business never sleeps, this is "squawk box. >> good morning, everybody welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and michelle caruso-cabrera let's look at the u.s. equity futures. right now things are mixed dow futures are up significantly, up by 52 points s&p futures up by 6. the nasdaq is down by 9. this comes a day after the nasdaq had a steep drop off. down by 1.6 pfrs yesterday the dow was off by a half percent. the s&p by 0.8%. we'll see how things shape up as we get closer to the opening bell overnight in asia, the nikkei ended down by almost half a percent. the hang seng off by 0.6%. the shanghai down by a half percentage point in europe, you will see some red arrows you will see that right now the

dax is off by a half percentage point. the cac is off by 0.4% the ftse relatively flat but still down finally look at crude oil prices crude was up by 2% yesterday in the market trading, but it dropped significantly after hours after there was a big increase in api crude inventories. that came as a surprise. this morning things are down by 13 cents here's some of the other big stories. jury selection in the trial of martin shkreli will enter its third day today. it's not going well. some potential jurors said they could not be fair to a man who gamed ed gained fame on raising drug prices over 5,000%.

shkreli himself has complicated matters by seeking public attention on his twitter account since charges were filed lashing out at critics and boasting of his wealth he even launched a charity auction for people who wanted to punch him in the face. he was banned from twitter in january for harassing a journalist shkreli's own lawyer said unfortunately the twitter history is horrific. >> this is a juror who said he was on twitter, and shkreli's lawyer thinks he would be prejudice by just seeing his twitter account. >> the judge said the first day it was okay if they already heard about shkreli. i dent see if they her about him how they'll be unbiased. you have to find somebody who didn't see that whole thing. >> when shkreli was active on twirt, i yo

twitter, i would follow him because it would be amazing what he says. and some people supported him. >> controversial people have been kicked off twitter who argued they are the reason twitter is interesting didn't you enjoy following him my god, did he really say that when those people go away, it's not nearly as fun. >> but those jurors are right. a snake. i think i called him the same thing myself you watch him, it's wow. nestle is planning to buy back nearly $21 billion of shares over three years following pressure from third point. dan loeb disclosed a 3$3.5 billion stake in nestle on sunday and pushed for the company to buy back shares shares of nestle sitting at a fresh year-to-date high. higher by 1.40 or a gain of 1.5% at $85.70 per share. new cyberattack is causing descriptiiskrurpuuption around .

the ransomeware attack is similar to the wannaattack data is only accessible if the user pays $300 in bitcoins we will talk more about the attack in a few minutes. a few stocks to watch today. toshiba is suing western digital accusing its joint venture partner of interfering in the planned sale of its memory chip unit a big dow chemical investor is calling for changes to the merger with dupont the "wall street journal" reports glenview capital wants the company to scrap plans to break into three separate units once the merger is complete. also complaining about andrew livers retirement being put off. and u.p.s. plans to freeze pensions for 70,000 nonunion workers switching them to a 401(k) fund.

the company is trying to contain a retirement fund that has a nearly $10 billion deficit let's get to our top political story of the morning senate republicans delaying a vote on the healthcare reform bill eamon javers has more on the bill and the fallout >> it was a significant legislative setback for president trump and his administration yesterday as the senate majority leader, mitchace doesn't have the votes necessary to do the repeal and replace of obamaca obamacare. he announced they'll have to punt on it until after the fourth of july recess. at the end of the day yesterday, after that had happened, president trump invited all republican senators over to the white house to discuss ways forward and where to go next at that meeting the president struck a downbeat tone here's what he said.

>> we have to have healthcare. it can't be obamacare which is melting down the other side is saying all sorts of things before they knew what the bill was. this will be great if we get it done if we don't get it done, it will be something that we're not going to like and that's okay. i understand that very well. but i think we have a chance to do something very, very important for the public >> the president there saying if we get this bill done, that seems to be a concession to the idea that it is possible that this obamacare repeal and replace effort won't succeed at all in the senate. some republican senators are intransigent on this the white house is look at the house effort, where they had to pull the bill and paul ryan was ultimately ability to get it passed in that chamber six weeks later. mitch mcconnell came out to the white house drivery to talk to reporters yesterday. he said if this doesn't work, it

republicans can't get their act together, they may have to negotiate with democrats >> as i've said the status quo is unsustainable it will be dealt with one of two ways either republicans will agree and change status quo, or the markets will continue to collapse and we'll have to sit down with senator schumer and my suspicion is that any negotiation with the democrats would include none of the reforms that we would like to make >> some of the objections here were in terms of the actual material in the bill, but some of the objections from republican senators had to do with the politics and the political hand that the white house was playing, including an america first super pac linked with the administration run by dean heller of nevada. a lot of republicans didn't like the idea of taking on fellow republicans here, particularly

one in a vulnerable race for reelection they didn't like the politics of that or the legislation they were dealing with. now the administration and senator mcconnell will regroup >> walk us through the calendar. post-july 4th, what could or could not happen, relate it back to the other legislative efforts, whether it's taxes that have to happen or not happen this fall. this is an administration that said it would have healthcare reform and tax reform finished by the august recess they certainly won't have tax reform done by then. they may not have the obamacare repeal and replace effort by then the calendar is subject to the votes. when you have the votes you call the vote as they say in washington and that can be done more or less at any time with several days notice. but the question is whether they can build a bill that brings in enough of the moderates without alienating as many conservatives.

you saw club for growth, the conservative organization yesterday, coming out against this bill saying it wasn't -- it didn't go far enough in terms of repealing obamacare. it was tinkering around the edges. that wasn't good enough for them i don't know how you bridge those. that's the challenge >> there was talk that mitch mcconnell was trying to get a vote either way, just do it. if the thing dies, okay. then that way they can move on to getting the budget done so they can do tax reform every single day of healthcare reform is a delay of tax reform, which is what the markets are much more interested in. what happened to that thought that they would do a vote live or die >> i think mcconnell blinked ultimately the idea here is the sort of the worst case scenario for the markets, which are focussed on tax reform this implies weelt isy ies we'la several week delay that will push back tax reform into the fall the senate wants to get on to

that the markets want the senate to get on to tax reform, but mcconnell seems to have decided that he won't let this thing go down in flames either he sees a legislative strategy, a path here that is not evident to the rest of us, or he just is unable to abandon this political promise that the republicans have made to their base that they'll repeal and replace obamacare. they campaigned on it for seven years. it's something the base believes in strongly. they want the republican majorities in the senate and house and republican president to deliver maybe he decided he couldn't let this go yet. >> we'll talk more about this. tobey cosgrove will be on this hour to spend some time with us on this issue. eamon, thank you in other political news, reuters reporting that president trump growing us from rated with china over its inaction on north korea and bilateral trade issues trump considering possible trade action against beijing including tariffs on steel imports the commerce department said it

is considering steel tariffs as part of the national security study of the steel industry. joining us is eric nutson and jim mccokin. the second the news broke this vote would be delayed, we saw a noticeable decline, and most people pointed to this news. are we making too much of the fact that tax reform is getting pushed back every time healthcare is getting pushed back >> not really. i think the market reaction was about fear that tax reform and the deregulation agenda -- remember, repeal of dodd-frank is on deck at some point that was all going to be delayed by the gridlock on healthcare. thesooner the senate can move

on and generate time and spice for tax reform and deregulation, that's better for the market if they were to repeal obamacare t would mean lower taxes >> the senate bill doesn't roll those taxes out until 2023 >> right still, we would see some improvement in terms of healthcare stocks. my larger point is would it be better to just let this -- just do a vote, get it over with and move on? >> whatever is going to expedite moving towards tax reform and other pro growth initiatives, healthcare, timing of this has delayed, as has been said, what the market focused on. that's tax reform, spending, additional support that can lead to an acceleration of growth we have gone from this reflationary environment in markets to a muted expectation around low moderate growth, low rates, low inflation if we get low growth, if we have

low inflation, is the fed going to continue to raise rates if they don't continue to raise rates, it seems like the stock market will still look like the best alternative if you can't get yield elsewhere, where do you put your money? >> we're describing more of a goldilocks environment in that environment equities credit tend to do better than sovereign bonds, low-risk assets the problem is the margin of return, the margin of expected compensation for that risk is modest right now so speaking of yields, the other big event yesterday, besides this, was the fact we saw this massive selloff going on in bond markets. doesn't that lift u.s. rates or does it not? >> i don't think so. i think that european rates have been pinned to zero. it's very hard to see a sustainable way out for the ecb. because growth, though it's -- there's signs of growth, it

doesn't look all that sustainability particularly with the strength of the euro you've seen over the last few weeks i think that the ecb is going to try and taper as a face-saving measure, recognizing that longer term growth in europe is pretty anemic i don't see that as having a big impact on u.s. rates, which i think will rise. >> because you think the european bonds will continue >> i don't think they'll long-term continue to weaken >> to michelle's point, you look at the ten-year note, it's up about 8 basis points from yesterday. >> exactly our ten-year, yes. i think that what you're going to see is that at least one more 25 basis point increase in the fed funds rate this year but it need not have impact on the ten-year the u.s. ten-year is the most important economic criteria in interest rates the fed doesn't control that that's the piece that the market will determine i don't see why even on rising

fed fund rates, i don't see why the ten-year moves much from 2.20 over the next year or so. i think the sustainable low rate environment, even with the fed funds raising rates, is actually a good environment for u.s. equities >> we take a different perspective. we think rising rates, the intermediate portion of the curve in europe is good, that allows long-term premium, removing some of the negative term premium with u.s. rates, allows better environments for financials and banks we are overweight europe we have been trimming from u.s. large cap on what we think is better growth in europe and an environment that will sustain strong corporate earnings in europe earnings are not at secular highs. we will see better growth in the second quarter in europe than the u.s. >> do you li you like financiale mark grant who comes on the show says he would not be abuyer of financials because you can't believe they'll follow the rule

of law >> we're overweight europe but not financials term premiums increasing and giving a steeper yield curve for financials improvesoverall situation in europe. >> you like u.s. equities? >> i think just broadly the u.s. equity market is okay. i'm not particularly strong on financials i think you have to be selective. there's not a bubble in the f.a.n.g. stocks, but they're highly rated >> they're expensive >> relatively. but that may be justified. my point on equities is the broad beta exposure. 18 or 19 times earnings on a ten-year yield, not much over two. that's actually a good margin of earnings yield over bond yield that's why the u.s. equity market is a buy on setbacks. in europe, because the growth is less sustainable, i would see

european equities as a sell on strength >> i agree with jim, u.s. large stocks are not overvalued. we see smaller company stocks, and in europe, emerging markets. >> when we come back, a growing cyberattack affecting u.s. drugmaker merck and many m more. we will get more from the ceo of cybersecurity firm rapid seven. and we will talk to former secretary of state kocondoleezz rice at 8:00 a.m we will speak to her about russia, syria, and the state department under president trump. stick around, "squawk box" will be right back. most etfs only track a benchmark.

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show me sports. it's so fluffy! look at that fluffy unicorn! he's so fluffy i'm gonna die! your voice is awesome. the x1 voice remote. xfinity. the future of awesome. welcome back an international cyberattack struck tens of thousands of computers in the united states, russia and nine european nations. for the latest let's bring in cory thomas, ceo of security firm rapid seven thanks for being here today. >> thank you for having me this is a little like the wannacry virus that we heard about that spread around the globe but this sounds like it may be worse >> it's definitely worse it leverages the same core

exploit as wannacry but we find that the ability to actually take over more of the system is more complex, more sophisticated, and it also has a bit more logic built into the core components. >> this is called petya. >> petya >> when you say it has more logic built in that implies what? >> there's two big things that are different. the first thing is that wannacry leveraged a specific exploit -- >> a weakness? >> a weakness in the environment. it exploits a vulnerability. >> in windows. >> this exploits the same vulnerability in windows >> which is what >> windows has a way to communicate between servers, smb, server message block, that was known vulnerable as part of the nsa leak that came out when the attack methods were stolen microsoft patched that

vulnerability for moths st of i systems in march but what you find is systems all over the world are still vulnerable >> because they have not downloaded the patch >> because they have not downloaded it. this calls out a core thing, a big part of the vulnerability that we find all over the world is that there's lots of known things we can do something about, but we have not found the mechanism to address those issues >> even though you think you have downloaded this patch at your company, if there's one company that has not been patched, that's the weakness in the system and that's the way in is that true >> that is true. i would say that most of the maturity around i.t. practices and cybersecurity are weak today. you have a die verbvergence betn the i.t. teams and the software teams. we have decades of a lack of maintenance of our core technology infrastructure. and lots of companies are rushing to fix it now.

but they're still developing the systems and the process to do that. >> if you have one person with a mobile phone connected back into the system that didn't get the patch and the message on this your entire system is vulnerable >> not the entire system degrees matter here. the core thing is that if you have one system that's compromised, it's one system what you find with most organizations, one device was compromised t spread throughout the environment because it found the other vulnerable systems within the environment >> the worm works its way in it goes from there >> it works its way in and spreads. the fact they're demanding to be paid in bitcoin, is that somebody -- is that the incentive, because they want the bitcoin more usable currency, or because of the nature of bitcoin, that nobody can track them >> it's the nature of bitcoin. for those who will do any of these types of attacks, i would around the entire black market

around cyberattacks revolves around systems with low transparency and low regulation. >> would you be a supporter of bitcoin as a currency or given the fact that it's being used in ransomeware for these reasons, this is the problem with the currency itself? that's not your business, but i'm just curious >> lots of things can be used negatively any financial system needs to have the ability to provide a minimal regulation for society to prosper bitcoin needs some form of ability to track and regulate. the positives of it, there's a massive burden that our current financial system has in terms of what they would argue in terms of overhead. costs associated with it i would say it's not an either/or. the question is people that want to pursue a method that has a

low total cost and overhead, but with transparency, that's a great solution but we don't have that today >> you eluded to an issue -- people have been pointing their fingers at the nsa as a result of this saying the world knows about this weakness because of a leak from your institution and they bear some of the responsibility do you buy any of that is the nsa to blame? >> i would say the nsa is accountable for securing their system i think they would acknowledge that as for the notion, the big debate is should the nsa have exploits of this type? >> should they notify the american companies if they find it >> i take a different view i think every organization has its own charter. theirs is clearly an intelligence charter they have to use tools and methods available to do that i think in the -- i think they have to figure out which things are broadly exploitable.

for things broadly exploitable there's a process to share those things >> how do you think about microsoft in this instance >> first off, i used to work at microsoft in this specific instance microsoft pushed out the patch, which was good. i think the entire technology ecosystem including microsoft has to do more to actually make technology easier to consume, easier to secure and update. when it's manual, it doesn't work well. >> wannacry was big in asian nations where there was pirating of microsoft software, and they couldn't download the patch. that wassed weird ir ethe weirda situation. >> we have a technology ecosystem that is too complex today. one solution is to make the thing more automated >> real quick before we go, is there anybody doing that now no today but i would say keep your --

>> in terms of investable options -- >> in order of having a differen difference, no today >> i used to cover crime in florida sheriffs would complain that there was a bank robbery, nobody updated the tape, nobody locked the door. they had this tool that should have been usable and known fixed it happens all the time >> cory, thank you very much for being here >> thank you for having me. when we return, positive economic signals coming out of china despite negative headlines from surveys we'll get the numbers from the china beige book next. as we head to break, a look at yesterday's s&p 500 winners and losers

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welcome back you're watching "squawk box" from the nasdaq market site in times square good morning welcome back to "squawk box" on cnbc u.s. equity put chores ha s hfu. dow is up 57 points. s&p looks like it would open more than 7 points but the nasdaq is down by 12 points on the wall street agenda just one piece of economic data. may pending home sales are out

at 10:00 a.m. eastern time monsanto, general mills and paychex will report results before the opening bell. the decision byindex provider msci will include some chine chinese main index funds a lot of surveys, smaller surveys seemed negative, yet you are much more positive and some of the big stuff has been more positive what is going on >> smaller surveys focused on a particular sector. property dipped down a bit or manufacturing ticked up. this must be reflective of the whole economy. we look at whole economy and make a decision based on that when you have a monthly survey, something that happens on the 26th of one month versus the 3rd

of another month, we can see the trends >> what do you think is really happening? >> things are better we saw a stronger economy in the second quarter the chinese have been able to do what they said they wanted to do, which is improve the economy to the point where going into the party congress, that the economy was significantly better than it was a year ago when they were scared to death over labor market, growth and other things. broadly speaking they have done that there's been no foreign shocks no domestic shocks it's been a perfect playing field for them, they've done a good job >> so you said there's been no shocks my question is president trump has been considering some sanctions over china or on china related to north korea north korea. what do you think the implication of that will be? >> everyone is wondering has trump flipped on china the reality is even though every beltway pundit has an opinion that it's starting to happen, we

have not seen it happen at all yes, he will talk about north korea, and, yes, there's issues on the human rights sides that he will condemn then on. the real barometer is south china sea. if you see a much tough every stance, th tougher stance, this is probably happening. >> wilbur ross has been complaining about what's happening with steel there for a long time. the whole world knows they have had too much capacity. the chinese acknowledge they've had too much capacity. they promise to shut down the unprofitable steel mills but never do because they provide so much employment. the talk now is tariffs on the steel sector tell us about that >> everything you said is true there's way too much overcapacity, it's a problem for the world and a problem for china but it's a false positive. the national security exception, whereby trump would take the

authority to restrict imports on steel or aluminum based on national security needs. china does not export muchstee or aluminum to the u.s >> commodities are fungible. >> but there are already rules in place that restrict chinese imports. so you are knocking down china's trade competitors in the region. this is a terrible idea. it's not anti-china. it's just protectionist. >> explain that if we don't import that much steel any ways and we say we won't do it at all, that means what in terms of they just send that steel elsewhere? i don't get why it's a net positive >> sure, right now china's trade competitors, those exporting steel are advantaged vis-a-vis china now. >> they would be more advantaged >> right now you would say those guys would be kicked back along with everybody else. because steel tariffs won't be focused on china per se.

even though the headlines say trump takes tough position on china steel. this will be broad steel trade action and hit everybody the chinese have already been hit. there's significant trade restrictions on chinese steel this will probably help china a bit. >> okay. thank you. >> pleasure. >> great to see you. when we come back, senate republicans delaying a vote on their healthcare reform bill dr. tobey cosgrove will join us to tell us why he's opposed to the proposed leg lagislation. then a first on cnbc interview with the new fda commissioner, scott gottlieb a little later, former secretary of state condoleezza rice will join us live from chicago. we'll get her take on what's happening with russia, north korea, syria and the state department under president trump. stay tuned, you're watching "squawk box" on cnbc

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. welcome back u.s. equity futures at this hour are suggesting -- what are they suggesting higher open for the dow, 57 points the s&p opening higher by 7 points the nasdaq lower by 13 points. yesterday a police helicopter attacked venezuela's supreme court and flew over the interior ministry in what nichololas maduro said was troyg to oust him from power he was speaking on state television at the time he said grenades thrown from the helicopter did not go off helping to avoid any deaths. the man accused of conducting the attack is a police pilot who called for rebellion against the leader of the country is probably a better word time for the executive edge. blue apron expected to price after the bell today the appetite for the ipo might be on the light side leslie picker has that story

>> that's right. less than 500 calories, that's how light it is. you know, blue apron is a deal that is a tough one. customer acquisition is high financials include net losses and it faces competitors big and small. even in this market which is technically the perfect recipe for ipos, it has been a tough sell i've spoken with sources familiar with investor demand, and it's clearly one of the more challenging consumer deals investors are skeptical of the business model and timing of the deal they're asking whether blue apron is trying to go out now before things get worse assuming amazon eventually closes i deal with whole foods that could be a big competitor to blue apron which bills itself as delivering fresh, healthy ingredients to your home voting power is limited in the ipo due to multiple classes of shares so blue upon may not get

people to pay at the lhigh end o the range they're marketing. the underwriters need to price the deal so that it rises and there should be ample retail demand the question is always how much. >> we talked about it several times here there's so many other competitors out there. but do they have the largest market share related to plated and martha stewart's efforts and everything else? >> they have the most in terms of fund-raising. they didn't specify market share specifically they raised the most money valued at the highest in terms of this delivering fresh ingredients to your home that super niche market of course each of their competitors have their own type of customer that they appeal to, whether it's the vegetarians, whether it's the people who want a certain chef to make their recipe it's just a tough sell, i think, to investors >> who has the one -- >> i'm shocked by the ones they

send home. 30 bucks off and i'm still not interested >> that says something >> who has the one with the tom brady diet is that blue i problapron? >> that's another one. >> to the point i made earlier, there's so many. >> lack of flexibility i did it for a while, but you had to cancel so far in advance. you leave town unexpectedly, there's a box showing up at the front door >> it's a challenge. >> leslie, we have some news >> yeah? >> while he were speaking, blue apron lowered the range. you're on to something here. they lowered the range of the ipo to 10 to $11 per share, down from 15 to 17. >> that's a big deal so technically you can price below the low end of the range without refiling they felt demand was weak enough that they had to refile with a l lower price range.

>> it's a much lower price range, 10 to 11 compared to 15 to 17? how many shares? that's a boatload of money they thought they could raise >> sources i spoke with yesterday said that they were seeing hedge fund demand and no much in the way of mutual funds. if you're an ipo, you want the people who will stick around a while. it could be they were lowering that range to get higher quality investors. it will be interesting to see where they go from here. >> leslie picker, her reporting so good they changed the price while she was on coming up, dr. toby cosgrove will join us and tell us why he's opposed to the senate healthcare bill. as we head to break, a quick check of european markets right now. as you can see, lower.

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senate majority leader mitch mcconnell speaking after pushing the healthcare vote until after the july 4th holiday >> i had hoped, as you know,

that we could sgrhave gotten toe floor this week, we're not quite there. i think we have a good chance of getting there. it will just take longer >> joining us with his reaction is cleveland clinic's ceo dr. toby cosgrove. thank you for being here today >> good morning. >> you told us in the past you're not fond of some of this legislation. what is your concern about the senate bill as it stands today >> my main concern is the fact that i don't think they're dealing with the root cause of the problem. the root cause of the problem is not how you divide the money, the problem really is the rising cost of healthcare we need to have a bipart sson bl that looks at the rising rate of healthcare we have to look at epidemics, ep democr ep sglooifrnlgtsdz sglifrnlgtsdz

sglooifrnlgtsdz sglaifrnlgs sglooifrnlgt epidemics swroe a t we have 14,000 pages of regulations in two years we have somebody in the hospital doing an inspection every day. we have rising costs of drugs. our pharmacy expenses last year went up 19%. we have to deal with some of those things i think if we came together and dealt with the root cause of the problem, there will be plenty of money to go around to look after people if we don't deal with it now, we'll have the same problem ten years from now >> regards to this senate bill, hospitals have almost uniformly come out against this. hospitals agreed to a lot of changes under obamacare, changes with how they get paid, changes to how much they get paid, on the understand flag there would be more people insured in the united states. so you would end up having less people you had to cover who came in uninsured when you walked into the hospital. what does this bill do in terms

of what it means specifically for hospitals. >> very specifically it means there will be more people who do not have insurance we're going back to almost the same number of people who didn't have coverage back before the aca came along that has real implications for patients, because it's going to keep many of them from going to get the care that they need and deserve. and that will send them later in the course of their problems to emergency rooms, which is more expensive. the second thing that i think is underestimated is the effect it will have on hospitals right now that you have to figure out hospitals across the country, and there are 5,000 of them, 22% are running in the red. 55% of the hospitals lose money on looking after patients. so if you have more patienpaties coming who are not paid will you have hospitals in deep financial

trouble. this is particularly true of rural hospitals and safety net hospitals which are dependent on medicare and medicaid. >> sir, what i don't understand is we have obamacare right now >> we do. >> why are those hospitals in the red? that was supposed to, right, all these people now have insurance. and therefore, they're in theory going to be able to pay. what happened? >> well, we -- one of the problems that we have is that right now, most hospitals lose money on both medicare and medicaid and make it up on private care and if you don't have any medicare and medicaid you're losing still more money. >> okay. so, what obamacare did was dramatically increase the number of people on medicaid. >> it did. >> as opposed to solving the problem with the individual market so, does that mean you would prefer roll back in medicaid and i mean the idea -- the gop would like in theory is you roll back medicaid away from

able-bodied individuals, and you create an individual market where prices would be much lower, because of choice, and therefore they would have insurance, and therefore that would be more profitable customers for you. correct? >> no, no -- >> you don't like the gop provision? >> i don't think that would be the case you've got to have more people who don't have any insurance at all. the people who are going to be hurt by this are people who are poor, the people in rural areas, and the elderly people, particularly the 55 to 65 group are going to be hurt by this people who are going to be helped by this are going to be younger people, and people who are -- have large incomes. and it increases the disparity and it's really going to leave a lot of people who are not -- do not have satisfactory incomes, or very low incomes, going to leave them uncovered, and i think that's going to be a disservice totally to -- across the board. i think the point is that i

think it's important that we're really headed in the wrong direction. we're talking about repayment reform we're not talking about health care reform. >> what is -- what if the way we paid for health care is the reason why it is expensive the more and more third party payer, right, that's essentially insurance, whether it's the government, means that me, the consumer of the product, doesn't see the price, doesn't make hard choices, doesn't do anything, right? it's all so divorced from the way we consume we don't see the bills until afterwards what if it is the very nature of the way we pay that is the cause of the increases in the prices >> no question about it. and what we're doing right now is moving from being paid for essentially for procedure to being paid for value and that is a major change that's going on across the united states which really is in the right direction. which, over time, will begin to reduce the cost of health care as we try to keep the population

healthier. keep them out of the emergency room keep them out of the hospital. and if we are being paid for doing that, then, that will eventually lower the cost of health care across the country but this bill really is moving how you get paid, paying from one group to another group it's not headed towards the root cause of the problem, which is the rising cost of health care >> toby, can you help us understand, let's just assume nothing happens. nothing happens in washington. tell me what happens in real life to everybody else >> if nothing happens, i think what we've got going on across the country is the aca has done a couple things. it's increased the coverage. it has increased the quality of care across the country. the problem is the rising cost of health care >> but toby, what i'm asking is, when you hear the president say that aca is in meltdown, when you hear, in truth, that there are insurance companies that are getting out of the market, what happens? so if you were to look out over the next 6 it 12, 18 months,

assuming nothing happens in washington, again, what happens in real life >> i don't think we're going to see major changes that are going on across this country i think you're going to see that one insurance company steps out, others are going to step in, just like you saw when airlines closed, other airlines stepped in to pick up the opportunity. >> even if the funding gets cut, as has been the suggestion that would be there for medicaid? >> well, if the funding gets cut for medicaid, then we're dealing with a whole different set of problems that's not maintaining the status quo if the status quo continues -- >> you can play out what andrew's suggesting, right so, we see more and more counties where there's only one choice or maybe no choice right? so there's only one choice, premiums start to go up, more and more people start to say, you know what? i'm going to pay the penalty instead of the premium, because it's so expensive. so what you end up with is many, many, many people uninsured and

so what does that mean for you guys >> well, what it -- we have more and more people that are uninsured this is a burden, particularly, for hospitals, in the rural areas. it causes a problem. but this is not what we're seeing right now >> so, just to then put a fine point on it, you would dispute the -- you would dispute the contention by the president, and many in the republican party, that have suggested that this is falling under its own weight, if you will >> i would >> you would and have you said that to the president? i know you spent time with him >> i have not said this to the president. i have talked to other people in the white house, and i have suggested to them that the issue is the rising cost of health care, and that is the root cause of our problems, and that we need to address it many of them agreed with that -- >> but you didn't think there was a massive misunderstanding then or in terms of the messaging that both parties are suggesting around what's happening?

>> well, i do believe that, yes. and the reality is that, you know, hospitals are running at a very low margin. and -- but patients are, for the most part, covered and that, i think, is this bill does not begin to address the basic issue. >> all right, dr. cosgrove, thank you for joining us today we appreciate your time. >> my pleasure thank you, becky >> see you soon. coming up when we return, a first on cnbc interview with the new fda commissioner scott gottlieb he's going to weigh in on drug posing, the opioid epidemic, and the delay of the republican health care reform bill. and then later it's energy week at the white house continental resources ceo harold hamm is going to be joining us at 7:30 a.m. eastern big hour coming up and then we've got condoleezza rice at 8:00

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markets on alert as the senate bill to overhaul obamacare appears to be on life support. the latest on where the bill stands and the battle against opioid addiction from fda commissioner dr. scott gottlieb. energy and focus, as oil is near seven month lows. major players meeting at the white house today and tomorrow we'll be speaking to oil tycoon harold hamm ahead of those talks. and technology tumbles after google is hit with a $2.7 billion fine a closer look at the sector and whether or not there's more downside to come that is straight ahead the second hour of "squawk box" begins right now live from the beating heart of business, new york city, this is "squawk box." good morning welcome back to "squawk box"

right here on cnbc we're live at the nasdaq marketsite in times square i'm andrew ross sorkin along with becky quick and michelle caruso-cabrera in for joe today. dow looks like it would open up higher 55 points higher s&p 500 higher as well close to 7 points higher. but the nasdaq, tech heavy nasdaq is looking to open down about 18 points. headlines right now, senate republicans are now hoping to get a vote on their health care overhaul bill, this is going to happen now after the july fourth recess that followed yesterday decision to postpone a vote, disagreement among the gop senators senate majority leader mitch mcconnell says work will continue on an agreement that will garner enough votes blue april rop lowering expectations for initial public offering now predicting a range of $10 to $11 per share. that's down from $15 to $17 just last night expected proceeds for the meal provider $293 million. but lots of questions about that

ipo. and we'll be watching that over the next 24 hours. also private equity firm apollo global rewriting the record books now raised $23.5 billion for new buyout fund. it is the largest. "the wall street journal" reporting that apollo is set to close that fund soon after it picked that target the prior record was set by blackstone just a decade ago at $21.7 billion. and some cyber attacks now are wreaking havoc across europe and the united states. yesterday, in a confidence shaking attack that appeared to stem from obscure ukrainian hacks software product viruses victims through major global companies like merck, rosneft and cadbury for similarities to last month's global ransom attack, peyta, the attack locked digital files and manded payment. more than 100 companies, institutions, asking for all that in bitcoin. we talked about how bitcoin has gone up. the value of bitcoin has gone up the more these ransomware attacks and i've heard from

treasurers and other people at corporations who claim to be stockpiling bitcoin. >> really? >> yes not a lot. but there's been a couple who've had to deal with it. >> in case their files get stolen so they can pay for them back >> by the way there's clearly a market for bitcoin because you need it if you're going to be paying the ransom money. >> you see it has a great run. a couple of stocks on the move this morning, big dow chemical investor is calling for changes to the company's merger with dupont "the wall street journal" reports glenview capital which has a 1% stake in dow wants the companies to scrap plans to break into three separate units once the merger is complete. ubs plans to freeze pensions for about 70,000 non-union workers switching them to a 401(k) plan. the company's trying to contain a retirement fund that has a nearly $10 billion deficit there could be a crowd in the cloud. alphabet is expected to roll out an update to google drive that will allow users to back up all the files and folders on their computers, into remote storage

the feature called backup and sync will automatically have google drive copy everything in your desktop folder. google will also continuously back up the folder to ensure your files are up to date. first 15 gigs are free after that you have two choices $1.9 a month for 100 gigs or a terabyte for $9.99 a month >> you know, if you're living in an apple and microsoft world, for example, and an android world, you can then share everything all at one time >> you're saying that's an advantage? you're not questioning whether they can do it -- >> i'm saying that's the huge advantage. >> yeah, yeah, sure. right now i back it up on an in-house drive that's part of my wi-fi. but this would now be an essentially a cloud version of that >> right i kind of like the in-house version because you have more control over it. >> right i mean you're always worried about stuff in the cloud >> hacking >> right >> president trump just tweeting, some of the fake news media likes to say that i am not totally engaged in health care

wrong. i know the subject well. and want victory for u.s we'll continue to talk about health care today. it's been a big issue. we've been following as the senate deals with the affordable care act the new commissioner of the food and drug administration is focused on getting more low cost generic drugs on the market faster to help ease the financial burden for americans joining us right now first on cnbc is fda commissioner dr. scott gottlieb. and scott, it's great to see you. thank you very much for joining us, mr. commissioner >> thanks for having me. >> we have so many things we want to talk about, but this is an issue, the idea of trying to bring down drug costs, that you've spoken for years about this in the past i know the fda is not responsible directly for trying to set drug prices, but you do have some things that you think you can do to help ease the burden, particularly with some smaller drug that have skyrocketed in price why don't you tell us a little bit about that >> right, we don't play a role in drug pricing but we do affect drug competition in terms of getting new drug on the market,

particularly with generic drugs. what we're focused on is places where congress intended for there to be vigorous competition from generic but that competition isn't coming to the market for various reasons one in may be because branded companies are taking advantage of rules to forestall generic entry. we think there's things we can do to try to address these places where the competition should be coming to the market but isn't. just to back up and give you a sense of what's happening. it usually takes between 1500 to 3,000 actual doses of a drug in order for a generic company to make a copy of a branded drug. there are various techniques branded companies sometimes employ to block the generic companies from getting access to the samples that they need one of them is taking advantage of certain rules the fda puts in place to manage the risk of drugs in the post market so-called risk management plans. so we're looking at these kinds of policies in places where we don't see competition coming onto the market where congress intended for it to be. >> this is something that i think would directly address a situation like martin shkreli.

we've been following his trial that's taking place now. not on trial for what a lot of people despise him most for which is taking a life saving drug and jacking up the price by 5,000% but what you're describing would prevent situations like that, correct? >> well, there's a second set of policies that we're promulgating that would prevent the ability of people to come in and take off low volume generic drugs that there might not be a lot of competitors because they're not used a lot and raise the price and basically take advantage over regulatory arbitrage where it might take a year or more to get another generic copy to the market we're also addressing that aspect of the potential challenges in the marketplace by making sure the generic process is more specific if you jack up the price it won't take two years to get a new drug, might take only six months we're looking at the places where there aren't a lot of generic kelt fors. publishing a list. we announced yesterday we're going to publish a list of all the places where there's only one injurieric drug on the

market, where patent exclusivity has expanded but there's no generic competitors and prioritizing the entry of new generic drugs into a category until there are three competitors. we don't see the big price breaks for consumers until there are three competitors in the marketplace. this is important because we worry about public health and access to medicine in order to facilitate access we have to facilitate competition this really does fall within the mandate in my view of fda. >> and what you're doing is simply shining a light on these issues stream ifli streamlining the process and making sure nobody can arbitrage it like that and take advantage people >> certainly arbitrage is an issue. before you can come into the marketplace you can pick off one of these low volume generics that isn't sold a lot, sort of a niche drug, raise the price a lot, and you knew that it might take years for another generic to come into the market. we've got to look at those places and have a policy in place that allows us to prioritize the entry of the second generic i don't want to be playing whack-a-mole with companies. i want to have rules in place

that prevent these sort of abuses and they are abuses and we want to make sure consumers can't be taken advantage of when congress intended for there toish vigorous competition and low prices exclusivity had expired on the blanded drug >> one of the things that really martin shkreli irked a lot of people was this idea that he was a self-described hero, because when he did this, and there is a germ of truth here, when you understand for example the commodity market, when you drive up prices, you draw products to market that's what you're talking about, essentially, right? i mean, the more and more the price -- the reason people weren't making a competitor is because it wasn't that profitable well suddenly shkreli made it profitable to create a competitor, right? >> well, i don't want to comment on the particular case in question i'm obviously familiar with it but you are right in that the market should be self-correcting. if there's no competition in a certain category and someone raises the price in that category, that price signal should send a signal to the market to entice a new

competitors. the issue becomes when the regulatory product prevents a new entry from coming up to the market for two, three, four years and that's what we need to address. we are addressing. we put out some reforms and we're putting out some more to make the generic drug far more efficient. the generic team has been beefed up in part from user fees supplied by the industry it's now an outstanding group at fda. a much larger group. and we're going to be putting out policies to make that process more efficient so if there is this area where someone does increase the price the marketplace itself becomes self correcting in six months, maybe a year, but not in four years. >> doctor we've heard so much about the controversy about the epipen, what do you think the epipen should go for in a perfectly competitive market >> i'm not going to comment on specific drug issues and certainly not specific drug pricing issues there is an issue with what we call complex drugs in which epipen falls into where it's hard to bring generic copies of are complex drugs onto the

market they usually formulation issues associated with them they're drug device combinations or drugs that act locally on tissue so it's hard to measure their therapeutic effect just by looking at them in the blood which is how we traditionally look at generic drugs and prove that generic is the staple as a branded drug we measure the generic drug into the blood and say if it gets into the blood at the same level as the branded drug and stays in the blood for the same amount of time you can approximate that it's going to have the same effect for a complex drug you can't use those standard tests as an approximation so it's harder to bring generic copies of these drugs onto the market. this is another area of active policymaking we put out some policy related to this and we'll put out more on how to facilitate better generic entry in areas of these complex drug in some applauses it's going to be bet earp scientific principles in some cases changes in our policies that allow generic companies to look beyond the traditional studies that they historically looked at in order to prove the safety of their copies to get them onto the market so this is another rare yeah

we're actively looking at. >> any thoughts on the senate health care bill or the house health care bill and what it means for health insurance in america? >> i haven't been actively engaged in it at all i haven't really focused on what's going on. i'm focused on fda right now >> let's talk about an issue that's been surrounding the fda in kind of a controversial issue covering the fda for quite awhile and that is the slow approval process for what people think may be life saving drugs in situations like cancer and situations like illnesses that affect children. is there a way to allow some of these people, some of these patients, to get access to drugs on a faster path without having to go through the full approval process? how do you balance sort of the safety, and the speed issues of these situations for life saving situations >> right well two issues here one is getting drugs on so-called compassionate use before they're approved. we've done a lot in recent years to try to facilitate access to

patients who want to get access to a drug who were facing life threatening condition and want to try an experimental drug. there's probably more that we can do we're going to be bringing in a team to look at our programs and related to so-called compassionate use. and then there's also the question of trying to improve the overall efficiency of the review process to get these drug to the market more quickly drugs that target very significant unmet needs and fatal conditions and there's a lot we can do that on how to facilitate to market the entry of drugs targeted to molecular targets, so basically, if you have particular cancer, but the new drug only targets a certain molecular sub type of the cancer and that cancer might appear in different tissues, it might be basically the same molecular driven tumor, but it's appeared in different organs like the pancreas or lungs, now you can look to target drugs just for that molecular significant rather than the particular organ system that the tumor appears.

so this is another way to facilitate the entry of very targeted medicine to the market really taking advantage of the new science and we're going to continue to look for these opportunities where we can make the process for new innovation more efficient >> michelle just asked you about the health care bill i know you said you're not involved in it but we've known you for many, many years and i know you must have views on this and i hope you will look at it, i know you must look at all of this holistically to the extent that pricing is a huge component of this, and getting drugs to people in need are important how do you think about the fact that there is currently no bill -- if there is no bill, and it just gets scrapped, what happens to pricing over the next twelve months? in your mind we've just had this conversation with toby cosgrove when it comes to the hospital >> well, look, i'm going to continue to take steps at fda to help facilitate competition in the market i know that facilitating more competition to market, and also trying to address the new drug approval process is going to ultimately impact pricing in some respects. remember, new drugs are ultimately priced at a cost to

capital to some measure of the cost to capital that it takes to develop those drug and if we can take steps to make the process more efficient, more modern, more science based in a way that's going to reduce the cost of capital by lowering the risk, decreasing the regulatory uncertainty, lowering the direct cost to develop drugs, or lowering the time it takes to get a drug to market that ultimately is going to lower the cost of capital -- >> in addition to that dr. gottlieb we had a previous discussion during the break about the epipen controversy and a lot of people don't like the fact that one of the things that obamacare did was burden shift back to the individuals in a lot of ways. because of deductibles that are higher and when individuals actually had to start paying for something, like the epipen, that was the first time that we heard a real strong hue and cry from people that i'm not going to pay that, and why is this happening. whereas before, it was all shielded from us by what was happening behind the scenes, due to the interaction between the drug companies, and the insurance companies. i mean, to the degree that the

consumer is more involved in their care, does that epipen episode illustrate how that can also help reduce the cost of drugs? >> well, look, i think there's complexity in how drugs get placed in the marketplace. i appreciate your effort to try to get me to talk about things outside of the scope of my responsibilities but i'm not going to take the bait we're really focused here on trying to increase competition i think that that's not going to solve the problem of drug pricing. you're right there's other complexities in the marketplace in terms of the supply chain, how drugs are sold we've talked about that on the set in the past many times but drugs, increasing the competition is ultimately going to lower prices in some respect increase access. it's also going to help facilitate the better supply chain. if you have more competition in the marketplace some of the things that happened in the supply chain that might be reducing transparency, increasing costs will become harder >> all right dr. gottlieb, let me try one more crack at this we talked with senator rob portman earlier this week, and his concern about the health

care bill was the problem with the opioid crisis. he has big concerns about it he's a republican but that was one of the reasons he was not willing to sign off on the health care legislation. he also wanted to see the cbo scoring on it. but the opioid epidemic seems to be raging across this country. what would you do to address that because it does seem to be an issue of bipartisan support and something that the senate bill may be a little lacking in >> look, it's taking a staggering human and economic toll, 1.2 million emergency room visits in 2014, 13,000 deaths from heroin overdose according to cdc data. there's a lot we can do. there's a lot that falls within the scope of fda when it comes to medically assisted therapy. tamper resistant formulations, i think what we can play a particularly important role is on the new addiction side of the crisis we know that most people who are going to become addicted to opioids are going to be first exposed through a legitimate

prescription we need to make sure people are only receiving prescriptions when they're properly indicated and when prescriptions do get written they're written for an appropriate amount that comports with the reason the prescription was written for the first place. no more 30 day supplies for a tooth extraction should be a two or three-day supply what does the fda do to try to affect that? there are things the fda can do. we're looking at those policies right now. we also need to look very actively at the risk associated with use historically we looked at risk and benefit and label indication but also in off label indication in certain settings. this is one setting we need to look at risk in the illicit setting not just in terms of how we approve new drugs but how we look at most market and maybe take regulatory action to recommend drugs be withdrawn from the market as way recently did. >> commissioner gottlieb, thank you very much for your time. we really appreciate hearing from you and hope you will come back again soon. >> look forward to it. >> nice to see him in this new role >> we've been talking -- >> -- on certain issues.

>> yes >> coming up, when we return, the outlook for m&a deals with morgan stanley's vice chairman, then harold hamm is going to join us to discuss the president's energy policy and oil prices and then you don't want to miss this at the top of the 8:00 hour, a special interview with former secretary of state condoleezza rice big show still to come stay tuned you're watching "squawk" right here on cnbc.

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i'm going to admit i don't understand a lot of what i'm about to read. lots of buzz in the gaming world this morning after amazon's streaming site twitch announced it is opening up an affiliate program that will allow streamers to make money on the site but aren't yet partnered.

affiliate streamers will have the option to offer subscriptions, which was once only offered to partnered streamers, an exclusive club of the world's most popular career streamers. >> whoa. >> of the more than 2 million active streamers on twitch, only 17,000 are in partner programs amazon bought twitch in 2014 for $970 million in cash analyst gene munster has said the streaming site could be worth over $20 billion by 2020 >> did you feel like you get it now, or no >> i know that there is a much larger market to be captured there. that's the one thing i can conclude from that >> all you need to know is that there are people who play games. >> that's a streamer >> no, no. if you play games, you can stream -- people are watching other people play games. that's what this is -- >> if you're good enough -- >> it used to be that you had to be basically an approved partner to stream your games >> uh-huh. >> now, all of us can stream our games. >> so anybody can watch us play.

>> and we can make money from it >> there you go. >> we cannot -- >> we can probably, but -- >> lots of skills. >> okay. sticking with the game theme, the guardian con marathon stream featuring some of the best streamers on the site hosting a nonstop charity stream this week all proceeds going to saint jude children's hospital. so far gamers have donated more than $900,000 to the charity event. nearly doubling the amount raised last year the event coincides with the guardian con conference happening this weekend in tampa. okay so i've nailed this down. it's a branding issue. to me streaming is pandora -- >> yeah. >> spotify >> it's more like technology >> i get that. >> it's streaming the stuff. >> right, right. >> okay we're going to talk deal making we've got a great guest right now. although the market for mega deals has cooled, shareholder activism across the globe picking up want to turn to robert kindler the vice chairman and global made of m&a at morgan stanley for more on the m&a global

outlook. thank you for coming in. >> thanks, andrew. >> so what's the deal, if you will why is m&a activity in the united states at least off so much what's happening >> well, actually, it's more m&a activity is down more europe than the united states but, it's definitely we're in the lull now and who knows how long that's going to last. m&a has always been a cyclical business as long as i've been doing it >> right >> you can account for it now, for things like there's no tax reform, who knows what the tax rates are, who knows about repatriation, deduct ishlt -- >> how much of that is a conversation in the board room where you're having meetings with people who are saying i would like to buy so and so, or we want to do "x" deal but we really need to wait to see what's happening or there's something else going on >> i don't think there's anything beyond that i think people, you have a very high stock market now so pricing is high. you also have ceos who are saying look my stock is doing just fine now. and they don't feel as much of a need to do m&a and you add to that all the uncertainty with respect to tax

reform, and there's actually regulatory uncertainty, as well. >> and you can tell me i'm wrong. i wrote a column a couple weeks ago about what -- two issues one whether deal making is a barometer of confidence. and given the fact that there is been less deal making that maybe there is less confidence than we think. what do you think of that? >> well i did read the article and, i think there's something to that. but in a way, a lot of ceos now may be feeling confident because stock prices are up. and they don't feel the compelling need to do a deal now having said that, you really need m&a as part of any kind of strategy that you have >> now you're talking -- >> why wouldn't i? >> good for you. yes. >> well, its fair, but reality is that you cannot get growth now in your businesses just organically. it's just very hard to do. so m&a, over the longer-term, is clearly going to be a big part of the strategy. but right now, with multiples so high, and with so much

uncertainty, i think we have a lull >> you mentioned that there's regulatory uncertainty and that's the one thing that the republicans have been able to say it doesn't matter if we get legislation passed through congress, we have a lot of control over the regulatory sectors. where does the uncertainty lie because they've been rolling back regulations pretty effectively? >> in m&a it's just more unpredictable. >> in terms of the justice department >> that's -- it's good to make the distinction. because in the fcc, clearly things are going to be better with the fcc it's a more rational approach. >> they're getting rid of some of the net neutrality issues that were confining things before, however -- >> when comcast tried to buy time warner cable which clearly had no antitrust issues it was really blocked by the fcc. i think that's been -- that's been cleared away. >> so that deal would have happened under this administration >> i think absolutely would have happened >> and i assume you think at&t/time warner is going to happen >> i cannot imagine it doesn't happen there are no antitrust issues.

>> what about amazon/whole foods. straight antitrust policy that you would think would be fine, but president trump has made comments about amazon before does that matter >> well, that's, to becky's question, an uncertainty i think with the populist president, there is uncertainty. i think people were counting on ftc approval being easier. i think may be surprised >> what about deals that rely on synergies? meaning, layoffs in the united states right now >> it's the same i think people are very attuned politically, if you can't make an argument that is going to increase employment i think it's going to be a challenge. >> inversions, cross border deals, it's long been said, we believe, that because of our tax structure here in the united states, it was easier for foreign companies to take over u.s. companies tax reform, obviously would change that. would that mean u.s. buying more overseas eliminate that arbitrage and therefore see fewer cross border deals? what do you think is the impact there? >> from an m&a perspective, it

doesn't really matter what the corporate rate is. you just need to know what it is it's really more certainty -- >> do you believe that european companies had an advantage particularly when it comes to pharmaceuticals for example, that their tax rate was much lower and therefore they could achieve synergy simply by buying a u.s. company and therefore paying less? >> i think it was more of u.s. companies becoming non-u.s. companies. >> right >> so, it wasn't so much of a heritage european company coming in to the u.s. for inversion purposes it was the u.s. going out. so i'm not sure that that will lead to -- >> what's the state of play with activityism? dan loeb went after nestle 48 hours ago. seems like they're in a bit of a slowdown in that which also was maybe taken a little bit of pressure off companies for themselves to do deals >> you know you've heard me say before that in the u.s. i think activism has been played out there's so many assets chasing so few opportunities and in the u.s. we don't have a lot of conglomerates anymore and the

play of doing buybacks is kind of played out. so there aren't a lot of opportunities in the u.s people have run out of ideas classic example being green light coming up with this idea for two classes of common which really made no sense >> at gm ams >> so then you talk about in europe, european companies are more like u.s. companies five to ten years ago so there's a lot more opportunity it's been there before i advised sony when dan loeb went after it. >> what would you be telling nestle right now >> i think, in nestle he's basically come with a very soft touch, supporting management, which is very large company. i think nestle may be something of a -- >> do you think the response just yesterday which i know they said was in the works already will be enough, if you will? >> well, i don't see what these really do for a huge company in switzerland. i don't see what -- i don't see an activist play -- >> what about glenview which

just went after dow and says that it doesn't want the company to flood into three companies post merger and also went after andrew liveritz and that retirement theme >> well, the -- on that transaction, that has haddivists on both sides -- you had trion on one side. you had third point on the other side it's been a deal that's attracted activists. sure you're going to have people coming up with all kinds of theories but that's a company that's basically transforming itself. i don't know how that's going to go >> you made your name and your bones, if you will, in the telecom and media space. big story in the past 24 hours, has been what's going to happen actually parent company of this network comcast, charter, conversations taking place with sprint, not necessarily about any deal but t-mobile hanging out there potentially to deal with spript all in the back drop of the at&t time warner americaner what do you think happens? >> at&t time warner it's unimaginable it doesn't happen

whether there are cellular deals, it's a little bit more complicated. i still think this is where it comes to play with the populist president. with this administration allow a t-mobile deal and sprint deal to happen it's just very unclear and i think charter and comcast are just trying to hedge their bets against that possibility >> is amazon/whole foods surprise you >> i think it did surprise a lot of people. although there's obviously -- >> did it make you start to think, actually, maybe i should go see this guy and this guy or whoever ceo like did you start to blue sky things in a way that you didn't before? >> well, people have been pitching that concept to amazon for quite awhile it isn't really a new concept. >> right >> but them actually executing on it, particularly company that's never done a deal of any size, i think that was a surprise about it. >> okay. rob kindler, thanks. >> you got a joke for us his brother's a comedian >> so -- >> you give me a pitch for my brother andy >> andy kindler. >> no, he's great. he's fantastic

>> you don't want to -- >> i actually think that would not be a good idea >> nice to see you >> thanks. thanks coming up he was one of the president's top energy add advertisers during the campaign. now harold hamm is in washington meeting with lawmakers and white house officials to discuss energy policy. before he speaks with them he's going to join us on "squawk box" as we head to break take a look at u.s. equity futures e w would open higher by 59. ths&p by nearly 8. nasdaq lower by 13

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0.8% increase. in other housing news the mortgage bankers association reports that mortgage applications fell 6.2% last week both new purchase applications and refinancing activity declined the average 30-year fixed rate mortgage was unchanged during the week at 4.13%. and earnings out this morning from general mills the food producer earning 73 cents a share for the latest quarter. that was two cents better than estimates. also beating on the top line and raising dividend by a penny to 49 cents a share its shares -- its results were helped by fewer promotions and expense controls and that stock right now 55.52. >> more crude inventory data later this morning that's after the latest api data reporting another build in crude. led to weakness in the price jackie deangelis joins us with more >> good morning, michelle. this does happen every once in awhile the api will throw a little bit of a curve ball ahead of the official report. we said yesterday the market was expecting draws in crude and gasoline more in line with seasonal

trends then the api delivered these builds across the board. so, watch for that surprise possibly later when we started this summer, demand was in we but all indicators have shown that it's actually pretty robust the builds today would mean either demand is not as strong as analysts think or supply is incrementally that much stronger with the holiday weekend coming, aaa is looking for a record number of travelers, 44.2 million people 37.5 million expected to travel 50 miles or more on the road andrew is one of them. that's more than a million more -- >> and me. >> and becky, too. and almost 3.5 million people are expected to fly. also 3.25 million will take cruises, trains and buses to their final destinations the bottom line here, we saw steep drop in oil prices, then a little bit of a rebound, but if the data doesn't support this higher price it won't last one school of thought here, liquidate your short positions before a long holiday weekend then regroup one thing is for sure.

while volatility hasn't been present in the stock market it has been in the crude trade. >> certainly not thanks jackie. >> sure. >> so energy ceos speaking of oil are gathering in washington to talk policy changes, and what it means for the industry. joining us now with what to expect from the gathering harold hamm chairman and ceo of continental resources, and a meeting attendee good to have you here, mr. hamm. >> good to be with you, michelle >> i can't emergency there's anything that you're going to tell donald trump that he hasn't already heard before, because you were in involved with his campaign from the very beginning, and have been advising him on energy policy. what's going to happen today when it comes to energy week for the trump administration >> well, it's a good thing we're having an energyweek you know, energy top on everybody's mind everything we do is so involved with energy. but, president trump was very quick to realize that the energy -- the energy renaissance in america could be a huge

driver in this country for both the economy, including putting people back to work, jobs, everything associated with it. and you know, we just heard about consumers enjoying all these cheap gasoline prices has been great for them, as well i think the thing we'll be talking about is a wonderful opportunity that we have, we've created from horizontal drilling an abundant supply first natural gas, and of course crude oil, as well so we have a wonderful opportunity to shift this clean, abundant fuel around the world >> mm-hmm. >> and so over the next two years, by 2019, we will increase that exports of lng five times so it's a wonderful opportunity, and i do the same thing with, you know, a lot of the area around the world

we've done right here in the u.s. >> there's been a big -- been an energy push and a foreign policy push to get more lng into europe to compete with russia, that wants to get this pipeline to germany. tell me about those discussions, and what are the hurdles to being able to achieve lng exports to europe? >> well, first of all, there's a lot of receiving terminals for lng around the world so that's the good thing it's been very slow here in the u.s., getting those approved, under the former administration that took as much as seven years to get these facilities approved that shouldn't be. you know, same thing with crude oil. you want to export crude oil, fine, do it. we finally got that done, you know, a couple years ago but we ought to be doing the same thing with natural gas, and i understand that secretary perry wants to speed that process up, get where we can have enough facilities that we

can supply that need around the world. >> wti at 44 bucks that's a lot -- a lot of that is because u.s. drillers keep bringing on supply, they've managed to become even more profitable, and drop the cost per barrel, that they drill. what do you think about wti at 44 lower than where you thought it was going to be. >> it is oil would come close to $60 by year end, and we were knocking on the door. but you know, it -- we're in a period of adjustment let's look at what caused that what caused that was opec countries decide e ed to drown producers. that didn't happen they overproduced by 2 million barrels a day for two years. we've got a huge overhanging of inventory that has to be worked off. that's what caused this. it wasn't u.s. production. okay that was -- there was a piece of

it they saw what we could do here and it scared them so they decided to cut, and correct the market, but you know, we're in a period of adjustment they don't know how much to cut, and so it may take us a little bit until we get it right. but they need to correct this market, and they're trying to do that it's in their best interests, and -- >> but it doesn't sound like they're trying to do that. it sounds like they're trying to win market share at all costs and are willing to try to punish u.s. crude producers to try to push them out of business. it hasn't been successful to date what price for oil, you know you pointed out how great it is for consumer, but what price for wti becomes a problem for you when it comes to profitability? >> well, you know, the price, becky, is not sustainable, we know that, in the 40s. needs to be north of 50 for sure to be sustainable in the world but we're in a period of adjustment -- >> to be sustainable, i'm sorry, to make sure i understand that, to be sustainable for you making

profits. we've had people who have come in who said they wouldn't be surprised by seeing oil head down into the 30s. is that something you could see? and what would happen as a result >> well, you see a lot of speculation. first of all, everybody's cap-ex, the money that we have to spend on drilling, would be much less, and people would stop drilling so that would occur. so -- and like i say, we wouldn't have a sustainable price. supply would dry up and we'd be on the short side again. so, in a -- while this period of adjustment is going on, producers don't want to drill themselves in to oblivion. and back up, and be prudent, and use some discipline and that's what we're doing and there's other ceos i think that are probably doing the same thing. we don't talk about those things >> talk about them with the president today, okay? >> tell him i told you to. >> yes >> and enjoy the day good to have you here, harold hamm appreciate it. >> thank you

okay coming up when we return, at the top of the hour 8:00 a.m. hour, condoleezza rice is going to be our very special guest. "squawk box" is going to be right back in just a moment. time now for today's aflac trivia question -- are you ok? what happened? dad kinda walked into my swing. huh? don't you mean dad kind of ruined our hawaii fund? i thud go to the thothpital. there goes the airfair. i don't think health insurance will cover all... of that. buth my fathe! without that cash from - aflac! - we might have to choose between hawaii or your face. hawaii! what? haha...hawaii! you might have less coverage than you think. visit aflac.com and keep your lifestyle healthy. aflac!

guess they didn't get it fixed for the 200 year anniversary. let's find out what the markets are focusing on. scott nations of nations shares joins us from chicago. scott yesterday we did see the markets sell off after the news that the health care bill was going to be put off that vote. is that what you think affected things >> i think it was that i think it was also the news out of the ecb that they're finally looking to taper the problem is we heard the president of the ecb say that sort of thing before mr. draghi will be speaking on a panel in portugal today so you know he's going to be asked about that i think it was just an opportunity for people who had some profits to book those profits, particularly in the tech space i mean, the nasdaq 100 has been

above the 50-day moving average for 7.5 months it finally closed below that level yesterday for the first time in a long time. that would be an important level today that's 56.87 but i think that if you look today you see that the s&p futures are up a little bit. nasdaq futures are down a little bit. so, things are coming back in to line, but i think the tech is still going to have a tough time >> we have seen the treasury yields pick up pretty significantly. the 10-year at 2.24% that's significantly higher than where we were yesterday at this time you think that trade is temporary, as well >> i -- no i actually don't. i think that it's -- it's a conundrum beyond understanding and i use that word on purpose that 10-year rates are lower now than they were before the fed started raising short-term rates. and i don't think that the rates, long-term rates, can -- can be sustained at this level particularly if we do finally see some sort of tightening out of the ecb i think what we see in rates

here is simply the expression that growth is not going to be everything we might hope it would be we're going to get another look. a final look at first quarter gdp tomorrow we expect that to come in at a really tough 1.2%. so i think that explains why rates are where they are >> all right scott, thanks a lot. good to see you. >> thanks, becky okay coming up when we return, can pandora get its groove back? company's ceo stepping down and giving up his seat on the board. we're going to talk tech and the future of streaming services right after the break. then condoleezza rice is going to join us for a very special interview right here on "squawk box" at 8:00 a.m [vo] when it comes to investing,

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welcome back to "squawk box. want to take a look at all things tech. bring in ed lee, recode managing editor and cnbc contributor. lots going on in techland. >> lots going on >> should we start with pandora and streaming, google antitrust, talk some cloud. >> all kinds of stuff. exactly. >> pandora >> well ceo stepped down or is going to step down you know, it's always been challenge to business, rightst because ad supported nice that way. you can generate a lot more user base 80 million people using pandora but the economics of it are such that they're just losing a lot of money, they're paying out royalties. it's not like radio plays where it's like a tenth of the cost in terms of the royalties so, they're paying more to artists which is nice for them but they're just not getting the margins. >> why do they have to pay so

much more? >> it was a court ruling like decades ago that sort of hampered them from the get-go. right? so then they pivoted they're like, you know, there's spotify, there's apple music, people are willing to pay for music streaming so let's do that as well that's helped a little bit but music streaming is a commodity you don't need more than one they all have access to the same artists. >> we just had mr. m&a on rob kindler. >> of course >> is there any chance now that the ceo is out of the mix there's so much commotion around pandora that somebody swoopes in and says i'm going to take them out of their misery now? >> no, i think if you're a competing player, i think you just let them either die off or morph into something else. >> what's the pivot? what could they morph into >> well, so, you know, they do have connection to artists they do have a good, you know, fan base in terms of music lo lovers, period ticketing services getting people to buy into the next concert for so and so that they're no that's a good way to kind of either market or upsell people into that.

>> talking about twitter twitter is not a company, it's a product. around it's a product that needs to be part of something bigger so, could we say the same thing about some of these streaming companies like pandora, when tesla is starting about starting their own streaming business so maybe they don't get bought by somebody else to get bigger market share but they get bought to be part of the largers -- >> i think that's a fair analysis the thing about apple music it's not a way for apple to make money, it's really to keep people -- it's a sticky thing, right? get people sort of more, you know, make the iphone more essential to them. spotify, you know, it's a stand-alone service and they're growing nicely, but, you know, they're still losing money right? so maybe i think even for spotify despite them potentially going ipo either this year or next year if it's not part of a larger ecosystem or they don't do better on their royalty sort of economics, meaning that they don't want to pay as much as they do, they're going to have a hard time as well. >> eu fines google for $2.7 billion with a "b" >> yeah. >> what does it mean for google?

what does it mean for everybody else >> it means that google has to change how it operates at least in the eu, in europe specifically to do with what's called product listing ads they'll show a grit of stuff of different retailers with little pictures and they've been really great for google it's sort of they get higher margins on those types of ads and people click on them it just performance better eu is saying it's unfair, especially on phones, it crowds out all the other results so you are only seeing google the ones that are paid for, these are google ads and you don't see anything else and that's what they're saying they're going to have to change that they might revert back to how it used to look before they started listing ads in europe which will hurt google in terms of there are not going to be as many ads -- >> does it change the way american companies do business in europe in any way >> silicon valley has suggested that this is -- this has as much to do with money as it has to do with several political gains -- >> favoring home grown players >> yes >> so there's -- there is some element to that. it's hard not to see that.

but at the same time, you know, they want -- they want to access that market, they have to -- >> ed lee, thank you very much coming up when we return, re o"seea ces intoe hen quawk box. [ crickets chirping ] [ light music playing ] you've wished upon it all year, and now it's finally here. the mercedes-benz summer event is back,

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despicable me 3. rated pg. health care reform is stuck in the waiting room. the senate delays the obamacare replacement vote a rundown of the stocks to watch straight ahead geopolitical hot spots former secretary of state condoleezza rice talks global threats. the u.s. on the world stage and the trump agenda first on cnbc plus move over tesla gm pumps the gas on its own version of autopilot first look at the hands-free technology as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. good morning, welcome to -- -- excuse me, welcome back to "squawk box" right here on cnbc, we're live at the nasdaq marketsite in times square i'm andrew ross sorkin along with becky quick, michelle

caruso-cabrera is hanging out with us. joe is off today want to get a quick check on the futures right now. we do have some green arrows on the dow and the s&p. dow looks like it would open up 61 points higher s&p 500 up about 8.5 points. but the nasdaq, it was down close to about 18 points earlier, now off by about a point. a quick look at the 10-year. as we flip the board around show you what's going on there. 2.238 is the number. and if you want to look at energy right now, wti is trading at 44.14 >> let's get you caught up on some other headlines at this hour blue apron is slashing its poi range. this just happened a little bit earlier this morning it is now projecting a range of $10 to $11 a share down from $15 to $17 and brings the expected proceeds to about $293 million blue apron is expected to price its ipo after the closing bell today. nestle is planning to buy back nearly $21 billion worth of shares over the next three years after pressure from activist

shareholder third point. dan loeb's third point disclosed a 3.5 billion stake in nestle on sunday and began pushing for the company to boost performance and buy back shares. shares of nestle, if you want to check it out, up by about 1.5% and on the economic agenda today, we'll be getting pending home sales at 10:00 a.m. eastern time that measure of home sale contracts signed but not yet closed is expected to show a 0.8% increase. a new cyber attack is causing mass destruction around the world. sorry. >> go for it >> hitting companies and governments in europe especially hard the ransomware attack is similar to last month's wanna cry attack infected computers display a message that says the computer is tied up and the data will only be accessible if the user pays $300 in bitcoin among the targets, russian oil giant rosneft, ad giant wpp and american drugmaker merck and some stocks to watch this morning, general mills out with earnings, the food producer beat on the top and bottom

lines. results were helped by fewer promotions and controlling expenses also, take a look at halliburton in late stand talks to buy selmet esp it's an oil field equipment supplier that's backed by oklahoma billionaire george kaiser and american airlines testing new screening machines for carry-on bags. the machines have similar technology to ct scans can measure a bag's density and map it in 3-d. the new technology could one day allowpassengers to leave liquids and gels in their carry-ons. >> yay >> yes, that would be -- >> that would be a welcome -- >> huge improvement. >> welcome addition. in washington senate republicans are now hoping to get a vote on their health kier overhu bill after the july fourth recess that comes after yesterday's decision to postpone the vote amid disagreements among the gop senators senate majority leader mitch mcconnell says he will work on forging an agreement that will garner enough votes. the kpmg women's leadership

championship is taking place in illinois that's where we find deirdre bosa this morning. she's joining us right now with a very special guest deirdre, good morning. >> good morning, guys. that's right we are here it is a beautiful morning in chicago actually on the golf course, and i am joined by the 66th secretary of state, dr. condoleezza rice thank you for being here and by the way, guys, i also want to mention, you had a very good golf game yesterday >> yes, but remember, they put it on the green and then i putt it let's not get carried away >> fair enough so lots to talk about. i want to start with your book you just wrote a book and you were talking about the case for the importance of democracy and institution building around the world, organizations like nato now we're six months in to the trump presidency are those ideas at odds with the current administration >> i believe every president of the united states stands for our values and ultimately, presidents react to that way you heard president trump say, for instance, after the syrian

chemical attack, we can't let that stand what he was saying was, the president of the united states can't let that stand and so, while the language may be different, and we might talk about needing to deal with policy, i think you're going to see that the views that americans interests in values are always linked, will come around it's early days in this administration let's remember that. >> but you're optimistic you do see, sort of a shift is that what you're saying? >> no. i just think that when you're president of the united states, it's different than when you're a candidate. and i think we're going to see a president who understands the value of alliances, the value of the democratic alliances, and democracies are amazing. they don't attack their neighbors. they don't trade in soldiers they don't trade in human trafficking in the sex trade they don't -- they don't harbor terrorists and so, i think we'll see that people understand that democracy is not just a moral cause, it's a necessity in our world

>> now you brought up alliances, and organization building just this week president trump tweeting about russia's interference in the election, seeming to confirm the meddling. how do you rate the president's handling of the investigation. >> i think this investigation is still under way. and we will see what emerges i will say this, any interference in our elections by a hostile power i think we have to, in this case consider russia a hostile power, sadly, because we need a decent relationship with russia, but, any interference in our election has to be investigated, and not just investigated to see what happened but to see how it doesn't happen again. i would note that i heard the report on the cyber attacks around the world we have to protect ourselves better not only should it not be that countries are interfering in our elections, but we need to protect ourselves better we have the chinese apparently hacking in to the office of personnel management and so we have work to do on our

side, too, to make sure that these things can't happen. >> are you optimistic now that the right things are being done? that this investigation is going the right way? and that, you know, putin will not undermine -- >> i have a lot of confidence in bob mueller. i know him well. he was fbi director when i was national security adviser and secretary of state this is zwsomeone who will go to where the truth is and once we have that report i think we'll have more to act on. in the meantime, we need to go about the business of governing because that's really what the american people want >> okay. a question from back in new york >> hi, secretary rice. michelle caruso-cabrera here >> good morning. >> good to have you here one of the biggest threats out there is north korea any threat -- any regrets from when you were working for the president, and you were in office as secretary of state, that there could have been more done back then, more decisive measures that wouldn't have led to where we are now?

>> well, i don't know what more we could have done we tried to negotiate using the chinese, as everyone tries to do the chinese influence with the north koreans. i just remind that that was kim jong-il. that was kim jong-un's father. while kim jong-il was a dictator, and someone that we couldn't ultimately do a deal with, i think we have to worry that kim jong-un might be even more reckless than his father was. the program is now further along, and i do have regrets that we weren't able to stop it more forcefully. but the choices are not very good when it comes to north korea, and i think we're seeing that now i think the administration is doing the best that it can, sending warnings to north korea and to others that we will act because no president of the united states can allow a reckless dictator to get a nuclear weapon that is capable of reaching the united states. >> secretary rice, there was a piece in "the new york times" earlier this week, head lined,

where trump zigs, tillerson zags, putting him at odds with the white house. do you think that rex tillerson is at odds with the white house? and how do you think about the approach that he's taken in this role, which has been less public, less outspoken, than the role that you and others have taken previously >> every secretary of state sig finds his or her own way i have great confidence in rex tillerson. i know him well. he came to this work from his purchase of ceo and chairman of exxon mobil. the oilmen know the world in ways that others don't and i'm very confident in his leadership and i learned something when i was in washington, don't always believe everything that you read in the newspaper about the relationship between the president and the secretary of state. my understanding is that their relationship is actually very good and rex tillerson is working on some very hard problems. whether it is russia and ukraine or north korea, or syria

but, i have great confidence in him and his leadership >> secretary rice, are you in contact with the secretary of state? i know that you were one of the people who represented him for the job, actually. have you gotten a chance to talk with him -- >> the secretary -- right. yeah the secretary of state's role is a very small one and we all try to support each other, and when rex needs to talk, he can talk to me at any time. and of course i talk to him from time to time but, this is somebody who is experienced, who has a -- will have a very good team around him. indeed the entire national security team is a very good team and so, i have a lot of confidence, though the problems that they're dealing with are really quite challenging >> doctor, i also want to ask you about what's going on in syria right now. with the prospect of, you know, potential strikes once again is it taking some of the focus away from the fight against

isis how do you judge that situation? how does that turn out >> well, this has always been a circumstance of having to deal both with isis and what with bashar al assad is doing against his own people and this is a brutal dictatorship it's a dictatorship that has caused probably 7 million displaced people and so, i'm not surprised that the administration, through ambassador nikki haley and also through the president, sent a warning yesterday to bashar al assad about the use of chemical weapons. i think this is really an effort as to deterring him from doing it and, that would be a very good thing. because, there are too many civilians who are suffering. and it's just a terriblebly unstable situation sooner or later that war has got to end, and end as quickly as possible >> okay. i've got to ask you a question about tech because i know you're on the board of dropbox. the tech community where i live in san francisco has been facing some really hard questions about issues of sexual harassment,

sexism you know, talking about the fallout at uber and binary capital. are these systemic problems in tech >> well, they're problems that the companies have everyone has to guard against these issues i'm at a university. universities have had their challenges in this way, and so, anybody that finds sexual harassment or certainly anything more serious than that has to act and act quickly. i don't know if it's systemic. i rather doubt that it's systemic in the sense that it's pervading everything i think people generally want to do the right thing and my view is, do the right thing, treat people as you would like to be treated, and you won't have this problem. >> and how involved are you at dropbox in terms of what's your responsibility as member of the board? do you have a responsibility to look after these internal controls and corporate governance >> i'm a board member. and board members have a responsibility to deal with the entire company i feel very confident about the board that we have

and the work that we do. but one never knows exactly when you're going to get surprised. and so my job as a board member, with any of the companies that i'm with, is to try not to be surprised. i have a lot of confidence in our ceo, i have a lot of confidence in the other board members. that we're trying to do the right thing. and that's all you can do. you try to do the right thing. >> okay. dr. rice, thank you very much for being with us this morning >> thank you >> we'll let you get back to the golf course later today. >> right and back to the kpmg women's championship here. >> absolutely. >> i'm doing a future leaders program this morning with leaders -- women leaders from around the country kpmg has made a real commitment to try and make sure that women are progressing both in the board room, in the seats and also on the golf course. >> i was here last year. certainly it's always a great event. >> deirdre, thank you. secretary rice, thank you. still ahead on "squawk box," when we return, health care

stocks, they are surging despite the obamacare replacement bill slowdown. the sector, one of the best performers to date we're going to run down the stocks to watch, we'll do it next and ex-uber ceo travis kalanick has at least one supporter in silicon valley we'll tell you which tech heavyweight calls him a good leader the not so new podcast trend is driving a radio renaissance in the industry we'll guk to gimlet media's alex blumberg are you ok? what happened? dad kinda walked into my swing. huh? don't you mean dad kind of ruined our hawaii fund? i thud go to the thothpital. there goes the airfair.

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welcome back to "squawk box" everybody. take a look at the futures this morning. we have seen the futures pick up again off of their lows of the morning. in fact the nasdaq has even turned positive now. it's gone weaker through much of the morning. dow futures indicated up by about 55 points above fair value, s&p futures about 8

the euro this morning, as well, take a look right now and you're going to see that the dollar's up against the euro. 1.1305 dollar is down against the yen and the pound. >> time now for a dose of sectornomics the topic this morning, pretty timely, health care. some of the winners and losers >> that's right. health care has been one of the top performers in the s&p 500 year to date the sector is up 15% compared to the overall s&p up about 8%. in the second quarter, in fact, health care climbed more than 8% some bright spots. so far this year, vertex soaring about 75%. morningstar attributing the pop to positive data for their new cystic fibrosis drug align, 55% intuitive climbing 48% the introduction of the da vinci x system for robotics surgery

should be a good catalyst for hospitals to upgrade their current systems, and it's also a lower cost way to expand their robotics programs, and the losers, perrigo tumbling 10% after a failed hostile bid for myleene and the departure of its ceo. mallinckrodt down 10%. also express scripts down 6% as high drug prices weigh on pharmacy benefit managers. andrew back over to you. >> thank you for that. right now we want to bring in ana gupta, managing director and senior research analyst covering health care services for leering partners good morning >> good morning. >> what do you love? tell us what's working in your mind >> broadly speaking the health care sector is working as you know, with obamacare all of the subsectors had to give up a little bit managed care is huge, taxes,

pharma tax, even the hospitals had to get some budget cuts on servicing the uninsured so you're seeing the sector responding to that and then, potentially, after that, corporate tax reform and the services -- >> how are you handicapping what's happening in washington and how that's going to impact these stocks >> well, i think the space has moved up broadly speaking. you know, all of the managed care, and hospitals of late in the last two to three weeks have rallied on the potential of the senate bill. so, i do think the senate bill is going to go through -- >> you do? >> the hospitals uniformly hate it we had toby cosgrove from the cleveland clinic here today and the hospitals all say they hate this bill because there's going to be more uninsured people, they're not going to be paid why do you think it's good for the stock? consolidation? >> it's a fair point toby cosgrove is probably representing the cleveland clinic point of view and that's more broadly speaking. it's a not for profit publicly funded sector.

the names that are publicly traded, aca, tenet in particular, have not had exposure to state expansion of medicaid so that was a big piece. >> and the other part of it is this could put a lot of pressure on rural hospitals you could see hospitals go out of business, shut down, or at least to have less competition >> that's fair i mean, the rural hospitals could see some pressure there, too. i do think there's the survival of the fittist trade that's going on i upgraded ata and life point and all the stocks have been slowly moving up they also get a bit of a break, in that as i just said starting in 2018 they will get a reversal of those budget reductions that they saw >> what wouldn't you touch right now? >> i think the pbms are under pressure the pharmacy, benefits managers. you are beginning to see some value money stepping in, even in to express scripts, and cvs but

i think the fundamentals are really challenged and managed care is taking share from them names like anthem are recontracting with express scripts and expanding their margin >> meaning that they're kind of middlemen in this business >> yes >> and middlemen are going to get potentially washed out when -- >> middlemen limits a commoditized service i think managed care at this point we saw a lot of margin compression five, seven years ago and now i believe it's bipartisan support that they're adding value with whatever they're making >> you said you assumed the bill's going to pass >> why do you think that >> i think there will be a bit of a sell-off. when you kind of reposition back to the fundamentals. i think fundamental sectors like managed care will still be in a great place. you know, the pharma industry really depends -- they're innovators so it doesn't really fall that much on the senate bill but initially i do think you'll see a bit of a sell-off. one sector that might buck the

trend a little, piece of what i cover, santine, molina, they do have zero pressure from this bill because the medicaid cuts are -- >> why do you think the bill goes through just so i understand >> it's par for the course in my view you know, you saw with obamacare, it was always a bit of negotiation that happened the cbo score was okay 22 million new uninsured versus 23, you know, very controversial whetherit's really 22 to begin with the cms had come up with 13. the deficit reduction was $320 billion. so i think they have something close to $200 billion to negotiate and bring a couple of the moderates on board i really don't think they have a choice now i'm not a policy analyst but i would be surprised if they didn't finally make something go through. >> you know, the medicaid customers themselves are the result of the bulk of those 22 million. that's where you have somebody like a susan collins or some of the more moderate republicans, you know, the nevada senator

>> right, heller >> that's where you see a real pushback on some of these issues you think the bill goes through as expected. as you mentioned some of those stocks could be under pressure because of the medicaid cuts you already think that gets softened to bring some of them on board >> i think you can soften it to some degree but to a large extent the medicaid cuts are needed for corporate tax reform. that is where the interest lies. but they can soften it to a agree. there is also the individual mandate which is highly misunderstood and is unknown but cbo projects that there's a huge reduction in coverage because of the mandate, as well as medicaid. so that's somewhat, i think, questionable for the analysis. >> okay. thank you. >> thanks so much. >> appreciate. great to see you >> thank you >> more stocks to watch. u.p.s. plans to freeze pensions for about 70,000 non-union workers switching them to a 401(k) plan. the company trying to contain a retirement fund that has a nearly $10 billion deficit big dow chemical investors calling for changes to the company's merger with dupont "wall street journal" reports that glenview capital, they own

a 1% stake in dow, wants the companies to scrap plans to break into three separate units once the merger is complete. qualcomm has unveiled a new fingerprint sensor used to unlock smartphones the chipmaker says it adds a new layer of security, can be used underwater and from behind a thin pane of glass. >> hmm >> i guess if it's raining -- >> if your car goes into the water and you're under water behind the glass >> maybe >> that's so weird >> in the shower, who knows. >> in the meantime, target is testing a next-day home delivery service. target restock will be rivalling amazon's prime pantry. it's going to allow online shoppers to fill a box of up to 45 poupds for $9.99 a box. for now the service is only available to target red card holders who live in indianapolis >> so the same loyalty concept, and then you're more likely -- >> everybody's getting amazon. >> for sure.

>> everybody is getting amazoned >> still ahead, former narc governor george pataki is going to join us on set, including infrastructure, president trump, and now, he's taking on puerto rico's debt crisis as we head to break, take a look at u.s. equity futures the dow, the s&p, now look at the nasdaq, big turn in the nasdaq this morning. now open higher by 21 points that earlier looked like it was going to open lower by 17. stay tuned you're watching "squawk box" on cnbc

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good morning, welcome back to "squawk box" right here on cnbc we're live at the nasdaq marketsite in times square among the stories front and center at this hour, toshiba suing western digital for interfering in the sale of its chip unit. the two companies jointly operate toshiba's japanese chip plant. western digital has maintained that the unit can't be sold without its permission toshiba is intending to sell that unit to a consortium led by government backed investors. also a cross border deal in the news phillips buying specifictranetics. a maker of medical devices that treat heart diseases 38.50 per share is the price tag a 27% premium to its shareholders and more money will be collected for victims of bernard madoff's ponzi scheme. trustee irving madoff -- irving piccard, rather announcing a $371 million settlement with two groups of offshore funds that

invested in madoff and coming a day after an announced $23 million settlement with the estates of madoff's sons mark and andrew did you see the hbo -- >> no. >> no? >> was it good >> it was great. de niro, they're going to win emmys. >> richard dreyfuss -- >> that was the abc version that we replayed. >> that's what i thought >> got it. >> volatility in the euro we want to tell you about show you what's going on with the chart. so yesterday, based on what mario draghi said we saw the euro rise and this morning go to 1.1 376 at one point now it's coming down because there are reports that the ecb panicked ecb already panicking, the market overreacted to everything he said yesterday when it comes to perhaps when the market thought maybe he's going to ease up on quantitative easing. and so now we're seeing a little bit of a turnaround there. >> okay. and this one's interesting former yahoo! ceo marissa mayer giving travis kalanick somewhat of a pass on uber's workplace

culture. travis kalanick recently resigned of ceo of the ride hailing company after months of scandals and controversy speaking at stanford mayer said i think he's a phenomenal leader i just don't think he knew when your company scales that quickly it's hard. she also compared uber's situation to the early days of google when it first brought in eric schmidt as ceo. she's very interesting because historically, if you ever ask her about gender issues, she said she's like gender agnostic, she doesn't care about that stuff, she doesn't look at it, she's not about empowering women, she just looks at it in a different way. >> she's also somebody who has been scrutinized pretty closely and been under that glare and understood when things might be in your control, and when you feel like you're getting not a fair shake >> i appreciate her not saying all the things she's supposed to say. oh, we cannot tolerate this behavior -- >> i should say the true cynics, the true cynics have suggested,

and she's been sort of mentioned about, i don't know if she'd ever get it, but she might want the job to run uber. >> by the way, travis is still on the board there, and still controls a big stake >> for what it's worth >> i'm not surprised that she didn't weigh in and take a harsh view >> michelle? >> yeah. >> apple music rolling out a new play list to show how much it knows you. the play list is called chill. it will cure eight congresses based on algorithmic interpretations of your musical taste. showing songs you may or may not know an updated chill list will be delivered to users who opt in every week >> a not so new media money maker podcast. expected to bring in $22 million in advertisements and about 90 million u.s. adults listen to podcasts joining us to talk about it is the co-founder and ceo of gimlet

media. great to see you >> great to see you. >> okay, so, it's growing like a weed >> yes >> your business is growing like a weed >> it is >> the podcast business. but can i say i'm a little worried -- >> you're a skeptic? >> i'm not a skeptic i'm wondering whether there can be a saturation point because there's so many podcasts i don't even know what to listen to. >> so obviously i'm talking about it in my view but my view is we're far away from peak podcasts we're at the very insection of this industry and it's got a long way to go >> i can see lots more money going into this industry my question is whether at some point people are going to start listening to these things in their cars more than they already today. >> yes >> that's maybe opportunity. the question is whether there will be consolidation of the podcasts themselves. you go onto itunes right now and it's just, i mean the list is -- you're -- >> yeah. >> people think there's too many cable channels right now >> right >> there's too many podcasts there's not enough time to watch or listen to this stuff.

>> podcast fit in the same challenges as every media, which is an abundance of choice, how do you differentiate yourself within that choice but i don't see that challenge as any different than cable or -- >> what's the issue? the cost is so low to create a new podcast the barrier to entry? >> yeah. i think the media is in its infancy. people don't say you watch video. they say which shows do you watch on tv. people still say do you listen to podcasts as if they're all the same as if somebody doing a chat show from their basement -- >> that's probably because there isn't an adoption. there is that barrier to entry you've got to figure out how to do this. and once you figure it out then you are a cable subscriber or whatever you might call them >> and people will start to understand that within podcasting there's huge variations of what kind of podcast there is and -- >> how many people are listening to pods? like if we say there are 310 million cable subscribers in the u.s. how many podcast listeners are there? >> over 60 million people are listening to podcasts right now. that number has been growing, you know, every year

>> are people paying i see here that you're working on a podcast style sitcom, fiction, one that may star julia roberts. how do you afford julia roberts? does she do you at a discount or are you making so much money that you can pay a big star like julia roberts -- >> so right now most people think of podcast and think of like, you know, two dudes in a room talking about tech or something like that. and so what we're doing is a completely different thing we're doing sort of like, we're doing the game of thrones. >> you're doing high production. >> and one of the things that we're doing is fiction fiction is a huge -- it's a huge opportunity for u.s. we launched a fiction show called homecoming. it's a fiction podcast starring kathericatherine keener and oscc and that was optioned. >> people pay for that >> and it is now being made into a tv series. >> people paid -- >> so we sold the ip and that -- >> but you're not making money because somebody paid you to download it. you're not making -- >> it's an ad --

>> okay so that's the question as we move into higher end, higher production sort of style podcast, can the ad rates that currently exist, in the same way that there's been compression on ad rates on the internet if you will and on television, what's happened to the ad rate -- >> the ad rate is still going very strong. we get really high cpms and that is because ads perform on podcasting listen so on mobile, the -- our audience is highly educated, and they are cord cutters, they're the unreachables podcasting is one of the ways to reach them if you're an advertiser trying to reach somebody on mobile, that's where everything is moving, there's not that many options. but when you're listening to podcast it's in the middle of the thing, it's embedded so they perform. >> we often talk about the success of amazon in so many different issues they own audible which has been very successful turning books into tape and that but they've been trying to do podcasts and i don't think they've had the same success do you know why? >> i don't want to -- i mean --

i love dan cass who runs audible. >> audible's got an amazing business and they do a great job. they're discovering, i mean the hard part is it's hard to make successful media >> right >> and so it takes development, and so that's where they're -- >> and the last question is, is apple your friend or your enemy or your frenemy in terms of how this -- how all these things get promoted because that's the whole ball game here for getting this subscription >> apple right now is the gate keeper >> and so apple is absolutely -- so they have created the entire industry it wouldn't exist without apple. they put the apps on the phone, that led to huge adoption. now they've just opened up analytics. we were sort of in the dark compared to other media industries now we're saying are people listening to the app so i would say they are friend >> and when and if do you think it becomes a subscription based business >> we're looking into that there are people who are doing that

i think there is -- i think there's absolutely room for a premium subscription layer in podcasting >> alex, thank you great to see you really appreciate this coming up when we return, former new york governor george pataki is going to join us on the set a lot to talk to him about including infrastructure, president trump how he's taking on puerto rico's health care -- puerto rico's debt crisis, ratherani nt t, d wao talk to him about new york city subways by the way

there is key news in the puerto rico debt saga this week

and someone who has gotten involved is george pataki, former governor of new york, good to have you here. >> good being with you >> for those who aren't familiar with what's been happening in puerto rico. puerto rico has a lot of debt, and not enough money to pay those debts. and now everybody's fighting over the little cash pile, and let me guess you think the bond holders aren't getting enough of that cash pile >> i can't believe that you have figured that out all by yourself michelle actually the financial situation is not as bad in puerto rico as it looks to the outside world. what we found in the last few months, their cash position is like $2 billion better than they expected this was supposed to be a time of austerity they're budget we believe increases spending by more than a half billion dollars revenues are coming in in the neighborhood of a quarter of a billion more than projected. and yet, the government has filed for bankruptcy, and i think in large part, it's because there's this washington appointed oversight board that has got its heavy hand dictating everything, and in my view,

violating the law and the constitution >> previous government, you could argue, did all of the same things, right? i mean they all spent money like crazy -- >> but they did it without the control board's oversight. and that's one of the biggest problems we have we believe the money to pay the geodebt is there but we believe that the control board that obama appointed before he left office is preventing serious negotiations that could result -- >> can president trump change the -- >> he can. president trump could remove that board congress can remove that board we don't think they're following the law that they were appointed under. we don't think they're following the constitution of puerto rico. and we think that bankruptcy could have been avoided. >> are you making any headway because i can see politically why a board appointed by president obama would generally be less favorable to a bond holder look at what happened with the car industry >> right >> and then one appointed by a more conservative government would be more friendly to bond holders. is that going to happen? >> we want to simply a board that follows the law the law that was created said

you have to respect priorities, including constitutional priorities, the gee yae-debt has a constitutional first lien on all revenues in puerto rico. they have to encourage negotiations the geo-bond -- >> general obligation bond >> we're this close to the commonwealth and the board pulled the plug on the negotiations and just last night they had a deal the commonwealth with the power authority bond holders, and the board voted 4-3 to reject that and force the power authority into bankruptcy. >> i mean i think this is important on a broader scale when you consider the state of illinois >> right >> which may be in junk territory very soon. when you consider a lot of states including new jersey -- >> and the virgin ierslands >> and i guess the question is do you follow the rule of law or not. >> becky, i think that's exactly right. do we follow the rule of law do we respect constitutional priorities do we understand that access to capital markets is critical and

once you file for bankruptcy and stiff the go bond holders, puerto rico is not going to have access to capital markets. because this is a precedent for other governments either on or on the verge of or near bankruptcy and you have to -- you're not going to buy government bonds. >> it's not just government bonds from puerto rico it's a much broader scale. can municipalities, can states raise funds. >> can they raise funds when you are loaning based on the law, based on the constitution, and all of a sudden, the government just says well never mind. >> you're going to get to the subway >> no, we don't have to do sunways. >> it's very important he used to the governor and there's an issue how much control does the governor have about the quality of the new york city subway stations which are awful, and making front page news every day for failures >> the subways are a disaster. >> yep tell me something i don't are know >> i was reading like 63% on time and when they're not on time too often you're stuck for hours in a tunnel.

the mta is an authority where the governor has a majority of appointees so ultimately accountability lies with the governor >> governor rick scott has been on complaining about the fact that he has -- >> the new york subways? >> no. he's talking so much about -- >> i didn't know he rode them. >> i looked at the numbers new york state spends double per medicaid recipient compared to florida. do you have any idea why that is why are we spending $9,000 per medicaid recipient and he's only spending $4,000. >> part of it is that we did medicaid expansion before they passed obamacare >> but that wasn't on a per. that wasn't on a per, right? i'm talking per person >> it depends. you have a sicker population you know our healthy people move to florida when they get old the sick ones stay here. taxes are lower. because we have better medical care and we have teaching hospitals. our medicaid expenses are too high there's no question about that but they're not going to be the same as florida, because the cost of living, the quality of health care, the teaching

hospitals, all place additional demands. >> they've got a lot more older people in florida. older people move to florida -- >> when they're healthy. then they come back to go to health care here i'm defending new york >> another question on this point, part of the tax overhaul that the markets are watching so closely, a big part of that, at least from everything you read at this point, is they're very seriously considering getting rid of this ability to get your federal -- get your state and local taxes rebated on your federal taxes. >> yeah. >> if that happens that would be a huge hit to states like new york, connecticut -- >> california. >> new jersey. is it fair, is it not? >> i'll tell you, every time when i was governor, and i was fighting against the legislature trying to raise taxes, or trying to get a tax cut it was always thrown in my face, oh, washington's going to pail for half of it anyway. and i don't think that's right so, i want to defend new york but on the other hand, i think it has allowed states like new york to raise taxes much higher than they should be, and pretend that it's because washington is

paying for part of it. so philosophically i have to agree that they should eliminate state and local taxes. >> then follow my fill offically on these intricacies of tax reform and tax planning. i'm a new jersey resident, i work in new york new york makes me pay taxes. i don't get to vote. to me that taxation without representation is that fair >> i think it is fair -- if you're from new jersey and you want to live in new jersey -- >> i do live in new jersey >> but you work here -- >> why don't i get to vote here? you take my taxes. >> because you live there. >> -- doesn't get -- >> because you live there. if you're a democrat you'd vote in both places >> oh! >> oh! >> but this is the kind of crazy law that you get into, where we are propping up new york city without all the people who don't work here and don't live here new york city wouldn't be able to run you could make the same argument as new york state as a larger -- >> i don't see cnbc, nasdaq, moving to new jersey so that you can vote for the governor of new jersey >> no, i --

>> i think it's perfectly fair that when you work here, benefit from all the services from police and fire and everything else, that you pay taxes here, but you don't live here, so you can't vote here. i think that's reasonable. i am for removal of the state and local tax, i think that is something that has allowed high tax states to just -- by washington high tax, high income states but we're not going to allow people from new jersey to vote here i'm sorry about that >> governor we don't always agree on a lot of things >> yes we do >> but this one i agree on with you. i'm with you we do. we do. >> good to have you here >> she's got to pay the taxes. >> absolutely. >> she's working right here. >> new jersey should get some of my taxes, too. >> and they do >> i don't know. see you later, governor. >> thank you, governor >> good to be on >> it was great too see you. >> when we come back, hands free on the highway general motorss tt igeing into

tesla's lane with its own version of autopilot

welcome to holiday inn! ♪ ♪ whether for big meetings or little getaways, there are always smiles ahead at holiday inn. the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc.

general motors is launching a new cadillac ct-6 and we have

the exclusive first look wow, that is something that's going to catch people's attention, phil. >> it's in the fall going to be offering super cruise which is this company's first attempt really at saying hands free driving. let me show you the difference maker in this vehicle. it's a small camera right on top of the steering wheel right here why does that make a difference? we had a chance yesterday to try it out and we were on the highway just north what stands out here is that that camera which is made by a company monitors your eyes as the driver so if you look away for too long, if you fall asleep behind the wheel it will alert you that you need to take control of the vehicle. otherwise you can do hands free driving as well as you're on the highway. it's only for highway driving. you never have to touch the

steering wheel as long as you're paying attention when you're behind the wheel a big question a lot of people have is is it a game changer is this the technology that people will say cadillac has that they have a chance to watch me as i'm driving so i can make sure that i'm paying attention and will it make people say it's super cruise not auto pilot changing the way people drive. >> this is definitely a shot across the at tesla that already has auto pilot cadillac is trying to take tesla on in that category of technology. >> as you take a look at shares of general motors they have been stuck in the mid $30 range it will be interesting to see if this is one of the types of technologies that is a game changer. later on this morning we'll go behind the wheel live on squawk on the street with the head of cadillac he'll be driving hands free with

us and we'll have a chance to show you as we did yesterday what super cruise is all about it's a very cool technology guys and the fact that the driver is being monitored to a certain extent and is being watched by a vehicle that adds a level of safety we haven't seen with other systems introduced by other auto makers. >> real quick, how many seconds can you look down for or look away from before it alerts you. >> good question andrew it's speed based. so in other words, it is much longer if you are in 5 miles per hour bumper to bumper traffic on the eisenhower expressway outside of chicago, you can look down much longer because the vehicle will say you're going 5 miles per hour if you're going 75 miles per hour on a highway it's maybe 4, 4.5 seconds. >> what happens if you don't. >> if you don't first it alerts you then it really alerts you

that you have to take control and then the caution flashers come on and it will eventually take control and bring them to a halt. >> une, das p ors. p xttoy'tostie at johnson's we care about safety as much as you do.tostie that's why we meet or exceed 15 global regulations for baby products. and where standards differ, we always go with the toughest. johnson's. if you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go? ♪ expedia. the power of a low volatility investing approach.

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doing a good job recognizing animals on roadways with one notable exception. in an interview kangaroos present a unique challenge for self-driving cars since kangaroos are like no other large animal and they don't take steps but they jump from spot to spot to the sensors a kangaroo in the air appears far away and then lands and looks closer the cars have a hard time determining how far away the animal is because the shape and position of its body is changing so rapidly it may not sound like a deal to most of the world but 80% of the animal collisions in australia involve kangaroos. things you never thought of. canada is celebrating it's 150th birthday this year but instead of fireworks or sparkling the country is bringing a light show to its money they're rolling out a new glow

in the dark coin the $2 tonnie is the first of its kind entered into circulation. i want one. >> cool. that's cool. >> okay. michelle, thanks for hanging out. >> see you tomorrow. >> we'll see you tomorrow. make sure you join us tomorrow squawk on the street begins right now. >> good wednesday morning. welcome to squawk on the street. mike santolli at post nine stocks looking to recover some of yesterday's spill as we watch fall out from the senate health care vote delay. results after the bell tonight euro dips on headlines the ecb saw the market as misinterrupting draghi's speech on tuesday goldman turning bearish on health care were cal