>> the desert inn. like howard hughes. >> today you're like a bilasio man. >> i might stay at the wynn. join us tomorrow. as for now, "squawk on the street" is coming right up. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange stocks stable this morning after four days down. we have a fed statement today at 2:00 p.m. eastern time. a press conference, europe is making up for some of this week's losses, both ppi and empire running warm continuing this week's flow of pretty positive data. our road member starts with fed day. we'll hear from yellen. bank of america set to cut thousands of jobs. and oil on track for a fifth day

down. goldman says we may be stuck in this range for awhile. let's start markets and fed today, jim, a lot of discussion about whether it would be a good idea for yellen to say let's have a presser in july on the off chance we move. we might be able to explain it better. >> i think that would be terrific. i think yellen has been the person who has been the least yelling. she doesn't yell. she is considered. when you have someone considered as she is. she is looking at the data. a lot of people criticize the fed. i'm not going to. she is trying to arrive at the right thing. imagine if you tighten it and they got the 38,000 number. they don't know what they're doing. the evidence shows they do. the endless criticism of all federal reserves and all of central banks around the world bothers me. i don't think -- i'm a fan because he had to reverse rate hikes. i don't know what japan is

doing. they seem erratic but i'm not a critic of the fed. i think the fed is trying it do it right. i think yellen will do it right today. >> gundlach, series of slide decks. he says central banks of losing control and they don't know what to do. every other week the feds message is different. they've turned into the zombie fed. >> that is strong stuff. i do think that there is, as i've been saying, if he is referring to the fact that the line coaches and the head coaches are in disagreement and the defensive back coach is contradicting the -- these are just examples, i agree with him. the losing control stuff, my problem with all of that, gundlach has taken on a high profile role. he should choose his words carefully. you don't want to choose your words carefully when you're just kind of, you don't realize you're on strike. so i think jeff gundlach who i respect has to say you know what? i have to adopt a different or

diplomatic attitude. maybe i should be saying i don't think that they are -- maybe they're ill-advised. you switch to terminology so you don't feel like the reaction is well, holy cow, i'm a tabloid financial manager, i'm not a times financial manager, so i suggest that he adopt a more statesman like attitude towards his speech. >> okay. we'll see. >> not that i'm the dalai lama, the dalai lama has gained the last two books very good. very positive about happiness. >> let's see if jeff takes that into consideration. your theme this week has been the fear and the fundamentals are at a miss match. >> bernstein comes out with a note and says banks should be down 40%. that down 40%, we've seen that in our country during crashes and we know that it can happen. does it make sense to say that? look, if you think there is going to be someone who is about to have a cigarette in a crowded

theater, you might want to yell fire but it is really about a cigarette. i don't want this to be something that is it is not. the unknown is fearful but the british bankers, the central bank recognizes it can be unknown. this e don't want world bank of scotland to be a ward of the state. they don't want barclays to do that. this is a different level of capitalism during the hay day of when we had tony west at the u.s. attorney's office, in the justice department and he could call in the big banks and say it will be 15 billion, 17 billion. you'll owe this. the tension between the banks and our government has been ferocious. that is not the way it works over there. i mean, look at these italian banks. five banks should have gone under. they're still out there because they're treasured institutions. they treasure the institutions over there. you may think it is the end of the world and october 11st of 2011, it did go under in paris. belgian bank where she seized

it. i mentioned that because it is a high profile seizure. these people don't think like we do. they belong to the same clubs. the justice department of obama, they do not belong to the same clubs as our u.s. banks. >> are you suggesting that a back stop is a healthy thing over there. >> i'm suggesting it is crony capitalism. they never raise the capital. we thought they should. they never stress tested anything. necessary don't do that there. do we want to own the stock? seeing the banks go down every day, that is worrisome. maybe you don't buy the stock of barclays. maybe you don't buy the stock at jp morgan. if they trade down to 57 you probably do want to buy it. gundlach did say they there could be buying opportunities. that was a level headed -- he went level headed there but i'm not going to adopt it is going to be down 40% if brexit because then it will be a simpsymmetric.

i got up this morning at 5:00. he had brexit brexit. he is like mr. brexit. he is like james bond brexit. he wants his market shaken and not stirred. i love his style. he was so good. he is on his game. and he is great to watch and i really feel more confident that it is not going to be crazy after getting the information from someone who is very good. after i listen to him, he made himself, he will be on mad money next week. i'm more confident that it is not insanity. insanity -- >> a lot of discussion why the bookies, betting markets continue to believe it will remain their thesis is undecided tend to break for the incumbent. >> i've never gone against the bookies anywhere. i don't gamble professionally but they have a two sided market and are aware of things and they tend to know versus the pole sisters. we saw pollsters say look, it is possible if indiana goes, the things we heard, remember that

bernie sanders wins california will be a contested convention in philadelphia and i thought i should take hotel rooms down and offer an air b and b. so i just find that pollsters have been very wrong. the bookies, i don't like to go against the bookies other than the year that the giants beat the pats where they got their clock cleaned. >> that was -- >> remember that? >> they were poorly positioned there. >> banks are the worst sector for the month. >> they're so horrible. >> or the week. >> for the year. the fft is saying b of a may cut 18,000 jobs. >> b of a is not my favorite, but b of a is the most tech logly superior in terms of the consumer offering so they don't need as much bricks and mortar. that story should be mentioned in the context of how fast forward they've been versus every other bank when it comes to mobile and millennials.

they don't need -- they need far fewer branches. i'm not going to take that as a negative and i bet you the stock reacts positively to it. let's turn to oil. numbers from api show a build last week and that is ahead of data out today at 10:30 a.m. eastern. goldman, they view the price recovery is fragile. they expect the market to return to surplus early next year but for the time being, the three month target, 49, we have to see massive production outages to convince them the market will remain in deficit. >> is it very hard to judge oil right now. it is king on venezuela. they had their 100,000 drop. they're off the grid. veteranzalal is far more important on whether we open a rig. goldman has been all over the map. they've been extreme. they've been extreme. we went with the 20 so when it fell really well, really big, they went with the hundred.

goldman has been playing it like a fiddle but i hate the sound. just grating fiddle. >> we talked about this yesterday, goldman's phrases upside surprises to production, right? that is what we kept seeing. >> we have the wells we drilled. let's open up. remember, i said 50 is where we stall out. you have a large number of companies that can sell into the futures and pay bank of america. remember, it is the banks that are in charge. the banks land a lot of money. they didn't do it in a fashion where they thought that oil would break down and all of these guys, like devon from ecuador, they're doing those when they don't want to they don't want the credit down graded and the banks to be stiffed. the banks would be saying please sell oil at 50 even if you don't make a lot of money. we need your cash flow. >> because we want you to pay your bills. >> 50 is a hard level to get to. very hard level to get through.

>> there was chatter that we won't be having this discussion until 60. >> as soon as he said we're going 60 to 70, god bless him, this is, nice man, you know how i feel. nice man. >> don't do it. >> that's true. when he went with the 60, 70 thing. i was like, okay, sell. sell, sell, sell. like when you were in the old days when we used to use hand gestures before the internet. >> charge offs, right? today, capital one and jp morgan says charge offs eased a bit. are you worried about consumer defaults. >> i thought it was a bomb shell. i thought every single analyst would say it was fine and dismiss it. when they said the consumer weakened they were talking about the fico from sychrony were much

lower. they do a walmarts card. i found that worry. some i thought american press was overly punished. it is snong keep in mind. i found it surprising. i'm not an alarmist but there are a lot of auto loans to be applied to. the it was brought on by synchrony. all of the analysts defended synchrony. i think they wanted to lower the bar because the people at the fico score are a little stressed because of healthcare bills and we don't talk about it because the healthcare premium has gone up for everybody. they've gone up radically. it is part of united in california pulling out was the last straw. there are forces eating up matthew boss talking to the ceo. the average person has $1,000 savings. that is what they have.

and so you know, you might be stretched a little bit on your credit card. let's follow that and jump to the conclusion that everybody is going to go down but it was a new, you mentioned zakota. i haven't seen that in a long time. now, they weren't that bad like jp morgan. very good, wells fargo, but that was something that was -- couldn't be ignored. capital one, no, i'm glad you mentioned it. it is on my radar screen is something i want to talk about, mad dash if we didn't get to it. >> we will. also the latest on viacom, surprise involving red stone and later on, lululemon's chip wilson has been critical of the management. he will join us from denver. e a? it's a question we get from some of our largest banking clients. the face of their business was tellers. then atm's. today it's their mobile app running on the ibm cloud.

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let's get industrial production. rick? >> we're looking at a minus number, minus 4/10th on the industrial production. that is not a good thing. that makes three out of the five reads, considering this is may, negative and it is by far not the biggest. we had march down .87, call it .9. that is what we want to pay attention to. if you look at last year, other than three months, they were all

negative. if we look at capacity, that is a big disappointment. we lost 75 handle. 74.9, looking for 75.3. last month, we lost a 10th from 75.4 to 75.3. 74.9 consider 74.901 was march's read. we have to go all the way back and this is a good way's back. you would have to go to 74.9. 74.8, 2010, 2010! october, 2010 to find a lower number so once again, the data a bit disappointing, empire did turn positive. yields hovering a bit above 160 and everybody of course trying to handicap all of the extra volatility in the market place. where is it coming from? i know one place, negative rates isn't calmk in the markets. carl, back to you. >> thank you for that. rick santilli. redstone made visits at the

viacom and cbs. the media mogul visited paramount inside the van in which redstone was traveling. he meant to cbs to meet as the lead independent director sent a letter to red stone asking to let the company look into potential deals to sell a stake in paramount. we are quite concerned that your voice and views are not being heard and that is not all of the news we're getting today. it is other reports on meetings with katsenber. phone calls with jack mah. >> it is hard to have a big show without -- he is not the invisible man, he is there. these are high profile people you met with. i don't think you would go wasting time. >> not tradeable? >> not tradeable. i went over this with david trying to come up with a theaterthesis.

he said jim, don't reach that conclusion. the over compensation of the executives there is wrong and if they left, i would raise earnings. if you put pretty much anybody in there i would raise earnings. i do think that i understand, those guys are over paid is what i'm saying. the gundlach guy is the situation. they're premiumized executives. we need dollar tree. those guys should take a pay cut. a big time pay cut. >> they're near the top of the lists for years. >> i think about america, people want to know how do we get the tele tale of three cities. >> this is a sad one. authorities in orlando are searching for a two-year-old boy who was dragged into the seven seas lagoon near disney's grand floridian resort by an alligator. it happened last night around 9:30. the family of five was vacationing from nebraska.

the child and his father were wading engine about a foot of water when the alligator attacked the boy's father tried to grab the child but failed. they will continue searching today until they reach a resolution. disney did release a statement saying, quote, everyone here is devastated by this tragic accident. our thoughts are with the family. we're helping the family and doing everything we can to assist law enforcement. when we come back, we'll get cramer's mad dash, countdown to the opening bell. one more look at the premarket this opening day. don't go away.

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let's get jim's mad dash. a lot of b's and y's. >> yes, we do. they down grade best buy and the read through is that maybe cell phones won't be that strong in q-4. some think this is an apple read through. this has been in a down trend since last year and i don't want to get in front of it. i think this is part of the consumer again where we we're not getting big discretionary spend. we need cell phones to be better and we're back in the amazon world. where is amazon taking share? from best buy. now, bed bath goes on the offensive and they buy my wife's favorite show other than rulala, one king's lane. many of the complaints about bed bath and bed bath is -- all they ever do is buy back stock. look at this. they bought back stock all of the way. what a bad game. so now they're buying one king.

undisclosed but this is an internet strategy. way fair has an internet strategy. this is furniture but to say they're finally doing something about the web means that this stock has a chance to turn around. they have a very smart group of people. this is smart to do something other than just keep buying back stock. >> yeah. certainly has flown in the face of other home goods like william sanno sonoma. >> when you look at t.j. maxx, how good it is doing. it has been terrific. they've lost their way at bed bath and bye-bye baby and this is a sign that there is a pulse. i appreciate what they're doing this time. do i want to buy the stock, no, but this short that has been bed bath may be over. we'll get the opening bell in six and a half minutes. don't go away!

owen! hey kevin. hey, fancy seeing you here. uh, i live right over there actually. you've been to my place. no, i wasn't...oh look, you dropped something. it's your resume with a 20 dollar bill taped to it. that's weird. you want to work for ge too. hahaha, what? well we're always looking for developers who are up for big world changing challenges like making planes, trains and hospitals run better. why don't you check your new watch and tell me what time i should be there. oh, i don't hire people. i'm a developer. i'm gonna need monday off. again, not my call.

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"squawk on the street" live from the financial capitol of the world, the opening bell in three minutes or so, it will be a busy morning and a busier morning as the fed statement comes out at 2:00 p.m. eastern time. press conference shortly after that. brexit remains a focal point. jp morgan has an analysis of all of the polls. they actually had to remove a hoax poll from the analysis but in the end they say leave has a 1.8 percentage point lead so it is tight. >> it is tight. you keep hearing that those who have not been polled lean towards. i don't know where they get it. that is the bookie thing. it is on the agenda. i'm hearing obviously comments that the banks will have to work overtime if this happens. there is a shrill level of fear that could be equalized. it is not unlike when we had the year 2000, all of the computers could go down. that was a frightening concept. i urge people to recognize that

the day that this happens may be the day that you might want to guy general mills. remember, i'm stuck within the four walls, the spread sheet in my mind, mier saetz way you go after brexit. >> you can seep the yield dipping once again. china actually had a decent -- >> how do you like that? >> msci postponed the con clues of the shares. >> the chinese market confounds. there have been a lot of, talk about something where we heard that if msci rejected, there could be a huge decline. now, my friends at msci, the thing they've been concerned about is look, the market, they stop stocks, they don't trade for days. there is no transparency. the transparency is nil. how can they possibly have them in and once again, msci exercising what i think is restraint because really, it makes their indexes far less

reliable. china knew there. there were regular people on the street that were shocked. this is another new story that the media created. and you know, msci, i don't know why anyone thought they would do. it msci has been saying we need transparent market. that is the least transparent market on earth. >> the times has a fascinate point on shanghai disney and all of the concessions disney had to give up. letting the government run it. pulling back on plans for a media channel. amazing. >> i think the company -- other than starbucks and maybe kfc and to some degree nike and now, i mean, under armor. everybody has a bad relationship with them. starbucks, howard schultz, he invites the parents of the baristas that he has a better idea. the chinese suspect the elderly as my father who worked for them

later in his years would have told you. >> let's get to the opening bell here. s&p 500 is down four days. total loss of 2%. the priors are actually worse. 2-7 and 3.3. it has been a bad week. >> this is much less root canal, more like daily drilling. that is a 211 scenario. and it is not root canal like the others which is nasty and they put the dam in your mouth. they will go in and do drilling. it is okay. >> at the big board today. actor tony hale of veep celebrating the 5th season. we'll talk to him later in the program. at the nasdaq, mobile services system. we talked about bby and the cut. cisco got cut. >> this is a judgment call.

cisco has been a decent stock. inexpensive stock. when goldman did this. i went over this with the portfolio manager at the street. we were kind of like, all right, well, there is not a lot of down side risk. chuck roberts did a good job. the dividend is good. people are saying, look, it is not doing enough switching and not enough in routing. hp enterprise had better numbers along those lines, don't forget oracle reports today. and not that they're going to say cisco but there is a sense that the lower evaluation techs have lost momentum. i i don't see it this way. i'm betting with robins not with him. those who bet against chuck robins and cisco, it has been a very big mistake and will continue to be so goldman sachs. >> a and f. >> they are still cutting numbers. it is the toughest game in the world. i would rather buy lb since he

fixed the victim dwroor secret can bet on a and f. i find a and f are one of those things where it goes down so much that people can't resist upgrading it and it goes down more and they can't resist upgrading. gap stores are similar. wow, what are we doing here. we're making clothes that not everybody wants. >> you've been seeing whole foods which is the biggest loser this week. >> that was just really unfortunate. you know, i know people are going to say, wait a second. this is structural to whole foods. i don't like what they said about chipotle, when ronald robb goes in and he is natural and organic. i like the stock of whole foods. this was disappointing, they've corrected it but i understand why people want to sell it because this is the kind of thing that is in the papers and you immediately think, well, maybe they're not as good as i thought. i standby whole foods but that

is obviously not the day to do so. >> you want to explaining why kohl's, macy's, nordstrom, pvh. is it pvh? >> all doing pretty well today. >> these are companies so over sold. maybe people are thinking that they're just down too much because pvh doesn't have a good yield but these have very good yields and there is a search for yield around the globe bwhich i saying i'm willing to take a chance with kohl's. not that kohl's is a it ft but people like yield. >> courtney reagan tweeting from the ceo, my business at department stores has gotten slightly better since we reported and going into father's day. >> manny said that to me, too, and it didn't react. now it is reacting. this manny terico from bbh. >> we're week to week. i've always bargained stores on tonight.

interesting store. this guy, they buy close outs and someone was saying, well, basically, how was last weekend? and he was saying i don't want to get too granular but saturday was okay. things are out of control. well, saturday morning was bettterrific but then it got da out. let's have consistency. i love manny but you know, we have to kind of let go of this idea that this last weekend was really good. i wlerremember when i used to t to frank mano. those of us who go to home depot for planting. my tomatoes are doing so well. my home depot is doing really well. but you know, i just think that they do have a little bit of a window, he knows that. this is different. the idea that we have to do week to week is really bad. we have to get away from that. >> you mentioned big cap tech.

crm does get initiatation. >> how do you like that? a love fest shown and the stock will get hammered for a nano second when microsoft went and bought linkedin. i haven't read a positive thing about that and i still swear it is terrific. he does not need growth. he has it. that company is social, mobile cloud, no artificial intelligence. it has all four. you want all four. amazon has all four. linked in had three. you need four to propel your thought. cloud, artificial intelligence and that sales force. they have it all. >> not having a bad day. on the back of it note, yesterday you had said for people to take it easy, basically, right in terms of fear of brexit. is today accurately reflecting that? >> i think so. look, other than the bernstein note about geez, you know, you have a couple of lloyds saying

it will be down 40%. they said barclays could tank, you know, i think that these are things that you can say that build in a little bit of the down side to brexit when you hear that. i think the scariest thing about brexit is the name brexit because it is unknown. it is like, wow, brexit, whoa, be afraid, conjuring brexit. well, they're thinking of leaving the eu. brexit has taken on a thing like doomsday. how i came to love brexit. again, it is a fear term and i don't like it. i just feel like if people were level headed and say this is the uk saying we don't want to be involved with that as much because we're doing better and they're doing worse and there will be currency issues and the banks are saying they will be ready because nobody wants to say they're not ready. the banks are doing what is right. we're ready for anything and

that is good. but ready for anything, that is interpreted as meaning it is worst than greece and portugal and ireland. the italian is at seven and italian markets are the third biggest bomb market in the world and that was when you should panic. when the john korzine's market went down. that was an appropriate moment of panic. i don't think this is as panicky as breaking italy. breaking italy and portugal and breaking ireland and breaking spain. that was something in retrospect we look back and say that was an -- that was something to be fearful. >> some what of a worry that there will be copycat referendums. >> i remember when the euro started and i went to bob reuben, one of my 40,000 bosses and this was after, isn't it

ridiculous that the boss could decide to declare independence in sfan and they would go against the euro. >> he says it doesn't make sense. this is the treasury secretary. remember, you always come back to, what i urge people to recognize. this was an anti-world war ii idea. they felt that if everything got together on a business like fashion, we never -- we never would have what happened in world war ii and that is a good concept. >> in theory. we'll see in practice. >> if buzz people webusiness -- business people were talking, they weren't having a lot of discussions. let's get to bob. >> we haven't seen that a lot recently. we were stronger in the preopen. we had the industrial numbers come up. it was advised downward so came off of the higher gains earlier in the morning here at the open. let's look at asia, though, interesting what happened over there because the shanghai a.

i'll have more on that and what it means in that. shanghai and shenzhen after initially being down, the nikkaei is in is up after a four day losing streak. the gaps have stayed up through out the morning. i think some of this may have been done due to the uk saying the u can f could would have to raise taxes and cut spending in an a vote to leave the eu. that might have helped. up one % in all of of the major exchanges. here in the u.s. two beaten up sectors leading right now. retail which has been very over sold and some of the other ones like the banks moving up here. you see banks up fractionally today. this group hasn't done much in a long, long time here. most of the big names are down 5 or 6% for the week. energy, well, we've had modest

down sides here today. crude opened weaker, goldman had negative comments on the sustainability of the oil rally. most of the energy stocks are to the down side here. in terms of the sector gains, retail and banks are on the upside. energy is on the down side as you can see here, healthcare sort of right in the middle. finally i want to note, we have a number of big events friday coming up. there is a usual quadruple witching, this is the quarterly expiration of stock and index futures and options here, friday is traditionally the heaviest volume day of the year. normally this is not a big market moving event. however, there is a billion dollars in s and p options expiring and it is a little bit more complicated because of the fed this week and especially because of the brexit. a lot of people are trying to figure out what the implications are for trading and obviously there are opinions all over the place on that. we'll keep an eye on that. also want to note there, will be an s and p rebalancing and ru russel 2,000 will be rescrambled

on friday and that also leads to very, very heavy volume towards the close so we'll see a lot of action on friday. back to you guys. >> thank you so much, bob. let's get over to the bond pits and check in with rick santilli. >> good morning, carl, we've had a wild year. i thought it would be a good day considering it is the fed day. we'll hear of course the statement and janet yellen most likely coming up with reasons not to tighten and not to normalalize and address the balance sheet. we'll have to wait and see. we're down 32 base points as we sit around 73. most maturities are unchanged at a low yield, high price. we're down 62 basis points. tens, we settled, down 66. remember that one. 303 for 30s. relative value trade should be darn close to our tenure, right? they're linked at the hip.

certainly is, down 64 base points. they settle it positive, 63. now, when it comes to foreign exchange and the scary word brexit, of course, everyone is saying the british markets are really nervous but i don't know, wherever i look, the british markets don't look a whole lot different than anyone else's marketed and if we continue to think about the currency, let's look at the ten year chart versus the dollar. granted, we're close to levels we haven't seen but then again, so is it is the euro and that is really the point, isn't it? this really is a referendum about leaving the euro zone. it is a euro issue, pay it aengs -- attention to what is going on. carl, back to you. >> earlier this month, lululemon chip wilson had harsh words for management prior to the company's latest earnings. >> what has changed is that the ceo hasn't produced, management hasn't produced but is it really the management or the structure

of the board that can't effect the management? that would be my question. >> what is he saying about lulu now? chip wilson will join us now from iconic in denver when we come back. dow is up 45. ♪ in new york state, we believe tomorrow starts today. all across the state, the economy is growing, with creative new business incentives, the lowest taxes in decades, and new infrastructure for a new generation attracting the talent and companies of tomorrow. like in rochester, with world-class botox.

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shares of lululemon out performing rivals like nike and under armor. that hasn't stopped the founder of the company from going after the board. joining us from our iconic conference in denver. lululemon founder. you've had critical comments. we had an amazing quarter from lululemon. i have in my hand five pieces of research that says it was a remarkable quarter, is it time to temper the criticism? >> well, the bar is set really low when it is around lululem

lululemon's revised earnings and they're still declining, so i think if you look at it over a three, four year period which is really what you have to look at to determine whether the ceo and the board is actually producing, no, they're not. >> but total sales are 8% iechl spend a lot of time covering retail. this was a remarkable, high single digit number this quarter and almost no one else hit it. i have to go to ulta salon to beat that. the margins are improving. isn't it time to just say, you know what? let's see. maybe these are doing better and rather than blame the board which has a lot of good people on it, why don't you say, you know what? they're going in the right direction. >> they're not putting any more bottom on the bottom line. they've increased but nothing has gone to the bottom line. >> they bought back a lot of stock and let's go over the

board. you have a couple of people who are close to you on the board. again, i'm defensive about this only because this is one of the few that it was a bright spot. i'm looking at a macy's and a cold and at an under armor, at a bed bath. alternative a lot of -- best buy, and you know, pvh. no one had these numbers and they bought back a lot of stock which in retrospect. they bought back at the right level. i'm imploring you to look at your comments before the quarter and look at it now and i'm not saying throw them a bone but you have to recognize that this was the best quarter. >> yeah, but you're looking at it within a very narrow context of competition. i had been comparing the lululemon to the competition, nike and under armor, if you look at the big picture, lululemon invented this market and we're in the middle of one of the biggest change in the way

people are dressing in the history of the world and lululemon has done, 60, 70% less than the competition and 15, 16% less than the s&p. >> we try to hit them hard. we're telling you, you're being too hard. you did write that you're not interested in going back inside and running the company. are there any circumstances that would change that point of view, chip? >> no. i mean, they would have to pay me $100 million to do it. quite frankly. i could produce billions and billions, but you know, the situation they are and as a public company, they would rather pay someone $2 million to earn them nothing. >> who is it that you think is doing such a bad job. the logic improved you know they're doing expansion now.

a lot of the things that you were critical of before this regime. since your people have gotten on the board, the company has improved. the plans to expand in asia and europe sound sound to me. i understand you believe they can't afford you. they certainly can't afford you. you would wreck their bottom line if you came on, if you think they're so bad, why don't you pull your people from the board, why don't you put together a group if you do, indeed have all of these kinds of money to go buy it. i'm sure that you sound like you can do a much better job, why don't you take the company in and if you have all of those -- all of that money, this might be the opportunity of a life time. >> well, i think you're missing the point. the point is if the company is being run so poorly and not just three years, probably four or five years, then you have to go after, not the ceo but you have to go after what is the board because the school board actually nominating the ceo but if you can't change the board,

you have to say why not. you can't change it because of the classified board which allows -- only allows us to vote against three board members at a time. i've activated to put two advent people on and catherine henry over the last three years but obviously in the last proximity because they didn't declass faecdeclassify the board, they don't have the structure inside to move it against what i would call the old school board members. >> okay, let's go over that. mr. michael casey coach. he was a genius at starbucks. most people would agree with that. is it john mcneu who was at tesla, emily white at snapchat, another executive who i would love on my board. again, i think the things you're mentioning are things that before the turn at the company, the ceo, i look at this board

and i'm hard pressed to see who is standing in the way. i would like names of people you think are obstructing because i have this board of directors in my hand and this is a list of people i would be very proud to work with. >> well, and then go ahead because you get the same results you would be getting in the future as we've had in the last three years. >> he could kill for these results. he is struggling. look at what gap is trying to do. columbia sports wear may be with prana. but you're looking at a group like vf corp. he does not have your numbers. he does -- deckers which has tried so hard to get into yoga. they don't have your numbers. so i look at this and i say wow, if this is bad, you know, what do i think about the other people in your industry? and i think you have a good group here and i urge you to

work with them more. this is the best stock i've got in the whole group. >> well, that is because you have a very low bar yourself. again, lululemon invented this business. they should be five, six years ahead. they shouldn't have the declining margins. they should have been morphing into other businesses that would have the margins that are way, way bigger, it should be worth double the amount of under armor, we're talking billions and billions of lost value. compare it against the bar you want it to, jim. i'm compare it to the bar in the world. >> i'm comparing it against the bar of the 25 retailers i follow, many of whom come on mad money. my family has been in retail, i come from a background of retail. my father worked at gimbles. maybe you say that is why they went out of business. in terms of the bar that i have it is about as tough as you can get of which mary at ultimaulta

only one to achieve your number. maybe they're not doing customer relations management. i would like three things they should do right now that would make it so you think that lululemon can rival nike which i think is the best but right now they're not doing so well. >> well, if you look at the company said it with going to go over the proximity over the last five or six years, it would do women's tops, mens and international. it should have 200 international stores. mens should be up a billion dollars in sales and women's tops half a billion dollars in sales which would easily double the valuable of the company right off the bat. that is just what the company said it was going to do within the context of what that company knows without any vision. imagine what it would do if it had vision and was five years ahead of the market place. >> you know the numbers were very good. you couldn't have any contempt

for the men's numbers. >> yes, i could. yes, they could because the numbers are so small. >> gap stores have been all over the place. >> the bar is so low -- >> you can talk all you want. >> anybody? >> you have a bad context, man. >> you talked about taking risks, not milking the brand for cash. moving into other businesses. when jim asked you for an example, your answer was to increase your store base. does it go beyond that? >> i didn't say just increase store base. i said women's bras. it should be at the level of victoria secret right now. >> that is not such a good thing. he was very unhappy was victim too -- victoria secret. he felt it was sub par i'm urging you to think you're taking an ill-advised strategy. you have people on the board. i want to know who are the board members standing in the way of the management so i can go find out myself exactly how weak they

are. i look at that board and i see very accomplished people. >> they're great and so do i. i'm not going to give you the sensationalism but it is the longest standing board members. >> you're attacking the man from starbucks. michael casey, the co-chair, you think he is a weak man? i know we could call howard schultz. i think he has done quite a good job there. he did a good job at starbucks. i'm stuck within the four walls of the knowledge. >> i understand. >> i think we got to, look, if they were doing badly. i have to tell you, sir, i would throw them under the bus in a nano -- i would throw them under a trailer, i have to tell you, they ain't that bad but i appreciate you coming on and i think you should moderated your comments when you came on june 1. it is a joy to joust with you. chip wilson, thank you so much. >> you have a low bar, jim. >> low bar. vi ever set a low bar?

61 years old, people thought i've set way too high of a bar. >> viewers like that. i guess, look, i guess his aim high thesis is admirabladmirabl. very concerned that i have too high of a bar. mary dillard, no, she did double digits. in terms of where the bar is, let's just say you're going to go to brazil. you're going to see the high jump, they'll never make my bar. >> what is on mad tonight, jim? >> i'm so fired up. i don't know. i'll set the high bar on mr. butler who delivered a good quarter and then we have perry sook who is building a media company. i enjoyed that. i think mr. wilson is every right to be tough but i'm not going to relent on a stock that has been so fabulous and a company that has changed from when he didn't like it. i may seem argumentive but the good ones, carl, i'm not going

to dump on. >> he has a billion dollars at stake. >> he could buy the company. if it was kohl's, i feel bad for kohl's. terry lund gren, eric wiseman, they're having trouble. columbia sports wear, they should hire mr. boil but that is a family company. i have to be tough because those guys are good and since he was on june 1, they have gotten better. i've been a huge critic from them. not even just from the recall of the stink pants. when whe come back, youtube star michelle phan. don't go away.

good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen. along with a press conference at 2:30. brexit remains a focal point,

oil below 48 now and we'll get inventories in a half hour. >> our road map begins with the federal reserve wrapping up the two day policy meeting. will fed share janet yellen deal an interest rate surprise? >> bonds break egg out crushing financials and rates. financials are the worst performing sector of the s&p this year, low low will the banks go? >> a digital star is born. how michelle phan turned make up tutorials on youtube into a multiple million dollar business. >> at the conclusion at today's meeting, the expectation is janet yellen will repeat her tone from last week. gundlach accusing officials of changing their tone frequently leading investors to drop risky assets in favor of safer bets like government bonds and gold. the co telling investors that central banks are losing control

in his view and don't know what to do on his web cast overnight. >> what was it, three, four weeks ago that many fed officials came out saying june is a live meeting? sure, i guess zombie fed. they say it is a live meeting but it is anything but live. the meeting tomorrow is dead on arrival so we have a zombie fed that thinks it is live but it is really the walking dead. >> joining us now to discuss, jp morgan asset manager allocation strategist and michelle mier, merrill lynch, deputy head of u.s. economics. michelle, would you agree that to some people in the market, the fed looks like it is a zombie fed or at least maybe unable to support assets, risk assets and boost the economy as we might like? >> well, i think the fed in all of the central banks are in a difficult place and that they are data dependant and dependant on not only how the data in

their regional economy is coming out but also external events. that is the challenge for the fed. so before the jobs report, before we saw this latest turn down in terms of risk assets, the fed was preparing the markets for a hike on the view that the data has looked better, the markets have been calm, financial conditions have improved and it should allow the fed to further normalize and then things changed, conditions changed, and the feds language has changed as well. it is made for a very confusing message. but i think it is a function of this type of recovery and i think it is a function of a very risk a verse federal reserve. >> isn't it also, i mean, isn't it the job of the central bank to gundlach's point to try to cut through that? that is their job to create a narrative as to where we're all going. to the point where you make the important point of the weak employment data that we had not only two weeks ago, since then, the data has been quite strong, retail sales. the argument goes, if you didn't have the brexit hike, a rate

hike would be on the cards but they completely discounted that. >> you raise an important point which is that the fed isn't supposed to be changing their message so quickly based off of every indicator released and i think they attempt to look at the trends and the data but at the same time they are beholden to what the markets are doing and financial conditions are reacting given the a symmetry of policy right now. so i think the message we need to get today is one that is the fed is waiting. they want time to assess how conditions are evolving but they're still going to prepare the markets for further rate hikes as further normalization. it has been confusing. >> phil, do you understand the anger there is in parts of the market. >> sure. i don't know about anger but i would say at the fed at the end of the day will make july a live meeting. june was never really a 50% probability meeting which is their rule of thumb. they want the market to assess a 50%. >> hold on a minute.

if you take it back three or four weeks. a man and woman saying that june was like. >> it never got to 50%. the july meeting got to 55%. >> that is what the market expectation was. they were unlush layout there. >> th-- unusual layout there. >> i believe at the end of today, given the strength you mentioned in retail sales. you can create a narrative, even though july is only 16% priced. they can get it back to 55% based on a brexit remain vote and based on the data on claims and on the jobs data for june that comes out the first week of july signaling the june number was more noise than a signal. >> what would be considered a big surprise out of the statement or the news conference this afternoon? >> one of the things i would look for is the evolution of the dot, it is likely that the dots will shift lower, we've seen that time and again as the fed

kind of brings their trajectory closer to what the market is saying. but if that median dot shifts to only one hike for this year and three hikes for next year versus the prior estimates of two and four, that would indicate that it was more than just a wait and see fed. it is one that is actually redefining gradual and saying we'll be slower, we have more risks, the economy is a bit more vulnerable. that would be a surprise and we're not looking for that kind of reaction. >> i want to talk about what is happening with fixed income in particular. we made history yesterday when the bond in germany fell below zero. a lot of people may not actually understand what exactly what is happening there. is it true to say that people are buying the bonds regardless of the value simply because they believe the ecb will come in behind them and poach the prices higher? europe up five % this year. i ask the question because it is what last night called a dangerous price appreciation game. once you break that spiral, this

thing could move rapidly couldn't it? it would be a temper tan trum with legs on it. >> the credibility question, i challenge jeff gundlach saying where would we be right now if the ecb wasn't. . in terms of the german bond. the ecb is buying all the way down to negative 40 points. g 4 central banks are buying up all of the global bond supply. this is something we've never seen before. >> you know, tying these two big stories together, michelle, the leave campaign for the brexit vote is gathering momentum. the odds are rising that it could go that way next week, if that happens, what kind of shock do you see on the global economy and could it take the fed off the table in terms of hiking rates for the whole year? >> i think that it is one of the many uncertainties that we have to deal with as forecasters and as investors and that the fed

has to consider as well, so if you look back to the feds, yellen's last speech, she talked a great deal a mid uncertainties and i think that that is part of their challenge. they have to determine how the developments in the external economy, developments abroad could feed back not u.s. through trade channels and if there is a risk that things will deteriorate, the fed's reaction will be let's sit back, wait, see how things evolve. >> michelle -- >> yeah. >> don't you remember an era where they strode on and when there was a problem, they would cut rates and everybody to a certain extent would say okay, they got this. we're in a completely different world now. completely different. >> totally different worlds because we're already at the zero bound or through the zero bound for other central banks. we have incredibly large balance

sheets. the crisis fighting mechanisms are diminished. it doesn't mean they're not still there. they're there through communication, but if things were to deteriorate. if there was a shock to hit the global economy, it would be problematic. central banks don't have as much ammunition as the beginning stages of the crisis. >> they're a stabilizer than an accelerator for asset prices. they aren't as high as european debt crisis three years ago. phil campareano joining us and michelle meyer. >> the worst performing sector, we'll talk banks and where we go from there. >> steve odland is here when "squawk on the street" continues. amb. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally.

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financials are strong right now, best performing sector today. the worst performing sector down about 5%. so how should investors be playing bank stocks on this fed day. let's bring in eric wasserstrom and paul miller. i said down five % so far this year but that buries the lead. morgan stanley down 23%. goldm goldman sachs down 19%. bank of america down 21%. are there buys here? >> i mean, the problem is that

the europe continues to flatten and we don't know what the feds will do. i think a lot of people were getting excited over the last couple of weeks with the fed going to raise rates. that is in question and the euro has fallen. i would love to buy bank of america here at these levels but nobody will touch these things until they get clarity on what the fed will do, get clarity with the ten year-year-old curve will do. i think right now i think everybody has a holding pattern until we have a better indication of what the feds will do and what the rates will do. >> eric it looks like you agree. a you have a buy on bank of america as well. target, 20. can you buy without more clarity on the fed? >> i think you can. i think my perspective might be different than paul's which is that we would say relying on the ma macro to improve isn't the reason to buy bank stocks. we focus on names where there is

more idiosyncrony buyers. >> and it looks like goldman sachs as well. are you still buy there? >> we are still buy there. it is a different thesis. it is around the strength environment on a dollar volume bis is at all time highs. we think that continues although recent val you pointed to weakening. we've been more cautious. >> while we're on the subject. 8,000 jobs are set to be cut at the consumer arm at bank of america. dumz this speak to something that bank of america is going through. >> they've been more aggressive in cutting down the branches to the digital side and cutting costs. i think the questions that everybody will have is where is the branch fit into the banking system. you'll continue to see banks cut the branches as they don't pay for themselves.

especially in low rate environments. the digital world is changing the landscape of banking and you'll continue to see this and bank of america is one of more aggressive ones doing it. >> paul, are these approaching a one in a generation buy here? what do they say to you when you're sitting around talking to the ceos and they're firing questions around. people shorting the stocks, do they believe we're part of a cyclical down turn where the fed might be on interest rates. at what point do you pull the trigger if you're interested in buying big, major franchises and holding for four or five years? >> the big issue is the regulation, the regulation has been very tough and on top of that, every time there is a new regular inclusion that comes into play, you get the fed or another regulatory body saying we have to hold capital. we have to break these things up. you have the political arena where the presidential debate is going on where everybody is saying the banks are too big and

need to be broken up and over regulated. there is an environment where it is difficult for these banks to make money. wells fargo put the targets at 15%. you have bank of america that struggles to have seven or eight %. where should a bank if they only have 8% return on equity. some pay say books. some say below books. they could be the buy of the century or something where they're stuck in this muck because the regulatory environment is too much. >> i mean, eric, that is a good point. there is a story that gripped the banks overregulation, the political campaign bashing, the fact that the fed is on hold forever. i would add to that potential brexit or international crisis in the linkages in the banking sector, why can you buy given that story out there? refute that. >> again, i think it gets back to our thesis which is the macro is challenging and you have a

hostile regulatory environment. so in that context which is true for all of the companies in the u.s. and globally. which will take the earnings up by company's specific actions that they're under taking and that is where we tend to pinpoint the buy rated names. >> we'll see what happens today this afternoon. good debate. eric wasserstrom and eric miller. >> thank you. we move on to a tragic story out of florida today involving disney. julia borstein has the latest on that. >> an alligator attacked a toddler at a hotel in orlando dragging the toddler into the water at about 9:20 p.m. police are officially calling this a search and rescue operation. officials saying a family of five was waiting in the seven seas lagoon. the father tried unsuccessfully to rescue his son.

disney issuing a statement saying everyone here at the ballot disney world resort is devastated by this tragic accident. our thoughts are with the family. we're helping the family and doing everything we can to assist law enforcement. more than 50 officers from the orange county sheriff's office and the florida fish and wildlife commission are involved in the search at the lake. fatalities from alligators are rare according to the florida fish and wildlife. there have been only 23 deaths in the state since the 1940s. this is the first at the seven seas lagoon. this is another tragic blow to the city of orlando in the wake of the pulse nightclub massacre. simon? >> thank you very much. the business roundtable releasing the economic outlook. the former office depot ceo gives us his take on what they're thinking now. much more on "squawk on the street." ♪

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"that was easy!" "check out credit karma today. credit karma. give yourself some credit." it is fed day on cnbc. let's send it thrive rick santilli in chicago. good morning, rick. >> i like to welcome robert helder. thank you for taking your time this important fed day.

>> good morning, rick. >> good morning, listen, you know, when we look at any areas of the given branches of government, there is always a check and balance. whether you look at obama care and supreme court rulings, labor relationship board, epa, there can be power but there is a check and balance on all power. is there any check and balance at all on the federal reserve? >> well, the two functions of the federal reserve, bank super vision regulation, the fed reigns supreme. they not only make regulations, they interpret regulations and enforce them in front of the banks and if a bank has done something wrong, then they get dragged in front of the federal reserve, from the federal reserves, it is the court that decides the case. in monetary policy, there is only one that speaks with one voice, hopefully, and there really is nobody else who is in charge of monetary policy because congress has delegated

this important function to the federal reserve. so basically, the federal reserve is a very powerful institution there. >> when you were on -- when you were board of governor actively and on the committee, my question to you is bob, did you feel as though you were in a group that was meant to control markets or i mean, what was the feeling there? we had a very big money manager say the fed lost control. my issue isn't really what he said. i think a better word would have been lost confidence. lost credibility. the word control is a dicey word. do you feel you were controlling markets as a fed governor? >> no, i think we were focused totally on controlling inflation. remember, those were the days where inflation was in the double digit range and was being brought down by paul walker and that was our total focus on get

inflation back under control but you cannot control markets. the markets will do whatever they want to do and i think we're probably a little bit over emphasizing the preparation of the markets, that markets have full expectations of whatever the federal reserve will be doing at the next meeting. that is not really the function of the federal reserve. >> you know, the record for forecasting isn't nearly as good as many of the money managers currently speaking out against the fed. you know, when you look alternative the federal reserve with regard to forecasting, and then you think, you get whip lash because they're so into short-termism, i'm sure you have a retirement account. do you day trade the stocks in various investments in your retirement knaccount, sir? >> no, i i'm a buy and hold man. >> okay. >> even through the 2008, 2009 recession, i held it.

>> okay appeared that seems to be the -- and that seems to be the advice of many money managers. why do they think it is okay to trade. your final comments, sir. >> i think the feds should be focusing on controlling inflation and leave it at that. they have done pretty well on that score and i'll give them an a in the monetary policy but they cannot control the entire economy and the markets as well. >> bob, thanks for your comments, really appreciate it. sarah, back to you. >> all right, rick, thank you very much. for the conversation, besides the fed meeting, we're counting down to blast off. the space x falcon 9 launch is coming up. we'll take you live to cape canaveral. "squawk on the street," we'll be right back.

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you're looking at a live shot of elon musk's space x

preparing to launch two commercial satellites from the falcon 9 rocket from cape canaveral in florida. we're counting you down here. we have 30 seconds to go. it is important for you not to just launch them but to bring them back as reusables as the race continues for contracts within boat defense and commercial contracts. >> they've had a few successful launches, six so far this year. this comes two and a half weeks since the last successful rocket launch and landing in may. >> they made comments about the space travel and how important it is to reuse the boosters. >> 3, 2, 1, zero, lift off of falcon 9. >> i'm assuming that is not a real voice they're using. that is artificial intelligence voice. obviously as we get -- the

rocket coming back down. another adventure with elon musk. let's get an update now with sue herera. disney just announcing that all beaches at the walt disney resort will be closed after an alligator dragged a two-year-old child under water near the floridian hotel last night. aaron persky, the california judge under fire for the sentence of brock turner has been removed from a different assault case. the santa clara district attorney said he lacked confidence that persky could participate in that case. >> there was a moment of silence that was stabbed to death by an isis sympathierer. >> california has over taken france as the world's sixth

largest economy in 2013. the most pop will you say u.s. state with a gross economy. that is the cnbc news update at this hour. let's go to jackie with the inventory report, jackie? >> goj to you, department of energy without with the crude oil inventory report. a surprise here. we have a draw down of almost a million barrels of crude. this i is expected for this time of the year. it is supportive of crude prices api report of a build was s what threw it off. when the number came out, it took us over $48. it indicates we'll be continue to be range bound, especially as we head into 4th of july. the peak of summer driving season. the api and doe don't match. it is important not to get ahead ourselves and look at the reports. that is an instance where it occurred today. it is important to dig into that

report last week, weekly production in the united states, it ticked up slightly showing around $50 a barrel, producers are more likely to pump so this week's number will be important as well. guys, back over to you. >> and a mismatch. one step forward, one step back. ceo's more optimistic about sustained growth from the roundtable economic outlook index while showing increased optimism about hiring for the next six months. executives remain concerned about weak gbp growth. cnbc contribute yoer steve odlin at the center for economic development. good to see you. >> good to see you, carl. >> six months sales are up. hiring expectations are up. what do you make of all of that? >> they're only up a little bit. i think basically this is not a big surprise, the survey of the largest companies in country say

it is going to be a little bit better from an investment standpoint but the economy is going to do worse, so they're protecting a gdp growth rate of closer to 2% which is down from where they were before. none of this is a surprise in the electioneer. no one expects anything to happen from a policy standpoint or big changes between now and january. basically, they're taking a wait and see attitude. the question is what is going to happen to policy with a new president and congress beginning in 2017. >> i see the consumer spending has a share of real gdp is set to make a record high in q2. does it make you worry about corporate profits? >> it does. when you start to see that, and by the way, most of the retail increase was online which is, you know, puts a lot of pressure on the bricks and mortar retailers and margins on that. so i think the question is, in the minds of most ceos and most business leaders is what is going to happen with trade policy, what is going to happen

with tax policy, what is going to happen with regulatory policy. there is a huge drag on the economy now with all of the new regulations and the expectations are in the last waning months of the administration that there will be a lot more. and what is going to be that impact on economic growth and then is anyone ever going to take on this whole corporate tax thing which is a lumpy mess as we all know. these are the kinds of questions that are in the minds of ceos today. >> you know, steve, to view things as you would on a channel like this through economic data or through asset moves, i wonder if you get the complete picture of what is going on out there. if i were to listen to you it sounds almost as if business has lost the mojo or the animal spirits are not as they once were and i'm not sure if that is an accurate reflection of what is going on in business. i mean, how would you sum up the type of meetings, the type of leadership that you see every day in the economy. what is the temperature? >> that is a good point, simon,

i think you have to discriminate between the largest companies and main street america, the smaller company, and they are different. the largest companies have a global customer base and they're dealing with economies all over the world. the companies that are focused on the united states are sort of the most difficult position because their markets here are growing very, very slowly. it is becoming more competitive. margins are being shrunk. cost of labor is going up. that is where the bigger worry is and the ceos of the largest companies can look all over. but i think this whole uncertainty thing is a big issue because any capital investment, any investment in labor has got to be taken in the context of what the cost is and so these are long-term decisions and when you don't -- >> hold on, isn't that in a sense self fulfilling? if business business and the business community doesn't have confidence and doesn't invest, you're not going to get -- you're not going to get the move in the confidence going through

the cycle. >> it is a good point -- >> you're victims of your own pessimism. >> you don't want to be a cheer leader but at the same time the level of optimism can drive the level of growth, no doubt about it. it comes back to policy uncertainty. everybody is waiting and seeing and so this survey talked about the next six months which isn't surprising. the question is what will happen after that and i don't think that you see real clarity in trade policy, tax policy, regulatory policy coming in the campaign, not that anyone would expect it at this point but from either candidate at this point and so there is nervousness. >> what would be the best outcome, steve? a republican president with a republican controlled congress? based on all of these issues that you care so much about and want to see change on? >> i don't think there is a real easy answer to that because every unusual candidates, let's put it that way. they're not traditional candidates on either side. certainly not on the republican

side, and so nobody really knows what would happen in this case. i think what they're looking for is a status quo in congress. at least then you have a counter weight and checks and balances to whatever happens in the executive branch. >> well, steve, executives have to plan through election cycles all of the time. i mean, isnt isn't the first election ever. is there something about the candidates that heightened the certainty this time around? ofyears, but this is a big one.e every eight years, when you're thinking about a change, even if you're in the same party, there is a big change that is going to happen here and so every time you come up with a big change like this, you see this sort of freeze in activity from the business community. it happened every single time and i think there will be greater clarity once the election is over and then business people will start to make their multi-year decisions. >> it is good to get your insight.

appreciate it. steve odland. >> good to be here. china denied again. msci denying inclusion of the chinese shares in the key index. coming up on squawk alley, don't miss tony hale. does art imitate life in veep. he is here to talk about the fifth season. "squawk on the street" will be right back. ♪ using 60,000 points from my chase ink card i bought all the fruit... veggies... and herbs needed to create a pop-up pick-your-own juice bar in the middle of the city, so now everyone knows... we have some of the freshest juice in town.

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welcome back to "squawk on the street." the s&p is up 7 points. consumer discretionary stocks taking to the upside. one of the leading sectors in the s&p, retail names leading the charge like pvc and macy's and nordstrom and kohl's up 3% and more. the spider s&p, the ticker srt up more than 1% today tracking for the first day since april. retail stocks will be a focus, sarah, given the consumer congress going on now as we

speak. >> thank you. china's domestic markets getting denied entry to international stock benchmarks for a third year a year. bob, interesting to see that chinese stocks actually rose last night. >> started down and ended on the upside. last night, index or msci did delay putting main land china stocks in the global indexes. china's main land market about ten trillion dollars. there is a lot of pressure to add main land shares in the global but they're not ready for prime time. china has done a lot to make the markets more open. increasing investment quotas for foreign firms. ruled foreign investors do own stocks out right and they've acted to curb trading halts that caused big problems earlier in the year. it increased investment quotas. foreign investors orien

investments out right. here are issues, big issues, investors are looking for authority to lift or change limits on foreign withdrawal or funds. fund managers have to deal with unexpected withdrawals but msci implored they needed time to address the effectiveness of policies that have already been made. they have the merging market index. hong kong and listing of china's stocks make up 25% of the emerging market index. if main land china was included, it would go to 40%. msci made it clear that any inclusion would be gradual. as sarah noted, the china market started on the down side, ended on the upside today. a brexit vote may central more than them leading the european union. it could create a rush for london real estate according to robert frank who joins us now with more.

>> a lot of dire forecasts about the uk economy and the real estate market if there is a vote for brexit but in the short-term, a leave vote could lead to a sales boom. the uncertainty around brexit is adding to the slow down in london sales in central london down 25 to 30% from the peak of 2014. that is largely because of recent taxes on million dollar homes and a lot of regulations aimed at money laundering chilling the market over the past year. but a leave vote could spark a quick burst of sales. the pound could weaken making real estate lower for dollar based buyers. they're ready to pounce if there is a currency discount. the last two times the pound fell by an appreciatable amount in'92 in 2008. there was a quick boom in property sales. they've been waiting since prices in central london, check this out, more than doubles in the past six years. what do you get for your millions in london?

knight frank is listing this one bedroom in saint james. 863 square feet, asking price, 1.5 million pounds. if sterling drops around 25 to 25%, that could save you $200,000 on that purchase. if you're looking for something bigger, this 6,200 square foot town house in kensington with five floors listed for 18 million pounds, if the pound falls, that could give you a savings of 2.5 million, so bargain here, simon, still relatively, a relative term, i should say but a lot of people waiting for the possibility of a short-term deappreciation of the currency making dollar based real estate more affordable. >> or if you think they'll vote to stay, then you could lock it in now on the idea that the pound will shoot up later. it is one giant currency trade, isn't it robert? >> the point is, even before the brexit concerns started to come top of mind, the property market in london was weakening it is

unlikely that you'll see a sort of relief rally in real estate but you could see a short-term bomb if it appreciates, longer term if there are jobs leaving london because of brexit, longer term, that could be a pressure on the property. it is a different there. >> i guess, you could argue the uk real estate is in a bubble. some big houses, i think other people said that and the question is if they vote to leave the european union next week, whether as the government said today, they enter recession from next thursday and they have $50 billion of public expenditure that they have to plug through further tax rises. it is not as simple as the pound falling, is it robert? >> not at all. to your point about the bubble. property prices in london have more than doubles in the last six years. in new york, by comparison, we've seen a 30 to 40% increase over the same period, so because of all of the foreign buying in london which is twice the rate as new york, you are seeing a

bubble. you're seeing that come down and any blip from brexit would be a short-term, just a short sale on assets that may not be long lasting but could be meaningful at least for a quarter or two. >> okay. robert, thank you. >> thank you, guys. coming up, youtube sensation michelle phan, her videos have been viewed more than a billion times and her make up start up company is hauling in serious cash. michelle phan coming up next on "squawk on the street." gomery a abigail higgins had...

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. our next guest joined youtube early on and now has 8.5 million subscribers. and she started up a new beauty empire called ipsy and we welcome michelle phan back on, and youtube and ipsy founder. we have had you on several times, but because it is a private company, tell us how you turned the youtube sensation into what is reportedly valued at a half a billion company.

>> i did so by building my influence, and creating the content and generating awe thutc content that speaks directly to the audience and finding a solution to what they want. they wanted a better beauty discovery experience and this helped to inspire the conception of ipsy. >> and how many subscribers now to the box? >> 1.5 million paid subscribers annually. >> and we have big box, which a similar service who is scale back the international growth plan, and laying off people, because of the change in the venture capital market, and the fact that it is cooling down a little bit. are you feeling that the at all? >> well, i think that there is a global, in a way, like it is not just in silicon valley, but it is everywhere. china, europe, and we are seeing like there is a lot of speculation in the market, and i think that is why it is really, it is really smart that they

scaled back, because that way, you more control over the destiny of your company, and you can be more nimble, and adapt fa faster to the ever-changing landscape of the internet, because things can change so fast. new ideas come and go, but as long as you have a strong idea, and a strong team, i think that it is really smart, and makes a lot of sense to have a leaner team. >> so do you feel the pressure to given the changes in the environment that you talked about to focus more on the profitability and to be more disciplined when it comes to spending as you continue to expand the business? >> well, we have been good at spending. when we first did the seed round and raising money, we raisedless than $2 million when we start and we didn't raise another fund until recently last year with etpsherpa and that is the second-round of funding which is two years later, and so the fact

that we have been profitable for the first day that we launched and i know that it is not something that happens all of the time and i'm grateful for that. a lot of it has to do with really just not me building the influence, but having a true authentic community that cares about developing the relationship with ipsy. >> michelle, i'm fascinated how you draw and what the cutting edge is of drawing in people with deep pockets. i see that you have for example a makeup line with loreal and specifically we had martha stewart on yesterday, and she is being paid to create hour-long shows for amazon, and where do you see the money, and the ability to capture the value, and what do you have to teach people, and how do you bring the bigger players in side by side? >> bigger players as far as the

content provides like amazon or -- >> well, anyone with deep pocket s. for you sit the makeup line loreal and for martha stewart, it is amazon and amazon prime, and so where do you have to go in a sense? >> well, i see. a lot of people are starting to invest more in the content, because people want to subscribe, and subscription is a powerful content, and resid yule income helps you the project the earnings and the growing and most importantly, the value is with the product that you create and whether it is great content or providing like a great beauty discovery, and fyi, my makeup line was purchased by ipsy last years, and now that we have are it, we own it. that is why it is important that more and more entrepreneurs have control over the destiny of the product, the vision and the idea and the company. >> my sister is a huge makeup fan, and so i know how much people are willing to spend when they are very into makeup and

how loyal they can be to different brands, but i am wondering how big the market is, and i mentioned birch box and now sephora is getting in on the subscription business as well, and so is there room -- >> absolutely. >> and do the customers overlap, and multiple subscribe? >> i know ipsy subscribers also subscribe to others because they are beauty enthusiasts at heart, and other subscription programs will kacater to a different market, and so, yeah, different products, and don't quote me on this, but the fact that the beauty industry is worth $500 bi billion, i think, but don't quote me, because it is a lot of money, and really, really big market and room for etch. >> than ing you, michelle. good to see you from our very own iconic conference, and michelle phan, co-founder of

ipsy. over to you. >> thank yog and we will go to dom chu over at the emerging markets. >> the best day of the week, the etf is trading above the trend line or 200 times the price which is $300 a share, and approaching the 50 dayer to shorter term price average level with the ten top hold inings ar asian companies, and chinese companies specifically represent a quarter of the fund, which is according to the fund itself, and eem up big, and asia and china is a big part of the etf's story. >> i am dovish and i think it will reach around the world. thank you, dom chu. we go over the jon fortt for what is coming up on "squawk alley" the next show on this

morning. >> we will have steve case, the partner of aool and revolution talking about startups, and also, we will talk about some some tv to a man who has changed the future there in ben silverman. and also, we will talk about the hack organizations and specifically led by the russians, and what it means for the future of security. all of that is coming up on "squawk alley." those new glasses? they are. do i look smarter? yeah, a little. you're making money now, are you investing?

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squawk master talking about the brexit vote and his cues for inare vestors tomorrow on cnbc. good morning. it is 8:00 a.m. in facebook headquarters in menlo park, and 11: 11:00 a.m. in new york and "squawk alley" is live. ♪ ♪ taking the fun out of everything ♪ ♪ making it wrong when i think ♪