Transcripts For CNBC Squawk Box 20140522 : vimarsana.com

Hang sang up 0. 5 . Modest decline in shanghai. European markets, things have barely budged there. Directionalist at this point. Waiting to see whats coming. Part of thats going to be what we get right here, a packed docket of Economic Data today. Most notably youll be getting jobless claims, that comes out at 8 30 eastern time. Economists are expecting 312,000 firsttime filings, higher than what we saw last week, that was 298,000. Something that a lot of people caught their attention last week, below 300,000. Well also be getting a key update on housing at 10 00 eastern time with existing home Sales Numbers for the month of april. As for corporate names to watch, we have retailers in focus again. Quarterly reports are due from best buy, dollar tree and sears. That all comes before the bell. Then this afternoon well be hearing from hewlettpackard, the gap, fresh market, gamestop and tivo. Andrew, over to you. Good morning. Good morning, becky. Thank you for that. Corporate news this morning, heres whats going on, reports suggesting that Reynolds American is in active discussions to buy lorillard, the britishamerican tobacco, also said to be involved. They are the largest shareholder in reynolds. So that matters, as it has a 42 stake in the company. The proposed deal would tie up the second and Third Largest tobacco companies. Well talk to analysts in the next half hour. Lorillard owns 50 of the vaping business, the ecigarette business in the u. S. Thats what this whole transaction is really about. Its the ecigarette, vaping trend. Flavors. Where are we on whether and the other big issue is that the fda has not come down yet, its unclear on where they stand on ecigarettes. Where does everybody here i can understand it if you want to quit smoking. In certain cities in america its becoming an entirely new trend. I always can, i can argue both sides. I dont understand why someone would want to deliver nicotine as a drug. I dont either. We all are addicted to caffeine. I drink coffee every morning. If people for some reason feel good after nicotine, and this is a way if it doesnt have all the carcinogens of smoke right. And it tastes good. Have you ever been to a hoka place . There are different flavors and stuff. The flavors are weird. Thats a way to try and lure kids into the whole thing. I dont know why. Its gross. People are fixated in the oral state. Theres something about doing that. If i walk somewhere and there are two people out smoking and i walk past it and i smell it, im like bloomberg, whats wrong with you . Which i cant believe. I remember thinking theyre never going to be able to ban this in bars. I see it anywhere and i notice it. Do you see people in bars vaping . Im not really out in bars. Poor marlboro man died at 52. I used to like the marlboro man. Its bad. I dont want to judge and say youre disgusting. But youre disgusting. But i find myself doing that. Do you think the ecigarette stuff is disgusting. They all look like addicts. With a big puff of cloud. Control yourself. Have a snickers bar or something. Youre right. It is judgmental. Its totally judgmental. I was curious what everybody thought about the ecigarette. I think the ecigarettes are good for convincing people who are still smokers to try and maybe i think its the opposite of what was really happening. I was glad except internationally i was wondering who is in the tobacco business anymore . Internationally theres still a lot of smokers. There is a scientific question whether nicotine unto itself is that horrible for you. Thats what i just said. I dont think it is. If you like nicotine, like caffeine, i dont know if theres a difference between caffeine and nicotine. I dont know what the longterm effects of nicotine are. Why get yourself hooked on it if it doesnt do anything good for you . There are great stories, a great tape somewhere where a woman who had smoked somewhere for years and years and years, talked about how her whole body has changed. She does the vaping. She couldnt do the nicorette. Shes still getting the nicotine. Youre the scientist. Jd. Com pricing its ip 0. At 19 a share, above the expected range. The company raising 1. 8 billion. Shares will be trading on the nasdaq under the ticker jd. The ipo expected to be closely watched because it comes ahead of alibabas move to trade in the United States this summer. Also in another corporate news, sony telling investors it is now thinking about selling or exiting the tv manufacturing business. Its been a lousy business for them but the Electronics Giant ceo says he would not rule out an equity tieup. Sonys struggling tv division will be spun into a separate entity. How much of a stake does dan lobe have in sony . I feel like hes gotten out of that. Unilever is selling its ragu pasta sauce business. You still use ragu . No. The sorkins are. Sold that business to a japanese condiments maker for more than 2 billion. Silver pallet although i like paul newmans own. Speaking of condiments yes. Do you know when a lot of people like to smoke . After 6 07 in the morning. After meals. What are you saying. Oh. What were you going to say . In movies people do something there could be kids watching. You dont know that i set this, like a mine field for you. I was talking about ragu sauce. Do you smoke after it depends on how quickly back to tomato sauce. Hes actually apologizing. They prevailed over rivals, including hormel. Hormel lost on this months long auction of the ragu brand. Divestiture of the ragu brand follows the sale of skippy Peanut Butter and wish bone salad dressing. Condiments are ketchup and mustard. Its for meals. Thats why i dont know why you i know, i know. No one believes your innocence. No, they dont. In washington news, general motorss ceo has been meeting with various people. The aide suggests both could be done within the next few weeks. And the s. E. C. Is reportedly investigating Charles Schwab and bank of americas Merrill Lynch brokerage. At issue is whether the firms are doing enough to police their clients identities. This would have to do with Money Laundering because the new antiMoney Laundering rules require that brokerages know their customers, which has always been know your customer. Know your customer has always been something. It wasnt always in the context of whether you were laundering money or not. We need to shift gears this morning. There was a deadly bombing attack in china, killing 31 and injuring dozens more. Eunice yoon joins us right now. She has an update from beijing. Eunice . Thanks a lot, becky. The government is calling this attack a serious, violent, terrorist incident. The state media is reporting that two vehicles rammed into a crowded marketplace in the Early Morning in the capital of the american xinjiang region. 31 people are dead, at least 94 have been injured. Witnesses say explosives were thrown out of the vehicles and that one of the suvs burst into flames. Now, many of the casualties were elderly people on their way to the market in the Early Morning hours. And the injure ready now being treated at the local hospital. So far, no one has claimed responsibility for this attack and the government hasnt yet identified who might be responsible but what we do know is that the incident did take place in a very sensitive part of the country which is home to the uighur muslim minority. That commune has been blamed in the past by the government for other recent incidents, including one here in beijing at tiananmen square. Many members of that community have voiced their frustration with what they see as repressive policies of beijing. The Public Security chief has now gone to the region and the president of this country, xi jinping has vowed to step up security controls as well as patrols. Hes also vowed to crack down very hard on those responsible for this incident. Becky . All right. Eunice, thank you very much. Eunice yoon. Stock market posting solid gains on wednesday after word that the fed wont be hiking rates anytime soon after all. And despite the many calls for a correction, some analysts say the market may already have correct. Its sort of a sideways rotational correction. Our next guest says he does not see this big correction happening just yet. Here with us now to make the case, james paulsen, chief investment strategist at Wells Capital management. Thanks for coming in. The other day i looked at my iphone, if i hit up stock prices, the market was up 150. At the bottom it has the News Associated with the s p. It had gartman says were already in a correction it was our own matt belvedere writes these things from what happened on this show. I thought it was actual news when i saw it. I read it and went wow, what a bad day to say that its he switches quickly. He does move quickly. Maybe hell change. Weve been posing the question that internal rotation in some of the high flyers, in the move to dividend stocks with the broader markets staying where they are but all this other stuff, weve been asking, does it mean were ready to go down or does it mean weve already done the work and are ready to go back up again . I think were getting ready to go back up. This is what you were looking at, too, this flatness. Yes. Nothing to write home about for the year, though, either. I think we go higher first. But we might have come down a little bit from there or later in the year yet. Were going up on better Economic News. Thats whats keeping the market from pulling much off its highs, i think. Were justifying where we already are, i guess. Were catching up. We have a big move, buying time, getting used to yield levels. 2. 5 tenyear seems low now. A year ago was high. Were getting used to fed tapering. Were getting used to were gut checking sentiment. Were checking values like highflying momentum stocks and small caps. I think we are setting up for another run. I think were getting used to the corporate profits not really growing like they used to. Yes. Theyre still pretty good but not growing. Yesterday before the move up in the s p, you know, i do the math. Its now 38 divided by 18. 50. Two times 18 is 36. Right . Right. It was under 2 until yesterday. Right, right. The gains for the year. You know what, its not down 10 . No. Its just off its highs. Even though weve only gotten 2 , its still up from where it was december 31st. If you annualize that 2 , thats still not a bad year. You said you think the market will go up but then dip back down again. What is that about . I think right now what were doing is good news is good news for the market, andrew. Right now, the better the economy. People are i thissing are we growing 3 or not. Were Getting Better news on china and the emerging markets thats another thing feeding into this feeling of sustainability thats causing people to come into stocks. I wonder and im seeing evidence where good news could become bad news. Were already got an uptick in the ppi. We have we had an uptick in the cpi, Commodity Prices are going up in the background. The dollar is weak. I think lending velocity is picking up. If Wage Inflation goes up just a little bit, all of a sudden we could have a panic about inflation that could feed into bond yields. I think the tenyear might be north of 3. 5 before the year is out. At some point that will be the inflection point. Thats where maybe we get correction. I think it comes back to where we started the year as opposed from here to lower. We have a big debate coming up today, in fact, based on some of yellens comments and alan kruegers work recently. Theres a notion that we have a slack labor market. With all these people that have left the work force, supposedly yellen thinks they could come back so theres plenty of slack, so there wont be any wage pressure. Krueger says those people are already done. 22 of the people. I think the Major Networks are trying to get this debate going, too, gma, the today show. All of them are like we have to get this Alan Krueger Janet yellen labor slack thing but we got it. You think in some places labors tight. You know, the wage numbers, 80 of the wage earners have the nonsupervisory wage earners have seen Wage Inflation accelerating for more than a year. Its been going straight up. The 20 has been deceleration. The overall number has been flattish. 80 of the workers have seen wages. I think well see wages its about time we see wage acceleration. I agree. Theres not bad things. If Wage Inflation goes up 3 , thats not all bad. For investors worrying about Interest Rate pressures, it is bad. You think investors will react. Do you think the fad will also react . I think theyll be forced to, becky, eventually. The real driver of fed policy, i think is the bond vigilante taking the tenyear towards 4. Once it gets up in that level, the fed decision is made for it. I have to think of a bond vigilante being at 4 . You said vigilante. Youve corrupted me. Last year we went from 1. 5 to 3 in a matter of weeks. I could do it again. I think the bond rate bores you to death and it kills you. Thats what we may face later this year. You would use it as a buying opportunity for stocks . Absolutely. I still think theres a lot to like over the next several years in the stock market. We have to get used to this fed going full bore. Its simple as the dove versus hawks argument. Yellen wants to stay easy. Thats why you have to argue theres a lot of slack. You have to raise rates. Im surprised krueger came down on that. As an obama guy, they dont care where the stimulus is from, fed, congress, wherever it is. I cant believe he was actually part of what was he . He had fuhrmans old job. President s never want the fed to tighten. If youre a lame duck its okay. I just saw on the cnbc website this morning another article about how the gain in wealth thats occurred is causing greater people retiring at a faster clip because they finally made their numbers. And get out. Cnbc. Com. You go. What is it . You go what . I dont know. You go digital persons. I dont know. What are they . Matt belvedere is an inbed. Hes part of squawk. Just cnbc. Com in general. Youre looking at the news on cnbc. Com. Hey, yes, were mobile, joe. Yahoo is lucky to be with us at this point with their yahoo finance. We have enough money for that. All right. Thank you. Thanks. Are you watching the series fargo . You betcha. You know where bemidji is. Yes. Is that a real place . Yes, way up north on the border. Its a good show. I havent seen the latest one but its pretty good. They tied it into the movie. You havent seen it yet . No. Dont tell me. The money oliver platt found. Plenty of actors to talk about that. Great to see you. Thank you. When we come back, why Many Americans dont even bother changing their passwords even after getting a warning of a security breach. And mcdonalds annual Shareholders Meeting comes with controversy. Thats coming up in todays executive edge. [ male announcer ] great rates for great rides. Geico motorcycle, see how much you could save. Welcome back, everybody. Mcdonalds holding its annual Shareholders Meeting today. Protesters expecting higher wages are expected to show up. Yesterday, more than 100 protesters were arrested in oak brook, illinois. Theyre demanding a minimum wage of 15 an hour. Workers at mcdonalds corporate offices were even told to stay home. A mcdonalds spokesperson says the company is monitoring the minimum wage debate and that 15 is unrealistic but it will increase over time. The average hourly wage of fast food employees across the country tops about 9 an hour. What is the actual minimum wage for mcdonalds employees . Do they have an average . I dont know. For the industry its 9. Im sure mcdonalds is at the head of the industry. What is minimum wage now, 8. 7. 25. 7. 25. I think its 7. 25. They want that the doubled. In switzerland they voted down 25 an hour. 25 for minimum wage . Yes. 25 . Yes. That would have been the highest in the world. Just to be clear, 7. 25 an hour in the United States across the board. In other states, other places Washington State its . 19. Theres Little Pockets like right outside the Seatac Airport where its higher. Australia, luxembourg, 14. 21 in luxe omburg. Korea, 3. 90 an hour, hungary, 2. 20 an hour. Thats hard to put that in to context. Theres places where theres no such thing as a minimum wage, arent there . Yes. Im sure there are. Anyway, just a couple of examples there. Were talking about pass words before. We were talking about passwords in the makeup room before we began. In the latest news, a data breach, big data breach. This is like almost targetlike in some ways. Ebay announcing it was hit by a hacker three months ago. 145 million user records were accessed which would make it one of the biggest data breaches in history. They told users to change their passwords but a story in todays wall street journal suggests many people wont listen to that advice. 39 of adult Internet Users canceled accounts or kans changed passwords. Im not sure what the password is on my ebay account. I have basically one password for my life. I have a couple of adjustments on it. You cant do that. Thats true. You dont buy anything online. We use ebay every day, were bidding on different things. Really . For the kids . No. For all kinds of stuff. What . Sconses, i dont know. Are you a hoarder . Not me. Sconses. Like different things. Presents. We like certain artists that you can see things come up. Are you on there all day long. Im never on. Its the royal we. When i mentioned to this other individual, there was not a whole lot of reaction to this. Were not changing passwords. They said theres no evidence a Single Person has had anything happen to them. Theres a reason for doing this stuff. The credit card information they probably didnt get yet. They dont think. What bothers me about this, youre finding out three months after the fact. Target came clean relatively quickly compared to a lot of these other hacking incidents. Dont you think if you could figure out your user name and password for ebay you could do damage in lots of other places. They have your address, email, birth date. Selling names and berth days to criminals that try to figure out the other stuff is what they do. Right. You know ebay, i guess its three months later. Theres pages and pages of things to look at. Its like on ebay. Yes. Light fixtures, chandelier type things, theres antiquey stuff. When i cant find this particular individual, thats where they are, looking through. Its like antiquing from home. Yes. You can check out all the the deals you can get. You sit there and youre waiting for like the last ten minutes, whether its going to move. Isnt there something you can do where you can make a higher bid at the last moment . I think so. I can buy it now, you know, theres the buy it now or the auction. Theres an Auction Going on right now with a minimum price of 2. 25. Is it really . Somebody else selling for 3. 90. Somebody else is trying to sell it for 28. 50. How much is the buy it now . Whats yours . I havent looked. Ill do it during the break. You should read my first. It would have prevented everything that happened in yours. I agree with that. My books available for 2. 25, too. Oh, man, this is what it comes to. Were both a couple of losers. We we return, russias Economic Forum kicks off. Vladimir putins investment show case is going to be miss something key ceos. I can sell you the german investigation for 17. 92. I dont know if i have a german version. A little report from st. Petersburg next. Where theres smoke, theres fire. A big deal could be coming down tobacco road. People still smoke those things . As we head to break, heres a look at yesterdays winners and losers. If i told you that a free tensecond test could mean less waiting for things like security backups and file downloads youd take that test, right . Well, what are you waiting for . You could literally be done with the test by now. Now you could have done it twice. This is awkward. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcbusiness built for business. For what reality teaches you firsthand. In the face of danger, and under the most demanding circumstances. Experience builds character. Experience builds confidence. And experience. Has built this. The 2014 glk. The engineering and the experience of mercedesbenz. See your authorized dealer for exceptional offers through mercedesbenz financial services. Through mercedesbenz tigers, both of you. Tigers . Dont be modest. I see how youve been investing. Setting long term goals. Diversifying. Dip you got our attention. We did . Of course. Youre type e well, i have been researching retirement strategies. Well thats what type e s do. Welcome home. Taking control of your retirement . E trade gives you the tools and resources to get it right. Are you type e . Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and andrew ross sorkin. The headlines, sears reported a First Quarter loss of 2. 24 a share. 2. 24. Wider than analyst forecast of 1. 87. Revenue, though, was slightly better than forecast. The retailer says its continuing to evaluate a possible separation for its sears center unit. Starboard value is reportedly launching a fight to take over the darden board. Starboard didnt want darden to sell red lobster. Really . Most people wanted them to. They had some ridiculously awful comps. Down 8. 8 or something. For red lobster. Yes. People like andrew. You go for the all you can eat shrimp. Always. Their Profit Margins are nil. Fantastic. Millennials dont show up. You cant also get different types. Not just fried. Shrimp scampi, popcorn shrimp. Forrest gump. Boiled shim sh rim. Ling weenie. What are you looking at . Something happen . I was sent a letter. Anyway, the activist investor, they dont want them to sell. Make up your mind. A lot of people say its millennials. They dont want to be at the same restaurants their parents show up at. They want to eat healthier. I can see why they dont like me very much. I dont like their tattoos, music, attitude, their politics. Heres whats sad about the red lobster story, now that i understand why theyre so unhappy. This is something that makes you sad . So the net proceeds of the darden deal are 1. 6 billion. Okay. The starwood people believe that the real estate is worth 1. 5 billion. So the entire company on an operating basis is only worth 100 million. Just the red lobster chain itself . Yes, based on what theyre doing. Which is less than one times ebitda. The comps were down to spectacularly, people look at that what is the situation with the real estate . They own it outright . I dont know the specifics. Its possible to run a business so badly that the real estate is actually the business is a loss leader. It could be worth less. If the operating business is only worth 100 million. Youre sad because it could mean the end of the big shrimp table. They have new brands. Seasons 49 or something . Those are pretty good restaurants. Smoky bones or did they get rid of that. I dont know about smoky bones. Where is macaroni grill . Where is olive garden. Definitely olive garden. I have a grill. I dont go out that much, either. We go to bed too early. Russias annual Economic Forum is taking place in st. Petersburg today as well as tomorrow. Many notable ceos decided to sit this one out. We go to geoff cutmore. He probably wont answer me for four seconds. Good morning. This is like the rush equivalent of davos. This is for president putin to show case all thats good and great in russia. About 6,500 people usually come to this. Its warmer than davos. Its warmer this time around for a number of reasons, not least russias position on the ukraine and the sanctions that have been imposed by the white house. And thats a reason why people like Lloyd Blankfein and interims from pepsico decided not to come this time around. Even the americangermans like Klaus Kleinfeld of alcoa decided not to come. We asked him why. We have decided to, this year, not tend the st. Petersburg Economic Forum. The situation is unfortunate. Ive always believed that in crisis you need to have a good dialogue. I also always believe that theres a political dimension that in some moments need to trump all other interests. You know what, joe, about the only people that have really turned up in some numbers are the french executives. So we have seen alstom, were all wondering what happens with that siemens ge type battle for alstom at the moment. Maybe well get a chance to talk to him about that. We also spoke to jeanfrancois decaux. He runs the big billboard advertising business. His view, some people dont have the stomach to do business with russia. When you look at what has happened in russia, if you dont have the guts to invest here, you better stay at home. All right, geoff. Thats the story here from st. Petersburg. I will tell you, i got a little bit of breaking news hot off the presses. We did talk to alexei mortischoff. They have operations in deerborn, michigan and mississippi. There was talk he was going to pull back on those investments. He told us hes not taken a decision on that. The delay is so big, i referenced this to andrew, the alstom deal, if you do get to talk to the corporate guys at alstom doesnt matter. Unless they tell you what the government is telling them, you really cant they dont know what theyll do with siemens and ge, do they . They dont have a choice. The corporation is on board with ge. Its the government. No reason to negotiate with a board over there anymore. Really . You sounded a little bit unhappy there. You dont think thats a way to go. Ace little despondent. You dont think the government can run all these Companies Better than in france, yes. Lets talk about m a rumors. The big one is about big tobacco. Reports suggesting that Reynolds American is in active discussions in buy lorillard in a complicated threeway transaction involving britishamerican tobacco. Heres whats going on. Well have nick mody help us explain it. Hes the managing director of rbc capital management. Weve been talking about this threeway thing. The british own the biggest piece reynolds. 42 . This is being driven, this is all ecigarettes . Or do you think thats not fair. I dont think thats fair. I think that is a component but ecigarettes are 1 of the overall u. S. Industry. Its still pretty small and there are product enhancements that need to be made to make this a big category. This is about cost cutting and value creation. When you think about the future of these a, if you were just to handicap whether this deal happens. Its tough to say until it happens but you have a high probability, at least 50 3rers ver 50 versus zero. One of the big issues from what i understand is lorillard, menthol is 80 of the market. Correct. Theres been question marks about how the fda will approach menthol in the future in terms of flavors. Correct. The way we think about it is, theres no science for the fda to make a claim or ban menthol which is what some of the concerns have been. Legislation and litigation in tobacco takes forever. Theres a case that started in 1993 thats still going on. These things take time. I think at this point the industry is pretty comfortable with the fact that the fda does not have proper science to have a draconian menthol ban. If youre in the industry, you feel good about your position, science, relative to what the fda has. Ecigarettes, you say 1 of the market right now . Roughly. When you model out five years from now, what percentage of the market is that . And then does it turn these guys into Growth Opportunities again . We basically think that the category can grow about 15 to 20 . Theres some out there that think the category can grow . The overall ecigarette category. How many of that cannibalizes the Traditional Market at the same time . We dont think theres c cannibalization. Since the product efficacy is not as good as people think you dont get the same type of impact if youre a smoker. Meaning its not as big of a hit. Yes. Basically people are smoking their cigarettes and smoking these things. And smoking ecigarettes. Youre having a combo effect. As the product becomes more effective in terms of getting a traditional smoking you get a better hit . Theres science you have to do, shrink nicotine molecules for absorption. You have to work on the battery in the product to get that vapor to make it feel like an actual cigarette. Theres a lot of stuff going on. Its going to take time for the product to get to where the consumer will start switching in a meaningful way. Nicotine feels like caffeine. Its a liquid alkaline, just like caffeine. Where are you on the health issue. Combustion of tobacco is what causes the carcinogens. You take that out of the equation, you have a less bad thing. Arent there negative things about caffeine . There must be negative longterm effects of nicotine. This is more about the carcinogens. Nicotine has been proven to help with alzheimers. Really . Have you found people are using it to get off of cigarettes successfully or its become, what were talking about, a trend for young people that could end hooking them back on to cigarettes later . I think the whole motivation for the industry is try to get people to get on to this product. The quit rate arent as high as you might think from switching, yet. Nick, thank you. Thanks for having me. When we return, former wells fargo ceo Dick Kovacevich will give us his fired up review of Tim Geithners book. We have more squawk box right after this. Mine was earned in korea in 1953. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. 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If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Welcome back, everybody. Right now its time for the squawk planner. More Quarterly Results are expected today from the retail sector, best buy, gap and the Technology Giant hewlettpackard will be unveiling results after the bell. On the economic front we have the government releasing the weekly jobless claims report coming up at 8 30 a. M. Eastern time. And several highprofile shareholder meetings, mcdonalds, intel and facebook. That is todays squawk planner. Should the markets expect hard times for Technology Hardware . We have a preview of hewlettpackards Quarterly Results and a review of meg whitmans turnaround strategy. Squawk will be right back. Entl you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Carstheyre why we innovate. Confident retirement today. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. Welcome back, everybody. Hewlettpackard reports Second Quarter earnings after the closing bell. Earnings per share growth 1 over last year. Joining us is abi, senior tech analyst. Thank you for coming in. Thank you for having me here. You think if theres going to be a surprise, its going to be a positive one. Yes. Revenue could be slightly down. We are seeing about expecting 1 growth. It has very easy compares. Last year, everything was falling apart. Revenues down year over year. Eps was, yes, many levels on the cost side that can deliver. Lets talk about pcs, how that has stabilized. Thats the biggest driver right now. The stability is coming from commercial side, which is where winds has been a big help. And it is indicating it will go to at least the middle of this year. Second half of this year, thats going to fall apart. And thats where it may not go down a lot, but its probably not going to go. Consumer is the one that needs to pick up. Thats where we think pcs in general the environment is difficult, even though it is stabilizing because were coming off low stpwhrs microsos. Is embracing the service. Is there going to be some needs for pcs . We are seeing the merger of laptops and tablets. Will it look like the Service Coming . They will probably have to do something to that effect. What they currently have is a tablet. Its not doing as well. Eventually the whole market will move that way, where with he see hybrid devices. How much ultimately is that the problem going on, versus whether they get on to chrome system or Something Else . Microsofts market share will probably go down. Its going to lose market share. Hp will have to diversify into other systems. I think shes done a great job stabilizing the company. The second step, a much more difficult step, is driving the company to go. Thats where we think its going to be hard. If we look at hps earning, 70 of its revenue base is in the markets with head winds. You have pcs, printing, and youve got services. All those things are 70 of revenues. Theyre not going to go much. Whats the other 30 . Storage. Software products. Thats where the Cloud Application comes . Yes. It is probably about 10 . Its really a hard job to drive the company to go. We dont know how they can get there, but thats challenging. I dont know if you follow ibm but both of them have tough its row to hoe not road. I know. U. S. Steel. Either one . I dont cover ibm. Ibm is the only company that has gone from main frames to pc and still relevant in the next stage. Ibm is the only Technology Company that has gone through all of these transitions. But they have done a good job in shedding the commodity businesses. Hp has kind of held on to a lot of business that are being commodotized. Are they in better position . I would think so. So youre waiting on hillet. Sit 10 times ebitda earnings right now. Theyll get what they want. Theyll get stability. But for Growth Investors to get involved, you need revenue growth. Thats hard to come by. Thank you very much for coming. Thank you for having me. Tim any geithners new book goes through a stress test. Dick kovacevich will sound off next on squawk box. Humans. Even when we cross our ts and dot our is, we still run into problems. Thats why Liberty Mutual insurance offers accident forgiveness with our auto policies. If you qualify, your rates wont go up due to your first accident. Because making mistakes is only human, and so are we. We also offer new car replacement, so if you total your new car, well give you the money for a new one. Call Liberty Mutual insurance at. And ask us all about our auto features, like guaranteed repairs, where if you get into an accident and use one of our certified repair shops, the repairs are guaranteed for life. So call. To talk with an Insurance Expert about everything that comes standard with our base auto policy. And if you switch, you could save up to 423. Liberty Mutual Insurance responsibility. Whats your policy . Welcome to squawk box. Reaction to the stress test the. Former wells fargo chief reacts to Tim Geithners new book. Plus, his take on how the fed and the government are handling the economy. What can brown do for you . Cfo of u. P. S. Delivers his message to squawk. And an indepth look at the high cost of health care. How doctors may be getting more uncomfortable prescribing drugs with high price tag. Stay on the right path. Squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. We have been matching the markets this morning. After a big day of gains yesterday, you can see green arrows. These are very modest advances. Do you have futures up by seven points above fair value. S p up by under a point. If youre watching the bond market it is yielding 2. 537 . In our headlines, Reynolds American is in active discussion toss buy lorilard. It has a 42 stake in reynolds. Jd. Com pricing offering at 19 a share. That is above the expected range. The success bodes well for alibaba set to list in the u. S. This summer. And the health of the consumer once again a big market beam today. Sears reporting a bigger than expected quarterly loss. Revenue slightly ahead of estimates. The retailer says it is continue to go evaluate a possible separation for Sears Auto Center unit. Shares down close to 5 today. Best buy will do it. Its an 8 billion company can. Lets rush it out here. It looks like it might be adjusted 33 . The estimate was for 20 cents. 9. 2 was expected. Earnings per share number of 1. 31 from continuing ops. That would be tough to believe thats versus the 20cent estimate that were looking at for best buy, at this point whats the stock doing . Ive got 24. 25, 25. 35. I dont think they will positive 1. 30 when you saw comp stores domestically drop 1. 3 . Expecting to see sales decline in many Consumer Electronics. So adjusted number is 33 cents. They are calling it better than expected 33 cents. Versus 20. But 1. 31. I dont know if thats the actual number. Maybe thats the actual number. You can use apples to apples. It was a little bit below the stock. Now its 25. 35 bid. Thats where it closed. It looks like it is going to trade. Its interesting. No guidance, though. They say domestic comps sales down 1. 13 . Target in its earnings this week, it was a strong point for them. All right. Anyway, well keep an eye on that now its lower again. Nagel will be on to talk about it. Talking about his new book, tim geithner said this in an interview. There was no way we were going to solve this crisis without doing what the government has to do in a panic, which is to take risks the market wont take. Guest cohost kick kovacevich joins us now. For the arsonist to take a victory lap after putting out the fire probably isnt popular. Im not saying he started it. Your point is he didnt see it coming for have a good feel for the Balance Sheets or the leverage or anything else did he, in hindsight . No. None . None. Didnt he say wells fargo needed money and was going to post a loss . Yes. Initially he wanted to sell wachovia to city group. That would have been definitely two guys holding each other as they drown . Potentially. It would have been a disaster. Not potentially. He says to wells fargo we are going to have losses and in adequate capital. Four months later we had record earnings First Quarter and did for five years. Now the most valued Financial Institution in the world. So you had the taint of tarp because he said take it. Now, lets contrast that when he wanted citi to win wachovia. Four months after that city reported multibillion dollar losses. The stock fell from 50 a share to 1 a share. And we now have the facts, which maybe he didnt have then. Maybe he would say, well, that wasnt a very good idea. We wrote off 50 likely to write off 56 billion of credit losses from wachovia. Billions of dollars of litigation costs. A lot of expenses to work through all of that. Citi would have had to come up with Something Like 60 to 70 billion more than the 45 billion that the government already gave them. And the fdic might have been completely depleted because they had taken 320 billion of assets. I can understand making a mistake in foresight. But he argues, which i cannot understand as well, that sheila barr made a mistake by switching it. So its really hard for me to comprehend. Your book did not justify back decisions that were made. A lot of decisions. Let me just take the other side. Not sos i agree with his position, but i think i understand it. One, on wells and why they needed to take the money, im not sure he necessarily specifically means that you needed the money, otherwise, you would fail but that if you didnt take it and his whole scheme required everybody to take it. You called it a scheme. His whole stream and Hank Paulsons strategy and bernankes strategy will be we will be ensuing confidence into the system broadly. The second you dont, it will be harder to give it to everybody else. Therefore the whole thing doesnt work. Do you agree with that . Thats what they thought. But what i was arguing at the meeting is the opposite would occur. We were a aaa rated bank. The stock market went down by 40. The book is written after the fact. And he should acknowledge that piece. He didnt even acknowledge what you said. He said in the book to me when i said i dont want or need 25 billion, he quotes himself saying you need more capital than you think. Right. And i responded that you dont understand that we have more capital than you think. And my point of all of these problems is these decisions were being made by people who really didnt understand the risk in Financial Institutions. He was head of the new York Federal Reserve and did not snow something that everybody else knew, that city was in trouble. And he does say in the book that bob rubens time at city tempered my skepticism. Why does he come back and go after sheila barr . Let me just take theeer side of that one just to put it on the table. His view, i think, and this goes for bailouts across the board, sheila barr originally but the citi and wachovia together. His feeling i think at the time, the second the government which had already done this transaction starts breaking up deals they already put together, the confidence that the deposit and the would be able to do pailouts. And this goes back to why they paid the aig bonuses. The governmentst no longer good for the money or no longer good for their word or whatever. And he was trying to preserve that. And i think there is some truth to this one piece of it. Which is the next time we get into a situation, if theres ever a need for bailouts again, i dont think any bank is going to do business with the government. I dont think there will be any rescue attempts. Youre missing the facts. Im just suggesting what i believe his view is. You cant understand that. What he doesnt say, which he knows, which i assume he knows, this is the first time in history that i have ever seen a deal done on the weekend where they awarded to citi corp. And the deal wasnt completed. You know why . It hasnt been completed by thursday because citi was reneging between wachovia for four days. And were change anything a way that even included not honoring the pensions of people. Now, this is unheard of. So citi is the one that caused this to happen. Thats the first ive heard that. The negotiation. But he knows that. Hasnt somebody say that more loudly . Why doesnt anybody say things more loudly about whats going on . Because they are discussing their decisions even in hindsight. And coloring it. That are very important to what caused things. So theres no chance that someone is going to say that you cant honor the government on this particular thing. Hank paulson, ben bernanke, tim geithner. Those are three different people. Then tim geithner. What will we think of them years from now. That they saved the world. And i totally disagree with that. My friend, former head of the fdic, bill isaacs, titled his book senseless panic. Thats exactly what happened. The panic was am accelerated because of the decisions of people who didnt understand the facts that they were doing. Now, they were under lots of pressure. You would think they would have wanted to talk to people who might have a difference of opinion, who had more knowledge. If you go back to the breaking of the buck, that was panic that somebody had to step in. It was not created by the government. You could have done the breaking of the buck. The reason they had a breaking of buck is because they had a big piece of land. They rescue bear stearns and not layman. What he says is we have to rescue people because no one else does. Well, no one wanted layman. Did they rescue him or not . Are you arguing they should have or should have let bear stearns go down . Let bear stearns go on. The biggest mistake, senseless panic, was rescuing bear stearns, half the size of layman. We didnt know after the fact, is jpmorgan making money on bear stearns or losing money . Hard to say. No, theyre making money. They said its been profitable except for the government. Thats another issue we can talk about. Well talk about that a little later. And the fed took 32 billion. Did they make money or lose money . Making money. If jpmorgan made money and the fed made money, why wouldnt we have let bear stearns go under, take the debtholders take a little hit. Because that would have made sure we didnt make any money. If that would have happened, i guarantee you layman would have been sold. They had 20 to 30 on the table many times. But he thought he would be rescued. Lets assume im wrong. They tried that and the markets went to hell, then for sure you would have had to rescue layman, right . You would have known the consequence. And its going to get worse than that. The worse thing you can do is confuse the market and say we have rescued someone thats half the size and is, you know, maybe less risky but certainly not more risky. Three months later you dont rescue somebody at twice the size. We dont understand whats going on. We ended up guaranteeing funds anyway. We ended up doing the 250,000 fdic as well. If you had done both of those things. Up front. Right. And let this other stuff happen. What about the credit markets . I dont know if the credit markets would have done it. I think the markets reacted to this stuff much worse than would have been the case if it was guaranteed. Dick will be with us for the rest of the show. We will continue this conversation. Tim does watch. Hes on a book tour now. I dont know where he is in the country and what hour it is. Coming up next, breaking down best buys earnings. Just reported results. Can that company turn itself around. Thats the question. Weve got some answers when we come back. Welcome back to squawk box, everyone. Weve been watching the futures this morning. They are seplly flat after a big ropl roller coaster of the week. Biggest gains in months. 158 points idea. That followed 125point decline the day before. The dow futures are up by less than a point. S p are essentially flat as well. Google plans to offer wifi Network Hardware and software to small and mediumsized businesses. They may require users to sign into this tkpaog el account. It would allow the company to target advertising to them. The report suggests that google might share with Business Owners to help them learn about their customers habits. Shares of best buy under pressure following the Quarterly Report and the outlook. Calling in with his Key Takeaways is the Senior Equity Research at oppenheim. Brian, they did okay on the profit side, but the revenue came in light. Good morning. I think this is basically more of the same from best buy. Thats exactly the dynamic we have seen for a while. The top line trends are quite week. The Management Team has done a good job controlling costs. We saw evidence of that in the q1 results. How long can that be sustainable if the revenue is not moving the direction you like . It is sustainable for a while. Best buy has been an undermanaged or poorly managed job. The new team has taken expenses down. The bigger question for me, though, is how long does the market tolerate this . Investors will grow tired or increasely tired of seeing weak lines from the company. Stock trading 24. 50. Where are you on where it is supposed to be . Really not a lot matters until the fourth quarter. What we saw last year, and we have seen it a lot, is extraordinarily aggressive competitors in walmart, amazon and others. Thats when it matters for best buy. When the earnings first hit, which was the target on electronics, actually did well this past quarter. Anything to read into that . Well, i think it is maybe a market shift. I dont know if theres much to read into it. They are getting a little more aggressive in the category. But best buy i should say, and this is an overall declining Consumer Electronics industry. Who is the biggest competitor . Target, walmart, amazon . Its mixed. Come can holiday season, the biggest competitor for best buy is walmart. It tends to use it to get traffic into their stores. Sounds like we should close our eyes until christmas. I think thats how the stock is going to trade. If it performs well in the holiday season, no doubt it goes higher. The music is playing us out, brian. Thanks for coming in. Much more from our guest host, including his investment in banking descriptor. 8 00 a. M. Eastern, someone will ask about bitcoin. 8 00 a. M. Eastern do you think becky will ask him . Yeah. Alan krueger joins us about slack in the labor market. E financial noise financial noise financial noise financial noise [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. I knew about this yesterday. I got an alert from my son. Big world of super heroes and hollywood. The title for the incomes batman movie is called Batman V Superman bond of justice. The release may 21st, 2016. You cant just assume theyre not going to mess it up. I would refer you back to George Clooney and chris odonnell, maybe the worst movie ever made. I can think of worse. Gigli . This was met, andrew, with quite a bit of criticism, as was the the affleck pick. Dawn of super movie tights. It sounds more like a tnt show about a lawyer named dawn. Dawn of justice. Theres 100 tweets here. Couldnt sound less like a legal case if it tried. Very discriminating about what you do to the franchise to, batman or superman. Ben affleck i dont know what finally happened. Did we show him . What youre looking at there is the suit itself, which is pretty cool. And the car. Hes been going to the gym. They took away the nipples that apparently George Clooney had in his suit. He looks ripped. We need a little do they do that with under armour . If i had ripples here, people would know what it was, dont you think . Britney spears had it painted on. Did you see that . I did not see that. When we come back, what can brown do for you . An update on u. P. S. After a challenging winter from delivery giant cfo. Squawk box will be right back. She keeps you on your toes. You wouldnt have it any other way. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. 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Williams sew know that Beat Estimates by 4 cents. Revenue above. Home goods retailer raising its outlook as a better Housing Market, it helps its business. Taking a look at the future of retail and shipping with big brick and mortar businesses turning their fronts into warehouses. How does u. P. S. Stand to profit . Joining us now, is the chief Financial Officer at u. P. S. Also a member of the cnbcs global cfo council. What do i put first . Its that cnbc thing, isnt it . Absolutely. Its the high point of my career. You couldnt even tell there was a hint of anything in that. You are well positioned. Some of your competitors are too for the new world. Its an exciting time in retail with, you know, he commerce being aggressive in growing. Retailers across the spectrum in brick and mortar. You want me to do it or are you going to do it . Go for it. Are you into drones yet . We cant get a straight answer from anyone on drones. I like the guys in the trucks and the shorts and everything. Yeah. We think it will at least be a couple of months before we have drones in your neighborhood. Cant you use packages delivered at u. P. S. Or fedex . Where are we now . Where is it on a scale of 1 to 10 for you . The First Quarter was challenging. Youre hearing that in retailer reports. There was a lot of disruption. It impacted u. P. S. We think beneath that noise, as the dust settles the rest of the year, were seeing a slowly growing economy. Clearly theres some challenges in some areas. Were pretty confident that its going to be a solid year. Just to follow up, i know from our own household, the number of packages has sky rocketed. We always used you and fedex as a proxy of the economy. How does that get distorted by changing Shopping Habits . We are seeing a longterm secular trend with more and more shipments going direct to consumers. To some extent our numbers are boosted by that. So there is a conversion going on. One of the things, becky, were very busy is working with with retailers that have brick and Mortar Stores to figure out how can they compete with Internet Companies and taking advantage of their local retail outlets as distribution centers. To that point, you are seeing amazon effectively getting your business to some degree trying to do same day delivery. Google just started in new york. Uber has larger am divisions to potentially get into the delivery business. How do you think that will impact your business . Well, its a fascinating time. You know, consumer demand continues to grow. Same day is not knew. Currier services have been doing that in the metro cities. Some are bigger than in times in the past. We have done pilots with customers. We think rather than same day delivery the big push will be local next day delivery. Thats where we are seeing retailers use their retail outlets to fulfill in the evening for next day delivery. We see it as a much bigger force over time than the limited same day deliveries. Do you think of amazons a customer or potential competitor . They push us. As long as we can provide most services they need, i think well be fine. On the other hand, the market continues to panned and adapt. Its our job to stay ahead of that. Even with the weather, we always think that it you get it back. It builds up and comes back. You wont get some of the business back because you had no lower fouryear guidance. It was really two issues. The weather caused operating expense increases that you never get back. But we think there is demand in these where cities are shut down for a few days. Are you more concerned about domestic or international. International will see higher growth. Especially europe, actually. We showed 15 increase in shipments moving across europe. So the whole issue of it moving instead and moving across europe is a big growth platform. Dick, i wonder what you think about the economy, where you see it from your perspective compared to what we are hearing . Im not that optimistic. It has grown 2. 2 . I would pick 2. 2 because it has been pretty consistent. It can be up or down a couple of tenths. We should be and we could be with the right policies, but i dont see the policies changing. Therefore im skeptical. Now, what i think is true is that the down side risk is i think very low. I dont see another recession coming. Theres a greater probability its better than worse. I dont think 3 is going to happen. Oh, yeah. Theres this obama deal with trying the get more exports. Whats it called . Nei. Export initiative . It is a large priority for us. We try to enable global commerce. And we have seen clearly u. S. Businesses are behind the curve on that. Traditionally businesses have been able to prospect serving domestic markets. 95 of the worlds consumers are outside the u. S. We think helping to train small and midsized businesses on being able to target new arguments ma is a critical thing for the growth of our markets and the health of the u. S. Economy. Thats a domestic business, though, still, right . You would be taxed here. You dont have to worry about these tax rates being different around the world, do you . Do you leave money over there . Certainly the disadvantage of u. S. Based corporations because of the high tax rates is a big issue. We see it as a longterm challenge to the u. S. Economy. For u. P. S. Too . Yeah. Its a challenge across the entire front. It leads to distorted Business Decisions is the problem. I dont want to have my tax guy next to me for every decision as i think about global expansion. I would rather do whats best for consumers. Keep that guy on retainer. I wouldnt rid of him just yet. Its a growth industry. It certainly is. Thank you. Youre going to miss our breakfast. Hes in atlanta. For more from our global cfo council, check out cfocounsel. Cnbc. Com. Anything can happen when you put cfos together. Lampshades, cop strippers coming in. Cop strippers . Theyre crazy. Who is crazier than the cfos . The wells fargo cfo is on the council. You know what were talking about. Hes not the cfo anymore. Welsh may 15th. Yeah, its past may 15th. Anyway. Come okay. Crazy. We will continue this conversation. Up next, the centers for medicare and medicaid predicting total Health Care Spending could reach 4. 8 trillion by 2021. That would account for 20 of gdp, one fifth of the u. S. Economy. What is driving Prices Higher . A special report solving the whole thing right after this. Later, alan krueger, former chairman of the White House Council of advisers will join us. His theory about how the fed overestimates the slack in the labor market was rejected by policymakers. He is here to defend his position. I always wanted to design a bike that honored those who serve our country. And geico gave me that opportunity. Now naturally, we wanted it to be powerful, innovative and we built this bike as a tribute to those who are serving, those who have served and their families. And i think we nailed it. Geico. Proudly serving the military for over 75 years. Welcome back, everybody. Lets take a look at the futures weve been watching this morning. It has been a rocky waoefpblgt first, you saw big declines two days ago. Yesterday the market made it all back and more. We have economic numbers. The market is waiting to take cues from that. Subsidiary of marathon is buying hess for 2. 9 billion. As part of the deal, speedway will acquire hesss Retail Locations and transport locations. And hess says the toy truck tradition will continue at christmastime. Sometimes there were helicopters. All kinds of things. Drugs are on the rise. Some oncologies are hesitate to prescribe some drugs because of their costs. The price of drugs is one of the biggest things weighing on the minds of phrma right now. They are going up. When it was approved in 2001, gleevec changed leukemia. That cancer drug and others that followed enabled patients to live almost normal life spans. It was 30,000 a year. It has tripled to 90,000. Everyone from doctors to patients to Health Insurers and congress is taking notice. Access is a problem into these costly medicines. People think insurance and obama care, theres a lot more coverage. But what it doesnt take into account is very often there is a big copayment that the patient has to come up with that is often many hundreds or thousands of dollars. In 2012, Kettering Sloan refused to put out zal trap. They called for lower prices on some leukemia drugs including gleevac. In march they asked gill yad about its 1,000 a day. It is a cure for heb titis c and could save the Health Care System money over the long term. They just appear high to folks. Its very difficult for somebody thats not a trained economist to explain why it costs 50,000 a year is cheap for society. Researchers say there needs to be a balance between reigning drug prices. It says it costs a billion dollars and takes a decade to develop a medicine. And the failure rate is high. For every one gleevac, thousands never make it, guys. Thats true. We have to tread lightly with patents. Its just you see, like, a pill and it costs 8,000 for one pill. And you just cant the leap of faith between seeing something obviously it didnt cost to manufacture. Especially when it can be that h for 1,000 or less in other countries. Pause of price controls. Which means the United States is subsidizing everybody else. But the drug itself can cost a billion dollars can get to the point where its finally tested and developed. That includes all the costs and failures. All the drugs that dont make it, they say its 1 billion to get that one drug that did make it to market. Thats why they buy drugs instead of trying to develop them. It is expensive to develop a blockbuster. If you have a side effect 1. 5 , almost negative in 1. 5 of the people is going to be something that, you know you ever watch nightly news. They never tested any of these on women because it messed with the science. Ever watch nightly news . This night this happened. Shoot me. How much benefit do these drugs really add and should we be paying a lot for six months to two weeks . You mean we now . What do you mean . You said since we are paying. Because, yes, we are paying now. Unfortunately thats the other problem. Meg, thank you very much. When we come back, more from Dick Kovacevic can h. And alan krueger. Hes going to be so bad. Dont get him mad either, alan krueger. Dick, i dont know, are you going to be here for this . Sure. Cfos of trulia. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back, everybody. Our guest host today is banking on technology with his latest investment. Its an app that lets people use their mobile phones to control how their payment cards are used. Dick is here with us again. This isnt Disruptive Technology but i get the need for this. I think i have had my credit card number stole especially twice in the last six months. What does this do . Allows you to make the decisions to stop it. You dont have to wait two days. You can watch whats happening on your credit card. You can turn it off and on. Just from the smartphone. You know, im not using this right now. Lets turn it off. You can do it for an hour, a day, weeks at a time. And turn it back on. Thats the easiest application. That will break up a lot of marriages, i think. Turn off your wifes credit card . Just have two debit cards for the same checking account. You could turn hers off. No, no. You can only turn off your own. Unless you share. If you shared it, yes, you could. If you shared it, you could turn it off. Joe, you never turned your wife off . There are so many different angles. What if you use your card for ongoing purchases . If i have a New York Times subscription, you have to keep it on . If its coming from that kind of entity, ongoing, you would do that. But there will be an application where you could turn that off too. Assume not sure if thats built in. But the software can do almost anything you want. Consumers see it as one application. Youre selling it to Financial Institutions. Absolutely. How big a problem is cybersecurity . Huge. You have to stay on top of it all the time. You want to make it easy and simple for customers to use. The more you do that, it makes it easier for hackers. Just like fraud. Youre upset your credit card doesnt go through. But if youre in afghanistan using it, which our an lit ex would say you have never been in afghanistan before, theyre trying to protect you from fraud. But youre upset if youre there. There is always this tension between making it easy and protecting it. Can i have the worstcase scenario . Im sure risk people have come in and said, look, what does a truly bad scenario look like . It looks really bad. It could cost hundreds of billions of dollars. Or at least the litigation risk could be in that category. But you would have had to have been making some serious mistakes that would be human error almost. Target was human error. The signals were working. And, you know, some people think that you should not allow humans can turn it back on. It should not have been the Decision Maker to turn it off. Do banks do that . Do banks shut it off first . Its up to the banks. It probably depends upon the application and how serious if someone is violating that particular application versus another. I dont think it would be overall policy. It would be dependent on the risk of that. Do you get printed statements every month . No. You go electronically. Thanks. A labor mark slack smackdown. Overestimating the number of people out of work. He joins us after the break with his response to yesterdays fed minutes. And then housing was supposed to help lead the economy the a faster growth. That has not been the case. The cfo of trulia about the state of jobs and home sales. Can you start tomorrow . Yes sir. Alright. Lets share the news tomorrow. Today we failrly busy. Tomorrow were booked solid. We close on the house tomorrow. I want one of these opened up. Because tomorow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. When csx trains move forward, so does the rest of the economy. Csx. How tomorrow moves. Cozy or cool . Or woof . Everything exactly the way you want is. Until boom, its bedtime. Your mattress its a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy his sleep number setting is 35. Youre the rock at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. Hurry in for memorial day weekend savings. All beds are on sale, starting at just 649. 99. Know better sleep with sleep number. Labor market slack smackdown. Yellen, krueger. Why krueger thinks yellen and company may have to raise rates faster than they expect. Theres something fishy happening this weekend. The population in this river is way above normal. From the makers of sharknado, here comes blood lake. The man behind the films joins us to premier. Flying fish to flying high. Jane wells joins us from the Cannabis Convention to look at the business of bud. Its time for a little wake and bake as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc. First in business worldwide. Im joe kernen along with becky quick and andrew ross sorkin. Becky is acting like shes not afraid of lampres. They can attach to your neck and not get them off. Yes. I am more afraid of manatees. The guy from river monsters put one on his neck. I saw that. I wouldnt want them. I wouldnt put it in my pool. I dont think this is that farfetched this movie. We will look at it at 8 45. Lets go the headlines. Im not readied for this. We should tell you whats going on this morning. Best buy, better than expected quarterly earnings. Retailers outlook, shares are under pressure. They expect industrywide sales declines for many categories in the next two quarters. We did have an analyst on who said we shouldnt Pay Attention until christmas. Turkey central bank cutting its main Interest Rate despite high inflation. It comes weeks after the Prime Minister called for a rate cut. Back here in the United States, were about a half hour away from a key piece of Economic Data 8 30 eastern time. Here are the numbers to beat. Consensus calling for 312,000. Who was it in pwepb whites Morning Money tphult saying if its under 297 this should look like 2003. Good snag to ian shepherd son. A hidden smackdown in yesterdays fed minutes. To the average viewer it sounded like discussion in longterm unemployment. It was sort of a quasi rejection. It depends who you talk to. Its a dove hawk argument, isnt it . Liesman is here. We have a special guest. Injured, slighted. Is he hurt . Great quote he said yesterday. I used it in my piece last night. He said better than being ignored. Mack him laugh, make him cry but make him do something. Heres what the fed said about the work we have had. Guest host. A number of participants suppressed skepticism about recent studies suggesting longterm unemployment provides less downward pressure than does shortterm unemployment. Joining us now is alan krueger of princeton economist, former head of the council of economic advisers who did the work. Are you otherwise feeling affronted this morning . I feel pretty good this morning. This has been a longrunning dispute within the economics profession. And time will tell. The more data i look at, the more evidence i see that the longterm unemployed become discouraged, increasely drop out of the labor force. Thats a sad state of affairs. I dont see them putting much pressure on wages. Also evidence suggests they dont lower the wages the longer theyre under employed. I dont think its very effective in terms of putting downward pressure on wages. One of the conclusion cans of your work, alan, is when you look at shortterm unemployment, its near where it normally is. I know youre not making the conclusion, but its hard not to make the conclusion, alan, you know, if were that close we must be closer to raising rates, to a full Employment Level and should be closer to the fed raising rates than we otherwise are if we count the longterm employed in the labor slack some inflation has been so low for as long. I dont criticize the fed for taking a more wait and see attitude. There are a lot of factors that affect inflation in addition to whats going on in the labor market. Profits have gone up. You can see that reverse without putting much pressure on. Health care costs have been growing more slowly. Import prices have been declining which is putting downward pressure on inflation. So i dont see anything wrong with the idea that were below the inflation target. Were above the unemployment target. The economy should continue to be accommodating. Most administrations love an easy fed. I was like, wow, alan is really making the case that there is lowes slack than people think. So they should turn off the stimulus. Most democrats dont ever want to turn off the stimulus. I sigh what he said. You said because the people are disenfranchised and not likely to come back into the market, Congress Needs to do the stimulating to get programs to get these people back to work. Now i see it. You would rather have good oldfashioned fiscal stimulus from congress to help the people get to work. Now everybody is in their right camp. Do you see what i mean, steve . Im not accusing you of being disingenuous. Because theyre not coming pack and wont cause wages to go up, you think congress should get involved with jobs programs . Look, i said on your program before, i think we need some targeted actions to help the longterm unemployment. Their problems are different than other peoples problems. They have become more approximate more couraged. Employers dont give them a second look. I couldnt believe you wanted the fed to raise rates. All president s want the fed to get the economy going, right . Look, all president s want a stable economy. They want to see full employment, stable prices. I think all of the discussion so far has been on the United States. We are in a worldwide economy. I dont think theres any question that worldwide theres a lot of capacity out there that is at least tphaoeurblly together to keep inflation under control until china comes back full swing 37 look at europes capacity. Worldwide it adds to what alan is saying. But there is a lot of inflation coming back from services, which is primarily domestic labor. Thats true. So i think flack is putting pressure on goods prices and that will probably continue. If youre worried about inflation, the best thing to worry about is the inflation rate. A lot of things go into the forecast of inflation. The atlanta fed had a nice study that found states that have low shortterm employment and high longterm unemployment has seen faster wage growth. Alan i want to get a little more detail on something you said. We have seen in the research and the data, which is really interesting. People, when theyre out of work for a long time, they still dont lower their expected wage to a place that gets them back to the workforce. The fed mentioned this. Its nominal wage rigidity. What is either the behavioral economics, alan or what is the data showing us about what happens with wage rigidity . A long line of researchers found that surprisingly the unemployed tend to cling to wanting a job that pays close to the one before. They dont have realistic expectations. I can understand that human behavior. If you are spending what you make to keep your house and your family and the standard of living youve adjusted to, its difficult to drop, particularly if youre locked into a house and cant sell. Some of peoples self worth, the way they view themselves is connected to what theyre paid. I think thats a natural human reaction. One exception is when people accept parttime jobs. There they seem to be willing to take a big pay consult. They say this is just there to get me through until i find a permanent job that pays close to what i think i am worth. We hope we make you feel better. We know you were insulted and feeling like your own self worth was less. But we hope your coming on the show, being on National Television raised your personal selfesteem. Steve, every time we talk it raises my personal selfesteem. Well, compared to thanks, alan. That was fun. Thank you, steve. When we come back, ceos of adp and trulia. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. We know were not the center of your life, but well do our best to help you connect to what is. Carstheyre why we innovate. Elp you connect to what is. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. Welcome back, everybody. We are continuing the morning with another special panel from global cfo council. Our next guest will hone in on housing and jobs. Joining us on set is chief final officer of trulia and chief Financial Officer of adp. Lets Start Talking jobs. Everything flows from there. Sure. We now . Jobless claims gave a big boost optimism. Last months numbers were good, i think. Our numbers were even a little bit too conservative. What we all had anticipated, the recovery from the strong winters happened. We saw the Small Business market creating jobs, which was good and broad based continued job creation. What do you think is really happening behind the scenes . Well, you have a number of tacto factor heres. The u. S. Economy has been doing well, creating job base abroad, broad bases. Florida and texas has been doing well. Tourism has been doing good. Texas, the energy sector. A number of factors created this fairly steady 250,000 jobs a month. So we feel pretty good. And in terms of what you think things will drag along, dick has been talking how he is not all that optimistic. 2. 2 , dick, is where you see things. Do you think 2. 2 is what you would get for the year . If that continues i think we will see the Unemployment Rate continue to drop into a much better area. I would say that job growth im not claiming the economy will be exploding. What about all this disaffected workers who got left out the last several years. Do any hope or is it a lost generation . A number of po jobs are contracted in the lower brackets. They have been gaining share. And participation rates are below prerecession levels. There is still room in the labor market. Lets transition into housing. Part of it is weather that its slow. Is there anything . When you talk about what jan is talking about, its peeling the onion back and look at the subset of what matter. It is employment amongst young adults. The 25yearolds to 35yearolds that will drive the Housing Market forward. When you look at that, what you see is 76 almost of them are now employed, which is at a fiveyear high. Nowhere near historical levels. We have a long way to go. But were moving in the right direction. So finally johnny, who might have moved back in with the parents, this is the year that johnny will move out of your basement, get a job, probably rent first, which bodes well for rental units, particularly in urban areas, save for a down payment. That puts him on the path to home ownership. Maybe even too much in . You are seeing it with multifamily construction booming. Thats johnnys first step. He will ender first before he can save for a down payment. The housing comes a little later. A big point is being missed here. It is consistent why johnny rents. Johnny cant get a mortgage today. It is the tightest its been in 50 years. It is totally unnecessary. Until that changes, even with better job growth and so on we will be a country of renters. And the blame lies where . Two things. The first is dodd frank, which the litigation risk that says we should not make any loan that a borrower cant repay. I wish they would have told me 40 years ago. Its a great idea. So thats the number one thing that needs to be changed. The second thing is that fannie and freddie react to political forces, put repurchase loans back to the originators. Right. They make 1,000 on a loan. They want to repurchase them if they go back using the criteria. They said that they missed, you know, nitpicky little things. And you would think that the person receiving this, fannie and freddie, should do due diligence. They want lee years they get to repressure back. They basically extort the originators. Because if you dont buy them back, they wont buy any new ones. 1,000 bucks is not a good enough insurance policy. Secretary watt started to do things on the repurchase. If we do those two things, housing would be much more but on your first step, nothing is moving on that. Right. And i think that raises a key point relative to the labor market. Construction has been sliding along. We have had 20,000. 10 of the job growth driven by expansion and construction. Now inventory is coming down. The expansion of the Construction Market would be a major driver for job growth. Access to for first time home buyers will be key. All of that is related to rentals. Much more on jobs related to homes than multifamilies. You have to make those two changes if you want to get it going because of housing. I think there are three jobs created for every single new home being built. We should add half a million more homes for steady state. Thank you both very much. We appreciate your time. Thank you very much. We appreciate it. For more, check out cfocouncil. Cnbc. Com. When we come back, minimum wage protests at mcdonalds lands in a hundred arrests. We will have the details right after the break. Later, if you have never heard of a lampr he y, you will know they are scary. You will know this. From the makers of sharknado comes blood lake, the attack of the killer lampreys. Welcome back to squawk box, everyone. More than 100 demonstrators seeking better pay for mcdonalds workers were arrested yesterday. They swarmed the chains corporate campus near chicago demanding minimum wage of 15 an hour and the right to unionize. More protests are expected to take place today as mcdonalds holds its annual shareholder meeting. They have been pushing congress to raise the federal minimum wage to 10. 10 from 7. 20 where it currently stands production houses asylum is in low budget films that become big hits. The new film day pewing this week. Blood lake, attack of the killer lampreys. And how the legalization of bud has been a boom for the mile high state. Squawk box will be right back. You probably know xerox as the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Welcome back to squawk box, everybody. We are just about two minutes away from the jobless claims number. We have been watching the markets ahead of that. This has been a little bit of a wild wide for the markets this week. If you have been watching equities, tuesday the market was down significantly. The dow was down 125 points or so. Yesterday the dow more than made up from that. If you look this morning, things have been relatively flat. At this point the dow futures are up 11 points. Of course anything could happen. This has been a very important report. 297. Looking for 310. I did see speculation from ian shepherd son just saying if you see a drop off, things could start to move rather quickly. You get momentum in the job market. Dick may be able to speak to that. The hair of the pack of the neck. I need that guy and i need that guy now. Rather than hes going to be around. Let me look at a few more resumes. Are we moving from where the employers market to where it could be an employee market. Do you think that really . There are certainly jobs out there. Technology jobs and others that are in high, high demand. They are having trouble. Skilled jocks. Lets put it that way. Were 70 services. And the Services Area are generally not highly skilled jobs. Those are the jobs that have been created. We have to be careful. So that really is people have money to go to the restaurants or whatever. We have to separate what jobs are being created. All right. We have these numbers coming out. We have been waiting for the weekly jobless claims. Rick santelli is standing by. Go ahead and take it away. Jobless claims are up. Theyre up 28,000. I know that might be a shocker to some out there. And the market will Pay Attention. Although in the big picture most of the initial jobless claims drops havent translated into the type of Economic News that the correlations have been dreamt in showing. If we see continuing claims, they have been drifting lower. Not long ago it was 2. 8. Now 2. 65. Last look, 2. 66. Existing home sales, leading indicators. We did get half a basis points dropping on that higher jobless claims less positive influence on the economy. The markets arent moving that much. Its like weather. When the weather drops, good rally. Initials claims being lower. I saw 55 and change. Now 54 and change. It is a bit thin. I would say 3 4. Again, what would have happened to the equity tpaoufpd if we had had a 28,000 drop. So you are seeing a symmetrical. Absolutely. Good news is good news but bad news isnt bad news. For the equities. The unofficial secretary. Its always going to be four lengths ahead of anybody. Theyre not going to go willingly, thats for sure. I want to echo correlation. I dont know how far back. It doesnt seem to make a difference what that number is relative to what job growth is. Its a prerequisite with lower claims. The fire is going on. This number doesnt get you that. Youre down below that 350 which was the bottom of the range we were for a long time. Dips a little bit below three. Everybody gets a little too excited in my opinion. I think that may be what the market sees. See, were in agreement. I wish i wasnt in transportation mode the whole morning. I was hearing wonderful things about the squawk box game and mr. Krueger and the notion there seems to be a split on the board mentality when it comes to his research. I will have to go back and look at the transcript. Is there any talk about the china data . May be a sign of stableation over there. Listen, the debate on china is going to be big. The deal between russia and china, as real as it may be, theres a difference of geopolitical theatrics. I would caution anybody who think thes copper in china and thats going to get you a better read, look at copper versus the index. What you will see is the wonderful commodity called copper was wrong way corrigan in terms of predicting. When stocks started to move down, copper moved up for quite a while. Okay. Thank you, sir. Mr. Liesman, thank you as well. We still have our guest host. Former chairman and ceo of wells far tkpoe. I know we dont have much time. Wii mentioned target briefly when we were talking earlier about potential breaches and what that all means. You were on the board of target. You helped higher greg steinhofel. Right. I know you werent on the board when this happened but you knew him. And you handed off to mr. Steinhofel. I was surprised, one, that it happened and, two, that the reaction was eventually that greg leaves the company. I thought very highly of him. But there was some issues going o. And i think the board made the right decision. How much of it was because of the data breach and the canada acquisition . Again, i dont know. Ive been gone three years. It was a combination. Im sure it wasnt just the data breach. Its always easy to secondguess things in hind set. Is he the right guy to run the company . I was convinced he was. Given whats happening, still convinced . Well, i dont know the facts. But theres issue. We cant deny that. On the banking side, i said i know you think wells fargo is the best run bank in america. But if you exclude that bank, how do you think about the rest of the banks . Just lay it out in terms of how you think about the jpmorgans of the world, citigroups of the world. I think in terms of banks that are perfecting well and have been performing well, us bank and pnc will continue to do well. And more Regional Banks that are in that cat fore. You are a fan of the Regional Bank more than the sort of supermarket model if you will. Than the Investment Banking side. And i have a very great supporter of that. You ensure you arent concentrated in any way. Small banks are really its really difficult because of the regulation. So they are having real problems unfortunately. In terms of the larger banks, all of which tend to be highly involved in Investment Banking and International Activities and so far, the best run bank is jpmorgan and jamie dimon. What do you think about bold man sacks . Goldman is a well run Financial Institution. But the Business Model has got issues. They get in trouble because of concentrated risks. Now they are more concentrated. I just dont 10 roes dont cut it. If you had a dollar to invest, besides wells fargo, you go to the regionals first . Well, i invested a lot of money in jpmorgan. 2. 8 dividend. I think these problems are going away. So thats still an investment. And the growth will come out of the regionals. We have seen a lot of the fines placed on the banks in the aftermath of the financial crisis. You talked about what would or wouldnt keep the private sector from coming back in. What is the effect of these fines . I think its been very negative. Its all political. And its very unfortunate that politics are causing things to happen. I mean, the attorney general makes a mistake maybe. The reaction was very negative. Now he started to jail people. This is just not the way america should be run. We have lots of problems. Some may well be legitimate. I know Many Political reactions. Just to sort of make a point, i said if they hadnt been shaken down for 20 billion, they could have spread 100 million. What did we get from the government. Wouldnt you rather have jpmorgan dolling out yeah. It makes the institution skeptical of dealing with the government and the repurchase agreements. Why would you do something it em boldens the everybody on the left is now sure. Ive seen them call an International Criminal enterprise. And the far left not even the far left would suggest even those allegations arent enough. It hasnt actually done anything. Thats where Capital Punishment they might be for. Thank you for being here. Youll be back soon to we can talk about bitcoin. We are hearing from the intercontinental change that Duncan Niederauer will step down. He will remain president of ice this year. Current ceo is named as his successor. We knew this would happen. Dick, thank you for a great hour and a half together. Thank you. Was it fun . It was fun. Up next, just when you thought it was safe amount of fun. Ultimately it was. Just when you thought it was safe to get back in the water. One our favorites. Blood sucking lampries. After slipping their way into the sewer system. This is not farfetched. Im telling you. It is not farfetched. Attack of the killer lampry. David michael joins us next. 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With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. From the makers of sharknado comes a new aquatic horror flick. This Holiday Weekend blood lake, attack of the killer lampre lampreys. We have to close the lake now. These lampreys are hungry and theyre dangerous. That is beautiful. And you have doc brown from back to the future. And shannon dougherty. David michael latt for the asylum study yes. They are the protection team. It will be on nbc universaal scifi channel. People are rolling their eyes. Im not taking it heightly. They are horrifying. They are like leetchs with eyes. Fish, leetchs. I dont know whether we have the tape of the discovery channel. River monsters guy put it on his neck and couldnt get it off. They are enormous leetchs. Theyre in north america. Actually all over the world. Whats fascinating are the teeth. The mouth is all teeth. It will give you a hickey, thats for sure. Congratulations on the whole concept. When they used to make these movies in the 50s and 60s, were they in on the joke back then . They didnt get in until much later. You were on the joke right from the start i think. Well, i think theres always room for the b movie. And i have to believe they knew what they were doing as well. Exploiting a certain kind of horror thing or animal. Everyone gets it. Were just trying to tell really fun story. Why back to the 90210 . You know thats the place to go . The same demo watching that are target audience for this. You know what, its probably more the partners are all in that age demo. Were men of the 8 0s. We dipped into the well of our favorite tv shows of people we alwaysmeet. Shorthand know dougherty, ian ziering. You know theres an up side. Theres a recipe for beer battered fried lamprey. I hear it tastes like chicken. Have you heard that . People do eat lampreys. The more research we did the more fascinating it game. Juicy with all that blood. How much did it cost to make sharknado or how much it cost to make this. Theyre around the same. It runs between 1 million and 2 million. They are expensive films for us and everyone. Its not as expensive certainly as godzilla. But i think we get more bang for our buck in these films. Its all on the screen. Its soup to nuts, top to bottom. You said a million to 2 million . Yeah. You cant even do a commercial for a million these days. Yeah. We make two to three films every month. But thats our sweet spot. What rating is shorthand know dougherty down to now . Im worried. No, no, no. Everyone is well compensated. The contracts are thick. Lets just put it that way. When were worried about antarctica, these lampreys are fully for me they are up higher on the list than some of the other stuff, david. I think you ignore this at your own peril. Its pretty crazy. My fatherinlaw im sorry. Go ahead. Go ahead. My fatherinlaw, when he found out we were doing lampreys. Hes from minnesota. He went on and on about the problems of the lampreys. It is pretty intense. This looks phenomenal. Whats doc browns name . Christopher lloyd. You have him in there. Perfect. Thanks for coming on. Im looking forward to it. And sharknado 2. Is there a name for it. Sharknado 2 the second one. Sharknami. We can talk. Jim cramer from the new york stock change. And colorados pot business is smoking. Jane wells convention taking ple in denver with a look at the positives and negatives of legalization. Squawk box will be right back. Tomorrow, squawk box kicks off the summer in style. We talk the business of barbecues, beaches, and boats. The best places to visit and where gas prices are headed. Kick your Holiday Weekend off with us tomorrow morning as we get you ready for some summer fun. Squawk box on cnbc. Profit from it. E or au lait . Cozy or cool . Or woof . Everything exactly the way you want is. Until boom, its bedtime. Your mattress its a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy his sleep number setting is 35. Youre the rock at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. Hurry in for memorial day weekend savings. All beds are on sale, starting at just 649. 99. Know better sleep with sleep number. When we arrived at our hotel in new york, the porter was so incredibly careful careless with our bags. And the room they gave us, it was beautiful. A broom closet. But the best part, worst part, was the shower. My wife drying herself with the egyptian cotton towels, shower curtain defined that whole vacation for her. Dont just visit new york. Visit tripadvisor new york. With millions of reviews, a visit to tripadvisor makes any destination better. Welcome back, everybody. Lets get down to the new york stock exchange. Jim cramer joinses us right now. Weve been looking through retail numbers. Sears and what we heard from best buy, a little concerning. Does any of this read to a broader issue or you think this is an execution part on the two retailers . I actually kind of like best buy. I know that they gave you some guidance that was downbeat but the quarter, the previous quarter was so awful, this is a step up. Sears, i know Everyone Wants to dump on it, including me, but theyre closing bad stores, the number wasnt as bad. Theyre losing a fortune. Not recommending sears at all. These were better than others and when you throw in dollar tree and childrens place and Williams Sonoma you get a picture the consumer is okay. Thats my point too. Healthier than a lot of headline reports where youve said theyll missed expectations. To me thats backward looking not forward looking. The ups interview was sensation app. No sensation of package spending. Amazon is amazon in certain industries. Pet smart, you could argue that staples, these were not weakness in the consumer. They were strength in amazon. When you have a category that cant be amazon like Williams Sonoma the numbers are good, i question the thesis and i dont like the downbeat best buy given the last quarter being horrible. A nice move up. They were doing some clearance on some phones. Thank you so much. We will see you in a few minutes. Coming up, Colorado Holding a cannibis convention. Jane wells is out there. Hey, joe. The pot business is trying to learn best practices at the cannibis summit like walltowall uniform grow lights, plant catalyst and intuitive resource planning. It costs money to go mainstream in marijuana. Well talk about it when we come back. The cannibis Convention Taking Place in colorado. Its expected to have high interests among users and growers. Jane wells is in denver taking a look all the angles of the booming pot industry there, jane . Hey, joe. The colorado cannibis summit is a b 2 b expo. Five months in how is it going in colorados pot retail experiment . The state says through april it has collected 22 million in taxes, licenses and fees. Most of that is still from medical marijuana which is taxed at a lower rate but has higher volumes. Here in denver, entrepreneurs are learning its costing a lot of money to abide by all the new regulations like keeping your medical product and cash separate from your recreational stuff. Two sets of software accounting, two safes. Here we have two recreational safes. This tag another expense to doing business in the state of colorado. Also retail. Brook runs four marijuana stores, 60 of sales are recreational, revenue up 30 . Margins are narrower because of all the new costs. Reality is that weve had to hire more staff, weve had to hire more security, provide more training, our exit packaging costs just the Compliance Costs that are now statutory in the state of colorado, you know, that adds another 20 plus thousand dollars in bottom line expenses. And then how does she bank . Banks dont want to accept their money. Listen. Taxes are paid in cash at this time and local government, state of colorado, department of revenue, made accommodations, they have gone out and purchased cash counter machines because they know the volume of cash theyre accepting. So somebody is taking a bag of cash to the state to pay taxes and the state isnt putting that in the bank . Absolutely. But you cant put it in the bank . No. In that case the bank has the risk of the federal illegalities. Guys, theyre talking about trying to start a banking cooperative. Back to you. Thank you. Mary jane wells. Dont know if you can bake that stuff. Squawk on the street begins right now. Good thursday morning. Welcome to squawk on the street. Im carl quintanilla, jim cramer, david faber at the new york stock exchange. Big morning for retail as it has been all week long. Today, sears, best buy and more. Futures up slightly after pretty decent china pmi numbers. 10 year yield, existing home sales in