Transcripts For CNBC Squawk On The Street 20160503

15month low. Australia cutting rates, auto sales on the way. Roadmap begins with tim cook. He joined jim on mad money last night covered everything from innovation to china to revenue to the companys value. Global data driving futures. Well tell you what to expect on wall street today. And shares of aig down in the premarket after earnings. Peter hancock will join us live. First up, tim cook defending app apples latest results and the stock mired in a slump. He was on with mad money last night. If you talk about macroheadwinds, difficult compares dominant. Yeah. Currency, no new iteration yet. If youre going to be opportunistic wouldnt you say let all the hedge funds blow it out and then well make a statement . Well, opportunistic to me means you buy it when you think the companys undervalued. We believe the companys undervalued. All right. I got to get your thoughts on what he said and whether it changed your view in any way, whether it should change other peoples views. I think if you want to take a longer term view, it should change your view. The reason is because the company will not look like it looks now. The company will be a Service Revenue company within an installed device base. The motto of all these usually the m. O. Is razor, razor blade. Thats whats happening. They backed spoo that, that wasnt the intent, but over and over again cook is talking about the icloud photo backup, music, just really looking at this device and thinking its hardware. And thats a mistake, because the fees that you pay are not going to be unlike netflix, unlike costco, amazon prime and then apple fees. So the idea that theres no revenue generated from the ecosystem is going to prove wrong, app store. I think thats the way you want to look at it. If you look at it as a device company, you should sell it. The fact is what hes referring to as the buyback, look, we see it undervalued. If you see it as a hand set companies and get out before it hits 60, but he doesnt view it like that and hes got a lot of fire power and take the other side of the trade. Cook went into some depth on this exact point on Service Revenue. Take a listen to this. Services now is the second largest revenue segment at apple. It was for last quarter, it was for the first half of the year as far as that goes. And so last quarter we were at 6 billion, up 20 . Its a fast growing. And you look at what it is, its things like the app store. You go and you buy apps far after the sale. You might subscribe to apple music. You might use apple pay. You might buy songs. You might rent movies. And so its all of these things. And it really adds up. Now and that of course is based on how many people are using our devices, how many devices are out there. And theres over a billion devices in use. This is huge. Yeah. Look, i think what hes focused on is the quality of the product, 95 Customer Satisfaction so the ecosystems going to stay and be passed onto kids. We talk about Hewlett Packard, intel, microsoft, companies that have lost their way in terms of very low multiple and broke down. He said, look, no one really liked the product. The product, the product, the revenue stream that comes with the product. These are the constants that he sees, but when you look at the Conference Calls and they dont care about the product. We were talking about everyones on their apple telling customers they should sell apple and yet you try to take their apple away they would kill you. Just the irony but its not the numbers, the numbers look bad because the numbers for the next three months are supposed to be bad. He told you that. They will be bad. They should downgrade, get out of our stock, so to speak, is what tim cook is saying. And i think thats a natural. When people say i didnt hear innovation, he said over and over again, if i told you innovation, you lose the drama. This is a surprise stock. Talking about the watch, carl icahn said youd sell 20 million and instead you sold onethird of that. He says we never said 20 million. Who said 20 million . Apple is a company where theyre not going to telegraph their moon shots in a way google or facebook will and does. No. They never have. As we know things are in secrecy. Everything covered when anybody goes to the headquarters some of the new stuff is all covered over. But, jim, i think youre making important point here, but i have to wonder is this move to have people focusing on services a move of necessity, or was it part of a longheld plan . And regardless, when you talk about a company that is then relying on recurring cash flow stream, which is a positive in a lot of ways and not as much on device sales and on the choppiness there, and not as much necessarily on growth from those sales any longer, how do you go about valuing it . What does it look like whats it peer group look like . Well, look, this is the issue. A lot of people feel its just a dodge. Out of nowhere were talking Service Revenue. I pressed him in the previous quarter why dont you talk more about Service Revenue. Now obviously im just one of the many people that talks to them. I think what happened is Service Revenue surfaced as being much larger as more devices were sold. Theres always been a component for service, it was never that big. Because of the amortization, you understanding the accounting, it doesnt look nearly as good as the actual the actual spreadout because you just cant book subscription the same way. But i would say, david, whether they backed into it, whether you believe it or not, what youre going to see in the next quarter is the Service Revenues going to go up even as the device sale slows down. And thats going to show you its not ios. Right. And i think thats what theyre banking on. Now, did they count on banking, last year you saw this great spike in device and it was on steroids and they show you if you smooth it out its not as bad. There is slowdown around the world. The device category is slowing, but they talk about india, they talk about china still middle classification, talk about new devices going to blow you away. But i think people who hate it are still going to hate it. After watching the interview going to say, wow, theyre going to say, oh, give me a break. Its a device company. Its Hewlett Packard. And i think thats a mistake. I think thats a very shortterm way to look at it. And that gets you out at 92 and back in at 83. I dont know. Where theres yield support and buyback support, but this is is truly one of those stories where you believe they know how to innovate or you sell. You dont hold. Sell. So you are prepared for more skepticism and more selling . These analysts have these 170 price targets and they got buys on it. They look like fools, go into the research department, you better downgrade. We havent had an up day. When you do an up day that gives them a chance to be able to say it was a great run. Those are two different worlds. Theres the world of people who actually believe in the device. And theres a great contrast here. This is not blackberry, this is not something that Hewlett Packard put out and they never did. The reason this is so important is because people are willing to pay because they like the device. Theyre willing to pay for these little things. And they could become big things. Apple may have backed into it, they might have lucked out. But to dismiss it is to look at the company and just say its this thing. And when another guy you know, when chow mi comes out with something or white box chinese, its going out wouldnt you agree his china call is fraught with some risk . Absolutely. Theyre still not willing to say that communist country, the committee, the agency that stopped it is the agency of all media. We dont have an agency of all media. We forget that its a communist country. And its not like, well, hold on, wait a second, call up the minister of justice and straighten this out. So theres risk there. They refuted the risk that i staid said the white box is taking over, theyre talking switching from android. Also talking about this idea that it doesnt have to grow right now just to switch from android means a lot. And the fact indias going to have more people than china in the course of the next five years and theyre going to be able to dominate china actually six years, and dominate india because india is bringing in a new lte system. In the meantime you have to go through the valley shadow death. And people fear evil. You make it sound so dramatic. It is a drama story, believe me. Were going to hear a lot more about what tim told jim last night. Meanwhile futures are sharply lower. Stocks poised to erase most of mondays gains. Data out of china showing factory activity did detract in april for the 14th consecutive month. And in Australia Central Bank surprises by cutting to a record low of 1. 75. First rate cut there of the year. The yen at an 18month high. More discussion about whether kuroda is playing this whole game wrong. All i think about the ceo from ford give us a level Playing Field well take the lions share. We are reacting to the pajamas traders, im saying whats bad for japan is good for the u. S. Whats bad for europe in terms of the euro is good for the u. S. And yet if you look at their markets, those markets trade down as they should because theyre going to begin to lose share. Benz is going to lose share, bmw, honda, toyota, thats really important for our economy. So whats bad for them, why their markets are going down is good for us. But these futures traders dont look at it like that. Do you think they know companies . They say oh, down, down, down. They wouldnt know a company if it dropped on their head. So nissan, okay, they miss. So the Japanese Companies will miss. Thats good for ford and gm. See, ford and gm are american companies. Yep. Europe in that obviously is a translation, so again they win. But we should stop looking at whats bad for the goose is bad for the gander. Pfizer today, david, raises its guide for the full year in part on this lightning dollar burden. Yeah, although the quarter itself was a decent quarter. Yeah, were going to see the stock up this morning. Listen, they are still reeling as you know from the decision on the part of the treasury to target their deal specifically, as we can say. Not treasury. To put an end to it of course. That being the allergan transaction. Decent quarter from pfizer. Stock up rather sharply this morning, guys, which is certainly good news. And it hasnt really moved appreciably. The name really has gotten crushed since then of course, jim, you know has been allergan after that deal fell apart. Yeah. I have very little faith that theyll make the quarter just because people dont like it right now. So whatever number they print. And thats because the type of deal has to close. When we come back, guys, big quarterly miss for aig. Stocks lower in the premarket. Well talk to Peter Hancock. And these auto sales are about to come in big. Thats coming up after the break. Dont go away. Fords out with auto sales for april. Our phil lebeau is in chicago this morning. Hey, phil. Hey, carl, increase of 4 last month for ford sales, that is slightly below the estimate of increase of 4. 5 as has been the case for well over a year. Its all about trucks and utilities, especially at ford. The f series up 12. 6 last month. Remember, were finally getting that full year rotation in terms of sales and production of the f series with both plants now up at full capacity. And the car sales as it has been for all automakers people are just moving away from cars down 11. 5 last month. Guys, we get gm numbers in about 15 minutes. All right. Phil, thank you very much. Well be watching that. Trying to get back to this 17. 3 number for the year after march was weak. Be cautious again. People have to understand that latin america right now is terrible for these guys. You can look at the United States and make a decision, youre going to get the decision wrong. Auto nation and car max give you more of a sense of what is happening in the u. S. Besides these. But i just really want to urge people these are inexpensive stocks and if you think the dollar trajectory is going to continue against the yen and euro, youre going to regret you sold these stocks on these figures. Aig, adjusted quartly profit well below forecast by a dollar. Company hurt by weak hedge fund returns. Well talk to Peter Hancock later this hour, but in the meantime, david, your thoughts on the quarter. Listen, theyre trying to do the right things. Youve got john paulson and carl icahn joining the board of directors of course after settling what was going to potentially be a very distracting and long proxy fight for board seats on the part of mr. Icahn. And youve got hedge fund losses. Now no surprise to us, right, guys, it was a tough quarter. But you do forget for aig this happened last quarter also. And it adds up. What are we talking 537 million loss in market value of its hedge fund holdings. And that of course resulting to a certain extent in some of the missed here for the company, but well have to talk with mr. Hancock and sort of see what he can cite as some of the key reasons why he believes theyre on the right track. Return on equity at least, jim, a little better than what we saw with most of the banks out there. Not saying much, but i guess its something. Yeah. Look, it was a soso quarter. I look at travelers. They are such better companies. Honestly, yeah, im happy to speak to this gentleman thats the ceo, but this aig is not really as great a company as people think. There are some possibilities here, but when i look at chub i think, wow, what a Better Company at aig. These are just night and day. Aig is never going to make the playoffs looking like this. This is a 610 team, maybe a 511. Theres no draft choices in this business. This hedge fund issue, david, i thought that was supposed to be last time. The hedge funds caused a problem last time. Why dont we kick the hedge funds out . Tell me what thats all about . Its not that easy to get out of hedge funds as you might think. They are taking exposure to hedge funds down i think roughly 11 billion theyre taking it down rather significantly, but it does take time. Sometimes, jim, you cant just get out in one quarter. You may have quarterly liquidity but doesnt mean youll be able to get out all in one quarter, right . I guess thats part of the reason here. Well see what mr. Hancock has to say as to whether we can expect more, of course the hedge funds performed a bit better as so the overall market. Unless things change dramatically in those kinds of losses. Im sure hes got an excuse for it. Got an excuse for everything these days. I will tell you jay fishman who ran travelers and took that stock to where it has to go because hes one great executive, remember what kind was he in valeant . No. David, you know that the real greats, and im talking about the people at chub, and you know chub and his son they dont fool around with this stuff. No. It is a wellrun company. Theres no doubt about it. Obviously they had a huge deal last year they closed, right, jim . Theyre winners. I think hancocks got to show us something. Yeah. There are a lot of different businesses too, right . I mean its not just apples to apples with chub. No, but theres a way to run a company. Lets hear it. I mean, look, hancocks new. But i got to tell you i look at this number i expected better. That sounds like its going to be a good interview. When we come back look at cramers mad dash, count down to the opening bell, take another look at the premarket. Some weakness obviously. More squawk on the street from post nine at the nyse. Straight ahead the stars and marvels captain America Civil War chris evans and jeremy r renner will ring the the bell. Understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. speaking japanese oh watson, your japanese is very good. Thank you. speaking japanese exactly. I can understand nuance, context and idiom in seven languages to help companies all over the world with everything from retail solutions, to banking, to cyber security. speaking japanese seven minutes until the opening bell. Lets get cramers mad dash ahead of that. Clorox out today. Industrials ran for a while, talk about this roving bull market. Back yesterday colgate, another fabulous quarter for clorox. He was dealt a great hand because when mr. Canals, when he left, that last quarter got him out of venezuela. Venezuela stopped paying for everything. I mean venezuela is not really its a failed state. And they got out of it, so they have really good numbers. What im really impressed with is you got the 4 volume increase, cleaning sales really good, household sales really go good, burts bees really good. A fantastic manager. He understands how to get to millennial. He spends a fortune on facebook. He knows where people the millennial are thinking. And hes got them on their mind. This burts bees which initially i thought was an overpay really ramping. This is the kind of company you get that good dividend, you get the buyback, you get wellrun management. And you can sleep. Sleep at night. Forex is a 3 point impact. Right. You talked about level Playing Field. Its going to be good. A little of latin america which i dont really like. You had the peso go up. We do so much business with mexico, they need to get that to 15. Its like 18to1 . Dont i know i go to mexico are you kidding me this meal costs me 9 . This was 18 two years ago. While youre talking chris evans and Jeremy Renner have made their way to the floor of the nyse. Marvel a unit of disney. Yes. And this cast, Robert Downey jr. , scarlet johansson. Yeah, but espn lost somebody. Heres iron man making his way i dont know where our camera is, but theyre coming and theyll ring the opening bell. Well talk about that and impact on disney for sure when we come back. Dont go away. The call just came in. Shes about to arrive. 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. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in 90 seconds as chris evans and Jeremy Renner are with tom farley on the nyse podium doing the honors today. It occurs to me, jim, this is likely to dominate the box office. Jungle book has been having a nice couple weeks, finding dory doesnt get a lot of attention. No, it doesnt. You mentioned that because youre talking about maybe five years worth of movies. I think a lot of people feel every movie is one off. What disney has done is make it so its not one off. So you may think that espn, which by the way i think the app has hurt it. The espn app is so good. We got to start thinking about this thing as not just ten pole movie but consistent movie, movie, movie, franchise, franchise, franchise, so that makes it so the stock is worth a little more than you think or if it sells off you want to buy it. Look at this. Were all going to see it. Meanwhile its a busy day of news. A lot of earnings coming in. Indiana primary, some of the betting markets now have trump around mid 90 likelihood of getting the nomination. Its funny, the best politics stuff other than new York Magazine is 538. Again, its an espn product. And they have an analysis of indiana that is brilliant about antibiotic lincolns father. I urge people to go to 538 because its politically neutral. And amazing analysis. Yeah, were waiting more auto sales. Well get some fed speak today. And then as we said at the big board chris evans and Jeremy Renner celebrating the release of captain America Civil War at the nasdaq. First multifamily investor celebrating its 30th listing anniversary. We touched on pfizer, but 67 cents beats 55. Yeah. Made a product revenue up 23. Before we do that lets get numbers from phil lebeau. Weve gotten ford. Now its gms turn. Carl, General Motors coming in weaker than expected for april auto sales, decline of 3. 5 , the estimate from ed munds was decline of 2. 3 . Little weaker, not a huge deal. Two pieces of information from the sales release that are worth noting. First of all gms day supply in terms of its inventory anywhere in the 60 to 70 day supply, its at 71 day supply. Not a huge inventory and gm is estimating that the sales pace for the month of april for the industry overall will be 17. 6 million. If thats correct, guys, that will alleviate a lot of the concerns we heard last month when the sales rate was 16 points. You put those two months together youre looking at a sales rate probably around 17. 3, 17. 35, somewhere in that range which is roughly in line with what people have been expecting this year. Phil, thank you very much for that. 17. 6 would be a number, jim, especially coming off of last year. Yeah. There was the piece the other day about the way to look at the Auto Companies as being trucks and autos. You know, i spent some time with the f150, sales are extraordinary, they make a huge amount of money on these, its not just the sales but its also the mix. The mix is very good. International Getting Better and better, i think, because again, the dollar getting so weak versus these currencies. Look, do you love the stocks . Every time the stock goes up theres some analyst that downgrades. Theyre inexpensive. Do i have a catalyst . Do i think this Time Next Year the comparisons going to get easy because of the dollar. Its a week of strategic alternatives. We talked about gnc yesterday. Aeropostale report now viogen spinning off hemophilia business. I think there was hope candidly that they would sell it. The hemophilia business is going to be very tough, i believe, because biomarin perhaps has a cure for hemophilia and there are not a lot of people in the study, but last week on mad money the last thing i would want to be in is hemophilia if they have a miracle cure. Not that dumb for biogen. You have to hope they have other things. Alzheimers its been a disappointment, sold a lot higher, kept some. Wish we hadnt. Maybe it comes back when people realize they have something alzheimers. What did you think of einhorn and yelp . Yelp is just i know the company. I know of course from the point of view of restaurant, and it is a company that cost a lot to advertise with. You really need to scale. Im going to say its a junkier site than it used to be. I think it got hurt by a google algorithm that made it so it was less looked up. I think its been a natural for yahoo to buy and yahoo never bought it. It would have terrific for yahoo. Sometimes you see these things, yahoo, just go buy it. You get that earnings stream. Now i feel apple should go buy it. Just kidding. Apple by the way, the apple if apple acts better its because the se might be better, the new small form factor. Yes. Because the kids in our country they want the power, but they dont like the size. Apparently its aspirational in china. It may surprise. My daughter said, hey, dad, i have the se, its fabulous. Of course meaning i just bought the se for her. You ever see those bills that your kids you dont have that yet. Wait until you get the family plan for everything and youre like, wow, my family is really fully invested in apple. David, id love to gel yot y take on einhorn at large especially when we get near the season delivering alpha this summer. Thats right. Good promo there, carl, well done on your part. I assume well hear a lot more about delivering alpha as we get closer to that in september. Listen, we all know hedge Fund Performances have been less than stellar certainly among bigger guys and guys that have longterm track records that are very impressive. I would point out something to keep in mind when we talk about longterm track records for some of these guys, they almost always seem to have done better when they were far smaller than when they got larger. Its been atypical that large funds have been able to outperform the market. Though not all of them have certainly lagged. Guys, i did want to get to side hedge funds, another area of course m a. We do have a deal this morning that at least is worth mentioning and taking a look at both companies, quintiles and merger of equals more or less a split board. I think ims will own 51. 8 of the company. You can see, jim, this is not being taken particularly well right now by the marketplace. 7. 2 billion in combined revenues. I think a decent number in terms of ebitda. And theyre talking about savings right off the bat as you might anticipate. Pardon me as i look at my phone to get some of the specifics. Thats not how you draw it up on paper, at least, when you imagine bringing an m. O. E. To the marketplace. No, tom pike has been on mad money, i dont know, since the company came public. I feel like ilt had a great quarter today and the stock would have been up nicely had they not done a deal. I like the combination from the point of view of being 30,000 feet that their soup to nuts for a drug company, but, david, this is remarkable hatred for this deal before people really think about it. Because tom pike is not going to want to ruin the stock. It was kind of an okay ipo and quarter after quarter after quarter theyve delivered. I dont know, its not like theyre just throwing away money, but people are saying, look, its just not a great combination. But i think the data of what sells combined with the Contract Research organization distinguishes quintiles as being more than phase three i thought it added value but right now im completely in the wrong. Wow. Geez. People hate it. Yeah. Well see. I mean, as weve said a lot of the same factors that brought us record numbers of deals and volume in 2015 had been in place. But one difference has been the reception in the marketplace. Whether it be to this merger of equals or even when were seeing as we more often do strategic player by yet another player has been less than stellar, jim. Certainly something to keep in mind because its something ceos see as well. Totally. Totally. Its just a, wow, i was looking at the quarter. Be up a lot if they hadnt done this. Lets not forget also oil is control and oils bad today. So oil sweep yeah. We busted through yesterdays lows. You worried about may at all . I know its been a session well, i just think we know that the day after Warren Buffett its been a markets up 0. 5 and gave that back quickly and here we go giving up the buffett rally. With that a lot of weak breath today. Lets get to bob pisani on the floor. Good morning, guys. China currency issues, a little bit of Central Bank Issues with the australians making some moves there. Australias market rallied overnight. If they had a cut there in the rates. I think the important thing is lets start with china and whats going on over there. The pmi numbers, both private as well as public ones, the government sponsored numbers were a bit below expectations. While hong kong the hang sang was weak, interesting china up on that news. Remember friday the president came out and basically talked up the stock market, talked they were promoting healthy developments of the stock market, they were closed yesterday so reopened to the upside and most people are attributing the president s talking up the markets to the reason were up today. I think the most important thing today is currencies. I dont normally get traders talking about the dollar index, but therapy overnight, stock traders, and were at a new 52week low in the dollar index. Thats playing a bit of havoc in europe here. You can see the german in fact all of the stock markets over in europe are down 1. 2 right now and germany a little more, little less spain and italy a little more. We also on top of the euro strength had some disappointing earnings with some really key players, particularly the banks. So Commerce Bank was a little disappointing. Ubs was a little disappointing. Commerzbank half what it was last year and not optimistic about full year outlook here. Lufthansa said they may have to cut capacity as well. Bmw looked pretty good. I think bmw is down because the overall market is down. They reaffirmed their targets for the full year and had record sales overall. So bmws numbers were not that bad. But here in the u. S. You can see the follow through on disappointment on banks in europe. Banks are down here, thats the s p bank etf, Consumer Discretionary weak and very defensive tone to the market as Health Care Stocks and utilities are leading. Banks by the way have done very well. I mean overall they weathered the earnings reports very well. Most of them are up in the mid Single Digits for the quarter. Bank of america, citi group, little bit of downside play here today, even regionals down 1 to 2 . Clorox, jim had a comment on that i completely agree with him, the reason clorox does so well in these environments is its boring and its slow and steady. Look at these earnings. Every year youre talking roughly 5, 6, 7 somewhere in that increases. They increase numbers here for 2016, so those numbers are going to go up even more. The analysts havent done that today. If you want to complain about clorox, its on the expensive side 24 times forward earnings but no one seems to mind as they keep increasing the numbers every single year. Right now the dow down 137 points giving away all the gains from yesterday. Carl, back to you. Thank you very much, bob pisani. Lets get to the bond pits. Rick santelli at the cme in chicago. Good morning, rick. Good morning, carl. You know, ive used this analogy before, but markets are really starting to move here. Now, its the roller coaster effect. Were getting a wild ride on the beginning of intraday type trading, but the realish shup is how it closes. Look at a oneweek of tens. Slipped back under 180, we havent closed under 180 in two weeks, two weeks ago we were around 178, 179 close. So you want to watch this. And it isnt just us. All fixed income markets have taken a drop in yields and a jump in price. Lots affects, of course what we see some rate cutting on the globe. So look at a oneweek of bunds. Boy, its hard to tell whos leading, but boy did they shave a quick ten basis points. Look at the tenyear gilt in the uk. Look at april 1st start to the japanese tenure, the jgb, it traded around minus 4 during the bank of japan meeting, now its going back negative into the teens. So we really need to pay attention. And all of that of course going on i told you these Foreign Exchange issues were going to push into the markets in a big way. Everybody wanted a weaker dollar, was going to be great. Be careful what you wish for. Look at oneweek of the dollar index. Look at one week of the dollar yen. Now 105 handle and its happened fast and furious. And of course as we get ever closer to 116 look at a oneweek of the euro versus the dollar. I know europe has its issues with lack of inflation because of course they concentrate more on talking about that than trying to figure out a way to actually find some reform and growth. Carl, back to you. Rick, thanks very much. Well come back to you a little later on. When we come back, aigs Peter Hancock shares of his company falling on the latest results. Standing by the post here at the nyse. In the meantime, dow down 126. S p down 15. Dont go away. Trolling for a gig with braindrone . Cant blame you. Its a drone you control with your brain, which controls your thumbs, which control this joystick. No, im actually over at the ge booth. Were creating the operating system for industry. Its called predix. Its gonna change the way the world works. Ok, im telling my brain to tell the drone to get you a copy of my resume. Umm, maybe keep your hands on the controller. Look out ohhhhhhhhhh. You know what, im just gonna email it to you. Yeah thats probably safer. Ok, cool. On top of your health . Ay ahh. Ahh. Cigna customers have plan choices and tools to take control. So theyre more engaged, with fewer high health risks and lower medical costs. Take control of your health at cigna dot com slash take control. Aig out with results this morning. The insurer falling short of expectations adjusted quarterly profit of 65 cents. Seeing shortfall on income from underwriting and investments. Aig ceo Peter Hancock is here with us onset in a first on cnbc interview along with david whos back in l. A. David, take it away. All right, thanks, carl. Ill start off. Peter, of course apologize for not being there in person, but jim and carl certainly have plenty of questions for you as well. Ill start off on hedge funds certainly because it does seem to be creating a lot of noise, so to speak, in your quarter. Youre reducing your exposure to hedge funds. Why is it taking so long . And why do you seemingly seem to be suffering such significant losses . Did you guys just pick a bunch of terrible hedge funds . Well, these hedge funds are about 11 billion in total at the end of last year out of a total investment portfolio of about 350 billion, so a relatively modest portion, but more volatile than the other more defensive investments. And over the last 20 years that weve been invested in this asset class have done really well for us. But its our belief Going Forward its going to be much less attractive. Thats why the end of december we announced and put notice in to redeem a large portion and will be exiting more than half our hedge fund investments. But it takes time to exit because of the lockup periods of these funds. So its not like a mutual fund where you get out overnight. But its part of our strategy to shift the risk of aig away from investment risk to our core competence, which is insurance risk. Because we are aiming to deploy our capital in the ways in which our clients value it most, which is dealing with difficult insurance risks. Right. And, peter to that point and to the larger picture of course at aig, in late january you announced a series of moves lets call it in terms of sort of reevaluating and reapportioning within the company itself. What evidence can you cite from the Current Quarter that shows youre making progress on the various goals that you laid out in late january . Recognizing its not that long ago. So we laid out a plan to improve the operating margin as measured by accident your loss ratio, the amount you pay in claims as a proportion of the premium you get in. Over the next two years to improve it from 66 to 60. And we were able to deliver 1. 7 points out of that 6point improvement in the First Quarter. So we think were off to a great start in the commercial underwriting margin improvement. And on the expense side were pleased weve been able to reduce general operating expenses by 5 year on year, part of our overall journey to remove about 1. 6 billion of gross expense over the next two years. And the final piece is doing it with more capital efficiency. And we were able to return 4 billion of capital to shareholders in the First Quarter. And that is out of our target of more than 25 billion over the next five years on top of the 12 we returned last year. So i think were making great progress on improving operating margins, improving capital efficiency and expenses. So im actually pleased with this First Quarter. Its a Good Foundation for the next few quarters. Well, peter, you continue to buy back stock, and i think we all kind of say thats terrific. 1. 4 billion shares down to 1. 15 billion shares in the last three years. Stocks done nothing. Why is that the right action . Sometimes the dogs wont eat the food. How about we give a dividend that is bigger make it more than 2. 3 and make it so aig is a company that id buy and put away . Because these buybacks are like are you kidding me, im getting tired of them. Well, we certainly think that dividend is an important part of our capital return story. We raised the dividend last year. We have a dividend yield thats sort of very much in the pack now, but we think that while our stock trades at a discount Intrinsic Value and also to book value, we think the buyback route is the right way for the time being. But were not wedded to it. And we certainly believe in the longterm sustainable earnings as we shift our mix of earnings to the more sustainable underwriting earnings as opposed to overreliance on investment income. Ive talked before, i totally get it. Your tangible book value it makes sense. Every dollar you buy is the right thing to do. But what im saying when i say the dogs wont eat it, its just like the market is not going to give you credit for that. So im trying to figure out what the market if you made an acquisition would they give you credit for it . A lot of companies are faced with this notion that its just gospel they should buy back stock. Its gospel. And yet it hasnt worked for a lot of companies. Well, i think there are a lot of shortterm factors that affect the stock price. And i think our job is really to deal with the fundamentals that will lead to longterm Sustainable Growth and repeatable earnings. And we believe our Intrinsic Value will also reflect that. So we focus on what we can control. And thats about doing for our clients what they value most. And investing in technology, investing in ananalytics, investing in people that can really be the consul at a timive risk experts that can help our clients avoid the kinds of risk that Insurance Companies are uniquely positioned to manage. Speaking of things you cant exactly control, i know you took a question on metlife and their success so far in nonbank status, what does it mean for you . Our status as a nonbank sifi so far has not affected in any way our ability to return our plans including returning capital. Were watching it closely. We reduce the leverage of the company and our exposure to derivatives and our exposure to variable annuities to levels which are very modest by any comparative measure. But we frankly until the rules are written dont view the sifi status as a major strategic question yet. But certainly this metlife ruling gives us interesting options down the road should it change. David. And, peter, finally, don paulson and representative of carl icahn of course slated to join the board of directors. How would you characterize their addition at this point . Is it going to create friction on that board, or do you think given your i would assume youve already been interacting with him that it will be a smooth transition . To be clear they havent joined the board yet. That will be at the next board meeting, but we certainly have stepped up the level of interaction and transparency. Im happy to say with a greater engagement were finding a lot of common ground. And i think with a large holding in aig stock, theyre totally aligned with whatever it takes to improve the longterm value of this company, which is all about improving operating margins, being more capital efficient and focusing this company where it can win. Peter, its good to have you. Welcome, thanks so much. Good to see you again. Peter hancock aig. Thank you. Dow now down 169. Well get stop trading with jim after a break. Hey, jesse. Who are you . Im vern, the orange money retirement rabbit from voya. Vern from voya . Yep, vern from voya. Why are you orange . Thats a little weird. Really . Thats the weird part in this scenario . Look, orange money represents the money you put away for retirement. Save a little here and there, and over time, your money could multiply. See . Ah, ok. So, why are you orange . Funny. See how voya can help you get organized at voya. Com. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive time for cramer and stop trading. If the market werent down what youd be seeing is a very big move in vf corp. I got to tell you north face is back. Columbia sports didnt deliver a bad number. Yesterday retail was doing well. We forgotten about the fact amazon was killing everybody. But today oils down. And when oils down, people just say the economy cant be good and they dont want to own apparel. But vf is having a much better quarter. Weissman really delivered. Crude back to 44. Whats on mad tonight . Well, weve got more tim cook. Remember, watch the new iteration im excited about, not focused on, t. J. Rodgers. We have to find out what the heck happened there. I think most people understand what you said and then blackhawk. Im tired of the disappointment. Just like with Peter Hancock, im getting tired of stocks going down. And i want to find out whats going on. Jim, we will see you tonight. What a week youve had already. Mad money tonight 6 00 p. M. Eastern. Dow down 160. Were back in a minute. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with sarah at post nine of the new york stock exchange. David faber joins us for day two of milken in l. A. Simon hobbs on assignment. Take a look at the markets, selling continues on this second trading day of may. Dows down 170. Oil not helping as it works its way back to 44. Were watching that. Our roadmap begins with our exclusive interview with apple ceo tim cook. What he told our very own jim cramer on mad money as he tries to ease investor worries, especially about that slowdown in china. Apples former ceo john sculley weighs in. Weak chie that data putting u. S. Markets in the red today. But are the worries overblown . Martin skre shkreli heading back to court today. Coming up later on, sprint posting wider than expected loss. Stock is up this morning and Marcelo Claure will join us in a few moments. Apple bouncing back after the tech giant reported its first ever quarterly decline in iphone sales last week. In our exclusive with our own jim cramer, tim cook defended the company against claims that their best days are behind them. I couldnt disagree more. Okay. Heres what i see, the smartphone market, eventually everyone in the world will have a smartphone, penetration today is in the 40s, long way to go. Emerging markets like india, weve got Great Innovation in the pipeline from new iphones that will incent you and other people that have iphones today to upgrade to new iphones. I will need Something Else . Because i dont think you will need Something Else. But i cant think of anything else i will need. But were going to give you things that you cant live without that you just dont know you need today. Okay. That has always been the objective of apple is to do things that really enrich peoples lives, that you look back on and you wonder how did i live without this. Tim cook also went onto discuss chinas impact on sales and shortterm strategy there. Heres what we see going on in china in the shortterm. In the shortterm the iphone upgrade rate affects all countries including china. The great thing is the switcher rate in china is huge. 40 up over the first half of last year, the first half of this year, this is huge. These are people switching from android smartphones to iphone in china. Economy clearly not as strong as it was a year ago. Softening. Currency weakening. And so youve got a confluence of items in there, some that are apple specific like the upgrade thing we talked about, some things that are more general that affect everyone. However, heres the way i look at it. Okay. Two years ago we had enormous sal sales. And last year we did even better, 80 better. So we grew 80 over the previous year. This year in Constant Currency in Mainland China we were down 7. So if you look at it on a twoyear basis, apple grew 70 in china. Its hard pressed to say those arent good results. Okay. Lets bring in dan rosen, former ceo at yahoo and just bought easy bib and john sculley, gentlemen, thanks for coming in. Thanks for having me. Theres this widening view, dan, whether or not they are a hardware maker and were beholden to the cycle or whether theyre going to make a killing in services down the road. What do you encourage people to believe . First of all theyre a phenomenal company and i think some of the numbers are amazing 10 billion in profit, 53 billion last year. Put all that aside the difficulty that i imagine is they really are a Hardware Company in terms of the phone. We dont we take the software for granted. Thats why. And the challenges in some of the countries they have to go into outside the u. S. No way in india is going to pay this amount of money for a phone. Its just not their economy. Its not the way it works. They dont pay a lot of money for these things. In china even though the middle class may be getting bigger, theyve got headwinds of just chinese culture. When i was at yahoo and we did the alibaba deal, we did it basically because we had failed seven times because the Chinese Government was not going to allow a u. S. Company to be successful. Companies like nike have been able to do it. Apple has been successful more than most, however local competitors, the price is particularly high. And there isnt a lot of reason to upgrade the phone anymore versus what it was when you first got it. So i just see headwinds it sound like youre agreeing with carl icahn who says hes out of the stock because he says hes worried about the Chinese Government letting them do business there. Well, i dont know that i would put myself in the same discussion with carl icahn, but what im saying is if you just think about the chinese market. Very few u. S. Companies have been successful over the longterm there without headwinds. I mean, they turned off their services. They turned off ibooks, they turned off itunes. Its not by accident they do it. If youre banking on china as a u. S. Company, it can happen and it has happened more for apple than almost anybody else, but its not going to be easy. Its going to be choppy. I think its another indication of it when the Chinese Government turned their stuff off. John cook argues that the middle classification is happening over the longterm at rates we dont even understand. Is he wrong . Well, what i think about, carl, is that Silicon Valley is often able to pull the genie out of the bottle. And i think while im not on the advisory apple, i have no inside information, im a big tim cook fan. And i believe that this new era of what is called bots, smart assistant messaging, it was discussed in some detail by Mark Zuckerberg when he talked about facebook m. Apples in the perfect position to take the strong position it has with apps, with app store, with itune songs, with siri and begin to introduce smart assistant messaging. Maybe it could be done even as soon as with the new iphone 7. The reality is that smart assistant messaging is a new pivot in the industry that is going to fundamentally add a new purpose for a great product like iphone or other smartphones. But its also going to be part of whatsapp. The question is whats the Younger Generation going to use as its Communications Products and its bots. Facebook users numbers are extraordinary. The Apple Services, i pay for the Apple Services and theyre very good. You dont pay for it because you want it, you pay for it because they dont give you enough storage, because you have too much video or other things from other people. Again, its not an innovation, its a necessary thing. So do you agree with the critics, dan, that apple has lost its innovation edge when they point to iterative iphone devices, new ones like the se . I would bet on apple to be the most Innovative Company on the planet, google, apple, facebook, these companies are extraordinary. What i would say is when i happen to agree, they want to give you things you didnt know you need and didnt know you wanted, its hard to know since we dont know what they are and we dont know we need them, we dont know how to make that bet yet. Right. I think we need to see them first. I think the wats was something that was neat and technologys awesome but its not that important. The other thing, john, you know, apple has always coveted that element of surprise. It goes back to one more thing. People love that drama. But then, you know, googles talking about 20 years out. Zuckerbergs talking about longterm strategic goals that are 20 years out. Thats not apples style. Does it need to be . Well, thats a really good question. I think that it was unfortunate for apple that Mark Zuckerberg came out with a very clear, exciting vision for facebook just two weeks ago what it was going to be by 2026. And apple itself never talks about it. I want to go back to the smart assistant messaging. Apple is in a place that can differentiate. Apple is not a company that invents technology, integrates it into the best quality experience. And i believe that they are still well poised to do far more with their services and they can do it relatively easily and relatively quickly if they seize the early momentum with bots. Bots are small subsystems that are little pieces of software that link together embedded apps. It was really started by we chat in china, facebook realized they were behind the curve. They introduced facebook m. Theyve got 800 million users, but the reality is apple is in a very good position to be able to pivot and to be able to integrate that into the next generation iphone. So im still very bullish on apple. So my question to you, john, is that a longterm story or shortterm story . Because views diverge on apple when youre talking about the timeframe. Well, i think that the iphone as tim cook has pointed out still has a long way to go. The challenge is that other peoples hardware like the new samsung 7 is a really good product in hardware. So apples got to show, you know, more and more reasons why its integration, its experience while it may not be inventing new technology that it can adapt technology. Remember back when everybody had an mp3 player and then apple reinvented the experience with the ipod and itunes . Apple can do that again, but i have no inside information but the sweet spot is around bots. Bots is the next really big thing. I like your specificity, john. If hes right, dan, whose expense is that . Search, google . No ones going to pay for a bot. Theyre going to be free from everybody. I dont know how it helps them financially. You might stick with siri as opposed to clicking through the internet. Sure, but if it becomes ubiquitous. This is always the concern, if it becomes ubiquitous, if you can talk into any device and its good, what do you care whose device youre talking into . If youre using whatsapp or Facebook Messenger and thats what a person is used to, are they going to switch necessarily so siri . I dont know. I think john is correct that apple can do more things than almost anybody can and has a proven history, i dont know if its a financial differentiator. But to your question, the one that concerns is google. Yeah, and the observation i would make is that apple doesnt have to be the first. It doesnt have to charge for bots. What apple has to do is its got to make the integrated experience of smart bots which is done better in an integrated way that people say this is what the iphone does thats distinctive in terms of the experience. Not the innovation of the technology, the experience. And they dont need to charge for it because people get their value in apple by the hardware. Its still a Hardware Company as we all know. Well, shorter term coming off of one of the worst losing streaks in 18 years its good to see both of you guys. Thank you so much talking apple today. Thank you, carl. Meantime, Martin Shkreli is back in court today, following criminal charges he defrauded investors. Our own meg terrell is in brooklyn in front of the federal courthouse with more. Havent seen any tweets this morning yet, meg. Reporter not this morning yet, sarah, but some tweets last night. Martin shkreli did arrive here at federal court in brooklyn for what is largely expected to be a procedural hearing. He was arrested in december and charged with seven counts of securities fraud as well as conspiracy to commit security fraud and conspiracy to commit wire fraud. Hes been out on a 5 million bail. None of these charges relate to his now infamous acquisition of a drug and raise the price. This has to do with the capital and health care as well as his previous biotech company. Essentially he defrauded investors in his hedge understood. As you mention no tweets this morning. There was one last night always taking to social media Martin Shkreli tweeting last night some people are traveling more than five hours to see him in court in the morning. Thanks for all the support, he says, it means a lot to me. So well be heading into the hearing right after this and bring you more headlines. Carl, back to you. Thank you very much, our meg tirriel. Shares of sprint on the rise after Company Reported a gain in postpaid net subs. Both more than verizon and at t for the first time on record. But ceo in hot water after calling its competitor inappropriate names, some argue. Coming up after the break, the ceo of sprint Marcelo Claure will join us. Dow down almost 200 points as the selling continues this week. Back in a moment. [vet] two yearly physicals down. Martha and mildred are good to go. Heres your invoice, ladies. A few stops later, and it looks like big ollie is on the mend. It might not seem that glamorous having an old pickup truck for an office. Or filling your days looking down the south end of a heifer, but. I wouldnt have it any other way. Look at that, i had my best month ever. And earned a shiny new office upgrade. I run on quickbooks. Thats how i own it. Man 1 man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Welcome back to squawk on the street. Im david faber in l. A. At the milken institute. Sprint reported First Quarter and full year 2015 results for the Fourth Quarter the Company Reported net operating revenue of 8. 1 billion, net income of 8 million and adjusted ebitda of 2. 2 billion. Joining us first on cnbc is sprints president and ceo Marcelo Claure. He joins us from kansas. Nice to have you as always, mr. Claure. Let me start with the Fourth Quarter of course. Your cost cutting was said to be by many impressive and led to an ebitda number that was above those who followed the company had anticipated. But there are as always questions. Let me start with one from citi this morning and their note. They questioned whether or not sprint is moving to cut costs for efficiency or migrating to cut costs to pursue survival and is willing to reduce its top line growth aspirations as a result. Whats your answer . No, not at all. I mean, when we said this from the beginning that in order for us to be profitable we had to take some extreme cost cutting. But this cost cutting has proven to be very positive. I mean, i think the best way to look at this is for the first time in over nine years we generate positive operating income of 310 million. To put matters clearly, sprint has not generated positive operating income in the last nine years. And were able to do this. Were not cutting costs for survival, were cutting costs to be a little more efficient. At the same time weve also announced that we plan to open thousands of more new stores. And we continue to invest in our network, so not at all interest of cutting costs. It was a company that in my opinion had too much costs and finally were starting to become a more lean competitor and one that i think is moving in the right direction in the transformation that we set up for sprint. Right, but given the constraints that youre under and youre obviously focused on cutting costs. Again, i would reference the citi note this morning. They note that network cap x of 3 billion for fiscal year 16, which will end in march of 17, is below the perceptions at least that they had of roughly 5 billion, and raises questions over the ability to adequately invest in the network, differentiate Service Performance and of course most importantly attract customers. Can you do everything you need to do to get bigger in terms of customers, mr. Claure, while you obviously are so focused on cutting costs . So lets talk about customers. I mean, for the first time in sprints history in the Fourth Quarter we beat both at t and verizon in that enhancing customers. If you look at the power and size of both at t and verizon, the fact we were able to surpass them for the first time in history theyll see people are coming to sprint and theyre liking what theyre seeing in terms of the performance and network and services were offering them. Spending 3 billion, yes, we are spending 3 billion in our network. We know how to do it more efficient than anybody else. And the reason why were going to be able to offer a competitive differentiating advantage is we have more spectrum than any other carrier in the world. We have over 200 megahertz of spectrum and therefore spectrum means more capacity and more speed. If you look at the latest neilson rankings, Sprint Network is the fastest in america, not us saying but that is neilson saying we like that for the fact for the first time in history we beat at t and verizon in attracting new customers. And we do plan to continue to invest in order to enhance the experience we offer to sprint customers. Right, but you know, 3 billion in network cap x, i mean, its a large number, but given the environment youre operating in it may not be that large. You just said you can be more efficient in spending than the other carriers, why . What is it that you know that they dont . No, what happens is in the last two years we did our big share of spending. We did what was called a network vision, repair and replace. The next phase were doing is were basically dense fiing our network and we plan to add tens of thousands of structures throughout the country in order for us to continually intensify our network. We can do that with spending 3 billion. Our network is performing better than ever. Were spending less capital than we had before. I guess when youre a company that have less money youre taught to be a lot more efficient and not necessarily outsource employment of network, were doing it ourselves and more efficient than weve ever done before. Right. I think the important thing is i think the best way to measure us is churn. Our customers coming are staying. If you follow earnings we basically reported the lowest churn in sprints history. Were deploying network more efficient, our customers are staying and were adding new customers. Although i see some notes here from jeffreys its all about expectations. Somewhere anticipating a lot larger number, did you miss internally in what youd hoped to add in terms of postpaid . No, not at all. I mean, the fact we were three consecutive quarters of being net positive and the fact at t and verizon were negative, we think we did quite well. Look at spent over competitors and we beat them both, im very happy where we are today. Got to put things in perspective, a year ago sprint was losie ining 1. 5 million han customers. We turned around and added a difference of 2 million customers. Im thrilled and all my employees are happy, were able to beat our own internal expectations and we plan to continue to grow this year. Yeah, and the stock of course was responding positively. Finally though, mr. Claure, i mean, it is very tough competition. The one name you didnt mention was tmobile. We had john legere on last week throwing bombs, dumb and dumber and had different names for you. Do they represent a competitive challenge that youre able to really take on . I think mobile has done an exceptional job, to be quite honest they have proven this can be done. They are doing a really good job of attracting new customers. Weve surpassed at t and verizon, tmobile is the next one. Theyre in our line of sight. And the one were going after now is t mobile. Now, to give full credit theyve done an outstanding job of finding customers. And now theyre number one in adds, were number two, verizon number three and at t number four. So now were going to try to go beat tmobile. Thats a new goal we have set up for our team. We always appreciate you coming on and updating us on your progress. Marcelo claure, the ceo of sprint, as always, appreciate youre joining us. Thank you, david. All right, david, thanks. See you in a bit. All eyes on indiana. The primary today, what to watch next, plus were keeping our eye on this market slide this morning. Stocks are giving back yesterdays gains and even more with the dow now down 180 points. The s p 500 dough a percent is looking at its worst day since early april. Well be right back. Bend me shape me, any way you want me 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. Here at the Td Ameritrade 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. E. T. Phone home. [ soft music ] when you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Nchs worst day for the s p since april 7th as its down to 2061. In the midst of all that look particularly hard at twitter today. Down 3 . This is a new alltime low. Fell below 14 earlier this morning. Currently at 14. 02. Indiana primaries are underway. Hillary clinton and donald trump leading the polls. Lets send it out to john harwood on what to expect. What will you be watching for today, john . Todays the day donald trump hopes he can finally break the back of his opposition for the republican nomination. He campaigned in inn ip last night as feisty and confident as ever. But ted cruz is still insisting indiana voters can help him and other republicans keep donald trump from getting the 1237 delegates he needs. The entire country is depending on the state of india indiana. I think hes crazy. Honestly, i think hes crazy. Lying ted does not have the temperament to do this. Hes choking like a dog because hes losing so badly. We have to put him away tomorrow. Folks, we got to get out and vote. Heres what the polls say about the chances of putting him away tomorrow. The nbc news the wall street journal marist poll showed donald trump ahead 49 to 34 over ted cruz. That is a comfortable margin. Look at the National Numbers from the nbc News Survey Monkey poll, they show donald trump is extending his lead that suggests the opposition is collapsing. Hes at 56 nationally and then look on the democratic side Hillary Clinton with a narrow lead in indiana. Shes got a 14point lead nationally over bernie sanders. Well wait for the votes tonight like your november matchup is going to be donald trump and Hillary Clinton and that, guys, is going to be one nasty campaign. And something were going to talk a lot more about in the days and weeks to come. John, thanks so much. Our john harwood. Some weak china data worrying investors today, as you can probably tell. Meanwhile, the imf warning of a bumpy economic rebalancing in that country. Were going to talk twith the dw down 160. Why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card good morning everyone. Im sue herera. Here is your cnbc news update at this hour. The speaker of the Iraqi Parliament meeting with the leader from the u. S. Delegation meeting days after the Iraqi Parliament stormed by thousands of followers of the influential shia cleric. J and j ordered to pay 55 million after a woman says the companys talc powder led to her cancer. 50 million in impugntive damages. Jnj says it will appeal. A baby rescued from a building that collapsed in nairobi, kenya, three and a half days ago. The baby had no physical injuries, amazingly, and being treated for dehydration. The death toll from the collapsed building now stands at 23 with 93 people still missing. The hip hop musical hamilton has been nominated for a record 16 tony awards. The show was singled out in every category of the theater making. In a few categories performers from the show will faceoff against another, and the awards will be broadcast on june 12th. Hottest ticket in town. Thats the cnbc news update this hour. Back to you guys downtown. Oh, yes. Worth the eightmonth wait i had to wait for getting tickets to see it. Im on that list too. Arent we all. Sue, thank you. Sure. Lets take a check on markets. Were monitoring et selloff for you stocks in the red following weak data in china, commodities under pressure as well as the u. S. Dollar. How should investors be weighing all of these concerns . Here with us at post nine is bonnie baja. Great to see you again. Good to see you too. So what is this all about . Is this the yens fault . You know, its the yens fault. Its chinas fault. The manufacturing numbers came out a little weaker than expected. And, again, i think the markets were so surprised by the announcement of negative rate policy in january which theyve had to backtrack from, its really bucked conventional wisdom. You would have thought that the currency would have taken a nose dive. Its rallied as has their bond market. So were in this interesting time in the markets where you really cant predict what the outcomes are going to be. Goldman has a good note on that today. They say if you really want to have unconventional policy work, you have to convince the markets your tenacity, right . And asking for patience is not the way to do that. Well, asking people to destroy capital purposefully is not the way to do that either. I mean, come on. Its not a tenable situation. And perversely look, quantitative easing, negative rates, negative rates is the ultimate attempt at, you know, societal manipulation. And in japan i think the Savings Rates actually gone up because theres such uncertainty about what life is like with this kind of economic policy. I mean, the way it sort of resonates here is it feeds into broader concerns that Central Banks just are out of ammunition and the more they do the more they just make things worse. Is that really whats going on here . Well, i dont know if making things worse would be the way i would put it, but i think its its making Capital Markets a lot more disturbed. I mean, look, back in the good old days the value of an asset was based on the cash flows it would produce. Now asset values are being determined by Central Banks. Thats probably not what people had in mind. What does it mean for this central bank . Weve got a jobs report on friday. Feds already signalled its pretty cautious here. So does that matter, the report . You know, its interesting because the fed as you know has a dual mandate price stability and full employment. And what is also sort of coming into focus in the markets is gdp growth and jobs growth have really been at odds. If you just look at jobs growth, everything is great. But that half a percent gdp print in the First Quarter was abysmal. At this point i really have to question if the bureau of labor statistics should be rethinking how they calculate that jobs report. Is it catching the gig economy . Is it catching the fact that, you know, millennial dont necessarily have 9 00 to 5 00 jobs anymore or even one parttime job. Why is it the jobs number faulty and not the gdp number . Or are they both troublesome . Well, they both could be trouble, but i think i have more confidence in the gdp number just because its born out by gdp across the globe. I mean, the eu just lowered their growth rate again this morning. Its more in sync, and its more easily explainable by the demographic profiles in the developed world and other factors. A lot of bulls at least on equities are taking some solace out of the dollar at a 15month low today. Right. Is that going to help add multinationals here . What does it mean for us . Well, certainly its going to help a lot of the s p 500 companies, especially food and beverage, consumer products. So many of their sales occur overseas. And when the dollar was stronger last year at times their earnings really suffered. So given all of these concerns and your view is similar to your bosss view with the doom and gloom and the fact Central Banks are going to be on hold. Right. What are you actually doing about it . Are you guys buying treasuries . We have added to our treasury position. Were being much more conservative. We have cut back our risk assets in high yield Corporate Bonds and bank loans. Were very defensive at this point. Are you buying apple bonds . Are they still the Gold Standard given the stock market selloff of apple . The guys on the desk are going to love this. We had a debate about this last week. Apple may have seen its peak. The stock or the bonds . The bonds. I mean, apple stock is not my daily work, the bonds have been a good performer but certainly trees dont grow to the sky. Always good to have you here. Bo bonnie baha. Meg tirrell has breaking news on the mart ii iin shkreli hearing. A superseding indictment of mr. Shkreli and lawyer saying they essentially may add more charges to the seven counts theyve already charged him with of securities fraud and other things. These new charges may include more counts of securities fraud although they say if theyre going to file them, they will probably do it within the next month. They have also said theyve scheduled the next Court Appearance for june 6th. And if they have filed these new charges by then, that will be an arraignment. Otherwise just another status hearing. Theyve already turned over a lot of the evidence affiliated with this. So now we are just waiting to hear whether there will actually be more charges against Martin Shkreli here, guys. Any minute now they should be coming out of the brooklyn courthouse behind me. Back to you. All right. Well continue to check back in with you. Meg, thanks for the update. At the same time we have toyota auto sales coming out. Lets send it to phil lebeau in chicago. Phil. Sarah, a little lower than expected from toyota last month. Increase in sales of 3. 8 . The edmunds. Com estimate was increase of 4. 8 . We have all the major automakers in now. What were waiting on in the next few hours the sales rate for the month of april. Most believe it will be in the range between 17. 1 and 17. 3 million though there are a few saying it could be even higher than that. Back to you. All right. A series of disappointments today. Phil, thank you very much. When we come back after the break, more of jims interview with apples tim cook telling cnbc the companys always looking to buy more companies. Who may be right for acquisition . Well talk about that with one of our sharks in just a moment. Dows down 188. Dont go away. Apple shares have taken a beating, but do the charts say it may be close to a buying opportunity . That and more on tradingnation. Cnbc. Com. More squawk on the street coming right up. politely wait, wait, wait you cant put it in like. That, you have to rinse it first bakedon . Its never gonna work. Alfredo. Dish issues . Cascade platinum. Powers. Through. Your toughest stuckon food. So let your dishwasher be the dishwasher. E . Told you it would work. Cascade. Apple ceo tim cook joining cnbcs mad money last night. Heres what he had to say about what their future acquisitions look like . Could it come in services . Yes, and weve bought some companies to help us in services. But it can also come in a number of other areas. Were fairly aquiztive. Right. We havent acquired a very Large Company yet. But weve acquired a lot of companies. We generally acquire a Company Every three to four weeks on average. And so its a rare month that theres not a company being bought. We typically buy for technology and really great people. Right. But, you know, well see. Were always looking. Robert is the ca shark tank host. Your industry is really cyber security. What kind of companies are right for awick sigcquisitions for ap . I think youll see get into connected companies for the home, i think were going to see an apple car, i was at the pebble beach concourse this year. I met a lot of designers and theyre working with apple. So i think were going to see a lot of different consumer products. Well, apple has certainly been acquisition. I think you might see that change. It costs about a billion dollars to produce a new vehicle today. Who else in the world has that kind of money sitting around except apple . Does it matter to you whether or not they are vertical in cars, whether they make the whole thing or whether theyre a partner with somebody else, a big three i dont see them partnering. I think apple is a dominant brand and i think they want to push their brand in the consumer space. The magic of apple is the brand. And i think whatever they do they wapt to control that. Just on general technology and m a, i mean, we were talking about the nasdaq now down eight of the last nine sessions. Misfire on earnings. Do you think this whole tech slump is going to make the environment for m a more attractive where bigger Cash Rich Companies like apple are going to take advantage . Absolutely. I mean, we see this right now. Youre going to see a lot of money from the east. Youre going to see people from europe. I mean, the Tech Companies are downright now, but the earnings are going to get better, i believe, over the next couple of quarters. And the Enterprise Market is still very strong both for enterprise and for security. I was talking to jon fortt about whats hot, where the money is going. And he was saying that there is this narrative right now that its all about cloud, and not so much about devices. Well, look what happened with amazon. Amazon for the first time made well, i guess the Second Quarter made some money. Aws is the biggest cloud company. They have more capacity than the other three companies combined. And youre going to see that continue. The cloud is everything. The cloud is like a bunny. You leave it alone, it multiplies sfwl theres like ten bunnies. A lot of people expect apple to do something in health. I mean, they already have some capability with the watch. Right. But the arguments been made thats just a taste of whats coming. Do you think thats true . I do. I think the iwatch is an amazing device. And i think it connects you to your records, it connects you to data in a way you couldnt imagine before. And to your point with the cloud, people are going to want to access their medical records. I want to go to any doctor and i want to be able to access my records safely, securely and on a consumer device. Im looking at some data sort of on a related note from Dow Jones Industrial average venture source which recently showed funding for startups broadly fell 25 from q4, largest drop since the dot com bust. Are you seeing that kind of sluggish activity . We are. But its interesting, its not that theres a lack of money. When the internet buzz happened its because people didnt have anymore money to invest, the big funds. Today the problem is theres no exit plan. So you have all these funds whove been selling to each other driving the valuations up. How do they get out of the market . Look at secure works went public recently. The stocks gone nowhere. So wheres the exit plan for a lot of these companies . So what changes that . I think you need the markets to come back. I think were just in a very negative, pessimistic view. The earnings are down. I think its going to take a little bit of time. We need some of these Tech Companies to go public. The young entrepreneurs today dont dream about this. I mean, when i was younger i dreamt about taking a company public. Today people dont have that dream anymore. Yeah. I mean, ken langon would argue going public now was not what it was like when you and i were young, right . Regulatory hurdles, Capital Markets, media works a lot different now. Its harder to be a Public Company. Its hard to be a Public Company because of compliance issues. One of the programs we work with is we work with a Company Called deluxe corporation. Were giving away half a Million Dollars to two towns that are finalists. People can go online and they can vote for this, but that is the spirit of entrepreneurism in america is these little towns. Going public is a lot of work today. Im glad you brought up the spirit of entrepreneurism. It is Small Business week, which is another reason were happy to talk to you. Yeah. But we are getting word theres a lot of pessimism. The Small Business index, which weve been citing the nfib at a twomonth low. There are concerns about the election and some of the election policies out there on taxes and health care. Whats your read of it . I think its temporary. This is still the best time in history to start a business. And the only security you have in life is yourself. You know, i would say to people the best investment you can make is actually not the stock market, its in your own education, in yourself. And starting a business its the easiest and best time to do that. And were seeing that across america. Were seeing that in little towns where people want to start. They want to create a great future for themselves. The election isnt helping things. Theres a lot of confusion with the election. I think thats really hurting the market. Its got to be adding to the uncertainty on hiring and spending and all sorts of plans. Who knows whats going to happen with taxes, who knows whats going to happen with trump, with hillary. Uncertainty is bad for Small Business. Robert, well leave it there. Thank you. Thank you very much. Good to see you. We were just talking about tim cook, of course. It was a starstudded event last night at the met gala where apple was a big sponsor. Cook joined by the cochair of the night. The theme was fashion in an age of technology and no shortage of tech execs in attendance. Elon musk seen here. And uber Ceo Travis Kalanick who arrived at the event of course in an uber. Along with all the stars, taylor swift, katy perry, madonna, emma watson. Youre forgetting the best dressed. Claire danes lighting up. If the theme was fashion in technology, that dress killed it. Taylor swift did pretty well as well. Everything was silver and everything was metallic, which is i guess how the fashion world interprets technology. Coming up on squawk alley, the cohead of Investment Banking at Goldman Sachs David Solomon an interview you certainly do not want to miss. Lets check on the dow as we head to break still down 1 or 180 points. Well be right back. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive lets get to the cme group with Rick Santelli and the san tell ly exchange. Hello, rick. Hi, carl. Id like to welcome in my guest jim paulsen, and thank you for taking the time this morning. You bet, rick. Thanks for having me. And it is fair to say, jim, you are bullish, and write some good pieces, and some things to worry about for the most thing bullish, and you are believing another stab at the highs on the eq equity side. So my question is, is the weaker dollar one of the big reason, and have we gotten too much of what we wished for and it seems that the fwliter associated with the reare bound of the stocks in january which is many ways was a weaker dollar related to tissues, be all of the sudden, it does not seem to be working. Thoughts . Well, i think that what is interesting to me, rick, about the dollar is that most people look at what is driving it is the policy differential between the United States and everywhere else, and i believe it is about the growth differential, and so you have have to explain why is the dollar coming off right now . It is certainly not that the policy differential is getting closure, but it is suggesting that while the u. S. Has been weakening a little bit, the rest of the world is picking up. Ultimately i think that is a good thing to the extent that we will get better data abroad, even, and i think that the u. S. Will pick back up again, too, we will get excited if all of the economic boats from china and europe and here lift at the same time, it could cause a stock market to make a new highs before the year is out. I real areally think that tlar is scaring the investors, but i am not sure that the dollar should be. And i agree with everything that you have said. So my next question is that when the dollar was strong, the multi nationals were squawking and the weather excuse for many quarters. And now, isnt that going to be the case for europe or for japan. In other words, if they are getting some data that is better, and i agree in europe particularly in spain not so much japan, but arent their currencies strengthening going to hurt the export business come rain or come shine, it is something that seems to be a lot more impervious to various dynamics where maybe the uptick in the general economy may be due to the glitter waved around by mario draghi and company. Well, ultimately, it is, and a stronger euro and stronger yen is going to have a influence down the road, but the thing that is driving those immediately is better economic growth. So we could have a period where there is better growth in the international regions, and ultimately as we get into the later this year, and next year, we may see the negative impact on the economies of the strong yen and the strong euro for example, but right now, if we are getting evidence, rick of the global synchronized pop in growth, i think that you will bring the investors back into the market, and get a sense that the bull is resuming. I am not sure that it is, but we may peak out and have another selloff before the year is out, and get excited and head up to 2200 on the s p 500. Jim, thank you for your observations. Always interesting. Sarah, back to you. Always interesting. Thank you, rick. Now, over the jon fortt for what is coming up on squawk alley. Good morning, jon. Of course, we will talk apple after jims interview with tim cook yesterday, and that stock defied the market drop, and the nasdaq drop this morning. Also, David Solomon the cohead of Investment Banking at Goldman Sachs to talk about the market, and finally the major indices down, and the dow almost 200 points, and the s p is down more than a percent, and what is driving that . All of that and more coming up on squawk alley. But you see, with the help of her Raymond James financial advisor, she had planned for every eventuality. Which meant she continued to have the means to live on. Even at the ripe old age of 187. Life well planned. See what a Raymond James advisor can do for you. Freshly made in the japanese tokyosttradition. Noodles. When you cook with incredible ingredients. You make incredible meals. Get your first two meals free at blueapron. Com cook. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Adp Employment Data and where the jobs are, and will seasonal hires add to the strength of the nations economic picture . Squawk box tomorrow on cnbc. Good morning it is 8 00 a. M. In apple headquarters in couper tee cupertino, and 11 00 a. M. On squawk alley. Hamilton, america sings for you do they know what you overcame do they know that you will overcame a world and the world will never be the same our congratulations to hamilt hamilton a record 16 tony nominations today. Good tuesday morning. Welcome to squawk alley, and kayla is out, but jon fortt and myself at post 9 with the dow down 400 point, and so later we will talk to jay conn calcaneus and more about why this market is moving and why. Over to you, bob. Well, the sectors down here, and the sector leaderships are the ones getting hit. And the big movers are energy, financial, mater a