Transcripts For CNBC Squawk Box 20160518

Out, you can see that japan, the nikkei was flat, too. The hang seng and shanghai deposit down, too. Japan, the flat market there, japan avoiding a recession in the First Quarter gdp expanding by an annualized 1. 7 . Much more than a 0. 2 increase forecasters had predicted. Take a look at whats happening in european equities, the modest dines for the dax, cac, ftse. Down by 0. 25 . Take a look at crude oil price this morning, kruld is unchanged got all the way up to 48. 31. Brent crude is down six cents to 41. 42. Finally check out currency, across the board after comments from fed officials making it sound like june is actually a live meeting. Well debate this. The euro is at 1. 1266. The yen at 109. 41. Weve got top stories including political news, Bernie Sanders winning the oregon prime but nbc news is reporting that Hillary Clinton is the winner in kentucky. 99 tallied. Shes now within 100 of the delegates needed to clinch the democratic nomination. Goldman sachs downgraded its equities in europe and japan. Overall, goldman saying it prefers credit to equities, as valuation is not a stretch. The note citing that the feds less aggressive tone is one of the reasons for upside in the u. S. And calls to offer a more upbeat view on commodities. Saying that the fed southwest chinese data should support oil prices in the next three months. Joseph. No, negative Interest Rates in a third. World, a flat yield curve here but credit is not stretched. What would constitute stretched valuations at that point . If youre actually negative ive been reading a lot of stuff on the effects of negative Interest Rates. It is say bizarre upside down situation. And its hard for us to do the right things in this country when parts of the world are like that. Because its much more painful. Which is why we have this fiveyear yield curve now. Its distorted people are still buying over here what happened with yields yesterday. 1. 75 or Something Like that. But thats attractive 1. 786 . Yeah, luyou look at germany or y other places. A much bigger return. So, the market, we made some ground up on monday. But then just the notion that, again, some day we might raise rates. Some day in the future. Now, maybe its june. Immediately traders negotiation, oh, yeah. Its like, are we in this permanent place where the only thing we like, rates coming down, i understand. Weve talking about a oneday reaction. But somehow, weve got to go back up some day. Do the markets selloff every time. Goldman put out something saying for the next 12 months, you might as well not put in any money. Its knee jerk. Its japan. But people told us if it goes up for the right reason, then well be able they were wrong. If we continue to get good numbers, thats the difference. The question is because the rest of the world is doing so well, do they drag us down . Is this sexy . I mean, its hard to make Business News sexy. Yeah. Youre off the table. Right . I mean for anybody who missed it right, yeah. Although, you know, pregnant women are sexy. You got to say it or else you get in trouble. You got to say they glow. Thank you for the compliment. I think if people are endearing of pregnant women, theyve got a problem, right . I mean, its like some kind of now, youre starting to sound a little they have places like destination this sparkling moment has been brought to you by joe kernin. I think theyre beautiful and motherly. Thank you. And Everything Else. You just dont think were hot . We i dont think anyones supposed to think that. Be careful. I watched you come in this morning, that guy was holding the door for you. You were going to hold it for me im like, no, let it shut. Go sit down. Anyway. And when you get close you know when you do get were switching seats. Last time i was pregnant, joe would show me video during the show of aliens with the alien popping out of the stomach. Its something alive. You. You see the elbows and feet. I was threatening him that i was going to have my water break on set. By the way, i was on the air until the day before i went to the hospital. Now, its uncomfortable. We brought sexy back. Home improvement retailer lowes anyway, actually talking to analysts, 98 cents a share, 13 cents above estimates. Revenue beat estimates. Beating forecasts of 4. 4 . And the reaction from as i said i dont get the i want to talk to brian about what happened yesterday. Its like the home depot worst day in a long time. Interest rates going up is never good. I think there were some questions about sales growth, and keeping up with it. Were going to talk to brian in a little bit. Lets talk apple this morning. A day cant go by without apple news. Apple announcing a 1 billion investment in the chinese Ride Sharing Company didi. Eunice is there. Good morning. Reporter good morning, andrew, im outside of the Head Quarters of didi chuxing, where i spoke with the president jean liu. She was talking about the past cub days have been very busy playing host in part to tim cook. She said that the two do see the opportunity for a possible future collaboration. This is what she said. I was joking with my team, it feels like a speed date. Weve got to know the apple team. They got to know us not too long ago, but we clicked very quickly. Because the two companies have similar philosophy. We both care about community. We both want to have a collaborative and Inclusive Culture as a Company Culture so that gives a lot of common ground. In the same time, in china, we actually share a huge overlap in customer base. Our driver base, our passengers, they use apple and iphone a lot. Ipads. So i think its very intuitive. Reporter and as we many chinese companies, didi has scale. 300 million users. They say 14 million independent drivers and 11 million trips a day. And jean told me its very important for the company to invest heavily in technology. They say data analysis, as well as Artificial Intelligence are pointing to help them match passengers with drivers. This is what she said. Thats one Technology Advantage that we have right now, is being in this market for almost four years, we have a huge database. Every day, we have seven we process seven billion continuous position data. Thats bigger than any map company in the world. And we have constant data in our sta database everyday. So this is something that we have been working on and we will continue to push forward. Reporter there have been a lot of rumors this week about a possible ipo, maybe in new york. She said at this point, there are no plans for an ipo, but, guys, i think that were probably going to be hearing this name, much, much more. I thought id give you a tutorial of what it means, didi is the equivalent of beepbeep. Like a roadrunner. The company used to be called didixite because it means taxi. So didi chuxing. Eunice, before we let you go, help us with one thing, do you expect them to move outside of china, do you think they would want to come to the United States to help them compete with other parts of europe or asia . Reporter she didnt say right now whether or not didi was going to move itself into other markets but she did say theyre working with lyft and theyre impressed with lyfts reach. She said theyll be able to help chinese traveling more and more being able to using the didi app and see things in chinese but being able to travel around the world using lyfts app as well. So she has her eyes on other markets but right now she said the potential for this market is very big but she also spoke confidently about the pential here and her position compared to competitors like uber. Eunice yoon, we appreciate that a lot. Didi and lyft could merge. Lyft has a relationship with ford. Its like everybody versus uber. The apple store down the street, were one block that way uhhuh. Remember the fao schwarz store, they may take that over, too. Remember we said, who can afford to take over that store . Apple. Right next literally right next to it. The New York Post which happens to get it right. They have a great little picture of tim cook on the big on the thats a cool space. From the movie with tom hanks. Lets get back to the markets, bond markets, and traders are going to bech whatting this afternoon and the fed probably listening. We have the economistic at ubs and chris vesler, fund manager and coportfolio manager. You dont think necessarily june is the liftoff for the next rate, you think september is more likely. I know that. But this certainly is a little bit unexpected, since we saw june across the table. Let me ask you, ive seen the point made that central banks, with countries that have large debt, that negative Interest Rates, that theyre actually for holding money, they actually get paid. And we know how much government loves taxes. That makes negative interests rates even more sort of distasteful. Problematic part, they can act as a tax on people, right. Depending on how the public perceives them if you have a Large Population moving towards retirement and you have rates going negative, lfall of a sudd, all the money you saved for retirement isnt enough. Even worse for savings. Your money is actually going down from saving it and you actually have less. So the natural response, as a tax, to do less of it in actuality in these levels because time is finite, right, you and i are only going to last for a certain amount of time then we hit our expiration date. You have to save the money when you need to save it so you dont have a choice. Negative Interest Rates actually serve as people saving money. Can create a downward spiral. Suddenly, weve gone from that terrible 0. 5 read that we saw. Have there been a series of coincident Economic Indicators that indicate a better economy, i guess thats why theyre talking about june, right . I spend a lot less time looking at gdp because i dont trust the data. I look at claims, bank earning and surveys. All of them suggesting that growth in the first half of this year kind of look like growth in the second half of last year. Were not gaining momentum but were actually holding up reasonably well. Okay, this Goldman Sachs, the cost thing from the other day, who is the person now saying stay of the equity information general. Theyre all on the same page, i guess. Do you think you can find individuals you have to do you pay any attention to this kind of stuff . We certainly Pay Attention to the macro and the bigger items at the fed. Were out there doing fundamental analysis, meeting with teams. Knowing your management they can operate through bad and good markets. So im beginning to think and were seeing the market is functioning a little better. Its not all correlated. Youre seeing improvement in defense contractors now that there are wars around the world. Energy markets that are pretty broad. As long as oil is fines something comfort in the 40 range. We as like semi conductors longer term. There are a lot of economic improvements coming. Theres a big conference this summer called semicon west. We think theres a pretty good chance that those dollars flow through on the back here. Irrespective of macrmacros. If Goldman Sachs says in the comie ing months theres no rea to own equities. Im certainly more defensive this spring. Were getting paid to find it. We like to find that good value opportunity. So, were probably coming into that point here in the summer. The volumes will probably dry up. That tends to be a Good Opportunity to be out there when everybody is fearful. Theres a lot of uncertainties. Theres a lot of headline risk which is were facing which are real but again, the markets like certainty. And i dont think we have that. We saw that yesterday. You know, i dont think the fed can probably move in june. But the market doesnt like that uncertainty. Because of the brexit potential . Do you think thats the only Thing Holding them back at this point . I think its also, as youre talking about, the european rates. Youve got the spread trade that makes it difficult for them to move. Youve also got to be looking at the dollar strength. Weve had a little bit of a tailwind earlier in the year. When they made those estimates the dollar was stronger. Its hard to predict where any currency go s. It looks to me that central bankers are on the globe. The only way they can win is if other conducts lose. Everybody is trying to devalue their currency. We have lower rates than the rest of the world, excluding japan. Now the ecb is thinking look, weve got to put pressure on our currency. Is that a way of looking at things. Its not, i think what you have to realize, its hard for any person to kind of do the right thing at this point. Everyone is afraid of the currency impact. At the same point, if you want to think about it at this rate, everyone is trying to move relative to the u. S. If the u. S. Is moving up, it doesnt work against everyone elses desires. Or even stand where they are and hope that we raise rates . Yes. So if theyre not going to wait, though, theyre going to cut. So if theyre willing to cut, theres no point in the fed waiting. Theyre not able to manage the dollar anyway. The fed has to do whats better for the u. S. Everyone else will follow at a relative rate. If the fed sat two, everyone else can be at fed minus two or zero. Wouldnt that be great. All of a sudden, the world may look more normal. Chris, you said youre a little defensive, what does that mean . Not defensive stocks . I do like the defensive. The bombs being dropped out are there are going to be smart bombs. But we want to continue on to have short positions on and hold cash. Now, im looking at something, a transportation index. Cast transportation index down 4. 9 in april versus 2015. So the simple fact is that there was less stuff bought, sold and shipped from around the country. So, yeah, less stuff being bought which absolutely points to part of that is gol if things go right, theyre all going to be unemployed, thank you. Lowes posting. The stock up by 2. 5 . A programming note, 8 00 a. M. Eastern time were talking the company with u. S. Chamber of commerce president Thomas Donahue. Squawk will be back. singing you wouldnt haul a load without checking your clearance. So why would you invest without checking brokercheck . Check your broker with brokercheck. 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. Welcome back, everybody. Lowes posting Quarterly Results jut moments ago, beating systems on the top and bottom line. Lets get to the numbers getting a sense on how retail savings is shaping. You many. Brian neagle joins us from oppenheimer. Thank you for joining us. Numbers a very similar story from home depot yesterday, sales up better than 7 . Whats going on . Its interesting, becky, by the lowes report by the initial take away, this is a good report but not as good as the headline figures would suggest. Because . Theres a couple things we need to take into consideration. One, there was a onetime gain with currency acquisition theyre making. Its still upbeat. Its not as good as the headline number. The other important factor when i was talking to you yesterday about home depot, we all look at the spread between home depot and lowes, lowes performed. Reporter well. They closed that gap in several years. But the sales were weaker. Its hard to say at this point, they may have used Gross Margins to drive sales better. Meaning they may have offered sales to get people in the door to make sure they were winning just in terms of that . Its possible. Its not typically what they do in home sales. With the home depot yesterday, initially when that news came out because it was such a big beat because they raised the forecast for the year, the stock was up as much as 3 by the end of the day, we had seen the biggest decline in quite a while. What was the theory . Just the Broader Market was under pressure or more specific to the home depot numbers . Really two questions. I was getting that question from our clients all day. Two things, home depot hosted the Conference Call at 9 00. In the commentary, they did indicate that sales growth decelerated through the period. I dont think that that is that big of a deal. Home depot had to do the same as lowes as the quarter progressed and became less favorable. Nonetheless, you do have a deceleration of home depot. But the second thing is the market. Weve got an edgy market. With focus of retail. To a certain extent, investors are looking at, even the Companies Performing well, theyre kind of wondering whats next. So what would you tell people in terms of the stock. Do you still have both of them . I do. Its been the case for a while, i think Home Improvement retail is very much a right spot in an otherwise weakish environment. Clearly, shoppers are choosing to shop the Home Improvement channel versus other retail. I know you mentioned a couple of caveats that you want to know more about margins and why the says are stronger at home depot, if you had to pick one of them it would be. What the market is going to focus on is comp growth. In the United States, 7. 5 7. 3 for the whole company. Thats as close for home depot for 2010, for a sales perspective, lowes did quite well. Theres some question how they got there. You actually came in the studio for home depot. This is a picture of him for lowes. This is demonstrative of the report. That speaks volumes. Let me ask you this, where are you right now, at home, in the office . At jfk, im preparing to fly across the country. Are you wearing a tie . Im actually wearing a tie. So youre wearing a tie today and you were in studio. I dont know he couldnt be here but he is wear a tie for lowes . A tie and a jacket, too. Or is this a tradeoff . Actually, my jacket is off. Its kind of a tradeoff. How are the tsa lines at jfk right now, thats a big issue . Surprised i got here so early this morning so its a good place to have this Conference Call. It was fine. I was here at 4 30 in the morning. Brian, thank you for being on with us once again. And for the instant reaction to whats happening. Safe flight. Nice talking to you, thank you. You see the latest about which story are we we talking about . The party that was yesterday. When he was standing up, there was a picture that he took yesterday. He was standing up in front of his on his wall. I was just thinking a lot of guys, ive been invited who would have really loved you kn know what i mean . No. You cant tell who that is that is no, im going to be running the economy. Anyway, coming up, that was another thing, i heard it, that made me think, wow, maybe hillary is not that far left. Everybody else says were electing you. Were electing you, youre going to put this man back in charge. Thats not why were can an established bank move like a startup . Its a question we get from some of our largest banking clients. The face of their business was tellers. Then atms. Today its their mobile app running on the ibm cloud. Across every transaction, the hybrid cloud helps their data move quickly and securely. Our clients are building out features and pushing updates faster, on five continents. With the ibm cloud, they can move at the speed of any startup. With the ibm cloud, you wont see these folks they have businesses to run. They have passions to pursue. How do they avoid trips to the post office . Stamps. Com mail letters, ship packages, all the services of the post office right on your computer. Get a 4 week trial, plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. What aremaking a cake ht now . Ayla reminds me of like a master chef and emiana reminds me of like a monster chef. Uh oh. I dont see cake, i just see mess. Its like awful. It feels like i am not actually cleaning it up whats that make mommy do . doorbell whats that . Swiffer wetjet. So much stuff coming up. This is amazing woah. Wow. Now i feel more like making a mess is part of growing up. Stop cleaning. Start swiffering. Welcome back to squawk box. Time for executive edge. The on demand economy is growing so we think and doing sales at what seems like a fast pace. The attracting more than 22 million customers annually generating over 52 billion in spending. Joining us now on this topic, the general partner at trinity ventures. Good morning to you. Glad to be here. You view that perhaps the uberization isnt working for everybody . Yeah, i think the great for consumers for taxi delivery, food groceries, pedis. Everything, clean up your house. Theres vcfml. Vv saved my life. A lot of these companies are not comfortable. Many of them are actually not even Gross Margins. Which say big problem. And am of them failing, youve seen for example, in the car space, a couple of Companies Like gm, that could not make it on their own. And there are others that are not just able to survive. Shouldnt we always known this, this thing called and he, i dont know if youre a fan of handy, these folks will that clean your home. Theres always been services that will come clean your home . Except now its on mobile. Thats right. So it becomes a technology play. Or is it a technology play . Probably not. Thats why people are realizing these things are not marketplace. Uber, for example, is marketplace. They dont have any assets, essentially the people that drive the cars are taking all the risk related to the car itself, insurance, maintenance. Cleaning homes you have to have people to clean homes. Ultimately, you look at even like a blue apron which is a food service, that is sort of a techified food service. Do you think that all of these companys. Its a subscription play. That model is actually quite different. Where the on demand goes around, you have to get a Service Within a certain period of time. You need to have density of labor. You need to have density of routing and that makes the economics very difficult. One of the things we were talking about, currently all of these businesses, uber is assetlight but long term, a lot of these companies will go assetheavy . When you think about autonomous, there are no drivers to take the risk in the automobile. Uber or didi, whoever it is, either these cars and that goes to people like google and google announced the service, i think you guy its know about this, it uber commute, its waze carpool. Almost everybody uses it for navigation. But in addition, the community. And it tells you were the others are. 54 cents a mile. 54 cents a mile which is the irs limit and if are two on the same route they can match them up for a commute service. Real quick on uber and the uberization of the economy, people look of uber, the promise of uber not just being a taxi or limousine company, but you think about it agency the last mile company. It can develop all sorts of things to you. Can end up replacement the sort of fedex. The way amazon is doing prime now and all of that. Do you believe that or is do you think that is i feel that the vertical place have more of a chance, for example, door dash that is dedicated to delivering from restaurants, that makes sure that food does not spoil. Theres no scale on driving food and people. Thats something to keep in mind. It would be a completely separate business for them, not the same as driving food. I think thats something to realize. We appreciate you coming in. Great conversation. Coming you, the earnings and economic events to watch. The squawk planner is next. Next the security log jam at the airports has the tsa intends to handle the surge. Phil lebeau, hes monitoring the situation at Ohare Airport where ive been reading a lot of stuff anecdotally. Whats happening now . Reporter joe, it may be midmay but it feels like christmastime here. Look at this line. This is just the beginning of a line that winds way down the third concourse here at ohare. How long is the wait to get through security . Well tell you when squawk box returns. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. As promised the squawk planner, we could get more chooses today on the feds thinking. The central bank will release minutes on the last months pose meeting 2 00 p. M. And as for earnings, look for target before the opening bell, cisco, l brands and salesforce after the close. Also of note, facebooks Ceo Mark Zuckerberg is going to meet with prominent conservatives to address the allegations of political bias on the sites trending stories. Our friends aei Arthur Brooks and that is squawk planner. That will be interesting to hear from him. Hes 7 years old or something. Is that him . No, hes 38 years old. I keep forgetting that. Billions and billions there years is he already 32 . 32. Just had a birthday. Bill gates keeps getting older, too. All of us. Yeah. Hes worth 4 million for every day hes alive. Something like that. Anyway, more tsa agents are being dispatched to chicagos Ohare Airport in an antito try to speed up the extra long security lines that left 450 American Airlines travelers stranded over the weekend. Pictures emerging of people sleeping on cots. Phil lebeau is live at Ohare Airport with more. Phil, at least on monday, people are being told to show up three hours before their flight. Is that still the situation today . Reporter theyre still being told to show up that early, becky. I want to give you perspective on how long the lines are here. Over here is one the security points where people are going through. Priority security. Loo looks about eight lines. Thats priority. But this is the precheck line. Were going to take you on an adventure. I know they say not to turn your back to the camera but its the only way to sneak through the line. I went through the line and didnt make it all the way there. And somebody said, look, ive been in line for 45 minutes. This is what it actually looks like during the holidays, maybe december 23rd. These people, again, this is tsa precheck. Theyre waiting in line. Where i have taken you to so far. This is at least a 20minute wait. I cant take you all the way down because eventually were going to run into a bottleneck here. This is some perspective on how long people are waiting here at american. The reason we came to the american ticket counters and security entrance is because of what we saw on sunday night. Take a look at this video. There were people who did not make their flights and as a result, they had to sleep on cots here at american. Since february 1st, since february 1st, 4500 people have missed their flight because they could not get through security in time. Just 450 on sunday. And again, american says all of this is due to the fact that they dont have enough security here. It brings up the larger question, which is whats being done to alleviate this. Until they add more security agents, the tsa is warning people expect threehour lines. Yes, they are adding staff here. Theyre adding overtime hours. Theyre encouraging people to do precheck. As youve seen precheck alone is not enough. And it has critics howling that the tsa needs new management. What we really need to do is look at tsa management which has always been at the short end of efficiency anyway. Not the people in the blue shirts doing the work. Theyre great. But the management, we need to look at that. Reporter and we talk a lot about the taxing and the fees that go into your ticket because those ultimately pay for tsa security for the upgrades that are needed in terms of infrastructure at airports. Look at this, this is san average fare, 383. Your taxes depending on the flight, how many segments, how many legs, landing fees may be involved, 43. This is roughly what youll see in terms of where your taxes goring. The faa, tsa, d. O. T. Guys we went about 45 minutes down. Look at this. I mean, this is chaos here for these people. And, frankly, a lot of them are trust trapte frustrated. Look at winding our way down here were nowhere close to the checkin. Yes, we are media. Youve been here three hours . No, we got here at 5 00. 8 00 flight to san francisco. What we were told to do, they didnt have any staff. They didnt plan to bring anybody here from 6 30. They already called headquarters. Reporter we dont have a microphone on this gentleman, but this is emblematic of what were seeing not only here at terminal 3 and other airports. I had the same phil, i had the same thing happen to me in omaha, i showed up early for a flight there was nobody there to staff it. I just wonder why ohare is so much worse . Just because theres so many people traveling through there . Reporter well, we are the busiest airport. Thats a big part of it. Theres the end of the line, guys. We finally made it down here. You pass all of the bags and this is what we see. You see people finally going through. Were going back this way. Everybody is a little shorttempered here, guys. Understandable. But this is some perspective on what youre seeing here. It is amazing, phil. Weve got some breaking news weve got to get to. Phil lebeau showing some of the problems that are preexisting at tsa and ohare and other airlines, too. Breaking news on Johnson Johnson, meg joins us from new brunswick, new jersey. Good morning, j j is presenting on its medical devices and Consumer Brands. Two of the smaller units the pharmaceutical is the biggest one. Were just seeing headlines crossing this morning, johnson and johnson laying out its pipeline for hospital devices going to file for approval of more than 20 new products by 2018 with sales potential of more than 6 billion. Consumer products like diabetes care. It says its going to file pipeline products by 2017 with sales potential of 2 billion. With Consumer Brands where were surrounded at headquarters some of the best known brands in the world. It currently has three brands worth more than 1 billion. Neutrogena and listerine and johnsons baby its going to add tylenol to that billionplus list. Well have more at the top of the hour with alex gorske right here. Well look forward to that, meg. Well be back in two minutes with the ceo. Do you ever were you in one of those lines, and you bought your tickets like months before. And it was hard work getting tickets and everything. Youve got the entire family there. And youve been in the line where you start having the feeling that youre going to miss the flight. Not only is it you know, its unbelievable pain for those people. But the feeling. I think i might pop a coronary artery or something. You get so worked up about it. And youre sweating. And if you miss your flight its absolute fear and panic. 4500 people. I mean, im planning a trip to indiana this summer. Its a 12hour drive and im going to drive because the idea of how long it will take you to go through all of those positions. It will take me ten hours at least. Kenny victor needs to get this to work like tsa for everybody. No. If you were him if your Business Model was to help people fly private that normally there has never been a more appealing time . Right. If you could just get it down to still very expensive. If you fly from teterboro, youre fine. None of us do. Andrew and becky, phil said, you guys dont fly out of normal airports. Or maybe you drive. Thats another option. If you have tsa precheck. The line phil just walked down was precheck. Too big to fail. Wont work in chicago. I dont care if youre aaron sorkin. It wont work. Thanks. I dont care if youre the other famous sorkin. The other one. He is pretty famous. Coming up, a new report ranking the fittest and the fattest cities in the United States. Well break down the list. Find out if your hometown made the cut. Squawk box returns in just a moment. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive youre the best nothings going to ever keep you down for the first Straight Year washington, d. C. , ranks as the fittest city in the u. S. Minneapolis came in second and denver came in third. According to the american fitness index compiled by the American College of Sports Medicine and the anthem foundation, in d. C. Nearly 100 of the population live within a tenminute walk of a park. Just a quarter of the residents are obese. The survey also found nearly 77 of americans nationwide say they have exercised within the past 30 days. Up nearly 12 from last year, at the bottom of the list, indianapolis, Oklahoma City and louisville. Watch it, indiana. I have good form. Thats the important important to this whole exercise. Form. Form. A lot of Government Employees in d. C. , right . I mean if you see people running a lot at the its not like theyve really got to go do anything at work. I mean, theyve got plenty of time to exercise. Like us . Right. 9 01. Here we come too. You dont have to really produce anything, do you . Its the government. Productive pay. Glass houses. Its a government thing. Thats why real estate is so valuable down there. Government is when we come back our guest host for the next two hours will be former senator bob kerrey. Here to talk politics, the economy and the fight against isis and Johnson Johnson chairman alex gorsky. We built our factories here because of a huge natural resource. Not the land. The water. Or power sources. Its the people. American workers. They build worldclass products. And that builds communities. And a better future. For all of us. Because making something in america means so much, to so many. Weathertech. Proudly made in america. You wont see these folks they have businesses to run. They have passions to pursue. How do they avoid trips to the post office . Stamps. Com mail letters, ship packages, all the services of the post office right on your computer. Get a 4 week trial, plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. With usaa is awesome. Homeowners insurance Life Insurance automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. The race for the white house. Bernie sanders staying in the fight, defeating hillary in oregon. She eekes out a win in kentucky. Donald trump cruises to victory but creates a new controversy. This one involves north korea Supreme Leader kim jong un. Former senator and 9 11 Commission Member bob kerrey is here to talk politics and more. A squawk ceo called Johnson Johnson. A Company Meeting with analysts to talk medical devices in their Consumer Products business. Alex gorsky joins us for an interview. Almost time for the second leg of the triple crown. Who will challenge nyquist at the preakness stakes. A preview of tonights draw for post positions for the big race. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box squawk box right here on cnbc, first in business worldwide. Im Andrew Ross Sorkin along with Rebecca Quick and joe kernen this morning. Looking at futures at this hour. Looking at a couple red arrows. Dow off 12 or 13 points. Nasdaq opening 13 points off and s p off a point and a half. We have a couple of headlines. Weve been watching shares of lowes after the Home Improvement retailer beat forecasts on the top and bottom lines. Same store sales up by 7. 3 , well above what analysts expected. We spoke with one analyst who said this narrows the gap between sales growth that home depot has been seeing for some time and lowes. This is the best number on sales growth to 2010. It cost them in margins, he points out, and he wants to hear more about that on the Conference Call. Stocks down 7 cents. It was up two bucks earlier. Its like home depot yesterday. Up 3 on the kneejerk reaction. Brian nagle, the analyst there, said that both of these companies he was impressed by the reports. We should also tell you Grain Processing company andersons the target of a 1 billion buyout bid. Investors are looking ahead to 2 00 p. M. Eastern time when the Federal Reserve releases the minutes of the most recent meeting. Analysts looking for a more hawkish tone than was evident in the postmeeting statement. Thats the tone weve been hearing from some of the fed officials. Jpmorgan chase boosting its dividend 9 as Financial Institutions benefit from resilient consumer businesses and the likelihood for a rise in Interest Rates in the near future. The fourcent increase raises the dividend to 48 cents. Payable july 31st when investors who hold the blah, blah, blah. People dont need to know that they need to know, okay, good, it takes the yield to 3. 1 . Thats what i wanted to know. 3. 1 yielder. I think jpmorgan is probably good for can cover that dividend. 1. 7 on the tenyear. 3 . Jpmorgan chase. A little bit of apple news this morning. Tim cook is now in india on his First Official visit to that country. Scheduled to meet with the Prime Minister there and other officials later this week. Apple announcing, though, as part of this that theyre going to set up a software lab in india to help indian startups and Developers Work on the ios platform. Also in talks to open its First Official retail store in the country. We talked earlier about the retail that theyll maybe open up in the old fao schwartz on fifth avenue. Next to the theyre running out of room, the big square across from the plaza. Its the most expensive real estate. The ceo of gap says he would consider using thirdparty retailers like amazon to reach customers. He made the comment yesterday at the Shareholder Meeting saying we are always considering all of the opportunities beyond our traditional mix of channels and stores. Amazon is certainly one, and there are others as well. Making these comments probably because gap sales down 3 in the First Quarter versus 10 this time last year. The Company Reports yulyear earnings for the full quarter tomorrow. The Obama Administration unveiled the final version of a rule to extend overtime pay to 4. 2 million u. S. Workers. A salaried workers making less than 47,000 will be automatically eligible for overtime pay. The previous cutoff was half of that. The rules expected to have the biggest impact on nonprofit groups, retailers, hotels and restaurants. Andrew. Presumptive republican nominee donald trump easily winning in oregon. With the win trump adds another 45 pledge delegates to his running total. Trump did not have a primary night event to tout the win but Bernie Sanders did. He held a rally in california for an estimated 11,000 enthusiastic supporters. He mentioned his narrow defeat to rival Hillary Clinton in kentuckys democratic primary and noted that he basically split the delegates with her in a state where she easily won back in 2008. The crowd really got fired up when sanders learned that he had won oregons primary and immediately declared that, quote, he is getting to like the west coast. Hillary clinton is the apparent winner of kentucky, a win that appears to be the narrowest of margins but brings clinton within now 100 delegates that she needs to secure the democratic nomination. To our guest host. Here to talk everything from the race for the white house to the war on terror to education reform is senator bob kerrey. Love you, senator, its great to see you. I kid you. I say youre the good kerry, but thats just a joke. Ha, ha. What is a nebraska democrat . How would you characterize a nebraska democrat in light of where the Democratic Party is right now, the center of the lets say of the Bernie Sanders wing of the Democratic Party . Do you feel like a republican at this point . Well, sometimes i do, yeah. I mean certainly on economics, i would say, i feel more like a republican sometimes than a democrat. I do think income inequality is a serious problem. But there are different ways to address it . Yes. I have difficulty with the idea to solve it with regulatory response and broad income transfers. For example, senator sanders, he gets you on your feet saying college will be free but it will be more expensive if its three. 20 trillion worth of stuff. Higher education the problem with Higher Education is we have limited supply and increased demand and prices go up beyond inflation and were surprised. I dont think you solve the problem the way senator sanders wants to do it. I find myself to the right of him on many issues. I knew that. Thats why i asked you. Im sure a lot of people from the old days feel theres a lot of people probably like me. I find myself almost a person without a party. I align with the democrats on social issues and align with the republicans on economy issues. I worry about national security. Align with the republicans typically there. I am concerned about the environment and aligned with democrats on that issue. I find myself sort of struggling trying to figure out which party im in. Everybody loves the environment. It began with teddy roosevelt. Clean water, clean air. Hundredth. I took all your Climate Change stuff from the last visit. As long as you dont vilify co 2, im fine. There are many things we need to do. Nuclear proliferation scarce me more than youre breathing my co 2 right now. 40,000 parts per million. And were worried about 400 parts i think the guest of j j is addressing one of the biggest problems. I think metabolics diseases will be the biggest problem. People are going to be 140. First thing i asked you when you sat down, when trump reaches across the aisle will you be ready . I doubt it. No. Im done how old are you . I am 72. The same age as gingrich. Really . Thats not going to be the problem. Im done. I am i am determined to die with one exwife, and that means the answer is no. [ laughter ] you got to have a comeback. No compromise . If trump wins . For you to for me to what . No. He just said hes gnot gettig in politics. Its a question for the head of the chamber of commerce when he comes in here. How do you get republicans and democrats to agree on, you know, a set of issues that will produce more growth in the coming year. Thats the one thing they do agree on. They dont like trade. Thats a problem. Finally found a bipartisan issue. Were antitrade. Am i wrong to think, though, given how polarized the country is, almost no matter who wins, whether Hillary Clinton or donald trump on the other side that instead of hitting the reset button it actually gets worse . No. Its harder. Its not so much that the country is polarized. Its easy to move the public with social media. We wouldnt have done Bretton Woods in 1944 if it was being done today. There are lots of things we did that we praise that we wouldnt have done. Is that because weighin from the general public is not helpful in accomplishing goals. It means a small number of people can leverage opposition and terrify politicians into doing nothing. Terrify the right into doing nothing. Terrify the democrats because labor will challenge them. Its easy to take something that is unpopular one of the most dangerous forces in democracy is Public Opinion uninformed. Its not public weighin that youre concerned about. Its uninformed. Its easy. Were all busy and we depend upon our politicians to figure stuff out and tell us what we need to do. Not to blow around with relatively minor winds. We would not have done Bretton Woods or the marshal plan. We praise the erie canal. We wouldnt build that today. Its so easy to shut down everything that we look back and praise and say, thats why our country is great. We wouldnt have done the Constitutional Convention in 1787. Theyd shut the doors and wouldnt let anybody in. For certain elements i disagree with what youre saying. If it were Hillary Clinton, i dont think the right would be as animated in the past eight years. I completely agree. You think if its donald trump would it be worse with the left and george w. Bush . About the same. You remember the left what they thought about w. W got in trouble with the right. Rightly so. He spent all that money, didnt pay for it. You have to praise him for taking on for disagreeing with his own base. He did he did attempt to move the party. I am assuming she would be like bill. And i its hard for you to say that, isnt it . It is. Thats what i said the other day when she said shed put bill in charge of the economy. Didnt do so bad the last time. Compared to where she is right now, that would be like 180 degrees from where she is. She is left of her husband on every issue. So is the party today. She is enormously competent. She knows how to do the work. I want to see the Goldman Sachs speeches where she says you guys are awesome. You must have a boring life. I am sure you want to see trumps tax returns. You are the good kerry but you still have issues. Youre sticking around. A lot more coming up. Including Johnson Johnson ceo alex gorsky joins us for an interview. A look at futures. Dow looking to open off 9 points. Back in a moment. Jake reese, day to feel alive jake reese, day to feel alive welcome back. Johnson johnson holding its biennial analysts meeting today where the pharma giant is suspected to give an update on two of the three major segments. 113. 83 is where the stock closed yesterday. Meg tirrell joins us with a special guest, alex gorsky, the chairman and ceo of Johnson Johnson. Meg. Thank you, becky and, alex, thank you for joining us. Great to have you in our Company Store here in new brenswick. Surrounded by your Consumer Products. Becky just mentioned the stock is trading around an alltime high, its really soared since you have taken over as ceo in 2012. A lot of it has been driven by growth in pharma. Today youre talking about medical devices and Consumer Brands. How will you grow those in the same way as the pharma unit . Were proud of the performance of the organization over the past few years. A lot of it has been driven by the pharmaceutical group. Last year we had an opportunity to talk about the great launches. I think we have had 15 since 2009 and about our Strong Development pipeline. But frankly what we are here to talk about today is the turnaround of the medical device and our consumer divisions. Both cases we put a lot of work in over the last few years. What well be talking about today is why we are so excited about the strong platforms we have and the innovation agendas. Medical devices. You have been divesting in terms of diagnostics in some of the devices. Youre shrinking. What should we see Going Forward . We think its about growth. What you will be hearing about today over the past several years, youre right. We have been taking a hard look at our portfolio. While were excited about the investments weve been making in the future in certain areas we realize that in other ars we needed to be for effective and efficient. We are making sure that were sized the right way and organized the right way for emerging customers. Particularly in the hospital setting, given all the pressure that you are seeing, much more of a businesstobusiness approach in many cases, but now we think we have done a lot of the heavy lifting, and we think the team is ready. Youll hear a lot about why theyre so excited for the next couple years. There has been so much consolidation in medical devices. Abbott, st. Jude. People have speculated you might want to grow in cardiovascular . Where should we be looking specifically. Were always looking for areas of great medical need. I think we were ahead of the curve when we consolidated in the orthopedics area as customers continued to evolve. We have a great business and a great platform in surgery. Youll hear more about that. Minimally invasive surgery. We have a great platform in orthopedics and cardiovascular business. We think it can be augmented. If you look at the history of Johnson Johnson weve invested 50 of the time on internal programs and discovery and 50 of the time versus m a. We want the best technology at the end of the day thats going to help patients. Joe has a question. Bigpicture historical question for alex. You know what i mean by this, meg. Alex. Four years goes so fast. I look at the stock chart. I have been following it but not that closely. The last i remember and you remember this too we went from ralph larssen, remember, to weldon, and something happened there. I know the board was unhappy. Some of the Johnson Family members. The stock and company lost its mojo. I am trying to think of what you came in and did with individual like facilities. He had one series after another of qualitycontrol issues that looked i said, wow, there are 400 factories. How can you ever go in and fix 400 factories. And i said nobody could do that. I watched the same thing happen to mcdonalds. A great brandname company. You put a ceo in who somehow suddenly changes the corporate culture. You have almost doubled since you came in. What did you do differently than weldon . Joe, look, i have been fortunate to follow people like ralph and bill with a long legacy of great leadership at Johnson Johnson. A lot of the things weve been working on have been taking place for a number of years. Its about a renewed focus on innovation. As you can see in our product launches. We placed a heavy emphasis on execution as well. You can have the greatest plans and strategies but if we are not crossing the ts and dotting the is, were not doing our job. If you see the improvements weve made around the quality side, what we have been doing with our supply chain, we are incredibly proud. At the end of the day its really the hard work of all of the employees at Johnson Johnson that are making the difference. I still dont get it. Hundreds of thousands probably of employees. I still dont know how it works. You can defray the question a little bit, but the chart spoke volumes. It was flat for eight, nine, ten years, and then it did you go in and hire people for Quality Control . Or did you change things . What did you actually do when you got in in 2012 to make sure that these things didnt keep happening at these factories, that j j had all this had to deal with that rather than innovation for a number of years. Joe, we have made some important changes. One of the things that we did was the beauty of Johnson Johnson through the years has been to have a decentralized structure so that you have a lot of accountability and responsibility, youre close to the customers. In other areas when it came to things like quality standards, manufacturing standards, we felt it was important to standardize and more centralize those kinds of procedures, so we made a lot of investments in those areas. I am pleased. One of the things well talk about today is were working closely with the fda. Weve worked through the Consent Decree issues in the consumer business and were talking about relaunching all of these brands. Those are the steps weve taken and we couldnt be more excited about the next several years. I loved your answer and your company and performance. Joe and i were talking about how both the republican and democratic candidate are opposed to tpp and to trade. As Johnson Johnson taken a position on tpp . Well, look, we think that, you know, right now overall free trade is in everybodys best interest but we also know there are certain provisions in that. Particularly as it relates to intellectual property in these areas that were working closely with a lot of different stakeholders on to try to work through. At the end of the day innovation, intellectual property for us in the long term. We have to balance that with making sure that patients around the world can get the right access to the medications. Were working hard and were hopeful that well find a solution. Alex, i get passed in lame duck . We are optimistic. Were working closely with the administration. This is a very core principle to our industry given the significant amount of investments that we are making, and frankly making sure that these medications will be used ultimately in the right way with these different patients and populations. So we are hopeful and continuing to work hard on it. Want to bring you back to something that joe was alluding to in your consumer business. Obviously Johnson Johnson is a historic brand. But, you know, the otc issues with tylenol. Now there are questions about talcum powder. Tell us the safety testing you guys have done to be really comfortable that talcum powder is not linked to ovarian cancer. To follow up on joes earlier question. Another important step weve taken is bringing together a lot of the safety and adverse event reporting procedures. Weve tried to take some of our best in class pharmaceutical standards and apply those across the medical device and consumer area to try to make sure that we can identify these issues early on and better manage them. Look, were disappointed in some of the recent talc verdict findings. We have empathy for the plaintiffs and the families they may represent. We think in this case its inconsistent with more than 100 years of experience with powder, more than 30 years of very compelling clinical evidence. So look, in these cases we think the right thing to do is to appeal it and to continue to fight it. But we put safety and quality first in everything that we do, and were particularly excited about some of the newer things that were doing in this area. We think it will make us that much better for the future. We have to leave it there, unfortunately. Many more questions for you. Hope youll come back soon, alex. Thank you very much, meg. Back to you guys. Thank you, meg. When we return, coming up, new competition emerging for Kentucky Derby winner nyquist as the preakness favorite gets ready for this weekends big race. And then, the coo of turner broadcasting will talk advertising and upfronts. Squawk box returns in just a moment. Images, videos, social updates. We call it dark data. 80 is invisible to most businesses. The ibm cloud has tools that can help see dark data and put it to work. Hello, my name is watson. Working with watson in the ibm cloud, we can help an Energy Company predict pipeline corrosion. And help a startup to use social data to predict market trends. Now businesses can get more out of their data. Thats what the ibm cloud is built for. Welcome back. Among the stories front and center this morning. Mortgage applications fell by 1. 6 last week according to the Mortgage Bankers association. Refinancing activity was actually up slightly as Mortgage Rates remain near threeyear lows. New purchase applications fell. Google will introduce a voiceactivated home device today according to the new york times. That will happen at the Google Developers conference. It will be called google home and it will compete with devices like amazons echo which has sold 3 Million Units already. Verizon in striking unions will meet this week in washington with assistance from the labor department. Officials say no public statements will be made as the two sides try to work out their differences. Kentucky derby winner nyquist returns to the track this weekend looking to win the 141 preakness stakes, the second leg of the triple crown. First, the draw for preakness post positions is today at 5 00 p. M. Eastern. Nyquists biggest competition could be exaggerator which was closing in on nyquist in the derby race and ended up finishing second. Lets talk advertising right now. 18 billion plus Advertising Market is convening for this weeks upfront. Turner, the parent of a tv portfolio including news, entertainment. Animation and more presenting today. Here to talk to us about everything from selling fewer commercials to how streaming has changed broadcasting is john martin, ceo of turner broadcasting. Thrilled to have him this morning. Good morning to you. Good morning. Thanks for having me. Many networks including your own have reduced or have announced plans to reduce the advertising load, meaning there will be less advertising on the air. Mmhmm. And i am trying to figure out how you make more money doing that. We withis is a business. We absolutely think we can make more money. I think the thing that and were in the tv business. I think the thing that we all need to recognize and understand is that were not in control. The consumer is in control. Right. And more and more the Consumer Experience is increasingly important. When there are alternatives for people to watch video that dont have any commercials at all, we have a responsibility to make sure that the advertisements that we put on the air that they are relevant, meaningful, helpful and entertaining. So the idea is by reducing the ad load, just the sheer amount of ads, but by making the ads more relevant and every day were getting more sophisticated with the data and analytics and the ability to target consumers, that we can demonstrate to Tamerlan Tsarna advertisers more value. Does that mean the cost will go up . Commensurate with the reduction do you break even . I expect advertising will go up. We feel really good about that. We have done a lot of innovation within our own company in the last couple of years to be in a position to offer really whats been the best of digital and what digital has been able to r demonstrate in terms of r. O. I. And analytics. Tv is coming over but has a much more immersive experience and much more reach. The idea is to take the best of what tv has to offer and marry it with digital and share ad dollars from tv and bring it back. A report out from craig moffitt, a cable analyst, goes to the larger debate about streaming in the future about digital. I call this the calm before the store on the brink of a new set of services that are more compelling than where we are now. He says you aint seen nothing yet in the sense that cord cutting could be poised to accentuate in the coming years. What does that mean to you . I actually think that i agree with what craig is saying, but i think actually this could be good news for Certain Companies which not surprisingly i believe well be one of those companies. I think distribution, the way that consumers get video, its evolving and changing much the same way that satellite took share from cable and then the video took share from satellite. There is going to be a group of new players that come into this industry, the socalled virtual mvps that will carry smaller bundles of packages of networks. People are calling it skinnier bundles. I am trying to rename it to say smaller packages of better networks. Let me call is something else. Margin compression. How about that . Yes and no. I dont think for i think there are going to increasingly be those companies that are haves and havenots. At turner we have almost 90 of affiliate revenues, the money were paid from our platforms, in four networks. Tbs, tnt, Cartoon Network and cnn. Based on, as you said, the portfolio of entertainment, sports, kids and news, we think that those networks, given their leadership position in the Overall Television landscape will be highly attractive in any smaller package of networks. Can you speak to the idea of how you have tried to transform the programming and make tbs and tnt more relevant in a world where repeats dont necessarily work the way they used to. Right. Were in the midst of doing that. Weve relaunched the rebrand of tbs the beginning of this year. We have seen or you have seen some original comedies which have a very distinctive voice that is different from what weve done before. Part of it is having the right team and the talent. I think we have been able to attract those people to our network. Part of it also is the scale of our programming. We spend 4 billion annually in programming costs. The costs of the original programming is that much more than being able to buy what was a successful show before, right . Marginal economics are, yes, on average its a little bit more expensive, but when you look at the economics of a 24hour seven day a week network, the number of hours of original programming is still small enough that we have been and were going to continue to be spending doubledigit increases on original programming every year while keeping the overall cost of programming, which includes sports, at no more than high Single Digits every year. I am a regular user of your services. We appreciate that. Thank you very much. I bought every single one of the horace and pete shows. I am a regular consumer of products youre not putting out. Are you looking at what the streaming that was done, increasing the number of podcas podcasts . The answer is yes. We have to be where the consumer is. We understand particularly among younger viewers that more and more people you hesitated as you said younger viewers. [ laughing ] more and more people are getting their video content from alternative destinations relative to traditional cable satellite intelco. I am looking at distribution as being a threelegged stool. You have your traditional players, the new virtual mvpds, half a dozen of those will probably come into the market place in the next 18 to 36 months. The third leg which may be more towards what you are talking about is, do you have the ability to go direct to consumer. If so, with what product. Weve announced last week, actually, a product of film Library Service called filmstruct. A complement to Turner Classic Movies which well go direct to consumer about. For Companies Like ours that have been traditionally wholesalers and stuck between Retail Companies and studios, going direct to consumer means weve had to invest in technology and incremental capabilities. Its taken a while but were almost to the point where we can be flexible to reach the consumer in any number of ways. How do you measure the success or dare i say failure of conan obrien on tbs . I followed him tremendously when he was at nbc. He is still a terrific comedian but i dont feel he is as relevant in the context of social media and Everything Else going on these days. To us to us at the turner family. Unfair . I think its unfair. I think he is an incredible success for us and our network. He is still relevant. Although, look, the entire space is getting more crowded. If you look at what hes been doing digitally and the clips hes put on youtube and other digital destinations and some of the shows hes done as hes been out traveling and visiting locations, whether cuba, armenia or south korea, its i think some of the best can you monetize a lot of that digital stuff . Absolutely. Its becoming the ability to monetize it is becoming easier and easier. Im going to get fatter and fatter and fatter. I dont skinny. I want to be skinny physically but in terms of content i am obese. I just i dont know whether people are going to all of a sudden decide i only want a 10 of whats out there. I dont think its either or. I think its additive. Im going to get three bundles and repeat them. I think there will be a lot of people like you. We love you, by the way. I love you too. No one surface. No one speed. No one way of driving on each and every road. But there is one car that can conquer them all. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. Lease the c300 for 359 a month at your local mercedesbenz dealer. Welcome back, everybody. A Biotech Company looking to disrupt the way diabetes treatment is hitting a major milestone. Clearing the final clinical hurdle for its product. Its product is a twoinch rod implanted under a patients skin that will deliver a steady dose of a type ii diabetes drug over the course of a year. That would eliminate the need for daily injections, trying to monitor things if you are taking a pill on a daily basis. The Company Plans to file for fda approval by the end of next quarter. Joining us is curt graves, the ceo. Intarci was number 29 on the disrupter list. Lets talk about the new treatment. I think you have i have a tiny mini pump here, yes. That is whats implanted under the skin . Yes. This is done under a simple procedure in a doctors office. This mini pump carries a year worth of medicine for the treatment of type ii diabetes. The patient then doesnt necessarily have to measure their blood constantly and figure out if they have the appropriate dosage . The big problem we are trying to address in chronic disease, diabetes is the biggest one out there is the fact that, when you give pills and injections 70 to 80 of people stop taking the pills or injections over the course of a year and thats when bad stuff happens. If you can introduce a new way to deliver medicine for diabetics that you dose once or twice a year, we have a six and 12month mini pump that does that. You virtually take the issue of memory and or changing patients behavior off the table and deliver up to a full year of therapy once a year. Youll be applying for the fda approval in the Third Quarter. Yes. Is basically everything in your Company Riding on this approval . Yes. [ laughter ] simply stated. So for the last five years we have been doing our phase 3 program. We had to study 5,000 patients around the world in 500 centers, raise about 1. 2 billion to do the r d program to get this medicine to the point where we can file with the fda. We just finished the fourth and last phase 3 study which is required for us to submit to Health Authorities around the world. Were now excited because we get to submit the new therapy for diabetes. Usually it takes a year after you file for the fda to complete the review and approve the medicine. I know you and the business. I know you have 25 Years Experience at merck and novartis bringing drugs to market and working your way through the fda in a respectful fashion. Prior i am a former pharmacist so i am aware of the compliance problem. Talk about the size of the market. How much do we spend every year treating diabetes . We have worldwide 415 Million People with type ii diabetes. The market right now, just for the drug part of the market, is 50 billion plus. In the 2020s its projected to grow up to an 80 billion market. The disease is huge. Its probably one of the biggest diseases on the planet that we are struggling with. 90 of diabetes is type ii. Yes. To try to treat that, its mostly pills . Its not insulin. Its pills and injections. And injections for type ii even . Yes. Most people are on two to three type ii diabetes medicines at once to try to control it. The problem is, for the last ten years, weve never had more than 50 of people treated to their goal, and over the last ten years these trends havent changed. We have had 70 to 80 of people stop taking their medicine. Thats the bad problem. You can solve that with diet and exercise, right . Exercise is irrelevant. Diet . Exercise does not reduce the likelihood of either putting diabetes in remission or its its all has to do with what you consume. People who have the injections daily are type i . Type ii as well. Daily injections . Who needs to prick their finger a couple times both types . Both. You have to monitor your sugar all the time. The problem is, when you are taking pills and then sometimes many times you have to add on injections, youre taking two or three medicines for just for diabetes. Give us your pricing strategy. Our strategy is to make sure that this totally new way of delivering therapy once or twice a year has broad access to the not just American Population but the worldwide population. The nice thing about our manufacturing is we have been able to squeeze our cost of goods down very, very low so that we can afford to compete with even the orioal therapies price. You come to market probably priced unit the oral medication . I wouldnt say necessarily under. We cant give our price before we are approved. What i can say is that we dont have to go really, really high because injectable therapies are really used last line in diabetes because people dont like to selfinject. Were taking whats normally an injectable medicine and making it once a year. How quickly could you ramp up assuming you get approval after you apply. We have to ramp up now. Were already in the manufacturing facility scaled to be able to produce millions of the mini pumps a year. Johnson johnson sold that to you . They sold one part of this. The technology i am holding is the mini pump system we acquired the licensing rights to worldwide to any new therapy we bring to the market. Our chemists are the rock star. They figured out how to stabilize this at body temperatures for three years. Thats the secret sauce, if you will, then its a question of putting whatever medicine in there together with what the chemists made in the mini pump and now you have a once or twice a year treatment. Kurt. Thank you for coming in. Interesting and well be following. Thank you very much. Cnbc getting ready to announce the new class of disrupters in june. When we return on squawk box, from turmoil in the middle east to the chances of a brexit and beyond. Well talk geopolitics with markets and guest host senator bob kerrey. Also, chamber of commerce ceo joins us. Target stock trading up ten cents to 73. 71. Squawk box will be right back. Amazing sleep stays with you all day and all night. Sleep number beds with Sleepiq Technology give you the knowledge to adjust for the best sleep ever. Its the semiannual sale save 500 on the memorial day special Edition Mattress with Sleepiq Technology. Know better sleep. Only at a sleep number store. This clean was like pow. Everything well . It felt like i had just gone to the dentist. My teeth are glowing. They are so white. 6x cleaning , 6x whiteninga in the certain spots that i get very sensitive. I really notice a difference. And at two weeks superior sensitivity relief to sensodyne i actually really like the two steps step 1 cleans and relieves sensitivity, step 2 whitens. Its the whole package. No ones done this. Crest healthy, beautiful smiles for life. The u. S. Senate unanimously passing legislation to allow families of september 11th victims to sue saudi arabias government for damages. The bill must pass to the house before going to president obama who has threatened to veto it. The president is concerned the legislation would make the United States vulnerable in other countries around the world. Our guest host this morning has been former senator bob kerrey served on the 9 11 commission. We talked about it during the break. Lets break it out onto the set. You asked me where do you think the dems and republicans can meet in the middle to stimulate economic growth. Yes. I gave you an answer which was around infrastructure and potentially on some form of tax reform around a rate of around 24 , 25 . Where are you . What do you think could happen . That could be. It produces a combination of public spending that demonstrably increases gdp. The good thing about hard infrastructure, roads, bridges, airports, you put people to work. A large fraction of the money goes straight out to contractors for the work. If you cut corporate taxes you get spending on both the public and private side. And i dont know what the numbers would be, but if the numbers are large enough it could pump demand up. If the demand goes up gdp goes up. Im going to play the devils advocate. Infrastructure spending historically the government has been relatively terrible at Infrastructure Spending in terms of efficiency dollar to dollar that theyre going to put out. Youre just stating facts at this point. Go ahead. What would give you the confidence what would give you the confidence that if you put out a trillion dollars which hes on the stick bob. You can you can organize this thing so you increase the amount of money thats going to roads and bridges that are absolutely necessary. Will you have some bridges to nowhere, yes. Some things you dont like, yes. At least somebody went to work to build it. Somebody in the private sector. If i tell you five to ten years for now dollar to dollar we find 250 billion was wasted andrew, you heres the problem. See, but go with joe here. He is saying 250 would be used. What was used on shovelready on the last one . But that wasnt shovelready was the bad was a bad way to do it. You need multiyear infrastructure development. This was a oneyear stimulus plan. Got to be shovel ready. It led to a substantial amount of inside dealing of how the money was going to be spent. You could really organize infrastructure in a way by the way, i can find examples of the interstate highway that we shouldnt have done. But you cant say in the aggregate it wasnt a good infrastructure project. Give it to companies that actually have to, in the private sector to actually private realistic if you could juice thats probably the wrong word. Get gdp to a number good to you. Whats the number. 4 . You could get to 4 in a global economy, by the way, where you have gdp shrinking were going to hear Hillary Clinton talk about how they balance the budget in the 1990s. You heard john kasich say the same thing. I was there both in 90, 93 and 97. We balanced the budget because of growth. Not because of cutting. Because the economy was growing. And the republican congress. They voted know in 98 and 93. They got one out of three right. It was newt ging ris. Target just out with earnings. Company coming in with earnings of 1. 29, above the guidance above the streets expectations of 1. 19 also above what it was a year ago at 1 1. 10. I think its probably the Earnings Guidance for the Current Quarter that has the stock reacting. The stock is down by 2. 69. Thats a drop of 3. 6 . The companys view of sect Quarter Results tempered by the slow down in recent trends. More at the top of the hour. Ahead of the chamber of commerce, the big debate when we return. Olay regenerist renews from within. Plumping surface cells for a dramatic transformation without the need for fillers. Your concert tee might show your age. Your skin never will. Olay regenerist. Olay. Ageless. And try regenerist microsculpting eyeswirl. It instantly hydrates to plump and lift. A retail bulls eye. Target rolling out Quarterly Results. Well bring you the numbers and ask what they tell us with the American Consumer right now. Ceo call. How does Corporate America view business . The economy and yes, the president ial election. Chamber of commerce head Thomas Donahue joins us to weigh in. A travel nightmare just in time for summer. Think long lines and longer waits at the nations airlines warning of turbulence ahead as the final hour of squawk box begins right now. Holiday road live from the most powerful city in the world, new york, this is squawk box. Welcome back to squawk box, here on cnbc, first in business worldwide. Im joe kernen along with Rebecca Quick and Andrew Ross Sorkin. We are less than 90 minutes away from the opening bell on wall street. The futures have now worsened down about 20 points so far this morning. A quick look at oil prices. Which were somewhere around 48 last time we looked. Now up a nickel. 48. 36. Numbers from target. Lets look at the numbers. We quickly ran through them before. You can see right now that the stock is down by 5. 4 . So this is massive pressure on the stock. Down 4 to 69. 60. For the last quarter, the First Quarter, the numbers were better than the street was expecting. They talked about earnings on an adjusted basis of 1. 29 a share. Street expecting 1. 19. Comp store sales up by 1. 2 . They cited the growth in traffic and basket. However, the street was looking for aening stro stronger number. The Biggest Issue is probably the guidance for the Second Quarter. Here is what the company has to say. Second Quarter Results, their view has been tempered by the recent slowdown in consumer trends. Thats an issue we saw yesterday with home depot, that the sales growth had tempered over the quarter. With heme depot it was explained away by weather. Theyre saying for the Second Quarter they expect adjusted earnings per share of 1 to 1. 20. The street expecting 1. 36. Target says their fullyear adjusted earnings per share they think is still within the Prior Guidance range and they think thats still achievable. The fullyear expectations offered 5. 26 a share. The sales growth slowdown has spooked investors. Well hear this from different retailers. If they come in at 1 to 1. 20 last year in the quarter they earned 1. 22 on an adjusted basis. In the First Quarter . Second quarter. Adjusted basis. 1. 36 oh, yeah, youre right. 1. 22. Now theyre saying a dollar to 1. 20. Its hard to put a multiple on a growth rate when its a negative growth rate. If you look at the first and Second Quarter combined, 1. 19 and 1 to 1. 22, its around the same as a year ago. Flat. The Third Quarter is typically not a great quarter. Last year they earned 1. 52 in the fourth. This year the street is expecting 1. 75. Top stories this morning. Minutes from the last fed meeting released at 2 00 eastern time. The fomc decided to leave rates unchanged and noted Economic Activity has slowed and Household Spending moderated. The question is today whether the minutes will be more hawkish than the statement. Thats the question. Also other Economic News of note today. Mortgage applications falling by 1. 6 overall in the latest week, refinancing activity did increase. Turning to corporate news. In the last hour we mentioned Johnson Johnson holding an Analyst Meeting today company saying it expects 20 new device filings in the next two years and sees 6 billion in sales potential for the new products. J j ceo alex gorsky joined us in the last hour. We really think its about growth. We also see the Business Model changing with our medical devices so making sure were sized the right way and organized the right way for emerging customers. Particularly in the hospital setting, given all the pressure that you are seeing, much more of a businesstobusiness approach in many cases. But now we think weve done a lot of the heavy lifting. We think the team is ready and youre going to hear a lot about why they are so excited for the next couple of years. Shares of j j this morning, 113. 90. Lets get other stocks to watch this morning. Lowes posting better than expected earnings, revenue and same store sales. If you have been watching the stock, originally it traded up about 3 . Went back to the flat line, and now you can see its up about 1. 5 to 77. 25. Staples earnings beating the street by a penny. North american same store sales down by 4 . That was worse than forecast and of course, the big issue overhanging this stock has been the idea that it cant combine with office depot. You see the stock up by 20 cents, thats a gain of 2. 4 to 8. 48. Hormels profit topping the street and raising the full year earnings forecast citing increase in pork segments. That stock up 15 cents. Jpmorgan increasing quarterly dividend. The payout rising to 48 cents a share from 44 cents. That makes it a yielder of 3. 1 . Is that right . Yes. 3. 1 yield for jpmorgan. That stock up by 51 cents. Hct Holdings Offering to buy grain handler andersons for about a billion dollars total. Thats a 42 premium. A anderson rejecting the unsolicited bid saying its not in the best interest of shareholders. Somebody is expecting something to happen. The stock up 29 today. 33. 50. Google introduces a home device to compete with amazons echo. The chamber of customers kicking off its Fourth Annual Global Supply chain summit integrating innovation is the theme this year, under the back drop of the meeting, a rocky president ial election, u. S. Chamber of commerce president Thomas Donahue saying his members searching for answers on how donald trump would operate if he wins. I dont know what that means for Hillary Clinton or Bernie Sanders. I might be thinking about how they would operate as well. Joining us now to discuss the summit and more is Thomas Donahue, the usa chamber of commerce president and ceo himself. And we were talking earlier good to see you, tom. Good to be here. We were talking earlier about the rare bipartisan, you know, issue where we can come together as democrats and republicans, and that is antifree trade and how nice this is to, in this day and age, to see the two parties in complete agreement that trade deals and free trade are bad for us. And thats sort of the one of the ironies of the political season that were in right now. And you can address that, but then im going to tell you where the chamber of commerce, youre probably right, obviously, you got to take your medicine, global economy. Youve got to do take down all borders. You have to do it. Eventually it will be good for you. But for some reason, there is the feeling that we havent always done so well for our workers in this country when weve pursued that. Thats the problem. So are you asking me . Asking you to sell has the chamber noticed that maybe theyre the the sort of dogma that free trade is always good and it will always result in better standards of living for the people working in the United States, that at this point there is at least the feeling that maybe thats not always the case . Thats my question. Have you got an answer for that . Well, first of all, it is true that whenever the people are involved in difficult elections, whenever people look at the economy during that time, and its down as it is now for seven or eight years, and the new normal being 1. 5 or 2 if were lucky, theyre going to abandon trade as a political reality because its a great way to explain to the American People why they think theyre in trouble as opposed to the significant explosion in regulation and other problems that have beset our economy. The issue of promising the American People that free trade is a panacea that everybody gets well on is not something we sell. We fundamentally believe that free trade opens markets and creates jobs in the United States. We fundamentally believe that the tpp, the pacific agreement, would do that in a very significant way. It would take away tariffs for agriculture and high techs. There are a few things that still need to be adjusted without opening the agreement up again, and we have to take a careful look at that agreement and say, if we dont do it, if everybody else does it, those countries in the chinasphere of the pacific are going to relocate their loyalties and their economic relationships there, not with the United States, and the 12 countries that have put together the tpp, and we should and by the way, we eventually will vote for it. Well, its just you can understand that globalization and what comes along with it given the differing costs of labor in different parts of the world, and youre doing a supply chain meeting right now. You can just see that just at face value the nearterm consequence of making things much cheaper where labor is much cheaper, it appears to be that its disruptive to people that are in the business domestically of making the same things for 20, 25 an hour when you can do it for 2 an hour. Down the road you can say it keeps inflation down and we can manufacture things more cheaply. And sooner or later this will trickle down, sort of and create jobs in places you can see the perception that its you know, i would have never thought i would be voicing those words either because i am a freetrader, obviously. But is it possible that we have entered into some bad trade deals in the past where the other countries got the best of us, tom . Lets answer that question youve really done a good job arguing against trade for somebody that believes in it. I know. Thats what i have to do. Youre the u. S. Chamber of commerce. Im trying to help you because i dont need your help. Listen, i need the time. Okay. Bottom line is simple. There are a lot of trade deals that have been very, very helpful. There is recently a trade deal well be talking about at the meeting today, a trade Facilitation Agreement that came through the wto and well all benefit significantly by reducing the cost and time it takes to move goods around the world. We have beat the dickens out of the nafta agreement, but the fact is its created all kinds of jobs here in the United States. The real issue that most people dont focus on is that what happened in the Manufacturing Industry all around the world and in this country as well is we have taken 40 of the jobs out of the process. Information technology, robotics, process engineering, supplychain management, and people see the result of that and think it comes from trade agreements. It doesnt. It comes from us trying to become more efficient so that we can compete with people all over the world. 95 of the people we want to sell something to dont live in america, and if we dont get more competitive, somebody else will sell it to them. I know. You can the chamber of commerce in watching the Bernie Sanders phenomenon, watching the donald trump phenomenon, the only thing is, the only reason i was telling you these things is that, you know, i see i am not calling you a establishment republican but i see Establishment Republicans saying its almost like ostriches. Theyre saying i dont care what im seeing here. I still want jeb bush and this is not working for me. But the people are saying something, tom. Thats my only point. I think the people are saying a lot of something. Bernie sanders is saying he wants everybody to be a socialist. Margaret thatcher, you know when a socialist economy dies is its when they spend your last dollar. Its shared misery. I voted for free trade agreements as well. It does seem to me that the combination of trade and immigration and technology suggests that some adjustment needs to be made in the American Safety net. Because there are going to be casualties. In the news yesterday was the likelihood in three to five years well have selfdriving trucks. At 50,000 a year and up many truckers will be out of work. What should we do . Should we lest the rest of the world develop the technology . No. Im not suggesting youre putting up for me, you know, basically a rhetorical thing to knock down. Thats not the alternative. What i am suggesting is, tom, the Chamber Needs to evaluate what kind of safety net do you need to have when trade is negative to jobs, when immigration is negative to jobs, when technology is negative to jobs. You support all three of those things and so do i. The chamber could answer the question what kind of safety net do we need to have . In my view, both in the trump and sanders world something is going on that people dont like. Fundamentally were working on a number of things that i think have put us at a disadvantage. The first is we have let our k through 12 Education System rot on its feet. We have a large number of people who are left behind and cannot compete in the new jobs where you have to be able to read and comprehend, calculate, run some amount of technology, work in a particular environment, and we have not given these kids a chance, and were working on that all around the country. Second, and it is very clear that the job Training Programs which we in business and is the labor unions and others advocate are antiquated, theyre training people to do jobs they dont need and arent training people to do jobs that we desperately need. Were saying to families all over the country, take a look a the Community Colleges and the opportunity for people to go there and study for and be skilled and accepted in a lot of very important areas. I think everybody agrees we need all those things. The question is how do you finance that, fund that . Then we get into the question of taxes both on the corporate end and, in particular, on the personal income end. And where the chamber stands on both of those issues. We say that all of that can be financed with exactly what we are spending now on education and companies are spending billions of dollars on training and will spend more if you can bring them a product that can read, write and calculate. And were pushing all of that very hard. You trade has to be looked at in a very critical way, and these agreements that have recently been done are much more carefully looked at. I think they have protections in them that we need, but we there is no protection in trade deals, and there is no avoiding trade deals simply to make up for a lack of education and a lack of preparing people to go to work. You would be in trouble if you followed donald trump or Bernie Sanders after they gave a speech to an answer. I think you need a different answer than the one youve given. Im trying to help, tom. I dont think so. I dont think so. Donald trump or Bernie Sanders, which or hillary, whoever walks into the white house, after lunch with the congress on inaugural day faces a fundamental reality. If they dont drive up economic growth, if they dont take control of an explosive regulatory system, if they dont improve this economy, they will be very shorttermers. Yep, im just trying to thats why i was trying to get you the god answerod answers. When the guys go into a debate they practice with somebody who is going to be like al gore. I am on your side. But these are things youll be hearing about. You did good. I hear about them all the time. Thats why i am hear talking to you. You didnt expect it from me. I apologize. Tell me one thing. Were you bernie or donald today . He was donald. I was donald probably. Thank you. Socialism is shared misery. Thats all they got going for them. Who wants that. Appreciate it. Thank you. When we return donald trump sounding the alarm on a potential bubble brewing in tech and Silicon Valley responding with a collective eye roll. We have the details next. First as we head to break, check out retailers, shares getting hit hard right now following weaker than expected sales at target and a profit warning more on the state of the consumer. Well be right back. Welcome back to squawk box. Consumer in focus again today as target disappoints and the shares getting hit hard now. Joining us is the Senior Vice President and chief investment strategist at charles schwab. Good morning. Good morning. What do you make of the retailers lagging numbers and whether this is saying something larger about the state of affairs for consumers or are these operational specific issues to the institutions . I think its more the latter. I think death by amazon or the more online retailers. Its not just the recent improvement in overall retail sales. I think its a testament to the relative health of the consumer. I actually track something that i put together 15 years ago, a consumer stress index. Though that is up a little bit by virtue of Commodity Prices having ticked back up its still at a relatively low level. I think we have a much smarter and more conservative consumer. I think the trends if youre comparing to predebt bubble trends are not relevant. I think were not in that debtfueled consumption phase as we have been in years passed. I think you have to look at the consumer through a different lens nowadays. I agree with you on a lot of that but i have some concerns hearing what target said today. Their First Quarter numbers were much better than expected. They talked about how there has been a slowdown. Yesterday home depot mentioned there had been a slowdown in sales growth as the First Quarter progressed. I that may be what some people are looking at. Targets warning on the Current Quarter. Home depot talking about the quarter warning. Maybe the weather is part of it. When you start to add it up, people will be asking questions about how healthy the consumer is today and if we have seen any slowdown in the last couple weeks. Lets put weather aside. That could be a factor, though a convenient excuse at times. We have to think about the relationship of energy prices, particularly gasoline prices. What was misunderstood is on the move down it didnt have the same benefit. But i think there is a tighter relationship when it starts to move up. I think we have to reconnect the consumer to that angle as it relates to discretionary spending. Health care costs have gone up a lot. Until you reach your deductible it takes more out of your ability to spend. Thats increasingly been a factor. Liz, we love your perspective. Always great. Hope to talk to you soon. Thanks. Coming up, the state of the consumer, target getting slammed on weak sales and a downbeat outlook. Well have an analyst weigh in on target and the consumer when we return. Theres a place for vacationers who seek more than just a little time off. The ones who choose to go big or stay home. Come with me now. Where every amazing, despicable, wizarding adventure reveals moments that are truly epic. This place is made for those who do more than just vacation. Whoa go with me now universal orlando resort. Welcome back. Coming up, whats behind the viral i hate the wait. Surge of summer travelers and long lines at airport checkpoints across the country. Well check in with phil lebeau, live at Ohare Airport. Plus, the graduating class of 2016 setting a new record for student debt. Were going to talk about how to fix the rising costs of Higher Education. Well have the founder of minerva when we return after the break. You wouldnt order szechuan without checking the spice level. It really opens the passages. Waiter. Water. So why would you invest without checking brokercheck . Check your broker with brokercheck. Baby, baby, looks like its going to happen you better come inside, let me teach you how to jive well welcome back to squawk box. Here is whats making headlines this hour. The Federal Reserve will be out with its minutes of its most recent meeting. That will be at 2 00 p. M. Eastern. Policy makers left rates unchanged following the conclusion of that meeting, which was in late april. Government officials will continue to oversee safety related decisions made by gm for another year. The additional scrutiny was first put in place in 2014 due to the companys delayed response in dealing with that ignition, the widespread ignition switch issue. Mortgage applications fell 1. 6 last week according to the Mortgage Bankers association, entirely due to a drop in new purchase applications. Refinancing has risen as Mortgage Rates remain near threeyear lows. Target earnings beating the street by a dime but revenue of about 16. 2 billion below the streets forecast. Same store sales fell short of what the street was expecting as well. Its guidance for the Current Quarter is weak. Joining us right now is tellsia advisory groups joe feldman. Off the top it looked like good numbers for the First Quarter but its the Second Quarter Earnings Guidance thats concerning. What do you think . Yeah. Absolutely. When i first saw the headline i was excited. They had a good quarter, did what we thought they would do. Then you see the comp was softer and the Second Quarter guidance is a little softer for sure. Definitely seems like business has slowed down for them, for retail in general. Particularly on the apparel side. Any kind of these Mass Department stores were off last week. Now target. I am worried about walmart tomorrow after the results weve seen from the other mass retailers. In the Earnings Guidance they said the second Quarter Results, the view had been tempered by the recent slowdown in consumer trends, however they are staying they expect to meet the fullyear guidance still. Do you think thats possible, likely is it. Yeah. They gave a pretty wide range. 5. 20 to 5. 40 for the full year. Maybe theyre giving back some of it in the Second Quarter. The underlying operations of the company are pretty healthy. Gross margin was a little bit better. They managed expenses well. If they can get the top line back and some of the initiatives in place that they have for the second half of the year. Rolling out natural and organic food and focusing on the style categories should help to drive sales to the holiday season. The stock down now by 7. 4 . Do you think thats an overreaction . I know theres concern about the Second Quarter. When you look at the valuation its pretty cheap as it is. As of yesterday it was trading 13. 5, 14 times. Now it will be even cheaper. We think there is lots of opportunity at target. We have an outperform rating and we wont really change that after today. What do you think about retail overall . The Department Stores versus jcpenney, versus a target, walmart . Are they trading in the same world or will there be some able to withstand the pressures of online commerce better than others . Yeah. I think you hit it on the head. Theyre all trading in the same kind of world and realm and amazon is going after all these guys. Now, walmart and target, as you know, have done a really good job officver the past couple ye focusing on digital strategies. Target more skewed towards mobile. Walmart is trying to be more competitive with amazon. We think they have an opportunity to do with the store base that they have. Targets Digital Initiatives have been great. Came back from the commerce called shop talk about nextgeneration commerce. These guys are doing the right things and theyre trying to compete effectively. One of the hidden secrets out there is amazons prices are not necessarily the best, its just they have a good shipping method. So that will converge over time. I think there is still opportunity. I am glad i still cover home depot and lowes. Its still one of the safer places to be in retail. Home improvement continues to do well. Joe, thank you for joining us. Thank you. Lets talk tsa lines. Some of our viewers who fly through teterboro may not know about this but most of our viewers probably will. So i may be on an airplane if they got through the line. More agents being dispatched to Ohare Airport in an attempt to speed up the extralong security lines. In the meantime you can see them live right now. Our own phil lebeau is there standing in front of them. The line has gotten a little bit shorter in the last hour. It ebbs and flows. Still talked with one person. They have a flight in 45 minutes and theyre nervous about getting through security in time. Earlier today we saw much longer lines here at the third terminal of ohare where American Airlines last weekend had to have 450 people miss their flights because they couldnt get through security. Here is some of the frustration we heard from people traveling this morning who were in line well over an hour. Terrifying. Terrifying. Brutal. Straight chaos. So i am we have a flight at 8 20. Im pretty nervous. They should divide the lines better. There is one long line. How do we get to this point . Its crazy. Whats being done . Its unbelievable. Disgusting and its uncalled for. And one person summed it up best when they said, somebody should be fired for this. We know that thats unlikely to happen but, guys, well be seeing this for some time. American when i checked with them yesterday, were telling people to get here two to three hours in advance to be safe and make sure that you can get through security. Thats the story here at ohare. Three hours in advance seems crazy. Its tough to get some of the tsa officials to come on and talk about this, phil. But there was some kind of return blame where they were saying part of this is the airlines fault for charging fees for bags which is why so many people take bags through the lines too. How do you sort it out . As you learned in brussels, what tsa is doing is creating more targets for terrorists because theyre creating big populations of humans waiting to get on planes. I dont think the government can do this. If you went to walt disney and said, can you reduce the size of the lines, nobody runs lines better than disney. This is an example where you have to go to the private sector to figure this out. I dont think you solve the problem by firing whoever it is running tsa. You were a democrat . In response to your question about people bringing bags through, its too easy to blame the airlines for that. The bottom line is that you have got staffing issues which are part of the problem in terms of funding there, but overall youve got old infrastructure as well, and remember, the tsa, because they have been exposed for doing a poor job in the past are tightening up their checks and taking longer as people are going through. Their response is, thats our job. Were supposed to take as long as necessary to screen somebody. But bob, the massive crowd on this side of the security you bet. But becky, where does that becky, where does that end . Where does that end . If youre going to make the line shorter, there is always going to be a soft point with all airports in terms of security. There will be. Phil, thank you. We appreciate it. You bet. This issue is obviously not going away soon. Speaking of issues that arent going away soon. Speaking of nebraska democrats, this isnt ben nelson. You told me you had ben nelson, the corn husker kickback. I get that all the time i get it all the time. Benjamin nelson is not bad. Thats not my name. His name is benjamin nelson. Im ben nelson. He is the founder of minerva. Get this, College Students graduating this month will be the most indebted class ever, along with the diplomas they carry an average of 37,000 of student debt as they enter the work force. Recent report showing 40 of americans with federal Student Loans are not making payments or are behind on the more than 200 billion owed. Joining us to talk about Rising College costs is ben nelson, founder of minerva. Our guest host this morning, bob kerrey, is the executive chairman for Minerva Research and scholarships. This issue has come up time and again with Bernie Sanders saying he would make College Tuition free for everybody. Whats the problem . Whats gone wrong . A number of things have gone wrong. Debt in and of itself is not a bad thing if its low and its serviceable, right . There is nothing wrong with saying im going to go get a good education that will allow me to get a better job or allow me to enter a career and have a modest amount of money that is skin in the game, effectively, you are getting an education and youre going to pay for some of that. Thats okay. The problem is when debt levels have to cover 60,000, 70,000 a year price tickets that then dont yield any kind of real career opportunities. Youre talking about private colleges. Yes. A State University at 10,000 to 20,000 in some situations per year. Ben, you made a decision not to get into the federal loan program. Why . For a number of reasons. Number one, the problem with federal loan system is that, when you take title iv money, when you take money from the federal government it comes with a set of regulations that actually increases costs for everybody. So, in order to comply with all the rules regarding the eligibility to take money from the federal government, you have to do all sorts of things as far as red tape and overhead that winds up costing about 2,000 per student per year. Wow right . And thats straight from regulation. So if you want to keep costs low, if you have a 10,000 price point like public colleges do, make minerva does, and you say im going to add 2,000 of cost across the board but title iv actually is only applicable to a percentage of your students, isnt applicable to all of them. So you wind up having certain students subsidize loans for other students even though the loans themselves are not subsidized. Where are you in the development of the school . So, now we have just metr matriculated the second full class. We received 16,000 applicants last year. You have been up and running for five years . Were in our second class now. There is some time to set up the new university. Then we from that pool we accepted just under 2 of our applicants. And but the way that we accept our students is that we only look at merit. And because were the most Selective University in the country, we dont look at any other factors that are associated with it, from wealth or background. So most of our students are not american. They come from all over the world. And the overwhelming majority of our students need additional support, not just even though our costs are much lower than traditional universities, we still need to come up with our own scholarship money for them. How do you take your model and apply it on a grand scale to try to affect this problem of massively rapidly Rising College costs. Universities do not exist as summer camps. They dont exist in order to take american taxpayer dollars and fund all sorts of frivolous acts, right . So the problem, if you look at the breakdown of american Higher Education costs, the bulk of the costs dont go towards education. The bulk go towards the amenities, the sports team. Facilities. The facilities, the campuses. Those things are just not necessary. Theyre not necessary in a Digital World. Theyre not necessary in a world where the majority of the population is going urban. Whats required to undo that . Meaning you have all these forces at play, people who want to keep their jobs. Yeah. Both, by the way, at these institutions and at some of the institutions or parts of the government that fund these institutions. Theres a lot of things going on here. How do you unwind . I think you have to start by having a moral argument, right. If you look at what universities generally make their money off of, they make money by certifying that you have read a book. Right. Right . And all of the information that is available in the majority of the credits issued by even elite universities is Available Online for free. Right . And these universities are behind those courses online. And they certify. They say, hey, soandso took this course. It costs a couple hundred becomes to certify somebody has taken them but they charged thousands of dollars for the courses in the regular world. At some point the taxpayer has to say this is immoral. Econ101 shouldnt cost thousands of dollars of subsidies. This is not a place where, if a Student Needs to be coddled they should go. Right. Its a teaching differential that impresses me. It comes from concept that we just find it morally reprehensible to charge for things that are available for free. When you ask what is the university about . You think about the intellectual development of the student. When you say to students, you have to teach them how to think critically or solve problems effectively. These are things you can teach but you dont teach them by giving the physics 101 course and hoping that comes along. You have to teach with purpose. One of the metrics people use to evaluate schools is how many freshmen come back to sophomore year. What are your numbers . More than 90 . Several of those who dont come back dont come back because its our choice not to invite them back as opposed to the opposite. When we come back, these guys are not in debt. Secret lives of the super rich. The story of a modern mansion that takes the whole thing to a new level. Maybe debt was used, though. There is robert. The rich always use debt, andrew. This is 17,000 square feet. Glass walls that retract with the touch of your iphone and a seethrough pool that becomes a human aquarium. Well tell you what it all costs coming up after the break. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. 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 easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. announcer over 400,000 businesses have already used ziprecruiter. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer6 welcome back to squawk box. A look inside the lives of the super rich. Robert frank taking us to a house with a seethrough pool. It is seethrough and so is the pool. Take a look at this. Warren is taking us to his most prized listing on his 1. 7 million yacht. He is throwing the pricey 55footer in with the home. One of several incentives he is offering to buyers in this massive estate with every convenience. From right here, open up the doors, turn on the music, the lights. From your phone. All from my phone. Welcome to 252. His father designed and built this ultramodern 20,000 square foot indoor outdoor tropical oasis. The idea was to create something contemporary that still felt intimate. A rooftop jacuzzi and infinity pool lined with half a Million Dollars of seethrough glass. We had to give the house an ooh ah factor. You can see the people swimming as youre looking into an aquarium. The house is listed for 36 million but you can buy it with the art, the yacht and a vintage jaguar for 50 million. And ball harbor, which is that part of miami is thats billionaires row. Micky arison is there. Water on both sides. Models in the pool. The model . How does that work . They were hired for this purpose. For this purpose. Crazy pool. 75 feet of glass. Wow. How much did that cost . The pool . Just the glass was half a Million Dollars. Wow. Very cool. We could just watch that for the rest of the show. Real estate porn is what they really call it, right . Lets be honest. Coming up, jim cramer going to join us live from the new york stock exchange. His take on the days top stories, including target. Thats next. Welcome back everybody. Lets get down to the new york stock exchange. Jim cramer is standing by. Jim, lets talk about target. Sure. And lowes. And how you can add up what we heard from home depot yesterday talking about sales growth slowing through the quarter. What do you think it means . I think april was a bad month. I think it was a terrible month for the consumer, which is of course at odds with the fed governors and president s who speak. The reason why i think the market is at a precarious moment is precisely when the consumer slows down, i believe may will be weaker than april. The inflation they fight whether it be oil, medicine, whether it be rents are things they actually would raise the price on for various reasons that is kind of onetime only. So were at this terrible conference, where we liked higher commodities going to be used against us and look at target and its squarely in the middle of the Digital World eviscerating pricing, because your talking about apparel and electronics, and a weakening consumer nobody expected to happen and yet the feds reaction is ignore that, worry about commodities and tighten. Thats how you get the worst of all possible worlds for the stock market. Pointed out we maybe underestimated the benefits of lower oil and lower prices at the pump, maybe we were getting more of a boost from that than we realize. She thinks the correlation in oil prices and prices at the pump move higher prices will be tighter, what do you think about that . We saw company like tyson saw cocacola, takes less to get to the supermarket. But the consumer didnt benefit because Health Care Costs rose. The consumer did not benefit because rents rose. And we have this overtime pay this morning, the feds going to say wait a second now we have overtime. But its government mandated overtime. So the fed cant do anything about it. But well see plenty of fed people say we have to tighten in june. Thats how you get a repeat of what happened in december and january in this country. And thats what im now forecasting if they proceed with this lunacy. Jim, drink some hot water. My throat hurts for you. Yeah, whatever. I know. I know. I know. Claritin is not working. Flonase. Its the same thing, isnt it . Theres a different ingredient, but similar. When we come back well get a final lesson from former senator bob kerry and later today dont miss jeff bewkes. Stay tuned youre watching cnbc first in business worldwide. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. In new york state, we believe tomorrow starts today. All across the state, the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in buffalo, where the largest solar gigafactory in the western hemisphere will soon energize the world. And in syracuse, where imagination is in production. Let us help grow your companys tomorrow today at business. Ny. Gov a few minutes leflt to spend with our guest host former senator bob carey who, i dont know, i dont know whether youve matured or what it is, but your answer to the tsa was get a private Sector Company in there like disney to run this Government Agency effectively. I feel like should we start maybe we should start a party . Socially liberal are you asking me out . No. Im asking you to start they say the Republican Party is collapsing. Well start one that is incorporates all the fiscal conservative stuff you would be a Terrible Party member. You have to go to a meeting and decide what the platform is. You know what you havent told him about . How disney does this fast pass stuff creates a level of inequality. Thats also a conservative no. Maybe people are suggesting we call it the wig party. Already used one other time. That was used. But we are in a weird sort of a surreal place. I mean, your party its a difficult time love him or hate him at least he was a businessman that worked for the private sector. Youre almost electing a socialist only thing hes ever done is mayor of vermont. Its going to be hillary. Hillary will be the nominee for the Democratic Party. Thats the best you could do the whole Democratic Party . Its a question not worth answering. Shes not a weak candidate. Shes done it before. You have 56 negatives and shes not a weak candidate . What would a good candidate be . It could get down to who sucks less, that is absolutely true. But i think its likely do you think youre going to get a group of people who are supporting her because they love her . Or because they just dont like you know, im through with trying to answer the question do i like or love. Who cares. The question is are they competent. Do they know how to do their job . You dont believe anything she says then . I do believe a lot of things shes with bernie. No, shes not with bernie. Almost. So you dont believe i watch what she and her husband did when they were in the white house before. And i have confidence that on the big issues they can solve them. All right. Thank you. Have a good day. My pleasure. That does it for us. Make sure you join us tomorrow. Right now its time for squawk on the street. Good wednesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the new york stock exchange. Futures week, if you thought the pain was over from retail earnings, think again. Were going to get to what target is calling a volatile consumer environment, goldman taking equities to neutral, overweighting cash. Watch europe, got some new brexit polls to tell you about