and "squawk box" begins right now. good friday morning. welcome to squax here on cnbc. i'm kayla along with joe kernen and and drew sorkin. becky is off today. we are counting down to the fed speech in jackson hole wyoming. listening for any clues about the rate hike. any pace of inflation in this country. u.s. equity futures at this hour, we've been counting them down to a few decimal points throughout the morning. currently dow was set to open up about 31 points. s&p would set to open about five. nasdaq would open about eight so we are relatively in positive territory going against the trend we've seen in week. overnight in asia, japan is negative by about 1%.

that's largely on the back of currency moves. shanghai is roughly flat. hong kong is up .5%. european equities. the ftse 100 is the only major average that is in positive territory. we did see a better than expected q2 gdp number for the second quarter. that was up .6% from the last quarter. 2.2% from the last year. that's going into the brexit vote. take a look where we are on crude. brent still below $50 a barrel. wti about 47$47.18. we are getting job onning from opec numbers. nothing is too certain. >> couple big stories we're watching this morning. apple is issuing a security update from infecting your ipad or iphone. devices can be affected by clicking a web link and hackers take over using the camera and

microphone and tracking information on apps like facebook and gmail. advising customers to update to the newest version as soon as possible. inning i'm going to do that on the show. >> mylan announcing yesterday it's going to be reducing the out-of-pocket cost of the emergency epipen allergy injection for some of the patients after price hikes more than 400%. senator chuck grassley appearing on closing bell last night saying the savings is not enough. price hikes are cheating taxpayers. >> competition will draw down the price and we want to know whether that process can be speeded up to get competition to market. because i think one of the reasons mylan had the guts to move this price up so rapidly is because they do have a monopoly and about 40% of their client

tel is medicaid. >> we'll have more reaction. couple data point on the docket today. second estimate on q2. growth forecast slightly lower. also look out for july international trade numbers in the final report on august consumer sentiment. >> you give me mixed signals. you're going to download this thing. >> i am literally. >> you told me never do that when it first becomes available. li you looked at me like i was a novice. >> i want to be clear. >> don't ever download the software on the first day. nobody ever does that. >> distinction. >> andrew it sorkin over here. >> if you're going from one ios a full letter or number grade you wait. if they have a immediate security patch where they say the world is about to end if you

don't do it, do it. >> how does a layman know these things. how do you? >> because i am a lay manman. i watch "squawk box." you go right here to the settings. you hit general. >> it doesn't really have. >> you hit software update. checksing for updates. doing it's thing. >> this will is not good tv because it's taking too long. >> let me go. like a cooking show where all of a sudden the food is like ready, we'll have it ready later. >> that is going to be some scintillating television when it is ready right there. >> this isn't one that says a little one you have to find this one. >> yes, yes. >> let me go on, stocks to watch today. game stop. talk about second quarter results. revenue missed forecast because the weak sales. video citing a lack of new titles and the push by video game makers to get consumers to

buy products directly on the consoles instead of in the stores. seems like that's been happening for a while. auto desk raising full year guidance. company makes design jenging and entertainment software. saw a surge in subscriptions. more customers shifting to higher priced deals. ulta salon reporting seventh straight quarter. beauty product retailer also raising full year outlook. those projections are slightly short. >> a u.s. judge has ordered the state department to release certain e-mails by september 13. specifically the order includs s any e-mails from clinton and the white house of the week of the bangladesh attack. meantime, on the campaign trail, hillary clinton is striking back one day after donald trump called her a bigot. speaking at a rally in right knee neo, clinton cite sized

trump for his divisive rhetoric. >> now, trump's lack of knowledge or experience or solutions would be bad enough, but what he's doing here is more sinister. trump is reinforcing harmful stereo types. and offering a dog whistle to his most hateful supporters. it's a disturbing preview of what kind of president heed be. >> donald trump speaking in new hampshire about an hour before clinton's rally. he offered a prebuttal of clinton's attack. >> it's the oldest play in the democratic play book. when democratic policies fail, they rely left with only this one tired argument. you're racist, you're racist, you're racist.

they keep say iing. you're racist. >> there are now speeches scheduled today. we will be talking about the author of the book later on. quiet markets for most of the week. that could change today when federal chair speaks at jackson hole. joining us for more is ian micro economics and jason pride director of investment strategy at glen immediate. guys talk all the time. yellen herself, i'll grant you that. i'm going to go ahead and pretend that this could be really monumental because it's august and it's been quiet this week and we've been waiting for news other than political so i'm going to say, okay, this is a big deal.

am i just playing along with this or is it a big deal? i expect her to say what we expect her to say. >> this has been hyped up like nothing else. i can't remember a jackson hole event that had so much hype and excitement. i don't really think she's going to say anything really rev la toir. she's going to stick to the line they need to normalize policy and data dependent. she's not going to say september fmc we're going to raise rates or not raise rates. she'll leave the door open. sheel be vague and we'll scratch our heads afterwards and think away was that about. >> jays jason, i was reading an analyst that said it would be crazy for her to do that. one job support certainly sufficient to either do it or not do it. in a fed that's so good at predicting future economic growth and just has a good handle on everything, any given

number of any given month could be enough to scuttle their action. that's sad. it's sad and. >> sure, i think they're in a position, joe, where tlair hey' a point they need to put in another rate hike. they're starting -- the wheels are in motion to try to get the market to that viewpoint. whether it comes out today or not, i don't know. it will probably be wish wash like ian suggested, but they're trying to nudge the consciousness to believe that there is another rate hike on the table. the reason for that is is their mandates basically met, employment is pretty full, job market is feeling tighter. we're actually starting to see wage growth. inflation is starting to poke its head around. it's been almost a year since the last rate hike and lastly, reality is the markets could take a quarter point. this isn't that big of a number.

they could probably take it. trying to nudge the communication that way. we might see a hint of that. i don't know. >> if they do communicate that way, tell me how the market ends today. >> i don't think they'll communicate it in september. i would say another rate hike this year. my guess is december. i don't think they'll come out and communicate that. it will be a lot of economic or data dependent. that sort of stuff. basically suggesting the economy has gotten stronger. employment markets are a little tight. >> should the market sell off on that or do you buy because you think things are better than we otherwise thought. >> i don't think so. i don't think the market would sell off dramatically on that. basically expectations starting to see the market has priced in 50/50 chance of rate hike in december. maybe move up a little bit there there. it's a quarter point. >> ian, we're in a tight -- are we in a tightening cycle because

to draw a line, a point is not a cycle. don't you need two hikes to be -- to draw a straight line, you need two points. is that threat tongue people that in a tightening cycle you get more than a quarter point from zero or whatever we are. >> well, we have to. ultimately we have to do more than a quarter point a year because the inflation picture is beginning to change and unemployment is pretty full. below 5%. it's going to take more than a couple of quarter point hikes a year apart to start putting some pressure on those -- on that inflation picture over the course of the next 18 months or so. which i think they will need to do. the problem is one piece of data doesn't go their way, they're like rabbits in the headlight. completely frozen. everyone is unsatisfied because people think they should be hiking faster are unhappener and

people who don't think they should hike are unhappy. >> they've become four experts and every single move they make has to be viewed in how it's going to affect currencies around the world and maybe the dollar gets a little stronger. even though i always thought the fed's main mandate was for stable currency, but when you've got both full employment and like this crazy inflation target, you actually might want a weaker dollar to get to your inflation target. they've got so many thing going on. so many things going on that can't do anything good. >> i actually don't think the path they put in place is all that bad. >> you're a money manager. >> all you care about is stocks going up. >> don't take the punch bowl away. it's sick to watch the way you sell yourself. just so you're portfolios might getted marked up a little. we need this wait a second, joe. we're dealing with deleveraging.

this economy is in tough shape. >> eight years later we got emergency numbers because we're dealing with the leveraging. we can't take a quarter point increase. get rid of the punch bowl. >> i'm saying we can take it. i'm saying we should continue this path. it's going be a very slow one. look at what happens with rates abroad what other central banks are doing. that puts pressure on the united states to some degree and let's face it, we've been dealing with 2% growth. 2% growth isn't rampant growth or rampant inflationary environment the fed has to fighten quickly. >> after all this easing and all this qe we're still at 2%. maybe that should tell you that's not the antidote though what ails us or the groeb. why keep trying. >> the problem there's not a great antidote to access debt. you have to grow your way out of

it and it takes time. >> ian, they have some culpability in this, don't you think, central banksers around the world? >> yes, they do. they've learned i think fairy recently the negative rate doesn't work. i think the zero rates in qe is questionable as well. it hasn't done what it's supposed to do. you read the textbooks, the economy will go to the moon. that hasn't happened. the central bank response has been do some more. the response should be maybe it doesn't work and maybe we're scaring people every few weeks the economy stinks. maybe if we raised rates and told people things are normalizing they might feel lisz scared and mend more money. >> we don't invest here at cnbc. we may have some mutual fund or comcast or ge left over. i haven't done any. i'm sitting here like a big mutual ju

mooch not worried about anything. i see these commercials if there was ever a time where the entire globe has built up sort of too much excess from printing money, if it's ever happened, this would be the mother of all busts. i'm watching it going, probably not, but if it ever would, has it ever been like in in history where they built up so much excess where it could be manifest in all asset prices being overvalued? i might be sitting here holding a bag. we'll look back on it and say, oh, that was really obvious. you watch the fed do that for so long. and it was obvious it's coming. here we are not selling anything. >> this makes he nervous. it's a very risky scenario when you have an enormous central bank balance sheet not just in the u.s., but other countries as well. we now have employment and inflation pressure. what if over the course of the

next 18 months rates have to rise by 2%. what's going to happen then to all those people who have been buying all assets. seems more. what happens when the money isn't free anymore. >> hindsight everybody knew housing was in a bubble. this is a huge thing built up. if after this is over you say that you saw this coming, i'm going so say no, you didn't. you never said anything about this. >> we had to be careful here a little bit. we look at equities. equities are at about 18, 18.5 times earnings. the whole financial system, yes, there's support built in by low rates and as rates go up, they should deflate a little bit, but 18, 18.5 is not that expensive for the equity markets. it's not the sort of expensive that brings about negative returns. >> unless earnings go down. >> anyway. >> if you think earnings are

going down. just a point. >> ian and jason, i don't know about you guys, but it's building for me. do you feel it? >> the excitement over jackson hole. >> i have to explain? then it's not building for you guys. >> i thought you were talking about the impending unraveling of the market. >> i cleared my calendar for the whole day. i plan to get the remote out. i don't even need the remote. i'm going to sit there. i got my. >> smoking jacket. >> got your microwave popcorn ready to go. >> got much better. raisins. all sorts of candy ready to go. watch this big event. >> speaking of this big event, as we have been discussing, fed chair janet yellen speaking in jackson hole later this morning. on the opening day of the conference, protesters in the town turned up the pressure on the fed more than ever. steve joins us from jackson hole with more, steve.

>> reporter: hey, kayla, good morning. protesters now in the third year. reaching a new and pretty extraordinary level in year. firm first of all, not only did the well funded group hold a rally outside the meeting. later they met and chanted and rallied for the fed not to raise rates. later met with 11 fed president skmts foempbs where they discussed monetary policy and it's affect on labor and the poor. >> want to be sacrifice against your enemy that isn't even here so my exact question to you is this, why not test the bonds of maximum employment. >>. >> reporter: fed officials including vice chair along with several fed presidents mostly expressed sympathy with protesters. they agreed to research the central question.

just when minority employment starts to make gains. >> what happens is eventually this economy will create imbalances or overheat and get into situations somehow that has to be -- we have to react to that. when we react to that, it leads to a recession or some other bad outcome. >> there was some push back from boston fed president. he noted that periods of too low unemployment were followed by painful recessions. the fed also committed to another demand from poerotester increasing diversity. we're going to be able to ask a bunch of fed folks about this today. we have at 7:30 coming up on "squawk box." and then loretta. then janet yellen. she'll speak at 10:00 a.m. eastern time. we have stan fischer the vice chair at 11:30.

>> i'm wondering what the talk is at jackson hole that lays blame on the fed for this outpouring of populism and inequality in this country that we've seen. >> reporter: so it was out there sort of last night. i didn't get to talk to too many folks about it. they had seen it. talked about it. they do agree they have a terrible communications probable. at least some of the folks i talked to. mostly they think the policies they pursued have been the right ones so there's a bit of disagreement as to whether or not the policies are wrong between the story and what i'm hearing from fed folks, but they certainly agree they've got a pretty bad job at communicating the reasons for their strategies. >> they didn't say, boy, did we screw up those policies, we're autism. they said they thought the policies were good. >> right joe, let me ask you, do you buy the idea, i don't know

if they're still here today. >> is there a direct flight from newark. how quickly can i get there? >> reporter: you want to protest for higher rates. >> is that what they want? >> how quickly can we get you a barn jacket. >> reporter: i wanted to ask you a question though, do you think it's a bit much to blame the whole break down in the political system on the federal reserve or does that make sense to you. >> i blame it -- i was just reading julian asan blames it totally on the politicalization of the meadia. a i blame pit it on that as much as anything. i can't stand the media. you're part of the media.

>> steve, weave s'll see you in little bit. >> we'll see a lot of your from jackson hole. i'm going to be sitting on the lazy boy today watching. >> pretty much. when we come back on "squawk box." the ceo of mylan making head looirns on this very show. blaming the cost of epipen on a broken health care system. reactions from the industry, next.

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call today and ask how to get these savings plus a $250 prepaid card. comcast business. built for business. welcome back to squax. >> my frustration is there's a list price of 608. there is a system. i laid out there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. no one -- everybody should be frustrated. i am hoping that this is an inflection point for this country. our health care is in a crisis. it's no different than the mortgage financial crisis back in 2007. >> meg terel joins us now.

>> what the mmylan ceo did yest was bring a fight. it usually takes place behind closed doors. this really affected the stocks of the rest of the supply chain yesterday. the pharmaceutical care management association t trade group for pharmacy benefits managers came out with a statement responding yesterday afternoon loop lg mylan and saying that mylan is simply the latest drug maker trying to reframe the pricing problem into a coverage problem. blaming payers for the massive price increases is a red herring and doesn't pass the lab test. we also talked with a chief million dr. dr. who issued a channel to mylan. >> we would love to see lower drug prices. we pass the savings we take from the marketplace back to our plans. i challenge her, she can lower the price today and we'll make sure our patients get lower co-pays and our plans pay lower prices.

>> because of course heather bresch was making the argument that the system incentivizes higher prices on branded drugs. >> is that true. you think ant the margin of all the other players. the graphic. the five different hand if you will that touch this. that's effectively 50% of the price of this drug if not more. >> more. >> how do you fix that component of it. she should be reducing the price too. >> your question assumes that this is accurate. the entry is now pushing back on this. we have a note out this morning who covers the distributors and the pbms and he's saying this is an oversimplification. what he say is the supply chain is not earning more than half of the mic profits here. not even close. there's an argument that this wasn't correct. >> as the price goes up and she takes margin. are they taking margin too? is that what's happening?

we don't know know, but the assumption is yes. the pbms are pushing back on that. the argument of the drug industry is that the pbms make money by negotiating bigger discounts on drugs. >> this is all an absurd discussion because both types of companies should trying to maximize profits. what should be stopping is competition. >> so when the p bm points and says no, no, you're the one trying to maximize profits. and heather says no, no, it's them. both of them should be trying to make more money. >> there's a lot more competition i'm just trying to understand. >> otherwise your left with trying to decide what's a fair margin. yes, they're trying to boost margins. >> i was going to go to a separate question. one of the things she talked about is the fact she gives away epipens to schools for free. this was part of the questikwqu

about the lobbying that's going on. i assume they're not giving it away from free. how many of these things we think they really are giving away for free? if you are somehow this altruistic fapharmaceutical company giving this away free. >> and subs diedsing the rest of the world. >> how much is really given away from free. >> i think they put out a number giving 750,000 epipens away from free. i saw that. i'll double-check and make sure that was right. the argument of the payers is that that obfuscates the patient system program. the co-pay obfuscates the issue of the drug prices. joe makes a valid point. mylan isn't unique in raising the price of a drug in this way. a lot of companies do it. it's some company suddenly gets this kind of attention paid to it and they're evil and greedy.

what the drug industry is concerned about this is going to start spreading to the rest of the industry. now, of course the middle when who we don't talk about as much. we don't look at their role as much. they're starting to get attention to. >> we need to look at the p bms. that's one component. do the retailers themselves. do the other middle men have a responsibility to step and you happen give us transparency too in this. >> that's a good question. . the pharmacy managers are presented as the folks who save people money. they negotiate the discounts. cr crew said on behalf of lower drug prices. they were also down. their stocks fell yesterday too. as there is concern that a pressure on drug prices may make it more difficult for investors to value the entire supply change.

>> what's frustrating and ann annoying is people love a knee-jerk reaction in a poster child for corporate greed. they don't need to look at any of the surrounding issues. >> everybody wants more competition. you would even agree that you would want the government to be able to negotiate prices, right? >> sure. >> that's the other piece of it. >> i know that's the other part. >> y here's the thing. we have a system here. we could change it and go to everything you match expenses and what you bring in so that it's exactly zero. and that everybody benefits and i think there's another system for that called we can nationalize everything. everything could be not for profit and try to do it that way. anything you make over and above expenses, you have to give back. that's one way of doing things. see what works. see if you have invasion. >> that would be the argument of the drulg industry. if you don't have that insen tiff to make money, investors

won't give you money to invest. >> it's what we have. yes, we have a patent system. when it is set up to generic to me. >> you maximize competition in a fair way. >> this is the story we should be focusing on why there's no more competition. >> we want a person like marten strek and have him and put his picture there and throw darts at it. >> both instances we're talking about drugs that existed for a very long time. this is not -- the problem is this is not the invasion story. if you gave me a drug that was came out of nowhere that saved people from cancer that was marked up to some crazy price, then you would have a big debate. this is a different story. >> you. >> i felt that.

>> i like the epipen. thank god for the epipen. are you coming back? we have guys from the p bm coming to come in and say it's the nasty greedy cldrug compani. be careful what you say. up next, a report card on the hedge fund. the best performers and recognizable names that are trailing the broader markets this year. as we head to break, here's a look at s&p 500 winners and losers. ay, soou launcyour ba. now what? how willou keep up with the nedemands of today's digit economy? the fa i

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it is time for the executive edge. delivering alpha conference kicking off on september 13. kate kelly joins us with a bit of a look at the biggest hedge funds and how they performed so far this year. >> it's been a difficult year for hedge funds. the summer stock rally not creating much upside for this krout. take a look at major brand name funds and how they're fairing at the moment. square down 16%. bridge water pure alpha down 11%. glenview capital and passport both down 7 pkts. maverick capital down 5%. against that backdrop, other asset classes are iping the s&p up 6%. the investment grade corporate bond index up 9%.

even the gsci up about 4% versus an average hedge fund that's up just shy of 3%. investors have been grausing for a while about this: now they're really taking note of it. pension funds from chicago to new york in albuquerque is dialing back their hedge funds. in some cases abandoning them all together. the fee model doesn't justify the performance, some of them are arguing, especially when a balanced index fund would do just all well, if not better. that's the view of mark levine. his pension fund bailed out more than 60 hedge funds earlier this year. all the pension fund now had 3% of assets in 15 hedge funds and expects those to be fantastic. if they're going to be in his portfolio, they have to be f

fantast fantastic. and so far they're down 7%. >> can i put you on a separate topic. front page of the wall street journal in morning. what is exactly happening here and why is bill ago man want to buy. >> i saw that and i don't make with you. >> he's short so what other reason to buy than to cover the short. >> he has been consistent he thinks this is a short target. he said so. >> why would he buy herbalife then? >> that's why i'm baffled. >> it's a baffling story about the hedge fund community. >> his current stance in the last month or so is he wants to wait and see if earnings erode as a result of the ftc settlement and continue the play it out. i honestly don't know. >> why do we have to go -- why

don't we have a word for that. >> we need one. >> what's the u.s. equivalent. >> i don't know. that's the only thing i feel. >> the pension fund story. >> no, about the hedge funds. the s&p has 6%. >> maes masters of the universe. can't match the s&p. i love that. >> the problem here is the argument in favor of hedge funds is they're an alternative. they're a hedge. it's a way to guard against other market investment. >> guard against profits. >> the problem is they're not doing well. they're not doing as well in the really good times and still doing negatively in the bad times and people are frustrated. >> what do you think for the end of the year. >> i think it's going to be sizable. the rate of outflees slowed a bit. >> is it an outflow from the

entire industry. >> were meaning money will be reallocated to some of the big hedge funds. >> yes. >> i don't know if that's possible. so many of the brand names that are doing well are closed to investors. that was one point mark made to me. think of it ask as you only want to invest in hedge fund that wouldn't have you because they're closed because their returns are so great. >> journalist envy. for me. they make so much money. >> this could be the second act. >> i already did that not for a hedge fund. >> i would pay you 2%. >> i don't get the 20. i know. >> you don't get 20 unless you're in the black. >> we should tell you -- >> shut it down and renew it. >> we've got a block buster lineup of folks speaking at the alpha conference. produced by cnbc. an institutional investor. these guys often make them

money. this group. we've seen has decedent profits. amazing list of people. >> they do. >> we'll be talking to them. >> and explain why hedge funds aren't delivering alpha. >> get your tickets available on the website currently. coming up, cheating has come a long way since the advent of internet. now with school underway, we'll talk about how kids are scamming their teachers. as we had to break, quick check at the european markets. they are mixed. we'll be right back. this car is aveling over 200 miles hour. to win, every millisecond matter both othack and thsands milway. thhe helof at&t, red bull raci can share critical information about every inch of the car from virtuall

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welcome back to "squawk box" in morning. sit back to school season, but this is an unbelievable story. growing number of students are using tactics to cheat. hiring hackers on what's called the dark net to change their grades, delay tests and actually alter attendance records: joining us to talk about all this is karl. he's the head of security at rad ware, a cyber security company

that protects school districts and colleges across the globe. i was astonished this is even happening. it's one thing there were kids looking over shoulders and, you know, getting people to help them with their homework. this is a totally. >> fast times. digital high. different world we live in. >> how successful are they at it. >> it's incredible ses. the truth is right now cyber crime and cyber hacking pays. that's the truth. not a lot of people want to talk about it. >> going on p online and finding hackers to do this. >> you can hack schools for as little at $5 on the dark net. >> you can hire the equivalent of a person to go do things for you. like a consultant. essentially to go get it done. you don't need to know almost anything about how to get this done. you just need to have either some sort of money or expertise how to get to it.

>> i feel like we're giving the kids at home some ideas here, but the schools are also trying to combat in. >> the truth is that there used to be the echo systems of pap larty. they're still there. jocks, scientists so forth in school. now you have efeign. the folks have have figured out how to do things or gain access to these things skpchlt they provide the conduits to get things done. >> who is hiring you? >> you would think this is just a u.s. based problem or just a big city problem, the fact is this is a epidemic not only in the u.s., but across the board. why? it's ef it's everything from espionage to great research all the way to i want the get a ph.d. or mda from a high class school and do it without going there and not paying to go there all the way to essentially i don't want to

take a test. i don't want to do work. >> is this happening at the college level? are we talking about the college level? are was talking about lower. >> you would thi >> the most egregious work is at the primary school level. it's been a surprise to us. it came out of nowhere. the fact is that the school systems don't have access to these expertise in general, security expertise. >> how much do you charge? if i call you up and say i need your help. >> we like to think it's a nice wage for if risk factor, the risk factor is tremendous. if we can dilute the trustworthiness of whether or not somebody has credentials. it's a pretty massive day. you think about also there are students actually acquiring income based on these attacks. so they're able to ransom for example their school, if they get angry. >> when you say ransom, what does that mean. >> they'll have a digital asset

that's very important to them. they want to take tests and make the test unavailable for a price. they'll make it back available again. there's a great story on the dark net of a college kid that earned over six figures for a ransom of their own university. >> i don't understand. there's a test that has to be taken on a tuesday morning. >> think of common core it's. if it needs to be taken, it's scheduled at a very specific time. if i make it unavailable through a cyber attack. >> d dos. if i make it unavailable during that period of time, i may not be able to reschedule it, frankly, through the logistics of things. people are willing to spend a lot of money to make sure those tests are taken. >> the school would hopefully be able to find out who this is and hold them accountable for it. >> this is the forensics trail. that's not always so easy. most of it is attributable to

other countries. >> last question, are people trying to do this to their sat scores. >> of course. sat and act. this is a major. a lot of reward to those. >> i would think so. >> have hacked that? >> there's been some hackers that have suggested that they did. in fact, there's been no known infiltration, although there's been some situations like that. >> thank you for coming in. that's eye opening. >> terrifying. >> fascinating. >> did you really graduate from m.i.t.? >> yeah, michigan institute of truckers. >> i thought you told me you know how to program? >> i think anybody who can hack in to change their grades should get an "a" anyway. >> very entrepreneurial. >> they should get the m.b.a. from harvard. >> exactly. >> as a reward. >> coming up, the trucking industry is gathering -- i just said, michigan institute of truckers. gathering in dallas and one big topic of conversation, amazon.

the ecommerce giant is changing the game for shippers. morgan brennan joins us next with that story.

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the price goes from 50 bucks ten years ago to $500 or $600 a year and you're making $18 million a year. >> i understand better than anyone that facts are inconvenient to headlines. >> is mylan a greedy company? you've been labeled greedy. >> the leaders, the senator, i've called all of them. i want to have a face to face -- >> when's the meeting? >> they haven't set it. ecommerce giant amazon is transforming a transportation, making it a hot topic at the annual great american trucking show in dallas. that's where we find, of course,

cn cnbc's morgan brennan. >> reporter: hey, good morning, joe. it's been a rough ride for trucking. we've seen tonnage falling in the first half of the year, amid an oversupply glut, and also slow economic growth. but there has been one bright spot. that's ecommerce. and amazon, of course, dominates that space with a billion packages shipped last year, and more expected to move this year. and of course, move as quickly to your doorstep as possible. for the companies that can cater to that, that's been a boon. take covenant transportation group. covenant specializes in exdiz this freight. i asked him if he was worried about the tech giant building out its own transportation network, leasing trucks, buying drones, and buying truck trailers. he said it's actually a relief. >> no one carrier can handle all of amazon's freight. they need every one of our trucks and more so. and that's what you've seen them in the last few -- you know, the

last year or so getting into airplanes and actually getting into some of the trucks and some of their trailers and those kind of things. but we welcome it. we welcome it. we need them. >> so, basically, covenant, like we've seen with other transportation companies, is growing as fast as they can to meet amazon's demands, and there are still more to be had. just to put these numbers in perspective for you, with covenant transportation, ecommerce is a third of their total sales now. and david says that's growing 50% per year. back over to you. >> okay. thank you, morgan. coming up, when we return, fed heads gathering in jackson hole. markets are waiting for janet yellin's speech. we'll talk to st. louis fed president james bullard first on cnbc. that is 30 minutes away. squawk returns in just a moment.

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wall street eyeing jackson hole. the futures treading water ahead of janet yellin's big speech. in this hour, st. louis fed president, jim bullard in a first-on-cnbc interview. we'll see if he's sticking to his one-and-done rate forecast for the year. mylan under fire for the $600 price tag of its epipen. cnn heather bresch saying the middle men are the problem. we'll hear from the ceo of the pharmaceutical company about her comments and whether or not pharma companies are driving up the prices. and apple releasing an unexpected update to fix a hack attack that would allow hackers to use your camera and even your microphone. the details and the fix straight ahead, as the second hour of "squawk box" begins right thousand.

>> announcer: live from the beating heart of business, new york city. this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with andrew ross sorkin and kayla tausche. the futures have been a little bit higher this morning. it's been listless all week, and actually it's up just 15 points right now. the nasdaq hauled the up 385 and the s&p, 263. that apple hacking is an old story, because andrew and i both have protection now. >> we've updated. >> we've both brought protection today. >> if you were planning on hacking us -- >> you can't do it. >> find somebody else. >> you're going to try and it's going to say, no can do. because their -- and it took me no time. >> no time. got on wi-fi did it. >> it was ios 9.5. and don't do the big, whole

number upgrades until -- but on this one, we did it immediately, right? >> so you're really -- >> high five. >> 9.35. >> you really believe that? >> i learned the hard way about you and your high fives. let's get you caught up on some of the headlines making news this hour. janet yellin could command the bulk of the market's attention today, but a couple other items of note on the agenda leading up to that main event. we're going to get second quarter estimates of gdp at 8:30 p.m. eastern time. and look out for july international numbers and the final reports on august consumer sentiment coming up this morning. also a big headline, tesla has u.s. trust approval to buy solar city. the u.s. trade the commission says it was quickly approved, because the companies have few if no overlaps. tesla says in july after it made its first offer, the two companies would form a one stop shop for clean energy, offering consumers solar powers, home battery storage, and electric

cars under a single brand. i'm trying to think, ron barron, by the way, thinks it's okay. >> with a sunroof? >> that's great with $40 oil. i have a one stop shop for paying four or five times what you need to pay for energy. a great idea. >> and a couple more headlines for you real quick. an update on the problems att r theranos. the centers of medicine and medicaid services revoked a key certificate for the company's newark, california, lab and terminated the facility's approval to receive medicare and medicaid payments for all services. and senators are turning up the heat on mylan. drug company announcing yesterday they would reduce the out-of-pocket cost for its epipen after price hikes of more than 400% of over the years. senator chuck grassley appeared on "closing bell" last night and said the savings card that mylan

is offering is not enough and he wants to tie it somehow into ethanol, would be a good way to do it. price hikes are cheating taxpayers, he says. >> competition will draw down the price and we want to know whether that process can be speeded up to get competition to market. because i think one of the reasons mylan had the guts to move this price up so rapidly is because they do have a monopoly. and about 40% of their clientele is medicaid, so they can cheat the taxpayers, as much as they're cheating individual families. >> and mark merritt is the president and ceo of the pharmaceutical management care association and he's going to join us in just a few minutes to discuss all this. and i have no idea whether that's actually him, but maybe it is, maybe it's not. i don't think anyone in the world would know -- do you think? except people that know him. >> we'll find out.

>> but that's the picture that we have. if that guy shows up, i assume that that will be -- right, andrew? a nice smile, doesn't he? >> very attractive. handsome man. let's take a look at the markets, too. we're joined by our guest host for the hour, jason trenert, a chief investment strategy -- >> that is him. >> we know that for a fact. he is here in the flesh. and john riding, chief economist and founding partner at rdq economics. mr. riding, the speech from janet yellin today is called the federal reserve's monetary policy tool kit. is there anything we don't know already about this tool kit? >> no. there isn't. there is no secret -- >> so we can all go home? >> -- weapon. we know that if they had to cut rates, they've got one-and-a-half rate cuts in the bag. the fed is not going to go to negative rates, not consider that at any time. we know they can hike rates, increase the balance sheet and buy treasuries and mortgages.

they can't pull a bank of japan, they can't buy equities. there's nothing in the tool kit that we don't know about and they haven't used. so what we're waiting for is some acknowledgement that maybe they need to use fewer of the tools that they've been using and start the process -- or restart the process of renormalizing interstate rates. and as joseph was talking about earlier, the jobs number, micromanaging the economy, she doesn't know what that jobs number is going to be next friday and she's going to be very reluctant to give guidance that she's willing to go in september. but i think the feeling is growing within the fed, they have to get at least one rate hike in this year. jason, your thoughts? >> i couldn't agree more. i think the greatest thing about -- >> that's not fun. can you disagree? >> no, listen, i think the greatest thing about what japan has done in terms of going to negative interest rates, it's shown how absurdly ineffective we're getting in terms of

monetary policies have gone from being ineffectual in my opinion to actually being harmful. and i think, i also agree with john, we're not guy to buy equities. the big transition, i think, for investors over the next couple of years, and you're already starting to feel this. in japan, they're doing it through this thing called helicopter money, there's going to be a transition from monetary policy to physical policy, in my opinion, over the next couple of years, because you've reached the limits of what you can expect. >> but there seems to be so much hand-wringing over what the fed can do and what it should do. and yesterday, greg ip writes that the fed needs to become relevant. and kevin wosht is writing that their models are irrelevant. we're coming off a decade where the fed has been a lifeline for the economy, where janet yellin has been one of the 100 most important people. the fed has had celebrity status. can't we let it recede into the

background? >> the fed hasn't been one of the forces driving the economy into that financial crisis in 2007, by keeping interest rates too low, too long, in 2004 to 2006. and so, they've been kept even lower for even longer. because, unfortunately, managing policies are the only game in time. but the problems the economy faces, low productivity growth being one of the main problems, are not treatable by monetary policies. so it would be nice for the fed to step back and leave the problems for others, but this fed doesn't have the dna to step back. and say, if we're the only game and there are still problems, we'll keep on doing something. and unfortunately, jason's right. the fed's probably at a point where it's doing harm. because low interest rates don't necessarily help borrowers, at this point, as people have serially refinanced their mortgages, but they do hurt savers and we're now actually raising a generation of people

who don't see the point in saving, because there's no return to saving. >> jason, can i ask you a stock market question? i've been asking this all week. how do you play this? assume -- less about what they should do and more about how you play what you think they're doing. >> i think, how you play it is frankly, you just assume that the status quo is going to remain. that the fed is going to remain extraordinarily accommodative, which will drive up asset prices. >> so this is an academic exercise. i also think, you know, largely, central bankers are gripped by this arrogance that they can -- they're almost al chemists, that they can move beaker "a" into beaker "b" and it creates some sort of magical -- >> sorkin, your questions imply these short-term -- >> yes, because i think there are people who wait -- >> there aren't! >> there are people who wake up in the morning and they're trying to figure out what to do. >> there aren't many people.

>> and this whole week has been sort of this slow grind down. >> i don't think so. >> and they want to know! >> but, very important issue, it's being held up by fed accommodation. because going back to the issue of productivity, the drivers of the profits are drying up. and so the market stays up now, either because people are willing to take more risk, or because the stock market looks like a better-yielding bond than the bond market. and you know, the question is, how do you get profit growth back. >> a time horizon of friday at 4:00 p.m.. >> there's a lot of people -- >> very few people. >> it happens every day. the viewers, that's what they're doing. >> they're easily holding for -- >> i hope they're holding. but we have a number of people who aren't always holding. >> there's a few. >> we're going to get some -- >> talk to a few more fed officials throughout the morning, steve liesman will. >> for now, john ryding, appreciate it. >> jason, you're staying with us. it's been a big week, because we

had national waffle day. most of these national days, i don't -- i don't think they're just looking for them. but one that we do need to talk about, because, you just can't say -- i can't say enough about the dog, as a thing. because, i finally figured out why all dogs go to heaven, why that's true, because dogs could never do anything intentionally -- this is pink floyd, "dogs," they could never do it -- you don't have one? >> i don't. >> you don't have one? >> i don't. cats. >> i have a son that's allergic. i would have one, otherwise. >> all right, the holiday celebrates all dog breeds, both pure and mixed, and encourages the awareness of the number of dogs that need to be rescued each year -- >> we know that guy. >> yeah, you know that guy? that's zarah, my female shepherd. that's pongo, who runs the roost. pon pongo, from dalmatians. hopefully we have one of zarah's little brother.

she has a little brother named gunther. there's pongo. he's so sweet. >> he doesn't look like a dalmatian. >> he doesn't. but he is black and white. we've got to get gunter in later. there's gunter, he's the new -- he's only 6 months and that's how his big sister feels -- half sister. >> are they watch this morning? >> they are watching? that's why we had to do this. but i will, honestly, i was thinking that there was a german shepherd that the latest thing is to drive these poor dogs behind cars. that's what some people do, these horrible, horrible people. and you see this german shepherd afterwards, it's barely -- you know, they're nursing it back to help. the minute it gets adopted by a family, suddenly it's happy, it's just -- these animals, they do need -- you need to go in, hopefully, if you're looking for an animal, go in and adopt a dog. people who say, who don't have a kid, they're not quite a kid, but better than anybody that's not in the family, as far as -- better than all strangers.

>> i need to find a rescue dog that's a doodle of some sort. we have a hypoallergenic situation. is there a doodle version of a german shepherd -- a hypoallergenic. >> i don't think you want to mess -- you have the perfect breed. there's no reason to put another breed in with it. i don't think. >> we've got to run. when we come back, mylan ceo, heather bresch, blaming in part the middle man for the rising price of its epipen here on "squawk box." after the break, the ceo of pharmaceutical care management will join us to talk about the growing problem of drug pricing and a possible solution. and st. louis fed james bullard will join us from jackson hole ahead of today's big speech from janet yellin. "squawk box" returns in just a moment. 's me, a! from theative gax mea box.

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milan ceo on "squawk box" yesterday saying it's the middle man, in part, that are responsible for the high drug prices. >> my frustration is there's a list price of $608. there is a system, there are -- i laid out that there are four or five hands that the project touches and companies that it goes through before it ever gets to that patient at the counter. no one -- everybody should be frustrated. i am hoping that this is an inflection point for this country. our health care is in a crisis. it's no different than the

mortgage financial crisis back in 2007. >> express scripts chief medical officer firing back on "closing bell," saying in his words, it's just not the case. >> that can't be further from the truth. we would love to see lower drug prices. we pass the savings that we take from the marketplace back to our plans. so i challenge her, she can lower the price today and we'll make sure our patients get lower prices. >> and joining us with more on this is mark merritt, the president and ceo of -- we had a picture of you, mark, and you are the guy. the pharmaceutical care management. >> pharmaceutical care management association. >> yeah. just rolls off the tongue. they represent america's pharmacy benefit managerers. our meg terrell is here. meg probably knows more about the specifics. i'll let you make your case. mark, the only point i'll make is, when, you know, you've got two opposing private sector

corporations that are both in the business of trying to maximize profits for shareholders. i don't think you need to be finger-pointing and saying, you're trying to maximize profits more than we are, or you are more than -- that's what private corporations do, and competition and innovation is what holds back things from going up. but the thing -- we can all be utilities, if you want, and we can pay out every dime that we make and just cover expenses, but that's not what private corporations do. so before both sides start pointing fingers at, oh, you're just greedy profit mongers, that is the system. that's what we do. we just need competition to clean it up, right? >> i totally agree. and that's why i was surprised that mylan blamed pharmacy management producers, and for all these convoluted things about why they raise the price of their drug. just raise the price of the drug if you want to, but don't blame others for it. it's a simple thing drug companies do t a the end of a

cycle when they're going to face competition, often they raise the price of the product, it's nothing new. but just own it and don't blame others that have nothing to do with it. and what pharmacy benefit managers do, we were created 25 years ago to help make benefits more affordable and accessible to the people that they serve. hundreds of millions of people. we bring down the cost of drugs. we negotiate with the drug companies, and in a sense, if you want to call us a middle man, we are between the employers' unions and government programs and the drug companies to keep those costs as low as possible. and a good example, the most noted example that people might understand, pbm's administrator, the senior's prescription drug program, which is the most popular program, health program in the country, has come in under budget every single year, exactly for the reason you mentioned, joe. there's competition, we force competition among competing drug makers. there's competition among competing pbms. ultimately, seniors get to choose the plans that they want. and they're not going to choose one that's overpriced.

that's something that pharmacy benefit managers do. so we weren't saying yesterday, we're mad because the price rose, we don't like that, but we can deal with it. but we're concerned when a drug company raises the price of their product and doesn't take responsibility for it and tries to blame others, specifically us. >> mark, it's meg terrell. can you explain a little bit about how pharmacy benefit managers make their money? >> sure. >> what pharmacy benefit managers do is we negotiate with all of our -- with drug companies on behalf of all of our clients, the union's government programs, employers and so forth. and we get drug companies when they have drugs in the same class, the same category, to compete against each other. and the one that offers the best price concessions usually gets the best place in the formula. or there might be a $10 co-pay instead of a $50 copay. employers, unions, and others are willing to pay us for that. these are fortune 500 companies, typically. so these are tough competitors, tough health purchasers. they're willing to pay us fees to get that.

there are all different kind of ways that they do that. there is no pbm contract that's a universal, one-size-fits-all thing. it's the clients that determine a kind of contract they want. a union may want one contract, medicare may want another, an employer may want another, and an insurer may want another. >> i guess the question is, do they pay you a set fee or a fee based on the size of the discount. the argument of the drug industry is that you can get a bigger discount by raising the list price of a drug, therefore you would get paid a higher amount of that as a percentage. >> that's a total fallacy. that's not true at all. we want lower prices. our clients want lower prices. our clients are very smart. insurers are very smart. fortune 500 companies are very smart. none of them have to hire a pbm, by the way. they all choose to, to save money. and they would never let that kind of deal come through. that's why they encourage us to promote generics and other lower cost drugs wherever possible. >> what kind of margin do you get on the epipen? >> i wouldn't know that. that's a company-by-company

thing. but i wouldn't imagine very much -- >> but as the price of that particular product or any product goes up, does the margin increase? >> no, we're not buying the drug. all we do is reimburse the drugstores for how much they pay for it. so we're working with the employers and the drugstores and the drug companies. but we don't buy the drug and then resell it. >> are the drugstores taking a bigger margin as the price goes up? >> drugstores have a good margin. of course, the drug companies have a good margin. and again, you have to look at this not as some complicated thing. every business is complicated. amazon is complicated. detroit is complicated with general motors. facebook's complicated. there are always lots of different players involved. so it's a heresy -- not a heresy, it's a foolish thing to say that because there's a lot of different people involved in the process, that's who driving the price up. the person who sets the price is driving the price up. fine. but take responsibility for that and don't blame others for that. >> mark, we appreciate it. we'll be talking more. don't -- you know, keep your

phone line open. we may need you again to talk about this, because it's not over. but we appreciate it. thanks. >> you got it, thanks. >> all right. happy friday. thanks, meg. >> thank you. coming up, gamestop hitting yet another glitch as more and more gamers turn to digital downlo downloads. details after the break. and a first on msnbc interview with st. louis fed president james bullard. "squawk box" will be right back.

gamestop's second quarter revenue missed forecasts on weak sales of video games. the retailer citing a lack of new titles and the push by gamemakers to buy products directly from their consoles instead of in stores. that stock down 7% in premarket trading, down 34% in the last year. a little other video game news this morning. activision blizzard's "destiny" has grown a huge online community and now the game and its players have done something no other online gaming community have has done. organizers of the destiny conference happening in tampa this weekend ran a 24-hour, 7-day charity stream on twitch, raising $500,000 for st. jude's children's research hospital. the results are the single largest donation st. jude's has

ever gotten from gaming based charity event. the funds will be presented to st. jude's this weekend at that conference. when "squawk box" returns, we've got a lot more. st. louis fed james bullard will join us live from jackson hole this morning. we'll find out if he's sticking with his view that a single move in september is all that's needed for a long time to come. as we head to a break, take a look at u.s. equity futures, ahead of miss yellin's must-watch speech. looks like dow would open up a little bit higher want 18 points higher. we're back in a moment. [annncer it forcnature? or aales event? [annncer it forcnature? the summ of audi sales event he. ge t$5,000onus onselect audi de.

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welcome back to "squawk box" on this friday morning. jason trennert from strategist is still here with us. we're awaiting some fed commentary from steve liesman before we get to janet yellin. the vix, i don't want to say is up sharply -- i mean, it's up about 10% this week, to, you know, 13 or so. >> 13 and change, right. one of the things we put out yesterday, i'll just mention is we are getting a little bit worried on a tactical basis on

the -- on bonds and bond proxies. there is a series of -- there's been a spate that hasn't been universal of stronger than expected economic news. we've had industrial production, new home sales. one of the things that people aren't paying attention to that i think is important is that money growth is actually up about 8% over the past three months. so we're saying, there's been a lot of people crowding into these trades. and yesterday we put out a note to our clients, institutional investors that you might want to be careful as you go into this fall. because there could be a strong patch and discussion of higher interest rates, higher long-term interest rates. >> there's this idea that you can't really trust the corporate bond market anymore, because of all of the qe that's out there, now the ecb, the bank of england trying to buy corporate bonds, but the cds market actually reflects that maybe it's not so healthy, despite the fact that yields are only going lower. >> well, that's -- i think there's been a lot of issuance. the companies have been doing exactly what they're incentivized to do. the cost of capital between equities and bonds is so great

that companies are doing precisely what they're incent e incentivized to do. if you look at a chart of corporate share issuance and bond buybacks, it's almost the same chart. it almost looks like a magic trick. the same scale, the same pitch, the whole thing. and i think that's fair. i think the corporate bond market isn't quite as robust as it might have been. >> perhaps that's what central banks had in mind all along. >> perhaps. >> today is the super bowl for central bank. and fed chair janet yellin expected to give her speech at the fed summit in jackson hole, but before that, steve liesman joins us from the mountains of wyoming with a very special guest with him. steve? >> reporter: hey, good morning, andrew. i'm here with st. louis fed president jim bullard, as the lead up we have here to the janet yellin speech in a couple of hours. thanks for joining with us, jim. >> sure. happy to be here. chilly. >> yeah, it is. you have this big idea, that the fed should do it -- i'm calling it ronco, set it and forget it,

on interest rates, for two years. but one of the things that's part of your plan is a single interest rate rise to 0.63%. and i want to get the sort of short-term out of the way here before we get to the long-term. when would you do that single interest rate rise? something you would do in september? >> our firm does call for a rate rise, but i'm agnostic on exactly when we do that. i do like to move on good news about the economy, so if we got a meeting and we felt like things were looking stronger, that might be a good time to do that. >> have we had enough good news in the economy of late? >> we had a couple of good jobs reports here, but year over year, gdp growth rate is very low, below trend, really, and the thing about that is, you can't blame that on seasonal adjustment. >> if you do it year over year. >> right. >> so, we're looking at your forecast here, and it calls for 2% growth. >> that's over the forecast rise -- >> which is 2 1/2 years. >> yeah. >> but can we do 2% this year?

because if we do, you have to do 3% in the back end. >> some of the tracking forecasts are up a little bit, up around 3. if you have a 3% second half, maybe you can get to 2% growth for the year. but that kind of says something. >> one more short-term question. is that rate hike something you could do this year? >> we could. but like i say, we're kind of agnostic about it. the important point about it is not that there's a rate hike, the important point in our framework is there's a rate hike, but not on the cusp of this 200 basis points story. >> which is the story. >> which is the story. we don't have anywhere near that kind of certainty about where the long-range outcome is for the u.s. so what's happening is, people are putting in their tailor rules and then they're saying, well, gaps are about zero, rates have to go back to normal levels, which is some sort of average of the past. this regime idea says, well, we're not exactly sure where the economy's heading. so what we're going to do is

make the right policy for today's regime, which is very low real interest rates on government paper, and very low productivity. a slow growth, low inflation economy. and we'll make policy right for that. >> so you're at odds with everybody on the fed right now. not everybody, but -- >> they're going to come around. >> well, inside the meeting. nobody would talk to you. nobody sat you last night at the dinner. i'm joking. but, no, you have this 0.63, and everybody else goes off like this into higher rates in the future. >> but the trend is those rates are going down, have been adjusted, the long-range levels go down. that's kind of an imperfect adjustment. i think i have a better framework for how to think about it. just think about the next two years. what are the parameter that are governing the next two years. and make policy right for that. and don't say too much about the long run. >> what if you're wrong about

this? the concern is two-fold. we hear from other beneficials. one is that you have these bubbles in asset values and prices. that's one. >> totally fair. there's nothing about asset bubbles. so that has to be handled judgmentally. that's outside the forecast for us. >> outside the forecast, but it could be your rate that's fostering it. people said the whole financial crisis was caused by rates being too low for too long. >> the model i described doesn't have anything about asset price bubbles. so you've got to -- most models don't have actually anything about -- >> i get that. >> but the typical forecaster doesn't have anything about that zp . >> but that's one of the reasons why we hear people likesther george say rates should go up. >> that's fair. >> you're ignoring that? >> i'm not ignoring it. i'm writing a forecast and i'll have to make a judgment. >> what is your judgment on that? >> i think we're fairly valued or in the high side of fairly valued and i could see the

process getting away from us. maybe tech stocks, maybe others. i don't know. >> what -- what about bonds? being overvalued? the idea that there's a huge bubble in bond prices. >> right. so our framework does have that, because we think the real interest rate on government paper is extremely low. and why is it so low? we're kind of agnostic about it. we say it's because there's a big liquidity premium globally, and that is pushing the one-year ex-post real rate of return on u.s. treasury, minus 135 basis points over the last three years. it really hasn't moved over the last three years. so what we're saying, for forecasting purposes, do you think that's going to turn around anytime soon? no. when i talk to people in markets, no. so you should just take that as a parameter. and then you should go ahead and make the right call. >> is there damage being done by the fed in terms of forecasting these higher rates, these 200

basis points of tightening in its forecast? >> yeah, i think that's hurting our credibility. we're two years, about a year and a half, by the end of this year, we'll be two years into the process since qe ended. maybe have moved twice we that point. >> you keep getting it wrong. >> so i think that's affecting global pricing. you've got this policy divergence story, which has been in fx markets for a long time here. and so, yeah, i think it affects the pricing. we want to line that up better with what is more realistic assessment of what's going to happen. >> and speaking of realistic statements, we had up early, our fed funds survey -- our survey forecast for the fed funds rate. the fed keeps coming down to where the market is. the market is giving a more realistic view of where rates are headed than the fed has gone. >> but the market agrees with me. >> the market does agree with you in a much stronger way. one other risk that's out there that's talked about by a lot of

folks is the risk of inflation. why wouldn't this low rate forever, or not forever, for the next, over the forecast horizon of 2 1/2 years, foment inflation in the system? >> so, one of the things that we put in this is that there is upside risk, i think, to our forecast. so there is some possibility -- we don't really believe in the phillips curve. the empirical evidence is pretty weak. we've got a pretty strong labor market over the next two years. but we're saying that's not going to generate much inflation. it could be that the phillips curve reasserts itself and comes in with a lot of firepower and that drives inflation higher. if that happens, we'll have to react. >> speaking of labor markets and then sort of also the political system. the washington journal had a story yesterday, saying it's been fed policy over the last several years that's helped forest some of the political divisions in this country and some of the political landscape we have right now. how do you respond to that?

>> tv fed has been in the middle of the response to the big crisis, but i think we're at the end of the era for that. employment is down below 5%. inflation's a bit low but it's not that far from our target. so i think monetary policy on the whole has ended up doing pretty well. and we're going to need a medium term growth agenda for the u.s. economy, which focuses on productivity, focuses on gdp growth, and there are many things that need to be done, better investment, for instance, but many ore things that need to be done, to get gdp growth higher in the medium term. >> but those are on the fiscal side? >> there's got to be a five-year kind of idea. it can't be stimulus. i've sometimes talking about banning the word stimulus, because it gets everybody thinking about what's going to happen in the next quarter, what's going to happen in the next six months. you've got to take a longer term perspective and think about, what kinds of policies can we adopt as a nation that will get

the growth rate up? >> speaking of policies, there have been some protesters here and they've been actually urging the fed not to raise interest rates. and one of the charges is that fed policy has helped support inequality in this country. is that fair enough? >> yeah. i found out recently, this was funded by dustin muskovitz, from facebook. it's facebook money. so, i don't know. i think it's kind of a funny thing for them to fund, because they want low interest rates in an era where we're awash in low interest rates. it's kind of crazy, isn't it? >> that they're out there saying, "keep rates low" when rates are already low? >> rates are low. it's kind of a different era. >> to give you their point of view, they don't want this next thing that's being talking about, this next one quarter point interest rate hike. >> yeah, you've got -- if it

were just zero interest rates forever, how about support some legislation that just says zero interest rates forever. >> so you're saying they should bring their issues to congress? >> well, first of all, i think dustin muskovitz should be here. maybe you can helicopter in from sun valley or something. why is he sending all these people? if he wants low interest rates, why doesn't he just come and argue about it. >> joe kernan wants to come and protest for higher rates. >> now, they do have a good point on diversity inclusion, which is very important and the fed is not good at this and we've got to get for the. that's good. so i think, on that, you do have the german labor market reforms, which, you know, they cut youth unemployment in half and brought their unemployment down from 10% to below 5%. so, they've been really successful. so i think you should talk to the labor secretary about some of the things you can do, to do that. i think monetary policies are doing all it can on that zp. >> thanks for joining us. >> coming up, we have loretta after the gdp numbers.

and at 11:30, we'll talk to vice chair, stan fisher. >> he's been told that maybe muskovitz can borrow bernanke's helicopter. >> that's a great point. did you hear that, jim? >> what? >> joe says maybe muskovitz can borrow bernanke's helicopter. >> i don't think ben has a helicopter. >> he doesn't anymore. he left it -- that was property of the fed. he left it for yellin who's been using the helicopter -- >> maybe the helicopter we used to drop the cash out, maybe he can use that one. >> you guys. it is funny, the political divisions, though. isn't it weird that the krugmans, the left, they all want zero interest rates, and then there's me and other people that -- that seems to be -- how are interest rates somehow a political, you know, litmus test? because they are. so many things are a litmus test. i don't know who to blame all this division on. i don't know. i really don't, the media. the divider in chief that we

have in -- i don't know. anyway. still to come, tennis goes high-tech. the u.s. open will be featuring smart courts for players. a closer look at the technology is straight ahead. check out the futures at this hour. (speaking japanese) oh watson, youjase isery good. thk you. (speing japane) exactl i can dersnd nua ntext d idiom sen lanagesapane) top companies all over the world with erying from retail solutions, tbankg, top companies cyber security.ld (saking japanese)

tennis is going high-tech. as you walk the grounds of the billie jean king national tennis center at this year's u.s. open starts monday, you may notice two smart courts. these courts are rigged with multiple cameras to capture and help analyze a player's on-court game. this is courtesy of the tech company, play site. and for more on this technology, let's bring in paul anacon, a former pro player and later coached pete sampras. and also, roger federer is now the co-head of coaching and player development for playsight. yobar yosef is playsight's cofounder. thanks for being with us. >> thanks for having us. >> i watch their games. i need the -- someone to analyze.

i don't need it analyze d than t is, but they're so good. they hit it so hard. i see shots i know i'm not going to get. so why should i even try? and this is my wife that's hitting them. how do they move across the court like that and what can i leper from the smart court? >> i think the big difference that we're bringing in is that whereby tracking what the players are doing, we can help you figure out not only what you're doing, but what kind of mistakes you're making and what needs to be done to fix them. so we're helping players of all different groups and ages, recreational, as well as professionals, to analyze their game on the court and after the court. and just become a better player faster and on the way, have some fun and excitement. >> does it help to be on the balls of your feet, paul, instead of -- i just sort of sit on my haunches, on my heels. that might be the problem. i see people moving around quickly. you immediate to anticipate where the shot's going. >> absolutely. got to be on the balls of your feet to keep moving and be ready to react and get a good

position. >> a lot of work. >> one of the things that's been amazing for playsight, the education, the technology stuff was the ability to help so many different levels of play. you can have really simplistic themes to help beginners. more advanced themes that i would use coach prague players. and in the middle, you have good club players. >> so what does this device cost and what does it cost as a consumer of it, if i want to have a lesson with it, if you will? >> that's a good question. when we started off, the model was not to go only to the top 100 players. the idea was to go to the club market and really to the mass market. the price so get the system into your facility is $10,000 per court and running charges around $5,000 per year. if you break it down, it's about $13 a day. that's what you need to make to really have an roi on it. >> so if i owned a court, which i don't, but if i did -- >> you don't own a yard.

>> my question is how much are people charged -- is it an up-charge or attraction to take a lesson at a particular court? >> we've seen all different types of creative solutions from charging up a lesson, from just adding it to the whole membership. some clubs decide to it as an add-on like everything else. >> but with everyone holding one of these in hair hands, how much more sophisticated can the average player's game get by watching something that comes from playsight rather than just having someone record what they're doing. >> it's great that you have that, because we have an app that can go right on the phone there. since it's a cloud-based informational technology unit, you can go back and stream what you've done, you can punch it up on your phone, on your smart phone, or on your tablet and go through stuff after the fact. what i love from a teaching and coaching technology, it gives you the ability to put kind of the whys behind a number. for me to say one thing is really good, but to back it up with some numbers and video -- >> there are a couple rackets

now, they put chips in the rackets. is any of that integrated with that? >> there's a huge wave of technology coming in with censors, wearables, wristbands. we're sharing that wave. >> do you need a coach to help you -- >> be careful now, don't get me out of hi profession. >> do you need a coach help you interpret what you're learning from playsight or can you do it on your own? >> the system is very friendly and it's really used by players by themselves, but also with coaches. so i guess the answer is that it would help a recreational player, but if you have a coach around, it would definitely high pressure you understand the numbers better and break it down better. >> i notice it helps to step into the ball, like leaning forward. why am i always going backwards as i'm trying to get to the ball? >> stepping in is -- that's an old philosophy. i thought you don't have to step in anymore? >> it actually won't step in for you, but it will help you -- >> when i get to the ball, i'm

running for the ball going that way and i'm weakly trying to hit it back over the net. am i doing something -- am i not fast enough? >> it's about reaction and repetition. that's why, again, for me to sit here as a coach and say, do this, do that, it's one thing to hear it, but to be able to go back and go through a recording of what you've just done, you can see your reaction time and see what's -- >> it's not good. >> we can improve that. help you get in better core position. >> okay. i don't even know why i play. thank you, paul. thank you, yuval. thank you and looking forward to monday. when we return, how to play the markets. >> what's going to happen by 4:00. >> later today from jackson hole, you don't want to miss it. we're celebrating national dog day. keep sending us your pictures, people. "squawk box" returns in just a moment.

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going to do at every meeting. and then you can focus more. my own opinion, the central banks are not good at producing growth. you can either accelerate growth, bring it forward, or delay it. it's not particularly a good tool to create growth. you can rely on other -- >> in my opinion, that's not their job, but it seems to me they're trying to micromanage the economy. there are other tools, fiscal, regulatory, trade, that are far better in my opinion to stoke growth. get the fed out of the way and have it not being, as you were saying, superstars and all this other stuff. i just think that's not -- they should be in the shadows. they should not be outfront. >> jim grant says they can't actually make things better. they can make things look better, but can't actually make things better. >> the fed's balance sheet has quintupled since the global financial conference. the velocity of money has continued to go down. so the great irony, in my

opinion, is the fed has made a lot of these discussions about income and equality, made it worse. hasn't made it better. it's actually helped, for all due respect, with our viewers, the wrong people. >> jason, have a great weekend. >> thank you. >> good to see you. >> thank you. coming up, the co-authors of a new book about donald trump stirring up a bit of controversy with the presidential candidate. co-authors of "trump revealed" join us after the break. take a look at the futures as we head to the break. we're back in a moment with the dow looking like it will open up about 17 points higher.

hawks, doves, and moose. janet yellin set to weigh in on rates and the economy, but first, cleveland fed president loretta nester will join us live from jackson hole. "donald trump revealed." the new book has an inside look at the gop candidate, but he's calling it a hit job. we're going to talk to the authors, straight ahead. rafa serves it up. tennis star rafael nadal talks competition on the courts, yachts, and brexit. the final hour of "squawk box" starts right now. >> announcer: live from the most powerful city in the world, new york. this is "squawk box." welcome back to "squawk box"

here on cnbc, first in business worldwide. i'm joe kernan along with kayla tausche and andrew ross sorkin. becky quick is off today. we're less than 90 minutes away from the opening bell on wall street. less than two hours now, you can feel it, from janet yellin's big speech in jackson hole. i don't -- andrew, do you think -- do you think that just having round numbers for the seconds really gives us enough info? do you think -- >> i think we should go down to milli -- >> i think we need hundredths. but it is 1:59 -- look, it's changing, it's 1 hour and 58 minutes away. the futures right now, and you can see they're just going all over the place. they're up 17. that looks like any day this week, basically. sort of, not much, amplitude has been getting smaller and smaller through the week. is it really because we're waiting for this. >> we call it the super bowl. >> it's not the super bowl -- >> i've got the popcorn -- >> okay. >> jelly beans.

raisinettes. >> gubers. >> twizzlers. that's good stuff. that's made out of horse hooves, isn't it? that gelatin is made out of horse hooves. >> i was thinking bone marrow. >> we'll discuss bone marrow. >> we've got some top stories to get to. markets will be watching janet yellin's speech closely this morning. st. louis fed president jim bullard just joined us in the last hour. he weighed in on interest rates. >> our firm does call for a rate rise, but i'm agnostic on exactly when we do that. i do like to move on good news about the economy, so if we got to a meeting and we felt like things were looking stronger, that might be a good time to do that. >> cleveland fed president loretta mester will join us in about 30 minutes.

i was thinking of keith myseeis, a hedge fund guy. and kelley's here with a big hedge fund story coming up -- >> you could call her the mester meister. >> keith meister just nominated ten of his own employees to the board as part of a novel contest strategy. a story we broke on monday. >> love it. >> are you going to fix it now? >> am i going to fix it? what do you mean? >> you broke it. >> a story earlier, carl icahn selling his herbalife stake to a new dealer. >> i just hung up with bill ackman and i believe he'll speak with us directly, but just to sum it up, ackman is confirming the basic gist of the wall street story. he says, yes, he was contacted by jeffries, apparently because carl icahn wanted to sell his 17 plus million share position in in herbalife, he's the top holder on record at the moment. and ackman said initially, no, but later considered to being part of a consortium of buyers if one were to be put together,

but only to the tune of a few million shares. and he said he would have sold them the very next day, because he still has a very short bias on this stock and thinks it's going way down. let's bring bill on to talk in his own words. bill, what's the story behind all of this? did i sum it up correctly? >> i think that's a pretty good summary. i mean, we were -- i was contacted by jeffries, i think, late -- the week of the 4th or 5th. >> of august. >> of august. >> and, you know, they were trying to put together a block trade to put carl out. i do that, obviously, very favorably, that he's, you know, obviously a seller now. which i think is terrific. and this is a confidence game. confidence games, i would say, carl is the leader of what creates the confidence in the company. and if carl sells, i think it can accelerate the demise of the company, because once -- i mean, we thought this was a great ftc

settlement in terms of the findings and all the requirements, but the requirements doesn't really take effect until may, and sort of a slower bleed, unless the top distributors leave. and with carl there, may may have a better chance of keeping top distributors. with carl exiting, i think it's over and it's over quickly. so the sooner he sells, the better. and if you look at -- you know, you guys covered this pretty well over several years, but dan, fidelity, a huge shareholder -- >> and some still appear in the top holder's list, although i know those are dated. >> so fidelity, i guess by the time the next filing comes out, they're gone. i would guess bill stirrup is gone. but they don't have to file until november 15th. so it's kind of carl's last man standing. and if he's gone, i think the whole confidence thing just blows up. >> so let me ask you a question. and let me say, i reached out to carl this morning. i haven't connected with him

yet, but i'm curious, why do you think he would want to sell now? >> firstly, he's made a bunch of money. his average cost is something like 32. and if he can sell this thing at 60 bucks and almost double his money and -- you know, great for carl. he doesn't have to worry about what happens to the company when they're required to completely change their business model. look, i think he knows that this thing is toast. and i think he also -- you know, a company -- under the terms of the ftc settlement, the company's only now allowed to compensate distributors very verified, documented, profitable retail sales to people who are not part of the system. and the ftc also found that there were minimal, if any, profitable retail sales outside the system. >> bill -- >> so -- >> two questions -- >> the bottom line, one, i think carl's selling because he thinks the stock's going down and i think that's a smart trade and i'm very happy for carl to make

a profit, particularly if he gets out soon. >> just to finish the narrative, bill, before we talk more broadly about herbalife, you officially say, no, you would not participate in a purchase of ican's shares. you later rethought that and told jeffries you were willing to take a minority position in that that black trade, something you would hold for just a day. can you go through your thinking there? >> sure, they came to me and said, do you have any interest in covering your position? i said, absolutely not. we almost sort of laughed about it. and then they said, well, you'll obviously -- you know, we can get carl out, that will help you? i said, you know, that's true. and so what i said to them was, i said, look, go find buyers for this thing. if you can find buyers for it, that's great. if you've got 14 million shares sold and 3 million left, that's a difference between you doing the trade and not, would i buy those shares, i might. and that's what i told them. so they went shopping for -- they went looking for potential buyers. and my thinking was, you know, one, i have no obligation,

obviously, to hold those shares. so the second -- you know, the trade would be done at 4:15 on, you know, wednesday, and then thursday morning, i can sell my entire stake, the new position. and even with those 3 million shares, i would still have a very large net shore position. so i viewed it as, i'll lose a little bit of money on the trade. i have 3 million shares at 55 and sold them at 45, i'll lose $30 million, but we have more than $1 billion short position. and getting carl out would help -- i would spend $30 million to get carl out. i would probably spend more. >> phil, you've talked about this being a slow bleed and i just sort of want to understand your thinking now about the timing, given what you talked about coming up in may. and how you've been in investments like this, whether it's like this or not, but mba, that took the extent of seven

years, and thun ravels, what's the timing look like now in your mind? >> the fact that carl is now a known seller, i think that accelerates the time frame of the demise of the company. because, i think, again, this is a confidence game. and he's got five directors on the board. you know, it's going to be a pretty interesting board conversation when the company now knows that carl's a seller. i think that's interesting. and the other people knows that carl's a seller -- pyramid schemes are driven by the top 50, 60 people in the system. and they have very little incentive to stay around. and, you know, this company is under enormous scrutiny. it's being required to change its entire business. >> if the distributor is still making cash -- >> yeah, look, the top distributors, what they need to do, they need to convince hundreds of thousands of people underneath them to keep buying product. and that's a big hurdle, now that the company is -- you know, everyone now knows that they're -- you know, the people who read the documents, understand that the entire compensation system has to

change. skpo maybe they can milk it between now and may, the top distributors, that they can keep convincing their down lines to buy product, but once may comes, it's going to be a lot more difficult to -- there's no -- the ftc eliminated qualification purchases. you know, people get paid for buying products from herbalife, not from sell products. it's a real confidence game. you have to keep convincing them each month to buy several -- the people on your down line to buy thousands of dollars worth of product they can't sell. that's a tough thing to do, particularly if, you know, the main, you know, carl's really been the main spokesperson for the company, he's a credible guy. what i would say is, carl's a great investor. you know, you were right to buy with carl at $32 a share when he bought the stock and you're right to sell with carl when he sells the stock. he's pretty savvy about it. he doesn't normally tell you in advance when he's out. very bullish on apple until one day he found he sold the whole position. >> bill, speaking of being a great investor, i was on-air

earlier talking about hedge fund underperformance this year. persian square down 15.5% through the last period, which i think is august 23rd, which you reported, year to date. icahn, was down 18% in the first half of the year, in their privately held hedge fund as per the holding company filings. can you speak to the environment that you're operating in, and what that's all about. and what is your current mentality about the markets and your own performance? >> sure. so, look, our performance, this is the worst period of performance in my history as an investor. i would say beginning around august, you know, in last year, you know, to now. last 12 months have been difficult. i guess, you know, fortunately, we've bounced off the bottom. things were actually worse, you know, mid-march, end of march. really, it's almost entirely been driven by, you know, valiant. and i've never owned the stock down 90% and world was saying valeant was going bankrupt, and the stock was 18. i joined the board in mid-march

with steve afrafrayden, and the company's made a lot of progress and that's obviously helping our performance. the rest of our companies are doing well. herbalife has also cost us money, but i think that stock's going down. you know, so, we'll see. we'll see where the year ends, but i'm still planning to have a good year. >> okay. >> but it's not an environment thing. it's really very specific. we made one very big mistake, taking a passive position in valeant. we paid a full price for the assets of the company and betting on management's ability to create value by buying other assets going forward. and that was -- we can spend an hour or two talking about the mistakes we made there. what's interesting is today, valeant, we stepped in and joined the board is now a more traditional pershing square investment. we normally invest when the shareholders have lost confidence in management. and that's what happened here. but it wasn't just management. the financial statements were delayed, there was a potential

fault. it was very similar to when i joined the board of general grove when they filed for chapter 11. i didn't think valeant would have to file for chapter 11, but it was the same experience. if you look at what happened, steve and i joined the board, we brought if joe papa, the board recruited joe papa. we have an almost entirely new board. last week, joe brought in john harradean, they commitmented to delever the business, identified assets they're reviewing for sale and and i think it's a very interesting -- i would say it's a classic pershing square investment today. and it wasn't, and that was my mistake, you know, when we brought it in february of 2015. >> what you're telling us now that the kind of thing you would say to an investor of yours, who was concerned or considering redeeming -- i mean, pension funds have been redeeming from pershing square and other places, and obviously you need to make a counterargument, right?

>> look, we've been very fortunate and have had relatively very modest redemptions from our investors, but, i've handled many, many meetings with investors. talk about what went wrong. and, you know, how this -- why this won't happen in the future. and i think what's interesting here is valeant was a unique investment in a lot of ways. and we never, you know, get to meet the management of a company before making an investment. we never invest in really complicated companies, that you can't entirely figure out from just reading the 10k. and we broke those rules here, because we worked for a year with the valeant management team, you know, on the allergan transaction and that gave us a lot more confidence in what is a very complicated business. and, we've really -- if you look back at the kinds of things we've owned historically, they're very simple, predictable, free cash flow generative companies and we're buying them at deep discounts with the underlying asset, the underlying business. and here we went off the

reservation and we bought a business at a very full price for the existing assets, betting on value creation by acquiring additional assets and we thought we could help, as we attempted to do in the allergan transaction, by creating other potential merger opportunities. and that was a big mistake. >> okay. >> bill, thank you so much for coming on-air and talking with us. >> really appreciate it. >> coming up on "squawk box," a new book takes an inside look into donald trump's past. but the gop candidate has called it a hit job. the authors will join us right after the break. nnouncer: they'll tt you.

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welcome back to "squawk box" this morning. to the campaign trail we go, and a new book out this week about donald trump. it's called "trump revealed: an american journey of ego, money, and power." these 20 reporters, editors and fact checkers and 20 hours of sit-down interviews over four months went into making this book. and mark fischer and michael kranish are the co-authors of the book. fischer is an investigator with "the washington post." and this was candidate trump's response to your book, gentleman. "the washington post" quickly put together a hit job book on me, comprised of copies of some of their inaccurate stories.

don't buy, boring! have you heard from him directly? >> just that one tweet and we're more than grateful for that. we asked our publisher to send him the most huge fruit basket possible. >> tell us how this book came about. because interestingly enough, he has not been that cooperative with "the washington post." and yet, behind the scenes, what we didn't know until recently, is that he had been you. >> yeah, there's a huge difference between what he does for public consumption, because bashing the media is a great applause line at rallies. and what he actually did with us in private, which was to be gracious and generous with his time. he gave us, as you said, more than 20 hours of interviews. cooperated with the book, in almost every regard. there were some people he didn't want us to talk to, like his siblings, but for the most part, he was very cooperative. and he wanted what we wanted, which was to tell a full, comprehensive story of his life, from his ancestry, we sent

reporters to germany and scotland, where his family came from. all the way up to the convention. and the idea was to examine this guy, who is the first major party presidential candidate since dwight eisenhower, half a century ago. who has not previously served in elected office. and therefore, has not been vetted the way most americans would want presidential candidates to, you know, to understand who this guy is. how he makes decisions. what his character came from. >> there are a number of interesting revelations and i want to get to them in just a minute. but just from your perspective, the biggest surprise? >> well, there are a number of surprises to us. i spent a lot of time working with reporters on his business dealings. and we know that he's had business failures, but the death-defying roller coaster nature of his business experience really was deeper than we had thought. he had six corporate bankruptcies. not a personal bankruptcy, as he points out, but he really took bankers to the edge, time and time again. shareholders, bond holders, stock holders. he traded a public company to

raise capital for himself when he needed it. and the share price was $35 at one point and went to 17 cents. it gives you a sense of just how deep the despair was. and there were numerous times where he clearly, he said to us, he took his eye off the ball at various times. and he barely survived. but in the end, his view is that, i made a great deal for me. i survived. and he came to this point where he is today. >> can you speak about his disposition? because i think that's, perhaps, the largest -- i mean, there are policy questions and all sorts of things, but people talk about the unpredictability of donald trump. and sort of, given the amount of time you spent with him, how you felt about that. >> you know, it's interesting. he's -- there's a caricature of him as this simplistic guy, because he uses these short sentences, very declarative, sometimes coarse or vulgar language, but he's actually, i found, a much more complex character than a lot of people know. and on the other hand, it's hard to have a real linear

conversation with him. you know, i think if you were born 30, 40 years later, someone might have said, this is a guy who has some attention issues. he's not much of a reader. he told us that -- we asked him about, how do you make decisions? how do you work as an executive? and he said, he really doesn't like to do extensive reading. he doesn't like it when people bring him reports or briefings to read. he wants people to come in and tell him orally in a matter of seconds the merits of an issue. and he says he likes to rule by his gut. he makes decisions by instinct. he has deep confidence in his own instincts. obviously, we know he has a great knack for reading a crowd. he believes he has the same knack for coming to the right decision about an issue. but he's unusual for presidents or candidates in that he is really not much of a reader. >> did he give any sense that his personality or his outlook or his disposition had changed at all over the course of the campaign, with what started out

as almost an experiment, to see where the gop was, and how the base felt, to now what is obviously, the nominee for president, for the gop. >> that's a great -- it's a great question, because he has been with different parties over his career. for example, he changed party affiliations seven times. he was a democrat, republican, independent, then a republican, and also changed positions on a number of issues. he called mitt romney's self-deportation of immigrants crazy and maniacal, and then he proposed forced deportations, and now he's going back something closer to perhaps what mitt romney talked about. he has been a man who has -- his philosophy has been one of reading the moment. he's not an ideologue. it's more of a pragmatic approach. but some people would ask, what is your core belief. we asked him that question. what do you really believe, if you've changed your party and position so many times. his response was, look, i'm a business person, i look at the moment, i want these people to be friends with me. it's very different than any

other presidential candidate, which if you asked, what's your core beliefs, they would likely pound the table and say, these are my core beliefs and here's what they are and i haven't changed. >> but we know about politicians, don't we? it would be nice if the world was really like that, you know what i mean? i think about the vetting, too, i still don't think i know a lot about the current president. i know he was a senator for a little while, but, i would like to know more. i would like to know more about all these guys. but we've got peter squhooitser on monday. tell your friends at "the washington post". >> okay, gentleman, the book "trump revealed," check it out. we appreciate it. when we come back, we have some numbers, breaking news, gdp numbers right on the wait. squawk returns in a moment.

coming up, we're just minutes away from breaking economic news. we're going to get a second read on q2 gdp. we'll bring you those numbers, and cleveland g tp president horror retrot mester will join us. [announcer] is it a force or a sales event? the summer of au sales eventer. t up to a $5,000 bonus selectudi mols.

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welcome back to "squawk box." a litany of data coming out, our july read on trade balance. and of course, it's a deficit, 59.3 billion. that's about 4 billion lower than we were expecting last month, and increases the deficit from 63.3 to 64.5. so sequentially and based on expectations, pretty good number. let's look at gdp, shall we? our second walk around the block. and it is 1.1. so we shaved a tenth, but pretty much expected by all.

if you look at now the last four quarters, we have the 1.1, 0.8, last two quarters last year, 0.9 and 2%. let's finally get to july. wholesale inventories read unchanged. unchanged on inventories. we are expecting a number close to that. keep in mind, last month, it was up 0.3. remember, this inventory deal, it surges, it recedes, surges and recedes. it plays havocs with a bunch of numbers, but it seems to be fairly consistent. corporate profits, by the way, mine is 2.4 versus 8.1. that's preliminary q2. put all of that together. after all of that, we walked in the door, and the ten-year note, surprise, were trading 156. every day in august, it's been in the 150s. where are they now? drumroll, 156. janet yellin, of course, and the f1c committee and all the policy makers around the globe will be in jackson hole and we'll so if anything moves the markets as

the day progresses. "squawk box" gang, kayla, joe, becky, back to you. >> all right. thanks so much, rick. and we are seeing some of the air come out of the futures. they have been up. dow would have opened as much as 31 points, now it's about 5 points. but we'll see how the market continues to digest that data. meanwhile, fed chair janet yellin set to deliver a speech in less than 90 minutes. let's get back to steve liesman in jackson hole, who is joined by another special guest. steve? >> reporter: kayla, thanks very much. i'm here with cleveland fed president, horrloretta mester. thanks for joining us. >> thanks for having me. >> another weak gdp number, 0.1%. the second half was kind of weak. do you have -- or the first half was kind of weak, do you think the second half will show a rebound? >> i think we'll have some strengthening in the second half. i think the economy's on a good track. i think the employment numbers show that. i think the inflation numbers are coming up with, slowly. they're below our target still, but moving in the right direction. >> what do you have dialed in for the full year?

we talked to somebody yesterday who thought, well, they had a 2% forecast for the year. they would have to do 3 in the back half. >> i think that's reasonable. it's going to be hard to perhaps get to 2, even 3. but i think that's not an unreasonable forecast. >> to do 3% in the second half of the year? >> i think we can do that. >> you say that so nonchalantly. that's a big number? >> well, the first half of week, we have some momentum and some underlying strength. some of the inventory adjustment will come back in the second half of the year. >> so if you're doing 3%, walk me through your rate forecast for the rest of the year. >> so, i really believe that the economy is still on track for a pickup in growth in the second half of the year, inflation moving gradually back to 2% over time. and the unemployment rate going down a little bit from where it is now. so, given that forecast, consistent with that, i see a gradual, you know, upward pace in interest rates as being appropriate. now, that doesn't mean, you know, we're behind the curve now. but i do think that, you know, it makes sense to be starting to

move interests up on that gradual path. >> should we be on the edge of our seats for september? is september a time you would like to raise interest rates? >> i think every meeting is a live meeting, as many people have said. i go into the meetings with an open mind. i like to hear what my colleagues say. i like hearing diverse views about the economy. and of course, we all have our own forecasts and our own ways of -- and frameworks for doing policy. and i know that's one of the things we're going to talk about at jackson hole. >> but it sounds like in that context, you would certainly like to see an interest rate hike by the end of the year? >> well, timing isn't the real thing. the real thing is the path. >> if you're in the market holding a piece of paper that has a term on it, which is a bond, timing is a lot, right? >> well, it is. but the way i do -- my framework for doing policy is i look at a medium run forecast. i look at the data and look at a lot of different data, not just one data report. i look at the trends and the data and i infer and try to predict what the medium run forecast is. and then i back out what would be the appropriate path of

policy. in my appropriate path, it's a gradual increase. that's why timing isn't really the right way to look at it. >> let's talk about the framework. because we did our fed survey, and 60% of our 39 respondents say the fed doesn't have a framework. and a plurality. more people than not also think, you know what, the fed's not making -- that's one thing we're looking at right there. and the next chart says, you know what, more people think you're making policy based on the latest economic data rather than based on the medium term outlook. are they wrong about that? is there a framework? >> there is definitely a framework. i can tell you my framework. i find that a disappointing result, but i think that's a really, more of a reflection of perhaps we're not communicating as well as we should. >> what should you be communicating? here's a form to talk to all of wall street. >> again, my framework is, we want to look at the median run forecast. we don't set policy data point

by data point. we look at the data, feed the data through models and through our forecasts. >> if you're on the way to doing a rate hike and all of a sudden you get a lousy job report. all of a sudden the rate hike's off. so it sure seems like you're going data point to data point. >> i don't think that's the right interpretation of what happened over time. i mean, i think people are always assessing the information that's coming in. and different policy makers around that table might have different forecast. and so, you're always saying, as the data comes in, is the consistent with my underlying forecast or not? so you continually do that kind of evaluation. >> so one of the things that the guys with the pieces of paper out there with the term premiums want to know is, you know, what's the path of rates? we were talking about to jim bullard this morning, he was saying, you have about 200 basis points of tightening built in over the next couple of years. is that a realistic number? is that what you have? >> i think what you have to do is look at the forecast that the fed policy people put out four times a year. i think that's our best assessment at the moment of

where we think rates are going. but also, you have to realize that there are error bands around that forecast. and they're not forecasts in terms of what like the market is forecasting. when we write down our policy, we think of that what we think is appropriate policy given what we expect to happen in the economy. >> but, specifically for your outlook -- >> i think a medium run, over the medium run, i believe that policy rates have to come up from where they are now and it would be appropriate to do. >> 200 basis points? >> i'm not going to give you an exact number, because there are error bands around it. and as soon as you put a number on it, people focus on the number. the real thing is, is it appropriate to gradually move interest rates back up. and definitely move them up. not moving them up every time, but assessing, moving them up, assessing the conditions, assessing the outlook. >> let's talk about some of the risks around the rate structure right now. how concerned are you that there are potential bubbles in asset values now that are fostered by low interest rates? >> i think you have to take on

board that we're in an environment where we have very, very low interest rates. and there is a potential for instability because of that. we saw that, you know, in the past, and we kind of want to have a framework, where we don't go back there again. so i think you have to take that seriously. do i see them imminently? no. but i think you have to be taking that onboard, as being a concern that going forward, if we leave rates low, too long -- >> are there excesses right now? >> i think there are some people point to the commercial real estate market and certain parts of the country as being probably a little bit frothy. but, again, i don't think that's an imminent problem. but i do think it's something you have to take into account. >> how about stocks? >> the stock market reflects a lot of different things. i'm not going to say there's a bubble in the stock market. i don't think i would be able to say that. i think investors, you know, assess conditions just the way we do. >> okay. loretta, thanks for joining us this morning. >> thanks a lot, steve. >> okay, that's loretta mester, the cleveland fed president. coming up at 11:30, we have

stanley fischer. >> the ettetons showed up. >> are there actual mountains back there? >> there are. oh, look at that! look at that! >> we knew they were there. >> i've done this once every 13 or 14 years, joe. i can see you're correct. >> they didn't go anywhere. i knew they were there. >> you were correct about that, joe. the mountains are still there. >> and so many other things. at least that one. >> we appreciate it. we've got to get to a quick story we've been following all morning. billionaire investor carl icahn mulling selling his herbalife stake to a group that included bill ackman and ackman joined us earlier this hour to talk about it. >> he's made a bunch of money. i think this has average cost is something like 32. and if he can sell this thing at 60 bucks and almost double his money, you know, great for carl and he dun have to worry about what happens to the company when they're required to change -- completely change their business model. look, i think he knows that this thing is toast.

>> and a quick reminder, we have a blockbuster lineup for the sixth annual delivery alpha conference. the preeminent investor simultaneous and you can get more details and tickets delivering alpha.com. coming up on "squawk box," snapchat is hitting the football field. the photo app getting big bucks for its sponsored filters. details, up next. plus, aspect ventures. theresia guow will join us with her ideas for the next big thing. we'll be right back. ts a as a vestednvestoin v, invest with*trade, where investors castated invest. this is retirement. reting rir tes and i neveget tired of it.

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welcome back to "squawk box." snapchat isn't just sending disappearing messages, it's augmented reality lenses that users can superimpose on their faces have turned into a very big business. cnbc's julia boorstin joins us now with more julia? >> today snapchat is partnering with nfl for a sponsored lens. building on a partnership snapchat has covering nfl games with live stories and nfl's the first sports league with a discover channel. first snapchat sponsored lenses are big business. take a look at this one. the company has run over 100 of them since halloween and sources tell us that brands pay between 350,000 and 650,000 or even more

per lens, per day. and that's just to reach snapchaters here in the u.s. now, snapchaters says it definitely pays off. its users playing with sponsored lenses for an average of 20 seconds before sending out what's effectively a commercial for friends, for the most popular, is this one for taco bell. it was viewed more than 224 million times. that was just on cinco de mayo. the most engaged, the one for gatorade with 30 secondsover average play time and an 8-point increase in purchase intent. amc paid for one for "fear the walking dead" over the weekend and they treated out some of the freakiest videos. pretty creepy. between these lenses and sponsored filters that go over photos, as well as video ads, snapchats's reportedly on track for over $300 million in revenue this year. though snapchat is private, and of course, it will not comment on those revenue numbers. kayla? >> instagram's hot on their heels so we'll see how fast they can keep innovating.

julia, thank you. now we're asking who could be the next snapchater. next guest is an early stage tech investor, who championed many successful companies, like trulia. the fact that snapchat has been able to make that into such a big business, does it have a mote around it. is it completely indefensible. >> i think it's great they've been able to make ate business, but i think there are other -- what it really speaks to is this generation really wants to have messaging apps as their main mode of communication. whether it's snapchat, facebook messenger, whether it's whatsapp, there's much more usage in terms of time spent on that any of the other kind of interfaces. so coming up with creative ways to monetize those apps is interesting. >> just a quick question, because i was showing it to kc y kayla earlier, do you know about masquerade? >> no. >> it's basically the identical thing that snapchat has, facebook now owns. i don't know if they bough it or

made it themselves. and i imagine it will ultimately get integrated into instagram. so how defensible are any of these products? >> i think the defensibility is less around the product innovation, the features. the defensibility is in the platform, right? so they like the platform and who are the people that are spending time on it? so it's about the actual content that the users are creating and contributing on there. that's why you'll spend more time on one than another. because if all of your friends are spending more time on instagram or more time on snapchat, that's where you'll be spending more time. but frankly, they mostly use all of them, from what i can tell you. >> which is fascinating, because at some point, you get app fatigue and you only have so many hours in a day and so many minutes of those hours you actually want to spend on social media. so at what point, do you think we're fully saturated on these devices? >> well, so it's interesting, i think that it's -- because you use the word social media, which, obviously, they are social media, but i think it's really about sort of the

messaging platform. so, on those devices, whether they're -- people are fatigued with apps. you know, most people open -- the average taapp they downloads opened 1.1 times. but when you think about messaging, whether it's imessage, but that's the way you interact, whether it's on snapchat or messenger or it's on whatsapp, that's the way people like to interact today, much more so than sort of e-mail or through a web page. so i think that's the way most new apps are going be skinned in the front. >> are you going to hang out on masquerade all weekend now? >> all weekend. >> i think i would only do that once. oh, look at that, i look silly. >> you should see what people -- the kids these days. >> they do it and then they do it with their other friends. >> and do it again and make a new face. they wait for new masks or new lenses every day. >> to put on your face. >> i have -- you know, i have -- you know, i'm a 6-year-old kid,

so every morning they want to see whatever the new mask is. so they can play with it. but then, there are people who are reusing masks. it's constant. different environments. >> she put your face -- >> on snapchat. >> why am i so ugly as you. >> why am i so ugly as you. >> you look better as me than i do as you. >> for theresia, for investors who want to play any of these secular trends, how would they do it if they're not in your seat? >> i think in the early stage side, there's a ton of noegs going on around this new ui platform. so it's not just about sending funny pictures. i'm not talking about that part of it, but the fact that people like to have these short text and graphicical messages back and forth. if you think about at work now, sort of the rise of like slack, as the way a lot of people who have pcs will interact with each other, as opposed to e-mail. i think it's just about that quick, really fast communication. and so there's a bunch of really interesting innovation going on

around that to enable. so you can -- obviously, you can better on which platform is going to win. by the way, we haven't talked about, but you know, google and microsoft are also trying to invest in these conversational messaging front end platforms and what they're building behind them are bots, right? there's a lot of talk about artificial intelligence and bots. we're involved in a very interesting one that's based on photo and video bots. that's an interesting place to invest. and on the public side, we didn't talk about this, but the other side of the whatsapp app, the data sharing -- >> we have a lot to talk about. >> that's another place to play is in the cybersecurity area. >> and slack, too. we'll we visit slack next time you're here. and just for our viewers who may not know exactly how it works. have you slacked? >> i slack every day. >> you slack here. but you've actually played on slack? >> yes, i do. >> it's different than e-mail? >> it is different than e-mail.

it may eliminate e-mail. at least, that's the goal. >> let's go to break. we'll let you slack a little. >> when we return, we're days away from the start of the u.s. open. and robert frank sat down with tennis robert frank sat down with rafael nadal and got served. re we will bring you that interview next. ♪ where we explo.the oceans. otecting bdiveity. erywhere we work. defeatlaa.

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welcome back to squawk. the u.s. open about to get under way in new york. robert frank had a chance to cook dinner with a tennis great. >> he cooked us dinner which is a great thing. rafael nadal ranked five in the world joined chef marcus at the taste of tennis event and talked about why his favorite meal is one that he catches himself. >> i love being in the boat so normally i go for fishing with lin lines, so i love the seabass. it's great when you are in the boat, you catch a seabass and then come back to the boat and you can cook it and have dinner with it is something. amazing experience. >> with a spear gun. that's scary. we asked him if the lack of an

american player in the top ten has hurt tennis' popularity in the u.s.? >> i think we are in a great moment, we have been a period of time that the sport grows a lot, we have a lot of sponsors, the tournaments are bigger so that's when you have more people working in the same sport and more people taking jobs from the sport is great and that's happening in tennis. >> and for joe, i asked him especially after brexit whether the spanish and spain should join other countries and go their separate ways from europe. here's what he said. >> i have an opinion. i feel that europe is bigger and stronger if we are together, so for sure i would like to see spain in the euro. >> do you think it will stay? >> i don't have any doubt. >> the good news is rafah's risk the up and down injury of the year, seems better. he was holding the frying pan

strongly and confidently. hopefully we'll have a fit and healthy rafah. >> how did it taste? >> amazing. marcus samuelson the top chef of the world right now, it was great. it was great fish. >> that's nice. >> i think the southern countries probably want to stay. >> they get all the money. why would they want to leave. >> exactly. >> thank you. >> thank you, guys. >> fun times. >> coming up today's top stories as we head to break quick programming note, steve liesman has an exclusive with stanley fischer 11:30 a.m. eastern time. we'll be right back. ♪ hello friday ♪

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welcome back to "squawk box." apple issuing a security update to prevent spyware from infecting your iphone or ipad, they can be infected clicking a an app and they can track information like facebook and g mail, advising customers to update to the newest version of the operating system as soon as possible and our own techs here at the table, joe concern nan did it himself while we were on the air. >> i might be the idiot savan

might be -- >> i am not commenting. >> all right. >> also in sports, and the ongoing ryan lochte saga brazilian police charged the swimmer with filing a false robbery support from the incident at the gas station in rio. lochte will be able to decide whether to introduce a defense in brazil. police are sending the indictment to the international olympic committee's ethics commission but not all bad news, he has picked up a new sponsor, four others dropped him, his previous only four sponsors, but pine brothers throat drops says lochte should be forgiven and appear in ads that say the company's cough drops are forgiving for your throat. >> that's pretty good. >> here we are talking about it. >> no one heard of prin brothins and now they have. >> only once a year is it national dog day. cherish your dogs, cherish them. they're the reason all dogs go to heaven because they could

never -- they could never deliberately commit a sin. i know this for a fact. they're amazing. celebrate the day celebrates all breeds whether poor or mixed that encourages awareness of the number of dogs that need to be rescued each year. hopefully fewer and fewer don't get rescued because they're man's best friend, someone once said. joins us -- >> your best friend. >> i have three of them that are my best friend. make sure you join us on monday. "squawk on the street" is coming up next. ♪ >> good friday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli at the new york stock exchange. we have made it to friday and most importantly, yellen's speech in about an hour whether you're fan or -- of the fed or critic, widely anticipated futures holding their cards close to the vest in