we'll tell you about that. it's wednesday, august 12th, 2015. squawk box begins right now. >> live from new york where business never sleeps, this is squawk box. good morning, everybody. and welcome to squawk box here on cnbc. i'm becky quick with andrew rosssor kin and kelly evans. >> welcome. >> great to see you this morning. >> joe is on vacation. we have been talking about investors walking a tightrope lately but check this out, this is nick wallenda completing the longest tightrope walk ever last night. he travelled nearly 1600 feet. that's more than a quarter mile folks. this was ten stories high above the speedway. he was carrying a 45 pound bar for stability and that wire looks a little thick but it's no wider than a nickel. folks don't try this at home. today's top stories, the

markets, china is the factor a four year low overnight. also following the lows. this move sparking fears of a global currency war. some people are saying it's already underway. some accusing china of unfairly supporting it's struggling exporters and you wonder what this means on so many levels. i don't know what the fed is going to do in response. they're watching the dollar but that lower yuan is going to need less inflation coming here. that's one of the two things they'll be foe cousin on. the nikkei was down and the shanghai composite also down by 1%. check out europe in the early trading there. you'll see there are similar decline there is with the dax down by more than two and a third%. the cac in france is down by 2.7%. the ftse is down by 1.3% and similar declines throughout europe. look at what this is meaning for

here in the united states this comes after a major down day yesterday. down another 180 points this morning. s&p off by another 2 points and the nasdaq is down piano 50 points. on top of that a traditionally bearish signal in the markets this week. a rare dow death cross. it sounds scary and it is for technicians. this is when the moving average crosses below the 200 day moving average. one is short-term trends and other longer terms and this death cross is a red flag for technicians. they say look out below. bob it may be the perfect day to have you sitting here on set with us to talk about what's happening. had is a massive shake up. for a second day in a row it changes the situation. >> it's a problem. no question about it. the optimist in me says don't forget the united states is 87%

a domestic economy. which is generally doing better. consumers doing better. jobs have ill proved. it's a concern. if this develops into a currency war we have issues and the death cross you just mentioned accelerates that. >> bob is with us for the next hour. so we have a lot more to get to with him. talking more about the markets in a moment but in the meantime kelly has a look at the headlines. >> here's the big stories we're watching today. key read on the employment market. the labor turnover survey or jolt we love this one due at 10:00 eastern and two big quarterly reports to watch. both out before the bell, alibaba and macy's. and macy's ceo will be our special guest at 8:00 eastern and oil prices again today. the iea says world oil demand is growing at the fastest pace in five years. the energy watchdog also suggesting global oversupply is so large it will last through next year. the iea predicts u.s. oil output

will likely take a hit soon. still waiting for it to show up as producers begin to suffer from low oil prices. take a look at crude now after another tough session. yesterday down about 4%. a little bit of a rebound this morning. wti up 1%. brent up a little bit less than that level. flipping over, let's take a look at bond yields. yesterday under pressure. down to 2.11. this morning it's below that level and magnifying the concerns about the global economy. again, the ten year note trading at 209 if i'm reading that correctly. let's flip over to the dollar and focus amid everything coming out of china. the euro a little stronger against the green back. it's at 111 but that yen down 124 stronger against the pound here too. finally a quick check on gold. it's up about $8. still well off the highs from several years ago. >> what was the ten year yield? >> 2.09. >> yesterday we were already

looking at yields falling to the lowest level in over six months. i don't know what this means as we're thinking about the fed on the verge of potentially raising rate with the market telling you look out, this is what's happening around the globe. >> not just the ten year, even the two year was down significantly. it doesn't look like a fed that's going to be tighter or if it is it looks like the impact will be negative for growth. >> it's another whiff of deflation. the oil price, commodities in general. the treasuries moving up in price and down in yield and that's not what the fed wants so it does make their september meeting a little more difficult. >> corporate news for you now. credit suisse and barclays in talk to settle dark pool allegations. u.s. regular you lay tors could hit the banks will large fines over alleged wrong doing they

trade shares a nonmousily to let the trading data available afterwards. so michael lewis can be happy today. boeing raising it's forecast for indian plane demand. senior executive there saying that indian carriers will need more than 1700 new aircraft for 2,034 with a value of $240 billion among today's stocks to watch, check this one out, fossil. shares under pressure after quarterly revenue fell short of estimates. company also lower ing it's outlook for the year. among the factors are the strong dollar. i'm about to segway to apple but first there was a view that fossil was going to be one of the great losers in the apple watch war. if you were going to buy an apple watch you're not going to buy an apple watch but also pay attention this morning to apple. shares have been having a rough

run lately. yesterday another tough day. we're down nearly 10% in the last month in total trading at 11136. >> china stoking investors fears again this week. joining us is the chief china economist at jp morgan and our guest host for the hour is bob and thank you for joining us this morning. what do you think is happening here? this is sending shockwaves throughout the global markets. do you think it's doing so with good reason? >> yeah, there's two main reasons why there's the policy shift. the first reason is that in the last 12 months they have been appreciating a lot and from that perspective the currency adjustment trying to relieve the pressure and china is not the

first mover. in recent months it's quite significant. so china is kind of trying to release the pressure. the second reason is that the efforts, particularly they specify that the daily fixing will be referred closely to the spot rate on previous days and the pboc continues to depreciate another 3.6% and that's a strng commitment and a very welcomed step. it's a step moving toward more market based regime. >> interesting though. they may say this is moving more

toward the rate but the timing when it happens to make perfect sense to them and helps them with their own economic issues has people here in the united states and europe questioning whether this is more market regime or currency manipulation. how do you come down on that? >> well, i think the first question is china is not the first mover to depreciate currency. china is probably the last one. the second point is if you look at the market, the fact that they both continued to shoot above it, although yesterday they depreciated by 1.9% to lead by another 1.6% but they continue to hover above so the market conditions have strong expectation so i will say that

it is market driven rates although you can debate where the fair value is. so follow the new rule and the currency will probably just move until it reached a fair value which means they'll truly come back to market and where this fair value is its a good question. my personal opinion is yeah probably 640, 650, that's fair value. so we're already about there but in the market that the expectation is very volatile and i think that you may run the risk of shooting and there's also a lot of the uncertain factors. how the other central bank will react and how the market will react with the change in the policy. that's a bigger risk we're facing at the moment. >> this brings up a lot of questions. we may say that look they may be the last ones to the stable to try to devalue the currency

however this is not exactly a regime that we're thinking is very market friendly when they are freezing the stock market and not allowing you to sell things and now looking like they're trying to force their currency lower even if they say it's to be tying things to the market rate, it leads to a lot of concerns about how we feel about what they're doing and what this means here in the united states. >> for sure. i think what it really underscores is china is a massive growth problem. that's been going on, some would say under the surface. i think it's been visible for sometime. consumption problems. inventories building, net capital outflows and now they do this. got to be followed for more rate cuts and physical stimulus and i think they're reacting and saying this major economy in the world is slowing more than a lot of people thought and now the ramifications from that. that hurts the pacific area the most, asia and europe next and us the least. we export less to china. >> although what i would see in

this situation that's tricky is we'll be the only ones trying to strengthen, raise interest rates and strengthen our currency. at the same time the rest of the world is devaluing and sprinting money still. how do you to that? >> with great difficulty. everybody knew september was more than 50% chance the fed was going to go for all the reasons we discussed. you have to wonder is this going to make it less than 50%? are they going to really listen to things outside of the u.s. if they look at employment in the u.s., they have to move. >> right. >> again because they're starting from zero. if they were at two and contemplating a move, different story but our starting point is zero. the economy in the united states doesn't justify that but that does re-emphasize how are we going to be the only ones doing this. >> and if we don't, how are we raising this many years after interest rates.

>> i don't want to be a monday morning quarterback which is why they should have started sooner. >> just before we go, we know that the chinese currency is floating against the dollar now to which it was pegged. what is it doing to another major currencies, the euro specifically? >> what's it doing against the euro. it's more free floating now. is it moving against other currencies? especially the euro with the same magnitude? >> so in the current system it's just using the cost rates based on the u.s. dollar so we have a number of key currencies, china directed bilateral exchange rates but it's based on the cross rates in the last 12

months it's been by 12%. so now we're talking about 3.5% against the euro and other key currencies and it would be a steal on the strong side. >> thank you for joining us with this morning. of course bob will be with us for the rest of the hour. >> we'll turn our attention to politics right now. hillary clinton handing over her private e-mail server amid concerns about data. john joins us now on this developing story. good morning, john. >> good morning, andrew. the clinton campaign says they don't believe e-mails are remaining on that server. of course there's a question as to whether forensic investigators can recover them anyway but it doesn't appear from what we know that that's the purpose of having the server in any case because the main

purpose is to pursue the fbi inquiry into the security of that server. it's not about, so far as what we know and justice wasn't saying much last night it's about evaluating the extent to which hillary clinton's e-mails might have been compromised or vulnerable to compromise. that's what they're looking into. obviously you have a committee of congress that's investigating bengazi and will be out of hillary clinton's possession or in the possession of the government they will make an effort to try to get a look at it or understand more about it so we don't know where that will be but for the moment this is about computer kurt and the fbi trying to evaluate the

likelihood that these e-mails were compromised. >> since we're on hilary watch there's a report out this morning, a new poll for new hampshire saying that bernie sanders is now ahead of hillary clinton. is that right? does it matter? >> don't know if it right. it matters to hillary clinton and it's a concern that bernie sanders has sufficient a strong sh showing it includes joe biden that's not running that got 9% in the polls and that could change the outcome but even if it did, the fact that she's running very close to sanders in new hampshire is something for her to be concerned about. not because sanders is likely to win the nomination but as a signal of potential weakness that's something to take seriously. >> let's turn our attention to donald trump. speaking to reporters yesterday here's what he had to say about how he'd deal with china if

elected president. >> so i said hey carl. so now the press will call carl. but i said carl if i get this thing i want to put you in charge of china and japan. can you handle both of them? china and japan. he said yeah i'll do it. i'll do it. i want to do it. you know what, just relax, everything will workout fine. we'll make great deals. >> john, just -- i mean, just help me. what is going on here? is carl actually want to do this? >> you know what's going on here. >> i know but we're all -- that's the problem. we're all having to play this game where we talk about this because -- just because basically. >> i have to admit i don't know what's going on here because if you look at this people laugh at it when it's coming out but it is working. he's still winning in the polls so what's happening and how long does this last? he could go all the way to the convention is what warren buffet

thinks? >> i don't believe that myself but the trend line of follows is slightly down for trump since the debate. he is leading in iowa and new hampshire but when you look at the small indications, we don't have a great volume of polls but he appears to be going down so it's possible that he has crested and it's also possible that he'll sustain support. there's a different filter the closer you get to the election and in terms of what's going on we're seeing a master entertainer doing improv in a political campaign and it's entertaining. it appeals to people that think politics is canned and scripted and they don't like the

political correctness. the idea that some things you can't say. whatever it is you can't say, he will say it and people like that. >> at what point does he need to raise real money and is there a chance that he does raise real money? and is there people in the business community, i think he originally said he doesn't want the job. but other people in that world that are going to support him. >> i doubt that there are many major figures in business who would take the risk of identifying themselves as financial backers of the trump candidacy given where most people think it's likely to end up and given how controversial trump's comments have been and how uneasy so many people are about them. that's why you saw people

cutting ties. i'm not sure people are eager to start new ties. as for raising money, he could raise some money in small donations from the conservatives that are appealing to him but is he willing to layout his own cash? how liquid is this fortune he has. that's the more important question. sometimes these guys that are billionaires when it comes to laying out the dough needed to run a big campaign they're reluctant. that's yet to be determined. >> we have to go but quickly what would force him out of the race? he's not political establishment. there's no one he has to keep happy. no one has he to stick around with. even if his polls were to drop what would force him to drop out before they get to the convention?

>> when the race stops being fun. if he starts to conclude this is going the wrong direction. i'm not going to win. i'd have an embarrassing performance in the new hampshire primary or iowa caucuses and this is gravy times for him because he's riding so high but if he's not doing well and he starts to see that l loser stamped on his forehead, maybe he doesn't want that. >> john, thank you. we'll have terry on from macy's cutting ties with mr. trump. and he recently responded in fortune magazine or fortune was quoting him, carl -- henry -- not carl but mr. trump had suggested that he should maybe be the treasury secretary and he said that's scary. so that was that. >> when we come back we'll talk more about crude realities.

prices bouncing back this morning after closing at a 6 year low. first as we head to a break here's a look at this date in history.

we've got a great story we're going to tell you about in a little bit in chairs. the stories always grabbing our attention. this one really grabs your

attention and becky, it grabbed her attention. the chinese government surprising devaluations of the yuan saying crude tumbling to a six year low. take a look at this chart. this on top of oils nearly 30% drop in the last two months. one guy that called it right is at the table. he is here to discuss where oil goes next along with bob dahl. i don't mean to say you haven't called it right. i mean we had this conversation back and forth. >> kind enough to have me back. . so where does it go? >> what's the bottom number? >> in the low 30s. maybe as low as 30. maybe two handle. potentially but that's because it will be an overshoot, you know, to the down side. we have been doing this sort of stair step lower and lower and haven't gotten the wash out you need to come out of the market for a real bottom to be established. >> you thought we were going lower because of supply issues.

i don't think you were counting on the demand in china being questioned so significantly. >> to a degree a lot of folks were dismissing it as a one off and i was saying the government was reacting to it and very worried about it. i'm hearing more stories about people taking credit card advances to buy into the stock market. >> it's coming early. it's coming fast and yes when you're making a call like that you'll take all the help you can get and if the chinese government wants to come and devalue the yuan and get the dollar going. >> you're not goe goiing lower your call. >> no. >> it's a timing issue now. >> we're starting to see the winds gather here for awe supply response finally. >> what is taking so long? you've got supply response. is it because it takes so long to shut the thing off and turn it back on?

>> i think disbelief. we rallied back substantially. a lot of folks jumped in. this is the oil market. the term blue sky was invented in the plains of texas about hitting a well and hitting it big so they thought it was disbelief and this second trip down made believers. we could be down as much as 5 hub thousand barrels a day early next year. now to get us back under 9 million barrels a day. they're going to say we talked to u.s. shell producers and we're going to cut down a little bit. >> are you saying it will trigger a rebound? >> it will trigger a rebound. that 30 print will be the low point in october. it will be a nice rebound and probably stabilize next year.

do the shell players come racing back in is is that enough to put production back on. this could be a vicious cycle. i could be coming here quite a bit. >> we'll save this video tape. thank you, john. we'll be saving that in just a little bit. coming up, did a disagreement over $600 take out the jets quarterback for a couple of months? we have that story when walk box returns in just a moment. nt's eg of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great.

welcome back. we're taking a look at the newspapers this morning finding things that caught our attention. the thing that caught everybody's attention, in front of the tabloids here in the new york air but also new york times and beyond. this is the story about the team the jets and just the latest issues here. this time around it was the quarterback. geno smith got cold cocked by a teammate. ikeme enemkpali was the teammate. >> he'll be out for six to ten weeks with a broken jaw. this was over a scuffle. rumor has it, some reports are saying this was over a loan gone bad for $600 that geno smith still owed him. >> always comes down to money. >> creditors, debtors. >> you can not imagine the troubles the jets have had. are you a jets fan? >> i am not. living in princeton i'm a philadelphia eagles fan so we have our own woes.

>> you do. but not like this. >> it doesn't end for these guys. >> we'll see where they go with this. >> this is the second trussel in preseason same team issues. didn't cam newton get involved in something awhile back. this one is much more serious bit it's the jets as well. >> let's talk about what's happening. kim kardashian and the fda. the fda warning the reality star about her instagram drug endorsement. now apparently she had -- what's the verb, instagramed something about this morning sickness treatment that she was using. the drug. and there was some company talking about the drugs benefits. she had more than 450 likes but the fda sent a warning letter saying if you're going to endorse this you have to put up all of the risk information. so the post is misleading because it presens efficacy claims but fails to prevent risk information. if this new age of celebrities

having access to social media and pushing whatever products they're endorsing, how do i kim kardashian do the risk effects on instagram. >> it's good news for the fda. the idea that you can get around the fda by going through non-traditional media outlets hopefully it puts a freeze on everything. >> i think the answer is stop doing. because you know that she was paid to do that. i think the answer is don't do it unless you have a way to get around it and understand if you do do it and get paid and you break the rules that you could be liable. >> i'm wondering for this drug or others if they work with their celebrity endorsements say if you're going to promote this can you copy and paste this text with the risk information at the bottom. >> it won't fit with the twitter. >> i'm fascinated be the at the no, ma' phenomenon of the celebrities endorsing drugs. that's a whole other thing. >> advertisements though,

there's a drug that there's a nascar driver brian bickers endorses. >> i've seen phil -- >> maybe i'm wrong because i was going to say is it somebody else -- >> brett favre? has he been involved with some of these? >> you're right. >> the rules are there for good reason. especially when you start thinking about morning sickness drugs, it takes you back to drugs gone wrong in the past. >> if this is reaching all of these young women, they should have all the information. coming up, the ceo of global power player siemens the company in every corner of the world with interest in everything from energy to health care. but first as we head to break, check out that u.s. dollar still trying to digest everything happening in china. of course. stay tuned. you're watching squawk box on cnbc. first in business worldwide.

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welcome back to squawk box this morning. it's been about a month now since starboard's value smith released it's best idea. it was macy's saying the stock would be worth nearly twice the current value and laid out his strategy to get there. >> we believe there's an opportunity to create two leading companies. we believe you can accomplish this goal while maintaining the dividend actually making it safer and by maintaining the credit rating. >> coming up at 8:00 eastern time we have macy's chairman and ceo joining us on set to talk

earnings and the consumer and we'll put the question of what jeff smith has said and whether he's talked to him about that strategy in just a little bit. >> now engineering and tech giant siemens completing two acquisitions to refocus the company on oil and gas. these have been muddied by the tumbling price of crude now at a six year low. joining us on set to talk about this, china trade, and much more, joe is the ceo of siemens global. good morning to you. >> we'll start with oil since we're talking about it. in the last couple of years since you have been at the helm of this company, doubling down and making big acquisitions on oil and gas. will they still work for you guy with the oil price where it is today? >> we care too much about the oil price but too much about the cost. so you need that.

>> give me an idea of how this will play out in the next 12 to 24 months. if the price of crude is 40 to $50 barrel, how are you helping them do that? >> if you look for example in saudi arabia, one of our biggest customers, it's about 30 billion u.s. dollars on capex every year. they take the cost down to 10 or 15%. >> if you keep bringing that price down by technology does that keep the structure down over time for the price of oil? and we aggravate the issue we have been seeing? >> we can help get the cost down and the oil too.

if you look at the oil process on the scale between 1 and 10 it's probably about 2.5. it's probably like 6 to 7 already. so if you talk about the internet of things or next generation of industrialization it can help us to really take the cost down. >> and geographicall the mix would be very different. some places are further along and some are further behind. what do other geographies look like? >> today it's in the united states through the convention unconventional area but if you look at the conventional area we can help everywhere. saudi arabia can benefit from that. but also other companies. >> the moves in china, extraordinary really. you have a 100 year history in

the country. how much of a slow down are we witnessing? how much of a head wind will this be for global industry? and how much further weakness do you expect? >> it's not clear yet what this is really all about. some deflation in china. the factory output has been much less than expected. exports have been actually way down so the jury is still out on how china will find it's place through it's restructuring. what they call reforms that is actually restructuring hasn't gone that well there's millions of people who are, you know, in fear of losing their jobs so they're slowing down and you can now see an expert.

we need to see the reason they devalue the currency. >> it sounds like potentially while they complete this transformation, what do you do at siemens. the last couple of years it's oil and gas. now you have the global growth industrial slow down. what levers can you pull now? >> what you do first is not to panic. so you look at the market. we have 40,000 people working in china for us. we look at local production f. the value comes down and the currency that helps boost exports. so i'm not too worried about our company in the long-term but we still need to see what the political environment will do on a global scale. >> i just want to break in. the wall street journal reporting five minutes ago now that china is intervening to support the tumbling yuan.

china intervenes to support -- i'm reading the headlines, to prop the yuan in the last minutes of trading. >> they're trying to stop the devaluations that they started. >> you saw it rebound about 1% off the lows as they did that in the closing minutes of the session. >> let's take a look at what this means for u.s. equity futures because we were looking at a very big down day here again today. down by 170 points last time we che checked. but still looking at the dow futures on a day it dropped well under 200 points yesterday. still another day of red arrows today. s&p futures indicated down by more than 15 points and the nasdaq off by 33. >> as you mentioned they seem to be moving in tandem with what's happening in china. here you are, you're one of the biggest global industry producers out there. you have a currency that's flipping around as the central bankers try to do anything they

can to stem the decline in china's economy, it's not he helping. >> gdp growth in china is between 5 and 7%. this is something europe would dream about having so it's all relative but we need to be mindful about what that does for the global trade so important, you know, don't panic. focus, understand what this is all about for our company. and they'll take it from there. >> any hints about your next acquisition? >> as soon as i know i'll let you know. >> that sounds great. thank you for joining us this morning. >> a nice segway to where we're going to go after the break. new data on the sector's most and least likely to see deals in the coming months. we're back with that in just a moment. ♪

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welcome back to "squawk box." global m & a volume set to hit a record level. or guest hose, good morning to both of you. help us with this. we have this buffett deal this

week. it feels like we are on trend to, as you said, get to -- this is the highest we will have been, but is this a high sign? meaning are we going lower from here? >> no. it's interesting. at interlinks or system is used for the due diligence process. we can see the announced deals in the second half will grow by 8%. as you know, we get more deals, and it's a robust market. >> it looks health in. blare ephron maid the comment that it looks like -- >> i think there's a very different fundamental going on. in '07 when you bought me, my stock went up, your went down.

part of the reason is you can borrow money at almost zero, so most transactions are immediately anti-dilutive. >> that's why or intralinks is predicting continued growth. >> do you look at this as a signal of confidence in the markets or a signal of defensiveness among companies that have lost their way and don't know how to create any organic revenue? >> that is a big challenge. the big driver that we've already talked about is the market is right. that's cash on balance sheets, you have to put that capital to work. investors are warning, there's a bit of that fomo, fear of missing out. they're saying if i can't return value by doing m & a, i'm going to be left out in the cold. >> what sectors should they be focused on? >> what we're seeing with the

predictors is that sectors like consumer retail, high tech continues to be strong, median entertainment where content remains king will be stronger in the second half. the weaker areas -- energy, plaining, even industrials kind of dragged down by the overall commodity as well. >> thank you. appreciate it. >> thank for having me. bob dahl, when you generally come in, i see you looking at spread sheets trying to figure out what you're going to buy or sell. i don't see that today. should i read in that you're not buying -- >> no, you should read that i have plenty of time before i'm off the air. >> a lot of confusion. is this a time for buying on the dip? >> a little more cautious on this dip than i have been in other dips. we're stuck in this narrow

trading. people say markets are volatile, yet one day to the next they are, but we've had the narrowest s&p rate in 90 years. it's a very non-volatile period. >> whave noi gng anywhere for seven, eight months, selfa stealth correction? are we still waiting for the correction? >> around a fed increase there's usually a patch of selling. we've got to get this first rate increase behind us so markets can say, ah, the sun came up. >> if we don't get a rate innic in september in. >> i think it's not good news. taal a tnot the issue. he d ber which i think they will, we'll be curious what macy's says, but

we've got to get through this, and technically the market is looking very tired. >> let's talk specifics, if you are buying, what are you buying? >> i want to own u.s. earnings. among them there are question marks for all kinds of reasons. we have another one in the last 24, 48 hours. >> a couple names. >> gilead in health care, unitedheal unitedhealthcare. joe would tease me if he was on the line. >> domestic names i think is a good place to be. >> it's been a pleasure having you. >> thank you, becky. when we come back, more of the top stories, including word that china's central bank is intervening to support the yuan. maybe we've seen enough blood letting from their perspective. and we'll welcome the guest

host for the next two hours, paul macaulay. we saw the is it down on an implied open. right now you're looking at 135 points. the nasdaq is down by 36. "squawk box" will be right back. music: etta james "at last" (plays throughout) ♪ sometimes, at last doesn't happen at first. ♪ ♪ your dad just kissed my mom. ♪

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falling sharply. chime shocking traders with a second day of devaluation. analysis from our guest host, charles mcculley, ahead.

breakneck crude production means that prices are likely to stay low for a long time. and we'll show you what the super-rich do what they want to get away from it all, glamorous camping or glamping, we'll take you inside a luxury tent, as the second hour of "squawk box" starts now. live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box." i'm here along with becky quick. kelly evans is here with us this morning, joe has the week off. china shocked traders by devaluing the yuan for a second straight day. this is a huge move, news just

breaking that china intervened to prop up the yuan in the last minutes of trading. >> request i just ask -- i'm completely confused by this. we have paul mcculley here. is it part. >> it's part of an overall mosaic. they want to move a more market-determined exchange rate. for lots of reasons. he needed to do this at some juncture, but it was a surprise to the marketplace, and you effectively have a one-way market, and they're doing something structural in the context of a dicey cyclical situation. >> so we want the market -- >> it's bigger than just devaluing. are they goods to stairstep, and always will be -- >> they'll probably be on both sides of the market for a while

until the market learns it's a new mechanism. it used to be if you knew what the dollar was yesterday, you knew what it would be today. now they're reflecting all currency movements overnight. it just takes time to learn it. markets can't figure it out immediately, so they will probably have to be on both sides of the market for a while. >> it does and does reflect -- what we just saw in the trading, they said it's gone too far, they support it, we saw the pop and our futures are now off the lows. how do investors make decisions? >> it's a learning process. half a decade ago when the fed was doing all sorts of quote/unquote unconventional things, there was a learning process. it's a learning problem, and actually i think china is

reasonably good at this sort of thing, but you can't do it in 24 hours. the markets have to recognize, this is not just a one-off 2% devaluation, it is part of a mosaic of trying to get the currency be a more global -- >> are they good at manipulating equities, too, while they're at it? [ laughter ] >> i think they are less skilled in that area. >> it's a hard area to be skilled ought. we'll be talking more over the next two hours with you. meanwhile, markets in asia closed lower across the board, as we flip that board around, we'll tell you what is going on in europe. the cac is down over 2%, the dax also, and ftse.

the dow looks like it would open off 140 points right now, and the nasdaq off about 35 points. let's get to some of the top stories. we're watching oil prices again today, saying world demand growing at its fastest pace in five years, but the watch dog still signaturing -- predicting u.s. oil output will likely take a hit soon as producers begin to suffer from oil prices. dropped to 29 million in the first quarter of this year, according to a new report from the cdc. the biggest declines in the uninsured came among the poor and near-poor americans given that medicaid expansion. and facebook working on a new app to sent alerts to users. it's expected users will be able to select news sources and receive is mobile notifications

for stories. they're calling this like the new twitter. >> that's right. maybe twitter will not be bought? i wonder what is happening with twitter shares. >> i'm not sure this is going to work any better than anything else. i think instagram is 'close to twitter as it gets. >> a billion they bought instagram for, one of the best purchasing probably in history. our guest host may be retired, but he has his finger on the pulse of the work us. paul mcculley is former head of the firm's short-term bond desk. paul, you mentioned that this is a learning experience. learning experiences can be very messy. you think this continues for some time to come? >> yes, i do. the world is short of aggregate demand, and we have chronic deflationary pressures, and fiscal policy is not being used

to stimulate global economies, so central banks ends up being the only game in town, not because they should be, but by default. so essentially every country is trying to figure out how can i get a bigger piece of a pie that's not growing very quickly. some call it currency wars, i don't like that at all. the fundamental problem is the pie ain't growing big enough and everybody wants a bigger piece. now, if i get to be policies are for a day, i say let's increase the size of the pie and use fiscal policy, but in the absence of that you'll have central bank it is forefront and markets every day will be slachislach i -- slavish to every move or every word from an fomc official. it's a new part of the life

we're living in. i don't like it, but -- >> what they wouldn't agree with each other on is how to get there? how would you say we should be growing this? how do we get back to the arena where we are growing? >> first and foremost, the notion of physical austerity should be chucked way into the next county. when i look at the last five years, whether it's in europe or the united states, this love affairy physical austerity or -- is an f answer to every graduate school. >> though china has not been working with austerity and it's not worked there. >> china is the one glorious exception, particularly right after the crisis in 2008 and 2009. they went proper keynesian, and it actually worked.

we should have a great deal of public investment in the united states, and the notion of austerity in europe is asinine. >> what do you really think? [ laughter ] we've got to break in for one second. we have news out of alibaba. >> earnings did beat the estimate, but revenues fell short and revenue growth slowed to the slowest rate in three years. total value of transactions across alibaba's transactions, and the ceo will join us at 9:00 eastern. >> so, paul, that is another indication, slowing growth in alibaba, which is another chinese company. i don't know how you kickstart what is this cyclical sort of chasing, there is no deplanned

so we can't build for it. use know how you knock yourself out of it. >> i wish i knew the magic answer. china has done a fine job in recent years, but there's a limit to how much they can do when the rest of the world wants to piggyback on chinese demand. their demand has been too focused on public investment, too focused on the export oriented sectors. they're trying to move to move domestic demand, which is the right thing for them to do, but it's a difficult transition. i agree with you 100%, it's difficult for china, but not because of mistakes they are making, but the context of what they're operating in and what they're trying to do. it's a historic shift to mork from a inspect model where it you have a robust household sector. they want to do it, and i think

they will do it in our lifetime, but doing it on a cyclical horizon is really difficult in the context of a glob liquidity if trap. >> one or question back to alibaba. one of the things they just announced as well is a buyback, huge buyback. what does that say? a chinese company that's supposed to be growing, ostensibly investing in its own business, deciding that rather that do that they're going to buy back stock? >> it's been an unusual and strange development here in the united states for the last five years, and now it's going global, and i can understand companies saying the best investment i have is to buy my own stock from a microperspective. from a micro perspective it says the private sector is not investing, we need more public investment. public investment is not an oxymoron. it actually is a bona fide,

legitimate vehicle for stimulating aggregate demand. in some respects it's a symptom of the problem that we have a shortage of investment. the private sector doesn't want to do it. we don't want another housing bubble, public investment is the often solution. just nobody in washington has figured out the obvious. >> if i'm alibaba and i'm buying back stock, what signal am i andying back? is there any explanation for doing a buyback when you're supposed to be one of fastest-growing companies in the world? >> from a textbook, it wraps the p multiple on that is stock is a bit too high. when they are spending their cash flow to buy back stock, as opposed to invests, that means that maybe the marketplace has an excessively high estimate of growth, and remember the higher issued expect ailing is your higher p.e., this is not a ringing endorsement that i have

great growth so therefore it should lead to the question that maybe the p.e. multiple is too high. >> just to tell pea the p.e. multiple is 47. if you're looking at a forward multiple, you're looking at 27. one thing that occurs to me is the game that we played with the fed, where we were going to go into q.e. and we did it aggressively, it works when the globe is not doing the same thing? how do we get out of it? >> if everybody does it at the same time, it works. >> it's trying to get out of it first. >> no, no, the fed is out of the q.e. game. >> we're still at zero interest rates. that is supposed to be for emergencies only. >> actually i think it's an important issue, because i think the united states is emerging from a liquidity trap, meaning that you don't need to be at zero. and i think the fed would like

to have what i call a valedictory, notwithstanding the fact that fiscal policy was going the wrong direction so i don't think -- that we got an inflation problem and the economy is too hot or anything, it's simply like the graduation speech of the number one person in the class when you were in high school. it's a valedictory, we did it. >> but it rings hollow, especially if it's done to save for their legacy purpose as opposed to being the right thing to do. look at the u.s. dollar. now look at it against the context of every currency weakening again. we'll have an upward spiral that's tightening fed policy at this moment already. >> i think that's why the fed hasn't done it so far. they may or may not do it in september. they are data dependent, and they're all aware of what's

going on in the world. this is not a sense of urgency that we have to get off of zero. it's more the issue of declaring victory, because if you say i'm looking for some excuse not to get off of zero, you will find an excuse to not get off zero for the rest of your adult lifetime. >> and we have used every excuse. paul is with us for the rest of the morning, he's our guest host until 9:00 a.m. if you haven't figured it out already, his father was a preacher. he has a lot more to talk about. when we return, a top secure expert says the occurrence agreement under consideration for iran is the only chance to curb the nuclear program. sandy berger will tell us why he thinking there won't be a better deal. and barney franks joins us to talk about politics and executive pay. plus what it looks like when the super-rich rough it. the way i like it.

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let's look at futures right now. another difficult overknight session out of china, but the selling was stemmed on some unusual last-minute intervention by letting the currency float. dow futures are currently

implied to open lower by about 135, on top of the string of losses we have already seen in the last 8 to 10 trading sessions, the s&p looks to open down 16 points, the nasdaq another 35. payment technology provider f.i. circumstances buying sunguard. that's a $9 billion cash in stock deal. it has annual revenues of just under $3 billion. check on the shares of alibaba, earnings did just slightly beat, but revenues were shy, revenue growth slowing to the lowest rate in three years. alibaba isn't alone. check out shares of other big chinese companies. baidu, waibo, and all down. alibaba's ceo is joining us at 9:00 a.m. eastern. the deal between iran and

six world powers comes for a congressional vote soon. one former national security adviser says it doesn't matter whether the deal is good or not, it's the only one we want. it was an adviser in the clinton administration. good morning to you, sir. >> good morning. i want to read from this extraordinary piece that appeared in "politico." you say it would not stop iran from supporting ha sad, hezbollah and syria. the underpinnings run deep and we should not expect them to change because of this agreement, but that is a reason to support the agreement, not to oppose it. explain. >> we shouldn't expect this agreement to change iran's behavior in the region. they're still going to continue to be threatening, continue to be trouble, but what the agreement does is that it stops

the nuclear program. any one of those conflicts that iran is involved in is more dangerous more difficult if iran has a nuclear weapon. >> it's not more dangerous to give them $150 billion to sponsor that terrorism? >> we're not giving them a nickel. let's understand what this is. this is a return of their money which is being held in chinese banks, european banks, during the sanctions, that money was being held. the sanctions were for the purpose of getting them to the table and negotiating an agreement. they have done that, so the money comes back. having said that it's probably at least than $100 million. they don't get it until they've done everything they're obligated to do under the agreement, so we're not writing a check for iran. >> i appreciate that, but you

don't believe that that is going to hasten their spending of additional money on things that are clearly not in our favor, at least in the immediate term? >> i think maybe some of it, but i have to tell you, those people who are cheering in the streets of tehran about this agreement are not cheering because iran is getting rid of their centrifuges. they're cheering because they believe that they will now get some economic assistance, that their lives will be better, and if they spent money in syria and not in iran, he's going to be in trouble, so i think yes, some will go outside for mischiefous activities. we have to be prepared to meet it. >> chuck schumer obviously has come out on the other side of this, one of the only democrats to do so. you say he's wrong and he's wrong because, what, that there is no other deal to be had? that if you hold out there's

nothing coming? that's the central piece of your argument? >> yes, i think you start with the proposition that this agreement is good on the merits, it stops their program, it's verifiable, i don't think they can cheat in a significant way. >> but there are other people who say if you want to go in there and actually inspect, there's a process. it could take 24 days during that period, who knows what could happen. >> all of their nuclear programs are going to be under international supervise, with inspectors, cameras, satellites, seals, every device known to man. a place that we suspect and we want to get to, and they say no, what happened? we're not going to blast our way in? in that situation, they have two weeks to open it up.

if they don't, go to the united nations, and the sanctioning can automatically be reimposed. i think that's a lot of leverage that the international community has against iran to open these sensitive sites. >> how much of the argument is based on the merits of the agreement itself, versus this idea that we have a certain place in the world and right now if we were to oppose this, it puts the president and this country, in your words, in a tough place, with everybody else? >> i don't think you can be for this if you don't think it's a good agreement on security terms, first. i think this agreement makes the region safer. without this agreement there will be other nuclear powers, all these conflicts will be more dangerous. in the first instance, i think it has to be a good agreement as an arms control agreement. having said that, we've led this effort. this has been an effort that

president obama, secretary clinton have led. they put together an extraordinary international economic coalition of sanctions, greater than anything ever done to put pressure on iran. they got them to the table, and they used that pressure as leverage to get very significant concessions out of iran, more significant, by the way, than most critics, i think, even thought of before this deal was done so i do think having led this effort, if suddenly with everyone else saying -- the europeans, the russians, the chinese, the president, it's going to be quite unusual for the world who say, the whole world is for this except the united states congress. >> i want to play devil's advocate for a moment. if we assume that everybody you have just said is correct, the deal goes exactly as we hope,

the iranians act like good actors and go along with all of this, i've always heard it described by an israeli saying best-case scenario, if all goes well, you are still looking at ten years down the road, a system somewhere the united states has recognized nuclear power within iran. at that point every other country in the region wants to be armed as well, wants nuclear powers, and it makes for a less safe rijen ten years from now. >> first of all, it's 15 years where they will not be able to enrich. when that period is over, this president -- i would say any president would say if iran moves to get a nuclear weapon, we'll prevent it, stop it, military action if we had to. >> but if you're not looking at nuclear power being something that we are going along with and saying, yes, we agree that iran should have this, if every region wants to do that, do you feel safe 15 years from now?

>> the iranian nuclear program started ten years ago. it just didn't happening. thieve building centrifuges, adding centrifuges for ten years. you're not legitimizing iran's nuclear weapons program. that's what matters. i don't know what it means to say you're legitimizing centrifuges. you are not -- a nuclear program that's been around since 2006, so it's not something new all of a said that's going to happen, you're stopping that program and rolling it back. >> we are going to leave the conversation there, sandy. we appreciate your perspective. i'm sure we will be continuing the conversation. we look forward to talking with you again. >> thanks. when we come back, donald trump sounding off on china's devaluation and who he might tap as ambassador to china if he is

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now the answer -- who is the only woman to appear on a u.s. quarter? the answer -- helen keller. welcome back to "squawk box." this is cnbc, first in business worldwide. china reportedly intervening to support the yuan, this came after they devalued the yuan yesterday. in the final minutes of trading in asia today, they stepped in and started supporting the yuan, as paul mcculley is here, he pointed out they're going to have to be on both sides of this. this has created havoc everywhere, though, the dow down on an implied open. once we got the news they had stepped in to try to support the yuan, we did see futures turning

around a bit. the futures look like they will open down by close to 18 points. speaking of china, alibaba's quarterly revenue, shares trading lower on the news, and alibaba isn't alone. baidu. seatrip and others are trading lower. markets got hit hard yesterday, chinese stocks down, and again u.s. futures down significantly after major declining for the market yesterday. and gop presidential candidate donald trump weighing in on china, he said the currency devaluation will suck the blood out of the u.s. and accused china of dumping cheap exports in other countries and keeping american goods out. here's what he said -- >> i said, hey, carl, in fact

now the press will call carl, i'm sure, but carl icahn, if i get this thing, i want to put you in charge of china and japan. can you handle both of them? okay. china and japan. he said, yeah, i'll do it, i want to do it. you know what? just relax, everything will work out fine. we'll make great deals. carl doesn't like to wake up before 11:00 in the morning, there's a bit of a time difference issue, so i don't know how they're going to get through that. a new poll has trump leading all gop contenders in iowa, though he lost some ground after last week's debate. a look at this time lapsed video, a dust storm known as a haboob, created low visibility. flights were delayed at phoenix international airports. winds of 50 to 60, flipped small

planes at the chandler municipal airport just outside of phoenix and produced widespread areas of damage. so not good. >> ouch. not at all. coming up, former congressman barney franks joins us to talk about the pay gap between ceos and their employees. and a look at u.s. equity futures, the dow off the low, bur we're looking to shed another 143 points at the open. "squawk box" will be right back.

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well, ceo pay becoming a controversial topic of conversation from wall street to washington. barney frank was a congressman from massachusetts for three decades, as well as chair of the house financial services committee during the function crisis. he joins us this morning look with our paul mcculley, formerly of pimco. good morning, congressman. good to see you again. >> good morning. the s.e.c. finally issued this rule, it's going to require more disclosure over ceo pay. a i'm going to quote the journal this morning saying a new s.e.c. rule has no function except for feed the democratic chorus of grievance. what say you? how southbound stan tiff is this? >> well, i'm surprised that an

organ of public opinion would be more upset about more public information. he says feed the grievance, in other words he doesn't want people to have information he thinking will lead them to views he doesn't agree with. again, i'm sorry to see that coming from a journal of public opinion. i don't like to get credit or blame for something i didn't do, that was not in the house bill. we had in our bill, a couple provision, one was the requirement there be a shareholder vote on pay, say on pay as it's called. particularly for financial institutions, frankly i thought the sing the most important thing we had was one that could know be pay schemes that incentivize people to take risks. we don't want a one-way kind of incentive. this was sponsored bush it came from the senate, senator menendez. >> your point is ints one thing

to move forward for a say on pay kind of rule, which this doesn't do, this is just disclosure. do you think it should have been more barbed? >> no, i say we have two things that were binding in the bill that require action, one again, i think serious problem where people could take a risk, a gamble high up in financial companies, and get a bonus if it paid off, but suffer nothing if it doesn't, which means people were taking more risk than they rationally should. on this one i think it's a useful piece of information. i would say this -- if i were a ceo and were embarrassed by this, i think i would try to do something about it. if ceos can't defend the amount of pay they get, then that's their problem. my own view of it is the major piece december and you're right about something more barbed. what i would prefer december not prefer, but in addition is a

taxation at a high rate for the very, very high salaries. >> barney, one of the things that people in the market who are again this rule would say is shareholders don't seem to care. if you look at -- every time proxy season comes around, for better or worse, the big shareholders, even the small shareholders for the most part, 90%-plus, vote in favor of these compensation programs. is the market broken? what's wrong? and how is that going to change that? >> well, that's a very valid point. this one is not so much aimed at the -- you're right, we put the say on pay in there. it's a right that shareholders -- a right to constrain pay that shareholders don't seem to want, though it has had some impacts on some -- i think the change in the ceo at citi corp changed because there was such a large vote.

i think in part of it is many of the large institutional shareholders who vote have other relationships with the companies in part. secondly many of the large institutional shareholders are themselves run by ceos who get large salaries. people who make a lot of money are disinclined to vote against other people making a lot of money if that same principle may come back at them. it doesn't do any harm, and this, you never know, is it a constraint in they want there have been a couple cases where it's operational. >> not that the market is broken, but i think the problem is there are no incentives to constrain ceo pay. boards of directors and ceos have a cooperative relationship, as you should have in a well-functioning operation. the shareholders themselves, the large once have no incentive to vote no. that's why the ceo pay publicity has an effect. i still say my favorite way to

deal with this is to say, given the need for risen, higher taxation at the upper levels. >> paul? >> congressman, let me step back a bit from this immediate issue of ceo pay to your book, which i just recently completed, and is the finest read in 20 years for me. it's an awesome book. it's rich -- >> wow. >> -- in all sorts of dimensions, your personal story, the political story. one of the core thesises that came out to me is you expressed that american people don't inherently hate government, they don't believe that government is inherently bad, however they are frustrated that for a generation government hasn't delivered that which it did to our parents' generation, and that they're frustrated with the outcome of government as opposed to the notion of government involvement

in the economy itself. i think that's a robust thesis, in your viewpoint, was there ever a tipping point where effectively a lot of people just said the hell with government, and particularly people who actually would be benefited by a more robust public sector? >> well, first of all, thank you, having you said what you said was wonderful. as far as summarizing my thesis, if i write another book, i'm going to ask you to do the summary on the jacket, because you put it in some ways better than i was able to myself. that's exactly how i feel. par docksically, it seems that some of the angriest against government are people who have the strongest belief that if government with us run right, it could do something. in other words, they feel portrayed. they didn't do nothing when my

baby left town, i feel that way towards the government. you didn't do nothing when my pay was eroding and the rich were getting all the money. as to when it happened, i do try to say the period in which it happened, there were two stirring comments in inaugural addresses, by very popular presidents. john kennedy in '61 asked what you can do to for your country. the next five presidents don't do very well, nixon, ford, carter, johnson, they were all forced out of office before they wanted to leave. that was indicative of public growing dissatisfaction. finally ronald reagan masterfully takes advantage of this, and his signature statement in his inauguration 20 years after kennedy is, government is not the answer to the problem, government is the problem. so it seem to me clearly happened during that 20-year period when you went from kennedy to reagan, and four presidencies, johnson, nixon,

ford's and carter's, all of which end ed unvon tearily. thank you both. we'll have much more. >> thanks to my favorite book reviewer of all time. >> great conversation. whether we come back, camping for the 1%. we'll show you how to rough it and do it in style, with cnbc wealth editor robert frank and the founder of abercrombie and kent. we'll be back in just a moment. you totalled your brand new car.

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♪ welcome back to "squawk box." we're now camping out on sixth avenue today. or should we say glamping? robert frank joins us with a very special guest. >> this is so much better than glamping, andrew. he is a legend of luxury travel, jeffrey kent created the first luxury safari in 1962, since

then his company has grown to more than 3,000 employees, serving over 250,000 travelers a year. they call him in part indiana jones, part richard branson, out in a new book called "safari" tell us about the first luxury safari, 1962. >> i worked out you either went hunting in those days, which i didn't approve you have, so i wanted an experience, so i had to build a camp. and so then i had the idea we build this beautiful camp, but i would want showers, flush toilets. >> champagne, caviar. >> you need ice, refrigeration. that would allow champagne and caviar, being watched by hippos at the same time. >> this has become a huge industry, luxury safaris, luxury travel. when you did this, what was it

like? >> we were the first to build a luxury camp ever, and my father thought i was crazy. your trips start at $8,000, go up to $135,000 per person, the private jet tours, which are, by the way, sold out. where is demand coming from? >> well, the majority of my business is about $8,000 a trip. but then i had this idea to up the tent safari, with a beautiful private class, and gotten to greenland, easter island, southern philippines, and the customers come, they're all international, mainly american, but they're international in scope. >> now, you also have taken everyone from richard burton to the gateses, to multiple presidents. what are the hot spots or most interesting places right now to travel? so many of these destine actions

have become crowded, overrun. what are some secret hot spots around the world? >> i think pioneers, i've pioneered them so well, they've become busy. i think hot spots today are probably botswana, and incredible places in the delta. myanmar, they have a beautiful -- and sri lanka, and uganda, we have gorilla and chumps, and the whole nile. really exciting. >> it sounds great. >> you have opposed to the hunting that were taking place. what do you think about the huge outrage recently? where do you stand on any of this? >> very simple. i'm actually really appalled and disgusted at what happened. i think this whole business of professional hunting has to be seriously relooked at. i know the arguments about hunters are great conservationists, but when i was born we probably had 500,000

rhinos in it is world, right? today we have only 5,000 black rhino. maybe there were 20 million elephant when i was born, we're losing elephants at about one every four hours. and going on like this. they're going to be extinct. rhinos will be extinct within ten years, and conservation should go to the local people. how much better for them to have an animal like our gorillas in uganda, whereby every person sees a gorilla, they make over a million a year that goes to the community. >> do we have to go to africa to stay in a tent? this is beautiful. can i set this up anywhere? can i rent one here in america? >> would you like a little sleep? >> let's have a look. >> is this the $8,000 or $135,000? >> even i can stand up in here. >> wen ensuite in africa,

flushing loos, espresso machines, beautiful, you know, love mwildebeests wandering on the outside. >> as long as they stay outside, but you lock it up, you see? nothing comes in, and the rain doesn't come in, either. >> it's canvas. >> you know what? animals -- when i was a kid my father took me on safari, no tents. we had a mosquito net. he told me please don't worry, no animals will ever come through the mosquito net. all right, dad, i'll take it. >> great stuff. >> robert frank, thank you for bringing us the story. when we come back, much more from our guest host paul muck cullie, and at the top of the hour terry lundgren will join us on the set. stick around for that and a lot

more when "squawk box" returns. ♪ blinded by the light ♪ wrap up like a --

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welcome back this morning. daredevil nick what learneda completing his longest ever walk performing at the wisconsin state farther, at more than ten stories high above the speedway, carrying a 45-pound bar for

stability. the wire apparently no wider than a nickel. that always scares me, but we all watch. we do. a quarter mile. coming up macy's is set to report. plus a first on cnbc interview with terry lundgren. stick around. we'll be back after this quick break.

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china has markets see reg. will the fed hold off a rate hike? and what should do with your investments? we're in market alert mode with our guest host paul mcculley. terry lundgren joins us with the numbers, his outlook for the sector, and the consumer, how global markets are affecting business. alibaba's earnings out a short time ago, we have street reaction, as the final hour of "squawk box" begins right now. \s live from the most powerful city in the world, new york, this is "squawk box."

welcome back to "squawk box," on cnbc first in business worldwide. kelly evans is with us today. good morning, we are less than 90 minutes away from the opening bell. take a look at the futures. dow looks like it would open off 125 points. checking out markets in europe as we flip that board around, you're going to see a down picture as well. the german dax off over 2%, aand ftse 100 off as well, sort of one step forward, two steps back, and now they're trying to push it back up again. >> andrew, just as investors were catching up, then capes new overnight, they actually interviewed to help keep it at a

level. up about 1% off the lows. that, as you mentioned helped get the futures off the lows. we have some breaking news, earnings from macy's just crossing the wire. it looks like they're coming in with earnings below expectations adjusted profit of 64 cents a share. the street had been looking for 76 cents a share. it looks like the company is also lowering its guidance for the full year, or at least in terms of comp ran store sales. they now say they're looking for based on a weaker than experted performance, cutting the full-year guidance for comp sales on owned plus mr. and mrs. -- on an owned plus license basis to be approximately flat. earlier they had given guidance -- comp sales on an n owned basis will be approximately 50 basis points. the company is talking about earnings for the full year 470 to 480 that is maintaining its

guidance it had given earlier. but it includes the sale of real estate in downtown brooklyn that was not factored into previous calculations. so if you want to look at what the stock is down now, it is down by about 4%. macy's closed at 67.53, looks like it's trading at 64.79. joining us is terry lundgren, i want to thank you for coming in today. this is difficult news, and we appreciate you being here, good news or bad. >> we're going to do that, face the music when we have good quarters, bad quarters. this is a tough one, no question about it. we definitely are seeing that the consumer didn't shop in our categories to the degree we thought the consumer would. a number of reasons, we're against our best quarter of the year last year. that's one issue. clearly, i've mentioned this before, that european, the chinese stores, the brazilian

tourists arndt the world, they're just not coming to america, and the strength of the dollar is impacting that. when they are here, they're not spending in our categories. i think finally, you know, you're just seeing where the consumers is spending, and definitely you're starting to see a little up tick. not great, but a bit better, is in automobiles, in housing, it's in health care, it's in, you know, certain -- and they're going to get to our categories, becky, but they weren't there are weren't there to the degree we expected this last quarter. >> when you talk about foreign exchange, the dollar strength, tourists not coming here, i know that has to be issues for like the flagship stores here. >> las vegas, miami, los angeles, san francisco, macy's in particular is very well known around the world. we benefit from that when tourists are here shopping. there's a couple other like us,

but frankly most do not have the same benefit or hurt that we have because of our recognition, thinks about the thanksgiving day parade, "mar cal on iracle street." eventually i anniversary it. it's not because a dollar will change, i think you're right about that. i think i come against it. it happened in november, but i think the spending is in mid december, so it's a good time to go against softer numbers. >> let's talk about what it means. >> maybe a little reluctance to spend. everyone is trying to figure out why retail sales have been so lousy when consumers have gotten a huge amount of cash back in their pockets because of oil. >> and i frankly thought that. i thought we would benefit from

that. i think that consumer has definitely spending in the lower channels. i don't know that for sure, you'll see though numbers later, but that would be my guess and my forecast. i thought we would get more of that share than in fact we did. i think the consumer got a race, if you will, at the gas tank, and i think those prices will stay low for some period of time. the consumers is saves money. you see the savings rates are hot. i think overall that's ga thing, but eventually, if history repeats itself, and it has a tendency to do so, they will get back into spending in -- i just hope it happens during the holiday period. >> do you have to move downmarket at all. >> i think you know we're opening off price business for the first time. we're opening the backstage stores. i'll have six open. so i'm going to get into it and try it. if it works, it's an easy expansion opportunity. >> when you look at the

omnichannel, and you've been a leader in that, is it working as fast? >> i'm the seventh largest internet company in the -- and right behind netflix, if my pace continues, we'll be the sixth largest. we're growing significantly faster than online sales are growing, but i think that's how the consumer will shop more so. i don't think they're going to want to touch the product and want to try a product on, but they may go back and buy it on their sofa with an ipad. so i think that trend will continue, in my opinion. >> let's talk about what you're talking about with the guidance, you say for 2015, you're still expecting earnings of 470 to 4.80 a share, but that includes the sale of this real state in downtown brooklyn. it looks like you're selling a property to -- >> that's the gain, $270 million transaction. >> what would that mean if you strip it out. >> very exciting, actually. first of all there's news about

real estate valuations. >> wait a second, jeff smith at delivering alpha named macy's as his single best idea. >> good for him. >> he doesn't think the value is there because of the real estate. this is the first time we've gotten to talk to you since then. >> this is an example we've been working on for well over a year. this is a great example. brooklyn is -- you know, brooklyn is a market that's booming, right? this fulton street has not been booming, we've been working on with the tissue man spire group for over a year to try to figure it out. we're selling our parking garage, we're selling the top floors of our building. we're going to have five flores, it's 150 years old, it definitely needs a remodel, not that it hasn't remodeled in 150 years, but it definitely need a remodel, but i'll have a big infusion of investment, not exactly a harold square, but that's the kind you can imagine,

and you've see office parks and all kinds of things happening around the store, and i still own the building. >> you're not going to be leasing the building back? >> no, i sold them the top floors i don't use, and sold them the parking garage, which they can figure up now. >> what do you make of the larger jeff smith thesis, that you could effectively break up the company or split it into two? >> again the subject has been floated by two other retailers in the past. we all looked at it. having says that i think real estate values are so high, we have to open our minds and think about it differently. we're not going to just figure this out with our bavgers, we've hired real experts. green street advisers is somebody very well known in the field we just recently engaged them to go through the detail. a lot of these subjects have big tax implications that we have to

be thoughtful about. so we've been to make sure what we're going to do is great for the shareholders short term. >> what was your near-jerk reaction? he's basically talking about creating two companies where the retailer would be leasing its space from the real estate holding company. when you first ahead that, what did you think? >> i don't have knee-jerk reactions anymore, becky, i really don't. i want to make sure we are thoughtful about this, and frankly i'm a retailer. this is what we do. we try to satisfy consumer demand and think about what's around the corn and what they're thinking about next. i think we just demonstrated that today with our brooklyn example, obviously, you know, we want to go after those opportunities. we'll judd see. by the way, there would be order transactions. we've already been working on other subjects. >> have you spoken with starboard about this? >> i have not, but my cfo has, and listen to do their ideas, as well as other shareholders who

have talked to us about these subjects, as we've said, the way i just described it is we're looking at these things, but having real experts guide us on this subject. >> before you go, let me pivot and ask about the trump factor. you start stopped carrying trump merchandise after he made comments about immigration that you felt uncomfortable with, in response he was tack talking about a boycott. that was just last month. would that have been in the quarter? is that possible that's having an impact? >> you know, first of all, this is a business decision. if hillary clinton had a handbag collection, we wouldn't be carrying that, either. so it's really a presidential election candidate -- >> but it's not his position on immigration. i'm not going to comment on any of those things. all i will tell you is we will not carry any product from any candidate ever. this is a brand-new experience experience for us. i do want to mention china. i think this opportunity that

we've established here with our joint venture, with victor fung, who are fantastic leaders, to be online in china directly, own the inventory in china, which is brand new, instead of shin it with a 40% duty, this is going to be changed our ability to connect with chinese consumers who frankly are shopping in america, and this is just reinforcing the connection. does it make it cheaper? is there local sourcing? how does that work? >> actually, what you're saving is the duty and the shipping, which are gigantic from america versus, you know, china to china. >> and terry, again, with donald trump, have you spoken with him lately about this? >> i have not spoken to him lately, no. >> i'm getting e-mails, an e-mailer saying donald trump is

denouncing macy's, why are yn't you denouncing trump? >> i'm not going to retailate that way. it's just unfortunate. he's a presidential candidate. if jeb bush or somebody else had a product line, we wouldn't be in the businesses either. half the people are not going to agree. it's that simple. so you just -- you've got to be thoughtful about it. >> "wall street journal" this morning does make it sound as though you would be one person in the past he was asked to call upon, his fund-raisers wanded him to reach out to 20 close friends to potentially help with his campaign. it sounds like today that friendship maybe isn't there or no longer the case? >> i just haven't talked to him. as far as i'm concerned, he's a good person, you know, he is who he is. if he thinking it's coming out and -- sometimes i'm that way as well, but as far as the business is concerned, you know, our decision to end that relationship was a business decision, based on --

>> did you have a bad quarter because of it. >> no, absolutely. again, you are someone who has shown up on the show repeatedly, good news or bad. >> i'll bell here. we're not here just talking about the good things, but when there's challenging moments like this with the consumer. we'll be back. we've had five years of fantastic return to shareholders, and this company is solid with a management team that i think is the best in the try. we'll be back. >> thank you, terry. channeling joe, i should say you're looking styling in your armani? >> armani today. coming up, while -- why paul mcculley says investors should be ready to celebrate a rate hike. his thoughts on what will happen in september and why this market has still room to run. and john kerry revisits the recently reopened embassy in cuba. we'll head to havana for a look at the changes to come on the island nation.

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welcome back, everybody.

watch shares of at&t. the stock looks like it's a bit under pressure. right now it looks like it's trading just at around $34, down almost 2%. company is updating the full-year guidance after the acquisition of directv. in terms of what it's looking for in terms of earnings per share, it says it's looking for an adjusted earnings per share of 262 to 268. the street had been expecting 2.60, but there is an addendum. if you look at the asterisk they're putting by that, it does say -- that adjustment excludes adjustments for nonkachmarik to market benefit from plan adjustments, merger integration costs and other charges that are not reasonably estimable at this time. they also are looking at free cash flow of $13 billion or more, the 2016 to 2018 guidance will be including things like the consolidated revenue growth

in line with gdp growth or bert and improving free cash flow with a different payout ratio in the 70% range. we'll be hearing more about this. they have an analyst conference at 9:00 a.m., but it does look like the street is selling off. the numbers just hit in the last few minutes, and it may take time on how to match up apples to apples. paul mcculley former head of the term short-term bond desk with us, and if we could show futures under pressure again and interest rates this morning, paul, that ten-year sinking lower. for everybody who for the last six months to a year or more has setting up portfolio for the first fed hike, what are they supposed to do now? >> i think we will have the fed get off of zero in our lifetime. this would be the most

advertised rate hike forever in our experience, and everyone's focused on which month it's going to happen and which month it will not happen, so i think people need to be positioned that the fed is going to get off of zero. not a mean, nasty nefarious tightening process, simply get off of zero. >> and what is that going to mean? why does that matter so much if they'll only make a one or two-step move? >> because it is declaring victory in the extraordinary set of policies that were put in place back in 2008. remember they've been at zero since december of 2008, and did a whole bunch of other things, and they've winding them down. i look at the first rate hike, or getting off of zero as a valedictory, the fed will be graduating first in class for getting us out of a liquidity

trap, notwithstanding boneheaded fiscal policy. i don't look at it as a citizen as a bad thing, but very much as a good thing. remember, i don't work on wall street anymore. i'm retired. i'm a citizen. >> i understand why we should be celebrating, okay, the economy is there, we're healthy, we have healed, but what happens if they do this, paul and the market reaction ahead of this is telling you, if anything, that the outlook looks weak eller, you have the other factor, china, falling oil prices. it does seem like a market that's poised for a -- it looks like perhaps lower rates on perhaps a weaker one. the fed may or may not go in september. when they say they're data dependent, it's not just the economic data, it's the overall mosaic of risk appetite in the marketplace. the fed wants to declare victory and get off of zero, but they're

not going to do it just to prove they can do it. they're going to try to do it in the context -- will it be the most discounted event and nothing actually happens, because it will be fully discounted, but i think the important thing for the marketplace to look at, both bonds and stocks, is that this is the fed declares victory and yellen says irs more important than the date -- literally the fed will be after the first rate hike, whenever it happens, kind, gentle and compassionia the. that's what's in the stock market now. i don't think you necessarily get to go to heaven twice for the same good deed, but i don't think it's a disaster for the fed to give the valedictory speech. paul we'll have more with you. appreciate it.

we are now just two days away from a historic reopening of the u.s. embassy in cuba. john kerry will be attending the event. we'll talk about what business leaders have to look forward to, when "squawk box" returns in a moment.

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later this week, u.s. secretary of state john kerry travels to havana for the flack raising at the u.s. embassy. now that diplomatic relations have been established, there are a lot of questions about whether or not there are business opportunities for american companies there. our chief international correspondent michelle caruso-cabrera is in havana with a look at the opportunities. good morning. >> so on the one hand there is still a u.s. embargo against cuba, meaning most american companies can do very well. at the same time president obama has signed a number of executive orders make it easier for some sectors to do easier here, food, pharma, other sectors. anybody who wants to invest here has one other big hurdle. it is the cuban government, which is quite problematic. let's take hotels, for example,

there are foreign companies here that don't have an embargo against cuba. for example, malea of spain, they have invested in hotels. they manage hotels here. they don't control any hotels here, because thus far they haven't been permitted to. the u.s. government -- the cuban government insists everything will be a joint venture. we spode with richard feinberg of the brookings institution, he's -- he says, you start a business here, the cuban government doesn't let you choose your workers doesn't decide how much you pay your workers, and it has the highest labor tax in the entire world. you don't pay your workers, you pay the cuban government's employment agency instead. >> then that workforce entity pockets about 95% of that payment in hard currency and

pays the poor cuban worker in local pesos the equivalent of only about 5% of what was actually paid by the corporation. >> reporter: so keeping in mind, guys, that every other country in the world has been able to investment in cuba brookings estimates from 1990 to 2009, the total amount of foreign direct investment, $3.5 billion. that's it. a small, small amount. >> okay. thank you very much. we will see you throughout the rest of the week in the meantime when we come back, alibaba shares are under pressure after quarterly results. we'll hear from an analyst talking the currency slide. as we head to a break, take a look at equity futures at this hour. the dow down about 114 points. we're back in a moment.

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welcome back to "squawk box." here is what's in our headlines this morning. we are watching shares of macy's

as earnings missed estimates, also cutting the forecast for the full year. the ceo told us earlier today the fast-growing online business and other measures should boost sales in both of short and long term. the stock is down, but by less than 1%. quite a bit better than when they initially had that news. applications were up a tenth of a percent as refinancings jumped, but applications for new home purchases, those fell. a fresh read on the u.s. labor department, it will be out with the jolts report, the monthly measure of job opportunities and labor turnovers. and alibaba is out of its results this morning, earnings lightly above estimates, but revenues falling short and its growth was the slowest in more than three years, joining us is managing partner robert sanderson.

you grow at only 30% and the market kills you. >> yeah, pretty bad growth rate, but it's a game of expectations and they came in a bit light. >> i was surprised by the buyback. what does that say about their business prospects? >> i think they have a try amount of flexibility, and they're putting it back where they think their greatering return on investment is. >> does that make sense to you? i would have thought you would be -- they're going to be reinvesting a lot of their money anyway, but this isn't something that jeff bezos would be doing. >> they have a tremendous amount of cash generation. unlike amazon, you ringsed. this business model doesn't have that capital requirement. they think there's an opportunity golf dislocation of the stock prize versus what they think is the intrinsic value.

>> we've been talking all morning about the yuan, about china's xhi, or best host -- you think it will be even slower than that. what's your take? >> well, i was asked what they're seeing on the call. you know, the question is, what does the correction in the tome, potential slowdown mean for consumption? and what does it mean for allocations to online versus off-line? that's an open question. we haven't seen many dislocations like this. i think this is the most severe correction in china in 25 years. the chinese consumer 25iers is a lot different from the consumer today, so we don't really have a reference point. management didn't adequately -- our research tells us there will definitely be a withdrawal of some dollars, but the allocations will increase if the consumer response is any indication, because there's better bargains there. >> rob, is alibaba going to continue to be a play on just

the china macro story? or are there specific things with this country we have to take into account, this being the bricks and mortar acquisition, regulators cracks down a bit on internet payments. do you see any specific issues that might hurt them? or is this just going to be how healthy is china? >> this particular quarter there were some one-time issues that hit them. this time it was the removal of online lotteries, which is about 2% of gmv, so that was probably the primary source of the revenue miss. i think it's more than just a play on china macro. there's a very significant shift in the way retail is being orchestrated in the chinese market, and it's moving to online much faster than it has in any of the developed world. a lot of that is the brick and mortar research undevelopment, and it's moving directly in

line. >> is that something you looked at and said, great, and great price? or -- that is the qualify independent of the china best bay, right? >> it is, it's a large consumer electronics and home appliance brick and mortar company. they have incredible in-market logistics, and i think that's the key to this deal for alibaba. they can deliver in two hours, in 150 cities, so there's a big fulfillment piece of the puzzle here and they're trying to bridge the online to off-line commerce gap. don't forts there's 2.3 billion coming back into alibaba, so the sticker price should be looked at on a net base. >> rob, we're going to leave leave it there. you're still sticking with your $115 price target? >> yeah, we'll review the estimates and see where the model shakes out. we still remain positive long term.

i think this is a near-term dislocation, and this is a long-term winner. >> if you were betting just doing your own math, would that come down? >> we'll have to reserve comment for when we publish. >> okay. we will talk to you soon. you've got the lawyers. we have a programming note alibaba's ceo will joining "squawk on the street" for a first on cnbc interview on the company's results. see that in just under half an hour. looking forward to it. china's yuan falling for a second day in a row. the devaluation parking fears of a global currency war. joining us is a senior foreign exchange strat jill at achblt nz. kuhn do you view this more as china allowing currency to catch

up with fundamentals. >> i don't believe that china is actively engaged in a currency war. i believe this is part of a long plan move to open up the currency to liberalize the rate. i guess the moves this week coincided with the record last week, which show the some operational issues in getting -- included in the sdr basket. i think today's move is part and parcel of that. >> the imf issue here is interesting, in some ways they are giving cover to china, do you believe that's all this is about, china wanting its currency to be more included in the global markets? it's hard to make the argument i would imagine as the global regulator today, that given and you have intervention we have seen and the yuan recently is now more viable as opposed to less so. >> i think it's one of the reasons wee they have done what

they have done. i think there are two other reasons involved. apart from the inclusion in the sdr basket. the other is clearly the weakening in china's economy they have already cut interest rates, done various other measures, and the sector is contracting quite sharply, so i guess they decided to ram through one of -- and the other thing that's important is they are trying to live by interest rates. it's very difficult for interest rates to be effective when you have in one part a capital account and trying to have a managed currency, and trying to have interest rates work as they normally intend. this is the unholy trinity in economics. >> paul, do you want to respond? >> we so fully agree, it's so hard for me to ask a question.

you have interest rate interests, capital control issues, and a currency pay, trying to manage all three is exceedingly difficult. they're trying to liberalize and move toward a more market-oriented system. >> but wait a minute, we know china is trying to do all of that, but what have they just shown us? and you really think this particular move, with this timing, is just part of that decades-long move in its economy, as opposed to another effort to try to stem its markets? >> i wouldn't argue with a straight face that it was done on a blackboard somewhere six months ago and implemented today on automatic pilot. it's obviously in the context of the fact that the china economy is weak, they're dealing with the back side of i think bubble and margin lending on the stock market. in the context of a global economy that is too weak.

so i think what they did is in the context of where they are right now, but it is part of a longer-term strategy. and i guess i look at it from the standpoint is they're a sovereign country making sovereign country decisions that are in their best interests. we do that in the united states all the time. we don't expect people to say we should listen to them. >> the fed told us they're not the central banker for the world, but khoon, even if they're not intentional trying to deval their currency, will it in trigger deflationary across its partners? >> i believe that's one of the consequences of what the chinese authorities have done? it's not easy to do what they have done, and i think this is quite clearly seeing that. i think one of the unintended

consequences we'll see furthers declines in the emerging markets currencies, particularly in asia, as china was previously providing an anchor, and now that it's -- it will cause more pressure across the region? >> we know it's been a crazy couple days. we'll have much more from paul here after a short break. we are in market alert motor. the futures right now are down. we'll show you that board, down about 122 points. the ten-year note at this point -- you're looking at 2.111. "squawk box" returns in just a moment.

welcome back, everybody. the company is getting ready to separate into two companies. today we're getting details about what the makeup of the board of those two companies will look like. hp introduced the expected members, and listen to what they have to say here. first of all hp inc., the company headed by meg whitman, she'll serve as the ceo of hewlett pack and enterprise. you have existing members who have been there for a while, including mark an degreesen, to be joined by alcoa and klaus kleinfeld. that will be chaired by the former head of alcatel lucent. they're talking about dan

automaticen, the president of general motors, and mike angelakis. >> cfo? >> what did i say? >> ceo, i thought. >> you're right. cfo. and headed by -- board members will include the ceos of autodesk and -- and the ceo of task rabbit. and skin are le resigning from the board. coming up next, we'll talk to jim cramer, go down to the new york stock exchange, and find out what investors will be watching. the futures are still off 100 points down. we're back in a moment. can it make a

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alibaba out with earnings, and kayla tausche has the

details. >> i know you did the top-level numbers, by i just got off the conference call. there were some interesting points beyond what you saw in the press release and the presentation. first, a local of the questions concerned this mobile monetization rate, and i'm sure the ceo will elaborate, basically saying a lot of the buyer actually browse on the mobile devices, but they buy on pcs, so there's going to be a blending of that rate going forward, that mobile growth will not always be linear. so you could see a bit of oscillation in that number. that's a number that's very concerning for investors this morning. second, they're really concerned about headwinds facing the chinese consumer, what tea leaves we can read about how the volatility in china and weakness in china's economy is affecting the merchant and the alibaba

buyer. john said, short-term movement won't affect our long-term strategy. active buyers average more than 50 times a year, people buy a lot of products for daily life a specific shopping purpose. he said they're going to be monitoring behavior but for the most part, that buyer is buying something that they will still need despite the downturn in the stock market, despite the weakness in the data that we've seen. finally, one point of interest for investors coming up next month is a ladies and gentlemen of the jury lockup that expires in conjunction with the one-year anniversary with the ipo. that that has two biggest shareholders in alibaba, their shares locked up. we know what yahoo is doing. he wouldn't comment on safe bank. he did say jack ma and he have zero intention to sell except for small amounts for charitable

do nations. beyond that, there are no plans to sell. the stock is under pressure. we saw the revenue come in light for the company. we are also seeing growth slowing for a company whose whole story is predicated on growth. that's going to be discussed all morning, especially when we have the ceo on "squawk on the street." >> really quick, my commentary on the buyback issue we were discussing earlier and now that you're talking about this window opening up in terms of selling, is there any connection there? >> reporter: you know, there hasn't been much discussion about the buyback besides a mention add the top of the call. i think most companies with exposure like this believe their shares are undervalued, but it is quite perplexing that you would sell shares at $68 a year ago, buy them back now.

there are a lot of investors who are trying to find out what it means. they say it's going to cover share base compensation. i don't know why a program like that didn't exist before. they are issuing so much stock for employees. we'll have to see for more details. >> appreciate the extra color this morning and more coming up in a few minutes with the ceo. but let's go to post nine. dzhokhar tsarna jim cramer, what are you watching this morning? >> i have to watch alibaba, and i think we all came to ascribe the communist part, be this totalitarian regime that can control the regime. it's not the case. it's causing a lot of contagion around the globe. here's alibaba front and center not doing the number. and buyback, we don't need no stinking buyback.

we need sales. and here's an executive who comes on and is straight guard. you have to love the guy. >> what did you think of the real estate deal that macy's did? the question was had they made interaction with starboard. he said the ceo had. and they come out today where they sell the part of the store in brooklyn that they're not using. >> i know that bar well. the cfo is fantastic. this was a win fall. if they really have this kind of value and this kind of thing. obviously, brooklyn is a store that's coming back and brooklyn the city is coming back but this is just foul money. they bought back a huge number of stock. this is not going away. i like this story, particularly because it is a strong dollar week. one sixth of their business is harold square. when you come on squawk and tell it like it is that sales are disappointing but you sold this property, what does that say? it says it's an undervalued

situation. i liked what terri had to say. can't everybody else did what he did which is say the sales right now, they're not that good but stay tuned. we're doing great things in china and real estate. told it like it is. got to stock up. probably won't be up after everyone sees it's a disappointing quarter, but it's money. >> we were talking about that off camera. the idea that more ceos don't come out and really explain to the street what happened and why and what they're doing to fix it. >> think about how rare it is. he has always been a straight shooter. a lot of this business is perfume. it's high margin and he explains it and it's not a lie. it's like hey, listen, we're not going as well. i don't like it but we sold this piece of property that was vacant. if every ceo were like him, this market would be a lot easier to

understand. >> great to see you this morning and we'll see more of you guys in a couple of minutes. >> when we come back, we'll get you ready for what looks like a wild day for the markets. check out gold right now. "squawk box" returns in just a moment. by the time police arrive on a crime scene, they could have little to go on. a vague description. a single piece of evidence. a partial plate number. with an app from ibm, officers can now access over a billion police documents to find hidden connections, and identify potential suspects. ibm analytics helps one hundred thousand officers work smarter every day.

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host. one of the things we haven't focussed on that much is the bond market. it has been stunning to watch the ten-year note, the yield, it was down. i think it was at 2.09% at one time. the two-year yield has been under a lot of pressure also. not what you expect. >> remember the bond market is reflecting a lot of things. first and foremost is expectations of bad policy. you can look at the bond market as a forward curve on expected short rates. lots of risk premium. the fed matters humgely. however the context of the risk premium is a fact of other

things going in the marketplace. government bonds move with risk appetite. in a day of risk off, you see bonds do well independent of what's going on with expectations of the fed even though actually today i think people would downgrade their expectations at the tightening in september. it all makes sense. it's music. you just have to think -- >> it doesn't make sense to everyone who sold their bond portfolios. is this a second wind for all these investments? >> i don't know if it's a second wind but the notion that you sell everything because the fed is going to tighten is not in the context of a dweriversified portfolio where come things move. i think the stock market and the bond market are part of a portfolio. i think the fed is going to get off of zero. that's my new phrase. not tightening, get off of zero. but it doesn't mean that bonds

should not be part of your portfolio. >> well, it's been a pleasure having you here today. >> great to be here. thank you. >> and kelly, evans, thank you for being here. >> thank you very having me. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ >> welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the selling continues as china devalues for a second day as it announces even more economic data. futures are lower but not quite as weak as earlier this morning. the dax down 2%. 5% for the week. ten-year down to 2.11% as expectations for a september hike are fading fast. oil is bucking the trend despite the iea calling for a supply glut thr