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tv   Squawk on the Street  CNBC  July 16, 2021 9:00am-11:00am EDT

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♪ good morning, and welcome to "squawk on the street. i'm david faber along with leslie picker and mike santoli we are live from the new york stock exchange jim and carl both have the morning off. let's give you a look at futures as we get ready to wrap up the trading week you can see we are set up for a higher open. and our road map this morning,
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well, it starts with a word of caution from the treasury secretary. why janet yellen said we'll see several more months of rapid inflation. intel is in talks to buy chip maker global foundries for $30 million in what would be the company's largest acquisition. plus, mask mandate, l.a. county requiring all individuals vaccinated or not to put their masks back on inside we'll start off with the market markets themselves i'm glad to have both of you along for the ride this morning. mike, i'd love to start with you. i had a couple of conversations this morning with people who at least are still around to actually have conversations with perhaps a bit more pain in the underlying market than seemed to be the case sort of at some of the big names that we look at, or even the broader indexes. >> yes. >> whether it's oil or health care but some real pain is what i was hearing from at least a handful of market participants during the course of this week. >> all you have to do is really look at the russell 2000 or look
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at even the s&p 500, but the equal weighted version, and it's been lagging so whether you want to call it a little bit of a stealth correction, very poor breath has been the rule, which is more stocks down than up on a given day, and essentially the move toward caution or safety these days tends to be in mega cap growth stocks. it's not necessarily by water utilities and,you know, food companies as much as it used to be now the question is that just a phase or is that kind of the first stage of the overall market kind of losing a bit of energy, and it's going to eventually reach the indexes so far this market has resolved itself through kind of rotation and just kind of finding the next area of leadership to work. but it is an issue, and i do think active managers who don't own enough of the age stocks that have been carrying. apple up 2%, not 2%, you know, on a given day that's tough sometimes. >> interesting because like russell 2000, for example, down 4% just this week alone.
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>> yeah. >> but we have heard this narrative of more of a risk on kind of growth trade forming, although today i guess is somewhat of an exception there would you buyifurcate small capi to bes -- stocks. >> there's profitable growth, we know they earn billions and billions every quarter that's the faang and adjacent type companies that to me is what's been working. if you look at the more speculative that don't have profits yet, that's trading alongside the smaller stocks and some of the kind of pure reflation trade. it is funny, it always happens this way people who are skeptical of new highs say it's not really supported by participation across the market. breadth is really lousy and everybody else says so what, the index is working and you have a couple downside on the in, and then the bulls say there's a lot of stuff to buy right now because stuff
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looks cheap even though the index is down 1% in a bull market it's been tough to fight the idea that it's going to kind of find its way higher eventually. >> on that note of things that are down take a look at the oih, the vector oil services. i don't need to tell you, you know every etf you know, that thing was almost 215 not that many days ago you can see what it's done that's this just a very recent period here. that's a month if you look at five days, mike, it's pretty painful, and i could do the same for health care as well, you know, at least the one that's biotech heavy i think it's the xbi that has gotten hit pretty strongly over the last week. >> there's no doubt about it there's definitely been a harvesting theme out there a couple dollars downside really in crude, and the idea that we're worried about global growth demand isn't going to be there you have this o'pex plus half deal out there there was so much hot money in those groups that basically said, you know, this is the big
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comeback i think that's what's being unround. i unwound. we've had some strong fridays i i think we should keep in mind i think that was also why we got a bit of a rally into the close. >> i was going to ask you how much of this is seasonal, given the fact it is summer. you're lucky if you can get someone on the phone because everyone is doing their vacation things and not quite paying attention. >> the tendency has been strength in june and well into july it's really tough to handicap that because, you know, sellers go on vacation too it's not just like the people who would other side be buying stocks every ta. there's sometimes been an occasion to lock in. it's tough to trade the calendar that way. >> we've also focused on the banks this week given we got earnings from more or less all the top banks. not a great reception to those earnings as mike's pointed out any number of times in our past shows, a lot of that group seems to trade
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off the yield. the ten-year yield did come down this of course also goes along with those comments we got from treasury secretary yellen, she joined "closing bell" yesterday, and of course was asked about inflation. here's what she had to say. >> i think we will have several more months of rapid inflation, so i'm not saying that this is a one-month phenomenon, but i think over the median term, we'll see inflation decline back to normal levels of course we have to keep a careful eye on it. >> yes, and so did powell say night and day, they are watching inflation at the fed, leslie. >> yeah, it was interesting. she did identify a few more months of this, which was a decent time line you know, powell saying he's looking at this and whether it would be a longer phenomenon, longer not quite sure what that means in terms of a policy
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shift. but you know, it seems like those two are on the same page, which kind of contrasts what we heard earlier this week with black rock's larry fink who believes that inflation could be more of a permanent feature of our economy as well as yellen's predecessor and treasury steven mnuchin who came on our air saying maybe the fed should be doing a little more to take control of this. >> and mnuchin's predecessor larry summers way back who also has been ringing that bell you put together what powell and yellen said, and it really does buy the policymakers time. if you're defining -- look, hey, we're under promising. we think this could be several more months of elevated inflation readings and you have powell saying we're humble about our ability to forecast this stuff. we realize we've underestimated it it still kind of pushes out that date when you have to say you said it would be down back towards 2% by this moment. i think preserving flexibility makes sense. they're looking at the same
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math, the same kind of year-over-year dynamics in terms of why we're up so much because of used cars and hotel prices and everything so it should, you know, moderate a little bit i think the market's mostly buying it. the two-year annual cpi up 3%, right? so if you go back to 2019 to here including the 5.4% number we got most recently, it's around 3%. it's way higher than it has been, but it sort of tells you that the distortions of the covid months is really pushing the current number, the one-year number up a lot. that sort of has people alarmed. >> something else we haven't talked that often about is the corporate bond market. it is worthy of at least some focus. yields are spread to treasuries has tightened dramatically the journal reporting on it as well all you need to do is look at it not quite at all time lows but getting pretty close certainly as we've discussed, the average high yield is not even -- the yield is below the inflation rate right now
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yesterday jeffrey dunlock was a guest on halftime. of course he is the so-called bond king. but he does love to talk stocks, doesn't he take a listen. >> the biggest case for stocks is that they're cheap to bonds because the bond yield is so ridiculously low, and you also have the fed doing their quantitative easing and it still remains the case that there is almost a constant -- it's almost like a law of physics that if you take the fed's balance sheet and divide it by the market cap of the s&p 500, it seems to be a constant this is true going back like ten years. so the fed continues with their bond buying. >> i have to say, mike, i've never taken the fed's balance sheet and divided it by the market cap of the s&p. i'm sure you have. >> it's really not worth your time to do it to be honest with you. it actually, you know, i think it's a very convenient way of saying somehow what the stock market is doing is fake or somehow what the fed is doing is
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irresponsible. the balance sheet did absolutely nothing when flat when they stopped 2014 or so through 2018. stock market was up plenty during that time, those four years when the balance sheet did nothing, so it's not a law of physics. it's a coincident kind of indicator. if you want to make the case that stocks look attractive because yields are so low and because corporate borrowing rates are so low and therefore earnings power is higher and you have the ability to pay more today for, you know, because the discount rate's lower, that's different. i think that makes sense as opposed to saying there's all this money sitting in electronic form at the fed, and it's created reserves in the banking system, which is what the balance sheet means. and say that somehow that is driving up stock prices or justifies where the market is is -- >> amaze ing tweet thi week about how a 40/60 mix of stocks and used cars remains an
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undefeated portfolio mixture, and i just thought that was -- of what we're seeing right now so for pension funds out there it's stocks and used cars. forget bonds altogether. >> storage costs >> a little bit of the time left we have for this block, i do want to get to some corporate news t. is reported by "the wall street journal," a company that we have followed closely as it tries to dramatically increase its ability to produce chips as well or catch up to some of its competitors. the story you probably are familiar with it, came out late yesterday that they're in talks to buy global foundries. globalfoundries is owned by mubadala, an investment arm of the abu dhabi government it is based in the u.s i usually have something to share with people, some insight, some senses to the likelihood of the transaction. i got nothing. unfortunately here not picking much of anything up from the typical group of
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people, at least that i would go to who have obviously advised intel in the past. pat gelsinger did a lot of acquisitions at vm ware, we know that, tucked in some larger ones certainly it's not hard to imagine they would be considering something like that. the only pause i would give it is a, i have no reporting on it. doesn't mean much, but b, you do wonder about antitrust, not here where our companies are being encouraged to increase their domestic capacity, although global foundries obviously is not based here or a lot of their foundries are not based here >> the actual facilities. >> and then the question becomes china, and china antitrust because that would obviously be a key here and it gets back to the heightening tensions between our two countries in so many ways people have seen i'm sure the latest from biden on hong kong and the advisory to u.s. corporations we'll just have to wait and see if we get any more information. >> as a former deal reporter, your current deal reporter. >> not really. >> you are >> here and there. >> just reading parsing through
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the language of the article, it does appear this is somewhat in early stages any talks don't appear to include global foundries executives that would say they may not have actually come to the negotiating table talking about pricing, talking about things like antitrust at this point in time. it's definitely going to be one to watch. >> global foundries does have its corporate headquarters here in the united states but again, a and d a big customer, that could be problematic. >> intel's ambitions, though it would be a third-party manufacturer yeah >> and they were obviously quite happy about the appointment of mr. gelsinger. coming up, cruise stocks getting a lift from news north of the border. they remain among this month's worst performers we'll look at what's ahead for cruise lines as the delta variant spreads and vaccinations
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slow down. taking a look at futures as well at this point in time still green across the screen. dow up about 61 points or implied to be open about 60 points at this point in time more "squawk on the street" from the new york stock exchange strahthe ig aad icy hot. ice works fast. heat makes it last. feel the power of contrast therapy, so you can rise from pain. i think you're going to like it here. umm, why is everyone... throwing things at me? look, as cfo it's my job to be ready for whatever's next. that's why i have my finance team, randomly hurl things at me. it's also why we use workday. it gives us insights, so we quickly pivot our strategy, people, planning, you name it. sorry, sir. i will aim straight at your next step. see that you do. would you like some coffee? workday. the finance, hr, and planning system for a changing world. ♪ the world's first fully autonomous vehicle is almost at the finish line
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to wear masks indoors in public spaces regardless of their vaccination status the county's medical examiner calling the decision an all hands on deck moment david. canada is set to allow cruise ships through zoom operations as of november 1st if they fully comply with public health requirements. that news sent shares of carnival, royal caribbean, and norwegian higher in the premarket. they are still down double-digits so far this month. wedbush securities james hardiman and truist securities patrick shoels join us now to talk about the industry. thank you both for being here. james, the stocks obviously have been down. do they play off of these -- i don't know if you want to call them setbacks, but you know, various things we're hearing about the delta variant in particular, or are they more set to sort of run their course regardless >> yeah, i mean, i think it's all of the above
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these are -- to put it mildly -- volatile stocks in the current environment. the news with respect to canada, canada isn't a particularly large source of customers or even a destination market for the cruise industry. the bigger deal with canada is that cruise ships coming from u.s. would typically go through canadian waters to get to alaska, which is a significant market that said, there was recently legislation that passed congress and was signed by president biden that allowed them to, you know, bypass canada effectively. but you know, big picture every step in the direction of normality is good news for the cruise industry. and we saw that with the news out of canada. conversely, obviously any news that suggests that the delta variant is getting worse is seen as a negative for the cruise industry and tends to send these stocks down. >> yeah, well, patrick on that question, are we back to normality and/or when can we
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forecast sort of what would be considered normality >> well, the big question is, you know, what is normality, and you know, i'm reminded of a musical quote that, you know, when life looks like easy street, there's danger at your door and you know, it may not be until 2023 or late perhaps next year that we're hopefully back to normality so i mean, it's definitely too early to say things are normal right now, and there's still a tremendous amount of risk here in this investment in cruise lines. i'm always constantly reminded that it just takes one large outbreak there's well over 100, 200 ships out there. one large outbreak could send this industry back to where it was a year ago so it's, you know, certainly not without its risks. >> james, what does that mean for bookings right now, and how aggressive are cruises able to be in terms of pricing given
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just some of the uncertainty that's out there in the long-term? >> sure, so i mean, what we've seen so far, and it continues to be somewhat of a surprise to the industry observers is that demand seems to be pretty strong, particularly here in the united states, and as i think about the delta variant, i think from a consumer perspective and their willingness to participate in certain travel and leisure activities, i really don't think the delta variant going to make a huge difference, at least not here in the u.s. i think people who are vaccinated are gradually getting back to normal, and the people who aren't vaccinated were less likely to let this affected what they want to do in the first place. where i think it may make a significant difference is from a regulatory perspective, particularly as you look to europe, as you look to asia, which still haven't entirely reopened to cruise travel and so the more that you see those cases tick up, the more concern
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there is that even a, you know, early 2022, you know, ramp to, you know, 100% capacity, which is what some of these cruise lines have talked about, even that could be in jeopardy in those parts of the world. >> patrick, just financially, what is the operating environment going to look like for these guys now, even assuming demand comes back to somewhere toward pre-covid levels, meaning they've raised a lot of debt. they have a lot of the similar kind of labor costs, and you know, worker retention and location type issues others might have -- you have oil prices higher. what could we expect in terms of profitability down the road, even if we're talking about a 2023, quote, normal year >> well, certainly profitability on the eps line is going to be hampered for quite a few years because these companies took on billions and billions of debt and also raised significant
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amount of equity of course raises share caps. you know, the good news and i'm always constantly sort of tweaking and running the models and numbers here in a normalized 2023, assuming we get there and everything's okay, all these companies have the opportunity to really pay down a lot of debt that could tweak their earnings higher we're still here we're still dealing with delta variants certainly only a small percentage of the ships are sailing at this point. so a lot -- you know, a lot needs to happen in the right way between now and 2023 but again, if you get to 2023, you could see tweaks pay down debt from their very large cash balances at this point it remains to be seen. >> guys, appreciate it, thanks to you both. have a great weekend >> thank you >> thanks, guys. still to come, shares of didi continue to slump as china
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you can't beat turkey hill memories. the opening bell is just minutes away you can see all three major indexes in the green this morning after retail sales showed a surprise increase during the month of june we'll be rig bk. ayitushtac
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>> announcer: the opening bell is brought to you by nuveen. shares of didi, you can see they are set to open perhaps below 12 yet again this due to the china-based ride hailing company being the subject of what is now called an on site cyber security review from at least seven departments of chinese regulators.
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the ministry of state security, the cyberspace administration of china, the ministry of transport and ministry of natural resources, all leslie amongst those who will be stationed at gb's headquarters going through things to try to determine the national or cybersecurity risk that the company poses all this of course only weeks after didi went public, a $4.4 billion ipo, one of the largest we've seen at the new york stock exchange really since alibaba. went up a bit, and then went down down a lot. >> now it's about $2 below its ipo price, 14% decline for those people who bought in at the ipo price. but to your point, it does feel like the crescendo of this just regulatory intervention in this company that's only been public for -- really just reach a allowed. >> investors obviously in chinese stocks that trade here
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are trying to understand a road map for what will regulators expect and want and hope, perhaps, mike that that will sort of be something you can work with. it's very unclear that will be case. >> the signals aren't strong stocks are taking a hit. people aren't waiting around to see the detail. >> there you hear it the opening bell, also take a look at the realtime exchange back at our headquarters here at the big board celebrating its ipo is a digital lending platform, lend laps. over at the nasdaq, oncology is also celebrating its ipo nice to have you here, leslie since you cover ipos along with some of the other things it's been an active market we've got plenty of spacs this week as well announcing deals or despaccing, but we don't want to forget
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straight ipos have also been quite strong. >> we did have a huge -- kind of on a comp basis to what we saw during the first half of last year versus this year. our data team just sent out a statistic yesterday about how i think we saw something like 200 % higher in terms of the number of ipos. of course the market was basically shut during the pandemic, came back with a vengeance during the second half of the year, and into the beginning of this year the question is kind of how sustainable is that. we are expected to see a lot more sponsors of that company in the second half of the year. those tend to be a bit more -- how much the market will receive those relative to some of the more growth oriented companies we've seen. >> that's a great point, so much of what we've seen is growth oriented, many of them coming from spacs, and even the ones that have been recently listing or going public as well. whereas typically if you're a sponsor, as we call them, leverage buyout that is then going back to the public markets
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so that the private equity firm can monetize to a certain extent their holdings, they tend to be highly leveraged, a lot of debt, and therefore it's not clear it's a different response sometimes from the investor base in terms of a debt reduction as opposed to a growth capital story. >> and of course the one example of major growth ipo that we're expecting is robinhood that is kind of the quintessential growth company that we might be expecting that should come later this month based on, you know, the time line for the s 1 if they get through all their necessary approvals as quickly as possible, it could come before the end of july. so that's one to keep an eye on. >> robinhood will be a big one i've got one to put on your radar as well for the fall rivian >> rivian. >> and that's going to be a very interesting one, of course the maker of evs a lot of potential demand. amazon, ford amongst their large investors and i mean, the last numbers i heard from people who are invested is 55 billion in
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terms of where they are right now, and perhaps as soon as october, that's still being discussed but rivian could be obviously an ipo before the end of the year certainly. >> yeah, that's a really, really interesting company. they have a partnership with amazon to help create, you know, lower amazon's carbon footprint through these kind of electric vehicle distribution trucks. and so that kind of separates them from your traditional ev that we've seen in the market. and it's one that i know a lot of investors are focused on. i think there were some reports out there, that their valuation at one point in time could be 70 billion for an ipo i'm guessing that's come down a bit. >> i don't know, mike, i saw that old pickup. i don't know if you want to trade it in for a rivian at some point. >> no, because they're not making any more '87 gmc short beds so i think the scarcity value. no, i think the market is going to remain very receptive, but it is kind of addicted to the big growth story
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the spac mode of here's where we're going to be in five years seems to be very resonant. so what's interesting, too, about the didi story, imagine if they did a direct listing and they didn't even have the money. at least they got the money from -- it's a difference of where you're foregoing if you do a direct listing. >> that's actually a really good point, they did still walk away with $4.4 billion, which by any stretch of the term is a successful ipo for a company, especially if they face certain regulatory issues. >> clients of course are morgan stanley, goldman sachs and jpmorgan, which are the lead underwriters may not be particularly happy unless they flip day one then they're fine. those that held more than just a couple of days are significantly down >> yeah, especially as the journal reports that the government actually recommended that didi delay its ipo before the ipo happened, and so that kind of begs the question if you're a client of some of these firms, did the underwriters
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know if they did know, why didn't they share that. if they didn't know, what's going on with their due diligence. it's just a huge mess all around. mike, we open up almost half a percent on the nasdaq comp and apple toward the point you made towards the top of the show has had quite a week actually and quite a couple of weeks in terms of its performance. >> it's up, yeah, 3% for the week it is basically bumped to new highs, $2.5 trillion market cap. it's kind of knocking down all these landmarks. i think it's mostly because of the category of stock. amazon had a similar breakout after ten months we've been pointing to that, and you know, did have a pullback yesterday. interestingly, the bond yield story, the relationship there, it doesn't necessarily hold true day-to-day, but we have pretty calm waters on the yield front today. very good retail sales report this morning, we should mention at 8:30. did seem to firm up the futures in general market's definitely receptive to wanting to make sure there's some energy, you know, in the consumer spending side of thing,
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and we're not really in a salt patch. you know, the realtime estimate, the atlanta of gdp for this quarter is down two percentage points for this month. it's still 7.9% or something like that. it isn't always right. it shows you people are leaning in the direction of wondering if people are losing their spending sort of interest right now in terms of spending down their savings, so yeah, it looks like it's still a little bit of a nasdaq day with the treasury yields not responding too much to that retail sales report. but you do have it 133 above last week's low is definitely, i think, comfortable that we're not making new lows in the yield if nothing else. i was going to mention, too, leading stock today is not yet in the s&p moderna is off, it's getting a bump it is going to join the s&p 500 next week. i just think it makes sense, it's up 6% right now really, really be cautious thinking that's going to matter on a forward going basis
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stock's above $100 billion tesla went in december 18th. >> hit its highs right before. >> before the -- before the -- i thought it ran before the addition to the s&p. >> it did. but even after the addition because the market went so nuts in january, it's trading today below where it went into the s&p. just being in the index does not mean anything for where the stock hits. >> interesting, i was going to mention that it remains me of tesla, just the thought of tesla being included in the index led to a bump in the stock >> tesla was certainly a bigger market cap it was a much more kind of, you know, is it going to be -- is it not going to be admitted because the profitability was sort of touch and go, and so, and of course there's a cult behind tesla, a little more so. >> to your point, big tech really leading the way in the s&p this morning
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microsoft, intel, apple, cisco sales force, the big outperformers this morning it begs the question too this idea of additional consolidation in the chip world, as we were talking about earlier with intel. you've got just this kind of uncertainty that's out there right now with with regard to the delta variant, with regard to what's going to happen in terms of the fed and various taper measures and potential rate increases and when that's going to happen, and so what do people do? they flock toward big tech. >> they do >> you talk about uncertain it i as -- uncertainty as well, talk with globalfoundries owner to potentially buy the big chip maker. uncertainty there is on antitrust and during the course of the show and being able to text with some experts on that front, there is some question if it went to the ftc, assuming the deal is real and the talks actually get to a point where they try and reach a deal, the
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ftc would likely get it and weapon where this ftc is on deal making. >> especially in tech. >> not overly predisposed even with the idea of being that it would be beneficial from a national security stand point because it would mean more chip ownership under an umbrella of a big domestic u.s. manufacturer what i'm being told is that would still require to a certain extent sort of the dod or the nsc to actually step in under the defense production act and do some things so again, just something else to add into the mix to these reports of talks between globalfoundries and intel. antitrust or fear and china could be -- issues. >> is there any sense that kind of consolidation could help with some of the supply chain bs we've seen with regard to chips this particular and maybe some vertical integration >> i mean, it would potentially be beneficial to intel
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particularly as it is trying to leapfrog yet again because it has a huge gap in its chip making in terms of where things are right now, and it kind of missed that. as for overall supply, that's still -- you know, that's sort of in process. global foundries and tsmc have spoken positively very recently about starting to be able to meet some of this demand that of course have seen from the automakers that has not been met that has resulted in far fewer sales of new automobiles. >> it is interesting that even on the reports the market bids up intel by a percent, not necessarily spooked by the idea that they may spend $100 billion intel spends 16 billion a year in capex i mean, is there just a massive, massive kind of sponsor of just, you know, creating the hardware that drives the world. so it's not as if they're not used to spending a lot of money, and maybe this would be a way of more efficiently capturing that productive capacity and opening
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up to new lighclients. it is interesting if it was a market test to see how would you take it. the chips are bouncing anywhere. >> to your point, that's always a nice signal to the potential negotiators in any deal if the acquirer stock price goes up, especially when you're looking at a price tag of $30 billion, which would be if i'm not mistaken intel's biggest acquisition ever. >> a big one. >> and kind of a big game changer for that company and just its overall portfolio. >> moving up a bit more. did want to take a look at shares of motors no not really down much. the doj is taking a look at the company. the s.e.c. is in there, the s.e.c., civil, the doj criminal, this obviously goes back to some of the things that the company said in terms of preorders for its truck and what it said and how it said it and whether, in fact, they were misleading or perhaps even outright lies
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board has had some difficulties to say the least, one of the main ones is they need to raise a lot more capital to actually even try to make good on some of the promises that are out there in terms of production. >> and they've said as much. they remain dramatically undercapitalized based on what their business plans have. to your point, a lot of the issues surrounded this idea of whether or not the orders are binding. you look at their presentation, and they, you know, mention that they have these orders without going into too much detail about how that revenue is playing out into some of their projection, and of course with a spac you're able to share financial projections in a way you wouldn't normally see with a traditional ipo. the documents are able to have some disclosure, much more like a merger. >> right but yeah, we always --importan to point out if you go public via spac, earlier this week we did see very strong comments from s.e.c. chair gensler when the s.e.c. took action against another spac, this one actually having to do with -- it's called space generally speaking, but
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misrepresentations that may have been made there as well. let's get back to the broader markets and take a look, bob pi pisani bob. >> hello there david, another strong start here. we started stronger, all sectors were on the upside a little mixed five seconds in techs was leading early on, industrials and materials. energy is the big laggard this month, that sector down about 6% we're in the middle of earnings season not a lot of big companies today. i just want to note charles schwab did come in, they were basically a penny shy of estimates. a little bit unusual they just keep raking in new accounts, 1.7 million. they have almost 4 tl$4 trillion assets under management. remember that big runup on the meme stock tratdding in january, february, march, volume down 10%. take a look at schwab. schwab is largely a bank they moved up, topped down
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around february or so on the rates and on the meme trading. not a lot of surprise, schwab's been a bit sideways since then a lot of anxiety out there, mike was talking earlier about the markets. you've got dueling narratives. to explain why the yields are low, the first and obvious explanation is what janet yellen said yesterday the market is saying inflation is transitory. the other narrative is sort of the pretzel logic narrative. inflation is not transitory, folks and what the yields are saying is that the fed is going to have to taper and sooner rather than later, they're going to have to raise rates and the market's reflecting the economic downturn down the road we know the one thing that kills bull markets is the fed raising rates. you might think how could these two ideas exist in the same debate, but actually they do part of the problem is there's a lot of anxiety out there because of the valuations in the market right now. they're very high. high valuations leave stocks
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vulnerable to a downturn we know one thing for sure we are likely at peak earnings growth we've talked about this for a couple of months peak earnings growth doesn't mean earnings are going to stop growing. the rate of change of earnings are going to stop accelerating that causes a little bit of anxiety as well with prices this high so instead of 22 times forward earnings a few months ago, we're looking at 20 times forward earnings on the s&p 500 and maybe lower a bit as time goes on you can't put a higher multiple after peak earnings growth that's a source of a lot of the anxiety in the stock market. the other is these high valuations if you look at the tech leaders, they are trading at multiples that are historically high, apple, microsoft, amazon, you see these multiples? all of them are much higher than they were two years ago. i don't want to use last year. i'm going back to 2019 when most of these were in the low 20s and low 30s. these are much, much higher here even with companies that continue to grow their earnings,
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these are top multiples when you're talking about the peak earnings situation if you remember looking for the anxiety, yes, there's a little anxiety, the advanced decline line is not quite as strong as it used to be. but really you're stretching to think that there is some kind of big decision on what's going on with the markets this month the s&p is outperforming equal weight s&p a little bit of reversal the russell 2000 is the weak story here, and a lot of people keep saying this is some kind of bell bellwether i do not understand this argument, folks. look at the russell 2000 it has been sideways since february it moved up in the big run up earlier in the year, and essentially has not been much of a market leader ever since then. david, the key to understanding this whole thing is there's a lot more than an economic debate about the fed's role in stimulating the economy and creating inflation there is people who have been at war with the fed and with the government since roosevelt took us off the gold standard in
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1933 these are the people who argue inflation is going to get out of control, and they're having a moment for the first time in 50 years. david, back to you >> all right, we'll grant them their moment bob, thank you bob pisani. as we head to break, let's take another look at how treasuries have been faring this morning in our bond report of course we did get the release of what was a better than expected retail sales report, and that has had the effect of sending yields up a bit on the ten-year, 132. the 30 year bond just below 2% at 1.95 even we'll be right back. i've spent centuries evolving with the world. some changes made me stronger. others, weaker. that's the nature of being the economy. i've observed investors navigating the unexpected,
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giant is cracking down on remote work that according to the verge which says workers at the i phone maker say it's tougher than ever to get remote work approved that as apple requires people to return to the office three days a week starting september. some employees say they'll quit
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if apple doesn't change its stance. >> it's one of the most important stories in business i believe it's a seminal change in the way people work but so many companies and the people who lead them grappling with how to approach this. they're hearing from their workforces that there's a desire to work in a hybrid at the least or have remote as a possibility oftentimes yet there's resistance in certain places we talked about it in financial services having it happen at all. but tech apple saying we'd love to have you back two or three days a week, and other big tech companies saying, you can work remote as much as you want it's unclear we all have our own biases i think we all feel perhaps we're better off together but the younger generation in particular, so to speak, seems comfortable with the idea of remote and certain jobs lend themselves to it, we know.
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>> apple just built a massive new headquarters, a lot of fanfare, investment around that and also a statement of principle about what they think works in the culture and they thought a lot about it they think there's magic that happens, whether it's true or not for every job. >> creativity is the key thing you're going to see both sides people say there's no data, i don't know what data there would be that there's a lack of innovation when you're at home versus in the office >> but this idea of a great resignation with so many surveys say a quarter of the workforce is looking to switch jobs once things stabilize with the pandemic, that's a huge deal for these companies. >> it's huge and i think we can all expect hybrids are here to stay the question is how do you measure whether it's better or worse than what it's replacing up next, something many billionaires don't want to hear this summer.
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turned the summer of 2020 into an arms race of excess at a restaurant in the hamptons, a plate of pasta is selling for $85 if you're lucky enough to get in customers are offering cash and plane tickets just to get tables it's not just the hamptons consumption is being redefined in many of the most elite resort towns. look at aspen, the favorite watering hole of the wealthy are now booked through august. forget about hosting a party at home, aspen's caterer to the stars is booked all summer and early fall and she's now turning down billionaire clients her new pitch is offering winter weddings normally the wealthy could hit the water but a yacht shortage -- there's a high class problem -- this yacht shortage
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means it's almost impossible to find boats over 80 feet long to charter, especially along the atlantic coast customers paying over $125,000 for a single week aboard a mid level yacht. dock space also full prices at some marinas there up 20 to 30%. and david, that's not even to mention real estate. you talk about aspen, average home price there 11 $11 million. we're seeing rentals in the hamptons, rentals, $2 million just for the summer. >> that yacht shortage alone is going to keep me up all weekend, robert i had no idea. > 'rbayou. >>wee ck right after this. if your money is working toward the same goals, why keep it in different places? sofi is a one-stop shop for your finances designed to work better together. spend with sofi and get cash back rewards that automatically go toward your goals. like investing in stocks, etfs, and crypto.
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we are getting consumer sentiment and business inventors. for that we go to rick santelli. rick >> absolutely. business inventories, this is a may number we're expecting up half one percent, that's what we received we need to build inventories, there are issues last month down 2/10 moved it up 1/10 that's a good thing. for the money ball number to finish the week, our july preliminary read which means it will change, 80.8. not a terrific number definitely much less than we were looking for, we were looking for a number around 86 to 87 this actually is the smallest number, 80.8, going back to february but keep in mind it can come back, the mid month reads change here's what's interesting, looking at current conditions, 84.5 also lower than 88.6 our last look.
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78.4 what lies ahead, below expectations and last month our final number was 83.5. inflation numbers. one year inflation ticked up 4.8. the high water mark had been 4.6 and that was in may. it now stands at the highest in 13 years, if you want to go back it'll be the highest since june of 2008, before you find a higher number but the five to ten year inflation on the other hand, moved down a bit from its recent high, now 2.9, the high water mark was two months ago at 3% and that was the highest in ten years. leslie, back to you. >> thank you, rick time flies on a friday we're 30 minutes into the trading session. the three big movers we are watching moderna up big after the announcement it will be added to the s&p on july 21st didi moving in the opposite direction following news chinese
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regulators paid a visit to them for cyber security review. and fubotv bouncing back after a sportsbook in pennsylvania negative still for the year. the s&p is on pace to break what would be a three week winning stream joining us now is omar agulair, and scott ren. guys, thanks to you both scott, let me start with you and the fed because it's so key to so many things, including rate we heard from jerome powell a couple times this week, anything you heard from powell or yellen yesterday that changes your view of the rates and/or the market. >> the yacht shortage made me change my views but as far as the fed goes i think jerome powell has continued to pound the table they're not going to do anything to upset the apple cart they're
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going to be on inflation if it gets out of hand, although they don't think that's going to be the case we're not expecting any rate hikes any time soon, could we see tapering here, maybe that starts late this year or early in 2022. so i don't think jerome powell i think some people are surprised that the fed is not tapering sooner rather than later i think you can make a rational argument for that, but clearly the fed wants to be careful here so for us we want to lean towards the cyclical, towards the recovery that's what we've been doing we don't see any reason to change that right now >> o >> omar on that note, the approach between slk cyclicals and higher quality secular growth, where do you guys stand particularly given the view of the fed and rates? >> we've been discussing this with clients all year of having
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a balance approach it's sort of very clear to us that in the long run that secular growth trend seems to be the winner however, because we have gone through the fastest economic cycle we have had in our lives, you know, we seem to be moving from fphase-to-phase quickly and this recovery period and expansion period that we started at the end of the last year with the vaccines seems to be going really, really quick and since march of this year we saw a little bit of a pause of that in our cyclical rotation piece. so we have been discussing this with clients in terms of keeping a balanced approach where we agree that because of the rates, because of, you know, the overall sentiment that is particularly in the bond market, you know, it is a good idea to stay with a cyclical trade, however, we have to still balance and diversify by having high quality cyclical growth
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that in the long run will tend to outperform. >> scott, what do you make of the outlook for 2022 seems to be where we're going to really start to debate at some point. you have some of the overarching issues, probably a lighter fiscal touch, a drag on that front. maybe we're going to be tapering at that point we're going to have to digest the massive jump in earnings we don't know what the earnings growth rate is. i know you said we have several years more of this expansion likely but how does the market anticipate and digest what it has to offer >> the market has good things to expect we're looking at 10% growth for next year, we have a g-20 next year for s&p earnings for 200 this year. i think that's what the market is doing it's trying to look ahead. it's saying, the fed's foot is still on the accelerator here, we know the fiscal stimulus is
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going to fizzle out late this year or early in 2022. but we've got a 5% gdp number out there for next year. that's pretty good growth. we'll have to watch that closely. so i think the market is very much right now in the mood that we're going to continue to have not a lot of inflation, good growth, still some fiscal stimulus, more progress on these vaccines things like that so i think that for now, the market through 2022 expects some good things. certainly in terms of earnings and economic growth and that's the way you have to play it based on what we know right now. >> omar what do you think could rain on the market's parade here no one was expecting a pandemic when it appeared last spring, obviously. is the delta variant something that could rear its ugly head
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and derail all of this optimism that's currently going on right now? >> it's interesting because, you know, it seems to me that the bond investors probably know more about this than the rest of us because with the 10 year being so low, you know, there seems to be a little bit of, significant amount of risk down the road and i think on that hand what is interesting is that you would expect with the numbers that we just continue to see on inflation that those bond yields should tick up higher not only that but on the other hand the potential for tapering, you know, instead of being bearish for bonds has been bullish for bonds which is an interesting situation too. it seems to me to answer the question, the risk in the horizon, number one is higher inflation. number two is slow down in economic growth and a lot of that could be because the rest of the world is not recovering
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at the same pace as the united states mostly because of the slow down in the vaccines. and the third is the delta variant, which is clearly something that has not been fully priced into the market when you combine those three risks together and you actually think about the fed being in very, very sort of conservative in their approach, yes, we could have a surprise of high inflation, low economic growth and increasing in the delta variant spread out that could easily derail markets and the economic growth next year. >> it's certainly something we'll be talking a great deal about. hopefully it won't happen. we'll see. thank you both, omar and scott >> have a great weekend, guys. >> you too. as we head to break, a look at our road map for the rest of the hour treasury secretary janet yellen says recovery is still on track. >> losses closing in on 10% for the week potential trouble for travelers ahead. get ready for lift off
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bezos is headed to space a look at what to expect is straight ahead "squawk on the street" back in two. into this chip i invested in invesco qqq a fund that invests in the innovators of the nasdaq 100 like you become an agent of innovation with invesco qqq
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♪ watch the olympic games on xfinity ♪ ♪ root for team usa and feel the energy ♪ ♪ 7000 plus hours of the olympics on display ♪ ♪ with xfinity you get every hour of every day ♪ ♪ different sports on different screens ♪ ♪ you can watch it anywhere ♪ ♪ and with the voice remote ♪ ♪ you never have to leave your chair ♪ show me team usa. ♪ all of this innovation could lead to some inspiration ♪ ♪ and you might be the next one to represent our nation ♪ ♪ this summer on your tv, tablet, or any screen ♪ ♪ xfinity is here to inspire your biggest dreams ♪ i think we've arrived at a good, strong global agreement on minimum corporate taxes that 132 countries, including china and every other g-20 country, they've all agreed to put these strong provisions into effect.
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>> that was treasury secretary janet yellen on "closing bell" yesterday discussing the global tax that 130 nations reached the ground breaking agreement last week for taxes on corporations it's been complicated by a handful of countries refusing to endorse the blueprint. with us now is jim stuart. happy friday to you, jim. >> happy friday to you a summer one. >> yes happy summer friday. so notably, ireland, some of the traditional tax havens have been some of the holdouts here. what do you think ultimately gets them on board especially as you hear from secretary yellen, she is optimistic they will reach some sort of agreement. >> i think it's incredible they did get something like 130 countries on board this is -- honestly this is another one of these things i was sure i'd ever witness in my lifetime
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there are a few holdouts, probably the main one is ireland, which has a -- you know, they have a thriving economy right now, a lot of it has relied on their very low corporate tax rates. but i think they will probably be brought around for two reasons. first of all, they're in the eu. the eu has a lot of ways of pressuring them to go along with this and secondly, and i think this is something not so many people have focused on. the rate they're talking about, at 15%, is pretty low. it's -- it is going to eradicate those advantages that the havens have over other countries, but they can still keep it -- say ireland moves to 15%, that is still substantially lower than the eu as a whole or the united states >> it certainly is low, although there are tech companies, especially nonprofitable ones that a 15% tax rate would seem high at this time.
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secretary yellen saying in the interview with sara eisen yesterday saying she's not sure if amazon would be subjected to this global tax deal do you think it goes far enough to cover those types of issues that have become ever present in this current climate >> well, in theory, it does. i mean, i think it is trying to close the kinds of loopholes that amazon has used and the ability of companies to shift profits to these low tax foreign jurisdictions. so i think if it does go through it is going to affect some of these companies. yes, it's a handful of these tech companies which are very adapt at the ability to move these profits into different jurisdictions who will take something of a hit here. but again, i think that if the rate is -- we're talking about is 15%, that is not crippling to anyone and by the way, i'm all for the tech companies paying 15%.
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you can make the argument for the lower rates, but 15% is pretty low another i think interesting dimension here is it seems to me it's going to put a cap on how high the u.s. can take its corporate tax rate the biden administration is proposing a substantial increase in corporate taxes but you get above the current 21% to 30, 35, the same level as, you know, ordinary income, you're really going to be creating some incentives for companies to move offshore and i doubt that's what the u.s. really wants to do. >> right jim, yeah, it creates a global floor but maybe domestically a little bit of a de facto ceiling on where the rates can go. >> exactly. >> it's interesting how the proposed corporate tax bump that the biden administration has been putting out there, how it even fits into the infrastructure plan, this multi-year extra fiscal package
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that's now being kicked around in an age where in the last year nothing had to be paid for and awful things didn't happen, you just wonder how this debate is going to go on this revenue piece of this proposed spending package. >> you know, i'm hearing from -- certainly from many corporate leaders, including biden supporters, they're giving the corporate tax increase ideas a pretty cool reception. there's always been the argument that when you raise corporate taxes like this, it seems like it's easy. make the corporations pay. but corporations don't pay someone pays that tax. that is a tax increase, it's going to be a tax increase on workers at these companies, a tax increase certainly on shareholders and there's always been this argument you're taxing them twice you're already taxing their dividends, their income in the companies and now you turn around and tax the income as well there is a pretty sophisticated
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base of opposition to raising these corporate rates. and, you know, the -- a lot of people have had -- even democrats i know have had to grudgingly concede that the trump corporate tax rate has been pretty good at stimulating capital investment and stimulating the economy here in this very difficult time my sense right now is there's not a huge political ground swell for raising the corporate taxes which means where are you going to move? there are plenty of other areas in the tax code you can raise money. i've been making this argument for a long time. there are incredible loopholes that can be closed and the biden administration has talked about doing some of those. and then, if you really want to go after people making a lot of money in the stock market, raising the individual capital gains rate could raise a lot of revenue. >> on that note, i don't know if you're in the market for a yacht, jim, but you're out of luck looking for anything more than
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80 feet forget about it. apparently robert frank says not going to happen for you. there's a shortage of yachts but i mention that kiddingly but also in seriousness because we sat at this desk talking about the wealth gap for years now what else do you see has the shot of changingthis trajector given it's only given more fuel as a result of the pandemic, perhaps unexpectedly. >> capital gains is the most effective way, if you want to start eliminating this gap when i look closely, particularly at the irs data for high income taxpayers, the biggest loophole, if you want to call it that, by far is the preferential rate on capital gains typically the vast amount of income from the highest earning people comes from capital gains not salary or earned income. there are some loopholes out there and i would start with the real estate industry, which just
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has a massive catalog, no surprise none of those got rolled back during the trump administration, and you could raise a lot of revenue there i think right now, look, we've got a booming real estate market how can you argue we need tax incentives for the real estate industry i think this would be the ideal time to roll some of that back finally, this comes up constantly but the carried interest loophole for hedge funds and private equity partnerships if there is a rate between capital gains and ordinary income, which i think there probably would be, they shouldn't be allowed to capitalize on it, they're the last group of people that need that tax break. >> it's remarkable how long that debate has gone on, regarding the tax rate of carried interest and the fact it continues over many, many taxation cycles we'll see what becomes of that.
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>> it's astonishing. you would think there would be bipartisan agreement on that. >> there is. >> that would be an easy no brainer and yet nothing happens. it's discouraging. i had given up on infrastructure, i haven't given up yet we got a bipartisan bill, i hope it goes forward, we need it maybe we'll get some bipartisan tax action as well stranger things have happened. >> that's for sure thank you so much, jim, for joining us have a good weekend. >> sure. you too. >> some chip news to get to as well this morning. the journal reporting intel is in talks to buy global foundries for about $30 billion, the proposed deal comes as intel looks to manufacture chips for other companies and follows a $20 million investment to build two new production facilities in arizona. samsung is the latest considering building a second texas plant of a cost around $17 billion according to
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documents filed with the local government, construction could begin as early as next year. coming up, cruise lines imposing new measures for unvaccinated passengers. and it may cost you. tetheerit k on the strt gh afr is experience our advance standards safety technology on a full line of vehicles. at the lexus golden opportunity sales event. get 1.9% apr financing on the 2021 rx 350. experience amazing.
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now for etf spotlight. looking at the i shares corp. s&p 500 etf, it's up more than 15% on the year, just wobbled down into the red this morning cruise stocks not helping the cause of late. royal caribbean and norwegian each down this week. that's not stopping j.p. morgan from reiterating both stocks had an overweight rating this morning. and the cruise line has in man dates for nonvaccinated for passengers. >> this is only for florida,
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everywhere else the cruise lines mandate 95% of people are vaccinated now unvaccinated must buy travel insurance policies worth $10,000 for medical treatment and $30,000 for emergency evacuation trip adviser estimates a family of four could spend an additional $700 on these costs it's a way to discourage unvaccinated travellers from traveling. they've cut cruises short a few times, in singapore nearly 3,000 passengers and crew confined to their room after one passenger tested positive for covid. and the cruise lines launched a
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lawsuit against florida. lawyers say the companies have a good chance at being granted an injunction but could delay when norwegian gets the ships back to seas, perhaps that's what's driving it lower, the worst week to date on the s&p 500 but this could have a broader impact as they try to operate at an environment in a time when the delta variant is becoming a bigger concern: those stocks remain volatile. thank you. as we head to break. check out some of the ride sharing stocks didi still down nearly 3% today. lyft and uber unchanged. chinese regulators paying a visit to didi for a cyber security review. art cashin is next we're back in two.
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here is your cnbc news update at this hour. up and down the west coast and as far east as colorado crews continue to battle wildfires the bootleg fire in southern oregon is the largest among the dozens of blazes rage it has scorched nearly 240,000 acres and displaced approximately 2,000 residents. dry conditions are expected to continue. the death toll in germany and belgium has risen to 120 as rains continue to hit europe where entire villages have been destroyed. key infrastructure has been sw severely damaged in paris the eiffel tower has reopened it was closed for nine months after pandemic lockdowns
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visitors need a pass showing they've been vaccinated, have a negative test or recently recovered from covid-19. and folks are probably asking, yes, there has already been a marriage proposal at the iron lady back to you. >> so somebody was made to wait for quite a while for that hopefully that works out treasury secretary janet yellen joining "closing bell" yet commenting on yields and inflation. >> to my mind, that the market expressing its views that inflation does remain under control. i think we do see a world in which interest rates will remain at moderate levels and inflation will remain well under control >> let's bring in director of floor operations art cashin to talk about this. great to see you this morning.
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markets trying to digest all the possibilities here, what's your take on how the market is now -- you know, accepting what jerome powell is saying, what janet yellen is saying about this idea that we're in this bulge in inflation, it's going to calm down, we still have time to worry about it, we don't have to do it now? >> i'm starting to lean in their direction. i don't think the market fully is i think there is some concern, small majority at least of the market continues to think the movement in the ten year indicates concerns about the economy starting to lag and things moving there. i look at some of the esoteric stuff like the manheim used car index, not many people have heard of that, but it appears to be rolling over, that might mean that used car prices which have been a big push on the inflationary front are going to roll over like lumber did.
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that would mean that this low level in the ten year is, as i have said, purely mechanical, mortgage duration and things like that. so we'll know in the next couple of days michael. as you know, we're shifting seasonality here, the bulls are going to begin to lose some of the upward push, the market historically, from june into the middle to late two thirds of july has an upward bias. that is dissipating now. so we're going to have to fight. i think if we can keep that ten year yield above the 2.25, and hopefully keep it above -- i'm sorry, 1.25 or 1.30, it'll be fine >> yeah. you know, there is certainly still a little bit of sensitivity to your point about what exactly the pace of the economy is moving at right now we have this consumer sentiment
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number, a little bit of a down side surprise still concern about inflation, and maybe it's manifest and you've commented on this, about how the market has actually had some pretty poor participation by the average stock, measures have been falling away a little bit, not keeping pace with the s&p 500 itself is that something that's always a matter of concern or just another way that the market kind of metabolizes things? >> well, i -- as an old foggy, let me tell you i look to see a broader participation. that's the old the tide raises all boats. if it's a narrow breath, michael, us old folks tend to worry a little bit about it. you remarked upon the deter ration breath i think earlier today, it's a keen observation if that were to continue another several days into weeks, then i would worry about my seasonality
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thing. september is usually a lousy month with stocks. that's why we get the famous october bottoms. we're about to roll into that area i would watch the breath, if the breath continues to narrow then i would be far more cautious >> yeah. and, you know, we've had this die -- dynamic you mentioned it probably would be a positive if the ten yield could hold at these levels as opposed to to go back to 1% or something like that we've had this dynamic where that's been used as a trigger, the lower yields as a reason to migrate back to the nasdaq stocks to punch up their well as well as the s&p as well. we saw it last summer, it was those stocks held things together while we tried to figure out what the economy was up to. i wonder if we're back into that mode again >> i think you raise another key point. i know your cocktail napkin as i
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am, somewhat nonprofessional but always observing we had apple and amazon and several of these caps in the last week that looked like they were about to stage a major technical breakout to the upside and they appeared to have stalled. that's going to be a problem they may have stalled while everybody is worrying about the ten year and if there's a trigger or not but if we don't get the i cap teches to do an upside break out then that market seasonality may overwhelm the bulls and we'll have a tough four or five weeks here >> all right certainly the calendar says be alert. thank you very much, art appreciate it. see you soon. >> my great pleasure thank you. companies are still trying out new ways of attracting and retaining workers. companies are going from hiring parties to tiktok.
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kate rogers has more for us. >> while companies are trying new things to catch the attention of would be applicants in this ongoing tight labor market chipotle allowing tiktok resumes allowing people to show their authenticity, currently 115 locations are listed for tiktok resumes and they'll get their first batch today. target and shop fie are also trying them out. chipotle held its second coast-to-coast career day yesterday to hire 15,000 workers across the country earlier this year it held a hiring fair on discord this year denny's had a cross country road hiring trips in the hopes of bringing on 20,000 workers in the 24 hour diners. taco bell revived its hiring parties outdoors and mcdonald's
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held events this spring. papa john's announced it's investing in new and existing company locations. all in these companies are seeking tens of thousands of workers. the labor crunch is hitting companies across the board but small businesses are feeling it significantly. the national federation of independent business reported a near record high 46% of small business owners had roles they could not fill in june they're feeling a shortage when it comes to staffing the most common hiring and recruiting, has been increasing wages, paid time off and benefits >> great story i would love to see if some of the dancing skills on tiktok translate to jobs for people. we appreciate you breaking that down for us. still to come this hour, bay bezos epinprarg to blast into
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space. "squawk on the street" back after this break competition beat us again. how? they have a better finance system than we do. i feel like they might have a better finance system than we do. workday. how do they make better decisions faster? workday. it's got to be something workday. i think i got something. work... hey, rob, you're on mute. hello! hey, rob, there he is. workday. the finance, hr and planning system for a changing world. that building you're trying to sell, - you should ten-x it. - ten-x it? ten-x is the world's largest online commercial real estate exchange. you can close with more certainty. and twice as fast. if i could, i'd ten-x everything. like a coffee run... or fedora shopping. talk to your broker. ten-x does the same thing, - but with buildings. - so no more waiting. sfx: ding!
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welcome back during the pandemic a wave of unemployment made the world of benefits a prime target for fraud. according to the labor department improper payments amounted to $39 billion nationwide the bulk of the fraud involved identity theft but more than 100,000 recipients identified transaction fraud. our investigation revealed that a cost saving but outdated technology fuelled this type of theft. ♪ >> with schools and venues shutdown during the pandemic, the former and part time music teacher found himself out of work. >> i had to go on unemployment insurance. >> those benefits were a lifeline until october when he
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discovered all but a few dollars were stolen. >> my entire account was cleared out. >> without those funds he became temporarily homeless, living in his car for weeks. >> to sleep i would lay against that side of the car, lay my leagues over the center console. >> moon and millions of other unemployed americans received their benefits through debit cards like these but lacked chips. still 45 states plus d.c. used debit cards mostly without chips although many also give recipients a direct deposit option our investigation found states like california and nevada found an outsized share of stolen benefits >> a card without a chip that's easy to copy. >> criminals can then take the duplicate card to an atm for cash >> it's just a matter of picking up a reader writer for the mag stripe and duplicating it like a
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photo copy. >> i would presume it would be impossible to replicate a card with an actual chip on it. >> it is extremely expensive and cost prohibitive for criminals to manufacture a card with a chip in it. >> a big reason why the cards had a lower level of security in the first place comes down to cost california hired bank of america years ago to distribute unemployment insurance on its behalf the state requested cards with magnetic stripes not chips they recently extended the contract with boa although the bank said they would like to exit as soon as possible because the bank lost millions of dollars due to transaction frowned in state benefits. >> i was shocked. >> vanessa experienced this type of fraud firsthand and blames the bank and the lack of cart security. >> i had to break my son's piggy
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bank for him to know i'm stressing, struggling, that was the heartbreaking moment. >> they're part of a class action lawsuit against bank of america, alleging the firm failed to fully investigate their fraud claims and credit their accounts when the funds were stolen. together they say they lost more than $10,000 cool was at the grocery store trying to buy food for herself and toddler when she discovered the missing funds. >> i was sobbing, i didn't know what to do because that was our life at that moment. and it was a really scary moment. >> b of a said in court documents from october 2020 through march 2021, about 255,000 fraud climbs were filed of which they aproved repayments of half. their number one goal has always been to ensure legitimate recipients could get their benefits. >> it was exhausting. >> after months of back and forth bank of america gave them
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credit for their missing funds but they say their lives had been upended already. >> this is people's lives you're messing with, my life, his life, her life i feel very punched in the gut. >> amid our questioning over the last few months bank of america and the state of california say they're in process of transitioning to chip based card, and california would also offer a direct deposit for benefits we called other banks that provide these benefits, including u.s. bank and key bank key bank responded declining any further commentary on fraud incidents pending investigations. >> it seems like not spending the money you have to face these charges now. >> it's cost saving measures on the cost side but when you have a pandemic, you have this
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massive target on your back for these -- this type of fraud and then in hindsight, yeah. it would have been a lot cheaper to add the chips in than lose hundreds of millions of dollars on the back end awarding these provisional credits for people with their accounts wiped out. >> a massive amount of noise surrounding the unemployment benefits situation over the last year and a half. the volume of new claims every week seemed like it was higher than you would expect. there were reports of people trying to hack and game the system because you had the federal component of it and stuff like that i think it's going to be a long time until we sort that out. >> absolutely. obviously a lot of the states are playing catch up now, a lot of banks are playing catch up, trying to refurbish the technology used in the cards, bring these things to 2021 but obviously that doesn't help the people who have been impacted in the past and a lot of the people we spoke with who have had this happen,
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they were in dire situations to begin with and then they saw their accounts wiped clean. so you're really looking at the most vulnerable aspect of the population for something like this >> great story coming up in tech check. buying square right now is like buying j.p. morgan in 1871 the analyst behind that call tells us why when "squawk on the street" returns. ou further. at the lexus golden opportunity sales event. get 0.9% apr financing on the all 2021 lexus hybrid models. experience amazing. get 0.9% apr financing on the all 2021 lexus hybrid models. experience amazing. this is franc lefranco, the owner of lefranco construction. specializing in projects like this. and this and this. everything was business as usual, until... urgent. need new contractor for town arts center development project asap. is lefranco construction in? if he was gonna pull this off, he needed to rent another crane. like, yesterday. so he turned to his american express business card, which allows him to pay off his balance over time.
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will be making his much anticipated journey to space on july 20th aboard his blue origin rocket the full passenger list now revealed as well it includes both the youngest and oldest people to ever make the trip 18-year-old oliver damon will be the company's first paying customer after the winner of the $28 million auction for the last seat said they have a -- this is their quote -- scheduling conflict they're going to take a later flight yeah, they'll just go to the counter. get on the later one pilot wally funk is going to become the oldest astronaut ever he'll be 82. still, that scheduling conflict thing is hilarious and our morgan brennan, she's
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going to be there live in texas, monday and tuesday for the launch bezos, bezos' brother, the 18-year-old, and a whole group of other people, i guess >> morgan does not have a scheduling conflict. she will be there. >> she's there for every launch. she doesn't miss a launch. obviously, this is very important. she's been covering, and i learned so much from the coverage we had in terms of space, in terms of tourism, and so many other businesses as you know, mike, as well, covering so many stocks, they move well. there are only a few publicly traded plays we have some that send satellites up. >> in a market where people let their imaginations run wild about the possibilities of certain stocks, it's been an interesting fit to have space as the final frontier of where you would invest, for better or worse. >> after the break, bitcoin down more than 15% over the last month. is the dip below 30k coming? that's next.
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on pace or it was for its worst weekly close since mid-june. joining us is matt hogan, cio of bit lives, the largest crypto index fund manager good to see you. as we kind of dance around the flatline today for bitcoin, obviously, major correction. we're seeing volumes at least as we can measure them in terms of transactions having ebbed a little bit from the excitement earlier this year. what have you seen in terms of customer interest, demand? has the fever broken >> i don't think the fever has broken at all, at least for the customers that biz wise serves we focus on the financial adviser market, and that market is making a two to five-year move into crypto our inflows have continued to be strong what's going on is we're going through a brief period of uncertainty. there's an expectitation there will be new regulations. we'll dealing with bitcoin mining moving out of china the important thing about those
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two pieces of news is while they're short term introducers of volatility, they're long term good for the crypto market that's what we're hearing from investors. >> it makes sense there is a certain core of investors, retail and institutional, that feel as if they want to have a long-term allocation to this as an asset class call it digital gold, whatever it is. but you have to expect that a lot of the people from late last year into early this year when we went up by multiples in terms of bitcoin price and other coins going up even more, that a lot of people were buying because it was going up >> that's definitely true. and you get a lot of people chasing short-term momentum. i think the important thing for viewers to remember is this is a long-term trade. look, the market is down significantly, but it's still up 27% year to date it's up 270% over the last 12 months crypto is the best performing asset class in the world out of the last one, three, five, and
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ten years. as you extend your investment horizon, your risk in investing with crypto goes down. short-term, it's a very volatile asset. long term, at least its historical record has been good. there's nothing about the last few months that's interrupted that story >> fair enough, although there has only been one ten-year period ever. you mentioned this sort of period of uncertainty related perhaps to some worries about regulation that might be imposed. why do you think that's going to be just a fleeting period? we have fed chair jay powell saying, look, if we had an official stable coin or something, a digital dollar, there would be no reason for crypto >> i don't think he's right. a digital dollar i think would be great for crypto. you would still need digital gold, you would still need ethereum to be the new internet of finance i think it's a short-term pause because the secret about increased regulations in crypto, the thing very few people know,
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that's the single most positive driver of a future bull market we talk to financial advisers all the time we did a survey of 1,000 of them in january of this year. we asked them what's keeping them from investing. the number one thing wasn't price volatility, it wasn't how to value bitcoin, it was the lack of regulatory clarity as long as the regulations that come put crypto on par with the traditional financial system, i think that's going to be the catalyst for the next bull market and what we have seen in crepto regulation over the last few years is very balanced approaches punishing the bad actors and creating a sandbox for crypto's growth that's what i expect out of washington if that's what we get, i think we could be at the beginning of a major bull market. we have to go through this period of uncertainty. if we get to the right place on the other side, it could be very positive for the market. >> all right, see if they give you the sandbox. thank you.
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appreciate it. as we get ready to wrap up here, want to take a quick look at the banks because they have turned lower again watching this week, of course, given the earnings from jpm, bank of america, citi, morgan stanley, and wells fargo leslie and mike, thanks to you both for joining us on this hour of "squawk on the street." "tech check" starts now. >> i saw it on tv. i saw it at the intro. but nothing strikes you until you see it in person >> good friday morning, an


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