tv Squawk on the Street CNBC July 15, 2019 9:00am-11:00am EDT
welcome back a quick final check on the markets. dow looks like it will open up higher in half an hour from now. nasdaq looking to open higher as well call it 18 points for now. the s&p 500 looks like it will open up about five points higher want to make sure you join us tomorrow thank you, guys, for being with us >> pleasure. >> pleasure. >> "squawk on the street" begins right now. ♪ ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. citi looking good, plenty else this week with powell on deck. tech companies on the hill soft china gdp number getting the president's attention. europe is green and oil is up a quarter this morning road map begins with wall street's record run, stocks poised for renewed gains of the open as citi unofficially kicks
off earnings season. >> trade war slowdown, china posting the lowest quarterly growth in 27 years >> and silicon valley tech lash from one of its own, peter teal calling out google, alleging, quote, seemingly treason ous acts we'll begin a new week, stocks on track to hit fresh record highs. citi kicks off earnings season with better than expected results held by gains and consumer lending also in focus, china, slowest economic growth in 27 years in q2 gdp at 6.2 for june, industrial production, retail sales, fixed asset investment all beat expectations, leading some guys to think maybe the central banks work is starting to filter in. >> i think so. the bears have the work cut out for them right here. if you watch our crawl underneath, you'll see the semiconductors going up. they won't have good quarters. people are looking through why are they looking through not necessarily because of
china, they say pc sales will get stronger the economy will get -- that's western digital. fairly typical because of the federal reserve the bears have a double whammy one, the companies, the numbers will go up they have an inverted yield curve still until powell cuts. so i think the bears are a little bit more trapped than i thought given the action in a micron, given the action in a broadcom, which are up nicely, because people feel, you know what, we're protected by the fed. it is a fed put. >> that continues. >> yes, i think it does. there are people who want to say, listen, jim, that money is only because of the fed. and i say the bank -- the bank is still not asking me about, is that because of the fed? they take the check. they charge you for taking any sort of -- >> that's the underlying question, is that what all we have to prop the market up from here is the fed? >> no, you have good earnings.
i like at pepsico, it was a good quarter. for every one of your goods, i can find a bad >> we're going to go to x, autos and chemicals? >> auto is horrible. we have been ex-auto forever phil said there will be a strike that takes off the table the autos. now they'll be bad anyway. david, i'm telling you right now, takeovers will be good too, galapagos, gilead or you know the symantec i'm tell you that. >> i'll have a share on that let's do it now since you mentioned it we have been talking about, of course, broadcom and symantec, a deal we have been following for some time, some significant news to report, talks between the two
companies have broken down and they're not talking. shows you jim and i do not talk prior to the show. >> you ruined my thesis. >> he's been saying that in his opinion based on his sources symantec would not accept 28 or less and i can tell you it was because broadcom was in fact not offering 28, but south of that that in fact the two companies are no longer in talks and negotiations have ceased, they put their pencils down, however you want to refer to it. but at this point they're no longer talking >> situations like this, sometimes shareholders having heard this will come back and say, please, you have to reconsider mr. symantec or mr. hill and sometimes they can be rejoined but for now, over the weekend, again, inability to agree on price, given symantec, sticking with its $28 a share ask and broadcom not willing to go there. the talks have broken down, no longer talking >> i was right about the 28, but can i get a wipe
i need to take the egg off my face for the deal. >> you don't like to talk at all before the show. >> if i talked to you, i wouldn't look like such a chump. >> that's our deal. >> we go for spontaneity >> didn't go for 28. i was right about that. >> i said to you, continuous, i'm not sure that in fact if you're right about 28 that they're going to actually be able to meet that expectation. we had that conversation they have been in talks for some time now they're working on capital structure. rating agencies, all the things you would expect but they could not get their own price. >> he's got to do some real -- very quick firing. >> there is not an expectation the equity check, everything else, the lack of synergies in which case as i reported and others have could be as much as 1.5 billion for broadcom, not there for private equity buyers.
we're talking about no more talks between -- of course, again, always unclear whether or not these kinds of things will be revisited it happens frequently if in fact shareholders say, hey, we're willing to take 27 or whatever the number may be. right? i don't know maybe you do >> i think the quarter will be bad. the stock will go back to 21 i know rick hill had no intentions of selling the company when he took the job fixing the company, see what happens. i'm not against what occurs. i do feel that the 28 was -- and rick hill had everybody throw it out because he wasn't interested in selling he took the job to fix it, not to flip it that said, wow, that's great news >> does it dent your overall thesis on strength on m&a? >> thank heaven for galapagos because -- and thank heaven for cariso, a piece out, i wasn't mention the firm's name, you got
to get rid of cariso, mentioned before they had a takeover bid i have galapagos and against is the one you didn't tell me about, we're spontaneous, symantec, key to my thesis now i feel like a complete dope. >> you should not. i don't think the inability of two companies to get together on price is not necessarily indicative of a slowdown. >> like twitter. >> that said, this is a deal along with many others that would require chinese antitrust approval, that had people concerned. that is not what this was about. this was about an inability to agree on price. >> okay. i got the price right. good work reporting. >> thank you, you too. >> that is good. we haven't touched on citi, which does beat card spending up 6, loans up, deposits up, and, everybody is looking at return on tangible. 100 basis points year on year. >> they can sit there and buyback stock and buyback stock and buyback stock because it is
the -- the tangibles, it is substantially below where this stock is trading 67, you buy the 72 michael, now, the thing that was most exciting to me, he did a much better efficiency ratio than i thought, how much is going to fall to the bottom line, like to look at it much, much better than amazon and "mad money" recently this is a good quarter back out the trade web what happened with visa, remember all the banks had that 12 cent gain i'm okay, if you back it out, much better than expected quarter. people sell it better, have a real good reason they need to keep buyback stock because they have to get back to where it was before -- >> how do they do on expense control? >> monumental, fabulous, so is credit card. just incredible. >> best quarter for the consumer business in six years. >> yeah. credit card business is --
>> that's q2. >> also one of the things you have to recognize, mexico is on fire really doing great in terms of growth there, ebitda growth. i don't know only thing people could pick one is nim, net interest margin. they did take in 450 million new revenue. so it is possible you should not be able to maintain your nim if you get that -- >> a nim is a concern for all of the banks. >> trading revenue down year on year for the third quarter in a row. >> they telegraph that it was down 4.5% investment bank, looking for down midteens, it came in down 10 efficiency ratio of 56, i was looking for 57.5 there are people who don't do their homework and react to this and people who don't listen to calls and just listen to the call but the stock is up four straight points. been a strong performer during this period. there isn't anything here that makes me feel it should go down
other than the fact that general belief that things can't that be good in the market and that this is just because of the fed i don't buy that by the way, mexico, such a liability for them, you got credit cards, 40% interest on a credit card there. so my credit card, i was doing some business in mexico, and it pays not to put it on your credit card. >> don't revolve. >> i would not don't have a balance >> there are concerns overall about mexico's economy >> you know what -- >> there is concern that -- >> but there is no -- >> i'm not going to disagree with you i think that the credit card business is booming and that mexico has positive and negative, but overall, i like what he said and, you know, should i marry mike corbat no like his kids, they'll go away at the end of the summer, like min mine, and i think it is terrific he gets a lot of heat and turn
the bank around. i think that's unfair. there. okay >> sounds reasonable >> i think -- >> you have your mojo back. >> that was not easy, but i did a quick pivot. good rest this weekend and the garden is coming up like roses. >> it is not roses not yet, though. that's later. >> i had tomatoes, i had another batch of raspberries, but turns out my dog marley likes my raspberries, ate all the low hanging fruit. >> the birds go after the blueberries. got to put stuff over them >> when we come back, america's ecigarette addiction, a sneak peek of our new cnbc original documentary "vaporize" which appears tonight. a number of calls to get to, constellation and tiffany and some others. a look at the futures here, "squawk on the street" continues in a moment. johnson & johnson is a baby company.
"vaporize" debuting tonight, we talk to many people in the space including the juul ceo kevin burns. if we did this tour today, with a parent, right, of a teen who had been using, who had been addicted, how would you sort of defend all this, all this scale? all this production, all this growth >> i would tell them i'm sorry their child's using the product. it is not intended for them. i hope there was nothing we did that made it appealing to them as a parent of a 16-year-old, i'm sorry for them and i have empathy for them in terms of what the challenges they're going through. >> burns hopes juuling turns out to be less risky than smoking, but admits there are real concerns about the impact of chronic vaping. >> we don't know today, we have not done the long-term longitudinal clinical testing we need to do >> the fda has not reviewed either the juul or any
ecigarette on the market and the product's efficacy, long-term health effects are unknown that's the problem. >> i'm having you on tonight i thought this was a power f documentary. i think every parent with a kid must watch this. i don't know how that man can live with himself. >> he's defending himself to a certain extent >> oh, great. >> wasn't the product intended or they say it was intended as a cigarette replacement. >> it didn't start that way. you see the documentary, you'll see the first ads. you'll see the first ads >> david is right. >> i'm sorry, i'm a little fired up >> you got to give him some nicotine to make it work, to get them off the combustible, that is the point. >> very sophisticated. we were having a decline in smoking in this country. these guys, merchants of death, okay, are much slicker now they won't actually like my -- >> it is nicotine delivery correct? >> okay.
>> the argument, jim, is it is better than lighting something on fire and breathing in -- >> better than lighting your body on fire better than the monks in vietnam. i think this is a travesty your documentary revealed things i had no idea. i was on the -- i wasn't on the fence, i didn't like them. now i see it i see it for what it is worth. and, kevin, you know what, they should make it -- look, it is very easy. god love them. very nice man. they should make it a prescription they want to help people get off tobacco, prescribe it. prove that you're hooked and you can get this drug. but this idea -- he feels bad, sorry. he's sorry >> now your complaint is with policymakers and -- >> i think gottlieb let us down. cnbc contributor he completely let us down. i don't care if he's a jim cramer contributor he let us down he should have said, listen, this is a drug this is what your documentary proved to me unequivocally it is a drug and it should be regulated
i'm sorry, he's on the show tonight. i sent this to everyone. i sent the link to my family i need people to see this documentary. this is breakthrough people don't know what's going on. >> what if they manage to cut the smoking rate in china? >> i don't know. >> by 10%. millions of people who would not be smoking cigarettes. >> that's why i think it is a great prescription drug. hey, why do they have to make so much money they prescribe it, it is a great drug, wouldn't that be great maybe it can caught down more if they make it a drug. mike hurt their profits, might hurt altria's profits, but, hey, hey, sometimes you win, sometimes you lose easy come, easy go make it a prescription drug. watch the documentary. if you feel any different than me, you know what, that's terrific, maybe your kids can start. >> sounds like you're going to need an addendum. >> i think your kids can start what a great way it is not what they want, juul, but what you can do on ebay. how about a kid who can't get up the steps because he's, what >> jim wants another hour in
prime to kick this around. >> i do. we should have a round table about this you represent the brits who believe in killing people softly remember killing people softly who is that? roberta flack? they got the roberta flack option and then the fugees did a remix. the second juul before -- i want to emphasize, this is important. that kevin from juul, he is super nice he's not just nice, he's super nice and that counts for something. great doc. tonight talking about it i'll let you talk. that's the last time i dominate this conversation other than i did with my kids after seeing this >> 10:00 tonight, eastern and pacific. we'll get cramer's mad dash. if that wasn't mad enough and we'll count down to the opening bell look at futures. don't miss your golden opportunity to experience our most advanced safety technology on a full line of vehicles. now, at the lexus golden opportunity sales event. lease the 2019 es 350 for $379 a month, for 36 months,
welcome back to "squawk on the street." i'm for mad dash you've been pretty fired up for the first 22 minutes of the show >> i have kids >> i know. we all do. >> i have kids i worry. >> all right, let's change it up here and talk ge though. >> all right ge, the negative group of analysts, they have someone getting close to them. and that's damian, damian karros, ubs, who goes buy to hold, some say it is a multiyear turn, no longer anything you can expect really fast
and i read this, it is not as bad as tusa. it is saying, you know what, power is not turning it around, and that coal has more wood to chop not like the paper stocks downgraded by -- >> what about the stock itself, which continues to sort of trade right in that, you know, is that where you hang for a long period of time? until there is really -- or is this enough of the weight of these analyst commentary. >> i think in the end, it doesn't go back to 6 where i wish tusa upgraded it. i do feel it is a 20 -- the turn has been delayed you're not talking about 2021. if that's the case, there is better things to buy i would rather own united technologies if we're thinking about 2021 this proves once again, while they're out of the woods, it doesn't necessarily mean they're on the yellow brick road. >> no read through ge specific as it always is.
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you're watching "squawk on the street," live from the financial capital of the world opening bell in about three minutes on this monday it is going to be a busy week. already digesting empire number, a little better than expected. the dow is going to attempt to climb despite boeing and the story in the journal that suggests we might be waiting until next year for a max flight. >> i think there is a lot of companies within that dow that are going to report better than expected numbers and when you look, look, i'm focused on ibm i know -- i think red hat will be very good for them. we had them on last week i'm focused on microsoft that will be a good quarter. they have pfizer in there. they have some drug companies, they could be hurt by regulation they have unh. i think unh will report an unbelievable quarter they won't attack the
government the stock went up and then went down i could go point by point with the dow. but there are some companies in there that are really going to shoot the lights out. i'm very excited about those companies. very excited. >> that doesn't include goldman sachs. >> no. look, citi, i gave an impassioned defense. this stock is going down goldman just ran up to 215 i feel more comfortable if it was at 198 and they may not be able to quantify how much they have to spend on one mdb and on the credit card. i wish the stocks hadn't run so much i would not buy goldman, let it come in a little >> you had -- you've been skeptical, maybe, on their credit card project with apple doesn't citi's numbers make you think they have the wind at their back. >> i think they do the problem is, really high quality one. i think people are so ready for the apple card and want it so badly that goldman sachs will be overwhelmed. and they have to spend a
fortune, maybe well beyond what they budgeted. that's my big worry there. i do like the branching out that they're doing, not just trading outfit anymore, but citi's trading wasn't that good better than expected goldman will be bad. you shouldn't pay out for the stocks ahead of the quarter. >> we should point out, they have not announced the details of that plan. >> they don't know. >> right. >> that's the big worry. i have both sides are not really -- in unison. but the demand for this card is off the charts i'm not sure goldman is ready for it high quality problem look how good credit cards is for citi you may have to adjust paying up for here is just ignoring the fact that the group just had a move that was monumental post sicar. >> definitely moved symantec we'll get back to that >> opening bell. >> let's get that bell for this monday
s&p 500 at the cnbc real time exchange, big board, biohaven pharma, at the nasdaq viking therapeutics >> biotechs, galapagos, people are raising their target rather dramatically gilead, fantastic interview with gilead in the previous hour. did make me feel very good about the optionality. everybody is still reeling from the idea that the government or trump is going after the drugs and not going after the pharmacy benefit managers i think they should just analyze cancer drugs because that's where the big markup is. people should explore the markup and -- >> you said this a couple of times in recent weeks. >> that's where the big mark -- i've done enough work to know where the hospitals really make money. it is by marking up cancer drugs. if the government goes hard,
goes to try to figure out what an average price of what europe is doing, the profits for our drug companies would be dramatically reduced >> the question is whether they follow through they were up towards the end of last week, while the major drug companies were down with the idea that perhaps they will come back into the focus, but, again, somewhat unclear. >> it was just remarkable. people were shorting united health like mad and they had to go long. people were buying merck like mad and had to go short. that was a funny thing everyone knows the pharmacy -- attack on the system and the drug companies, i think, are far less -- really far less at fault that's my own view i happen to think that bristol celgene could be a good deal i think what mr. fraser has done at merck is fantastic. i think, look, alex skorsy, that
stock lost eight points in a heart beat just as the bank stocks ran, the drug stocks have come down a lot and we didn't have any tweets, the president is focused on other things this weekend. >> carl mentioned symantec shares we reported at the top of the hour, talks between broadcom and symantec, talks have broken down, that according to people familiar with the situation. the two companies were talking for a number of weeks, were thought to be getting close to a deal late last week there was an expectation among the sources they would announce a deal as soon as tomorrow that's not going to be the case. they broke down around price as jim told you, symantec wanting $28 a share. and broadcom unwilling to go to that price not that far south, perhaps, but far enough that the two sides are no longer talking. they have as we sort of say, or sometimes the people refer to,
put their pencils down, does not mean that perhaps at some point these talks won't be revisited, that does happen on occasion, certainly when there is pressure applied from share holders who are upset at the inability to complete a deal. that said, we'll see, jim, you and i also had a brief reference, i referenced chinese antitrust approval i don't want to say they would have needed it my understanding is broadcom believes it wouldn't have needed that antitrust approval from the chinese authorities. but that is nothing to do with why this thing is off the table at least for now >> interim ceo rick hill, who came out of retirement, he was the man who pitted all that money to knnovellus i think that rick has got his plan and rick is going to -- he's got his own cfo. will put his plan in would have been nice easy money. now it is harder money maybe much harder.
>> maybe maybe over time they get to a price from which they'll look back and say, look what we did 28, rear view mirror that does happen that can also take time. do you want to take the 28 in cash and move on >> i would have been an unbelievable, ten-point hit. i do point out they own life lock, a brand that is doing fabulously i don't know how broadcom would feel about being in a b to c business. >> to your point, you can understand why broadcom may have flinched at the idea of paying 28, give the current state. >> rick was in the driver seat rick has a plan to turn it around he doesn't want to -- i think broadcom will regret they didn't pay 28. >> you do? >> yes, rick will get there much fast gl faster >> has not been a good performing company. >> ceo left under a big cloud. no clouds over rick. speaking of rick hill, look, the fact the stock is in its 17, 18,
would have been on earnings, is very telling to me >> right >> but great reporting better than mine it's all right. >> not better than yours you're not a deal -- you don't report minute by minute. you had an important data point ended up being correct stop -- i also tell you not to pat yourself on the back too hard >> okay. you pulled the band aid off it >> it is gone. >> sutures. >> got some initiations of slack. 45 and $40 is the target. >> i think it is more of a -- all right, here we go, overused term, ecosystem. i think it is replacing traditional email for those of us who use it, don't think that's a problem recognizing that the stock sells just beware at plus 20 times sales. not earnings so many people would say that is expensive. >> 20 years worth of sales, i'd say. >> some people some people. >> some people a lot of new deals have come
are, you know, time sales. this is perhaps the highest time sales. this is more expensive than stock optia. i'll continue to use opt ia >> what is optia >> cybersecurity. >> what do you think -- >> crowd strike? >> yeah. >> i know those guys a little. >> you do? >> yeah, the guy -- he was on my cyberdocumentary from seven years ago on -- >> the one that used to be the best documentary until tonight's very even handed juul. >> i was a mini of that one and it wasn't -- >> juul talks about how nice the people are at juul and they're sorry about what they have done. how great. maybe they'll make reparations, you know >> i think jim will want equal time after your documentary. >> pulmonary, for the pulmonary
cause. i think reparations is good. i think -- you look at apple what is that you think about juul, you watch tonight, i'm going to say that it is even handed. shows the uk is off their -- uk is different. >> you mentioned apple 205, almost 206 as -- you have some consumer names, depot, gap, all doing well today. >> you got the strong unemployment number coupled with the fact that jay powell has to eat some crow because the last rate hike was the rate hike too far. not unlike the bridge too far, operation, failure, david. >> yes it was >> montgomery. montgomery >> montgomery. >> montgomery. bridge too far got it cariso oil and gas, it is worth hitting right now. we're talking about a all stock transaction valued at $3.2 billion in which kalyn petroleum, i assume i'm pronouncing that properly, is
acquiring carrizo. this is about permian. this is about scale. >> these stocks have all traded badly ahead of this. chip johnson has been on the show he's been on the show many times on "mad money. what is interesting is right before that deal, jeffries came out and took carrizo from buy to hold would you call that subpar timing ill timed? >> not so close to no that they can't know it is unfortunate for the analysts. >> unfortunate that's why i'm not going to mention mark leer's name, it is not fair. >> we haven't mentioned ge having one less buy rating >> i'm glad you brought it up. there is some people at ge who would contest this and say that there is no significant change of fundamentals, it is a valuation call, and the stock has outperformed year to date. let's not forget that. you could say that larry is on
target and he's done a pretty good job i don't know, david. i think -- talk about larry culp i think that he's defied the negative steve tusa rap so far he put it on a piece last week which talked about how the bulls may have something right i thought it was -- might have gone positive. i was disabused very quickly of that 2021 year, still no occasion -- they sold this fabulous lifetime business at danaher, danaher does an equity offering. people felt that was terrific. >> they did. >> for danaher >> they did. you your point earlier is you would rather own united technologies there is a lot of opposition to the raytheon transaction. >> i know. i'm saying that's in 2021. >> why not do the split prior to doing the deal if you're raytheon on the pro forma, the way you're taking the deal, announced a number of weeks ago, we have detailed that ackman and lobe are both set against it, jim.
you're in favor. >> yes i think that you're getting once in a lifetime opportunity to buy raytheon because its missile division is so nderperformed that raytheon stock is well below where it should be there has been three straight quarters i think greg hayes gets in there, disappointment will end rather quickly he's not necessarily known as a guy who just sits around and, like on a big yacht in southeast asia, making calls. >> no. like his predecessor he thought the boat was smaller? 17 foot like i own -- >> always another side to the story. >> like juul >> always. >> like the juul story, knife fight, gunfight. >> we are fans of mr. hayes typically. >> yes, we are >> he doesn't have as many fans among the shareholder base. >> it is not about friends it is about money. have you seen chipotle, in terms of things that went wrong that have come right back >> i haven't. >> facebook, we haven't talked
about that united, the president, with even the gang of four in the house, i think. >> that was a story over the weekend. you're right about the ftc fine, more lieber criticism today, peter ta eteal on google. >> yeah. he talks about the fifth column within google that may be working with china rather shocking. >> that's totally shocking not rather -- you're being -- you say something like that, don't you need to present some semblance. >> treason is a death sentence is that what you're thinking >> those guys know a lot of what's going on in the world. >> private slowback. >> i'm not suggesting they know something he knows you would like to know from what basis he makes the charges >> i do think that we have had executed people for treason in this country it would be a capital offense. >> you know there is a guy in
the oval office who listens to peter teal or did, right >> i wouldn't want to be the alphabet today where people are trying to -- this could be like what happened. remember when the communists infiltrated british secret intelligence what do you think? you think it is not -- as well documented as you would like chinese military >> i would like to understand more of the basis for making statements like that. >> you make those statements, you have the money that peter thiel has you can make life miserable for people from now to kingdom come >> that sort of ties to huawei, which sort of ties to wilbur ross and nbc today reporting the president is considering whether to oust him, maybe because of the census retreat is the market like that or not >> i've been trying to figure out all morning, wilbur ross considered to be a hard-liner, also considered to be not as much involved as lighthizer or,
you know, peter know vario ekn o wilbur ross is a better friend, acosta much more of a hot button, but my sources indicate that don't expect any change in our trade talks if -- in other words, he was not the man that the chinese hate the chinese don't like a guy who wrote the book death by china. no one calls navarro treasonous. >> no, they don't. >> do you think -- alphabet is treasonous >> not as far is aias i'm aware >> do you think he has information about something like a phil brick kind of earn. >> information that would rise to the level that journalists would consider is credible and would report probably not i would love to know heck of a story. >> if i worked there, not a great moment at alphabet when
you -- everyone is looking to see, let's get the phones. do you think they'll gather the phones >> we'll watch it for sure a very big story. >> this is not bad blood, this is worse blood. >> we got a hat trick of record highs at the open. lost a couple of them. to bob pisani. >> open record highs, flattish right now. i want to point out what's going on in china. we had an update headline gdp number we had, 6.2% for china, the weakest in 27 years, we did move up in both of the major indices, hang seng and shanghai i want to point out that while the headline number seems like that's a weak number, even though in line, the june numbers that we got were really very strong so, for example, we got industrial production in china b for june, retail sales in june beat, fixed asset investment, that beat, machinery investment. yes, weak gdp number, a lot of stimulus going on there, having some kind of effect, looks somewhat on the positive side.
here in the u.s., sector mixed open, home builders, new open, 52 week high for them, little down a bit energy, industrials lagging and banks lagging. this is that sell on the news. really nothing terrible with the citigroup numbers. 2% beat, i saw long growth 3%, the deposit growth 5%. those are not bad numbers. that's the most important thing i watch. not trading activity want to watch loan and deposit growth that's what important -- mild to the downside here. not unusual sell on the news for the first day of earnings season i'm more interested in jb hunt, one of the big shipping companies, they are the largest intermodal shipper this is rail and freight together shipping has been soft, pricing overall in shipping. and intermodal as well as global shipping has been on the soft side i want to hear what they have to say after the bell all these companies have been affected by the global slowdown in trade wars overall. we mentioned jb hunt, ch
robinson, fedex, hub group, u.p.s., all having a tough time. all of those stocks have been basically flattish for a while now. for the full year. compared to s&p up 20% on the year so earnings season will begin here the focus will be on guidance. we keep emphasizing everyone wants to know what is going to happen in the second half. the bears have a strong narrative. because the trade war, the strong dollar, the issues around ship -- around the overall economic outlook, globally, guidance is going to be disappointing. the bulls are insisting the dovish central banks and the trade deal getting done will lift earnings into above flattish into somewhat positive territory. we'll see. remember, margins are a big issue now. when you have a lot of talk about strong dollar, higher wage and higher labor costs, higher raw material costs, that impacts margins. margins are about 11% for the s&p, have been for a while, right around there that could get under pressure a little bit this is another side argument
that is being made by people who are on the more bearish side where are we bottom line is this? we have flattish earnings for the year and we have a problem, we're up 20% for the year. that's an issue. the market is now very pricey. at month more than 17 times forward earnings you got to get going on the global economic outlook. interest rates are low there is your big help overall but a lot of people are saying, how is it -- you can't have a higher multiple if earnings expectations are not rising, they're not. global economy is not expanding. is interest rates low enough that enough to justify the prices now that's the parameters of the debate carl, back to you. >> a lot of information, thanks, bob. bob pisani bond pits, what a day on friday. rick santelli in chicago hey, rick. >> good morning, carl. maybe the most notable feature last week was how the long maturities of sovereigns across the globe held on to gains to the upside in yield and downside
on price we're melting a little bit today. down a couple of basis points in the short end. as we dip below 2 10 here at 209, now three basis points under where we settled on friday but we still as you see six day chart of 10s, still holding that upper strat. to may 1st, what should jump out is when we started to give up a lot of ground in the long end of the market place, the first line of defense was that zone you see about the middle of the chart around 205 to 209. so that is an area of consolidation, we should pay very close attention to. bund yields, here is the six day chart, quite an event, not whether it holds or not, nice bounce off the minus 40 plus all time historic lows as you see. we challenge minus 20, we're drifting a little bit lower than that minus 24, minus 25, open that chart up to june 1st, that reverse does jump out. and it came at a time where more
was promised by mario draghi, euro volatility and dollar volatility, of course, always seem to answer when the interest rate differentials kick in and if we look at the dollar index, since june 1st, it really has been crushing this zone between 96 and 97 from both sides, we're a bit under it and do keep in mind, slightly above 9820 is the high for this year and that goes back to around may of 2017 carl, jim, david, back to you. >> all right, rick, thank you very much. still to come this morning, the always outspoken former presidential candidate ron paul. you'll want to get his take on bitcoin today. we see if we can get back to the record highs we got at the open. s&p 3,011. don't go away.
. let's get to cramer. >> one of my favorites easter book at mcdonald's. a terrific note about jpmorgan about what's working and one is mcdonald's maybe the easiest single stock to buy in this market today. >> targets of 220 a week ago, closing that gap. >> this guy is -- don't forget, easy comparisons >> developing market strength. this will be the stock that's a magnet for the institutions because it's got so many things going for it by the way, the negative heat about beyond meat and the impossible burger, particularly impossible burger is gmo some people resistant to roundup. we know it's not that good for you, as we reported on the monsanto - >> it's not. i'm busy i have to buy some stuff here. >> prime day. >> i paid way too much for fire
stick last week and it's on sale i think, you know, almost paying you -- >> yeah, you could have saved 25 bucks. >> it wrecked my week other than the fact i said symantec deal -- i said 28. >> do i want a roomba. >> no. you need to watch the documentary. >> and "mad money" tonight vm ware. i am not thinking juul should be a class one felony i think you will support that, right? underage maybe they will go with the class one. they are really nice you can tell that from day one, carl they let you win with the hair net. >> we will see you tonight when we come back, amazon's prime day is underway. we will talk about that in a moment we're carvana, the company who invented
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market gets ready for a slew of earnings today kicked off by citi. >> a roadmap starts with the stocks that did hit record highs before they dipped a toe into the red pool earnings season getting underway. the trade war slowdown china posting the lowest quarterly growth in 27 years. and symantec and broadcom have stopped talking about a potential deal. let's begin with the markets. a ton for investors to digest here earnings season getting underway with citi beating expectations china is feeling the pressure of the ongoing trade war, recording its slowest economic growth in nearly three decades the president took to twitter on the topic. he wrote china's second quarter growth is the slowest in 27 years. the united states tariffs are having a major effect on companies wanting to leave china for non-tariffed countries thousands of companies are leaving. this is why china wants to make a deal with the u.s. and wishes it had not broken the original
deal in the first place. meantime, we are receiving billions of dollars in tariffs from china these tariffs are paid for china devaluing and pumping not by the u.s. taxpayer. jpmorgan global strategist david leibovitz and peter, chief investment officer, great to see you both today david, starting with you, set the scene today. do you expect the markets to see a new record high? what do the china numbers mean what is to come for earnings season >> the china numbers from where we sit don't come as a surprise. what we have been hearing, it's having an impractice act on gro there. the numbers are nebulous to begin with growth is in fact slowing. meanwhile, you have an economy that continues to plod forward in the u.s we are going through a bit of an inventory adjustment and you look at the fed which
made this dovish pivot it looks like they are going to cut rates later this month so the question is you can't have all three you can't have a deal on trade, you can't have an economy that continues to grow and you can't have a fed that remains easy one of these is going to have to budge. i think earnings season will give us a clear view as to the outlook of growth in the united states and that broad weakness in manufacturing is affecting the labor markets. >> peter, what are you expecting out of earnings season >> earnings are expected to be down i want people to be looking at the pre-stock buy-back number to get a sense in terms of the organic trend. the tariff increase from 225% from ten hit mid-may 25% is going to much more difficult. i mean, global growth is slowing. it's not an opinion. it's a fact. earnings will help us quantify to what effect that's going to have an earnings with the stock market rally with
earnings declining, it's obviously been multiple expansion pushed by the fed and that obviously has to be reconciled at some point. >> right peter, and your note, and i read them all the time, 18 times earnings you also point to price to sales ratio. i don't know a lot of people who are focused on that, although that has hit some recent highs as well, hasn't it >> right it's another metric to look at outside the standard pe ratio. one reason it's elevated is because marchness ha ins have bn high 10% to 11% profit margin level is beginning to show some receding to what extent that continues will be key for q2, particularly labor costs as that is the direct driver and most influential driver when it comes to profit margins. >> the labor cost point is key it obviously effects margins with a bit of a lag. the wage growth over the past 18
months is filtering in and impacting the numbers. if that coincides with an environment where there isn't a lot of inflation and economic growth is slowing, maintaining those margins is much more challenge. one off sectors are benefiting from margin expansion. if you decompose the margin growth rate, the majority is from buy-backs where do we go from here >> where is margin a good story? >> in the financial sector margins have expanded quite nicely we see relative strength in buy-backs. we see good corporate decisions being made from an expense standpoint they are cheap so longer term there could be value there. >> david, you go to -- where do we go from here? okay if earnings are not as strong as perhaps we would hope for, nonetheless we have a fed that's going to be potentially
aggressively cutting rates or at least cutting rates. how to equities not stay favored over, obviously, lower - >> i think that if you're a broadly diversified investor, that's the issue what are you going to buy? you are getting paid in equities in some cases the dividends are higher than the ten year bond yield. to me this is a brewing pullback in clothing. at some point the lack of earnings growth will expose itself the fed may change course or keep cutting that's not a good thing. a couple of insurance cuts is fine, but one of the things i picked up on in powell's testimony last week, the june jobs report didn't change our view where things are headed are they seeing something different in the market the rest of us are and we should be more concerned than the stock market would lead us to believe >> this is turning into a pretty widely shared view that is that if the fed cuts once, that's one thing you might be able to escape that cycle and equities can perform
if this is the beginning of a sustained cut, history shows that's not good. >> right it's usually in the midst of a recession as the prior two re-cutting cycles we saw a soft landing is a rare occurrence since world war ii, the fed has been on 13 rate hiking cycles. only three saw a soft landing. we will try to get it this time. the cost of money is already so low. by trimming it even more, is that really going to encourage faster economic growth i'm suspect of it. and this trade war, which i think is sort of intensifying, and i don't see any sign of any deal, as long as this continues i don't see, at least in the manufacturing side, accelerating any time soon. to the profit margin story, profit margins are getting clipped because of higher labor costs. how are companies going to deal with that? are they going to hire less? are they going to start to raise prices there is going to be a corporate response to that trimming of
corporate profit margins which i think will be important and will affect what the fed does. >> it was interesting to hear the exchequer on "squawk box" talking about the impact of this trade war between china and the united states and on the global economies. i will play what he said. >> we understand the concerns that the president has about china's trading practices. as china gets bigger and more important, it has to comply with international norms. it has to play the game. what we have never agreed with is the approach of using punitive tariffs as a route to resolve this issue we think that just leads, as it has done, to a tit for tat spiral, which makes everybody worse off. >> in fact, david, he went on to say that the economies of europe are dependent on china and the united states at having a trade deal regardless of what happens with trade deals with great britain or the eurozone. >> exactly if you look at europe's position
in the global economy, they kind of sit smack in the middle the u.s., emerging markets in china which are manufacturing driven and a little bit of a better blend in europe they could potentially get hit on both sides depending how things escalate. the key take away is that a tariff for a tariff makes the whole world poor in the long run it's about generating productivity growth the tax cuts were on the way to doing that through a boost in investment we have counteracted that through punitive tariff mesh iers this is not the approach i would take. >> it's clear the president doesn't see it that way based on the tweets we saw from him this morning. thank you. speaking of all this, we mentioned earnings season getting underway citi is the first of the big banks to report this morning wilfred frost has been digging through the numbers and listening to the numbers. >> the call is literally just started. the revenue for citi and eps
beat expectations but flattered by a one-off gain without which revenue would have been in line and eps just ahead it was 182 compared to the forecast of $1.80. a slightly lower tax rate of 22% than the 23% expected. shares jumped pre-market the market is somewhat critical on that earnings beat. net interest margin, which will be in focus for all of the banks fell to 2.67%, lower than the 2.71% expected that said, 3% loan growth and 5% deposit growth meant net interest income grew overall credit costs rose 16%. 6% quarter-over-quarter. the cfo on the media call remained relaxed and attributed some of that to very strong growth in their u.s. cards business their markets-related businesses
were down year over year, but slightly better than expected. stripping out that one-off, trading down 5% year over year the market was expecting high single digit investment banking down 10% compared to a guide down mid-teens. finally, worth noting, 11.9% on track for this year's 12% target despite that, citi still trades below book value despite the strong gains here today. >> and we have seen the stock actually weaken in the last half hour of trading. i assume nothing from the call itself, just perhaps, well, i don't know it was up in the pre-market? >> yeah, there was nothing huge on the media call. the analyst call just started. it will be interesting to how they question the management and what answers are in general, the focus on the ahn offs, the 350 million revenue, the key one, that tax rate aspect if you are splitting out the core businesses, the interest
rate related businesses softer than expected whereas things like trading and investment banking, though down year over year was slightly better than expect and markets more vool tile the more certain businesses perhaps a little softer between the two. >> all right one of the first big ones of the week we will talk to you in a bit. when be come back, a retail holiday for some has gun amazon prime day is official underway what it signals about the consumer, amazon and investors amazon holding on to 2k. back in a moment don't miss your golden opportunity to experience the luxury you desire on a full line of utility vehicles. at the lexus golden opportunity sales event. lease the 2019 rx 350 for $389 a month, for 36 months, and we'll make your first month's payment. experience amazing.
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welcome back symantec down 13% after we first reported this morning around 9:05 the talks between broadcom and symantec have ended at least for now. that according to people familiar with the situation. the two companies had been in talks for am in of weeks, designed of course to get to a deal that many thought would be announced tomorrow in which broadcom would be acquiring symantec a company that currently has an interim ceo in rick hill and has not performed particularly well. perhaps one reason why they could not ult ultimately agree on price symantec holding out for $28 a share. broadcom was not there with its offer. perhaps in the region, but not close enough to meet the desires of mr. hill, the management
team, the board as well in terms of what they saw as fair value being 28 bucks a share there is always possibilities that talks get revisited, that pressure from some shareholders say, wait a second, why did you walk away? get the management team to reconsider unclear if that will be the case for now the pencils are down no expectation for a p.e. bid, meaning their price expectations as well given some of the breaks on that potential equity check that would be needed, the financing and everything else, and the synergies, of course, to the operating company in broadcom as much as $1.5 billion we will keep you updated if there are any new things to say. stocks reacting to that news. >> if they need to pick up some pencils, they could probably do that zblorn there is a deal on everything. amazon prime day is here courtney with more on what we
can expect what's become one of the biggest shopping events of the year because it says doorbusters and flash sales, and i am with the rest of the herd and already bought an echo dot it was such a good deal. i couldn't resist. >> so many consumers are attracted to this day. you know it's already been underway for seven hours but this year's event is two full days. you have plenty of time to shop on amazon and competing retailers if you haven't already because nearliy every survey points to consumers planning to shop this year than last year. a survey found of those planning to check out the deals nearly all will browse on amazon. makes sense, right six in ten are going to compare prices on other websites before they do any checkouts. more than a third say they are going to shop for deals on other online retailers so they already plan to look around 17% are going to hit the stores, too. it's a big event all the way around npd says prime day shoppers are
primarily female both high and income shoppers are looking around half have incomes under $75,000. the third have more than $100,000 early this morning as prime day kicked off we asked shoppers what's in their shopping cart. >> my wife is definitely shopping i will look. i usually pick up some type of electronics on sale. >> i haven't decided yet what i'm going to buy. >> i don't want to spend the money. i'd rather spend it on summer activities with the family. >> i have no idea, but i definitely am going to go on, see what hthey have. >> tools i got my belt off there. >> i didn't know about it. i will have to check it out. >> hard to believe some people didn't know about it but will they end up keeping those purchases? it turns out there are a good amount of buyer's remorse. adobe says there was a 30% increase in returns for items bought on prime day last year. i know an awful lot of people
bought insta pots. i asked who actually uses their insta pot. i don't. carl, back to you. >> thank you we'll work on that joining us to discuss this morning, john blacklich and victor anthony good morning. >> good morning. >> when prime day rolls around analysts say one day, a couple days, not going to move the needle i saw a revenue estimate hike because the conversations they say around big categories look big for prime day. that true? >> yeah, i am projecting $6 billion of sales over the two days that's up from $4 billion last year to put that in performance, i'm estimating amazon will do $350 billion in gross sales. that's slightly less than 2% of total gross sales for the year it's significant because i think what prime day really implies is that the benefits for amazon is
prime memberships go up. that should benefit the growth curve in the fourth quarter and on i think they should be a little bit more sales of their amazon branded products i am seeing a lot more of the amazon ad units. so i think the ad growth decelerated somewhat in the first quarter. i think that should accelerate in the fourth quarter. that's a positive as well. ultimately, i think everyone agrees this is a critical test for the one-day shipping service that amazon has been spending $800 million on. >> right john, what would you argue is the first report card out of prime day? is it about memberships or is it about speed and delivery, something else >> thanks, carl. yeah so our data suggests from our proprietary survey a couple of interesting data points. 44% of u.s. households say they will purchasing something on prime day. that's 30 million u.s. households purchasing. then it's in 17 other countries. it's 48 hours -- or 48 hours
this year versus 36 last year. so agree, incremental to revenue in the third quarter the other thing that's interesting is that 10% of non-prime u.s. households per % our data said they would sign up for prime to participate in prime day. that work out to about five million incremental households on top of the 63 million u.s. prime households that we estimate going into prime day. so it's definitely good for sub penetration. we have seen starting with prime day the last couple years per our data it kicks up the prime penetration heading into the holidays that's a big part of prime day. >> is there a chance here, john, of overexposure? we keep seeing an increasing number of hours that prime day lasts. i was buying the december last night before prime day actually started. is there a chance that amazon overdoes it? >> i don't think so. i mean, i think this is the fifth year right now i think it's now an event.
i think awareness is up as evidenced like half prime subs are going to buy 10% of households are going to join. >> amazon knows how to sell that fomo and if you give them two days, maybe they still have it but if you expand it to a week, as has been predicted by some analysts, what to you think, victor >> i think they expand it to a week all the signs are there. every year they increase the number of hours. two days now they will probably end it with prime week ultimately and i think -- what's interesting though is that all of retailers are benefiting from this not just amazon. walmart, target, you know, ebay has a crash sale just in case, you know, today. amazon has created an event for all of the retail industry and they benefitted from this. >> assuming your e-commerce strategy is a good one, right? >> right. >> some people are behind the eight ball. >> i'm surprised that walmart is taking this long to really build
up their online business i remember looking at walmart, comparing them 15 years ago. walmart versus amazon. i think they dropped the ball. they are trying to -- the acquisition of debt was somewhat of a positive, but it looks like they are having difficulties there as well. amazon is in a position to lead the way. but everyone else is benefiting. >> walmart seems tro have made great strides the last couple of years. in-store pickup seems to be helping. you don't seem to think much of the effort >> the efforts are incremental for walmart. i think they probably should have jumped on the online bandwagon over a decade and a half ago i think they are behind the ball, behind the curve they watch amazon. they were in the position to be the amazon of today. >> sears was in a position to be the walmart. this is the age-old -- >> yes it comes down to the in management. >> it's hard to do something different when it's going pretty well. >> giants are hard to move we are going to get your
thoughts on facebook here, the fdc hitting the social media giant with a record penalty. elon in washington, what are you learning >> $5 million. but that is not going to be enough to satisfy capitol hill several key lawmakers, two whom happen it object presidential democratic presidencandidates a say it should be bigger. senator elizabeth warren tweeted this settlement is a victory for facebook pointing out the company's stock went up after the news leaked. of course, it is down this morning. meanwhile, senator amy klobuchar said the fine doesn't fit the offense, especially compared to facebook's earnings. she said $5 billion is not enough to deter the company and force them to put consumers' privacy before profits now it's not just facebook feeling the heat senator mark warner slammed the ftc as unable or unwilling to put privacy guardrails in place. he said it is time for congress to act the problem though is that capitol hill hasn't been able to
agree on the path forward. privacy legislation has stalled amid fights over preempts, which is whether federal law should take the place of aggressive new state laws like california's the powers that the ftc should have and who has the right to sue companies over privacy violations still lawmakers on both sides of the siel are getting a little bit antsy about moving a bill. perhaps senator john kennedy put it best. he said congress needs to get this tun with a microwave, not a crockpot perhaps they should buy an insta pot on amazon this prime day back to you. >> beautifully done. privacy be damned. facebook is your top pick this year >> yes i think monetization is a bigger part of the mix for them that's one number two, i think there is a lot of runway in terms of monetizing of the messenger. they pulled back on that
i think the next several years those could become multiple billion profit generating assets for facebook number three, if you look at what they are doing in video, that's the ads they are putting on the video, that's a bigger part of the mix as we see from our daily checks so we think they are becoming really a big competitor to youtube, i think, over time. so monetization. the fact that they really aren't losing users over this data privacy issue over the past year and a half users are still growing across the globe. video is a bigger part of the mix. undermonetized assets. whether they become e-commerce or payments as well and potential china entry down the line. >> john, want to weigh in? facebook i guess the broader social media platforms are facing this challenge of regulation that's brewing on capitol hill and elsewhere around the globe what's likely to happen for these companies?
>> yeah. you got the $5 billion fine. they told us last quarter they were -- they abrood three bill they set the expectations to five bill. it came in at the high end it's a 60% impact to earnings in '19. the street will look past it per the press reports, more privacy restrictions, we don't know what that likes yet i think there is more to come. more broadly, and i think it impacts facebook perhaps more than twitter or snap given the scale. it is a bit of a limiting factor on the multiple on what people will pay for it. i think there is probably a couple more years of this heightened discussion around privacy and anti-trust for all of the players ultimately, we don't think there is going to be anything material happen, you know, or material change in the business >> victor, facebook is your top pick right now for years you have been saying amazon is your favorite.
yes? >> listen, i tell you to buy amazon all day every day for the next ten years with the pull back on facebook, stock pulled back to 140, i made it my large cap pick from that point. it's up 45% since. that's my top pick for smid cap. >> still chairman. not ceo, but still chairman. >> we don't talk about it that much maybe next time. >> thank you very much john, thank you. appreciate the perspective. >> thanks. when we come back, citi kicking off a big week for bank earnings which name it might be time to buy into and a quick check on the markets. and we are getting record highs again. more "squawk on the street" -- said it like it was no big deal, right? we are hitting record highs once again. again. we'll be right back.
tries to cut down the number of people crossing the southern border asylum seekers will be ineligible for asylum. that's expected tomorrow. people are being told to take heed of tornado and flash flood warnings as barry moves north. much of louisiana and mississippi have been under flash flood watches as are parts of arkansas, eastern texas, western tennessee, and southeastern missouri. and de-escalating tensions in the persian gulf, calling on iran to particular stick to ther deal. >> we have a very intense agenda we will start with points from iran we will see how we can together with all the member states and with the rest of our international partners conserve the nuclear deal with iran. >> and that is our cnbc news update this hour back to you. >> okay. i will take it, thank you. time for our etf spotlight
mike is here talking about bank stocks in light of citi's earnings this morning. it says why may be the time to get in now >> well, why do they look cheap? they have for some kind. we can slice it a few different ways the financial backing off a little bit after a strong run on citigroup's earnings look how the group splits according to different sub sectors. xlf is the overall financial sector spider 4.5% up in the past year. this is a 12-month chart what's interesting about this is kie is the insurance stocks. up 15% they have been bolstering the entire financial sector. kvwb is the big banks. kre is regional banks. they have lacked when you talk about financials you are not really talking about the banks. as i like to point out, the xlf, s&p financial sector, 12.5% is brookshire hathaway. that is not a bank it is partly an insuranc company. look at the relative valuation
the etf, the forward price earnings multiple relative to the s&p. it's been cheap for a while. we have never gotten close to a market multiple this entire cycle. half the valuation the s&p is getting more expensive as the rally has gone on and banks are not moving in terms of valuation, guys it seems the bull case as with citi cost control, buy-backs, and steadiness on credit it's not the end of cycle, so therefore credit is not going to become too big of a problem. >> why the strength in insurance? >> actually, life insurance is in fact the best within it so contessa has the answers as to why the insurance - >> well, you know, i'm newly assigned to the insurance beat i'm just learning about this particular field it's so interesting that property and casualty is seen as a safe haven bet so what you're seeing right now is people trying to make money
on the life insurance and their investment arms of this life insurance is the big driver there zblnd the bond market has been strong. they kind of own huge portfolios of bonds you know, normally the ten-year yield would have to go up for them to do better. the very, very long-term yields have done better 20, 30 years they buy these things. it's hard to know exactly why. it is a bit of a haven and they are steady as opposed to what's perceived with the banks. >> thanks. when we come back, america's e-cig addiction. a sneak peek of the original documentary "vaporized" which apartogh apartogh aquatic is bac is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward.k afts every day, invesco combines ideas with technology,
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labs launched in indonesia last week second largest market for smokers in the world domestically they are fighting accusations the pop theularity n teens is addicting a new generation of people to nicotine carl had unlimited access to juul the last few months. >> juul's early marketing campaigns, including social media influencers that boost their businesses take a look. >> can you explain to viewers about the marketing strategy about campaigns that appear aimed at young people? >> well, we think that's inappropriate. when we launched juul we had a campaign that was arguably to kind of lifestyle oriented, too flashy, lasted less than six months it was in the early days of the product introduction we think it had no impact on sales mu sales. the success of the product
didn't occur until a year later. >> you are referencing the vaporized campaign >> yes. >> actually, in the year immediately following what juul called its vaporized campaign, its sales grew by nearly 1,000%. >> big numbers valuation has continued to skyrocket, hitting 38 billion. adam bowen and the co-founder are now billionaires of course for a look inside the company and the vape debate dune in 10:00 p.m. eastern for america's e-cigarette addiction, also available on cnbc, apple tv, fire tv, roku, for purchase on amazon starting tomorrow when a new company comes along with disruptive technology, they end up having to apologize for early behavior we have seen this in a couple of very big examples. >> we have right. the old mantra of break things first and then apologize later
fascinating company, carl. obviously, our colleague jim cramer has cite quiquite an emol negative response to it. i come back to the deal. it was so interesting. enormous no path to control they just wanted an economic interest in the company without seeing a way to control it. >> juul will tell you in terms of being in on meetings, having operational influence, minimal for the size of the stake. that's fascinating i think it's just they need to hedge quickly. >> here's my question about juul if you're in a business where you are going to say we're in the business of weaning people off of cigarettes, and that vaping is healthier than cigarettes, at some point you have weaned the majority of the smokers off of it. you have to grow your audience what's your path for growth without getting this young audience they can say we think that's
inappropriate, we don't want to do that, but what's the long-term strategy here without sucking in young people? >> it's largely international, taking countries where smoking rates have not come down like ours india, china, and trying to get inroads there. you are dealing with multiple governments who are not always happy to have them come into the country, are concerned about the levels of nicotine in the pods it's not just about whether san francisco is banning these or not. >> although interesting that their hometown chooses to actually ban the product. >> yeah. >> anyway, should be good. >> looking forward to it, carl. let's look at the markets right now. the dow has once again turned negative on the day, but just slightly s&p flat nasdaq flat. all in the red at this point "squawk onhetrt"s ck rit after this don't go away.
let's get to the cme group in chicago rick santelli with the ex change. >> thank you i would like to welcome my first guest, andy brenner, national alliance securities. good morning you are the perfect guest to open up this week. looks like the fed put, as a matter of fact the central banking global put is alive and well and resurrected stocks seem to depend on the stimulus and easing factors of central banks. boy, lots of volatility in long duration sovereigns. tell us what you are seeing. >> well, rick, there is no question -- >> andy? are you still there, andy? well, it looks like we have an
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welcome back we want to get you an update on this grounded 737 max. american airlines has removed the plane from its schedule through early november now and this new "wall street journal" story says the planes are unlikely to be ready to carry passengers until 2020 because of the time it would take to develop and certify the revised flight control software, train the pilots on the changes. the report says boeing executives and regulators have expanded their safety analyses to cover a growing list of safety issues. we talked to delta about a month ago. the argument was it's going to take longer than anybody expects. that's showing up to be true. >> yeah. and they have to make the scheduling adjustments pilot hours are down at places like southwest as well all right. let's send it over to john he has a look at what's coming up on "squawk alley." >> long time, no see we are going to have joe
lonsdale on. that's important to talk about tech in government and his fellow co-founder peter thiel's controversial comments about google, guys you don't want to miss that coming up. contessa. >> sounds great, john, thank you. never onegreat, jon, thank u never one to let a little thing like a tech issue keep him down rick santelli at the cme group, rick, back to you. >> let's talk about that same topic i was bringing up with andy money, traders pay very close attention to the spread between bunds and bonds, our ten-year notes. if you look at the all-time chart over 20 years you can look at how historically it's gotten and the fact it's starting to narrow many times on this trading floor, traders will ask me, where's the next 25 basis points in ten-year note yields. and my answer to them is, tell me where the next 15 or 10-year basis points in bund-year-olds are and can i give you a much more accurate answer we are tethered at the hips. the reason for that is clear
with a free-moving, for the most part, foreign exchange market and interest rates for the most part now controlled by central banks, policy is transmitted through those spreads. i sort of call it the growth spread, as we were outdistancing on growth in much of 2018, that spread ended up at its widest. as we started to slow, that spread started to reflect the fact that we were getting pulled into that slowness but at issue now is, with christine lagarde on the fringes of potentially taking over for mario draghi, just think about it this way. what would the eurozone like they would certainly like not so much with regard to negative yields what topic today in earnings season is so important with financial institutions and banks? net interest margin! how much banks are making on interests. well, it should be pretty easy to understand that european and japanese banks are much different in this regard than american banks, especially when you consider at recent we had a bund auction with a zero coupon.
so the long and the short of this is, if you are trading global rates anywhere, you need to be very cognizant of the rate relationship between the most short maturity rates that the fed most likely will continue to keep pressure on to the low side versus the potential to try to get things wrapped up. and at first maybe doing more stimulus long end is initially reflecting growth that's why yields have popped. but ultimately, how it ends up might once again be a divergence between u.s., europe, and japan. david, back to you >> rick, thank you rick santelli. well, san francisco is looking to slap a new and additional tax on highly paid ceos robert frank joins us now with more on that story >> good morning, david you can call it the tax on the wealth gap san francisco's board of supervisors approving a, quote, excessive ceo salary tax the tax would apply to any ceo's who makes at least 100 times the median pay of its san francisco employees. now, companies would pay between
0.1% to 0.6% of additional tax on their gross receipts. so that's their total sales in san francisco. that, of course, is on top of the current city tax of up to 1.3% on gross receipts now, the tax now faces a vote on the spring overall voter ballot. the authors say it will raise up to $140 million a year, which they hope will fund a new mental health program now, this comes a year after the largest-ever tax increase in san francisco, that was proposition "c." that taxes companies to help pay for homeless services. the revenue from that tax is still tied up in a lot of legal challenges that money has yet to go to the causes it was supposed to fund now, portland actually became the first city in the world last year to pass a tax on highly paid ceos. that tax in portland raising between $2.5 to $3.5 million in the first year, about what they projected san francisco politicians blame the tech boom and highly paid ceos and workers for driving up housing and
living costs in the city, which they say have added to the homeless problem, but the companies here most likely to get hit are actually banks, retailers, and fast food chains, since they, of course, have well-paid ceos and a lot of lower paid workers, labor experts saying, that tech companies not likely to face any tax since their san francisco employees, those in the area, are much more highly paid. others warn that the city risk chasing away companies to more business-friendly states, like utah or texas. guys >> yeah, that seems to be a competition underway for who can be more anti-business. san francisco, new york, i'm not sure, robert but these new fees seem to keep mounting >> they do and i think part of it is the need for services, so we all know, san francisco, they have between 8,000 to 10,000 homeless people in a city of about 800,000. so it's really anybody who's visited there knows it's a huge problem and they've got to solve it, coupled with the sort of
emotional and economic anger at those at the top, how gentrify indication has chased out a lot of people in san francisco there are two sort of, in some ways, separate problems, but there are some ways who just, politicians say, well, the magic bullet here is just tax the rich people and the homeless problem goes away. obviously, it's not that simple. >> i was going to say, robert. i mean, if taxes are a way to modify behavior, is the argument that this is a sheer money ra e raiser or are they trying to bring executive pay down or medium wage up >> it's a great point, carl. and given that the numbers -- you know, san francisco, they're aiming to raise $140 million that's significant in portland, they only raised $2.5 million, even in a city the size of portland, that is a tiny drop in the bucket so in portland and in san francisco, i think the value for them is symbolic they hope that this is adopted nationally, that the federal government does something like it, but so far, there's little evidence that that's going to happen >> well, it seems to me like a carrot might work in this situation, what you were talking about, with the ceos of fast
food restaurants and things like that don't they have an impetus to make sure that their workers can live somewhere in a reachable distance and commutable distance to these low-paying jobs that we have >> yeah, i just don't think that, you know, the markets are going to pay what the markets should pay you have, especially if you're mcdonald's or any of these other fast casual restaurants, you have to keep your costs down i just don't know if this tax is what's going to encourage companies to pay their workers more, especially given the economics of cost-cutting in an especially competitive business like fast food >> yeah. what's the minimum wage in california, they have one set, robert >> i'm not sure. they're obviously, seattle, they pushed up the minimum wage new york is now looking at 15. but i think the labor markets themselves are solving a lot of those problems for them in that pay, especially at the low end, is coming up quite rapidly,
recently >> robert, thank you robert frank meantime, pretty flattish action on this first day of official earnings season quk le icongp quk le icongp next ♪ and with bank of america and merrill, the benefits you get can grow, too. as a preferred rewards member, you can enjoy priority service and exclusive discounts... the benefits you get can grow, too. so your growing life can be more rewarding, too. ♪ what would you like the power to do? ♪
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good morning it is 8:00 a.m. at facebook headquarters in menlo park 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪ good monday morning. welcome to "squawk alley." i'm carl quintanilla with morgan brennan. jon fortt is back at post nine >> the band's back together. >> we are getting some breaking news from facebook testimony from david