♪ oh, it was a given we were going to open with that music. good morning. welcome to "squawk box" here on cnbc. scott wapner along with becky quick and tyler mathisen. joe and andrew are off today. and attention star-gazers, tonight could bring the best meteor shower of the year. the perseids. nasa tells us to expect fast and bright meteors that frequently leave trains with as many as 80 per hour at the peak. look out for the perseid meteor shower. now to business of the morning, starting with big news out of china. ? a surprise move, the central bank there deciding to allow its currency to fall. the pboc described the near 2% devaluation as a one-off based on a new way of managing the exchange rate, but many investors are wondering if this is really the beginning of a slide in the yuan's value. we'll talk to a currency trader in just a few minutes. asian stocks selling off late in the session on that currency move. take a look. it's red arrows across the board. shanghai, where you'd like perhaps first, not much action at all. and that's a change because

those shares have been so volatile in the last several weeks. european equities, meantime, on news of this greek arrangement there, you do have red arrows mostly across the board, and perhaps not surprisingly, greece is the one that's getting the lift by 2.25%. u.s. equity futures at this hour? well, after yesterday's big day breaking that seven-day losing streak, the dow would open lower by nearly 125 points. >> here are the big stories we're watching today. greece and its lenders agreeing on bailout terms. a greek finance ministry official tells cnbc there are still some minor details, but they won't affect the completion of the deal. the european commission expected to comment on the deal at its midday briefing. on today's economic agenda, a few data points of of note for this data-driven fed. at 8:30 eastern, a first read on second-quarter productivity and costs, and then at 10:00, wholesale trade. as for earnings central, the consumer front and center this week. among the companies set to post their quarterly results today,

red robin gourmet burgers, becky. all right, let's get a check on the broader markets this morning. as scott just showed you, futures are under pressure, and guys, i would imagine this has a lot to do with the chinese devaluation of the yuan. this kind of changes the game at this point. if you are now talking about the fed, most people think it's most likely that they will raise interest rates next month. if they are raising interest rates, that means that we are strengthening the dollar at the same time every other nation is weakening its currency. >> that china is effectively weakening theirs. >> right. >> which would give chinese exports an advantage, and that's obviously what they're trying to do. >> this has been something the fed's been watching closely. they've been watching the dollar strength. they tried to say recently, at least fisher said recently, it's really going to be the u.s. economy they are watching the most, but it's hard to look at that in a vacuum when you see what's happening around the globe. let's take a look at oil prices this morning. yesterday oil hit a 4 1/2-month low during the trading day to $43.35 and ra rallied towards the end of the session and settled up by about 2.5%. you can see it's down about 1.5% this morning, $44 .29 for wti.

taking a look at the ten-year, this is interesting. ten-year note looks like it is yielding 2.166%. that's going to be the point people are watching closely, too, as we start to think about what the fed does next month. taking a look at the dollar at this point, euro yesterday was back above 1.10 for the first time since july 31st. the dollar index this morning sitting at 97.23. obviously, what's happening at china's going to have a lot of play in these currency markets throughout the day. gold yesterday settled back above $1,100 for the first time since july 21st. it was up by about 1% and you can see it's up another $9 this morning, $1,113 an ounce. now to today's top corporate story, google rolling out a major reorganization plan. jon fortt joins us this morning with the details. and jon, there are a lot of people in chaos, but it kind of makes sense the more you look through the details. >> it does, but the impact is yet to be seen, becky. a big surprise after hours yesterday around 4:45. google announces that it's not going to be known, at least the

parent company, as google anymore, creating a company called alphabet. google will exist as a part of that. eventually, the stock did spike about 5% after hours. larry page is going to be the ceo of alphabet, but google itself is going to get a new ceo. this move is supposed to aid efficiency. larry page saying in a note, "our company's operating well today, but we think we can make it cleaner and more accountable." and a key to that accountability and that clean operation is going to be a man named sundar pichai. he's the new ceo of google. he's been the senior vice president over product and engineering. he rose through google first running google chrome, then android and other apps. he's known for getting things done and being a nice guy at the same time, which is tough when you're getting as big as google is. so, what's going to be part of alphabet, what's part of google? well, most of the businesses that are known as part of google now, including android, search, maps, all of that will be part of google under sundar pichai.

so will youtube. what won't be a part of it is google x, google ventures, google capital, google fiber and nest. things like that will be part of alphabet, run separately. the new cf loving report to larry page and also serve in that capacity for google, david drummond, the longtime general counsel and overall legal mind behind google will also going to alphabet. and the father of the google business model, who's been serving as chief revenue officer, he will be an adviser to alphabet. the q-4 results are going to be the first to show this different structure. google will be reported as an entity on its own, giving investors more clarity into exactly how profitable google itself is. alphabet and all those businesses will be reported separately. not line by line, but just alphabet as a whole, guys. >> it's funny, the stock is literally right at 700 even today. the knock, i guess, on google would that the company wasn't

transparent enough, and it was growing too large and they were spending too much money on these disparate businesses that were sort of called moon shots, rather than what the core business has been. >> yeah, and we'll have to see exactly how this addresses that. i mean, ruth porat came in just like gangbusters on the last earnings call, obviously had a really firm grip on the business overall, talked about being mindful of costs and how they're invested -- >> is he a driver in this? >> it seems like it. this holding company, it feels very banking-like to me. i think what we don't see yet is exactly what the forward plan is here. i mean, is google going to buy whole businesses? i was talking to somebody at google last night who likened this to berkshire hathaway. exactly how berkshire hathaway do they get with this? are they going to buy whole businesses? could they buy a car company to supplement what they've been doing with driverless cars? >> well, larry page said that he admires sort of the way that

berkshire hathaway is run, not only by warren buffett himself, but just in the structure and the way it operates. so, it's no surprise that those are the kind of names that are being thrown out. it's the ge of the internet, i've heard this morning, the berkshire hathaway of the internet i've heard as well. >> when you look at the class "a" and "b" shares, moves that google has made governancewise, it makes sense that way. >> jon, stick around. we'll discuss this with ivan feinstad at tigress financial partners. ivan, thanks for being here this morning. you hear likenings to the ges, to the berkshire hathaways, but in the case of berkshire hathaway, that's a very different scenario. you've got warren buffett and charlie munger at the top and they can allocate all the money that these other businesses kick off. this seems like a slightly different setup. this is, we're going to take all the things we're interested in and put them over here. we will make sure there is a different operating structure, and that makes sense. but if you're a shareholder, you're still basically getting all of the things, the moon-shot stuff and the google. it's not like you pick one shock

over the other. >> i think you want the moonshot things and i like companies like google that spend money on technologies that will hopefully add value in the future like apple and facebook. i wish more companies would invest in r&d and spend for the future. however, the reason the market likes it, because there will be more accountability and maybe a little bit less money spent on these future -- >> so, what happens if i own google shares today? what happens? do i get new alphabet shares or what? >> no, the symbol -- the name of the company will change. the two symbols for the "a" and "c" will stay the same, the google and the google "l." you won't notice a difference. however, you will notice the fact that the stock is up $30-plus this morning, which is positive, saying the market does like it. >> but it's less of a change than we think, correct? this is almost a name change and a corporate structure change, but not some split of the company in some way? >> no, but i think -- >> if i have 100 shares of google today, i've got 100 shares of alphabet whenever this takes effect. >> yes. >> what happens -- scott or maybe jon mentioned the idea

that google will report -- the google portion will report its numbers separately. how do those -- are those numbers reported just not in terms of earnings per share, because there is no earnings per share for google. there's earnings per share for alphabet, which includes both the google stuff and the other moon-shot stuff, right? or what? >> i think they'll report line items for advertising revenue, you know, the search revenue, youtube revenue, so you'll be able to have more granularity in their different business lines to see where the real growth is and where the real drivers are. >> but the eps numbers, those kind of gross profit numbers will be alphabet, will be one company. >> but in theory -- >> spread over two stocks, because thechz have the two stock classes, right? >> you could break it down to see where the biggest driver of the earnings are. >> we're going to be saying alphabet is reporting earnings? it just sounds weird. alphabet? >> it will take 10 or 15 years. google sounded weird at the time.

>> google and yahoo! sounded weird back in the day, too. >> there are challenges that come with this, too. you can't help but think, google has built this brand and culture. >> yeah. >> it means something to work for google. what does it mean to go work for alphabet? there are three brands that occur to me as being iconic brands -- coca-cola, kleenex and google. and the idea that we would -- that coke would change its name or its structure some way and we're going to talk about a company that's no longer called coke, but it, of course, is coke. >> but i'll bet the prestige goes with alphabet, right? you want to work for alphabet if you want to work for the moon-shot projects, if you want to work on the futuristic sort of cool things out there. that would be my guess. >> i think a lot of people in silicon valley want to work on the cool, futuristic stuff. and after a few months of talking about alphabet, people will forget google the same way that everybody talks about verizon and they forget the two companies that merged into verizon. >> so, is it worth the $30 pop? >> well, the market is saying we like the fact that there will be more transparency and more accountability to their capital spending. so, i think that's the key,

which has started when they first announced earnings a few weeks ago with ruth borat as the cfo, feeling there is going to be greater accountability for their capital spending. >> does the core business itself, the search business, which generates, what, like $66 billion, i think it is at revenue last year? does it suffer without larry page? >> i don't think it does, because larry page has put in place a number of deputies over at google who have been running that business. sundar pichai has had a ton of influence not only over core search, which isn't exactly his area specifically, but over android, over chrome, over all these areas that are wrapped around search, especially in the mobile era, keeping that protected from some of the encroachments from the likes of facebook. so, larry's still there, but he's got the deputies in place. >> speaking of protection, could this be a way for google to protect the new ceo of google

and keep him from getting poached by the likes of twitter? >> that was the first thing that came to mind for me. >> because he would be in play, you would think. >> you would think. i mean, maybe the upside potential of something like twitter could intrigue a guy like sundar pichai, but he was mentioned in the microsoft search. much bigger company. you know, as these larger companies and rivals to google look for executive talent, he could have been in play. and he's a guy for a couple years now people have been saying, owen malic was saying he's ready to be a ceo. he was ready to be a ceo. so, good for google, i suppose, that they managed to keep him around, because there are not many executives in silicon valley where as a company gets huge they are really good at product, getting people to do things on time in high quality and still have them smiling afterwards. that's what sundar pichai was able to do. >> he's a product guy. he's 43, i think, too. >> people like him. not only does he get stuff done and it's a good product, but people like him. they're not supposed to be able

to do that. >> thank you. back to our big breaking market story this morning. the people's bank of china sending shock waves through the currency market after letting the yuan depreciate almost 2% against the dollar overnight. here with us on the set, boris schlossberg from bk asset management and a cnbc contributor. boris, good to have you with us. >> good to be with you guys. >> this seems to be something where the chinese government has said, okay, you dwuyz want us to be more market tied in terms of the peg for our currency. we've done that. but the effect is to devalue it, which is what a lot of people in the u.s. don't want. >> i think it's screaming that china is in trouble. i mean, we've seen a series of data points out of china of serious slowdown. the trade data over the weekend was actually sort of the biggest tell where both imports and exports contracted by more than 8%. i think this is simply a story that's basically telling us that the chinese leadership is really starting to run scared at this point. >> this is the first step in what's going to be a long road

of stimulus. >> yeah. >> pboc cutting rates. >> trying to plug a hole on a leaky boat, absolutely. >> that's a pretty big about-face a few months ago. the premier was saying we don't want to do this. >> huge, huge, and i think it shows you how worried they are about what's going on. i read a story in "the new york review" that talked about how the whole clampdown on corruption is creating a massive slowdown in chinese economic growth. because in the olden days, you could just bribe somebody to get things done. now the whole bureaucracy is literally frozen. everybody is petrified that if they do something, the government will come after them for corruption. so, while he's trying to clean it up, the short-term impact is a much more increased slowdown for the chinese economy. >> currency war coming? >> already happening, you could argue. >> yeah. what's interesting is we're clearly moving now from a point where we used to have currency cooperation between most central banks to now currency competition, clearly. and this is where it brings up

the fed, where i think it's fascinating. i've argued for a very long time that the only reason why the fed wants to move off their euro interest rate basis is political rather than economic. we have no inflation, no wage growth. there is very little reason for us to want to raise rates right now, but they want to do it because they are tired of being observed at this point. but this brings up an interesting point, because yesterday stanley fischer said they're watching china. and the fact that china kind of gave its tell, that things are not going that well over there, may make them pause, or -- >> those comments from fischer, did they come before or after the devaluation news? >> it was before. it was yesterday morning. so, today we had the devaluation news coming right after this. but i think the big story is this. even if they do hike rates, i think what they're probably going to do is if they hike rates in september, they're going to say we're going to do this, but we're not going to do anything for a long time coming. in that case, it becomes very much like a boj model, where it's a one -- >> one and done? >> one and never done again. hiked rates and never did it

again. i don't think they want to be in that position either. they want to be in a position of hiking rates on a steady, consistent basis, so they'll be careful about the lift-off. >> does this change the equation? i think the consensus up to today had been they will raise rates in september, based on what you said. >> i think this makes it more likely they'll hold. one key tell, retail sales this thursday. we need to see the u.s. consumer come back. we've been talking about, the bulls saying the u.s. consumer's coming back because labor numbers are good, and we've had disappointing retail sales every time. if we have another disappointing retail sales on thursday, i find it really hard to believe the fed is going to raise rates. >> look, the way people have argued away, the way observers have argued away the idea that retail sales stink is saying people are spending in other places, buying big purchases, doing things like going out to eat and fixing up their houses, and those don't necessarily show up in retail sales. >> that's true. there is some truth to that, but with, you know, gasoline at, like, i don't even know where it is, $2 something, oil literally at $40. the other thing, by the way, is

if they tighten, right, take a look at oil. the stronger the dollar, the lower the oil, the lower the inflation wages are going to go. it's kind of a self-defeating mechanism. so, i think they're playing all of these things -- >> but gasoline price is part of retail sales, the other part of retail sales. auto sales were fantastic in july. >> that's the one thing where people have been arguing, you know. there's been a huge tilt towards the massive auto spend, but i still think you need to see a relatively decent print this month in order for the fed to feel confident the consumer is come back. >> going back to something you said a moment ago, do you think this move by the bank of china throws a wrench into what our fed will do in any way or -- >> it certainly does, because it makes them pause at this point because i think policymakers were not nearly as concerned about the situation in china as they are now. i think this was a big tell -- >> this says -- >> this says that conditions in china are starting to really -- >> they had to know. they had to know that the chinese economy -- everybody knows the chinese economy is slowing down. >> slowing. the question is how much.

the bears argue that it's not just slowing. the bears argue that it's cratering. and maybe the bears' argument is actually starting to finally come to bear. and if the chinese economy's cratering, it's like jupiter. it has a magnet effect on everybody in asia, including us, and by the way, also europe. i was just thinking who's going to get hurt the most by this? how many bmws do you think they will sell in beijing? >> the biggest declines on the market are the german carmakers. >> china's a huge, huge market now. it's fascinating. we're now playing a multiglobal chess game on the monetary front. >> i think it has gotten way more complicated. >> much more. >> used to be that central banks could look at their own economy and figure out what to do. now -- >> used to be a unipolar world, we used to dominate. now we have a very, very serious component to consider, absolutely. yeah. but it should be fascinating. and i do think that it really creates a pause on the idea of a september fed hike. >> do you think the chinese economy's cratering? do you think it's crashing? >> no, it's hard to say, but i clearly think that it's having a

massive slowdown. there was all this malinvestment -- >> and then we need to bring back more corruption, right? >> the irony -- >> because that made it fun. >> the irony of the whole thing is that in the near term -- in the long-term, it's probably very good that they're trying to simply address these issues, but in the near term, i think it makes sense, that you basically freeze all economic activity because, you know, like when people watch over you, you start to become much more careful. >> although it's hard to argue let's go back to the corrupt old days. >> i know. it's sort of the law of unintended consequences, which is always interesting in the markets. >> boris, thank you very much. appreciate you coming in. coming up this morning, stocks to watch, including hamburger chain shake shack, which is getting a big boost right now. first, as we head to break, a look back at this day in history. ♪ ♪ go big or go home ♪ nervous whitening will damage your teeth? introducing listerine® healthy white™. it not only safely whitens teeth...

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let's talk about stocks to watch this morning. shake shack beating the street on top and bottom lines, very nice report there. revenue increased 75% from the year earlier period, shares jumping on the news. and the web hosting company rackspace posting a better-than-expected increase in sales, also announced a $1 billion stock buyback. u.s. cranemaker terex is merging with finland's krona cranes in an all-share deal, shares of

terex rising on the news. hertz earnings in line with estimates, revenues a bit better than expected, despite being hurt by a lower dollar and rental car volume in the u.s. mixed car for take-two interactive. earnings missed but revenue beat. expenses soared 30%, and that explains why. scott? all right, let's get back to the markets now. futures pointing to a sharply lower open today. joining us now on set, hans olson, barclays wealth and investment managements global head of investments strategies. thanks for coming in. >> thanks. >> what was yesterday about? we broke the seven-day losing streak with a really nice rally. was it a one-and-done deal? >> well, coming into the day. i'm not sure it was one-and-done, but i am not sure that you can put together based on that one-day rally a string of further advances. we've been caught in this churn now for some time, you know. we're closing in on the back half of august, and we're up, what, maybe 2% this year? so, there's, you know, we're caught in sort of this infinite loop of muddling. >> what gets us out of that?

>> well, i think more earnings, better earnings, certainly better quality of earnings. that's something that we haven't had in the second quarter. and you know, it just seems like -- it seems like, i guess, the bottom line is the market feels tired. advanced decline, you look at the break between the industrials and the transports. you look at sort of the lack of good revenue growth, which then leads to higher quality earnings in q-2. and you have the conditions for a, technical conditions for a market that just appears tired. and the fact that we've had a profound lack of real volatility, right? we haven't had a correction of any meaningful size since 2011. >> do you think we're going to? jeremy siegel, noted market-watcher, obviously, thinks we still can get to 20,000 on the dow by the end of the year but the next five to six weeks could be pretty rocky, in his words. do you agree with that? >> 20,000 -- >> not even the 20,000, but do you think the next five, six weeks are going to be tough, getting closer to a fed hike? >> absolutely.

and you know, we're eating our own cooking with that. a couple of weeks ago, we cut our u.s. equity exposure, both in large cap and small caps space based on the things we're talking about. and to be absolutely clear, this is not a call on the economy. from the economic perspective, things look fine, right? rates can go up. not going to be the end of the world. but from a market perspective, away from the fundamentals but more on the technicals, yeah, i think we're due for a correction. and if anything, it probably, while not feeling good, it will probably be fairly healthy. >> although i have to say, i feel like it's waiting for guido, waiting for this correction. maybe this year has been the mini correction where we just go nowhere. maybe that gives people a chance to kind of get in as earnings kind of build up over that time. >> right. >> for anybody who's been waiting, it's been waiting and waiting and waiting. >> that's right. i mean, the lack of an advance sometimes is sort of the correction expectations in and of itself. that's a good point. but we have -- you know, it was interesting, i've been away for a couple of weeks on holiday,

and you know, i tried not to look at the news, right? and -- >> good luck with that. >> yeah good luck with that. so, when the fed came out with its announcement, i briefly took a look at it. and what was remarkable about it, even though people were making a big deal out of it, it was remarkably free of any news. they were telling us the obvious, the things we already know. so, just this churn on the discussion of whether they raise rates or not continues to go on. and the fact of the matter is, if the u.s. economy can't handle a 1% interest rate, when historically, it's been at the inflation rate, which is, what, 2%? our problems are so much more profound than we're giving it credit for. and then it's not a question of whether the market can be trading at 16 or 17 times, it should be trading at 8, right, if that's the real state of play. so, i think we're in better shape than people are giving it credit for. and what we need to do is see improvement in the technicals and some of the fundamentals, earnings. >> are there any meanings to china devaluing its currency,

maybe helping put a floor under materials, which had a great day yesterday? buffett doing the buy of precision. >> right. >> maybe putting a floor under industrials? >> i think buffett's move yesterday, which was really the principal cause in the market rally, right? when you stroke a check for $37 billion, you have to be fairly confident, one, about the due diligence that you're doing, but also about the future of the company that you're buying, right? so, it's the ultimate expression -- >> in the industry in which you're buying it, right? >> yes. but that industry, right, it sells into a lot of other industries. and so, it's at a foundational aspect of the american economy. so, you could read into that that a very savvy investor is putting his money where his beliefs are, and those beliefs actually coincide with a pretty good view of the future. and it's hard to argue with that, right? it gets back to the fundamentals of the economy. but the -- >> in other words, if the industrials are good enough for warren buffett -- >> yeah, exactly. >> -- they're good enough for me, right? >> it's the statement value of buffett doing it. if it was somebody else, it wouldn't have had that same

statement value. >> precisely. >> in an area of the market that's gotten destroyed. >> and it's more than a statement, right? it's a big check. >> oh, no, he's talking with his money. >> but it's an area of the market that's been obliterated. industrials have been terrible. >> true. but to your question on china, it depends upon where you start, right, how you frame it. if you frame it from the belief that, in fact, the economy was growing at 7%, 7.5%, then you find this unnerving. if you actually believe that the economy was growing a lot less, and that's normal, where they are in their development cycle and the fact that they're trying to clean up corruption is actually a good thing, it's sort of like, you know, the new york stock exchange in the 1920s that led to the '33 act and the '34 act, which ended up being a much more durable and better place for investors, then none of this is terribly upsetting, right, or surprising. i mean, it shouldn't surprise anybody that the chinese were going to use their currency to

help their exports when they fell almost 10%. so, you know, maybe i'm just a bit relaxed coming back from vacation, but i don't think any of this really at this juncture is -- >> we've got to go, but quickly, you said that you cut your exposure to u.s. equities. did you make a switch in allocation and up your exposure somewhere else, like europe? >> went to cash. >> you did? >> yeah, on the belief, right, to the earlier point, was that we were going to get an opportunity to come back at the market once we got this bout of volatility and fired that cash back in other markets. >> interesting. hans, good to see you. >> good to see you. >> hance olsen. when we come back, hackers allegedly tapping early deal news. the "wall street journal" is reporting that charges are coming in this. we have that story and much more when "squawk box" comes right back. ♪ ♪ it always feels like somebody's watching me ♪

♪ rain, rain, go away, come again another day ♪ ♪ all the world is waiting for the sun ♪ i don't know if you saw it, but here in new york city, the rain is coming down. it's coming down pretty heavily. >> first time in a long while. we've had a very dry summer. >> we are, but it's all coming at once, so look out today if you're on your way into the city. i think the flood warning's until, scott, what'd youds say, until 4:00 p.m. today? >> i think so. >> look at it as a messy commute today in new york city. we are in the chairs this morning looking at the stories that have caught our attention. and guys, when you talk about hackers, at least i usually start thinking about foreign entities, other kind of rogue players and other nations that are trying to hack into our

computers -- >> oh, just say it, china and russia! >> yes, china and russia. that is what i think of -- >> not that the u.s. would do any hacking of anybody else. >> but china and russia is usually what i think about when i think of our corporations coming under siege by hackers. turns out, we have homegrown hackers. there are charged expected to be brought today in brooklyn against cyber hackers who have been hacking into news organizations or news release agencies, i to say, the wires that put out the news releases, hacking in, trying to find out when big deals are going to happen and play on that activity by trading stocks ahead of that coming. and it's a little bit of a heads-up. we think that security is something we need to worry about in a lot of different areas of life. this is yet one more arena. and guess what, this is home-grown hackers who are doing this. >> it's always people who think they are smarter than the system until they're not. >> until they're not, and going for a financial edge, which is obviously the lure here is to get some information -- >> follow the money. >> -- that can help them make some money. but usually, they'll trip themselves up one way or another. >> looking forward to seeing who

this is. i think half a dozen people will be named in charges later today and we'll hear more about it. >> i'm going to call my lawyer now. >> you're up. >> oh, i'm up! i'm up. we're paying attention to the nfl. i'm all in on the nfl this week. and word now that the competition is heating up for a team in los angeles. they've been without a team since, what, the mid-'90, when i guess the raiders left, the rams left. the rams went to st. louis. now the rams and stan crunky may move them back, if they can get a new stadium, i believe in carson. the chargers, who way back when at the beginning of the american football league were actually the los angeles chargers, they're interested, because they're unhappy with their stadium. the raiders perpetually unhappy with their stadium in oakland. who knows, they may -- there's a meeting i guess today in chicago where the league will start, perhaps, to be talking about it. it seems natural that los angeles would have a team. >> it's crazy to have a market

that big and doesn't have an nfl -- >> a market that big. they may wind out not with one team but two. >> i think it's inevitable that they will, it's just a matter of how soon. >> and which one. >> yeah. >> and which one. >> yeah. i was going to stay with the nfl. there's a receiver on the detroit lions, ryan broyles, who lives on a budget in this day in age of athletes making hundreds of millions of dollars, tens of millions of dollars a season. this guy right there on your screen lives on $60,000 a year. that's what he -- i don't know what his salary is, but -- >> we should have him on. >> it's clearly more than $60,000, because even the rookie minimum is more than that. but if that's the budget he put himself on, it's amazing, considering that not a couple weeks ago, there was a guy in the nba who signed a new contract, and he's going to be making $6.5 million and said how difficult it was going to be on him and his family. >> apparently, they're telling me he signed a four-year contract for just under $4 million. why is he putting himself on this $60,000 budget, just to

make sure he has enough left over after he gets out? >> i guess. >> good for him. >> the road is long littered with stories of athletes who have gotten these big contracts and have gone out and bought everything in sight, and it hasn't ended well. >> no, and the bankruptcy -- >> maybe he's seen that. i don't know the circumstances of why he's doing it, but it wouldn't surprise me if that at least plays some sort of role in it. >> good for him. that's a lesson for all of us, i would say. >> yeah. >> we did a story last week on "nightly business report," the pbs show that we produce, on a former nfl tight end. he played a couple of years with charlotte, north carolina, the carolina panthers, then with tampa, won a super bowl, but he was always a business-oriented guy. he now -- he started a mortgage banking business by going on google, or alphabet or whatever it's called, on google, and looked up "how to start a mortgage banking business." he did it in 2007, rode out the dip in 2008-'09. he's building now a new headquarters outside of charlotte where he expects to

employ like 600 people. they are writing billions of dollars in loans -- >> i think he is, if not the biggest, one of the biggest individual originators of mortgages in this country. >> yeah. >> wow. >> which is an astonishing story. as you say how the whole business started. >> so, maybe this young man is thinking the same way. i'm going to save some money, i'm going to invest my money and good luck to him, if that is what he is doing. >> did we do the bollywood hunk story? >> i thought one of you two would choose that. >> i was thinking about it. they're among the highest paid superstars in the world. >> right. the bollywood guys. >> move over, tom cruise, right? coming up, not so fast, amazon. the death of the shopping center could be greatly exaggerated. why a new report out today suggests that millennials who we baby boomers want to crush, want to see things in a store before they buy them. imagine that! calling all mall rats, next. but first, as we head to break, check out the futures. stay tuned. you're watching "squawk box" on cnbc, first in business worldwide.

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welcome back to "squawk box," everybody. if you are just waking up this morning, there is some big news out of china overnight. in a surprise move, the central bank there deciding to allow its currency to fall. the pboc described the near 2% devaluation as a one-off, based on a new way of managing the exchange rates. the important thing here is that this is a devaluation, and it puts a lot of pressure on the u.s., on the federal reserve here to try and figure out what they're going to do. if they are to raise rates next month, like most people think they will do, that will send the dollar higher, making it very hard for us to export things in this country.

so, it does change the game quite a bit. we'll be watching this all day. take a look at what it's meant for the early action in europe, for the trading action there. the kayak is down about 1.75%, the dax down 1.9% because it's huge for places like germany and france, too, with their exports. china has been a big buyer of some of those places. with china weakening its currency, it makes it tough for exporters everywhere. and you'll see that the dow today is down triple digits. all righty, moving on. teen vogue and the international council of shopping centers teamed up this year to find out what millennials are looking for this back-to-school season. some of the results, specifically where the generation plans to shop, may surprise you. you can find the results in the latest edition of "teen vogue," but here with a sneak peek is jason wagenheim, public shasher "teen vogue." jason, welcome. good to have you here. so, what did you find? i guess the biggest surprise

here is that they are inclined to go back to stores and see and touch and feel, and the mall then becomes the ultimate social media place, because it's social. >> that's what the word used to mean, right? 59% of our respondents said they will do all of their shopping in store. 35% said they'll shop a mix of online and in store. so, 94% in total said that the mall still matters to them. only 6% exclusively will shop online, which kind of mirrors against the u.s. census data with 7% of u.s. e-commerce sales. >> are you looking at all millennials, the 15 to 35, or just looking at the teenagers? >> this was for back-to-school, so it was a subset, mostly high school students 75% with 25% being back to college and women. >> do they do most of their buying before school starts or do they do a large portion of it after, when they see what other people are wearing? >> yeah, that's the follower. they will do that. 16% will shop after school

starts, and the few weeks after that first day of school. >> what's hot this year? is there a must-have? my wife would say this, what's the must-have this season? >> it's a great bag and perfectly fitting denim, which is good news, because there have been a lot of need -- >> it's great bag. >> there's been a lot of negative chatter around denim the last 12 to 18 months. it's been in a slump. people are sacrificing denim for yoga, for leash your pants. it's come back. >> it's because they've put more stretch in it, too. >> the fits are much better. there's lots of innovation in the fabric, for sure. >> i was going to ask you, because if you look at, say, what are we talking about, the age of 15 to 35 is what we said millennials are? >> exactly, right. >> nike, under armour, lulu is what's resonating, seemingly with everybody. >> for sure. >> is that not hot? >> it's still hot, for sure. at leisure still matters. those companies will continue to do well, but we also like american eagle. talk about the three as in teen fashion. eagle's poised to do well.

they're doing with denim. their stock is almost where it was a year ago with back-to-school. it's a strong brand that can do well. >> everybody says that the millennials want more. specifically, they want to feel good about the brands they patronize. >> that's right. >> they want to know whether the brand stands for something, gives back. >> that's right. >> do you find that that's true? >> absolutely. our data from this recent back-to-school study says that it matters. they know about working conditions in factories in bangladesh and india. they know about whether you're giving back to your community. they are more likely to reward companies that are supporting their opinions -- >> so, they're like a washy parker, they like a toms -- >> two examples of brands that have disrupted industries and completely set retail on its head in the last decade by giving back and showing that the consumer matters first and they'll make it work around everything else they have going on. >> i know why they like h&m, because the price point is unbelievable. >> it's cheap. >> really. >> quality matters, though. you know, this generation is tired of --

>> should put uniglo on that list. >> it is, and zaras, the second riches man in the world now, the owner, a $100 billion company. they get product on shelves within three weeks, really terrific fashions that are on trend. they keep their stock low so they create some demand for it. it's a big business. but quality matters. you know, you can't wash a hoodie and have it break after two times. this generation doesn't go for that anymore. >> jason, i have to say, it doesn't surprise me that teenagers are staying at the malls, first of all. they like to go there for social reasons. second of all, they don't have credit cards, so it's tough for them to shop online. and third, that's what you do when you don't have kids and you have time to do things like that. >> sure. >> what about the standards in the mall, though, the macy's, some of the big department stores? people who are in the malls, these millennials, do they like those stores? >> definitely. macy's always ranks high. it's a perennial favorite. terry lundgren basically invented the word omnichannel. they figured out how to make online mobile commerce, social commerce work within their bigger ecosystem, supporting the instore experience as well. >> jason, thanks very much.

appreciate it. >> nice to be here. thank you. coming up, a shake shack taste test. >> really? >> are we getting burgers? >> no. >> they're teasing us. we're talking about the stock, not the burgers. and this morning, investors are big fans big time. but first, as we head to break, check out oil prices this morning. you're watching "squawk box" on cnbc. we're first in business worldwide. ♪ cheeseburger in paradise lily lily, may i call you lily? i don't really know what else you'd ca- lily, i want an iphone, with a great data plan to share pictures of this smile. well, all of our mobile share value plans come with rollover data so the data you don't use this month rolls over to the next. wow. using unused data for all sorts of uploads. my constituents love... to... watch...me talk. today's leftover data means a brighter future tomorrow america. write that down. right now, get $300 credit for every line you switch to at&t

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we are back. shake shack reporting better than expected quarterly results, raising its full-year guidance as well, and shares of the burger chain are soaring, there you go, in the extended hour up near 7% -- i was looking at the price, $75 and change. jack moore is for action alerts plus at thestreet.com. what's not to like about this story? >> first thing, great quarter, but as much as it pains me to say it, because i love shake shack. i think three or four burgers, no jock. but it's overvalued. >> you say it's absurd. >> 400 times forward earnings or something like that? >> yeah, and then you're looking at almost 200 times ebitda, 20 times sales. i understand you have to value it on the out years, but i've stretched the model, looked at every way shape or form you

could value it, and it doesn't make sense. >> is it possible to grow into? >> almost sh it's practically impossible to grow into. there are a lot of other high-growth peers in the food space. the highest are trading at around -- shake shack is about three or four times -- churning at three or four times higher than their multiples, however it's only growing at twice the rate. we've seen this with a lot of restaurant names. when you have i to value it on 2030 earnings, which i'm seeing in almost every research note, that's just a problem. >> year 2030? >> yes, they're using that. >> people are talking about going into the numbers that the slightest misstep or miss was going to cause the stock to crater. you didn't get it. that ups the ante for subsequent quarters. does any miss at all just cause

a complete reset? >> i think, yes, absolutely. i think what's going to start happening is some of the analysts are circling around what management is guiding to. i think management totally understands. i think they're freaking out how overvalued, and so they're trying to set the bar so incredibly low, but at some point the market starts to correct and have the expectations that are maybe even twice that of what management will be guiding to. i think at that point take two or three quarters, but i can't get to anywhere near the 70s here. it's really tough. >> well-run company and the burgers are darn good. >> how quickly are they adding stores? 20% about. that's what the story hinges on. the 20% rate, it has incredible -- obviously new york, it is just the biggest hit, but it's hard to extend outside the market. the investor base is obviously

concentrated in new york, if this was a california company, i can promise you it would not even be sniffing. >> because it's so hot in new york. >> i bet if in out burger would go public, it would rip, too. >> why isn't it as hot in alabama? >> i think the concepts might work in other cities, but it's obviously a cult company and it's tough to extend that model, and that's why we've seen in in' out being careful. it's going to be hard to go into the midwest and south. those concepts haven't stuck. >> you don't think it's a fad?

>> no, i don't think it's a fad, but tough to extend out to every single region and have the same type of numbers. i don't think the burgers are that differentiated. again, i love them. i have four in my stomach right now. >> you're probably feeling really good right now. >> yeah. good to see you. jack, thanks. when we come back, more of today's top stories, google shaking up its abcs, and we'll welcome our guest host. first, a check of the futures. off the lows of the session, now the dow is down by about 86 points.

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going the announcing a new corporate structure. the company's businesses will be housed under a new company alphabet ♪ the alphabet ♪ the abcs why investors are cheering this shake-up. ♪ 26 letters are in the alphabet ♪ ♪ but we're here to sing about u ♪ a currency devaluation by china catching traders by surprise, could it take a september rate hike off the table. we'll have jim from principal global investors. and tenet's ceo runs the largest hospital companies in america, and he'll tell you how the winds are changing and who is benefiting the most.

the second hour of "squawk box" starts right now. good morning. we've been looking at the headlines. there was a surprise currency devaluation it sparked the yuan's biggest one-day loss in two decades. check that out. that's the currency start. you can see the deep jump it's playing out in other currencies as well. the dollar is up against the yen at 124.91, but this is the beginning of the markets it's touching. it's described as a one-off. they say it's a new way of managing the exchange rate.

they are doing it at the expense of other nations who want to trade with them. take a look at what's been happening earlier. earlier we saw the dow down about 115 points, now down about 87 points. s&p is down, and the nasdaq is down by about five points. we'll be talking more about the impact of china's devaluation with jim mccaughan. greece and its lenders have agreed to the terms of a new bailout. that deal must be approved. on today's economic agenda, a few data points of note. at 8:30 eastern, then at 10 wholesale trade, and we are watching shares of symantec today. they're buyi ining veritas.

gene muenster covering google stock for piper jaffray. good to have you with us. why did they do this? do you think it's a good move for them? and why? >> it's a great move. first it offers transparency. investors love transparency. what they'll find with this is their core search business is more profitable than what people thought. we think it's probably about 10% more profitable. for a company that doesn't give a lot out. transparency is good. second and more sustaining is just a whole new structure, which really benefits a company like google, which is more than just search. it has a lot of other projects, but giving them the proper management structure i think will be good for some of what they call moonshot businesses. it's good for those two reasons. what does it do to the stock? it's got to pop here, obviously up 6% in the most recent quote.

what does it do to the stock because of that transparency of people able to see better the real money that google is producing and those other businesses are producing, to the extent that they do. >> we think it's tum 5 or so percent in the premarket trading, but probably should get in total maybe a 5% to 10% lift because of this, 10% greater profitability with google search, so i think that that's probably the near term, but more importantly the longer term it gives investors a sense that all these projects that they don't know a lot about are in better hands and better focus. that should provide a better opportunity for some of these projects to be more sustainable to the overall business. that has a longer posit impact on the stock. >> gene, what does it say by virtue of the fact that the stock popped so much on what is essentially -- it's not fundamental announcement by

google. does it speak to how frustrated wall street had become in the past structure? just how big the company got? >> absolutely. it speaking to the frustration that they haven't told anything to investors, very little. this is a bit reminiscent to some of the things amazon has done, just giving a little more. there is a small fundamental positive impact here about the structure, but to your point, most of the move in the stock is really an indictment in some ways about how google has handled their relationships with investors in the past. >> when does this take effect, gene? and when do you start saying i don't cover google anymore, i cover alphabet? >> i'm having a hard time with the alphabet right now. >> that's what i'm figuring. >> i think we'll probably stick with google. it takes effect when they report the december quarter, so we'll

probably start seeing some better transparency in the middle of january? >> do you buy google? >> we do. we think there's still room to go. we think the core search with byrne fit from better global monetization, but some of these projects will get more attention, which is good for their multiple. >> gene muenster, thank you. >> thank you. they're escalating the rate of consolidation, you combine that with changing payment systems for health care providers, and you could be looking at a financial boon. trevor fedder joins us, and trevor, thanks so much for coming in. >> it's great to be here. thanks for having me on set. >> i was trying to think through how we wanted to go through this discussion, and it seemed like the consultation in your entire industry at large will be changing things pretty

drastically. what do you think about the health care insurance proposals that are going through right now with both aetna going after humana and anthem -- what do you think? >> first of all these are some of our best customers. we have big relationships, but typically in the markets we serve, the largest insurer will be a blue cross plan. most of those are not-for-profit. so for investors, really the only possibility to invest is through the big companies. the consolidation obviously brings bigger scale, synergies, something they have to do, i think given the pressures they face based on some of the new regulation, that essentially limits profit margins, and requires them to take all comers, so it's not a surprise that it's taking place. maybe it's a surprise it's all happening at once. >> does it concern you as the hospital that will have to be done big with them, you don't have other competitors. is that tough to make you feel

like it's not a monolithic company telling you what they will and won't pay for. >> more competition is always better, so when you see these big companies consulting, it is possible they'll use that power to try to contain, you know, prices for providers. that makes it more difficult for us. on the other hand, we're consolidating as well. we've gone from 50 hospitals to 80 hops, from 25 ambulatory surgery centers to 250, and we've expanded in our other business lines as well. so hospitals typically have been a cottage industry, highly fragmented, with most of the industry, 80% of it being not-for-profit. those are organized in very small groups. so it's one of the last truly huge but very fragmented industries in america, and i think you'll see it continue to consolidate. >> you're saying basically what's good for the goose is good for the gander? >> of course, every sector who

rather consolidate itself and have the other one remain fragmented. we're not completely okay with it, but we're at a scale i think we're well positioned to deal with the changes. >> do you think regulators will step in and not allow any of these, but you think it was set in motion with the a counter. a? >> a bit of both. i think the insurance industry is reacting to some of these pressures. if you're in the business of insuring anything, you would like to be able to underwrite that risk and select who your customers are. they're now required to take all comers. you're -- and now they have these -- what's called a medical loss/ratio floor, but essentially a cap on the gross margin them set publicly this will be a long regulatory

process, in addition to the typically antitrust reviews you would have at a federal level, they also have to apply to, you know, state regulators, so we'll see. these were just announced recently. it could take up to a year. >> in both of case of your hospital chain and in the case of these insurance companies, those are arguments you can understand from a market perspective, at the same time you're looking at massive profits that are kicked off both by your company and by these others. that creates the political will to say, wait a second why should we allow you to merge when it looks like you're doing well. >> we are one of the most regulated industries in the united states. i've been told nuclear power plants are more regulated, but it's hard to imagine. we face all sorts of regulatory scrutiny. it begins with the fact that health care is one of these few industries that everyone, literally every american has some kind of interaction, either

as a patient or an employer or as a taxpayer, and people, don't particularly want to consume the product, but they need to, when they don't, they don't particularly want to pay for it. this is a hot political issue. i think these mergers or any mergers, they take on quite a lot of regulatory scrutiny. >> what's the future of the community hospital in this environment, this world? >> i think it's tough. an individual community hospital trying to exist on its own. let me give you one example, beginning october 1st, we adopt in the united states a new system for coding there are now 87,000 codes. >> didn't they just do it a couple years ago? >> great question. it's been delayed multiple times. we've been ready for it for over a year. we're just fine with the fact that it's being implicated. if you're running a small community hospital trying to code your claims, comply with

regulation says, deal with the payer consolidation, deal with all sorts of other pressures that are taking place, it's really tough. that's where you see particularly a lot of pressure is in small hospitals, rural hospitals, unaffiliated hospitals, and, you know, part of our strategy is to partner with other organizations. we don't have to buy everything in sight, but there are new models emerging of collaboration in our industry that will enable these community hospitals to continue to exist. after all, if you're in a small community and you call 911, that's what you're relying on, a community hospital to be open 24/7 to be staffed with people who know what they're doing and can take care of any virtual situation coming in. as all of us know, the stock is doing well. is wall street looking for something that they're not getting from your company? why do you think the stock has had a difficult go?

not only most recently, but it's underperformed some of your peers fairly dramatically year to date. >> it all depends on your measuring point, so what is the perspective? we have done well on a three and five-year basis. actually last week we reported earnings the stock went up and was performing very well and we were closing that gap with some of the competitors, and we were ahead with others. later in the week another company reported earnings, some of the comments i think were misinterpreted frankly, and the whole sector, you know, fell back. i think if anything is being misunderstood, too much emphasis is beings placed on the affordable care act and the impact of that. we have for the last several years broken out the impact of the affordable care act on our earnings, and actually in terms of volume growth, which has been a big story, it's been less than half every quarter coming from the aca, so there are other

fundamental things that are going very well in our industry. if anything, investors place too much attention on trying to play the aca story. >> the sector -- your sector is arguably the most levered to the affordable care act. >> yes, and our company is one of the most levered to it. we're big in california, texas and florida, which are big states in terms of policies, developments and the affordable care act. >> you're describing what could be a very big net positive. >> there is now. there are a lot of cuts that came with it before the coverage kicked in, but it's been a helpful thing for us. my point is just it's not the whole story. >> trevor has agreed to be with us for the hour. we'll have a lot more coming down the road. coming up, the falldown from china's surprise devaluation, will it affect the fed's timeline and mike at leavitt is

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boy, did china surprise traders overnight, devaluing yuan.

earlier this morning, boris schlossberg told us it could put the rate hike on hold. he's ceo of principal global investors. jim, nice to see you again. >> good to be here. thank you. >> what do you make of this move in china? do you agree with boris this could push the fed further back? >> well, firstly, i think the devaluation, surprise traders will be interpreted as a sign that maybe china is slowing more than perhaps some people thought, so the soft landing of the bulls will be undermined, which i think explains the initial reaction. i don't think it has too much to do with pricing of exports. it's really only a 2% move. as far as the fed is concerned, i don't think it really changes the equation. the fed will be making monetary policy on the basis of u.s. conditions, and because of the

u.s. policy needs, and i don't think this changes much what we saw last week from the job data. we are seeing a slowly tightening modestly growing u.s. market, which is just about at the point now where zero interest rates are no longer necessary. >> if china is slowing more dramatically than people expect, that's a major problem for our equity market here in the u.s., isn't it? >> it's a major problem for many international companies and for those who export to china. it depends how much it's slowing and how much it's transitioning. remember, one of the key issues with china is a lot of the growth in the recent path has been infrastructure and real estate, which sucks in a lot of commodities, but isn't necessarily that great for u.s. exports, which are things like aerospace, technology, entertainment content. those types of things may actually grow a little faster in the service economy that's

replacing the purely infrastructure-driven economy. i don't think it's necessarily all that bad, though it is margin, it will be negative for some of our global companies. >> what's more representative, jim, of where you think we'll go in the near future? the seven-day losing streak that we had in the market or yesterday's rip that saw a couple sectors like materials, industrials, and energy, which have gotten bludgeoned outperform? >> i think what happened is the market came to realize it had overdone it, and of course warren buffett emphasized to them that the very thoughtful, very deep pocket investor thinking american industry is a good place to address, note he was investing in primary area other space, which i would identify as one of the strong sectors, and one of the sustainable strong sectors for the u.s. i think what's happened really is so far this year we're up a

couple percent on equities. august is quiet. we've actually seen, you know, the seven down days in a row were not big down days. it wasn't a big move. i think what we are seeing is characteristic of this market. my expectation is still even with a modest fed rise that equities will be higher at year end than they are now. >> a quick question here, back to china for a minute. do you think beijing has a grip on the challenges it faces economically? or are they grasping for one? >> yeah, that's the really interesting question. you have to hand it to the chinese policymakers over the last 20 years. they've steered a very effective course to very rapid growth. i have to say, though, i think they've somewhat lost it in the last few months. i would point to the fact that the equity mark is no longer functioning as a market. it's really a centrally planned economy, a centrally planned

market, if you can believe that. and, you know, the government is really moving things, a lot of stock has been suspended. i think that symptomatic of the fact that maybe they're in a difficult position. one of their main policy objectives for this year was to get it is remembi in the sbr with the imf. it will be a political exception if it happens, and i think it would be back for the sdr if it's included. it isn't free le convertible. i think that's almost a contradiction in terms and will dissuade reserve holders. i think the imf and people's bank the china are in fairly difficult territory, geffen that they may collide a bit with some of the economy realities. >> jim, thanks, we'll talk to you soon. >> thank you very much. good to be with you. principal global investors.

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some bad any this morning. our universe is slowly dying, according to a new study by the university of western australia. researchers studied more than 200,000 galaxies and found the energy being produced by stars and other object says about half what it was just 2 billion years ago, just a drop in the bucket of time. so get your affairs in order. researchers believe our universe may only have a few billion years left. scott? ty, coming up, more on the big changes brewing in the health care industry. michael leavitt will join us, the former governor of utah. as we head to break, a look at u.s. futures. it looks like a down open after yesterday's big rally.

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welcome back to "squawk box", everybody. we've been watching a lot of stories this morning. opec is raising its forecast of supplies from nonmember countries this year. this suggests the drop in prices is taking longer than some had expected to impact producers. also m & a is on pace for a record year. if the perfect level of deal-making continues, it could reek -- according to data provider. and nbc sports group extending its exclusive agreement to carry england's premier league soccer in the united states. it's owned by our parent company comcast. google announcing a major reorganization. josh lipton has the details from outside google headquarters in mountainview, california. good morning to you. >> reporter: morning, scott. google is becoming something very different -- alphabet.

what is it. alphabet is a new public holding company that larry page is going to run with sergei brinn, that calico, the biotech focused on aging, nest, fiber investment arms ventures and capital, and google x, the incubators for. the biggest will be google inc. the man in charge will be 43-year-old sundayer pachai. he used to head up android, one of the most influential tech leaders on the planet, all of this for a move toward greater transparency. larry page writing -- our company is operating well today, but we think we can make it clean are and more accountable.

all shares will automaticallyier into the same amount of alphabet. google saying the reporting changes will take effect immediately, those the transition, the company is saying, will take several months. >> josh lipton, thank you very much. reporting from dark google headquarters out there. our guest host is trevor fetter. we're going to continue our conversation on the monumental changes in the health care industry with another experts. michael leavitt is the founder and ceo of leavitt partners, as well as the former set tear of health and human services. welcome. good to have you with us. >> thank you. good morning. i'm certain trevor will have some questions, but my first one, so much has been made of pledges to repeal the affordable care act on day one. what do you think? would that be a good idea to

repeal the affordable care act? >> well, the republican party has dined out on that phrase now for several years and they've been successful. they've been able to assume control of congress, and they would like now to see the white house. the practical reality of actually repealing the law seems quite low to me. however, in fact i think it becomes a virtual impossibility, but they will, i believe, make significant changes if in fact they are successful in winning the white house and retaining congress. they'll begin to move it far more toward a market-based system as opposed to a regulatorily controlled system. is the practicality simply the political practicality, in other words it would be very difficult to overcome a filibuster to amass the votes to do it? or is it -- it is it the

practicality we're already three, four, five years down the road and so much of the system has now accepted, adopted the proposals or the laws under the aca? >> well, by the time a republican presidency could move into office and get their team in place, 5 1/2 years will have elapsed. you'll have roughly 20 million people who will have received insurance under one scheme or another, one method or another, and we'll have a system that has dramatically changed, as trevor has indicated earlier today. so a lot has happened. some of it would be considered positive, others parts of it would not be considered positive, but the reality is that a lot of water hats gone under that bridge. so rolling it back is an impossibility in many respects. >> trevor, what do you think? and ask mike a question. >> first of all, thank you,

mike, for joining us this morning. it's great to see you. i wanted to ask your advice on behalf of states, so, for example, we operate, as you know, in many states across the country, just to compare california and texas, california has now gotten its uninsured rate down to about 12%. texas is almost double that. california has embraced all of the opportunities for a state until the aca, and texas has embraced almost none. a big question for us is, if you were running texas. -- you ran a major state, utah, what advice would you have for the government in texas decreases? >> well, i think the first is to make it a priority, and of course a decision every state faces is whether or not to expand its obligation for medicaid. california has made that decision, and they have adopted

aggressively an expansion of medicate, is a practice that helps those who have financial needs or low income to get health insurance. texas historically that is not done that. they have different populationses, different ideologies, and different approaches. texas would argue we have a great economic story and people are employed. they would point to california and say things aren't working as well in california. there are two sides to the coin. that's the reason why we have 50 different states and 50 different philosophies that govern them with 50 different outcomes. >> trevor, has the aca been good for you in your business? >> it has recently. the idea of the law, as it relates to hospitals is over the duration, it was going to be neutral. there would be cuts first, expansion in coverage and the cuts would persist, but sort of

front loaded with cuts, more recently, we've been in this face where we're sealing the benefit of newly insured patients. we've substantial decreases, 30% to 50%, quarter after quarter in the number of insured patients in the states that expanded medicaid, and increases in the people who are covered under medicaid. in the states that have embraced the exchanges, consumers have more options available to them and it's very affordable. >> but net-net, what would you say? >> net-net we're about neutral today, but the parts that generate benefit are here to stay so i think it will turn out to be positive. geography matters a lot, and our geography favors that. >> as trevor and you point out, the number of uninsured has

decline declined what has it done for expenses, and what is the potentially for any expense reduction? has it done anything to lower costs? >> it's also clear that through the last five years, we have seen a reduction in the rate of growth of health care. >> is that because of the aca or other factors? >> well, many would argue, it depends on your partisan point of view. if you are pro-aca, you immediately point to it, but the reality is many of the factors that have driven that were in place before, and there's a lag here in doing so. so it's hard to know exactly what it was. i think in my mind it was driven by a lot of economic downturns and hardship. we see over time when the economy is doing well, people get health care. when it's not, they don't. so that's at least one part of it, but a lot has been said about the number of new people

that are insured, but the big change in my mind, in addition to that is the way that risk is now being apportioned. in the past, insurance companies have been the bearer of risk. in the future, the market is changing to require those who are providing care to assume part of the risk. companies like trevor's are doing a very good job positioning themselves now to begin to transition into that new place, and i think with the consolidation of the insurers, that in time will lead to a greater degree of regulation on the insurers, and we'll see that trend hasten. >> secretary leavitt, thank you very much being with us. former health and human services secretary, governor of utah, good to see you. >> thank you for including me. more from our guest host, trevor fetter. as we head to break, let's look at shares of shake shack.

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welcome back to "squawk box." the futures are negative, pointing to a lower open. the dow would open lower by more than 100 points, s&p down by double digits, nasdaq would open down 13. it comes after china's surprise currency devaluation overnight. more on that story at the top of the hour, in just a few. there's a look at the currency markets. let's get back to tenet health care ceo trevor fetter. we talked a lot about what the aca has meant, what the affordable care act has meant, but there's changes still coming. there's much reported about the rate increases that insurers are looking for. that's led by blue cross and blue shield. if rates rise anything like that, you can only guess that a lot of consumers will no longer pay to have health insurance. what does that do when you have more uninsured patients who are showing up?

>> obviously it gives you concern, and what doesn't quite make sense to providers about it is that most providers, most companies in our industry and large hospital organization are talking about achieves rate increases with insurers in the range of 4% to 6%, so if that's the hospital rate increase, what is driving a -- you know, a much higher, 25% to 40% insurance rate increase. it's the underlying issues of pharmaceuticals and utilization. >> a lot of people were much sicker than the insurance companies expected. they were using insurance for much more than they anticipated. maybe that's pent-up demand, or if i'm paying for it, i want to make sure i get my money's worth. >> going back to something that secretary leavitt said just a few minutes ago, the economy and the difficulty in the job market did suppress demand, and people who didn't have jobs didn't have

insurance through their employers. now that they are gaining that back, we are seeing some increase in an amount that obviously is attributable to that, but you do have underlying chronic conditions afflicting people, and i think you have -- when people obtain insurance, either if it's on their own through an exchange or through their job or through medicaid. they do field an entitlement to use it, and they will go and get hospital care or urgent care or care in an emergency room. part of the challenge for us is to make sure that's done in the most efficient setting in a very effective way. we're -- if we don't do it right, if they come back again and have a riyadh mission, but i think it's a combination of utilization, pharmaceutical, these order inputs, not so much the provider price increases. >> what is the faesest growing part of your business. is it the basic hospital -- >> actually for us, it's

interesting. we have made a is it major push into alternate sites of care, blamtory, free-standing emergency departments. it's what the consumer wants. they want something more convenient, where you can pull up, have your service take place and leave. it's a lower cost setting. we don't have to be open 24/7 and don't have to be prepared for every emergency, so we can provide that much more cheaply nan this a hospital setting, and we can distribute it into a the community. >> can i ask a totally crazy questi question. in this world where hospital companies, whether nonprofit or for profit are conglomerating, and where insurers are conglomerate iing is there a wo where the hospital system is the person from whom i buy my

insurance and the insurance -- or alternatively, the insurance company is the owner of a hospital and medical system? in other words, the university of pittsburgh medical system, enormous, biggest employer in pittsburgh, maybe in the state of pennsylvania, apart from the state government itself, where i would go to them and buy my insurance, because then they would control not only the price of the insurance, but the delivery of the service. is that a possibility in large metropolitan areas? >> i think actually both of possibilities, and you're seeing some experimentation now. some of the large insurance companies -- in fact all of the large insurance companies are acquiring urgent care sites, physician clinic, they're providing care directly, but approaching it, say, from the bottom up in terms of levels of complexity. >> not from the hospitals. >> they're not buying hackensack

medical center. >> you're also seeing experimentation in the hospital sector, where hospitals are offer insurance products, and they are -- they are definitely taking risks-based contracts. so mike talked about value-based care, this is a huge new trend. i would get five years ago we had nobody until -- no patients under value-based care arrangements. we now have over a million that we're providing value-based care for directly in our hospitals, and over 5 million where we're managing value-based care arrangements on behalf of other providers -- >> what is value-based? >> i was just going to define it. sorry about that. what that means is you're getting paid generally a fixed fee to take care of people regardless of their condition. >> no matter how many daze in the hospital -- >> right. you're not getting paid for each service event or each day, but getting paid more a fee long term to just take care of this.

capitation is -- it's the same exact concept. to do so that well, you have to have the ability to assess risk, price that appropriately, and then manage the care of those people in that population over an extended period of time. that's not easy to do. we have a services subsidiary called conifer value-based care. it's probably doing it for more people -- >> jeb bush was on your board. is he your guy for president? >> yes, he's outstanding, he was on the board for eight years. i think he attended virtually every meeting, and he came prepared. he was engaged. he's a policy wonk, and a man of high integrity. i couldn't imagine a better

president. >> we'll continue with fetter in a moment. he'll remain for the rest of the hour. coming up, a checkup on the city of detroit, mayor mike duggan joins us to talk balancing the budget, upgrading, and attracting investment. when you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about.

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welcome back, everybody. detroit emerged from the bankruptcy proceedings late last

year, but there's still lots of work to do in the motor city. as they contend with a continuing weaker tax base. mike duggan is the mayor of detroit. he joins us right now along with our guest host, trevor fetter. mr. mayor, thank you for being here today. >> well, thanks for having me. >> obviously you've come a long way, but there still is work to do. how would you characterize the state of detroit's economic right now? >> well, it's definitely heading the right direction. you very rarely hear the word "bankruptcy" in detroit anymore. the number of young people coming across america to start businesses and nonprofits and move here is -- is remarkable. we've got 5,000 new residential units under construction. i've been in detroit my whole life and i've never seen anything like it, but we've got manufacturing companies from india and china setting up shop, and of course we're deeply appreciative to trevor, tenet is

one of the largest employers in detroit and they're putting $500 million into hospital improvements in this city right now. it's a good time to be the mayor. >> we hear about some of these revival stories, but many seem like they come from downtown detroit. is there a difference what's happening in downtown and what's happening in some of the suburbs surrounding detroit? >> there is no question that there's been a trend in this country for young people -- they don't want to live in the suburbs and drive a minivan anymore. they're moving back to urban centers and there's nowhere it's more true thain in detroit. robert penske, and the private sector, dan gilbert embarked on a light rail line, 3 1/2 miles through the heart of the city first time to have light rail since the 1950s. it will open in early 2017, but already anything within three or four blocks of that rail line,

buildings that have been vacant for 20 years have been renovated for shops and residential. so that ar is going great. in the neighborhoods, you can go on to buildingdetroit had the org, and we're auctions buildings every day. people are fixing them up and i think very shortly we'll have an historic reversal of population decline. >> trevor? >> yeah, i mean, our main campus is in that downtown area, and one of the problems we have is not enough housing. the occupancy rate is like 96%. we're partnering with the mayor and his initiatives to build additional housing units. the whole foods you hear about all the time, it's adjacent to our main campus. the light rail project we're veg excited about, we're sponsors a station right there at the campus. mike is doing a great job. all you need to do is visit it

and you see the evidence. >> mr. mayor, we want to thank you very much for joining us today. love to see the progress and we would love to get you back at another time to take more about it. >> thanks for having me. a special thanks for trevor fetter for joining us for this hour. it's been great seeing. >> >> my pleasure, fun to be here. >> very nice to meeting. jeff sannen ned is here to break down google's new corporate structure, and we'll have analysis of the product activity data. stick around. \s

google will be call the alphabet. the move could spell big things for investors. >> "squawk box" is brought to you by the letters -- >> c-n-b-c! the company's growth prospects straight ahead. is china in trouble? the devaluation of the yuan pushing the dollar higher, raising the prospect of a new currency war. does the move take a fed rate

hike off the table in. and shake shack shaking things up. kraft heinz looks to be playing catch-up. and the stocks you need to watch. >> "squawk box" begins right now. >> now! [ laughter ] live from the most powerful city in the world, new york, this is "squawk box." welcome back to "squawk box." this is cnbc, i'm along with scott wapner and tyler mathisen. it's been great to have you here. >> nice to be here. we are less than 90 minutes away from the opening bell. after yesterday's big markets gains, you're seeing a lot of give-back this morning. the do you futures are down, s&p futures are off by 11, and a lot of this is because of what china

has done to devail the yuan. more on that in just a moment. check out what's been happening. the things there are also feeling the pain, the dax down. the cac is off about 1.5%, and china decided to allow its currency to fall. the pboc described the nearly 2% devaluation as a one-off move based on a new way of managing the exchange rate, but many traders are wondering if this is the beginning of a big slide. places like the united states and germany that want to export, it becomes more expensive. also raises a lot of thoughts about what the fed will do. the united states federal reserve, most people are assuming will start that -- start the move to raise interest rates next month. this puts that into question, at least according to some of the

analysts we have spoken to today. here's some of the stories that investors will be talking about today beyond that china currency matter. u.s. prosecutors are expected to announce charges against a group of traders and hackers who allegedly worked to get early access to m & a press releases, and then trade on them before the deals were made public. "wall street journal" reports authorities believe the scheme netted tens of millions in illicit profits. well, the european commission confirms that greece and its lenders have agreed on the technical details of a third bailout. a europo group meetings is set for friday to approve the agreement. corporate news, carlisle group buys symantec's unit veritas for doctor 8 billion. it's a cash deal. google giving its business model a major overhaul.

we've been following the story all morning. joining us right now with more insight on this for what it means for alphabet, the new parent company and google itself is anthony declemente. and a cnbc contributor, plus our very own jon fortt. you have some ideas about the impact this will have. >> exactly. there are a number of companies that have just become huge in the era of mobile and cloud. they face some of the same questions about how do they get even bigger and investors' leave to make the big bets. apple is one of them. if you think about their business, they have mobile in the iphone and ipad. they have the mac. they have retail, and then services. all of these things they have decided to do some capital return, as they also seek to investment. they have you have amazon, the retail business, media and streaming fulfillment and then

the cloud business. they have chosen to break out cloud, but there's still questions about how they'll grow as they move into local. then i have microsoft windows has stagnated, but cloud is looking better for them. they have an xbox business to the styled. and, of course, facebook it has instagram, some smart acsigsz, but can you imagine a couple years down the line mark zuckerberg having to make similar decisions. they have decided to take on this structure, what will facebook do? so i think we've seen google make this 3406789. investors initially will like it because of the insight that it gives you into exactly how the core business is doing. one thing that hasn't been talked about, to me this reduces the likelihood of a capital return. are we going to get a capital return? they're giving an information

return, so we're going to show you what we're going to do, but invest it in all this other alphabet stuff when i first saw the headlines, i thought it was huge, but the more i read, this was more clarifying things for investors, but seemed less earth-shattering. >> jon mentioned the -- it had great success when amazon carved out the investment segment. so for us analysts there will be better disclosure around the operating businesses within google inc.,ing with youtube, and the add-tech services, so the disclosure is a good thing. for the other longer-term investments, those are investments harder for wall street to value, but also more likelying to a pass, so to some

degrees it allows more all ton mick, the manager of the alba phet services will have more autonomy, and for that reason i think in terms of valuation, it gives us as analysts more clarity, a better ability to tell a story on the sum of the parts basis and feeds into the theme of a better narrative from the cfo, op-excoming in, cap ex coming down, and i think that is part and parcel to the bull case on google from here. >> from a management perspective, it certainly clarifies issues? >> i think it does, as jon and anthony said, it certainly brings great transparency into the financial reporting, but also in terms of the managerial reporting, it's clear that larry page, it wasn't just his voice that had been faltering, bus hi interest in running the day-to-day execution of this sfrp business, and certainly they were am bass endorse to the

world at large, gets them focused on the areas they're d god -- interested in. there are some challenges. one of them is if you really separate off a group that is the highly innovative creative space and the other business is the traditional space, what's the threshold that decides where an invasion is just too edgy for us in the traditional world of google? >> almost nothing. the bar for that, jeffrey, is high, right? based on what they're doing now and where they want to go. all the things that fell under google x get over here. people are throwing up high balloons in the air, and maybe that's too far out, but what is there that is on -- youtube does

something innovative -- >> and does it marginalize the employees still left there? >> the stock prices will make them feel better, don't worry. >> surely we would have wang, and apollo and a lot of those places -- >> nobody is making a bear case on this, so i certainly could. i'm not saying this because i believe it, it could work out either way, but this is an anti-apple approach. you think about, here are the founders, the trium ver rate. we're going to do this alphabet thing. we're going to let him run google. if -- >> how about five hours ago? that's what's really important. steve jobs never would have done

this. if you're going to set up this umbrella company, with two sort of boxes beneath it, why seasonal the umbrella company called google and the experimental stuff called alp alphab alphabet? >> because that would then put pichai at the top of the org calendar. you don't want to start with hotel st. regis, because it's the premier chain. and to the issue of the founders, for every one of those guise you come up with, howard shultz, michael dell, were examples -- >> what i'm driving at is google the name has such value intrinsically. >> but that's not changing with respect to the brands -- google inc. will hold maps, search --. not that google -- alphabet feels like -- >> it carries baggage, too. one of the things that google

means to people is massive amounts of data about you, and you're not sure how it's being used. if you can take a business like nest, which is supposed to live in your home and split it off and say, no, this isn't google, this is nest, that could actually help them. >> it's like pay no attention to the man behind the curtain. >> and also to your point, if you're worried about privacy issues, cal do or other things they're passionate about extending life, you really don't want that. other than facebook or the wii chat, apps within apps that are doing everything, is that the governmental challenges, is that certainly these new businesses are less hamstrung by the google name, as you mentioned, can be a drawback in some global markets. >> i think it allows for greater focus for sundar pichai, because they will be incentivized,

whereas prior there was an umbrella organization where larry was ceo and those businesses were muddled together. it might actually make it so that they're more motivated and incentivized to make the core businesses work. >> it certainly allows them to invest in china without having that google brand, which is not very china friendly for them. they have said we won't sake that -- alphabet can certainly go to china and make investments. it allows them to probably do a better job, we'll acquire -- and you won't report into google. we can set up your incentives. i'm sailing there's negatives, too. >> to jon's point, and i say this respectfully, anthony, you already had your price target, but i'm reading stuff from other analysts, everybody issiuming on

the train. you guys are getting more transparency, but the google fundamental story doesn't change much at all as a result of this move. so, i mean, are we rewarding? are we over-rewarding a fact that a company that didn't give much is now giving more? are or are we rewarding the fundamental story? >> it's a really good point, sco scott. i think the reason there's bullishness around there is it's part of the bigger theme. the new ceo this may be one thing she had influence behind. the other things that people are pointing to, so she's saying -- she's protecting the resource at google inc., perhaps, watching out for head count, down three straight quarters, margins are up. i think it's part of a broader theme of financial management. >> does it change the way

capital is allocated? >> it does raise a question of who is making the decisions, how much discretional autonomy sundar will have, and with page and brinn and schmidt -- you have five people who are the voice of the company. in a time of crisis or in a time of great invention, who is it out there on the frontier. there's an awful lot that is challenging this company to its core. i think they have to be ready for some dramatic advanced technologies, and there helps prepare them. once ed land told me when he was being challenged about more vision, said the bottom line is in heaven. he didn't care about people questioning him. ken olsen of digit add said why would anybody need a computer in their own home. founders can have quite a restraining impact. we see this in twitter, not to digress, but how awkward if you

want to challenge the model of a founder, it's pretty difficult. real quickly around the horn, what do you really think about it? >> i think i'll tell new three years. >> anthony? >> i like it management autonomy feeds into the broader narrative, and we as analysts get more information. >> jeff in. >> i like it, in the interest of full disclosure, i own a bit of it, but i'm just a schoolteacher, so it couldn't be much, but i think it's a great deal. jeff will stick around with us for a bit longer. connecticut-based terex is moving with kohn cranes -- >> glad you got that instead of me. >> hope was tyler got it. >> the people who run it are called the cone-heads. it's going to crail a company -- and check out november avac, a mid stage study showing

promising results for a vaccine that would be the first to be effective against a common respiratory virus known as rxv. and jeff sonnen feld will stick around and we're going to talk politics, donald trump in particular. he seems immune to the laws of politics, so say new polls in the wake of last week's debate and the kerfuffles that followed. could he one the gop nomination? meantime, check out the futures at this hour. it looks like we're teeing up a downward open and big one, off 144 is the implied open on the dow. ah! aflac? aflac! i thought you said this guy was the best? oh, he's a horrible stylist. gah? but he's the best at paying claims fast!

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if -- john mccain -- is not an hero, and your number go down, you have a very solid base. and, you know i wouldn't be surprised if he maintains a base for a while. he's not going to run out of money, so it's going to be a lot of fun to watch.

particularly if you're a democrat. >> talking about donald trump's lead in the gop polls. let's talk more about the donald and how he's handling the election campaign thus far. jeff sonnenfeld from the yale school of management is with us. mr. buffett talked about he's got a solid base. the base is there, the base is sticking. could the base grow, or is he at the ceiling and the floor at the same time? >> if he feels vilified, victimized, there are people that will rally behind him. this is not in any way to condone the misogynistic statements, and the attack on megyn kelly is pretty unforgivable. i'm sure he didn't mean it, and john mccain, defending the veterans, latino vote, can he offend all those constituencies and have it grow? yeah. i one party we're not talking

about is the millennial. i took on "the apprentice" as a show. i was writing editorials and going and often debating him. he wasn't wild about it, but as i would talk about this, our generation are offended by the narcissism, the millennial just love that straight talk. they love your face, a cynical belief this is the pathway to success, the things that we found abhorrent. plus he's not a quitter. you snow, that art of the comeback i one got set up in a debate in kuala lumpur, but i asked him to talk about your failures and setbacks which he wouldn't do in the u.s.

he talked about how leavitt, the homebuilder was once sitting on the curb, and he said, can i help you? he looked over and said, donald, how's your dad, fred? he didn't believe this big homebuilder had a big business reversal, didn't -- trump learned a lesson from that, he said i know where my limits are, no matter how flame buoyant i appear, i know where that line is, and he's not going to quit. >> that is something i think a lot of people are picking up on. after the sound bite, he wouldn't be surprised to see him go all the way to the republican national convention, and it might be tough for anybody to get 50% that first time around. you could have a contested vote. >> if he keeps up this strength by midyear, you certainly will

see pressure on the second-tier candidates, very reasonable, nice, smart people like lindsey graham and governor pataki, who i like very much as a person carly fiorina will probably fold in their support behind existing candidates. >> people say she won the jv debate the other night, like hand over fist. and for that matter, she may have won the whole night by virtue of her performance in the early one. >> you know, if it's all about a performance on stage, she deserves high marks. if it's about the fact that even on this network, not to mention seven other publications and have celebrated her as the worst ceo in american technology in history, she sliced shareholder wealth in half, she lost the job, fired as ceo, never been hired for another job since as ceo. she is was on a prominent board,

taiwan semiconductor. she said she left to run for office. it turns out taiwan semiconductor released her attendance records. she only made 17% of the board meetings. if you don't hit 75%, it's pretty awful. she's a nice person. >> in other words, you're not sold on her? [ laughter ] >> you know, she's never held elected office. i think she's a very smart, honest person. she did not some rogue ceo. she did her best. he best wasn't good enough. the company took a tailspin. she likes to say the rest of technology was battered, the s&p 500 was down around a 15% at the time her company fell by over 50%. >> plus she was rewarded roughly $100 million for slicing shareholder wealth. we have to leave it will, jeff, getting ready for some data coming up at the bottom of

the hour. it's good to be with you. >> thanks. then the future of youtube under the alphabet umbrella. julia boorstin takes a look at the service. check out shares of googl this morning, $700 and change, up 6%. squawk is back right after this. a new season brings a new look. a chance to try something different. this summer, challenge your preconceptions and experience a cadillac for yourself. take advantage of our summer offers. get this low mileage lease on select ats models, in stock the longest, for around 269 per month.

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still this morning, we have productivity and data costs. then the market snaps a seven-day slide. if you're watching what's been happening with the dow. the futures are indicating a lower opening this morning. the nasdaq down by 26, the s&p is down by almost 15. we're talk market sentiment and much more with david kelly and savrita subrainenian. here at td ameritrade, they love innovating. and apparently, they also love stickers. what's up with these things, victor? we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals, a tool that uses social media to help with research.

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welcome back for "squawk box." we have preliminary second quarter productivity, and unit labor costs. the magic behind the economy. well, it was up close to expectations, but still light, up 1.3. many were looking for 1.6 to 1.8. last look originally reported, down 3.1, was definitely a shade more than in half, to down 1.1,

but still negative numbers. of course, if product activity is dwindling, costs go up, correct? they did go up half of 1%, which is half of 1% more than most were looking for. just like we see productivity upgraded unit labor costs, 6.7 originally released 2.3, so there is an improvement there as well. so we're going to continue to more ton the imaginic dust in the economy. many have placed that at the epiany of issuing to be working on, but it's hard to fix it. what is directly or indirectly responsible? one thing i can tell you, china has set the music for what we're all going to march to do, and of course if they're going to change the exchange rate, everything they export becomes cheaper. isn't that the point? what happens to our prices? it talks about how dropping

prices are in many ways what a function of what central banks and planners are doing with regard to -- back to you, judge. >> thanks, man, rick santelli there. becky? we are more breaking news. first in breaking news about a story we were talking about earlier. u.s. authorities have brought charges against nine people allegedly part of a group of traders and hackers who schemed to get early access to m & a press releases. court documents showed that the scheme netted about $30 million in illicit profits. companies whose shares were impacted -- a press conference is at the time for 11:30 a.m. eastern time this morning. let's get more reactions from you're dynamic market duo, david kelly, chief global strategist at jpmorgan funds and savita subramanian is the head of u.s. equity and quantitative

strategy at bank of america. savita, you first. this news out of the china seems that the economy is maybe worse than everybody thought, and what the implications are for our market. >> it's interesting. i think they were trying to shift to a consumer-driven economy. this suggests maybe that's not working as well. they're forced to lower their export prices and court the overseas consumer. now, what's interesting to me from a u.s. perspective, is that u.s. stocks with a lot of exposure to china growth actually haven't really discounted this. so, you know, we've seen major earnings revisions, earnings were cut for oil and europe exporters, but china exporters haven't really seen a lot of negativity built into their numbers. meanwhile, they've been disappointing this quarter, so i think that's the real risk and the u.s. market is china exporters starting to show weakness.

>> david, how worried should we be? if this is a real wake-up call and a slap in the face that it's not about the china stock market, it's all about the chinese economy, and this is evidenced more than we've gotten to this point that it's dramatically slower. >> it's highlighting a significant problem. if you look at the chinese gdp numbers, everything is fine, about you if you leek at electricity consumption, housing starts are way down year over year, and exports also down year over near down about 8%, that's a very bad mix. the real problem is they're not getting consumer demand going in china. in fact the probable with monetary policy around the world tight regulation, all this uncertainty and trying to export their way out of local consumer weakness, we can't all export our way out. i think that's really the problem around the world. >> we are talking about this with boris, and jim mcgaughan,

boris thought this could ice the fed for september. jim said absolutely not, the fed is focused on the u.s. economy, and this is really a nonfactor -- that's my word, not his -- in that decision. what do you think? >> i don't think the chinese decision. it's a 2% devaluation, and actually what the spot rate in fact was. that was really minor in the big scheme. i think the global slowdown is a problem, but the real issue is u.s. growth is slow. the problem is you can see in the productivity numbers, or ability to grow is even slower. if we have this anemic. six tenths of a percent over -- if that's all the productivity growth we have, it will tighten the labor market. i think that's the number one thing they're looking at. >> rick is right. when you point out the weakness of the chinese yuan, and think about what that means for

inflation here, what it means for the dollar, it's hard to ignore that. >> i think, though, the offset is what china is doing is pro-growth, right? what granted, central bankers across the globe are easing, and, you know, so far it hasn't really proved great success, but if we do see growth come back in china, that tillingly is good good for the global economy. what i worry about is everyone is short the global cycle. it's really dangerous to be short global growth in an environment where central bankers across the globe are so hyper-accommodative. i'm trying to figure out how a u.s. investor should view it. should they be more worried, because the economy is going to slow down, earnings will come down, the multiple in the market has to come? or do you say, well, this is just more evidence as to the reason why they're going to stimulate to the hilt and that's

going to cause a positive impact on their economy, which is going to ripple through the other stock markets? >> there's far more -- there are far more problems in china than just the issue. the real issue is global spending on infrastructure has slowed down a lot because of measures they have taken to stop the debt growth. that's really the problem. for u.s. investors, i think you would be nervous about china and those companies, i think that's reasonable, but in general, i think the u.s. economy looks okay, the european economy is that -- >> if china is slowing, europe will be hit by that. emerging markets -- >> not too much, because it hits commodity prices and actually lower commodity are generally positive for developed countries, so i don't think this is a negative for europe or the united states. i don't think that's going to

hurt consumers in either of those huge blocks of the global economy. i wouldn't back away from equities behalf this, and i don't think the federal reserve will back away from tightening just because of this one event or there's lots else that could happen between now and september. >> agreed. i think september, december is the likeliest tightening date. the thing is zero% on fed funds is emergency-based. it's an emergency measure. we're not in an emergency situation anymore. >> so let me ask a question, i forget whether it was in my notes from you or from you or from you or someone completely random and different. i am old. i can't remember who, but someone was making the point that what the markets need in the united states is to get past that first fed hike, the idea that then that uncertainty goes away. >> right. >> but 24e7b don't we in the

media, doesn't the chatter then become what are we going to do now? what is going to be next? how frequent? how high? does the uncertainty really go away? >> i think it does diminish, the big issue is the futures market is saying something completely different, that this big divergence, one they actually tighten, which of those is right? and they are going to move rates up more slowly. we know that. particularly with a second rate high, we'll be able to figure out their pattern. >> they're playing my song, david. that means we've got to go. thanks very much. good to be with you. up next on "squawk box", he hit the sigh seas with the kreismt oeis-- ceo of celebrity cruises. and later, youtube was a big highlight for google. now with a corporate

restructuring, the spotlight looks to shine even brighter on that video service. we're going to talk about youtube's role in the business, in just a bit. ♪ introducing the samsung galaxy s6 active only from at&t. tested to withstand pretty much

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the s&p would be down nearly 15, and the nasdaq down by nearly 24 on concerns over china's growth, as they act to

devalue their currency. it's a big story we'll be following throughout the day. citigroup will pay $13.5 million to settle a lawsuit dating back to the financial crisis. the bank had been accused of deceiving investors in a fund that was liquidated, leaving them with sizable losses. cruise stocks are crushing it. royal caribbean trading near all-time highs this week, and several of the royal caribbean cruise brands you attending a conference in las vegas. one of them is celebrity cruises, and the ceo and president joins us now. lisa, welcome. good to have you with us. >> thank you very much. it's great to be here this morning. >> you're one of i think few female ceos in your industry and you've just named, among other things the first captain a woman. why? what's that signal? >> yes, kate mccould you.

it signals a lot of things. first of all, i felt it was something very appropriate for me to do. i met kate a couple years ago, and she's outstanding, and she really deserves this opportunity. and as something that was important to me in my new role, i wanted to give her that opportunity with celebrity. so she has joined us. and kate grew up in san francisco. she now lives in las vegas, where i'm speaking to you from this morning. >> fantastic. business is good? >> business is very good, thank you, yes. >> tell me about it. >> well, we just released our earnings, as you know, very recently. we beat guidance. there were a few contributing fact factors to that, fuel price as well as small close demand on the caribbean and china. those were the key factors that

make business so good. we have some solid demand and the future looks pretty bright. >> we've been talking about china this morning. there anything in that market or that part of the world that has you concerned. are you as optimistic about its future as you might feel about its present and past? >> yes. you know, there's nothing that we have seen that would change that. we are vigilant wherever we go around the world, so we're always looking at what's going on in the different parts of the world we cruise in, so we're always watching, but nothing concern at this point in time. >> how about cuba? are you going there? >> cuba is a big topic, isn't it? i think all of us will be going there. we have nothing that we can talk about that we have confirmed we all know cuba is still not open, so until it is, none of us can

definitively say we are and when, but you can rest assured were planning like everybody else. >> you come here first and tell us, all right? >> okay. all right. that's a deal. that's a deal. for sure. >> we'll hold you to that. >> okay. i know you will. you cater to a bit of a step-up kind of customer, luxury travelers, healthy, they're doing fine, no matter where they're from? or are there any little fissures in the market with respect to russians, chinese, latin-americans, who might have joined you before, but now are playing it closer to their vests? >> you know, it's wonderful to be here, because this is a huge conference with amazing travel professionals from all over the world, in all sectors of the industry. one thing that's been wonderful to see and here as i've navigated my way through is how

healthy the industry is. it's wonderful that we source guests from around the world and we're always able to change course if necessary, but right now we're not seeing any reason we need to do that. >> will issa, i've never been on a cruise. i'm temped. maybe i'll join us sometime. >> you have to. my pleasure. >> lisa, thank you very much. >> bye. when we come back, google's reorganization putting youtube in the spotlight. julia boorstin has a special report on what investors could learn. plus jim cramer, a alpha about the and yuan cut. futures are looking ugly at this hour. squawk will be right back. two . the only difference: that little blue thingy. you see it? that's a sensor. using ge software, the light can react to its environment- getting brighter only when it's needed.

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>> now that google is stripping away businesses, youtube will be in the spotlight. we'll find out what this means for the business. >> separating out the moon shots and other investments is designed to shed light into the core google business which

youtube is an increasingly important part of. with shares up this morning, investors are focusing on ad business which means youtube. the ceo credited youtube for the better than expected quarters. she didn't reveal sesk financials but she said youtube has increased. while youtube's top 100 advertisers are spending 60% more than last year. it's unclear how much new details will be provided about youtube but analysts hope to get an idea of how fast youtube is grabbing ad money and how big it's going up against facebook's video push. having a separate ceo seems like the model they're now adopting.

google and alphabet now apply it to the other businesses. >> julia, thank you very much. let's get down to the new york stock exchange. jim cramer stands by and let's talk about google in a moment but let's talk about the overall market. yesterday you pointed out that you thought it was a couple of different things boosting things but you said hold on. this may not be a rally that's here to right. you were right. what do you think about the downturn today. >> yesterday was the counter turn. this is a major cord minor cord rally, and the minor cord gets to last a day. it's certainly not right. china controls the stock trading, so to speak, in all the stocks that were up yesterday. the chinese are desperate. they want to do whatever is necessary. and their desperation is often confused with strength or the idea that they have a plan. it's a totalitarian country. we seem to live in awe of what

they do. i think they're a communist paper tiger. one way they'll be called. not by this president but they should be. >> it causes concerns about this global currency war and what it means if we're the only ones strengthening our currency. >> every time we used to see this a president or treasury secretary would speak out and say we're not going to tolerate. instead, it's not a focus in washington anymore. in the old days, under the previous bush and reagan, pretty much under every president, it was a big issue but it's not now and we seem to want to do a deal with iran. i'm not political but you don't hear anyone saying this is outrageous. you're debasing. and it's what tim gieithner use to do. >> we're out of town. we'll have a wait a couple

minutes to see what you think about google but we'll be watching. >> when we come back, mercedes is watching an suv for chinese consumers in an old hummer factory in indiana. a shift for the auto maker as suv ramps up. a closer look at what the new auto class will do for the auto maker and the hoosier state is up next.

>> the old hummer plant in indiana today will start to crank out a mercedes-benz r series. >> reporter: these are mercedes that will never be driven in the united states. they're all going to china. it's the r class. you might be saying r class? i haven't seen one of those in the u.s. in a long time. they haven't been sold here since 2012 but there's a hot demand in china. because it needs to free up capacity in mississippi which is the hub for all the suv production not only in the u.s. but around the world, it has shipped production up here, contracted am general here at the old hummer plant to build the r class. as i mentioned, it was built in mississippi. now they are building it here.

annual production, about 10,000, and this is the reason mercedes has contracted am general. look at demand for suvs. sales up 17.3 this year but when you look at the china market, sales are up 47% this year. as we mentioned at the top, this suv is being built on the old hummer line. i was here more than a decade ago when the hummer was the hot vehicle. it's no longer around, as we all realize, for several hundred production workers, they're glad to have jobs added here as they build the r class. take a look at shares of mercedes. this is a classic example of what we're seeing what the auto industry in the united states. production is so high and capacity so tight that auto makers are turning to firms like am general and saying if k you pick up some excess capacity for us? that's what's happening here. all of these built in indiana are going to be wound up and

driven on the streets of china. >> very quickly, i know this is breaking news overnight but when you see moves like we did overnight with china allowing the yen to be devalued. that might change the value a little. any word on what that might mean? >> they're watching the news closely. overnight we saw in july retail auto sales in china dropped 6 .6 %. it's not to the point where we're seeing auto makers curtail production or imports into that country of vehicles but if there's a prolonged slow down, that might impact some of the r classes that are built here that ultimately will be shipped over to china. >> all right. thank you. great seeing you. >> we're going to have an ugly day in the market today. the futures are at the lows of the morning. dow opened low at 180 plus

points on the nervousness on china and what it means for the global markets, et cetera. >> make sure you stay with "squawk on the street" for continued coverage. tyler and scott thank you for being here. >> thanks. >> that does it for us. right now it's time for "squawk on the street." >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the market is rattled as china announces the biggest devaluation. benchmark yields around 2.17 as productivity finally gets a positive number and oil back below 44 as opec at a three-year high. google making itself one unit under a new