"squawk box" begins right now. live from new york where business never sleeps, this is "squawk box. good morning, welcome to "squawk box" here on cnbc. we're live at the market at times square becky and andrew are off today guest host, jason trennert great to have you with us. >> thanks. >> big day here. we want to take a look at the u.s. equity futures ahead of the release of chair powell's testimony. that release happens at 8:30 a.m. eastern time before he actually testifies on the hill at 10 a.m. s&p 500 looking to open down by 10 dow jones indicated to open lower by 73 points the nasdaq looking to lose at 32 at the moment. overnight the china ppi had the lowest reading in three years.

the nikkei was off by .10. hang seng managed to edge higher by 1/3 of a percent. shanghai comp down .4 of a percent. over in europe, take a check there. we have red arrows aside from italy which is managing a .6 percent of a gain. the dax is down by half a percent. as for treasury yields, it seems to be in focus it has been in focus as we are waiting. fed chair jay powell might say about a potential rate cut in july the two-year now 1.925%. quite a steep rise considering that the recent low is 1.696%. >> 195 on a close. >> amazing yields. >> obviously stretched lower in trade news, top u.s. officials, talks back on the hill the first high level talks with the chinese counterparts yesterday. they continue to try to work out a trade deal people close to the conversation say both sides are going to

continue talking but that existing tariffs could be, in their words, the new normal. netflix is losing another high profile tv property next year "friends" is moving to warner streaming service hbo max. this is a second big blow to netflix. cnbc parent company comcast announced "the office" is moving the fresh prince of bel air, joe's favorite and pretty liars. they didn't announce a subscription price for hbo max i think the question here is is netflix really facing finally that competition that everybody had been projecting but in the next couple of years we have disney plus, hbo max, you have a comcast streaming.

>> disney content and all of the rest of it and all of these things. >> right. >> i guess what we don't know now. we know that it's a huge source of from from the users, time spent on netflix and all the rest what we don't know is what filters into the subscription decision. >> that's all that matters. >> the background stuff. the stuff is still in reruns on regular tv. >> that's true "the office" was the number one streamed show on netflix "friends" was close after that. >> which validates what netflix did years ago. >> that's true >> "friends" could seem -- put it in terms of something i could understand. >> of your generation? "m.a.s.h." >> thanks. >> i'm just trying to understand where you're coming from. >> "bewitched". >> honeymooners. >> "wkrc." >> no.

"seinfeld," you can watch it. >> that's true >> is it the same with "friends"? >> all appears where rogs ss --h was already married. >> it wasn't your show. >> no, it wasn't. >> that you grew up with >> and i'm concerned about the well-being of some of the former stars of "friends" as well with some of the pictures i'm seeing. we're all getting old but, wow, what happened to that one guy? what was his name, tyler chandler are you okay, are you doing all right? >> how's courtney. >> i haven't seen a picture. >> she's good. >> they all are. >> sure. >> what are we talking, yearly income do you think? >> i don't know what that could be in royalties. >> obviously warner's got to pay them even though it's within the same company, you have to pay a market rate for the rights. >> i know ross i've met ross a few times. i was sorry to see he was shoplifting over in england, remember no, kidding.

he was -- a guy -- it was -- he tweeted out about it yeah, geez, i was over in -- yeah >> picked up on it. >> he was very funny about it. did it not look like him >> looked a lot like him >> we are traveling -- >> we've been exposed to the same. >> is that what it is? >> cultural content? >> not everyone has. what was the one, our break through moment i can't remember do you remember it >> so touching >> no, no, no. it was the best in show reference. >> yes >> i was here for that >> about starbucks. >> it was a very special moment. >> did you they met in starbucks, these two what canny people, but they

didn't do it wow, big digression. >> hunl. back on track. >> impossible to get back on track. >> we'll try. >> stocks to watch this morning, levis reported a drop in second quarter profit due to a drop in the ipo. they beat forecast but shares are down sharply today as the company says sales growth will slow in the second half of the year on weakness in the wholesale business set to go down 7%. t-mobile will replace red hat in the s&p 500 on july 15th ibm completed the $34 billion deal on wednesday. you wonder how long t mobile will remain. >> exactly we'll hear about sprint. >> rachel by far the most successful post "friends". >> with a living line of hair care products. >> and the recent netflix movie, bringing it back home to what we talked about. >> she looks the same. >> murder mystery.

>> where is -- >> lisa goodreau >> phoebe? >> phoebe. >> do we agree jennifer aniston has taken it furthest? >> i don't know. >> it's pretty hard to argue -- >> that other guy had a show for a while on one of the streaming services that was pretty good. joey did >> how you doin' >> yeah. >> all right hotel chain marriott has been sued by the district of columbia over allegedly deceptive drip pricing. tack on hotel fees marriott has failed for a decade or more to disclose fees the fees could add up to $95 a day. the d.c. attorney general seeking a court order to force

marriott to advertise the full price for a stay to pay financial penalties and restitution to guests. marriott does not comment be on pending litigation. separately, marriott is facing a potential fine from the u.k.'s privacy watchdog. the regulator said marriott hadn't conducted proper due diligence. the breech happened two years before the acquisition they said they would contest the ruling and it is cooperating with the regulator. coming up, firing up the capitol hill grill fed chair jay powell will answer questions from lawmakers we'll get you ready for the potential market moves straight ahead. as we look ahead, we're looking at the dow when it comes to your customers' expectations,

there's one thing you can be sure of. they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪ but we're also a cancer fighting, hiv controlling, joint replacing,

and depression relieving company. from the day you're born we never stop taking care of you. here, hello! starts from thewith -hi!mple... how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome.

so come ask, shop, discover at your xfinity store today. well, as we've been saying, fed chair jay powell is headed to capitol hill later this morning to testify before the house financial services committee. he's expected to make the case that the fed is ready to cut interest rates as needed but he's unlikely to reveal how soon or how far the cuts could go

powell's prepared testimony will be released at 8:30 a.m. eastern. we'll bring that to you. now kristin viverly and our guest host, jason trennert after the jobs report you did not change your viewpoint that we'd get a 25 basis points cut >> we're basically expecting that there will be a 25 basis point cut. the market is obviously pricing 100% probability of that we're really reviewing the data on a daily basis today and tomorrow are critical. whether there's any guidance whether that 25 basis point cut will be taken off the table. given the market conditions it will be difficult for them to do that. >> we've got pretty solid gdp. i don't know what it's going to be the rates are low and headed lower. what's not to like >> i know. there's a lot of data where when

you think of the traditional playbook it's hard, right? economic data is good. there's everything that we've seen in terms of -- there's really no clear sign when we look at that traditional playbook for the fed to cut rates. that being said, the signaling and the market pricing at 100% probability, hawkish surprises have been very rare. when we look at the percentages, in about 7% of cases versus 80% that the fed does what the market wants it to. >> maybe we don't get it -- you know, the big picture and, you know, we're so used to being worried, maybe we don't see that inflation is so low that we're in a place where we can leave rates low and enjoy better economic growth. we got so used to 2% growth. everyone tells us that's the best we can do there were times when we did better ma inwe an, jason, but is ther a time to stay long? >> they're quite good.

the only problem the fed really has is that you have $13 trillion of negative yielding, sovereign debt, which is up 7 trillion from last september so it's not a closed system. that's the only problem the fed really is dealing with, which is to say i agree with you, joe, but by the same token the fed can't be completely blithely unaware of what's happening in the financial markets itself so if you have -- let's say if you have an inverted yield curve of three months two years, there are things the fed probably has to do. >> don't say you agree with me i'm just making the point, i think i can go to the other side immediately and tell you this is one big massive central bank orchestrated bubble that bond markets, stock markets, i read people that believe that very seriously. they were in territory with the stock markets, very vulnerable. >> as we've talked about before.

the dollar winds up really being the governor on the engine for how quickly the fed can tighten. i think the fed might not like to admit it or other people might not like to admit it, but the president was right. in my opinion the fed probably tightened one too many times last year. i think the market's reaction right before christmas eve last year was a pretty good indication of that the s&p fell 9% in four days so it's probably not bad, as larry kudlow said, take some insurance. >> the last move in any sort of cycle of a move that that move in december should be taken back and should be sort of negated. but, kristen, in terms of how you position, it seems like there's a huge risk, you said it's very unlikely that the markets wouldn't get the cut because fed funds futures are

100% that seems like a number one risk the market is sitting at practically record highs that we get hawkish testimony. that he starts saying, you know what, to break the cycle of the markets leaving the fed, jerome powell could come out today and sort of walk that back a little bit. >> that's an opportunity exactly. when we look at the economic data, the jobs report, obviously that was almost an argument not to cut, right? we saw the market adjust having 50 basis points on the table and then 25 basis points really being the only option. so right now the only thing that could talk the markets back is today and tomorrow so powell will have to actually signal to markets that we don't need this cut at this point in time i think the market is going to look to the longer strategy. do we see that a recession is imminent no we at citi maintain a bear market checklist where we look across 18 different factors. right now only four of them are flashing slightly red.

it's the ones that you would imagine. it's basically leverage on balance sheets it's the inverted yield curve. everything else is actually quite positive to put that into comparison, in 2000, it was 17 out of 18. in 2007 it was 14 out of 18. by the way, this doesn't tell us the direction of markets, it just tells us, should you buy the dips if we see a pull back, buy the dips. >> if this whole system was a 25 basis point move in december away from the difference between a good market, a decent economy, an acceleration, what do you pay for that market? is it really -- because we're talking about flat earnings for the first half of this year. what multiple do you put on a market that could be knocked off course by 25 basis points. >> that's why we're advising our clients right now, it sounds very traditional but it's asset allocation, diversification. >> don't wait on the sidelines.

>> don't wait on the sidelines. >> but we must remember, you could never have your money with her. i don't think any of us could. this is trennert this is the citi private bank. i'm not private -- >> we're public kind of people. >> we're all public. >> the people you're talking about are the ones that have a target on their back they have so much money already that we're thinking about like a wealth tax you, too, trennert, i'm looking at you. >> you're saying yes easy for you to say stay long. all your clients are -- >> everyone. >> we'll have a discussion. >> they could keep the bear market checklist to themselves but they don't. >> one of the mistakes they've made regardless of your net worth is staying in cash. >> what's a minimum people need to get in with you >> so we cover the ultra high net worth clients. >> oh, boy. >> ultra ultra. >> we'll talk about those people because we're after them

we're going to have a debate later with the american centers for progress tell your clients -- >> we don't know what to do with the money. >> portfolio. >> we don't know what to do with the money we're going to take from them. >> piss it away like we always do. >> let's talk cash, though, this is important for markets when we look at the carbon the sidelines, whether it's corporate cash, whether it's household cash, there is $12 trillion of household carbon the sidelines. there's another 4 trillion in corporations another 1 trillion with private equity funds that's 70% of the s&p market capitalization. >> you stay right until 7:00 because we never hear this stuff because we can't get into this technical -- but thank you. >> you're more than welcome. any time. jason, you might take her aside. you have -- >> i don't know if i have the chips. >> what does ultra mean? >> 25 million. >> whew! >> 25 million.

>> okay. >> coming up, boeing's disappointing numbers could show disappointing numbers on the leader board. plus, amazon locking up a cosmetic deal with lady gaga "squawk box" will be right back. ♪

you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis. facebook's ahead of its digital currency project libra is calling for more regulation

david marcus says the company needs government, central regulators involved to properly launch libra they're set to testify before congress is that not enathema to everything they're talking about? begging for oversight. >> can you hear yourself >> i do hear myself. >> i do hear myself. check the price. i understand the rationale. >> now you understand. >> that's not what it is can't you use venmo or a debit card >> he came from paypal, david martin. >> that's when this sounds like. it sounds like crypto. what you're selling. >> i'm appropriately

intimidated. >> you know what, once i said shhh to dennis kidding around with him, people now have these reptile -- they think people came from other planets and they're like reptiles. they're nuts they're crazy. >> can we agree on that? >> okay. we agree on a lot. after reporting no new 737 max orders, boeing is set to lose its standing as the largest plane maker to airbus. jet liner deliveries fell by more than 1/3 after the grounding of the 737 max boeing has lost $50 million in market value you can see the divergence. lady gaga is making a big bet on cosmetics the brand is called house laboratories it will launch in the u.s., germany and japan. amazon embraced her message of

self-acceptance and of course this is a push by amazon to push further into cosmetics challenging alta and sephora. >> i don't know anythingabout makeup. >> what? you wear it every day. sure you do. >> try not to wear -- >> everybody wears makeup. >> i need as much help as i can get. >> really? its he hard to reveal the top states for business in the top of the hour. with a rundown of all of the diabolical hints we've had here's a look at yesterday's s& 500.

through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from finding out what's selling best... to managing your fleet... to collaborating remotely with your teams. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.

welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning u.s. equities futures at this hour down 72 on the dow. those are some of the worst levels we've seen since we came in anyway this morning the s&p indicated down about 10. nasdaq indicated down 32 nasdaq and the s&p both diverged managing to eke out small gains. we'll see what happens later. >> 3m was a big issue for the dow. >> after the european markets closed you have european rallies. today is the big day we will reveal cnbc's top state for business in the 8:00 hour. scott comb joins us live from the winning state. where are you? >> don't you know it's early here in the top state for

business that's where i am, the top state for business let me tell you what we're going to do today. this is something we are now doing for our 13 year, america's top states for business. there is a real study as the day goes on. the plan is that in the next hour on "squawk box" we will give you runners up states 5, 4, 3, and 2 you will see how our state stacks up. all day yesterday if you were with us we were giving you our patented diabolical hints. let's give them to you one more time where is the top state for business our lips are sealed, nuts to you, time of my life, surfing u.s.a. and don't fear the reaper we're getting some great guesses. the hatch tag is #topstates.

you don't want to miss the next hour for when this countdown starts next hour is 5, 4, 3 and 2 and the top state will be revealed we will talk with the state's governor in the next hour. >> you have pants on, right? >> that's the first question you have for him >> you know -- >> oh, my god. in fact, don't -- >> never mind. i don't -- none of those clues make any sense to me. >> they're more confusing. i got more confused -- >> he always does that. >> diabolical. >> you know, we have had people figure out from landscapes where he is. he's in a tent i mean, this is like -- i mean, there's absolutely -- and we can't tell if it's dark outside. >> he tweeted a picture, there was a sunrise. >> what time in. >> he tweeted it six minutes ago. >> see, that's cruel >> but you don't know when i took it. >> diabolical.

anyway, coming up, morningstar initiating coverage on six cannabis stocks. you're looking at 4 of them. well, there they are looking forward. the topics as well as the prediction for the future of legalization that's next. "squawk box" coming right back at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

in washington today a house committee will hold a debate over decriminalizing marijuana banks currently cannot invest while cannabis is illegal at the federal level. joining us from morningstar, shading coverage on eight cannabis stocks. thank you for joining us. >> thank you for having me. >> there are so many glowing projections about what the total market could be. so far it's only penetrated this percent, 8%, 6% of the cannabis market what is the total projection built on how can we better understand that is there an assumption that every dollar in the illegal market will be converted to the legal market is that what the total adjustable market is >> yes, i think that's part of it you have to understand the black

market is quite large already so for the growth in the market, the demand already exists. it's simply just converting it the legal market offers advantages that the black market doesn't. on top of that, i would also add that what we generally see in states that have legalized, there's a boost in consumption rates. consumers that would have never consumed cap any bus prior to legalization start trying it after it is legalized. you have some of that effect as well. >> is that the predominant experience that you've seen in terms of what you've seen in those states or are there more states like california, for instance, where when you take a look at the tax revenues received last year in 2018, they fell well short of what had been projected because of a very robust illegal market? >> so what i would say about what happened in california is that states and countries that

have legalized, they're still learning how this works. california was pretty aggressive on the excite tax. the black markets serves as a price ceiling for the market the demand will still come to the legal market if you don't get too greedy about how much taxes you're trying to charge. >> let's walk through your picks. how do you think one is better than the other in such a nascent industry what sorts of catalysts do you think will power the most growth >> sure. two of our topics are canopy growth and kuraleaf. canopy growth is a canadian. they have a standing agreement to buy u.s. based acreage holdings upon the change of the u.s. federal law we really like both of those aspects of canopy. one, the partnership gives them exposure to helping develop

cannabis infused drinks and food for the consumer market late skrer down the road. moreover, that deal to acquire u.s. operation the exposure for a canadian producer, it's rare because of the llegality. we like pure leaf because it is a pure play. the u.s. is going to be the biggest and best market, investors are looking forward to the exposure get into pure leaf. we also like aurora cannabis this is interesting because of the major canadian producers, they're the only one that doesn't have a major strategic partner outside of cannabis. that's a strategic ploy. >> it's jason trennert marijuana is still a class 1

narcotic at the federal level. is there any indication that the trump administration is going to change its attitude towards cannabis >> i think so. so the president has been open to the states act proposal that has been put forward by senator cory gardner, a republican out of colorado and elizabeth warren that bill actually has bipartisan support that would allow states to recognize the right to choose the legality we think that type of legislation is the most likely that's going to pass. >> that would still not allow most institutions from participating in this trade though, christopher, correct >> i'm sorry, what was that? >> if it were up to the states and it wasn't deschedule ieszed on a federal level, that would

stil bar them. >> it would be removed from schedule one but it would recognize a state law that would make it illegal. >> with the excitement as we kind of handicap the prospects for legalization and all the rest, dial it forward. what does this industry look like in a mature state are we talking about agri-businesses? will it be archer daniels midland? where's the excitement long term for the actual business in this area >> sure. i think you're right i think when you look at the cannabis companies now, they all look sort of similar they are all pretty much cultivators primarily. i think what you see ten years down the road or further is that there's going to be a divergence of what they look like there's going to be companies that remain focused on the cultivation aspect then you have the emergence of

companies focused on the consumer market. and then potentially also companies that are focused primarily on the medical market. >> christopher, we're going to leave it there >> thank you. coming up, netflix under pressure with two of its most popular series set to leave the service in the next two years. and we'll talk about the evaporating moat and other shows that netflix could potentially lose as we head to break, here's a look at what's happening in the european markets right now sfx: [phone ringing]

you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by automating claims with machine learning and analytics, cognizant is helping insurance companies advance how they serve even hard to reach customers. cool ♪

♪ ♪ big news in the streaming wars with one of netflix's most popular shows leaving the platform julia boorstin joins us from sun valley with more on the big news julia, good morning. >> reporter: well, good morning to you, mike at&t's warner media announcing the name of its new streaming service. it's going to be called hbo max. and this service will launch with 10,000 hours of material and a new deal with warner brothers tv. they will have all 236 episodes of "friends" which happens to be the second most popular show on netflix. it will be the warner brothers produced shows with cw the company announced exclusive movie deals with rece

witherspoon's hello sunshine and greg berlante. now this news that netflix is losing "friends" to -- netflix is losing "friends" to warner media comes two weeks after nbc universal announced it will pull "the office" for 2021. john stenke and everett hastings are both expected here in sun valley though we haven't seen either one of them a riff just yet. >> julia, stay with us your a up early. for more on all of this, let's bring in tom rogers. former ceo of tivo and cnbc contributor. tom, obviously every emerging player in this world is trying to marshal the known assets to beef up their offering where does it all head

do you think this is a genuine edge that warner media has going out with hbo max to pull in the "friends" catalog? what else does it take, i guess? >> the first competitive move here has to be rebranding the show cnbc max. this is the longest show on cnbc and the great max myers as your executive producer, this has to be hbo max i think this is a yawn for netflix. netflix originals. ten of the top most watched shows are netflix originals. because of the tonnage that friends or the office has, yes, it's a popular show. there are three things that drive netflix. one is new sub, two is low

return and the price value relationship "friends" is not the key to any of that. it's the original production that drives all of that. >> if it's a yawn for netflix, is it not a particular advantage for hbo max trying to charge a comparable comparable monthly subscription fee to netflix? >> at&t warner has to manage the decline of the traditional business while trying to build a new streaming business and this hurts on the traditional side they're obviously giving up a lot of license fees. $100 million a year just on this show they have some melting ice cube problems like directv which is something that they have to balance in the midst of trying to build a new streaming world i think it's something that shows some commitment to building some streaming. i think it enhances it in some ways but look, 10,000 hours of programming on streaming just in

one year last year i think netflix added about 2,400 hours of new originals in one year to a massive library of content there are a lot of arms dealers out there, studios that are going to be willing to sell their shows to netflix still who are not in the streams -- streaming business themselves and therefore don't have the conflict of netflix picking up the content elsewhere is not a problem. >> it's within the company, they have to pay for the "friends" rights, but how do you size up the hbo offering here? >> sure. well, looking, i agree with what's been said and our digital media team also agrees, this is not as impactful for netflix look at the other aspect of that they're doing. they have all the original content from hbo and interlaced in the announcement are a bunch of new content they'll launch. clearly having this original

content and building the libraries is what's important. they pushed the launch out they have hbo go and they indicated to us it will be the end of this year but now it's next year. we were hoping they would have had it earlier but clearly leading with their own content, leading with what they can do best and control is what's really going to ultimately drive the value here. >> julia, you know at the -- at the bottom -- the end of the day i should say, it only matters whether or not netflix will lose subscribers by losing the shows, but this might provide subscribers a window of time to cut their subscription to netflix and switch over and to help them keep them sticking around in between "house of cards" and the great originals >> i think that's right, melissa. i think it is worth raising the question about whether people may -- they may subscribe to

netflix because they want to watch the new show or the new movie that everyone is talking about but the reality is that a lot of if bulk of the time that people are spending on the platform is watching shows that netflix is licensing from third parties. so i mean, tom is optimistic that people won't care if all of the popular shows disappear from the platform but i think the question is if you look at the wealth of new other alternatives that are entering, whether it's disney plus or you have the nbcuniversal service that will launch next fall or the fact that hulu and amazon are investing in other content the question is what happens when you have two things. more alternative subscription services and the fact that you have so many of the providers of content and netflix pulling stuff off the platform, will the combination of those two things make a difference? not immediately, but next fall when people say, hey, this hbo max thing may have more to it than what i was getting from netflix or if there's netflix fatigue. so much pressure on netflix to continue to spend billions and

billions of dollars on content while they're fighting with the fact that they're losing some of the core license properties. >> but that's the point. they can spend billions and billions on content. they're spending about $15 billion this year. the majority on originals. they have created the kind of scale where they can do that where others are going to be spending a couple billion dollars a year and there's no way to catch them in terms of new subs, in terms of lower churn and in terms of a price value relationship when they have that many originals particularly of the quality they have coming to the market. remember, for the first year this year, hbo was not the leader in emmy nominations netflix was. in 2013, netflix set a strategy. they said we'll be hbo before hbo can be netflix and they did that and -- >> but it -- >> it's also a matter of the investment i mean, hbo has to pull back on

investment as the government had them tied up for two years i think you will see them come back but again it gets down to where you're willing to spend that original content is where you'll drive the traffic. >> but it's a pimple in some ways compared to what netflix is spending i think "friends" turns it well. hbo said netflix is the albanian army they're friends, you know what, they won't hurt us we can deal with that then they said they're frenemies and we're addicted to the fees that netflix gives us we know ultimately they're going to hurt us they couldn't get off the heroin to use another entertainment double entendre. now it's their enemies, they'll eat our lunch if we don't get into the streaming business but netflix has a massive lead it will be tough to catch. >> but netflix does have a massive lead but i think you have to look at the fact that shows like "the office" and shows like "friends" are very unusual. they're just aren't that many

properties like that that have so many seasons, so many episodes and people get sucked into so i think it will be interesting to see once, you know, people realize that you have services, whether it's like disney plus or now hbo max that have those tried and true series that have a built-in fan base. the kind of shows that people are going to watch over and over and they have to find one or two to get anywhere close to that kind of popularity netflix also sort of has the issue of the fact there's so much content on there they have to really work on making sure that that content that's right for the individual viewer can surface. because a lot of people especially in hollywood are talking about the fears that their great content is going to get lost in the mass of hours that is on netflix. >> yeah. obviously, netflix for now playing by kind of amazon rules, wall street letting them spend all this money and having this high valuation on the way to real profitability, we'll see how long that lasts. we have to wrap it there tom, frank and julia, thank you very much. all right, coming up

senator pat toomey is going to join us next he is gearing up to question fed chair jay powell in front of the banking committee. he'll give us a preview. he's a big powell supporter. one of the biggest coming up we'll reveal the runner-ups to the top states for business places five through two. this is like some of the beauty pageants where i get confused. runner-up is that second, i don't know stay tuned "squawk box" on cnbc will be right back

the fed front and center as jay powell heads to capitol hill we'll hear from the ranking member of the house finance services committee and what you need to be watching for. moguls gathering and we'll discuss the battle for your living room. and is economic growth bridging the wealth gap? second hour of "squawk box" begins right now ♪ >> live from the beating part of business, new york, this is "squawk box. >> good morning.

welcome back to "squawk box" here on cnbc i'm melissa lee with joe kernen and mike santoli taking a check on the u.s. equities futures, we're indicated to open at the dow is looking to lose 66 and the s&p 500 down by nine points and the nasdaq losing this morning and the testimony will be released this morning by jerome powell levi's reported a drop due to the ipo from back in march. the shares are down sharply today as the company says sales growth will slow in the second half of the year on weakness in the wholesale business stocks set to open down more than 6%. and top u.s. officials held high level talks with the chinese counterparts yesterday, the first time since the g20 summit that that happened. people say both sides will continue talks but existing tariffs could be quote the new normal. and "friends" no more. netflix is losing the high

profile property next year and it will move to hbo max. this is the second big blow to netflix within the past months cnbc parent comcast announced that "the office" is moving the upcoming streaming service hbo max will offer warner's library of content including the fresh prince of bel air and pretty little liars. we'll ask david zaslav about this in a few minutes. jay powell is set to testify in front of the house finance services committee this morning and tomorrow as well he will appear before the senate banking committee and while president trump continues to criticize the central bank chief, senator pat toomey has been a defender of powell's record and fed independence. he joins us now, he serves on the senate banking committee just reading between the lines with some of your comments, senator, were you as big of a fan of the bernanke/yellen

tenure or as part of your respect for or admiration for jay powell that he's tried to rein it in and tried to maybe reverse what might have been some irresponsible or profligate policy >> well, you're hitting the nail on the head, joe, as far as i'm concerned. i thought that the very, very long extended period of zero interest rates and negative real interest rates was very dangerous, long after the crisis had passed the fed was engaged in a monetary experiment that we had never seen and i just -- i just thought this was a very bad idea and chairman powell i think he resisted a lot of that policy while he was there and as chairman he's the guy who has been normalizing rates have been increased to what has got to be close to a neutral rate balance sheet is gradually being wound down he has done it in a way that's really -- it's been received relatively calmly by the

markets, generally speaking. >> yeah. >> you can argue that they overshot by a quarter point in december fair enough. that may have been the case. but look, this has gone more smoothly than i thought it would. and chairman powell it was a lot of credit. >> probably not surprising, i mean, i can remember, you know, in my college days at 2:00 a.m. they come and say, you know we have to close. this is last call. it's like you don't like the people that are moving the punch bowl -- it's just natural. >> not the most popular people in town, right. >> it's so easy to love someone that keeps rates at zero but is it possible, senator that we have -- that we haven't appreciated technology and innovation and productivity and amazon and the internet enough to see that maybe the old

interest rate levels based on inflation are anachronistic and we're in a new era i hate to say that. >> no, i think you're absolutely right, there's something going on that's different, right i mean the neutral rate has got to be lower today than it used to be. how else do you explain all of the treasury yield curves although i think the interference of central banks -- i mean, the sovereign debt market in europe is absurd the idea that you have a german ten year that yields 40 basis point below zero to me that doesn't make any sense. but your point i think is essentially correct. i will say one other thing i think we probably still systematically overstate inflation because of the constant product improvements that are harder to quantify. we can register the change in the price of an apple that you eat. but the -- you know, the apple product that's in your pocket gets better every time a new one comes out and it's harder to capture that so, yeah, i think technology is absolutely changing markets and the economy

in profound ways >> it would be great if it was based on inflation it wouldn't be great if we were tethered to the low rates because of the crappy economic policies over in socialism land over in europe and that's what we're seeing right now you look at trying to run italy with the same currency as some of the - >> right. >> that's not working. and so we're in a global interest rate environment right now and maybe we're being held artificially low by their inability to grow. >> i think there's some of that. i really do. it's hard for me to imagine that euro land having negative interest rates and it's hard to believe that doesn't have some effect, some ability to artificially lower our interest rates but still at the end of the day i think this judgment that the fed has to make clearly there's been a deceleration of growth in the u.s. i think we're still growing. i think fundamentals are still good but clearly, they're not quite as strong as they were in the

first quarter and there are more threats emerging and as i say with the entire yield curve trading at at least a quarter point, more than that, below fed funds i think that's why the market is expecting a rate cut coming up. >> senator toomey, how are you >> good. >> good to see you do you think populism in some ways ask a result -- is a result of central bank policies which is to say that monetary policy being so easy is essentially benefited for lack of a better term the wrong people. wealthy people have disproportionately benefited and the average guy gets zero or less on a savings. and again, maybe going back to joe's point, if you have $13 trillion of negative sovereign debt around the world what can the fed do to escape

the black hole that you find yourself in without a closed system >> well, i mean, to your point i think the answer is yes, i think the fed's behavior when they held rates at zero did contribute to some understandable resentment. financial assets, people who had accumulated some wealth saw their wealth increase in value whereas the guy who is living from paycheck to paycheck and maybe has some modest savings probably had that in the bank on a deposit basis earning him zero so yeah, that wasn't very fair by the way, it didn't give us booming economic growth. because the problems were really on the supply-side so at least i think our policies are much better now. we have a much more constructive tax regime, we rolled back the excessive regulation and we have an expansion on the supply-side. that's part of the reason that we have no inflation. >> but you don't blame president trump, do you?

i mean, you know -- and, you know, i know he -- for his maybe not the most noble reasons he wants to be able to brag about the economy. he wants to win. it's all about his scorecard on how he's doing, but a stronger dollar really does not help -- at least in his mind in terms of trade imbalances and everything else you see where he's coming from, right? >> i totally understand. what president doesn't prefer a lower interest rate? i'm not sure i can think of one. i think that's the norm for a president. >> right. >> that doesn't mean it's always the best and appropriate thing for the economy. >> but doesn't mean it's not though. >> sometimes it makes sense and sometimes it's not such a good idea you know, i think the fed is taking a very prudent approach they'll watch the data the market is convinced we'll get a rate reduction at the end of this month. the market's probably right, i suppose. you know, but let's take this carefully and prudently and one step at a time. >> they could have kept yellen.

>> yeah. i'm in favor of having chairman powell there. >> so senator toomey, you're a supporter of chairman powell and prior to the jobs data the markets believed that the fed was going to cut by 50 basis points that would diverge where you think they should be at this point. do you support chair powell because of your belief in the independence of the fed or do you support chair powell because right now he has been the person who has been trying to move towards normalization? >> really it's both. and i'm not suggesting that i know exactly where the fed funds rate should be like i think the fed is in a better position to make the call and the people there now are taking i think a much more prudent approach than what we had, you know, some years ago. but i do think it's also important that the fed have some degree of independence now look i think they took their independence and they ran a little wild for a period in the last -- you know, the last number of years when they kept

rates at zero for an extended period of time. >> if he came out and cut by 50 basis points in july or whenever, you would still support him? >> yeah, you know -- i would be a little bit surprised based on the data that i have right now i would want to understand the rationale behind it. i don't want to judge that today. we'll have more data come out between now and then and so, you know, obviously that would also inform all of our judgment about where the fed funds rate should be the other thing i would say, i understand it's important directionally. i understand it's important with regard to market expectations but i don't think the economy -- the strength of the economy hinges on whether the fed funds rate is 25 basis points higher or lower where it is today. >> i was going to mention that what happened? you know, you lived in a time where most people didn't know

who the fed chairman was. >> joe, remember when we stopped everything on all our trading desks and watched what the money supply number was. the only thing that mattered was m-1, m-2. >> maybe it's the crisis or even that or social media or something. i look around and a lot of things i don't understand. i sound like never cracker, like the guy, get off my lawn i don't understand why -- i'm going to talk to cramer later today. he's like buy companies that do well why are we basing investment decisions based on what jay powell says to politicians >> i totally agree. >> maddening senator, thank you >> hey, thanks for having me, guys. >> good to see you. >> thank you coming up, the ceo of discovery will join us and david zaslav is our special guest.

the dow is looking to open lower and the s&p looking to open lower by eight. you're watching "squawk box" on cnbc. "squawk box" is sponsored by franklin templeton

virgin galactic is planning to go public. >> it's an exciting time for space and the investment community is taking a lot of interest in it. >> aviation began in a similar way, right wealthy people wanted to go for a joyride and then it was a necessity. >> basically it's about capitalizing something that will do everything from space tourism to potentially hey! i'm bill slowsky jr., i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back,

it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass.

♪ lady gaga is making a big bet on cosmetics the pop star announced an exclusive partnership with amazon for a new line of beauty products called haus laboratories it will launch in the u.s., germany and japan. lady gaga said amazon embraced her message of self-acceptance and tesla is making preparations to raise output at the auto plant in fremont, california according to a report from bloomberg that said the company is working to increase american vehicle production after logging record deliveries in the second quarter. you see the shares up about 1% indicated right now. about 232. big comeback from below 200, but still beneath the range they traded at for a couple of years. well, it may be hard to believe but school -- i get butterflies when i think about this, the school is starting up in a couple of weeks

did you used to be excited >> yes. >> i knew people like you. but that was not - >> don't tell her what you used to say about people like her. >> no, i'm not but three months used to be the eternal summer, remember even that song "see you in september" that made me feel nauseous anyway, i don't -- i'm not - >> it wasn't about the start of school. >> starting in a couple of weeks in the south, i guess? >> i don't know. it's july. summer goes too quick already. it's july 10th let's just chill for a second. can we just kill the rest of this -- i guess i have to read it don't expect back to school spend tock give real tailors a -- spending to give retailers a boost. the parents will spend about $1,362 on their college student. overall, consumers are projected to spend about $3.6 billion on tech gadgets as more school work gets stored in the cloud i thought that would be easy to

say. i guess -- can it guess lost i guess not. your dog can't eat it. they'll lay out the backpacks and notebooks soon it will happen in late july and in early august. coming up, it's reveal day see what's under that blanket. >> not that kind of a reveal. >> no. which states put it together for business the exclusive study on the best states for businesses. later, media moguls have gone wild. media in sun valley, we'll hear media in sun valley, we'll hear from disney ceo zaslav every day, invesco combines ideas with technology, data with inspiration, ilife and investing are greaterf when we come together.

♪

we're getting set to reveal america's top states for business for 2019 right here on "squawk box. scott cohn is in the mystery top state with a look at the ones that came oh so close. scott? >> look at me now. so our top states producers are always trying to get me to -- i'm like a toy every year they're trying to do something new. it's like they put me through this test. it's kind of like what we do with the states as we get ready

to do this okay, amanda, let's go so it is -- it is ten categories of competitiveness 64 metrics, 2,500 possible points for the 13th year, let the countdown begin. at number five, washington, the evergreen state, down from second place last year still the nation's fastest growing economy, but that growth has taken a toll on the state's already crumb bling infrastructure number four, utah, the bee hive state. it was in third place last year. a well-rounded economy with solid state finances but with the largest class sizes in the nation, education is a perennial weak spot. third place, north carolina, the tar heel state surging from ninth place in 2018. we ranked north carolina's economy as the best all around in the nation, a aaa bond

rating, a healthy housing market and steady growth. 2019 runner-up, texas. america's top state for business last year and always a contender. but lower oil prices have a taken some energy out of the economy. the hot housing market is showing signs of stress and the state still suffers in education and quality of life. but texas still manages top ten finishes in five of our ten categories of competitiveness. i survived so let's again or runner-ups, number five, washington, number four, utah, number three is north carolina, state number two is texas so where am i? i have to zip to the next location and i have to get changed because we'll meet the governor the top state revealed, next hour on "squawk box. you can see where your state ranks at that point. top states.cnbc.com. >> i thought you loved virginia all the time and that wasn't

even in the top five i'm trying to figure out who's left >> maybe it's one. >> i know. but you aren't trying to figure out who's left >> of course. >> you weren't that high there are much higher zip lines that - >> and steeper. >> where people hook the latch back here in superman and superman down. which is just -- it's so frightening. >> you're sitting in a nice, warm studio and you're telling -- >> telling me how to do it it was one of the scariest experiences in my life in costa rica, actually you're not in costa rica, that's not a state. >> you're right about that. >> do you have any other -- what do you think it is >> it's nowhere around here i can tell you. >> definitely not tri-state. >> yeah. >> i would love to find out. >> santoli alamo stuff. >> georgia has ranked highly in past years >> i don't see how the diabolical clues support georgia

but we'll see. all right, scott, zip to your next location. we look forward to the reveal. scott cohn - >> he can't wait until we go to break. he's saying, go to break, please. new data suggests that economic growth isn't helping the working class and benefitting the wealthy. we'll show you the numbers around discuss the unequal consequences of a strong economy. take a look at the u.s. equity futures holding steady and the s&p is looking to open lower by eight points and nasdaq lower by 22. top states is sponsored by comcast business take your business beyond take your business beyond comcastbusiness.com. take your business beyond comcastbusiness.com. beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast busin is s

go beyond the expected, to do the extraordinary. take your business beyond. you might or joints.hing for your heart... but do you take something for your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

♪ still to come on "squawk box," david zaslav will discuss the battle for your living room and much more. plus new data showing that economic growth is not helping the inequality gap robert frank will bring us the numbers. at the top of the hour, a big day for jay powell his prepared testimony will be released in an hour's time, 8:30 eastern time and we'll bring it

to you as soon as it hits the wires. "squawk box" will be right back. [ dogs barking ]

what about him? let's do it. [ sniffing ] come on. this summer, add a new member to the family. hurry into the mercedes-benz summer event today for exceptional offers. lease the glc 300 suv for just $419 a month at the mercedes-benz summer event. going on now. welcome back to "squawk box. futures right now poised with some slight losses dow down almost 60 points and the nasdaq down 20 and the s&p

down about 0.1%. two hours before the opening bell. media moguls have gathered in sun valley, and julia boorstin is joining us with one of the players hi. >> hi, mike. i'm joined by david zaslav, ceo of discovery thanks so much for coming and talking us to so early. >> how are you >> i'm good. here in sun valley, people are talking about the streaming wars just yesterday warnermedia announced hbo max is going to be the new service. with so many players in this space, who do you think is going to win the streaming wars? >> well, i think it's going to be a street fight and the good news for is we think we have kind of side stepped it. you have the greatest media companies all chasing the same ball, scripted series and scripted movies. so you have netflix, hulu, comcast and nbc are launching. randall and stankey with hbo max. apple is doing it. scripted series, scripted

movies great companies are going to fighting over that market share. price of content going up. it's great to watch. i think it's great for consumers but incredibly crowded and incredibly expensive and none of them have enough and so we're -- our strategy is let's step to the side of that 50 to 60% of the content that people consume is not scripted series or scripted movies. so for us, it's home, food, discovery, oprah, crime, chip and joanna gains we own most of the golf, most of the cycling. okay, people love that kind of entertainment, but we have almost all of that other great quality content. and we own it everywhere in the world. so we have quietly turned ourself into a passion driven ip company and they're fighting over the same producers, over the same talent. while we get all of the great talent in food and home.

we did a big deal where we bought the bbc library so we own almost all of the science and natural history on planet earth and we feel like we're in a good position and we'll watch as they see the market and fight to get scripted series and scripted movies for six, eight, ten, $18. it will be a very difficult fight. >> so we have seen hulu invest more in food content that was sort of a big feature of their up-front this year. we can see netflix invest more in the documentary space and so what happens when those companies decide they want to go after your viewership? especially when you have a company line netflix which is spending billions and billions of dollars >> look, we're secure in our space. we have the top four channels for instance in america with women, tlc is number one with women with oprah when they want to watch food they spend their time with the great chefs that we have and the

great content and most of the producers that produce well in the food area or the home area, natural history or crime we have been doing business with them. more importantly, people aren't buying netflix to watch a home show so for us, we think we have something very differentiated and people come to us for it they come to us for it on all platforms in all languages so they're almost ceding the marketplace and training people to pay for content ip and content is becoming more and more valuable. people are spending more time-consuming talent. >> they may be getting people to cut the cord and people are mostly watching your content, at least here in the u.s., on live tv. >> well, first, the traditional business is in secular decline but our business globally we're generating about $3 billion in free cash flow we have a low to mid single digit growth company having nothing to do with all of the global ip that we own. we have said that we think it's sustainable that we can grow low

to mid single for the next several years so we have decline, but the advertising market is strong the up-front market is strong. we feel that we have a nice growth business. but we're investing in this global ip and we are going direct to consumer with golf, with cycling, with natural history. and we're the leader in women in america and we have that to bring direct to consumer. >> first, in terms of your direct to consumer businesses it is really more about the passion products you're asking people to subscribe for golf or a cycling service here in the u.s. and then you have a broader something more similar to espn. >> golf everywhere but the u.s. >> and then also cycling so my question is as there's this proliferation of direct to consumer services people are only going to subscribe to a number of them they can't subscribe to all of them the fact that there are so many new players in the market just in the next year mean that that's more competition and it's

going to raise the bar to make it harder for you to add subscribers to your services >> i think it will be harder for them because they're doing all the same thing they all have scripted series and movies and the scripted movies are becoming more and more commoditized. you see the same movies on each of the platforms and if you want scripted movies, you can go to amazon prime, netflix, apple tv, hbo max, but, you know, if you think about when you are younger and you waited for a magazine if you love golf we have all of the golf in the world outside of the u.s. we have all the natural history and science in the world we're dominant in food, most of the great chefs domestically and around the world work for us we did a big deal with oprah and with chip and joanna and people that love food will come to food and people who love home will

come to home we think this is an ecosystem will work together it's like a soccer field. >> but there's nothing to keep them from wanting to chase your area in home and food. >> one, we have the great characters in each of the areas. difficult to chase us in natural history. we own the entire bbc library, the discovery library. animal planet. we are the biggest producer of natural history in the world so i think it's hard for them to come into our space. and it's unlikely that they would because those are broad entertainment services but people still come home and they want -- they love golf they love science and natural history. they love food. >> yeah. >> so i think they'll coexist. and we believe that we'll be the big beneficiary because we own all of this passion driven diversified content. >> what about m&a? does that mean that you think that maybe some of the big companies that are not in your space will be interested in

buying a discovery who are you in talks with now? >> well, right now our -- we're driven to make our content better and grow our market share. and continue to grow, you know, right now it's low to mid. we want to push it more to mid and see if we can continue to generate more and more cash. but one thing that's changed over the last two years and that's that each of the players that are chasing that ball, that are doing scripted series and scripted movies, they're chasing ip and none of them have enough. none of them have enough so they're ass they're saying, i need more. who has great differentiated content and they're talking to us, can i have some of your stuff? we are saying for now we'll keep our stuff. we think that we could generate our own assets and we think in the long term owning that quality content unencumbered -- that's a big differentiation. >> but with three mega media deals that have closed in the past year, disney, disney buying

fox, comcast buying sky and at&t closing on the time warner deal your rivals are bigger than ever do you need to merge with another player of your size or do you need to sell to one of the giants to ultimately really be competitive >> well, we're the largest independent media company. and we think some of the assets we have that we're the largest media international company, we're in 200 countries we're the largest player in sports so we think that in our area that we're big enough. we're the biggest player in golf we're the biggest player in cycling, biggest in natural history but in the long run if we're wrong, we have the affinity groups that people love and we're in every language around the world we think we'll win either way. >> are you having any deal talks right now? >> no, most of the discussions that we're having are around getting our content direct to consumer or we're pushing off each of these players and saying we're not ready to sell our content to you. >> joe has a question. you want to jump in here >> good morning, joe.

>> good morning, david i'm wondering if there is a number for you that you'd go, i mean it would be expensive to buy you. take a pretty big player. >> well, look, right now we're trading from our perspective incredibly cheap we are eight times cash flow and trading in $3 billion in cash and we have a sustainable low to mid deal the fact that we own all of the golf, natural history and the street is not giving us credit for that if we could turn that content direct to consumer, we have a sustainable traditional business but then we own all of the differentiated ip and we can get it into the hands of every person on the device, we're start we're -- we're starting to do, as that starts to scale then we could be a hell of a company

and we could have a hell of a run and i could be here in ten years talking to you about the strategy of quality content and not scripted series and scripted movies >> i want to ask you about advertising. you mentioned the up-front was strong and i'm wondering if that's because you're appealing to advertisers as a place for safe premium content as an alternative to facebook and youtube which have been struggling with issues around brand safety is that something that you're talking about with advertisers and have their issues and challenges benefited you? >> well, it -- that's benefitted the whole tv market. there's two or three things that have happened. one is the shiny gloss on the big digital companies has at least for the moment toned down a little bit because of the ability of -- to give clear measurement and what are you next to and the overall view of those brands have diminished a little bit but more importantly advertisers have found that if they want to move product, being on tv, doing a 30 or a 60 second spot with an engaged audience on tv is a much

more powerful way to move product. so more money came back to traditional tv and cable this year in the up-front that's number one. two is we're the number two or three tv company in america and we have audiences that come to us and stay with us. so whether it's food or home or id so we went in to the up-front with the top four cable channels for women and with length of view on each of the channels in a meaningful way where most of the other cable channels people came for a scripted series so we think we went with an advantage. quality brands and a differentiated and scale audience so we did very well in the upfront. i think everybody in tv did well this year, better than last year and scatter has been strong. we have been in a market that's in slight decline but not only do we have a low to mid single digit growth business but outside the u.s. subscribers are

growing a little bit and no question people are spending less time on traditional tv that's why we have made it our business to own all of our content to take it to every platform. >> melissa, did you have one last question here >> actually, yeah, i did i wanted to know what david thought of the role of the likes of an apple or amazon or alphabet in the media landscape, is that driving up content and the costs overall and can you see them ultimately being a buyer of a smaller content company? >> well, look, they have an extraordinarily powerful platform you know, the cable business started with the franchises and you tried to build the business out of a county and then eventually you owned the state they own the world they're above the globe and the ability to go above the globe and offer ip is compelling they haven't figured it out yet but their strategy is our strategy the reason why we own all of the golf in the world is because we think that when you go above the

globe with golf or natural history or oprah or the gains, you could build a hell of a business the rest of media is still mostly owning their content because it's so expensive. they're owning it for the u.s. and then they're selling it off in other markets but eventually, we're going to want to -- the real market cap appreciation is going to go to the companies that can take their ip and go above the globe and say who everywhere in the world wants to see cycling who wants to see natural history and planet earth and be able to draw from the entire planet that's what apple can do that's what amazon can do, that's what google and facebook could do so we all have platform envy but they need ip to attract people to their amazing platforms. >> global platform envy. that's a future battle david zaslav thank you for joining us in sun valley we appreciate it guys, back over to you. >> thank you very much, julia

boorstin the comcast shares are trading higher, it was upgraded from neutral to a buy over at goldman sachs. $54 price target and they added to the conviction buy list they included the strong fundamentals in cables, nbcu sky and attractive valuation across all the metrics. they pointed to the flexibility predicting $59 billion of excess liquidity in 2024. the shares are up 2.25%. >> funny how it works. during the sky negotiations it went down to $31 because there wasn't going to be enough financial flexibility a year later, what has changed other than someone's perception of what the flexibility was? >> deleverage. >> i know. look, the analysts back -- or the people didn't realize that they could do that sky did cost a lot more than what it started. >> that's true all right, coming up the white house and conservative

members of congress are arguing that strong economic growth helps solve inequality but the last two years of growth has done the opposite. robert frank has a look. >> not according to me, but it's done little to reduce inequality and in fact the 1% now has more of america's wealth. we'll break down the reasons and the debates, taxing the wealthy to shrink the wealth class coming up after the break. johnson & johnson is a baby company. but we're also a company that controls hiv,

fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. from the day you're born we never stop taking care of you. i need your attention for a from the daminute.e born what are you looking for? is it inspiration? because she's changing the world. every post out there is like "dream big"

but when it comes time to take action- girl scouts are making a change. we're the risk takers. athletes. leaders. i'm not saying you can't be part trendsetter, but i am saying you need to be all girl scout.

new data showing that economic growth is not helping the inequality gap robert frank joins us now with the full story. >> we are -- >> we are going to parse this. but let's do this. the longest expansion has done little to reduce inequality, in fact it's grown. the top 1% have doubled their wealth over the past decade by more than $17 trillion even during the past two years we have had the strongest wage growth, very low unemployment. the 1% has surged ahead. they own 31% of the nation's wealth at the top -- at the beginning of 2017. it is now 31.1%. so a slight increase there meanwhile, the bottom 90% have lost share during these past two years to 29.9% the top 1% now have $32 trillion in wealth. that's more than the bottom 90%.

so what's driving the wealth gap? one word -- stocks for most americans, wealth comes from their houses and their salaries those as we know have grown, but not as quickly as stocks which are the main source of wealth for the wealthy. equities alone boosted the wealth of the top 1% by over $1.5 trillion over the past two years. there's one way to reduce inequality -- a recession. the biggest drop in inequality over the past decade was between 2008 and 2009 when the wealth of the top 1% fell by $5 trillion. >> yeah, that speaks volumes right there. but you said a lot there, robert i'll tell you why at the beginning i thought the premise was specious to some extent. when i think of growth, i think of the enewed growth just at 3 for the last couple of years i think of the prior eight years in the decade that you talk about as being rather tepid for a lot of reasons for a lot of reasons and that's when i think the fed rightly tried to cause the

wealth effect with qe because we were coming out of a recession you know if you're trying to -- you cause the wealth effect you're trying to getthe stock prices up. the people who own the stocks are going to benefit up. >> asset recovery. >> i think we leave out after 401(k)s. you don't think of all the fat cats the retirement - >> but of the overall -- >> the last two years the income inequality has actually flattened the getting worst in the last two years and most was in the first eight years of the previous administration. >> it continues to rise. >> so does the stock market. >> correct. >> but my point is that -- >> maybe. >> jeff bezos adding $100 billion to his wealth is not the reason we have the stagnant wages >> i know whatever jason said was true too but we have to get to our guest.

our guest from the center for american progress. andy green is the managing director of economic policy with the center for american progress that's about as good as it gets from here probably, andy but i do understand that once people have a accrued a lot of wealth, it's hard to get at the capital gains and if you wait until you die it's never touched. that's place to look to generate some income, have i got that right, to some extent, andy? >> i think you do need to generate income from where it is and the wealth has been accruing to those at the very top and meanwhile those at the middle and the bottom have not seen the type of investments they need to do well. after world war ii, we invested in housing and invested in college. we invested in the middle class opportunities between 2000 and frankly a lot that the obama administration tried to do to turn it around we saw massive

disinvestments with the financial crisis knocking the real wealth of the average middle class family by 49% which they have only barely recovered we have to make sure that the workers have a chance to do well. >> but the people that do benefit from some of the wealthy that paid taxes on the income and then have had -- have been benefiting from capital gains if they saw -- you want to -- do you want a wealth tax so if they didn't take capital gains -- do you think that's the way we need to go? essentially taxed again? >> oliver wendell holmes said the taxes are what you pay for a civilized society and looking at the conflict and the challenges - >> then it's okay to do that >> i don't think it's a form of double taxation but fair taxation we have capital gains taxed way below what it ought to be.

and from the romney ira to other means, the wealthy are - >> i got it. but joel, your point is that everybody is living better now and there's no doubt in my mind -- i mean, i know it sounds like let them eat cake and that's not what i'm saying but the quality of life -- the idea that a lifting tide doesn't lift all boats, it does to some extent we have made some -- when you grow the pie, might be frustrating to wait for it to get redistributed. but sometimes that works better than letting the government just redistribute it because they don't know what to do with it once they get it. >> prime minister margaret thatcher said it best in 1990. folks like andy that are focused on the income gap, they would much rather the poor be poorer provided the less are less rich but no way to create wealth and prosperity end quote. if you look at the past 100 years with absolute wealth confiscation, we know it failed across eastern europe. we know it failed in the soviet

union. we know it's failing in venezuela. but it's also failing where it's been implemented to a far less extent across europe across the oecd the united states, yes, we have the biggest inequality in income and we have the highest average disposable household income you look at us versus german, $45,000 per family here. germany, $34,000 that's because our individuals, our businesses are better incentive sized to grow and invest and that's what leads to the productivity that results in our middle class being better off than the middle class elsewhere across the world. >> jason >> i would just -- my firm has done a fair amount of work on this. >> which the gino coe efficient is the measure - >> the lower it is the more equal the society is the higher it is, the more unequal. to get back to this point, the

higher the per capita incomes are and so, you know, the power to tax is also the power to destroy. it might be the cost of a civilized society. but taken to an extreme you might just -- everyone might be equal but they might be equally poorer i just -- i don't see how that benefits. >> this was not long enough and, you know, you come in here with this incendiary stuff all the time i know they tell you to do this. you look at me - >> it's factual. >> i know. >> to me it's incendiary. >> thank you go to stamps.com/tv and never go to the post office again.

wall street watching washington fed chair jay powell headed to congress today and investors will listen for clues about a possible rate cut. we'll hear what he has to say at 8:30 fighting the faang tax tim armstrong will join us to talk about selling direct to the consumer and getting around the virtual toll booth controlled by the likes of facebook, amazon and google no. and the best state for business is revealed the final hour of "squawk box" begins right now

♪ >> live from the most powerful city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square i'm joe kernen with melissa lee and mike santoli the dow is down under 60 points and the nasdaq down about 20 s&p indicated down 8 the treasuries the yields have moved up in the last few sessions, really since friday. today we are back above 2.1. surging above 2.1, choking off any type of investment or mortgage activity. >> he says it sarcastically. >> yes. >> just in case -- >> you're right. but we have smart viewers. >> we do

we do. okay. >> except for "fast money. [ laughter ] >> why do you anger me like that >> i thought i was throwing you -- >> except for "fast money. they're smarter. >> yeah, what did you think i meant? >> did everyone here think joe was making a slight of my show >> yes. >> we have the smartest except for "fast money. is the bitcoin back a bit? >> it comes and goes the two nations china and u.s. are seeking to work out a trade deal lighthizer and mnuchin spoke with the vice premier and the commerce minister and it came after president trump and xi jinping agreed last month not to

levy any new tariffs on each other. the hit sitcom "friends" won't be on netflix. another hit show that viewers have been able to watch on netflix, "the office," will leave the platform in 2021 that's when it will transition to nbc's streaming service. and if head of facebook's digital currency libra is asking for help to get it off the ground david marcus says it needs government and regulators involved to properly launch libra. marcus is scheduled to testify before congress later this month. jerome powell is getting ready to testify before the house financial services committee at 10:00 a.m. east earn time. steve liesman joins us. >> yeah. the fed officials wanted to stop the rate cut train from leaving the station, they might have spoken up weeks ago. the markets are going into the critical two days of testimony

priced and primed for a rate cut this month so talk about the train being already at next station, 100% of a july cut and a 72% of one in september. it agains -- it dips down in october and that shows the proclivity to think that the fed will do the business on a quarterly basis. then 48% for that third cut in december inflation below target that's one of the big reasons why the fed might cut in july. the trade tensions that are out there. so they may have eased a bit after the g20 meeting and the weak global demand on the other side a strong jobs report raised questions about how much the economy is weakening an not sure everyone is going to deliver today. we don't expect powell to confirm the widespread expectations for july easing leaving bonds and stocks vulnerable to a hefty sell-off that's a minority view given the way that the futures market is

priced i think powell will stick closely to the phrase that the fed will quote act as appropriate to expand the expansion. the question is whether that's enough for the markets it raises a question about fed communications did they let itself get boxed in in december to hike and is it now boxed in to cut in july? does it need to do a better job of maining that -- >> completely boxed in if there's a 100% chance for a cut later on this month, that is by definition boxed in. >> most -- cpi to come retail sales next week who knows what's going to happen on the trade front but all of those are wild cards. what is good i think about this is the market adjusted last week and that's -- that's the way the fed wants the market to react. the job market came out and the probability of that 50% cut -- the interest rate cut came off in july and there are no more 50

basis points built into the future of the market. >> but you say that, you know, had the fed wanted to push back against the market's expectations it should have done so by now but we are still three weeks from the meeting so it's almost a little bit -- you know, too soon to completely allay the market's slight fear they won't get a cut. >> i'm surprised that i'm not seeing that point of view more fully priced in. i don't see -- the only place i see a debate is on the third cut in december. now, i guess joe was talking about the ten year earlier it's not the best place to look at it. the two year is a better place to look at it. and so that's where i would see the doubt creep in i don't see it unless jason -- >> i think from the fed's own credibility point of view it has to go through. >> has to deliver. >> has to deliver it. >> boxed in.

>> it is boxed in because i think clearly in december, people thought it was a bad idea, it turned out to be a bad idea a couple of weeks ago, fed chairman powell suggested that you're going to get one. i think to pull it back now it makes it -- there's a difference between being data dependent and also being schizophrenic you know i think you have to -- markets i think the structure of the markets, yield curve, three months, ten years probably suggest that the fed - >> can we take joe's sarcasm to another level here which is not -- >> don't do that >> i want to be less sarcastic because you made a joke -- you made a sarcastic comment that has a backbone to it, jason, is anybody not doing anything right now? double negatives right there because interest rates are too high and is anybody going to do more if they cut a quarter i mean, i'm not doing -- 2.1, i'm done, i'm out. >> a currency thing.

>> i think it's a currency thing. i think as far as the health of the banking system in terms of the steepness of the yield curve -- >> you need to cut - >> especially given what's happening globally in terms of all of the negative yielding sovereign debt, that to me is the best reason for it. >> so you might -- >> it's not necessarily an economic growth perspective. just that you create the structures so that the financial markets act better. >> all right thanks, steve. let's talk more about fed chairman powell's testimony today. joining us now is ranking member congressman patrick mchenry. you just -- i'm just -- you have a great name i well up with pride patrick mchenry. >> every time you have this poor man on. >> he can't help it. it's not his real name. >> my parents had a sense of humor, let's say that. >> yeah.

summarizing where you stand on this, congressman, that the fed obviously needs to be independent. if you had - >> yes. >> if you -- god help us all, they control too much already, right? but -- >> i agree. >> but i think you also point out that presidents one way or another maybe not to this extent but one way or another they always tried to mass sam or get what they wanted from the federal reserve to try to get on the same page is that fair to say? >> that's fair to say. the fdr interactions with the then fed structure is well documented every president since the creation of the federal reserve has privately expressed concerns with fed policy. and president trump has publicly expressed with every previous -- what every previous president that's had a federal reserve has said so the fact that he's sharing his frustration it's not because he's mad at some personal slight it's because he wants to see job

growth and wage growth continue. that's the fundamental piece and seeing the stock market continuing to rise. >> so what do we need to change around the edges of an independent fed? should it be more rules based? is it okay for someone not elected and potentially -- i'm not talking about jay powell, but let's say some academic who's never really been in t the -- you know, the private sector, should he -- he or she have this much power >> well, the federal reserve at this point in our history has the greatest power -- over the last decade has had the greatest power in the 100 year existence. over the markets, over really decisions by investors and deep engagement in the economy. so yes it has massive power. i think the fed structure is really important for congress to get right and for legislators to get right. but the decisions thereafter are really up to the board structure. we don't have -- and in the last

couple of years we have not had a full membership in terms of fed governors. that's a problem so i think we need to get appointees confirmed to make good decisions for rate cutting or rate raising. and the general monetary supply. and so what -- you know, that's my concern as a legislator, that structural piece each decision, i have the same opinions that you all just talked about, about fed decision making but it's not up to me as somebody who is elected every two years to make monetary policy decisions >> so are you on twitter when you see -- have you seen like musicians and stuff, they get in beefs with each other do you have a beef -- a specific beef with powell about anything right now? is there anything you want to ask him to explain in terms of his actions or something you think he did wrong what do you think he's going to hear today we say he's going to have a tough session the next couple of

days what will the criticism be what will the beef be? >> that's driven by folks in the market i mean -- that's a new york discussion that's a markets discussion. here on capitol hill, he's had deep engagements with policymakers his candor is really welcomed to us as policymakers his openness for fed decision making is really a positive sign not to the completeness that we all desire out of the fed, but in the significant step in the right direction we think but markets are trying to come to terms with how jay powell talks because he talks like a normal human being rather than sort of the -- >> president trump has a beef with him jason, do you have a beef with powell >> i don't i think that the approach to try to get to a neutral rate where the fed can actually stay adamant where there are other policy tools, fiscal, regulatory and trade that push economic growth forward, i think that's a very noble goal.

the problem is that once -- you know, in for a penny, in for a pound. once you start fiddling around with this as you have in the past ten years of financial oppression it's hard to get out of it and global central banks are having -- are making the fed's job tougher to get to that rate i would just ask the congressman, does -- do you think the president has the authority to fire chairman powell >> i think the president has broad authority. i don't know the specifics of the legislation that -- the law that he would use to make that decision that's not been done in the 100 year history so i don't -- this is not something i have contemplated. >> all right congressman, thanks. we'll be watching. ment i made the point, boy, we sure do care what the fed says every -- it's like every week we have something it didn't used to be that way. >> well, i want didn't used to be that way but we have softening in europe, we have softening in china

we see global trends in the economy slowing. so there's real action there. >> you know it's nice they could be behind the scenes helping the u.s. economy perform at maximum efficiency, but i don't know if they should be, you know, one of the key drivers of that economy, which they have become i don't know how you try to extricate -- >> i agree. >> congressman mchenry, thank you. when we come back the wait is almost over scott cohn unveils america's top state for business in 2019 and on the other side of this break, 50 states ten different categories of competitiveness and one winner get your final guesses in. the big real ives next stay tuned you're watching "squawk box" on cnbc this cnbc program is sponsored by wells fargo building a better bank ♪

♪♪ ♪♪ ♪♪

hey! i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. welcome back to "squawk box. it's time to name america's top states for business in 2019. al scott cohn's -- scott cohn's going to join us now and then you'll come back next week and

tell us the real state is this really it, honest to god? >> we have milked it all we can, joe, so yes, this is it. and there's a very serious study behind this which we'll be talking about. so every state -- all 50 states are put through the paces so the state that emerges on top deserves a tiny bit of fanfare so a drum roll, please ♪ the u.s. army old guard fife and drum corps, have you figured it out yet? let's have the top state for business named by one of this state's favorite sons. >> hi, i'm wayne newton, born

and raised in virginia now here's why virginia has been named number one state for business >> from the mountains to the sea, an american original and a business power house. >> tonight, the celebrations have begun. >> amazon has found its next home. >> virginia was already a winner beating out more than 200 bidders for amazon's hq2 project. >> we were really excited by virginia, what it had to offer probably the most important thing was the attraction of this place to talent and particularly tech talent. >> the numbers bear that out virginia has america's top workforce, smart and tech savvy. tied for the top in education and number three for business friendliness with a bipartisan program to cut regulations >> what functions very well in this state is government officials, business officials,

local citizens groups, people talk to each other a lot. >> when businesses large and small want to call virginia home, that is a one-two punch for our economy. >> but not all is perfect. >> what do we want >> education >> when do we want it now? >> now. >> the governor's own history has revived questions about the state's exclusiveness and it's an expensive place to live and do business. this is virginia's fourth win but its first since 2011 the old dominion, back on top. america's top place for business, 2019 and we are live at shenandoah river state park in bettenville, virginia it's an important day, where were we yesterday? well, we were at the james town settlement in williamsburg it's a museum and a village,

everything that is dedicated to recreating the first permanent english settlement in the u.s. now, about those hints our lips are sealed, well, chapstick was invented in lynchburg. somebody else said the cia is here nuts to you, the first peanut crop was raised here in virginia and time of my life, dirty dancing was filmed at the mountain lake resort in pembroke, virginia, even though it was set in new york surfin' usa, 70% of the nation's internet traffic goes through loudoun county and don't fear the reaper, cyrus mccormick, the inventor of the farm implement was born here in virginia thank you for being here >> thank you this is an exciting day for virginia we want to make virginia a place that families want to come and to live and to work and raise their families and children and enjoy the great quality of life. what a beautiful morning this is

on the shenandoah river. what a back drop one of the things you didn't mention this is 50th year anniversary of virginia is for lovers you can see why virginia is for lovers >> that's right. that famous tourism slogan. >> yes, sir. >> this is the first time that you have been top state since 2011 it always seems to coincide with when defense spending is up. >> yes. >> that's been a theme in this state for a long time. that there may be too much reliance on the -- what are you doing about that >> you know, we have relied on the military and government contracting and we always will but especially during the sequestration, the government shutdown we realized that we really have to diversify our economy. and so looking at high-tech jobs, looking at biotech jobs, obviously amazon chose to come to northern virginia which was a big win for virginia but to diversify the economy has been a top priority of ours. >> it is an expensive state, we talked about that as well. high cost of living, high cost of doing business. anything you can do about that or is that just the nature of

the beast? >> absolutely. i think you can start with education and workforce training here we have great colleges and universities in virginia actually we are ranked number one for our colleges and universities we have frozen tuition for those. we have 23 great community colleges we have a plan that we're getting ready to roll out, get skilled, get a job and give back which will allow virginians to go to community colleges without incurring debt we're putting emphasis on the technical training at the high school level and bringing jobs for the 21st century workforce health care is important last year we were able to expand health care to up to 400,000 working virginians so that was a big deal for virginia. and affordable housing is something else that we have worked on and we put it a historic amount of funding into our trust fund this year so that people could afford to live in virginia. >> you talked about at the outset making this a place where families want to come, where workers want to come you had a rough start to this

year, governor your whole top leadership had a rough start to this year i don't want to relitigate all of that, but if somebody is looking to come to virginia and they see that there were offensive pictures in medical school yearbooks in the '80s it's not a long time ago. >> yes. >> what's going on with this state's past what have you learned out of all of this? what should people know about whether virginia is an inclusive state? >> absolutely, the occurrences in february hurt virginians. confused virginians. i regret that. we didn't handling it as well as we should have i have traveled around virginia, i have listened and learned a lot. i still have a lot to learn but the more i know, the more i can do as we sit here today, scott, there are a number of inequities in our society to include access to health care, access to education. access to the business environment. access to the voting booth so we are really focusing on those inequities and our cabinet

members are addressing those you know, i want to let this country know and certainly virginians know that we are an inclusive state. we welcome people to the commonwealth of virginia our lights are on, our doors are open we're not only open for business but we're doing business in virginia. >> so it's easy to say you're an inclusive state and you said you'll dedicate the rest of the term to equality what have you done >> last week we signed an executive order to level the playing field for small minority and women owned businesses that's something that, you know, small businesses believe it or not about 97% of the economy, they're the backbone of our economy. so that was a real step in the right direction. a couple weeks ago we were able to on july 1 give drivers their licenses back, over 600,000 virginians who couldn't drive because they couldn't pay their court fines and fees and we're looking at the infant and mortality rates in virginia.

is a lot of different -- a lot of different inequities are being addressed. >> governor ralph northam, thank you for being with us and congratulations again. and let you know that you can see where your state ranks, see the whole study right now at top states.cnbc.com. we'll have a lot more about this state and the other states and the bottom state, all throughout this day let's hear once more from old guard, fife and drum corps ♪ >> where was colorado? i thought it might be -- virginia wasn't in the top four, so i thought, well, maybe it will be number one but then i thought maybe it's colorado because colorado is usually up there too. >> top five last year. >> all right

i like this. some people could get triggered but i like it. coming up the markets will be paying close attention to fed chair powell could the fed cut rates sooner or later we'll talk about what investors are hoping to hear when "squawk box" comes right back.

dear tech, dear tech, let's talk. we have a pretty good relationship. you've done a lot of good for the world. but i feel like you have the potential to do so much more. are you working for all of us, or just a few of us? can we build ai without bias? ai that fights bias? ai that helps us see the bias in ourselves? we need tech that helps people understand each other. that understands my business. dear tech, dear tech, dear tech, dear tech, let's champion data rights as human rights.

let's use blockchain to help reduce poverty. let's develop new solutions with the help of quantum technology. let's show girls that stem isn't just a boy's club. let's make a difference in people's lives. let's do it all. together. let's expect more from technology. let's put smart to work. you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.

quick check of american airlines up 2.6% premarket they outlined the cost of the 737 max grounding. also raising second quarter total revenue for available seat mile so we are seeing it react in the premarkets. something to watch. let's get to release of the fed chairman's testimony. >> well, powell gives us a little hint of how he sees the economy evolving since the june meeting uncertainties over trade tensions and concerns about the strength of the global economy continue to weigh on the outlook. now, that line really jumped out at me because if you remember back during the june press conference, powell asked the question, he said that while the outlook -- the base line outlook

remained favorable the question for the fed was whether uncertainty would continue to weigh on the outlook and thus call for more monetary policy accommodation. in today's testimony he clearly states thatincoming data shows uncertainty has not abated while he says inflation pressures do remain muted now in in addition to trade he points to a slowdown in business investment he also says that key policy issues remain unresolved he mentions brexit but also as the federal debt ceiling as a new area of concern. a lot of his testimony does track his statement during that june press conference. he said cross currents are reemerging and he said that the economy performed reasonably well in the first half of the year and he noted that wage gains are being shared more broadly amongst low skilled workers but guys, the clouds at the fed saw a gathering on the

horizon are not going away. >> for more reaction to powell's testimony let's bring in our guest host, senior economics reporter, and steve liesman is rejoining. >> the market's up. >> yeah. what's - >> it sounds likely's affirming the market stance. i think you can stop right there. and from that, from the overall look of the headlines that i'm reading here, obviously what elon said, it looks like he eemphasizing the negatives and the challenges and acknowledging some of the strength out there you're shaking your head. >> naturally the stock market goes from negative to positive because he's emphasizing all the things wrong in the economy. >> i think the market feels like it's getting a freebie here. they're getting a cut. >> and there was the opening in theory to say, trade uncertainty has abated a bit. >> he didn't say that. >> financial conditions have loosened >> he didn't say that. global weakness is not a bigger problem -- >> they add another worry. that's the debt ceiling. >> yeah.

he has been on that for a while. >> after the jobs number on friday, no, didn't say that. >> well, he said the labor market remains healthy it's a nod to things over here and a stare to those things over there. >> i like the nod and the stare thing. the yield curve has been telling us for something for a while now people jump to it's telling us a recession is coming and the quote is always out there. a recession is always coming if you don't do something about it. so the yield curve and the -- on the back end is saying if the fed acts and preacts appropriately, quote/unquote, you can get a soft landing if the fed doesn't act -- i don't mean save the equity market if it doesn't right size the yield curve, they have to do more later so you have to rebalance the yield curve according to data as it's becoming fluid and i think this so-called quote that came out here before the testimony are saying that. re-emerged concerns have re-emerged

continued to weigh on. those are strong words to suggest that there's the out for the july cut. >> we should note that the two year yield that's the one we're closely watching 1.86. so we see an immediate reaction, bringing down the dollar index as well. >> it tells you, melissa, there was a bit of a looking over your shoulder, maybe he doesn't give it to us today trade in the market and then that's -- >> exactly. >> chris, i would ask you, i think you and i might be on the same page on this. but what do you think about where we are in the business cycle and also -- i think particularly as it relates to cyclicals versus some of the more growthier stocks. >> we released our midyear report yesterday it's never good to be contrarian just to be contrarian. you can wait a long time for your view to come out. but we're in contrast to what people call the late cycle we don't think we're in the late cycle. look what the fed is about to do look where inflation is. look where earnings and the rest of the world is. there's a dual track economy

the u.s. engine of growth is the u.s. consumer. the rest is manufacturing and trade and that's why the fed is in a tough spot. so we think we're early to mid cycle again because it's the fourth wave. we have been doing this for 11 year so it's not the length but about the components of the business cycle so we think we're back early or mid which is why we're very bullish. >> don't people think it's late because you do have this inversion of the yield curve because you have seen some curling over of things like, you know, business and consumer confidence not that it's an emergency but it looks like it's getting ragged around the edges. >> good point. i think the fed raised rates in december and it cut it off now with the fed going back to potentially and easing bias they can right size the yield curve that's why we think we're going back to early mid. >> a quarter point cut is not going to solve most of the problems that jay powell

outlined in the testimony. >> the thing i know about chairman powell and the rest is that they're very practical people they're not -- they don't necessarily define themselves in stark economic terms which is to say they're not phillips people or keynesians or supply-siders i think they're looking at the yield curve in particular and looking at that and saying this could back us into a serious issue if we're not careful and we have to be -- we have to tip our hat to the fact that the conditions -- financial conditions are such that we have to change our policy i don't think it's going to change economic growth the trajectory of that economic growth. >> kind of a nice chart, if you want to look at the euro which looks to be strengthening against the dollar and - >> which poses a problem for the ecb meeting later on this month. >> it's a big football actually it's a football we throw across the atlantic and turns into the soccer ball somewhere around the atlantic trench and then we throw it back who can out -- you know, sort of

appreciate or depreciate their currency there's the chart right there. as melissa said, the two-year yield has fallen five basis points i didn't get a quick look at the ten year >> came in just a bit. >> just a bit -- >> yeah, the stocks rallied. i think the focus now -- it's a little bit early to say this, but when i think about the data for the rest of the month it has to outperform and outperform the number it has to be super super strong to say to the fed what are you guys out of your minds, because i think the bar is relatively high for them not to cut so i think the focus goes to what happens later and now the market i think has to start to digest this question is it a one and done, is it an insurance cut or is it part of -- i think chris said it earlier an easing cycle. easing bias, but an easing cycle. i don't know if that's the case.

>> that's the next shift right there. i would point to it's a small data point because it's only one company. but a big german chemical company gave us a lot of warning. >> basf. that was pretty ugly that warning. >> yeah. that's about what's to come potentially. so right sizing the yield curve and staving off what that would be in a collateral way is probably what the fed is looking. >> you have to wonder if basf is a taste of what's to come in earnings season but in terms of the yield curve, it has -- has the spread actually increased? that's a big question here. >> we should have a chart in the back on the -- >> it always looks like it's pretty much the same. >> just to look at it, whether or not this was actually a steepening thing i think jason's comments on the idea that that is an animating factor for the fed to move is interesting. something that might help the banks and might -- do you have the spread up there? it might help -- >> yeah, it steepened a bit.

>> it might help the economy but that said if you want money today -- >> you can get it. >> yeah. >> if you can't get it, you definitely don't deserve it. >> right yeah. >> i would say you can get it today. you may not be able to get it the same way six months from now. if you don't right size the yield curve because the cost of capital at the front end being higher than the return on capital a few years out will stop some businesses from saying i'm going to wait. >> right. >> that feeds on it. >> for stocks it's hard to be short going into the second half of the year because the president is getting a rate cut and he's trying to -- it looks like he's trying to resolve some of the tensions with china it's almost, you know, kind of -- you're sticking the landing in terms of what he wanted maybe at the start of the year. >> gentlemen, thank you. chris, thanks for joining us, steve, thank you

jason is with us for the rest of the show. coming up, fighting the faang tax, and it's e aithbrn child of former ceo at aol, tim armstrong. stay tuned

your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

take a look at airline stocks they're on the rise, american in particular up 3% this after it raced the forecast for a second quarter unit

revenue. a quick check of the big banks we were just parsing through the release of the testimony of jay powell the testimony he'll give later on today he seemed to indicate that a july cut is pretty much in the cards. that's the interpretation of it. so we are looking at banks which are weaker across the board. the steepening of the curve, it happened, but maybe not to the degree that many people had thought. >> yeah. >> we did have the two - >> the banks have found a way to grab the defeat from the jaws of victory. we see powell testify. quick break now. when we return, former aol ceo tim msonartrg will join us live from sun valley. stay tuned this is "squawk box" on cnbc

i'm here with michael conrad, head of education savings at jpmorgan asset management paying for college is a huge challenge but you have three ways to start getting ready for the big tuition bills. >> indeed it is challenging given that tuition has gone up 776% over the past 3 1/2 decades so you need to have a plan around this. that plan should include three things one is an understanding of the costs. two, know what to expect from financial aid.

three, take advantage of investment vehicles such as a 529 which also offer powerful tax advantages in when it comes to investing how are family doss >> the average account balance in the 529 plan is $20,000 which is far and away where costs are today for four years let alone tomorrow. >> how can families manage the college savings and retirement >> don't overshoot one goal at the expense of the other the best way to do that is being able to answer the question. what is my number for retirement, what is my number for college and have separate investment strategies for each of the goals >> thanks so much, mike. >> sure. >> for more insights from jpmorgan asset management, search for it online

no welcome back to "squawk box." we saw a turn around after the release of fed chairman jay powell's testimony just about 15 minutes ago. the dow turned around by just about 100 points or so, looking to open higher by 47 s&p 500 looking at 6 at the open and the nasdaq indicated to open up 35 points the annual conference is in full swing and julia boorstin is joining us from sun valley, idaho, with a special guest. >> mike, thanks so much. i'm joined now by tim armstrong. tim, in february you unveiled a totally new company direct to consumer and now you're unveiling unbox, trying to connect consumers and brands and what is unboxed?

>> i think this is our tenth year doing this interview before sun valley so i think the next ten years for us is really about building a direct to consumer ecosystem and unbox is an ecosystem basically allows consumers to directly connect with brands an brands to connect with consumers consumers on their phones have enabled through the camera and through nfc codes the ability to directly connect if you pull your camera out, go and scan an unbox code it takes you directly to the brand and from a brand perspective that allows you to have a direct customer relationship or customer ownership with the consumer that allows you to manage the acquisition costs and allows you to build a different type of relationship than over the last ten years the platform companies have done a great job of that. but the future we believe is in direct to consumer >> the platform companies are facebook and google and the brands you're talking about, these direct to consumer brands have basically lived on the likes of instagram and facebook.

you know, companies that you have invested in like dirty lemon, like olive and june, products that people see on instagram then they click through to buy their products on instagram. how is what you're doing different in trying to remove reliance from the likes of instagram? >> we think that the faang companies are super strong and will continue to be strong what we have built in the ecosystem are an online/off line so you can go on tv, catalogs, at a home, go into the web, go on mobile, go on social, you can go on events where we're announcing two events today. one is an event that hit the midwest, ohio, michigan and indiana and then a national dtc day on november 15th out of soho in new york that will get broadcast to the whole country and you get introduced to great dtc brands i have one on right now, roan has partnered with us.

we have 10 or 12 companies that have signed up to be in this ecosyst ecosystem. so the faang companies will continue to be strong, and we are zeroed in on partnerships -- it's not a winner take all but a winner for all marketplace that's about giving brands access from directly from your phone, directly to a brand and for a brand to keep the data and keep the crm relationship they have, you know, with consumers. and in that ecosystem we have signed up some partners, quad who's one of the largest marketing operations companies in the world put an investment into dtx and unbox and they have also lined up a strategic partnership with us we acquired tipster one of the largest social media ecosystem companies run by andrew and daniel, two successful entrepreneurs out of the stanford accelerator so ecosystem we're building is all companies that want to have direct to consumer businesses and relationships. >> you had described the idea that small businesses pay a faang tax. they have to pay a certain amount of their revenue to reach

consumers through the likes of facebook and instagram and they also don't get the data that need from facebook and instagram. how are you going to help them move away from that and does that mean you're effectively stealing ad market share or -- you have the potential to do that from the likes ecosystem ad say that our business is built off of retail e-commerce the second piece i would say is in our model what we're building is the direct connectivity we expect all brands use social and google and those things, but really you can essentially create an online/offline direct connection model which is when unbox is doing we want the physicality of you as a consume er making a conscience choice. there are other platforms, algorithms will direct you to other places our model is based off a specific consumer action they're choosing to take that consumer action is very, very valuable. so i believe our brands will

basically be able to augment and expand their market share outside of the faang companies and really control their customer acquisition costs >> so help to diverse other businesses away from reliance on faang companies. if you want to give small businesses more access to data about who their shoppers are, how they're shopping, do you think the way the faang companies use data needs to be regulated? what do you think about this big push to regulate both the data usage and privacy as well as the content that exists on facebook and google and the like? >> what i would say is in our -- those companies did an unbelievably great job of organizing the internet when it was chaotic and chaos driven we think the next generation basically is going to be able to use data, information direct between consumer and a brand and i don't know whether or not those are going to get -- platforms get regulated or not with today's technology, you don't need to go through one of those platforms to have a direct relationship and i think the

small businesses and the medium and big businesses we're dealing with basically are starting to understand the fact that data -- data is the oil of the economy for these companies and if those platforms don't allow you to have that data, you know, you're basically one step removed from your customer, one step removed from understanding how to run your business properly our model is to basically give you those things our privacy policy is built for that we think it will be a different model. >> the giant in the retail space is amazon. and there say lot of concern that amazon and other companies are too big. do you think a company like amazon needs to be broken up to give your clients, your partners the ability to compete. >> i don't think so. in our model basically i believe this and i've seen two generations of the internet over the last 20 years, i think when walled gardens pop up and things become more closed, it squeezes opportunity for market expansion. but in the world today, consumers have specific issues which they want to know what they're getting, why they're getting it, how they're getting

it and brands want to know who their customers are, what their data is and what the customer acquisition costs are. it is 100% across the board. those two problems is what we're addressing and those problems are popping out of those platforms. >> that's an amazing time right now and big move for the direct to consumer economy. back over to you >> julia, thank you. let's switch gears, down not to sun valley, but new york stock exchange, why jere jim cramer js us now i was referencing you earlier, buy good companies, forget about the fed. still matters, right even though it is -- what, a quarter point, the world will be a better place, jim. >> well, look, we both know we have companies doing great things let's take pepsico that quarter was good. some nitpicking on it. you buy a good company like that, with the fed giving you yesterday's fed news, meaning might not be a cut an opportunity here is the stock that is down that's what i'm talking about. i think you and i both know, we

can play this parlor game what the fed will do forever. the futures move up. but if we buy the high quality companies that do good this quarter, we're going to make money and you know if we buy the companies that will miss a quarter, doesn't matter about the futures. we'll get hurt i'm trying to caution people, don't buy a stock because the futures are up >> we earlier we were talking, i still would like to know whether the fed is, you know, just responding to things or causing things i mean, are we -- are they inflating a bubble or are they just responding to low inflation with what they should be doing and these are great times. >> don't you think this was a larry kudlow statement larry could have written it from what the -- from the interview yesterday, kelly pressed him and you got this powell seems to be in sync with the white house all of a sudden and i think that makes his life easier. >> if there is not some horrible dislocation between bonds and if

there is not just a huge credit bubble, times appear to be pretty good, i don't know how you look at unemployment, gdp, wage gain, look at all -- the stock market, all the good things that are happening. >> be careful. got to be careful of the media because it is a good time, but if you say that, joe, i mean, come on, if you say that, you're in trouble. >> i know. i know we got to keep in mind all the horrible things. >> you say there are jobs available in the state of virginia, you could be in trouble, that means there are 49 other states that there aren't jobs available yes, the rest of the world is bad, but i don't see anything in this thing that says that we're doing badly, but i do see that we think that others could pull us down. >> we had -- >> it is a nice safety net. >> chris highsy saying, late cycle isn't a duration, you look at things happening to decide whether they're late cycle or not and maybe if we just assume it is duration, we're late

cycle. >> i don't think we're late cycle. i think there is so many cycles going on this is the first time powell addressed the sales force phenomenon, all the incredibly great people laying off by the technology, and the labor participation is largely i think made up by these amazing productivity gains from silicon valley, even though powell says we need to have more productivity gains it is a recognition of what has happened silicon valley caused a gigantic layoff of a lot of people in their 40s and 50s and those are the people that powell is worried about. and he's worried about minorities, which he should be >> jim, three and a half minutes we'll see you, a few don't miss live coverage later this morning of jay powell testifying in front of the house financial services committee wall street will be watching closely. you can catch all the developments right here on cnbc. are there questions? i hope some of those new people in the house -- >> i hope they ask se om questions. i love that. >> "squawk box" will be right

back

final check on the markets now, after the comments were released, we turn from maybe down 30 or 40, now up 95 on the dow.

solid on the s&p, up 11 or so. and the nasdaq indicated up 53 points or so not a whole lot of movement. we moved from 210 on the ten year 210 to below 2.05. quick look at the dollar maybe trade deficit today, it did fall off a level make sure you join us tomorrow, same crew will be here "squawk on the street" is next it is what investors around the globe have been waiting for, fed chair jay powell set to testify on the hill today. the watch is on for more hints about future rate moves. that begins in about an hour good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. futures got a bounce and yields did drop, seems to affirm expectations of a cut. in his prepared remarks, he says, quote, it appears uncertainties around trade tensions and concerns about the strength of the global economy continue t