Transcripts For CNBC Squawk On The Street 20160414

Were going to have much more of sara eisens exclusive interview in just a few moments. In the meantime, a lot to look at as stocks hit new highs for the year, about 2 from alltime highs. Bank earnings in focus. Europes mildly positive. Core cpi up 2. 2 year on year and jobless claims hit a new low going back to 1973. First up, wells fargo beating expectations with a firstquarter profit of 99 cents per share, revenues above consens consensus. They say while credit results remain solid, the oil and gas portfolio remains under significant stress due to low prices and excess leverage in the industry. And then b of a exceeded estimates with firstquarter results, put profits down 18 on a doubledigit decline in trading revenue. Not a repeat of the performance we got out of jpl. Going over these quarters all morning, and i have kind of a very simple takeaway, which is that, wow, if these companies were to have a bunch of rate hikes, you know, theyd make a fortune. And if they dont, they kind of do a little bit worse. And the stocks took a swoon when we found out there were only going to be two rate hikes, and these two numbers do not make me feel like, you know what my Charitable Trust banks are not the ones to own if theres a rate hike because they can loan progressively and they make a fortune. But jpmorgan set a high bar yesterday, because their whole release, their whole Conference Calls, their whole attitude was basically, look, we dont really care as much as we did when we thought we were set up for rates to go higher. And so, thats why i think jpmorgan was a big one, because they kind of distinguish themselves from just a rate hike bank, and that was impressive. Yeah. They also distinguished themselves because the expectations had gotten down to a point where they were able to beat them, even though it was not an impressive quarter from a year over year perspective. Everything was right. Most everything was in decline, not everything, jim, but it did set a tone. I just wonder whether now that weve heard from b of a and wells fargo this morning, that will continue, or did that rally already burn itself out yesterday . No, look, there is a deep cyclical component to bank of america. Its now tangible books now 16. I know without the regulators saying green light to buy as much stock back as you want, thats very hard gap to close. But i look at caterpillar, which is up 8 this week, even though peabody filed bankruptcy. And i say, people felt caterpillar was devalued. There could be someone who says bank of americas devalued, but in the end, youve got to have the people who want three rate hikes win in order to make that stock fly. I mean, bank of america is so set up for higher rates, its amazing. Therefore, its not set up for a raise. Meanwhile, the cfo, denof roe saying more tepid comments than dimon, slowly improving. As for trading, said march obviously felt better than january and february and that april feels a little bit more like march than the first two months. I thought that was great and you know, they do have a huge amount of revenues. Again, im making the case for not selling it. I cant make the case for pounding the table and buy. I felt like i could with jpmorgan because they had such great momentum, and they did make the march comment. But you go over i mean, we can talk endlessly about oil and gas, and oil and gas is not good, but a lot of that is starting to get baked in. But david, we were talking beforehand yeah. You dont really know how bad the exposure to oil is because you dont know the quality theres a lot of lines that still can be drawn down. Right. Bank of america has a lot of lines to be drawn down. You dont really know the quality of these guys. You know if Oil Goes Back to 26, you have to sell almost every bank. But if oil goes to 50, then the pressures off. Yeah, and do we get any real sense on the Conference Call or anything else . I mean, some of them have not yet taken place, but i think that, you know, the sense is that, geez, we hope well, hope should be part of the equation but look, were okay. If oil goes down big, were not, and if oil stabilizes, were okay. Again, this okay concept is part of the earnings conundrum i have right now. Csx was okay, and people bid that stock up 4 . Okay in some industries when youre down from 37 to 24, like csx, are pretty good. Bank of america i mean, its almost like they should put out a release that says we are ready for rate hikes. But the overall barometers for the u. S. Economy are not bad no, no 7 total average loan growth. Yes the revenues are there. Thats not bad. I mean, we know deposits think about the number, 1. 2 trillion worth of deposits. Can you imagine when rates go up, how much money at wells fargo. Look, i think Net Interest Margin was a little bit shy. You know, youre picking, nitpicking. Look, the theme of today is, is that we have better jobs and we have low inflation, and thats an environment where you do not want to sell bank of america and wells fargo. You dont better job growth and lower inflation . Thats when you buy these, but you need a catalyst, and i havent heard the catalyst. And i know stocks were up big yesterday. So, lets accept the fact they were up big yesterday and to have a secondday rally, you would have had to have seen tremendous earnings growth, and you cant. You cant get it if the question is on the overall markets whether this is a blowoff top or a sign of something new to come i find it hard to be a blowoff top when you have low inflation and better job growth. Thats kind of like, my whole life ive wanted that. Since 1979, when i bought my first stock, what you wanted was low whats the matter . Jim came out of the womb, said give me low inflation and good job growth take the top off no, but listen, pop when my firstborn was born, i bought alcoa and that was a big mistake. Never mind. Lets not read into that because thats the past. Thats years past. But i do think when i look at an environment where the fed cant raise and job growths okay, look, we had real earnings of plus 0. 2 in march. Its pretty good. And in that environment, i can find stocks to like. I guess thats what im saying. Look, as long as i dont buy value traps like a seagate, right . Those are problematic. I dont buy coal. I dont want to buy coal. I dont want to buy Oil Companies that need 80. Equal is the best place in this country to drill. Sorry to reassociate with that. Thats okay. And there are three counties where you can make money, the best prospect. When i look at the oil and gas loans and see that theyre criticized, im more worried than they are. Im more worried. And perhaps you should be. Quick aside for me, and this is sort of apropos of nothing. I mean, guys, please, what are these press releases that were now dealing with . This is decipherable. Please stop, bank of america. Jpmorgan started this trend. Here they are. I thought they where do they your eye doesnt know where to go, you have no idea. And look at ge, by the way. I just picked that one , too. I mean, come on, guys. Give me an oldfashioned press release like wells fargo, all right . I can read it i can actually read it. Stop with this newfangled press release that basically is designed to make you not want to read it. I dont like it. Look at unilever, since they have a model on every other pitch. Okay. By the way, you cant rely on these press releases for anything other than basics. Read the cues you want this, right . Yes. Yes. Thats nice. Swimsuit edition. Sure. I mean, this is a guy whose stock is going up. Jpmorgan will put her on the front of their press releases next. Anything to divert your eye from the actual news. Nonsense. Its got my eye. Coming up, sara eisens exclusive with treasury sec jack lew on the sweeping tax inversion tracrackdowns and earnings, delta and a lot more. Dont go away. Ng good. She needs more care though. She wants to stay in her house. I dont know even where to start with that. First, lets take a look at your Financial Plan and see what we can do. Ok, so weve got. Well listen. Well talk. Well plan. Baird. Steve, other than making im here atme move stuff,rade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. Our sara eisens in washington this morning for the Imf World Bank meeting. She spoke exclusively with treasury secretary jack lew. Sara, good morning to you. Reporter good morning, karl, david and jim. Jack lew is playing host this week to finance ministers and central bankers from around the world. He wants to project u. S. Leadership, engagement in the Global Economy, contrary to what were hearing a little bit on the campaign trail, but of course, we had to start the conversation with his recent clampdown rules on inversion. So, i asked point blank, was it your goal to kill this more than 150 billion merger between pfizer and allergan . Heres what he said. Let me be clear, the goal of what weve been doing here has been to deal with inversions as a matter of policy. I said several years ago, the right way, the best way to do it is for legislation to be passed that would do serious comprehensive Business Tax Reform and shut down inversions once and for all. I also said well use whatever Administrative Authority we have, and its a complicated matter because you dont have infinite flexibility. We have worked and worked on it. This is the third action weve taken, and each time weve slowed down the pipeline, and each time ive said Congress Needs to act because we want to make sure that inversions are stopped. I think that it should have been no surprise to anyone that we were working on this, because weve been working on it for a long time. I think how aggressive it was came as a surprise . I mean, do you understand the frustration of the companies who say we went about it legally, we played by the rules, and the rules got changed after the fact. Brent saunders, the ceo of allergan, told us it was unamerican. You know, what i think most americans understand is here we are in tax season. Most americans either have or will be filing their tax returns over the next few days, and they know that if youre on a salary, you pay your taxes every year, and thats that. The idea that a company could take advantage of all the benefits of being in the United States, the wonderful rule of law that makes us the best environment, the innovation thats supported by publicly supported research and development, the infrastructure thats supported by tax, paid for, roads, bridges and tunnels, and the education thats paid for out of our tax code as well. Reporter but i dont think it was a question of that. But that is the question. The question is, if you get all the benefits of being in america, doing business in america, do we have to change your address to avoid u. S. Taxes is wrong. We said we wanted to stop that, and we are continuing to look at what tools do we have. So, i actually dont think that anyone should be surprised. Most americans are offended by the idea that this can be done. Reporter but the issue was sort of the way of going about it retroactively. Even your predecessor it was not retroactive, lets be clear. Thats very important. What weve said all along and the way these kinds of things are done is it affects things that have not yet closed, have not yet taken place. You know, i dont know what else is in the pipeline, and frankly, our goal is to stop the pipeline. Reporter but the serial inverters like allergan who had made acquisitions, those acquisitions in the previous three years did not count. So, this question of serial inverters is a really interesting one. It took a while for the pattern to become clear that Companies Plan over a multiyear time horizon, to be able to build up a big enough foreign presence so that the inversion can take place where it meets the Technical Rules not to be subject to u. S. Tax. What im really focused on is shutting that pipeline down so this is not available as a matter of policy Going Forward. And as with all policies, its effective when. Reporter even hank paulson said hes troubled by the effort, saying were a nation of laws and rules and you cant change the rules after the fact and keep changing them and changing them. I think we have a wellestablished practice of issuing guidance based on legal interpretation, based on legal authority, and thats what weve done here. Everyone who engages in business knows that its subject to changes in law or rulings. And i think the important thing here is that everyone has been on notice for a very long time. It hasnt been a secret that this is an area of deep concern, bipartisan. My only frustration is that legislation hasnt been enacted to deal with it in the best way. But we remain focused on what administrative tools do we have to stop the pipeline as much as we can until congress acts, but Congress Needs to act. Reporter is there more to come from your office until were continuing to look at what options there are. I mean, weve obviously now taken a third action, and we have some of the best tax lawyers and tax analysts. And i have to say, the people who work on this are the most nonpartisan people you could imagine. Theyre Tax Professionals who are broadly respected for their ability and their integrity. Reporter so, potentially more rules on yeah, im not going to announce anything else. Im just saying, what weve said all along, well continue to look at what tools we have. Reporter then what would you say to a business, executives who already face so much uncertainty right now about the Global Economy, theyre trying to plan, and now the government can come in and change the rules in a way after the fact . How do you plan in that kind of environment . You know, look, i think to the extent that youre talking about mergers and acquisitions or Foreign Direct Investment in the United States, we are profoundly in favor of economically productive investments. What were not in favor of is using tax loopholes to move income around to avoid taxation. If youre working on a deal that has really economic benefit, this is not going to be something that interferes with your plans. If youre trying to structure a deal to avoid taxation, the goal was to make that harder. Reporter jack lew defending the recent actions and rules on inversions, saying it shouldnt have come as a surprise, addressing some of the company criticism and criticism from the broader Business World there. He also did not rule out that more rules are coming on inversions, said this was the third one and they have a whole team of nonpartisan tax lawyers working on this kind of legislation. The full interview with treasury secretary jack lew is on cnbc. Com right now. And in the next hour, guys, im going to bring you some more of that interview. We did talk about the current legislation thats going through congress on puerto rico and how the treasury is going to deal with some of their debt problems. We also, of course, talked about this issue of too big to fail. Calls are heating up for more action on banks. And karl, because i love you, of course i asked about Alexander Hamilton remaining on the new 10 bill, with everybody loving the play, and he gave me a hint as to whats to come. Ill have all that in the next hour, but for now, ill send it back to you. Thats called a tease right there, sara. Really nice work getting a lot of news out of the treasury secretary on a day where larry fink on our air stopped short of criticizing treasury but said he would have preferred a dialogue between the companies. Yeah, you know, i think, jim and karl, clearly, pfizer and allergan, the senior executive, the leadership there questioned how atune they were to this potential change. And regardless of what the treasury secretary says, when it comes to the threeyear lookback provision of those changes in the regulations that took place, it was designed to stop the pfizer allergan deal. And in fact, it was designed primarily with that in mind, at least based on the reporting ive done thus far, and bue beautifully done, because the people who figured it out knew it would effectively stop the ability of that deal to go forward, at least as it was currently constructed, and therefore, they abandoned it. The earnings provisions of the changes in the regulations may have more of an impact overall and will affect Foreign Companies that have u. S. Subsidiaries that have been trying to reduce their u. S. Tax bill. You know, theres so many different parts to this, not to mention, of course, the fact that theyve locked into a permanent bidding advantage, those companies that have already been inverted and that are in consolidating industries. Yes, right. But sara, i mean, when i look at the idea that youre not surprised not surprised allergan has lost 120 in market since the top. Right. Since its top. And those are people who were surprised, and they tend to be very smart people. Im close enough and done enough homework to know that they werent surprised, they were out and out shocked. They were. No, they were. Okay . They were shocked. And they were questioning why they didnt have a better sense for it, fair to say, in retrospect, or at least, theres nothing they could have done, because the provisions in terms of the threeyear lookback simply werent possible for allergan to get around to be the size that pfizer were to be able to make it aine version any longer. You and i were following this closely, going back and forth, and we both realized at the same time we just said, oh, my god, this is to stop the deal. I was shocked. You were a little blurryheaded about it. But when i figured out i said, this is truly unbelievable, given what i had heard from the two companies. And look, its he saidshe said. Secretary lew said they should have seen it coming. Maybe the tax advisers, maybe i dont know. My sources did not see it coming. No. I think thats a fair point. When we come back, well count down to the opening bell, well get cramers mad dash. The dow begins the morning less than 100 points from 18k. The last time we were there, july 20th. Back in a minute. Y, jesse. Who are you . Im vern, the orange money retirement rabbit from voya. Orange money represents the money you put away for retirement. Over time, your money could multiply. Hello, all of you. Get organized at voya. Com. We believe in the power of active management. 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Theyre indecipherable, and im tired of it. Okay. Delta is the opposite. Its a straight out terrific beat. Earnings tripled. Heres what i really like about it capacity is not going to increase nearly as much as i thought. You know, theyre talking about a 2 to 3 increase in capacity. There were a lot of concerns when these stocks took their big swoon that it might be up to also here maybe 4 , 5 capacity, so its a very good number. Obviously, fuel is amazing. At 2. 93 last year, 1. 34 before. This is very cheap stock, like bank of america, cheap stock. But remember what you said at the beginning, this is first one. Stocks come down a lot. Its kind of an intriguing value play. Its a value play. Whats the multiple were talking about . Seven times. They earn their cost to capital now. They actually buy back stock. They return capital. Theyre actually going to buy back stock. At this pace, they dont want to nail themselves, but 8 of the companys being bought back this year. They continue to buy. I mean, this is an airline, returning why is that attractive . It hasnt been a bad performer. Nobody believes first of all, if we had a longerterm chart, you would see that its up big. Okay. But secondly, no one believes. Im telling you, that capacity number indicates you should believe, and the commentary about getting the revenues back, plus the dollar. The dollar really hurt them. And the dollar continues to get weaker, youre going to see a very big earnings game here. I like this stock very much, and i like the fact that theres no gizmos, no gimmicks. No. Its just straight out the way it used to be. This is throwback thursday. Its a throwback press release. You can actually read it. Yes. All the lig boxes and the emojis and no bitmoji heres the commentary down here. Dont look over there, look over here. Designed to have you not actually look at it. You know the oil and gas situation at banks, a problem . Yeah. Not a problem for delta. The lower the oil, the better. Simp simple, dal. Speaking of financials, we have to get to blackrock earnings and more. We have the opening bell coming up after this. Thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in less than a minute. The dow 92 points from 18,000, 2 from alltime highs, erasing the losses not only for the year, but for all of last year, 2015, although tonight china gdp right, look for something north of six, i think well be fine. There were a lot of top callers in this market, if you recall. A lot of people put out bulletins saying this is a dangerous time. Its proving far less dangerous, and i think there are a lot of people with a considerable short base, and they probably support not great numbers and they dont go down because theres a great shortfall. Japan at a twoweek high, china a threemonth high. Well see what happens. I just think things i told you, things are okay. Things are okay. Theyre not okay if theyre in energy 21, by the way, which youll see has filed for bankruptcy. Youre not okay if youre in peabody, but listen, joy global was up yesterday. They need their equipment to get oil out of the ground. So its a counterintuitive rally in the cyclicals. Theres the opening bell. S p at the bottom of the screen. At the big board, the governor of tokyo, japan, doing the honors. Over at the nasdaq, the good plus foundation, providing lowincome parents with essential Child Products and services. And yes, that is jerry seinfeld. What is it with the opening bell, jim . Every day they ring this bell. [ laughter ] call me cramer, okay . Dont call me george. No, no. Some research to get to. Chipotle continues to get bounced back and forth. Today its jpmorgan upping to an overweight, 510 target. They say comps not only are bottoming this quarter, but expectations on margins are effectively set. I thought that was a great piece of research. What theyre basically saying is, listen, were going to go back to 2017s going to be like 2014. If thats the case, you want to buy it. It was very well reasoned. They have a fabulous balance sheet, they have a lot of firepower, and they tend to use it. They bought a lot of stock for 500, bought a lot of stock for 400. And i believe if you look at jack in the box after the terrible e. Coli, you look at the kfc in china, you look at taco bell a decade ago here, you see everybody comes back within 8 to 12 months. Jack took longer because it was a terrible situation, but they came back. Thats your top s p gainer, chipotle, along with wynn on reports that steve wynn bought 73,000 more shares. He doesnt stop. Remember, he bought about 100 million worth of stock its a good time to follow him in when he bought that initial. Yeah there were some guys who downgraded it the other day and hes basically saying come get me. Steve wynn is a hero of mine, so, hes basically not going to sit there and say you downgrade my stock, ill show you. The Chinese Communist party, we all know behind the scenes is letting up on some of the crackdowns. Maybe a little bit. They are. But you look at number brees numbers, highend, relies on china. They were not great. I think Johnnie Walker blue, those are things you give when you want to get by, part of the giftgiving process in china. Yeah. Youre still not there yet, huh . I think many people will tell you when you speak to people who study these things, xi has more power than any premier since mao. Thats true. Totally true. More than Deng Xiaoping . Yeah. Im no expert, but i try to talk to some of them. Holy cow wow. And he, you know, lawlessness was rampant in china prior to his taking over. It was. But the stateowned companies, they have not been able to get them to rein in. No. Thats what im saying, they still cant rein in the stateowned companies, now that theyre now mao, huh . Wow. Deng xiaoping was a very powerful guy. He was. More powerful than maos wife . More concerns about the enterprise this morning, jim. On seagate, western dig not far behind. Seagates guiding q3 revenue, 2. 6 versus 2. 7 estimate. The tobacco stocks. There was a positive story of seagate, looks like a value trap, they have got to cut costs. The pc segment is very, very bad. By the way, 3d systems gets a guy from hewlettpackard, and you see dvd soaring. But the disc drives, everyones trying to catch a bottom in them and its really eluded people, because they are value traps. Disc drives are a thing of the past. Everyone keeps saying that intels going to report a bad number and intel stock hangs in there, but it does have a good yield. Seagate has a good yield. I think people are worried about the dividend. In the minute we have before the World Bank President , i want to mention blackrock earnings. The stock is down a bit. Diluted earnings per share decreased 19 , 13 as adjusted. Always important now as were in earnings season to look at all of these adjustments. In the case of blackrock, they adjust their operating income for restructuring charges comprised of sell ransom, previously granted deferred compensation rewards and exclude Product Launch costs, such as closedend funds, which is a key part of their business, launching these products, and related commissions. They believe the exclusion of those costs is useful because the costs can fluctuate considerably. I dont know whether that should be the case, but blackrock didnt you know, its flat. Well, this is the issue. I mean, things are okay. And so, youre looking for something that is that people dont think was going to be okay ahead of time delta and it turns out that delta is good. Excuse me for, you know, i just want to get a current quote. But you know, delta was not horrible. And people thought that for some reason there were going to be big capacity increases and they wouldnt do that well, and they did well. But the bank stocks, you know, yesterday jamie dimon stole a lot of the thunder. Yep. It was very hard, very hard to be after them. You dont want to do it. And bank of america should report the day before. Lets get back to sara eisen, whos live in washington at the Imf World Bank Spring Meeting. Sara . Reporter hi, karl. I am here with one of the hosts of todays meetings, president jim yao kim of the world bank. Thanks for coming on. Thanks for having me on. Everyone was surprised when president obama nominated you, a doctor who spent much of his life in Public Health care policy. Well, now thats coming in handy. Yeah. You know, were in the middle of trying to build finally a Pandemic Response system. You know, the Insurance Companies will say youre talking about zika. Yeah, Insurance Companies will say pandemics are a huge Downside Risk to the economy and weve been trying to do it. Now zika has illustrated again why this is such a concern. Zikas important because its one of the things we fear the most, an old bug, an old virus that behaves in new ways. Thats one of the big concerns. The other is Something Like the spanish flu pandemic that killed 25plus Million People. We could very much have Something Like that today and still as a world were not prepared for it. And talk about Downside Risk reporter but were not talking about any deaths from zika. No, but this is very important. I think what tom frieden with cdc did was important reporter last night. A turning point . It was a turning point, really good. It was not easy to make that association. They had to really think and be creative to make the association. But now the associations very clear with children. And at w. H. O. , theyve also made the association very clear with adults. So, this is a major issue. Its not like the flu pandemics that kill tens of millions of people, but it is again an illustration that there are many Downside Risks to the Global Economy that we have not really buffered. The pandemics is one, Climate Change is another, the refugee crisis, forced displacement is a third. And all of these things now, we are really stepping up to try to see if we can put in place mechanisms that will buffer potentially the effects of these kinds of crises. Reporter you mentioned we were unprepared on zika. Theres currently a debate over whether congress should release 1. 9 billion that president obama has asked for for research in fighting it. Is that necessary . Well, you know, our view is that if you look at the potential impacts of pandemics, of things like zika, you know, the earlier you spend, the better. The later you spend, the more expensive its going to be. And so, we think that preparedness for zika in every country in the world is really important. And of course, you know, again, every minute that you wait, the cost goes up. And your estimation of what were looking at in terms of the United States as we get into the warmer weather, what are we talking about, something of crisis proportions . Well, weve heard 30 states, right . So, if its 30 states and we know that, for example, in pregnant women, we dont know the numbers yet. We dont know what percentage of pregnant women, for example, infected with zika will have these effects. But the thing is, the only things that were recognizing now are things like microceph y microcephaly, which are very dramatic effects. The other question is, could there be more subtle effects that dont look like microcephaly but show up over time as other problems with childrens brains . Reporter question on brazil, where theyre feeling this crisis acutely, not to mention what is going on with the political upheaval and the economic pain ahead of the olympics this summer. Such an important market for corporate america. How deep is this recession . How many years is it going to last . You know, a lot of fundamentals have been put in place. I mean, our current managing director, chief financial offic officer, minister of finance in brazil just before coming, he did a lot of very good work. That government did a lot of good work in getting some of the macro fundamentals in place. Right now, though, its a political crisis, and we dont see we see negative growth again for brazil this year. We think that if the political crisis passes, that brazilian recovery could be pretty robust, but the political crisis has to past first. Reporter china, you have a great handle on the emerging markets. The guys were talking about the relative calm weve seen in china with gdp numbers coming out tonight. The question is, is this temporary . They certainly seem to have a handle on their currency and on their economy. Or is the worst behind us . Weve been working with china really for about ten years in doing just what theyre doing now. Theyre transitioning to a different growth model. So, we see some signs that are really positive. Service industry is now more than 50 of the economy. We see clear growth in consumption. There are still some issues that they have to deal with. Theyre still overcapacity, but theyre aware of that. There is still a high level of indebtedness in the private sector, but again, theyre very aware of that. What were seeing in china is a deliberate move toward more sustainable, higher quality, but a lower growth rate, but we still have to remember that china has been responsible for 30 to 40 of Global Growth over the last few years. This is very important, and i think the chinese now understand fully the weight that they have in the Global Economy. And i just met yesterday with the central bank governor. He is communicating so much more clearly than he did even nine months ago, and he knows that its important reporter whats he doing with the currency . Is it done devaluing . So, what were doing is something thats really, again, unprecedented. This is a huge economy. Theyre joining the sdr, and theyre now not just pegging it to the dollar, but theyre pegging it to a number of different currencies. Theyre beginning to communicate about what those currencies are. And they now know very clearly that communicating what theyre doing is a critical part of the work, and he is very committed to it. Well, certainly, investors have been a lot calmer about the china situation. Always good to see you. Thank you for your thoughts. President jim yong kim, the president of the world bank, talking china, talking emerging markets, and of course, very focused here on zika. Just a flavor of some of the conversations in the imf building here at the world bank imf Spring Meetings, karl. Sara in washington, d. C. Sara eisen, thanks. Stocks not going anywhere. Bob pisanis on the floor with that. Hey, bob. Not right now, karl, but weve had a nice move up yesterday, remember, and also, remember big moves in asia. Take a look at what happened overnight in asia, nikkei outperforming. A littlen weakness always helps. The hang seng is strong. Well get china gdp tonight, but thats the highest level for the shanghai since early january. Nikkei also on the up side on yen weakness. Fractional gains in europe, but whats interesting is here in the United States, whats going on, if you look at the energy sector, modestly to the up side here in the u. S. , despite the fact that the Russian Oil Minister said there may only be a loose agreement to freeze production in doha. So, if you look at energy, well, energy just went negative. Thats interesting. It was positive just a moment ago. Industrials, Consumer Discretionary and financials fractionally on the up side. Take a look at the big earnings picture here. We did have earnings from bank of america, wells fargo, and they were pretty good numbers. But remember something, you see wells fargo down a little bit. Thats had a big runup this week, up 4 going into the open today. So, a lot of these stocks have moved up in anticipation of earnings. Regions and citigroup will be reporting later this week. As far as specifics on the bank of america earnings, a little discussion already, but i think its very important, long growth 11 . Thats a pretty good number. Deposits up almost 6 partly clou cloudy 6 , pretty good numbers. Energy reserves, everybodys worried about losses in the energy group. 500 million, added to reserves, so now they have about 1 billion in reserves. Thats about 4. 6 of their energy exposure, pretty high reserves here. Similar with wells fargo. Total loans up 10 . Those are good numbers. Again, they have very high energy exposure, so everybodys looking at these reserves for energy, potential losses in energy, 200 million. So, total reserves are now pretty high here for them as well. Remember something about all of this as oil goes up, the chances that there will be large and dramatic defaults later this year declined, so its actually good news that oils going up because theres a chance these reserves may never actually have to be realized against actual losses. Finally, just a note, we had a warning from burberry, getting pressure, you see them all to the down side. Karl, back to you. Bob, thank you very much. Quickly here, airlines leading the charge. Yes im looking at the average price delta paid for a gallon of fuel in q1, 1. 33. A year ago, 2. 93 . Remember, they also were in refinery. Its such a fine company, so undervalued. Totally rodney dangerfield. Remember rodney . I do. Remember the great sam kinderson . I do. That scene about vietnam, back to school. Theyre getting some respect today. In the end, dangerfield wasnt great. He got respect, finally. He got it. Lets get to the bond pits as well. Rick santelli at the cme in chicago. Hey, rick. Hi, karl. You know, weve had a bit of a nice ride, a little wild ride when it comes to treasuries, but not necessarily where they closed and not necessarily expanding the range. Looking at interim 10s, were up just a little bit, moderating a little. But a oneweek chart and they reflects intraday levels versus the normal charts the drift is towards the up side. We couldnt challenge the sub170 area. If you look at the hyg, the barometer weve been looking at for riskon, hey, today was the day it finally popped up. These are the highest levels since the early part of december last year. One week of the bunds. This chart also is more of an intraday versus my normal close only charts. Why . Because its so unreal to see that it basically came close to the seven base points but closed higher. Thats intraday. 17 to 18 on a oneweek chart, now thats some Serious Movement when you consider how coiled some of these markets are. And the last chart, one week of the dollar index also showing a lot more of the points from an intraday perspective. You know, the dollar was strong yesterday, rates were down. You see that this chart really is right. There is a drift here. The big news is the fed is going to normalize, the dollars weaker, maybe multinationals will kick better butt in the future, but its a chart you want to watch, especially in deference to the 94 area. By the way, coming up shortly, were going to have an exclusive interview with sheila bair in person, in chicago. Karl, back to you. A perfect day for that, rick. Thank you very much. Rick santelli in chicago. When we come back, sara talks with imf managing director Christine Lagarde live from the Imf World Bank Spring Meeting in washington. The Global Economic outlook, the fed, the banks, all on the agenda. 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So, this is a major change. Theyre not some yahoo, stick your finger in there. They do fantastic empirical work on the ground. And that said, Everyone Wants to short oil ahead of the meeting thinking its got to be ranked first, but this was a very calm, cool, reasoned, were in balance, and that means that the tightness is for real. Tightness . Tightness. Tightness. Weve had a big rally already, percentagewise, were up but if youre producing oil at a terrible price, youre not producing energy 21, the bankruptcy this morning. You know, they paid what, 2. 3 billion for a company that allowed them to be the number one producer, but they paid a price that made it so you cant make money on the cash flow im sorry, the debt payments cant be serviced by the cash flow. Right. So, i thought it was a significant thing, and i think that the wise guys who all want to short ahead of this meeting might turn out to be wrong because of demand. The demand has stepped up and were finally seeing a Million Barrels drop off year over year in the u. S. So its significant. The tickup in Energy Reserves at the likes of b of a is not thats when i you go back and forth to try to understand the numbers. I dont want to ever say im sanguine about any debt that could go bad, because that reveals after what happened in 2005 to 07 period where it looked like everything would be fine. Remember the vintages . Vintages of oil that if you got a loan lets put it this way, energy 21. They bought in 2014, march of 2014 if you bought Oil Properties between 2013 and 2014, youre under reserve and you drew down a credit line. That bank has worked. And we should be looking at who borrowed a lot of money in that time frame, between the last quarter of 2013 and the Third Quarter of 2014, because thats that vintage thats going to undo you, and they should be fully reserved. Should go to the regulars, say listen, we want to be fully reserved because those loans are worth nothing. Nothing fortunately, there is some debt thats ahead. Theres some public debt thats ahead of that senior to the no, junior to the bankers. Yes. And thats whats going to save some of these guys. Believe me, a bank loan on something that was bought First Quarter of 2014, yeah, sure, its like a bad credit card loan. Its a fico score of like 400. Well get stop trading with jim in a moment. This morning i read over 4000 articles on leukemia. In less than a second. speaking japanese i can understand euphemisms, idiosyncrasy and complex metaphors. I know every detail of every public Quarterly Report in the last 20 years. And im just getting warmed up. Hello. My name is watson. Together we can outthink the limits of whats possible. Welcome to the cognitive era. As long as you love me, its alright bend me shape me, any way you want me. Shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjust any way you want it. The bed that moves you. Only at a sleep number store. Time for cramer and stop trading. Its incredible. There was a downgrade of starbucks by Deutsche Bank this week. I want to read what Howard Schultz is saying. The senior at Deutsche Bank whos covered for years resigned and a junior analyst was promoted and in less than a weeks time downgraded the stock. During the less than a weeks time on the job, no visit with the company or downgrade in management, yet a downgrade was issued. Im sure the Investment Community would have benefited from a more diligent and thoughtful approach to the work. I thought that was interesting. Hes never commented. I wish i would have known it was a new analyst, which i didnt. And for the 24 years starbucks has been a public company, we have never publicly commented on an analyst report. I just think that was worth the note. Why do you think he chose to come out and do that . I mean, that is odd for him to choose to gets Free Research . Who cares . Im not my analyst brothers keeper. Oh, who cares . Yeah. I think that theres look, the guy commands Great Respect and deserves it, Howard Schultz. And i would have i just didnt know. I didnt know that it was a junior analyst. Now, we could say nothing matters. April 21st numbers reported, and thats whats going to and Howard Schultz would tell you the same thing, april 21st is the day you decide whether to buy starbucks. But when i read through the downgrade, i thought it was one of those, were going to downgrade it at 60 and at 54 be cute and get back in, like the apple talk at 93. I think being blindsided by the Deutsche Bank process, thats okay, but i want to point out that if you sell it, just be aware, youre selling it on a junior guy, not the senior guy, and that maybe you ought to do your own work and look at the quarter and make a judgment whether you think you should sell or not. My judgment is that i hope it comes down more because my Charitable Trust has a small position, anxious to buy more. There. Thats great color. I wish i had known that at the time. Mea culpa. Whats on mad tonight . Gme, game stock. My friend, ken langone last night, he told me listen, watch paul raines. Hes good. Ive had paul raines on a couple times. I think hes been trying to reinvent the company, but the last couple quarters have been disappointing but has a big yield. And the rubicon project, which is not a project but a company, doing internet advertising and theyve made a big comeback. Is that like the Allen Parsons project . No, its like they shouldnt call it a project. Im going to get them to change their name tonight, call it the rubicon company. And its time that we crossed the rubicon, frankly. The dyes been cast, partner. Shangrila reference yesterday, rubicon today, jim. Well see you tonight. Mad money 6 00 p. M. Eastern. When we come back, saras interview with imf managing director Christine Lagarde. Dow continues to trade in a narrow range. Dont go away. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of the at t network, a network that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Good thursday morning. Welcome back to squawk on the street. Im Carl Quintanilla with simon hobbs, david faber at post nine of the new york stock exchange. Sara eisen is live at the Imf World Bank meeting in washington. Were going to get more from her after an already busy morning. Her interview with jack lew and Christine Lagarde still to come. Markets a little trepidation here ahead of china gdp, which comes out tonight. Oil also down just a touch. Here we go then, the road map this morning. In a few moments time, saras exclusive interview with treasury secretary jack lew. Hear now what he said about banks, trade policy and who could be on the next 10 bill. Plus, a live interview with imf managing director Christine Lagarde and former fdic chair sheila bair will weigh in on regulation, and of course, too big to fail. But lets send it right back to sara in d. C. For more of that exclusive interview with the treasury secretary. Sara. Reporter good morning, simon. Treasury secretary jack lew came out and defended his recent actions to block inversions, saying Companies Like pfizer and allergan should not have been surprised to see the treasury take its third action to stop these deals. He also said that it was not retroactive legislation and the tax lawyers have been working very hard. He did not rule out further action to come. The treasury secretary was also very eager to talk about the Imf World Bank meetings. Finance ministers and global central bankers come to washington to speak to him. He is projecting a message of u. S. Leadership in the Global Economy. He wrote a big piece in Foreign Affairs magazine about how the u. S. Needs to engage more, so i asked him if this piece was an effort to refute the trump world view . Heres what he said. Im making an economic and Foreign Policy argument that has been profoundly important in having the United States play the leadership role thats helped make us economically secure and promote our National Security interests. I mean, you look at Something Like sanctions. Our power to influence the world with sanctions is not unrelated to our economic centrality. And we have to be aware of that, because we want to have all those kinds of levers. Its not just about asking people to do the right things. Reporter well, i was going to mention trade, which is another big part of our engagement with the world economy. Even democrats like Bernie Sanders and Hillary Clinton have trashed the tpp and other trade policies. Do you worry that there could be some real damage by the next administration to our trade policies, or is it Just Campaign bluster . You know, i think that the Transpacific Partnership is an agreement that is very much in the interest of the u. S. Economy and american workers. You know, right now, we have a world where markets are more open here than they are in other places. We benefit when we open other markets. We have high standards in terms of labor protections, environmental protections. Other countries have lower standards. Raising their standards makes our products and services more competitive reporter but thats not the prevailing view right now on campaigns or really in america. Look, we have to make the case why this is good. We accept that. I accept that. But im arguing the merits of something that i think are profoundly important to promoting a strong u. S. Economy and strong opportunities for u. S. Workers. You know, you look at where the growth in population in the world is, you look at the growing markets in the world, i dont think we should say that we want other people to make the rules of the road of who can do business there and what the terms of doing business there are. We want to promote u. S. Values. We want them to have high labor standards and high environmental standards. We also want those markets to be open for the best products in the world, which are u. S. Products, and the best service in the world, which are u. S. Services. Reporter on american values, Bernie Sanders recently said that General Electric is destroying the moral fabric of america. Is that problematic to have such an antibusiness, negative Campaign Rhetoric . Look, i try to stay away from making comments about individual businesses, and we dont target our policies for one or another in business to be affected by it. You have to be reporter but the sentiment. You have to be able to advocate policies that make sense in terms of overall where will we be as an economy and as a country. I think that weve made a case for the kinds of policies that we think are the right ones, and im going to leave it to the political process to work through these other issues. Reporter speaking of policies, do you think neel kashkari, thas it right when he says the only way the taxpayer can foot the bill in a banking crisis is by breaking up the big banks . I think that weve made enormous progress in the last several years building up the capital in our financial institutions, making what they do more transparent so they can be accountable and we can see where the risks are. And making clear that if they fail, they have to be able to work it out on their own. Theres not going to be the backstop of a government bailout. Reporter would you ever go work for a bank again, now that youve been on the other side . You know, i have a fulltime job. I dont think about what i would do next. Reporter theres currently legislation being debated by congress on puerto rico to help solve its debt problems. You know, investors we talked to say that the legislation somewhat undermines the muni markets and sets this precedent that contracts arent enforceable. Are Investor Rights taking a back seat in this deal . No. I actually think that the argument thats been made on that regard is not a correct one in terms of the structure of the municipal markets. Municipal markets right now have a very clear understanding of what the risks associated with different debt issuances are. As youve seen trouble in puerto rico, it hasnt spilled over into other areas. Theres a broad understanding that when you have an insolvency, there needs to be a restructuring. What makes puerto rico kind of unique is that its not covered by any kind of an organized process to go through restructuring. And the legislative effort is to create a process where all stakeholder interests will be fairly treated and where there will be a viable economic plan. But everybody has to be involved and you cant have holdouts. You have to have a process. Reporter i know youve been asked this a lot. Can you ensure that Alexander Hamilton stays on the new 10 . I know youre working on some sort of compromise. So, sara, people are trying to get me to say what were going to do before its all ready to be announced. Its a really exciting process. You know, when we started this conversation not quite a year ago, it wasnt clear to me that millions of americans were going to weigh in with their ideas. Were not just talking about one bill, were talking about the 5, the 10 and the 20. Were not just talking about one picture on one bill, were talking about using the front and the back of the bill to tell an exciting set of stories. What im committed to is keeping our currency the safest in the world, so the first principle is going to be we dont do anything to undermine the security of our currency. Secondly is we cant wait. Were going to have a representation of the contribution women have made to our democracy on the next bill thats issued, and thats going to be the 10 bill reporter so, women on the front, hamilton on the back . Im not going to say whos where, but were going to have an exciting set of announcements. Reporter so, i tried for you, carl, there, but clearly, he is aware of the current Public Appeal of Alexander Hamilton right now and staying on the 10 bill. But seriously, we did talk about a range of topics there. And the key, i think, that Going Forward is going to be on this question of u. S. Leadership at a time where the u. S. Economy is doing okay, better than the rest of the world, but still continues to struggle. And thats a topic that im going to talk about with imf managing director Christine Lagarde this hour. She just downgraded Global Growth again. She also just downgraded u. S. Growth forecast for 2016, so were going to talk about why, what sort of policies need to be put in place, whether were addicted to Monetary Policy, as larry fink of blackrock told squawk box today, and whether the move to break up inversions, as i talked about with treasury sec jack lew, is more harmful than helpful when it comes to Business Confidence. For now, though, back to you. Cant wait for that, sara. Thank you so much. Sara eisen in washington, d. C. Meantime, two big banks reporting before the bell today, b of a and wells topping estimates. Stocks are trading in opposite directions right now. Bac is positive, wells in the red. Wilfred frost back at hq with more on those names. Hey, wilfred. Hey, carl, thanks very much. As you say, both beat. I would say the boa eps was really in line, although the Conference Call has helped Investor Confidence and moved that share price up. Wells was just ahead, as you said. Both of them really, though, only ahead relative to forecasts at the start of the week. They probably underwelcomed a little bit relative to jpmorgan yesterday. A key takeaway for both is the economy seems okay, despite the volatility throughout the quarter and the Interest Rate hike in december. Loan growth was strong, both saying that the consumer is looking fine. Wells even saw loan growth in every single segment, deposit growth for both also solid. On the bank of america side, as i said, were in line on the eps line than a beat. On the plus side, though, expense control was good, always a key factor for bank of america. But Investment Banking was weak across the board, and the ficc performance, fixed interest, commodities and currencies in sales and trading was a particular disappointment. For wells, expenses, in fact, was a weakness, which will be a question for the Conference Call, which has just started, as they didnt control expenses in a weak topline environment. Their earnings beat was driven more on the fee side than the Interest Income side. There were some headlines on the wells side of a big increase in provisions for energy. Yes, relative to the same quarter last year but relative to worse fears that deterioration was modest and not an immediate cause for concern. Overall, share prices are mixed, as you said, right now with bank of america doing well, wells slightly disappointing and in the red. Neither quite the euphoria of jpmorgan, but nevertheless, a couple good days for banking shares across the board. Carl . Wilfred, thank you very much for that. Of course, tune in to closing bell later today. Theyll be joined first on cnbc by the cfo of wells fargo. Coming up on the program, former fdic chair sheila bair will join us for an exclusive interview to talk about the big banks, and of course, regulation, a hot topic this week. And of course, also still ahead, imf managing director Christine Lagarde. Lots to talk to her about. Squawk on the street will be right back. At mfs investment management, we believe in the power of active management. By debating our research to find the best investments. By looking at global and local insights to benefit from different points of view. And by consistently breaking apart risk to focus on longterm value. We actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. Data bright spots this morning, a 43year low on the number of workers applying for new Unemployment Benefits and the slowerthanexpected rise in core inflation falling back to an eightmonth low. Market flat overall, as you can see. Ben mandel is jpmorgans global strategist and Michael Geffen is barclayss chief economist. Michael, did some of the gloom that were getting in the economy over the wake of the gdp changes, is that beginning to ease slightly with the data today, or is it just incidental, do you think . No, i think the data that you saw today does support the view that the domestic economy in the u. S. Is doing okay. So, as you said in your last segment, that the consumer looks okay. Obviously, labor markets are quite strong, the initial claims data point to that. And what the inflation data today says is the weakness in the retail sales data earlier this week was really a price story and not a volume story. So, were tracking close to 2 on consumption, which isnt great. But given where autos have been, it suggests that overall, consumption is fine. So, i think it supports the view of a modest, if unspectacular, u. S. Economy. So, what happens in the second half of the year . So, i think what we would be looking for is two things one, that manufacturing stabilized, and second, energy stabilizes. Im using that word stabilize. Were not looking for these to turn around, accelerate, and provide a meaningful boost to activity, but we just need these sectors, which have been drags on economic activity, to stabilize. If the dollar stopped rising, if Energy Prices have stopped falling, we think thats a reasonable outlook, and it makes the second half look a little better than the first. You know, ben, in quiet markets, the sort of moves that weve had on jpmorgan and bank of america this week really stand out. I mean, financials were obviously the worst performing area of the market, still down about 4 for the year, but its an 8 gain that youve had on both of those as theyve come to market with their earnings. Is that changing your perception, if at all . Well, i think its linked to certain bright spots in the u. S. Economy, particularly the consumer, where fundamentals remain fairly positive, even if the narrative has taken some time to translate into aggregate growth. So, i think what youre seeing is the link to those positive pockets in the u. S. Economy. And so, just to add to michaels point, you know, the disappointment weve seen in the First Quarter this year is a different brand of disappointment than we saw right at the beginning of the year, whereas there we were seeing evidence of a sharp deceleration in q4, big tightening in Global Financial conditions. Now its translated into more sort of business as usual type of disappointment and consistent with our view that were still in the middle of a very long, very flat business cycle. Interesting. Jeffrey sorts from Raymond James has a note thats doing the rounds this morning, and hes been, as he puts it, screaming that the expectations for this earnings season are too low. And obviously, were just at the beginning of that. And ben, what he points out is a lot of people are expecting a rebound in earnings in the second half of the year, to michaels point, and the next year. And if you look at that, were currently only trading on 15 times next years expected earnings. Therefore, that might change your view of the valuation of the market. What do you think . Yeah, i mean, i think thats a fair point. We certainly see an acceleration of earnings going into the latter half of the year. There are a lot of risks surrounding that outlook. So, one is obviously that the u. S. Economy continues to accelerate. Two is that were in an environment where weve seen a dialing down of global risks, right . So, thinking about valuations and multiples. Weve seen a recovery and a decline and the possibility of another big financial conditions tightening. Right. And thats mainly linked to whats going on in the u. S. Dollar. I think the risk as we go into the middle of the year is that the fed starts walking back towardsresumption of rate hikes, the dollar starts to move, and if it moves too much, then it dials those risks back up, so i point to that as probably the biggest risk. Just in terms of cost benefit, i mean, what would be what is your benchmark for how rapidly the stock market can gain here . What are we benching everything against, if you like, all those risks . Yeah, i think were looking at a situation where the, you know, topline growth for firms probably remains a little bit disappointing, in line with weak well, not weak id say, you know, positive but benign, nominal gdp growth in the economy. And i think margins probably end upholding up better than people expect. Okay. So, i think that helps. One last quick word from you, michael, about the meeting we have in doha on oil over the weekend. There was a lot of news flow earlier in the week as to whether or not that could bolster prices longer term. I think you were saying we will bottom on energy during the course of the second half of the year. Is there any chance that doha sends a substantially higher on sunday, do you think . I dont think the risk is to substantially higher, but i do think it would help support the idea that weve hit the floor. So, well bounce around within a range. That would mean extractionrelated activity and mining activity should stabilize over the course of at least the second half of this year. So, i wouldnt look for that sharp upside surprise, but i think it reinforces the bottoming and the stabilization. Its great to have you both. Thank you, Michael Gapen joining us, barclays chief economist, and ben mandel from jpmorgan. Thank you both. Thanks. When we come back, a live, exclusive interview with former fdic chair sheila bair. Were back after a break. Lets get to the cme group this morning. Rick santelli has a special edition of the santelli exchange. Hey, rick. Thanks, carl. And yes, id like to welcome sheila bair. Needs no introduction. Bull by the horns, maybe one of the most frank, honest books ive ever read about what was going on behind closed doors during the credit crisis. So, lets kind of pick up on that. Okay. Okay . The news of the day, living wills, the fed and the fdic not enamored with what some of the major, as i call, too big to fail banks have turned in as their plans. Yeah. What are your thoughts . Well, i wish they had been doing this sooner not later. I think this part of dodd frank was one of the most important pieces, the most frontal attack on too big to fail. So, the good news is theyre finally moving forward, but theres not much transparency, soe dont really know whats in those living wills or what their rationalizations are, and i think that really we need a lot more public xlour. Its important for them to see the living wills and for the market to judge their credibility. I know in general, sheila, you dont mind dodd frank. You think there are issues, but we can work within that. Right, right. Dont you think theres too much micro managing going on with the big banks . If a banks going to fail, do you really think that regulators or the fed or the fdic are going to know how its going to metastasize in the system . Yeah, well, there are a lot of unknowns. Its good to have planning, though. Just knowing what your legal entities are, where there are cross subsidies, Common Services are shared, those are the kinds of nuts and bolts things you need to know and understand in order to have a orderly winddown. So, its boring, but i think its important. It may sound like micromanagement. Some of the other rules, though, i agree. I think we should have focused on capital. They were far too leveraged. And liquidity issues were really driven by the markets perception of insolvency because they were too overleveraged, so there should have been more emphasis on that. And the work theyre doing, making sure that the management themselves understand the organization well enough to know how they can be unwound if they get into trouble. Whos going to watch the watchdog, though . If everybody was an expert on leverage, i would think its the current federal reserve. Last i calculated it was about 1101. Yeah, well, thats a good point. So, well, they kind of you can print your only money, maybe leverage isnt as important thats right, its all about the printing press. They should be, but its not. You know, we need more transparency, i think. And again, i think its in the regulators to have more transparency. Theyre putting it all on themselves. Theyre the only ones that see the stress test, really detailed information about the stress tests, the only ones that see the detailed information about the living will. Were all riding on their judgment. If their judgments wrong, i think exposing more to the market so they can have additional eyes and minds analyzing that would be helpful to them. Our sara eisens doing spectacular work at the Imf World Bank conference today. Right. Jack lew continues, of course, to defend not only what hes trying to do with regard to inversions and maybe specifically guided at certain mergers right. But its about the process. Yeah, yeah. Lets talk about the process. Sheila bair, do you agree with the shortcut tight process, whether its the president s executive orders or the treasury secretary with regard to the rule of law in taxes and laws that are already statutes already on the books . Yeah, so, im very troubled about the shift of power to the executive branch. But in fairness, congress has created this problem by being so dysfunctional so often. We need fundamental Corporate Tax review. Jack lews problem is, whether he sees it this way i do that the top rates too high. We have a noncompetitive rate. Corporations will constantly try to find their way around it. There will constantly be other areas where its going to be more efficient and lower cost to do business, so hes got a hydroheaded monster. Hes trying to kill it off with executive power and he cant. We need tax reform and congress has to do that. Its in their court. Currently, washington college, your new role, president. One of the issues thats near and dear to you is trying to solve the student loan problem. Right. Bernie sanders make college free. Many of the other candidates say its all about wages. We have to figure out a way, wages, its the economy. Right. Whats sheila bairs avenue to potentially fix this, and does it agree with the Bernie Sanders approach . Yeah, well, no, i dont think free college its kind of doubling down on some of the problems we have already. And we have free elementary and secondary schools. And you know, we spend a lot of money there. And id like to get that fixed as opposed to i fear some of this is just trying to make colleges the high schools now because the high schools are not performs as well as they should. I think it should be affordable, but there should be skin in the game on everybodys part. I really like a plan that jeb bush had put out, where everybody just gets a 50,000 line of credit. You can use it for colleges, vocational ed, ongoing job training. You pay it back as a percentage of your income, very small percentage over a long period of time, so its going to be affordable. And you make schools have some skin in the game. So, if theyre in default, the schools have to pay up part of the price for taxpayers. They would align economic incentives, simplify the program and make the loans affordable. Well, doesnt it figure that the one candidates plan that you liked hes gone. Was one of the first to exit. Maybe the plan can survive. Maybe he will contest the convention, resurrect. Thank you, sheila bair. A pleasure having you in chicago. Hobbs, simon hobbs, back to you. That was nice. Thank you very much, rick. Straight ahead, were live from the Imf World Bank meetings in d. C. Sara eisen will sit down next with the imf managing director, Christine Lagarde. Thats next on cnbc. Welcome back to squawk on the street. Im Jackie Deangelis reporting from the nymex. The department of energy out with its weekly Natural Gas Storage report. Just checking on prices here, because we did turn positive. 2 right now is where were trading. We had a drawdown of 3 billion cubic feet, not exactly a bullish number here, a small drawdown, but compared to what we saw last year of 49 billion cubic feet increase in stocks, it is a little bit of a disparity. Remember, these prices have been trading largely on the weather, and we saw that little blip over 2 because it was a shortterm coldweather trade, but temperatures now starting to average out in terms of what you would expect for springtime. So, traders are telling me to expect these prices to stay relatively low. Were probably going to dip back under the 2 range, and to expect that to continue until we start to see these summer temperatures heat up. Thats when people start turning on the air conditioning. Guys, back to you at post nine. Thank you, jackie. Heres your cnbc news update this hour. A powerful earthquake with the preliminary magnitude of 6. 4 has struck southern japan, knocking over houses. It was entered in the kumemato region. Japans Meteorological Agency says theres no danger of a tsunami. No immediate reports of casualties, either. A belgian judge has ordered Mohamed Abrini and five others arrested in connection with the attacks in paris and brussels to be held for another month. French tv reported that abrini, who admitted he was the man in the hat in the surveillance photos, told investigators he wouldnt hurt a fly. For the first time, the u. S. Has ruled that american ships have started conducting drills with the philippines in the south china sea. Defense secretary Ashton Carter making the announcement in a News Conference with his philippine counterpart. And a farewell to end all farewells. Kobe bryant scoring 60 points in his last nba game, leading the Los Angeles Lakers to a win over the utah jazz. Kobe scored over 33,000 regularseason points in his 20year career, leading the lakers to five nba titles. Truly a legend. And thats our cnbc news update for this hour. Back to you, carl. Sharon, thank you so much. Sure. Sharon epperson. The cdc finally confirming whats been suspected for a while, that the zika virus causes the birth defect microcepha microcephaly. Meg terrell is in new york with latest on that. Hey, carl. Public Health Officials say the more they learn about zika, the more concerned they become. An important mark of progress in a study published in the new england journal of medicine, cdc authors confirmed the link between zika and microcephaly. Tom friedman saying it is now clear that the virus causes microcephaly. We have now confirmed what mounting evidence has suggested. We are working to do Everything Possible to protect the american public. And of course, one of those tools is controlling the mosquito that carries zika. In an exclusive interview with bill gates, cnbc europes hadley gamble yesterday talked about what the Gates Foundation may be able to contribute to this. Take a listen. We actually have the mosquito which is the carrier here along with dengue and yellow fever as well, that we could have cases. And so, ideas about how can we use new tools to go after the mosquitos, thats one way to conquer these diseases, to go after the vector and reduce or eliminate the mosquito populations. Our foundation has some tools there which we will probably want to try, because there wont be a vaccine, even in the best case, for several years here. And so, theres a lot being looked at, but no, theres not a total solution to zika in the world. The u. S. Is playing a disproportionate role in moving to find solutions, though. As the u. S. Is playing that role, this comes amid a fight between the white house and congress over the 1. 8 billion the white house has asked to allocate for zika. That fight continues. Back to you, carl. And i guess its worth pointing out, meg, that as far as this countrys concerned, its important to noit note that this is sexually transmitted. Thats also confirmed, is it not, in this instance, which makes it a big threat for the next generation. Simon, thats absolutely true. Its not just mosquitos, but surprisingly, also sexually transmitted. Meg tirrell with the latest on the zika virus and the contribution from bill gates. Next, imf managing director Christine Lagarde live with sara eisen in washington. What stocks might be the biggest beneficiaries of a weaker u. S. Dollar . Our traders are naming names at tradingnation. Cnbc. Com. Right now, more squawk on the street. Credit karma, give yourself some credit. Know that my score sucks. Told ya. Thats about what my score was when i signed up. No way i mean it took some work but credit karma made it alot easie. Hey, maybe ill give it a shot. Check out credit karma today. Credit karma, give yourself some credit. No missed payments. Ooohh, up 5 points. Paid off a loan. Welcome back to squawk on the street. Stocks are mostly lower as the tech sector struggles for gains here, standing out as one of the worstperforming sectors in the days trade, down about a third of a percent. The biggest laggard, seagate shares down double digits after cutting thirdquarter guidance. Other tech stocks weighing on the tech sector are shares of Western Digital in sympathy there, also netapp and micron as well. The tech sector is still up 2 for the year and of course, is the biggest sector in the s p, so one that many traders Pay Attention to. Now off to sara eisen in our nations capital. Back over to you. Reporter dom chu, thank you very much. After the International Monetary fund downgraded its global forecast, were here at the imf World Headquarters for the Spring Meetings and im here with managing director Christine Lagarde. Good to see you again. Good to see you, too. Good morning. Reporter good morning. You set the tone with the downgrade to Global Growth. So many downgrades to your forecasts over the last few years. Is it just that the imf is too optimistic or this recovery is just so disappointing . Well, first of all, there is recovery and there is growth. Thats the good news of the message. But it is too slow, too fragile, and while recoverys under way, it is progressing too slowly. When you look at poverty levels, when you look at the number of people unemployed, when you look at inflation, when you look at debt, all of that is not moving in the right direction as we would like it to move. So, what we are saying here today is because of this Downside Risks on the horizon, and because of that weaker baseline, we would like to encourage policymakers to take decisions and to implement them on both Structural Reforms, fiscal policy and Monetary Policy. Thats what we call the threepronged approach. Reporter well talk about all of them, but quickly, on the downgrade, you also cut the u. S. Economic outlook but dont see a recession coming in the u. S. No. Reporter correct . No, we dont see a recession coming up. Reporter no massive recession as donald trump sees. We dont see a recession for the u. S. Economy. We see a growth of about 2. 4 , 2. 5 , 20162017. And clearly, there have been job creations in much larger volumes than, number one, was expected, number two, we are seeing in other places of the world. The quality of those jobs need to be looked at, in our view. Reporter stocks. We were just looking at the boards. Theyre at 2016 highs. Its been quite a reversal from the beginning of the year, worst start to a year ever for stocks. What do you think fundamentally has changed between january and now that has brightened the outlook . Well, one of the very significant changes is good clarification and much better communication by the chinese authorities in relation to their own market and in relation to the Exchange Rate regime. So, i think that level of uncertainty has been removed, and it has been a significant change. Reporter you have been very positive on china. You recently upgraded your forecast for growth to 6. 5 . What are the doomsayers, what are the big hedge funds that are betting against the chinese currency and the hong kong dollar and betting on a financial crisis hitting the chinese economy, what do they get wrong . Well, im not going to comment on their strategy and their policies, but what we are seeing because we look at the fundamentals and we try to assess what the impact of the chinese measures will be in the short term and in the medium term, and we have slightly upgraded our forecast for china to 6. 5 because we took into account the measures that they have announced just recently under their plan. Having said that, were also looking at the medium and long term, and we have a slight concern, and we certainly will convey the message to the chinese authorities that we hope that they follow through and implement on some of the major reforms, such as the restructuring of the stateowned enterprises, such as, you know, the right reforms in order to open up the Service Market in particular, such as the deepening of the capital markets, all such conditions that really need to lay the ground for a solid and Sustainable Growth and transition in china. Reporter another thing thats happened in the last few months is the dollar has stopped strengthening, and thats relieved a lot of the tension out there in emerging markets and in commodities. We know that there was an agreement at the g20 meeting in china to be more open and communicative about Exchange Rate policies. Was there any agreement that the dollar should weaken . If there was such a thing, i wasnt privy to that, and i doubt very much that there would be such an agreement. By the way, we slightly downgraded the u. S. Forecast precisely because of the impact of the strong u. S. Dollar on exports. And to the extent that the u. S. Dollar would sort of stabilize and not continue to appreciate, then certainly, the forecast might be a little bit better. Just on u. S. Policies, we just had a great conversation with treasury secretary jack lew on u. S. Economic leadership. We also talked about his recent aggressive rules to crack down on tax inversions with corporate america. Do you think that those new rules will do more harm than good because they hurt Business Confidence . But on the other hand, they bring tax money back to the u. S. The u. S. Tax regimes are probably the most sophisticated and the most complicated regimes in the world. And i really welcome the determination of the u. S. Treasury to bring about more transparency, a better understanding of the rules, and the principle of fair share of tax being levied and collected reporter but youre not critical about the way they went about it . I believe that good cooperation is always needed, consultation of the business community, which im sure hes keen to also entertain, but then there comes a point where the treasury authorities and the tax authorities have to take measures, and they have to do so as is required in order to implement changes. There will be a lot of work to be done in the tax domain. Clearly, what we have seen recently as a result of the Panama Papers is going to be a significant wakeup call to all authorities to have a more coordinated and more comprehensive approach, because reporter is there a role for the imf in that . Oh, absolutely. A lot of our Technical Assistance is actually dedicated to fiscal, which includes taxation, and we have a big section of Technical Assistance which is really dedicated to an antimoney laundering regimes and implementation and counterterrorism financing, which we try to help countries with. And we need to continue. What i really hope as well is when we issue a report which is not flattering for the country, there is actually followup and policymakers take action as a result. Reporter talking about policy prescriptions, Monetary Policy. Larry fink was on, blackrock, squawk box early this morning talking about some of the ramifications of negative Interest Rates and low Interest Rates, saying that they could sew the seeds for the next crisis, and they also buy time for governments to delay fiscal policy. Are we addicted to Monetary Policy . What is critically important is that Monetary Policy be not alone. And at the moment, it is very much alone. It needs to be supported, accompanied with fiscal policy and with structural measures, Structural Reforms. So, on that particular point, i agree with larry, it cannot go alone. It has to be accompanied. But at the same time, i believe that Monetary Policy, if accompanied by the other two fiscal and Structural Reforms has to continue to be competitive. There are many corners of the world where inflation is low where there is output gap and where the Monetary Policy has to sustain the recovery and has to fuel enterprises with credit. So, its perfectly legitimate, but it has reporter negative rates . Negative rates included, of course. We believe that its a net positive, no question about it, but it has side effects, and those side effects will have an impact on banks, which is why larry fink is expressing concern. But we have to remember always that is a saver could be be concerned is also an employee who is very keen to keep his job and for the economy to continue to thrive and is also a consumer. So, you cannot isolate the facet of an economic actor. It is multifaceted, and we have to look at the Global Economy. We believe at the moment that negative Interest Rates are a net positive in certain parts of the world and have to be supported by fiscal policy and Structural Reforms. Reporter should the fed consider them, if we hit another downturn in the u. S. Economy . Currently, the u. S. Economy is not at all in that situation. And if anything, being datadependent, being gradual and being well communicated, we are more likely to have an Interest Rate rise rather than a move into negative territory. This year youve advocated that johnny allen should be cautious and gradual in her approach. She has been much more cautious and gradual. You must be pleased to hear that theyre paying more attention to global events jess. Reporter but how gradual is too gradual . Clearly, janet yellen is focusing on her mission and her mandate, and im not surprised that she is, but i was very pleased that she actually included in the domestic economy analysis the impact of the Global Economy. If there is anything that has massively changed in the last couple of years, it is the spillover effects of policies going in all directions. It used to be, you know, how will emerging markets face an Interest Rate rise from the fed . Now we have seen that significant move of the Chinese Markets have a global impact. Reporter when it comes to a fed rate hike, do you think that they can hike rates this year . Data dependent on both inflation and unemployment account and gradual approach, it could probably mean a move in 2016. Lets hope so, because it would mean that the u. S. Economy is faring better. Reporter and what would that mean for emerging markets . Theres no question about it and whether its an issue of added volatility, a move on Exchange Rate, it will have an impact because all economies and all Financial Markets are strongly interconnected. They are prepared and some of them are taking it to be equipp equipped. I know that you do not like to comment on politics or the election. Correct. But we are seeing frustration in america on economy and inequality and low wages and americans are thirsty for change. How would you characterize president obamas economy over the last 8 years. Well it has certainly created jobs in the last few years and it has faced the biggest financial crisis since the second world war. And it is recovering in pretty good order compared with many other countries of the world. But having said that we also recommend the Structural Reforms that would actually help the american people. 50 million of whom are in poverty and this needs to be addressed. This needs to be addressed by various means. Whether its the income tax credit and the minimum salary raise or Family Friendly measures but clearly 50 Million People in the United States living in poverty is not something that you want to have for the future. Thank you. Always a pleasure to speak with you. The managing director of the imf here at imf headquaters. Well send it back to you in new york. Still to come, alan greenspan, sarah. Hes ahead on the next hour. If you ever missed a flight because you were stuck in a security line youre not alone and the situation is expected to get worse. Whats being done to change that . Thats next. At mfs investment management, we believe in the power of active management. By debating our research to find the best investments. By looking at global and local insights to benefit from different points of view. And by consistently breaking apart risk to focus on longterm value. We actively manage with expertise and conviction. So you can invest with more certainty. Mfs. Thats the power of active management. Thats why i run on quickbooks. Details. I use the payments app to accept credit cards. And everything autosyncs. Those sales prove my sustainable designs are better for the environment and my bottom line. Thats how i own it. So what else is new . Humm. Shes doing good. She needs more care though. She wants to stay in her house. I dont know even where to start with that. First, lets take a look at your Financial Plan and see what we can do. Ok, so weve got. Well listen. Well talk. Well plan. Baird. Investors asked to pull a billion dollar from paul tudor joness investment firm. He invests in Macro Economic events and one of the giants in the industry. Which focus on macro events. The company has 13 billion in assets under management. This comes in the wake of the companys chief operating officer saying he is planning to leave but a sign that the difficult economic environment, difficult market environment is certainly having impact on some of the Hedge Fund Giants including paul tudor jones. Thank you very much. At one point or another everyone has been stuck in a long security line at an airport. One company is trying to change that. Phil is live at Denver Airport with more. Those look like long lines there at denver, phil. This is only half of it, simon. This is the tsa security wait line. About 15 minutes you guys have been online. Not uncommon in the morning rush hour here in denver. Clear has its own line here and theres a couple of people that will be coming through. Beyond that is the tsa precheck line. Its saying if you come in and put your fingers down we know who you are and you go right to the front here and then you go through. They believe its a much faster way to go through the airport. Now look what its doing, it is expanding beyond airports and moving into sports venues. In fact theres five Major League Baseball parks where clear has a designated entry point. Coors field is one of those. You dont have to be waiting with others at the park. Fans that we talk to love the expedited entry. First time i used it at a game i like it. Its real simple and makes it streamline and not waiting as long in the normal lines. I think its going to be great. I just signed up so this is my first time through but its going to be quick. One theres no lines. Two i dont have to pull out my i. D. S and stuff like that. They dont go through all of my stuff. It works out well. Clear is not a new company. It was in bankruptcy about five years ago when a new owner that had fast experience on wall street and the hedge funds took over they reformatted the business and they have expanded to 13 airports. More than a half million members. Enrollment up 200 this year as they look to expand. We had a chance to go to the clear lab in manhattan where the security is saying bio me tricks are the key to not only quicker entry into airports and sports venues but also if you want to pay. Thats where they are targeting growth but the airport someone of the points where a lot of people say i dont like waiting in line. Can i get in there quicker. More lanes, less congestion. Phil, thank you very much. Coming up on the program, or on squawk alley, more accurately, an exclusive interview with the former fed chairman alan greenspan. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Whats going on here . Im val, the orange money retirement squirrel from voya. Were putting away acorns. 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