Transcripts For CNBC Squawk Alley 20160414 : vimarsana.com

Good morning its 8 00 a. M. In Los Angeles California and its 11 00 a. M. On wall street and squawk alley is live. Welcome to squawk alley for a thursday. John fort is out today but kayla and myself at post 9 joined by mike santolli. Good morning, guys. Its a little trepidation ahead of china gdp tonight. The season is heating up and bank of america in the green after earnings and revenue Beat Estimates but theyre down 18 on concerns about the Global Economy and topping expectations. Delta, in fact all the airlines seeing nice after profits Beat Estimates. Theyre impacted by a stronger dollar but their fuel costs are coming way in. After 14 in two months will earnings will seen as good enough . The early evidence is maybe. Honestly it seems like we can at least support these levels if oil cooperates and all the other things hold in place. It does seem as if i think the reaction to the banks yesterday shows you that people were leaning too hard against that group. Didnt own enough of them. They had a little bit of a buying panic. In that context the fact that bank of america can add into those gains yesterday is probably a good thing. Outside of the banks im looking toward next week the industrials. Its been a really key sector. Quitely out performing after a bad 2015. A lot of the chart readers are saying this is the group right now. Its a china play and everything all in one. The question is whether the market was not giving the banks enough credit because it was the most beaten down sector. In terms of the industrials theyre not showing evidence that its for the better and really its the china panic play so they got way beaten down in february and january and by the way, since january 25th, 3m came out with a descent outlook. Thats the moment the industrials sparked to the upside. You point to some of them being used as a source of funds to make it more aggressive in growth and tech. Are you seeing that . It was the story yesterday. Its really early days if thats going to happen but yesterday you did see the staples and utilities and telecoms down. They are the ones that lead this entire yesterday actually. Really the only strong points. They did start to buy the tech stocks yesterday. Small caps way out performed. Also on a very shortterm basis, speculative indications that the market started to run hot yesterday and today in terms of grabbing for upside plays in terms of call options but its only recently. S p still hasnt been able to pierce 2100 but the dow is just 80 points away from 18,000. Psychologically this time around does it matter . I think the way it matters is these have been levels that have felt smart to sell before so its not so much that hey were here. 18,000. Lets have a sense of achievement. Its much more about the smart may was to fade the market when it got to this point. Last year in 2100 the market crossed it 55 separate days. Its more than one out of every three or four trading days. The market toggled back and forth around that line. Havent been able to get much more back to date. Theres some apparel that might have been brought back. Hats, shirts, the like if we get there. Well hear about it on social but are you seeing anything different about this environment other than those other 50 some odd days . The difference is i think theres a little more skepticism. The starkest difference is today verses the autumn rally of last year. We came off the september lows and you got to 2100 in early november and then i think all the talk was year end rally, seasonal effects are in our favor and you dont have the same talk on this back toward 2100. Stick around. Thats a net positive. People understand that. Youre not going anywhere. A lot more to get to this hour. The cfo will be joining closing bell in a first on cnbc interview. Tune into that. Another black eye according to the journal federal regulators could try to ban the Companies Founder from the business for at least two years. Meg was in the city with that story. Thats right in another big scoop for the wall street journal he uncovered a level that the centers for medicare and Medicaid Service had sent back in march essentially saying this on going audit of their laboratory their answers were insufficient saying essential through laboratorys allegation of compliance was not credible and evidence was not acceptable. With this comes the threat of sanctions including a potential ban of the founder. Now the company had ten days to respond to this. They said in a Statement Last night they did respond within that 10 daytime frame. They said we received the letter and we have responded. Theranos has not received any sanctions at this time. If they do well work with cms to address all of their concerns. This is hypothetical right now but the sanctions on the table if cms deems their response insufficient again include revoking the certification of that newark, california laboratory. With that comes the prohibition from owning and operating in this industry for two years. That would effect the arizona laboratory which does 90 of its business. So this is what were talking about when were talking about regulators threatening a ban from the industry. So the next step here is to see how cms responds to what they got back from theranos. Fascinating story that just continues to evolve. One story involves the make up of the board which on paper looked like the most impressive board you have seen. Its most of what you heard about the company. You havent heard a lot about what it has meant for the valuation of the company and all the rest of it. Obviously just fascinating and also the flip side of the whole story coming in which is somehow, this individual had created this kind of new way despite the fact that being a very crowded area for very large companies. You hear about these start ups being essentially bulls in a china shop and some Companies Argue its a freshman mistake. Its being the Industry Standard and doing it in a certain way and then well figure it out later and thats the model. The next chapter here will be profiling start ups trying to play in this space. Theyre going to get scrutiny. Thats a really great point. I have been hearing from people in the Health Care Industry that theyre very frustrated by this situation and limits the ability to get funding. What a lot of people say mike was making a really fantastic point is ask questions and get it later and that doesnt work with this industry and you saw it with 23 and 3 getting slapped down and saying we understand that regular withdrew lay tos are a much more important part of this industry than they are in other Silicon Valley start ups . Does it stifle innovation on a net basis . Well, funding is limited to other start ups that have great ideas. That could hinder it and thats what folks in the industry are worried about. Everybody is watching to see what he reports next. Mike is going to stick around a little bit longer. Meanwhile t markets have been hanging in there just above the flat line. The s p is up by 0. 3 right now. The dow is up by just a little bit more than that. 17 points. Gains by the dow s p and nasdaq if they hold on to them will be their third straight. That hasnt happened in a month. Nasdaq has just gone negative. Shares of seagate falling after the company cut the outbreak because of weaker demand. That stock down close to 20 this morning. Carl quite a move for a stock that many had been betting on in recent months. When we come back, a cnbc exclusive interview with former fed chair alan greenspan. His take on Interest Rates inversions and a lot more. Muscle tech earnings quickly approaching. Well talk to the top analyst about why facebook is a pretty safe bet this quarter and issuing an ultimatum to johnny manziel. Get treatment or start looking for a new agent. He is going to join us live when squawk alley continues. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. And she joins us throughout the morning and meeting with former fed chairman alan greenspan. I am here with chairman greenspan. Always a pleasure. Nice to meet you. They also found u. S. Growth forecast for this year. You have a theory on whats holding back the u. S. Economy. What is it . I think you first have to look at where the problems are. And they immediately come out when you begin to examine productivity. Going across the International Spectrum with remarkably few exceptions every single major country, developed country and a number of developing countries are sagging badly and the last five years the growth rate has been 5. 5 . And depending on how you measure it and thats basically true of everybody. I listed an analysis of all the countries. I picked up 2thirds out of productive growth rate of less than 1 over the past five years. Is this related to the fact that Corporate Investment has been low . Wages have been too low. Companies are not spending enough. Profits are such a decline for the Third Quarter in a row. Whats causing all of that . Its basically its basically the issue of corporate profitability as its seen in the future and as a result what youre seeing is Corporate Investment has come down very significantly as a percent of gdp everywhere and when Corporate Investment falls and productive sags the question is why did Corporate Investment decline . Well if you look at it in the bookkeeping sense, its because gross domestic savings everywhere across the spectrum, political spectrum has been severely undercut in virtually every single country. We need to cut entitlements. The demographics, the populations are aging. Japans numbers go. So theres a political problem. Its fundamentally a political problem. Its a political problem. Most things are political problems. This is a very difficult problem to solve. I know you leave the political coverage to your wife but who is going to solve this problem . My wife. Are any other candidates talking seriously . We could have solved the problem in the United States a number of years ago. Thats a very clever way of controlling the deficit which is what the problem ultimately is and with bipartisan support. Meantime its all on Monetary Policy to do the dirty work. Its done everything it can theyre not helping that much and since that determines whether or not youre getting an effect of what has happened that obviously is done what you expect it to do and bring longterm rates down and price earnings ratio in the equity markets go up and no real impact on lending and the economy is picking up. Its the net positive. Its best understood in the context of the fact that there are certain currencies that are much stronger. Ten year italian euro note yield is significantly above where switzerland would be. Now that spread will stay there irrespective of the overall interest rate. All of a sudden youre going to keep that space and rates are going to turn negative so the demand exceeds and it is negative Interest Rates. So this is dangerous. Is that your view . Financial intermediaries require positive Interest Rates. I wouldnt blame it on the negative Interest Rates. It got us to where we are. You will always get negative Interest Rates if there is a spread. Now the spread exists because of the quality and security is difficult. You cant change that and ultimately you solve negative Interest Rates when people decide that theyre getting tired of foregoing currency and stick it in the fault. Which we are saying very quickly in the moment that we have left, i want to ask you about oil because you have been thinking a lot about the impact of the economy and deflationary pressures. Has oil bottomed . Its too soon to tell. At the moment we have about 2 to 2. 5 Million Barrels a day global surplus its caused a pretty large number across the board of producers who cannot function at those levels. What is occurring is were seeing a gradual decline in the United States down about 600 barrels a day. We don know if thats enough. And its going to go lower because most of them are still able to get cash flow but they cant meet their overhead costs new drilling and new expansion will not occur because the price is too low. You need about 60 barrel in the United States to really rejuvena rejuvenate shale. I know you have been thinking a lot about this. Thank you for joining us here at the headquaters. Back to you guys on squawk alley. Thanks so much. Sarah in d. C. Mike seems to be saying that the problem with growth in this country is a political problem. Is that impassable . A political problem because of a failure to have a longterm solution on, you know, fiscal issues comes out in favor of the frame work and makes all kinds of sense. I still think it doesnt get to why everyone is in this condition. You also talked about the productive gap which to me is striking because he was credited and productive is growing adjusted to that. Is it more dem graphics or something else. Wed like to have that problem now. What i thought was interesting was and its broken and because of that savings go up and investments come down and you wind up with a negative spiral. Negative Interest Rates thats the back word impact of negative rates. What is the response to people that have money . You save more. Thats not exactly what theyre trying to get at. Monetary policy has done everything it can. Not helping very much it says. Thanks as always. Mike santonlli joining us today. Facebook snagging a high profile google employee. Well have the details when we come back. 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The hardware part of the moon shot division. She will do something similar on facebook working on experimental hardware. Dugan was the director. Not sure if it signals facebook getting more into hardware. Of course oculus was first there but she will be working on something called building 8. Yes. Interesting how corporate defections have been a big story this week. Go pro managing to steal talent from apple and that resulted in a big game yesterday and nothing on the level, much more than facebook is getting today. These arent necessarily 8k level employees where you get a filing with their salary but curiosity does it. We love intrigue. Thats for sure. Meanwhile, some intrigue in europe as their session is going to end in about 2. 5 minutes. Simon is back at post 9 to wrap that up. A relatively flat session. You have an out performance from italy because the banks are still moving higher but an underperformance from the United Kingdom which is flat overall. Bank of england tint move on Interest Rates today but theres already softness in the u. K. Economy from what is happening in advance of the vote to leave the European Union and in particular it says the Capital Expenditure and commercial property transactions are being delayed so a warning there from the bank of england. For the record the deflation we got has been revised overall and the Big Companies at the start of earnings season in europe. The likes of uni lever are suggesting their volume growth in europe has been erased by declining prices. There you see the main movers today, burberry warning about soft demand in the future. Its again talking about softness in advance of the brexit vote on june 23. Thats partly because theres a surge working its way out of the system as a result of tax changes. Again, on brexit, we now have the opposition leader, Jeremy Korbin today, a socialist through and through suggesting he will support the campaign to keep britain in the European Union despite the fact that he voted against it in 1975. Thats important. He carries the bulk of 9 million labor party voters. One of the 28 members of the European Union when he came to new york earlier today on squawk box. He gave this warning about what will happen if the United Kingdom vote