Transcripts For CNBC Squawk On The Street 20160222

Hit markets since the year began, is up the most among the big three over in europe. The tenyear note yield, crude oil always a key consideration here. You can see the tenyear note yield below 1. 8. Wti up 6 . Brent also nearing that 35 mark. Were well above 30 on wti. Our road map this morning, it starts with apples fight against the fbi. Things continuing to heat up. Tim cook sending another letter to employees, and fbi director james comey taking a shot at apple in an oped. Ailllergan with better than expected results. Facebook teams up with samsung with Virtual Reality. Over at barcelona. 2017 additive. You mean Virtual Reality will be added for facebook in 2017 . I think so. If you parse what Su Zuckerberg said in the last conference call, he doesnt do anything unless its now, versus google. Google says how much money you are really making on this . Want to talk facebook and google. Stocks are poised for a strong open to begin the trading week. You saw future theres helped by that jump in oil prices. The u. S. Rig count fell for the ninth consecutive week and the International Energy agency says it expects u. S. Shale output this year to fall. A 22point jump in the s p 500 would put the index at break even for this month. Which is impressive given how we started off. Yes. Though, man, i know a lot of hem funds. The numbers there not quite as impressive. I dont know that 22 points or 22 whatever you want to call it is enough to move them back to even for the month. Always interesting to note that performance because, of course, they get a 2 of the ups. Usually, you know, a Significant Management fee as well. 20 of the ups and 2 management fee. Its been a difficult time, fridays close not that great. You think what will happen this weekend to make things good . Bernie sanders loses. Suddenly we have a frontrunner, the frontrunner is good for stocks. She can move to the right. You will see bank stocks moving up, drug stocks moving up. Lets watch allergen. I dont think think the shale is not the key issue. That agency can come out with whatever they want. Its canada and gulf of mexico. Shale is going to go down. Gulf of mexico theyre going nuts up there, they have been able to make it so all the money they put in is coming to tr fruition. When theyre pumping, theyre not making money. Theyre losing 2 bucks a barrel. The big issue is theres no place to put it. When you get the spread of brent, its possible we could make gasoline and sell it she cheaper. West texas posting is not accurate either. If you want to sell oil and you have heavy crude, it depends on the variety. I find myself wondering, reading stories today, a big energy conference, audi oil minister will be attending for the First Time Since 2009 this idea of getting the shale guys to shut off production. They cant. But even when they do, how quickly can they come back on . They can come back on quickly. Wont that keep a cap on prices . Thank you. This is what this a lot of the guys who come on, a lot of independent oil guys say listen, it will be back to 60, 70. No, the thing were good at is adding to production. We can create our own ceiling. So you need the saudis to ratchet back, which theyre not going to do, they dont want to lose market share. The whole idea that oil can go magically back up is just not going to happen. Theres so much companies that need to pump. A lot of the hedges are off now. 2016. And youll see a freeport or chesapeake start going up. People think, wow, this is my chance. Its not can freeport go to nine . Anything can go anywhere. Oil will not soar here. They cant. Right. Too Many Companies the marathons. Look at devon. If you go back over devons conference call, they literally said, listen, were fine. Were selling assets. Was this before they sold the stock . The day before. I matched. I parsed the wording. I mean, they banged people badly. Now, obviously if youre on if you made the stock went out below where the offer was on friday. Now its back up. Thats the kind of thing going on. You listen to these oil men, these guys are saying we have these assets. We cut the dividends that preserves capital. We are making asset sales. Were in good shape. They do 69 million shares. But those that can do. If you are in a position where people will buy your stock, even if its at 19 or in the case of hess, well bow low where you were buying it back yourself, as we saw them issue a lot of shares, you will do it. And you will live to see another day as opposed to companies that we know are not in a position to sell stock and will be dealing with restructuring. Theres two groups. The guys about 2 or under, 3. Companies are very much in trouble and then companies very much in trouble with their banks. We know that the banks john stump, the ceo of wells fargo, hes got about 20 billion. Now in bank loans to the patch what is the collateral there . Did you hedge . The bank of america guys are telling me that they hedged. You cant really hedge that much. Thats funny, hsbc reported earnings that were below expectations. The giant asian european bank. Part of the reason was write downs on Energy Related loans. We have not seen it impact the u. S. Banks. Not yet. They have been taking some reserves for that. But it will start to hit. Right. Its not small. Thats the one thing people have to realize. If you lent money to schlumberger, you will get that money back. Exxon. Exxon stock acts so great. They can pick off things. If you lent money to a Natural Gas Company in order to do an acquisition, good luck to you. Natural gas is so low. Right. Right. By the way, were not always talking even about public companies. Think about audrey mcclendons mid america how is it doing . How is it doing . Bonds are trading at very low numbers. Not doing well. In that case it was largely funded by the bond market. People have to keep track of the Pipeline Companies, we are so overpipeline in oil. Its incredible. Rbm put out a piece that was fabulous about how much how crude by rail is just ridiculous. We dont even need it in a lot of these areas. The Pipeline Companies have overbuilt for oil. Thats thats not going to change with oil going to 31. Right. So thats why i say dont chase this rally. This rally is based on crude surging, not based on the dollar going down, which is what we want. Not based on earnings which we would like. Its based on pajama trading. The futures guys seeing good over there and buying them here. All right. Its embarrassing how stupid it is. There are other things going on. The dollar is stronger against the british pound. We dont want that. Europe is going up because the dollar is getting strong. Were supposed to buy stocks because europe is going up . Its been wrong the whole year. We also should mention verizon . I see something on verizon. Xo assets s that fun . Yeah. Its a way back machine. I know. I know. Carl icahn. Owner of xo. Xo, chesapeake, freeport. And apple. I wonder if icahn still owns apple. The last filings indicated that he reduced. When hes a seller, he usually likes to sell. The 13. 5 million may have been in process. I dont know. It could be. This is one of those stories, whether us read the comey letter or the cook letter, and whats very clear is that theres really no edge for you and me to add to this. I want to add, look, do i know what tim cook is thinking . Hes pro Law Enforcement, antiterror. You know who we can get to add to it . Who. Eamon javers. How did you know to do that . Then we can react to it, or maybe not at all. Lets get to eamon. Hes been following the moment by moment emails and letters. He joins us from d. C. David, this thing has been hot overnight with the back and forth now in this war of words. Last night with the fbi director, this morning tim cook, the ceo of apple sending out a letter to his employees at apple thanks them for their service on behalf of privacy. Heres what tim cook said this morning. This case is about much more than a single phone or a single investigation. So when we received the governments order we knew we had to speak out. At stake is the Data Security of hundreds of millions of law abiding people and setting a dangerous precedent that threatens everyones civil liberties. Also last night we had the fbi director making a post to a legal blog making his case. Heres what james comey had to say last night. He said we dont want to break anyones encryption or set a master keys loose on the land. I hope thoughtful people will take the time to understand that. Apple hired ted olson, the legal tighten. He was on abcs this week yesterday making apples case. Apple has a responsibility to maintain the trust and faith of millions of people who depended upon apple to produce a product that protects their privacy, their intimate personal life. This is a pandoras box. Were not just talking about one magistrate. There are hundreds of magistrates. There are hundreds of other courts. And theres no limit to what the government could require apple to do if it succeeds this way. Clearly, guys, neither side is getting ready to back down. We can expect there might be congressional hearings. The house energy and Commerce Committee invited mr. Cook and mr. Comey to capitol hill to testify. We dont know whether they will accept that invitation. This legal wrangling could continue until the end of march when the next hearing is set. This doesnt look like its going away any time soon. No. Thank you, eamon. It does not. Its going to be in the news. What impact it has on apples stock, ill leave that to you to tell me. I didnt like the fact that theres a characterization that apple is doing this to sell more phones. Everyone in Silicon Valley is behind apple. I do think that you bought that phone with the expectation of privacy. One thing you taught me is the notion of the expectation of privacy with big government, here and in china, is a fallacy. Dream on. Encryption has changed the battlefield to a certain extent when it relates to your phone. Not your work phone, by the way. But the county says we want to be hacked. You should be able to hack your own phone. Why cant the county do that . Everyone is surprised that there wasnt a behindthescenes move to cook or someone high level at apple or securities saying, listen, dont make a fuss. Im not sure there wasnt. Do we really know . Its not clear there wasnt and he decided, this is it. Weve complied with dozens and dozens of these kinds of requests, but now were drawing the line. Do you think chinas a gimmick that they lose sales in china if they suddenly capitulated . I have no idea. Thats another thing floating. A lot floating. But what matters is the earnings, the iphone 5 and where they are, barcelona. The Iphone Iphone 7. The g. Whether the 7 will mcadam is on the move again. Hes on the move. David, what happened with verizon . Why is verizon the sexiest company we have today . Really, the sexiest company we have today is verizon . Youre saying that . Not sure i believe that. I have to make a phone call during the break. Lets take a break. Is it at all work related . Absolutely work related. I dont know what it will be about. We still have a few things coming up here. An exclusive interview with Brian Krzanich. Who is a blast. So understated. So cool. Hes a gamer. The guy is really cool. There you go. He doesnt act cool, hes soft cool. His company is teaming up with at t to test drone technology. patrick 1 how about done . patrick 2 thats the kind of control i like. And thats what they give me at national car rental. I can choose any car in the aisle i want without having to ask anyone. Who better to be the boss of you. patrick 1 than me. I mean, you. Us. vo go national. Go like a pro. And choose world. Choose, choose, choose. But at bedtime. Why settle for this . Enter sleep number and the ultimate sleep number event going on now. Sleepiq technology tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store, all beds on sale right now save 50 on the ultimate limited edition bed. Know better sleep with sleep number. Allergan reporting better than expected results from key products in its International Brand segment. Im going over some of the report here and the research. Generally a very good quarter from allergan. They are in a deal to be acquired, as we all know, the largest inversion thats ever taken place. Pfizer will be moving to become a foreign corporation. An irish corporation. As part of that deal. But the results themselves do matter in these cases. Yeah. Allergans Earnings Call going on now. And generally quite a positive number this morning. Reassuring over at isi, theyre saying positive things in terms of 2016 revenue guidance. It was a beat on gross margins. Gross margins were quite good. Revenues in line despite foreign exchange. Operating cash flow. Yeah. I liked it heres the thing, theres two components you have to watch. When is this deal going to close . Its such an overpay. Apparently thats in april. Thats the expectation. I want to see if theres any notes from the call in which they mention it. This is 44 of the new pfizer allergan . Thats right. Very high growth. It moves up pfizers growth rate and lowers the tax rate. It is attractive. My travel trust owns it, it has been a dog of late. Every pharma has. The spread in the deal is large. Theres continued concerns that treasury will do something when it issues the final regs on inversions. They issued in the midst of negotiating this deal. So there are a lot of worries. Many of them may be unfounded. They continue to pressure the socalled spread between what the deal is worth and where allergan and pfizer are. When i ask brent saunders, i ask him where would the stock be without the deal. Thats like asking dow chemical about what would happen. Yes. Is he coming on with you . I have senator saunders. Someone said how did you get senator saunders . I said brent saunders, this is a business show. Not senator saunders, who peaked, and thats why wall street and the drug stocks should be bought. He was never in it, i think thats something the media did. Senator sanders . I have the philadelphia accent. I have brent saunders. Senator sanders opinion on allergan is not of concern to me. Saunders, not a social list saunders is a moneymaker. David, i want to say, brexit. Now were finished with that, right . You said brexit. What you are going to see. Hangman . Really. Im going because of brexit. The london theater, the best. I was listening to willfred this morning. What does willfred recommend . Go to london. Up next, cramers mad dash. Lets give you a look at futures. Were set up for a strong, strong open. That is if you own stocks and are not short them more than long. To help pay for her kids ice time. Before earning 1 cash back everywhere, every time. And 2 back at the grocery store. Even before she got 3 back on gas, all with no hoops to jump through. Katie used her bankamericard cash rewards credit card to stay warm and toasty during the heat of competition. Thats the comfort of rewarding connections. Apply online or at a bank of america near you. We have about six minutes before the opening bell. Its monday. Yes. Bank of america has a really interesting kind of really part of this whole moment, which is that they say buy the truckers, but they also upgrade csx. You and i talked about norfolk southern. It was in the 90s. Its fallen to 75. Csx, the beneficiary of the widening of the panama canal. I think ships will go all the way instead of dealing with the west coast ports. I like this call. I think the rails have bottomed. They have been brought down by cruel and coal. They already told you coal will be down by 20 . Crude by rail is going down. Trinity 50 decline in orders in one of the most jarring Conference Calls i was on last week. These stocks are cheap. If you do year over Year Analysis its not going to be bad. Thats what people are starting to do. Theyre saying year over year comparisons get easy. I know people at home think this is so stupid, you can look at the way a company reports. But csx has bottomed here. Im willing to buy it. Not based on consolidation. Nobody believe theres will be any. No. On panama canal. Panama canal is huge for them. You need explain that more and quickly. I dont know if you remember that horrible strike in the west coast ports. You drop off in the west coast and you ship by rail east, because the panama canal does not allow those big container ships to go through. If you spend a couple more days and go east, think about the lack of friction, how much cheaper is it do business in the east from asian ships. Its really important. I was going to do valares. Mexico is strong. Wow. I thought it was interesting. Mexico is strong. Brazil is not. Brazil. Well get to that on the opening bell and a lot of other stocks we have not mentioned. Getting ready for the start of trading. Big week ahead. A lot more squawk on the street. Choose world. Choose, choose, choose. But at bedtime. Why settle for this . Enter sleep number and the ultimate sleep number event going on now. Sleepiq technology tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store, all beds on sale right now save 50 on the ultimate limited edition bed. Know better sleep with sleep number. Every insurance policy has a number. But not every Insurance Company understands the life behind it. For those whove served and the families who supported them, we offer our best service in return. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. Youre watching cnbcs squawk on the street live from the Financial Capital of the world with the opening bell set to ring in about a couple minutes. Im looking at were trapped by oil. As long as oil stays up, well continue to rally. I hate that kind of rally. Im urging people to not participate at this moment. Oil is probably at its high. You know what . Heres one to watch, youre watching the opening bell, its abx, gold is coming off, and i want people to understand that when gold comes off, thats part of this same trade of the less of the pressure. Here we go. This stock has not been that good, but barrick doing the onners. At the nasdaq, Sunshine Bank corp. Two stocks not doing good, the bank stocks and the oil stocks. There they are, ringing the bell. Stock has moved up. The gold stock, if you want the growth stock is randgold. Gold is pulling back because the flight to safety has come off here. One reason weve seen shreveport up is gold moving up. Not just copper. Copper has been strong for a couple days. Everyone has writing off the commodities, but the commodities. Alcoa was up. Youre not talking about a major rally here. No, its great that brokers can make phone calls, turn you a bit. You have to trade these things, you cant own them, right . You cant own them, not with china. We have some Interesting Data out of china in terms of what mark fields is talking about, how the cars are selling well because of tax deals. Vf corp talking about how chinese sales are good. This is not what were looking for. Were looking for big container ships taking re ining raw goods and selling things. Steel is up here. Thats another sucker trade that will last a couple weeks. These are sucker trades. When you talk about sucker trades, is buying the market now also part of that . No, i was going over the consumer Package Goods stories. They are so good. They so benefit from oil and lower gas. They are a great place to be. I dont find you wildly bullish on the broader market. Youre not. Its hard because i like the banks to be participating. The banks are terrible. Im looking for a Hillary Clinton rout of the democrats which makes it so she can go back and cozy up to wall street, maybe you get those bank stocks starting to trade more towards book value. The Federal Reserve not raising rates does hurt them. I was thinking about donald trump and whether or not he would be kind to the banks. No, hes not kind to banks. Or the Hedge Fund Community or wall street. No, no. I would think in some ways his hes closer to the democratic side in that. I think hes a little more antibank than hillary. Yeah. He wants to eliminate carried interest. Brent saunders senator sanders wants to know what she talked about with goldman sachs. I can tell you what they talked about. Hey, well stop being as tough. Did you tell him theyre doing gods work . That never really worked. If you watch the drug stocks. One of the things thats hurt the drug stocks is pricing. Allergan moving up. If you look at radius, rdus, this is a company that is up huge, has an osteoporosis drug. Amgens osteoporosis drug did not test as well this stock would not be up this much if they were having this sanders bash drug company, hillary back drug company. Watch these stocks get their multiples back because hillary will not bash the Drug Companies as much as sanders. As she Gains Momentum moves to the right. Better for the stocks, better for drugs. So much of it is rhetoric to begin with. True. But rhetoric scares people. Does, doesnt it . It does. You have trunk attacking the banks. I was talking about Morgan Stanley. Should Morgan Stanley be at 24 . I dont know. Business is not bad. Not particularly good. Fixed income is not good. Getting some m a. Were getting some, though the the beat on m a has slowed. I know. Its slowed considerably versus last year. If youre gore maman dont you there and say how did this happen . Were not that bad. Goldman is not that bad. Theyre just not. The book value is clean. The government made them. They dont take a lot of risk. Thats one of the reasons their roe is so bad. There was a recent report saying the roe was around 7, when you add it all in. Which is below the cost to capital. Now weve all been looking for them to move consistently above 10 . To double digits. They have had quarters where the return on equity was well above that or above their cost of capital. But not consistently. No. The one that has been having people flummoxed is where they gave the ceo a big raise, bank of america. You were not a big fan. I felt i often find there should be an alignment, stock has been horrendous. My travel trust owns it. Im mortified that we bought this one. Mortified. This thing is the book value is 15. 50. Moynihan got a big raise. They would do best with the fed raising rates. It looks like the fed wont be raising rates aggressively. Big bump for the ceo. A lot of people at the company probably are not all that happy. Why dont you just sell it . I was going to give you the too cheap line. Too cheap to sell. If Hillary Clinton is frontrunner, trump somehow gets beat, you have a couple of pro bank guys. Is that a reason not to sell . Youre just waiting for a bump . Im waiting for a bump. I believe the Federal Reserve will eventually have to raise rates. I was appalled by the salary increase. It seemed wrong to me. I think a salary cut would have been dynamite. That would have been fabulous. David, going over some of the quarters on friday, they were disappointing. I went through vf corp that was a disappointing quarter. Why do i say that . Eric wiseman at the end called it a disappointing quarter. Deere, deere quarter was abysmal. Abysmal. Theyre talking about farmers and receipts being terrible. You got some bad quarters last week. Really bad. Jack in the box. I have not mentioned jack in the box yet. You were upset. I ruined dinner last night. You couldnt fall asleep last week because of jack in the box. It kep t me up. It kept you up because you assumed differently the people who follow the company thought it was having a good idea who would have thought the mcdonalds all day would have hit them. I was just with wendys management. Wasnt hurting them at all. Not one bit. Jack in the box was saying the same. Wendys, mcdonalds and burger king doing quite well. Excellent. Its like phones. People keep adding phone lines, people keep eating bad food. Chipotle is coming back. People will forget about e. Coli by the third quarter. On the broader subject of earnings, we talked about allergan, not many more to come here. No, just retail. Mace sises will be problematic based on vf. I think vf has to do a deal. What kind of deal . They talked about they havent done a deal in four years since timberland. They have do something else. They have to reshuffle. I put through lulu lemon. The strongest area in all of apparel right now is yoga. Yoga. Yoga. Mountain climbing and yoga. If you go over the good columbia sports we spor sportswear quarter, it was yoga. Technical mountain climbing . Who is doing that. Vf corp had good technical its faux technical. So youre doing it in the gym . No, no, its outerwear that sells well. I see. If youre going to climb ev everest i would think the people who need that equipment is small. The numbers were great. Vf corp complained not enough cold weather. Columbia sportswear said it didnt matter. Now that were concluding earnings season, aside from a handful of retailers, the numbers dont seem particularly good. What is an appropriate multiple for the s p therefore to have . Given what weve seen and what we can expect in terms of guidance. Theres the clorox part of the s p, which is at 28 times earnings and growing at 1 , 2 . And then theres the fo ford american airlines. The five to six multiple which makes no sense to me. There should be a convergence. Cummings should be cheap. There was a piece about southwest air. Just a very good recommendation. I dont have it at the tip of my tongue who did the recommendation. It was the type of thing which tells me, yes, you cant give up on stocks that are selling at eight, nine times earnings. Credit suisse nonfuel margins holding up. I like that call. That stock is too cheap. The one that will blow you away, home depot. I think spending on homes Still Holding up. I had Briggs Stratton on last week. Power washers, engines, lawnmowers, very strong. Making your house look better is the theme thats working. Dressing better is not resonating. Its just not resonating. Shirts are not doing well. Ties are not doing well. Suits are not doing well. People are not spending on that. No. They want to power wash. Briggs stratton. When haley and i did our house, magnificent. Added at least 190,000s to the value of the house. Okay. Maybe 100, but it looks better. Briggs stratton, the best power washers. Just putting it out there. That stock up 20 . I learn something every day i sit next to you. If i ever need to we didnt talk about limber liquidators. Geez. Vp corp ditched a lot of inventory. Thats why tjx and ross can continue to go up. Dont give up on those. Dollar stores report this week. Thats where the marginal dollar is going. People saved from gasoline and heating costs, thats going to tjx, ross. If Doug Mcmillan were to sit over here, join galfan and zillow, we could get we need the straight story from walmart. We do. Maybe Doug Mcmillan will join us at some point. You know who will join us now . Mary thompson. We have to get to her on the floor. Fantastic. Mary, take it away. The dow jones off to a strong start bidding on last weeks gain. A healthy one for the markets. The dow up about 183 points. Were seeing a broadbased rally today. All ten of the s p 500 indexes or sectors are higher today the dow is trading at its best level since january 13th. We are seeing strength in oil. Thats giving a boost to energy stocks. Metals are higher. Despite the weakness in gold which is up 21 in todays session. Transports looking good, up 158 points. All of this coming on the back of a strong session in asia overnight despite a decline in the japanese flash pmi. You can see the nikkei was higher. In europe today, all this stalk swirls about a possible brexit that vote in the uk set for june. The european markets are mixed. All of that coming into todays session. It just turned higher now. Lets look at the energy sector. As we are noting, oil is a factor today. That, in turn, is driving oil stocks higher. Oil is up just about 1. 61 now. You can see all of that, the drillers, the major oil all benefitting from that today. Were looking at miners, as i mentioned earlier, other than gold, the metals are showing strength as well. Look at that. Freeport up 10 , rio tinto up over 5 , bhp billiton up 5 as well. Goldman sachs cutting estimates for the big banks in the u. S. They expect Capital Markets revenue to be the weakest in the First Quarter than it has been for years because of volatility in the markets. Youre seeing a bounce back today. These stocks have sold off hard in the last or since the start of the year. Again, seeing a bounce back with the general market. Quickly a couple other stocks to watch. Amgen getting positive news on a late stage trial for an osteoporosis drug. Gm considering a pullout of the big investment in brazil because of political and economic uncertainty. Were watching yahoo as we have been since last week on expectations or reports that the company will put itself looking to sell certain parts of the company. That continues to be a stock to watch. The dow jones now at the highs of the day, up 194 points. Now lets go to chicago and check in with Rick Santelli. Rick . Thanks, mary. You hit one of the big dynamics. It doesnt matter how it fits into the Global Financial puzzle with regard to the price of oil. We know that the machines like to create relationships. Theyll pound them until they stop working. If you look at yields, our yields are either higher or unchanged depending on which part of the curve you look at. On the higher end, short maturi maturities. Two day of twos. Look at the formation relative to fridays session. When you flip it further down the curve to tenyear on a twoday, you can see what i mean. The right side is not as aggressive as the left side. Were unchanged on tens. Unchanged on tens and 30s if we go to bunds, look at a twoday of bunds. They had a low yield testing 18 basis points. On a closing basis, these are levels we have not closed below since april. It continues to reinforce not only the spread between our tens, but how all these sovereign credits are linked toda together. You want to watch this area. If you open up the chart to one year, you can see that. Look at april and all the activity on the left side of that chart. The most popular chart in chicago today is the euro versus the yen. Were a couple months from threeyear extremes. The yen is winning this one. Look at euro yen. The euro is at the worst level since april of 2013. Look at a twoday of the dollar index. The euro figures significantly in the percentages of the valuation of this dollar index. Of course it does reflect it. We are up, you know, at one point up close to a whole penny. These are big moves for the dollar index. They could reverse a longterm pattern. The second most looked at chart, a oneyear chart of the shanghai composite. We know china was closed for a while. Look at this chart for one year. See that low . Twothirds of the way to half middle of the chart . Thats end of august. 29. 29. Once we dipped below, we have not closed above it. Is this testing it, going back down . Or are we going to breach it to the upside . Key level to watch. David and the gang, back to you. Thank you very much, mr. Santelli. Coming up, well have House Oversight Committee Member darrell issa speaking out on the u. S. Versus apple. Also ahead, intels looking to capitalize on drone technology. An exclusive coming up with Brian Krzanich. Hes a cramer favorite. Certainly started off as a very poor year, if you were long in the market. But now were down less than 5 for 2016. As you see there, with a 1. 28 move up in the s p 500 index this morning. And all the broader averages, other averages up as well. A couple names we have not gotten to sales force and palo alto. Both these companies were victims of what i regard as being the socalled channel check. That the quarter didnt end well, guidance could be negative. Last weeks a couple firms said it. Today piper, opco and Pacific Crest say thats nonsense. Palo alto when it reports on the 25th says it will have a good quarter. Merrill says you do not need to worry about salesforce. I dont like this. Its very confusing to the individual at home. You are really telling me that it was bad, now its good . If you like these companies, theyre very expensive companies, but theyre the winners in cybersecurity and the winners in cloud and Enterprise Software management. So either like them or swing in the breeze. If you swing in the breeze, short them coming into today, and long them last week. This is nonsense. It is no value research. Microsoft was serious about trying to buy salesforce. It is interesting when it comes to the idea of consolidation. Do you think theres anything in the future for this company that it would consider again . Benioff has a gigantic world view. Heres what happened. Benioff, the ceo of sales force, did not have a Good Relationship with baum. Does have a Good Relationship with Sacha Nadella who is humble. I know they like each other. The idea that microsoft wants to buy them. If its for sale, im sure this would be one as opposed to oracle, which is ridiculous. I think mark likes running the company. He has the giant power coming. He loves what hes doing. Talking about the software. No desire to step down. Hes very young man. Very young man. But sachan nadella, if he decides to make an 85 bid, i dont know. Not that thats coming soon. There was some what got me crazy was this t tableau, they took salesforce down. Ridiculous. Well talk stop trading with jim. Squawk on the street will be right back. Time for stop tradin what have we got . Not that if you try to put a mosaic together of whether theres a peak in industry, whether its cell phones, housewares, autos, you look to see what the retailers are doing. Mike jackson announced a buyback. Since 2007 he cut the flow here in half. The reason why this is important, he came on squak and said sales were not that good. Immediately people felt peak. When he broke it down, mark fields, the ceo pointed out the sports u s utility vehicles and trucks are good. Watch this. This is good news for ford. Mark fields was telling bloomberg that business is good. Ford and gm are the two cheapest stocks in the market, theyre a great quandary to people because people say they are not cheap. Earnings will fall off a cliff. If they dont, they are what to buy. Theres a longer term discount being applied because people think automobile also go away as you get the rise of the automated car. People no longer taking drivers licenses. I think its overdone in terms of these stocks being too cheap given the fact that autonation is putting its money where its mouth is. What do we have on mad tonight . Brent saunders. A allergan, look, a very difficult quarter to understand. The reason why its difficult to understand, its not whats driving the stock. The combination of pfizer. And its the sale of its generic at the absolute top and getting that deal closed. Right. Get the deal closed, then we will close the gap and the stock goes to 330. Ill be watching that tonight and talking to you right here tomorrow. You have spring training and i dont. Yes. There is spring training for the phillies, but it dont mean anything. No, i dont have spring training. As a mets, fan, yes, its beginning. When we return, an interview with intels ceo, Brian Krzanich. I moved to boston when i was two. There was 14 of us in a four bedroom apartment. To be the first kid to buy a house. Its a very proud moment. Whatever home means to you, well help you find it. Zillow. Oh hey. Ive been using you hey mforever. Youre grimy. Grimy . Naw, thats personality who you talking to. . Hey, the wife jump in, lets all shave change that filthy razor change blades . Wooooh, rich folk alert fooled me with your linoleum tile. Stop hanging out with a dirtbag razor cause new ones are so expensive. Dollar shave club. Amazing razors delivered for a few bucks. Shave with a fresh blade anytime. Try dollar shave club. Com a dollar sign looks like an s. When you send financial info through a website, look for a url beginning with https. The s is the difference between an encrypted site and one thats not. S equals secure. [light instrumental music] welcome back to squawk on the street, im david faber along with sara eisen. Live from post nine at the new york stock exchange. Carl quintanilla will be joining us shortly. Simon hobbs is off today. We are in a rally mode. The s p up over 1. 3 . The decline on the year below 5 . Oil also stronger. Far stronger on the session. Lets get to the road map for the hour. British Prime Minister David Cameron reaching a deal to keep britain in the eu, but londons mayor says he wants a brexit what does it mean for the Global Economy . And a live interview with darrell issa, why hes siding with apple. And what the results in South Carolinas primary mean. And coming up in a few minutes, jon fortt will talk to the ceo of intel from barcelona with an exclusive interview. The markets looking at a 200 point gain for the dow. Oil prices are helping to extend last weeks gains, currency fears remain on brexit fears. The pound is plunging against the u. S. Dollar. Lets bring in jeff and michael. Jeff, david mentioned strong gains, we erased february losses. We cut the losses for the year in half. Is the sign of strength a signal that the worst is behind us . No, i think its a sign that what were in is not a trend to the down side, its a trend towards greater volatility. There will be days like today, more down days as well. Brexit is a great example of how there are increasing concerns over the course of the next you to months that will weigh on this market. Well have days to the upside, days to the down side. We are seeing a reaction in the british pound. I mentioned a sharp slide in the euro and the dollar it doesnt seem to be impacting equities, either in europe or the u. S. Is that because its four months away or will we move on opinion polls . I think we will move on opinion polls. Back in the Scottish Referendum in 2014, the polls did not give a good indication where that will go. Scotland stayed in the uk. Last year the general election in the uk, the conservatives won it outright. I do think the uk will elect to remain in the eurozone in the eu, but the polls will probably still be neck and neck. That means volatility but investors will be wise to look through that. Michael, can you tell us about the Economic Risks to the u. S. On top of the brexit . We know it would be harmful for britain and the eu. Any risk for the u. S. . Theres some. I think britain is the one thats going to bear the brunt of the cost of brexit. I think it will have some impact on the eu, but its more probably the ancillary questions about the stability of the European Union, how many other members might opt for special arrangements. I think the direct economic spillovers will not be large for the u. S. Lets talk about the economy. The data has been better. Todays manufacturing number was weak and disappointing. In general, do you buy this idea that underpinning the reality that weve seen today and this week is the idea that stocks overreacted to concerns about recession in the u. S. . I do think so. I think fear trumped fundamentals for a bit. As you pointed out a minute ago, theres been a high correlation between oil prices and whats happened with equities. I think thats reflecting some concern that the drop in Energy Prices is reflection of weak global demand. I dont think you see it in the data. Certainly the u. S. Data has improved over the last month or so. Jeff, keeping that in mind. I want to ask you about the credit market. Still lagging equities in terms of the rebounds. Still elevated spreads, increasing risk there. Is that a red flag for this u. S. Equity rally . I dont think so. The markets are worried about another financial crisis, a Balance Sheet issue that can spread from banks around the world. Credit defaults are up about 150 basis points, thats a far cry from the 500 they reached in 08 09 or 2013. More of what we are seeing is around income statement issues, not balance statement issues. That means theyre limited to earnings and not really something that will be a contagion. I think the market is overdiscounted the risk of another risk of a Global Financial crisis. Sounds like what im hearing is youre still worried about volatility but downplaying major fears and concerns what you are telling investors to do . This is a market where theres significant volatility. Make sure you have an appropriate diversified asset allocation. This is a time to allocation an out the volatility. A lot of data this week, confidence, housing numbers, durable goods. Which is most important . I think probably durable goods and consumer spending. That will give us an indication whether q1 will have the rebound were expecting after week q4. We get the updates to Fourth Quarter gdp growth, and those will probably be to the down side. I think the worst is behind us there. I think q1 will be north of 2 . Who will lead us higher . The consumer chris crechary stocks on the back of that economic view we saw last week . If we get more relief in commodity prices, maybe on this deal between russia and saudi arabia, maybe you get some of those deeper value names bouncing back. You know, i think financials are the key. Theyve been the weak point in the market. We have to see that sector firm up to move the overall market higher. Would you be buying them . From a longterm perspective, theyre attractive here. Theyre cheap. I dont think were seeing the Balance Sheet issues. If you look out a couple years, the picture is brighter. Gentlemen, thank you very much. The dow up 215, s p up about 1. 5 . The fight between apple and the government continues. Fbi director james comey saying over the weekend that they do not want to break anyones encryption. Eamon javers is live in washington with both sides digging in over the weekend. Thats right. We had these dueling statements last night and this morning from comey and from apples ceo, tim cook. Lets start with cook who sent an email to employees thanking them all for their work on behalf of privacy. He said this case is about much more than a single phone or a single investigation. So when we received the governments order we knew we had to speak out. At stake is the Data Security of hundreds of millions of law abiding people and setting a dangerous precedent that threatens everyones civil liberties. That came in response comey who posted his take from an fbi perspective saying we dont want to break anyones encorruption or set a master key loose on the land. I hope thoughtful people will take the time to understand that. We had the chief privacy offer of fireeye on cnbc earlier this morning. He, like so many ceos in Silicon Valley, defended apple. This is not a warrant, this is not a subpoena this is a court order that makes them rewrite their own operating system and this is unprecedented. Thats the crux of the question, does the u. S. Government have the authority to ask them to rewrite this code. Apple says no the government says yes. Doesnt look like this will end any time soon. Well talk to congressman darrell issa about that in a bit. Donald trump whipping big in South Carolina, jeb bush s suspending his campaign what does it all mean . John harwood has more. This weekend was a big weekend that doesnt clinch anything but moves us closer to a matchup between Hillary Clinton and donald trump. In nevada, Hillary Clinton held back the surge from bernie sanders, beat him 52 to 47 , not a wide margin but sanders was hoping for a break through there, as the campaign moves to South Carolina and Southern States where she has an advantage. On the republican side, a smashing victory for donald trump. Double digits. He won across the state, all significant demographic groups, all congressional districts. He took all the delegates. Marco rubio came in second, 1,000 votes ahead of ted cruz. Theyre trying to cast this as a threeperson race. You had jeb bush, john kasich, ben carson. Kasich and carson saying theyre staying in. Jeb bush dropped out. Theres a scramble for his supporters and donors. Donald trump right now is in the drivers seat of this company. Hillary clinton is in the same position on the democratic side. Guys . Just a question here on the money trail. Some of the reporting youve done on donors. Does senator rubio pick up the big wall street money behind governor jeb bush . How much does he gain from bush dropping out . Does it matter in this era of the seemingly unstoppable donald trump . No, it doesnt matter all that much. It matters some because rubio and kasich need cash. Ted cruz is better positioned financially. He had 13 million in the bank at the end of january. Marco rubio, because you have a common overlap in florida, because a lot of the socalled establishment money is looking to go to rubio will gain. Its not going to be a Straight Line bee line to rubio. Kasich is looking to michigan and ohio to break through. This is a campaign in which the alignment of Campaign Donors has not settled anything because of the strength of donald trump. If the alignment of those donors mattered all that much, jeb bush would have been in better shape and wouldnt be out of the race. Good point. John harwood, thank you. Up next, an exclusive interview with intels ceo, Brian Krzanich. Thats when squawk on the street comes right back with the dow up 208. The mobile World Congress is underway in barcelona. A few announcements have already been made on the product side. Jon fortt is there on the ground with intels ceo. Take it away. Thanks, sara. Here with Brian Krzanich of intel. We will talk 5g, Virtual Reality and more. I want to start off by talking security. Your thoughts about this situation between apple and the fbi about opening up a back door into apples Security System to solve a crime. First, welcome to the intel booth here at mwc. I should probably start im not an expert on apple ios, and i havent seen the actual letters, but the basic answer is i dont think any company should be forced to build a back door into its products, on the other hand we have to work with the federal government and Government Agencies to protect people and when theyre properly subpoenaed, provide the data. Theres a balance between those two. Im absolutely not in favor and dont believe we should do backbobac backdoors and be forced to do backdoors, but maybe working with agencies we can get them the data they need to protect the citizens from the terrorists. This has escalated in a public way. I think its best when the engineers get together and solve the problem rather than the escalation. A lot of engineers together here in barcelona talking about topics including 5g, faster wireless. Still a couple years out. You guys are working with a lot of other Companies Including ac ericsson to bring that to bear. How will it be used and will we actually see the 10x speed . Were working with ericsson, nokia, its a worldwide effort. Its not just intel, its all our competitors and partners. It will take everybody to do this. 5g is better speeds. We are seeing 5 gigbits in some trials. It will be machines, automated driving cars. Drones. And its going to be the farm out in ohio, wherever. All of those systems will use it 5g, for that autonomous car, it provides a seamless transition as it moves from the out in the arm to downtown. It will move from wifi, 3g, 4g, always providing the best performance so your car can get cloud data and drive safely. How important is that for you strategical strategically . Youre basing a lot of bets on the internet of things. Your chip, like sophia that is able to run at low power, low costs. Is 5g going to be the platform for you to scale that . You bet. Its a combination of the small chips that will get into everything. The 5g connectivity and then the cloud. And thats where all of this data moving to the cloud that will grow at a rate two, three times faster than today. Instead of 6 billion cell phones connected, you will have 60 billion devices connected in the future. Thats the growth rate we expect. We talked about the Global Economy, you said it tracked similar to last year. A few bumps in the stock market since then. Were not at the lows of where weve been. How you are feeling about the economy versus peoples fears . What youre hearing. Are things still looking stable . Yeah. If you look at the business environment, its probably not as scary as the stock market makes it appear. I wake up on days and watch the stock market drop, and say business doesnt appear that bad. We guided to the low range, were seeing the quarter play out pretty much like that. So were careful about some of the emerging markets, china. Its not playing different to what we forecasted at the beginning of the year. Lets talk Virtual Reality. Displaying it in the booth. All the major players, when theyre talking about muscular vr, they are talking about attaching it to a pc, usually core i5, your chip w an nvidia graphics processor backing it. Youre showing untethered vr here. How long before that experience of being able to move around with these goggles on and get really good quality . How long before the consumer gets that. Youll start to see it next year untethered. It wont be the High Definition movie or leading edge games, but you will be able to reach out and manipulate objects in 3d space, so for education, with the pyramids, going through doors, pushing things away. Perfect application. For the High Definition game, probably two, three years away from those things being untethered. We have a path to get there. It will come. Quickly, in terms of your development, how important do you think vr and augmented reality is going to be as a driver of consumer demand for chips at the high end . I actually think augmented reality will be cases will be more targeted towards the higher end user. Education. Training for offices or commercial use. Augmented reality over the next five years, seven years everywhere like your cell phone is it could change how you travel, how you move around the world. How you see data. Virtual reality more limited, augmented reality a lot broader. Brian krzanich, thank you. Youre welcome. Jon fortt, thank you for that view into the future. Coming up, hedge funds have been struggling recently, that actually might be a good sign for the markets. Well explain when we come back. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk on the street. The gains at this hour, and the price of oil up nearly 7 , above 31. 31. 69 a barrel. This after the iea came out saying it expected shale production to fall this year and next, supercharging what was already an overnight rally. That is helping stocks. Energy companies are the biggest gainers on the s p. Carl, good to have you back. Nice to be back. Hedge funds are struggling to produce returns that could be creating more opportunities for some savvy investors. Our senior markets commentator mike santoli has more on that. Im suggesting that eventually ultimately this will create opportunities. Hedge funds have had a tough run. In january, it was the worst monthly performance by one Big Hedge Fund index in almost four years. This has placed them in retreat. Usually they cut bets back severely. Thats going on right now. Net exposure of hedge funds to u. S. Stocks is around a threeyear low. They pulled in their horns. Im suggesting this retreat will generate opportunities especially in certain areas where hedge funds play a lot. Obviously theyre long short equity hedge funds. A lot involved in credit. One thing thats come out of this is a wide valuation gap among the best performing stocks and the worst performing stocks. For s p stocks, the top 10 have a 30 plus price earnings multiple versus 12 for the bottom. Thats the kind of Hunting Ground that active stock pickers are looking for. So just when theyre in retreat is when the opportunity set might be rising. Im saying this could be early days for this trend. Specific opportunities, areas like spinoff stocks. This has been a heavily owned area for hedge funds. There is an etf that focused on recently spun offcompaoff compa it has been a disaster. I would think a skilled junk bond manager can find relative obscure value in there. Closed end funds, a bit of an out of the way area, when yields are high, they try to kieep the values tight. Theyll leave behind opportunity in their wake. Thats a nice fresh take, mike if this were a prospective for a new market playbook what would some factors be . We have not had a purge out there, we will have a default cycle. And stocks are not cheap. You could say deep value is starting to look relatively attractive. But whats the catalyst outside a pick up in growth . Generally it will have that work. Obviously the real risk factor is this could be an early idea that has more pain to be felt before it works. Nice piece, i read it this morning on cnbc. Com. Thanks, mike. David cameron reaching a deal to keep britain in the eu, but now londons mayor says he is siding with the Brexit Campaign what does it mean for the Global Economy . The british pound is getting crushed right now. Thousands of hours of painstaking craftsmanship. And an infinite reserve of patience. To create a vehicle that looks, drives and thinks like nothing else on the road. The allnew glc. The suv the world has been waiting for. Starting at 38,950. Good morning. Im sue herera, and here is your cnbc news update. Scores of angry protesters gathered in seoul to strongly denounce north koreas latest nuclear test and longrange missile launch. They slashed and burned the north korea flag as well as a picture of kim jongun. A federal judge ordering the release from prison john rigas, the founder of Adelphia Communications because he is dying of cancer. He has been serving a 12year prison sentence because of fraud. Camille cosby scheduled to be deposed today in the defamation lawsuit against her husband, bill cosby. Her attorneys tried to postpone the deposition but a judge ruled sunday it must go forward. 106yearold virginia mclaren shrieking with delight when she met president obama and mrs. Obama, as you can see her there. Its in celebration of black history month. She said shes waited all her life to see an africanamerican in the white house. She got her wish. On that note, thats the cnbc news update. Back to you, sarah. That is a good video. Thank you. Want to show you a live shot of the British Parliament where, as you can see, british Prime Minister David Cameron is making his kay for briton stay in the eu. He did win a last minute deal with the European Union, but also after the mayor of london came out against him and supporting the Brexit Campaign. Joining to us discuss it is jeremy cliff from the economist who happens to be in town visiting. Good to see you. Good to see you. How big of a blow is it for Prime Minister cameron that the mayor came out against him . I think its a blow for him. The European Union campaign is camerons legacy. He has to win this. One of the great strengths of the campaign had been they did not have a figurehead it ran the risk of looking like a bunch of noname ministers, fringe eccentrics. Now they have Boris Johnson, a massive name recognition. Is he more popular than the Prime Minister . Polls suggest so. Whether they think hes a credible serious character is more in question. He certainly is liked. He is certainly a popular figure. This view that cameron came back with a weak bag of tricks from this meeting, does that make sense to you . It does to a certain extent. His great failure was to lay the ground work for this. He let expectations get too high. When he announced he would renegotiate britains membership to the eu, he talked about a new settlement, bringing back powers from brussels. The European Union is many things, but responsive and fast moving is not one of them. Now hes paying the price. What about the ftse 100 companies are coming out and vocal vocally supporting him, does that hurt or help his case . I think it does help him. Ultimately in referendum like this, voters like to err on the status quo. The london mayor has to prove its riskier to stay in the European Union than leave. What is the argument . What is really at heart of the case for britain leaving the eu . This is the problem, theres not a single case. Theres many cases. So there are some, like Boris Johnson who says leaving the eu is a chance for britain to reconnect with its allies, the u. S. And the commonwealth. For others, its cutting immigration and closing the doors on the country. Theres a range of different visions of britain outside the eu. If the out Campaign Wins t sets into motion other messy decisions, right . Certainly. Scotland, for instance . Certainly. Well go through a long period of volatility. Youre seeing a foreshadowing of that today with the massive fall on the pound. That is a sign of what will happen if they leave. Scotland could leave the uk. There could be two years of negotiations for britain to leave the about investment. At best, youre looking at five years of volatility for britain if they vote to leave. You guys have been doing work and studies on various outcomes. If it comes to an out vote, if they win, the brexit voters s there any way to do a clean break . The formal period would take two years, but in practice youre looking at a much longer progress, to recreate relations that switzerland has with the eu, youre looking at ten years. Do they lose the trade deals . The quality of the trade deals that britain will get depends on the politics at the time. I think its in europes interest to have open access to british markets, but at the same time theyll look at their own electorates where popularism and skepticism is on the rise saying do we want to create a positive precedent for a country leaving the European Union . The main thing is avoiding the chance of the whole bloc. They will impose harsh terms on britain. The eurozone at large dealing with immigration issues. Merkel under pressure. If out wins what is the eurozone left to argue . It contributes to the sense of a great overlapping crisis. You have the refugees, the eurozone. Greece is not a resolved issue. I think across the continue innocent, particularly in the rich north, you have skeptics. Britain leaving emboldens them and it tips the balance away from the more economically liberal, antiprotectionist northern countries and towards the southern ones which are more protectionist. Even though we heard existential crisis over and over again, you think this would deserve that . I think it merits the term. All sorts of fundamental questions about europes future, the character of the union, about what joining the union looks like. For the whole of the union you will be looking at volatile years. Until then, we have four months until june 23rd. Which opinion polls should investors be looking at . I would look at phone polls overonli online polling. Polls were wrong last year and they massivy under calculated the vote of David Camerons favor. This year the out campaign is doing slightly better than the in campaign. How often do they come out . They are coming out almost daily these days. Look at the phone polls, polls representative of the electoral. Pound at the lowest level since march of 2009. Jeremy, thank you very much. Youre welcome. When we coming, the ceo of at T Business Solutions and at t international, ralph de la vega he will join jon fortt in barcelona. Welcome back to squawk on the street. Shares of Lumber Liquidators sinking about 20 in early trading. The flooring maker stock under pressure after a new report from the cdc, saying it was informed in an error in a report with regards to exposure to formaldehyde in its flooring. The report did increase the risk of cancer. Limber liquidators says despite the errors in cdcs calculations, we note they do not expect to change their recommendations, and we support their recommendations. Shares are down almost 80 since reports of that flooring emerged. This company about 310 million in market value. Still an important story. Don, thank you very much. Lets get over to Rick Santelli and the santelli exchange. Good morning, carl. You know, the question everybody is asking is, is oil bottomed . I cant answer that. As a technician i have my own views on it. Heres a man with not only his own views but maybe suggestions on how to capitalize on that notion. Peter ture, thanks for taking the time. Thanks for having me. Do believe you think oil has bottomed. Quickly tell us why and tell me a good way to take advantage of that, sir. So, we think oil bottomed. We looked at some of the technicals. We think weve been in this bottoming process for a while. It finally feels like theres enough pain in iraq, iran, saudi arabia, russia there is some pressure to inflate the price of oil. Theyre eproducing too much. U. S. Companies have been adapting. Oil, we think is bouncing. The best way to play this is play oil directly. People have been chasing the entire stock market, we think its better to play the whole space. The area that was most contentious when oil was moving lower is the junk end. You believe you grab the wild animal by the tail, if you believe correction is in process. Does that about cover it . These got hit the hardest. The credit people were more concerned. You are protected to the down side. If you get good Fund Managers who can find value or closedend funds trading at 10 discounts, theres a lot of upside here with better down side protection. Since were in barclays territory, lets go to the Investment Grade since we brought up high yield. You have written extensively about how theres a new loop between Investment Grade and equities that may magnify volatility. First why, and second, how long will it last . Can we make some money on that notion . I think it was last year we started noticing that Company Buybacks were driving the stock market. We had the problems in august due to china. We really rebounded as companies bought back their own stocks. Whats happening is last week as soon as the markets calmed down, apple came out, ibm came out that got everyones juices salivating a bit because apple can do stock buybacks, ibm can do stock buybacks. As stock markets do well, you get these more stock buybacks. The problem is the second the markets turn around, those things go away and everyone starts wondering is the Investment Grade bond market quiet . Is it dead . We get moves up and down. Thats a concern for me. Again, it seems too credit focuse focused. On treasuries, you believe the treasury complex i always want to say we, has built in too big a negative dynamic handicapping the world and hence low rates. In the last 30 seconds, can you tell me why youre thinking it might be time to sell treasuries . We have gdp coming good. Thats one the atlanta fed puts together. Were clearly weak on the manufacturing side. I think we switched from a manufacturing side to a service economy. And a wealthy. By wealth we service rich people across the world. That drives our economy. We can see a disconnect between manufacturing and the rest of the economy. Theres enough data pointing we could be surprised to the upside. As bond people we look at bearish, i think we got too bearish here. Im looking for a bit of a bounce in yields. Higher yields. Makes sense. Takes two sides of a trading card to cones masummate a transaction. Thanks. Thanks for having me. Up next, more on apple squaring off with the u. S. Government. Former Deputy National security adviser, jim jeffrey is with us. And later, darrell sis will be joining us live sa will be with us. Well be right back. The street. All ten sector in the s p green. The best performing s p 500 sector both trading up by 2 . Among the names lifting, material stocks higher. Freeport, alcoa up by double digit percentages as iron ore rallies and copper rebounds. Those prices on tops for possibly improving demand coming from china and elsewhere. As the brooder market improves on correction levels, off by around 19 from the recent highs. Still negative for the year, down by 4 , as well. So carl, materials a big focus. Lets put it in context. Been beaten up pretty badly over the last year. Thanks so much. Back to the high stakes stand off between apple and the fbi. For more insight, were joined by the official who headed up fisa and Law Enforcement tapping questions. Former deputy u. S. National security adviser, ambassador jim jeffrey. Mr. Ambassador, good to have you. Good morning. Good to be with you. A lot of discussion over the past week about this court order, and whether its truly valid in this case. Youve you have some thoughts on this. Yes. This is one of these classic 5149 decisions. Its not commercial interests versus National Security specifically, possibly stopping another terrorist attack by people that the San Bernardino terrorists were in contact with. Its two sets of National Security interests. We have a real interest in protecting the privacy of our citizens and everyone who uses these electronic devices. Secondly, we have a real interest in cuttingedge technology being exploited from america. At the end of the day, in this specific case, because there is a court order, and because there is an argument that it is a clear and present danger of another terrorist attack, i suspect that the courts will support the government, the fbi, in this case. But nonetheless, apple makes an extremely good case, and tim cooks letter over the weekend and then a followup that this authority that might be given to government must be extremely limited and it troubling and apple is right here. Of course, the hope now, at least on from cooks point of view, somehow this order is withdrawn, that they head to capitol hill, they have hearings and work on some longerterm legislation that has true standing in this case. How likely do you think that is . Well, i think it is very important, and i think from our experiences with fisa, that is wiretaps of individuals related to terrorism in the bush administration, we did see we could cooperate with the congress and come up with legislature that protects privacy while also giving government and Law Enforcement an ability, a targeted ability to go after specific terrorist figures and terrorist activities if there is clear and present danger. But this has to be very, very narrowly defined, or otherwise Law Enforcement will have a field day running around, tapping into everybodys iphones and other devices. Theres no doubt that that will be the danger. So, mr. Ambassador, do you not then take james comey, the fbi director at his word. He wrote today this is not about setting a precedent. There is no deeper message in this. It is just the fbi carrying out its responsibilities and its duties to investigate u. S. Terrorism. If i were the fbi director, i would be doing just what hes doing. But tim cook, the apple ceo, is right. Once this is done, the technology is out there, and the minds of apples engineers and probably locked up someplace. That is in and of itself a danger, because it can be hacked or people can go rogue. Secondly, once you do it in one case, there is all sorts of Law Enforcement officials apple is talking about hundreds already, coming forward in the united states, who will want to use this unlocking capability for all sorts of nonemergency life or death situations. The more thats done, the less valuable the privacy protections of your iphone are going to be to you. Do you think the government has any sympathy to the idea of what would happen to apples sales in china, for instance, if this happened . In a general sense, that is in the white house, they do. But the first rule in the executive branch is terrorism, particularly stopping terrorist attacks, trumps everything. And thats where the focus will be. The government will kick the issue of how do ensure that this capability is not widely used down the road. But again, theres a difference between government and the Law Enforcement community. The Law Enforcement community is very aggressive on finding evidence, prosecuting people, way beyond emergency situations and terrorism. And thats a danger that apple sees, and theyre right. Do you think that apple has any chance at swaying Public Opinion and actually winning this, if it goes all the way up to the Supreme Court . The Supreme Court will not decide on the basis of Public Opinion. I think that apple is going to win the Public Opinion fight on this. But on the other hand, this will be decided on law, and the act of 1789, while it seems archaic, does seem to give the government authority, if backed by the courts, to go forward with this. You talk about Law Enforcement being aggressive, as im sure a lot of americans would applaud. Do you think that point of view extends to the Intelligence Community . The Intelligence Community, trust me, is very aggressive too. But the Intelligence Community is more careful in how it protects the information and how it protects how it gets the information for obvious reasons. It has those authorities. The major danger is that this technology that apple will have to create will escape out into the larger environment, where hackers can get ahold of it, and go after peoples private data, for all kinds of purposes, mainl nefarious. And the best way to protect that is the most narrow definition of when apple has to do this possible, there has to be under court order and in a clear and present danger case. It cant be finding more evidence for somebody who is selling marijuana. And thats what Law Enforcement will do, because thats how they operate and understandably. Mr. Ambassador, really good insight on this case, which well be talking about for a while. Thank you very much. Jim jeffrey, National Security adviser, thanks. Thank you. With the dow here up 181, lets send it out to john fortt at the mobile World Congress in barcelona with a look at whats next on squawk alley. Well be talking with the Business International ceo, everything going on at this conference. Mobile, of course. Very much in the spotlight. And ceos reacting to the apple versus fbi situation, including intel ceo who talked about it with me. And also Mark Zuckerberg in a keynote right after squawk alley. Why its important in this environment. All that and more coming up on squawk alley. Here at the Td Ameritrade trader group, they work all the time. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. [so i use quickbooks and run mye entire business from the cloud. I keep an eye on sales and expenses from anywhere. Even down here in the dark i can still see were having a great month. And celebrate accordingly. I run on quickbooks. Thats how i own it. Ashley bryant, you are a teacher of small children. Thats right. I have read it is the hardest job in the world. Thats why im here. Can you. I can offer advice from the accumulated knowledge of other educators. Thats wonderful but. I can tailor a curriculum for each student by crossreferencing aptitude, development, geography. Sorry to interrupt. But i just have one question how do i keep them quiet . pause watson . There is no known solution. Good morning. It is 5 00 p. M. At the mobile World Congress in barcelona. Its 11 00 a. M. On wall street. And squawk alley is live. Welcome to squawk alley for a monday, joining us, john fortt today is live at the mobile World Congress in barcelona. Kayla tauschy