Transcripts For CNBC Squawk Box 20150417

Down by 11. We have a couple of stories were watching this morning. Earnings central today. Quarterly results before the bell from dow component ge and honey well. Also Economic Data is going to be front and center because at 8 30 eastern time well get the Consumer Price index and then at 10 00 we get consumer sentiment. Also the Spring Meeting of the imf and world bank taking place in washington. Among the headlines greeces finance minister is promising to compromise in loan talks but also pushing back against some of the reforms. Greeces borrowing costs soared this week amid growing fears of a debt default. You were watching some of the bond yields for greek bonds. They skyrocket to the highest level in ten months. The yield. The price has dropped. I was focussing on my you werent listening. I was focussing on hitting this out of the park with the stocks to watch. Lets hear it. Batter up. I have often thought about that pause some people have aspirations. They can go to general news morning shows, things like that you need to pretend youre excited about like a recipe or something tasting have you ever seen how carl is able to make something he does so good. Wait a second when weve had, lets say mexican food in here. I dont have to fake the mexican food. Or alcohol. I love alcohol. Are you suggesting that youre faking stocks to watch. Im suggesting there are times when youre enthusiasm for stocks to watch. No i dont try to fake it. That would be you. Anyway, a mixed quarter for American Express earnings beat but revenues were short. Results were hurt by a stronger dollar and the loss of several cobranded tie ups. Mattel shares the company is struggling as barbie revenues drop. Sales of barbie dolls fell 5 in the most recent period while shares of fisher price preschool toys rose 3 . Shares of amd under pressure. See i have to look at the market cap here. 2 billion under pressure. The chip maker posted a bigger than expected loss. Its a 2 stock now. Its Current Quarter guidance for revenue is weak. Schlumberger said it would slash another 11,000 jobs and this is one of the things with Lower Oil Prices, the benefit of lower gasoline prices sometimes offset by what were seeing in the employment arena. The most interesting thing said yesterday i dont know check out the corporate i heard him say that. Check out what . Doing a big thing on the Corporate Board room that they need to wake up or something. I remember you said something about that. But we booked him for that today. No, i like what he said. He said if youve got somebody that comes along and owns 2 of the stock. The board should have we dont use stones we stieded. To have the stones to do it. But to see a guy who i would have thought would start to worry for so long hes more worried. Hes more worried about what a rise would mean for the dollar. He thinks we would lose jobs in manufacturing if we let the dollar get much stronger. You see johns story today. I saw that. Its gone. Who is his mole . He has more than one mole. He does . People familiar with the situation. He is pretty well connected too. Yeah. Those guys sort of he goes and i think, yeah exactly. The two of them are sort of in competition. We were just talking about it. Let me tell you about how exciting some of this news is on whats out there. Its been a big week for ipos. Three stocks getting off to a strong start in their debuts yesterday. Etsy shares doubled after pricing at the high end of its expected range. Party city stock closed 22 higher in the first day and shares of High Frequency trading firm rose 17 . The Company Posted an ipo a year ago amid controversy over michael lewiss book. Wow. I just want to give [ applause ] oh stop. Im not picking on anybody in particular. Its just how they told us we should be doing things. Youre supposed to make love to the camera they say. You would never fake it would you . Never. You know me too well. I do know you too well. Here we go. Here we go. Wow, that never happens. Anyway. The big corporate story. Cant come up with anything. No. The big corporate buzz story of the morning a company allowing a new pay tv plan today. It allows customers to choose channels they want. They start with 36 fixed basic channels and then pick genere based packs such as sports or kids channels. Broadband service, the basic channels and two added packs for 65 a month. Additional packs cost 10 east. Everything costs the same. 10 for sports. 10 for kids and you would think some would cost more. I would have thought sports would cost more. Right. This is easing themselves into it. Netflix the guy said something too that linear tv will be totally nonexistent. Whatever linear is. I figured it out. In 20 years it will be totally nonexistent. It will be different than what we think and we dont want to exaggerate until we know more. Yeah maybe do want that. I was like which one will i get rid of . Wait a second this doesnt have wait a second. Sooner or later youre pack up to what you have anyway. But the single guy is not going to take the kids back. Right. You can actually see where some people it could actually add incrementally people that didnt have the whole thing. Im just going to get this. Theres people that still tell me what channel is that . Oh, i dont have cable. Thats why i dont know who you are. Very rare. We should also tell you dont want to miss the president of verizon wire lines on squawk on the street at 9 45 eastern time this morning. Bad news from any traders around the world this morning because bloombergs trading term anonymous experienced an outage. Some customers began reporting the terminal was back online. Bloomberg looking into the cause of that outage and give bloomberg credit because that terminal traditionally stays out 99. 99 of the time. So this wasnt the network itself. Unclear. The tv. No, were talking about the terminal. People would have to notice. Anyway. Look at how uncomfortable you get. I am very uncomfortable. Ignoring you. I was trying to be nice by saying they keep their terminals up all the time. Take a shot. Lets check on the markets. Check on the markets this morning. Well take a quick look. Because if they wouldnt be watching us if they know about that anyway right . Correct. They cant hear we said that. Tree falls in the forest. Yeah. Unfortunately we have a few trees. Down 72 points on the dow. S p when it was all said and done not a lot happened. We are fixated on what the fed is going to do. Now its based on cpi. We look at the unemployment side and inflation side. We dont want too much inflation because we dont want the fed to raise rates. Is that what the point sat this point . Right. Yeah. Were, i think traders are starting to get happy about june. Its really a point. A quick look at europe. Germany fairing the worst. As you can see asia it is friday. Theres a japan market down and shanghai up the most. Look at oil which has had a big run now what im seeing is they expect it to head back down when we see it. So now the consensus is that you know i dont know the fun was over. It was a gain of 6 two days ago. Maybe its not. Who knows. The best minds of the world supposedly cant figure that out. The ten year note now at 1. 86. The best minds in the world have been wrong on that for five years. Where that was headed. 108. I like 102 for the next objective. Thats a big move. That is a big move. We were just at 105. But if you continue to see more of the talk with the fed rate hike off do you see thats the same thing. And goal take a quick look at the precious metal. It is at 12 04. Big build up. Big build up. Earnings season heading into full swing of the S P Companies that reported First Quarter earnings so far, 25 Beat Estimates and only one missed. Thats an 83 beat rate. Joining us to tell us what to expect for the rest of the season is lindsey bell. Thank you for being here. Thank you for having me. So the good news is most companies are beating expectations but thats because ex expectations have been lowered so drastically. Thats right. Earnings are supposed to decline 3. 3 in the First Quarter but analysts got comfortable with the negative 3. 1 to 3. 3 decline early in february and its stayed there. Last quarter we saw the numbers keep coming down. The difference is there was a dramatic cut from early on. And this was really people getting their heads arnound the idea that oil had fallen so drastically and the dollar has risen so sharply at the same time. Those moves were completed. And since early february oil has been pretty erratic up and down. Its interesting that numbers did stabilize. Its just they were cut so much. It was interesting we saw schlumberger last night. It was 5 of their revenues got hurt so those numbers might be a little bit too low. So well watch those closely Going Forward. What do you think happens with this quarter and the guidance were giving to this point . I think management teams Going Forward are going to be conservative but the First Quarter is not that great. Muscles home sales werent that great. Industrial production still weak. The Consumer Confidence number is going to be very important to watch today. Theyre not really spending. Retail sales havent been that great. First wart isnt going to be a great quarter. People know at a but they are looking forward to the latter part of the year for the consumer to rebound and benefit from the Lower Oil Prices to start spending money. Until we actually see that though i think its going to be hard for Corporate Management teams to get confident about the Second Quarter and the second half of the year. Lets talk about the sectors. Energy is the area thats going to get hit hard. Thats been expected. When you talk about the financials some of the banks numbers look good. We have been and management teams have been positive about the direction of the business and the economy. Theyre learning to operate in this low Interest Rate environment and of course the investment banks are firing on all cylinders. Trading revenue is strong driven by currency volatility in the First Quarter but Investment Banking active has been very strong. Were seeing early indications that has continued. That should drive investment banks but well need the consumer to turn around and investors within the Banking Sector theyre okay with where estimates are either now pause as you mentioned you were talking all morning about the fed pushing back the raising of Interest Rates and learning to period operate in that environment and investors are are betting on the latter half of this year. Those Interest Rates start to increase and nobody is really expecting a home run on the revenue side as you look at revenue estimates for 2015 for the Banking Sector its 0. 6 . Thats pretty weak. Right. Lindsey, thank you for coming in today. No problem. Thanks for having me. Coming up what disney ceo thinks of the new star wars trailer. Bet he loves it. How important the franchise is to his companys future. First as we head to you know he has a name. Fantastic. No grey hair on him. Grey hair. You can you know we head to break. Look at this. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Drivers, to your marks. Go its chaos out there. But the mclass sees in your blind spot. Pulls you back into your lane. Even brakes all by itself. Its almost like it couldnt crash. Even if it tried. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Without this revenue, how much more would american households have paid in taxes. 1,150 more. Disney has fans and investors excited after the release of the latest trailer. Check this out. Wait for it. Wait for it. Dont take this away yet because the exciting part comes at the end, when guess who is back. Well just talk over this until you see. Chewy, were home. Yea. Thats what were excited about. This is the first time we see Harrison Ford as hans solo. The force awakens had the stock moving higher after its release yesterday afternoon. No predictions on how big this will be. We know that star wars films did incredibly well but there hasnt been a film out since 2005 actually. The movie going audience in the world is much larger than it ever was. Theres markets today nonexistent before in terms of movie going. China being a great example of that. Were fairly confident this film is going to do well but way too soon to make predictions and we will not make any in public. Yeah for indiana solo. And what we can say is theres also companies trying to grasp this excitement about this already. All Nippon Airways will be wrapping its new 787 dream liner as r2d2. How is he feeling by the way . This is before. The film is before he had the accident. He got hurt on the filming of this. A broken bone or something. Does he have feeling . He does. Youve seen him fight with joda. How many lines can you pull from these movies . Why could c3po talk to clearly . Hes also an sbreptdinterpreter. We get Software Upgrades all the time. That was part of the beauty. He could communicate without speaking the hang waj. Right. You knew when he was fighting. It may be his chip set, they couldnt upgrade him. Its a good idea for companies to jump on and take advantage of this because you have the fans into this. So we did not have chairs yesterday and i actually had my attention called to a big article in the post. Do you remember how carson used to call him that can i start doing that . Yeah you can. Anyway he pointed out to me nicely that we missed the huge story yesterday. So check it out. Bull riding. Actual bull riding. You know about how much now live sports are. Maybe people dont immediately think of the pbr. Do you know thats professional bull riders circuit. And wme used to be the endeavor but after his death they own img and the latest acquisition is of the pbr which had been a private equity firm. More than 3 Million People attended last year. Theres more than 300 events and broadcasts. It goes all the way to australia, brazil canada and mexico. Have you ever been to a rodeo . I have. I have. Im going to say that i have because i use the expression this isnt my first rodeo. So i would be lying if it wasnt where did you go to scarsdale. In dallas texas. Ive been to actually two or three rodeos. I think i was at one in argentina. One time i caught the goat and they pulled a string around his neck and let the kids chase him and i caught it and i won 50. Have you ever been to a bullfight . Ive never been to a bullfight. Id like to go with a bullfight. I might like to run with the bulls. You have children. You cant run to the bulls. Once they go to college. Youll be a little slow. The bull riding thing. Its only about 8 seconds. Youre familiar with that length of time right. How long it takes to run from one side yeah i know. Whats wrong with you. I dont know. Anyway its scary these things. How is it they dont get trampled when they fall off . Often times it does happen by the way. They have clowns to disstrakt the distract the bulls. Its upwards of 100 million supposedly. The value of Live Programming you dont necessarily think and he doesnt seem like the guy interested in bull riding. They also own the Investment Private he equity that owns the mm stuff. Mixed martial arts. Started with the wm and went with the e. Doing a lot of stuff. When we come back well talk about General Electric. Theyre set to post Quarterly Results within minutes. Maybe even 8 seconds. Well bring you the numbers and instant analysis next. First a look at yesterdays s p 500 winners and losers. The real question that needs to be asked is what is it that we can do that is impactful . What the cloud enables is computing to empower cancer researchers. It used to take two weeks to sequence and analyze a genome; with the microsoft cloud we can analyze 100 per day. Whatever i can do to help compute a cure for cancer, thats what id like to do. Man you run a business. Could be any kind of business. And every day youve got important decisions to make, like hiring. 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Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Why pause the moment . Ask your doctor about cialis for daily use. For a free 30tablet trial go to cialis. Com good morning. Welcome back to squawk box here on cnbc. Im joe kernen with becky quick and andrew ross sorkin. Were waiting for general he lek rick. While we do that lets check on the markets. Otherwise, wed just sit like this. Its so uncomfortable. Its been weaker throughout the morning. The losses are picking up steam this morning. Dow futures down 151 points. Were waiting on General Electric shares. That dow component could have an impact on where things are headed. I have to figure it out. Looking down 75 a few minutes ago. Now ge is out and coming out with earnings of 31 cents a share. The estimate was 30 cents. Revenue looks like its light though. 33. 1 billion versus the 34. 3 billion they were expecting. Wouldnt be the first time in dealing with they would say they have been remember it used to be we were pairing down ge capital. Theyre saying its due in large part to currency. Who do you see earlier this week . Johnson johnson. Industrial organic revenues up 3 . Growth market revenue up 6 and orders are down 3 . But if you exclude the currency. Profit up 11 on an organic basis which is interesting. This is also cpi . I dont know. If the cpi was hot, then that would probably for a lot of reasons, that would cause it would cause some concern because people would think the rate cut was actually coming in june. This wall street journal story out this morning is suggesting that rate increases are off the table for june based on the weak Economy Numbers weve been getting recently. You would expect the futures would be picking up. It would also be just throw some out the into the notion that we never have to worry about inflation again. We want to take a look at the ten year and oil prices. Youll see now that the ten year is all the way down at 1. 848 . That yield continuing to decline. A lot of reflection of overseas. Ten year rates in germany went negative this week. As a result the u. S. Treasuries look much more attractive even though youre only getting 1. 8 on the ten year thats a much better return and thats why more money is flooding into our markets and continuing to do that. Theres the yield for the ten year bund. 0. 5 t. Comparison to our 10 year yield does make this a much more attractive market. Thats why you see money flooding here and that yield continuing as investors are clammeringing for that. I dont care if its a point higher. I wouldnt buy that. Thats for sure. If you had the opportunity which one would you pick up . I wouldnt buy either. I wouldnt either. But people have to. You cant put it in your mattress. Theres people that have to do it but waiting the principle risk in a ten Year Investment at 1. 8 is way too big. Lets get reaction to the ge numbers. Join us is jackie chief Investment Officer of harbor advisory. This was an important quarter for ge. We delivered good First Quarter results in our industrial businesses with 14 growth in operating earnings per share and last week we announced the new plan to create a simple more valuable Industrial Company by selling most of ge Capital Assets to refocus ge around its competitive advantages. Were reshaping the company. So thats the lead story. Anything incremental that you can clean from these numbers to make Investment Decisions . I think the most important thing that im seeing from these bullets is industrial didnt slow much in the First Quarter, you know he . They came in very close to the guidance they gave earlier on and the guidance issued in december at the analyst meeting. So in light of the environment and the deterioration in the currencies you know the appreciation in the dollar over the quarter their industrial performance was impressive. Analysts will be looking almost exclusively at the industrial side of the business. Its going to be easier to analyze smaller and more focused. So i think it was a pretty good performance overall. I dont know. Is organic Revenue Growth industrial organic Revenue Growth of 3 is that thats excluding what happened with the dollar. But thats organic so factoring it out thats a 3 growth. Is that in line with expectations . Joe, i think back in december they were targeting something on the order of 4 to 7 but we had a very slow First Quarter here in the u. S. And to just fall 1 below a range that was set four months ago, i dont think it was all that bad especially since oil has continued to drop dramatically year to date and 12 come from the oil and gas business. Maybe it bounces back above 27 but i dont know after announcing the move out of ge capital if its 26 and change at the end of the day if its at 26 and change by the close of the session today i dont know thats a little thats probably disappointing in terms of the bang for the buck you got for that huge transformational move. Yeah we got most of that move thursday and friday. It was 28. 5. If it goes down to 26. 5. It can be a great thing for the company to get out from under all of those things. What do you expect ge to do in terms of bolstering its businesses . What would you do if you had cash and were going to be an Industrial Company from here on out . Aerospace, oil and gas . Medical . Some of all . Of those three, joe, i am most impressed with the longterm prospects for aerospace. Its aa long cycle business. Growth will be above gdp growth probably for at least a decade. You can bring a lot of hightechnology to that area and material science they have guided to adding incrementally overtime so nothing big and transformational. If i were making those acquisitions id be looking in aerospace aerospace, the actual operating loss was 1. 13. Thats a big number. Did you see what that was . Just by chance . I havent seen i havent seen anything beyond that joe but you have to believe that the kitchen sink is in there. This is their opportunity to clean everything up so Going Forward theyre an industrial that has no skeletons left. I think everything is in there. It must be a huge General Electric First Quarter loss if you take all of that in account and dont back out it was 13. 6 billion. On ge finance alone it was a decline of 1. 25. Yeah 1. 13 was the continuing operation loss where theyre taking into account everything the Company Plans to do with ge capital. Right. Obviously that transforms the company. It certainly does and it will be interesting to watch it as a pure industrial play. Yeah. The stock and the company. Jack thank you. See you later. When we come back this morning, companies are using more of their bank credit lines. Well talk about why this could be a big sign of confidence. Plus former australian Prime Minister on why hes not worried about a china slow down and then later more reaction from the street on ges quarterly report. Well be talking to nick heymann and get his take. First check this out as we head to a break. Futures weaker this morning. Down 117 for the dow futures. We team down 150 points this morning. Obviously concerns about whats happening in europe as concerns about greece continue too. Take a look at whats happening in the early trade in greece. The greek composite down about 1 but the dax is down by 1. 9 . Cac is down by 1. 4 . Stick around squawk box will be back after a quick break. Welcome back. Were seeing a Global Market sell off this morning. Take a hook at the futures. They were down by about 50 points and that rapidly increased. Now theyre down by 117 points below fair values for the dow futures. S p futures off by 11. Nasdaq is close to 35 points. With ge im hearing that the december organic revenue guidance was 2 to 5 . So 3 . 3 . 3 but then it was 7 or whatever we just heard. 2 to 5. Thats General Electric. A dow component out with its earnings. It came in with earnings per share better than expected. 31 cents versus the 30 cents the street was looking for. Revenue was light. You can see the ten year note that yield continues to decline as prices have increased because this bond is looking more and more attractive relative to other bonns around the world. The ten year note in the u. S. Is an incredibly low yield. 1. 85 . Check out what you get in youre in germany and looking for a ten year note there. The german bund is yielding 0. 5 . It actually went negative. For a negative yield theyd pay you. Or youd pay them to hold the stock earlier this week. So again, thats the story that were watching. Concerns continue to rise in greece as the talk is tougher. She wont let greece miss a payment warning they would be ruling out further concessions to the greeks and as a result you have seen the greek yields spike back to 12. 8 . Thats the highest level weve seen in a years time. Banks are reporting companies are tapping more of their credit lines. Company hes said to be using that money to fund hiring and business expansion. Commercial borrowers are using 2 or 3 more than a year ago. Thats a level we have not seen since before the financial crisis and are we ever going to talk about Hillary Clinton today . Flying coach and going after hedge funds and all of those other headlines. Whats left to say . Knowing how much she loves private jets most of the time youd have to say its blatantly, why even go there. I was thinking the headlines of the morning and i realized we have not mentioned it. It would be surprised if it didnt happen. Im being told we will discuss it later. Just like the rest of us. We have kevin rudd coming up. Well get to this break so we can get to him. Coming up former australian Prime Minister is going to join us. Hes no stranger to dealing with china. He has more than a few words of advice for washington. Hes our special guest right after the break. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. Man you run a business. Could be any kind of business. And every day youve got important decisions to make, like hiring. Where are you gonna find those essential people you need . With ziprecruiter, its simple. We post your job to over 100 job boards with just a single click, so you can reach millions of qualified candidates. Then well give you the tools to help you manage, screen and rank your applicants all so you can find the right one. Try zip recruiter for free today. Welcome back to squawk box. Question this morning can china sustain fast paced Economic Growth for the long haul . Heres what the sustain Economic Growth for the long haul . Im not surprised by the growth rate and the growth rate isnt really what i look at. I look at the source of the growth. China has had great economic success, as we all know and has taken hundreds of millions of people out of poverty, second largest economy in the world. And this is a company a country that has a growth model that is running out of steam. The institute disagrees on that last point and says china can keep the economic Engine Running higher. Here to discuss it all, the former Prime Minister of australia and also the president of the asia society incident. Good morning, kevin. Good morning. I apologize. I just called you mr. Prime minister. Do people call you kevin or Prime Minister still . It depends on if youve been having a drink or not. Kevin is just fine. Sometimes it feels that way at this hour. Thats okay. Thats okay. Help us understand the rationale for the 6 plus number and what you thought of Hank Paulsons numbers. Basically, i agree with hank. Chinas growth model is running out of steam and what they are in the middle of doing is transforming the economy to a new growth model, not just based on low cost low wage labor intensive, manufacturing for export and a whole bunch of state investment to a new growth model based on personal consumption and explosion of Services Industry plus a much more vibrant entrepreneurial sector. In the midst of restructuring a growth model, which has been around for 35 years, in the last two years flipping this into a change is difficult. The economy is in transition. Why do we pick 6 . Thats my understanding of what the chinese see to be the fundamental number to sustain general stability in the economy and to continue to generate sufficient employment jobs growth and living standards. Therefore, if 6 was threatened as a fundamental basement they would intervene and theyve got the capacity to do so. Lets talk about that. Which is to say, during this transformation, you would see that there could be a crisis along the way and a bumpy ride. The point that youre making now, if you have Something Like 4 4 trillion lying around you can jump in and try to manage it. The question is how manageable is it going to be when clearly the things that hank paulson was talking about this week its clearly unsustainable. Well, the old growth model is unsustainable. Thats why two years ago they produced a new blueprint for the new growth model. The problem with the new growth model i described before they havent had the buffer if you like, in the Global Economy. If you look at the contribution of net exports, for example to chinas growth numbers, they are very low. In fact they are into negative territory. So not chinas fault but the Global Economy has been flat and chinese exports from europe to the u. S. Has been down. So i think we need to take a broader view. And i think its just a little too fashionable to join the doom and gloom. How long before the chinese become, over the next five or ten years, as part of this transition . Because clearly it requires that, to some degree but at the seam time there are political elements inside china which seem to be preventing that. Well if i were to try to summarize president xi jingping it strikes me as retention of centralized political power within the Chinese Communist power on the other. So within the economy, what we see through the blueprint and that they announced a year or two ago, is a determination to decrease high personal savings rate increase private consumption to contribute to the final growth but on top of that the rub is here. Will the private sector be able to expand as much as it needs to in china when you still have some reluctance to bite the bullet on final interstate reform. Thats where the policy debate remains now. Is chinas entrepreneurs. And i think were going to have a new engine of chinese growth for the future. One of the things that hank paulson mentioned earlier this week, that was fascinating, however, was this issue about information and free press and the ability for citizens to actually get information and how important that is to the extent that you care about being able to grow an economy and an information economy. How open do you think that effort becomes . Well thats a core question and i think its one that we should absolutely focus on. If you want a free open market economy, as you just indicated, you need a free flow of information and data. Therefore, this is a great challenge to chinas current policy with restrictions on internet flow of information. The chinese entrepreneurial class, if they need that data that information, by and large, my experience is most of them are able to get it. Where the red line gets drawn, literally, is in terms of core questions debate about the centrality of the Chinese Communist party holding on power. Kevin, appreciate your perspective this morning. Thanks for having me. Good to see you. Coming up this morning, top stories. Plus, our Corporate Board iss, are they asleep on the job . First, as we head to break, check out the futures which are down 150 at one point. Now down 123 on the dow. Well be right back. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Doug, we have the results, but first, we have a very special guest. Come on out, flo [house band playing] you have anything to say to flo . Nah, ill just let the results do the talking. [crowd booing] well, he can do that. We show our progressive direct rate and the rates of our competitors even if progressive isnt the lowest. It looks like progressive is not the lowest ohhhh when we return well find out whether doug is the father. Wait, what . Friday night, buddy. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. Verizon fios taking a trip to ala cart tv. Revenue is at 31 billion versus what the street was expecting. Were going to dig through the dow report with analysts. And jack welch sending a wakeup call to the boards. Let me tell you that the problem is lousy boards. Lousy boards. Cowardly boards. Steve says the buck stops with the sea. Ceo. Please take a moment to silent your cell phones. Just let it go just let it go mister. Sorry about that. The second hour of squawk box begins right now. Live from the beating heart of business new york city, this is squawk box. Welcome back to squawk box on cnbc. Im joe kiernen along with becky quick. On friday when the stocks are down triple digits strap yourself in. We could close higher or compare it to double or single digits. Its something to keep your eye on on friday with an important inflation number coming out as well. Overseas in europe they look perhaps those markets they either caused what were seeing or they are at least chiming in with the weakness here with germany down almost 2 . Dow component, General Electric gave us one data point to make decisions on and although the backdrop for ge is the news last week. But in reporting results, if you adjust the earnings it was 31 cents a share, which is a penny above expectations. Our revenue was affected by the strong dollar. 950 million to the tune of 950 million adversely affected. There were big charges for the upcoming exit from our sale of ge capital and there was a huge loss, if you didnt include that 1. 13. Explains why the stock is looking the way it is. Lets talk about what is going on. The word of the day is inflation. Consumer price index numbers are coming in. Fed watchers say the data could affect the timing of rate hikes. Also in the corecutting news of the morning not core cutting but al a carte, verizon rolling out a new tv programs that gives you channel packs. Heres how it works. You can get a sports or kids channel pack and add extra pack force 10 each and you can swap or unsubscribe after 30 days. We can dig through the pricing on that. Basically, if you want broad band you can get it for 65 a month and we wonder if thats a profitable business for them because we assume thats what is keeping other people who might leave. Arguably if you can get rid of video completely broadband from a margin perspective is a much better business. The problem is youre doing both of them at the same time. If they got all the way to the point where they said i dont know what youd use for each channel and lets say i had to look at 300 to choose from and id be picking and said i do want discovery because i may watch it and then yeah i think maybe i want ive got to have tnt just in case. And then usa. Id end up if it was 10 per thing, id ends up more than im paying for 1500 channels. For me i wouldnt want to miss out. Theres not a single one of these packages and granted, theres not a single package but theres not a single tier that i would drop. I may not have nickelodeon but sometimes i like a sponge bob booster shot. I dont know. Teenage mutant turtles, too. There are some that i wouldnt be on. I might need it for christmas eve. Well tell you, if youre an apple watch lover and joe, youre going to watch those for your kids . For my kids. You wont be able to buy them in stores until may. Thats according to a memo from apples retail chief posted online by the telegraph. Customers will be asked to order online to get the model they want earlier and faster. So i thought it was two weeks. Yeah but if you were rushing up to the store, you couldnt get it. Weve waited 4 billion years for this watch. Whether its may or june would you wear a watch . I wear a watch. Nice. Its not an expensive watch but its a nice watch. Do you hang out in bad neighborhoods . Why wouldnt a guy like you would you wear an apple watch . Im not going to be an early adopter of apple watches. I am of iphones and ipads and all of that stuff but i walked by the store and at one point it showed if someone was calling you, youd see their face on your watch. Very dick tracyesque. What was the casio watch . Its not a casio. I used to have a casio. This watch . Its a nice watch. Thats what im saying. Here we go. Lets get going. All right. We spoke to jack welch yesterday and he was talking about boards not having enough guts to just say no. Let me tell you, the problem with activists right now are lousy boards. Lousy boards. Cowardly boards. Some activist comes tripping on the door with 2 of the stock, pull them out the door. Now, some activists have a real case. The company has been sleeping and they provide a value. Joining us to get his take on the role of the board and growing number of the activist takeovers is steve ratner. Nice to see you. Nice to see you. What do you think about what jack had to say . Not lumping activists into all is equal but at the end of the day, every board in america is led by the ceo who is also the chairman. We have a different system from europe and they split those jobs. Its the ceos job to say, we have this activist out there. We should go right or left. The problem is activists have demonstrated that with only this 2 Share Holding that jack was referring to it causes turmoil in the market and so they tend to give in perhaps sooner than they should. On the other hand many of these moves that the activists force are good moves, changing the ceo, whatever. Although nobody likes being told what to do particularly by somebody who owns 2 . You dont mind having some input but if you look like you were falling part and parcel of everything that youre being told to do that doesnt necessarily demonstrate strength either. The 2 cant actually do anything, right . They can create a lot of raucous. If they said tim cook should be fired, i dont think he would be fired because the other 98 would say thats not what we want. The issue is where they have not managed the company as well as they should, they dont go after the best managed companies in america for a reason. But you would like to see us follow the european model of having a chairman who is separate than the ceo or an independent i believe two things. I believe that in general, a ceo should be free to manage. No board can manage a company as a committee, mostly retired, not in the business doing a lot of other things. The ceo should be free to manage but also a board should have a nonexecutive chairman who is not the ceo so they can organize the board, focus the board and if the ceo is not doing his job, fire him or her. I think its a Better Division of responsibility than the way we do it here kind of an allpowerful ceo and a board of people who are not led by anybody. Lets talk about politics. Shifting to Hillary Clinton. Yes. Youre a supporter of Hillary Clinton . I am. There have been concerns on wall street about comments shes made about hedge funds and ceos. Your thought on this . I think shes right. I go back to when Warren Buffett was talking about lowering tax rates than his secretary. I think thats fundamentally unfair in america and we should deal with that. I dont think thats particularly new. I think what wall street is waiting for is to see what else she says and shell be asked lots and lots of questions about wall street. You obviously have Elizabeth Warren with a strong point of view. Shes going to be identified as constructive, believe that our Capital Markets who is constructive on wall street . Elizabeth warren . No. No. Hillary. Shes been constructive in the past on wall street that she believes that our Capital Markets are the best in the world and have a role to pay in our enormous success and wall street is going to be watching closely every time shes asked about the role of wall street to see what she says. Your comments were made public this morning on morning money, ben white of politico said that. He writes, the question with hillary and wall street has much more to do whether her banking friends will accept the rhetoric of Elizabeth Warren but whether its credible that someone who has spent 15 years embraced in the hedge fund of every manager, including her soninlaw to now suddenly claim shes not one of them. Well shes not one of them. Shes had a point of view about them. But as john maynard cane said when the facts change you change your mind. She ran her campaign in the last eight years and things have changed and its become clear that wall street does not always act constructively in the countrys interests. So she can change her mind but i do think it would go down. Steve, we are going to be for the next two years, youre going to hear the right with all of the stuff that helps them with their base were going to get tired of hearing that but were going to hear hillary try to maybe at least speak to the Elizabeth Warren side of things and its all just most of it is just like this. The only thing im disappointed in is that i just wish the first thing she decided to focus on because she had just kicked off her cam peanpaign, those were the headlines, one was 300 times the average for the ceo and the other one was carried interest. Im looking for somebody who unites everybody eventually and has a pro growth positive message, not pointing at ceos and then private equities. She can do it. She doesnt have to do it this way. Give her a positive. I know you have one. Give her a positive inclusive message where were all trying to get this country going as well as it possibly can. This came out of some remarks she made in just listening to her. This was not a major policy speech. But i think what she has made clear and what will unfold over the next weeks is that the central focus of her campaign is to deal with the american who is have been left behind help the middle class. And, yes, income inequality is a part of that puzzle. Its going to be more of a divisive no its not. The question is whether the message is about trying to rebuild and better the middle class or its about the fairness issue about what is going on at the top. How connected they obviously those are connections. I dont want to miss those connections. The emphasis of how you frame the issue. And that seems disingenuous with her as well. I think youll see her i agree with what youre saying. This may not have been ideally the first thing reported on the subject but i think you will see her say it as andrew said it essentially, as this campaign unfolds, about the middle class, about increasing the wealth of the average american but its about fairness. Theres a strong case to make that ceo pay in this country is out of control. Steven shes requested a certain type of room in any hotel she travels in a certain type of jet shes been flying on. To immediately switch and go to pulling your bag s. That what we have to do for the next two years . Thats a different issue. I thought she was going to say she doesnt have credibility on this. Is that what youre no but to suddenly be the champion of the havenots. She said we were broke when we left the office. Not everything that happened over the last year or two not everything has to be a political but i take it from a different perspective. Shes not the only one who is doing it, though. I think she could take on the position she takes if she says look, i am so blessed and so lucky and so this and so that. I have lived the life of a but i feel like but i have these views that i want to help everybody else and i recognize that i am not that. But i want to do this. But instead of trying to pretend that shes do you think its her political enemies that say these people will do or say anything at any time to do in terms of public polls and in terms of getting and dont have any core feelings about anything . Is that just the haters . Look joe. I think nobody is perfect and there are things that you can say about Hillary Clinton and the clintons. But to say what you just said is really unfair. I think these people at their core i dont think theres any difference in their core values or goals from when bill clinton ran for president. We want to help the average american and make this an Inclusive Society and give people equal opportunity. I think all of those pieces are the same. The policy responses and where the world is today, income inequality is much much worse in 1992 than when bill clinton ran for president. We need to talk about that. Theres nothing wrong with talking about that. Is it possible to grow the pie, as happened with the economy, when bill clinton was president . Can you grow it the same way or do you have all of these things that have been done by the fed and anybody who owned assets in the last six years that have benefited from the ballance sheet of the fed. Anybody who owns assets has done great. Anybody who doesnt have assets has had their income go down in the last eight years. And do you think pro growth is the answer instead of redistribution . No doubt about it. And that would be an inclusive message i think youll see a progrowth agenda. I havent seen one yet. But i also think youll see a desire for fairness. No. From the six years and keep that from the democratic party. So why have the incomes of ceos gone up so much over the last eight years while the average workers pay has gone down . If you read those proxy statements and see 40 50 million ceos, its up a lot. Why do actresses get paid 20 million per move viewie. Thats where the market is. I would aspire to be when a rewards card is designed to sync with your life it gets talked about. So you can live the way you live, and enjoy all the rewards. Chase sapphire preferred. So you can. General electric posting revenue. It was below that forecasted because of the companys recently announced restructuring involving ge capital. Joining us on the squawk news line is nick heymann. The quarter just ended. Should we talk about it or was it so important last week that theres not much to say . No theres good news and theres things to watch in this most recent quarter. Then thats why youre here because wed really like to know. It was a surprise that it held up so well . Yeah i think thats clearly the number one issue as it relates to understanding this year. They are on track for the 1. 10 to 1. 20. The offsets and thats what is on everybodys mind where are the offsets, its going to be in aviation and health care. So when we look at ges industrial business, is there a way to gauge the effect of the strong dollar on that . Because we factor out 4x related costs, right . Because then can we see where the business becomes is affected for being less competitive or is it all in currency translation . Its pretty much currency translation. We have a 4 hit on sales which were up 3 organically, well within the gold post targeted this year and they were down 1 on a reported basis due to 4 fx. Orders were down also. That sounds like the Global Economy from this report you cant tell whether there was any weakness. If were looking for something to confirm weak economic numbers that weve seen recently which has the fed on hold. Actually, appliance was better than expected and that would be with ges remaining businesses and when you look at the company today, clearly the incremental 1 came off the industrial side where you got better margins. And the margins are coming from a new initiative sponsored by dan, the vice chairman to not just reduce sdna. Wonderful. Nick, thank you. Were going to need you, especially when we have a pure industrial to talk about in the future. Were all sort of interested in how it performs when the black box is gone ge capital gone. All right. See you, nick. Is he gone . They must have cut the volume down really low. Theyve got to wait until the guy says bye. Its kind of like this right . Give me five give me five give me five. 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If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Why pause the moment . Ask your doctor about cialis for daily use. For a free 30tablet trial go to cialis. Com excellent looking below the surface, researching a hunch. And making a decision you are type e. Time for a change of menu. Research and invest from any website. With e trades browser trading. E trade. Opportunity is everywhere. Heres to breaking more glass ceilings in golf and everywhere else. Kpmg. Continuing our commitment to the next generation of women leaders. Every day activities would be improved if they were announced by a golf announcer. Our commentaries at the golf channel make it worth watching. Its so windy that hats are being blown off and this fellow paid a lot of money for that hat because he went into the water to get it and is he going to be able to get out . Can he do it . He almost fell over going in. Now hes going to what has he lost now . Hes lost his beer. Hes going to have to go back to get that. Thats pretty valuable. So i dont know was it worth it . Hopefully it was empty. It was floating. It did float. He was carrying that and a little bit of a beer is that a pocket . I thought maybe it was a belt or something. Hes not looking real limber and coordinated, though. I dont know which beer that was. Right . I think i could get out a little that looks whoa. Try again. Get the leg up. Coming up if you are a company if youre a company thats really weird in the first place, if you are a company and you get hacked you better have cyberinsurance. Thats a message from aig to ceos and its working. The new market is booming. Were going to talk to the head of that division next. As we head to break, take a look at u. S. Equity futures. We could get under triple digits, theoretically. Todays top stories, verizon rolling out a new plan to let customers pick their only channel buttons. Weve been talking about this on the squawk line. Rich greenfield is joining us. This is something that weve been watching in a lot of variations and forms. Its almost like watching a new industry sort of blossom right before our eyes. How is this different from the other things that we see . Well i think this is still very early in the evolution of the news story. It sounds like this is part of the traditional cable video bundle being launched if its true, by verizon. This doesnt look like the ott, the over the top Video Service that verizon is thinking about launching nationwide. Its a mobile basis as well as on a pure kind of fixed line basis for verizon nationwide. But this seems like a way of chopping up the channels and Broadband Service into a cheaper accessible bundle which seems to be as you mentioned at the start of this it seems to be an increasing trend. I just wonder if you take it to its conclusion will there come a time where you could actually pick each channel that you want . Theres going to be no bundles whatsoever. And there would be different pricing depending on what it was that you were getting. Espn would be expensive and i guess some of the other ones would be less expensive. But the key point is where you end up picking so many that what your prices when its not al a carte and thats what i am trying to figure out. Will it be for the average person will it be cheaper to pick al a carte . Two things. One, i dont think this is about price. Just like on your phone, youre able to download the apps that you want and choose which you pay for. But youre the consumer. Youre in control. If you think about the television, youve been presented with no options, essentially. Youve been forced to digest whatever these companies these Companies Make it. Not exactly true rich. I click on the channel that i want to watch. It just depends on no. The package you pay for is defined kbl but if im paying to cents per channel, thats better than picking something at 10. You see what im saying . I get to choose. I may end up paying more when i choose myself. Thats what i wonder. If you were to take everything under this package, do i pay more today or more under this new system. I get to choose. I dont feel like they are ramming it down my throat. I get to choose. I think there are 60 70 million homes that feel like all of you. There are homes that would like to choose less at a lower price. I think thats really the issue. I love my bundle. I love watching football on sunday and on tuesday. But this isnt about us. Is this a way to actually charge more to the people who have all of this right now . Thats what i havent been able to figure out by reading through the press release. Am i going to pay more for what i have right now . I dont think thats going to happen. The reality is its going to allow a Certain Group of people who are frustrated, who dont like the price point that has escalated too far and its going to try to bring them in or hold onto them. One of the problems weve had for a long time now, will the Cable Companies be better off providing broadband and not the video . From a margin standpoint youre 100 correct. From a total gross profit standpoint, they still make a lot of money on video and that transition from being video to broadband will be a painful transition. Comcast and time warner and all of these companies, they make a heck of a lot of total dollars. The margin has decreased substantially because of retrends and paying for Networks Like espn. But the reality is they make a lot of money and losing that unless they can raise broad bandband prices dramatically, i think it might be difficult. Real quick, rich one of the things that joe has talked about is this idea what he calls the stained Glass Network is going to be a loser in this. Certain channels will not win, that people are not going to subscribe to. Maybe they will for christmas eve. But when you look at the winners and losers in all of this who do you put on the winner category and who do you put on the loser category at this point . Well, i think when you think of espn and disney channel, its easy to see that disney is going to get carried and when you look at fox sports and everything with fx they are clearly there. Time warner has shown between hbo and the instate tournament on turner network, they are going to be fine. But the problem is when you have naked and afraid on discovery or mtv and vh1 or you have problem naming any talent on that show when you look at the a es, amcs, those groups of channels where, yes, they may have a good program here or there, but are they absolutely critical . Thats much more than just a stained Glass Network. Those are what you would consider major networks. Where do you put the Weather Channel in this . The Weather Channel has 220,000 viewers on a given night. They are in a very challenged position. They have a great web presence but does the Linear Network have to be carried . What are the musthaves where you would not subscribe and you would cancel . I think its a pretty small group. It sounds like a pain and if i could easily get up to what im thats what is going to happen. I get up to where i am. Theres no way i would get rid of amc. I dont know what youre talking about. Insanity. But do you have to have amc for the entire year . Yes. You could sign up for slink and then watch your walking dead and then cancel. Even on saturdays they run some scary movies and stuff like that. It doesnt make sense for the coupon mentality, if you are willing to spend the time and when youre able to price each individual thing and youre a content person youre going to get to the point where you are making more money than you are now. Those are the expensive channels. If youre not a sports fan, i dont want to pay the premium for a show you didnt care about. Just remember every consumer is sitting there comparing this massive bundle of channels to the 9 they are spending a month for netflix, getting a tremendous amount of content and the average household is watching two hours a day and they are paying all of 9. So the big bundle that were talking about looks bad, especially when youre not watching a lot of live tv. The ratings are falling rapidly. Netflix is rising rapidly and the price value equation favors netflix. Everyone has to figure out how to deal with that environment. Rich thank you. Of course, well be continuing this conversation over days weeks, months probably years if not decades. Well see. Another topic, ceos in board rooms around the country are on high alert over cybersecurity. This has created a new market called cyberinsurance and its booming and its growing at 25 to 30 a year for the past four years. Plus, 40 of the fortune 500 companies have now bought coverage so far already big winners in the space, aig is there. Just announcing a big investment in Investigative Consulting Firm to help manage and deal with cyberattacks. Tracy is joining us and jeremy president and ceo and cofounder of k2 insurance is joining us. Good morning. Good morning. How do you price insurance for cybersecurity when i imagine just about every company in the world is being hacked one way or the other already . Well at aig, weve been the leaders in cyberinsurance for the last 15 years. Weve helped our customers with breaches. Today our clients are reporting about three breaches a day to us. We have a lot of activity in this space. Weve handled a lot of claims and litigation. We have the data that helps us price this risk. Has sony bought insurance from you . Many Large Companies buy insurance, as you mentioned. 40 of the fortune 500 buy. Certainly many more should be buying insurance. The total penetration in the market is about 25 . Heres the question. The reason i was asking about sony, how do you both how do you price the insurance and how do you price the payout . So i look at a sony that had a clear hacking attack that had clear implications for the company but less clear, probably how to decide what the losses associated with that hacking attack actually came to. How do you do the math . Well, the what the policy responds to is really the aftermath of the breach, responding to the forensic work that needs to take place, notification to customers about personal information thats been disclosed, possible payments for business downtime. So those are all expenses that were used to pricing in the insurance industry. Right. But what about if youre finding out that there are emails that are going to get an executive fired . Can you price the impact of whatever movies didnt go to sony that were supposed to go elsewhere, the downtime involved or is the insurance literally just paying the cost of all of this work that i imagine k2 does some of . Absolutely. We use our Forensic Experts to help us understand what those costs are going to be and were able to gather that data and provide appropriate pricing. Im trying to understand does this cover business loss meaning, look walk me through lets view sony as the example. Absolutely. It covers what do you associate the losses with sonys hacking attack . What kind of number can you put on that . So the numbers go into the hundreds of millions of breach for Something Like that. And how do you hold on. What are you thats the cost of the investigation or thats the cost of lost business . Who is deciding what business was actually lost as a result of that not just you know look, on a movie like the interview, there are different insurance policies you could buy on a film. You can buy insurance on the weather being bad so the Production Company doesnt have to pay the day it snows. Thats a different insurance policy. Im talking about what i think youre trying to sell here. Right. This policy responds to the loss of business income as a result of the breach. But how do they come to you and say weve lost this amount of how do they justify the number to you and how do you then pay it out . Theres a proof of loss. Business income is a common concept in insurance that you have in property coverage and other coverages. So theres a proof of loss. They show revenue that they may have had a similar time or from similar types of movies. You would take that loss of revenue and be able to provide that to the insurance company. Right. Jeremy you actually do a lot of this investigative work and when you look at just sort of the biggest threats out there right now, can you just sort of help us understand where you think the threat is coming from. Is it a commercial threat . Is it other countries that are trying to hack material for i. P. Information . What is it . Unfortunately, its all of the above and theres the garden variety internal actor committing fraud of some kind. So this landscape is emerging, in a sense, this is all new. But in another sense, its old wine in a new bottle. So what were seeing in terms of the theft of intellectual property, this is the kind of asset that is being compromised in many Different Industries by both state actors and nonstate actors. When it comes to financial crime, we are seeing all kinds of screamshemes emerging and focusing on a number of industries not in the news at this point. What kind of industry are those . Lets put them in the news. Well, what were used to hearing about are the Critical Infrastructure industries finance, power and various forms of financial technology. We also have heard about data companies. So i think what youre beginning to see is newer targets that are softer. Industrial Companies Consumer packaged Goods Companies and professional service businesses. All right. Okay. Its a fascinating topic. Id love to hear more about it. So maybe well next time youre in new york well continue the conversation. Thanks guys. Appreciate it very, very much. Thank you. When we return a couple of stocks to watch this morning, including a major toy maker. Stick around for that. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. Welcome back everybody. Honeywell is beating estimates. Its upping it is margin growth expectations. Take a look at that stock. And mattel has been struggling as barbie sales continue to drop. That stock is up by 5 . When we return this morning, we asked the wealth editor about the dime month market and he delivered. Youre looking at a 100 carat dime month. Up next well get a closer look at that rock and talk to a diamond expert from southerbys. I love my mileageplus® explorer card. Were saving our united miles. For a trip to hawaii. We love free checked bags. Ive saved 75 in checked bag fees. No foreign transaction fees means real savings. We can go to any country and spend money the way we would in the u. S. One of the best things about priority boarding is you can just get on the plane and relax. I put everything on the explorer card. I really want my united miles. Well, diamonds are thought to be a girls best friend. It is big. 102 carats. Internally flawless White Diamond sold by southerbys between 19 and 20 million. Joining us with that famous diamond is lisa. Thank you for coming and thank you for bringing the diamond. Thanks for having me. Does it have a name yet . Not yet. But when you buy it you can name it. How rare is this White Diamond and what makes it so valuable . What makes it particularly rare is the size. The size is the most important thing and then the fact that it is perfect color internally flawless. And no nitrogen. It has a special transparency. Its like a pool of icy water. Youre going to touch it . Shes going to try it on. Now, its in a ring right now so its in a ring right now because its easy but it can be you can wear it as a pendant, set it as a bracelet. You can just have it because theres something if youre being looking at a tangible asset to put your money into that talks about wealth retention. Right. This is something. But not everything is wearable as youre waiting for it to appreciate. Better than a bond. Much. Much prettier. A beauty on top of a good investment. Would somebody actually wear this . Because, first of all, if i wore it nobody would think its real. Those who know know. Those who dont know dont know. In reality, i dont know if somebody would wear it as a ring. Its more likely to be worn as a pendant or it goes right into a safety deposit box and sits there. Where would someone wear a ring this size . At home. Dubai, asia . There are places. There are places. Weve had the diamond around the world and there are places that have a lifestyle that affords very serious jewelry and when you look at the diamond market right now, so much is driven by asia and the middle east. Those markets had recently been a little weak. Where do you see the most likely origin of the buyer for this . What type of buyer . Is it a trade buyer . I dont know that its going to be trade. The buyer is going to be somebody who has an individual . An individual who has an appreciation for stones in the parts of the world that this is more money than they know who to do with. Its 20 million in your pocket so its somebody who has enough money that its an attractive place to put some of it. Right. And again, a lot of attention has been on colored stones. When you look at this per carat, this versus lets say, the most expensive pink or red in. In november we had fancy vivid blue. It was vs2 clarity. It brought 3. 3 million per carat. Per carat . Per carat. And i think the auction record for a White Diamond is 260,000 per carat. That speaks to the rarity. This speaks to Global Market. Right. For something really to be valuable as an investment you need a lot of people that want it. Right. And so this one its the size and the global value, the colored diamonds are just a very small group of i could do serious damage if i punched one of you with this. The only reason could you damage that another diamond can scratch it and if you drop it on a marble floor and it hits the right place, you know you can chip it, little bruises that happen just from wear and tear. So for 100 carat diamond, any diamond thats a certain weight you dont want it to have it be 5 carats or 100. This one you have 20 points to play with. So thats about as small as 20 million can be. Concentrated. Yes. Okay. Thank you. Thank you. Coming up key inflation data that could influence the feds timing for rate hikes. Thats coming up at 8 30 and it could be a big market mover today. Tdd 18003452550 [ male announcer ] your love for trading never stops tdd 18003452550 even on the go. Tdd 18003452550 open a schwab account and you could earn tdd 18003452550 300 commissionfree online trades. Tdd 18003452550 so when a market move affects one of your positions, tdd 18003452550 schwab can help you decide what to do. Tdd 18003452550 with tools like free livestreaming cnbc tv tdd 18003452550 that give you the latest Financial News and trends. Tdd 18003452550 and bubble charts and price charts that let you see exactly tdd 18003452550 how market activity is affecting your positions. 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Announcer live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box here on cnbc first in business worldwide. Im becky quick and we are less than 90 minutes away from the opening of wall street. The do you futures is down about 94 points below fair value. Weve seen it down by as much as 150 points. S p is down by 9 points and nasdaq down by 28 points. If you want to check out the markets in europe this is where some of the trouble either began im not sure if its the tail wagging the dog. You can see in germany, the dax is down by 1. 8 . And greece is down as we see a continuing climb on the yield on greek bonds. I think people are were going to get more insight on the markets move but greece is reemerging. We havent seen 730 on the average. It goes down into the 6s and then it looks like and the dollar is getting beat up too. It could be that the fed rate hike for june is off the table. Thats the story in the wall street journal this morning. Steve liesman is going to talk to us about that. The dollar is weaker against the euro today. Its been a pretty strong move if youre looking over the last day or two and that could be accounting for what were seeing. Its like an unsettled feeling and we dont even know what we are afraid of. Jim, neither surprise would the market go up on it. It seems like it would cause more consternation. I think a cpi number than expected makes the fed feel better. The fed generally wants to tighten but also thinks it cant tighten. The june tightening is definitely off the table but theres a psychology behind it too. I dont think highpowered people like that like to be told what to do with the market. Last night, reaffirmed my belief that going to sleep is expensive because theres a lot of opportunities in the markets overnight. The dax got hit and china got hit after they allowed more shorts. The story was out also that connectivity broke down and that accelerated the move and really what the takeaway is we spent two months trying to push out of a range here. Markets need to look back at earnings season and say, they are pretty good and were not there yet or we need a clear sign from the fed saying in june we probably wont tighten in september. Until that happens, we stay in the range. The greatest minds in the world that we put on the fed and yet they dont want to decide intellectually what to do. They need to be told what to do on the market. Thats what i said. I dont care who you are. Once you make a plan and chart a course, its difficult to not get knocked off that course. Thats why ive always indicated that people who trade should be more involved because they stay in the middle and await for the data and interpret it. Im not trying to insult the fed. I feel for them. Without the markets, its impossible. If they were just set in their if in their mind the fed chairman or woman said this is what im doing and ignored the markets or reality, that would be bad, too. I just wish someone was so good at what they did that they could do the right things regardless of whether the market and shortterm traders are what they are indicating. I dont think they know what the best thing to do is. I agree. They are compiling the data as everybody else. Stanley fisher, janet yellen. No doubt about it. Its a difficult job. Weve seen it with the leading economists in their positions. Any way, jim iourio you tell us what you are seeing and thats what we can expect. We would never want you to say anything intellectually. Of course not. I try to steer away from that. Me too. Short words. Buy and sell. Market base. You cant explain that jacket. Until you can explain why anyone would design that or wear it. Exactly. Thank you. When i can, ill be ready. Okay. We also have stories that investors are going to be talking about today. Verizon announcing a new paid tv program today. Its going to allow customers to choose bundles of channels that they want. Also, a mixed quarter for General Electric. Earnings were a bit shy. Ge is setting currency pressures as a headwind. And in a tweet, bloomberg lp saying most of its terminal customers are back up and running right now. This is good news after an outage that it affected most users overnight and that being los like its working now. So if youre on the Trading Floor now with the terminal you can get back to seeing what they are doing. New jersey governor Chris Christie may not have declared his run for the white house just yet but hes making waves in washington with entitlement cuts from the rich and increase the retirement age. For me if you want to start a National Conversation i started with entitlements intentionally because it consumes 71 of all of the money that we spend in the federal government. Even if it doesnt make a you lot of friends . I hope if it doesnt bring me friends, it brings people who respect me. Here now to talk more jared bernstein, budget and policy priorities. Budget and policy priorities. Thats right. And kevin is a senior fellow and director of Economic Policy studies at the american institute. One thing that occurred to me jared, in just tlihinking about how to approach this im glad Chris Christie is talking about it. I dont know what happened in the last couple of years, maybe the budget deficit went down a little bit. And success has many fathers, whether it was a sequester or a better economy or whatever but, i mean arent we kind of like an ostrich with our head in the sand . Isnt it the most important and daunting challenge not for just Social Security but unfunded liabilities . Isnt it the most important thing . And president obama talks about minimum wages and Hillary Clinton talks about ceo pay. Well those are important, too. Theres no question that future budget pressures are coming not so much from entitlements but Social Security is actually a much smaller concern than pressure on the health care side and there, in fact we have made progress, which is good to know. Some of the changes that weve made have showed the health care costs. I think the issue here is not so much i give christie credit for bringing the entitlements to the table but i think we want to get into the weeds a little bit. This is less helpful for people who depend on the programs. Im critical of the weeds but good for him for raising the each. Well that is the the devil is in the details and kevin, jared would like to remove the cap on Social Security. Not remove. Just raise. I would rather people that are really well off for some reason they think fair is fair and i paid into it and i need it and its not the way to look at t. It, i dont think. Theres not enough money there and you should get over it. Youve got enough money. You dont need it. I think with your intro and the power of the force with jared, i was half expecting him to say this is not the plan youre being looking for. The fact is the Chris Christie plan is very solid. To get to your point, joe, the way to think about it is if i give the government a dollar and i get 90 cents back i paid a 10cent tax. Its made a lot of sense to analysts, is that we need to take the people who are very wealthy and receiving Social Security, very wealthy and receiving Health Benefits and have them pay a higher copay or get a reduced Social Security benefit and, really that increases the tax on those people but does it by reducing the benefit that they dont need because they have a generous retirement. Let me respond to that. But jared, its the only time that democrats dont want to stop the risk. I dont understand. This is your chance. Take it away from them. Listen first of all, i happen to support the idea of a more progressive kind of changes to benefit the top of the scale like you guys said. However, what i think you guys are missing and this is not a solid plan at all, do you know that the percentage of the recipients that this hits this means testing, its 2 . It does virtually nothing for solvency. Where christie actually gets traction is not at all from this means test. Its a bad way to do it by the way. Its from raising the retirement age which hits everybody, its actually a 7 reduction in benefits across the board and, by the way, those in the bottom half of the income scale, they have a shorter lifespan. So this is a bad plan. And the medicare plan is also actually making health care more expensive. So its not a solid plan at all. Still jared, youre talking about going up one or two years. This hasnt changed in how many years . And Life Expectancy is up probably 20 years. You cant jigger it up one or two years . Thats really going to sock it to the people that need it the most . I think it will hurt the bottom half. And the big thing that jared is you can tag about is theres no labor force participation. This will force people back into the labor force and make growth higher. I have not been whining about anything. I have been calling it the way i see it. Right there. I would almost say a curse word. Go for it. Its cable. If you want people to work more, the idea of cutting Social Security benefits on the people at the bottom half twothirds of Social Security for them its more than half of their income. Kevin, let me ask you a question. What is the Median Income for Social Security beneficiaries . He cut taxes, too jared. Okay. 25,000. You want to cut their income . Im just saying the people who get Social Security need those benefits. Not the folks at the very top and they could take a little bit of a hit but thats not where the money goes and youre not going to do much for solvency. Well math is math and thats an interesting point. Joe, you already said this, this is taking a tax and turning it into an insurance program. They are calling it what it is. Everybody gets Something Back at the end. I dont know. And i dont feel like highend but im not depending on Social Security. You know what i mean . Im going to try and handle what i need. And i wouldnt say, look i paid it and its my money. Give it back to me. Right . You want it . I think jareds point it doesnt fix the problem. Not raising the age would. I want to know now. Right. Tell people so they can save. Start preparing to replace the right. I have to get a fourth job. Right. One residual check from billions is going to cover your ens insurance, right . We can only hope. American airlines is ready for takeoff. And later, California Water wars. The farmer versus well everybody else. How weather is changing the economy in that state. Squawk box returns in just a moment. Is it crazy that your soccer trophy is talking to you right now . It kinda is. Its as crazy as you not rolling over your old 401k. Cue the horns. Just harness the confidence it took you to win me and call td ameritrades rollover consultants. Theyll help with the hassle by guiding you through the whole process step by step. And theyll even call your old provider. Its easy. Even she could do it. Whatever, janet. For all the confidence you need td ameritrade. You got this. Welcome back everybody. Taking a look at the futures. The dow was down at one point by 150 points and now they are down by 80 points. Nasdaq is down by 24. The squawk button portfolio is back this morning with a buy and sell from one of our managers. Craig hodges is joining us. Youre adding American Airlines. Why . Its not that we dont like swift as much. I can see the situation with American Airlines and the whole industry in general is being undervalued. The situation to me seems like youre going to see these Airlines Make money over the next three or four years, have cash flow over the next three or four years and they are going to be able to return some of this money to shareholders and youre going to ensure future earnings Going Forward that i think the industry will be able to do for a long long you know people are sort of very skeptical about the airlines. We think 8 to 10 a share in earnings over the next three or four years is going to be able to deleafverage and ensure future earnings. Not that we dont like swift but we see a real opportunity in american. Lets go back to swift for a moment. That stock is down. Thats youre only losing stock in the portfolio. What do you think has happened that the market hasnt seen what you have seen . Theres a few industry headwinds there. They are still having trouble getting drivers and that sort of thing. The fundamentals are getting better. The fuel prices are helping them. But i just see, you know at 4 1 2 times earnings on american, i think its really undervalued and i think the stock could be a 70 75 stock here in 18 months or so where theres a lot more upside in the airlines a the this point. What happens if oil prices and gas prices diesel prices all come back up . I think were still fine. Thats what has been interesting, is you had the airlines have spent basically five years getting used to 100 oil and theyve made their models where they can do okay at 100. Well their price has been cut in half. Their jet fuel price has been cut in half. Its down 44 year over year. So we just think that they are going to be able to do extremely well. Lets say Oil Goes Back to 70 75. They are still going to make tremendous profits. So the opportunities are there. I think theres algorithms that any time oil moves up these airlines get hit and they have been getting hit. We think theres a real opportunity here. What you say about their earnings, thats something that the street is already there. American airlines, the street is being looking for them to earn 10. 42 a share. Its really the history of the industry. Theres a million punch lines about airlines about how you start as a millionaire and become a billionaire by investing in an airline. We see what is going on in the rail business if you remember in 03, 04, the previous years in rails were uninvestable. They were not returning their cost of capital. You saw them get right sized where they went to the major four. The same thing has happened in the Airline Business now. And so we see, you know the fundamentals a lot like in the Airline Business as we do in the rail business. I think its going to be a long team of time of proving themselves. It would be a tremendous move up. So theres still a lot of skepticism and very underowned and i dont think people trust that soon the airlines are going to get back into the days where they are cutting costs or cutting prices and having the fare wars. But there is seat growth and capacity and all of those things. A little bit of a contrarian bet but were willing to make that bet here on american in the upper 40s. Greg thanks a lot for joining us. My pleasure. Folks, a reminder you can go online to cnbc. Com to track the picks of our Portfolio Managers in realtime. Plus, read their exclusive analysis. Coming up ever felt like this . You think your commute is bad, wait until you see what is being called the worst city for traffic jams. And then cpi data and reaction and what you need to watch today. Squawk box returns with all of that in just a minute. under loud music this is the place. Their beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. You think you have a tough commute . Jakarta in indonesia ranks worse for traffic jams. It starts with the average driver having to stop 33,240 times a year. Thats more than twice the number in new york. Data shows that in the metropolitan area 27 millionress million residents, at least 1. 2 Million People commute on the road on a daily basis and the average daily speed for drivers there is about 12 miles an hour which you could basically walk. Or ride a bike for sure. And when you jog you do 12 miles or 11 miles i wonder where l. A. Is on that. I cant believe that jakarta is that much worse. Have you ever lived in l. A. . Ive spent enough time in l. A. Live and die in l. A. . Not enough. But i would love your views on this debate. I dont even know if its a debate anymore. Electronic cigarettes use among teens has tripled. The traditional cigarette use has fallen which is the good news in all of this. This is the first time in the National Survey they used ecigs more than any other tobacco product. However, you get more nicotine . Nicotine but theres another chemical oftentimes in these ecigarettes thats also bad for you. So we think we are improving things but we are not. What do you embalm a dead body with . We have the numbers and the reactions after this. Plus, as we head to break, triple declines for the dow jones. Down 103 points. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. [ male announcer ] your love for trading never stops. So open an account with schwab. And when a market move affects, say a Cloud Computing stock youre holding, we can help you decide what to do. With tools that help you see how market activity is affecting your positions. So when the time comes to decide whether to scale in or scale out. You can make your move wherever you are. And start working on your next big idea. [ ] there is an ancient rhythm. [ ] that flows through all things. [ ] through rocky spires. [ ] and oceans swell. [ ] the endless. Stillness of green. [ ] [ ] and in the restless depths of human hearts. [ ] the voice of the wild within. [ ] welcome back to squawk box. Breaking news march cpi, big news. But not as big as expected. Up. 02. We were expecting 3. If we take a step back and look at some of the year over year data, were at 1. 8, which is onetenth hotter than many were expecting in the marketplace where we once again, squawk box game, 186. We have sentiment but for a variety of reasons, dax is down 2 and preopening dow moving lower. Its down to 131. We know what happens when equities are under pressure. That seems to be what is occurring right now. Back to you. Rick weve been trying to figure out this morning what started this whole chain reaction, why weve seen the weaknesses in stocks both here and in europe. Part of it may be the strength of the dollar and im trying to figure out if thats related back to the story in the wall street journal that says that the fed is not going to raise Interest Rates in june that that is off the table at this point. What do you think . I think a lot of journalists i dont know that i bumped into anybody who thought there was going to be a tightening in june. Just dont see them down here. Maybe they are out of touch with the fed. To me i would argue that. I dont think thats the big news. As i look at the Foreign Exchange markets, yes, they have been entrusted with volatility but not with auctions trade screens, its the weekend. Its friday and sometimes thats just enough. Lets be frank here. Some of the data has slipped a bit. To me, if the big story was the fed and i understand how that plays in but i think wed see a much bigger move in the euro against the dollar if there was a belief that changed in the last 24 hours. I saw some expirations, some of the futures in europe being blamed for some of that too. Does that sound like enough of a reason . Yeah i think that could be enough of a reason. But i also think mario draghi and many of his comments i thought the interview that sarah had yesterday with the vice chair of the fed was very fascinating because, to me mr. Fisher has great market respect and one line just rings true with a lot of traders down here scratching their head this notion that jim and i talk about, that the markets are not listening to the fed. But listening to the fed would be going to the baby ward and hearing the crying and saying do you understand what they are saying now . Thats the way they look at it now. Charlie browns teacher. Have a good weekend. You, too. Lets get more reaction to the numbers. Justin is the economic and policy professor at the university of michigan. Last year the imf named him one of the Top Economists shaping the way we think about the Global Economy. Michael zen is Senior Vice President at ubs and Steve Liesman is also here with us. Steve, why dont you go first and tell us what you think about the cpi. The big story here is its not that big but the core rate comes in at 1. 8 which is a tick higher. The importance is the expectation or concern was that the stronger dollar and Lower Oil Prices would feed into the core. It hasnt. Youve had a pretty stable core at 1. 7 and now ticking up a bit. Looking at the details, you had and expected a bump up in gasoline prices. Here are the numbers. Nine minus 18 in january and other than that a bunch of positives, including shelter and primary residences up. One good thing is for all of you making your travel plans for the summer, airline prices are coming down. I shouldnt have brought that up. They are down 1. 7 and 5 year on year. Lets move on to something more interesting. Real quickly, the idea of june being off the table comes substantially from lockhart yesterday. He kind of said you know the data is really murky, its a bad time to make a major policy decision. June could happen but its not my preference. You have said that hes the guy we should listen to the guy in the middle who doesnt have a dog in the fight. Hes a former banker. We know lockhart on this show. He seems to have taken june off the table, which is the bigger development yesterday. Ive got to divorce my own ideas from what they are likely to do. I should know how they operate. Instead of hoping they will do something, i should realize they are not going to do it. Dont bring it to the you saw welch yesterday. The dollar would cause if youre not listening to jack then i have no hope. I do listen. What hes talking about, you will say layoffs in certain if you read the beige book from earlier, its full of weakness from the dollar. There must have been i think i counted it 19 references to the dollar. Justin, what do you think . Just in terms of what the fed is looking at the cpi number in conjunction with the other economic numbers that weve seen. Well theres no real surprises in the cpi number. It looks a bit weak. It looks like were in the middle of deflation. Everyone understands thats temporary and that they are going to look through that. Theres a core number the one we should be looking at 1. 8. That runs about 40 basis points ahead of the feds preferred inflation numbers. Theres certainly no alarms coming from the inflation side and its interesting to see people catching up with this finally but the data over the past three months its been a long time since a negative surprise in a row. Weve hoped that maybe this was weather and if that were the case, youd expect to see some jump back and activity in the late march and early april numbers. It gives a great under uncertainty. Michael, what does that mean for the market . Well i would agree with most of that. The point i would add is you saw wti move up a little bit. If you begin to see energy really come back, you may see that trickle down. People say, forget it were looking at this Oil Supply Glut at this point. Hard to tell obviously. The curve is expecting oil prices to continue to rise. I think yesterdays level was important not oem in the Energy Companies but in the oil prices themselves. People suggest that its going to come back down again. Predicting it has been hard. When you look at how its been be behaving its broken through. Theres no doubt. They are kind of linked . They are kind of linked yeah. I think i went lower oil and euro. Yeah. I mean those would be the dollar would be bad for employment. I think the American Economy and im not running for office here is incredibly flexible. It adjusts over time to shocks but it takes time and thats why Something Like lower gas prices a net positive shows up. And justin what i can tell it shows up initially as a negative because we dont have enough time to adjust to the positive aspect of it. The surveys that i follow show that people are saving it they may be paying down debt but may be reluctant to overspend it but over time it ends up being a bad thing. What is different this time is its the first time weve had a really good decline in oil prices and the u. S. Has been a major oil energy producer. The bad news what is happening today, the good news is folks are spending the money and it appears to not be happening yet and its basically somewhere between hoping that its going to emerge over the next few months. There were references in the beige book to four districts that had negative impact from Lower Oil Prices from Energy Suppliers in those districts. The guys who make the machines that are used in the oil fields. And they were cleveland and san francisco. And now youve got to find me a Department Store that expanded their sweater department because people had Lower Oil Prices. And it hasnt happened yet. So is there a chance justin if michael is right and were looking at Higher Oil Prices and a climb from here that we would have gotten the bad and none of the good . No. I mean oil prices even if Oil Prices Recover big, which is sounds like michael is suggesting, they are going to be much lower than they were a year or two years ago which is much better for consumers. The u. S. Economy cares less about oil today than it once did because now weve gone to importing a key share of energy that we once did. Thank you gentlemen. The water war is raging on. A proposal on cutbacks. Its going to be out today. Cities are already lining up to complain. Were going to talk to a professor who says the states two main basins has just about one year of water supply left snoochlt. And putting your money where your mouth is. How much money Floyd Mayweather is putting out to protect his grill. Thats when squawk box continues. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. Woman its been a journey to get where i am. And i didnt get here alone. There were people who listened along the way. People who gave me options. Kept me on track. And through it all my retirement never got left behind. So today, im prepared for anything we may want tomorrow to be. Every someday needs a plan. Lets talk about your old 401 k today. Developing story this morning, top of mind for traders who rely on bloomberg terminals. Experiencing outages earlier today but the company says service has been restored to most customers. There is no indication that there is anything other than an internal Network Issue at play. Some people worried about the bond market. So many people depend on bloomberg terminals. In the meantime governor jerry brown of california talking about cutting urban water use by 25 as the drought there, the most populous state enters its fourth year now. This study shows that theres just one year he says of water left in two major river basins. Jay is a professor of earth system science at uc irvine and senior waste scientist at nasa jet propulsion laboratory. He joins us now. Good morning. Good morning. What does this mean literally, one year . And all of those other basins tell us what those basins are and put it in context for us. Sure. Weve been looking at the sacramento and San Joaquin River basins which is the swath of california and contains all of its water. We have one year of water left in our reservoirs but of course we have groundwater that we can rely on. That groundwater, at this point in time is unregulated so its essentially a free for all. Jay, what is the answer to all of this . Its one thing to tell people to stop watering their lawns and another to look at the agriculture industry thats so important to california where most of the water is being used and telling them to cut back. Thats right. Thats right. So, of course cutting back in the municipal regions is important but the biggest user of water, not only california but around the world, is agriculture. It uses 80 of it. We have to look at improved deficiency, different crop choices in the Central Valley of california. Its inevitable. Theres no way to make it through without cutting measures. Are there certain crops we should not be promoting . Almonds but its not just almonds. Its really any of the perennial crops, the orchard crops. So any kind of vineyards, those are crops that have to be watered yearround. Thats the problem. You cant foul them in dry years. This drought, you expect it to go on for how long . What do you think its a function of . Well first of all, its a function of the natural variability but its also a function of Climate Change and its also a function of population growth. If we didnt have as many people here, it wouldnt be an issue. To expect it to continue its hard to know what will happen in the next couple of years. But certainly moving forward into the next decades and the rest of the century because of Climate Change we can really expect to have more events like this and more severe events like this. I dont know if you saw the New York Times piece a couple of months ago, in the last 1200 years, they pointed out the mega droughts that lasted decades. I dont know what caused it in your view. But what if this were to be a mega drought, a 100year drought . People are going to have to move out of california arent you . Thats right. I think we will so its very difficult for humans to adapt these days. We want to stay put in the most beautiful parts of the country and i think california is one of those. I know. But the reality is something else. I think well see agriculture migrate. Your point about the mega drought is very very important. Thats what got me to write this oped a few weeks ago. A mega drought lasts more than a couple of decades and to think about a mega drought of unprecedented who knows . How do we know . Thats right. Thats right. We dont know. But thats what the predictions are telling us. And that is really really scary because i dont believe that were prepared from a Water Management and planning perspective. No. I dont think were prepared for that. Right. Okay. Thank you, jay. We appreciate your perspective this morning. Its an ongoing story. My pleasure. Thats their home. Isnt the most 38 Million People. The point about agriculture eventually migrating, thats a huge user of water. Did you see that its the bread basket of the country. Up next the most anticipated boxing match in the history of the sport. We will be talking about the big Floyd Mayweather flight and Manny Pacquiao. And one of them will definitely be coming out with a full set of teeth. Find out how much one spent on a mouth guard after the break. Check out the futures as we head towards the final trading day of the week on wall street. Well be right back. Anyone have occasional constipation diarrhea, gas, bloating . Yes one Phillips Colon Health probiotic cap each day helps defend against these occasional digestive issues. With 3 types of good bacteria. Live the regular life. Phillips big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. The countdown to the main event is on. Floyd mayweather taking on Manny Pacquiao may 2nd. Mayweather is spending cash to protect his multimillion dollar grill. Jane wells got a chance to talk to the fighters. Im so clueless about certain things. I didnt know we were talking about floyds teeth. I remember another boxer did have a grill. You know. Anyway, i thought we might be talking about an actual grill. I swear to god. I said that makes sense. Because of . George foreman. It does. Oh, gosh wow, joe. Work with me. Thats the wayback machine. Anyway. I need a lot explained to me. All right. The fight of the century has taken a better part of the 21st century to come together. The favorite Floyd Mayweather is putting his money where his mouth guard is. Look at that smile of his. Part of the credit goes to his dentist to makes the fighters mouth guards. Mayweather will fly him and his staff to the gym where they will get a custom impression. They make a few different mouth guards. Some have money embedded in them like 100 bill. Mayweather pays top dollar for them. We charge floyd roughly 25 grand, maybe a touch more. I mean that was not upcharging. If you consider the cost of the labor, the cost of the travel the cost of making to get to that one, probably ten mouth guards to get there and the cost of fitting it its not really charging a lot of money. Dr. Gause says mayweather breathes better with the mouth guard in than out. During the fight when he was choking on his mouth guard, mayweather was drinking in the corner with his mouth guard in. We dont know which one he will pick for the fight. Bet its the one with the 100 bill. Later well talk with mayweather. The fight is a little over two weeks from tomorrow. Tickets to the public are still not on sale yet which tells you negotiations are still going on. Its kind of still being figured out. Negotiations still going on as to whether the fight goes off or how much they charge for the tickets . Who gets how many tickets. Its business negotiations that have been a problem all along. Pacquiaos team is blaming mayweather. Make go says in the end, le seven moonves will be the arbitor. Im not kidding. Thank you. Well watch later today. A lot more to come. When we return on squawk box star wars fans are buzzing. The trailer of the next installment released yesterday. How disney stock is reacting. The eclass has 11 intelligent driverassist systems. It recognizes pedestrians and alerts you. Warns you about incoming crosstraffic. Cameras and radar detect dangers you dont. And it can even stop by itself. So in this crash test, one things missing a crash. The 2015 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. 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Disney and fans and investors very excited after the release of the latest trailer. Chooy, were home. For the first time we see Harrison Ford as hans solo a role he hasnt played in over 30 years. The force awakens has the stock moving higher after its release 2 00 p. M. Yesterday. Bob iger has this to say about the star wars expectation. No predictions how big this will be. There hasnt been a film out since 2005. The movie going audience in the world is much larger than it was. There are markets that were nonexistent, china being a great example of that. We are fairly confident this film is going to do quite well. Way too soon to make predictions and probably we will not make any in public. We could predict. The movie hits the Silver Screen december 18th. My guess is there will be lines. Nerd lines. Watch that. Hey, watch that. Ill be there. Will there be there midnight . I wont be there at midnight. We dont have time for the runaway golf story. Okay. Here we go. Check this out. A runaway golf caught causing havoc at Loyola University in chicago yesterday. It ran in reverse at full throttle for several minutes. Campus authorities finally managed to stop it. Those college pranksters. We should play this type of music at least once for every show. Benny hill. Weve got to show bigbusted english folks. Make sure you join us monday. Have a great weekend. Squawk on the street begins right now. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with sara eisen, david faber. Cramer is off today. Fair amount of red in the premarket as europe is selling off to the tune of about 2 . China cracking down on margin lending. Concerns about greek debt today. Earnings back here. Ge honeywell, American Express among others. Oil settling back after a big week to the upside. The ten year is around 1. 89. Consumer prices