Transcripts For CNBC Squawk On The Street 20150515

Stock futures on friday were coming off a record close for the s p 500 yesterday. The dow closing in. Another number 600, netflix crude oil a little change. Think Lower Oil Prices are good for the economy, think again. This morning, job cuts jumped 68 in april to 61,000 job cuts. Oil firms a huge part of that. Tenyear bond note, costing investors about 500 billion in the past month. Its probably low, i think you think thats low . I think thats low, i think the damage of this german remember, thats the liquid security, its the only socalled aaa. You think ill hold it to maturity. When the fed chairwoman said there are losses. All right, meantime other road map this friday starts with the markets, coming off a strong day if the green. It will continue to march higher in the bond market. Again, not a big upside predicted. A downgrade for john deere, that stock is down well tell you why it was cut and theres a big warning in it. Netflix stock is about 600 bucks in the free market. Netflix at 600 a share for the first time, ever. Meantime let oots kick off this friday markets with a strong day for stocks again, the s p 500 recording the new high yesterday. Again, the doe is at 18,288. Mean time, facebook closing in on its 50day moving average. Netflix, jim, is above 600. Just banking coin on this name. A bloomberg report says theyre in talks with a chinese company. I think netflix, one thing that we have been waiting for is this shoe to fall because, why not . Netflix program seems to be uniquely loved worldwide. I felt over and over again that this market cap of this company is way too small versus the opportunity. I just think that the netflix is the world tv its generational. Were late to netflix, a younger person netflix is their tv. Thats what people are really battling here. Any time you talk chinese the adjustable market is 1. 3 billion, i dont know what the broad band penetration. How many people have highspeed internet into their homes in china . We dont know. To me thats the number that i care about, otherwise, netflix doesnt work. John chambers the outgoing ceo of ci is co says the worldwide digitization is happening everywhere. I think china, its not open and shut what you can show there. The dijization worldwide is playing into their hands. People dont understand how widespread it is. And so therefore, its netflix with china, theyre always seems to become a blank of china, alibaba is the amazon of china. You wonder will there be a blank netflix of china at some point . Home grown. There are certain franchises kentucky fried chicken, yum upgraded today. The government says you have to have a partner. Is netflix a brand . I think its a worldwide brand. In the end, they have programming 245 makethat makes your sign up. Orange is the new black you have to watch it. You talk about house of cards right after, youre in porg toir because maybe Carl Quint Quintanilla hasnt seen it. You have to figure out which period you can go before you can talk about netflix program. Thats seminal in this country. I think that netflix is unique in that whatever they seem to produce resonates. Strictly with younger people. Yum, made me think about doritos. Im hungry. The california china, loco has been rt hot, not today. When youre that this is a growth stock. One of the things that plus, were in a rotation to end all rotations. They have could have done 6 . Party city did 5 . But, we have to understand that people want out of domestic securities so badly that they have to overshoot. The kohls overreaction yesterday was extraordinary. I was on the nordstrom call last night. It was big. Watch that stock, because nordstrom will tell you whether the overreaction is done. You ever talk about the holdings. Super small cap stock. You mentioned kohls. I named kohls my surprise stock of the year a month ago because it had been red hot. The stock is still up to date but its collapsed in the last 30 days. What did people get so wrong on kohls . They used the world modestly. Thats the kiss of death. That means growth modesting when i was on the kohls call Third Largest retailer what made me think about what happened at kohls we started thinking that kohls is the winner taking share from everybody and now youre pausing, is kohls losing share to jc penney . Will macys do something to get shares back from kohls . So if kohls is gaining share, are they getting it from you mentioned macys. I would say target. I think hes reinventing target. That was a horrible performer yesterday. It was devastating. People said kohls target kohls, theyre both losing. I dont know. Now, this is christmas time for home depot and lowes. Gardening season. Thank you. Were only seven months out. You dont plant this weekend youre gonezo. How are your tomatoes . I have four different varieties. They look really perfect this year. I dont see that usual blight i have complained about. Im trying to do some japanese eggplant and new peppers. The next stock that were going to talk about, john deere. This is a big name. See what i did there. A downgrade from Jpmorgan Chase this morning. Theyre cutting the price target on dere to 84 from 90. In the note jpmorgan says we believe its clear from what we heard that the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016. All of the commodities are down wheat, sugar, soybeans are down to date. The farmers lot of people view them favored by washington. We spend a lot of time on mad money, talking about the way organic and natural has to start picking up because of the demand. I read this report. I kate at an interesting time. Dere stock was breaking out furiously yesterday. This could put a buzz kill to that whole group of stocks. Watch agco the weak sister to dere and so if it goes down we know that its perhaps the dire straits. I said you know guys you better be right about this. You got a drought. Bird flu. They just got over swine flu. The stock is up year to date. Theyre ignoring this. They have. People believe that the cyclicals are coming back. People want into those. You mentioned the same way they sold sonic. People novak. Im afraid of clowns. You know what that is . Coolophobia. The fear of clowns. Maine guy, likes baseball. He wrote stand by me. Heard of him the shining. All right. We have done an hour show in 11 minutes. Coming up some high flyers taking a beating this morning. More on king the king of candy crush. Also ahead, an exclusive interview with dropbox, drew houston. Dont miss that interview. Jim says the valuation is too high. The s p 500 coming off a record high. The dow jones, 18,288 would be your record high. Oil down a bit this morning. Lot of stocks on the move. More squawk on the street when we return. At chase, we celebrate Small Businesses every day through programs like mission main street grants. Last years grant recipients are achieving amazing things. Carving a name for myself and creating local jobs. Creating more programs for these little bookworms. Bringing a taste of louisiana to the world. At chase, were proud to support our grant recipients and Small Businesses like yours. So you can take the next big step. All right. Welcome back. Waiting on breaking Economic Data here. U. P. S. Upgraded. Lets get to Rick Santelli some breaking news. Industrial production for april a miss. Were looking for unchanged. We go more left on the number line to minus. 03. I guess if theres any good news here is that last months. 06 was split in half. If we look at the utilization rate it was a minor miss to 78. 4. Similar to the revision on the production side we see a positive revision. You know empire was also a miss. Well continue to monitor what looks like some logic back in the fixed income markets. Lot of circumstances. We have dipped under key economic levels. Were still up on the week in rates but down from is the intraday squeamish trades that pushed the stock up. Rick santelli thank you, sir. Lets get back to stocks now, sales of keurig mountain. It will be sold online and certain Stores Starting this fall. Not fully available until the 2016 Holiday Season thats a much slower rollout that investors were expecting or hoping for. The machine starts at a cool 300 the company cutting its forecast last month. Keurig Green Mountain jim, disappointing on a number of levels. The Cold Shoulder they spelled the word cold wrong. Kold is not a spelling error. The full National Rollout is 18 months ago. Can i put out once again . I dont expect to take over until this stock goes even lower. Wow, this was disappointing. I got to tell you this guy kelly who came from cocacola i had hopes for him. I used to like the stock. But, wow, this thing, i wonder what shes thinking right now, shes not involved in this right now. It looks pretty good. 00. 300 for soda. For something you dont want to drink. Im a water guy. What matters here this is not happening fast enough and its way too expensive, not like you can go bed, bath next week and buy it. Thats a great call. Okay heres the thing about keurig Green Mountain the average price target on gmrc is what you do analysts are they going to defend the name and upgrade it or a follow me downgrade downgrades . At 85, they turn on it. Its 73. Cocacola bids 90. I expected so much more out of this management team. Im really disappointed. American people arent going to spend 299. Even with the coupon. Gmrc 30 below its average price target. It was didsastrous. This is a frugal america. The fact the product wont be out until the next president ial election i wish it was tomorrow. Shares of king digital oh geez another one. Theyre getting candy crushed, forgive me. Yes, that was above what analysts were expecting. Soft forecast for candy crush. Im not an analyst on this name. When my daughter goes to the app store and we look at the hottest names out there, whats trending . Its not king digital i dont like a Conference Call which is all rosy rosy. On page 6 they talk about how they have a gap basically theres a gap between all of the spending theyre doing for their new product and the actual theyre used to be a gap in gap. Absolutely. It said were great, were great but the new products it wont scale until the if second half of the year. Thanks a lot, were in the middle of a game gap, king pod. Another name though wall street, where are you at . The average price on king is 19. 50 a share. Stock is at 15. So, wall street is tens of percent below where the stock is right now. Are you going to defend the stock and say this is where you buy or are we going to see a wave of downgrades come out on king digital . We cant just downgrade it here, because the second half when they finally ship product, people will like it. Theyll put it on a soft hold. Theyll see it the ohio state pension fund where are you going to go with them . Theyre irrelevant. Forget them. The only game i play mad money. Youre so tall can we do mad dash sitting down . Im not standing next to you. Lets take a look at the futures again. Positive for the dow. Implied open futures changed ten points. 18,288 the Record Number we could hit that today. It looks like the buyers are gaining a little bit of steam. Stick around. And why stop what youre doing to find a bathroom . With cialis for daily use, you dont have to plan around either. Its the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. 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This stock is well behind the group, if theyre right and they may be right theyre talking about the handling the peak sales better theyre talking about some very interesting things about smaller package, better cash flow conversion if this piece is right, u. P. Is going to go to 110. They talked about u. P. S. Growth, they like the whole lodge lodgistic space. I mean look theres no secret. U. P. S. Has major problems converting in peak seasons. They have problems in their free cash flow. These guys are saying that the goldman piece says thats going to change. More buyback. They will peak for two years. If they get peaked right. I like the stock here. If only because i have faith that this time they cant blow it. Is Goldman Sachs saying sell fedex. No. You got to buy fedex here. 219 target on fdx. Actually the implied upside on Federal Express is more than the implied upside on u. P. S. U. P. S. Is well behind. 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In the future, it could help clinicians spot key patterns quickly and precisely. Ibm watson is working to make healthcare smarter every day. All right, youre watching squawk on the street on a beautiful friday in new york. Live from the Financial Capital of the entire planet where the opening bell is set to ring in less than a minute. Not a huge opening, but a record high for the s p 500. The money is still there. Actually i think theres things that are soft here. Your word rotation. Whats rotation . We got to get the transports higher. Theyre domestic. You cant have them just fall apart. Ksu is falling apart, kansas southern, down 7 this week 22 year to date. And there you go. Were off the opening bell the s p 500 at a record high 18288 is the number if you care about record highs for the dow. Low engineered aircraft components make me nervous. We had a breakout yesterday. Arcadia celebrating its ipo today. Ag we have been talking about dire straits of farmers. Coal a big commodity for trains. You had a feed on your show about the notion about the decline in oil drilling can mean for regions of country. For trains, that was the incremental bargain. Be careful. Bsf is not public but its part of berkshire hathaway. When we talk about these drilling rigs coming offline, you cant say this is Oil Production going down, but a lot of bigtime piping that Oil Companies pay to the Oil Companies to hauling, theyre not hauling sitting empty. Whats happened if meantime, some of the bigger companies, theyre being aggressive in getting piping up to north dakota these train wrecks by the way, for passenger trains terrible. But be wear, there will be a backlash against trains i have a lot of piping companies on. People are scared about pipes in their backyard. We talked about spectra yesterday in our street talk yesterday. It never gets any love. A huge natural gas. Its 30 . Theyre bringing natural gas to new england which is still fueled by oil. Fair to say this in the age of etfs this is for you you got to know what you own. Lot of these etfs have funky names. Bed bed, bath and beyond is one of parts of the etf. One may be hauling cars out of long beach while the coal and oil is weak. The problem with the etfs i say over and over again, youre grouping the bad with the good. Etfs have taken over. I know that im a throwback. I dont care. Theres one railroad stock thats higher this quarter of the majors csx, outperforming, 5 this quarter. The rest are down. Csx people felt that it was going to be hurt so badly by coal. Also theres a takeover ill tell you what i cant figure out the saga of jc penney their comps werent bad. Jc penneys shares right now are up 2 still down this quarter, but theyre up to year to date. This stock is highly volatile. Everyone is watching this level, the stock seems to cant get out of its own way. Is there a real turnaround to the turnaround. They really lowered the expectations for 2016. Then youll have a stock that will start percolating. Almost, there are too many retailers. Thats what plaguing these guys. Yes. For instance what happens when a company blinks lets look at hertz closing some of its offices and what happened with avenue vision. Avision goes up. Because hertz blixt blins. You need a sears to blink, a kmart to blink. America, im going to throw out the numbers theyre not right. America has to threetimes, to fivetimes per Square Footage devoted to stores to the next highest country. When i think about stores closing, i also would look to kimco first of all, its been an unbelievable stock. The companies that are in this quarter, their retailers, when someone goes under, its like good for them because they raise price. They cant be amazons. Thats the key thing. His customers, amazon is not able to get to beat them because of the various things that they do. Simon is very good. Simon should have been able to buy that. Near my house, theyre adding malls, his are full. All right, lets talk about netflix, 606. 03 for netflix, first time the stock has been over 600 bucks. The market cap on netflix is now 35. 5 billion. The market is gigantic. Bloomberg story, china they reiterate their target. I think thats a realistic target. Again i hate to go back to these average targets. I look at this stuff, when i notice a big discrepancy with the consensus of the market it captures my attention. The average target price is 569. Okay, the stock is at 606. Once again they have been overrun. They have been overrun. We could then see a wave of analysts upgrading what do you do . When the head of your Research Desk say, why are you off on your target price . I i think were seeing some of these upgrades working. Ever since the split into two companies on monday united technologies. I mentioned emerson earlier, lets watched the semiconductors. Micron has been a hourrrendous stock. I just moved avis 2. I love idaho, i dont like you slamming micron by the way. They did that great act acquisition acquisition. Take a look at micron stock. Its down 25 year to date. Its bring down everybody else. By the way, i think its a strong buyer. I started my career here in 1998 in that little booth thats up in the corner here i think i said waiting for higher dram prices. How long are we going to say that . No. Thats one of the bestperforming stocks two years in a row. The sam sung micron really did change this. Youre going to see the ek wi equilibrium equilibrium. Courtney regan joining us on the floor with more with whats moving. Happy friday. On the floor of the New York Stock Exchange slightly flat. If we look around the world and where were taking the lead perhaps, asian markets mixed. China rally continuing to cool over there. Moving over to europe mostly higher the bond market calming. Greece, of course the outlier is down about 2 . The euro is down below 1. 14. This is something that we continue to watch as we see these currency mentions in a bunch of earnings reports. Again, we have lost some of that s p 500 did close at a record high. Well see how we can end up the week here. Traders, perhaps, placing those bets that those rates wont rise in june. Gold, that commodity falling from those threemonth highs and were getting some earnings from some of the smaller players, still those equity prices are falling. Down more than 10 . Earnings aftermath on this friday morning lot of these consumer companies, El Pollo Loco not a lot to like in their earnings report. You touched on king digital, lack of new releases to hurt its current quarter. Keurig shares getting hit. Also some strong Sales Guidance for the third quarter, got reports of netflix is in talks to enter china, like you said topping 600 a shares 601 right now for netflix and nordstrom, reporting a beat on revenue. Better topline growth than bottom line what was interesting to me in those nordstrom numbers, the rack comps were less strong than what we saw out of those fullline stocks. Back to you guys. All right, courtney thank you very much. Lets go back now to chitown. Rick santelli. Brian, its no secret that many that are trading the fixed income no matter what country, realized were superglued at the hip at the most recent set of moves probably because were bolted together when rates are moving down in an unbelievable fashion. Lets look a variety of twoday charts understanding that all of the fundamentals and the dynamics of these economies are highly different. Grourt in italy and france may be moving up but also moving down a bit in germany, remember you know if youre taking a step back the Global Economy is just that a Global Economy, and when you add up everybodys horsepower it doesnt matter whos up or down. They have come off from key levels we could argue what the real rate is maybe it should be at 3 were still too far down, but its very difficult and the adjustment process has been spotty and liquid at times. Twoday of italian rates. A two day of portuguese rates. The way they move the times they move, all highly correlated of course. Microview of september, on bu in d yields. Maybe this is kind of a turn but thats still a very aggressive chart. If you look at our tenure from the same time period you can say the bund was more vicious in inin in. The yen is down today. The dollar is improving. Really, you know f youre talking rates, its all about Foreign Exchange. I tell you, open this chart up to april 1st, just april 1st, this is an aggressive trade in this Foreign Exchange re relationship. I will say this its midmay and the cubs are still four games above. 500 that has to be a record. Yeah yeah but, no theyll suffer the same fate of the bulls. Im more realistic about sports and Interest Rates. But i hope the rangers win, i tell you what on that one, i think the hawks rule back to you. 1234r wow, we got a Little New York chicago action going on. Who knew santelli would get all fired up . Months and months rooting for new york just to come to chicago. All right, thank you. Lets go to addlib oil prices in the script. Im going to adlib. Before we get to jackie i know youre listening, one thing i have to say, it will probably going down again. Whats not down is actual production. Drilling riggs can go down all they want but if were pumping more oil, splice are going to go up. Brian, well be watching those numbers, they usually are supportive to prices but if youre taking rigs offline, seeing a decline in production, and keeping those overproduction rigs up we saw a u. S. Production go slightly higher today. Were watching prices this morning. Theyre easing a little bit here. Were watching the june spot. Most traders looking at july 59. 38. What were wong derring is if were going to eke out a weekly gain here. We have had eightweek win streaks before. This could be interesting. It may come down to the wire. Meantime as Rick Santelli said we have a little bit of an improving dollar. So many factors impacting this trade that traders dont know what to focus on and theyre definitely booking some profits going into the weekend. I want to talk about gas prices a friday check before we go into the weekend. Aaa saying the National Average is now 2. 69 this is up 30 cents from a month ago and as were heading into memorial day, this is part of the season demand is going to pick up because of the summer driving season. These gas prices still on the rise. Back to you. I cant wait to get you a summer driving season gift this year. What did you get me . Summer driving season a new camaro. Again, you did a piece earlier this season gasoline still down a lot. Disney is still percolating higher. Dont freak out. Dont freak out. You know what im freaking out, every single oil and natural gas on my screen is down except for two. Shef ron didnt buy aback a lot of stock. All right, from john to jim stewart, pulitzerprize winner on the transformation in technology signaled by that verizon aol deal we have seen this week. And jenny lee, she led the investors of show me that interview is coming up on squawk alley. You will not want to miss that. Stick around. At chase, we celebrate Small Businesses every day through programs like mission main street grants. Last years grant recipients are achieving amazing things. Carving a name for myself and creating local jobs. Creating more programs for these little bookworms. Bringing a taste of louisiana to the world. At chase, were proud to support our grant recipients and Small Businesses like yours. So you can take the next big step. This is big f youre around the philadelphia region got to go to the game tomorrow night, guess whos throwing out the first pitch, are you feeling okay . Jim cramer first pitch tomorrow. I play hurt. Just like chase utley. 20082009 he was king. My crew calls me chase. They do. Im very impaired but i dont care. I used to work at the stadium in 1971 with a similar record i didnt care, sold ice cream. But carlton won half the games. I got caught with a lot of ice cream because he pitched quickly. Ice cream here. Up next its trading with squawk on the street will be right back. Being a keen observer of the world has gotten you far but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. 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I want to break free all right, time now for jims stop trading. Name we dont talk about is a arista networks. A competitor to cisco, just trying to bury them alive, they had a good quarter. New cfo. Lot of people fill that this was the company that chambers really went after, that i have a lawsuit, chambers sold them the outgoing ceo and i do think that, lets just say, that hes going continue the process of trying to dismantle arista. Dont count them out. The stock is going down on a guidance okay. Very wellspoken, interesting dis disrun or the to the business. Buy anet. My friend Adam Schefter has introduced me to draft kings. We have draft kicksngs on. And klarnaa way to buy things. Im a fantasy football guy, im crazed about it. The wife is not crazed about this. This will be the test of the marriage this year. This is the test of the marriage, i said that the marriage wont be tested until fantasy. I said to al adam were not going to speak during dinner. Any time before or after dinner is fine. What about the eagles . I played both fantasy and reality. I play hard. No one had a better draft than my chargers. You stole our running back. I think draft kings melvin gordon. Melvin gordon. She said no to daily fantasy. Two things ill say, my Virginia Tech hokies are going to be better than you think, theyll have ten wins. And the chargers will win ten games also this year ill bet you a coffee. Good luck. Are we on for coffee . Sure. Greenberg owns you about 16 difference. He fled to san diego. We have breaking data on the other side of this break. Were going to break twice. Plus Jeff Rosenberg, on power lunch, 2 00 eastern time tune in. The host is okay. Great guy. Nt criteria, why did a panel of 11 automotive experts name the Volkswagen Golf motor trends 2015 car of the year . Well give you four good reasons. The Volkswagen Golf. Starting at 19,295, theres an awardwinning golf for everyone. Good morning. Welcome back to squawk on the street. Im simon hobbs. Carl quintanilla and david faber are both off today. Alltime record high on the s p 500 last night of 2,100. Oil trades lower at 58. 73. Breaking news now on consumer sentiment. To chicago and Rick Santelli. Good morning, this is an interesting number and i just want to doublecheck the decimal, it looks like its 88. 6. The reason this is so fascinating, first of all, its a may preliminary, well compare to all of the final numbers. Our april fine was 88. 6. January was the best of january 06. Definitely another miss. Lot of data misses. Markets are acting accordingly. We see rates coming back off a little bit. Well continue to monitor. Sarah eisen, back the you. Thank you very much Rick Santelli, disappointing read on consumer sentiment. A look at the stock market. Were still off the record high on the s p 500. The dow down about 19 points. Lets bring in the ubs director art, it looked like we were going to get a breakout record close yesterday, what happened . The light data is helping to some degree. The yield is down 2. 2 . You had that treasury refunding this week. The big supplies is out of the way. So we were all hoping the bulls were hoping certainly, that if you broke out of this narrow range, some followthrough some sideline money, none of it has come about, this is a very very disappointing breakout it may bode for the fact that were not really breaking out or staying at the top. The story all year, i guess we should look at the resilience of this market. It came at the same time as weak retail sales, Economic Data misses. This bond rate the fear of higher Interest Rates. The worry lists goes on and on. But we continue to make new record highs. Bad news is good news. Thats steadying the hand of the fed. We have discussed before that Stanley Fisher is going to be a very big influence on the fmoc and he wants to introduce surprise into the game. He wants the markets not to feel selfassured that will allow the markets to prediscount things. The soft data makes the market feel better. You called it a ceiling, are you saying we havent broken through the iron ceiling, its still through . We havent broken significantly enough to force the shorts to cover or to get that some of that sideline money to come in. The earnings season turned positive. I think we were looking for a decline but its actually in that environment, 4. 9. The one thing that the bears cannot complain about for the market is that earnings have come through, now theyll say that part of that is from Financial Engineering, from all of the buyback tas we have youre getting less revenues and therefore actually smaller amounts. Some breaking news at headquarters. News on carl icann. Carl icahn investing in ridesharing. Carl icahn invisits in lyft invests 100 million. The Company Controlled by carl icahn. As part of this Investment One of the investors is going to join lyfts board of directors. Again the ceo of lyft saying theyre thrilled to be working with ikanne c icahn. The company is valued at 2. 5 2. 5 billion. Back over to you guys. Private company we should mention. Private company. Not going by the icahn playbook. Thats a very different move. Just finish your thought, we were talking about the markets and the fed a moment ago. As i said i think fisher is going to try to push the fmoc one of the difficulties will be that the fed speakers as they come on will try and give a hint that wait a minute even though its data dependent were still at the ready and so i think you can expect that to be a pushback on the market. I know were out of time. One other question if you look at the economists they all think a majority will be a september rise, if you look at the market the futures is not saying that at all, maybe if you get a rate rise at all this time if they dont pull the trigger, can the equity market rally substantially from here. I think it can. Whether its through Financial Engineering or not. Im in the camp that thinks they may not do it this year. Good to see you, art. Thank you. Have a good weekend. Thank you, you, too. During the last nine weeks, crude futures have surged a staggering 30 . Effectively willing the price to rise. The underlining fundamentals of the market are shifting or a serious disconnect. Michael, welcome to the program. Good morning. Do you theres a disconnect . I do. What were seeing right now is west african grades and all of these areas of the world where production is actually increasing. We got a situation right now where production in russia is up 200,000 barrels a year. Year on year. Iraqi production is now at 20year highs. So the situation is more dire in the u. S. Yes, rigs are off 60 , actually in the march data we saw that production from north da koe to was up about 20,000 barrels a day. Theyre so theyre high grading. Theyre going to their asset bases. That may not be the. Perception of some particularly when saudis are taking credit for the trouble they caused here. Saudzis are producing upward of 10 Million Barrels a day. In 2007 Spare Capacity was a big issue. Saudis can produce at 10 million or more. Because you have this massive amount of crude inventories, they can get that and not really compromise the Spare Capacity. The bottom line here mike were coming into the our ninth weekly gain. So youre saying this is what a correction and not a major trend reversal thats the debite right now on the price. I think were right for a correction. We got refinery utilizations at record rates. Basically, were transferring this glut of crude oil into a glut of products. Process that crude and therefore lead to being recorrected. 60 from the peak last october. When does that bottom and when do we see shale players add to their rig activity . Thats great question what is the 12month deferred price saying, for producers, they need to see a price up into the 70s or even higher for them to start to add rigs back into the market and so we think by the end of the year end of the latter second half we think prices will rebound and contracts will make it worth their while. We saw them saying theyre going to add a rig theyre one of the best positioned players out there. Its interesting. You spend your entire working day looking at the oil markets we shouldnt have this rise prices should be lower, but yet the hedge funds still pile in. Given that theyre there and other people have bet so strongly theyll rise and they make up such a large portion, could you be wrong by the sheer weight of money . Yes. At a certain point if you rise up too quickly, then the calculus of the producers changes. So its an intertif point. Steve i wanted to ask you about gold gold has made a pretty nice move lately. Threemonth high. Weaker dollar. Weaker Economic Data. Falling inflation pressures. This is a big sea change for gold . Thats a question for my fellow commodity researchers. Its all interrelated. Tlaung for joining us. Michael cohen from barclays. When we come back a fake bid for avon briefly sending shares higher. Why was it so easy to file this bid . Plus Green Mountain shares tumbling today, down 8 . Investors not impressed with the new details that the company introduced about its cold brewing process. When squawksquawk on the street comes back. Is. A phony bid for the Cosmetics Companies avon raising Big Questions about how they handle filings of public documents. The latest on that. Simon, a good walkthrough on this last night, he walked me through the process how this likely happened yesterday and the key is in getting access to the s. E. C. s system, where this document was posted yesterday, based on apparently bogus information that was filed. According to korn anyone can get access filing an s. E. C. Form i. D. You reng ster with s. E. C. They give you the credential and security codes. What korn says the s. E. C. Does not check whether these are real people or Real Companies or not, once you get those keys to the kingdom over at the s. E. C. You can file documents on edgar. Filing a fake form t. O. Thats tender offer for ai von saying they were going to acquire shares in ai von. You tag a particularly company with this notice. It went out to the whole universe. Thats what moved the stock yesterday. They said under the federal security laws fierls are responsible for the truthfulness. The s. E. C. Saying theyre not checking these filings including these i. D. Filings that give you the keys and the security codes to this system. I wanted to ask you, eamon, any vetting process at all for companies that file these edgar filings, is that a discussion on the table whether there should be hard to do when theres trading and so much information on social media, what are they proposing they do about this. Apparently no the s. E. C. Is not vetting these guys theyre not the judge whether these filings are truthful or not. The s. E. C. Is also apparently not checking whether or not these are real people who sign up under their real names. What could be done about this . Add another level of security at the s. E. C. Doing due diligence. That would be expensive. But eamon thats not the way the world works in general, people file their i. R. S. Returns and the i. R. S. The federal government cant be big enough to prevent everything going wrong in society. What kind of effort and expense would the s. E. C. Have to go through to police all of these things . It doesnt happen often. It happened yesterday, apparently the problem is it could happen this afternoon theres no gatekeeper controlling who gets access to the code. We dont know how many of these phony companies have been registered at the s. E. C. How Many Companies on file are fake companies. It seems very easy to fake this in the governments sight. Check out shares of keurig Green Mountain the shares are on the move and falling sharply. Almost down 9 . They wanted to show off its new keurig cold machine, kold machine. This is brandnew tech nothing. You can use the pods to use sparkling water, juices cocacola is a partner in this project and the reviews from the analysts not too hot at all. The machine starts at 299. The pods start at. 99. The pricing is very high. The rollout, not exactly fast they start selling online this fall and then theyll slowly roll it out to various retailers. An analyst said took down her forecast of how many machines would sellby half. And another one said he saw the brewer as too big and the taste of the diet a little bit off. Morgan stanley likes the stock says it wont be the hoped for nearterm catalyst. This stock as you can see, has been beaten up after a weak quarter, second weak quarter in a row. Hot machine admitting that the consumer didnt want it going back on it. The cold machine here thought to be a catalyst. I have to say, i had to rely here on the analyst commentary when it comes to touching the machine, press were invented then took it back. How do you feel about that . Its just interesting and suggests along with this negative commentary perhaps theyre not ready. A Company Already dealing with missteps. It doesnt look good. The rollout to the stores in general is delayed until the Holiday Season after next. They have got a problem with backtracking as well with the technology that prevented you from having the own fill cups. At the same time the diet coke is off according to bernstein. Would you put your ceo in front of sarah in that environment . Maybe not. Ask a simple question is there room on your countertops . If its going to go in your kitchen well see. Up next this is a plane powered solely by sunlight. A fiveday sol low flight across the pacific. How will it go . How will they do it . Well talk to one of the pilots after the break. Financial noise financial noise financial noise here at td ameritrade, they love innovating. And apparently, they also love stickers. Whats up with these things, victor . We decided to give ourselves stickers for each feature we release. We read about 10,000 suggestions a week to create features that as traders wed want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. Who reads all those . He does. For all the confidence you need. Td ameritrade. You got this. Ideas come into this world ugly and messy. They are the natural born enemy of the way things are. Yes, ideas are scary and messy and fragile. But under the proper care, they become something beautiful. Is solarpowered plane, now the aircraft and the pilots are preparing for the toughest part of the journey, fiveday flight from china hawaii. Joining us from skype are the pilots at the control of this aircraft during the flight cofounder and ceo, andre talk us through this. 5,000 miles. No fuel. How does it work . Its going to be the moment of truth for us. Our goal is to fly around the world with it powered by solar energy only. The challenge is how to fly during the nights we have to be extremely energyefficient. For us demonstration of energy efficiency, thats what we want to prove with this project. If its powered by the sun, what happens at night since this is going to take five Straight Days to accomplish . Well thats the challenge of the technical side how to be so efficient that we can fly through the nights or make it on the technology. Different companies from many different industrial fields the Chemical Industry electronics, who have technologies allowing to save energy in fact technologies can be used now on any application on the ground you know we use insulation materials to protect the pilot against the very cold temperature we have at High Altitude exactly what we could to insulate our homes if we want to save energy. So thats the demonstration that we want to do is to promote the technology of andre, im fascinated as to what life is like for you and your copilot for those five days without touching ground i mean, for example, do you have enough weight allowance to have sufficient food and water . We do. But, thats true that we have to make it pretty small. But the seats, i can lay down the goal is to sleep for hours and depending the aircraft depending on the situation. I have to keep my energy. Im using metdeing meditation. Im using breathing techniques to keep the body and mind function. What is the larger goal here . Do you see a world where commercial passenger aircraft can be partially at least powered by solar . In the short term i we have to realize at the time of between the Wright Brothers and the Charles Lindberg who crossed the for the first time. We want to redemonstrate the potential of the technologies we have onboard. You know if everybody will use on ground the technologies that we have on this aircraft we could reduce our Energy Consumption by 50 . So instead of always thinking about how to produce more and more energy everywhere we should try to see how we can use the energy we have in more appropriate ways. In china, for six weeks, china either way, Solar Technology worldwide, china, they have to if you look at you know the pollution and the cities theyll do it. Andre, be safe good luck. Thank you for joining us to talk about the flight. Andre borschberg the cofounder of this solar impulse. Straight ahead on the program, Jeff Rosenberg will join us live and why europeanyearolds could be pointing to a fundamental economic upturn. Well be right back. If you want to succeed in business, mistakes are a luxury you cant afford. Thats why i recommend fast reliable comcast Business Internet. They know what businesses need. And theres a nomistake guarantee. If you dont like it, you have thirty days to call and get your money back. With comcast Business Internet you literally cant mook a mistick. I meant to say that. Switch today and get the no mistake guarantee. Comcast business. Built for business. Morning, everyone. Heres your cnbc news update at this hour. U. S. Marine helicopter has now been that had been missing in nepahl has been found completely destroyed on a mountainside. All eight crew members were killed six marines, two nepalese soldiers on way to deliver aid. Amtrak is working this hour to restoerre service between philadelphia and new york. Service is supposed to be suspended through monday. Modified service continues between washington and philadelphia. No drought in san diego county, the region there catching the brunt of rainfall from a pair of storms overnight, six people were rescued from their cars from flood waters more rain is expected today. They need it. Just not all at once. And guitar legend b. B. King over the course of 72year career, known as the king of blues, passed away. It was 89 years old. And the world legend does fit that man there. Thats the cnbc news update for this hour, back to you guys. Turmoil that grips denmark and pummelled europe has subsided. Here, the treasuries over the past month, has led to 40 in the yield on the tenure. Jeff rosenberg, good morning to you, jeff thank you for joining us. Are we able to put to bed that what we witnessed over the past week or so the tremors that might lead to a bond bubble bursting . I wouldnt put it that way, simon. I think were talking about a significant change in expectations around the world for what kind of policy accommodation youll be able to get out of central banks. In terms of europe and japan and of course the changes in expectations for the fed and what theyll do as well. Well what is that change . Particularly for the feds we were talk earlier in the hour if you look economies, there will be a rate rise in september if you look at futures and where investors are, theyre not suggesting there will be two raises by the end of the year just one move. Yeah you know theres a couple of divergences going on here whats happening to longerdated Interest Rates and whats happening as far as ek expectations around the fed. They were really about changes in global expectations particularly around longerterm Inflation Expectations partly thats related to the turnaround in oil prices but certainly other things going on in shift of expectations in terms of growth thats impacting low longerdated Interest Rates. We have been pushing that back. The Economic Data has been weaker than expected. Continues to be weak in the First Quarter, expectations for the first liftoff of the fed has been pushed out. Longerterm Interest Rates going higher as well as expectations of the fed have been pushed out. Jeff whats with that . Whats with the weaker Economic Data coming into the spring . Cold weather has worn off. How much do you have to worry about that and have to doubt the bet that it was going to be assumed that everything would rebound in the second quarter, in the second half . Yeah certainly the april data as we have seen recently the retail sales earlier this week its been disappointing and certainly thats going to raise some doubts and some questions about the expectations that the seasonal patterns that we have seen over the past four five years will reemerge. Weaker Economic Data in the first half of the data and the second half of the data. Consumption trends rising real wages theyll show up in a better consumption trend in the second half of the year. That data will show up. In the short term theyll focus on the disappointment in the nearterm. Jeff let me pick up the point that you made about changing inflation, oil, particularly in europe the Central Bank President said well expect it to 2006 providing that Inflation Expectations dont substantial ly is there a pocket that the ecb will blink, if that happened what would happen to rates here. Hes been very clear that the plan for ecb will run to its completion. For financial markets, its priced in even more than that. Potentially a drop even further to the deposit rate. Potentially even more. The market is very much ahead of the ecb. Part of the shift in the european bond markets was recognizing that the Growth Outlook for europe wasnt as bad as has been anticipated. Associated with that the inflation wasnt as bad. Hell make good on the promises. Just a shift in Market Expectations running around global Interest Rates. Warnings that the bond market is so overvalued. Negative rates in europe are unsustainable. Wheres the opportunity in bonds. The opportunities are in really more flexible strategies around how you extract opportunities out of fixed income. Interest rates are really low, buying bonds outright is tough. If you can play different areas of the yield curve is a very attractive way. And taking on global Interest Rate exposure but being able to hedge rick another way to invest in fixed income markets. A total pleasure having you on the program. Thank you for joining us. Jeff rosenberg. The dow down about 30. A string of multibilliondollar deals this year. M a at its highest level since 2007 whats driving all of the dellmake dellmaking . Squawk on the street will be right back. Detect hidden threats. See the whole picture. Process critical information and put it in the hands of our defenders. Reaching constantly evolving threats before they reach us. Thats the value of performance. Northrop grumman. Why do we do it . Why do we spend every waking moment, thinking about people . 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So you can make your move wherever you are. And start working on your next big idea. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Verizon making a bold deal this week with its 4. 4 billion purchase of aol, is this a push for verizon into the technology of advertising. Joining us now here cnbc contributor jim stewart. Your latest column verizon ready to do battle . Signature transaction for verizon. I think verizon should be the focus here and you cant just look at this deal in isolation, its one of a series of fairly bold steps that this giant tell com company has taken thats shaking up a lot of industries were seeing convergence between media, entertainment, Technology Telecommunications and this is evidence of that. First of all, theyre willing to go head to head against google and facebook. It comes on the heels of theyre starting to unbundle the cable deal, what this adds up to verizon is really making good on its promise to put consumers first in these businesses. Lets face it despite lip service to these, these industries didnt put the consumer first. What do you see verizon turning into . If they have their way, theyre going to be a multi multiplatform, multicontent, get what you want any time you want. They sees themselves as a connecting company. Whatever device they have to whatever they have on there. Its moving into direction competition with a lot of people who supply that content who work with them. Theyre partners. That, too, is a pretty seismic change in that area theyre willing to mow these people down if they have to i love seeing competition and this is really impressive at this level. The real interesting theme that runs through this the relation with google may lie particularly since google is going to take on Telecom Companies with the idea you can buy your Digital Stream online. Theres much more other areas that fascinate more. This is a huge challenge and is fascinating, too, because you see a giant stalwart google taking on a giant stalwart on the east coast, in verizon. Google is calling their wireless thing is quote, unquote, an experiment. They would love this to wrap this up. This is taking direct aim at the core of verizons business. Verizon was kind of the sleeping giant. Google is coming into fiber, well, we dont like it. Well wait and see what happens. All of a sudden google is coming right into wireless. I guess the question is verizon is Telecom Provider are they able to cut across the markets, what are they saying . The provider of choice for everyone . Well no theres always going to be the government is going to make sure theres going to be competition here. The Cable Companies are not a separate business at all anymore. Verizon is going to have competition. They have a very strong market position in wireless. Slay have over 100 million users there. Thats big. All of these people need them. Espn sued them over the unbundling thing thats amazing, people who work as closely together as they do and they get a lawsuit, but as they pointed out theyre the only content provider that actually has sued on this. Everyone else is quietly wringing their hands, swallowing hard and say, well have to live in this world where our partners are also our competitors. Theyre putting espn out there, espn has that critical relationship with the cable bundle like no other. Like no other. Espn is like no other. I want to shift gears, in all of your years of covering Public Companies and your experience how on earth does a fake Public Company file on a government website for Company Filings and cause the company to move 100 million, how does that happen jim . Thats a great question i havent seen anything like this happen. I didnt realize that anyone can down there and make registration and start filing documents and the s. E. C. Edgar system. If thats easy amazing me why this hasnt happened more. It looked like kind of clumsy not the most sophisticated schemes. They spelled their own companys name wrong. They spelled it two different ways. Huge market impact. So, this clearly is going to call this is going to take some rethinking. I knew you were going to have some outrage on this. Jim stewart of the the new york times. Up next on the program, the story of how the family behind Kentucky Derby winner american pharaoh came back from bankruptcy to raise a potential triple crown winner. And reddit owner joins squawk alley to talk about its new efforts to cut down on ar has rattle. Were back after this quick break. Seven out of ten Power Outages in the us are caused by weather. But utilities can now predict where the power will go out, within a few city blocks. Working with ibm theyre combining micro weather forecasts with detailed data from local sensors. To predict where outages are likely to occur. And send crews exactly where theyre needed, when theyre needed. Ibm analytics from the internet of things is making energy smarter every day. Welcome back to squawk on the street. Shares retailer dillards coming off the worst levels of the day so far. In early trading the retailer reported a slight drop in First Quarter profits yesterday. Jp morgan analysts cut the price target to 114 a share. It was 126. It still has a neutral rating on the stock. Lets send it over to chicago and Rick Santelli for a final exchange this week. Yes, thank you, simon. And actually coming to chicago might have its own extra set of dangers, so in that regard. Id like to welcome nye guest from s p, jon sugden. Thanks for taking time on this busy day considering you had an announcement yesterday. Thank you for having me rick. On may 8th you addressed issues related to illinois. Yesterday you addressed issues related to chicago. Could you summarize what s p did on may 8 and yesterday, please . Sure. So on may 8th we put our rating on the state of illinois on credit watch negative. We expect to take action on the rating within the next 90 days. And it also narrows our window for taking action on state. And this is based on the pension ruling from the illinois supreme court. Ruling the pension reform unconstitutional. Yesterday we lowered our rating on chicago, two notches to a minus with a credit watch negative and while this takes into account some of the pension pressures that the city is facing, it is directly tied to some of the liquidity pressures that the city is facing. And our determination on that front will depend on how the city deals with those liquidity pressures. If they rely solely on go ahead. You know many years ago, maerd ith whitney said theres going to be a huge ballooning going on in defaults in local and municipal government paper. She wasnt right. But maybe shes going to be a hole lot more right in the confines of illinois. Unlike california illinois has laws that preclude local governments if going bk. They have legislation pending to change that. Federal law of course disallows states from going bk. What happens if that legislation doesnt pass . It seems to me its either bk or default, right . It depends on the individual credit i dont think its necessarily that. I think theres still options for pensions reform both at the state and the local level. In ways to manage this liability. You know, i think from chicagos standpoint youre absolutely right. I should clarify, im not going to mention, but i have very good sources that say theres three to four cities obviously in illinois smaller than chicago that really arent going to be able to get this together. Im not going to mention names, but you know if you were recommending to investors whether you know they should be in chicago or illinois paper, what thoughts would you give them . And what timeline would you point to . Rick, is that a trick question . You know we cant recommend any action just from the general notion of paper being downgraded potentially and the issues that youve pointed out thus far. Sure so definitely we from our standpoint credits that are staying on top of their pension liabilities and making their pensions payments and have revenue and expenditure alignment are certainly a stronger credit quality and so thats something that we look at when were assigning our ratings. Well john listen i know its a tough issue, were going to continue to try to have you back. Well concentrate on Illinois Issues for the next several days. Sarah, back to you. Sick santelli thanks for that, well switch to horse racing, american pharaoh is the pride of the zayad stables, but things werent always so easy for the family and their business, robert frank joins us more with the back story. Incredible comeback story for this family. Hes always been the ultimate outsider, an egyptian brewer who stormed the world of horse racing. Ahmed zayad is becoming the ultimate disrupter in the sport of kings. When american pharaoh crossed the finish line his owners the zayats had a lot to celebrate. The 1. 2 million prize they walked away with is just the beginning. In a sport filled with old money and families who have been at it for generations, ahmed and his son, justin are newbies with an incredible track record. They started their stables in 2005. That short time theyve taken secondplace in the derby three times. Finally winning a 3yearold colt in kentucky. Out of 21 winners, im one of them, its history. I still cant believe it. The zayats will be garnering even more attention in baltimore. Mirren pharaoh is the favorite at the preakness and theres already talk of a chance at the triple crown. Love that expression now like american pharaoh, zayat is at his best when coming if behind. His stables filed with bankruptcy in a battle with fifth third bank. He restructured reduced his horse count a and is now at the top of the sport with three runners in the derby and the hope for the triple crown. And hes the favorite this weekend at the preakness. Hes got the number one spot inside the rail. No horse has won from that spot since 1994. Interesting to see the look of the family behind the horse. Lets send it over to john ford with a look at whats coming up next on squawk alley. Well the theme of the day is the power of the cloud and china, june houston, ceo of drop box, well hear from him. And netflix, stock popping up 600 a share and out of china, ggv will join us live. Ameriprise asked people a simple question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. Good morning, it is 8 00 a. M. Here at one market in san francisco. And its also 11 00 a. M. Here on wall street and squawk all li is live. That