategy session. post jobs and post a rough week for oil. we haven't talked about media. and the overall markets, what can we expect this week. joining us now is jim o'sullivan, and doug codey is here, chief market strategist. >> i wasn't here on friday. i read the news, i watched a little cnbc. what does the fed do after the jobs report? what is the new betting arm if there there isn't a new betting arm? >> i call it the fed, the new maestro in a positive way, she's

going to finesse this no matter what happens. i believe in september, she raises rates 25 basis points she catches it in dovish language, everybody goes home happy. and she's been doing that. she has been finessing this market in every statement since she became fed chair. so i think she needs to raise rates. and then it's go to be a shallow trend from there on in. but -- >> but my question, i guess, or where i'm really going to this, the earnings numbers seem lousy which would make me think september and maybe not so much? >> no, 215,000 in employment is more than enough to keep employment down. it's 1.8% per year which at one time was not very strong, given demographics but it's going to be 1% per year. the second trend is .115% for

the year. the message is they will tighten if the labor market shows some future improvement. and the labor market is improving. >> do either of you want to take on the issue in terms of oil, what's happening with oil? and more importantly, is it going to have a economic stimulus, if you will, when it comes to other companies? >> well, were have retail sales coming out this thursday. i actually beg to differ. because i think it's going to be a strong number. i think back-to-school sales are going to be strong. >> who are you delivering with? >> i didn't say retail sales were going to come in a week. i just said there's not a big benefit to lower oil in the retail sales numbers. >> it could come in spectacularly great. >> it's not a media trend. but positive trends in housing. but i think that has the ability to be very strong. and i think the back-to-school sales. and energy. one of the things about energy,

it was coming back up. we had a $68 price target. but people were concerned that it was going to continually go up. it's not going up. we're in a low-area environment for the next 20 years. consumers are finally starting to get that. and it's a long trend so i think it will be positive. >> the drop in gasoline prices was worth about 1% for real disposable income for consumers. and it was a jump in the saving rate in the first quarter. but second quarter did come in decent. i mean was 3% basically growth for consumer spending. having gone up a point in the first quarter, going down a half point in the second. >> but they're spending more on gasoline and dining? >> i don't think gasoline was up all that much. total consumer spending -- >> up 5%. >> compared with how much gasoline prices are down, i think it's still a small amount of it. consumer spending was up 3%, not a booming number but stronger

than income. we should get a decent regional sales report this week. and jobs last week. the other thing is the huge plunge in drilling activity which has probably taken half a percentage point out of gdp. >> that's a big thing. number one, i think the retail sales number is going to be spectacularly big because of amazon's prime day. prime day was, what, bigger than black friday or cyber monday, whatever that holiday is. let's not forget the oil has provided the only real growth industry in the united states over the last five years. 23% of jobs created in the last five years come from texas which is only 9% of texas. midland, texas had the highest per capita, a high school graduate can make $100,000 a year. >> the investment is worth 1% of gdp. in the fourth quarter, down 6%.

but it's plunging in the first half of the year. you look at weekly oil numbers and they've bottomed out already. >> things that you guys are talking, jobs picture and retail sales up, how come that didn't match up with how americans feel about the country right now? usually, don't watch consumer sentiment and how americans feel. watch you how they spend. they are starting to spend. also the manufacturing numbers, i was actually surprised at the strength of manufacturing. manufacturing, it's been positive all year. we had 39 consecutive months of positive manufacturing in light of a collapsing energy sector, so something else, there's another dynamic going on. the resilience of these markets are astounding. >> >> we're going to let you go, but i did watch on the media guy, but what about the media stocks? >> i can't comment on individual

stocks, i think it's mainly consumer driven, but i'll just leave it at that. >> nobody wants to touch -- we'll touch on it a lot more throughout the show. thanks, guys. in global news this morning, reports of a bomb blast in an attack on the u.s. consulate in istanbul today. heather joins with the latest. >> authorities are on high alert after a series of attacks including a shooting outside of a u.s. consulate in istanbul. officials say a man and a woman opened fire. local media reporting that the female was wounded in the fire fight and is in custody. the other suspect is at large. the u.s. consulate closed until further notice. in a separate incident, at least ten people were injured after a truck laden with explosives outside of the city. media saying at least three

people were killed in that attack. nobody is claiming responsibility for the incidents but it comes after a few weeks after president erdogan declared a war on terror. just as a turkish soldier was killed after a bun gather with turkish fighters. that's the latest in a string of attacks as turkey cracks down on militants. and turkey's president is using his agreement with americans to fight isis in order to, quote, a bigger push to eliminate opposition from the kurds. >> okay. thank you, appreciate it very much for that report. in the meantime, when we come back, donald trump hitting the sunday shows, defending his debate comments. and now a new nbc news survey money poll showing he's still in the lead. john harwood joins us to talk about it.

but first, as we head to break, here's a look back at this date in history.

welcome back to "squawk box," everyone. a new nbc news online poll conducted by survey monkey is out today. donald trump remains at the top with 23%. ted cruz in second place with

13%. the overnight poll was conducted for 24 hours frommed any evening into saturday. that's when trump was, of course, in the headlines following his comments about fox news anchor megyn kelly. john harwood joining us from washington. this is a counter to what a lot of people were saying after the debate. they were saying trump lost ground. >> yeah, and people thought that marco rubio had a breakout performance. look, you can't draw too many conclusions from any single poll. and we're going to see a raft of others in of the next couple of days and see if this is confirmed. but i've got to say that, every time people have thought we hit the moment of peak trump, and then trump is going to decline, it hasn't happened. you've got some supporters who are very angry with politics. and angry with the party establishment. and donald trump, all of the

in-politic things he's saying they don't seem to care. i think they will eventually, but it hasn't happened so far. >> john we talk all the time, we've heard from a lot of people last week. people who were on that stage, who were behind in the polls who pointed out look if you look back four years ago, it wasn't the front-runners who were in the lead at that point. when does that actually gel? when do you say the front-runner that you have now is going to be the front-runner you are going to have? >> i think it gets serious when we get keep into the fall and the campaign for new hampshire and iowa kicks into gear. people are advertising, they're engaging in a very intense way with the republican caucusgoers in iowa. primary voters in new hampshire. and i think that's when we get from the -- you know, spring training people working out the kinks in their campaign. and people start looking at these candidates, becky through a different lens. through the lens can i see this

person behind the desk in the oval office as president. we're not at that stage yet. and i think we could expect to get there maybe thanksgiving time would be a fair marker for when you really get into the serious business part of the campaign. remember, even the democratic race in 2004, howard dean had a lead for quite a long time. then late in 2003, john kerry went in a big way. >> john, with trump out front, though, if you say he's going to be out front through thanksgiving, who gets hurt by that inside the party and who gets helped by that inside the party? >> well, first of all, just to clarify, thanksgiving i think is when people will look more seriously. i don't know if trump's going to be leading through thanksgiving. there are some people who think he won't be in the race a month from now. but i think donald trump mostly is helping jeb bush, giving him a little bit of cover and time to get in shape, as a candidate. remember, jeb bush hasn't run in

quite a long time. and by blotting out the opportunity to move up for a bunch of other candidates who aren't getting the attention that they would otherwise get. you know, marco rubio was on "meet the press" yesterday. he said, if i spend all the time answering questions about donald trump, i couldn't get my own message out. look, that's what's happened a lot. he hasn't, scott walker hasn't, ted cruz hasn't. the message has been blotted out. so because jeb bush has got $100 million. and he's because got long-term staying power in the race, had he is more likely to survive and be in decent shape at the end of the trump period than others are. >> but where are jeb bush and marco rubio. we talked about ted cruz, how far behind are they? >> well, at this particular poll, behind cruz, carson and

trump. but again, that's just one. in most of the polls you've got trump leading with right around 20%, maybe a little more than 20%. and then you've got jeb bush, scott walker around 10%, 11%, 12%. and some people below that. and marco rubio is very clear to that 10, 11, 12%. >> john, you talked to trump supporters. do you get the sense they support donald trump the man? or is there support for trump really a proxy of them being six of everybody else? >> the latter. i think even the feeling that the political system hasn't delivered for them, they're mad. and laura ingraham, the radio show host, said there's a cadre of voters who are seething with the fury of politics and establishment. those are the kind of people who are impervious to the

conventional calculations that we all would make, oh, he said something you can't say. you offended women. they'll stand up and say, hey, he's speaking the truth. and donald trump's response to most everything he says and gets criticized is we don't have time for political correctness. there are a lot of people that say damn right. >> john, the funny part, the people who know him don't seem to be supporting him. even carl icahn, i don't know if you saw his tweet, he doesn't want the job nor does he want trump in office. today, there's another piece of news around hillary clinton who may make it to office, i don't know what you think these days. on education reform and specifically going at the debt issues. she's come up with a couple of financial plans. so far, we've heard about her quarterly capitalism irk and some other things she's said. is this going to play? >> it will play among certain democratic primary voters.

but 350 le$350 billion over ten is a lot of money. she's proposed to tax reducti s reductions. people think taxes ought to be higher on wealthy americans but a straight out program to spend $350 billion to relieve higher education debt, is that going to be something in a general election with broad appeal? maybe. but certainly in a primary where you've got people like martin o'malley and bernie sanders talking about debt-free college. they would go further than hillary clinton did. that sort of, at least in a primary context puts her in the run for the party rather than a fallout. >> john, thank you very much. >> you bet. coming up, why americans are no longer lol'ing. yes, laughing out loud. first, before we head to break, let's get a look at last week's

s&p winners and some losers as well. you're watching "squawk box," cnbc business worldwide. we're back after this. can a business have a mind? a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive?

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♪ ♪ in the city welcome back to "squawk box." looking at stories that are getting our attention this

morning. you know, donald trump always says you got to stop being politically correct. i know donald comes down on the story, but there's a story this morning about target, the retailer, deciding to do away with gender orientation in terms of certain products in the stores, so that toys, for example, kids toys or bedding which historically got the boys toys would be like in a blue area, and they might be superheroes. answer the girls toys might be in a pink area with colors. they would do with bedding and other products. not clothes, obviously clothes are gender specific. but they have decided to do away with all of that, they're going to mix it all together now. >> you know why they're doing that now because they got in big trouble. shoppers were in the stores and boys toys had things like legos and building blocks and there were irritated shoppers who said

hang on a second, that's not just for boys. i have say having boys and girls, they gravitate towards different things. at least my kids did. >> do you think on a broader scale, do you think we're nearing peak outrage? like everybody is outraged for everything? every week, we lurch from one outrage to another. this is over here now. >> sort of. i think it's a function of social media. >> i agree. >> everybody gets a microphone. >> but then you have -- >> that wins the game. that's the dangerous part about this business. so, anyway, that's the story that's got me a little irritated this morning. out i don't want -- i think legos should be boy for boys and girls. i'm not saying they shouldn't be. >> yes, particularly at a time when you're trying to get girls into more of the s.t.e.m.,

science, technology, engineering and math. i can understand that people were irritated with boys in the boys section. >> i get that. >> my daughter is at camp and she mailed her rifle targets. >> oh. >> how did she do? >> she's good. she's tough. you take on any boy you want, honey. >> hey, guys, i'm going to talk about while we're mentions social media, do you guys write lol, for laugh out loud? >> i did. i felt like a joke. i was late to the lol game. >> apparently, nobody is using -- nobody is using lol anymore unless you happen to live in florida. that's the one place it's still pretty big. older people are there doing these things. >> grandma just got a smartphone. >> right, oso lol is for the lae adopters. andrew, you're usually not.

lately we see ha ha, or he' he. he he is something used more on the west coast. >> that's more of a sweetened half. ha ha means i'm laughing. he he tends to be -- west coast uses he he more often, east coast use ha ha more often. >> are you in an emoji group? i've done a few emojis and realizes we're talking hiergolyphics. it's like a flaming cat -- >> what does this mean? >> like if you were to say are you free, would you write "u" for you? >> i'm not send might go buddies the wink, blowing, kissy with the heart, you know.

but the aforementioned daughter, she texts me and stuff. i've trying -- >> i think the rosetta stone, i'm looking through this thing, what does this mean, i've got the poop, the airplane and a cat. i need a translator. >> that is a poop, right, that brown thing? >> yes. >> i haven't done that yet. >> my story, coca-cola funds efforts to alter obesity battle. they want to contribute money. people say that's a good thing. anybody contributing to the obesity fight is good, except what some are taking exception to, on the front page of "the new york times" which is basically doing it to say we need to exercise more. don't worry about calories in. some scientists are saying, wait, that's kind of a misleading topic by coca-cola

saying it's not what you put into your body, it's exercise. we all know at this point that 3500 calories is a pound. it doesn't matter what you weigh. if you eat 1,000 calories a day but do no exercise you're going to skinny. if you eat 6,000 calories and run six miles a day -- i don't know. i'm a big dude, i work out often but i also eat pizza. >> there are two sides for this, you need to monitor, "a," what you eat, and "b" what you exercise. >> just net it out, 3500 calories. it's good that coca-cola doing something. when you get bigger, mcdonald's and fast foods, you're going to be targeted. >> but the charge is -- they're funding scientists who are going out and producing studies and things. i thought it was interesting with the scientists at least on their own, they're saying we're

doing this on our own volition, these are our views. and the folks getting the donations from coca-cola came to the table already. >> problem comes anytime you get funding behind it that has one specific agenda then it's that. >> cholesterol, right? what's now an acceptable level of cholesterol is way lower than it used to be. all the doctors that make the decision about what the acceptable level of cholesterol are i'm assuming are on the payroll. any scientific study, that is sanctioned by a corporation you got to look at that. >> people automatically, if they realize the funding is coming from there -- >> if were you to put an emoji to my story, which one would it be? >> squiggly face now. >> there's a beer mug, i know that. once in a while that pops up, may, man do you want to get a --

>> they did disclose it. the second someone called it, it's like -- >> thumbs up. >> emoji. coming up next, anning me ji for elon musk, because elon musk, the latest daredevil, a stunt is out. >> an open mouth and big eyes, like, wow. >> and macy's taking a turn. the retailer will be front and center. is it time for shop for the stocks ahead of the holiday rush. and if you're keeping track there's only 136 more days, if you can believe this, until christmas. we're back in a moment. a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling.

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box." this morning, making headlines, alibaba is now investing $4.6 billion in the chinese retailer suning for a 20% stake. they'll invest in a newly issued alibaba shares giving up to a 1.1% interest in the ecommerce company. this is sort of a bricks and mortar for the company. it's like the best buy, retailer, 1600 stores in china. this gives them a new rival. check this out, instagram posting from selon musk. it shows him on a biplane. the caption, what could go wrong? i think it's awesome, it's brave, but if you're the board of tesla -- if you're the board,

you're thinking, hey, man. if you're a shareholder, what are you thinking? >> stop! >> i've got a ceo, but i need you around. >> is there a revision -- >> it is his company, i guess. you could write that in, no keynote. >> there are certain things i think if you're at that level, you can do it, right? >> what about if you're -- would you be okay with that? >> not on the first flight. 10 or 20 flight. >> statistically, maucking do down -- walking down the new jersey turnpike is higher risk than that. that will be technically and physically impossible. >> i don't agree with you in

terms of the statistically speaking i think i'd rather drive down the turnpike any day. >> it's a dangerous place. >> it is. it's a big week for department store earnings, with the likes of macy's and kohls and nordstrom's reporting. we have talked about retail sales, while the numbers are decent, they haven't been as low as oil prices. >> the what we've seeing in the first half the year, west coast port delays, inventory overhanging, lower tourism, it's not a great first half of the year. we could have a tale of two halves where the second half could be better than the first half. for the first time we're seeing newness of products out there. we're going on a new york city

shopping tour today. i expect to see improved denim. there's no change in active where it's still growing. jewelry is working and cosmetics continues to be on fire. that's what's working out there. >> you bring up a good point, tourism has hurt pretty substantially by the stronger dollar. there would have to be some companies that suffer from that. i wonder the big flagships here in new york city? >> exactly, macy's talked about it. impact to come about 5%. 5% of sales from tourists. last week, ralph lauren or handbag companies, everyone is being impacted by the fewer overseas tourists that are here. and the locals aren't making up the spendingin. >> dilliards not so much. >> well, even though they're based in the south, what we're

seeing tax-free holidays more in the second quarter than the third quarter. >> brian brought it up earlier this morning, but the amazon prime day. that was a very strong day for amazon. what did it mean for retailers overall? >> not that much. everything that you heard about amazon prime day it wasn't the appealing things on amazon prime day. i think the best thing for retailers overall, what are we going to from off price, and what are we seeing from online, and total sales will tell you more than just what's happening in store sales. impact from sales will be a concern. >> is there a negative impact to cars -- the car economy is good. but what you're hearing from retailers, if you're buying a house or a car, those are huge

buys. but they may steal sales from denim. you my put off that suit purchase because you're saving for a car? >> that's exactly right. home depot, how many people roofs did you hear were collapsed or harsh winter that we had, that's where some of the dollars went. >> the reason i mentioned that, dana, if we do get a weak yonone number and people saying, the economy is slow. it isn't that the economy is slow enough that people are taking big chances and not buying a pair of jeans? >> yes, i think it is. the retail stocks pick up in october. we're in a seasonably week time of year. month to date for august department stores, we're down 3.5%. >> wow. if you've got concerns about, let's say, macy's concerns about dillard's are there any stocks you like? >> kohls of the word should be

better given the fact they have a loyalty program out there. jcpenney is a surprise. back to school. the jcpenney stores we've been touring recently, they're set for back to school. >> dana, thank you for coming in. coming up, oil shock, crude oil prices now dropping for six straight weeks. we're go to go over what is causing the decline and the impact of that drop. it is monday, you're watching "squawk box." we'll be back right after this.

well,back. crude oil trying to come back. keep in mind, folks, oil is in a six-week decline, getting close to six-year lows we set back on march 17ing. joining us the ceo of analytics. you create cool graphs showing what's hot, what's not. inside the oil space even, is there anything good? >> no, the global economy is not getting good. supply is still oversupply, demand is okay. that itself the only bright spot. the problem is, it's not enough to fix the oil mark. >> oil is one of those -- one of the few pure supply/demand

things out there. agricultural commodities have government subsidies, et cetera. there is simply who one-and-a-half to two million too many barrels out there on the global market every single day. you said that opec may have to cut. but we seem to be in this great game of global oil of chicken. do you think someone will turn away? smr the problem is it takes a while. the only people that can cut fast enough is opec. so they are going to be the ones that have to cut. so they're waiting it out. they will have no choice. >> well, do they have to cut? >> they don't. but the pressure is the buildup. saudis, the other countries will put pressure on it. they need the money for their infrastructure. >> okay. enough is enough. >> we got to go back in history. nobody remembers the 1960s. i wasn't alive, in the mid-80s,

saudi arabia opened up their taps and it crushed oil. it crushed -- it crushed texas, it crushed houston. they regained global mark share. prices went back up him dining there is either inadvertently or semi inadvertently a distinct goal here to put the u.s. shale revolution out of business? >> i think they want to slow it down. because i don't think they can afford to go as long as they did back in '86. so at the end of the day, i don't think that is the case here. >> they might be going after canada more than us because the canadian oil production has surged the last five or ten years. we import a lot more oil from canada hand the saudi arabia. >> unfortunately for them this time around the traffickers have gotten much better to do this. >> they can't shell out at this time. our cost structure is pretty low. they will put a few companies out of business for sure, in fact, the question is how long does this last is really the

question here? >> so steven, how long does this last? >> yeah, i think it can last another six months, maybe longer. at that point you will have too much pressure. >> in the 2:00 show, we have talked a lot about how, i have been to midland a number of times, calgary, you talk about you see the boom. that's why i have been a little more on tstory that there is a downdrop. oil provided, whatever you think of the industry, a lot of jobs. a high school graduate making well over $100,000 a year. >> we have people like jack we goch come on saying these are the new manufacturing drops. >> exactly. to your.when you say they have become lower cost producers, yes, a lot of that lately has been pay cuts, people taking 25 and 35% pay cuts overnight in the oil patch. is there a downside to lower oil price? >> oh, for sure, in fact, maybe the next time i come on the show, we are seeing signs about

u.s. economy here, some of our leading indicators are not as good as we like them to be. on our consumer platform, we are seeing weakness in wage growth. we are seeing weakness in job growth. the netanyahu, you know, people assume lower oil prices are great for the economy. omany other factors that guide the economy. we have concerns about market here. we almost downgraded this month. we couldn't shut off september, october. but it's lots of downgrades. >> why would you not downgrade when you see so many things that concern you? what held you back? >> one month of data is not a lot to go wmt you see some warnings. i think we will do it. ten you wait. it's not there yet. >> i would say -- >> when you say the mother of all downgrades, what does that mean? >> the markets are going up forever him at some point you have to make the big call the market is going down. >> how far down? we have people come on all time

i think say the market is going down. we've had that call before. >> very few people like to come in. >> it's not popular. >> ritz not popular, for sure. i don't think the markets would go down a lot. >> you mean there is a 5% pullpack? >> generally when we downgrade the mark, we look for at least 10%. >> so now, let's did he go a little deeper into this, i've tweeted this out. 12 of the last 13 days oil and the dow has gone in the same direction. 28 of the last 38 day versus gone in the same direction. so are you saying that you think that oil's decline is going to bring down the u.s. stockmarket or contribute to it and something else will bring us down? >> yeah, i don't think they are related in one sense, you can see that happening. the market is driven by a lot more domestic economy. its coincidence the global

economy is bad. now the u.s. economy may be as well so that is just. >> oil is an effect not a cause? >>. not at all. it doesn't help the job situation it's not the driver of the u.s. economy. >> i mean the stockmarket, oil decline, is it good or bad for the stockmarket? it appears bad the last two weeks, they have been 92% correlated. >> the problem is a lot of companies in america have earnings overseas. so when oil is going down, it's not necessarily good because it's suggesting the global economy is weak an most of the s&p 500 have earnings overseas. so there is a relationship that it's not fit for some company. but if terms of the u.s. economy as dana pointed out, some oil prices can be good for the consumer if they don't stay there. >> thank you so much for come income today. >> thank you. when we come back this morning, planes, trains and albertos, dow transports are back in correction mode.

dom chu brings us the stats many are saying are troubling.

>> market alert. shanghai down 5% him we'll tell you what's driving the rally. berkshire atmosphereaway's next target, a price tag of $30 billion, it would be warren buffet's largest acquisition ever. the details aheadments a big week for retail earnings, they are set to report. the ceo is here, break down back-to-school shopping season. the second hour of "squawk box" begins right now. [ music playing

[ music playing ] >> live from the beating heart of business, new york city, this is "squawk box." >> "squawk box" right here on cnbc first in business world wide, andrew ross sorkin, joe kernen is off today. we have china shares surging 5%. speculating a bad news good news situation, eggs port data over the weekend showed a bigger than expected drop in july him that fuels speculation that further easing could be coming. it forced out the government to overhaul the enterprises. berkshire hathaway in a massive transaction. >> this is a deal. are you looking at it is happening. >> yes, it is. buying precision cast.

>> if are you a pcp shareholder, congratulations, it's been a good morning. it's a huge company, 70% of the revenue is in the aerospace business. in the press release, here's what they have had to say. >> i've admired it for food reason, it is the supplier of the choice for the aerospace industry, really warren buffet confirming not only a deal but saying this is effectively a bullish bet. >> by the way a todd combs investment. i don't know if you know, two investors the hair apparents there if hair apparents on the investment side. he made one of the original investments in the company a couple years ago. they did own 3% of the company. now they own 100% of the company. in the last hour, the ting so interesting to me about this particular company is how

inquisitive it has been and how much capital it has spent on a dozen different deals. they keep making deals. they keep talking about wanting to make more deals. now they will have the elephant gun that is warren buffet mooind behind them, they will be able to do more. >> this is a huge deal, not a household name. it's a $37.2 billion deal. it's the largest single deal that warren buffet and berkshire hathaway have always done. >> burlington northern was $6.5 billion. i'm not sure what the math adds up to. >> whole ownership, unlike the nsf, just under 80%. >> now they own all of it. so the combined. it's a big deal for berkshire hathaway. >> it comes at the exact time t. deals are coming faster and

faster for berkshire hathaway, because of the massive amounts of cash. >> he's been looking for a big deal one of the things remarkable about warren buffet, i imagine he is getting twice the ebitda which is not the cheapest deal in the world. >> i think it's disappointed with the earnings. a portion of its earnings and its revenues do come from the energy markets in the oil and gas field. and that part of the business got hit pretty hard as a result of the earnings. that's what knocks the stocks down. if you look at what it's paying, it's just near the high, they looked at prices higher than this less than 12 months ago. so he is able to get a little

bit. >> the company gets about 10% from the aerospace industry. this is a bet on what you think will happen to airlines over the next couple of years a. lot of new orders. >> it's also at some point an energy play, they make gas turbines and also in the oil industry. the website has a pick of an oil rig. an offshore platform. they are primarily aerospace. you wonder if warren buffet is making a play for the oil side. maybe assets are a little undervalued. certainly, this is not an oil company, they are involved in the oil business. >> a point of price for a moment, becky, you made a smart point to say the stock has come down the year. i thil still go back to bnsf they paid 18 times earning, that was back in 2010. the probably if you do the math is closer to 20 times.

when you go over the threshold and break out the elephant on it, if you will, it's hard to find stuffed a cheap prem number these days. >> i wonder, this is an all cash deal, i wonder, this is one of the biggest all cash deals of all time? could it be the biggest all cash deal of all times? generally you will see an equity deal, we want will share 3% of our stock. this is 37 billion if cash. someone will show up at headquarters with 50 suitcases full of hundreds. >> that's not a big point. it's not like paying for deals because you think berkshire stock is more valuable test you used it occasionally. i think burlington foreign, they used that stock too. >> they did because that's when they put the new shares out.

remember the smaller shares? >> he has made the point some of his shares were shares he paid for, that was a huge issue. he doesn't like to use shares. he likes to use cash. as you pointed out, he has something like 65 or 70 billion in cash. it's 66. >> the second biggest company in oregon, too. this is a big part of the portland power index. i expect that pcp will be run the same way as most buffet companies, right? they continue to be head quartered, siloed there. >> there is little input from headquarters. garnered in the true sense the companies are run by the ceos. >> if you wake up, you are on oregonian, you think what will happen here? you know warren buffet, likely business as usual, just that buffet will now be your boss in

omaha. everything else will remain relatively the same. >> he likes companies, where he likes the management. he doesn't like to buy companies you have to fix unless have you something like 3 g going. >> we have an amazing team here, i will challenge them on tv. hi, good morning, this might be the biggest cash deal of all time for one of them. first of all who has that much cash? right. i mean, very few companies pay in all cash. they can use tear equity. there is advantages to using equity on the tax side. sometimes. up wonder. anyway. >> going back and looking, verizon if you remember verizon bought out voteaphone a $100 billion transaction. a major piece of that. >> i'm not asking, i'm saying look at the numbers. >> definitively, i am willing to bet this is one of the all big cash deals, 37 billion that's not a lot of money. but to me, it's a large sum of

money apparently not to mr. buffet, however. the dow transports are back in correction territory. they're now down more than 11% for their highs that were hit last november, cnbc's own don r dom chu taking us inside the numbers, tell us why this could be a worrisome part of the market? >> i'm listening to this conversation you are having about warren buffet. when they make investments like this, they're looking longer term than maybe a week, a month, even a year or. so here's the reason why, you talk about precision castparts, highly leveraged to the aerospace and oil and gas. their are weaker signs in the market, this may have enabled them to get the deal done. here's, let's show you this, all right. this is the dow zrichl airlines are a part of it a. lost 48 and logistics companies are a part of it. they use things from precision

castparts. can you see year-to-date the white line is the dow industrials. we seen that seven-day losing streak happening. it's losing treatment t. dow transportation stocks saw a bit of a bounce. we thought that might have been positive. now it's rolling over yet again. you look at the one month transportation stocks, here it becomes interesting, you can see this rollover on the right-and side of the screen. so the transportation stocks, perhaps a leading indicator showing signs things are fought as good as we thought they were going to be. here are three individual stocks leading the charge lower over the past week. they run all different sorts in terms of logistics and transportation companies. first of all, check out this one, avis budget group, ticker cars, down about 3% over the past week. check out another one, csx showing again signs of weakness here, they're down nearly 4% and conway, which does truck great logistics, they're down as well,

almost 6% at this point. so these transportation stocks are perhaps showing a little bit of this weakness here that may translate into the overall market. that's what has some traders concerned. i will throw one more in there, guys the russell 2,000 small cap index. the index now, we did see near record highs at one point. now we're down about 6, 7% from those levels here. between small caps and transportation stocks, yes, some of the warning signs, that might be some traders and investors are taking a little of a breather here with regard to that bullish sentiment that they've had, back over to you guys. >> dom, thank you very much. we are looking at the numbers again on this deal, berkshire hathaway buying precision castparts, this is a deal they are valuing at $37 being. >> $37.2 yes. >> warren buffet is calling into the control room. we will be talking to him and many more in a moment tom run through these deals, they are

paying $235 a share in cash. this stock closed at $193.88 on friday. i think right to you we do have warren buffet on the line. sir, are you there? >> i take it, yes, warren? in there yes, i'm here. >> so we see the news that's out today. this comes as a surprise to a lot of people t. "wall street journal" did report this on saturday. i wonder, when did you first hear about this, when did you first talk to the company? and how did the deal happen? >> i would say it was about five weeks ago. -- you got to give credit to scott combs, he manages about $9 billion now, maybe three or so years ago, he added precision to his portfolio. i never heard about it before that. todd told me a lot about i. over

the last two years i have become familiar with it. and about five or so weeks ago the ceo mark doneogan and the ceo person came by berkshire, they were seeing a number of shareholders and they dropped with todd in the last 15 minutes or so. i have been impressed. so shortly thereafter, i asked todd to give them a call to see if they would be offended if we made bid. they didn't indicate they were receptive. they also indicated they would listen. so i subsequently made a bid. i met mark out at sun valley.

he came by, i was there for the conference and i made him a bid and he took it to the board warren has done a deal. i seen you to sun valleych you had that phone with you. there was something intense going on. i didn't realize this was what you were doing. >> i'll have to be careful when i'm around you, andrew, one of the questions we had from an ebitda, i was doing it and thinking it was 20 times ebitda, not the cheapest deal in town. it allows you to spend a lot of money quickly. in terms of the valuation, though, when you talk about spending this kind of money, is it harder and harder to actually get a really cheap deal? >> well, yeah the lance tore the latter part, it's not 20 times

ebitda, andrew. i'm not sure what figures you are looking another there. but it's all deals seem expensive to me. but this one, we're certainly paying a very good price but it's for an extraordinary company run by a person that's, you know, as far as i'm concerned, he's the best in the world at what he does. >> he's made a number of deals over the past couple of years, about $8 billion of transactions, do you imagine using a lot of berkshire cash to make additional acquisitions if you will? >> well, it's always acquired i don't know how many acquisition, it's a lot in aerospace in parts. they've gone after one time over another over the years, in fact,

they made a couple small deals in the first fiscal quarter. they have one pending or so. now they make a good bit of.too, so they will probably be able do the acquisitions or many of the acquisitions intern ally generated funds, if they need money from berkshire, all they have to do is call. >> warren, this is an expensive deal, how does it match up to burlington northern? >> the most expensive deals don't work out. you mentioned dexter shoe a while ago. if terms of price earnings, multiples going in. just this is right up there at the top. when we bought burlington, that was a high pe. it was off a very depressed figure. because we bought that in 2009, precision earnings have fallen off moderately because of

developments in the oil and gas field, where they do business as well as aerospace. so but this is a very high multiple. >> good morning, sir. in fact, you read my mind on oil and gas, how much of this if at all is a bet the u.s. oil and gas industry may be bottoming out at least from the price perspective? >> well, it's, we're going to be in this business for 100 years. so it doesn't really make any zimps difference what oil an gas does in the next 84. if somebody told me for sure the oil an gas business would be in the doldrums say for three years, i still wouldn't have made the deal. it's not a prediction. i'm saying it's fought important to us to outlaw the oil and gas slump. when you get a chance to buy a wonderful company, there is some reason you are getting that, the health system, but there will be some day, there will be a slump

in aerospace, that will be much more severe in a company like this. if you look over the decades, both oil and gas and aerospace will be good businesses, and these fellas are their key typically in the aerospace business. the industry feeds them. they're universally regarded as the most reliable innovator dependable supplier of very key parts that go into all kind of aircraft. >> warren, speak in the defensive mode that you often talk about when you think about this particular company if terms of its market share and ability to maintain if not grow that market share? >> well, what you need is you need people that have got physical facilities. what you really need is brain power. you need prarl at the top somebody with a total passion

for the business. i've met mark four or five times and each time he's been in the air. he's been in the air a thousand hours. i loves this business like i like berkshire, he's a lot better at it. you can't find people like this. you certainly can't hire them. i mean they the one thing i guarantee, mark, he is running the company people like that are very, very rare. you see it in the passion that he's got for what he is doing now. he's never satisfied. he's never satisfied if terms of getting more business done in the air frame or in the engines. he is never satisfied to getting his costs to where they should be. he just has a passion for the business. >> warren, what does this mean in terms of the cash you are using for this. i know you like to keep about

$20 billion of cash on hand. are you in the market for potential deals or does the take you out of the market for a while? >> no, this takes us out of the market but we'll probably be buying a few small thing in the next six months, i mean, we're in negotiations on a is up him. but in terms of a deem of similar size what we will probably do on this one, is we'll probably bor re10 billion and use 23 billion of our cash. we will be left with 40 billion of cash when we get all through. i like to have a lot of cash at all times. so this means we have to reload. this doesn't mean we won't be doing smaller dealss. >> you talk about talent and special berkshire people and it's hard to find them. when you think about park, dare

i ask the question, should we start asking him to the potential list of people that may run not only this company now but ul put into the berkshire fold? >> i read mark correctly. i really have respect, all he wants to do is run precision and take it to you know greater and greater ideas, he would fought want to run berkshire. that's true of most of our managers. they love what they're doing. that's the combuty of it. i have to decide when i run a company, i have to run precision or anybody in our operations, so the first thing i ask him. march 58, if he has any ideas that he's going to go and play shuffle board, the fellow, as long as we treat him right. if we treat try him rights he will be running this for decades and decades.

that's what he wants to do. just like i like running berkshire. >> you mentioned this will take you out of the hunt for a big elephant 12 months or while the country reloads. last week, bill acman made a play or made it public he has a large stake in mongolese. what do you think of bill's proposal? >> i will listen to anything my friends want to do. at craft tiles, we got our work cut ut for us for a couple years. i think it's quite unlikely that they will be doing a big acquisition in the next couple of years. somewhere down the road, i wouldn't be surprised. it also would have to make sense financially. frankly, most of the food

companies, it would be hard for us to make a deal even if we had done all the deal. a lot of the companies are selling at prices that sort of reflect improvements in them equal. >> meaning that mondelez at these prices you wouldn't like? >> it would be hard to make a deal that made sense? who knows what happens do you know the line. few look at, you know, kellogg, campbells soup, or mondelez, to some extent the market has put into those prices that reflect an expectation that craft times margins are poobl and that may be the case want i haven't seen it elsewhere.

>> in 2009, many of the banks came to you for help. have you had any oil and gas companies come to you in the last few months looking for your rep for your investment? >> not yet. prices pay down here. soar that, i would say most of the people got to spend this up until very recently, they felt that oil prices would bounce back. they may not have felt the gas prices would bounce as much. they felt oil prices would bounce back. so that the oil production have been selling not $40 wti. they've assumed higher prices and okay the former curve reflected higher prices. so i think it would have been hard to make realistic fields in oil and gas until now. we'll see what happens in the future. nobody has come to me. >> does that mean have you not

made other purchases in the oil and gas business? >> that is correct. >> there is nobody aside from this deal today you think this is ended? >> i would say maybe 15% of the businesses had been in there. they got hurt in the last couple of quarters significantly. because when oil slows down, if they got various building equipment on hand, they don't need to order any for a while even though they continue to produce. we have not made any commitments in oil and gas. >> hey, warren, every time i see you, i always ask the question, ibm update, stocks trading about $150 billion right about now. how are you feeling about it these days? >> i feel fine. >> what's your basis in that company at this point? >> what's our stock cost us?

>> yeah. >> yeah, i would say around $170. >> around $1 seven. now by my matthew have actually made some money on this deal in part a function of the dividends. you are not concerned at all? >> i love it when it goes down. it means the company buys stock if cheaper and wants to buy more stock. you can look at our 13. it means i get to buy it cheaper him i'm not a seller of stock. people assume when we buy some stock, we want it to go up. we don't want it to go up. obviously, eventually, five or ten years from now, we like it. we love the idea of the company buying stock cheaper. that's happened at american express, for example. american express is a regular repurchaser of shares. we own 15% of it. our ownership goes up faster if the stock is down than if it is up. >> you talk about -- >> i'm sorry, becky, in american

express, mr. buffet, when you own a stock like an american express, are you happy to see an activist come in? do you welcome it? >> no, but i mean, it's up to them what they do with their money. but actually it sent the stock up. we can't buy stock because it's a bank holding company. we own over 10%. but the cheap ter stock is, the more shares we will be able purchase for a given amount of money and on balance, you know, that helps us. will is no moral problem attached it to. because it takes lace in the market. but we're buying out our part first cheaper. >> it's also a lot cheaper than it was a week ago. disney kicked it off when bob eiger said they already concerns about espn, very brief concerns from his perspective. the market took that as a huge selling point.

not only for disney but the dis my /* disney-related stock. >> i think bob i canner is one of the best managers in america and a good guy beyond. that but i am an observer of the pedia pick. todd and ted own some shares in certain media stocks, but i know big commitment, myself, and the sell-off did not entice me. >> warren, you know, speaking of buybacks, one of the questions, i don't think we talked to you about this since he sempbt his letter. we had him on the show, larry sent a letter a couple months ago to ceos and said, stop at the buy back, stop at the dividends. we want you to invest in the future. part in part, that letter seemed

to inspire hillary clinton with her latest quarterly examism approach and program that she talked about in terms of changing the tax structure, capital gains structure, what do you think of what hillary clinton had to say? >> well, people make buy backs complicated. it makes sense when you buy it below intrinsic value and you don't feed that money for the business. it makes no sense when you pay above intrinsic value. and that's a very simple principles. it's been ignored. if you look at the history of buy babs, people buy back a lot in terms offing a gre gait. people buy a lot more stock back when stocks are up tan down. they are behaving like joe public. there have been some great investment stories based on people who bought back stock intelligently, which means

buying back intrinsic value. we would buy back stock by the bush el basket. you know, had it sold well below intrinsic value. >> that would be well below intrinsic value. we won't buy a share if we think we are paying intrinsic value or more. it's fought a commissioned equation. but management, when somebody says i will have a $5 billion buy back. they ought to say we will have a $5 billion buy back if we bite and interbelow. it's not the way we operate. >> has it been an efficient use of capital? >> efficient use of capital for some companies. i would argue that our buy backs were peanuts, unfortunately, but a couple buybacks that make great sense, but we couldn't do it on scale. >> what did you make of hillary clinton's proposal on capital gains? also, she said she wants people to look into, i believe, buybacks themselves if terms of how they should be regulated?

i believe it was warren and others that had suggested that they are effectively insider trading, that the companies know about it? >> i'll be glad to write a paper on it sometime. i have written on it 20 times over the years. in general, i very much approve of where hillary is going in terms of fine tuning all the points. we'll talk about that in the campaign as it progresses, but buy backs are fought, they're not nirvana, they're not evil. it's a question of whether they make severance. if our stock sells well below intrinsic value. we don't need it for the business, we will buy it back as fast as we can. unfortunately, whenever i say that, it keeps it from happening. >> warren, we know you are a supporter of hillary clinton. did you watch the republican national debate? >> i wouldn't have missed it. >> what did you think? >> i thought that it was trick

television and i think there is a small chance that, you know, with proportional awarding of delegates and a great many of the primaries and with super pacs enabling people to keep getting finance, where otherwise they would rub out for lack of money if they weren't doing that well. i think there is actually some chance that, one, they go to the republican convention, no one will have a majority going in, but i think it will be very, very interesting. i don't know if donald trump is going to have a certain percentage of delegates. so are a whole lot others, if you are in the top two or three, you got a couple. with superpacs on, can you have quite a few candidates for a period of time, the pie will get divide up that nobody has a majority. it will be very interesting. it's a great spectator sport.

>> we did have an overnight nbc news poll conducted from friday into saturday. it showed that donald trump is still leading the pack, which may come to a surprise, some pundits have written him off after that performance. >> he can get by saying the numbers go down, it's a solid base. i wouldn't be surprised if he maintains a solid base that means you get a proportion of states. he's not going to run out of money. so it's going to be fun to watch. >> as a democrat, you must enjoy watching how this plays out? who would you like to see your candidate run against? >> well, i don't think, if i gave that prediction, it would

be a candidate, i want to see him run again i should say i want to see her run against the whole field. >> you know, warren, we have a lot of other things we'd love to talk to you about, too. we saw the jobs footballs that came in. the jobs report was just as expected on friday, 215,000 a. lot speculating the feds will raise interest rates come september. you have a very good idea of what's happening in the economy based on the numbers you see the businesses have you your fingers on the pulls. what do you think is happening with the economy? what do you think the fed should do in september? >> i think what is happening with the economy is it's moving ahead. roughly at a 2% rate and sen industries spurt occasionally, all are strong right now. but it's been a very steady inkreechls people have talked about double dips. they've talked about acceleration. every time they talk about moving sharply if one direction.

it doesn't do it. the economy has come back and very well considering the shock we had five or six years ago. but i don't see it particularly accelerating. i don't see it decelerating either. as i've said before, i think it's very tough to push rates higher in the united states when europe needs to keep them low and you know you got this situation existing around the world, but i keep hearing the various governors say it will happen soon. so, you know, it may very well happen. but i don't think it's an easy decision when rates considerably lower in europe and you may be acting exports and imports very significantly, if you push rates here to be considerably higher than existing europe. >> there has been a lot of people concerned about the market lately. if you watch what's been happening during earnings

season, some of the moves have been extraordinary by small amounts on earnings of revenues and coming in with double digit decline. you saw what happened with the media and the entire sector lower. there is something of a correction that's due. do you even think about what's happening on a day-to-day basis? >> stocks are going to be higher. ten years from now, 20 years from now. i'm not smart enough to pick dimes to get out and get in. if are you in something a lot higher over time, if you thought your house was going down 5% if price. i've just, that's not my gain. my gain is to own decent business and prices and you are going to make a lot of money over time if you do it. i this i the ability of people to dance thin on marks is quite

limited and in my case it's zero. >> warren, will is a story on the front of the "new york times," which is coca-cola, you are the largest shareholder in. it points out coca-cola teamed up with influential scientists to try and advance a message in medical journals that it's really more about how much you excercise, not what you eat that matters. the "time's" says something they look at big corporation is funding a message like this. what do you say as the large et share holder? >> your weight depends on how often you take in, how much you burn up. if you take in 2700 and up burn up 2700ure weight isn't going to change, you take in 2500 and burn 2500, you will gain weight. it's a mathematical type equationened if you are like me and don't like to exercise very much, you better fought take in

too much. >> all right. there is no mystery to wait. there is four per gram. you got to figure out if you don't want to campaign weighing, you have to figure out you are buring as many as you are consuming. >> warren, we want to thank you for joining, congratulation on the deal, warren buffet the chairman and ceo, joining us first on cnbc on the news of the deals to buy precision castparts, thank you, sir. >> i have a feeling ibm might be in play today. i think mr. buffet inadvertently said he was buying more. is that what you heard, andrew? >> check our ftc filing. >> the stock didn't go down, it's basically $1 seven.

he was not unhappy about that. >> we could be wrong, we should photo. that it sounded if buffet-esque ways that are -- >> 5630 it should say. check the ftc filing in a couple of days. >> if you look at the premark, the stock is going up. >> you may want to look at mondelez. bill ackman has an acquisition, almost 10%. warren buffet shut that down this morning. >> a lot of people thought kraft times would be a rolloff vehicle. warren buffet said probably not a year or two as they try to merge all of these assets together to make them work. >> we will continue to talk about this and a lot of other news this morning when we come back on "squawk box," oil prices, hitting lows not seen since palm beach, rising the gain the past few months, commodity analyst eric lee will

join us next. former tax ce is here to talk back-to-cool shopping and the held rth of the consumer. stick around, "squawk box" will be right back.

. the price of oil sliding as

strong job data is pushing higher and you had an increase this oil rigs last week. crude oil now posting six straight weeks of loss, here to break down what is next for oil is eric lee commodity expert. is this too much production? is the not enough demand? is this, c, all of the above? >> i think it will be c all of the above. if you will say what is the single most important factor that took us from $100 oil, it's the shale revolution. >> are relooking at oil wrong because we have the last six years oil has been above $100 twice. i looked backed a 25 years inflation adjusted data shows the average price of isle oil was about $48 a barrel. do you expect a redown or maybe this is the price point where oil wants to be? >> in terms of the next 20 years or 2020, i think we can get back

to the $70 level or $75 level. i think it will be hard to see triple digit oil in a while. that's where we're headed. >> the only way to get back to 70 is a jump in demand, which seems unlikely or a cut in production which seems more likely, but who is going to cut production in. >> i think that's the thing. you have if you will this pregame of chicken. you have opec the new challenger, shale and non-tech shale, none of those are blinking, at the beginning of this year, we thought cafe cuts, maybe shale is going to stop declining quickly, opec maybe stays flat, now they are gunning with the production, saudis may be going to 11 and shale, u.s. shale is just holding up. >> 11 million barrels a day? >> that's right. >> which would be just a massive

output? >> it would be if they do that. >> you just borrowed $27 billion last week. >> yep. >> many people i know is not your area of expertise necessarily say saudi arabia may be losing money owl in with their needs inside the nation. >> no doubt they are losing money, one thing we look at is the so-called fiscal breaking price of oil, that's probably a somewhere, it's not a science, somewhere around 70, 80 or $90 a barrel. on the other hand, they have magic borrowing power. >> you are listening to the interview of warren buffet earlier, he comments on energy and the markets. do you adegree with him? where do you stand? >> yes, in terms of oil prices staying lower for longer, i the might get another downtourn. the problem for the u.s. shale guy sts for the first time in a long time the u.s. is right on the margin. these guys are playing the game of if you put in more money into

these companies, they pro mou. they are directly impacting on the margin where the price goes. >> it's easy to forget once a well is drilled and there is a pump check on the well, the increment am cost is almost name. the deposit is in the initial well to cap a well to stop producing a well is incredibly expensive and time consumer. there is all these legal issues you have to deal with environmental regulations, whatever. so on that basis, with the exception of wells being drawn down quicker because of the fewer technology do you see a big decline in u.s. production coming in the next few years? >> i think it's hard to see. for the shale geluys, a 60% cutn the rate count, right? one thing to know is the u.s. is something that used to be only around saudis.

but with u.s. rate counts at 40% of what they were, u.s. production probably stays flattish. you have offshore production that's unrelated to the price on the short therm that's still coming on. >> that was a good discussion there. thank you very much for your time and insight. a leg of an economic story overall. >> coming up when we return, we will talk back-to-school shopping with ceo steve sadoff. we are beam. choose the right portfolio.u . mutual policy.

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>> the back-to-school shopping season is here. this week retail earnings are picking up steam. we will get reports from macy's and koh's in a few days. joining us is the former chairman, ceo of saks. thank you for coming in. >> happy to be here. >> we have been talking all morning long, we know the consumer has more in their pockets. they have been spend ting more. >> they are shopping, not necessarily buying apparel. they are going to experience, restaurants, traveling, it's a different mindset. there are parts of apparel doing extremely well. the atl-leisure, for example, the footwear. i don't see it in terms of the traditional apparel areas t.

consumer is healthy. >> you say a changing mindset. you think that is something the millennials have a different priority than other generations have before? >> i think they shop for the people. i think they have a lot of other interests other than apparel. brands are important. but they also are very interested in price. >> and as a result, what do you think is going to happen with some of these retail stocks when they report later this week? >> i think will you have a choppy period. you have a little bit of shifting going on from july into august because of the timing of some of the tax-free holidays. i think the back-to-school season is going to be late this year. you clearly had a high promotional period in the second quarter. i expect to see choppiness. >> do you boy the fuel story the oil story, that somehow magically we're in the same chance together on this piece of it, which even though oil is

coming down, it doesn't necessary e necessarily mean the choppers are showing up. >> i seen the data. the numbers are showing they are shopping. the things you are looking at in terms of traditional where is it in apparel, for example? which was the old way of looking at it isn't right. try to go to a restaurant in new york. it's absolutely. >> no, to be fair, steve, i don't know few heard our earlier conversation. we would agree with that. we said, okay, restaurants are probably the biggest beneficiary of this next to gas station, because people drive more. but do people say i'm going to go auto and buy a couple extra pair of jeans in ap shoing mall? >> not necessarily a shopping mall. they're improving their houses, it's different things, denim happens to be doing better because of the stretch factor. but they're not necessarily going to the department store to buy clothing. thatry getting out there and spending money. >> you are on the board of the national retail federation. so when you guys get together,

does anybody come out and say amazon.com will have a bunch of strip malls? what's the broad retail macroview of amazon? >> i think the broad view is omni chan sell what's going to win, omni channel means brick and mortar and the internet. amazon has an enormous impact on the business and you are going to see a lot of the malls go away. what you are finding is the winners are the ones doing the stores and they're doing the internet. look at something like a war b parker. you have nordstrom, it's the play, amazon is starting to open a distribution center everywhere. so you will see this interplay. >> the distribution center is different. >> absolutely. but the consumer is able to get same day shipping from the macy's. so i think this instant delivery will happen everywhere. what it's happening the prices are declining. amazon is bringing the lowest

common denominator saying if you don't have differentiated products. >> it's killing margins for everybody. in part, amazon doesn't care about amazon. they're shoulders allow them this last quarter, but they do care if macy's has a margin. >> absolutely. apples and oranges, you have differentiated products. why is it a macy's or a pennies or kohl's has differentiated products. you have to compete not just on price, you have to have the brick and mortar. >> do you think amazon is spending too much on one day stuff. wal-mart decided thus for they don't feed to play that compact game. >> i happen to think wal-mart is right on this one, quick shipping have very important. i'm not convinced one-hour delivery or same afternoon is as important. >> prime is important. >> prime is critical. >> you are going to have it here

two days and not charge me more, most of the other retailers you can't count on that. last holiday, i got burned the christmas before, so i ended up buying everythingen-on-amazon prime i knew i would get it if two days. >> i think you are getting most of them delivered. if i look at the numbers, most of the good retailers are delivering well. >> they don't promise it like amazon does. >> what do you think the way it works? right now they're bundling in media and video. do they have to do that? is that a different customer, for example? there is now, last week, they started limiting where you can send some of the prime packages, it used to be you can send it basically anywhere. now you are down to family member, what what they call, i don't know what the immediate family is. is there a point at which the price becomes too high or they roll back too much? >> it's a balancing act that they've got to do. right now they got so many people engaged with $99. i'm going to spend that, it

starts getting higher. you are right. that i will lose the dealership on the thing. they will continue to bundle the packages. this is where they will make some money. >> you think a little like the costco model? >> exactly. you look at this new company, jet.com that launched $200 million in backing. they're a sort of a membership organization. do you believe other retailers like wal-mart, obviously the sam's club t. wal mar brands or maesies are grand jury to have to emulate amazon and go to these membership models, take the model up front at once and sell everything off at cost? >> grown it will move if that direction. i think you will see some. jet has problems because they put brands on there without permission. so they have new start-up issues. i don't think you will end up going to a total membership model. i think you will see loyalty programs involved. all these brands have loyalty

programs. i think you will see changes in that. >> thank you. >> great to see you. >> appreciate it. coming out the blockbuster deal of the morning, berkshire hathaway buying precision castparts. stick around we have the highlights when we return.

at ally bank no branches equals great rates. it's a fact. kind of like shopping hungry equals overshopping.

a big new week on wall street and a host of fear factors to face. oil closing in on a new low, da to for retail and fed speak. dennis lockhart talking today, early hint at a rate hike in september. we will set the table straight ahead. the country is having serious debt issues. add more oil onto the mix and the fear is you could see a huge uprising in the oil dependent country. oil drove down on saudi arabia and the rest of the region coming up. plus, cruise lines getting set to turn cuba into a new destination. we had to be fashion week of travel and hear from a norwegian crew in atlanta. the final hour of "squawk box" begins right now. [ music playing ]

live from the most powerful city in the world, fork. this is "squawk box." >> welcome back to "squawk box," everybody. this is cnbc, first in business worldwide, i'm becky quick. joe is off today. the morning's big breaking story, berkshire hathaway is buying boeing parts maker precision castparts. here's warren buffet on the deal and the role that price of oil played in making his decision. >> queer going to be in the business for 100 years, so it doesn't really make what difference what oil and gas does in the next year in terms of us buying items, if people said we will be in the doldrums for say three years, i still would have made the deal. that's not a prediction. i'm saying it's not important to us lounge the oil and gas slump lasts. >> of course, precision castparts is mostly an avionics

business, it sells to companies like general electrics that makes jet engines, 15 to 20% is in the energy space, over the last year, stocks came down 20% as weakness in oil prices hurt that part of the business, paid it miss an earnings expectation earlier in the year. >> can we just get to the pain point here? can i jen you next? the there are 37 deal breaks, becky picks up the phone anwar ren buffet calls him to the show. >> i humbly submit. >> we were all very good to have him on. >> you are very humble. we rock it. >> two quick points, todd combs, one of the most interesting pieces of this. this is a todd deal, todd came in and bought $900 million. that's how this deal happened. he walked through the statistics, he met with the ceo

and sort of pops on by for fuven. maybe you should buy the company. >> amazing. >> that only happens, this entire deal is put together in the last five weeks or sex weeks ago. >> there are two things that stuck out. number one the press release says all cash deals. this is one of the biggest all cash deals of all time. definitely one of the top five. it may not be all cash. in the interview, buffet said i will probably do $23 billion in cash and borrow the others. number two, when you press them on ibm and he says, well, you know the stock has gone down which i like, i think if you bought more, he said, check my ftc filing coming up in a few days, it was hard not to leave that thinking warren buffet kind of said he is buying ibm. >> if you look at the stock this morning, ibm, the stock is up on an expectation i imagine warren

might have been buying. that stock is trading at $156. not unhappy he says about where the stock is trading. >> if the latest filing does not indicate a higher stake, i will be surprised. will you? >> i agree, kudos to becky on this i thought the other major item in terms of news in that conversation beyond the big deal this morning was the piece on mondelez, telling everybody last week they should merge with kraft times and mr. buffet saying probably fought or at least not soon. >> he pointed out that first of all kraft times has its hands full already that i have have work to be done internally. so he doesn't expect major changes, second of all, these stocks, mondelez, he says it's hard to find any trading at a

reasonable price at this point. he thinks they have all factored in the idea that food companies should have margins even before he had them. >> by the way, precision castparts, if there is any other company with derivative plays? people say should we buy ahead? rockwell collin, hei a texter based if florida that has hundreds of sort of unique airplane parts. >> to get into an airplane, to get a screw on to an airplane takes about five years. >> entry is extremely high. buff let loves those kind of industrys. >> i wouldn't be surprised if he uses this like he says. >> his elephant gun officially unloaded. he will unload.

>> about 12 months before he has cash. it's funnier, when you think of what makes him comfortable? now he has a 30 ot 6. gasoline prices are now down about 11 cents in the past two weeks. that puts the national average for gallon of regular standing at $2.71. gas now down 81 cents a gallon from this time last year. oil prices down six straight weeks. you can look at it. 44.12. becky. >> stocks as we know will be put to the test this week. have you data coming up on the consumer and plenty of fed speak as well. joining us right now to talk more about this and much more is dennis gartman the founder and editor and publisher of the "gartman letter." and gentleman, welcome to both

of you. just a moment, why don't we start quickly, based on what you saw last week with the jobs number, what do you think the feds is likely to do some september? will they raise rates? >> i think they will raise rates. i think what the report says is the economy continues to grow. this is average the last three months, looking in the range of $235,000 w. repretty much at the bottom of the forecast range for full employment on the fed members if you look at their charts. so i think the feds wants to get going. unless there is some bad news. i think the fed is inclined to make that move. keep in mind, we are talking 25 basis points. we are not talking about putting foot down on the brake at all. so i think the report was enough to give the confidence to fed members so they can start the process, which they want to do.

>> i have to say, that is probably a the consensus the fed will raise in september. if they do that, it probably will strengthen the dollar. >> that would be my guess. that stronger dollar has all kind of havoc in the quantities market and places like oil, what do you think the impact is of that? >> well, i think the fed is very concerned about a continued strengthening of the u.s. dollar. i don't think they will be able to stop the strengthening of the u.s. dollar. i think it will continue. i think that is an overt tune iting or a subverted sort of tightening that nobody wants to talk about with you is quite extant. it's the only thing the only thing that will keep the fed from tightening in the near future is the inordinate strength of the u.s. dollar. take a look at what's been going on. we really have started the process of tightening. i watched the adjusted monetary base as i said here on the program before. the adjusted base by the federal reserve bank of st. louis tends to be the stock of the soup of monetary aggregates is derievd.

they should always be growing by population plus some number as far as economic growth is concerned. let's tall that 3.5 or % a year t. last six months, it has been at best sideways and in some instances has been negative. so the fed has already becombun the process of tightening. when they begin to take the overnight fund rates up is to me relatively inconsequential remember it will go up soon t. question becomes how soon after do they make 50 basis points. people can remember how it moved by 100 times basis points in the 'seven and ''80s. >> what do you do if you are someone in and about the commodities market? do you play or wait and and see? >> you don't have a choice. in the grain market, in particular, we have lost for all intents our wheat mark to other

countries around the world. we iced to have egypt as almost a weekly buyer of wheat. egypt hasn't been in now for months ands. we see it moving to egypt from australia where the currencys are demonstrably cheaper. so its a very real problem. it's not going away any time soon. >> joel, would you say your job as an economist has gotten a lot tougher. it seems like a global pash. you have to be able to pluck things into a model and say this is going to work. things feel different. maybe that my perspective? >> i think they are a lot different than they have been. in an environment where interest rated don't change that much is an issue. i think he is right in talking about the dollar. i'm not so sure how much the fed places on their ability to control it. to me as far as the future and the dollar is concerned.

the reports that we are starting to see growth out of the major economies in europe may be as important as the 25 basis point rate increase as far as the fed is concerned. i mean the darst had nothing to prevent it from rising in the world. i think that becky, that's the key point. we have to look at europe and other parts of the country to look at parts of the world. to look at what's happening too the dollar, to look at what's happening to fed policy. i think once we start growing a lot stronger, then this issue with the dollar is not going to be as important. as far as europe is concerned, that will come into play in the fed decision making. right now, that's moving in the right direction as far as the potential for the fed to raise rates. >> dennis, is the biggest risk of the fed here, not the fed, itself, that americans seemingly become addicted, a 4% mortgage

used to be a dream come true. we talk about 4% mortgage the hughesing mark will be crushed. where why are we so fearful of higher rates? they can be great for savers. >> it will be better for savers, eventually it will be great for savers. i find it amusing, when i boughtpy first house 25 years ago, my mortgage was 10.5% it's amusing to me. >> well, joel, you probably bought yours before i did. i was trading in chicago and couldn't afford a mortgage at the time. but it's astonishing how we are amused by or dispaid by and worried about a 25 basis point increase in the mother-in-law rate as if that's going to shut off the mortgage business. i think it will actually be a reason for people who have stood on the side lines and be more

aggressive rather than deferring it. >> dennis, joel, thank you both for joining us. you can check out den dmis this afternoon with the "fast money" gang. at 5:00 p.m., he will get you caught up with the commodity action. >> travel network virtuoso. a big focus on cuba and oil prices as cruise companies look to entice examiners, later, cruise prices at a 52-week low the oil dependent country of saudi arabia expects to fall further into debt a. real iran can play in the years ahead. "squawk box" returns in just a moment. aw. aw. ♪ thirsty? they said it would make me cool. they don't sound cool to me. guess not. you got to stick up for yourself, like with the name your price tool. people tell us their budget, not the other way around.

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>> welcome back to "squawk box." network virtuoso is the largest event in the country with buying and selling, the ceos of all the major cruise lines, airlines and hole chains around the world the company says he drives like a $400 million in travel sales. the chairman and ceo joins us now. i gather there is also speed demons that goes on this week. everybody meets four minutes at a shot and makes these deals, is that how it works?

>> yes, for four days, we actually have 5,000 people here changing every tour minutes. at the end of this week, we will do 450,000 appointments in four days. >> what does that mean in they're all trying to boy what? >> well, in luxury travel it matters, it's not what you know, who you know. the general managers of properties the cruise line representatives. all these advisers are here making personal contacts to really get the insight to change the way if which people experience travel. it's that first-hand nooj. it's really understanding and having the contacts that make travel, particularly luxury travel special. >> you talk luxury travel. then you think the next generation of millennials. how are millennials traveling nowadays? are they a part of this luxury category?

>> absolutely. one of the things that's really interesting is one of the reasons luxury travel is doing so well is we've never actually seen in the history of travel, four major generations traveling at the same time with such big numbers. you know the matures are so much healthier, today a healthier 80-year-old is different than they were 20, 30 years ago the bombers are huge. but what's interesting about the millennials, a lot of people said they won't travel, wouldn't used a advisors, actually, we are finding the affluent millenials incredibly into travel. they're using advisers. it's also spawning a whole new generation of millennial travel advisers, which is very, very exciting. >> you talk about advisers, you think about the next generation and people use kayak and priceline, all this stuff online t. old travel agent, we all to the was out of business. you say they're not.

>> no, they're not. they can't hear at this thing that we're doing here is amazing the millennial advisers, what's happening is, the millennials have the first generation that grew up with online booking from the get go from the very beginning some they actually understand the difference. it's different to be able to talk to a millennial adviser who picks up the phone, calls the general manager, gets you greeted. has you met at the door, et cetera, et cetera, vs. book online. it's about personalization and access and making a difference in the way you travel. >> we keep hearing about experienced travel. what is that? >> yes, well, quite frankly, it's about understanding what makes the difference for the individual. it's about access, personalization and customization. it's about things that just aroundt the ten cal base rates kind of things. it's access.

it's being able to have a plan with your family, for example the him booers, and their children, it's become an important part of the boomers travel to actually educate their children and, in fact, we have a number of people who say, what we really want to do, we're already spending money on travel and our family vacations, but i want to have a strategy on how my kids travel to university it's great, it's competitiveness and makes them better people. >> we appreciate your time this morning. i believe, hey, brian. >> we got breaking news, which appears to have stock futures on the rides this morning, according to reuters, greek banks can get a capital injection shortly after the bailout. a lot consumes guys about the capital positions and lick wittied around the banks of greece. in fact the national bank of

degrees, that stock is down this year, one of the biggest banks in greece obviously, they were closed for a period of time, according to reuters, greek banks could get a capital injection. the market seems toic loo i. dow and s&p 500 futures rose relatively sharply on that news so we come into this monday morning being down seven days in a row on the dow jones industrial average. it may not be in part because of this headline, it is early. >> we were up 35 points earlier before we got the news, you can see how much is adequate gain. >> i wonder if your interview with warren buffet is getting impacted to dow because of the comments he made on ibm. if they get a lift. >> that can also lift the dow as well. so maybe greerks buffet and ibm will prevent us from having eight straight down days, who knows? all right. coming up the deal of the

morning, the aforementioned berkshire hathaway buying precision castparts, a $37 billion deal. we will have more on what warren buffet said about other deals that may be in the works. he joins us earlier in the show. could the oil policy shift of saudi arabia last year cause an uprising in that country? the debt is piling up. folks there cannot be happy. we'll speak about the future of the kingdom and how iran plays into that pick. "squawk box" will be right back.

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>> we will probably be buying a few small u small thing in the next six months. we are in negotiation with a couple. in terms of a deal of similar size that pretty much takes us out, what we will probably do on this one, we will borrow about $23 billion and use about 10 billion of our cash. we will probably end up with 40 billion of cash when we get all throug through. >> that was warren buffet talking this morning about buying precision castparts t. stock is up this morning on that

news. >> ibm getting a little bump after his buying. when we come back with more iranian oil expected to flood the market. what will the impact be on saudi arabia? a closer look at u.s. saudi relations? what could happen if the kingdom went broke? take a look at this hour. "squawk box" returns in just a moment.

. >> welcome back to cnbc "squawk box." i showed my enthusiasm. >> i knew you were ready to go. >> july was either the beth of times or worst of times for hedge funds. kate kelly has a run down. >> good morning, july was a poor month for hedge funds. the average was deadly flat.

they're about on par with the stock market itself, up stage two and a few percent. a few funds are killing it. citadel and amazon and dollar general an big size up 3% for july 14% for the 84 through the end of july. way better than average. pershing square helped with mondelez up 10%, a full 7% from the past year alone. up about 11% at last check they saw capital drop 17% in july. he is down on a move he wrote in a recent investor letter he frankly did not anticipate. david einhorn, nonetheless, saw 6% in july bringing his fun green light down % overall. in part it seems on long

positions held in energy dmams, including consol and sun edison. no word on whether the huge sell-off related to einhorn's selling, maybe the earnings were bad news enough, it has been a big move. >> steven coen has a family office there is no letter he writes. >> no, i don't know he wrote a letter, did he in. >> i would think he wouldn't be publishing his numbers. >> i think he probably has something to prove. so i think the idea of letting people know, informally, seeing if it trickles out, it is probably beneficial to his public image. >> there you have, thank you. meantime, saudi arabia's budget expected to reach 20% of gdp the slump in global oil forces saudi arabia to burn through cash and reserves and possibly borrow from foreign investors. the director of global energy and natural resources joins us

now, greg i think saudi arabia shocked a lot of people saying the $27 billion in debt will come out there. a lot of debate about what saudi arabia's true cost of oil needs to be to break even. what do you guys have as estimates, how much money do they need for saudi arabia? >> well, at the current product level you are looking at a lot of offbudget spending, somewhere in the upper 90s equivalent they're queer e clearly at a big budget delaware they're not terribly worried. it's not just the cash reserves they have. they also see the ability to borrow on the mark, you know, mainly from saudi domestic investors repatriateing their money from elsewhere in strength. they look at this analogous to the late ''80s. >> it's incredible what you just said. from what we know, greg the cost of production for saudi arabian

oil is probably in the high single digits, $5 to $10 maybe per barrel. you are saying they need 90 to break even. let's call cost of production ten. where is that $80 a barrel difference going? is it placating the population? here's money, don't riot? >> the money balancing crisis to offset foreign aid, military spending is another transparent item. rather than the cost where oil is profitable. a lot where spending has gone way up after the spring. that accelerated if foreign aid, you know, their allies in the region and increased arms purchases an a football of things with public workers. >> when you look at saudi arabia, they got a shia minority primarily on the eastern side ought country. the eastern side of the country by the way is where the oil

field is based. that is the biggest oil field in the world by far. i believe it's twice as big as the next biggest oil field. we don't hear a lot about this kind of stuff with saudi arabia. but how stable or unstable is saudi arabia right now? how much does this money go to kind of buy protection internally? >> well, that is kind of what they're doing. i think in years, it is reasonably stable internally. the government does not face major threats. you could see some eggs kalation in terrorism from sympathizers with isis. you don't really have a threat to government stability a. lot of that is based on keeping the population happy with thisen creased spending. for the time being they will be able do. the question is over the long term whether it's sustainable. >> greg, it's been decades the saudi arabia has this market. they haven't developed a second

export, anyway, to put tear gung younger people to work. can they do that. >> >> i think they tried to build out petro chemical business and refining and move down two value chains from the oil. beyond that, their progress has been pretty limited. but you know it's still not a particularly balanced economy. i think not many people will make that progress. >> what do you think long term in terms of the regime? >> when you think out ten years from now or a little bit before that, it's pretty easy to see an environment where you have to go. they clearly can't maintain per capita spending over the long term with population growth rate of 3%. although, some of that could come out from foreign aid, military spending. they have been building housing at a rate faster thatten the population growth this year. so there are things they can cut that wouldn't be extremely painful. but it's double digit oil

prices, you probably have to do some constraint over the long the early. >> if we start exporting oil, greg, what does that do to saudi arabia? >> well, if the u.s. export ban is lifted. i don't think it will be before president obama leaves office, it old after that, you have more light coming on to the mark. have you the u.s. importing more medium, the closer map our refinery configuration, he would have a, you know, a very small global price impact. i don't think that would actually be a big deal for the saudis. actually, it might slightly increase the appetite for some of the saudi sour exmorts coming into the united states. >> kind of describes a little of why the saudis must be frustrated with us from a geopolitical stand pointed, though the deal with iran may be also what they see as the last straw the thing that breaks the camel's back, how do our relationships stand at the moment? >> i i think they feel the u.s. has reduced their role in the

region and backed off from their interests. so i think there clearly is a lot of tension in that relationship right now. you know, they're definitely looking at an iran that will be able to spend more on its proxys in syria and iraq and yemen. from an oil stand pointed, the real problem is, how can you get opec back together when iraq is growing strongly andine is about to come back from sanctions? are the saudis going to contemplated bringing up market share? i think the answer is. it's hard with the differing interests of those three major numbers of opec. >> we will leave it there. great analysis, serious topic. thank you very much. >> thank you. on a less serious topic, unless you are a tedz la share holder, check this out. this is an instagram post featureing elon musk. it is called wing walking, a dare devil student. it's called, what could go

wrong? >> i love the guy, he should be allowed to do whatever he wants when he's not the ceo of two major companies. this is the key man. this is the key man. he's standing on top of a plane. i don't know, maybe it's to be expected. >> good luck. >> i don't think that's going to happen. >> it's still cool. very cool, very cool. i won't be doing it any time soon. when we return, cruising cuba, a luxury cruise line looking to set sail to aa have a na. we will catch up with norwegian cruise lines next and the futures right now at this hour. are you looking at green arrows, delta can open up much higher. we are back in a moment.

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welcome back, everybody. if you are just waking up, the news of the morning, berkshire hathaway is buying precision castparts. we spoke to warren buffet early this morning and covered several topics along the way. berkshire owns a large percentage and we asked him about bill ackman last week when he said he bought a large stake in mondelez. he said he thought it would be great to have it as well. we asked mr. buffet about the profit of doing a deal like that? >> it would be hard to make a

deal that make i made sense. who knows what happens down the line. but if you look at, you know, kellogg or campbell's soup or mondelez, their prices to some extent is market has put ahead of those companies prices that reflect an expectation that kraft times type margins are possible. and that may be the case but i haven't seen it elsewhere. >> okay, kraft times is run by 3g. they have done a phenomenal time of increasing margins along the board. mondelez shares are down. le pointed out kraft times has its hands full dealing with they have already bit off. he thinks it will be a year or two before they make purchases. >> meantime, we will talk about travel, cruise lines, the big

virtuoso. expanding to coin, india, australia and new zealand. andy stewart joins us the coo, andy, a name i like a lot. i want to start with cuba, though, the u.s. embassy if cuba opens later this weekend, a lot of buzz in the cruise industry about whether cuba will be cheap and whether you guys will be getting people there very soon? >> well, good morning. we are very excited about cuba. we think it's a big opportunity. a lot of the people in the u.s. are very excited to go to cuba. the caribbean is 40% of the market. so having a wonderful few destination in the middle of the caribbean is pretty exciting. >> it's complicated. when dunk that will happen in. >> we have applications in with the u.s. government and the

officials in cuba. so we'll see the timing is uncertain at this point. but certainly it's a destination that has a huge potential. >> how huge is that potential? does it come to the expense of puerto rico or other islands? >> we don't think so. we think the caribbean is a large destination. we think this is a new engine for growth. something that really is going to get consumers excited again, bring people back and also bring in new people who haven't cruised, so we think this is all about growth. >> you know, you are at a luxury conference, you guys are doing more and more luxury on board, creating multiple classes of service on board. how does that work? >> we developed in norwegian, a private key card access area, with private sun bathing, private restaurant, private loun him, butler, concierge, everything you'd expect from the most upscale experience.

but our guests get to dust if and out of the big ship experience, 28 restaurants, facilities for families, tony award entertainment. we are excited about offering a new choice in this industry. we are growing it fast. every ship we build, we expand the haven a little bit. it's resonating with our guests. >> there are three things cruise ships go through a lot, food, fuel, diesel fuel is down a buck a gallon. we talk about the airline, how much does a lower diesel fuel cost add to your profit? >> it certainly helps. as you say, we have three items we spend a lot of money on, fuel is one, lower fuel costs are certainly a profit for our industry. >> we will leave the conversation there. thank you. >> thanks very muchch. >> i never been on a cruise. i have a lot of work to do. all le? never been on a cruise.

when we come back, jim cramer is ready to kick off another big week of trading on wall street. check out the futures this morning, they are looking sharply higher. this pint looks like the dow futures are up by 130 notes on the greek banks cashing southeastern rather than later. the nasdaq is up by 33. "squawk box" will be right back. so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep them all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberyy apple scones smell about done. ahh, you're good. i like to bake. with at&t get up to $400 dollars in total savings on tools to manage your business. having a perfectly nice day, when out of nowhere a pick-up truck slams into your brand new car.

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>> welcome back, everybody, berkshire hath jay way is buying precision castparts for $37 billion cash. we spoke to him this morning and asked him about the stock's weak performance over the last year. >> i love it when it goes down, it means the company will buy it cheaper. you can look at it in two days. it means i get to buy it cheaper. >> he didn't exactly tell us, he did tell us to check out the sec feeling. it's up by 1.5% this morning. let's go down to the new york stock exchange. jim cramer is joining us, it seems like the futures have

turned around because of headlines that greek banks may get a capital injection before the ecb invests remember is this going to be a greek headline t interview, plus the fact that the chinese were able to mount a rally despite the fact that that were really big numbers this morning plays bag role. if you see the dollar get weaker because of this, you can have a sustainable rally. we've had so many fakeouts on monday mornings because the dollar stayed too strong that i don't want to buy in until i see where the dollar is going to be. >> jim, do you like this deal this morning? we'll talk about ibm in a moment but this transaction? >> i think it shows he has faith in the airline industry. he said there's a ten-year window, maybe 20. you don't buy precision cast parts unless you think the airlines are going to continue to buy planes.

17% of the company is in oil and gas. he was able to get the bargain. it wasn't the aircraft orders. >> what did you make about his comments around ibm? he has said he's been happy because they've been able to buy back their stock but at some point isn't the low stock price a signal about the operating business itself? >> i think the problem is there's 29% to 30% that's greeing wegre growing well. it doesn't help the gross domestic product isn't growing. i keep watching the fast part and hoping it will happen. so far he's not been right but that doesn't mean he won't be right if they can somehow get that 30% to be 50%. he's a patient guy. maybe they can get 50%. otherwise he's wrong. >> we all want it to return. >> i say no because they say no. they're not in there saying

there's a tipping point. they're saying we can get there and we made a small acquisition last week that's going to help them get there. they're not bullish until they get to a higher level of fast growth part of their analytics and data division. they need to get there. they didn't last quarter. >> do you get bullish around monday de mondelez? >> i think so. the consolidation of food group is amazing. they were the new high list last weekend. the new activism is to find ways where the stock goes up no matter what. that has been a very good story for mondelez is the margins. >> can we go back to the dollar? i know you pointed out when the dollar gets stronger it has impacted stocks lately. do you think that's a long-term play? i don't see the dollar getting substantially weaker against the

euro or any major currencies over the next year or so first-degree fed raises rates while other bangs print out cash. >> you're right. if the euro doesn't bounce and we get a little bit of acceleration in a lot of countries and they don't press the euro, the president should say, guys, can't just keep knocking your own currency down. everybody is doing it to be able to get exports going to the united states. so far it's working and we're like a pitiful helpful giant. we're not focussed on this thing. our government is not focussed on the fact that our exports are allowing our dollar to be crushed. we all know it's happening but that's a probusiness stance. the republicans are business talking about socialist issues and the democrats are not

probusiness. >> thank you for your time j jim. we'll see you time. >> the latest survey saying gasoline prices are down $0.11. gas is now down $0.81 from a gallon from this time last year. >> and that could negatively impact the retail sales number not from not people spending the money but because so much of the retail sales number is gasoline. as the dollar value goes, your local gas station is pumping the same amount. we've seen a lot of this. the sales are okay but a local gas station owner reported less revenue. >> coming up, media stocks slammed last week. what can investors expect this week from the sector? we have more after the break. aflac!

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after last week's big slide for media stocks the next question is what's next. we have more on this. good morning, julia. >> reporter: good morning. investors are carefully watching for signs of how fast cord cutting will accelerate and how fast ad dollars will shift to the internet.

we may see m&a pick up as media valuations fall and media companies look at the scale they get in teaming up. investors are watching time warner. shares are trading before the $85 takeover offer. they have the advantage of the least exposure to advertising. discovery could draw acquisition interest. it generates half its revenue overseas and viacom fell last week and could be up for grabs. robert kraft resigned from the board last week in the midst of the selloff but any ownership changes are unlikely to happen until summer red stone passes away. as companies try to shift their business in the face of cord cutting. >> what have we seen on hbo?

what does that represent if that's sort of the bellwether for everybody else? >> they say it's been off to a great start, very successful. they haven't given us any specific metrics about how many subscribers they have for hbo now but they're clear to say that it's incremental that it's not cannibalizing their core business. >> in terms of media investors after last week, are they saying, look, this stuff is oversold, we should be buying now while stuff is under pressure? do they think there's more to go? was there really a tipping point last week? did people overreact? what's the thinking? >> i think it really depends on the companies. companies like viacom which really are targeting that millennial audience which is more likely to be spending time on new services, i think there's a lot more skepticism about those and confidence that companies like disney that can sell directly to consumers if

they decide to are a little bit better off. i think we'll see some buying after these declines and we saw some rebounding on friday after the steep selloffs. >> julia in l.a. thank you this morning. we should thank brian and becky this morning as well. make sure you join us tomorrow. "squawk on the street" starts right now. >> reporter: become to "squawk on the street." i'm carl quintanilla with jim cramer and david faber. >> china got the best gain in about five months after a trade data was lousy. bonds are worth watching as w l well. stan fisher saying it's