"squawk box" begins right now. live from new york where business never sleeps, this is "squawk box." good morning welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. i'm melissa lee along with joe kernen, becky and andrew ross sorkin are off a check of u.s. equity futures and how we're poised to open this first full session of the week nasdaq lodown about 24 points s&p down about 1, dow jones up about 13 we have a mixed bag in europe. the dax and cac up marginally, the ftse, italy and spain down

by a fraction of a percent crude oil, this is the one we've been watching very, very closely. we have wti down by 1.6% brent it down by 1.5%. this is quite a rebound from the lows back in june. we are up by 12% from june 21st lows so staggering move in just a short amount of time weird. weird to see the dow so strong and the nasdaq so weak that's been happening more the nasdaq had been stronger on a relative basis -- >> then the rotation happened. >> i don't know what it means. maybe it's healthy this is scary and not healthy. maybe the meeting is good, but the reason for it frightening. the u.s. requesting an emergency u.n. security council meeting today after north korea tested an intercontinental ballistic missile. the missile could put all of

alaska, so mainland -- i don't know if you call that mainland, but pretty close late yesterday the u.s. military said u.s. and south korean troops fired missiles into the waters off south korea in a show of force back that way apparently it can reenter the atmosphere and maintain the integrity of the nuclear tip device that's there. they succeeded this was like another major milestone for what they are able to do. also looking at the way they showed exactly how this fired -- it went for 40 minutes >> right >> 37. >> it went up and down like this but if they -- if you put it out and put the apex here, it could reach anchorage. now we are within -- >> within range. >> i'm afraid to call him a madman he's so insane. but there's a guy who has

potentially -- he could press a button are we -- the markets at new highs every day, are we living in some type of denial >> the geopolitical risks are those things that we know are always there, and they don't matter until they do the question is is this the thing? is this the change that suddenly makes it something more real to the markets? we have seen these events tip equities, tip the economy before in 19990, '91, with the gulf war, at the time alan greenspan was warning of a possible recession. that event hurt confidence and the economy enough has it did contribute to a recession and the downturn in equities this is something we have to watch incredibly carefully while the economy today is not vulnerable, it is not growing so strongly that there's no risk. to your point on valuations, the equity market is not crowded but the valuations are high this could lead to some profit

taking it is scary. >> it seems -- this just seems different. >> it's not easy to resolve either >> with putin, you have a guy maybe he's evil, kgb, but he's not going to do something -- who knows. it almost seems different when you talk about north korea we had evelyn farkas on on monday, she still thought russia was the biggest threat trump is going over to see putin. they can talk about north korea almost as being aligned against what could be really destabilizing globally with north korea. i don't know whether russia is our biggest threat >> right a military response to north korea is so difficult because it almost guarantees that you have a lot of casualties in south korea. >> 35 miles away >> exactly >> japan, our ally >> right >> south korea is going to be hit if this escalates.

china prefers not to have akz send t south korea and the u.s. aligned. >> well, we have a jobs report that's what we do. >> that's going to be a market mover. >> what about wage gains that's why it is all surreal sitting watching great fireworks yesterday. and the entire community is there at the high school flags, and great music we cherish this. and i don't know if we can just take it for granted that it's always going to be as easy that's what i -- i didn't sleep well the eu approved italy's $6 billion state bailout of banca monte dei paschi this comes after bmps -- that's what i will call it from now on, agreed to a

major overall including transferring bad loans and capping pay for senior managers. volvo says that every model from 2019 onward also have an electric motor this will make it the first traditional automaker to stop making vehicles powered solely by an internal combustion engine i was kidding, they have a couple cars that are not that ugly i was like -- they talk about the old volvos they used to look when they were saf safe >> those boxy scare vol yy squa- >> i still don't like them >> but the safety. >> there's a lot of safeguards, i don't know if on the tests whether they outperform. there's been strides made. >> a lot of car companies, yes >> a lot of car companies are

safe you don't need to drive a boxy swedish whatever it is >> it's another competitor for tesla on top of jaguar, mercedes and audi which all have cars -- >> why can't bmw -- bmw and mercedes figure it out that is what scares me about the tesla thesis if you have the good german automakers and others -- even ford and gm, why can't -- how do we know that they're going to own that electric car market forever? >> we don't know that. >> the stock says they are. >> they have a first mover advantage. >> and they got elon musk. >> on the space company, watching those takeoffs and landings, whether r whatevateve him, it's extraordinary to think we can reuse space equipment for the first time in history. >> andrew is not here.

he can't stop me i look at elon musk's hair and think this guy -- if you look -- he was bald. you look at him now, so he can do anything. >> true genius reflected in a man's quaff. >> he was basically bald and now has a full head of hair. >> that's the business >> you like the reusable rockets. >> you like the hair >> a lot of people can do that to regenerate and have a full head of hair after being bald, that speaks to me. >> a backup plan, huh? >> yeah. >> i think i made it this far if it happens now, it's -- >> you will go with it >> i do go with it >> it's very full. >> little combover >> lush, joe >> now to today's top political stories. president-elect trump will leave for poland this morning for his second foreign trip since taking office kayla tausche joins us now with a look at the agenda

where is eamon is he stuck in ireland did you see his tweets >> i don't have the full background on what the delay was. he is on his way to hamburg, which is where the g20 meeting will be taking place later this week, joe. the president leaving this morning for that second foreign trip he'll arrive in poland this afternoon. he's expected to make a speech to affirm the u.s.'s commitment to nato and allies followed by that g 0 meeting in germany where he will meet with russian president vladimir putin that's the first time this bilateralist is taking place since the election that was the highly anticipated event of the meeting but now the focus is turned to north korea north korea after pyongyang launched that intercontinental ballistic missile shown here according to north korean state tv the country says it could carry a nuclear warhead and it could reach the u.s. that emergency u.n. security council meeting, that will take place later today after the u.s.

and south korea conducted a joint missile launch in response to show the precision of those allies in being able to potentially launch a military strike now, president trump is expected to take up this issue with president xi of china at the g20. he criticized the efficacy of china's efforts to thwart north korea's ambitions and said perhaps a heavy move was needed from beijing now in response the president did not mention the issue tuesday night at a white house event for military families but he acknowledged that the u.s. faces challenges >> i will always have your back. i will always under all circumstances. our country is doing really, really well. no matter where you look, the economy is blazing on every front we're doing well. we do have challenges, but we will handle those challenges

>> he's tweeted eventually about wanting gas prices to be lower, about job creation under his administration, about the stock market hitting spintraday recors a week ago you might say the challenges that face the u.s. are on a legislative front, but these geopolitical issues crop back up and quickly usurping any other discussion point >> that's our discussion this morning. you can't -- i don't know whether you call them black swans or what. it's leak the end of the world, if you're in cash, it doesn't matter maybe gold it's hard to prepare for the end of the world it can only happen once, right? >> i haven't confirmed that, but it sounds right. >> if you were a worry wart you would start worrying at this point. but i don't know if you worry about the overall economy if

nothing does happen. all these legislative things look like gravy. deraeg la deregulation, europe coming back the bo a lot of things are happening. i don't know if the market has the pro growth policies factored in i think they could go further if they get it done i think right now it may be gravy. >> specifically with regard to the events unfolding in the korean peninsula there's some attention paid today to the fact that asian markets are largely sa sanguine on the back of what happened but there's activity in the options market where you might sensevestors are trying to prepare portfolios for a black swan event or something unpredictable to happen. here in the u.s., the fundamentals still appear good

that's what we keep hearing about growth, corporate earnings, and about some of these agenda items happening behind the scenes. there's still a lot of confidence baked in that washington can get some of these legislative proposals become behind the finish line there's a lot to get done. the clock is ticking, but for now bigger issues are at the front of table >> kayla, we will see you soon hope you had a good 4th. >> same to you >> did you see any fireworks >> i did the fireworks in washington are pretty spectacular on the mall, with the monument in the back. it's a special view. exciting to see that for the first time >> they play some music? >> a little bit of music beach boys, four tops, yeah. great lineup >> have you heard this -- this insufferable katy perry song "i

am a fire work" or something i didn't know who it was she was screaming. all the kids are singing the lyrics i'm like what is this? >> she says you're a fire work >> whatever. >> you're a firework >> god, it's just -- i can't believe what passes for -- the louder she sings, the better the song is supposed to be i'm getting old. thank you. i sound like -- i sound like the people that used to talk about the beatles when i was young these long-haired kids >> back in my day music was -- >> you're the muppet guy in the balcony, joe >> i am. >> tho that was a real snort. not a sound effect >> it was. i need some diversions from worrying about the end of the world. let's get back to the broader markets, joining us is mark chaiken and rebecca batterspate our guest host mark, you feel markets are in

good shape t i guess it would take something unexpected to derail things? >> i do. thanks for having me on. i think the transition from a fed-driven bull market to an earnings-driven bull market will continue in the second half. the second quarter earnings due to start coming out next week will be very positive. we've got some events in the financial sector which i think will help mitigate the weakness in tech that we saw last week. >> the jobs market, is it strong, full employment? where are the wage gains are those coming will that give it another leg up is it still not what it appears to be in terms of people working a couple part-time jobs, the participation rate not baby boomers but people who could still work is that still high

>> even though the numbers are coming from the government which always make them suspect, i'm a big believer in what we've been seeing in the unemployment numbers and rising wages and the jobs report. i think this is healthy. it shows the economy is growing. the labor market is tightening this is good and suggests we have a strong economy that we can count on in the second half. >> mark, good morning. so you have this amazing background with your company in terms of looking at dashboards, indicators to help you figure out your view on the market and specific companies and sectors is there one or two indicators you're looking at now for the rest of the year that if they don't work out as planned you change your view you're fairly constructive on cyclicals going into the second half of the year what would make you change your mind is it the yield curve? technically driven inflation? what are you focussed on the most >> rebecca, i think the yield curve is an interesting place to

start. it flattened out over the last four weeks that spooked everybody the reality is that a flat yield curve that doesn't invert is bullish for the stock market going forward. we saw the beginnings of that last week as interest rates started to move up what would spook me is if second quarter earnings disappoint analyst estimates. we had a string of not just earnings surprises but sales surprises. that's a key factor in our multi factor quantitative model. i would be looking closely at both how companies report relative to wall street estimates and also guidance going forward. you know, you have a lot of companies that are benefitting from a weak dollar you saw the beginnings of that with nike's report on thursday where their international business carried the company to better than expected earnings. i'm watching analysts estimates. the trend of estimates, they typically key off earnings

surprises. that's why i'm so optimistic on the market with a target of 1505 to 1600 for the balance of 2017. >> disruptive things happen. i think about retail the world is changing so quickly or media looking at that disney story. god. kids are doing -- do you see it, they measure ratings for 2-year-olds to 34-year-olds. how do you measure -- i'm trying to figure it out what i can do to big bird -- how do we try to -- >> costumes. that's the answer. >> going after that demo i keep referencing back watching these fireworks. there were some kids, the fireworks are going on, i'm like what is that light i look, a kid was on his iriphoe with his fireworks i was almost going to grab the iphone and throw it. what are you looking at on your iphone while the fire works are

going off? will you be in the moment just for a second sorry, mark. thank you. thank you. you know what i mean it's disruptive. things are different i don't like it. >> change is hard. >> change is difficult >> go ahead. >> if you look at consumer discretionary, a diverse sector, you can see you have retail and amaz amazon, electronic arts and activision blizzard are doing well kids are buying, and you see that in the video game stocks. >> the money is still -- it's not a completely zero sum game, you lose one place and it's going somewhere else i understand that. it's tough if you thought disney would be the greatest company in the world forever. you read about espn. those are the two pillars, the espn and the kids stuff, that's where the problems are it's scary >> comcast has been the model

for how to die vefversifdiversi. they've done a good job of combining cable with content >> are you available every day you're coming back, my friend. that was the most compelling thing you've said and the most accurate mark, that's our parent, you know that. >> i do, joe i hope you remember we've been doing this for 25 years, you and i. i hope i will be back. >> you will now. you will now, my friend. you're with us until 8:00. it's a two-hour sentence you got today. you made someone mad china's central bank says the country's shadow banking sector lacks regulation. the pboc is promising to increase supervision and ensure the economy has no systemic financial risks. eunice yoon joins us now >> here in asia, everybody in

the financial world tends to go to shanghai or tokyo or hong kong to make their money but we spoke to one ceo raking in the profits on the farms. >> reporter: far from his posh beijing office, roger ying is meeting some of his best clients. >> we love coming down here. it's always a treat. >> reporter: the stanford grad from south africa founded a peer to peer lending company called pa flshgs ashp pandai the p to p industry in china has run into financial trouble to survive ying lends almost solely to people on the farms. >> when i look at the china economy, 1.3 billion people. 300 million to 400 million have already been enriched. there's 900 million other farmers who have been left behind by the mainstream financial system we see the demand for farmers. >> reporter: in this village in southwest china, fu used to be a coal miner after getting injured, he wanted

to try pig farming but didn't have the money in the countryside it's hard to get money, he says even if i were to get a loan from the bank, it would be too small to start the business. then the local village chief introduced him to pandai who approved a loan of more than $11,000. rather than hand over cash, the company bought the pigs and feed in one year, fu expects to earn a profit of $14,500 after paying back the loan plus the 15.5% interest this kind of lending may sound risky, lending to people on the farms who don't have much experience with modern finance in fact, pandai says their recovery rate is 98.5% and in a country where companies may or may not pay their deb back, these farmers are a good bet. >> the farmers, we find them to be honest, reliable and basic people they are just looking to improve their own lives out of poverty

>> reporter: good for a economy in need of consumers for future growth this may seem like small-time finance, but there's a larger point for china. as the economy continues to slow down, policymakers need to find new sources of growth. it makes it that much more critical for china to bring those hundreds of millions of people into the modern financial system and get them access to capital so they can invest in businesses, improve incomes, and eventually become a larger part of the overall economy guys >> eunice, thank you live from beijing. if you see any of the leaders over there, can you just ask them to try to help here a little bit with north korea. just, you know, just -- >> yeah, you were talking about fireworks, the katy perry song i was listening to that last night. >> oh. >> we were worried about a different type of fire work involving north korea.

>> oh, my god. ♪ oh, my god is this it there's like a -- >> yeah. >> there's another song i didn't like either. i said who is this it's miley cyrus >> to your point, china did have a response today they were calling for calm and restraint on the korean peninsula and also asked north korea to remember to abide by the u.n. resolutions so what china is doing is that they're trying to put forth their own proposal they're saying the north koreans need to hold a moratorium on nuclear activities as well as missile activity the u.s. and south korea into suspend their military drills. from the u.s. and south korean perspective, they're not buying because they say they are legally allowed to do these military exercises, and that it's a false equivalency for the chinese to say you need to do both they're saying the u.n. resolutions are being breached by north korea north korea has long said it gets scared by all of these u.s.

activities around the korean peninsula, and that that is a threat and a reason why they want to have nuclear weapons it's a real difficult call but the u.s. is already arguing that -- and south korea are saying they need to have these military drills. and today we saw more military drills because of the concerns over the icbms >> that is complicated eunice, thank you. appreciate it. had to play that -- >> hopefully they play it for the next two hours coming up, tech was the best performing sector -- had that tiger song ♪ you want to give them a play list of things that annoy you? >> just screams. >> wow we'll look at tech the best performing sector of the first half can the run continue that debate is next. stay tuned you're watching "squawk box" on cnbc ♪

so that's the idea. what do you think? hate to play devil's advocate but... i kind of feel like it's a game changer. i wouldn't go that far. are you there? he's probably on mute. yeah... gary won't like it. why? because he's gary. (phone ringing) what? keep going! yeah... (laughs) (voice on phone) it's not millennial enough. there are a lot of ways to say no. thank you so much. thank you! so we're doing it. yes! start saying yes to your company's best ideas. let us help with money and know-how, so you can get business done. american express open. so you can get business done. what in real time?stomer insights from the data wait, our data center and our clouds can't connect? michael, can we get this data to...? look at me...look at me... look at me... you used to be the "yes" guy. what happened to that guy? legacy technology can handcuff any company. but "yes" is here. so, you're saying we can cut delivery time? yeah.

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yogig-speed internet.me? you know what's not awesome? when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids. and these guys. him. ah. oh hello- that lady. these houses! yes, yes and yes. and don't forget about them. uh huh. sure. still yes! you can get it too. welcome to the party. introducing gig-speed internet from xfinity. finally, gig for your neighborhood too. second half is underway. we have james chacmach before we dell ve into the name you're looking at. are you concerned this will bring down good stocks with the

bad stocks because technology is out of favor now >> i think you can argue it's out of favor, but the fundamentals still are there you look at where it was prior to peak levels, it's still relatively under indexed the margins are there. we have only seen slight expansion in the multiple, estimates have risen you can make the case. but i think you have to think that we're entering a new paradigm of what it means to be a tech company and a big tech company. we're looking at antitrust issues the ftc's role as the companies look to merge. there will be a re-evaluation of the risks. >> are you saying that we have not factored in these risks sup such address ts the antitrust r? >> i don't think so.

if you focus in the old world paradigm, you can make a case that the 16% rise is just the beginning. what we saw in the first half and we can continue in the second half. at the same time the eu is taking a forceful move we have no idea what the u.s. response will be as the companies get bigger, yes, if the experiences are getting better for the customer, is that a good thing for the economy? we don't know how the administration will be responding to that question. i think the mega cap stocks driving this growth and the tech sector, you can name them one by one. we don't know, you know, what too big is going to potentially mean as we look forward. if size and regulation is a threat, at least near-term for some of these stocks, if not all of it, where in that broader space would you be looking are there pockets you think are relatively more attractive >> absolutely.

the two stocks i've been calling out, google because that one, i think, the multiple does factor it in. it's the most favorable risk awards at 10 times ebita pay pal, secular tailwinds they're benefiting from the growth of all companies. then cloud services, security services, things of that nature. those can potentially continue with the rally >> when you say underindexed, what do you mean by that underowned >> i'm saying -- the proportional weight to s&p it's been in higher teens in loftier periods, now in lower teens. >> your pop tick going intop pid half >> paypal and google >> james, thank you. >> all right if you weren't worried enough

about north korea, coming up, cyberattacks pose a huge risks to global businesses, and governments -- what all we need to know about this, and what we need to fear that's cominupex g nt.

♪ welcome back, you're watching "squawk box" live from the nasdaq market site in times square ♪ >> good morning. welcome back to "squawk box. u.s. equity futures at this hour have been mixed up a little now. the dow is up.

again in keeping with what we saw, the nasdaq is down. the s&p is flat. in the dow, at least dow stocks, could disney be facing trouble the "wall street journal" reports that the company's biggest business, cable tv is stalling and not just the old story that we've been talking about for over a year, maybe two years, not just espn paper says that the disney channel and the free form channel have lost about 4 million subscribers over the past three years the "journal" cites executives who say they're trying to improve programming and the shift to online platforms, but it's tough for kids because they don't use the same pipes to get content. i don't know how you get kids to go back to watching on conventional devices they don't >> you hand a kid an ipad at an early age, you start getting them used to that.

didn't world >> they have some problems we'll see. if you watched disney over the years, they had boom and bust -- >> they always figure it out >> pre-isner, they were lost they were buying gibson greeting cards this is like 25 years ago. he came in and did a great job then they wandered around after him. lost frank wells, then iger stepped in a massive cyberattack last week thathit targets in 65 countries could be a round of practice from state-supported hackers, let's bring in "wir "wired's" andy greenberg i find this topic fascinating. the implication of saying ukraine is a laboratory or test run is that russia has something

bigger planned against bigger targ targets. >> we can see that there's good evidence that russia is practicing something in ukraine. they're at war with north carolina for three years they attracted every sector of ukrainian society from business, government agencies, destroyed government data, paralyzed the transportation systems, finally they took down the power grid twice, the second time they used a piece of automated malware to do that. they probably will want to do that again that looked like a practice round to develop the capability they wanted to use globally. >> i think a lot of people here who think about cyberattacks, they know the grid is definitely a target the reality, based on what you have seen in ukraine, what was done there could be done here and even to worse effect >> well, yeah. this piece of malware used in

late 2016 to take down the power grid in kiev, it has these modular components that you can swap out you can adapt it from the ukrainian equipment to american equipment or to other parts of europe it seemed to have this little component that might be used to actually cause physical damage to the grid. that's the kind of real nightmare scenario we've been worried about for more than a decade the grid can be not just disrupted, but parts of it could be destroyed in a way that would have a lasting effect. >> i don't think people realize -- transformers, you destroy a transformer. it takes years to build. they don't keep a spare transformer on the back shelf at con ed in case this debts gueges destroyed. you can use a cyberattack, cause physical damage and that can have far reaching implications >> these are multimillion dollar pieces of equipment, custom made we have some backup ones, but

probably not all the ones we need in a place where they could be replaced quickly. i think once you start to destroy equipment we could start to see not just hours of blackouts as we did in the ukrainian examples but days or weeks even >> new york city had one of those about a decade ago >> right >> my neighborhood, it was ten days without electricity it got old after day two do you think the u.s. is -- i would hope to think we're on top of this, aware of it how ready are we to respond or defer something like this from happening here >> the u.s. government is -- they're pretty sanguine about this they tell me that we're prepared we have better cybersecurity than ukraine >> one would hope. >> at the same time we depend on automation more in our grid. our grid is more modern in a way. that makes it more vulnerable to hackers. more of it can be controlled by computers. what i hear is that it might be

harder to take down the american grid it might be easier to keep it down in part because we're not as good at responding to blackouts as incoukraine who ha much less reliable, older grid that goes down all the time. so they're used to sending out trucks to manually flip the power back on. we don't have as much practice at that. >> so lower probability event, but it it happens, potentially longer lasting danl. >> our response is unknown we never considered a cyberattack an act of war. >> if you look at -- if you look at the u.s. presidential election hacking, which we might all be tired of talking about. we had no coherent response to that we had sanctions that the white house has tried to roll back, talked about trying to undo. it doesn't seem like we have any kind of unified diplomatic response not just between the u.s. and ukraine but even across american partyandy thank you fon

>> coming up, the executive edge, how companies are trying to deal with a key issue of equality in the rk fwoorce you're watching "squawk box" on cnbc and the wolf huffed and puffed... like you do sometimes, grandpa? well, when you have copd, it can be hard to breathe. it can be hard to get air out,

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♪ see, you got to be -- to criticize, sometimes it helps to be close to the person she would understand what i was saying as you can see, you know, we were, you know, basically attached at the hip at the white house correspondents dinner. i sat down for less than a second probably, she looked like she didn't want to scream or run or anything else. yeah >> which is the normal response you get? >> the normal response i get any way, she was very, very nice very pleasant. >> did you bring up your hatred of this song then? >> that was a couple years ago >> did you know she sang the song >> this was three, four years ago this is a new song >> not that new. this is not? this is not new. >> this "fireworks" thing is not new?

>> maybe relatively speaking to the other songs you are acquainted with. >> it's newer than grateful dead >> i listen to alt nation. i listen to sirius xm, i listen to new stuff now >> released in 2010. >> fine. >> she's got some hits time for the executive edge. national pride month just ended, our next guest is working towards lbgtq equality all year long joining us is justin nelson co-founder and president of the national gay and lesbian chamber of commerce. nice to have you >> thanks for having me. >> when did you found this >> 15 years ago. >> you've seen unbelievable change, i guess acceptance of advertising to this demo, businesses being started it's mainstream now, any fortune 500 company that doesn't get that -- i think they all get it now, they had to basically to exist in the current world,

right? >> not just because it's the right thing to do, diversity means diversifying your revenue stream, making sure the customer and employee and supplier base mirror the one you want to have and attract. >> the numbers are staggering that i'm looking at here lbgt-owned businesses contribute 1.7 trillion to the economy. which is great because for so long we knew what the lgbt community was in terms of a consumer spending power, about 8$880 billion this year what we buy in consumer goods but we didn't know what we put into the economy my organization sanctioned a study that found we were 1$1.7 trillion in economic impact. to give you an idea, because i know people like to understand where that puts us on a chart, we would be the tenth largest economy in the world if america's 1.4 million business owners were our own country. so bigger than south korea, bigger than canada, and i think

in the national dialogue right now, something that is important is we're bigger than russia. >> what -- in terms of how far you have come and how far you still have to go, what still is needed to be done right now? there's been a lot of progress >> absolutely. there is still opposition out there. we've done a lot of great forward movement in the business world. there are still a lot of issues. there's access to credit issues. only 15 states and the district of columbia have nondiscrimination and access to credit laws on the books for a lot of small businesses that's still a very big issue for them there's also nondiscrimination believe it or not, as much progress as has been made in corporate america, you can still be fired in the majority of states for being gay, lesbian, bisexual or transgender. so whithere are still challengi

issues out there >> you hear about the religious, the hobby lobby, whatever. if you look at the way things were with legislation, public opinion usually ridictates legislation. legislation can be on the books or pending but it doesn't go anywhere based on public opinion when it gets to a certain point. i think it's at that point >> look at the pendulum on marriage equality. let's go back ten years and see what it was. it's pushing 70% now you know, it's a very slim minority that still doesn't believe that as red blooded tax paying americans we should have the same rights and responsibilities as anyone else. >> just one last question. are you totally nonpartisan in terms of -- the reason i ask, to be a hard core pro growth business guy, do you have to ab democrat can you be a republican? you know -- >> absolutely. our mission is to create opportunities where lbgt

business owners can become a part of diverse supply chains, whether that's federal government, state, municipal government we take partisan positions on particular issues, especially on social issues. what about fiscal issues >> we have to be open to legislation that's moving the ball forward for business owners >> okay. just figured i would throw it out there. thank you. >> thank you coming up, the business of education, we'll bring you the story of an organization changing the world one pencil at a time stay tuned, you're watching "squawk box" on cnbc ray's always been different. last year, he said he was going to dig a hole to china. at&t is working with farmers to improve irrigation techniques.

remote moisture sensors use a reliable network to tell them when and where to water. so that farmers like ray can compete in big ways. china. oh ... he got there. that's the power of and.

welcome back to "squawk box. while american schools are enjoying summer vacation, pencils of promise is a global enindication nonprofit that builds schools in the developing world. their data driven approach has attracted google, delta and goldman sachs. joining us is michael doherty the ceo of pencils of promise. great to have you with us. >> great to be here. >> how do you use data in this >> data is so important for us in terms of figuring out what works. so we test kid at the beginning of each year we test at the end of the year

and then we compare the degree to which they've learned how to read that year with schools where we're not working. we use that to refine our approach, report back to our communities and our government partners and then spread that to get better >> sort of proof of performance so to speak? >> yeah, i mean you know what we're trying to do is get kids to learn how to read there are 250 million kids in the world that don't know how to read we really believe education is the way out of poverty and so if we can extend the years of learning that a kid's in school, get them to read more effectively, we can help their lives and also, you know, grow economies. >> tell us a little bit about your particular goal because there are a lot of nonprofits out there that also aim to keep kids in school, to educate children around the world, to build schools. >> yeah. so, we work in the rural parts of the world we call the last mile so, ghana, guatemala and laos. these are communities that are off the grid and in the first place we put schools where they don't have one. literally replacing mango tree

in some cases with a school structure. and then we work with teachers to help them have kids read more effectively. ultimately, we teach the teachers how to help the kids buts are we put e readers in the kid's hands. we give them a personal library of reading material that they take home at the beginning of the year, 24 hours a day they can read by the end of the year we're able to show that they've progressed and read more effectively. >> which is often the first time that these kids have technology in their hands >> think of a village that may not have electricity, sanitation, water and hygiene and think of a third grader in her home, reading by the glow of an ereader at night. >> in thames of the corporate sponsors or sponsors of your nonprofit, how influential are they in terms of what you do was google influential in how you use data, for instance to attract kids or what sort of readers? >> we use amazon kindles to partner with an ngo called world reader our corporate partners are huge. in fact, you know, they really sustain our work in terms of the

funding. so we have partners like common bond, we have other partners that really drive our work and the partnership is about social purpose you know, we believe that brands can, you know, consumers essentially want to associate themselves with brands that make a difference and so we do that. we allow brands to partner with us to build schools in developing worlds. and then to show that impact to their own. >> i know our client base increasingly is looking for opportunities for responsible investing, right doing good while hopefully doing well at the same time. with something like this, i think the investment and the return are obvious if you can educate populations, those populations tend to have stronger economies and that benefits all of us how do you show people who give money to their return on investment because it seems like a very long-term thing to educate someone and help the economy that way >> yeah, so it's huge. we actually don't think of ourselves as a philanthropy or charity. we think of ourselves as a social investment.

our donors, whether they're individuals, family foundations, or you know, corporate partners, we publish quarterly transparency reports kind of like a quarterly earnings report in the for-profit world we show what's worked and what hasn't we take our donors into the field. they get to experience their impact and meet the kids and the teachers that they're working with where their dollars are really having impact. and then we show over time that, you know, the enrollment rates for kids, enrollment rates for teachers, the kids' scores on tests that they're improving, and ultimately we know in the long game that makes a huge difference you know, one extra year of learning in a low income country results in a half point of gdp increase, and so we know that it keeps kids in school longer good things are going to happen >> michael, thank you very much for joining us >> thank you >> pencils for promise >> coming up this morning's top stories including the global market reaction to another north korean missile launch. futures right now are mixed.

with the dow thank you up, and the nasdaq thank you down. dow is up 30, flaz down 21 stay tuned you're watching "squawk box" on cnbc tclouds can't connect? michael, can we get this data to...? look at me...look at me... look at me... you used to be the "yes" guy. what happened to that guy? legacy technology can handcuff any company. but "yes" is here. so, you're saying we can cut delivery time? yeah. with help from hpe, we can finally work the way we want to. with the right mix of hybrid it, everything computes. 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

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find love anywhere. he's cute. and buy things from, well, everywhere. how? because our phones have evolved. so isn't it time our networks did too? introducing america's largest, most reliable 4g lte combined with the most wifi hotspots. it's a new kind of network. xfinity mobile. good morning it's the first full trading day of the second half of the year the dow set to extend its run but the nasdaq under pressure. the full rundown straight ahead. president trump takes off for his second foreign trip. first stop poland. plus calling all baby boomers and gen-xors a new report says you might be facing a frightening retirement reality. it's wednesday, july 5th, 2017 the second hour of "squawk box" begins right now

live from the beating heart of business, new york city, this is "squawk box." >> how many kits does she have >> we could play katie perry all day today. >> that's fine welcome back to "squawk box" here on cnbc live from the nasdaq marketsite in times square, i'm joe kernen along with melissa lee andrew and becky probably happy, they're probably happy, they're off today. actually maybe they went -- i think andrew probably like -- >> why would you say that? >> because he's young. i know he's a believer huge justin bieber -- >> really? >> our guest host this morning, rebecca patterson, cio of bessemer trust and joe, portfolio strategist at richard bernstein. markets, we checked before we

went to break. the dow was actually positive, up 31 points the s&p is positive up just under 2 but the nasdaq extending some losses from monday when it diverged from the other averages it's down another 21 the 10-year, 2.35, 2.34 this morning, it's back to 2.35%. and oil prices, monday were back above 45 46.7 but down 80 cents or so today. 1.7% the u.s. has requested an emergency u.n. security council meeting today. after north korea tested an icbm, that's intercontinentalal bestic missile and do the math, you can figure out what intercontinental means and it's not good for us. according to analysts the missile could put all of alaska in the range of north korea for the first time late yesterday the u.s. military said that u.s. and south korean troops in response, they did

this they fired missiles into the waters off south korea in a show of force president trump will leave for poland this morning for his second foreign trip since taking office kayla tausche joins us now with the rundown. >> the president will begin his second foreign trip in warsaw landing this afternoon with a speech committing the u.s. and the nato alliance and potential talks on deals for u.s. liquefied natural gas. then on to germany's largest port city for the g20 meeting where he'll meet with russian president vladimir putin on friday for the first time since the election but it's the standoff between north korea and the u.s. and south korea increasingly taking center stage in politics right now. the game changing launch by north korea of that icbm that could reach the u.s. and that pyongyang says could carry a nuclear warhead was then followed by the military exercise by the u.s. and south korea launching a precision missile into nearby territory. that emergency u.n. security council meeting that was requested by the u.s. and its allies is taking place today at

3:00 p.m president trump on twitter again putting the onus on china to do more but a joint statement from china and russia calls on all parties to de-escalate tensions. as for the market impact, horizon's greg valliere writes today, the theatrics are annoying but they're background noise, the geopolitical risk is far more serious and suddenly that's the new factor in the equation the president just tweeting moments ago saying he is about to head off on that trip and he will be back saturday. joe and melissa, we'll see exactly what news we get about a potential u.s. response from here >> i found greg valliere to be annoying in recent years somewhat annoying. thank you, kayla for that. in other headlines this morning, we'll take a quick look, the trial of former drug company executive martin shkreli, continues today in new york. prosecutors have asked the judge for a gag order saying shkreli's statement to the media could taint the jury and disrupt the trial.

why do we know so much about him? anyway his attorneys say that the request could be rejected on first amendment grounds. he's being tried on securities fraud charges. he's a hedge fund guy, hasn't he when he first bought -- before he got into, saw an angle there to work, and now, he loves being on camera. federal reserve is set to release minutes of its most recent meeting at 2:00 p.m. eastern time today investors will be interested not only in comments on future rate hikes but also on the timing of the fed's planned balance sheet reduction. two foreign airlines emirates and turkish airlines says the u.s. has lifted a ban on laptop computers on their u.s.-bound flights. that ban had been in effect since march but was lifted after newly announced security measures were implemented. some stocks to watch this morning, potential takeover for world pay the payment processor received approaches from

jpmorgan reporting that the offer was in cash and could be announced as early as today vanta is halted for news pending. pfizer has entered a brazilian joint venture. according to reuters the drugmaker accepted a token payment worth 30 cents for the stake. apple may get help from the u.s. government in its tax dispute with the eu. reuters reports that the government is said to be seeking to intervene in apple's appeal that decision that will report a $2.8 billion in taxes to ireland. joining us now josh fineman global chief economist at deutsche asset management and tom lee managing partner and head of research at fund strike global advisers. our guest host rebecca patterson, and joe ziedle. tom you got recently not quite as bullish how long ago was that? and are you still there? >> yes, joe.

we've been more cautious this year, it's been a great call because the market's -- >> since the beginning of the year >> yeah, really since the beginning of the year. and the markets have been great. i think it's just proven that this year is a lot more about how technical and liquidity has been a lot more important than seeing acceleration of fundamentals >> but what fundamentals haven't kept pace? >> well, if we look at things like earnings growth, you know, we had a pickup in earnings growth, but it's -- we've seen the p/e advance much faster than the pickup in earnings so, you know, we say that if you look at ford, multiples, they've increased by more than 2.5 times. so the median p/e now is close to 19. and that's in the last 30 years, there's only been four quarters where the median p/e has been higher >> tom, with the p/e today, don't you have to factor in the fact that bond yields are so, so low. does that skew how you should look at valuations right now >> i think that's absolutely one

of the things we've overlooked, that with low interest rates, and in the absence of being able to look at other opportunities, stocks may be one of the places. and i think that's sort of the liquidity argument -- >> you haven't been a bullish, pounding the table stock market person either. you're neutral now on equities >> right >> were you neutral january 1st? >> we went from overweight equities to neutral last may and we've stayed neutral since then. we left some money on the table by not having more equity exposure but for our client base we're talking about wealthy families, they don't want to have to lose it >> i always hear that. i understand -- >> we want to make them -- >> the reasons why they invest but going neutral in may was the wrong call >> last may? >> definitely. >> yeah, but you know what -- >> -- 20% since may. >> if we wake up tomorrow and we're at war with north korea, having -- >> my grandmother was, you know, my grand -- you know -- >> but the -- no, no, no, i'm

not trying to be defensive i'm saying to tom's point, valuation -- >> too defensive -- >> i was, i was. but if valuations are higher, the economic cycle is getting more mature, the liquidity, slowly, is starting to come out, i think it's prudent to take small inkreemtal steps to slowly reduce risk in my portfolio. because then if we wake up, and there's a shock, be it north korea, be it a cyber attack, be it something else that triggers a recession, we're going to have to be less reactionary and protect our clients' capital, and i think figuring out that balance is what my clients look for. it's not for every trader. >> there's never a period on 365 days a year, where you're -- you don't need to worry about something happening that's 10% downside we all know that then you have to make a decision >> right >> am i more bullish or bearish or more neutral. you always want to protect capital and that just goes without saying >> right our diversified portfolio,

year-to-date, so 70% equity risk, 30% bond risk roughly speaking, has still outperformed the s&p. >> okay. >> so if i can beat the s&p with 70% of the risk i'm not unhappy about that >> joe, you've been bullish. >> we have and i think one of the things that's been overlooked in a lot of these discussions is the second derivative of growth which is the change, right that is over the last year and a half, since february 2016, things have been getting better, versus worse and i think a lot of people invest according to the notions of good or bad is the economy good? are earnings good? is this bad? but what they're missing is that things have been getting better. when you think about stock valuation or you think about corporate earnings, no one really cares how much a company ernst. the first question they always ask is was it better or worse than a year ago. we've seen since earnings troughed in january 2016 or february 2016, quarter over quarter, year over year, earnings get better and better i think that's been a major key for this, you know, equities rally over the course of the last year and a half

>> i think the signals that we've been getting from various asset classes don't necessarily confirm that things are getting better you take a look at the rally in the bond market, until just recently where we've seen yields rally, it has been a confusing message, hasn't it so where do you stand and what do you make of that recent rise? >> -- doesn't have to worry about equities and -- >> right >> but you can talk. >> --. economy. >> bonds and bond yields >> but you need to tell us exactly where we are in terms of -- >> i think the u.s., you know, the beat goes on i mean it's not a particularly thrilling beat, or a fast beat, but it's more plodding and methodical but it's getting the job done. literally. i mean the maylabor market has largely healed i think we're back at least in the vicinity of 4.1. and that's normally, given where we were coming from. in terms of comparing growth to where it was in past cycles, we're not getting the kind of growth we had before and we're not likely to get that kind of growth the economy's potential to growth is diminished in demographic factors and other things relative to that bar,

structurally we're not back. but cyclically i think we've accomplished a lot i think, well to your point that recovery is mature, fortunately you know, recoveries are not like people. they don't tend to die of old age. they tend to die of a cause and the normal sort of historical causes, still seem largely absent >> and that's inflation. so can we talk about that for a minute >> sure. >> we know some of the factors that have dragged it down recently are one-offs. wireless services, that sort of thing. do you think inflation recovers from here? i feel like that has a big part of everything we're talking about. >> for sure. >> what happens to yields. the yield curve, cyclical stocks >> absolutely. even the fed minutes how much they've been saying they think a lot of it is transitory we'll get more of a read on that i do think inflation picks up a little bit in the very low readings we've been getting recently still i think it's going to take awhile to get back all the way to the fed's target. i think that's one of the reasons why that normal historical recession, you know, inflation picking up a lot, the

fed slamming on the brakes, i don't think so i think they're going to move very slowly. >> tom, it's been a very tough year to call and you've been long crap, that's your new acronym but it's been crap this year >> well, it's been good, banks have been good -- >> resources and telemon i think there's a lot of resources to like resources and telecom in the second half i think oil for instance the market looks like it is coming in to balance the second half. oil credit's gone really well, so we think there's a convergence trade there. and then on telecom we've written about it recently, i think what people are overlooking is the potential for consolidation at industry has the best probability in the past ten years because of the new administration, a much more friendly dod lly doj and ftc ank it really is time for that group that trades at twelve times earnings to get rerated. again telecom credit traded in line with utilities.

telecom equities have underperformed 22 pshs the last six months which is a near historic underperformance. so i think crat, i think a strong second half >> just because you found the four initials for -- i still don't think that's okay to say, you know, that to go from fang to crat, you think it's okay to say crop what about the parc. >> it could be fresh >> the crap stocks, really >> but -- >> there's the comments, because we like fang -- >> in junior high or something >> well, you know there's a common thread between fang and crap -- >> there you go again. >> they're the earnings drivers. i think that's, you know, we're talking about all this whole conversation about rate change improving, and you know, leverage to gdp. you know, these are the groups that have been driving earnings, but, they haven't all been getting the p/e credit so i

think that's the opportunity >> is that an urban legend, thomas crapper did he really invent -- >> i'm not sure. i'm still trying to figure out if samuel johnson made a mistake -- >> my father had a biography in the house. i didn't know if it was a joke or real. but, yeah. >> because, bob newhart, they really did, when he asked them where's the funniest place you ever made whoopi that actually happened did you look that up yeah, that actually -- did you know that? >> i don't know that >> you mean on the -- >> thomas crapper is not, either here he is right here. thomas crapper >> the more you know >> you know, we haven't talked about joey crest nut, either speaking of -- >> fireworks >> no, 72 hot dogs in ten minutes. >> oh, i know. i know >> he's still somewhere suffering doing something. >> he's used to this now he is the championship hot dog eater. >> what goes in, must come out

>> -- sir thomas crapper >> good way to round it out. >> exactly, thank you, guys. still ahead, major changes coming to the housing market it will make it easier to get a mortgage but there is a catch. we'll tell you what it is right after this break plus the state of main street new data out on small business job growth bringing all the numbers 7:30 a.m. eastern time and later millennial men are spending less time at the office the reason, video games. we've got the details. stay tuned you're watching "squawk box" on cnbc a used car,

the future isn't silver suits anit's right now.s, think about it. we can push buttons and make cars appear out of thin air. find love anywhere. he's cute. and buy things from, well, everywhere. how? because our phones have evolved. so isn't it time our networks did too?

introducing america's largest, most reliable 4g lte combined with the most wifi hotspots. it's a new kind of network. xfinity mobile. welcome back to "squawk box. i saw this, and now it's on the teleprompter the president trump tweeting four minutes ago he had tweeted earlier about embarking for poland now he's saying the united states made some of the worst trade deals in world history why should we continue these deals with countries that do not help us? so we'll keep an eye the twitter feed see what else is forthcoming >> that do not help us i think we're talking about china. >> this is all about north korea. >> mm-hmm. >> all right a ratings agency moody's has downgraded qatar's economic outlook, ahead of today's meeting with arab nations where they plan to discuss the ongoing

diplomatic crisis in the persian gulf joining us now the former u.s. ambassador to the united arab emirates and to syria who is currently the president and ceo of amiti a nonprofit focused on education, training and development in the middle east and north africa ambassador, thanks a lot for joining us >> my pleasure >> today was the deadline for doha to reply to the sanctions what's at stake at this point? what sort of response do you think could help doha in its effort to have this block lifted >> well, saudi arabia, the emirates, egypt, put forward demands, 13 demands on the qatari amir that are clearly not realistic in terms of his willingness to meet them and so you have to ask what the next step is because, asking him to close a

base where turkish troops are stationed downgrade relations with iran, and close al jazeera, the flagship of -- flagship satellite channel in the middle east, would be humiliating so there's no way out of this immediately. >> do you think that the 13 demands were an opening gambit and which demands do you think are make or break? are ones that doha would have to comply with in order to further the conversation >> you know, when you're dealing with gulf rulers, they're very secretive. i've been in saudi arabia in a senior position, the emirates, and the like and really, often u.s. officials are a bit in the dark as to what they intend. i think this is very puzzling, it is the toughest i've ever seen these states go after

qatar, even though there have been tensions between them before and one has to wonder what they intend i think the most -- the area where qatar could please the u.s., and ease some of the pressure, is to quit supporting islamist terrorist groups, but the gulf countries consider the muslim brotherhood a terrorist group. the united states has not labeled the muslim brotherhood a terrorist group thus far >> you know, about a couple weeks ago, three weeks ago, or so, qatar airways announced an interest in buying stake in american airways and there's sort of a, what are they up to could qatar be looking to have american support in some way and align itself with the u.s. i'm just curious what your take is on this, given what the situation is >> well, not just qatar but all the smaller gulf states in the gpc, in up with way or another, have looked to have allies because they're very vulnerable.

they're like kids in a tough neighborhood, who have too much lunch change in their pocket and therefore, they need friends and allies kuwait, we saved kuwait during the 1990-1991 period when saddam hussein invaded. because of the ties that existed between us, kuwait and the gcc states so of course qatar has looked for external friends one of the dangers here is that qatar could be pushed closer to iran rather than farther away by these demands. >> ambassador, this is rebecca patterson. good morning i just wanted to follow up on that point so far from an investors' point of view this has seemed fairly contained regionally the markets globally haven't been impacted very much by the developments here. do you think there's a risk that that could change? or do you think this is likely to stay pretty much contained to the region is there something you'd be watching that would say, uh-oh, this thing is getting bigger

>> one thing that may happen is a secondary boycott, much as the arab league put on israel for decades. whereby, the uae, saudi arabia, and egypt would say, well, if you do business in qatar, we're not going to do business with you. now that would be a little hard to enforce with companies like boeing and lockheed, which sell fighter aircraft to all of these states, or most of them, but that could be another step that is taken united states is committed to keep being shipping lanes in that region of the world open. so i don't see any move to close qatar's court to oil shipments and gas shipments in iraq. >> mr. ambassador, thanks so much for joining us. we appreciate it >> my pleasure >> so, first thing president tweeted was about making bad trade deals. and why should we continue to deal with countries that do not help us. and we immediately said china.

and now president trump says trade between china and north korea grew almost 40% in the first quarter, so much for china working with us. but we had to give it a try. so -- >> had to give it a try. >> but he -- >> that implies -- >> -- hopeful, and that they're friendly and he had developed a good relationship supposedly with xi. and now, it looks like he's frustrated that, you know, things have not changed. and has everything to do with that icbm from yesterday or -- >> mm-hmm. >> major changes in the mortgage markets go into effect this month. they could help more people get a home loan but there is a risk. diana olick joins us now from washington with more good morning, diana. >> good morning, joe the two major changes in underwriting that go into effect this month should help thousands more borrowers qualify for a mortgage but no question, both will add risk to the mortgage market. first, the credit rating agency,

they're dropping tax liens and civil judgments from consumer's profile. of the 220 million americans with a credit profile, about 7% have these credit hits without them, their fico credit scores could go up by as much as 20 points per person now, second, and unrelated, fannie mae and freddie mac are increasing their debt-to-income limit for borrowers. it's going from 45% to 50% of your income allowed towards debt payments that's a reaction to today's high level of student debt and yet it means consumers will be saddled with even more debt but fannie mae's chief economist claims the risk to the system is still low. >> in this case, we're not changing the underwriting criteria and we believe that the initial increment of risk when making that change is very small. and given how pristine credit has been post-crisis we don't feel like that's an unreasonable risk to take >> but others argue that the two together will increase the potential for more mortgage

defaults, and possible foreclosures yes, we are near record low default rates right now, so maybe there is some room for risk >> all right, thanks, diana. check this out, we're just talking about it, and the aftereffects >> you were talking about the aftereffects >> i was, before it even happened i was talking about the aftereffects because i think, i just don't know about this whole contest, it reminds ---ive seen it, is it in the movie "stand by me" remember they had a pie eating contest. it's just grotesque. the nathan's hot dog eating champ, is yet another victory, under his belt, so to speak, joey chestnut set a new record, putting away 72 hot dogs and buns in just ten minutes this is his tenth career title on coney island. i guess, groundhog day, bill murray talked about, you know, needle nose ned and says, you

don't remember i won the belly button contest, and he asked him did you ever go pro with that? and, is this guy actually a professional athlete do we know is this -- >> professional eater. >> yes >> but can you go pro hot dog eating >> he makes money off it he won $10,000 by eating those hot dogs that will cover his medical bills for the next -- >> look at the crowd there, too. >> $1,000 a minute he made >> i think that -- >> it's not bad -- >> and recent eating contests, someone choked to death on a pancake thing? i mean i -- >> pancakes are very dry >> and hot dogs? >> i don't know. >> coming up, right now i'm telling you. that guy is somewhere sitting on a crapper, a thomas crapper. new data on the state of small business about to hit the tape rtmui llre dn the numbers. he's next.

♪ starting to ask. why? why? why katie perry. why? >> because i referenced it

earlier that i heard this new song by her, you're a firecracker. >> ten years old >> seven years old ♪ >> played it last night at the mill burn fireworks thing and i thought, i don't know. made sense real fireworks. good morning welcome back to "squawk box" here on cnbc live from the nasdaq marketsite in times square among the stories front and center, illinois may be about to resolve its ongoing budget issues three budget bills have been approved by lawmakers and then vetoed by the governor however the veto was overridden by the state senate the states house of representatives is expected to vote on a veto override today. "journal" has a interesting lead editorial on -- >> illinois. >> state finances. and then some mayors in some of the cities where we think, wow, their finances are a mess.

and usually democrats for years, mayors -- anyway that doesn't prove anything. shares of payment processor vanta were halted. reports say vantiv was about to announce world pay they've been approached by vantiv and jpmorgan chase. and automaker volvo is planning to make only electric cars or hybrid cars as gas is below $2 a gallon july fourth. anyway by 2019 they're going to do that and doing so would be the first traditional automaker to phase out completely internal combustion engine vehicles got to love their timing as well we'll see. i don't know i think it's -- you know, the grid is not always the cleanest place necessarily -- >> it still needs coal or nat gas, right, to run the grid? >> yeah, you do. >> so you're charging your car >> right

>> you're still a consumer indirectly >> i have a feeling that we won't have any boeing electric powered jets any time soon, either so we should at least still have the capability did >> but battery -- the battery technology has not caught up to that, that's for sure. >> no. we don't want to shut down all the hydro carbon development i know it sounds good and all. but, volvo >> we are just dayses away from the labor department's june jobs report joining us now to talk jobs in america and the u.s. economy is ellen hughes cromwick, the former chief economist for the u.s. commerce department ellen, thanks for joining us >> thank you >> what are we expecting this friday and i believe it's one of three jobs reports we'll get before the september fomc meeting so how important is this going to be >> yes, indeed in fact, as you've seen we've had a pretty decisive slowdown in job growth recently we're running at about 1.5, 1.6%

year over year so we really do expect to see job gains that are a little more subdued. you know, we're tracking something around 150 to 200k for a monthly gain in june, and i think that that will kind of reinforce the fact that we're in this slowdown mode >> as we march to the september meeting, and the "journal" just had an article today saying that september's going to be the date at which they announce normalization of the balance sheet, that's the first step to be taken, and they won't hike until december, just to see if normalization actually works as we go to that september meeting what are you watching most closely particularly as we get the fomc minutes today, for may for instance they said the tight labor market conditions could cause inflationary risk,

there are others who saw downside to inflation. what are you looking for >> yeah, i don't see any inflation risk in fact, as you probably saw, we've had, you know, three months now where, you know, the cpi is really not moving at all. and what are the inflationary forces out there if anything we're seeing more disinflationary forces you know, the global economy is picking up, but competition is pretty intense so that's keeping a cap on pricing, and all the disruption in the retail activity is further meaning, you know, a lot of companies, they've got lower unit costs, they can pass that advantage along to the consumer. so i don't see any nflation. but i think the fed's going to be looking very carefully at all the hard data. you know, the monday pmi was encouraging. that looked fairly strong across the board, especially some of the key components but you're looking at that, but also industrial production, the shipments numbers coming out,

and durable goods orders so incoming data is going to be critical here. but they're definitely, you know, on this ramp-up to normalize, and i wouldn't be surprised, even though the fed funds futures are saying what about 18% probability of a september hike, you know, that could be on the light side >> ellen, this is joe ziedle, just a question for you on the possible sources of inflation. you mentioned tight labor markets, and you know, it's a classic kind of late cycle environment where, you know, we have had years and years and years of expansion, labor pool itself, you know, you're hearing a lot more competition for workers. at what point does that translate into higher wages? >> you know, i guess i don't really agree that we have really tight labor markets. yes, the unemployment rate's at 4.3% at the same time, you know, job growth has slowed. we're down to, as i say, like 1.5% you have a lot of people that

are under employed you know part-time for economic reasons is over 5 million. and if you look at the u-6 unemployment rate we're still hanging above 8% 44 so there are a lot of folks out there that are either underemployed, or you know, looking for a full-time job. so i think, you know, we just have to dig in and train a lot of these people. you know, the future of work, especially with automation, is that we've got to get the training out to these people but they're employable so i think there's a lot of labor on the sidelines >> ellen,thanks so much. appreciate it. >> thank you plays right into this next segment, news just crossing on the state of small business in america. job growth declining for the fourth consecutive month but hourly wages are rising according to paychex small business employment report joining us marty mucci, paychex ceo. hopefully you were listening to the last guest

marty, from the anecdotal evidence you're saying it sounds like the job market is pretty tight and we're finally starting to see some wage increases and that would explain why, you know, the index goes down but wages are going up but we just heard that maybe there still is some slack in the jobs market in terms of people that want to work more or work full-time. who's right? >> yeah, i think well, joe, i think it's very specific i think it's two different industries if you look at the construction industry, construction we saw is down in that sector pretty strongly year over year and i think it's finding the right labor in the training. she did mention training it's very important to find the right people for the right jobs. that's where i think it might be tight is trying to find the right folks for those jobs overall we saw the index come down fourth month in a row after a pretty strong start to the year, and we're getting back to kind of that normalized job growth that we saw in our base year which is 2004 and now it's all about the wages, wages almost hitting 3%

overall. and i think that will be important to watch, as that wage growth gets stronger if it is a tight market >> what should we aspire to? what's the -- out west, it's the fastest wage growth. it's almost 3.6% what's the best we've ever done? what's the best we could hope for? >> well, i think typically, you know, in the tightest of markets, probably a little over 4% maybe 4% to 5% i think we've seen in that really tight market, and it's going to be very specific. again, some of that wage increase is tied to minimum wage increases. so you're seeing the biggest growth in wages on the lowest paying jobs. that you'll see. because, it's in other services. it's in leisure and hospitality. where minimum wage increases, a lot of those are taking effect right now in washington state, in california, in arizona, and that is seeing lower job growth and higher wage increases. and frankly hours are up as well because they're not hiring as

many, they're just pushing more hours on the employees they have today. >> are you suggesting that this is a one-off that a lot of the wage gains we're seeing in this report are coming from that minimum wage increase that we shouldn't expect to continue seeing the same sorts of increases in the months ahead >> no. i think you're just seeing part of this wage increase is driven by minimum wage. but i think overall, because you're seeing pretty consistently across the country, we're in that 2.5 to 2.7% overall kind of wage, even though the west is higher where you have some minimum wage increases, arizona, again, and washington state, where that's growing at over 3.5, i think the rest of the country is still somewhere between 2.5% and 3% and i think we'll continue to see that that will be the thing to watch, are wages increasing to give more spending power to the consumer >> all right so job growth in the south, but wage increase is best out west i guess. that's -- >> correct >> okay. marty mucci, thanks. we'll see you next month >> okay. still to come, playing hard and working less

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now the answer to today's aflac trivia question -- we've got an update on a story we told you about earlier. uk based payment technology company world pei has agreed to a takeover off of vantiv worldpay shareholders would own 41% of the combined company, but the two sides say talks to hammer out final terms are still ongoing. also according to headlines worldpay is in talks between parties remain on -- worldpay and remember jpmorgan had been in the mix as a potential

reported bidder in this whole story that would have been jpmorgan's biggest deal since the financial crisis but it looks like vantiv hammered out terms with worldpay. vantiv shares were halted at last check they're halted right now so we'll keep you posted on how these two stocks do. >> all right millennial men work 12%, 12%, 12% fewer hours in 2015 than they did 15 years ago, and one study says that the biggest reason is more video games the national bureau of economic research analyzed how people spend their time when they're not working. they say video games have been responsible for reducing the amount of work that young men do by 15 to 30 hours over the course of a year the study also notes a lot more men between the ages of 21 and 30 are living with their parents, or some other relative. >> is there a correlation here >> absolutely. they're in their basement, playing video games.

>> it's all drshs >> eating avocado toast, probably >> avocado toast while they're playing video games? or do they just want cheetos >> not milmillennials. avocado toast from whole foods or amazon. >> while they're in the basement all right. >> legg mason is out with its fifth annual global investment survey among the findings baby boomers and gen-x investors are not meeting their goals for retirement savings joining us james norman qs investors' president and head of equity strategy. i read somewhere that paying people to save did you see that it was an article, paying people $10 -- >> yeah i think they're trying to encourage people to save, because people are not really meeting their goals and actually one of the things we found from the survey that was really interesting and also concerning was that people are -- really aren't meeting their investment goals by quite a bit baby boomers who are closest to retirement or in retirement actually have saved less than half of what their goal is

and that's really concerning >> that sounds like an insurance company and pension managers and states with retirement plans nobody is hitting their goals with a 2% 10-year. >> yeah this is one of the difficulties, as well. we also found that their asset allocations are way too low to growth asset for example baby boomers have more money allocated to cash than they do to equities so they have on average 30% and we all know, money markets, it's close to zero, inflation call at 2% -- >> but they're young they can -- they can ride things -- no, they ought to be buying -- over time stocks outperform everything else >> but do you get into stocks now. if you're underallocated -- >> not if they listen to you in may of last year >> my clients are doing just fine thank you very much. >> okay. >> but if you're -- >> 20% since may >> if you're a baby boomer now >> yes >> and you're saying okay i don't have enough money to retire, do you put money into the equity market now, at your age given your goals, i mean

it's a hard call >> let me use my mother as an example. she's 78 and you know god willing she'll live as long as my grandmother who died at 95 so, she still has a long way to go and the thing is if she doesn't invest in growth assets, if she has 50 too much money in cash, we all get the calls from our relatives, as soon as there's market gyration or some geopolitical news like with north korea people get concerned i get that call from my mother, i'm really nervous, i'm not going to have enough time to recover, should i put stuff in cash i've been able to convince her to keep in the market compared to many of her friends who haven't and the result, the difference is stark. you have to invest there are some rules you should follow as well >> they're going to be in to hold the bag the millennials will finally get into the stock market like when it peaks >> well, that's one of the interesting things we did find from millennials, as well, is that they really have underinvested in equities, because you think about the type of situation they represent you with they were presented with their

parents and grandparents during the financial crisis losing a lot of money, some of them losing their jobs, and that was really, i think traumatic for them so they have not been investing much but what we did find from the survey was that this is the year that they all of a sudden want to increase risk dramatically. >> hmm >> and they might be buying up the top. and the problem being is if they have a bad experience they might be out for another 20 years. >> and it might be one of the reasons this equity market has run as far as it has and may continue because people are so scored by '08, '09, it's fascinating. you've seen more than double the amount of money going in to fixed income and credit that you've seen going into equities cumulatively since 2008. equity market is completely underowned which is your point >> yes, exactly. and also if they stay in cash, think about it, baby boomers have on average 30% cash 24% equity they need to really invest in equities now of course they should manage their downside risk and really, you know, pick some of the best principles of allocation, they should diversity u.s. has had a great run time to maybe put a little more money in international markets

and emerging markets as well you don't know where the return is going to come from and you need to diversify that >> so they are saving some they're just not putting it in equity i thought they were experiencing things aren't they like experiencing -- they're going to live forever. they're immortal >> right >> but aren't they experiencing things leaving the parents' basement to go out and like experience something? or -- >> right, i mean -- >> they're blowing their money, right? >> well -- >> they can save later >> yeah. and they're just -- they're always thinking, you know, if i use -- you know, what's the point of saving it because i might lose it in a drawdown. that's for millennials more concerning i think is for the gen-xers like myself or the baby boomers like my mother, they're going to be living a long time. and if they do not put the money in the market and sort of focus, and also income was another thing we found out -- >> generation z really what they call people after millennials? they do, and i saw an article, much more conservative generation-z they're not -- you know, you look at the current milieu in terms of, you know, college

campuses we keep going down this route, the country is in -- >> think might even have -- >> if they're more conservative -- >> no, no, no. they're being more pro-business. they won't feel dirty if they invest in capitalism like the millennials. which is also part of the problem. >> right >> all right thank you. appreciate it. >> thank you r e coybng up retail plaook fothsend half. we'll talk to an analyst next. [man] we're campers. look at us. look at us. it's so nice to get out of the city. it's so... quiet. is it, too quiet? it's awful. yeah. feel at home, pretty much wherever you are. t-mobile is america's best unlimited network. this is a story about mail and packages. and it's also a story about people.

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the retail sector has seen a number of bankruptcies, and a record number of bankruptcies and foreclosures in the first half of 2017 here to give us the second half retail playbook randy connick, jefferies analyst covering consumer department stores and specialty retail good to see you. you've actually had safety retail stocks. what you call safety retail stocks what are -- who is immune to what is going on, aside from amazon that's the obvious >> the way to think about the retail space today is to think about what has limited competition. brands matter. amazon's taking away mall visits but it's not taking away brands. so our top pick this year has been nike. performed very well helped by the most recent quarter last week we also have a big pickon tiffany. so tiffany you're not going to buy a $20,000 piece of jewelry on the internet. so most of the winners this year in the first half of the year have been companies that can't be amazon, as well as companies that are basically value plays

for retail offprice retailers or basically retail stocks have been down dramatically it's trying to find stocks that aren't going to go down. >> even though the huge gain in nike shares you would say continue to buy the stock? >> yes, very much so we really believe nike has a big play in terms of no fx issues in the back half of this year into the next fiscal year -- >> or -- >> and fiscal 19 in addition we like the athletic sector generally speaking. again, there's only three companies that really matter in that space nike, adidas, and it's under armour under armour is a name where most of the sell side, in fact all the sell side pretty much dislikes right now what we're recommending to our clients since the month of march is go into under armour, go into nike, play the strong athletic cycle and there's two companies that really matter >> so amazon wants to buy whole foods. do you start to take a look at some of the names in the sector, beleaguered namgs with a

physical foot print and think, they could be targets for somebody like an amazon looking for some physical presence, and some just sort of brand? >> yeah, i think amazon tells you with the whole foods acquisition that retail matters. what i think is interesting about the retail space generally speaking, it's underowned. and underowned does equal under valued i do think as joe said earlier, we do see the ability for retailers that have strong cash flows to basically improve those cash flows by cutting their store bases. if you look at retail over the next two years, majority of them can close 50% of their store leases within the next two years. so that's an ability to rationalize your supply, match your supply with demand. the consumer's actually pretty strong $2 gasoline is pretty good it gives the ability for the consumer to spend a lot of money and stores will matter in the long-term. >> randy, thanks >> all right, thanks to rebecca

patterson and joey ziedle for joining us this morning. sam waxle is going to guest host for the next hour. coming up the trump agenda and the impact on farmers. he will be our guest host for an stur ay tuned you're watching "squawk box" on cnbc

a developing story a u.s. and north korean missile standoff the latest is straight ahead prosecutors want a judge to silence martin shkreli during his trial. a live report from the courthouse coming up plus new this morning did amelia earhart survive a crash landing in the marshall islands? we'll bring you a never before seen photograph that could be proof 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 and welcome back to "squawk box" here on cnbc live from the nasdaq marketsite in times square i'm joe kernen along with melissa lee andrew and becky are off today and our guest host for this hour, timely, dr. sam waksal, founder of cadman and imclone

systems and we'll have a discussion with sam. a lot of health care stuff a lot of i don't know where to start. it is complicated. it's 17% of the economy. and we've got to figure this out somehow. right? >> we do >> and i don't, you know -- >> i'll help >> you'll help but tell me how difficult it is between pricing, and trying to curb increases and yet not hurt innovation we've got to make sure we do it right. >> so that's the trick it's walking that tight rope between making sure that we deal with this big part of the economy, but making sure that we innovate so that we actually save money by saving patients' lives and curing disease it is important. >> and if you take a pill, it's a lot cheaper than sitting in a hospital bed for a week. >> or being in intensive care unit and like there for nine weeks before you die >> right right. and baby boomers, and -- i mean at the turn of the century, sam,

i think what was the life expectancy i don't even like talking about it, it was like 39 years old -- >> in the 1930s -- >> not the last century, the century before >> in the early 1900s, into the 1930s -- >> it was what >> the average life expectancy in new york city was 44 years of age. that all changed because of vaccines, and antibiotics, and we changed the world and now, drugs, which are making people either saving people's lives, or allowing people to live longer. and that actually saves money, puts people back to work, it saves lives, and it is critical. and it's what biotech and pharmaceutical industries -- >> we've got to figure out the last six months, too, don't we >> we do we do. >> but we don't want to do it in a heartless way, or -- i don't know how you do it >> well, there are ways to do it i mean, we give patients and families choices we tell them that -- that in the

last nine weeks of someone's life, that payments are going to be different than they are if we really change outcome. and we have to figure out how to deal with that we do live in a new world. i mean, in 25 years, in 20 years, we're going to be spending a trillion dollars a year taking care of people with alzheimer's. 50% of people who reach the age of 85 have alzheimer's and we have to find a cure i mean there are people out there that are doing brilliant work, scott small at columbia, greg pesko at cornell are doing brilliant new work that's changing the paradigm of what this disease is. >> i don't even know how -- the plaques come, are they first or second >> second. >> the plaques aren't causing it -- >> i believe that it's a transport mechanism work that's going on, is talking about transport, talking about cleaning up the brain. >> wow

>> we may have to talk about some other things. but we'll -- yeah, that's -- we got sidetracked. in fact that was your first -- that was our first discussion probably i don't know -- >> there's a lot more to talk about. >> ahead >> making headlines this morning the united states is condemning north korea's first test launch of an intercontinental ballistic missi missile. an emergency meeting of the u.n. security council is set for today. and in the last hour president trump tweeting trade between china and north korea grew almost 40% in the first quarter. so much for china working with us but we had to give it a try. meantime in corporate news, uk based payment technology company worldpay has agreed to a tentative takeover offer from u.s. based payment company vantiv it would be a cash and stock deal valued at nearly $10 billion. worldpay shareholders would hold 41% of the combined company but the two sides say talks to hammer out final terms are still ongoing. let's get back to our guest host this morning. >> dr. sam waksal. founder of cadman and inclone

systems. we've talked about a little bit, you know, in the past when we've had pharmacy benefit management companies on, i get you -- you e-mail bomb me with the, you know -- you're going to get a chance to talk i thought they were part of the solution, not part of the problem. >> i think interestingly because of the lack of transparency, you don't know we don't know. and i think if you ask pharmaceutical companies and biotech company ceos why they raised prices, a lot of what they will tell you is they raised prices to deal with the kickbacks that pharmacy benefit managers get on the more expensive drugs. >> is that kickback -- are they legal? or is there another word -- >> i'm not sure. i think it's discounts so let's think about it this way. if a drug is costing medicare thousand dollars, and the

pharmaceutical company says to a pharmacy benefit manager, we'll only charge you $700, that savings doesn't go to medicare that savings and that money goes in to the hands of the pharmaceutical -- >> is a way they can hide their profit margins so that we don't know -- >> i don't think a lot of them are owned by insurance companies, and i don't believe we're going to have a pharmacy benefit managers ceo on today. >> so we'll see. >> we're going to ask him. >> we'll see what he that's your guest, right >> so we'll see. but we believe that i think a lot of the industry understands that those savings do not go to either the insurer, or to the payer, more importantly, or to the patient. >> if amazon said we have reports that amazon wants to get into the pharmacy business could they actually change what's going on? could they make the system --

amazon is known for transparency, go online see all the prices, they tell you the different sellers. could that be revolutionary? >> i think it could be the big question is how we deal with the fact that people might get their drugs online it's one thing to get your statin online and not worry about abuse. it's another thing to get your cancer drug. online it's a new world i think that new media that the internet is going to change efficiencies, and efficiencies are critical >> so, i don't know where you were when obamacare was passed and i know where the public was. it never even hit a plurality until you talk about taking in-changing it or repealing it, and suddenly it's more popular then it's ever been. it's above 50% one of the most unpopular pieces

of legislation in history until now when you try and thinking of how to replace it. do you think, have you always thought it should stay or have you thought it should have been repealed up to this point? >> i thought that there were real issues with obamacare and i think one of the issues that we have right now is a polarization in politics that's overwhelming and i think what we need to do and look, there were the senator from louisiana, and the senator from maryland, that were both on "meet the press" this weekend, and one of the things that was clear is with medicaid, which is a big part of the controversy right now with health care, the states really need and have different issues, and need to have controls. and a lot of the runaway costs with medicaid are because the federal government just ahowed runaway costs for a long time, and it was very hard for states to get waivers to do things

their way. and i think right now, both the republican and democratic politicians need to sinner just in the way they look at the world, need to compromise in the way they look at the world, fix the grave mistakes that occurred with obamacare, but also make sure that we deal with our patient populations and make sure, as the president's said, deal with pre-existing conditions and make sure that insurance companies begin to deal with things a little differently. i'll give you an example, in the future and in the near future, we're going to have one time cures with gene therapy, or gene editing. gene editing is further away but with gene therapy. so we're going to cure disease and if you're both insured by company "a," and they pay for that cure, say that cure is a

lot of money, say it's $50,000, $100,000 you leave that insurance company and go to a new one, the old insurance company didn't want to pay for that, because the new one's got a cured patient. so we need to figure out how to amortize these things, how to have insurance companies agree that when we cure a disease, when we change outcome, we figure out how to pay for it >> hmm >> so that continues innovation. it continues keeping us alive, and in a positive way, and i think that's going to be one of the other things >> all right we'll return to this mind boggling, though, isn't it >> yeah. >> it's tough. then we have north korea anyway, we've got a lot of things to try and figure out that are difficult, sam will be with us for the rest of the hour coming up, a roundup of this morning's biggest market movers. plus a story that could rewrite history. a new photograph that appears to show amelia earhart possibly surviving the crash landing in

the marshall islands back in 1937 this is a picture you need to see to believe stay tuned you're watching "squawk box" on cnbc a used car,

welcome back to "squawk box. we have a story that will have everyone talking this morning. new evidence from the history channel suggests amelia earhart and her navigator fred noonan survived a crash landing in the marshall islands in 1937 nbc's tom costello reports on a never before seen photograph

discovered in a formerly top secret file in the national archi archives >> reporter: amelia earhart on a flight with navigator fred noonan took off and was never heard from again >> reporter: for 80 years the world has wondered what happened to amelia earhart and her navigator fred noonan? in july 1937, they were over the pacific on a round the world flight when they disappeared >> this photograph came out of -- >> reporter: but now investigators from history believe they found evidence the two were blown off course and survived >> i have a photograph which i believe clearly indicates that earhart was captured by the japanese >> reporter: retired treasury department investigator les kenny has spent 15 years looking for earhart clues. while searching through formerly top secret files in the national archives, he discovered the this photograph from about 1937 marked, jaluit atoll in the marshall islands a string of small islands at the

time under japanese control. >> we have a cow caaucasian womn with her back to the camera sitting there looking over towards the ship >> you think this is amelia earhart? >> that's right. >> photographic analysts tell history the photo appears legitimate and undoctored. former fbi executive assistant director sean henry and nbc news analyst worked on the project. >> when you pull it out and when you see the analysis that's been done, i think it leaves no doubt to the viewers that that's amelia earhart and fred noonan >> reporter: in 1937 the japanese had banned nearly all westerners from the islands. but in the photo it appears there are two caucasians on the dock a man standing on the left, and what appears to be a woman, with short hair, wearing pants like earhart, sitting on the edge henry took the photo to facial recognition expert kent gibson, who first overlaid the photo of the man with file photos of fred noonan >> the airline is the most distinctive characteristic it's a very sharp receding hairline

the nose is very prominent >> reporter: the airline and nose all appear to match up. >> it's my feeling that this is very convincing evidence this is probably noonan. >> reporter: then the person sitting with their back to the camera, with air that appears too long for a man and too short for a native woman gibson compared bodsy measurements with previous photos of earhart. again, striking similarities >> i usually go from not likely to likely to very likely to extremely likely and i say this is very likely. >> and there's more evidence in the distance, the japanese ship, which is towing a barge with something measuring 38 feet long the same length as earhart's plane. for decades locals have said they saw earhart's plane crash and the japanese ship koshu took her and noonan away. a story even documented in stamps issued in the 1980s now, photographic evidence that the story may be true. we believe that the koshu took

her to saipan and that she died there under the custody of the japanese we don't know how she died we don't know when she died. >> reporter: the history team may have even found pieces of earhart's plane. and the prison in saipan >> this may actually have been her cell >> reporter: this morning this newly uncovered photo is opening a whole new set of questions about what happened to earhart, and noonan, and what, if anything, did the u.s. government know? >> we have no evidence anywhere that she crashed into the ocean, even though that's been the common narrative for so many years. i think we have a lot of evidence that she lived, and survived, in the marshall islands. >> guys, we're live here at the air and space museum, and this is one of amelia earhart's planes of course the plane that she was trying to go around the world in has been missing since 1937. now the locals in the marshall islands said that they were told by the japanese at the time the woman in the plane is a spy, don't talk about it. the japanese, for decades, have said they know nothing about

earhart. we reached out again to the japanese foreign ministry, the defense ministry, and the japanese national archives all of them say they have no documentation that earhart was ever in their custody. of course, any official alive then is today not alive, and much of the evidence and much of the documents from that time have long since gone they were destroyed in the war but, the question now is whether this photograph really kind of reopened the entire investigation. it is a fascinating, two-hour documentary on the history channel, on sunday, 9:00 pardon me, 9:00. i got to tell you, i watched it. i was riveted. then i interviewed all the players and i came away thinking this may be the real deal. guys, back to you. >> all right that is -- that's something. before you said that and explained it, tom, you would think they have some records, but it was all destroyed in the war. so you don't have that so i don't ne whether this ever is definitively decided if there's no paper trail

whatsoever no one's alive, obviously, from -- >> well, and there's more. you want me to entice you even more listen to this there is a file in the national archives, marked amelia earhart in the marshall islands. it was a file composed or created by the office of naval intelligence 176 pages. those pages, those documents, are missing. they were purged in the '30s and '40s we simply don't know but at some point, office of naval intelligence had a file. so if the united states, first of all the united states gets this photograph. do they know that that is, in fact, amelia earhart in the photograph and fred noonan? or are they simply compiling photographs of the marshall islands, because they're trying to keep track of japanese troop movements at the time? is that what was going on? >> yeah. >> and by the way the person who took that photograph they believe was later executed by the japanese for being a spy >> wow >> so you can imagine that if the united states or the australians knew that somebody was taking photographs on their behalf in the marshall islands, they wouldn't want to compromise them

>> well, that is that's even more -- you know, i haven't followed it that closely. i never even heard of fred noonan i've heard of danny noonan from caddyshack. but -- why are you laughing? >> a real person -- >> danny noonan -- >> -- is not real either >> fred noonan >> only you would take this to caddyshack nobody else but kernen would take this to caddyshack. >> daddy noonan. >> that's not what she said. >> fred noonan -- >> i never even heard of him heard of danny noonan. anyway, tom good to see you. >> and a free cup of soup with that hat >> all right thank you. thank you tom costello the trial of former drug company executive martin shkreli continues today in new york. prosecutors have asked a judge for a gag order. saying that shkreli, and sam waksal's idol that his statements to the media could

taint -- you really don't like this guy >> i really don't. >> we'll talk about that after we hear from meg but it could taint the jury and disrupt the trial. meg tirrell is covering the trial for us off camera sam goes off. maybe we'll get him to do that on camera. >> i think there's a high likelihood that sam will express his opinions about that. so there is news in the ongoing martin shkreli trial on late wednesday the prosecutors requested a gag order on both the defendant and counsel. and really counsel for all parties in the case citing comments that shkreli made inside the court house, outside the courthouse and on social media saying that there's a danger that his comments could get back to the jury and corrupt this very carefully and long taking jury selection process. it took them 2 1/2 days just to get down to 12 jurors and 6 alternates the defense has objected to this request, saying that while they oppose a lot of the media coverage around the trial calling it inaccurate and biased that they need the ability to respond to that media coverage

so they have asked that the request be rejected. we expect the judge will address this today, this morning in court and we will see what happens there. the prosecution in addition to asking for this gag order has said they don't want to grant that, or if, you know, in addition, they've asked for a potential semisequestration of the jury there's no real -- i talked with law professors about this, no definition of what a semisequestration is, but say maybe limiting social media or any sort of media access, electronic media access that the jury has during the course of this trial of course a full sequestration they have to be staying in a hotel and that would really annoy the jury martin shkreli famous for increasing the price of a drug by 5,000%. that is not what he is on trial for. that is for securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud to which he pleaded not guilty >> okay. >> so his twitter account, his alleged twitter account because he had an original twitter

account under his own name and then he had an anonymous twitter account i guess, was suspended >> that's right. so the prosecution actually cited this twitter account martin shkreli had been banned from twitter for harassing a female journalist. it appeared that he had come back on the social media platform and in this prosecution's request they really cite evidence showing that shkreli on a youtube scream because he likes to live stream his life cited this tweter account as being his and this morning we have seen that that twitter account has been suspended. >> live streams his life >> yeah. yeah there were even a few times during status hearings leading up to the trial that he would show up sort of periscoping, walking into the courthouse. showing the press around him and so, hours and hours of footage of martin shkreli online that he has taken himself. >> just ordinary mundane things, right? like eating a bowl of cereal or whatnot? >> yeah. he has many fans, he also analyzes biotech stocks. so -- >> well, he does that for --

>> not for me, no. >> so we've had on here scott gottlieb as a co-host with me. and one of the first things -- >> new commissioner of the fda >> fda commissioner. we're really lucky, the country's lucky. and one of the first things that scott did to make sure that we don't do the kinds of things that shkreli did before was put out a 60-page report that will, in the future, when there is a generic, and it's the only one so that people can play with the price and raise pricing, put out a report saying what the fda is going to do is get drugs very quickly on to the market, that are competitive generics, so that they don't price these drugs that way, that affects patient. these are 60-year-old drugs, there's 50-year-old drugs, a courtco steroid -- >> it would have been --

>> well epipen is a specific issue because of the delivery system >> right >> not that the epinephrine can't be made by other people. >> but you can't -- there was a -- feet dragging in terms of allowing -- >> application for generic epipens have been rejected >> the market is -- >> so when the market can't cure things, and competition can cure things, even with innovative drugs, we now have a slew, richard pasdor has said stop making anti-pe1s >> a new class of immune owe therapy. >> a new class that are really changing outcome, they're going to make that market competitive, pricing will be affect the, and i think patients will be happy because they really have changed outcome for cancer patients. >> let's talk more about drug pricing, thank you, meg. meg tirrell. joining us now kyle fields, ceo of an ohio based pharmacy benefit company. kyle, thanks so much for joining us

>> thank you for having me thank you. >> your industry has pointed to pbms as the pull prit for high drug prices. you say your company is different. you provide transparent to the consumer so if you were using the transaction would a consumer know exactly how much he or she is paying for a drug how much, you know, the pharmaceutical company is getting by way of discounting? i mean how are you different >> essentially the patient has no idea what the actual price of the drug costs a lot of cases, it's zero copay at the point of service at the pharmacy, or $10 copay but the pricing models that go in to that, that are kind that from the drug manufacturer all the way down to the patient receiving the medication, is such a complex, intentionally complex situation that unfortunately even the savviest fortune 500 ceos have a hard time deciphering >> sure. but getting back to the original question, how is your company different? how do you provide -- how do you cast a light on that murky

process so the consumer knows exactly how much he or she is paying >> essentially it's pass-through pricing. basically our clients and our payers, our employers get to see the same numbers that we see and so if there's $1 that comes in, for a rebate, for example, that $1 goes out to the employers in order to lower the cost of those drugs. also, we make sure that our contract pricing between the pharmacy ends with the employer is the same, as well so if we're in a situation where we get better pricing through one channel or another, that the actual patient, the actual employer payer gets to see that savings in realtime. >> so, am i going to be paying less for drugs in general if i buy through -- appro-rx is the pbm involved as opposed to another one out there? >> shorter answer is yes not only be paying less on average as we've been able to do for hundreds of clients across the state of ohio and thousands across the united states, but you also get the it's not just

you get a better pricing we actually are able to show better outcomes so if you're taking a medication we don't want you to just have a good price on that medication. we want you to make sure that that medication you're taking is actually working >> so what are some of the biggest discrepancies in terms of pricing between what your company might distribute versus another pbm? >> again, the pricing companies down to what are the rebates how much rebates are being passed through, how many rebates are being paid by the drug manufacturer to lower the cost of the drug and actually making it to the employer and to the patient. also, what -- what does a pbm make per transaction you know, in the state of ohio, a good healthy pharmacy, pharmacy can make according to the ohio pharmacy association, should be profiting around $11 per per description. we have faces where we've taken over accounts for the pbm is making twice, three timeses, even four times that amount per transaction. and so and the employer doesn't know that. and that's where it gets very

interesting with the pricing, to say the least. >> so, kyle, that means that, for example, patients would do better paying out of their own pocket for a drug than for, example, getting reimbursed by their payer, so we're talking about a situation where pharmacy benefit managers have become a middleman to add pricing on rather than making sure that things are cheaper for the patient, or the payer? >> i'm not saying pbms don't have a legitimate place but there are instances sam that absolutely we have numerous examples that i think i've even show you that if a patient had actually paid cash that it would have saved not only the patient money but also their employer who is actually footing the cost of that bill >> so how did this happen? how does it happen

that suddenly we have a new industry popping up and you know, right now, with congress, with payers, with patients, everyone's ire is aroused, and we have a new industry that's totally nontransparent, gaining moneys that are supposed to be saved from both payers and patients how did that happen? >> again, it's what is a pbm the average person on the street don't know what a pbm is so our biggest problem is education. if you don't know what a car is, how do you decide between one brand manufacturer and another brand manufacturer but you don't know what a car is and the problem is the people -- the same people i speak to have been driving a car for the last ten years. in this case, they've been purchasing medications, utilizing pbms, but it's -- pbms

have become thegate keepers. as a pbm myself i don't distribute the drug, i don't prescribe the drug but yet in a lot of cases we make the most profit on those medications. as a pbm we don't. we want to make sure the employer, the patient, sees the actual pricing that's out there so they know that they're getting a good deal and we're doing our job and we're making money simply on a transactional basis. >> so it's going to be the old thing of who will watch the watcher, right right now -- >> correct >> right now the pbms are doing things that really aren't helping the health care system, aren't helping the manufacturer, the biotech company, or the pharmaceutical company, and clearly aren't helping the payer of the country >> we've got to leave it there, kyle but we appreciate you joining us good discussion. kyle fields. >> thank you very much >> beautiful shot. two great stadiums, fortunately one is the bengals, and the other is the reds. the north korea threat escalating the country tested an

intercontinental ballistic missile over the weeks and experts say the missile could have the ability to hit alaska joining us now is james woolsey, a former cia director and former national security adviser to donald trump's presidential transition team, and we should mention that director woolsey wrote the forward for a new brennan center report, known -- called securing elections from foreign interference director woolsey, thanks for joining us, the icbm was qualitatively different in a couple of ways i guess you know, it's just not another missile launch this one was very concerning, no >> that's the position that most of the establishment takes i'm afraid i think it's worse than that. the north koreans have been able to detonate, in orbit, for several years, a nuclear weapon. orbiting a small satellite is the easiest thing that's done in space. that's why sputnik and russia in '57 was the first thing done and so forth

and if you put a simple nuclear weapon, something about the size of a golf bag, into a simple satellite, and detonate it, 30, 40, 50, 100 miles above an area, you can knock out the electric grid of that area. and i think the north koreans have been able to do that for now several years. what they have not been able to do is to launch an icbm, an intercontinental ballistic missile that goes up into space and comes back and re-enters the atmosphere, and has heat shields, and accuracy, because it's being shot at a specific target all of those are hard to do. and the north koreans are coming along on that. they're much further along than they would like to see, but they're -- they're -- they made progress by this launch. but, i think they have been able to knock out our electric grid now for several years. s. >> where would they -- how close would they have to be to

mainland u.s. to do this >> 50, 100, 150 miles up in space -- >> but they can't go -- these icbms can't travel that far yet, can they >> the intercontinental ballistic missile that was tested, in a sense, goes up into space, briefly, but it follows a ballistic trajectory, and requires heat shields and all those things i described, and it's aimed at a specific target. >> right >> the north koreans have made progress now toward doing that what i'm saying is that if they had wanted to, and the same will be true soon i'm very afraid of the iranians, if they want to detonate a nuclear weapon up above the united states -- >> right >> somewhere in orbit, 50, 100, 200 miles -- >> that's within -- >> that is much easier to do and it knocks out, i'm afraid, under most circumstances, the major share of our electric grid >> that's all we need. so what -- china going to help

eentzly? president trump is sort of laying, sort of nudging them again today. >> china is kind of the ball game on north korea. we really need them. we need their policies, towards exports for north korea, we need them to lean hard on north korea. they're the only real source of north korean hardware, and economic progress of any kind. and they are dragging their feet >> we've got to wrap this up but i've got to ask you one more thing. you were director of the cia is the idea of elements of the cia deep state elements, is that a tin hat conspiracy or is it possible there are still elements left that want to see trump either fail or embar osed >> i think probably there are some who disagree on policy. i think almost all of them are good enough americans that they'll play it straight, even

if their views on a substantive policy matter tilt much more toward the obama way of doing things -- >> but there are people, obviously, career -- >> sure. >> but you figure most of them as you said they're patriots >> i think they play it straight, 90-plus% of the time that leaves 10% -- >> 90-plus >> so 5% >> you know we could talk about a lot of other things. the president heads off to see putin so there's a lot that we're leaving that we're not talking about. >> right >> mr. putin is sitting in the catbird seat, and he can foul up our elections three years from now, and he will do everything he can to do so. and we are -- we need badly to take some steps to preserve our voting ability >> director woolsey, thanks for being with us this morning appreciate it. coming up isorng sckth mnitos to watch, including a deal, "squawk box" will be right back. the power of 100

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well it looks like there will not be a bidding contest for worldpay jpmorgan chase saying it will not make an offer for the company. the bank had approached worldpay in what it calls a very early stage consideration about an offer. just a short time ago worldpay announced a deal to be akwiefed by vantiv for nearly $10 billion. coming up rules of the road.

how deregulation could impact health care mpie acoans,nd investors. stay tuned you're watching "squawk box" on cnbc if you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go? ♪ expedia gives you the world in your hand, so you can see more of it. ♪ expedia.

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containing this information. read it carefully. distributed by invesco distributors inc. health care information technology is one sector that could shift with deregulation. our next guest was an early investor in the space. andrew adams is co-founder and general partner at okay hcft great to have you with us. >> thank you for having me >> first what kind of health care are we talking about? there's so many different ways to invest in the sector.

>> our belief is there's no silver bullet technology there's no app that's going to solve our problems in this system what it takes is a convergence, a purpose-built technology platform, modern technology platform and a specialized service. that combination is what can really impact cost in the system so what we do, is we look at big dollar problems. end of life care we look at a mental health we look at primary care. and we train those solutions on containing those costs >> how, if at all, are your decisions to invest in a particular company have to do with policies and what policies exist at that moment in time >> we do not like taking stroke of the pen risk. what we do is focus on that almost trillion dollars that's wasted or misspent every year in the health care system where can we make the system more efficient where can we provide care at a lower cost setting that is very beneficial for of aing money and getting in front of the cost trensd that we're battling with right now. >> so who -- how -- i'm just

trying to understand like if you have an app that helps to manage the cost of end of life care >> absolutely. >> who is paying for that app? how does the company make money in that situation? >> so it's a great example so when becky goes out to omaha and charlie munger's talking about the $200 billion we spend in the last sixmonths of a person's life. their company out there is aspire health care they get in front of that end of life care 12 months ahead of end of life, dealing with that conflict patient in the home and community and outside of the hospital it's a third of the cost and you can do that through a specialized technology platform and a specialized care team coming together. and it's a win, nine out of ten people don't want to be in the hospital receiving that type of care, and again a third of the cost of providing that care in the hospital >> so, a long time ago, you're talking about end of life care and the last century, it wasn't that long ago, and the earlier part of the last century, a

patient went home, and if he was dying his family surrounded him, and he died beautifully, and without a million tubes everywhere, spending money, and not really having a change in outcome. how does this save money, and how does it change what we're doing right now, in spending a ridiculous amount of money with patients that really aren't getting any benefit? >> it's a very similar model to what you just articulated. that $200 billion is spent in the last six months, a significant portion of that is in-patient -- unnecessary in-patient stays you can still facilitate high quality care in the home and community through the use of a modern technology, a care platform that unifies that team, and again, providing high quality care and that lower cost -- >> and saving all that money >> absolutely. >> the flip side of this is that technology can be used to prevent conditions from happening, and to monitor

conditions to ensure compliance for medications. how big a part of your portfolio, if it is at all, are things like apps that help you monitor your health, monitor for instance diabetes, or monitor, you know, medication >> you know, we're big believers in the use of preventive care. but again, we don't believe that can be done with just an app it has to be married with a specialized service to really change the behavior of that individual and so, really, we focus on more of a convergence than an app, per se >> all right >> we have to leave it here, andrew thanks so much fascinating. >> thank you >> sam, you're -- if memory serves you're an m.d., are you not? you're a ph.d. okay then you can't help when you eat 72 hot dogs in ten minutes, what happens to your -- i mean is that healthy can that not be -- >> all week we've been hearing about this hot dog eating contest. >> first of all that stomach is

really stretching. >> it's stretched. and what happens over the next three or four days >> you go to the bathroom a lot. >> you do a lot -- >> i worry -- >> he wants to know how. >> no, i've got some video i'm worried this is eventually going to happen at one of these hot dog eating con -- this was a blueberry pie eating contest that the people haven't seen this video, this documentary -- that's what can happen -- >> it's not a document rid this is a movie! >> this is -- >> this is not real. >> it's not -- >> i thought that -- >> i thought it was real >> i mean it's happening -- >> oh, it is you're right it's "stand by me." okay but i'm worried that is going to happen at one of these hot dog -- >> i'm worried, as well. somebody is's going to throw up -- somebody -- >> there are consequences to -- >> there are consequences -- >> to treating your body like that op have you seen these things? pele are about to, because you cannot regurgitate any part of what you're consuming -- i hired some help. he really knows his wine.

this is the new guy? hello, my name is watson. you know wine, huh? i know that you should check vineyard block 12. block 12? my analysis of satellite imagery shows it would benefit from decreased irrigation. i was wondering about that. easy boy. nice doggy. what do you think? not bad.

time now for your kensho stat of the day --

fourth of july weekend isn't just about barbecues and fireworks it's about big hollywood movies hitting theaters julia boorstin is in los angeles with a look. >> the holiday weekend failed to turn around a weak summer box office with the summer season down 9%

from last year, dragging the year to date u.s. box office down nearly 1% from the year early according to com score that reverses gains we saw earlier in 2017. "despicable me 3" topped the weekend in the u.s. but about $10 million lower than the opening for "despicable me 2." sony's baby driver and will farrell and amy po her's comedy the house from warner brothers fell flat. with the exception of wonder woman and guardians of galaxy,er, it's not expected to improve. saying in a note given tough comparison for july and august we estimate 3 q will likely fall roughly 6% morgan stanlly slashed the price target on regal on a lower box office forecast. for studios, the bright spot continues to be overseas where films continue to outperform

despicable 3 off to a huge start internationally and the fifth films in the pirates of the caribbean and transformers franchises have had a huge run overseas the global audience can further shift what movies hollywood decides to make. back to you. >> thank you julia boorstin up next, biotech's landlord shares of alexander real estate up 9%. iswi jn rhtftig aer th (baby crying) (slow jazz music) ♪ fly me to the moon ♪ and let me play (bell ring) the power of 100 of the world's top companies. the power of a proven

15-year track record. the power of an etf. the power of qqq. the thinking we put in, clients get out. power your client's portfolio at powershares.com/qqq. 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. containing this information. read it carefully. can we at least analyze customer can we push the offer online? legacy technology can handcuff any company. but "yes" is here. you're saying the new app will go live monday? yeah. with help from hpe, we can finally work the way we want to. with the right mix of hybrid it, everything computes. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call

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welcome back to "squawk box. one company helping build the biotech rev ligs literally joel marcus ceo of alexandria real estate equity a reit that owns life sized buildings. >> we own and operate the best facilities and the best aaa locations, the key coastal science and technology markets on each coast. >> they're clustered and i was looking at -- >> indeed. >> when i saw cambridge i was going to ask you, kendall square or out near harvard square kendall square probably. >> kendall square, technology square, and the street corridor, three large campuses surrounding m.i.t. >> so, you own the buildings or do you own the -- is it also

part of the centrifuges and the equipment or just the space? >> it's basically the infrastructure and the land. >> yeah. >> so we provide the infrastructure so that companies can do great -- make great scientific breakthroughs >> and they do, i guess, because of talent being close to the university or intellectual, you know -- a place to draw the -- these people from so they congregate together. you must have some in south san francisco. >> back in 2004 we made a big bet at mission mission bay in san francisco when no one was there, '05, a big bet in new york city before the industry came here in a commercial way and '06 a big bet on cambridge and luckily those bets turned out to be well-placed bets and today the best place to recruit and retain great talent. >> i'm trying to understand your business, how closely do you mirror biotech stocks or what measure do you look at to determine whether companies will

be willing to take on space? >> well demand is generated by -- the biotech and pharma sector is not so much tied to the general economic macro economic condition it's more event driven and 50% of our revenues are from investment grade tenants we actually can sleep well at night. over half of our leases are over ten years. and our shareholders and 80% of our revenues come from these class a buildings, brand new buildings, in these amazing markets. so it's actually a very safe "i." it's kind of an alternative way to play the industry in a safe fashion. this year we've given guidance for about 10% earnings growth and a 3% dividend more or less it's pretty good as a stable investment. >> so, when i read sam zell's book and learned a lot about reits, by reading that, yours is really different than the

paradigm you know, we see, you know, with equity partners that they built space in these great office areas, the best buildings, the best space, but you do something really different and you're outside that pack and you don't really have the changes that occur for the rest of the industry. >> that's essentially correct. we have very similar super new, high-tech buildings, but they have the infrastructure as you know to drive laboratories, the infrastructure for the gases, the waters, the -- >> right. >> the air >> and floor to ceiling heights that allow you to put that infrastructure in. floor loading capacity which allows you to put heavy equipment. so those are buildings that historically investors schehied away from. >> do you worry about the private or public sector more? do you need a national science foundation funding to continue >> n.i.h. funding. >> people ask what keeps you up at night it's one word, government.

industry, the factors that drive our demand really are multi -- multiple one is the r&d generated by the private sector which is about $180 billion a year and has had increases every year, the n.i.h. and other government funding is about $40 billion and luckily it's been pretty stable, philanthropy today is about $30 billion in the medical research which years ago didn't really exist, and about another $15 billion of venture so you have an over $200 billion of r&d per year going into this sector which really drives space demand >> so $120, right now the reit, the units i guess, yeah? >> it's a share. >> that's a share. okay >> up about 93% over the last three years. >> it is the yield is almost 3% you buy it for both yield and -- >> correct we've given reits have two parts of growth, one is internal growth from existing assets,

ours this year is predicted to be 6%, which is at the high end of reits, and external growth to be approaching that, which is also strong. plus the dividends you get a pretty good return. >> all right >> better than investing in bristol-myers, right. >> thank you and sam, thank you >> you're welcome. >> melissa, thank you. joe thank you. especially for that throw up video. you don't do that -- make sure you join us tomorrow "squawk on the street" is next ♪ ♪ become to life back to reality ♪ good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with david faber and jim cramer who is back at post nine of the new york stock exchange first full day of the new quarter and a lot to keep on the radar including north korea's missile test, president heads to poland and later the g-20.