respond to statins commonly prescribed for that condition. >> here tomorrow? you? >> i'm here. yeah, i'm here. i'm here. >> never know. >> andrew is vacationing. becky comes back this week maybe on wednesday. make sure you're hopefully joining us tomorrow. "squawk on the street" is next. ♪ >> good morning and welcome to "squawk on the street" i'm david faber with jim cramer. carl quintanilla is off. let's give you a look at futures. the market looking up so slightly. see it there european markets down, not a great deal of movement. london's stock market closed for a summer bank holiday. see italy taking it the worst. very glad we've included italy and spain. gone for a couple weeks. glad to see the consistency.

10-year note yield around 1.6 and crude oil the story as oil prices down, as you see it right there. maybe we get the fed moving before the end of the year, right as we come out of the jackson hole meeting. a look, though, at wti. let's get to our road map this morning. on this late august monday. mylan, the controversy continues. the company announcing a generic version of its epi pen. it is going to be enough to satisfy critics and congress? the herbalife hedge fund drama man here we are, year three, four, five, ackman, icahn, going yet another round. on this battleground stock. we'll have news from williams by the way responding to activist pressure and the proxy fight that is looming for the company. it nominates three new independent directors to its board. i will give you updates there in terms of what we can expect on that front. first, though, let's get to the broader markets. economic data to consider this week includes friday's key job

reports especially after yellen's marks at jackson hole where she says the case for a rate hike has strengthened. data out shows consumer spending rose for a fourth straight month. it was up 0.3% in july. incomes up 0.4%. jim, i'm back from a two-week holiday, not that i haven't followed the markets although feels like where we left off, jackson hole, obviously, being perhaps the key component for the market to digest over these last couple weeks. >> i think there's been a subtle change in the market since you left and the subtle change is, there is a bit underneath tech but a bit under the banks. people want the banks, betting we get two rate hikes, starting to annualize compares, credit has loosened. you gave consumer spending picked up a little. credit card data has been strong. the takeovers in tech have been remarkable. it's been also the notion some of the more commodity goods, particularly whether it be disk

drives or flash and the semiconductors are strong. against that we confuse things with mylan. health care is rolling over. >> started last week in particular. why? >> well, i think that people like the fact that the fed, as a way to be able to tell the economy, they like the fact that the fed is saying look, things are stronger. the fed obviously is benefiting from the fact that brazil is into the bad, russia has gotten strong, india, that china doesn't seem to be that bad. but the european numbers last week from the companies that are international, were as strong as american numbers. but we don't want is also, by the way, they take their cue that oil hasn't fallen like why. there's a big glut, pumping like mad. what's happened is that i see people coming back from vacation, buying tech, that's a very traditional pattern. these health care companies, i think that people feel they lose no matter what in the presidential cycle. >> we've seen this before and we've seen this reaction throughout this year owe kalcc n occasionally with price

increases by so many companies or i should -- maybe that's not fair. a lot of companies. valeant was under the microscope this year for all of its price increases. in front of congress. and now the latest mylan. it's interesting, because the epipen price increases have been going on for a long period of time, something that crossed my radar some time ago in part when they were trying to buy teva and then when they were trying to -- or excuse me, right, and then when teva was trying to buy them and perrigo they were trying to buy perrigo came up a number of times and also in patent challenges out there, kyle bass, hedge fund manager i know well, had a fund put together to challenge patents. why now? you know, the price is up enormously, but why now as opposed to six months ago a year ago, two years ago? they've been raising this price for years. >> i think a lot of what happened is when you raise prices for drugs that are for children, it gets social media. one of the things that's changed is twitter.

the notion of building a regime of people who are angry. it's more difficult when you have certain diseases that don't have vocal -- let's say they don't have vocal moms. this is like a vocal mom issue. another thing that's surfaced is just because something is generic, doesn't mean the price examines down. >> no. >> other companies have to compete. what happens is we know in the old days, mylan would immediately issue a drug, the moment something came off patent and teva would issue a drug. in the indian companies would be. but because the margins are low, what's happened is generics are targeting the generic companies are targeting specific drugs and that competition doesn't come in or try to have them come in and the fda blocked it. you raise prices in part because you think you can get away with it. which is the can'tist system. but also because you expected another drug is about to come in. there's vigor. try to make extra money before the generic comes in. the fda never talked about that. everyone is blaming mylan and

mylan, obviously, is raising prices, as did valeant, but no one -- there's no per se organization. express scripps got hurt. express scripps has to pit one against the other. >> there is no other then it's very difficult to do that. we should point out valeant a pharmaceutical company and mylan a generic company. pharma has been getting hit in part because of the sentiment around this. i want to get to the mylan news as well. they did introduce, we should say, of course, that first generic to its -- to several weeks from now they're going to launch at around $300. this generic epipen priced at about 50% below the branded epipen. mylan taking actions to reduce out-of-pocket costs last week after all of this pressure. jim, to the broader thesis. >> right.

>> investors and pharma believe what? this pressure is going to continue, that -- >> you don't -- >> a clinton presidency which appears more likely based on the polls at this point, that congressional action is going to continue to hold pressure to the pharmaceutical companies and their ability to raise prices. >> because of the house and senate, drug companies -- the house is still a long shot for the democrats. >> it is. you see those articles about how -- >> you do. >> but i think that it's all the piece. utilities went down, real estate investment trust went down, 3 or 4% yield not enough defense against a fed reserve raising rates so you can get a little extra if you just save and the drug companies fit in, as do the consumer products, the consumer products goods companies. now david, the takeover world that you're in, has kept the bid under consumer product companies. we keep thinking, hershey never came in. >> right. >> kellogg never. general mills is strong. but we don't see a lot of takeover talk in the pharma

after it seems to me. >> pfizer paying 81.50 for medivation and sanofi was the covereded by at 80. >> i just -- well before this, before this mylan -- >> i don't know -- >> we were talking about -- >> m&a gives you aeal valuation barometer you're happy to take to the bank every day. >> i think that they go under cover when we get these kind of -- these blips in politics and then they come right back. sanofi does have -- apparently everybody has a war chest. j&j has a war chest. >> pfizer will buy anything. >> you know pfizer. >> they're like mikey with life cereal years ago. give it to mikey, he'll eat it. give it to pfizer they're buy it. >> i like the cereal business, red hot no it has been red hot. >> raised the prices. >> my life cereal. i enjoy that. >> i like that carl makes carl's wife makes this unbelievable granular stuff. >> really.

>> never been party to that. you know, here we go. >> yeah. >> playing favorites on the anchor desk isn't he? >> i think i made no secret i like granola. >> you are a granola fan. >> back to -- yeah. so look, i want to own the banks, david. and i want to own -- >> the chips. >> the chips. >> every time on the banks it's been a mistake to own them. >> completely. >> totally wrong. >> it has. >> oh, get a rate hike, going to go to 50 basis points. >> you know -- >> would it be, could it be? 50? that will do a lot for them. >> i'm stuck in a world where jamie dimon came on the floor and said four rate hikes equals x. bank of america is so levered to the rate hikes and that stock, come on, that stock is moving. that stock gets closer and closer to the 16.30 book value. that i will another front run you. the key to this market. >> right. most are trading a lot are trading below book and as we pointed out a lot don't seem to be having a return on equity

that's above their cost of capital. >> morgan stanley moved from 28 to 31 while you were away. >> 31.16. you're right. >> no earnings news. >> yeah. no earnings moves in semiconductors and banks very telling. semiconductors i have a list of a half dozen. >> they're consolidation play. >> too many semis, too many retailers but we haven't seen that. you missed a blood bath in the dollar stores. and a lot because walmart cutting prices. the analysts were blind sided by dollar general cutting prices on 400 items. maybe the analysts don't shop at the dollar stores. they shop at neiman maybe or go right through the brioni stores. i don't know. maybe not tiffany. >> analysts these days are not that well paid. one might think they look for the bargains. >> macy's. >> macy's.

>> a lot of stores they told us last quarter. >> but the dollar stores know. only burlington, the old burlington coat factory, a bid among the discounters. >> reading and watching from afar last week and thinking herbalife again. carl icahn buying 2.3 million shares in herbalife late friday. sources tell cnbc he may have been interested in exiting in august and jefferies ubs to find a buyer for a stake but nothing materialized. icahn issued a statement on friday denying he suggested to sell herbalife stake. none of that is my reporting. i like to make that clear. i stayed away from this a long time other than watching it because it is a carnival. >> i have been working on the earnings. i know you're not -- with that, this is like hitchcock, who cares what herbalife will earn, but that's a fundamental because

when you put the new rules together a lot of people who feel like instead of being able to earn 455, they will earn 2 bucks. >> show every receipt for every sale now. >> they claim they have software. >> here in the states. that's a big issue for them. will they be able to do it and successfully so and what is the actual demand for the product. >> versus -- >> icahn saying, this is a -- this is a viable product that is going to grow and ackman continuing to say the ftc in many ways echoed what he had been warning about for years. >> there is earnings power, some elusive earnings power. they're still using the volume points which i wish michael johnson -- >> i wish they would both just end -- enough already. >> go private. it has a lot of debt. big convertible they did that hurt them. they weren't wise about it. >> ackman still fighting the fight, down on the position. icahn is up on his. >> look, there is room for this kind of marketing if you do it the way the ftc said.

but it also means -- you can't start the storefront, you can't store it in your garage and book the earnings. i mean, there had been a sense from the ftc, 20% of the business, asckman may say is higher than that, me selling it to you and booking it before it got sold to the ultimate customer. a huge international company, probably hurt more by the strong dollar than any other company i follow. but if you take a look at other companies with the model that i believe ackman won, neither you one wants to be put in the same -- immediately -- herbalife, ricks going called it toe cheese when i had him on. but herbalife he said this is a -- really he just -- really wanted to distinguish him from the other multilevel marketing. >> toe cheese. not very nice. >> rick was really adamant these guys are bad guys. my issue is that if there is a

model that you can use and if they use the model i think earnings power will be hurt. not wiped out. under ackman's scenario, he says zero. >> supposed to be zero. >> it can't be a zero. >> come on, i wish they would move on. >> want a new stock for them to football. >> yeah. >> caesars entertainment. >> right. why not. up sharply today. >> carl icahn keeping track of his moments is going to be at delivering alpha with other big investors and important people such as jack lew, paul singer, that's by the way on september 13th mark your calendars now. >> i have a feeling we're going to be telling you about it as we get closer to that day. coming up on this show, right here today, we're going to talk about williams company, active investors going after it, company nominates three new or has three new directors to its board and another look at futures here as we head to a quick break here. you can see we are looking for a higher open ever so slightly on

the broader markets. what if a company that didn't make cars made plastics that make them lighter? the lubricants that improved fuel economy. even technology to make engines more efficient. what company does all this? exxonmobil, that's who. we're working on all these things to make cars better and use less fuel. helping you save money and reduce emissions. and you thought we just made the gas. energy lives here.

williams company announcing it is appointed three new

directors to its board. those all have significant experience in the -- the natural gas, the pipeline business. for example, berk strom was a former associate of aubrey mcclendon, scott sheffield ceo of pioneer natural resources. >> gary sutton. oh, no. pioneer scott or -- no scott sheffield. >> it's interesting. he's retiring. which is too bad because he's a great visionary and i think what will happen is when you see somebody like him involved, david, he's a total heavyweight. you remember he has the permian and remember he's use 2g -- $2 for some of the oil out of the permian. >> 6 to 9 -- >> ppl. >> independent, yes. >> another heavyweight. this is done last week, you may

recall, keith meister from corvex, sosh sorebin who stepped off the board with four other directors was unprecedented because they said they believed that current ceo alan armstrong should not be the ceo. now they've replenished the board with three but facing a proxy fight from mr. meister. >> seems like people come on cnbc and talk their position. i will say -- >> well, he's getting ready for a proxy fight. had the deadline in front of him, had tnominate, didn't directors to identify so put in placeholders arguing shareholders will trust and believe he will put in the proper people when that comes. the question is will there be a settlement. there's also this other story out there, the ftc reported last week enterprise, a lp -- >> the real one. >> the dunkin' family, they had made a bid at some point. i can tell you while there had been from enterprise, it was

done during the worst days at williams when they were still dealing with the fallout from the failure of the ete deal and really didn't engage. the offer made while at at premium when the stock was lower. williams interestingly has actually if you look at it over the last few months, even the years, rebounded nothing to where it was but has rebounded significantly from the lows. >> it bothers me people don't distinguish between oil and gas pipelines. >> why is this. >> natural gas the draw down from marcellus and utica is extraordinary. those are the biggest fields in the country. bringing those down instead of making it directional to the northeast is a great business. one of the reasons why ete wanted williams. build this natural gas network it's great. oil, unfortunately, is saturated. that's different. we don't need more oil pipelines. we had a lot of oil pipelines taking the place of crude by rail.

down dramatically. >> and out of the backikken. >> the permian is still profitable -- >> sheffield and pioneer, the old st. mary's is there. sm. we see a lot of companies like simmer rex is there making fortunes because the price of drilling has come down, the actual ground was always good and you have already existing pipe. to get that marcellus and utica down to where it's in use to send it overseas, given those huge ships that are now -- remember become an exporter. >> we have. and then also -- >> the five -- >> the private free port behind that. you're going to have -- >> that's going to work. >> big export terminals yeah. >> it's all going to work. >> finally here on williams, we'll see. you know, settlement still a possibility it would seem but there's -- looks like there's more drama to come for that company which simply can't seem to get out of its own way when comes to at least upheaval. up next cramer's mad dash down to the opening bell. another look at futures this morning. see we are set up for a higher open as we get started here on

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six minutes before the opening bell. we have police and mad dash for you as well. >> talking mu, micron. starting to get deutsche bank raised price target 15 to 20. stifel, 15 to 18. on a call for hp, which is the hpq, they talked about tightening in flash and in glass. ever since then, all these stocks have been going up. obviously micron has d-ram and

flash. w why? >> not because of anything specifically to the printer of hp, they change all these things, but it's specific to a build up of the apple watch, don't read anything into that about strength, happens to be a seasonal thing, and also tvs and that would be korng korning should be going up too. this is also just a recognition that they just got too low, versus the rest, advanced micro same thing. >> give me sense of value at 17 with the stock up as we see since, you know, since the summer began. >> average selling price goes up. the -- it's a fixed cost. you get this incredible ram. every little bit of pricing falls to the bottom line. also, we're going to see more ordering. you saw kla up. lamb, kla, we have to talk about that at some point. the regulators looks like want to block that. i don't know. marvel. you can even argue there's tightening in the hard drives

meaning western digital and sticks. i'm not seeing that yet. but i do like marvel, mrvl and i think that company is for sale. >> you do? >> i do. >> to your point about consolidation amongst the chips. stocks to be taking a look at and broader themes. opening bell about four minutes away. stay with us on "squawk on the street." ly a hug.

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that's what the ibm cloud is built for. you're watching cnbc "squawk on the street" live from the financial capital of the world. opening bell will ring in 50 seconds or less than that, jim. this is when i turn and is what is the key to this market? >> we want to see if jpmorgan can break out. bank of america started going. jpmorgan has not yet. jpmorgan had a great quarter without fed rate hikes. this has been the best performer of the group. let's watch that stock. a breakout there is going to trigger big move in the rest of the group. >> you've been saying, the banks have caught your attention. >> i've been wrong. i point out i kept thinking they would move. >> you have.

>> jpmorgan had a nice move off of the jamie dimon when he bought at 53. >> i don't believe it's ever traded that low again. >> my hat off to him. >> right. >> but doesn't mean it's been great for investors as we hear the opening bell this morning. of course, the real-time exchange back at hq looks like we'll have a bit more green on that board than red when it composes itself. ringing the bell the movement foundation providing health and fitness programs for young women. and over at the nasdaq assure software a workplace management software provider. >> david -- >> a lot of young women here today. >> i go over the charts like, like to do every weekend, apple, i think it shouldn't try to trade, is one of the worst. a lot might be taxish shus, a challenge by the eu to get more

money out of apple which seems to be a little outrageous but they put aside money for taxes and eu is trying for u.s. taxes, eu trying to claim that money, irish tax jurisdiction when it comes to it. the stock is heavy and don't forget, the 7 comes out shortly. >> it does. >> and we're still not hearing that there's going to be a rush towards the 7. i saw t-mobile making some noises there. john legere. >> john legere tweeting up a storm this morning about unlimited data plans. >> i don't know. >> no plan at all. >> be aware that -- >> no plan. be aware that apple does not look good on the chart. i'm not a chartist. but there's a lot of people saying listen, going into this launch, you do expect a little more bubbling. >> although the stock did, jim, to be fair have a decent move. >> from when he came on "mad money" in '93 and '94, people said he's grousing. no. the service income is better. i think the service income needs to be augmented by an

acquisition. i have suggested we should have been here. sirius satellite would be a good acquisition to get in the car. the satellite technology. apple doesn't like because they think it may not be the way of the future. it's not interactive. be aware that to build that service revenue stream is the holy grail. >> you and vi talked about it and whether or not apple would actually pursue a large acquisition which has been something they have never really done. >> forget the really. they've never done. $30 billion. talking about a chunk of the buyback that wouldn't go to the buyback and i think that the stock is still very controversial because while it's had a move back, we are still saying that there's a hole. it's a cell phone company. and i think it's really incredible that you could have a $28 billion surface stream that means fog for the multiple. >> right. >> only means nothing because of the hole, the hole so enormous that being whole, not hole.

>> i just pointed out that i did expect the -- when i was looking at the chart, maybe it is the tax issue and the outrageous nature of the eu after them. the eu comes after. we don't talk enough about the -- we talk about the eu and brexit. >> right. >> the eu is in many ways a renegade organization for all capital, not just for britain. >> they're very aggressive. >> they are. and listen there has been a focus, as you know, on some of the tax transactions that are done and the use of ireland and the use of intellectual property that's been transferred over there so that so many of the revenues can be deemed to be -- which is how apple ended up. apple sells at an enormous amount of phones overseas. >> largest tax payer in america and in the world but it's never enough for the regulators because well regulators view apple as a honey pot. >> why not. >> that's what they do.

they're always on the lookout for something. regulators are tough on alphabet and google. >> they are. >> the eu in particular. you're right. it's worth mentioning. eu with brexit. far more workers coming to the uk. the eu does play by its own rules as the case in the apple situation. it's funny, in light of that, it's worth mentioning monsanto. >> where are we? >> moving along. moving along. couple of people have said, someup dates don't have a lot. bloomberg story talking a that a deal might be getting near and all i've got for you is they're continuing to be productive and fruitful talks between glerm germany's buyer and monsanto. doesn't look like there will be anything this week. but that is something that the eu, if and when you do get a deal, jim, we'll be looking at closely. >> dupont dow has been stalled, involving the division.

one of the companies spun off by ed green. i just find it's very unusual to see any deals get done where you just -- we saw a deal with santos buying a competitor. we saw ball corp and rex am that raised the price. i think the regulators are on the lookout constantly. but i do think that they would not be inclined to let that deal go through and a lot of these companies seem to be oblivious, hence halliburton, baker hughes, they got advice that was so wrong. >> have been a number of times when the advice given to companies that have been trying to do a deal was completely and totally when it came to the anti-trust environment and that is a huge, huge toll they pay as a result of the distraction that takes place at both companies for upwards of year if not two years sometimes in some of these cases where they're trying get their deal done only to fail at the end. >> look at wall green/rite aid.

walgreens is a winner in this either way because rite aid management turmoil must be something because, you know, this deal has been going on forever. >> why if you are in a deal where there is anti-trust risk you want to negotiate a large break fee to compensate you for that very po point. think t-mobile and at&t what they were able to get from at&t relatively quickly by the way because that deal died fast. >> right. >> some of these deals drag on for a long time before you know they are dead or challenged and decide not to move ahead with challenging the government. the hmos deal that will go in front of a judge -- >> and david, i would have loved to hear your commentary on abbott. looks like everything they do is subject to kind of like murphy's law. >> i will tell you. miles white may be wondering what he got himself into. the short sellers on st. jude questioning whether the -- it's

hackable. >> i will leave that to you. >> i had red seal on last week, you can hack it. there happens to be a tv show "homeland" the vice president is killed by hack of his pacemaker and red seal said it can happen and if st. jude would call us in it would tell you. st. jude says we're fine. >> red seal? >> it tests to see your -- can you be hacked. >> i see. >> muddy waters. this was a kind of a vicious short, david. it was -- >> yes. >> boom. >> a firm that prefers to go public with their findings. >> kind of a herbalife situation. >> st. jude got hurt. >> abbott seemed to be curiously not that vocal. >> no. but then they also got sued by alere. which is their other acquisition that is out there that has been fraught to say the leasts. >> last -- >> alere saying all right, guys, you know, step up and make this happen. and we'll see what abbott

chooses to do. they're going to fight this. they don't want do the deal, try to get out of it, it's unclear they will be able to get out because it's a tight merger agreement but we'll see. i mean when williams and et went to court a lot of people thought williams had that won and they did not. >> another reason -- >> take your chances in delaware court and we'll see. >> drug stocks don't interesting me as much as the health care stocks. banks no consolidation. one we ought to watch, a downgrade of one of my favorite banks key corp and frankly, i thought it was very unusual given the fact that key is very well run. ohio bank. i think it's doing quite well. all of them first horizon, bbt, all breaking out and the analysts do not believe, simply do not believe these things can continue to rally. i think that they can. but instead, what do people like, they like the paper stocks where there's container board increases being put. saying cyclical -- >> paper stocks. we haven't talked paper stocks.

>> are they still around? >> everything has been consumed. rising container board a sign of a more robust economy and it's been rising. international paper breaking out last week. >> did want to mention caesars, in a market cap there very small, but -- or relatively small but the stock down sharply because the bankruptcy court in the northern district of illinois denied a motion by caesars to extend and injunction that had enjoined prosecution of a lawsuit by a number of investors against caesars. that will go forward now. and you can see that is not being taken kindly by investors. stock had been down as much as 20 plus percent, 28%, now down only 20. it's small. that's where caesars is right now. >> another one that you missed last week. >> please. >> involved with sig net. signet reported a terrible quarter. >> terrible.

>> that was -- they went through but leonard green got involved saying this is the right level because the stock is so low. i don't know why they said that. that was one of the -- signet, dollar tree, dollar general bad conference calls while you were away. terrible. tiffany bad conference call and people like it. >> people like it. >> because they still -- >> did you happen to read "the new york times" business story on general electric this weekend. interesting that they focused on the digital transformation of that company. mentioned it in part because the stock up about a half a percent this morning. >> that's true. ge software has been -- this is the idea of internet of things. >> that's right. >> ge is kind of putting -- putting a lot of chips on your jet engine so that you can predict. >> right. >> when it needs maintenance as opposed to having to take it out of service. >> not a bad position. >> to save you money. >> not a bad business. internet of things wherever it is. >> qualcomm will tell you we benefit from that because it will be our chips. >> qualcomm stock has been good.

the broadcom has been the strongest in the group. >> right. >> of the semiconductor equipment. applied materials. >> applied materials. >> happening under -- >> they are. don't forget arm holdings. the ber internet of things at softbank. >> 30 plus billion acquisition. big, big premium. >> intel back to where it was when they reported the shortfall. >> you don't like intel. >> i like brian cra san itch. >> you do? >> he bought out -- xilinx is another -- always rumored takeover target. this group is hot. texas instrument has been a leader and don't forget at analog devices deal. people know it's too pane semis and the way to fix it is to take out, remarkable unheralded move. you take a look at that broadcom, one of my favorites by travel trust owns, what a move. got rid of the p/e the big private equity. one of the things david, private

equity cashing out. trust owns walgreens that's been terrible because of p/e cash. >> the constant selling. >> yeah. >> by the original sponsors of the deal. let's get to bob pisani on the floor. check in on what else is moving this morning. good morning, bob. >> good morning, david. we would say mixed market here, three to two advancing to declining stocks. story globally the dollar strength. second day dollar has been up here putting pressure on commodities and a strong dollar and a weak yen. the nikkei having a great day, up about 2%. i think the key about the nikkei here, well off the lows of earlier this summer but still had a tough year down 12 or 13%, but so is china, shanghai down about 12 or 13%. you know the amazing thing about asia the emerging markets are doing well in contrast to the two biggest markets, china and japan. thailand and indonesia and philippines, all have had a great year. emerging markets in general

doing better partly due to a weaker dollar. that's been definitely reversing. we'll keep an eye on that. in europe, mostly to the downside, we're having that strong dollar putting some pressure on commodity stocks. there's total. the italian oil company to the downside. the big car companies are down. bmw has been down for a couple weeks now. the trend has been down. the banks have done pretty well in august, today to the downside. by and large most of the banks are on the upside. slightly defensive tone here in the united states. if you take a look, so we had telecom and utilities and consumer staples leading early on. technology lagging. there's your energy stocks down slightly as oil down about 84 cents. speaking of oil the ceo of conoco was speaking at an industry conference in norway and made some comments. he said the oil market will be oversupplied and will continue to be oversupplied into 2017. cost cutting will continue and,

of course, he reiterated sort of a rule now, no dividend cuts in the cards so don't worry about that. nonetheless, most major oil stocks still to the downside today some of the pressure there. but not much. chevron, exxon, often bucks the trend with the major oil companies, up when the other ones are to the downside. august was the second worst month of the year, september generally the worst month of the year. be careful when you talk about this because the presidential election throws a monkey wrench into these and does influence the markets. nonelection years, september is the worst year. it's 12th of 12, literally the bottom. typically the s&p down 0.98%. however in an election year, a lot of this summer stuff doesn't work well. in an election year, s&p is typically up 0.167% and not the worst month. it's the seventh of the 12 which is not great but still well off of the lows. the point here is that all of

these presidential election things kind of throw a monkey wrench into some of these including sell in may and go away, does not apply and doesn't work really well in presidential election years. right now the dow up 69 points. back to you. >> all right. thank you very much, mr. pisani. let's head to the bond pits and check in with rick santelli at the cme group in chicago. rick? >> hi, david. bob's spot on. it's funny how money markets change during election years. the political notions there. many think federal reserve has to be thought about in the same light. it's up to you. will they really move in front of an election? will they really take a chance to throw the economy in just a little bit of uncertainty? i'm not sure. but one thing i can tell you they certainly talked the market out of its recent range. let's look at two-day chart, two day of twos, 10s, 30s, dollar index. the further down the curve you go the less oomph you get. when you get to the 30-year we have intersected into the pop

that was the words of the federal reserve, the notions, whatever changed investors' minds, stan fisher, janet yellen, you pick it because any given day it's hard to nail down. and if you go to the longer term charts to get a gps on it you have to go to the first few days of june last time you closed in the 80s in terms of a two-year note yield. look what happens to the rest of the curve. everything then reverts to, brexit. 6/23. these charts to go the 22nd last time the 10s popped up like this, obviously it was brexit. neat thing about 10s we now broke that notion that every single day in august closed between 150 and 160 and not by much. and when you start to get to the 30-year you can see it's flat as a pancake, despite the notions, especially when you look at the left side in the can context of brexit where we are, but the dollar index is the best for everybody to look at. certainly it's up. it was up then and up now.

0.5 of a cent today. in the grand scheme of things, not only down for the year when you keep that same day on this chart the 22nd of june, you can see we're a long way from there. as a matter of fact, the current comp last time the dollar index was here was like the 11th or 12th session of august which isn't that far away. and the spike on that chart is around the middle of july. now what does all this mean in english? what it means is, the fed has power. so, obviously, they can move markets. it really isn't about the pour of the word. it's about the power of the action and that's what the market is going to be defining today. if the dollar index is any indication, the talk is starting to wear off, a half life of maybe a mosquito, you know, don't live that long. david, back to you. >> thank you very much, rick santelli. >> coming up we'll have -- going to have a live interview with golfer tom watson. blue chip company is among his sponsors. "squawk on the street" will be right back.

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if you picked up a copy of "people" magazine these weekend. >> geez. >> you may have found a nice story about my co-anchor here, making the market his own. the former newspaper reporter turned a talent for giving stock tips into a financial empire. and a tv career. >> well -- >> still -- the print is still alive. >> it was. >> which is nice. >> "people," that was a nice piece. picture of my late day. >> your late dad. >> a great picture of you when you were just crazy looking guy interviewing ted kennedy. >> what it is, it's about -- >> 19 -- >> actually, jim, you say i'm very insecure but i think the way to conquer insecurity is through skills and hardwork. >> because i get up early still at my age, just because i got to compete. i got to compete. and i think competition is something that we all know starts with skill set, good luck, obviously, and hard work.

and breaks. but those breaks come to those who rourke hard. thank you, "people," a little embarrassed and a piece even my wife thought was good. she didn't say swell head. >> she's not watching as we know. >> she never watches. except the show "mad money." her dad mentioned i have a morning show but she was dialing around trying to find it. >> all right. well, we do okay without her. not that we wouldn't welcome all viewers. >> yeah. >> of course. >> all right. up next -- >> she knows about wilfred frost. >> loot of people do. >> what is that about? >> i don't know. very tall. >> up next, it's stop trading with jim. "squawk on the street" is going to be right back.

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so you need it to be reliable and fast. really fast. introducing the comcast business summer savings event. fast internet speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. get some of our most advanced products at a great price with over $500 in savings. call today and ask how to get these savings plus a $250 prepaid card. comcast business. built for business. time for stop trading with jim. >> lieu ululemon reports. the key thing about lulu they brought in lee holman from nike, very respected, brought him to men's too. they have superior supply change management and terrific cfo and ceo. i have to tell you i think this call is good. a lot feel it's a one trick pony. proprietary store in the mall,

as we saw from l brands bath and body works and pink, has -- there's room. urban outfitters mall store doing well. lulu, i wouldn't want to be short it because i think the company is so much better run than it used to be. it's a joy to watch that company. i bought abc pants. google what that means. i'm not going to say it on air because my wife who doesn't watch would hear about it. >> i have no idea what those are. >> abc pants are about where the action is. >> are they? >> it's a very -- it's at the forefront. >> what do we got on "mad" tonight? >> one of the great companies no one talks about thor. people talk about winnebago as being the motor home. thor is the winner in this category. they bought jay corp. gigantic machines out front. millennials. >> i saw them out front. >> millennials love to camp and thor is a roll up but it's done well and i'm excited to talk. >> millennials love to camp in.

>> campers. >> they do? >> my daughter camps with -- >> i thought they went out with their -- >> yeah. >> no no. these are very -- the numbers here are rather extraordinary and i have to tell you, david, i felt like after this that i wanted to rent one. >> really? >> go across country. >> i like that idea. take the show on the road in a thor. >> yeah. >> i would like to do that. we need a road trip. all right. coming up, tom lee of funds global advisors his take on the fang stocks coined by you. >> it was. >> it's used everywhere now and what they're telling him about the markets. keep it here.

♪ going back to "squawk on the street" i'm david faber and sara eisen and mike santoli. post nine at the new york stock exchange. a look at the markets and oil as we get things started on this hour. as you can see we are up in the broader markets and oil something of a story here, down almost 2% on the session so far. >> our road map for the hour, starts with a hawkish message

from fed chair janet yellen. continued rate hike might be in the cards in the coming months. will friday's jobs number be enough to make it a september to remember. we discuss straight ahead. >> plus the epipen price controversy continues. mylan announces a generic version of its life-saving allergy treatment for half the price this morning, but will that be enough to calm its critics. we'll have the details. >> and golf, the gary player invitational teeing off in new york. hear from eight-time major champion and golfing legend tom watson. but first, let's start with the markets here. nice little rally. stocks higher this morning as investors try to decipher through fed official comments on the timing of the next interest rate hike causing gold and oil prices to pull back on a stronger u.s. dollar. plus we did get better spending and inflation data this morning. more on the markets and where we go from here let's bring in tom lee, fund track global adviser and founder and stephen friedman

at ubs wealth management. good morning to you both. >> good morning. >> so tom, you've been bullish for a long time. we have to give you credit as stocks reached record highs not long ago. how would you describe your relative bullishness right now? more or less so heading into the end of the year? >> i mean, we're a bit confliktsds right, because there's some things that will cause volatility, the fed hike in elections, but i think the bigger story remains credit conditions are easing. a huge rally in high yield bullish for stocks and global industrial production now is on track to be the strongest in three months. bullish for earnings. you will have a lot of performance chasing at the end of the year. >> the fed hike. i'm looking at the market now. the dow up 80 points. is this rally a reflection of the fact that the markets are okay with the fed hiking rates this year on a better economy or that they don't believe it's going to happen? >> i think over the weekend, a lot of people realized the fed's message is the economy is good

enough to actually hike and that's good news is good news. i think it's sort of a mildly bullish things fig if the fed moves. >> stephen your also like the stock market and say there's room to run higher. do you agree with tom, that even if the fed hikes it means the economy is in good enough shape for it to happen? >> i think we're in a mode where good news and more hawkish tones on the fed side are positive. you know, we came out of a growth scare during the first half of the year and at this point any confirmation that there's a second half of the year and 2017 are going to be better is positive for the market. we think it's really all going to be about earnings. we now have confirmation that the first quarter was the weakest point in terms of sequential earnings growth and we think that, you know, the -- that removal of the headwinds coming from a stronger dollar and from the slump in the energy sector these are things which are going to allow earnings to drive the market higher. >> stephen, i guess the question now is, we've gotten to this

point, pretty close to all-time highs, a few things had to go right to get us here. you had to have people believing in the second half recovery in the economy, the bond market has been incredibly strong and the corporate bond level and yields have stayed tame and essentially all that had to work together and also you had skeptical investors kind of fighting the move earlier. now they've bought in to some degree. are we losing any of those tailwinds right now as we get into september? >> well, i think if you're just taking a view a few months out i agree there are some elements including the election which could create some uncertainty. but i think the main point here is that we do expect earnings to accelerate further into 2017 and that's what's going to be the key driver for investors. >> tom, sector wise, where do you go right now, given the risks around the election and around the fed rate hike finally time to go into financials, industrials making a little move higher as well? >> i think investors have to

think of it two ways. one, a really strong message is coming to buy small caps because when economic data picks up and credit eases small caps almost always win. you want to think about lagging groups. the industrial recession is ending so you want to be more cyclical, tech, industrials, basic materials, energy. >> tom, speaking of lagging something you've done through the years is tracked active money managers and whether they're lagging or not lagging the broader indices they follow. where are we on that? it can auger increased buying on their part to catch up. >> it's been -- we've sort of written less about it these days because it's been a depressing message. it's terrible this year. it's over 77% of large cap managers are missing their benchmark this year. >> wow. >> and -- >> what does that mean for that industry? at what point does -- do the flows, they already have, i guess. they're going to etfs and passively managed funds. that continues i guess? >> i think the sell side bears some responsibility. i think the sell side is given

some bad messages out there and if they're relying on independent research they're not getting it. in some ways, a lot of responsibility gets shared. >> 77% lagging right now. >> yeah. and almost every asset class up almost double dij ises you would think the industry should have double digit performance and it's not. we're seeing 1 to 2% returns. >> even if they wanted to chase they don't really have the money to do the chasing with, right? they have outflows on a net basis? >> there is a lot of cash on the sidelines. what's been puzzling is for this point in the cycle, margin debt shouldn't be collapsing and margin debt is falling double digits. it's never a sign of a top. margin debt usually rises 30% in front of every major top. i think you should take some comfort knowing there's a lot of powder on the sidelines. >> stephen, do you want to weigh in and how this is changing the fundamentals in the dynamics in the market? we won't make you defend the sell side unless you want to.

>> i would definitely concur with the observation there is plenty of cash on the sideline. we see that in wealth management in our business, right. i think this is where the fundamental picture is important. if you continue to see signs that the economy is improving this is something that can improve confidence and draw some of this cash on the sidelines back into the market. >> all right. >> tom, thank you. stephen as well. good to see you both on a monday morning with the dow up 93 points. we want to show you some live pictures right now of the christ liberation fellowship church in philadelphia where firefighters are battling a two-alarm fire. flames reportedly broke out about an hour ago in the church's basement. according to our nbc affiliate in philadelphia no injuries reported so far but we are keeping a close eye on these live pictures and the smoke there outside of this church. we'll bring you updates as soon as we get them from philadelphia. david? >> all right. well when we return the fallout

continues as mylan announces it is launching its first generic epipen following the backlash over the company's pricing namely its increase of price of the epipen over the last few years. and as well, news its ceo sold $5 million worth of stock in the wake of that scrutiny. the latest. plus we'll also have the ackman/icahn herbalife saga which has take on a new twist as mr. icahn increases his stake. we'll give you the details, a lot more ahead on "squawk on the street." please, stay with us. energy is a complex challenge. people want power. and power plants account for more than a third of energy-related carbon emissions. the challenge is to capture the emissions before they're released into the atmosphere. exxonmobil is a leader in carbon capture. our team is working to make this technology better, more affordable so it can reduce emissions around the world. that's what we're working on right now. ♪

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mylan announcing it will offer a generic version of the epipen for half the price of the brand name product. our meg terrell joins us now and tries to make sense of this. i guess so may be confused because mylan is a generic drugmaker what do they consider the product now they are being criticized for now, meg, given they've raised the price so much? >> usually when a company is preparing for generic competition to a branded product to enter the marketplace it's not unusual for them to plan to launch their quote/unquote authorized generic, an identical version of the branded product on the market and that is what mylan is doing here essentially the generic epipen will have a

list price of half the list price of the branded so about $300 for a two pack, identical to the product available in -- available in the same dosage forms and plan to make it available over the next couple weeks. what's unique is there isn't a generic product from a competitor launched so they're doing this in response to all of this pressure that's been put on them about the price. now, mylan's ceo heather bresch putting out a statement saying because of the complexity and opaqueness of today's branded pharmaceutical supply chain and the increased shifting of costs to patients as a result of high deductible health plans we determined that bypassing the brand system in this case and offering an additional alternative was the best option. so still that sort of opacity of the health care system pointed to here. check out the stock prices of mylan and teva which is working on the competitor, mylan has started to tick down. teva going down 1.3%. what's interesting here is this will be a -- it's planned to be

an identical product that pharmacists can swap in if your doctor writes you a prescription for epipen. the question among analysts and investors what impact will this have on mylan's epipen revenues. this is a smart move because it takes some of the pressure off. basically takes the epipen out of modeling for mylan because you're getting that generic competition from themselves. but other people are speculating this may enable them to keep higher revenue stream from epipen because they're going to be doing all that discountinging david. trying to figure out the impact. >> when could have have originally done this in terms of introducing a generic competitor. >> they had a deal with teva essentially where teva could launch their generic competitor in 2015 but didn't get fda approval. mylan was probably waiting until the generic competition was on the market to launch their own generic but since that hasn't come about and so much pressure on them they launched it now. >> see if that helps them abate. another thing i know you're keeping an eye on, is the fda.

giving roche emergency authorization for a zika test. >> roche getting the emergency authorization for a test for people with zika. this comes just after friday when the fda recommended that all blood donated blood in the united states tested for zika. this is the second test that roche has gotten the emergency authorization for and one for testing people and one for the blood supply. other folks is quest diagnostics. whole ic on the blood side and quest for people. this comes as there's increased concern this can be sexually transmitted, spread locally in florida as well. all hands on deck here, guys. >> all right. can't happen soon enough. got some treatment. thank you. meg terrell at headquarters. another story we are following billionaire investor carl icahn upping his stake in

herbalife bit bimore than 2 million shares but we understand he may have been interested in exiting his position. kay kelly joins us at post nine with more on the latest sort of confusing saga between ackman and icahn. >> you certainly need a notebook to keep track of every twist and turn. we woke up on friday morning to a "wall street journal" story suggesting carl icahn wanted to sell his 17 million share stake in herbalife which makes him the largest single shareholder and a member of the board and that ackman had briefly considered or considered without a time frame buying it. we called bill ackman that morning and he called in to "squawk box" where i talked to him in depth about this. here's what he had to say and follow his words closely. >> they were trying to put together a block trade to take carl out. they came and said have you any interest in covering your position. absolutely not. they were kind of 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 that's true. and so what i said to them, look, go find buyers for this thing and if you can find buyers i have -- that's great. they went shopping for -- they went looking for potential buyers. >> so note he said they went shopping they were looking to find buyers. that was his terminology. now, of course, he went on to say that carl icahn is obviously a seller and he thinks that's a very good thing for his case which, of course, is the bear case on herbalife because carl is what creates confidence in the stock. unsurprisingly the stock was down multiple percentage points for a good chunk of the day on these comments. and what happened, though, around the 2:00 hour, was suddenly the price started to rise from a low of about $57 and change up towards $60 and ultimately north of 60% per share and the volume for the day was five times the average. the average is 2 million shares a day, friday we saw 10. what happens towards the end of the day. carl icahn who had been relatively silent all day around

midday scott wapner reporting he had no comment on the matter wasn't going to talk about market rumors and comes out with a blistering statement denying what bill ackman said, saying i have never given jefferies an order to sell any of our herbalife shares. today i bought another 2.3 million shares. you can see the stock reacting to what no doubt was his purchase activity. we know from the 13 d that he filed his average cost was about $59.31. so, another war of words between the two billionaire hedge fund managers. i would argue they're confirming albeit in a nuanced way carl had considered for a moment in time this sale. he did confirm that to wapner. the question of whether you have an investment bank solicit bids for your stock or say i'm going to sell it, that to me is a see man tick question. >> he's got at least chris odoro on the board, icon reps. when you're on the board it

requires you to -- to let the company know -- >> yeah. >> well the company and icahn said this in his statement which was longer than just the excerpt i read, that herbalife had given him permission to buy a larger stake in the company and so the logical conclusion is that what he did friday was part of that. >> in other words, my point if he was looking to sell, he would have had to alerted them. >> a window of time to do that after the ftc settlement of july 15th which potentially was the signal he wanted to sell. that matter resolved. i don't want to put words in carl's mouth but he had about a week where he could do an unregistered offering and another week to do a registered 144a offering. i think there was urgency in that initial week in early august because, obviously, easier to sell stock if you don't have to make that filing. >> odd that ackman came on the program and talked about carl? i know, the icahn response and his statement is why would he talk about investment decisions that happened behind closed doors? >> carl certainly thought it was

odd and offensive too. i guess in ackman's defense i mean first of all he's being imself and loves to talk about himself and everybody too as it pertains to his stock ideas. we would all look to a big sell order like that as a signal of some sort and carl has made 70 plus percent returns on his investment since late 2012. even as a value investor perspective that was very good move. >> he has been a seller of other positions. >> sure. >> even when he's not all of a sudden saying i changed my mind entirely about this. >> and i think carl keyed into the sort of potential arrogance of telling us what other people might think, on ackman's part. at the same time, of course an indication like that is a sell signal. >> i should point out he's got five guys on the board. five. so i mean carl icahn in many ways is not quite controlling this company but certainly -- >> fair to say he's the confidence setter. >> yes. >> and then anyway i don't want to muddy the waters but a lot of

stuff went down including comments about other investors that might be selling that might not prove to be true. >> another week for herbalife. thank you. >> thank you. >> speaking of carl icahn, he is one of the guests at the upcome sixth -- upcoming sixth annual delivering alpha produced by cnbc and institutional investor. other speakers include treasury secretary jack lew, paul singer, ray dal leo, just to name a few, delivering alphaic kicking off september 13th. for more, on details and tickets, go to deliveringalpha.com. >> when we come back, a stronger dollar and high output from middle east opec members weighing on oil this morning. head of global commodity research to talk about oil. francisco joins us next. you're watching "squawk on the street." when you travel, you want your needs to be understood no matter where you go. you want an experience that feels highly personalized.

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let's get a check on t

commodity markets. oil pressures slide by middle east opec members and strongers u.s. dollar weighing on commodities today. should you be bearish or bullish which has been trapped in the range for a while. joining us is head of global commodity research, francisco blanch. thank you for being with us. >> thank you for having me. >> caught in this range when it comes to crude oil. a lot of talk about potential incremental supply that's been the story for months now, but on the demand side you point out maybe things look a little firm globally, firmer than people think. >> that's right. i think if you look at developed work, always say the economies are decelerating for sure, two bumper years 2015 and 2016 that's going to slow down next year because again, the markets are pretty sat it you are rated moving to more fuel-efficient vehicles. look at the emerging world it looks still pretty strong to us and we think that the zero or

negative rates environments across many parts of the developed world is going to continue to feed into the availability of emerging markets and oil is going to lead to strong car sales and firm consumption for fuel across the emerging world. china and india both are running on double digit car sales at the moment. so we see a pretty robust expansion into next year as long as monetary policy stay a accommodative. >> does that mean the market is not hinging on the potential for an output freeze or any other decision out of opec and prices can get stronger from here? what's your outlook for the actual price? >> well, look, the market has been trying to read opec for the last couple years, but as we said back in november of 2014, following that dreadful opec meeting on thanksgiving day, the cartels basically finished, i say cartel, i think very little

room for compromise among the parties. they have objectives. having said that the market is rebalancing. we think demand is going to move ahead of supply over the course of the next three months. so remember, we've been if an oversupplied market for ten quarters, now the last couple quarters we've been more balanced and established a range around 40 to $55 a barrel and going into the fourth quarter and beyond, we are going to see a multiquarter structural deficit kicking into the oil market and that's where we think prices will be at 55 by year end and we'll touch a high point of 70 heading into a driving season of next year. >> you're talking about wti going to 70? >> we are talking -- mostly brent but wti will be very close to brent. we think wti will be lagging by a dollar or two. wti say 54 and $69 a barrel by the -- by the end of the year and end of the first half

respectively. >> do you not worry that the federal reserve could get in the way of that bullish forecast and your demand story? because if the fed does start raising interest rates as soon as september or december as they've been hinting, that's been sending the dollar up made a sharp move in the last two sessions, maybe sharp is extreme but exaggeration, but if the dollar starts going own a fed move that pressures commodities like oil and we're seeing it today? >> absolutely. i think that's one of the key risks to our views for the next 6 to 12 months but i would say the fed has been extremely cautious already if the past few years. they've been very reluctant to allow for a stronger rally because they've seen the impact on u.s. exports. the u.s. presidential debate has been centered around the industrial sector and all the job losses that the strong dollar has inflicted across the heartland of the u.s. i don't think the fed necessarily wants to allow for the dollar to get stronger here

so they're going to be hiking at a very slow pace. i think that's our view. that's why we think the natural rebalancing mechanism of the market will continue over the next five or six quarters. stronger demand and stagnating supply leads to higher price. we're look for a deficit of 800,000 barrels a day. the last time we had that kind of deficit was 2010, prices rally 38%, vis-a-vis the year prior and the same thing for 2011 where we had the same deficit another 30 plus% rallied both years back to back. >> all right. so maybe the fundamentals starting to be the friend of royal bulls right here. francisco blanch, from merrill lynch, thank you very much. when we return here on "squawk on the street," rbc's mark mahaney joining us to talk netflix. why he says this is his number one buy right now and has more room to run internationally. it's been a loser so far in 2016. we'll ask him why he likes it.

much more ahead on "squawk on the street" with the dow up 82 points. stay with us. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade

good morning. i'm sue herera. your cnbc news update at this hour. suspended brazilian president dilma rousseff telling senators she's being unjustly accused of breaking fiscal rules in her. management of the federal budget ball game saying her conscious is clear. speaking at her impeachment trial she reminded senators that she was re-elected in 2014 by 54 million voters. secretary of state john kerry meeting with the prime minister of bangladesh for talks on security and human rights issues. his visit comes amid increasing concern about government militancy in the wake of a series of extremist attacks.

a scary incident at los angeles international airport last night following reports of an active shooter. officers ran into the terminal guns drawn as thousands streamed on to the tarmac and out of the airport. no gunman was found, no shots were fired. pope francis meeting with facebook founder and ceo mark zuckerberg and his wife priscilla at the vatican and they discussed the use of communication technology to help relieve poverty around the world. and that is the news update this hour. i'll send it downtown to you, sara. >> of course that ended up on instagram. >> of course it did. yes. >> sue herera. netflix making a big international push. that's combined with some strong original content is why our next guest says netflix is his number one buy, despite the fact that shares have slid so far in 2016. joining us now is that analyst, mark mahaney at rbc capital markets. good morning to you. >> good morning. >> beside stranger things i'm very too, and very scared of,

what is there to get excited about with netflix which has under whelmed in the last few quarters on domestic and international subscribers? >> as the stock one of the reasons we like it is it has underwhelmed traded off relatively materially this year. we've had two quarters in a row of submisses so that's why the stock has traded off. three things we think are important. first based on our quarterly testing in the u.s. it looks like the churn challenges may be abating at netflix. we found a smaller percentage of subscribers saying they were willing to turn off than three months ago. we found that amazon prime seems to be less of a competitive threat than the market fears and third some of the announcements shows international which has been a money loser for netflix the last four years the older markets there are scaling as profitably as the u.s. did in the earlier days, we think the financial markets under appreciate the profit potential for netflix outside the u.s. >> you looked at uk and brazil

because international, it appears, mark, has been a major driver of the stock's under performance this year and the results missing the mark. why can't netflix manage to forecast or give better guidance on those numbers? >> yeah. it's -- we would prefer if the company was better able to forecast out its business, they do report relatively early in the quarter, could wait a little bit, not going to do that. they had a surprise for themselves or they created a challenge for themselves, which is that they did announce a 25% price increase. two years ago but implemented for the majority of their subscribers in the last three to six months. when it's rolling out. and you don't know how consumers will react to price increases but mostly people don't like price increases and you're going to have some turbulence as you go through that and make things awfully clear and things look better as you go into the end of this year into next year. you got the worst of the pricing pressures behind you. that's why we also like the

fundamental setup here. beyond -- we think you're beyond the pricing turbulence. >> if your survey did find that netflix customers are sticky and watching more, less likely to cancel even if they have to digest the price increase i wonder what it means for the future course of potential price increases? seems the bull case on netflix largely did hinge on the ability over time to charge more for a product that a lot will argue is under price right now and has howe does that happen when netflix is no longer seen as one for one substitute for themes of tv. amazon prime members who have access to amazon video like netflix more than the average consu consumer. people are paying for more than one of these things. >> if there's a pricing challenge you need a solution for it. we think netflix has that solution, original content. this company is spending 5 to $6 billion this year only about a billion maybe a little more than that is actually on original content, things like stranger things, house "house of cards,"n

two of "narco." what this company has to do is keep building out its value proposition. we think they have pricing power. when all is said and done they did implement a price increase to get turbulence but did grow subs. not many can do a 25% price increase and grow subs. netflix did. it will continue to build out more original content, more shots on goal and as they do that the service beings more compelling for the users on there. >> mark, with the proliferation of over-the-top platforms over the next few years that are centered around -- hulu will come out with something, interesting to see where they would come with the price point, the competition will increase, but i assume it's your contention that netflix is still going to be a key value proposition for the potential consumers? >> you know, look that's the single biggest risk on the stock. that's why the amazon prime survey result was so interesting, surprising, and useful in terms of thinking

about the stock going forwards. you're telling me that amazon prime customers, despite all of that access to quote/unquote free video content are likely to sign up to netflix than those who aren't. tells you something about how either the -- maybe the well off amazon prime customers how they're willing to pay for additional subscriptions or may tell you and/or it may tell you people are really internet savvy will continue to migrate more and more of their entertainment need to the internet and there's netflix at 9.99 or 7.99 with an increasingly attractive bundle of original cup tent and acquired content. we think the competitive risk has always been there over time. netflix starts to separate itself more and more and that's what our survey shows. >> you're saying the stock is a barr at 300 times earnings? >> yes. i'm going to -- yes, i'm going to say that. this is how we do that. if you're willing to look out three years this is one of the few names in the large cap internet surface that can be a double. the ability here to generate 8

to $10 in gap earnings by 2020. we think the market would put at least a 20 multiple on that. so that's the pathway to 160, 180, $200 stock price from here at 90 today. that's why we like the stock right here right now. >> whoa. $200 billion market cap and five years time, four years time? >> yeah. that's exactly right. if they can get to our kind of numbers. $160 million in subs, 30%, 25 to 30% operating margins and pricing that holds here or raises a little bit thp. they've shown the ability, a company that has 80 million subscribers worldwide already, 25% gap operating margins in the u.s. and shown some pricing power. not as much as the bull stock but have shown pricing power and they build it out. that's our call here. >> $42 billion market cap company. thank you. i think you give the highest target on this stock on the street. mark mahaney from rbc. >> thank you. still to come we are live from the gary player

invitational in bedford hills, new york, where we speak with eight-time major champion and legend tom watson. you will not want to miss that. as we take you to break, take a look at shares of caesars. a federal judge ruling the company is going to have to face lawsuits from bond holders seek something $11 billion in claims. he lifted an injunction there against the lawsuits. caesars has warned the lawsuit could push it into bankruptcy. more ahead on "squawk on the street." stay with us.

three groups of stocks may be dropping hints who will win the presidency. what stocks and what are they saying? go to tradingnation.cnbc.com to find out. more "squawk on the street" coming up.

day two of the gary player international kicks off today in upstate new york, kind of upstate, not far really.

dominic chu is there with eight-time major champion and golfing legend tom watson. take it away, dom. >> all right. thanks so much, guys. we are here with tom watson ahead of the gary player invitational. one of the charity events during the season. thank you for joining us on "squawk on the street." the first question we have for you is, we're here for a god cause. gary -- good cause. gary player supports a lot of charities and you do as well. how important is the charitable giving side of things to the game of golf? >> the game of golf is the absolute best vehicle to raise charitable funds in the sporting world without a doubt. billions of dollars have been raised through the pga tour, but also, what's unsung how many events these players do in their own communities, in other communities to raise funds. it's a natural fit for people to come out and give their money and play with us and the game of golf is the only sport to play with professionals and still compete with them. >> you say that. i'm going to be out there later

today and i don't think i can compete at all. >> that's what a handicap is for. >> yes, sir, it is. >> a number of causes you're directly involved in. what are some of the passions you when it comes to the charitable side of things? >> well i've been involved with the als lou gehrig's disease cause for a number of years. my caddie bruce edwards passed away from the disease recently jay fishman formers travelers ceo passed away from it after raising a tremendous amount of money for research. the problem with what we do is that there hasn't been any break through in the research. but we still do that. so plus, i'm very involved with growing the game in kansas city with the first tee and the youth first programs we have in kansas city to get kids out with a golf club in their hands and out playing on golf courses. >> speaking of growing the game, the olympics just happened. what was your take on it? was it a success and a ryder cup coming up how do we feel about

the game of golf? >> the olympics at first, i wasn't very much in favor of the golfing in olympics. i didn't think it was an olympic sport. more of an individual event at the way it was played. what changed my mind, the number of people that came out and watched it in rio, only 20,000 golfers in rio and had 15,000 people come out and watch golf in rio in the olympics. so if that's any indication of what golf in the olympics has done for the inspiration of people to follow golf, i think it's a very big plus. >> what's the next step? what does the game of golf have to do to get people involved in the sport? >> well the most important thing is that we get off our cell phones, most important thing. it's just a time waster. we need -- we don't have any time to do anything else. you know, you see it in everything. but -- and golf in particular. it takes a longts time to play, expensive to play, but we need

to create opportunities for everybody to play. the first tee program does that. youth on course promotes getting on golf courses and only $5 to play and that's what will help the game. >> sounds like between this event and everything else it will be a great time for golf with the ryder cup coming pup thanks for joining us. i have to el you, a great day in west chester, fun playing golf, raise a lot of good money for causes out there and send it back over to you guys. >> you are in your element and looks beautiful. thanks to tom watson as well. keeping an eye on the markets here, the s&p 500, is about 1 percentage point away from hitting a record high again. mike, you've been writing about this for your column which we eagerly anticipate on a monday morning. what do you think investors can expect from here? >> you know, yeah, i thought it was a good time for a status check on the market not just because we're at all-time highs but we've had an excellent five years. i don't know if you can think

back to late summer of 2011 that was kind fds mini bear market, the debt ceiling issue. great buying opportunity but just how good it was, i think a lot of people don't recognize. if you look at the five-year performance of the s&p 500, 16% annualized over that period, not only stocks if you had a typical retirement portfolio of the 60% stocks, 40% bonds it's had one of the best five-year runs in history. especially on a risk adjusted basis because the bond market held in there nicely while stocks went up a lot and that, of course, has gotten us to a point where stock's valuation is bumping against historic highs, trailing p/e on the market close to 20 times. leaves open the question can you expect more out of the market in terms of annualized returns going forward? the math says it's tough, but here's the other side of it. is it still a young bull market. some will argue when you first made a new high in 2013 that is when the bull market first started acting like one, breaking out of that long-term range and we've had very modest

returns over the past ten years, only 7% a year. not bad but not up to historic levels. typically a bull market if you're going to be in a long-term one overshoots to the up side. seems to sum it up keep your expectation es s modest because evaluations and might be open to the idea that the market will give you more than you tee serve. >> my question on that valuation point we have had so many people come on the network and warp us about the above -- warn us about the above average valuations and yet with this low interest rate policy by the fed and everybody else around the world, it seems like investors i mean that sort of those the valuations argument off the table because compared to bonds they would look good. >> it would be bizarre if stocks were not very highly valued in this environment. i think that's kind of where you come down. and say stocks relative to almost everything else which looks expensive don't look as expensive. it's on a purely on a comparative basis. i think that's where people settle out.

>> if you had bought bonds not that many years ago your total return has been darn good given the move in the price. >> i mean that really is kind of the trick if you're a financial adviser, somebody saving for retirement, you say we got a lot out of all these markets and is the math going to work in our favor. say for the next 10 or 15 years. >> you've tracked this closely as well, michael, but when we had tom lee on, 77% of active managers trailing their benchmarks, i just can't -- i mean i yonts understand how they're going to be able to -- forget hedge funds we talked about and structures and trailing but there's a crisis going on here. >> even talk that because the pressure is on perhaps initially the weaker active managers, the fee pressures and maybe they have to go out of business that the market could get tougher to beat because what you're left with is the efficient indexes and better active managers. a tough story if that's the way it goes. >> one we will keep following. as we head to break a look at where stocks are trading at this hour. we mentioned we've got a rally

to start the week here. s&p 500 up almost a half a percent. the dow leading with a bunch up 96 points. nasdaq up 0.2. it is lagging. coming off a down week week. keeping a close eye and much more when squawk on the street comes right back. [announcer] is it a force of nature? or a sales event? the summer of audi sales event is here. get up to a $5,000 bonus on select audi models.

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comcast business. built for business. welcome back. rick santelli has the santelli exchange. good morning, rick. >> i'd like to welcome my first guest of the week. thank you for taking the time. >> always a pleasure. good to see you buddy. >> there was a time when ben wrote something along the lines of, you have to have qe or negative rates. many people think the fed at some point was going to opt for both. one thing that i found that's a common threat of everybody that's kept up with jackson hole negative rates are on the outs but qe will be a normal tool. your thought on all of that. >> negative rates haven't worked. if you look at how the european economy or japanese economies have been performing with negative rates and how badly

capitalized the banking systems are in europe that's a clear failure. as far as qe, i'm a big believers in what the markets do, what the markets are supposed to do but what from i saw with janet yellen, she is going to expand qe to buy different things going forward. our view is that she is going to buy corporates. i think she will go as far as infrastructure bonds and try to keep the economy going because physical stimulus is not going to be there. it's not politically viable. >> it's not politically viable and we can debate that from hours and hours. one thing we said over and over, they take the heat off congress to make their own independent mistakes to try to come up with programs. they met with them on thursday. i'm not going to get into that but to me, this to me is wanting higher rates. b if they're going to protest

anything it should be qe and the decisions this group makes but what i want to talk about is you walked away with a different stance of stan fisher's come mens. explain. >> i started originally when steve asked him the question and i reviewed it a couple of times over the weekend and i think fisher's answer was very cavalier and what he was trying to say is the fed is going to leave every meeting on the table and he didn't mean to say that he expects two interest rate rises this year. we don't see the fed going in september. you have just come off five straight quarters of delining earnings. you know, it's up to 6.69. the global economy doesn't look good. we think it's more data independent and fearful of global markets and i don't see it moving in september. >> we have hardly any time left

but a agree with your notion and always likes to keep every meeting hot. people don't like when i say it. getting aggressive before the election. and answer the question for yourself. >> thanks for having me rick. >> thank you very much. the mover of the morning. that's the dollar versus the japanese yen. we're at the highest level here since early august. it's a signal that the higher interest rates are becoming more expected. the dollar index higher. financials leading the way. all ten industry groups higher. there you go. >> well done. >> it's the most important thing. now a look at what is coming up on squawk alley. >> good morning. big show. we got the ceo of vm ware and a new twist on cloud competition. also hbo coming to at&t.

is this a new sort of bundle we're seeing forming? and fitbit has new devices i can use to track my steps. all of that and more coming up on squawk alley.

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it is 8:00 a.m. at fitbit headquaters and squawk alley is live. >> good monday morning. carl is out today but here for the hour. mike santolli and cr of founder and president and tech columnist at the wall street journal joining us from baltimore. welcome to everybody. first up a short-term bounce could be coming from