Transcripts For CNBC Squawk Box 20170419

Overnight in asia, the nikkei flat. Hang seng and shanghai were weaker. The shanghai down by 0. 8 . In europe this morning, some of the early trade, just 24 hours after that announcement from british Prime Minister theresa may about a new snatp election, things have turned around. Yau european markets in the green. The cac and dax up by 0. 3 . The tenyear yield in the United States fell to a low of 2. 165 on tuesday. That was the lowest level since november 10th. Well keep a close eye on that today. The tenyear yield now is sitting at 2. 209 . Well have much more of this coming up later this morning. Lets get you to some other big stories. In earnings news, ibm reported Quarterly Earnings that beat expectati expectations, but sales fell short of estimations. Revenue declined 3 from a year ago. That marks 20 consecutive quarters of revenue decline. They have long talked about those revenue being empty calories, but a big debate about that remains. Youre looking that the stock down 4. 5 . Well talk to an ibm analyst in about ten minutes about all of this. Federal reserve beige book report, which tracks Economic Conditions in the feds 12 districts is out at 2 00 p. M. Boston fed president Eric Rosengren is speaking this afternoon. People watching for his comments. On the earnings front, banks in focus. Blackrock, u. S. Bancorp and Morgan Stanley out with reports before the bell. Corp. Not the marine corps. Corporation. Its not a corps like marine corps or peace corps. You would call it citi corps . I might. He might, actually. Finally later this morning, the British Parliament expected to approve theresa mays plan to hold an early election on june 8th. Debate expected to begin around 7 00 a. M. Time with the vote soon after that. The main opposition, labour party, welcomed the call for snap elections, so almost certain the Prime Minister will retain the twothirds vote she needs for the elections. Snap elections. Theyre voting for the vote. Voting on snap . Not on snapchat. This is a different use. You say snap now quackcall elections. So they have not adopted some voting procedure using no. Youre right, we need to clarify. For me, you do. Im not sure what snap is. So its now quick elections. Not waiting until 2020, well do it in june. Nothing with voting on facebook or snapchat. Nope. Some day we might. Stocks to watch today. This ibm thing is weird. It is. Did you see the in buybacks and dividends, it looks like 2 2. 6 billion. Total Free Cash Flow was like a billion dollars or something. Were been saying this for so long. I know. Not how do you but how do you invest for this transition to a new business when youre paying out 200 of your cash flow and yahoo revenues jumping 22 as Quarterly Results smashed expectations. This is likely yahoo s last Quarterly Report as a standalone company. The deal with verizon expected to close in june. Shares of Intuitive Surgical ticking up after posting strong quartly result Quarterly Results. The medical devicemaker beating expectations thanks to its da vinci robot. And ultra genex seeing a pop after a phase three study to treat a genetic kidney disorder was approved. Stock up sharply. Facebook is holding its annual Developers Conference this week. Earlier this week they made a push into augmented reality. Ma one version overlays effects and photos and videos, similar to snapchat and those snap elections, but facebook will allow developers to contribute their own effects. Facebook spaces will allow you to interact with other users in an entire Virtual Reality world. We have some political news that may impact the market. The result of yesterdays special congressional eelection in georgia coming in overnight and we are headed for a runoff. John harwood has more on that story. John . We had our own snap election last night in georgia. And democrats did not get the snap and awe they were looking for in the first round of that voting. You had jon ossoff, the Young Democratic candidate who was the target of a flood of money coming in on his behalf in the district as well as volunteers, 8 million raised. He was able to get 48 of the vote in a very divided field. That is pretty good, but not good enough to win that seat outright. You needed to get 50 of the vote. Donald trump, who intervened in the race at the end with a robo call on behalf of republican turnout trying to dilute his vote share. With a bunch of tweets attacking jon ossoff the democratic candidate as a super liberal took credit last night. He said this was a big win for republicans. He was glad to be playing a part in that. And for jon ossoff who is just 30 years old, this was a disappointment. He spoke to supporters last night. Said he was ready to fight on. What fight on means is that on june 20th he is going to face karen handel, veteran republican politici politician. Not the most exciting republican in the field, however she will find the Republican Party mobilizing strongly behind her. We have a real battle in the district that has been represented by republicans for 40 years. Newt gingrich once held the 6th district. Tom price, the health and hulen Services Secretary won it easily in 2016. While this is a republican district, its not a huge trump district. He barely beat hillary clinton. So well have a big fight on our hands and have to redo all of this hype again in june. Talking about not bag trump district. Do you know who bruce level is . Do you remember bruce . No. Entrepreneur we had on the program. I met him in atlanta on squawk the vote. Joe, remember . Yeah. Trump supporter, jewelrymaker. In a swing state. Africanamerican businessman. There he is. Right. Derun . Polled 455 votes. Despite an youre saying despite an appearance on squawk box, he did not make the runoff. I was wondering. Did the president not make a trip down there to campaign for him or what . No. The president did not endorse a candidate. He went after ossoff. And he was simply the goal for the Republican Party was to make sure that on election day they had as much of a republican turnout as they could muster. Democrats did very well in the early vote, the mailin ballots. All of that all the things you can do with money and organization. On election day, the underlying structure of the district, a strongtilt republican produced enough turnout that those votes that jon ossoff got did not add up to 50 . Arethere are 1 republica1 re right . Thats right. Five democrats. I guess he got 48 or something. If he got anywhere near 43, which is what any democrat you will always have. You have the base of 43 down there. You spend 10 million worth of whose money was it . It was all out of state money. The guy doesnt even live in that state. All over the place. You spend 10 million, you get 5 Percentage Points . You have a base of 43, he gets 48. Do you think trumps tweeting yesterday and the day before helped galvanize republicans . Possibly. The republicans were trying to make sure democrats will a clear enthusiasm advantage. They lost the last election. The energy is usually in the next elections with the losers from the last ones. Republicans have been dealing with setbacks in the Trump Administration, including the veil you failure on healthcare that deflates their base. While they knew democrats were juiced, charged up, people were sent in to try to jack up his turnout, republicans had a challenge. I think trump put his shoulder to the wheel metaphorically speaking with the twitter account yesterday and made a difference. He tweeted this morning, it was entertaining. I saw some still from the hill or you know, the stuff you read every day. It said ossoff ready to deliver knockout blow. Just trying to figure that out. It would be one guy going to the house that happens to be a democrat . How many do the democrats need to pick up to take the house . But really, a knockout blow . 44. So trump was saying today, despite the efforts of the fake news, it doesnt happen. When you write articles like that, a knockout blow, youre frothing at the mouth, Mainstream Media hoping there guy wins what do you expect. Then it doesnt happen. Now it will fall by the wayside again. Its not a story anymore. Hold on a second. Im not sure the hill represents the Mainstream Media. But, look probably better than the average Mainstream Media not as bad as politico. Special elections inevitably become the focus of a lot of hype and importance. Theyre doing the hyping. They have some important everybody was doing the hyping. Right. Everybody. They have some importance. If the republicans lost this race, that would be a marker of the ability of the democrats to rally. Its not a knockout blow for anything. Its a fervent desire for that to happen, religious desire for that to happen but it didnt. Any way, thank you. Joe, before you go. Joe i have sports news for you. Nationals. My cousin Andrew Triggs no my cousin Andrew Triggs in the starting rotation for the oakland as won his nithird consecutive start. 30. He has not allowed an earned run this season. That is impressive. Amazing. Cousin . Yu jarvish and the rangers he saw last night. 12th cousin . Hes the son of my first cousin. That counts. That counts. Joe, youll be joe, youll be interested to know this. The off season before he made the majors, which was last year, he spent the winter working for jeb bush at the right to rise super pac. Nobody can say thats like nobody can say that no victories came out of the Jeb Bush Campaign because Andrew Triggs made the makers and hes now 30. He worked for a republican. Is he the black sheep in the harwood family . The red sheep. You dont know what youre talking about. Theres a lot of i knew there was a rhino joke coming up. Exactly. Con grgrats to your cousin. Joe, hold on youre the black sheep. A lot of my family is in the deep south. Then youre the black sheep. If you havent noticed, the deep south is pretty republican. So so hes not the black sheep. What happened, john . Whats his name again . Andrew triggs. The nationals must be good, because i see a 90 chance that they win their division. The reds are in first place. They have a 20 chance. No one believes it. Theyre 95, i think now. Any way i dont want to blow your mind or anything, but im a direct descendant of john d. Mosby, the gray ghost of the confederacy. You need to go back and change that history, i think, john. Thats what everybody is doing nowadays. Come up with somebody else. Any way, thanks. Lets get to the broader markets. Were joined by Chris Retzler and dennis gartman. Dennis, i want to ask you something. You say you just got to continue to slowly add to equity positions because thats probably what you should be doing, even though fillable market. Because all of us have to decide what to do if we have enough disposable income to invest. Yeah. Ifrmt dont n i dont know something about north korea, something about the unknowns out there that scare me and wonder whether cash at some point wouldnt be a cash at some point shall be a wonderful thing to have. Not yet. Theres been times when i have gone to cash, every time i had done it i wish i had not. You had a nice selloff in the last few weeks, its still a bull market. You should err on the side of being bullish. Yes, eventually cash will be a wonderful asset to have. But not right now. 2. 20 on the tenyear. The 2. 20 didnt come from global forces. It came from domestic forces. Fell below 2. 20 yesterday. Yeah. That seems to portend that the stock market has not been factoring in everything. It may have been the germi a bund. Joseph is now going to cash . The tenyear worries me. I wouldnt jump the gun with the tenyear at 2. 70, but where it is now markets have a propensity to go to the obscene number, then it turns around. You may get a 1. 98 just to get there. You can look at it as half empty half full there, too. 2. 20 might imply slower economy, but it gets you back to theres no alternative. Youre back to stocks being more attractive than 2. 20 on a tenyear. Thats what the driving force has been for the last year and a half, two years, three years. We may all find stock prices to be overpriced, priced te ed ear multiples they are, but if you fight the trend, it costs you money. Ive done it. I fought the trend, every time ive done it, it has cost me money. I trade from my only account, im up for the year, i find it difficult to buy stuff, but you have to. Were still at 20,500. You cant declare victory. We were at 17,500 when you were bearish. For you to be talking about cash is victory at this point. This is my own he has been consistently bullish. Right. Ive consistently said the markets will come down 5 . If you come back 5 , youre still at 19,500. With your own money you have to think, every quarter you have to think about it. A little bit. I put money into a vanguard mutual fund, set things aside there. This is like sabre rattling. You wonder if between that and syria if that is an opportunity to buy. As long as this guy doesnt have the capability of hitting the United States. Right now he doesnt have the capability of hitting the United States. Youre looking at that like looking at stocks with special situations, right . Yeah. Look, were in a period right now were in a period exciting for earnings season to start. We went through a lot with the elections. Its time to earn your multiple. Stocks have been up on extechtations, which we thought for a lot of the policies, pro growth which we think are coming are further out into the future. If you miss your earnings, as were beginning to see ibm and Goldman Sachs give you pause. If you can maintain growth rates, earnings and margins, i think youll be fine. We think opportunity will come about in the next couple months as companies do come down and miss. We dont think the growth the trajectory is over. We think were still in a bull market. The yield curve is flattening, which tells you the reflation trade is more under questionable times. We dont see the high yield market collapsing. Thats all good for small caps. And they underperformed the large caps. Ibm beat on the bottom line. Missed on the top line. Ibm and Goldman Sachs, you think those are the exceptions to the rules . Barracuda networks yesterday. It was a decent number, down 14 , 15 . So they are taking them down. The multiples are probably stretched in certain areas, but thats opportunity for a longterm investor. Ibm, well talk about them obviously some more. The earnings number was down almost 20 but above what analysts are forecasting. Yes. Revenue was down for the 20th consecutive quarter. 20 consecutive quarters. By its what theyre spending the cash flow on. Your point was apt earlier on, how can you spend that much money to buy back stock which is twice what you are taking in. Makes no sense. The revenue decline has been going on. They have not been overspending on Free Cash Flow, just to cover the nut, to cover the ability to do it. Something has to give. You have to spend in order to make money in the future. Thats what ibm has done here and is egregiously wrong. Thank you. When we come back, as we just mentioned, shares of ibm are plunging after the Company Reported its 20th consecutive quarter of declining revenue. Well dig through the report with an analyst next. Hey, the f, whats her problem . Apparently, i kept her up all night. She said the future freaks her out. How come no one likes me, jim . Intel does just think of everything intels doing right now with Artificial Intelligence. And pretty soon ai is going to help executives like her s trends to stay ahead of her competition. No more sleepless nights. Were going to be friends im soy about this. Dont be embarrassed of me, jim. Im getting excited about this we know the future. Were going to be friends because were building it. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distribud by invesco distributors inc. Welcome back to squawk box. Were having a fierce debate about ibm. Ibm has q1 earnings beating expectations, but sales fell short. The company has logged four straight years of quarterly revenue declines. Call that an anniversary. The stock down sharply in early trading. The stock now down close to 4. 5 . I think got closer to 5 earlier. Joining us to talk about this is james wang. Ibm has long talked about dont look at the revenue, theyre empty calories, its not the issue, were looking for a higher margin here, thats the ball game. Thats how they want the market to see the ball game. And watson. How do you see the ball game . We found ibm we traditionally wouldnt have gone for a name like this we were looking deep into the Artificial Intelligence field. If you talk about ai, most of the names that come up are stuff you already own. Alphabet, facebook, nvidia if youre into hardware. Outside of core internet theres not a lot of choices when it comes to investing in ai. Its an exciting field but not a lot of choices. Ibm we think is a legit dif rentaren differentiated thesis. If you are going to invest in ibm as a theme, theres one horizontal play, thatsizontal everyone, and a great specific play, ibm. What about the we talk about ai, i think there is a larger debate to be had about watson versus some other ai efforts. Sure. On this specific issue in terms of earnings, in terms of the continued decline in revenue, also in terms of the buybacks and dividends, the amount of money theyve been spending or not spending to give to you rather than to invest in the business, how do you feel about that. Theyre investing pretty aggressively in the business. If you look at their r d spend, they spent about 4 of revenues on r d consistently. Even in 0 and 09, they did not let loose joseph, whack him. What . I thought you were unhappy, you think ibm is terrible. Go ahead, andrew. Hes your guy. You had a whole you had a whole thing about someone pointed out to me that they are spending a lot of money, more than their cash flow, spending almost if you dont take out working capital, theyre spending 230 of their Free Cash Flow just to maintain the dividend and to buy back stocks. If youre trying to transition your business from the old ibm model to a new one, its difficult to have the money if youre spending all the money just trying to orchestrate a beat in earnings or to buy back or to pay the dividend. I think their accounting is fancy, but if you look at the actual reports of the r d output, theres no way but to recognize that they are actually doing good work. We hear a lot about google being advanced in ai, and they deserve a lot of credit. Ib ma we give amazon a lot of leeway, netflix a lot of leeway. Youre talking about the future promise, i dont know, maybe ibm deserves some of that a lot of these companies are trading on fumes about the future. We keep waiting for the Tipping Point. We do. Its been 20 quarters of declining revenue. This was not a narrative changing quarter. The revenue declined by another 2 . But its so they deserve the benefit of the doubt like some other companies. I dont think theyre heres the thing. Tesla. Ibm is trading 12 times this yours earnings. Theres no other company out there that you can buy that trades 12 times earnings. Thats how they do the earnings. I have an ai question for you. If you talk to the guys in the valley, dare i say yes. They will tell you about what they think of ai up here. They think google is doing, facebook is doing it. They would say microsoft to some degree is doing it, maybe amazon is doing a bit of it. They have a lot less respect for what ibm is doing, for what watson is. System of them in a derogatory way say its a fancy if then statement. Yeah. How do you think about that given that youve studied ai . I think thats whats interesting is ibm has been doing ai long before google existed. Agreed. Of course the valley guys will poohpooh the company. The deep learning stuff came out popularized in the bay area. I worked there at time it was very exciting. But if you ask anyone the key to ai is data. This new wave is about Machine Learning, the way you get smart is by feeding data into the system. If you look at data, whether its google or facebook, they only own consumer data. They own what you search, they own what you bought at jay cr c thats fine, but their play has been to go after verticals. By partnering with doctors, hospitals, insurance companies, tax companies. To use one example with healthcare. They spent about 4 billion of m a acquiring healthcare companies, four of them over the last two years, today they claim to have the largest Repository Data outside of government. When does it pay off . I think it will take another two, three years. Some of their solutions are just ramping. Like watson for oncology, which is the closest thing to the original watson tv program being remanufactured, that has just reached 10,000 patients and was at zero a year ago. The numbers are not showing partly because the base is low, but if the narrative is true, and it is a real debate, it will eventually show up. Great. Thank you. Thanks a lot. We need to get harwood back. Apparently if your first cousin has a child, its not really called a cousin. Its your first cousin once removed which is what i said while on the air. You dont listen to me. I didnt even know what that meant. First cousin once removed. People call them a niece or a nephew if its a first cousin once removed. Its not a second cousin. People will debate back and f t forth. All right. We have to get him back and square him away. Coming up, mark grants message to investors, beware of europe. He explains next. His weekend . His weekend . Picnics are delightful. Oh, wish we could. But were stuck here catching up on claims. But we just compared historical claims to coverages. But we have those new audits. My natural language api can help us score those by noon. Great. See you guys there. We would not miss it. Watson, you gotta learn how to take a hint. I love to learn. Welcome back. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning. Welcome back. General news, some sad news, i guess. Former patriots tight end Aaron Hernandez has been found dead in prison hanging, hung himself with a prison sheet. Last week suzy welch she had an interview with Bill Belichick and asked about Aaron Hernandez. He said i think the word was heartbreaking. That may have been the word that suzy put in afterwards. But something along those lines. All right. It says he was discovered by Corrections Officers in massachusetts early this morning. Thats in general news. Wow. We try to follow everything. Lets transition from that to talk about quarterly numbers that just came out from blackrock. The company earning 5. 25 per share for the First Quarter. Compared to the consensus estimate of 4. 89. Revenue came in slightly below street forecasts. Blackrock increased its Quarterly Dividend by 9 to 2. 50 per share. A snap election in the united king come. T kingdom are among events fueling uncertainty in europe. Joining us is mark grant. It seems like most of the world sat up and paired attention yesterday when theresa may they were calling for snap elections. You said you would stay clear of europe for a lot of different reasons. Do you want to lay out your thinking here . Yes. I would not be investing in anything in europe right now. When you have, as you pointed out, the new elections coming, the snap elections in britain. A nightmare scenario occurring in france right now where it was long thought that mr. Fillon or the other centrist candidate would be running against marine le pen. It appears now that one real option is that the leftwing candidate, melenchon, is really like Frances Bernie sanders, if you will. Communist, running against le pen. Either of those two as president of france is a disaster for the European Union. Mr. Melenchon wants to borrow all the money he wants and get rid of the stability mechanism in europe. Ms. Le pen wants to leave the European Union altogether and have a referendum about it. You have the italian Banking System that is bust. And you have greece, if you take their public and private debt, well over 5 500 billion, and its 302 debt to gdp ratio. You have too much risk in europe, and i want nothing to do with investing there at present. I told a lot of large Financial Institutions exactly how i feel about this. Mark, thats counter to what we hear from so many guests who come on the air and say europe is a great place to be. I would say that is kind of where the herd is headed at this point. I agree with you, but the herd is always headed off from another direction from where im headed. The reason is the technical analysis, fundamental analysis for european stocks looks interesting. But its the eventdriven horizon that is the carey part. I dont want to be in someplace that has a lot of possible the risk. So im avoiding that area of the world. Weve been talking about the tenyear yield this morning. Back up at 2. 2. 2. 2 , but fell below that yesterday. The lowest level since november 10th. Some commentary pointed towards the yields and german bunds. Why do you think were sitting at 2. 2 now . I think two reasons. Ill disagree with what was said earlier. I think part of it is global. I think the large european and asian institutions are very nervous about what is going on in europe. And theyre moving money into the United States as the safe haven. And then the tenyear treasury, its a huge pain trade, as you know a couple months ago everybody and their brother was calling for 3 tenyear. I was on your show with you, i said no, 2. 51. We backed up a bit past that. Now were seeing a huge scramble as many institutions bet the wrong way. If the fed continues to raise rates, will the yield continue to be so stubborn and hold out . Where do you think were headed from here . Okay. Lets address that, becky. The fed of today is not going to be, in my estimation, the fed of tomorrow. Meaning that mr. Trump, we know, is going to appoint four people to the fed in short order. So all these dot plots, all these people speaking at the fed and these conferences, theyre really talking about history. Theyre not talking about the future. Though he suggested he may leave janet yellen there just last week. Well, even if you leave janet yellen there, hes going to appoint Business People to the fed. In my estimation thats going to totally change the outlook of the fed. And where theyre going. I dont see see this big rate rise on the horizon. I think the market is making a comment about that. Were flattening to almost getting towards pancaked in terms of the tenyear versus the twoyear. That is giving you an indication that at least the bond Market Participants just are not buying this. All right. Mark, always love talking to you. Thank you for joining us. You, too. Always great. Coming up, when we return, the battle for defense contracts. Well get a special report from Morgan Brennan next live from a Lockheed Martin facility in south carolina. And later, riding the rails, how train transportation is performing under the Trump Administration. What to expect when the big Rail Companies report. Youre watching squawk box on cnbc. Always on the lookout for patterns and connections to make everything work better. I call it the internet of everything, but its really the internet of everyday life. The partnership between Dell Technologies and sap helps make the promise of the internet of things a reality for our customers. We know how powerful live data can be. We use sap at dell to run everything from finance to procurement to travel expenses. And thats the same kind of live insight we can now start offering to all of our customers. And as we get better information, better insights, it can improve virtually every aspect of society and the economy. Thats the opportunity of our generation. The next industrial revolution. Thats why Dell Technologies runs live with sap. Lets[ whimpers ] dog. Find pingpong. Find your awesome with the xfinity x1 voice remote. Thats amazing time for the executive edge. Were taking a closer look at the big business of defense contracts. Morgan brennan joins us from a Lockheed Martin facility in greenville, south carolina. Good morning, morgan. Good morning, joe. As we look behind me, these are t50as. I flew in this one yesterday. This is an upgraded version of the t50 golden eagle used to train pilots and military pilots in south korea and a few other countries. This plane is the plane that Lockheed Martin along with Korea Airspace Industries is proposing for the tx trainer competition. That competition represents one of the biggest contracts in play now. Its a 16 billion program for 350 jet trainers that are expected to be rewarded this year. When President Trump talks about rebuilding the military, a big part of that is future programs like this, which is sorely needed to replace the t38 trainers that pilots test fined for f35s and f22s are using. Even though they are dr dramatically different. This will come down to this system and boeing, they have built a brandnew plane direct to specifications. For lockheeds part, they say because it is already in production, they can begin building the planes now and they could deliver them two years ahead of the air forces schedule. As i mentioned, i did fly in that plane yesterday. Given the fact we had multiple conversations in recent weeks about what its like to pull gs, i thought i would just wrap it up with this clip for you. Ready . Ready. All right. Here it comes 7. Base ops. Oh, my gosh. 7. 1. Whew nice job. So, i thought i would let you know i just did 7gs and i lived to tell the tale. Wow. What did that feel like . Almost like a roller coaster on heavy duty steroids. Thats the only way to describe it. That doesnt even do it justice. Your whole body presses back, you have a compression suit on that inflates immediately, and you just shake. Afterwards, as the day went on, i felt sort of i felt like i had been beat up a bit. I didnt throw up, though. I was going to say, did you feel like you were going to throw up . Never . No. But after we were done and we were coming back in and we got out of the plane, i did feel like i had been knocked around a bit. I felt woozy and out of it. I was going to ask whether you had to rinse out that mask. Really. Because, becky hit a pothole on the way in this morning and threw up. I did throw up after being on the west side highway. Theres no way you would get through that. No. You were not nauseous for the rest of the day, just queazy or anything . I wasnt really gnaws hav s ynauseous, just achey, woozy. Are you okay today . Im good today. I had a little coffee. Thats helping. Drank a little water. The other thing we did, we did rolls. I got to even fly the plane for one of those rolls. You are kidding . They let do you that . They did. We have video. I dont know if you guys can pull it up, but its really crazy. Yeah. My husband is not a good driver but did you tell them that before they let you fly . The pilot said i was. Good job, morgan. We will see you again later. Fun day. I have to give a shoutout to elliott clemens, a, kaka hemo. When we come back, the china factor and the escalating problems with north korea next. Things are mixed in the european markets, the dax and cac are higher. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Welcome back to squawk box. President trump walking back Campaign Promises to label chinas currency manipulator after his visit with president xi at maralago. Our next guest is a china bull and says the currency has bottomed out. You like being called the bull . Peter alexander, founder and managing director, good morning to you. Lets talk currency. But help us understand in the context, if you will, of whats going on in north korea, and whats happening no, no, but this is the real sort of larger overlay to this is, our relationship with china, what happens with north korea, and therefore what happens to china and ultimately chinas economy. Okay. Well if youre trying to tie the two together basically between the Bilateral Agreement with the u. S. And china, what areas are there that the u. S. Is trying to achieve . North korea seems to be a very high priority. And how can they push, if you will, or work with, even better, the Chinese Government to be able to achieve that . So whether or not there was some sort of grand plan that was agreed to down in florida, or even before that, remains to be seen. But what do you think donald trump has on offer . What he has on offer is the market. Meaning that, you know, a lot of the talk thats been out there has been china has had pretty much open access to the u. S. Market. Right. And the United States has had very little to the chinese. But youve long thought that chinas going to open up . Very much so. And it has. And thats the irony over the last 24 months, especially on Financial Services, youve seen an opening up of the equities markets, fixed income markets, hedging of the curvesy, you name it. The issue is global institutions are just unwilling, if you will, to take advantage of it because theres concerns over what direction things will go. Theres a lot of volatile if i. And it always will be. Its an emerging market, after all. In terms of labeling them a manipulator or not. We were talking during the break, they might be manipulating it, but the other way. Right. I think what is funny is everybody jumped all over President Trump saying oh, hes walked back. I think in your segment you called it that. Its the most recent of many president ial candidates that say one thing on the trail. Bill clinton in 92 ill never forget talked about china with thenbush saying coddling dictators from baghdad to beijing. By the end of clintons tenure they were part of wto. There is a reckoning that the u. S. And the chinese have a symbiotic relationship. I think trump is trying to work his way into getting more from that. And but how does that manifest itself in terms of what happens to the currency . I think if you look at the currency right now its up 1 for the year. Our outlook is its probably going to be 2 higher this year, probably another 3 next year. A lot of it is sentiment driven. The governments been able to step in and slow the flows. You have a populist driving a lot of flows out. Last time we had you hear. Right. I think i mentioned have you ever talked to jim chanous and you said no. Look, between jim chanos, kyle bass and all these guys they were throwing bombs last year, about 30 , 40 devaluations. Some of the hardest money in the hedge fund has crowded in against the relast year and i think investors and their funds should be asking a lot of hard questions. Peter alexander. Appreciate it. Thank you very much. Coming up, British Parliament debating the Prime Ministers call for a snap election. Still dont know how that works. Use your mobile phone, i guess. Snapping who you want its a quickcall election. Thats what it means. Theyre going to have it in june instead of 2020. Wouldnt the results disappear if it was aquaman . Some fireworks, were expecting some fireworks between theresa may and members of the labor party coming up next in. That schwab billboard. Oh, not so fast, carl. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Happening now a big vote in parliament on theresa mays call for a snap election. A live lookin at that debate which is getting a little heated. Well tell you what it means for your money straight ahead. Can the transports get back on track . Two major railroads reporting after the bell. A preview of those numbers and what is next for the sector is just minutes away. Plus the Ford Foundation committing up to 1 billion to impact vesting. The foundations president will join us. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning welcome back to squawk box right here on cnbc. Were live from the Nasdaq Marketsite in times square. Im Andrew Ross Sorkin along with becky quick and joe kernen. In studio for the hour sharing his thoughts on the markets and washington, Scott Sperling is here, copresident of thl partners. Futures right now, a little bit of green there. Dow looks like it would open up three points higher. S p 500 up over 5. 5 points and the nasdaq up about 15. 15 points. A couple of big headlines earnings just out for Morgan Stanley. First quarter profit came in 1 per share compared to estimates of 88 cents. Revenue beating forecasts. Ceo james gorman is calling it one of the firms strongest quarters in recent years although says the market environment remains uncertain. Some on wall street would juxtapose those earnings against Goldman Sachs. Well talk about that a little later. Another wall street Earnings Report coming from asset manager blackrock. Earnings of 5. 25 compared to consensus estimate of 4. 89. Now revenue was very slightly below street forecasts. Quarterly profit was more than 30 higher than year earlier levels. And the fed will be out with its beige book later today. Thats the region by region assessment of the u. S. Economy. Its scheduled to come out at 2 00 p. M. Eastern time. Breaking right now, lets take a look. There are some live shots of parliament in the uk. And thats where the debate over a snap election has begun. Things can get a little heated in parliament. And theyve been doing that this morning. Yeah. This guy wants to do a facebook election. Not a snapthat guy is promoting an instagram election. There has been some debate this morning not only about that snap election which would occur on june 8th. Why snap . Theyve also been going back and forth about scotland. My guess would be scotland leaving the uk, not leaving not leaving the eu. Theyre going to get another referendum. Whether theyre going to get another shot at this, too. Wilford frost is going to be with us in just a little bit to wrap us whats been debated, whos been yelling at whom, and preview todays vote as well. Well tell you what this could mean for stocks as well. Switching gears back to equities a couple of stocks to watch today ibm reported Quarterly Earnings that beat expectations but sales were short of estimates and declined 3 from a year ago. That marks the 20th consecutive quarter of revenue decline for the stock, which is five years. Thats why im here. To do the math for us. To do things like that. Five years, every quarter, year over year, revenue has declined. This is a story weve known for awhile. Theyve wanted to get rid of what they call empty calories. Those the revenue thats not helping them. But theres been a huge question about when youre actually going to see the turning tide. The Tipping Point for when it gets back into its a 30year question, really. Going all the way back to grossman trying to figure out what hed do when mainframes get replaced by distributed computing and now trying to get into the cloud. Yeah, its a rough day. Im surprised that youre not seeing more of an effect on the futures. The dow futures. So some other stuff is offsetting it. This alone is more than 55 points negative towards the dow. The rest of the dow futures are making up for it. The rest of the market was mixed. Comcast was up. Yahoo revenues jumped 22 . Quarterly results beat expectations. This is likely yahoo s last Quarterly Report as a stand gentleman loan company. The deal with horizon is expected to close in june. A consortium you havent said one thing about adams in those comments yesterday. What did you like me to say . You didnt think that was a little weird . Thought it was interesting. Why would you say that . Why would you want to bring people up to speed you can bring people up to speed. Referring to yeah. Why would you say that if you were really which part are you talking about . About whether they were would do a deal with someone, an acquisition or a merger with someone. Right. But youre saying there were several companies that were mentioned, comcast wouldnt that be sort of a big deal if comcast or disney merge with verizon. A lot of these but there was also some question about whether you get so excited. Questions about whether Lowell Mcadams comments were walking about comments he made earlier. Come on, this is you. This is dealbook. This is you. Ive got to wait. To me theres a regulatory overlay that means that all of this is sort of then say that. What did you say . So its not likely to me, you cant do it. Wouldnt it be the biggest deal in history, either one . Oh whats the market cap . Verizons got a huge market cap, obviously. I dont know if it would be the biggest deal in history. 200. Is it over 200. Disney is just i think if youre acquiring disney normally you get really still under the price tag of manusman. You remember vodafone buying manusman but theyd have to pay a premium and this should be the kind of thing back in 2000 maybe. This should be the kind of thing that you just really go on. And im just surprised. I dont know if im disappointed. I thought i could have brought this up. Its an m a thing. Thats you, man, isnt it . I dont know whats going to happen. Probably not but to say yeah, consider mergers when the guy says i consider a merger with either one of those. I thought you worked for comcast. Im right here. Okay. All right. I it would be theyd be the acquirer with comcast . Or so its just not going to happen. Wed end up owning verizon shares . I dont think its going to happen. So thats why im not somehow you could see a little mo green going on there. You buy us . No were going to buy you. So im not sure that, you know who gets shot in the eye . I dont you know what happens. I know, someone is getting a massage and gets shot in the eye. You cant come in here and talk to a man like mo green like that. Anyway. All right. Lets talk about the broader markets. The dow dragged down triple digits by disappointing earnings. Gee joe political your honor certainty surrounding north korea, the uk Election Debate in parliament. Joining us to weigh in on all of this is jason trendert, Strategic Research partners chief investment strategist. Anastasia, jpmorgans investment strategist and Scott Sperling, with thl partners the copresident there. Jason, thank you for being here with us today. Why dont you tell us a little bit about what you see, because there are a lot of sort of doubters recently with the market runup that weve seen and people now really looking to earnings to see if they can put up the numbers. The good news is that earnings are poised to be up probably Something Like 10 for the First Quarter, which is a pretty meaningful change. As you might remember, we had an earnings recession that started in the Second Quarter of 2015, and it ended the Third Quarter of 2016. And a lot of that was due to energy, and the dollar. Lapping some of those problems. So the good news is that earnings, i think, are good. The bad news is that from my perspective is that the trump trade faded pretty dramatically in the First Quarter. So a lot of the things that really, we have a republican sweep portfolio that we created. And, a lot of the things that make that up, which are financials and industrials and all the other things that you would see in a republican sweep portfolio faded during the quarter, and tech really took its place. My own opinion, for whatever its worth, is that people should reload on that on the trump trade. I think that they i think its just going to be delayed. I dont think its going to be canceled. And it might take longer. There are certain things, though, part of the new administration that can happen without congress that would be regulatory reform, and deregulation of financials and energy. The budget, and taxes will take a little bit longer. You say buy now . I would. I would certainly in financials i would like in. I think this is a multiyear change in financials personally. Its not going to obviously be a Straight Line but i think this is an opportunity right now. Anastasia, you say when you look around you think that you see some deals in other markets that might be a little better at this point . I do. I look to european markets. I look to emerging markets. I do look to u. S. Cyclicals, and i look to reduce duration and add credit so i agree with the statement that was just made. I would add to this that this is not just about the fading reflation trade. This is about the election fears, and this time emanating from france. The reason why the u. S. 10year is at 2. 2 this morning is not because all of a sudden we had a collapse in confidence in the United States or the economic data. Its because investors are rightfully worried about the outcome of the French Election this weekend. So i think thats artificially been driving down the yield, the safe haven yield in germany, and has a knockon effect in the United States, as well. So i agree that this should be looked at as an opportunity to reload, and to amp up exposure to some of the trades we like, which is cyclicals, europe, emerging markets and credit over duration. Youre talking about shortterm pullback, particularly if the election goes smoothly this weekend, this could be as quickly as next week that the market picks back up. Im not, by the way, saying that this is going to go smoothly. I think investors are right to play a little bit of defense into this weekend. Because if the polling is telling us anything, its a very tight race. So its absolutely anybodys any two candidates race to win to go into the second round. So i think its right to play defense here. But you also have to look on the flip side of the coin and what if you do get a positive outcome. What if it is macron and le pen heading into the second round. Europe is a toughy. Were underweight, despite the fact that its cheap mark grant despite the fact that its cheap. Despite the fact that Economic Activity is picking up in europe, but i were very skeptical as a firm that populism has peaked. And thats really the bet that youre making. And there was obviously the dutch election, there were some german Regional Elections that might suggest that. Im very skeptical on that, though. I think, you know, you have a possibility in europe of a neverendum. This rolling existential question, you have france, you have germany, now youre going to have the uk, italy by next march, and thats, the lord only knows. Things wont stabilize you think in europe i think it might stabilize for a couple of weeks and youre going to have another election, and another one of another one of the member states. Scott, you probably have incredibly important view of the u. S. Markets. And private equity always seems to be the smart money, deciding when to buy, when not to buy, when markets look expensive. When you look at the u. S. Market does it look expensive to you . Thank you for the incredibly smart comment. Im not so sure i will earn that. The markets have been pretty frorsy for awhile. Weve seen them go up. Some of it on the animal spirits coming out of the election with the expectation that all these good things were going to happen. I think the reality in terms of the fundamentals are going to get better because you havent yet seen the full effect of the regulatory pullback. So without changing any laws, all you have to do is have the regulators no longer start to legislate as they have been and enforced in ways that went well over whatever the existing legislation was. I think thats impacting a number of different sectors from energy to finance to health care to a number of things. And i think thats going to have a very positive impact on the performance of companies in a fundamental way. Im hopeful that washington get itsability together, and one of the things to focus on with that hope is that we have a president who, as he says, likes to win. And i dont think you can win solving complex issues with complex solutions in todays political environment. So what does that mean . That means that nobody gets a nuance well, your best hope is some tax reduction as opposed to reforming the entirety of the tax code. If you thought health care was bad, as people say, then you know, this whole debate over do we do a v. A. T. , which has all sorts of unknown implications for our border adjustment tax . The border adjustment tax. I would hope its gone because i do think we just its a wild card you dont need. And i dont know if youre ever going to get to a 20 Corporate Tax rate. But im not sure you need to. I think if you get to 25 , 26 you bring down other rates and you go for a simplification across the board, that would have an enormously positive effect, and my hope is you have a president that wants to win, and you have a belief that there is some central agreement that can be reached, then youre going to have another positive impact on the markets. So, thats the hope, well see what happens. All right. Scotts going to be with us for the rest of the hour. Jason, thank you for coming in, anastasia, its great to see you today, too. Okay, when we come back, the rails have been long considered a good economic indicator. Tonight, we got two major railroads that will report results. We will find out what the street is expecting and how you should play the sector after the break. Later lots of buzz around europe this morning, including a vote in parliament on theresa mays request for early elections. A closer look at whether or not you should be buying european stocks right now. Stay tuned youre watching squawk box right here on cnbc. To err is human. To anticipate is lexus. Experience the lexus rx with advanced safety standard. Experience amazing. Usaa gives me the and the security just like the marines did. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children. Were the williams family, and were usaa members for life. Welcome back to squawk box everyone. Shares of Morgan Stanley are higher this morning after the firm reported quarterly profits of a dollar a share. That was twelve cents better than had been expected. Revenue also beating forecasts. That stock is up by 2. 25 . 42. 15 is the last trade. Going back to the Lowell Mcadams comment on verizon. You want to do it now . No you dont want to do it now . No, i dont. You dont . No no okay we can talk about it later. No we cant. We can. No, we cant. Talk about the dow becky do you need a helmet . Sometimes. I feel that way. Flak coming in and coming down. Thank you. Transports had a rough ride so far this year. The group is down just over 1 . But tonight, things could get back on the track. Oh, boy. For the sector when two major railroads report results. Dow transport component csx and Canadian Pacific will be out after the bell. Joining us, donald broten, managing partner and principle at broten capital. Don, it was, i think the last time we spoke, we were staying well Commodity Prices are still weak but we got this riproaring economy, either here or coming. From the trump train. And so this is going to improve. Now, i dont even know where we are right now. Now, maybe even that narrative isnt as strong as it was. You look at the tenyear. You look at the gdp numbers. It was that was just reported. Even the jobs numbers. Is there reason to be not as optimistic about an economic rebound right now, which would help, obviously, the rails . No, not quite the contrary. What you have hang is i would say the stock Price Performance since the beginning of the year is really a function of we had a rally going in to the end of the year. And now theyve just been looking for waiting for the evidence to come along. But when you look at the volumes underlying, chemical volumes in particular have been very, very strong in the United States. And even in canada. And what thats telling you is that industrial productions is indeed picking up. You know, chemical volume is such a great predictor of industrial volume because its almost impossible to make or assemble anything of any magnitude without consuming some form of chemical. So, the five most important things in deciding whether to buy or not buy a railroad stock are are there five . Can you come up with five commodity . Week Commodity Prices doesnt help, right . Well, it doesnt well, it depends. It depends on what the demand side of it is. The pricing of a commodity could be simply, as in the case of oil, that weve discovered a new technology in fracking, and that allows there to be plentiful, cheap oil. And it doesnt mean the volumes going down. I started at the macro level and look at the dollar. We certainly had a strengthening dollar going into the end of the year and then theres been more placid since. Usually strong dollars are bad news for railroads. But weve had tend growth in chemical volumes, now, we have very easy comps, but in the case of csx and Canadian Pacific we have a different story. You have the macro story, then you also have a different Management Team story. So give me some of the other ones, then that help us decide whether to buy a railroad stock. What else . Most of these guys logistically the mergers have happened, theyve got their act together in terms of efficiency and operating, right . I mean you dont try to find someone undervalued because they have you know, they got a lot of upside, you know, from getting better. Csx is a different story. Understand you have to have the macros right. These are cyclical businesses. So whats the dollar doing . What are Commodity Prices doing . What are commodity demand volumes doing. Whats happening with housing, building, auto, et cetera. All those things are important. But then you also get down to the level where you got a guy like keith treel who runs Canadian Pacific and hunter harrison, who is the michael jordan, Wayne Gretzky of railroading. You have to understand what hes capable of. In the First Quarter results that csx is about to produce hes only been there just a mere little over three weeks. But i guarantee you that the results are going to come, theyre going to come fast, because thats what hunter does. Hes going to go in. Hes going to take out any and everything that doesnt produce return. Hes going to sweat the assets, and these are very asset intensive companies. And so anything you can do to improve asset utilization is the fastest way to improve the finance results. Hunter is one of these guys who literally, if theres an extra paper clip somewhere around in the csx infrastructure that isnt being utilized, he will sell it, he will get rid of it, and hell make better Financial Results as a result. Then youve got cars, right . Youve got auto sales matter. And then i would think infrastructure, or at least Construction Activity would be bullish for the rails. Absolutely. To the extent that we get infrastructure built, somebodys got to move that cement, somebodys got to move that aggregate, somebodys got to move that steel to make that build happen. And rails are definitely almost the entire trip, if not the entire trip from the mine and the mill to the destination where we all get to ride on that highway or go over that bridge. And then what about i im giving you your five things. You were supposed to do this for me. And if im dragging this out what about auto sales . If auto sales peaked doesnt that matter whether were at the end of that cycle . It does matter. But, yeah, no, it does matter, joe. But heres the thing, are auto sales going to go get cut in half or do they go down by 20 , or are they going to be down mid Single Digits this year . I think down mid Single Digits is probably more realistic. If you have enough volume in other segments that can more than offset a little bit of weakness here or there. Its like any business, the whole picture, its not just one segment that makes it. What im looking for, though, in these two particular rails is more important is asset utilization. Am i going to see train speeds go up . Am i going to see times going to go down . Am i going to see cars online . Are they managing their inventory of cars more efficiently . I look at csxs results in the most recent quarter, their ontime pickup was just over80 . Their ontime delivery was just over 60 . I guarantee you, day one, hunter walked in and said, thats not acceptable. Both of those numbers need to be over 90, and this is how its going to happen, and this is what were going to do to make that happen. And like i said, asset intensive companies, you increase asset utilization and financials get better really quickly. Got it. All right, don, thank you. Thank you. Okay still to come this morning a number of strategists telling us that europe is the place to be putting money to work. This, right now, is parliament debating Prime Minister theresa mays proposal for early elections in the uk. Were going to get an update on that and whats been said and find out if its time to buy european stocks when squawk returns in just a moment. Time now for todays aflac trivia question mr. Diaz. Mple procedur, were just going to make one small incision here, then were gonna go in and remove your 67 corvette. My vette . Its just a gall bladder you dont have. Aflac paying you cash, so you might have to sell that sweet little muscle machine just to cover your rent. More funny juice. But my papa gave me. That. Car. What do you wish you had . Aflac. Ohh, i love doing that. Health can change, but the life you love doesnt have to. Keep your lifestyle healthy with aflac its your tv, take it with you. With directv now and at t, get the ultimate in Entertainment Plus unlimited data. Get directv now for 10 a month when you have the new at t unlimited plus plan. Im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. Now the answer to todays aflac trivia question good morning. Welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square. Among the stories front and center, Mortgage Applications fell 1. 8 last week. Thats according to some new figures from the Mortgage Bankers association driven entirely by a drop in new purchase applications. Refinancing activity measured a rise as Mortgage Rates fell to their lowest level since november. Also pet food and supplies retailer petsmart extending its Online Presence announcing a deal to buy chewy. Com. Do you use chewy. Com . No, do they sell pig ear, do you know or lamb for you or the dogs . No, no, you buy that for your dog. Can you imagine buying lung for somebody . But you do. Its an online seller of pet supplies. I dont know if its called chewy, the financial terms of the transaction not disclosed. Petsmart was taken private two years ago. Did you bid on that f we did not. We used to own we have been heavily involved in the pet business for a long time. Scott sperling, private equity mogul. Its a great space. People care about their dogs. And cats. And whatever else. We pay unbelievable amounts of money for crazy stuff. And the margins must be huge. Like, well, i think online i could get an elk antler for less than 40 or 50. But its a bone that lasts basically forever. You know, again, its a business going through some level of transition, and the threat from ecommerce is pretty significant. Its real. Youve seen that impact the margins are so high at the pet store. The margins are reasonably high. But you know, the same store sales across retail, in pet superstores are no exception are suffering because of the growth of the ecommerce channel. But the weight of a lot of these things, meaning theyre physically heavy, costs more to you know, i get we have three dogs, and i get dog food, you know, delivered every month. You think were at a Tipping Point with retail . To hear that its been impacting the pet stores. I think we have been at a Tipping Point in the sense of growth. Whether or not we see it go negative on bricks and mortar, you know, maybe the smartest people look at whats walmart buying. Whats pet smart buying . Where are they expanding . Is it more white space expansion with stores . Or are they trying to change channels . Theyre trying to change channels. The problem with a lot of these changes is that the margin structure and the profitability of ecommerce isnt necessarily what it was, as you point out, in the bricks and mortar store, and so youre seeing this transition occur, and you know, history would suggest its going to be pretty rough. Youre buying a car. I might. I might finally break down. You dont own a car . Im a proud new yorker without a car. Next im thinking dog. Yeah. You know, then you go to go to the burbs. I could see you carrying one of those little dogs around. Its got to be a little dog. No, i think its inhumane to have a big, large dog in a new york city apartment. I do. I agree with that. Its also harder to carry, right . Do you think we have labs. Beautiful. Now heres my joke that i always use. So i go in carls got that little thing. He does. Lucky. Dont mess with lucky. Very cute little chihuahua. Lucky is adorable. So, you go in and buy like a bag of pig ears. Yeah, i dont do that, buy the way. Its not an acronym. I thought it was like bear claws. Give me a bear claw. Its not really a bear claw. Pig ears are pig ears. Yeah. I bet thats a high margin product. And theyre greasy, and theyre big, and theyre [ dog barking ] you could see him with you know the nice thing about that is then you need the vet deal. So, because you know, look, theres no there are no reimbursement issues, government reimbursement issues with vets. You walk into the vet its 350. Thats the thing. They say hi, and you say oh, im in the wrong building and you get a bill for 250 for walking in there. The boys need a dog. You should get one. The boys need a dwaug. Like scott said. We need one, too. Pomeranian. We could get a parrot. A marmut. Theresa may will likely get confirmation in parliament for her early general election on june 8th. In the next hour. Cnbcs wilford frost, a bachelor, you cant get a dog wilford, its got to be its a family thing, joins us now with more on what it all means. Hey, wil. Joe, yes indeed. That parliamentary vote comes when the current debate finishes. Its been heated, as usual. Heres theresa may. And every vote for the conservatives will make it harder for those who want to stop me from getting the job done. Every vote for the conservatives will make me stronger when i negotiate for britain with the European Union. And every vote for the conservatives will mean we can stick to our plan for a stronger britain, and take the right, longterm decisions for more secure future for this country. To recap, theresa mays main reason for calling this election is her current strength relative to the main opposition party, labor. The latest polls give her a 20 percentage point lead. This is huge in uk terms. For some perspective, in 2015, David Cameron won the current conservative majority with 36. 9 of the vote to labors 30. 4 . Just a 4. 5 lead. Could the polls be wrong . Well the risk for theresa may is that this becomes a de facto second Eu Referendum with her party representing leave, other parties remain. In that light, may is certainly risking some of her mps in proremain prosperous urban constituencies, and parts of the rural southwest, who will likely lose their seats based on campaigns centering on brexit. She believes shell take enough off labor elsewhere, particularly the north of edge land, for it to be whort while. Another big risk is what this ends up meaning for scotland. Either way sterling and the ftse settling down today after the pound rallied past 1. 28 yesterday on the expectation of may increasing her majority and with it her Bargaining Power with the eu in brexit negotiations. The ftse hitting negative territory yeartodate returns earlier this morning. Having fallen 2. 5 yesterday. Wil, thank you very much. All that Political Uncertainty surrounding the Upcoming Elections in europe, including right now that snap election in the uk, so is this the time to buy or is it just a little too risky for europe right now . Joining us for more is david zahn, head of european fixed income at franklin templeton. David weve seen how this has played out in the bond market for european bonds. All this uncertainty has certainly spooked people a little bit. What would you be telling people to do at this moment . I think what we have to do is look at the fundamentals. And i think that theresa may calling an election will solidify her majority in parliament, which will make it much easier for her to negotiate, and get anything passed that she does negotiate. So i think thats positive. For the brexit outcome. And so we think that, you know, uk bond yields will continue to do well. Conservative government tend to be very fiscally austere, and so therefore that should be beneficial, and the pound, i think, is seeing some optimism that yes, actually, there could be a good outcome. And i think thats important. So you would be telling people to go ahead and buy, that the risk is less than might be implied not only by the uk situation, but also by the French Elections this weekend . Well, i think we have to split the two. I think that the uk election, i think, is the lead is quite wide. So i think theres a good chance that she will win. And the French Election, i think that election is wide open. And you have four different candidates that could go through to the second round. And any theres several combinations of that. Which could be quite bad for france. Theres some combinations that could be quite good for france. So i think that french government bonds, and french assets are not really pricing in that risk. Were kind of just sitting in the middle not really sure whats happening. I think we need to have more information there. We dont even any french government bonds in our european accounts. What about german bonds . German bonds are very good credit quality but theyre very rich. On the short end of the yield curve is very negative. So we dont own anything there. We do own a little bit out in the 30year sector which doesnt have a huge amount of yield. That has the yield of about 90 basis points but its kind of a hedge for the rest of europe. Coming undone. And thats really what the French Election is about. Is whether or not you get in somebody like a le pen, and she calls a referendum and what does that mean for the eurozone. Thats what people are concerned about. I think the probability of that is not that high. But beyond the French Election, there are all sorts of other questions. Questions weve been asking for seven or eight years at this point about the future of europe. If its not france, then potentially it could be the next step with greece, whether they choose to pull out or whether they get kicked out. Whether italy chooses to take itself out of the mix. We had a guest earlier today who suggested, jason trennert, who said, look, if you want to get into europe, then you are guessing that the populism play there is done, and hes not convinced thats the case. Are you . Well, i think populism will continue to bubble along in europe. I think that probably this election cycle its probably too early for populism to come back into the ruling party. And so i think from that perspective, it probably is going to be the next election when we need to be very concerned about it. I think this one well probably still stay more mainstream. Germany, especially, will stay mainstream. France will probably stay more in the middle. And then we can see that change back to populism if they dont do anything to fix the eurozone. I think thats one of the reasons why European Assets can do okay is because the ecb is going to the central bank is going to continue to be accommodative for the next several years. Because they have to. Theyre the only ones doing anything to keep growth up, and keep inflation up, and keep euro down. And so i think in that environment, you really need to have that. Give politicians time to make some adjustments. David, thanks for your time. Thank you. Coming up, unleashing the power of endowments. One of the nations largest foundations committing up to 1 billion over the next ten years to help reduce poverty and injustice. The president of the Ford Foundation, darren walker, is here to tell us where they will be putting that money to work. Check out the futures at this hour. Squawk box will be right back. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Welcome back to squawk box this morning. The Ford Foundation pledging 1 billion of its endowment to Mission Related investing. We want to bring in darren walker, the president of the Ford Foundation. And this is a major milestone in missiondriven investing, if you will. How did you come to this . Well, andrew, when you think about the mission of the Ford Foundation to reduce inequality in the world and advance social justice, we have to use every asset in our tool kit. And our largest asset is, in fact, our endowment. But, by law we only have to spend 5 of that annually. So the question is, how do we use the other 95 to advance our social mission . So what were you doing before this stuff . Well did you not think about these other pieces of it at all . I mean, what was the mix . Well, the mix was, 95 invested in a traditional right. Portfolio. And were you getting pressure from i mean did people come to you and say you need to start thinking about this . How did it all come to be . I think when we consider the challenges in the world today, and the fact that theres 850 billion in foundation endowment, and 95 of that is invested in traditional traditional investments. So the question is, how do we think about using that money, that capital to advance our mission . What kind of stuff were you in that you no longer will be in and what kind of stuff will you be in that you werent in before . We will be in affordable housing. We will be in Financial Services for the poor. These were not areas we invested in outside of our 5 grantmaking and Program Related investment budget. So this will be a new kind of frontier for us. But its essential that we think about how to deploy capital for social impact. Its no longer good enough to say, do no harm. We have to say, how can we do good . Did you change your quote unquote hurdle rate, if you will, in terms of how you think about investing to pursue a sort of more socially missiondriven investing approach . Well, thats a really interesting question. Because when you look at the housing funds, the housing marketplace, there is a lot of money to be made in affordable housing. So im not willing to say that theres going to be some big haircut because we now are investing in housing for the poor, housing for low income people. There is money to be made. You know, 25 years ago when i was working in harlem, we were doing housing, a big supermarket. We couldnt find investors. Today, theres a huge marketplace. There are clients who want products that serve their financial needs, but also make them feel like theyre using their capital to do good in the world. And back to the second part of the question, are there things you were invested in that you now no longer feel comfortable investing in . No. We had a traditional screening. No tobacco, no guns, that sort of thing. But we are confident that our traditional portfolio will continue to do well. We have always been a high performer. But what we need to focus on now is how do we build this new marketplace . So that more capital flows to social impact . And how are you investing, and the reason i ask is, private Equity Industry over here is now starting to think much more missiondriven. Im thinking tpg just started a fund called rise. Others are doing similar things. How do you see the money flowing in to funds like that, relative to more traditional funds, and how do you think thats going to change investment . I think there will be more funds, likewise. And thats in part because clients, consumers, will be demanding more products. Right. And so clients like the Ford Foundation and i think an increasing number of large foundations, and High Net Worth individuals, are going to be looking to fund and so were going to see those kinds of vehicles multiply, i believe, in the coming year. Have you had that experience thus far . More as a investor, contributor in a number of social finance things, including my wifes been very involved in social finance bonds which i think is a great concept of being able to prove out, use that kind of public financing, to prove out a concept that can have a major impact, where the individual contributor takes the risk, but then can stimulate Government Support if the project works. And i think those and the money goes further that kind of way . Those kind of Public Private partnerships i think are going to become increasingly important in order to be able to leverage into the objective that i know you have. Absolutely. Theres no way well solve these challenges without Public Private partnership. Let me ask you about just, in terms of tracking missiondriven investing. I did a column earlier this year with bono, whos involved in the rise fund. And he said that a lot of these deals are bad deals done by good people. Meaning that theres a lot of people who want to do the right thing, but theres been a almost a laziness, i think was the word he used, in terms of how people approach it, and then ultimately track the success of these investments. You need these investments to work for your endowment to work. Absolutely. This is a charity. Right. This is an opportunity to make the Capital Markets work. For social impact. So what bono i think was talking about is a lot of people came in to this marketplace early on with a kind of a charitable instinct. Right. Dont do that. Thats a big mistake. Were coming in to this with the instinct to do good, to do well, and to deliver performance. Okay. Darren walker, thank you. Appreciate it. Happy to be here. When we come back, abbott labs reporting just a few minutes ago. Well take a look at the numbers and the entire Biotech Sector after this. And is the border adjustment tax dead . Former commerce secretary Carlos Gutierrez will join us to talk trade and the president s proposals. N, i just need to knof the customer app will be live monday. Can we at least analyze customer traffic . Can we push the offer online . Brian, i just had a quick question. Brian . Brian. Legacy technology can handcuff any company. But yes is here. Youre saying the new app will go live monday . yeah. With help from hpe, we can finally work the way we want to. With the right mix of hybrid it, everything computes. The power of the Nasdaq Market. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Abbott labs reporting moments ago. Meg tirrell joins us with a deeper look inside abbott. Thats right. A beat on both the top and bottom lines for abbott labs on earnings per share and adjusted basis coming in at 48 cents versus analyst estimates of 43 cents. In terms of revenue, 6. 34 billion dollars versus analyst estimates of 6. 15 billion. The company also reiterating its 2017 adjusted earnings per share guidance of 2. 40 to 2. 50. Theres been a lot of news for abbott recently renegotiating the terms of the adeal with ahere. Be listening for any commentary on that. Call starts at 9 00. The share looking up just 1 on low volume. Beats and unchanged guidance in the First Quarter. Okay, thank you for that. Lets get some final thoughts from our guest host Scott Sperling, thl partners copresident. Youre looking for today. Final for today. Thats good. Final for today. I dont like that, right, exactly. Hes fine. Hes good. Where do you think this is all going to go . Between the time we see you now and see you next. So, again, as i said, im reasonably optimistic that we have fundamental drivers that are going to be very helpful to investment, for investment opportunities. But lets face it, the market in terms of conventional metrics still is reasonably pricey. Youre looking at almost 19 times forward p e. Maybe thats a good metric. Maybe there are better ones. But, you know, you need to have good performance to sustain this level. I think if you look around the world, i still like the United States better. For all the reasons that some of the guests were talking about. I think the potential divisiveness in europe, and the corresponding impact on the markets there remains a very significant risk to their fundamentals. And i dont think that dissipates. The election, populism is a sign of other underlying problems. And thats not going away because nobodys dealing with those problems. So i think that theres still some risk in europe, and if you look at emerging markets, the developing world, its the end of the whip. In other words, if things go bad in the u. S. , and we hit a recession, and look its been a long time since the last one, so you can argue that were within a couple years of recession. But ive been saying that for four years. At some point im going to be right. Have you been holding onto cash waiting for it . We have reasonably high hurdle rates. I would say that in our business weve been very unsuccessful at buying things at auction. So, you know, in our last fund the dozen deals weve done eleven of them have had to come from other sources. And theyre on average much smaller than i would have exp t expected. Were looking for companies that we can build upon. Thats how you find things at prices that to us make some sense. Its hard to go directly into the public to private big deals and find value there. Other investors say look if i cant get any yield in the bond market though it makes the stock market look more reasonably priced. Right. Than p e ratio might suggest. I think thats exactly right. The math works until it doesnt. In other words, you know, if we get the growth and rates go up, then obviously that math changes, and the relative the multiple that you would expect to come out of that formula will should compress. So you know, its a little bit of a twoedged sword. But its definitely true that when you look at the cost of money today, it justifies higher multiples. What we need is higher growth. And thats what we havent had and thats what again im hopeful we get an environment that allows for that higher growth rate. Pet supplies. Pet supplies. Its a great growth area. People pay up. You dont even ask. Its like, its for my dog. Crazy. Thank you, scott, its been great seeing you. Thank you. Good to see you all. When we come back, former commerce secretary Carlos Gutierrez talks trade wars and the president s agenda. And later Facebook Holding its Developers Conference this week. Well take a look at what the company is working on and what it means for the stock. Squawk box will be right back. Fees . What did you have in mind . I dont know. 4. 95 per trade . Uhhh. And i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 4. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Thithis is the new new york. E . Think again. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov at bps cooper river plant, employees take safety personally down to each piece of equipment, so they can protect their teammates and the surrounding wetlands, too. Because safety is never being satisfied. And always working to be better. You never got the brakes looked at . E girl. Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading Companies Lead with digital. Earnings alert. Blackrock and Morgan Stanley both beat the street. Were going to dig into the reports. A showdown in parliament. We welcome the general election. But this is a Prime Minister who promised there wouldnt be one. There are three things that a country needs, a strong economy, strong defense, and strong, stable, leadership. Thats what our plans for brexit and our plans for a stronger britain will deliver. Uk Lawmakers Debate the Prime Ministers call for an early election. The latest on the vote is straight ahead. Plus the business of beauty. Makeup mogul bobbi brown is going deeper into Department Stores. She will join us on set as the final hour of squawk box begins right now. Learn from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc. Were live from the Nasdaq Marketsite im joe kernen along with becky quick and Andrew Ross Sorkin. The futures right now are up 14, even though ibm is down like a lot. Down like eight or nine points. I havent checked it recently. Eight or nine points puts about 50, 60 points of downward pressure on the dow. Yet still higher. S p indicated up 7. Dow up 14, nasdaq up 18. Treasury yields up a little bit in recent sessions. They had been below 2. 2. Morgan stanley reporting earnings in sharp contrast with rival Goldman Sachs which reported yesterday. First quarter profit came in at 1 a share compared to estimates of 88 cents. Revenue also beating forecasts. The Ceo James Gorman is calling it one of the firms strongest quarters in recent years although he says the market environment remains uncertain but as you can see, Morgan Stanley shares up by 1. 6 . Shares of ibm as joe mentioned are under pressure. The Company Reported Quarterly Earnings that actually beat expectations, but the sales number was short of estimates. Revenue declined 3 from a year ago and that marks 20 consecutive quarters of revenue decline. Ibm shares are down by 4. 8 . Thats a decline of 8. 16. A lot of talk about this throughout the trading die. Also bidu is banking a selfdriving Technology Later this year. The Chinese Company said its apollo project will provide tools that carmakers need to make Autonomous Cars challenging the likes of google and tesla. And across the pond a heated debate is under way in parliament over british Prime Minister theresa mays plan to hold an early election in june. Results from the vote are expected soon. The main Opposition Labor Party has welcomed the call for snap elections meaning its almost certain that the Prime Minister will obtain the twothirds support she needs for the election to be held. And President Trump signing an executive order to bolster protections for American Workers and American Made goods. At snapon tools headquarters the president also called nafta a complete and total disaster. Comments we heard on the campaign trail. Joining us right now is former commerce secretary Carlos Gutierrez, the chairman of the Albright Stonebridge group. What do you make of those comments about nafta . Hes sort of gone a little back and forth on this now. No, no, no. I have been a Firm Believer in nafta and i am a Firm Believer in nafta not you, im suggesting President Trump. Oh, im sorry, im sorry. Okay. Yeah, look, i think that theyre going to go forward with some negotiations. Nafta is 25 years old. So, you know, it was before the internet took over the world. Theres a lot to update. I think the idea of restarting nafta and renegotiating nafta is not a good idea and its not good for our economy. But you know, you mentioned the buy american, hire american, i think that is the the scope is relatively small. But its tremendously symbolic. So it does have a Ripple Effect around the world where other countries will do pretty much the same. But, you know, if you look at it, not a lot is changing on both sides. Whether its the buy american or the hire american. And thats all part of, you know, having an impact on the way the world reacts to trade and reacts to opening up their markets. Mr. Secretary if you were in charge of trying to bring back jobs to america, what would you do . Incentivize Foreign Investment as much as i could. I would review our immigration laws, because i believe that we need more immigration, not less. Its a matter of math, very simple math. The economy gross on the number of people in the workforce and the productivity of those people. Our productivity has been relatively low. So were not going to grow 3. 5 through productivity. And our nativeborn population isnt enough to keep the workforce growing enough to grow at 3. 5 . So, you know, for me its an economic issue. I think we need more high tech workers. I dont know what were going to do about the million farm workers we need. Its just its a reality of our economy. The other thing, too, is look at banking regulations. I think the president s right on. In terms of doddfrank. I dont think small businesses, startups, new ventures, medium sized businesses, are getting the capital they need. And at the end of the day, this economy works on the basis of new businesses. New businesses hire well over 50 of all new employees. All new jobs are created. Primarily by new businesses. Not small, but new. Our startups are actually down. Which is a bad thing, because in the future. Right. You know, thats the pipeline for Large Companies in the future. So those are a few things. I think tax reform is a great idea. And if we want to attract Foreign Investment, and investment in the u. S. , i think we have to do it through incentives. Right. Not, you know, not through punishment, if you go overseas. So, you know, those are all things that work. Secretary and i think the president should get on those things that actually help hit the 3. 5 were coming up on 100 days here. How would you grade the administration thus far . Well, look, first of all, i think the idea of this artificial 100 days is crazy because you cant judge a ceo in the first 100 days and what they do in the first 100 days will be very different than what they do in 18 months. I would say hes done a very good job on building a team. And he has a good team. This is a good cabinet. Hes delegated. He that looks to be one of the bright spots. I think theres still a lot of question on policy. And whether it be foreign policy, domestic policy, and i think thats the challenge, is its either a management process challenge, or just a discipline challenge, but policy is the key. Mr. Secretary, when your clients, in your current role, come to you and say, what do you think is going to happen . Meaning what do you think is going to happen to tax policy . Whats going to happen to Infrastructure Spending if thats really on the table . Whats going to happen to Health Care Reform one way or the other . What do you tell them . Look, thats very uncertain. And thats the big question. What we know is that health care was not easy to put through. And just think about tax reform if you want to step back, okay, take taxes down. Spend a trillion dollars on infrastructure, increase defense spending by 58 billion. Dont touch dont touch Social Security or medicare. Well how do you put that together in a way that doesnt blow up the deficits . Right. You can, perhaps you can do it in the top line. By growing. But were not going to grow if we continue to clamp down on immigration. But youre in d. C. So what do you think the chances are that we get some tax reform . What is the chance we get this Infrastructure Spending . Look what youre seeing out there. I think the highest probability is probably infrastructure, because both sides agree on infrastructure. The tax reforms going to be tricky. Because, you know, how do you pay for it . And theres always this idea that the tax for corporations and big, bad multinationals, which you know, thanks to those big, bad multinationals we have the best economy in the world. But, you know, theres this string inside the Trump Administration that is on one hand its probusiness. On the other hand theres a socalled globalist corporatist elite. Well thank god for that corporatist globalist elite because thats why we have the best economy in the world. Thanks so much. I think infrastructure is more likely. Right. Tax reform can be done, but i think its going to take focus. Just lets focus on tax reform for the next twelve months, and stop the distractions. Secretary, that was pretty unapologetic defense of globalism. You think populism goes by the wayside . Well i think the numbers will tell. You know, at the end of the day, its going to be the numbers. And we have a president that is numbers oriented. Results oriented. And whether populism works or not, is going to depend on how fast were growing gdp. How fast were creating jobs. Its a matter of results. So at some point after the 100 days in six months, in nine months, in twelve months, the numbers will start showing up and thats when policy will be reflected in the numbers, and you cant hide from that. Okay. Mr. Secretary, thank you for your time and your perspective, of course. Always. Thank you. Weve been talking about earnings this morning. Blackrock also out with earnings. Leslie pick ert joins us right now with a rundown of that. Hey, becky. A few things reinforce the trend from active to passive investing quite like blackrock earnings. The girl grew its total assets under management to 5. 4 trillion dollars. And most of that can be attributed to 64 billion worth of inflows into ishares, etf products and another 12 billion in index funds. Now blackrock cut their fees in core etfs about six months ago to build even greater scale in these products and that showed in the quarter and blackrock was still able to produce a gain in revenue, which was 2. 8 billion during the quarter. That was up 8 from a year ago. That still lagged analyst estimates, though. The story looks a little different on the Asset Management side. The firm saw outflows in equities and fixed income and these results come just weeks after the firm announced an overhaul to part of itzhs activy managed equity unit. All in all, blackrock beat analyst estimates for adjusted earnings. Block rock reported 5. 25 per share while analysts were expecting 4. 89. Shares little changed this morning. Guys . All right, leslie, thank you very much. Take a look at it. Looks like theyre down by about 1. 60. Coming up, chinas car sales. In that rare yeah of the world, running out of gas a live report from the shanghai auto show next. Plus, facebooks new spin on reality. Ceo Mark Zuckerberg pitching the future of social media, and that platform at its annual show and tell and it looks a lot like snapchat. Were going to talk to an analyst after the break. Then later money and makeup bobbi brown is heading back to the Department Stores. Shell join us to explain. Stay tuned. Youre watching squawk box on cnbc. There it is. Now youre an expert in less than ainute. This is how car buying was always meant to be. This is truecar. Welcome back, everybody. Facebook ceo Mark Zuckerberg taking the stand for his keynote dress at the annual Developers Conference. Some include the media giants plans for augmented reality. Joining us right now is colin sebastien, Senior Research analyst at robert w. Baird. Colin, its great to see you today. And you know, facebook came into this really having quite a bit of momentum in terms of the earnings that theyve been dealing with, and in terms of what theyve seen with instagram and the momentum its picked up. So how do they kind of build on this . What messages have you been looking for . Well, its primarily a Developers Conference but it does give us a glimpse into the companys product road map and from that point of view, what we saw yesterday was a focus on the core facebook app and how facebook using the camera, as a bridge towards augmented reality, hopes to engage with more younger users. So thats an important point number one. Secondly video. Video is clearly more important for facebook. Half of mobile traffic and there facebook is introducing more tools for professionals. Publishers, to distribute videos on facebook, and to monetize those. For example through new ad breaks. And messenger was the other point of focus of the conference. And there its becoming a little bit like amazon alexa but in chat form. More of a personal assistant to answer questions, and deliver goods, and things like that. So its an interesting day one. Lets break down some of these things. Augmented reality is interesting but its not really reality at this point. We havent seen huge pickup with a lot of these things and facebook, the Virtual Reality set that they have has been running in third place. Are they behind the gun at this point . Or is everybody still kind of trying to figure out how to make this become main stream . Well in terms of the near term trend specifically they are behind the curve a bit. Its an expensive device. There arent many Practical Applications for it. But in terms of vision, id say Mark Zuckerberg is a bit ahead of the curve. And the integration of camera features, integrating some of those snapchatlike features into facebook is a primitive way as he put it to taking a step towards augmented reality in which we use glasses or the camera on the phone or perhaps a head set to socialize with our friends, to interact with businesses, so the vision is there, but its going to take awhile for us to see that affected in terms of the facebook app. You mention the voice platform trying to use it with messenger and getting something i guess thats more akin to an apple siree. But apples had huge success with siree, and youve seen amazon have this huge success with alexa now maybe a Tipping Point from that perspective. Facebook really knows how to come in and kind of capture a market even when theyre not the first once there. Do you expect to see that happen in this instance . Yes, definitely. I think the vision, in particular for messenger is to use the Artificial Intelligence the Machine Learning that helps make facebook a Great Technology company, and turn those into tools through voice, as well as through chats, where users are given access to personal assistant, intelligent asithsant like google home, like siri, like alexa and echo. This is a paradigm for internet plorms. In facebook were seeing messenger as the centerpiece for that initiative for them. All right, colin. You sound like a true believer. Thank you for joining us today. Thanks, guys. The auto sector in china could be facing a tough reality. Phil lebeau joins us now. Really . Holy cow, phil. Live from the shanghai auto show. Thats kind of cool. Hey, phil. What a view, joe. As we were 60 floors over shanghai looking out the big focus here is all about whats happening with the chinese auto market. Compare chinas auto market with the u. S. Auto market. We talk about the u. S. Being at record sales. Look at china. More than 23 million vehicles sold last year. The question is, will it top that total this year . So far sales are up just 2 . They had a rocky start to the beginning of the year, january and february posting double digit declines. Part of that is because of the taxes on new vehicles, went up from 5 to 7. 5 . The one part of the market where they are not noticing any slowdown, luxury automobiles. And also electric automobiles are growing. Not quite as quickly as luxury. And who plays in that segment . Tesla. In fact we went to a tesla store today, saw a few of the tesla owners driving in, as we talked with one analyst here he said look, tesla is gaining momentum here. It tripled its sales in china last year. Remember as we take a look at shares of tesla we will get the First Quarter Earnings Report in two weeks. Tesla typically does not break out individual sales by countries, and certain markets. But thats always always a question that comes up during the Conference Call and it will be interesting to see what tesla has to say about the growth that its seeing here in china, and whether or not at some point, guys, we see a tesla production plant or a giga factory here in china. Guys, back to you. Phil thank you for that. In the meantime were going to talk Bank Earnings this morning. Morgan stanley beating the street. Wilford frost just got off the phone with the companys ceo. As we knew revenue and eps beat 1 versus 88 cents more like 95 when you account for oneoff tax. Just spoke to the cfo. He said it was strong trading activity across the board. Particularly in rates, fx was a little slower pushing him in terms of the offset compared to Goldman Sachs performanceance. It was hard to say if there were market share gains based on one particular quarter. It is interesting that he said very much it was volumes, activity across the board that drove this which is something Goldman Sachs said wasnt the case for them. Still we dont quite understand why there was that difference. Just to highlight how big that difference was. There you have it the select performance of various investment banks, for q1 trading overall. Goldman sachs down 7 quarter on quarter. Morgan stanley plus 9. Bank of america, as well, with the standout of all the names, up 38 . That huge dichotomy that we saw between Goldman Sachs and all of the other banks confirmed this morning that they were the single outlier. Also just quickly i asked him if he was sort of welcoming the Upcoming European elections balls it would lead to pickup in volatility again and he said that wasnt the case. And in particular, which again is slightly different to what some others have said with the French Election he said its leading people to do nothing at the moment, to sit on the sidelines, as opposed to being taken big positions. So well have to wait and see whether that and the upcoming uk election lead to bigger volatility, as brexit and the u. S. Elections did last year. Just saying he wasnt expecting that to be the case in contrast to what some of the other guys have said. The atlas call starts in eight minutes. Wil well let you get to the phone. In the meantime when we return, adidas under fire. Were going to tell you why the Sports Apparel company is saying sorry this morning. And then tomorrow on squawk box you dont want to miss an exclusive interview with former treasury secretary bob rubin. He will be our guest at 8 30 eastern time. Stay tuned, squawk box returns in just a moment. Hes a nascar champion whos shes a worldclass swimmer whos stared down the best in her sport. 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Xarelto® can cause serious, and in rare cases, fatal bleeding. Get help right away for unexpected bleeding, unusual bruising, or tingling. If youve had spinal anesthesia, watch for back pain or any nerve or musclerelated signs or symptoms. Do not take xarelto® if you have an artificial heart valve or abnormal bleeding. Tell your doctor before all planned medical or dental procedures and before starting xarelto® about any conditions, such as kidney, liver, or bleeding problems. Youve got to learn all you can. To help protect yourself from dvt and pe blood clots. Talk to your doctor about xarelto®. Theres more to know. Welcome back, everybody, azidous is under fire. Adidas acknowledged that the email was incensensitive given that three people were killed and more than 260 people were killed in the Boston Marathon bombing back in 2013. Sounds like it was probably an unfortunate accident. Coming up, trouble in the terminal. And were not talking about united. Well tell you why one investor is betting on the comeback of two airlines. Thats next as we head to break, take a look at u. S. Equity futures overcoming the weakness in ibm this morning. And the dow is indicated up 28 points. S p up 8. 5. The nasdaq up 25. That schwab billboard. Oh, not so fast, carl. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. What if we could bring you by having better values . At blue apron, we work directly with more than a hundred family farms. So instead of spending on costly middlemen and supermarkets, we can invest in the things that matter most making farmland healthier. Cutting down on food waste. And bringing you higher quality, fresher ingredients for less than you pay at the store. Because food is better when you start from scratch. Get 30 off at blueapron. Com cook lets[ whimpers ] dog. Find pingpong. Find your awesome with the xfinity x1 voice remote. Thats amazing welcome back to squawk box here on cnbc. I cant even keep it together right now. Live from the Nasdaq Marketsite. We will let everybody in on what we were talking about in just a minute. We have some stories to tell you about. The first one here Mortgage Rates are at their lowest since november. A weekly report from the Mortgage Bankers association puts the average 30year Mortgage Rate at 4. 22 . The report also shows Mortgage Applications are down 1. 8 last week thanks to a drop in new purchase applications. Also, take a look at shares of abbott labs this morning. Higher in premarket trading. Drugmaker beating estimates by five cents with quarterly profit of 48 cents per share. Revenue also beat forecast by abbotts acquisition of saint jude medical. Alcohol and beverages appear to be doing well in World Markets in recent months. Frances they told me how to pronounce it, reported 1 rise in Quarterly Sales helped by a rebound in china and continued good demand in the u. S. Also heineken reported better than expected First Quarter sales with europe the key driver there. Joseph . Time now to take a look at whats working in the markets. Joining us with his view on airlines, and technology, is paul meeks, chief Investment Officer at floyd, dahl and holtz. What is working . The nasdaq is up sharply today. Yeah the way i look at it i have a couple of tech ideas. I continue to like micron, then i have a stock idea that i like very much as a turnaround candidate so its not working very well at all, at least fundamentally in the shortterm. But thats a big fit that will make a comeback right now. The stock trades for fiveish. Its got about 3. 5 in cash and no debt. And if they ever do anything right, i think you have a double in the stock, and probably our downside is five bucks even which is about 10 . Broaden out your perspective. You follow a lot of the, you know, the name Brand Technology players. What are your two or three favorite in the big names . You know, i continue to like facebook. I think apple, i might be turning more positive on. Since the stock is finally flattened out and give me a chance to buy it. Amazon and google. Google is one that has not really participated in the last couple weeks or month or so. Probably has at least these biggest upside. And so i know, old news but exnetflix i like them all. In terms of, you know, the, just the investing environment and macro concerns, what is buffeting the technology right now, is it the fed . Is it the prospect of tax reform . Is it europe . What is it that, you know, thats that is keying off on . Yeah, joe, thats a great question. You know, this was a beneficiary of the trump bump. You know, maybe with a little bit of delay a couple weeks after the election in november. But the last couple of sessions, you know, technology has kind of come in somewhat. I think everybody is very anxious about what theyre going to say this quarter. And the biggest story, that continues to buffet these stocks, as youve asked is Cloud Computing. You know the Cloud Computing leaders. The way i look at that is, you know, some days you cant buy them because theyre too expensive. But you always want to buy them on dips. Its a real powerful theme within the sector. Do you cover ibm, paul . Or do you have an opinion on it . Yeah its a great question. Ibm i dont even think that is a tech stock. You cannot shrink your revenues every quarter for five years and call yourself a tech company. I know theyre working on the cloud. And they know what theyd like to advertise that the cloud and Artificial Intelligence and Big Data Analytics is becoming a bigger piece of that pie. But the way i look at that, this is a 70s, 80s, 90s story and maybe for the 3 dividend yield you buy it. But this is a value stock. I dont think i would even consider it a Technology Company anymore. Hmm. So, when youre looking at Something Like an amazon, which we had this discussion earlier, you know, amazon, god knows the valuation. Netflix the valuation there. Theres so much future growth in the multiple, or in the stock price, why not give the same benefit of the doubt to ibm if theyre successfully transitioning to the next generation Cloud Computing . Interesting perspective. The way i look at it is, we have to go, it wont be a number of quarters, it will be a number of years, before we see even close to the Tipping Point. Where it becomes more of a cloud or new era technologies franchise. Because we are being held down by the al ba tros of the old. I dont think its a shortterm in coming i think its going to be awhile. All right. So the nasdaq has been on a relative basis, probably holding up better than some of the other areas. You expect this to continue if, you know, if theres any policy on successes . Yeah, i think so. Because well have a couple of things. They will benefit from a drop in the Corporate Tax rate, and of course, as we know, joe, these are companies that have a lot of money abroad. And when they repatriate their capital, if they can do that with some sort of tax holiday, i think it will drive another round of mergers and acquisitions in the United States within the tech sector and that should bring, for better or worse some euphoria and higher valuations. All right, paul meek, thank you. We appreciate it. Thank you, sir. When we return, makeup mogul bobbi brown is moving beyond beauty. Shes here with the details about her new venture in retail and she will join us, next, right here on squawk box. Im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. When this guy got a flat tire in the middle of the night. Hold on dad. Liberty did what . Yeah, Liberty Mutual 24hour roadside assistance helped him to fix his flat so he could get home safely. My dad says our insurance doesnt have that. Dont worry i know what a lug wrench is, dad. Is this a lug wrench . Maybe . You can leave worry behind when liberty stands with you™. Liberty stands with you™. Liberty mutual insurance. Beef prices are dropping just in time for grilling season according to data from the u. S. Bureau of labor statistics, consumer beef prices were 3. 59 a pound in march, thats 30 cents lower than the same time last year. And 60 cents lower than two years ago. Beef is expected to see increased consumer demand as prices drop in grocery stores. Starbucks cashing in on the unicorn trend. Check this out. The company debuting its first color changing and flavor changing drink, with whats called the unicorn frappuccino. Those of you who know me know i enjoy frappuccinfrappuccinos. This one i dont know about. The drink starts out purple with a sweet and frutti taste but after stirring changes color to pink and the flavor becomes tangy and tart. Drink was once on the secret menu. Now will be available across the board starting this sunday. Or until this sunday. Its a special a special thing. I dont know about this. Does it have caffeine in it, though . Dont know. Lots of pink and lots of purple. Entrepreneur bobbi brown made her name in the beauty industry, but the experienced founder and grand developer has now moved deeper into the department store. Bobbi brown is a Makeup Artist and the founder of her namesake cosmetics line. She has a new book out this week called beauty from the inside out and shes here with us on set this morning. Thanks so much for being here. Thanks for having me. You moved away from your autonomous brand, stepped away from that. Youve got a whole new line that includes not only Beauty Products but also wellness. How did you go down this path . Its not my line. It is a Concept Store at lord taylor, basically a creative popup shop that talks more about lifestyle. Theres beauty. Beauty tools. Great health supplements. Everything is there to lead a great lifestyle . Why wellness overall . Wellness has always been really important to me and i do believe that the better you take care of yourself, the better you look, the better your skin looks, the better you feel, the more you can do the best thing at your job and now its a trend. Its always been important to me but now its a really big trend out there. The food you eat, healthy food. I wouldnt bet against you, because you are an incredible entrepreneur. But moving deeper into the Department Star right now there are people who think wow theres such a change happening in retail. How do you kind of see the landscape . We are all buying online. You know. I mean theres no question. But i love this opportunity with lord taylor because its a way to bring people in the store. And you have to be creative in order to, you know, bring the customer back. So we have a lot of vents that were going to be doing and just now, you know, different kind of assortments every month. I do think that the Department Stores have to now figure out how to get people back into the store. Do you think they will . If you could create a new company tomorrow would you create something thats brick and mortar at all . I would do both. I would absolutely do both. Because people still want to touch and feel things. You want to feel the material and then you want to, you know, be able to get it online. So i do think that theres a way to do both. But it has to be a little bit experiment experience. Experience kiss margins. Because youve got to have people, right . You need talented people to be hanging around. Thats right. Yes, we need talented people hanging around to give a reason for people to come into a store. This kind of back to your roots, the whole idea of ecommerce. You were selling out of your house at first, right . Right, exactly. With the lipstick in a manila envelope which i didnt realize at the time i was green. I was saving the universe. I just didnt have, you know, enough money for a box. So, is it something the popup stores will you be doing that also with an ecommerce site as well . Oh, absolutely. Right now its going to be on lord taylor. Com and were in five stores and theres plans for definitely growth. Whats the book about . The book is called beauty from the inside out and its honestly, i spent my life telling people how to put makeup on to look healthy and look better. Im not telling people not to wear makeup but honestly if you take care of yourself and eat the right food and you know what supplements to take what are the right supplements . Whats the right food . Well, first of all. For me the right supplements are things that are easy to take. In a powder or something to chew. I dont take capsules. Okay. But you know, and everyone is different. The whole idea of the book is that you read all the different experts, and you try one thing at a time. You know. When youre not feeling good you maybe open the book again and say okay, let me try that. Green powders, Elle Mcpherson is in the book and shes got this amazing green powder. So maybe if we take it we will all look like Elle Mcpherson, i dont know. Green powder . Yeah. Its greens its like vegetables. Okay. Its a powder and its green and it works . Its green. And its made of green. Its fullon green. Have you ever had it . No. I prefer blue powder. Blueberries but think about color. Good color is good food. Just thought green powder okay. You get it and be like i feel like all of the models sleep a lot. Because thats you need for it to look the models are really young and they dont sleep a lot. They dont sleep a lot . No. But theres meditation in the book. You always hear people say you need to sleep. You do. You live in new york city. You know this guy Leonardo Dicaprio, models im not saying Leonardo Dicaprio is sleeping. You can do that when youre young and get away with it. You can get away with a lot when youre young but you have to take care of yourself as you get older. Model hes dating im with the program. Bobbi you created bobbi brown i guess 26 years ago at this point. Yeah. And, it was quite a ride. Mmhmm. How does it feel to be an entrepreneur all over again . Well, its amazing. You know, its amazing that i started it, and its amazing that i, you know, worked in this big company. When i left we were building in sales which was awesome. And now, to be able to start all over again, press the reset button, see whats out there, you know, i dont know what my future is going to be and how lucky am i to be at that place right now . I dont know if this is hard or not. How does it feel to see this thing that you created with your name on it, and then be one step removed . Well im not the first founder that have left a company. Right. Theres calvin klein, theres donna karan, so you know, i love the company. I love the company i created. Im proud of my product. I still wear the product i love. I put on a lipstick which is called bobbi, and you know, but now i have an open slate. And so im looking and seeing a lot of interesting things out there. Im not sure what my future is. But thats such a great place to be. As an entrepreneur working inside a big company what are the advantages and disadvantages . Well the advantages are that you figure out how to get around things. And as Leonard Lauder once told me never ask for permission, beg for forgiveness, and that was great advice. But the exciting thing not being in a big company is i dont have to ask 15 people or 100 people what their opinion is. And i can actually get it done probably in a couple days or a couple weeks. Thats nice. The lord taylor thing took six weeks, which is amazing how quickly we did it. We want to thank you very much for joining us today. The book is called beauty from the inside out and the popup stores will be appearing when . It opened in lord taylor fifth avenue and theres five others and lordandtaylor. Com. Thank you very much for joining us. Orange powder . Met musil. Its amazing. Yeah. Fiber 100 but its orange. Does that count . Or do i need its like youve had it . Its like tang. For me its an orange powder. Go eat oranges for, you know, the vitamin c. Thats not going to help me with the problem drink a lot of water. If you drink a lot of water that will help you. I guarantee it. Fiber. How many glasses of water do you drink a day . Eight, ten . Probably. Okay. Probably do. Okay. Probably do. I swear by the other stuff though. When we return, jim cramer, live from the New York Stock Exchange, well get his take on the days top stories. Here are the futures right now. Up 17 on the dow. 23 on the nasdaq. Well be right back. Predictable. The comfort in knowing where things are headed. Because as we live longer. And markets continue to rise and fall. Predictable is one thing you need in retirement to help protect what youve earned and ensure it lasts. Introducing brighthouse financial. A new company established by metlife to specialize in annuities life insurance. Talk to your advisor about a brighter financial future. Deartheres no other way to say this. Its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced, our senses awake, our hearts racing as one. I know this is sudden, but they say if you love something. Set it free. See you around, giulia welcome back to squawk box. New data on Media Consumption from nielsen. The company says streaming services have become a bigger staple in homes now than the dvr. In the First Quarter of the year, 57 of homes subscribed to some streaming video services. Outpacing dvr ownership, which is at 54 . Of the streaming services, netflix is the market share leader with 51. 2 of homes, followed by amazon at 28. 6 . And hulu at 4 . Okay lets get down to the New York Stock Exchange and cramer joins us right now. What are you looking at, jim . Im actually i think that were trying to figure out whether these banks are rear view mirror or not given where Interest Rates are. I tend to think that a lot of these banks have a lot built in away from the yield curve. Morgan stanley is not a yield curve dependent company as some of these others. Banks are really pretty good. Goldman was the outlier. And its kind of surprising. I think it took away from the luster of the bank of mesh Conference Call. Bank of america was really terrific. So look at the banks. Liking abbott this morning. Abbott really seems to have gotten it together. Have gotten it together. Im looking at j j to see how bad it was. I dont think it was. Its an okay morning. How do you look at Morgan Stanley relative to what happened with Goldman Sachs yesterday . I really dont you know, going over that fixed income commodity currency line, i just dont get it. I mean, goldman just did not deliver. What its almost as if their business were hedge funds and hedge funds stopped doing things. I know thats too simplistic. I need to do more on goldman. I just dont get it. And then how do you think about ibm . We were debating that earlier this morning. Look, i think ibm, theyve they didnt close on some deals. If they had closed on some deals the whole narrative would have been difference. Its hard to sell it because people are sick of waiting. I would not sell something down 10. What do you think the chances that Lowell Mcadams at verizon ends up buying either comcast, disney or cbs . I love lowell. You know, love him. None. None. Thats im in the same place. I love him. Love lowell. Love lowell. Great to see you. Well see you a lot more in a couple of minutes. As we head to the break, a quick programming note. Former treasury secretary bob rubin is going to be join us here on the set tomorrow. An exclusive interview you dont want to miss at 8 30 a. M. Eastern time. Squawk returns in a minute. Kevin, meet your father. Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond James Financial Advisor can do for you. All right. Take a look at the shares of ibm, the stock slipping after the Earnings Report. It was the 20th consecutive quarter of decline. Year over year revenue decline, the shares are down over 9. Thats about 5 by the way, wheres the dow future . The dow futures have been fighting this heavy draft. 20 or so. This is a decline, down 9 s a quarter and a half. Thats a drag of 60 points from ibm. So wed be up more than 80 points. Right. Were watching the shares of td ameritrade, it fell a penny short of quarterly profit of 40 cents a share. And shares of intuitive is up. They had strong sales of the da vinci robot. More than 175,000 arizona residents received blood tests from fair aknows who will full a full refund. The lab company will pay 4. 6 million into the state fund and theranos will pay a civil penalty without admitting wrongdoing. Thats in stark contrast to the 30,000 penalty theranos agreed to pay to regulators. There are still additional lawsuits pending. This is the story that never ends. Nope. It does not. Emirates airlines is reducing the number of flights to boston, l. A. , ft. Lauderdale. The reduction is the result of weaker travel demand to the United States. And also, i dont know well, the issue of they cant i dont know if its not all on of their flights but you cant bring an ipad or a laptop on many of the airlines. Thats right. Talk about competitive disadvantage. Right. Another airline was temporarily doing that, right . Or just in certain parts of the world . Certain parts of the world, but emirates serves a lot of the places. Facebook holding the fa conference and pushing into augmented reality. Mark zuckerberg demonstrated how it will work on the smartphones and vr headsets. And facebook will allow developers to contribute their own effects. I think if you can put dog ears an a dog nose on someone thats 50 billion market cap just for starters. Who doesnt like to put a dog nose or dog ears on a person . Hours of entertainment . Its just worth a lot. A big bump to the market cap. Another platform called facebook spaces will allow you to interact with other users in a vr world. Now, thats getting avatar like. Maybe well get that way some day. Okay. Other news, pet see, i shouldnt be doing this because im not a pet guy yet. Pet smart is buying chewy. Com. Financial terms are not disclosed. Pet smart was taken private by bc partners. Letget a final check on the markets. We have been showing you throughout the morning that the dow futures have been relatively stubborn, hanging in there by the pressures put on them by ibm. Down 9 this morning. Well see where it opens when we get to the opening bell. Green arrows across the board. The dow futures are indicated up by almost 20 points this morning. S p futures indicated up by about seven. The nasdaq indicated up by 23. This comes after the down day for the markets yesterday. Dow was down triple digits yesterday. After being up about 185 points the day before. Down four out of five days. Down four out of the last five days. And momentum people are questioning momentum at this point. Part has to do with the bond market. The yield has picked up to 2. 2 . Yesterday, it fell below that. The lowest level since november 10th of last year. All kinds of questions about what was going on. The uk announcement bringing up some uncertainty in the market. That put pressure on yields and german places in the market. Lets look at oil prices today. Crude oil prices so far look like theyre relatively flat. Wti is down about 5 cents to 52. 36. A heated debate under way in parliament over theresa mays early vote in june. The main Opposition Labor Party welcomed the call. It is almost certain that the Prime Minister will obtain the twothirds support she needs for the election to be held. Look at all the ramifications. The pound rallies like crazy on the idea that brexit becomes more certain, but what it really means if they have enough people on board and a consensus with her party that they can extract better deals from the eu so it wont be as so theyre not facing an election when theyre in the midst of these negotiations again. Its four years early, supposed to be 2020 when the next election was. What are they doing there . Do you know how many snap elections wed have over here every time we were unhappy we have one on the set every morning. Maxine waters wants to call one right now. A snap election. I want to call one on you. You had reelected in a landslide. Join us tomorrow. Squawk on the street is next. Good wednesday morning. Welcome to squawk on the street, im carl quintanilla, good to have jim back at post 9. Futures are solid after losses, the dow looks to open higher despite a 60 point drag from ibm on the revenue mix. Some mixed action in europe. And ten year sits right at 2. 2,