Transcripts For CNBC Squawk Box 20160412

Its called the stack. Thats the way the stack works. There it is. Look at that. I see whats going on. The yen is weaker. The first time in eight days. You just have to laugh. All these Central Banks trying to hard to intervene. Japan desperately every time the central bank of japan does something, their currency gets stronger, not weaker. Instead of these half measur measures, why dont they pay junk bond yields to people to borrow money . Give them 13 , 14 . How negative can rates go . Can they go to why not inject money directly into peoples accounts . Just pour it in there. I like that. Much more effective at this point. You saw germany. The average yield is now zero. On friday it was 0. 01. They lost that now. Across the board, its zero. Whats the record for now negative . I dont know. You cant get 5 negative, can you . I dont see why not. Its not working though. This is what makes me laugh. Front page, lew urges imf regulators to get tough. Give me a break. Its ironic. Arent you still mad at him for the inversion rule . Furious. Disgusted. I havent seen you since that. Dont get me started. Ill get you started. No, no, no. I wont. No, please. Cant we all just get along . Yesterday, terrible day. Crappy. Disappointing. Up 150 at one point. Then it all faded away. Correlation is broken. Can we show crude . Do we still have that in the stack . Real tv guy there. 40. 76. Excellent. Brent, 43. Thats supposed to help, right . I think orlando is going to come on. Phil is never bearish. Hes not positive right now. He says its you can leave. Let me get to the big stories. Usually after a rebound, after Something Like that in the First Quarter, it goes back to new lows after that. Election years, second termers are never good. Almost always down. Okay, phil. Big stories were watching today. Speaking of elections, president obama met privately in the oval office with fed chair janet yell yellen. The white house says they discussed the labor market, inequali inequality, and potential risks to the market. They also talked about the regulation of the bug banks, although the fed and the white house are in regular communication, president obama and yellen rarely meet face to face. Their last formal meeting was in late 2014. I assume its so they dont look like theres undue influence. The cdc using its strongest language yet in warning about a zika outbreak in the United States. A Deputy Director said yesterday the virus seems to be scarier than they originally thought. Public Health Officials are warning that mosquito eradication efforts, lab tests, and Vaccine Research may not be able to catch up as summer mosquito season approaches. And in earnings news, mixed results from alcoa. Earnings of 7 Cents Per Share beat wall street expectations by a nickel, but revenues fell short, hurt by low commodity prices, the strong u. S. Dollar, and plant closures. Overall profits down 92 . The ce o, said he expects aluminum demand to outpace supply this year. Heres what he said last night on mad money. We will not be making the number that we originally had intended for this year. We are working on it and trying to get it up to the numbers that we said we will be. As you see, we are making progress already compared to last year. We are putting an expectation on the second quarter. As you continuously see, we are improving. Alcoa still split in two. Some stocks to watch. In addition to alcoa, Marathon Petroleum announcing plans to sell some of its noncore assets for 950 million. The move brings its total divestitures to 1. 3 billion. United airlines will comply with two hedge fund requests. Add more directors to its board, including an independent chairman. The potential agreement, which was first reported by our own scott wapner, could come within the next week. And General Motors calling off a plan to build a small cadillac plant in michigan. This according to reports. But who wants a small cadillac . Thank you. Hello. I think maybe the plant was small. I think they were going to make large cadillacs. The cad lillacs have gotten very small. They introduced something called like a simuron. It looked like a vega. No one bought any of them. Dont you miss that big old el dorado . They make the big entourage. The escalade. You roll in the escalade every morning . I do not roll in an escalade. Im in a yukon. I dont even think its a denali. I dont want anything fancy. A couple other metrics to check this morning. The ten year right now i saw. The dollar again, really . Theres the ten year. The dollar, as you saw. Finally got a weaker yen. Its been unbelievable. They go negative, but you know what, they werent expecting janet yellen to one up them. Theres no currency war, joe. Theres no race to the bottom. Lets check out gold, which had a brief day in the sun earlier. Now its back to a threeweek high. Maybe its building a base and its going to go back up from here. For more on the markets as we head into earnings season, phil orlando joins us now. Chief equity strategist at fed rated. Along with Steven Whiting from citi private bank. Ive already talked about some of your comments, phil. I always thought of you at value line. How long were you there . About eight years. Great company. I always thought of you as there was always like a jim cramer thing. A bull market somewhere. At this point, youre not thinking were set up for much of a year. The reason is we came back from a very bad start to the year. Other times this has happened in the First Quarter doesnt mean its off and running. It means more volatility. By the end of the year, the best you can hope for is maybe a 2 gain. Other times where its a second term of a president , you actually have some down years. Weve had a terrific bounce year over the last two months. Markets up 14 , 15 . You look at the fundamentals, theyre right in front of us. We kicked off with alcoa last night. Revenues for the First Quarter are expected to be down 1 year over year. 1 to 2 . Earnings are expected to be down 8 or 9 on a year over year basis. The Economic Growth, the atlanta fed took their gdp estimate for the First Quarter down to onetenth of 1 this that number was 2. 5 a month or so ago. The fundamentals are not particularly good, would not surprise us to see a pullback here. As joe pointed out, this being sort of an election year, what they refer to as an open election historically, that hasnt been good for the market. So theres plenty of reason to be nervous with the market having just rallied 15 . Look, i think the biggest overweights we have are municipals, things that can get you a 5 return are big overweights. Were not where we were a couple years ago. Accelerating Economic Growth, easing Monetary Policy, underrated Economic Growth. Thats where we were really overweight. I wouldnt get quite so bearish on the u. S. Certainly this earnings season every single earnings season since mid2009 has had upward surprises. First quarter earnings season had been stronger surprises than fourth quarter. So negative 9 , it means the Energy Sector is unprofitable in the First Quarter. These are overstatements. Certainly when youve had, you know, a 10 rally over a couple months, suddenly the market is going down because of a weak dollar when it was going down because of a strong dollar. These sorts of contradictions happen after you had a big rally. When you remove energy from earnings . Five Percentage Points better. Look at last year. We would have about 5 , 6 on eps growth last year. Were having an isolated recession in the petroleum sector. The breadth of growth around the United States especially is as strong as it ever was. Its slow growth, but theres plenty of slow growth. The energy piece of this First Quarter earnings, i think, is going to be down Something Like 75 . If youre able to strip the energy piece out, earnings dont look bad. Maybe flattish or down a little bit. Energy is clearly and materials the issues to concern ourselves about. With this 26 wti number that we saw in the januaryfebruary, we may be putting in a bottom here. I dont know that were going back to 108, but we may be going back to a bottom here in the First Quarter. Phil, why dont you just say theres no alternative . There are people saying that this zero global Interest Rate could last five, six, seven years. Why wouldnt that just portend long term good things for stocks . Youd have to go somewhere. There is no alternative. Why not buy stocks . Well, what weve done in the portfolio is our stockbond mix, we were coming out of the 09, 10 period. We were around 85 equities. Were at 60 now, which is a neutral allocation for us. We have a little more cash than normal. A little more bonds than normal. The equities were investing in are more defensive. Were playing a little bit of defense. You think growth in earnings can make a difference, etch if there is no alternative. We wont go to 22 times earnings just because rates are going to stay low. If inflation and Interest Rates remain low, we ought to be trading at 18 times earnings. We dont have a problem with that. The problem right now is that earnings are going in the wrong direction. Weve had this sort of negative yeartoyear comparison four quarters in a row. We need to see the Earnings Growth bottom out and start to improve. I think that will get us more excited about stocks. We think that earnings will go up, that this will end up being a positive year. The first half of the year is actually the underrated part, rather than the second half of the year. You dont have to wait for some of these earnings beats. There is no alternative. Didnt stop us from having a global correction in january and february. Trend growth has been so slow that its very difficult to put the multiples that you would at periods of really strong growth on broader markets. So thats why 5 returns in assets like munis and corporates with half the volatility of equities stand out. Steve makes a great point. As we look at the world, first half of the year from an earnings standpoint is going to be down. Wed like to think the second half is going to be better. I like that muni idea. Were you around when i reached my moment of clarity . No. Was i around . You were around. You dont really listen. This moment of clarity where this election has become so troubling to me in the prospects to get back to, you know, a private sector, sort of an American Enterprise Institute View of the economy. I dont know if thats going to happen or not. Ive decided, why is it my responsibility to push progrowth why do i have to care if anybody else is able to raise themselves up . You have to be the voice of the voiceless. Thats what we do in journalism. Ive got what i need. Why cant i be a limousine liberal . Ive got mine. I can pretend i care and do all these things but not connect the dots that were actually hurting the people. Why do i need to go for lower Corporate Taxes and less regulation . Its like until im blue in the face. Im well off. Im fine. I have assets, zero Interest Rates have gotten me wealthier. Why do i care . Because there will be a wealth tax. They wont do that. Are you kidding me . Thats what twitter people said, theyll come after me. You think we wont do a wealth tax in this country if certain people get in power . Give me a break. Whats the rate . You would be at the top. Whats the cutoff . 200 million or more. Youd be okay. Id be okay. I dont have 200 million. Im just under. 450 and above. All right. Thank you, guys. So thats where i am now. Get you some chardonnay, a latte . Were going to talk politics when we come back, if we havent started already. House ways and means chairman kevin brady has a plan for tax reform. Weve got the details next. Plus, donald trump blasting the president ial nominating process. Talk about delegates. Im hundreds of delegates ahead, but the system, folks, is rigged. Its a rigged, disgusting, dirty system. Its a dirty system. John harwood has the latest from the president ial campaigns. Maybe he can weigh into this debate with joe and michelle, which im desperately trying to avoid. Squawk box returns in just a moment. I could get used to this. Now you can, with the luxuriously transformed 2016 lexus es and es hybrid. Welcome back. In global news a committee in congress in brazil has recommended the impeachment of dilma rousseff. If twothirds vote in favor, the impeachment will be set to the senate. She would be suspended for up to six months while lawmakers decide her fate. Rousseff has denied any wrongdoing. They have already started putting up barriers around where the vote is going to happen for fear of protests and violence. . Squawk booze news, cuba is running low on beer. A surge of american tourists and the addition of new private watering holes are straining the countrys main brewery. An executive told the government that the Company Needs a new plant to keep pace with rising demand. They make the countrys most widely consumed beer. The company is a government joint venture with Anheuser Busch inbev. Never thought id see the day. Interesting. Are you going to go down there . You going to see socialism in all its glory . Some day, make. I dont know. Youve been there, right . Ive been. Lets go together. Youve been there and you still advocate socialism. Its amazing to me. I do the no advocate socialism at all. I could go down there or just wait around here. I live in de blasio land. Im here. Is he in trouble . You mean for the lit skit they did over the weekend . No, no, for the lobbyist whos also a fundraiser. I dont think hes going to be in trouble for that. Right now hes in a lot of trouble for the little skit he did with Hillary Clinton over the weekend. Is heest mayor in the history of new york . No. We know who his favorite is. He changed a rule so he could serve a third term. Sorry. When the history books are written, he clearly will be seen as one of the great mayor of our time. I agree. Rudy giuliani after 9 11, absolutely. I agree. We got spoiled. We had a long reign of very good mayors. Im suggesting mayor bloomberg. Oh. I like that machine. Remarkable things. Gave hundreds of millions f not billions, to the city directly out of his own pocket. Still have big gulps though. Yes, you can have your big gulp. Tax reform continuing to be a hot topic on the campaign trail. Lets talk about it. John harwood sat down with the chairman of the house ways and means committee, representative kevin brady, to discuss the outlook for actually getting tax reform done. You realize that now the word powerful is permanently affixed to your name. Every news story about a ways and means chairman says the powerful ways and means chairman. Well, it does, but it always affixes to the title. I think its powerful because it can do big things. Thats what the committee is all about. You are literally a chamber of commerce republican. Tell me what is the place for chamber of commerce republicans in this party . Ive spent my whole life before coming to congress as a chair ber of commerce manager. You help start Small Businesses, help them grow in good times and in bad. What do you make of this populist brush fire weve got in the Republican Party that says xm bank no, thats not helping. Thats special favors for business. Trade deals, no. Thats special deals cut by these businesses to help them at the expense of average workers. I think people are so frustrated by the last eight years of this administration. Theyre striking out frankly at just about everything just out of frustration. Including fellow republicans. Well, they are. I think this will pass. Truth is, with the right president in the white house actually unifying this country and focusing on what we need to do better, which is to create jobs along main street, give people opportunities, i think we have a chance to turn that around. Dave camp went through a process, came up with a plan, which you kind of like. Dave camp, in my view, made tax reform inevitable in the sense that he showed you could broaden the base and lower the rates and simplify the code and be competitive around the world and make it more understandable. Let me stop you on that. Some people say he showed it was impossible because he laid it out and his own caucus shot it down in about five minutes. Well, it didnt, in my view. In fact, i dont think it got the oxygen it deserved at the time. John boehner said, blah, blah, blah. He did. But paul ryan is all green light thinking on tax reform. John joins us now with more. What do you think realistically . Really, tax reform . I think its very difficult. You can see it by whats going on right now on the treasury invoking these rules on tax inversions. Why did they do that . Because congress cannot act to deal with that issue. Now, i think eventually International Tax reform will get done and maybe broader Corporate Tax reform will get done to lower that rate and adapt our worldwide system. In terms of a comprehensive rewrite, kevin brady is going to have to prove he can get that done. It hasnt been done for 30 years. It is possible that you could get some momentum for that, but thats an issue where both parties are going to have to come together. At the moment, given the difficulties with bridging the gaps on do you raise more revenue, raise the same amount of revenue, do you keep the distribution the same, do you change it. Big disagreements there. Well see if he can get it done. But handicap it. Are we talking about a 5 chance, less . If we look back lets project forward five years. I would say five years from now, there is a better than 50 50 chance well have a new Corporate Tax system, a new International Tax system. If i asked you that question five years ago, you dont think you would have thought the same thing . No, i think stuff takes time. Consensus takes time. I do think weve reached a Critical Mass of consensus on the Corporate Tax system that it makes it more likely than not it will get done. Individual tax system, i dont think so. Thats something that is likely to take a much longer period of time. John, its too bad this is such a crazy election season where you cant even tell whos who, you know, in terms of populism and antitrade. Exactly right. It would be nice if the American Public had a clear choice in november when you had on one side, lets say, i dont know, just for arguments sake, paul ryan, who wants to do something with entitlements, who wants to do something with Corporate Taxes, who wants to do something with regulations. On the other side, youve got, lets say, not Bernie Sanders, lets say youve got a Hillary Clinton. You see what the electorate actually wants to do. You need the electorate to get behind Something Like this so that you can say like remember when bush said, identify got some capital built up and i plan to use it and he squandered it and blew it . In fairness to bush, he squandered it in certain ways, but republicans also headed for the hills on that priority that you mentioned. But you had two big midterms that put the people in place that could have enacted something that paul ryan could have put together. Its all ready to do it. Then along came trump. Well, trump certainly scrambles it. Youre right, joe. We have elections every two years. You could make the argument that the 2012 election with paul ryan on the ticket was a choice like that. Mitt romney and president obama had pretty different visions for the role of government and the economy. Weak candidate that rolled over after the first debate. You can say that. He doesnt look too bad right now. No, i know. War on women, all the normal stuff was rolled out for that. Im not sure what happened. You never get to define an election purely around the issues that you want it to be about. If you wanted the you know what im saying. Its just too bad you dont have a clear way for the American People i mean, even on the supreme court. Thats a great idea to say, look, let the Voters Decide on this very important you know, since were 44 and youre trying to replace scalia. Who knows with that. I do think that the Republican Party has got to work out some of the internal fractures. Ill give you an example. Kevin brady, who very likable, new chairman of the ways and means committee, somebody very smart, ambitious about getting stuff done, he just had a tea Party Opponent in his primary who was arguing he was establishment. Kevin brady beat back that tea party challenge. But the fact that somebody in his position faced a serious effort at his job is an indication. Donald trump, if paul ryan were in the race with his views of entitlement reform, donald trump would be going right at him on the issue of entitlements, and the partys got to figure that out. Theyve got a significant part of their base that is the bluecollar republicans who are rallying to what trump is saying. You know, before the two parties can present a clear oice, each party has to figure out what its for. You were ahead of the game on that, harwood. Four, five years ago you said republicans dont want their medicare touched, dont want their entitlement touched. Nobody wants their entitlements taken away. Thank you, joe. Youre welcome. Going to mark that down. Save that tape. Were going to keep you around. You too. Really . Im saving the tape. Thank you, sir. Thank you, john. Great to see you. Coming up, the ceo of Boston Consulting Group is here. Were asking him to consult for us for free. Well talk tax inversions and more of the top issues facing executives today. As we head to break, heres a look at yesterdays s p 500 winners and losers. Thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. Welcome back to squawk box on cnbc, first in business worldwide. U. S. Equity futures are suggesting we would have a positive open. Okay. Time now for the executive edge. Rules by the Treasury Department aiming ing ting to curb invers causing a stir among ceos. Pfizers ceo took issue with the rule in the wall street journal. Jamie dimon releasing his annual letter saying bad decisions by policymakers are one of his top concerns. Joining us to talk about all this, the president and ceo of the Boston Consulting Group, rich lester is here. You usually charge by the hour or the project. We have you for a couple minutes. Send us the check when its over. Im delighted to be here. Thank you. Its great to have you here. You look at what the government has done, and which side of this do you take . I think the fundamental issue is les about the action last week and more about the need for Corporate Tax reform and the frustration that ceos have that make it harder to invest in the u. S. I think that frustration produces a search for ways so heres the question. I dont disagree at all. Actually, probably everybody at this table wants some form of tax reform. I would imagine there would be differences in how we get there. I would argue the democrats and republicans at least claim they want it. The probability i know we talked to john harwood, who thinks tax refrorm is coming in the next five years. Between now and then, its very possible that the United States would otherwise lose some of its most iconic companies. What do you do about that . I think, look, the treasury is clearly making it as hard as possible for companies to pursue those kinds of actions and doing it in two ways. Someone the rules that are set. Second is creating an environment where its clear the rules can change. You think the rules are illegal . Whats interesting is, to your point, Business Roundtable had a great session with senior democrat and Republican Leaders last fall. They all stood up. The first line was, were for Corporate Tax reform, with passion. The next line was, the constraints around which they could support Corporate Tax reform. When you got to the end of that warning, it felt like there was until a null set. Each stated a public support for it. The areas for compromise seem so immaterial willed when you put the other constraints around it. I think there is a mounting pressure. I think, you know, at a time when all we want are growth and good jobs and investment in the u. S. , and theres such a need for that when you look at top line growth rates. You hope that there will be a basis in the new administration. The clarifying moment likely will be so theyve done all these rules. You cant do an inversion. Then theres going to be big some takeover by a Foreign Company that really means the company is really going to leave the United States. Happens all the time. But its going to be something where everybody realizes, wow, and you cant tell the chinese youre not going to buy this. Arguably, the new rules have made it harder for a Foreign Company to buy u. S. Companies and use earnings stripping and some of the other devices they would have otherwise used. Thats like antitrade. But it is possible to buy a Global Company and take the global earnings and pull them out of the u. S. Exactly. Thats still true. And thats the frustration. You could take earnings that a Global Company had overseas. If a Foreign Company bought it, they could invest. And a huge improvement in earnings by the one transaction. We all agree there should be some form of tax reform. In the world according to you, the rate would be what . Something more in line with no, heres the problem mid20s. You said mid20s, i say im going to ireland at 12. 5. You could say its a start, but then it happens and then what . Andrew is worried a about rush to the bottom. Im trying to figure out you dont want to go to zero. No. By the way, you want to go to zero and other the government should spend less. So this is where the divide comes. Well, i dont know if i could go to zero. Youre prepared to go to zero. Oh, yeah. Absolutely. Youre prepared to go to zero. Youre prepared to go somewhere in the 20s. Most ceos dont want to spend their time focusing on tax policy. It is so frustrating for ceos right now that they cant focus on where they really want to focus, which is how do i grow my business, how do i deal with a more intense competitive environment, and how do i navigate through one of the Biggest Technology revolutions under way and prepare myself for the future . I think if you had a global he competitive tax rate and a system that encouraged investment in the u. S. And encouraged people to want to build for the future, you would see ceos turning their attention to where they want to turn their attention. Lets say you do the zero and tax individuals however you want to replace whatever youre losing in the Corporate Tax, which isnt that significant. So you definitely replace it. What if i told you beforehand that would allow u. S. Companies to compete better globally and we could maybe have more jobs and maybe earn more, have better dividends. Is it just a fairness issue that these corporations, which arent people, but they use roads and bridges and no, no, no. See, there is a fair share idea that corporations are these big, horrible things that pollute the and they need to pay. No, im into we need to create a certain revenue number up here. Youd like a trillion more. Youd like a revenue enhancement. We have to figure out what it is that the services are that the government is going to provide. Then we have to figure out how were going to pay for it. Thats all. But not necessarily the corporations punitively need no, i dont come at this in a punitive way at all. Lets reflect. There are two goals here. One is the government needs to raise a certain amount of revenue. The second is we need a tax system that encourages the right behaviors. When it comes to businesses, the behaviors we most want are behaviors that invest. Invest for growth, invest in human capital, which we desperately need. And invest to create longterm opportunity. When the system is working against that, then we need to adjustment system. What do you think about running for office . No, hes already done a lot for the world. Hes already contributed a lot to humanity. Developments head of development at proctor gamble. I made better soap. Did you make pringles . They were happy with me in malaysia. My first pocket was palm kernel oil. But that was 30some years ago. So no connection to the current malaysia situation . Not okay, good. 30 years removed from anything going on there. A lot of oil going on there now. Great to see you. Hopefully were going to shift away from this focus on the tax side to whats really going on. Right now whats happening on the Technology Side is amazing. The emerging markets is painted with too broad a brush stroke around whats happening there. Theres brazil and what you just talked about, but theres a lot of other opportunities in the world. Look at this guy. So optimistic. Dont you like that . Its morning in america. Its morning in the world. Its really not. Were like midevening. No, its not. Thanks. Coming up, the events that could move the markets during the trading day ahead. Squawk planner is next. Plus, if youre looking for a discount first class plane ticket, were going to tell you which day of the week to fly. Is it discount first class . Discount on what day. Begins with a w. As we head to break, a quick check on whats happening in the european markets right now. Theyre mixed. The call just came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Welcome back to squawk box. Time for our squawk planner. This morning, two economic reports to watch today. March import prices come out at 8 30 eastern time, forecast to have rebounded from last month, following a decline of 0. 3 in february. Then at 2 00 p. M. , well get the monthly federal budget statement. Also, Railroad Operator csx reporting earnings after the closing bell. Of course, we got big train news yesterday, that Canadian Pacific deal is off. Also, philly fed president , San Francisco fed president , and richmond fed president are speak today. You do not want to forget that the new dallas fed president Robert Kaplan will join us at 8 00 oa. M. Eastern time. Speaking here on squawk box. That is your planner. Excellent. Look forward to that. Tell me about this next news. You know me. This is pretty i like two things. Things that are cheap and first class. I know that. This is pretty profound. I believe this is the result of a 50 million, 60 million government study, which found that to travel first class affordably, you fly on a wednesday. See, theres these weekends where people dont work, so they went and its just 50 or 60 million. They found out its better for people if they can fly first class on like a monday or tuesday to combine it with the weekend or thursday or friday. So after all was said and done, somehow they found out wednesday was the day when its cheapest to fly. There was no study. Yeah, we get it. Its the least expensive day to fly first class if you book your ticket at least seven days in advance. Who says its affordable . Its not affordable. Less expensive. 20 more expensive to fly on a friday. But you see what im saying. Everybody has weekends off unless youre in some weird you know a bartender or something. Most people have weekends off. Yes. So wednesday, wouldnt you guess wednesday . Yes. Did i just tell you anything you didnt know . I will also tell you im told, at least according to the same government studies no babies in first class . Thats true too. If you book either tuesday night or wednesday night oh, theres a certain day of the week its cheaper. Its also cheaper. When you book matters. I dont need this. I just need to check with you how to do this. I just hang out on kayak a lot. I dont know what that is. Its a travel website. You row to where youre going. Coming up, if youre looking for ways to make money in a volatile market, stick around. David katz joins us next with his best investment ideas. Our whats working series is next. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive the first stock index musiwas createdoughout over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. My m. About my toothpasteice. She eveand mouthwash. Ice. But shes a dentist so. I kind of have to listen. She said jen, go pro with crest prohealth advanced. Advance to healthier gums. And stronger teeth from day one. Using crest toothpaste and mouthwash makes my. Whole mouth feel awesome. And my teeth are stronger too. Crestpro health advanced. Is superior to colgate total. In these 5 areas dentists check. This check up . So good. Go pro with crest prohealth advanced. Moms right. Again and to help you accelerate,ast. Weve created a new company. One totally focused on whats next for your business. A True Partnership where people, technology and ideas push everyone forward. Accelerating innovation. Accelerating transformation. Accelerating next. Hewlett packard enterprise. Time now for whats working. With market volatility and Political Uncertainty ahead where should you be investing your money. Joining us now is david katz, president and chief Investment Officer. How i do make money right now . The lead in is whats working. The thing thats been working best this year is utilities. We think that is not the place to put new money. They had a great run. Richest valuations right now. We would be taking money out of utilities and putting things that have not been working. What kind of multiples on utilities. Generally sell 12 to 17 earnings. They are 17. 5 earnings. Historical peak. Youre getting 4 . 4 in a 0 world. You can also buy financials that paying 3 to 3. 5 . So youll get the income stream which we think is safe plus appreciation. Interest rates start to rise banks are going to do well. Yoil utilities do poorly. And they are regulated the same. In terms of banks if earnings grow nicely and we think they will over the next few years. Will that yield curve move at all the yield curve has to move. Interest rates have moved from 12 down to 0. They have to go hire. A healthy economy need higher rates. We think they will move up. Not a dramatic move higher but the fed will raise whether its two times. Dont buy utilities, by financials first. Got road one . Health care has been beaten up. One of the better performing groups. We think there will be a lot of pressure on health care from the political area going to be . Thats why they are down. It will continue. You can buy one or two at this point that are so depressed that the news over the next year are better. We like abvey. 11 times earnings. Playing 4 yield. Got a great drug portfolio. Their drugs are lifesaving whereas certain cancer drugs will keep you alive for three months. Abvey has products that can improve the quality of your life forever. Expensive but adding to your life. Whats the risk to this stock. Purely political or stuff in the pipeline that may fail or stuff going off patent. Risk is political and their primary drug has some patent challenges. They think they can keep that patent through 2020, 2022. But thats a risk out there. They came out with a hepatitis c drug. We were not upbeat about that. Gileads drug is better. Weve written that off as a small part of their portfolio. So financials and health care two sectors deemed very evil right now because they rip off the American Public. What else . You need a banking Death Penalty youre exactly right. We also like the industrials right now. They actually had a good start to the year in terms of the stock prices. They had a miserable 2015. We think business is still poor but get better. Why why is business poor . Why is business going to get Better Energy prices ultimately will go up. Thats good for some industrial companies. China which slowed down significantly is bottoming out and be okay. U. S. Economy is good. With the expectations solo for a lot of industrials that businesses are a little bit better the stock will do better. Youre starting to see that in the First Quarter. Sales and earnings are down. Stock is up 10 . Mr. Katz, could to see you. Coming up, spring selling season is here. Up next well get a chance and a check on those Real Estate Markets across the country and then later new dallas fed president Robert Kaplan will join us right here first on cnbc. First tv interview since taking the job. Were back in just a moment. Every year, the amount of data your enterprise uses goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Because you cant build the business of tomorrow we believe in the power of active management. Management, by debating our research to find the best investments. By looking at global and local insights to benefit from different points of view. And by consistently breaking apart risk to focus on longterm value. We actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Earnings season officially under way. All could gentleman shares understand pressure after weak aluminum prices. More on those results and what experts are saying about playing your portfolio. The spring real estate season in full swing. Flowers are popping up and so are for sale signs. Warning signs too. Could there be another housing bubble brewing . A look at the nations Real Estate Market is straight ahead. Its National Retirement week. How prepared are you to hang up your hat . The ceo of tiaa Roger Ferguson will join us to discuss how you can protect your nest egg. Second hour of squawk box begins right now. Announcer live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen. Im with someone thats not just me, you are sorkin, andrew ross sorkin. No relation to aaron sorkin. Judge sorkin. Ira sorkin. No. No relation. Nope he represented madoff. I used to get letters from people any relation to powerhouse sorkin. Michelle carusocabrera is here as well. No relation to the singer. We cut down on all the other names. Futures at this hour you like when i do that. No one is watching that you know. Up 51 points now. Almost 52. Up seven or so on the s p and the nasdaq up about 19. Oil right now is well above 40. Its been firm. But that really hasnt helped the equity markets. Why it would, i have no idea. I guess that part of the s p wouldnt be dragging down earnings but as we all know, it was a great tax cut for consumers and now well see if we like it if it goes back above 50 and 60. We had a guy yesterday guaranteeing me what was that . 85 by the end of the year. That would be 100 . Crazy. Buy the futures. Dont buy, mortgage your house and buy oil futures. One single trade. You would make ten times your money. Other headlines this morning Small Business confidence has dropped to a two year low. The monthly index fell. 3 of a point for march to 92. 6. Chevron ceo john watson said crude oil supplies are starting to come back into balance with currents price levels. That means supplies are dropping. Low prices wont spur much industry development. He spoke at a conference in australia. Fords f150 super cab pickup truck got a top safety pick rating following new tests. It was the only vehicle in the doir receive that top rating. A pair of economic reports on todays agenda. March import prices come out. At 2 00 monthly federal budget statement. Csx reporting earnings after the closing bell. Philly fed president , San Francisco fed president and richmond fed president are also speaking today in addition to mr. Kaplan who will be on our show late per. Dallas fed president as andrew just told you rob kaplan said its too soon for a rate hike in the United States but open to a move at the june meeting if gdp, employment and other data are sufficiently strong. You want to hear more . Dont miss the exclusive interview with kaplan right here on squawk box at 8 00 a. M. Time. New guy in philly. He was head of wharton. Thats new. We havent said that name before. Nope. I got it right too. You did. You nailed it. Sounded it out. I keep telling you that. Sound it out. Hooked on phonics. Slump in pc market. Shipments dropped in the First Quarter by 9 . Customers delay or skip buying desk tops and laptops opting for smartphones or tablets. Gartner says dell has dethroned hp. Alibaba has agreed to buy lazada. Its worth about 1 bill. They will buy 5 million of existing shares. The president says the investment will support alibabas expansion plans in southeast asia. It is the heart of the spring housing season but red flags are popping up along with for sale signs. Diana oleck joins us to explain whats going on. Reporter the weather is warmer, buyers are out but facing two huge hurdles. One a lack of supply and two over heated home prices. A new report from jpmorgan warns strong home price growth can be misleading. Unsustainable, student loan debt, subpar Income Growth and more americans choosing to reynolds than buy can pose potential risk to the Housing Market. Sales of existing homes took a big drop in february. Those are based on winter contracts. Realtors warned even then the Spring Market would take a hit because theres too few listings for sale to meet the demand and todays buyers cant and will not overpay. Home builders sentiment was unchanged. While it usually rises in the spring it doesnt execute with what we talked about yesterday which are those near record low mortgage rates. Home buyers and sellers alike are lacking confidence in the market and First Time Buyers Young Millennials are under represented in this housing recovery. For more on the state of the Housing Market lets turn to ralph mclaughlin, truly chief economist and cnbc contributor. And the founder of dolly lens realty is here. Do you agree . The market is hyper local. If were looking at billionaires row, its in trouble. Too much product. Its here in new york city. If were looking at the west village, tribeca, areas downtown its that local. Could be local two streets. Then its totally different. No supply and therefore theres demand and not enough. But its interesting, though. Confidence is key. And im seeing confidence start to wane. So thats completely true. Why is confidence waning. Prices are too high. The economy they dont think is already over that hurdle totally. The elections are messing things up. All this noise going on one says the market is terrible, the other says the market is worse. Its not good. All the new York Real Estate historically has gone up yes. Over and over again. Yes. Are you calling for it to go down or just be flat . No. Flat in normal areas where theres some demand. Down where they are over built. Again this 57th street corridor where its totally so over built. How much are we talking about down . The thing is they wont probably sell it wont be down . It will be down. Or there wont be any trades. Mark to market. Exactly. No trades. Ralph, you listening to this . I am. Good morning. Good morning to you. You have all the data. So what do you say . Well, we dont think the Housing Market is in a bubble. We think the big story the spring buying season is inventory is down and down a lot, which is making it very difficult for home buyers to actually find a home. Its good news if youre a seller, bad news if youre a buyer. When you look at the cities with least inventory which ones are they . So, cities where inventory is down a lot are primarily in the west coast and the northeast. If you are in the midwest or south its not looking too bad. But if youre looking to find a home out here in california or even in new york and boston it is more difficult now than it was at any point in the last four years, which means that youll be up against other people looking for limited supply which means prices why so little inventory. Whats Holding People back from listing . It could be a couple of things. One, especially at the starter end level a lot of homes were foreclosed upon in a turned into rental units. Second were seeing price spread occurring in those markets which means as prices of say trade up homes or premium homes start to get out of reach it can be difficult to afford those homes. So existing homeowners may not sell their home and may choose to, you know, modify or expand on their current home. Because they cant afford the trade. Some homes are under water. Theres still 3 million homes under water. Thats huge. How many years . I know. Holy smokes. Banks are slowing it down for whatever reason. A whole lot in florida. You do any work down there yes, we do. I think theres a bubble in florida. You think theres a bubble in florida. Big bubble in florida. How big. Im getting email after email. Bonus if you sell this. Well sell below cost. Constant in prime is this stuff bought in the past couple of years. Stuff that just closed. What happened . There was an oversupply, this llc issue is an issue. And brazil. Exactly. People are taking a pause and saying a, do i want to get involved in this now . B, do i want to have an llc and have it exposed. I think thats the big issue. Can we talk about the llc issue. Yeah. Its bad for your business in the short term but long term i think its very good. I want to know who lives next door to me or i want to know who lives next door to me and not somebody that absconded a billion dollars worth of fund from some place. Have you historically represented people that you didnt know who you represent . I didnt really know. I suspected. I didnt really know and i wasnt required to know. Now its a little more dislow sure and more requirements to know and i think thats a very good thing. Billion shell. Congratulations. Amazing. I cant take the credit. Thank you for that. And ralph thank you. Coming up the earnings breakdown officially under way. Alcoa reported after the bell. What investors need to watch. Then later former Federal Reserve vice chair turned ceo of tiaa. They dont call it who would change that. It was so catchy tiaa. Such a catchy name. They are just going with tiaa now. Roger ferguson is here with his outlook on the markets and economy. A lot to discuss with our special guest at 7 30 a. M. Squawk box will be right back. Actions speak louder. Something well show you. Through small things, big things, and spur of the moment things. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Futures right now suggest a positive open. Dow would open higher by 36, s p by five and nasdaq by 13. Lets get more on the main issues facing the markets. Earning seasons is under way. Joining us is chief Investment Officer of Merrill Lynch and ceo of Richard Bernstein advisers. Does that mean you get to go first . 3 billion. See, you can make it in america. Is it a zero sum game. Is Merrill Lynch down 3 billion . No. Were all growing. The economy expands. We did not steal clients. They give you all this visibility and then you leave and 3 billion. Wow. All right. Come on, this is capitalism. Exactly. This is america. This is a success story. What do you tell people to do . What are we doing . Were actually still reasonably bullish. We are pretty cyclical these days. Thats not a bad combination. Chris . Im cautious but constructive. What does that mean . Cautiously optimistic. Youve been saying that. Youre with Merrill Lynch. Thats right. Imagine that. A little awkward. Whoa. Did he take lines from you . No. Look, the reality is theres a lot of cross currentsing. You have big moves in there are. Concerns about the referendum in britain. You have a lot of issues that are shaking investor confidence. Thats really part of where the caution comes from. The earnings trough is a good one but revenues on the corporate side are weaker. The constructive part is about whats going on inside. Theres unit growth. Decent Revenue Growth. Lets call it three plus percent on the consumer side and more on the haer the health care side. In this kind of market where theres caution thats warranted. 2 trillion, 2,000 billion. Thats spread across how many employees. Its just you, right very diversified. He controls all 3 billion. Very diversified. 17 employees. We have 17 employees. Were not doing two and 20. Fees are increasingly important in a low return. Especially when you think whats going on with regulation, low fees are very advantageous these days. Its interesting Merrill Lynch manager fund survey came out this morning and among portfolio man fwers what youre finding they are very conservatively positioned. Big cash levels. Defensive stocks. Big rotation in the last three to six months where theyve got end conservative. That tells you what . Troughing. If were right and profitability is troughing pay to have a cyclical bench portfolio which we have right now. Volatility that we saw in the First Quarter, is that coming back . That will depend on the fed. I view the world very simply. Earnings and Interest Rate. Fed will raise rates during a profit recession wild get more volatility. Belief whether theres more volatility does that affect the multiple youre willing to pay for earnings . Sure. What people have forgotten were part in the cycle where you get an earnings driven market. Thats not unusual to have that happen thats what were looking for. I would like have an earnings driven market. Im tired of talking about fed. Wouldnt that be nice. One is causing the other thats the problem. As long as the fed is inactive youll never hit the earnings to drive the market. Thats a good point. The fed has changed the dynamic by saying well be more data dependent, close the gap on Interest Rates between us and everyone else. Janet said that. Thats read through. This split cause ad lot of things, Dollar Strength, rise in price of commodities, et cetera, challenges for growth in the rest of the word. As you shrink that gap you get to a place where investors are more confident that you won have this split policy driving a lot of the volatility. That said i mean the turn of the rally has been oil related, dollar related cities in beginning of the year. Some of the sectors rich talks about in the cyclical piece is part of that. Financials . You need more spread. You need more Interest Rates. Youre not is going to get that with a fed on hold. Did you say Interest Rates will lob. Interest rates will be flat. Were looking for the curve to steepen a little bit. I dont want to overplay that. Anything looks steeper. I think it would. Look, if the profit cycle turns and credit quality improves financials do okay cyclical. Financials have a tough problem over the longer term. There could be a cyclical rebound in financials. Balance sheets are too bloated. Return on equities are too low. They need to sling their companies hugely and just not doing it. They are still geared up for credit bubble. Is there a play to be made on the idea they might do that ahead of regulators because were hearing this drum beat to get smaller but the markets been telling them to get smaller. Markets have been telling them to do it for seven years since the bubble and they just dont do it. You cant go the ceo of any Major Institution and say sling your Balance Sheet by a third. Thats insane. The market is raising uncertainty. You have extremists leading the polls. Thats obvious. It is hurting the markets . I think so. Keeping investors on the sideline. Do you favor the fed, avoid health care . Too many extreme choice of what was presentsed so far. I think the thing to watch are the coat tales. Thats whats all about. Long tails. Depending on who is against who and the republicans and democrats, i wont call that. I think you have to be concerned about how big are the coattails on one side or the other and does that change the composition of the senate or the congress or the house, rather. And if that happens, then i think the market has a lot to deal with. Faits democr if its a democrat in the white house and Republican Senate who cares. New get more policy action by cabinets and that leads to other funky outcomes. If stalemate necessarily isnt the best thing out of an alexandr election cycle. Thank you for coming on. Is it scary starting your own business . Not scary. Look, youre about to love what i say. Thats what capitalism is all about. Youll be an entrepreneur you have to be willing to take risks. Nobody ever grew their wealth being scared. When it fits you, you embrace capitalism when it suits you. I always embrace capitalism. Ive learned so much for you. You hawk your wares after you left merrill. Coming up, weve all brought a fwlof to a baseball game with the hopes of catching at least one foul ball. You wont believe how many this guy caught at a tigers game. A check on the price of oil, about 40. 58. patrick 1 whats it like to be the boss of you . patrick 2 pretty great. patrick 1 how about a 10 raise . patrick 2 how about 20 . patrick 1 how about done . patrick 2 thats the kind of control i like. And thats what they give me at national car rental. I can choose any car in the aisle i want without having to ask anyone. Who better to be the boss of you. patrick 1 than me. I mean, you. Us. vo go national. Go like a pro. Got a baseball story for you this morning. Hard to believe. A fan attending the piratestigers game in detroit had himself a day to remember. This tiger fan caught five fall balls on monday. In a really good seat to do that. Four during the game itself, one during batting practice and according to the tigers broadcast he gave them all away. All five balls were hit within 15 feet of his seat, located right behind the plate at coamerica park. Hes like going after them. Its funny. Good for him. That would be fun. How awesome. Coming up retirement and financial challenges, Roger Ferguson kroerch of tiaa will be our guest. Well talk markets and retirement planning. Take a look at u. S. Futures. Dow will open 25 points higher. Were back in a moment. announcer need to hire fast . Go to ziprecruiter. Com and post your job to over 100 of the webs leading job boards with a single click, then simply select the best candidates from one easytoreview list. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer2 welcome back to squawk box. Among the stories fronts and center at this hour did you think to listen to this. Is this for me no. You know the name of this . Fergilicious. Oh, wow. No one has ever played fergilicious. Now i have my own song. Now much about we do the official intro. Well be hearing from philly fed president patrick harper, richmond fed president and San Francisco fed president , they all have speaking engagements. Ahead of that we have rob kaplan right here in about 30 minutes from now. We should tell you press release distributor Business Wire is back online. They had a four hour outage stemming from a poerj at a thirdparty facility. I want released earnings reports including one from alcoa. Get ready to pony fun youre a fan of craft beer. A bad european hop harvest last year following hot and dry weather more expensive hops are putting a squeeze on Profit Margins for small brewers forcing the home raise prices by 50 . 50 . Holy smokes. Cdc using its strongest language yet and warning about a zika outbreak in the United States. Cdc Deputy Director said the virus seems to be scarier than they initially thought. Public Health Officials are warning mosquito eradical occasion efforts, lab tests and vaccines may not catch up. Netflix is over taking hbo as the top streaming spot for best original programming according to an annual streaming survey by morgan stanley. It measures original contact from noncable and Premium Networks but excludes traditional networks. Netflix has the best original shows fold by hbo at 18 , showtime, hulu and amazon finishing in the 4 to 5 range. Shares of netflix are up 50 . Now its time to introduce fergilici ourch s. Youre tiaa, peoples money and retirement. Given this week is National Retirement planning week we have with us this morning a man with a plan for action for achieving a satisfying retirement plan. With more on that his perspective on the recent going ones with the fed were joined by Roger Ferguson, chief executive officer at tiaa. Former vice chairman of the board of governors at the fed and so many places to go, roger, but i guess the most important one is you cannot sound the drum beat loud enough about maybe getting some personal involvement in retirement because we need to do it and the state cant take care of everyone. You cant start too early. I agree. You cant start too early. Frankly nor can you start too late in the sense you should be saving for retirement. Should be planning for retirement. As you point out theres a share of responsibility between employers and employees these days. The 401 k which came into existence as a Supplemental Retirement Plan was never meant to be main retirement plan. For a lot of folks thats what happened. We had an argument yesterday about whether we should assume Steve Liesman says youll assume 3 for a retirement plan. In the old days that seems low. I dont know if 3 is just a risk free rate of return. You need move out on the risk spectrum just a little to get 3. Do you. The way we think about it you have to have a broadly diversified portfolio. In the old days people used to think primary fixed income because that was safe. Then theory brought equities into retirement picture. Right now you got to have everything. You got to have fixed income, equities. If you can do it and we do you have to have alternatives. Agriculture, timber, commodities, all of that is part of the story. Your job got a lot harder and you were also at the fed. So its great because im not saying the orphan is putting out the fire, but think about it. The fed to some extent has orchestrated these low rates which has made it harder for anyone to build for retirement. These low rates are an important part of getting the economy back on track. We have to keep the big macro picture in mind. Maybe two or three years ago they were more important. Maybe they stayed at the party too long and missed their chance. What they are doing now is the right thing were trying to figure out how to move rates back towards normality. If we were having this interview ten years, 20 years from now looking back on this period, what do you think what would be an average return . You think that people can expect these days . I think 20 years from now, maybe 10 get back to what we thought of as the norm. Im not a big believer in the new normal. I dont think were going into a period of low rates. One thing we know is when you have a recession thats triggered by a sudden change in asset valuations it takes a long time to get back to normality. Thats a process that were going through. You think its 5 , 7 . The guy from stanford, two days ago said 3 . Thats too pessimistic. You need to beat inflation. Bottom line. Regardless where everything is as long as inflation is three and im making five. You feel pretty good. Its about the real return. Inflation will be low for some time. So sure, you need to beat inflation and the way you do that i think back to what i said is a broadly diversified portfolio. You talked about alternatives. I was going to ask you about hedge fund private equity. Typically high fee oriented products. Does that make sense to you right now . Look. I think all of us know fees are one of the thing that eats up return for sure. As a general matter we say to most individuals you dont want to be in a high fee offering. You want to keep it low fee. We as an Institutional Investor has a big exposure but given our scale and scope were coinvesting and working hard to have returns eaten up by fees. Hedge fund . Hedge funds not so much. Thats a question of how you think about leverage and which leverage is in play. But, one should never demonize any particular asset class. Keep fees low for the average investor. You said something at the beginning. It sounded like you thought it was unfortunate we had moved from a system where it was pensions and you were depending on the Company Rather than to 401 k s. Which was supposed to be supplemented. I feel much better im in control of my money than some corporation that will go bust 20 years from now. I get shoved into the Government Programs which means everything i thought i would get from a pension isnt there, much lower. So i much rather depend on myself. I got the psychology of it. The thing you have to ask yourself are you a professional retirement planner. Im in favor of having more individual control but that subject to getting good objective advice. It also ultimately its my money, right as opposed to when its in a pension fund maybe its not my money down the road. Fully agreed its your money but then you have to have the wherewithal with good advice to manage it smoothly over time. What happens with people they get excited about the size of the asset pool. They dont think about the deaccumulation. This is where the word annuities come in to play. Not normally a positive word for most people but, in fact, annuititization is an important part of creating a safe retirement. Its a much more complicated story. The reason a lot of people dont like aannuities is because of fees. Were a large annuity writer. Low fees. No hidden guarantees that are like try to be bad when the future unfolds. So we just done a survey of 1600 of our participants, 93 are blaesd their retirement and vast majority have chosen an annuity option. The validation is there if the model is correct. You know, were well aware of whats happened to savers based on the zero, okay. And i mean thats a problem. And a lot of that money, which would have been ma and pa out in the country has been used to bolster banks Balance Sheets. Its not fair and something that maybe was necessary and not an intended consequence. What about the notion that its pushed out corporations on the risk curve as well. And caused them to delay Capital Investments and instead has caused the home buy back stock and do all kinds of Financial Engineering which is responsible for the sub 1 growth well get in this quarter. Low Interest Rates are always the transmission mechanism is through people taking more risk in some sense, seeking greater return. Thats the theory of why Interest Rates are low. You want people to go out and take more risk, you want people to make bigger investments. On the other hand all of the concerns and the boardroom at the ceo desk are all driven by these low Interest Rates. Some of it has to do with are we actually going to get a return on investments. We have a low growth economy right now. Is that exciting for a business person. I think if youre confronting the possibility of call it 2 to 3 growth rate in the u. S. And maybe Slower Growth rate overseas as a ceo youre uncertain what to do with the cap x and face the short term that faces in society where they want to see shareholders grow every quarter. You get in a buy back mode. When stocks are already, have been lifted artificially high and you ramp up your buy backs, the stocks go down. Youre seeing it right now. Thats what i mean. Some mergers that shouldnt have been done at those valuations. This is always the risks when you have low Interest Rates. Hindsight, in future transactions that should not have happened. Can you tell your clients to go over to europe and just take out a bunch of mortgages and get paid for borrowing money . Thats how crazy the world is. They are paying people. Were telling our clients stick with your plan, maybe adjust a little bit if your risk profile slightly different. Were saying something important to them as well which is you want to every once in a while, you want to go back and rebalance your portfolio because youll see something that ran ahead and maybe its not consistent with your risk appetite. Thank you. We will put the song in our play list. Walks in a room and plan it all the time. Everyone should have a theme song and now i have one. Maybe you should get a royalty on that. Coming up celebrating the Colorful Life of ben bemosche. The author who happens to be ben bemosches son. Box will be right back. Welcome back to squawk box. In august of 2009 bob bemosche former ceo of met life came out of retirement to become the ceo of aig. One of the most dramatic comebacks as he led aig to replay 142 billion in bail out funds. He passed away from lung cancer in february of last year. He has a new memoir out. Its out today. Joining us now is the son of the late ben bemosche. Were thrilled to have you here. Nice to be here. Let me put it this way. When you look at what your dad did in the last couple of years, did you think he could turn around and you just reminded me during the commercial break, we met back in 2011. July of 11. I said they would never pay their money back. I thank you for the write up you did in 2010. You called him ceo of the year. That was right after he was diagnosed with cancer and he was feeling a little down about what was happening with him. And i thanked you for that. You said hes done a terrific job but i still dont think they will get there. And they did. My question was not right away but now that were on the subject but whether the mainstream medias take on the entire process and taints on aig whether it was the stupid sales job meeting in la jolla. At the saints regis. At the st. Regis. He seemed to not even stay on the tore period dose. He didnt care what people said. He was going pay his people. Everybody wanted 85,000 was going be the maximum for these guys sifting through this stuff. He just didnt care. But did it ever bother him . I think he wasnt going to be captive by it. Bernie sanders right now would be going wild on him if it was the same period in time, you would be hearing bernies stump speech about all the crooks at aig. The irony is those qualities that made him such a polarizing figure were the exact qualities that really made this turn around possible and had the people of aig rally behind him. My dad was saying it will be the world versus aig, bob against the world. But even at home same thing. What we saw out here in the public was the same thing at home . Same thing at home. He was honest with us. He was authentic with us. He was transparent with us. And he was family man. Family was important to him. What would he have thought of this met life decision the met life decision no longer too big to fail. We dont know exactly whats going to happen and, you know, thats always been in flux. You think the decision will come back. No im saying we dont know what will happen. What if he as a met life guy and very happy they sued government and won of course. Thats what i would have assumed. He always believed in regulation. He thought regulation was necessary. Depends on what the rules are. I also remember talking to him and i dont want to speak out of turn here but about the greenburg lawsuit and Everything Else. He couldnt possibly give an endorsement to that but then again he didnt totally think that it was insane either. He thought the government had overstepped its bounds, by the way that happened, right . He said that greenburg had a very good case. It wasnt at the time he said it wasnt in aigs best interest. If you recall the judge, a judge ordered aig to take a careful view at what of what the case actually was and make a judgment call on it. But he said, interesting privately he said to me that hank has a very good case but its what are the damages. He was wrong. He was off by a dollar on what hafr hank was going to get. Was he writing this towards the end . How did this book come about since its his memoir. He work opened this book for a were up until the weekend before his death. Knowing he was thats my question. Ill give you a little history. In 2010 in october of 2010 he was given nine to 12 months to live. If treatment didnt work. So he found treatment that worked and lo and behold five years later you know is when he lost his battle. But it was always the clock got reset to that nine to 12 months once the medication stopped working and he didnt realize that until, until, now that i think about it, february. Did he ever think about not working, stopping . He always believed that people need to work to stay healthy. And he was just going be another maybe do a real estate deal with me or something less in the public eye but he was always going doing something. Dename names. Take any shots at politicians that were particularly just stupid and wrong minded, misguided . I think he was outspoken. In the book. He didnt name names. He does. Theres a great scene, the boardroom scene possibly the best scene where he almost resigns, hes ready to resign. Amazing scene. You thinking movie already. No. Someone should make a movie about his life. At least write a book. Have a couple of scenes very visionary back in 2000. To buy a place. Yeah. Did you know game of thrones was coming . A communist country . Not any more, obviously. Its gorgeous. Its gorgeous. New rivera. The book is called good for the money. Great title. He really was good for the money. Is that the only time youve been wrong in one of your columns. No, ive been wrong a lot. I wanted to hear that. Wrong a lot. Save the tape. Never in doubt. Coming up stocks to watch at the top of the hour. The president of the dallas fed Robert Kaplan is joined by Steve Liesman for an exclusive interview and his you thoughts on fed policy, rate hike timing and much, much more. Squawk box will be right back. How will you keep up with the new demands of todays Digital Economy . The fact is some believe they wont need a Traditional Bank down the road, so at cognizant, were helping banking and Financial Services Companies Think digital, be untraditional, and reimagine what the bank of the future can be. Our clients can now leverage customer intelligence to predict their financial needs and provide more contextualized products and services. Were creating new platforms across channels so customers can effortlessly invest, borrow, lend, transactwhereverwhenever they choose. And were digitizing the way banks run, driving efficiencies and delivering new value for their customers in return. Digital works for banking and Financial Services. Lets talk about how digital works for your business. 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Built for business. Lets take a look at a couple of stocks to watch. Starbucks was downgraded to hold from buy at deutsche bank. Shares carry a premium valuation and Investor Expectations may be too optimistic. Juniper Networks Expects to report First Quarter earnings of 35 to 37 cents a share well below street estimates. Maker of networking gear says weak corporate demand is impacts its results. Shares of abbvie are higher. They received accelerated approval for a new leukemia treatment. A cnbc sbf. Robert kaplan will be our very special guest. Well ask him about fed rate hike timing and his expectations for Economic Growth this year and much more. Then later for the love of beer, sam adams founder will talk about business lessons learned, the craft brew craze and the challenge of building a Small Business. Another hour of squawk box when we return. Which allergy . Eees. Bees . Eese. Trees . Eese. Xerox helps hospitals use Electronic Health records so doctors provide more personalized care. Cheese . Cheese patient care can work better. With xerox. Thats it. How was your commute . Good. Yours . Good. Xerox real time analytics make transit systems run more smoothly. And morning chitchat. Less interesting. Transportation can work better. With xerox. A cnbc exclusive. Dallas fed president rob kaplan speaks out in his First Television interview since joining the central bank. Market alert oil hitting its 2016 high on hopes of action by the worlds Biggest Energy producer. A wizardry world. Why Intelligence Agency calls harry potter, high spy. The final of squawk box begins right now. The stars at night are big and bright deep in the heart of texas end. Announcer live from the most powerful city in new york, this is squawk box. Welcome back to squawk box here on cnbc. First in business worldwide. Im joe kernen along with soandw ross sorkin and michelle carusocabrera. Were less than 90 minutes away from the opening bell on wall street. Futures back up to 34. Up 60, up 20 now 35. S p up 11. 5. Im sorry. The s p up five, the nasdaq up 11. 5. Markets in europe were around the flat line, except for spain up half a percentage point. Oil prices rising on hopes of an output freeze. Opec members and other outside members including russia are meeting in doha. Earning seasons officially opened. Mixed results for a metal company, alcoa beating the street by a nickel. Results were hurt by low commodity prices, strong u. S. Dollar and plants closures. Alcoa lowering its full year outlook in the Aerospace Industry and announcing plans to cut up to 2,000 jobs. Those results came out late because of a snafu with Business Wire. Small Business Confidence dropping to a two year low monthly index from the National Federation of independent business fell. 3 of a point for march. Few stocks on the move. Juniper networks warning quarterly revenues will fall short. Among the reasons weak corporate demand. Abbvie receiving accelerated fda approval tore new treatment for patients with chronic leukemia. United continental will strike a deal. A deal would include more new directors for the Airlines Board as well as the possibility of an independent chair hahn. Costco is telling shareholders to reject an offer to buy up 1 million shares of the warehouse retailer at 149. 50. Watching shares of legg mason. Activist investor is holding its investment in the group. The stake represents a 9. 9 of legg masons outstanding common shares. Now to our news maker of the morning, lease is at the Federal Reserve bank in dallas and he has a very special guest with him. Steve. Reporter good morning, andrew. I ham here in the great state of texas with the new dallas Federal Reserve Bank President Robert Kaplan. Mr. Kaplan, thank you for joining us this morning. Thank you. Welcome to texas. Reporter lets start off with the National Stories and theres a lot of stories we want to get to here in texas as well. Gdp in the First Quarter has come down. Its crashed people say from a 2. 3 on our average to down just half a point. How much concern do you have right now that the u. S. Economy is decelerating. We had other years where First Quarter gdp was week. Our own forecast is still that gdp growth will be a little under 2 for the year and the reason we think that is we still think the consumer will remain strong this year, job market is strong and so time will tell. Well have to see more data. I want to see more data because First Quarter is very mediocre. But we still believe that the under pinnings for solid growth are there and so thats what i aspect to see. I just now want to see it. Reporter are you chalking this up to seasonal factors rather than real economic softness . Some of it may be seasonal but ill say this. A lot of people have written off maybe too quickly the financial turmoil in january and february. I think myself probably had some psychological impact on consumers. If you turn on the tv and see market falling and financial conditions are weaker may have a psychological effect. Reporter lets talk about the path for rates. Federal reserve raised rates in december. Was that a mistake . No, i dont think it was a mistake. Reporter you havent followed it up . Listen its not a mistake. Path to normalizing rates was never going to be easy. One reason why i took this job and came to fed the next five years will be as complicated as the last five or ten years. Theres lots of reasons for that. Slowing Global Growth. Ageing population in the United States in advanced economies. High level of debt in all advanced economies. So the move in december i think was the right move but i think we have to be slow and patient. Done mean standing still. And i think well make another move sometime in the not too distant future if gdp recovers in the way i expect. But i think people should expect its going to be a slow patient gradual normalization and so, no, i dont think december is a mistake. Reporter the market at some point the written off rate hikes this year. Was that the right call having been in the markets for the last 30 years, markets can change on a dime. Sentiments can change on a dime. Youll see markets change again. Was at any time right call . The market makes a call every day, every nanosecond. I look what the Market Expectations are but i wouldnt overread it or overreact to it. You have a situation right now where two other big Central Banks in the world have negative Interest Rates. How much does that hafmper the ability of the Federal Reserve to raise Interest Rates. Its something we have to be aware of it. We have situation where growth outside of the United States is slowing and we got a situation where a strong dollar great some head wind for our manufacturers. Helps our consumer but creates some head wind. We just have to be aware of it and excessive divergence will create some destabilizes forces potentially on countries like china and we saw that in january and february. I think we have to be aware of it. Should it keep us from no normalizing. Its something to be aware of. Reporter is there a limit how far the fed can go positive if everybody else is negative . I think its a factor. Sure, its a factor. I think were just going to have to be very cognizant of whats going on, underlying economies outside of the u. S. Thats causing the Central Banks to be as accommodative as they are. Were not an island. And slowing Global Growth and also strong divergence has some effect on us and we have to take into account. Which is why janet yellen has said and i agree with what she has said. Reporter my colleague joe kernen has a question back from new york. We hope to see you a lot, sir, and we appreciate it. Its interesting that a lot of people, some of the same people that said the fed missed its opportunity a couple of years ago, they take issue with the rate increase that the fed then orchestrated. Its like oh, you shown have done it but actually you missed your chance. You should have done it a couple of years ago. I dont know how that works. I dont know if you agree with that. Number two whats happened with the dollar even though you did the increase or your predecessors did you did the increase and now 114 on the euro, the yen is stronger. Maybe this is another window where you dont have to worry so much about Dollar Strength for whatever reason and you shouldnt miss this window to get another quarter or two in. Well i would say say the following. First of all part of the job yes there will always be people that have different points of view. Our time frame is a little longer than a week or a month or a quarter. And so when you look overall longer horizon, what were trying to do is get ourselves to more normal level of rates. Theres a cost to accomodation. It hurts saver and asset allocation. We have to take into account all the data and whats going on around the world as well as here. We have to move patiently and do it in a thoughtful way. Do you think theres a better time a couple of a years ago when the economy was stronger and missed the opportunity to get back to maybe 1 . So, im a business person. Ive been in the markets. I was in the markets in those years. I can tell you as i recall even two years ago i wasnt at the fed but the fact is there were periods also in the last years, people were questioning strength of gdp, Unemployment Rate was higher. We are closer now to full employment than we were. And so i think id say i was part of the decision in december. I think the fed has handled this the last couple of years in about the right way, in my view. Its michele here. Thanks for coming on. When you look at collectively the actions of the central bank in the world is it working . Is it working . Heres the issue. Weve had seven or eight years where the primary actions have been monetary. We havent had fiscal policy of any significant for many years. Almost to the points where we think Monetary Policy is supposed to address all the issues we face. The big issues that are going on in japan, in europe and some of our big challenges in the United States cannot they can be helped by Monetary Policy but they are structural. Ageing demographics, high level of debt to gdp, other issues that can primarily be addressed through structural changes, including fiscal policy and so i think these lower rates around the world and the actions of some of the Central Banks s bu these countries time but they have to address the structural issues. They are not going to. Were getting to a point here in order to help improve potential gdp, were going to have to have other actions other than just Monetary Policy. Reporter the other actions going the other way when you look at the political level right now for things like free trade. Yeah. Reporter how do you feel about that. Youre in a state that has probably benefitted more than almost any other state in the union. From migration. Reporter from migration and from free trade. Thats correct. Reporter first question. How do you feel somebody proposing a wall along the border of your district. One of the key aspects of my job and i feel strongly about this is to describe the underlying conditions and describe the economy and describe the challenges we face. And i wont get i will not get into the political discuss but ill say this. I would like to see us in this country and around the world have a discussion that addresses the big issues and the big issues are ageing demographic, which is lowering Labor Participation and thats going to continue, by the way for the next number of years. Thats the same trend in all advanced economies. High levels of debt to gdp including here. Take into account entitlements. These issues need to be addressed. Monetary policy cant address all of them but i certainly can in my job talk about these issues and call attention them so as a country we do focus on it. Does that mean you like the idea of a wall or dont like the idea of a wall . Ill stay away from getting in the middle of the political discussion. I think one of the keys to this country and why weve been so successful decade after decade sim integration. My grandparents were not born here. Many leaders i know are either first or second or Third Generation americans. Immigration has been a key to this country. We have to find a sensible way to address it as well as investing in education, infrastructure, and other key aspects that have made this country a great country. Reporter youve agreed to hang around through the break. Yes. Reporter do you mind, andrew for your question until after the break or ask it now . Ill be very patient. I will wait until after the break. Reporter youre a patient man. Great conversation. Reporter will you toss to break or should i toss break here from texas. Ill briefly toss to break and come back and hopefully ill get my question out to rob kaplan. Check out the u. S. Equity futures. Were up by 31 points. Dow was higher before. Back in a moment. Index was created over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. We believe in the power of active management. Anagement, we actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. Welcome back to squawk box. Our news make they are morning is dallas fed president rob kaplan and i have patiently waited. So heres my question for you, mr. Kaplan. Im hoping you will opine a little bit on what you see Neel Kashkari doing when it comes to this idea of too big to fail and at least it looks like he would like to break up the banks. I wanted to find out where you stand on that. My view is the following. I look at capital liquidity and interconnectedness between Financial Institutions and in that regard i dont think i think too big to fail is something we need to watch. But i think weve made excellent progress over the last seven years in deleveraging the banks, making them more liquid and reducing the interconnectedness. I dont think too big to fail is the biggest issue. The market might over the next few years take its own actions with companies to make these banks smaller, but i think of the issues i see out there that are systemic, breaking up the big banks is not high on my list. Im much more worried today about Systemic Risk that comes from the shadow system and i just remind people even in 2008 some of the worst practices, aig, countrywide, the broker Dealer Community which were not banks were a big part of the problem and ironically a couple of big banks, jpmorgan and wells fargo, for example were asked by the government to participate in shoring up the nonbank financials which had the worst practices. So it is not a high priority for me in terms of Systemic Risk. Talking about nonbanks, your view on the met life decision that the judge just came out with, effectively up ending what fsoc which the Federal Reserve is part of designating that institution too big to fail institution systematically important . You know, ill stay away from the merits prone kind of decision. Ill talk about why its important to designate some institutions as systematically important. Its because you want to make sure they have an extra layer of capital liquidity and you want to make sure that we dont have the Counter Party risk that we had that created such a problem in 08. I agree with the effort and any specific one ill avoid comment on but i think the effort to designate sefis is the right policy. Reporter another big banking issue is whats happening with energy loans and theres a story today in the paper that says theres 147 billion of unfunded loans, companies in trouble, essentially drawing down credit lines. How much concern do you as a Bank Supervisor see among the banks here in your district in terms of potential losses coming from energy loans we watch this as you can imagine very, very carefully and we watch the related areas of commercial real estate areas. There will be losses. But by and large bank loans are senior secured at least among Small Midsize banks. Among bigger banks they often are associated with bigger leverage transactions. So i think youll see more reserves. You already have. I dont think this will be a systemic issue. Just see banks lose some money on this. But the banks in this region, for example, we think are handling this reasonably well. There are some issues that wont create a systemic issue. Reporter what about high wreeld debt and energy. Thats a bigger question for me. That goes back to the shadow system. We have a meaningful percentage of high yield issuance or material was for energy. And so high yield bonds today are held in mutual fund and etf form primarily. Those funds offer daily liquidity. What happens when energy is weak you may not be able to sell your energy bond but you can sell every other bond you can to meet redemptions. I worry about the instability that creates. I would like to see in the nonbank financial area the mutual funds have more liquidity because i think theres a mismatch between offering daily liquidity in a mutual fund or etf and the fact you cant sell a high yield bond in some cases over many weeks or significant spe period of time. Theres a mismatch there. Im glad the fcc and fsoc is focused on that because i think thats a potential exposure. Mr. Kaplan, ill channel your predecessor just briefly, richard fisher, who by the way, after cutting his teeth at the dallas fed he was offered a cnbc contributor position. So just might want to keep that in the back of your mind. But he always talked about the fed being put into this unenviable position by the gridlock in congress and things he would have liked to have done there cause the foed have to be the only game in town. Theres another school of thought that says, already, the world had been very slow we cant expect to have done better. Richard always thought that some of this was selfinflicted and theres a new thought that maybe the entire world, instead of saying the world hasnt grown so we hadnt. Maybe if we led and were at 3 or 4 after this deep recession maybe the rest of the world would be at 1 or 2 like they used to be. So maybe we are the dog and just didnt wag the tail because of selfinflicted policy mistakes. Yes. Ive gotten to know richard very well and think very highly of him. Hes done a great job and bean great adviser to me. My view is this. I agree with the point of view that Monetary Policy is not the be all end all. It was never designed to act alone. It can have a positive effect on certain things. But not a substitute for fiscal policy, regulatory policy and other government actions. Thats the case. Youll hear me talk about that. Ive been talking about that. Part of my role is to continue to talk about that. In terms of the natural rate being a lot higher, the one caution i give, and ive been in the markets for a long time, the world has changed a lot over the last ten years. Even since 2007. Advanced economies again have gotten older. U. S. Working forces getting older, means the Participation Rate all things be equal is lower. This is true in every advanced economy. Advanced economies have gotten more leveraged in the last eight or nine years. The household sect josh has deleveraged. Overall deleverage debt to gdp ratio including china has gotten worse. The world has become more globalized and weve got now Slower Growth outside the u. S. And i think china will be slower for an extended period of time. Why do i mention those factors . It means potential gdp has got a head wind and is going to be all things being equal lower natural rate of i want will be lower. I want helps explain why the fed, for example, has moved more slowly, has stayed lower for longer than people might have expected. Its because the world has changed. The natural rate ten years ago might have bean couple of hundred points higher, but the secular changes, i think, have made the natural rate somewhat lower and thats why youre seeing a rate that tom people feels by history vickal standards unusually low. I think thats a fact of life. Theres a lot of talk about whether or not there are things that can to be done on the fiscal side. Yeah. To make things better. One of the things talked about right now is this issue of inversions. We have corporations are essentially fleeing a high tax rate in the United States. What is your opinion of what can to be done on that level to fix the problem of companies . Goldman sachs international. I think the tax code in the United States needs to be updated, modernized to take into account the fact that our companies are much more global than even they were ten years ago and i think one of the reasons youre seeing this trend of Companies Looking more at taxation, when Revenue Growth and margin growth are harder to come by people look at every possible cost aspect they can improve and thats the reason they are now looking more at taxes. So i understand why the treasure swri did what it did but i dont think its a substitute and they would say its not a substitute for more comprehensive reform which takes into account that our companies derived much more revenues and profits from outside the United States. Michele . I was going to ask about the fine against Goldman Sachs and how you view it and what you think is the state of fines against the Banking System . We hear some politicians want to fund the state through bank fines so doesnt sound like they want them to come to an end. Where are we in that cycle, do you think . I dont know where we are in that cycle. I wont comment on any one firm. Ill talk about fines and regulation. Id say the banks over the last ten years maybe got away from some practices that helped them become great firms. In particular focus on clients, serving clients interest, suitability issues and i think these fines are in many cases are coming as a result of that. And i think youre seeing the banks being much tougher in terms of their own compliance standards, beefing up their compliance and i think thats a good thing. Also renewed focus on serving the client and make being sure that what they do is suitable for a client. I think all those trends are positive. Im afraid thats all the time we have even though i have a bunch more questions. Join us in new york. Joe has invited you and apparently you passed the audition on potentially being a cnbc contributor, which is a higher level thank you. Thanks steve for being here and look forward to seeing you again. Very good first step. You are the arbiter. Yes. We appreciate it. In the meantime when we return we have breaking Economic News import prices is minutes away and a programming note because on friday you dont want tonis. Senator ted cruz will be live right here on squawk box. Hell join us on set for an hour. Starting at 8 00 eastern time. Nothing is off limits. Beautiful. Breaking Economic News. Were seconds away from import prices. Futures right now have been higher throughout the morning. Not as high as they were earlier but they suggest a positive open. Ten year note that hour ahead of this data coming out, 1. 7. Thats where we stand 1. 75 . Rick santelli is standing by at the cme in chicago and were a few seconds away from the numbers. Rick . Reporter import prices of course, are important. One other thing to mention, today may not be the eighth day of a higher yen lower dollar at least the way its currently set up. Losing a little bit of ground today. Here we go. Import prices month over month expected to be up 1 . Were only up. 2 of 1 . In our last month revised lower from down three to now down. 4. Thats month mover. You want to take a look at it yearoveryear. Were expecting a number closer to down five. This was down 6. 2 . Last month also a bigger minus revision from minus 6. 1 to minus 6. 5. Month over month prices were up less than expected. They were down more than expected on a yearoveryear. The aftermath of that not a lot of change. Still around 1. 75 which is a bit of a high side. Yesterday we were challenging close to 1. 75. Best way to look at this all time low yield for 2016 anyway is 1. 66 from second week of february. Thats a good benchmark to Pay Attention to and, of course, throughout the day well be monitoring the Foreign Exchange side of this. As counter intuitive its the best since october of 2014. So weird. Kuroda cant get out of his own way. Reporter i want gives us a case study. I think that theres an important lesson in this to monitor the yen and look at the confusion in the faces of those monetary personnel in japan that are scratching their heads at the recent strain. Thank you, rick. The call to break up the banks has been Bernie Sanders rallying cry, one of them. But many are questioning how sanners would actually go about enacting his policies including bernie, i think has a few questions about that too. After a daily news interview seemed to catch sanders offguard on the logistics. Former white house chief economist tweeting if main policy is to break up banks regulate wall street how can you not even know whats legal or what regulators do. Sanders interview is disturbing. Austan goolsbee joins us now. Is that the first thing that bernie has said to you that you find a little bit disturbing. How about starting to think that socialism is a better Economic System than capitalism. Did that occur to you . I agree with that. Lets go back lets roll back the tape about disturbing. Did joe not just try to offer a Government Official at a said bank a job . Has he been watching billions . Is that the plot lines of billions . Thats highly illegal. You got me. You got me. In fact, here i said it you cut your teeth at the dallas fed. Now you can become you know that was a joke. I wasnt serious. All right, good. The thing is with the bernie interview, i should say with senator sanders interview the thing that i thought was problematic look weve been back and forth about this issue if you say break up the banks what does that mean as regards the shadow banks, youre looking at mutual funds, hedge funds, insurance companies, all of which were central to the financial crisis. Anesthesthese shadow banks. In that interview they asked him what do you think about the met life decision and he basically says yeah i havent looked at it. I dont know anything about it. Whoa. I mean you cant really answer this question unless you think about the whole Financial Sector not just those commercial banks. Watching the world as it has happened over the past year or so, i would feel like were like buddies. Oh, no, i got to rethink my whole approach. You saying you agree you were in administration thats pushing tpp and fair trade. Yeah. Its all relative in the universe if a body is moving. You dont know if Everything Else is moving or youre moving. At this point suddenly you end up and all your friend in this administration are looking reasonable compared to Bernie Sanders. I told you that i thought it would take obama leaving office that soon after that you would be saying that he was a good president. But its already started. I appreciate that you have come around and recognizing that. I just didnt know that a mainstream politician could move left of the president on a lot of these issues. I didnt know that was only the republican candidate. As you know i complain about a lot of things. The thing i complain about lately theres all this discussion about whats going on in the Republican Party but i would point out many, many republicans have disavowed donald trump but on the democratic side, i havent heard a single democrat come forward and say hold on folks were not socialists, socialism doesnt work. Weve learn that. Whats going on . Look i said that and you saw Hillary Clinton saying that she has she ever uttered the word social jim. She said im not sure hes a demonstrate, he democratic, hes not a democratic hes a socialist. Were not going socialist. How do you feel about the fact that a socialist is doing so well among democratic voters . And young people. University of chicago. This is your fault. Whats going on with our kids . Whose educating our millennials . Im educating our nba students and they are still doing well. How do you feel about the fact that socialism is getting a big play . Im an economics professor. Im not a fan of socialism. I dont think thats the right rochester. I do think there are issues that sanders has raised that i agree with. So the issues of College Affordability is a big deal and i think the more we go that well cut Financial Aid and make it harder for people to go college in the long run i think the growth rate will suffer. Im not for socialism. Ive said that all along. What is the mystery about it . I dont know. Ive heard the president say you can pick the good parts of one of capitalism, the good parts of communism, put them all together ive been quiet the whole time. I can defend this if you want. The basic question of how you divide a nations resources. Young kids come in the moves, its like the questions never been posed to them even though that is the great economic battle we fought starting in 1917. You guys are trying to change the subject of what the leading republican candidates are saying. Youre having ted cruz in your office. You should ask him why die used to beat up on him so much in college. You got both republicans espousing pretty extreme views and one is like try to be the nominee. Bernie sanders will not be the nominee. Ill make it more complicated. Play the hypothetical with me. If it became bernie and ted cruz or bernie and trump what do you do . Oh, man. I would definitely vote for bernie. Would you . I would still object. Man. Were not buddies, all right then. Never mind. Hes already said that deportation thing is a negotiating tactic. Hes not against immigration, hes against illegal immigration. Hes not against anything, thats the point. Okay. You guys got to be youre on a college campus. You are not going to want to have said at any point in your life that you were for him because im not going to automatically like Richard Nixon when they asked Richard Nixon who voted for him only 15 of people voted for him. I liked tricky dick. Number two im not willing to disenfranchise our republican viewers and say they are so stupid for backing this guy. Thats not my place. I want to apologize to you for the micro aggression i saw michele les levy at you. I know youre at a college. If you need counselling ill pay for it. Ive always bean michele fan. Thank you. Save face. You wont see trump scrawled around here. You debated ted cruz . Yeah. All the time. Wow. Whats the big question. If youre not going to be here on friday whats the big question you would ask cruz . What i would ask cruz . Im telling you. Asked him who used to win our debate. Thats because youre a master debater. Thats a cop out. We got to go. Coming up on friday dont miss this senator ted cruz live right here on squawk box will join us for an hour. Got a lot of questions for him starting at 8 00 eastern. Squawk box will return in just a moment. Actions speak louder. Something well show you. Through small things, big things, and spur of the moment things. Coming up, craft brewers getting a boost but as a bubble brewing in brewing. Jim koch will join us in a second talking about his new book. Hes opening beers right now. We cant drink we can drink just before noon like hoda. After the break. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Welcome back to box. Craft brewing seeing a 13 increase in volume in 2015, the eighth Consecutive Year of double digit growth now representing 12 of the total beer market and it all started with founding father of craft beer sam adams joining us right now is jim koch the founder of the boston bear company and author of new book quench your own thirst. You brought us more than a beer or two. You brought a beer of three. Im a brewer. What did you bring us . I brought you sam adams summer ale. This is a wheat beer. My favorites. Its little crisp. Lemon zest and historic brewing spice. This is breakfast. I want to get into this interview. You brought us cans. Whats that . This is a new very innovative beer we came without. Sam adams nitro project. You got to pour it immediately. You can see its coming out. And because it has nitrogen instead of Carbon Dioxide youll get this amazing cass said. See that swirl and bubls going down. So this will make a much smoother not with a nitro beer. This is a whole new approach to beer. Bubls going down. You want all of that foam. So it doesnt spill over the top. No it will form a dense creamy head. Its good for you. Youre allowed to drink any to again. Shul. Does it cause Climate Change . No. So, jim whats amazing about this book its an unconventional book you talk about a lot about your mistakes. People talk about their mistakes but they are usually fake mistakes. One reason that it put in the mistakes is because thats really where a lot of your learning is and you know its a book about my 32 years starting sam adams in my kitchen and then growing it and growing this whole craft beer revolution. Its beer. Well have screw ups. Not everything goes what was the biggest screw up . One of my earliest ones when i got this an oedipus complex. I wanted to build this big brewerry in boston before we were ready for it. I did the engineering. Had the equipment. Final bids came in at 15 million. It would have jeopardized the company. I had to step back. I wrote off 2 million. When i did that i realized thats more money i earned my whole life. Economically im net negative. We have a lot of craft brew guys that come on the show. When we mention your name or sam adams name you can tell sort of like look that comes across their face yes you were an innovator and innovated this industry but youre no longer a craft beer. What do you think of that. Youre so big completely different business. No. I mean ive been doing this for 32 years. I can tell you its the same base and one of the things i think thats made sam adams so successful is as weve grown weve kept the same passion and pride and culture. But you wanted size and scale where some of these other guys they sort of talk about wanting to be tiny. Im just throwing it out there. When i started sam adams my original Business Plan its smoother. Its demonstration of, you know, as weve grown weve succeeded by making great beer that people want to drink. So why would i want to stop making great beer that people are going to want to drink and enjoy and as weve enjoy . As weve grown and become successful, weve made that. What do you think about the biggies . Theyre enormous. All craft brewers together, as you mentioned tlsh tl theres of us, were 10 , 12 of the market. 90 of the beer made in the United States today is made by just two big foreign owned conglomerates. What happens if one of those guys call you . I assume they must. They used to. After theyve been told no, they stopped calling. This is so interesting. Its so dense. Yeah. Its smooth. Yeah. You dont get that tongue sting and the acidity from the Carbon Dioxide. Does it have to be in a can . Yes. I always associated cheap beer with canned beer. Thats an old mentality this is a unique can, we bring them in from england. If i tore this open, you would see in the bottom of this can, a widget thing that is a capsule containing nitrogen. Dont hurt yourself. Doesnt guinness have Something Like this . See at the bottom of the can . Now im making a mess. Can you see that there . Isnt there a capsule in the guinness can . Guinness has one that floats around. Nobody has done this with a white ale or ipa. Thats been the reason for sam adams success. Weve always been passionate. Thank you. Thanks for coming. Good luck with your book sales. May it be as good as your beer sales. Jim cramer will join us from the new york stock exchange. Lets get down to the new york stock exchange. Jim cramer joins us now. Jimmy, if i had a sip of beer thats all i need in the morning. Im like right . What is it . I cant do it. I dont really understand the convention of why beer is something that should happen later in the day. What is it with o. J. In the morning and beer just flip that. Maybe put some vodka in the oj. Constellation brands is another outfit i like. Craft beer, i know you guy may like the density of beer. If i want cheerios, ill have those in the morning. Thats a can of cheerios. Youre right. Am i wrong . Did you try this new nitro thing . Its impressive. Its so smooth. All the bubbles are gone. I have a degree in pouring from guinness when i went to dublin. I dont i dont want to tarnish that diploma. That was a hardfought degree. I was magna. Jim, if you could pick one group that we should Pay Attention to over the next month with earnings, what would it be to let us know whats going on . I would say technology. I think that Technology May surprise. The dollar, you know, a lot of these companies have a huge business overseas. If any of these cfos want to say i listened to you guys about the yen. The euro seems to be stronger. It would be something for a lot of these technology guys who have about 55 of the business oversees to say, you know what . Year over year comparisons will be better. Im thinking about ibm, intel. Thats the group im watching. Everybody has written that group off. I think well see upside surprises from tech, not from the banks. Wow, the banks. Great, thanks, jim. All right. Have a beer on me. Will do. Coming up, why a uk Intelligence Agency called harry potters publisher. Well be right back. [engine revs] [engine revving] the allnew audi a4 is here. The publisher of the Harry Potter Series reveals a uk Intelligence Agency called to flag a possible leak of the sixth book. The british surveillance and Security Service saw an early copy on the internet. It turns out it was a false alarm. The page was fake. Nice to know our spying agencies are doing such a good job. Thank you. Thank you for being here. Nice to have someone who wants to be here with us. I like it. Join us tomorrow. Squawk on the street is next. Good tuesday morning. Welcome to squawk on the street, im Carl Quintanilla with jim cramer, david faber at the new york stock exchange. Stocks trying to find their legs after yesterdays downside reversal. Only the dow remains positive for the year. As we open earnings season with alcoa and csx tonight. Uk inflation firmer than expected