Transcripts For CNBC Squawk Box 20140530

They started at 3 at the beginning of the year. Anybody looking for rates to go straight up has been completely confounded by this. A lot of different guesses as to why you would see the bond market still in a situation with the tenyear, below 2. 5 . Well talk a lot about that today. Central banks will be in his words, exceedingly on shortterm Interest Rates as markets emerge from the liquidity trap. He made the case for what he is calling the new neutral on cnbc yesterday. I dont think the worlds upside down. I think the world is pricing in and coming to grips with the fact that post the moment and post five years worth of healing in the economy and in the Financial Markets and in the banking system, that were on the cusp of emerging from a liquidity trap and that the fed and other Central Banks around the world are going to be exceedingly low on shortterm Interest Rates. Thats a brand new regime. We are calling it here the new neutral. Well be talking more about the new neutral with pimcos deputy cio within the hour. We had the question, was Paul Mccauley going to cut his hair within we came back . He did. He took the beard off. He chopped the hair a little bit, too. Do you think that was required. No. I thought he was going to be so cal, fit right in. A little shag going. He cleans up well. He does. What do you think about why were looking at yields below 2 . You have the gdp numbers that stunk. But thats not it. Thats not it. Its an issue of liquidity, assets going into being spread around. The risk assets still look okay. You want to be in stocks. On the rate question, i was talking to a fund 34ger. He told me he was at a Goldman Sachs round table recently, everyone there was concerned that the rates will stay this low. Theres too much of it. Its so heavily weighted to one side. Nobody is breaking from it yet but everybody is worried about it. Was that the gary cohen comment that made no sense where he said the whole markets make no sense . Its been a huge pob for them. They havent seen the volatility. For anybody who plays on the volatility, its affecting how theyre performing. Right. It could be a perfect spot, though, right now. If you look at the mark, im not sure what the new neutral is, what it really means. I think i get it. Im not entirely sure i do. I didnt know what the new normal was either. Easier than the new neutral. Right now, its quiet, everyone. But things are pretty good everywhere. If youre a bond trader, things might not be so great. But for the rest of us, right . A goldilocks moment. No one talks about it. Thats why were seeing the markets hitting new highs. Exactly. We were having this conversation yesterday in the editorial meeting. All the old guys are worried that there isnt a disconnect between stocks and bonds right now. One of my guys said you come into next week and get this data. Next week the data will matter. Next week if the data is mild, the market will float along like this. If the jobs number comes out strong, bang, then youre off to the races on equities. You get the disconnect that all the old guys have been hoping to see again, helps us sleep at night. Lets tell you what well be getting today. On the calendar personal income and spending, that comes at 8 30 eastern time. May chicago pmi and a final read on this months Consumer Sentiment. As dan mentioned next week, thats maybe when people will take more attention to whats been happening. Ill get your views on this next story. In corporate news, google now taking steps to comply with eu socalled right to be forgotten ruling. The company launching an online forum today that lets european consumers request to have personal information removed from search results. Google is not saying when it would remove the links. Is this doable . I mean, the links dont the sites dont disappear forever. Its that they link from google disappears forever. But it doesnt mean that this is going to happen at bing, for example or any of the other search places or yahoo . Does this make sense to you. Its a story that regulators are much more concerned about consumers. When have you heard consumers complaining about this . I think people understand the tradeoff. They know they have Great Services for free and they give up privacy. It bothers me from time to time. So dont buy anything online. Im not going to do anything online. It hasnt impacted me to this point but i dont like the constant collection of data. They havent figured out how to use the metadata yet. You trust the eu regulators to make that right . I dont know. I dont. I dont trust either one of them but i dont want these guys messing around with it. I dont Want Companies to be constantly able to gather that data to change the rules and requirements along the way. I dont mind them gathering the data, i just wish the rules were more clear. They change them. This is theater. Youre never going to get rid of those things. Theyll always be there. There are 10, 15 stories id like to get off of google. Really, lets bring some of those up right now. How is google going to decide . Are they going to have human beings sit there . That becomes an expensive pursuit. Right. I dont understand the whole thing. Forget the ruling itself. Like the forgotten ruling. He wish he could get rid of that link, the link of the story. Another story to talk about this morning. The u. S. Justice department wants bnp to pay 10 billion, issues that the french bank evaded sanctions against banks in iran and other countries. This would include some type of criminal charge or at least pleading guilty to a criminal charge. We saw credit suisse, this happened before. Do they pick on foreign banks . Do you see a trend here. You think thats a problem . No. I dont have a problem with that. Is 10 billion enough . Too little . For whom . 10 billion catches your eye. Do you care . Do i care . That they do this. Does this seem like an appropriate thing to be done . I think its appropriate, sure. Youre okay with it . Everyone here is all good . I dont know enough about it. Dont have a big opinion on this. Theyre transferring money, illegally transferring money from countries they shouldnt be transferring money from. Should they be in business at all . In the United States. Should they be in business at all. Paribas. Yes. Whats the magnitude of the business with iran they did . I dont know. You think theyre the only large Multinational Bank to do business somehow i would imagine to shut it down or revoke its license youd have to see systemic Business Plan around doing this. Lets work with the axis of evil. Absent that, 10 billion, a couple criminal charges, thats legit. Go Donald Sterling on them, ban them completely. We call them criminal charges. This is what happens. We say theres a criminal charge but none of the things that come along with the criminal charge actually happen which usually mean going out of business or revoking your license or whatever. Andrew has a stronger opinion than anybody at the table on this. Im just answering the question. Are you for or against. I was trying to stir up a debate but im failing. Nobody wants to play. You want real krirn charges, hang them in the Public Square or not do anything. I think either you do something with consequence or dont do anything at all but this is theater otherwise. Where does the money go . 10 billion not consequence. Where does the 10 billion go . Who gets the money . How is it used . For more enforcement . Its like academia, you get a degree to teach more people so they can teach that . Does it go to build highways in america . If its for highways in america, im okay for it. They should double the fine. Shifting to technology news, microsoft announcing that it will integrate rival sales force. Com apps into its windows platforms. This tieup will help microsoft in its pushed. The stock was up 1 and sales force. Com was up by 2 . The company was founded to have colluded to fix the price of ebooks. A july trial will determine damages. Lets talk about the buzz story the morning. You will have views on this. If you dont, i dont know what to do. Steve ballmer is buying the Los Angeles Clippers for 2 billion. The Purchase Price sets a record for an nba team. That deal needs to be approved. A lead group by david geffen. I want to say proudly that i think we might have mentioned Steve Ballmers name for the First Time Ever relating to the clippers on this program. The monday after the news first broke about sterling, having said that congratulations. Thank you. Do you believe this deal sterling, the man says hes not going along with this. The wife signed it. What is that about . Well, i mean, first of all, maybe this is gods way of telling you you have too much money when you can bid 2 billion for the clippers. The second thing that occurred to me, shades in the 45 bid for yahoo right, 2 billion for the clippers . Im just saying. If he was willing to do the clippers, he should have been willing to do yahoo . Do i see a trend here with over paying . Then you have to wonder, is it really going to go down . Because remember whos there by the way is dick parsons is in the mix, trying to make sure this thing happens. I would you think dick parsons is trying to steer this deal to someone else . No, i dont. The way this thing happened quickly, i think it means that adam silver and the nba are signing off on this thing. I think so, too. Sterling can say what he wants. The wife and Family Lawyers haven hadaled his objections. You think the wife and husband are in on this together . He has to pretend that hes no, no. He has to pretend hes not interested. I do. I dont know why. The wife is saying one thing, hes saying another, theyre in cahoots. They did this to get to 2 billion. Think of the taxes the man has to pay. I heard someone saying that. Not in jest. Good problem to have. Think of the taxes. How get is this for the nba . More importantly. You have two teams in one major market in new york. Now youll have two competitive teams, a real owner. Sterling lucked into this team he has now. Do you think that ballmer will be a good owner . The ceo of microsoft, hello. Here we go. Thats a sorkin rhetorical question. Im asking you. Im not asking wait a minute. You have to answer the question, youre a guest host. I think the record would show he was not a great ceo of microsoft. Why would you think he wouldnt be a good owner of the clippers . If you think he was not the greatest ceo of thats snarky. Im asking the question. Youre right. It doesnt necessarily translate that youre good or bad ceo or good or bad owner. This is a snarky conversation. It ends up the clippers get knocked out of the playoffs in the second round every year. Theyre not apple. Theyll be coming in right about here. I think this is going to happen. He was already vetted because he was going to buy another team. He wanted to bring a team to seattle is what he wanted to do. Thats an interesting question. Does he bring the team to seattle. His quote was in los angeles. How long, is that a wink, how long los angeles, four years, five years, do you try to get another arena . So youre not in the same arena as the lakers. Steve ballmer is an exciting personality, somebody who is incredibly enthusiastic. Thats for sure. I want to see him on one sideline, cuban on the other. Thats going to be great for the referees. Do you think hell complain to the referees at games . No. You answered it. I was hoping youd show the clip of him jumping around. Hell watch from the sidelines. Well pick the screaming shot for maybe the 7 00. Great, looking forward to it. Right now its time for the Global Markets report. Julia chatterley is standing by in london. Good morning. Good morning, becky. I was listening to you asking questions about what to do with bnp paribas and whats going to happen Going Forward. Investors asking the same question. Thats the key underperformer in the stoxx 600, the tiny square down here, down 5 right now. In an unchanged market for the stoxx 600. Ill give you a look as far as whats going on with the individual markets. Losing ground as far as the ftse mib is concerned. It wasnt a sell ain may and go away. The key outperformer, the german markets. Interesting to see whats going on italy, losing ground by 0. 8 . On the yeartodate performance, up 14 right now. But ill go back to what i started out, talking about bnp earlier, shares in bnp off around over 5 . A wall street journal reports that the french lender could be hit with a 10 billion fine over those allegations that evaded u. S. Sanctions against a number of countries, including iran. Weve heard from the french siene tall bank saying theyre watching the situation very closely. I spoke to the head of European Equity trading strategy at jpmorgan earlier today. He said even if we see a lower fine of around 8 billion, which is what bnp are fighting for, we could see a dividend cut Going Forward. They said, look, even with a 10 billion fine, this is still undervalued, theres still value at these levels. A whole host of different opinions. The key question is what does it mean for the u. S. Operations Going Forward . Well continue to ask these questions. Guys, thats it on the european wrapup. Back to you. Thank you very much, julia. Have a great weekend. Lets get more on the markets now after the s p notched another record close. Joining sus david joy, chief Market Strategist at ameriprise financial. What happened to the gdp. I think investors are comfortable with the idea that the First Quarter was a total laboration. Second quarter, maybe close to 4. The data seems to be telling us that its getting a little bit better. I think allowing stocks to drift higher along with the better data, plain and simple. We expect that things are getting better. Anthony, is that really the case . What does the economy look like right now . It really is, to expand on what david just mentioned, yesterday we saw much of the weakness was in inventories, inventory contribution was minus 1. 6 from a previous number of minus 0. 6. We know historically when the economy is expanding, when you see that kind of weakness in inventories it snaps back very sharply in the Second Quarter. I would not be surprised if you get a number thats sharply stronger than 3 in the Second Quarter. We probably will gravitate to 3 in the third and Fourth Quarters but thats still a pretty firm underlying growth trend over the next three calendar quarters. David, with the numbers weve seen with the latest gdp print, that keeps the fed at bay for now. Andy said this is a goldilocks moment. Is that what you think . I think it is for the time being. I would define that as maybe the next couple of quarters. Once we get within that sort of sixmonth time horizon of the first fed rate increase, youll see a market correction, simply as a result, the portfolio reconfigure ration. I dont think it means the end of the recovery or the bull market but i think theres a correction waiting for us out there. History would tell you that, but also history would tell you it doesnt have to be that severe. Maybe somewhere between 5 and 10 type pullback. I think we get it in the Fourth Quarter or so. Is that pull back that takes us below the levels were at today or do we run further ahead . And that pull back, if youre waiting for the pull back to jump in, you missed it because youll be looking at stocks. I think the upside is limited. Maybe we get to 2,000 on the s p. That implies about a 4 rise from here. I think we get that over the next couple of quarters. We end the year somewhere, i think, around 1850 or so. Wouldnt be a bad number. Below where we are today, were above 1900. 1920. Yes, yes. I think we end the year below where we are today. I thought things were supposed to get better at the end of the year and into the First Quarter. Everything has changed. If we were to go back and ask people a month or two ago, everyone felt lousy. Everyone thought, the Fourth Quarter. The market has moved. Hes saying the fed will act, rates will go up and youll have this pull back. Weve been talking about that for how many years right now . Its unbelievable. Anthony, what do you think . Weve been talking this morning. Rates and points hitting well below 2. 5 for the tenyear. Theres a couple things going on. First of all if you look at this economic expansion, its been about half as strong as the typical economic expansion that weve seen in prior cycles. So that means that in this kind of an environment, the Federal Reserve when they normalize Interest Rates, they may not have to go as high as they historically have gone. If you look the aa normalized fed funds rate of 4. 5 , this economy cannot withstand at this time a 4. 5 fed funds rate. If you are going to so a fed funds rate that rises not only slowly but maybe not reaches that very high level, then youre going to see these tenyear treasury rates perhaps being weaker or perhaps not going up as much. Then of course youre seeing the noneconomic buyers. Yesterday we saw another number where foreign Central Banks increased their holdings of u. S. Treasuries by another 8 billion. Again, theyre holding over 3 trillion worth of those treasuries. So those noneconomic buyers that are not in there just to look at Interest Rates are in fact holding down Interest Rates. But having said all that, at some point the forces of gravity will really overrule. And that is when you see Economic Growth starting to increase, you will see those tenyear treasury rates going higher. Ive done research that finds when you see a 3 acceleration in real gdp, thats good for about 34 basis points increase in the tenyear treasury rate. Will you get that . Of course not. Because youve got all these other forces going on. Youre also seeing a lot of investors, whether it be hedge funds or others, now realizing that maybe its a good idea to jump on the band wagon and push those rates lower because theyre not going higher. A lot of those factors out there will offset the 34 basis point increase. Between now and the end of the year, well see the tenyear treasury rate ending the year, somewhere in the neighborhood of 2. 75 to 3 . I think thats pretty much baked in the cake, if we see this kind of growth that im projecting between now and the end of the year. Anthony david, gentlemen, thank you both for joining us. Have a great weekend. See you soon. Pleasure. Coming up, Mark Zuckerberg makes a 120 million gift to California Schools. He made a 100 million gift a couple years ago to newark news. First, squawk sports news. You went to sleep. Are you waiting for the goal . The new york rangers are on their way to the stanley cup finals for the very first time in 20 years. They won game six in the Eastern Conference Finals last night. Back in a moment. Mine was earned in korea in 1953. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back, everybody. As andrew was talking about, facebook ceo Mark Zuckerberg and his wife Priscilla Chan are donating 120 million to the San Francisco bay areas Public School system. Last year, the couple pledged 1. 1 billion in Facebook Stock to the nonprofit Silicon Valley community foundation. The first 5 million will focus on principal training, Classroom Technology and helping students transition from the 8th grade to the 9th grade and it follows that massive donation of 100 million they made to the Newark School system. Theres a story in the new yorker thats out right now critiquing what happened there. Kind of looking through it. 100 million hasnt made nearly the impact that had been originally hoped for. Thats the thing about philanthropy. The outcomes are hard to achieve. This is one way of redistributing it, isnt it . Doing it yourself. The Education System is probably the biggest thing you can point to. If you cant get a good, quality education, theres no way to balance out the playing field. If you look at High School Graduates versus college graduates, not only in income but in terms of unemployment figures, its off the charts. No question that College Education is the way out. There are a lot of bodies on the beach from people who tried to fix education. Education is tough. Public education is almost impossible. Because you have unions, bureaucracy, local politicians. You have a whole ecosystem of he tried to do it through the system. Right. They didnt try to change the system. They did try to change the system and right, but not in the same way you see some of the hedge funds walter isaackson will be joining us at 7 00 a. M. Hes been involved with the makeover of the new Orleans School system, which is based on charter. It came after Hurricane Katrina and theyve had massive success. Well talk to him a little bit more about that, too. Lets tell you about another story, microsoft said to be jumping into the wearables market with a smart watch. Forbes reporting that the device will use optical engineering expertise from Microsofts Xbox kinnect division and continuously measure your heart rate. No word on the watchs release date yet. That watch will reportedly work with iphones and android. Apparently, it will be able to look into your eye and figure out your heart rate . What. We were wondering how we lived without this all these years. I was asking andy what my heart rate was. Pitter patter. I wear this thing, this is the jaw bone thing. I wear it on my wrist. I cant live without it now. I wore it for a while and got rid of it. Do you use the information on that . Constantly. For what . For what . It tells you how much you walked and how much you slept. As a result of it win believe i probably walk or do exercise 10 to 20 more because im conscious of the numbers. Its your guilty conscience. Totally. That wrist banned is your guilty conscience. When i see how horrific my sleep is, i start looking at the calendar, saying i cant go to that, i have to take a nap or go to sleep early. I change the way i behave because of the numbers. It used to be i would feel lousy and suffer along. Now i look at the numbers and change my behavior. Tmi. Think about it. Theres a great article in the wall street journal, i believe yesterday, in the personal journal about a goo who jogs that used to be hooked up to every gizmo in the world. He stopped wearing all the gizmos and he said life was so much better. He felt his heart. He could see the air. Why you put the goat in the kitchen. Lets tell you about one more story. Some of the nations Largest Companies are creating new security positions. Theyre looking to hire cybersecurity experts and put tech specialists on their boards. This is just the latest sign that Corporate America is worried about hacking threats. Reuters reports that the Company Seeking chief Information Security officers include jpmorgan, pepsi, Cardinal Health and deere. In the past, this type of position typically reported to the chief financial officer. Now they may report to the ceo and the board. It positions it as these are not the guys with the pocket protectors who come around and fix your email anymore. This is a cabinet level position inside a company. It shows. We talked about jpmorgan looking for one. Look at the potential damage that can be done systemically. Weve seen target and some of the credit card companies, ebay, these are minor, dress rehearsals, right . Its fascinating situation that this has now elevated, a risk manager, a financial officer. This is that level job right now. Its significant. Its very significant. Its got to be the best College Major out there. Right . Talk about guaranteed job security. In fact, a lot of colleges and universities are stepping up these programs. Were laughing but seriously, siper security is becoming a major. Schools are teaching it. Youll have a job for the rest of your life. That might not be the job you want. The most talented drop out of college. Hackers. Snowden had a ged. Its not just private Companies Looking for this or public companies. Its also the government that is massively trying to build up its cybersecurity, too. Yes. This is something that is, as andy said, the job of the future. When we come back this morning on squawk, well talk a little bit about growing unrest in libya and why the Global Markets should be taking notice. Michelle carusocabrera will join from us london with that. Michelle . Hey there, becky. Yes, libya here in london for two days, trying to get Big Oil Companies to invest in the country. Pretty bad timing, though, just this week, the state Department Says the violence is so bad, all americans should leave libya. What to do . 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The dow within striking distance of a new record, just a few points off. The nasdaq having a very strong month. This is the last trading day of may that were heading into this morning. You cant see the equity futures look weaker, dow off by 17 to 18 points. S p futures off by just under 3 points. The nasdaq down by less than a point. Right now, the tenyear is yielding 2. 468 . Also the big story in oil right now is libya and the growing unrest there and the mysterious rise of a rogue general who lived in the u. S. For nearly 20 years, libyas Oil Production has plummeted to 155,000 barrels per day, down from 1. 6 Million Barrels per day due to ongoing violence. Its gotten so bad, just this week, the state Department Said any americans in libya should leave immediately. Cnbc international chief correspondent Michelle Carusocabrera has been attending a conference, of all things, investing in libya. Shes managed to interview the rogue general as well. Michelle . Hey there, andrew. Lets show everybody the price of oil, particularly the price of brent. 110 bucks per barrel, spiked earlier this month due to the ongoing violence in libya. It was widely expected that by now, three years after the fall of gadhafi that Oil Production would have recovered, even increased in libya. When you look at a chart of whats happened in the production of libya since the arab spring it has been plummeting. Nearly 1. 5 million rl bas of oil are missing from the market due to ongoing con flicks between militias and islamic jihadists. The violence rose dramatically about two weeks ago when haftar appeared on the scene with the support of what appeared to be left of the air force from libya, various militias coming together. We spoke with the general last night. We spoke to him through an nbc producer who speaks arabic. General haftar told me his mission is to eliminate the islamic fundamentalists from libya. That the libyan people do not believe in fundamentalism in religion. His viewpoint, which would sit very well with the u. S. Government, plus his reported previous involvement with the cia in the mid1980s in an attempt to overthrow gadhafi has many wondering if the cia is backing him now. He lived in virginia for nearly 20 years, awfully close to langley. He denies involvement with the cia. He says hes getting no support from overseas group and nbc news efforts to reach sources within the cia have not been fruitful. Bad coincidence of timing . Theres a big conference going on here in london, two days, the third annual new libya oil and gas forum in london. Its designed to entice the Big Oil Companies to invest in libya, boy, its been a really tough sell. We were there yesterday. Theres a lot of skepticism. Joining me now is one of the attendees from the conference, hes the chairman of transsahara group, an Oil Services Company in labibya. Youre libyan yourself. Pretty tough sell to invest in libya . I would not say its a tough sell. I think people are watching. Libyan oil is very important, especially to the europeans, more than to the americans. The europeans the iocs from europe. The international Oil Companies. The european Oil Companies know libya quite well. They depend on libyas oil. I dont think theyll be walking out of libyas oil market. All theyre concerned about now is more of the security issue for their independence or employees in the country. Libya will remain an attractive place. What do you think of haftar . People on the ground have rallied for him. I dont believe exchanging a military man with another military man. Thats my importantal view. The rally that he has gathered today behind him is due to the fact that the government has no existence. They have done nothing at all to bring back stability, bring back security. Libya does not need an army. Libya needs police and needs a judiciary system, which has been inactive since the revolution. Thats what we need, somebody to implement order for judicial system to be active, fast and implementing the law. But there is no need for an army. If hes successful, there will be an election. The ballot box is the only way forward for libyas problems. The answer to libyas problem is not on a tank or a general on a tank. The answer to libya is we all go to the ballot boxes and we vote. If the islamists win, let it be. If its the liberals, let it be. The people are the only ones to decide on libyas future. No one else can decide for libyas future. Lets hope that happens soon. Thanks so much for joining us. Thank you. Youre welcome. Can i ask a quick question . Sure. You bring out the point that security is a huge issue for investors, just security for their employees, people on the ground. I heard a report earlier this morning that suggested that libyans with means have left the country because its not just not having a 34military there. Theres no police or rule of law. Is that an accurate statement or a real portrayal of how things are on the ground . Could you hear her question . No. Are you seeing the upper class and the well to do in libya leaving because of the situation on the ground . Are people escaping due to the violence and the lack of rule of law . Not really. Not really. Im not seeing people escaping. There is fear. There is some sort of instability, but that instability will continue to exist in libya as long as we have corruption and we have abuse of the Legal Executive and judicial system. As long as there is corruption you say thats been going on for the last three years. Theres more corruption and abuse of the law than ever has been in the last 42 years. Okay . So as long as you still have that corruption and going on and the abuse, criminality will exist and well still have problems. Guys . Michelle, thank you for the report. Have fun in london. Hope to see you very soon. Coming up, forget drones. Why helicopters could soon deliver documents to your house. Plus, selfdriving cars that look like marshmallows. Beckys going undefeated in the week for the word jumble contest. And joes rants on the latest cialis commercials. Read it it right now, go to squawk. Cnbc. Com. Latte or au lait . Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. And right now all beds are on sale starting at just 649. 99. Hurry in, sale ends sunday know better sleep with sleep number. Dhl express planning to start delivering documents by helicopter in chicago. Theyve been using helicopters in new york for several years. I didnt even know about this. Dhl plans to double its u. S. Sales force it says to 600 in the next two years to increase market share. Not drones. Hedge fund managers. Thats what the helicopter its like an 800 package. For like two pieces of paper. Exactly. Right. When we come back, we go from drugs to food. Weve seen a surge in m a activity this month. Well get to all of that when squawk box comes right back. F] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. [ bottle ] ensure®. You need to see this. Show em the curve. Do you know what this means . The greater the curvature, the bigger the difference. [scifi tractor beam sound]. Sucked me right in. Its beautiful. Gotta admit one thing. Cant beat the view. Introducing the worlds first curved Ultra High Definition Television from samsung. Mayo . Corn dogs . You are so outta here aah [ female announcer ] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. Fear came back in the market in a very big way. What happened in greece has quickly metastasized. Down 800, 1,000 in a heartbeat. Classic capitulation. There was a factfinding error. May have been a bad trend in proctor gamble. This is classic 1987. It just stopped on a dime. This is all happening in realtime. Its been a busy year for m a. Activity will pick up the next two months. Tom mcgee is the deputy ceo of deloitte. Good morning to you. Good morning. So heres the thing. For the last three or four years, everything was in place for huge m a push. Right. Cash on the balance sheet. Everyone needed revenue. Now it looks like its happening. You say its going to increase. If i read your reports two years ago we ought would have thought this. Whats going to happen here . M a is heating up. We just completed a survey of 2800 respondents. 84 believe it will continue at its current pace orac accelerate. You mentioned strong fundamentals. Strong stock market. Low Interest Rates. There is an increasing level of confidence in the economy, although theres a level of uncertainty. Can we agree the timing is all wrong. They should have been doing the deals three or four years ago. Their stock wasnt as overvalued. Again, the economic recovery, we have been waiting a long time. We have been waiting a long time for this to happen. Why do a deal if the customers arent on the other end . Why do a deal if youre not going to get there . The level of uncertainty is a cloud thats hung over the economy and the m a market in general. For the first time whats different now, and this pertains to the equity markets approximate bond markets now, whats different now than six months or a year ago . It is finally unassailably true were in a recovery thats not going back. Even last winter people were still concerned that the recovery is not real. Right. Going all the way back to 2008. Now its like, yeah, we have a recovery. Is it a backwards looking indicator . No. You dont think its late . Late relative to the recovery as you would expect it . Yes. Its halfway in or threequarters into recovery. On a metric level its late. On a psychological level, it feels right on time. If you try to use m a as a barometer. Its hard to predict. A couple of things that are probably positive. If you look at private equity, theres expectation they will exit more of their portfolio companies. A third of those look to an ipo. So that is certainly a positive. In terms of the deals, 2005, six, 2007, the big mega deals disappeared. They are relatively big strategic deals. The currency issue, stocks are in a better place. Does it matter that the guys are not buying stuff . You know, based on the survey responses i think the private equity guys are in the market too. They have the same level as the corporate buyers do. And i think that and it depends. Look at the spectrum of buyers. They are looking to do larger transformational deals. Theres an openness to do club deals. One of the things we have heard continually is this question about what comes first. Is it confidence from ceos . Is it demand that comes from the consumer . Are we seeing actual demand from the consumer at this point . It seems to me all indications are there is a level of optimism out there. We have done other surveys at deloitte and they have a level of confidence. What drives a lot is bankers coming in with their power points. You need scale. Oh, no, no, no, come o. You need global scale. No, no, no. We cant do that because im concerned about the future of the economy. Now im not so concerned about the future of the economy. Get this guy in and see what makes sense. When you look at a stagnant area where there is not a lot of growth. Did you see the point in the times yesterday. Some of these Industries Like telecom, airlines, others. Is there so much consolidation you will run out of places to do true m and a, unless you go international. Theres a lot of capital in the marketplace. Coming up, more on this mornings top stories, including google taking steps to let some users delete search results. And the 2 billion shot fort l. A. Clippers. Squawk box will be right back. Latte or au lait . Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. And right now all beds are on sale starting at just 649. 99. Hurry in, sale ends sunday know better sleep with sleep number. May comes to a close with the bulls quietly in charge. Our market news maker hour pimcos deputy c can io. The right to be forgotten. How google users could erase unfavorable search results about themselves. And nothing but net. Steve bomber nails a shot for the l. A. Clippers, buying the team for a record 2 billion. The second hour of squawk tkpwobgs begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with andrew ross sorkin. Joe is off today. Andy, walter and dan. Good to have you here. Youre welcome. Were going to talk about a lot of things. Take a look at the futures. Yesterday the s p closed at another record level. The dow within striking distance. You can see this last trading day of may that things are starting off with modest declines. Dow indicated down by 11. 5 points. S p off by less than two points. And the 10year we have been watching so closely is still looking the a yield below 2. 5 . We have a busy day for economic numbers on this final trading day of may. 8 30 eastern, april readings on both personal income and Consumer Spending. Both are expected to rise, not by as much as they did in march. Also out, the Chicago Purchasing Managers index. And the final may reading on Consumer Sentiment from the university of michigan. Well be watching shares of saleforce. Com. They have struck an agreement with microsoft that will allow its applications to work about windows devices. Wow. They will also work with microsofts Popular Office software. They used to hate each other. Now they are teaming up. This will give a leg up when it comes to the cloud. And former microsoft ceo Steve Ballmer is buying the clippers for 2 billion. It has to get approval from the leagues board of governors. It was announced by shelly sterling, the estranged wife of Donald Sterling. He was forced to sell after making racist remarks in a recorded conversation. Sterling paid, get this, 12. 5 million, for the team back in 1981. Sales price of 2 billion. Is bill gates ever going to own a team . Anyway, elis spacethe x company is designed to carry seven astronauts to the International Space station. The coneheaded craft is reusable. Thats the good news. It will cut down on costs and open up opportunities for space exploration. The space ship should be ready by 2017. It is one of several private Companies Competing to build space taxis for nasa to replace the entire Space Shuttle fleet. I kind of want to go on that. Great audio track. The other big tech story, apple bringing on jimmy iovine with his acquisition of beats. Here to talk about what all of that means for apples culture is our guest host this morning, Walter Isaacson joining us the rest of the crew. Good morning. Good to be back with you. It is lunacy. Whenever i tried to talk to steve about some great piece of programming, how it would come to apple, let me show you what were going to do. He would go on and on and on about how Strawberry Fields did seven different versions. Jimmy is i think the greatest talent spotter now in the music and content business. And so it just feels. It feels part of the deal. Would steve have done this deal . Yeah. I dont think he would have cared that much about buying the piece of hardware. Although he was the one who touted those headphones. He and dr. Dre and jimmy iovine they are sending headphones out to all of their fans. You really care if you are getting the base right. I like the headphones part of it. Its a typical apple kind of thing. Super cool piece of hardware. Everybody wants to wear it. Its a nice deal. Not only would steve have made the deal, but how would steve have operated this new group of executive. We have somebody from burberry, jimmy iovine, dr. Dre. Tim cook is out running the company, bringing in talented people who have an artistic sensibility. Steve brought the art, the beauty, the liberal arts, as he would say, to the technology. Now they are bringing in other people who are cool. First of all, i was there on march 6th in couupertino. Im calling about. All of a sudden katie goes, hey, jimmy. And its jimmy iovine. I blew the story. Number two, as far as the way the Company Beats fits with apple, apples earbuds, not so good. The beats, the best in the business. Theres the streaming and the itunes piece, putting them together. Beats has a screaming business, right . But theyre not i would agree with you. We only have 200,000 customers to compete against spotify. Apple has a Radio Business that competes with pandora. They need to do that. All the growth in the music business is going to spotify and pandora. The announcer said on the software side, they were keeping itunes over here and run beats separately. You have a good executive. Youre going to put the beats, hardware under him. And he has always been steves right hand man. You put jimmy iovine and the Subscription Service reporting to him. It seems to work pretty coherently. You have this team of artists if you will around tim. How is that going to work . Its angela running the stores. Jimmy is going to be involved in the music. Who do they get from Christian Dior . Yves st. Laurent. The question is, how does that work . Its going to be tim running the company definitely with steve. And i think that tim is a really calm, really focused, really good manager. And hes comfortable enough having some of these strong artistic types around him. The music business run very differently than apple. Apple is a bastien of secrecy. The music business is the wild west. Even still. On the creative side. That is, you know, still a different world. When you are doing a streaming service like that, the service itself is creative. Theres a long, long period where jimmy iovine was riding shot done with steve and doug morris of course. Iovines close friend, to get Music Companies to go ahead and be part of this itunes store and the whole apple he key system. And i think tim needs somebody to rise up with him. All of that stuff is getting more complicated. Its not so easy the way it works from a consumer standpoint. Putting all of that together, having all your different devices. They need attention. Its a technology issue, not necessarily creativity issue. Its a process. Its a packaging issue. You talked about one thing, though. Its got to be seamless. From the hardware, the software. It needs some attention. Over and over he would say that. He drilled it into the dna of apple. I want to change topics. This is something im furious about. Do you know what im furious about . Amazon. I love jeff besos. I love amazon. Every day its part of my life. Whats happening is this is a big Book Publishing debate where they have shut down the publishing business. They own 30 of the business. What do you think of this . This is huge. You have a big coming out . I have conflicting interest here. Im speaking without having a dog in this fight. I get my clothes from amazon. I love amazon. Right . And the reason i love amazon is they are great at Customer Service. When we were making jeff the man of the year in 1999 people were saying, youve got to be crazy. The whole internet bubble is about to burst. I said, yeah, but hes in the Customer Service business. He will be here in 10 to 15. All he cares is putting the customer first. You have to wonder when he says im going to make profit so i have to make it messy. Isnt he just asking for a fight with the government . Explain exactly whats happening. You want to explain whats happening . Yeah. Hes hitting up first to say youve got to give us much better deals. Youve got to change that split we get on it. You have to cut what youre going to make if you are to be sold on amazon. You cant buy j. K. Rowlings next book on amazon because they say it is not available. And they recommend books for you to buy. This is cutting into Customer Service. Customer Service Company to say you cant buy that novel. Sure, you can go somewhere else. But once you get 30, 40, 50, 60 of the ebook market thats when you get to your question, which is when microsoft had that you cannot leverage dominance in one part of the industry to get to another. I would argue that is a huge piece of the business. It gets into time warner comcast. Companies say many i have 40 of the business. Youre either on our youre not. But if youre not, youre in trouble. That gives more leverage to the market. The other thing i will say. Going back to comcast, the situation with that, comcast said it will make concessions, a number of them. Still would have 40 of the Internet Connectivity coming through. You would prevent that before the bad behavior you are describing with amazon right now . The best thing is have as much competition as only. You say, you will get 40 . But just make sure the other Financial News shows are on just like cnbc. And then Huffington Post comes along with a show. Or andy does the Fortune Magazine show. This is something every month you have to have competition and openness in the market. You cant decree it by saying make these deals that. And the behavior in some cases its just the organic nature of distribution, all that fragmentation coming in around a few different spots. What looked good a few years ago, its hard to get your confidence. They are competing with more companies than they ever were before. Its not just a cable utility. I have an apartment in manhattan. Everything has to be comcast, time warner. Its time warner today. It will make it slightly worse by saying there will be less ability for multiple companies to come in and try Different Things if any of these companies lets take espn theyre going to be on comcast. People will say i can get the espn. So you would plug the deal. We have to find a way to get more competition. Maybe i would say lets have overbuilds. Lets have google in. So the way to do that. I think theres builtin we work for comcast. I could be against the deal. Theres already builtin monopolies in each municipality. Its one of the rules that gave them licenses in the first place. Right. If you want competition, i dont think its getting hurt by this deal. You need to get in regionally to each market. And have the Cable Company or the phone company be forced to carry some of those things. Because thats the question. Im crazy enough to think that actually you should open up the wires. Or at least on a buildout allow them to, like a google, to come in and give them rights on the streets. Which by the way, they try to block constantly. And make sure that the next netflix, the one not in your consent deal, they say, okay, we have this new way of packaging. The more concentration you have either in the pipeline of amazon, you have to be through our pipe or your books dont get published. You might as well give up. You dont want that concentration of the control of pipes especially when the people controlling the pipes also control the content. When you get back to amazon, i think amazon has a wonderful thing going. If you want to publish, you want to go around the traditional publishers, you can go direct with amazon. But they also center to realize publishers actually do things too. They have lawyers. They have copy readers. Im going through this process. I want to be in a traditional publisher thats going to give me all of those services. And amazon has got to deal with those types of people as well. Thank you. Walter will be sticking around, as is the rest of the crew this morning. When we come back, we have details on a 120 million donation from Mark Zuckerberg and his wife. Google has moved to erase search results. And how a number of o geopolitical fights are impacting oil prices. Squawk box will be right back. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. All right, everybody. Lets talk oil. Specifically, russia and ukrainement how does it impact the u. S. . Whats the answer . The sanctions were targeting individuals very select entities. It was not the sweeping sanctions we saw in iran. If you are looking at the russian sector, the companies have really escaped the sanctions news. The st. Petersburg economic forum, it was surprising, not surprising but kind of shocking that all the major European Energy companies showed up. One ceo saying its business as usual. Bp just signed another deal in russia. Right now it looks still open for business. So its good news for oil prices. Bad news for what we could be trying to do. What made the sanctions so effective on iran was the sweeping nature. The eu went in for them. The fact that they were really spider webbed. The russian sanctions effort right now has been a slowly ratcheted uppest. Its not so punitive that it really changes our calculus. Do you think putin is playing rope a dope now or is he pulling back a bit . It depends which stories that you read. Some troops are leaving the border. But the question is when you have the russians in Eastern Ukraine, how is the chain of command . Is putin really calling the shots there . Again, it seemed as long as they did not formally disrupt the elections, as long as they didnt have formal Troop Movement into Eastern Ukraine we would all basically say, you know what, thats fine. What do you think it is . You think it is rope a dope. I certainly think it is. A lot of people in washington think it is rope a dope. It is unclear whether putin has control of the troops in Eastern Ukraine. Ed question is no one is sanctioning that. Where is the appetite for that . Theres no appetite. I was down in washington talking to treasury secretary lew. He was insisting the sanctions worked. I was pushing back and saying, well, they might be working for our u. S. Policy aims, but they are certainly not working in europe. Europe wants the oil and gas as much as they want to sell it to them. They dont see these pictures of putin without the shirt and the gun. This is, as you suggest, this is russia. We do business with russia. It comes and goes. At a certain point, bp and the ceo of bp is going to be shamed and really have some trouble if he keeps going and targeting. Its going to be a problem in the United States. And thats not going to be good. And its going to lead to sanctions. Any investment in bp drilling. It could be. You have a region. You have a private sector manufacturers who are very dependent on low energy prices. U. S. Manufacturing kicking up. It is coming hugely competitive and geopolitical issue. There may be more shame in the stock price than there is the argument i think for the u. S. To start exporting like crazy. Exporting like crazy oil. Doing the keystone pipeline. Building the export facility on the east coast. So you can assure the people of europe that in five, six, seven years, theres going to be a supply that is an alternate supply s. But i am pretty sure it will be but thats in the future. Thats a decade from now. Its four or five years. We have had four or five years. Why are they willing to do it . They may not. But if with he start doing them and we put sanctions, as im sure will happen on u. S. Investment in the Energy Sector in russia and places like bp that keep trying to break it, it will put a lot of pressure. Again, you say they have to start acting tough. The question is will they start acting tough . I think there is a marked difference how they approach iran and how they approach russia. I think part of the reason as well, if you did not have u. S. Corporates in iran you have u. S. Businesses there. I do not think it is as easy to put the sanctions on russia. Sanctions on bp. I dont know, walter. I think it will make it hard. You need Companies Like bp that invest. They will make a lot of sound. It will make it difficult for them. John mack just left the board. Of course. He had to leave it. Wait, wait. No. Wait, wait, wait. He said ive got to get off of this. Hes are the type of things that will happen. And its not going to be a fullfledged sanctions regime. But it is going to be tuff n uff that it will be very difficult for an American Business to feel sure about making contracts in russia unless putin pulled back. He may be actually pulling back. Im not sure at that point. Thank you very much for joining us this morning. Okay. Still to come, pimcos new neutral. The firms deputy cio will join us in studio still ahead right after this. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. When we arrived at our hotel in new york, the porter was so incredibly careful careless with our bags. And the room they gave us, it was beautiful. A broom closet. But the best part, worst part, was the shower. My wife drying herself with the egyptian cotton towels, shower curtain defined that whole vacation for her. Dont just visit new york. Visit tripadvisor new york. With millions of reviews, a visit to tripadvisor makes any destination better. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Still to come, pimcos deputy ceo on the the deputy, the fed and the rates baffling investors right now. A little weekend reading. The talking sidewalk blog is up. And cars that look like marshmallows. Joes rant on the latest cialis commercials. Cnbc. Com. Join in on the fun. Well be right back. Welcome back to squawk box, first in business worldwide. Ahead of the final trading session of may, we have an upbeat profit of 50 Cents Per Share, six above estimates. Big lots raising its earnings forecast for the full year as sales increase. Specialty power retailer express earning 6 cents a share First Quarter. Spring inventory sold slowly. Recent promotions were less than anticipated. Natural foods maker annies saw quarterly profit 33 from a year earlier. 29 Cents Per Share was short of estimates, as was its fullyear forecast. It points to higher input, not the weather. Its a big miss. There must be Something Else happening for that stock to be off this morning. Well take another look at that and dig deeper as well. Pimco executives recently convened for the firms annual secular forum. The key takeaway, there are plenty of Investment Opportunities in what they are calling a new neutral economy. The deputy cio ahead of Global Equities at pimco. Its great to see you. Thank you. Its great to be back. The new neutral. We know the new normal. Pimco has been talking about it for five years now. It is about a world with a lot of debt. Mostly government debt. And aor is quite slow, anemic. Inflation is slow. Its a world where real rates dont have to be at 2 but actually could be much closer to zero. And if you look at the past 100 years, youve had quite a few times, periods where you have had those rates near zero. So that means a lot for equities. It means a lot for bonds. Its not a bad environment. But that means you really have to look for ours not beta. When you had rates so low, what happened after that . Or when was that also . Yeah. Different times. The key thing is to understand that the world today is very different than in those periods. Because the world is very global. And i think you have to think of stress points on this system. Because what that new world means is clearly volatility is going to be it is law. But when you have less growth, the pie is smaller. So you will be much more susceptible to air pockets. Like on an airplane. It could be rush shafplt there could be slowdown in china. Because rates are so low, they can petition from your Bank Account Interest rate in in existent. So if there is confident people should use the air pockets to act to the market until you feel variations are too high. And to equities. To equities. Do you feel there is a slowdown in china . Yeah. When i think of, you know, the low probability but not so good kind of options, you can see an environment where china might slow beyond what people expect today. China might say, wait a minute. Japan devaluated its currency. It has not been accused of being a currency manipulator. If china wanted to reaccelerate exports could say, wait a minute, i could actually put a bit of pressure on. But if that happened you could have deflationary impact. It would not be great. That is not my central case scenario. But we have to think about that. Gdp growth in 2017, 2018 of 5 would be good. Pretty low, right . Well, it depends. It is 7. 4 . The world is accommodating a china thats not much larger. Its in transformation. And you have a lot of things happening. You have anticorruption, antipollution. You have a new government. The chinese leadership has been getting people ready for this. A lot of the rhetoric. Yes. Were about 6 . About softening. About a changing, evolving economy. Youre going to see that setting. 5 is scary a little bit from my point of view now. That sentiment in china is quite prevalent. If you think 20172018, the demographic figures if you look at the demographic profile in china it would actually be consistent. I dont see this as negative. The reason is a slower but better quality growth in china would be much better for the world. And being such a large economy, the contribution to growth in a low growth world actually could remain quite similar. The law of large numbers. Yes. I get it, sort of. I want to deconstruct what you said. Its interesting. Theres a lot to think about. But there were also a lot qualifiers. If you see these air pockets. If you hit an air pocket and you think its an opportunity, you should jump in and buy equities until you think they are overvalued. Yes. We are looking at the s p another record high. The dow within striking distance. When do you know its overvalued. There is market valuation which for equities overall the overall market is fair. 16 to 17 times stearns . If you think that we are in a world of low Interest Rates. And if you can capture Growth Opportunities or dividend opportunities. In a lower rate world, you want to have some income somewhere. Emerging markets, though, is cheap. We know why. Yeah. The fed reverses. Yes. They are screaming about whats happening in the markets. If you think the new neutral means we normalize much slower, the reason why the performance was so dire in face of anticipation of tapering is actually reversed. At least postponed. You dont think the fed will be raising rates by the middle of next year . Are we looking at six months of this moment in time and all bets are off because the fed will start hiking Interest Rates . Thats very, very low in a very measured way. Thats the key. Its the dialogue. Its the talk versus the action and its the speed. I think in an environment where growth is low, they will prefer to take their team. Its nearly this probing approach. Whats happening in the market. What do we do . Whats happening in the market . If you look in the uk and in europe, its the same thing. We have been talking about qe in europe for a long time. Have we seen it . Very quickly, were out of time. But not all emerging markets again, the concept of emerging markets, thats the last 10, 15 years. You wouldnt say youre up. You have finland, spain, germany. So for me you have to look at the energy sort of in mind. You have to look at brazil. I like brazil. I like parts of southeast asia. Eastern europe im still very concerned. Russia seems a shortterm buy. Longer term, still in issue. I like mexico as well. Coming up, media merges booming in the first half of 2014. Big ticket, highprofile deals could change the entertainment space. But is it good for the industry . Well talk about that. Maybe jump back into that comcast Time Warner Cable debate. Very persuasive man. Later, the business of craft beer is booming. Dogfish is here to talk summer beers and the state of the street. Those Little Things still get you. Cialis tadalafil for daily use helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. 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At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back, everybody. We have two of the champions of the Scripps National spelling bee. The first time in 52 years there have been cochampions. I dont know if they ran through the whole dictionary or ran out of time on this. I watched it last night. It was on espn. I love this stuff. I missed it this year. But this is great television. By the way, these two are the fourth only cochampions in the boo bees 89year history. More than 33,000 a a piece in cash and prizes. Just in case youre interested in this, the last word of the night was sithawikea. Im not sure i have these pronunciations right. Im glad you can ask it properly. She had a little help. Just a little bit of help during the commercial break. Like i said, im not sure i did pronounce it correctly. Is big media too big . Major deals announced the past few months left some skeptical about the concentration in the industry. Joining us is walter at btig. Another skeptic is at the table. I dont know where dan and andy come down about the skepticism in some of this. Walter, if it was up to you, are you letting at t buy directv and are you letting time warner table be sold to cam kos . I dont know about time warner comcast. At t directv. Directv, im not sure what future there is in that pay tv business. You reduce competition. I think its probably not a big deal. The regulators have to look and say where is the market going to be five years from now. You cant look at how people are consuming product today but competition five years ago. And look to inspire more competition the. This may sound counter intuitive but the next deal coming could be sprint tmobile. If you combine their capital investment, both of them combined spend less than verizon or at t. Right. Maybe they allow the companies to the emerge so they can be more competitive and offer wireless broadband. Thats what i want to ask you, walter. Then i want to bring in the other walter as well. Think out five years from now in terms of what the industry looks like. Comcast will control 40 of all broadband. Most of us use brad band. That is an important part of the puzzle. If you tell me the world will be different in five years, maybe that 40 number doesnt matter. What does it look like . Their argument will be obviously they dont compete in an individual market. The issue will be the amount of power that they have as a large broadband pipe thats out there. But the solution to that is to try to stimulate more broadband pipes. Help google expand. Help sprint and tmobile build more pipes. Thats the municipalities who have to decide to let in google and let them run their pipes and possibly subseu died it. It is also federal regulations. Its allowing the fcc and the department of justice to allow a company like sprint and tmobile to emerge to get the scale. Walter, you said if a deal like this happened, who is going to be campaigning . You have a lot more power. They will control a lot more content. And the competition comes not just for a consumer but for the content. Whether it be abc, Huffington Post, netflix, you have a lot of different pipe players that you could make deals with. But if you have a lot of consolidation, the pipe owners get all the leverage. Let me ask you this, walter. Do you agree with hastingss assessment, that he should not have to pay more even though at times his users are i think you can get around that on net neutrality. You can build the user per bit that they the use. And thats fine with me. I think to say netflix you have to make a deal with that or you have to make a deal with amazon. If he gets a deal with amazon. They get back on the buy now button. If it were me, i would say these pipes people should pay for the amount of bits they consume. Has Consumer Behavior and the advertiserss behavior or revenue behavior, whether its carriers, content providers, has it made it impossible to not operate at scales like this . Is there a choice between comcast time warper and buzz feed . You need the scale to be a real viable competitive business. On that scale, you have so much more power over buzz feed than if there were multiple players. To go out and get to that business point, right . Thats Walter Isaacsons point. I want to ask one other question. You talk in some of your reports about the possibility in the future you will see wireless providers literally be able to compete meaningfully against the broad band pipe, meaning you will get broadband over wireless at a Competitive Price possibly over sponsored content. We talked about this at the recode conference as far as where our broadband is in the wired business and what you can do on wireless. You talked about tech. We are watching whats going on closely. Nothing precludes google from going to dish and say lets build on spectrum. We will expand google fiber, build a wireless knelt work. Google can be a player. They bid close to 5 billion in an auction in order to get verizon to promise to provide open access on their phones. So tech has the power. And obviously the money, to get involved and provide some new competition. What regulators have to look at is a way to in cent them to help Companies Like dish, sprint or tmobile to be more competitive against the big guys. At t, verizon, comcast. Thank you for joining us this morning. Thank you. Appreciate it. When we come back, well be talking summer beers and the craft brewing beer. And later, a french economist Thomas Pikettys book on capitalism and income in equality striking a cord with many in the community. He will join us himself on monday. Will talk about that in just a little bit. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back, everybody. Joining us to talk about their summer ales is sam calgionni. Sam the beer man. President and founder of dogfish heads pwraobrewery. I never thought as beer being seasonal until the last five years. But you have different beers you would drink in the summertime. In the winter you will drink heavier, darker, stronger alcohol beers. In the summer, something lighter, more refreshing. I brought a pale ale. It has wasabi in the beer. Wasabi . We do it with sushi. An amazing artist musician from brooklyn helped make this beer. Is it hot and spicy . It has a little spice to it. Sam, i like your beer a lot. But dont you think some of these flavors are going too far . Citrus blueberry . All this stuff thats driving me crazy. Sometimes ill pick up a six pack and it will be too flavored. Everybodys palette is different. People are trading up to more flavorable beers. Theres a beer for every occasion. A beer that pairs for every food. A beer for every second of the day. This has wasabi in it . It has wasabi in it. Is it spicy . It is like youre drinking sushi over there, right . I dont know about that. Sam, what kind of sales do you get with a beer like this . It is called naaste. It has lemongrass. We sell tens and thousands of cases a month. You based . Coastal delaware, three hours from new york city. Lewis, milton, rehoboth beach. We are starting the first beerthemed hotel on lewis harbor. You can paddleboard to us. Dogfish. Com. Putting coriandeer in the beer. How close are we . With finite shelf space, we may have a shakeout period. But the overall Beer Industry is flat. But the craft breweries. Frothy. Still doubledigit growth. No signs of slowing. Let me ask you a question. Why is that . Big brewers like budweiser are starting to really make their beers more bland . A certainly trend . It is two things. They make high quality, wellmade light lager. Its wellmade beer. It is an affordable luxury in comparison to highend wine. All beer is pretty darned affordable. And its local. Every american lives within 10 miles of a local brewery. But youre one of the bigger ones. So you have sam adams in sierra, nevada. You know your stuff. 13 biggest out of about 3,000 put it in the the context of market share. Dogfish rules onethird of 1 . So were still tiny in the context of the big guys. How do you get this . Youre private, though . Totally private. My wife and i and two other coworkers. Are you doing a bacon beer . We have done baconinfused beer. A breakfast beer. Sam, real quick, how do you get shelf space . Shelf space is super competitive. The way we get it isnt with a giant force of salespeople or billboards. We get it grassroots, events, coming and talking to you guys. Facebook, twitter, social media. We rely on consumer pull instead of pushing our beer. Do you follow it online . We dont. Beers go through distributors. We would not be able to get to market without the great independent distributors that are out there. We always enjoy talking to you. Thank you so much for coming in. And bringing beer. Next time you come, bring more. We will see what happens in the next hour. With which we return, a handful of rich folks own everything. Income in equality, the tax code and the fate of whats left of the middleclass. Programming note, economist and author Thomas Piketty will be joining us for a very commercial interview monday morning. You do not want to miss it. That interview starts at 8 00 a. M. Eastern time. Were back in a moment. Sfx bing. Whos got two hooves and just got a claim status update from geico . This guy, thats who. Sfx bing. And i just got a. Oh no, thats mom. Sorry. Claim status updates. Just a tap away on the geico app. Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. And right now all beds are on sale starting at just 649. 99. Hurry in, sale ends sunday know better sleep with sleep number. Tech rises to another large finish. Where markets could be headed just ahead. The debate over income in equality growing. Should there be a redistribution tax the on the rich . The next generation of space flight unveiled. Jane wells looks how astronauts will be traveling in the near future. One half of the stanley cup finals has been decided. Everyone is a winner when they watch squawk box. The final hours begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. I think were listen to go music and we should be congratulationing the rangers. We have a full stint this morning as well. Dan, executive etd tore of digital at reuters. Walter isaacson of as salesperson institute is here as well. We will be with you guys in just a moment. Lets get you through some of the headlines. A half hour away from personal income. It posts a rise of 0. 4. It is arriving 0. 1. Salesforce. Com is one of this mornings early winners. That comes after the maker of Customer Service software struck an agreement what i used to think of as their enemy. They will work on windows devices and used in conjunction with microsofts Popular Office software. Remember the glitch in healthcare. Gov . The state of oregon went with its own web site designed by oracle. It doesnt work out. The states governor is asking to sue oracle pause they had so many problems that they abandoned it and switched to healthcare. Gov. The buzz story of the morning. Steve ballmer is being the Los Angeles Clippers for 2 billion. Im not sure mr. Sterling thinks sit happening. The deal will need to be approved by the board of governors before it is finali d finalized. He outbid magic and oprah. And guggenheim for 1. 4 billion. Thomas pikettys capital in the 21st century. Mity will be joining us on set monday at 8 00 a. M. Eastern to talk about capitalism and income in equality. His arguments struck an ideological chord. The times said his data was flawed. Piketty himself is defending that work. Joining us now to jump into the debate is tony, former White House Deputy press secretary and managing direct thor of Hamilton Place strategies and cnbc contributor. And our guest hosts. Tony, why dont you weigh in on this . What do you think about what Thomas Piketty thinks about income in equality . Is he right . Has it listen in recent decades . No question it has risen. Not only is the book right on that point. And he has done a lot of work with emmanuel saez, i dont think thats in dispute. Not the way we see cash pay, market pay for a lot of workers in the United States. That is definitely a phenomena that increased in recent decades. The question is whats left out of that accounting. Tax policy and transfers have really grown the last five decades in the United States to the point where today about 17 to 18 of expenditures are from cash transfers or other forms of fringe benefits. It is pretty significant. The other is why has that income disparity changed over time. Its really easy to see in things like the return on the investment on income. So investments in Human Capital, we know that if you do not attain a College Degree your chances of being employed and being employed at rates that you can sustain a happy living on are really initialed. They the actually fall off a cliff. That is something that has been a significant change over decades. It is more interesting to me than how he looks at the return on capital in the future. Me too. Education in equality i think is a huge issue, tony. And i would like to throw this out to the table here. Walter, this is something youve been directly involved in. Yeah. Its a great moral, financial, social and political. With the amount of education gets is how well you can succeed and the opportunities you have. The amount of education is determined by what zip code you were born into. It is not a big ideological thing. From paul ryan to president obama you could say, okay, every kid in america deserves a decent shot. We should have greater, greater equality of opportunity starting with prek. The question is how do you fix it, though . Thats where ideology comes into play. In there is a shallow story in the Washington Post today. But it gets out a truth. What do you really think . The story says all the schools in are now choice schools. You get to pick the school you go to. By the way, this is something you have been directly involved in. Yeah. Its not ideological. Its just a story that in my mind people say, oh, yeah, we have this school. As opposed to going down to what happens when you allow people to compete in the k through 12 market. We will have this academy competing with this academy. And parents get to choose the competing schools. Thats the type of choice that has gotten double digit gains and new orleans at least for the past three years in a row. You guys were able to start over. Yeah. Its a really bad way to do it, with the hurricane. However, you watch washington, d. C. Trying to do that. Newark. It has not had the same success. And you have a general blowback to some extent against some of these reforms. The real thing is to try to stop this fracturing of it and trying to get the civil rights communication, the education community, the unions, everybody. Say lets try to agree on 80 of this. Walter, my wife is actually a Public School teacher in the d. C. Public school district. This is around our Kitchen Table discussion, a lot of these reforms that are really, really important on improving equality. The charter schools, choice, improvements in Public School education. But, you know, theres so much attention on those things. Theres very little tension. It needs to be even on strictly rates. We know 40 of dallas or chicago Public School ninth graders arent going to graduate, that is a huge clear and present danger for our economy and a permanent hit on the longterm productivity of your economy and on their return on wages. We have to do both. It suggests that completion rates doubled in the past three years when parents and kids had a choice of let me move from this school to this school. They go hand in hand. I was just going to say we did an interview with piketty and reuters. It wasnt the 700page. But he talked about changing the tax code. I want god to add another day to the weekend. Thats not going to happen. Education. A crucial piece too. Thats great. But what are we graduating these welleducated kids into . If we had 6 , 7 growth, would income in equality be the issue . There would be this access to wealth on the lower rungs, that kind of economic grist. Thats why we have the 700page book on income in equality being talked about as the best seller. I have a different question. We talk about equal opportunity. But equal opportunity to what . Were not going to get equal outcomes. Its never going to be. And the question i think the book poses and this whole in equality issues poses is whether we have now we are structurally involved in something that gets worse and does not get better. You mean the decline of globalization. Im not saying the system that we have create sd necessarily a bad system. But this is whats happening. I dont think theres equal people on one side or the other. The question then becomes if you have capital, are you in the economy with great new technology. All of a sudden you have uber drivers making 95,000 a year because that just popped up, things are going to happen in the economy we cant predict. But what you need is Human Capital thats able to take advantage of it. That means making sure every kid gets a decent opportunity. So we need kids to be able to read piketty and the original. Read it and see pascal. A final point before we go, you mentioned uber. They are creating 90,000 jobs. On the flip side, google is doing driverless cars. Five, ten years out that is a technological advance like that. When people say it has cut out jobs, has it actually cut out jobs . I just came from boston, which has the worst cab system in the world. Boom. Uber is there to pick you up. New orleans, which is supposed to be anovative town, theyre afraid of uber. I read a big essay saying this is the first time in fact, where it is going going to destroy i know. This time its different. I agree with you. Well revisit this in five years. Look what happened toeuf him. He passed away. Thank you for joining us. Byebye. Have a great weekend. Tune in monday at 8 00 a. M. Thomas piketty will be here on the set. This is the first on cnbc interview. Coming up, more Economic Data for investors to chew on this morning. Well bring you that and a lot more in just a moment. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Its called truecar. And truecar users. Save time and money. So when youre. Ready to buy a car, make sure you. Never overpay. Visit truecar. Com today. Welcome back to squawk box. We had a guest on last hour that suggested we were in for a 5 , 10 correction by the end of the year. That would be very normal. We have been rather short on corrections the last year. So a normal year actually does have a significant correction. But i think the general trend is still one which is up for equities. The economy will strengthen as this year goes on. The problem with the correction is you have a correction for a few days. People say maybe i should jump back in to catch the rebound. That is the trend the last 18 months. I think it will continue to be the trend. What would force the issue later in the year . What will happen is a correction is going to come when people truly doubt the premise of us improving here. Maybe geopolitical shop which suggests that the economy is growing might do it. Until then, i wouldnt i basically would rather try to pick the waves here. Are we through the worst of it in ukraine . I think we are. It is important that poroshenko has won the first round. Seems to be a leader. Putin plays games in geo politics in a way other World Leaders dont seem to be doing right now. But i think there is an uneasy equilibrium here. Russia will not try to take over ukraine because the consequences will be detrimental. I think it is going to the fade a little bit from the gee overall Global Financial scene. Im going to throw you for a loop. You had a brilliant question. You dont know what you were asking. We are talking about the coup. This is our global guy. Ill ask him. David, what do you think what if you bought equities in countries having coups . It sounds crazy. Thailand. Libya has a big problem right now. Its a little wacky, i know. Will it work . It sounds immoral. We dont want to make judgments on this. It really depends on what youre dealing with. In egypt they have had almost a quasi coup. They have a strong general lead with 92 of the vote. It brings more stability to egypt. It probably will work out better for egypt than chaotic democracy. Its a question of how good is the country . Democracy is better. As long as they can make it work. Egyptian equities. How have they done the last two years . That hasnt worked, has it . No. Thats because of the chaos that follows. The chaos can happen. There could be a coup in 24 hours. It becomes attenuated. David, there is a coup going on right you to for us to get to commercial. Still to come this morning, well talk about what the nations top cfos are saying about the state of the economy. The results of our survey are right after this. Personal income and spending data. Check out the futures this morning. You looked at the s p. Closing at a new record. This morning, modest decline. Futures down 18 points in the dow. Around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. As the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Welcome back. We have the Quarterly Results representing a trillion. The u. S. Economy is modestly improving. 80 say congress should reform the current tax code. Cfos arent holding their breath. They expect congress to do nothing at least for the next year and a half. On the Global Economic front, tensions between russia and the west caused the council to abandon the plans. We were talking about the john mack situation earlier. Slightly different but same realm. A Ripple Effect for russia and that region of the world. For more on all the survey results cfocouncil. Cnbc. Com to check it out. Back to andy and walter. You will be taking off in just a moment. Before you do, though theyre staying. Youre going to the book expo. I thought you were coming with me. I was worried with the traffic. Im getting a real guilt trip here. Separate from everything else, it relates to weeinberg. When did we do that . The chairman of board at as salesperson. You do work as well. Yeah. What do they end up doing . What does that firm become . First of all, partly because i worked with bob steele i know what a great executive decisionmaking, you know, person he is. Somebody has a clear vision. He was, as you know, undersecretary of the treasury under hank paulson for domestic. So what you have in banks like weinberg is banks without conflicts of interest. This is hard to have in this day in age. We will focus back on the client again. They are investing their own money. They have competing clients. They are trying to get into all sorts of things. Its one of the oldfashioned ways of doing things like wall street used to do when the old Goldman Sachs people used to do. Lets keep both whats good and good for our clients in mind. Some of these smaller boutique banks have succeeded some have succeeded. Evercore has done well. So its not a given. No. It takes great leadership. You have joe perella. Hes a force of nature. Peter weinberg. And bob steele. The best executive and manager and visionary i have ever seen. You put the three together, its like what im writing about in my book. If you get the right team of innovators, youll succeed. My next book is called the innovators. Its about the people who actually developed the computer, the internet. We talk so much about innovation. Its a buzz ward that is zapped of all meaning. I want to go through and see how exactly did it work. How did steve jobs actually occur. Part of it is real imagination and thinking differently. It starts with the first person to come up with a concept of computer programming. Women are the leaders in the programming. Jump forward 100 years, and you get others doing the computers. Groups of women who were quietly doing the programming of it. And all the way up to larry page to bring it all together with google. A lot of famous names. A lot of interesting people. Its not about one biography. How do people work together. How do they collaborate. Can i ask an innovation question. Do you believe that entrepreneurs, people like steve jobs and others, that everyone has one great idea in them or you can have multiple great ideas . If you put together groups of people. Like if i asked steve that question, what was your greatest question, the iphone, ipad. He said no, the Apple Computer was the greatest thing. Of course they do the micro championship. But then they do a processor. All sorts of things. The real goal is not to have one idea but to create a team that will continue to innovate. Thats hard to do. To invest a company that will invent 10 is a hard one. Thats what i will look at in the book. Fortunes new website launches sunday, doesnt it . Thats where im going. Im going back to lunching sunday. You can check it out. Its part of a spinoff from time warner. Were also closing our fortune 500 issue, which is our big issue. First time that profits in the fortune 500 collectively are over the big t. Ill just leave it at that. Think about that. And also, thats going to be coming out on monday morning. So were releasing the fortune 500 with a new website. So its a lot of fun. Should be a lot of good stuff. Thank you. Walter, andy, dan, stick around. Good luck with the book. Thank you for having us on. Still to come this morning, personal income and spending data. And then, could disney be a magical investment . Its one of todays platinum portfolio picks. You can find out whether or not you may want the house of mouse in your portfolio. Welcome back to squawk box. Personal income, 0. 3. Spending down 1 . Not as expected. Revisions up 0. 5. Revised on income spending. Originally at 0. 9. Even with that subtle revision, spending numbers are weak on the surface. Up 1. 4 on the core year over year. 1. 6 number on the yearoveryear, thats pretty big. It looks to me like that is the largest number yearoveryear change going back to october of 2012. So that begs a couple of issues. And different is yields are going down. Well, its not because of deflation or disinflation. Believe me, that is never going to be a chronic problem in the u. S. Thats my opinion. Inflation is going up. Look at the break evens. You have inflation, moving higher. Yields moving lower. And you see numbers down 1 gdp. Draw your own conclusions. Rates, 246. Not right on the lows. But anything under 250 at this point on a weekly basis is going to continue to keep the momentum to lower yields, higher prices. Back to you. Hey, rick, thank you. Have a wonderful weekend. We will see you soon. Yesterdays revised gdp showed the u. S. Economy contracted for the first time in three years. So, do the numbers bode ill for the Second Quarter, or should investors be shrugging this off . Thats what we have done so far. We have both sides of the story. Joining to us make the bearish case, is chief economist at stearns. And chief economist at Pnc Financial services. Lindsay, why dont you go first. When you look at Second Quarter, you are not expecting things to get a whole heck of a lot better. What are you expecting . Yesterdays First Quarter revision down 1 . Shows how deep of a hole the u. S. Is struggle to go dig itself out of. In february and march, that much more lackluster in comparison. The idea there is this pent up demand in terms of consumption, investment to carry us through the Second Quarter, let alone the second half of the year, thats already coming under pressure as we see april data coming in short. We look at retail sales, the consumption numbers. All coming underneath expectations. And pulling away expecting us to carry us through into the Second Quarter. You are looking for growth in the Second Quarter closer to 4 . Lindsay is only looking for 1. 5 to 2 . What do you see that she doesnt . I think theres better news on the consumer. Youre right. This morning was down a tenth. But they revised large up. If you look at the last three months. Most of the weakness, i agree with lindsay. Most was january. As the rest of the quarter went on, the economy was crawling of that hole. In Consumer Spending was up 3. 5 annual rate. Just a little better than the First Quarter. You have unemployment claims down around 300,000. I think a week from this morning we will be talking another gain of 200,000 and maybe even march or april revised up to over 300,000. I just see the data as much more positive. We saw Housing Starts do better in april. I really think we had a minimum correction in autos. It dragged the First Quarter down. And the very cold weather. It seems to me sense then the momentum has been up. Im expecting 4 gdp growth. Still not a breakout. 3 in the second half of the year. Lindsay, i was wondering i wanted a quick question. Next week is a big week for data. Whats your tale next week. What are you watching most closely to see where youre going with this, if youre right on this case . Obviously, well be watching nonpharm. The the job number is the number of jobs being created. Im concerned about the quality of jobs being created. A good portion, if not half of the jobs created since the end of the recession, have been low wage sectors. What i want to see is upward momentum in income growth. So im going to be looking at that average Hourly Earnings component to really get a sense if there is that impetus for wage pressure in the pipeline. Lindsay, the market seems to be agreeing with stu at this point. The stock market shipped things off yesterday. What do you think . Does that worry you . Do you think the market is betting against you . Do you think stocks should come down from here . Well, its really tough to say. The market is obviously forward looking. Where the stock market is now seems to be pricing in Unrealistic Expectations given the underlying fundamentals. If the economy does not Gain Momentum and we with he do not see a pickup 3 , 4 , i would expect the market have to correct at least in part to a more realistic expectation for growth based on a lackluster growth rate in the second half of the year. I will throw this out for you. It doesnt look like the bon market necessarily agrees with you. How do you explain a 10year at less than 2. 5 . The 10year is sort of in a global decline, government yield. I go back to what lindsay said about wanting to see income growth. It was up 0. 3 . That was tkpwhrea little bit ah inflation. Auto sales and construction numbers. Clearly i think one of the weaknesses in the First Quarter construction dragged down Economic Growth in the First Quarter. We saw better Housing Starts. So we should see an improvement in april construction both in private and at the government level. So that and jobs and of course auto salesis a pretty good idea about what consumers are doing. And the purchasing indecks. The manufacturing side has been doing pretty well. Auto guys will build a lot of cars this quarter. We will see that reflected in a purchasing Managers Index and manufacturing that goes up even higher in the month of may when that is announced next month. St and you lindsay one thing we have to keep in mind, though. Im sorry. Real quick point. When we talk about month to month, of course we are taking steps in the right direction relative to the low levels we saw at the beginning of the year. We take a step back and look at an annual basis, it is declining from 7 a year ago to just over 3 . It depends if you want to take that shortterm look or longerterm trend. Lindsay, stu, thank you both. Thank you. One company who went through a tough selloff recently. Why tia crepps said this Biopharma Company is ready for rebound. And the new space ex program transporting astronauts to and from the space station. Jane wells has more on this in just a bit. 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We are adding the final members of the squawk box platinum portfol portfolio. Head of tiaa kref. They hold investments for about 18 months. Sarah, i know you are bottoms up. You are really looking at these companies. Lets get straight to some of the picks. Like marriott. Partially because there hasnt been a lot of new supply in terms of hotels. Thats exactly right. The hotel sector is doing a great job of putting heads in beds s. Marriott has low supply growth. Occupancy rates are at peak levels. Pricing power is straight to the bottom line. We love cash. Cash is king for marriott. They returned a billion dollars to shareholders last year. We expect them to return a billion and a half this year. Have they gotten back to the place where they were before 2008 . Are hotels back in that power yet . They are continue to go increase Pricing Power over time. We expect them to at least get to those levels or exceed them Going Forward. Is it the story about the consumer or Business Traveler at this point . Its about both. Marriott has a balance of both businesses. They benefit from both trends. You also like shares of disney. We know frozen was a surprising mega hit out that came out of this. What else do you like about it . We love their movie business. Disney isnt only about kids. They have a great adult movie business with movies such as star wars coming out. Nine out of 10 topselling products are president frozen. Espn has the world cup. And cash is king for disney. They spent 3. 3 billion repurchasing shares in the last six months. All right. Lets talk about gileod. Investors are missing the fact that help sites c business should have a bigger market than people expect. And hiv business should be more sustainable. Biotech overall was a victim of a shoot the winners mentality we saw earlier this year. If you take a step pack and look at the companies, a lot of them have strong cash flow and earnings over 20 . You said it was a controversy around the hiv drug weighing on this stock at all . That seems to be prevailing. If not on the market, at least in the public conscious. The bears believe that the hiv is not sustainable. We think the new drug coming out on the market will get a lot of patients transitioned over to it and will be a bigger drug. Even at the price tags were talking about. Sarah, i want to thank you very much. Thanks for having me. Congratulations. Welcome to the club. Coming up, billionaire elan musk is unveiling dragon 2. Jane jetson got to sit in the spaeubgs ex. The use of the space taxis in the future. Check out our website after our show. Selfdriving cars that look like marshmallows. Becky going undefeated for the week. And joes rant on the latest cialis commercials. Does he know anything about that . Its all in the latest edition of talking squawk blog. To read more about it go to squawk. Cnbc. Com. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Mark zuckerberg and wife are donating 120 million to California School system. They are at the talking about the gift on the today show earlier this morning. We have seen firsthand that the quality of education it really varies in our area. From the highest performing schools to the most under served of schools. What do you think the teachers saw in you . When youre growing and youre first generation to go to college, you dont know what the potential possibilities are until someone believes in you and says, hey, you could do that. Chan talked about the side of her husband others might not know and offered her opinion on his hoodie. I thought he was just this really interesting guy who maybe wasnt that studious. Really . Yeah. On our first date he said he would rather go on a date with me than his first midterm. The type a child in me was appalled. I said what . It turns out he was trying to convince me to spend more time with him. We have been growing up together ever since. The hoodie is its okay. Im prohoodie. He wears a fresh hoodie every day. As long as its appropriate for where were going. He cant wear it to weddings. But he can do whatever else he wants. Nice. Very sweet. Very sweet. I dont have permission to wear a hoodie. Were going to get down to the New York Stock Exchange where our good friend jim cramer joins us. Good morning, jim. Good morning. Great show this morning. Really loving it. We have had a lot of fun. Thank you for your email into the group earlier. What are you looking at in particular . I just kind of focused very strongly on some of these tieins we are seeing in technology. Everyone has been doing such a great job at the conference out there. This salesforce. Com union. The same time Steve Ballmer is buying the the clips. Never the two shall meet. He pays 2 billion for the clips. And this good deal with benny off. I was trying to figure out how they work. They were both up in the news. They were tying up together. Do you think this is the right direction the, just getting into the cloud for microsoft and tying up with salesforce. Com. Theyre in the clouds. They used the cloud the three times the first paragraph of the last Conference Call i think empire, talking about sales force, tied up with oracle where does it leave ibm and sap, not clear. This is say better for sales force because sales force wants everybody to adopt the platform and this is not about adopting the microsoft platform. Its about adopting the sales force platform. Is it more kinder and gentler microsoft now in terms of these microsofts . Is nadella, a little new philosophy, more open . Totally, youre dead right, as ive known you, 50, 60 years. Thats what it is. Its a microsoft that says lets partner, lets not destroy. And its a great spirit. Meanwhile, i like balmer because he never wanted to destroy, he wants to build. He has a second life at the clips. Not a stock but are you long the clippers now . As a manager and owner, are you long Steve Ballmer is mark cuban without the technical. He could still be with the technicals. Want to see them both on opposite sidelines first game of the season in ballmer is so fired up. The day i met him so fired up about everything. Fired up about nothing and fired up. Jim, see you in a couple minutes on squawk on the street. Still to come, astronauts soon could be hailing space taxis. Jane wells has that story. Becky, the russian says theyre going to stop taking u. S. Astronauts to the space station. Elon musk says thats okay, theyre ripping us off. See how much it will cost when we come back 37. Unveiled the next generation of space travel for astronauts and space cadet jane wells joins us with that story, hey. It was a little like tony stark. Space x hqa little hollywood, steve jobs, detroit auto show, but worth more money than all of them put together as elon musk unveiled a privately crafted and owned spacecraft he hopes will carry humans into near earth orbit. The dragon v 2 craft is a human version of a cargo craft space x has sent three times to the space station but with key differences, including an abort system to avoid a challenger like disaster. It will seat seven, the same as the shuttle, for a tenth of the cost, and will land on land to be completely reusable quickly which saves money in the long term. This unveiling taking place as russia says it will stop ferrying astronauts to the space station by 2020. Musk hopes to be good to go taking the first humans up for a test in 2016. Its not merely the fact that russia is taunting the United States for lack of manned access to space, but massively overcharging and i think its gone even above 70 million, its 7 76 million that the russians are charging. The quote that weve provided nasa would allow the cost per astronaut to be less than 20 million. In fact, he says it could go lower with multiple missions into the single digit missions. Millions. This is assuming he wins the contract. Space x is competing with boeing in sierra, nevada, for the space taxi deal, although nasa has given all three hundreds of millions each for development. If he loses, musk says he will soldier on developing the program. A launch pad abort test will happen later this year. By the way, with the launch abort engines all made through 3d printing. Then a higher altitude abort test next year, launch into space without humans and then in 2016 hopes with humans, no monkeys going first this time. Later on squawk on the street, musks thoughts on whether to take space x public. Guys . Jane, how come no monkeys this time around . He says they dont need it. On the next cargo trip that the dragon is taking to the space station they will have 40 mice so theyre calling them mouseastronauts. They are going to do tests with test dummies and co2 reinventing the human environment, but no animals going first than the mice. Richard branson talks he wants to go on his own ship. Good point. Does elon musk want to do it too. We asked him last night, he does not want to go first. He will go two to three years after the other people go. He says it could be four or five years. I dont want to go first either. He says you know, i used to do Dangerous Things and now i want to see my kids grow up. I thought the same thing, let someone else go first. I am not getting on one of these flights ever. Sign me up. Not first, correct, jane . Oh, no, not first. Ill be second. Live long and prosper. There we go. Thank you. We will see you in squawk on the street with more on that too. Have a great weekend and the last time i tried to do this, somebody told me i was doing gang signals instead of the live long and prosper. This way is the gang signal, this way. I dont know. Anyway, dan, we are watching whats been happening with the markets, looking at new highs. You get nervous at this point where do you think were headed . Im not as nervous. I think were in a nice comfortable bounce period. And i do think the Second Quarter is going to be the tell. And i im more on the bullish side here. I think the Second Quarter will show, the recovery improvement. When it comes to the economic numbers or when you start looking at Capital Expenditures and what companies do. Capital expenditures. Hiring. These deals are a good sign. Strategic deals are a good sign. Private equity not a great sign for the economy. I like the way things are going. So im fairly confident going into the third and Fourth Quarter. One of the deals we havent talked about, nondeal now, the pfizer astrazeneca deal which i think represents something that could be happening in terms of tax inversions. Do you think that gets played out in d. C. Or nobody cares . I think theres going to be something playing out on the deals front in d. C. A lot of the deals are on tax inversion, antitrust, d. C. Will have to step back and start to look at these the whole m a market again. I think were close on scale on a lot of them. The obama machines put it into the budget, not that budget will get passed. Instead of 20 ownership, you have to have 40 ownership outside of the United States to do the tax inversion. Its crucial. Weve had the repatriation issue hung over the markets. But are you with our cfo counsel that says nothing happens in the next two years . In terms of. D. C. In taxes. Nothing happens. Maybe after the midterm a bump of activity, but come on. Dan, thank you for joining us today. That does it for us today. Everybody have a wonderful weekend. Make sure you join us on monday. Remember Thomas Pickety will be here at 8 00 a. M. Talking about the book that so many have been talking about. Time for squawk on the street. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the New York Stock Exchange. The final trading session of may which is actually closing out pretty nicely, futures are weak this morning, all three averages up five of the past six days. Ten year yield a boost back to 2. 46. April core pce up 1. 6. Although Consumer Spending a bit of a disappointment. Europe down a touch this morning. Going to our road map with your last chance to sell in may, another record closing high