15month low. Australia cutting rates, auto sales on the way. Roadmap begins with tim cook. He joined jim on mad money last night covered everything from innovation to china to revenue to the companys value. Global data driving futures. Well tell you what to expect on wall street today. And shares of aig down in the premarket after earnings. Peter hancock will join us live. First up, tim cook defending app apples latest results and the stock mired in a slump. He was on with mad money last night. If you talk about macroheadwinds, difficult compares dominant. Yeah. Currency, no new iteration yet. If youre going to be opportunistic wouldnt you say let all the hedge funds blow it out and then well make a statement . Well, opportunistic to me means you buy it when you think the companys undervalued. We believe the companys undervalued. All right. I got to get your thoughts on what he said and whether it changed your view in any way, whether it should change other peoples views. I think if you want to take a longer term view, it should change your view. The reason is because the company will not look like it looks now. The company will be a Service Revenue company within an installed device base. The motto of all these usually the m. O. Is razor, razor blade. Thats whats happening. They backed spoo that, that wasnt the intent, but over and over again cook is talking about the icloud photo backup, music, just really looking at this device and thinking its hardware. And thats a mistake, because the fees that you pay are not going to be unlike netflix, unlike costco, amazon prime and then apple fees. So the idea that theres no revenue generated from the ecosystem is going to prove wrong, app store. I think thats the way you want to look at it. If you look at it as a device company, you should sell it. The fact is what hes referring to as the buyback, look, we see it undervalued. If you see it as a hand set companies and get out before it hits 60, but he doesnt view it like that and hes got a lot of fire power and take the other side of the trade. Cook went into some depth on this exact point on Service Revenue. Take a listen to this. Services now is the second largest revenue segment at apple. It was for last quarter, it was for the first half of the year as far as that goes. And so last quarter we were at 6 billion, up 20 . Its a fast growing. And you look at what it is, its things like the app store. You go and you buy apps far after the sale. You might subscribe to apple music. You might use apple pay. You might buy songs. You might rent movies. And so its all of these things. And it really adds up. Now and that of course is based on how many people are using our devices, how many devices are out there. And theres over a billion devices in use. This is huge. Yeah. Look, i think what hes focused on is the quality of the product, 95 Customer Satisfaction so the ecosystems going to stay and be passed onto kids. We talk about Hewlett Packard, intel, microsoft, companies that have lost their way in terms of very low multiple and broke down. He said, look, no one really liked the product. The product, the product, the revenue stream that comes with the product. These are the constants that he sees, but when you look at the Conference Calls and they dont care about the product. We were talking about everyones on their apple telling customers they should sell apple and yet you try to take their apple away they would kill you. Just the irony but its not the numbers, the numbers look bad because the numbers for the next three months are supposed to be bad. He told you that. They will be bad. They should downgrade, get out of our stock, so to speak, is what tim cook is saying. And i think thats a natural. When people say i didnt hear innovation, he said over and over again, if i told you innovation, you lose the drama. This is a surprise stock. Talking about the watch, carl icahn said youd sell 20 million and instead you sold onethird of that. He says we never said 20 million. Who said 20 million . Apple is a company where theyre not going to telegraph their moon shots in a way google or facebook will and does. No. They never have. As we know things are in secrecy. Everything covered when anybody goes to the headquarters some of the new stuff is all covered over. But, jim, i think youre making important point here, but i have to wonder is this move to have people focusing on services a move of necessity, or was it part of a longheld plan . And regardless, when you talk about a company that is then relying on recurring cash flow stream, which is a positive in a lot of ways and not as much on device sales and on the choppiness there, and not as much necessarily on growth from those sales any longer, how do you go about valuing it . What does it look like whats it peer group look like . Well, look, this is the issue. A lot of people feel its just a dodge. Out of nowhere were talking Service Revenue. I pressed him in the previous quarter why dont you talk more about Service Revenue. Now obviously im just one of the many people that talks to them. I think what happened is Service Revenue surfaced as being much larger as more devices were sold. Theres always been a component for service, it was never that big. Because of the amortization, you understanding the accounting, it doesnt look nearly as good as the actual the actual spreadout because you just cant book subscription the same way. But i would say, david, whether they backed into it, whether you believe it or not, what youre going to see in the next quarter is the Service Revenues going to go up even as the device sale slows down. And thats going to show you its not ios. Right. And i think thats what theyre banking on. Now, did they count on banking, last year you saw this great spike in device and it was on steroids and they show you if you smooth it out its not as bad. There is slowdown around the world. The device category is slowing, but they talk about india, they talk about china still middle classification, talk about new devices going to blow you away. But i think people who hate it are still going to hate it. After watching the interview going to say, wow, theyre going to say, oh, give me a break. Its a device company. Its Hewlett Packard. And i think thats a mistake. I think thats a very shortterm way to look at it. And that gets you out at 92 and back in at 83. I dont know. Where theres yield support and buyback support, but this is is truly one of those stories where you believe they know how to innovate or you sell. You dont hold. Sell. So you are prepared for more skepticism and more selling . These analysts have these 170 price targets and they got buys on it. They look like fools, go into the research department, you better downgrade. We havent had an up day. When you do an up day that gives them a chance to be able to say it was a great run. Those are two different worlds. Theres the world of people who actually believe in the device. And theres a great contrast here. This is not blackberry, this is not something that Hewlett Packard put out and they never did. The reason this is so important is because people are willing to pay because they like the device. Theyre willing to pay for these little things. And they could become big things. Apple may have backed into it, they might have lucked out. But to dismiss it is to look at the company and just say its this thing. And when another guy you know, when chow mi comes out with something or white box chinese, its going out wouldnt you agree his china call is fraught with some risk . Absolutely. Theyre still not willing to say that communist country, the committee, the agency that stopped it is the agency of all media. We dont have an agency of all media. We forget that its a communist country. And its not like, well, hold on, wait a second, call up the minister of justice and straighten this out. So theres risk there. They refuted the risk that i staid said the white box is taking over, theyre talking switching from android. Also talking about this idea that it doesnt have to grow right now just to switch from android means a lot. And the fact indias going to have more people than china in the course of the next five years and theyre going to be able to dominate china actually six years, and dominate india because india is bringing in a new lte system. In the meantime you have to go through the valley shadow death. And people fear evil. You make it sound so dramatic. It is a drama story, believe me. Were going to hear a lot more about what tim told jim last night. Meanwhile futures are sharply lower. Stocks poised to erase most of mondays gains. Data out of china showing factory activity did detract in april for the 14th consecutive month. And in Australia Central Bank surprises by cutting to a record low of 1. 75. First rate cut there of the year. The yen at an 18month high. More discussion about whether kuroda is playing this whole game wrong. All i think about the ceo from ford give us a level Playing Field well take the lions share. We are reacting to the pajamas traders, im saying whats bad for japan is good for the u. S. Whats bad for europe in terms of the euro is good for the u. S. And yet if you look at their markets, those markets trade down as they should because theyre going to begin to lose share. Benz is going to lose share, bmw, honda, toyota, thats really important for our economy. So whats bad for them, why their markets are going down is good for us. But these futures traders dont look at it like that. Do you think they know companies . They say oh, down, down, down. They wouldnt know a company if it dropped on their head. So nissan, okay, they miss. So the Japanese Companies will miss. Thats good for ford and gm. See, ford and gm are american companies. Yep. Europe in that obviously is a translation, so again they win. But we should stop looking at whats bad for the goose is bad for the gander. Pfizer today, david, raises its guide for the full year in part on this lightning dollar burden. Yeah, although the quarter itself was a decent quarter. Yeah, were going to see the stock up this morning. Listen, they are still reeling as you know from the decision on the part of the treasury to target their deal specifically, as we can say. Not treasury. To put an end to it of course. That being the allergan transaction. Decent quarter from pfizer. Stock up rather sharply this morning, guys, which is certainly good news. And it hasnt really moved appreciably. The name really has gotten crushed since then of course, jim, you know has been allergan after that deal fell apart. Yeah. I have very little faith that theyll make the quarter just because people dont like it right now. So whatever number they print. And thats because the type of deal has to close. When we come back, guys, big quarterly miss for aig. Stocks lower in the premarket. Well talk to Peter Hancock. And these auto sales are about to come in big. Thats coming up after the break. Dont go away. Fords out with auto sales for april. Our phil lebeau is in chicago this morning. Hey, phil. Hey, carl, increase of 4 last month for ford sales, that is slightly below the estimate of increase of 4. 5 as has been the case for well over a year. Its all about trucks and utilities, especially at ford. The f series up 12. 6 last month. Remember, were finally getting that full year rotation in terms of sales and production of the f series with both plants now up at full capacity. And the car sales as it has been for all automakers people are just moving away from cars down 11. 5 last month. Guys, we get gm numbers in about 15 minutes. All right. Phil, thank you very much. Well be watching that. Trying to get back to this 17. 3 number for the year after march was weak. Be cautious again. People have to understand that latin america right now is terrible for these guys. You can look at the United States and make a decision, youre going to get the decision wrong. Auto nation and car max give you more of a sense of what is happening in the u. S. Besides these. But i just really want to urge people these are inexpensive stocks and if you think the dollar trajectory is going to continue against the yen and euro, youre going to regret you sold these stocks on these figures. Aig, adjusted quartly profit well below forecast by a dollar. Company hurt by weak hedge fund returns. Well talk to Peter Hancock later this hour, but in the meantime, david, your thoughts on the quarter. Listen, theyre trying to do the right things. Youve got john paulson and carl icahn joining the board of directors of course after settling what was going to potentially be a very distracting and long proxy fight for board seats on the part of mr. Icahn. And youve got hedge fund losses. Now no surprise to us, right, guys, it was a tough quarter. But you do forget for aig this happened last quarter also. And it adds up. What are we talking 537 million loss in market value of its hedge fund holdings. And that of course resulting to a certain extent in some of the missed here for the company, but well have to talk with mr. Hancock and sort of see what he can cite as some of the key reasons why he believes theyre on the right track. Return on equity at least, jim, a little better than what we saw with most of the banks out there. Not saying much, but i guess its something. Yeah. Look, it was a soso quarter. I look at travelers. They are such better companies. Honestly, yeah, im happy to speak to this gentleman thats the ceo, but this aig is not really as great a company as people think. There are some possibilities here, but when i look at chub i think, wow, what a Better Company at aig. These are just night and day. Aig is never going to make the playoffs looking like this. This is a 610 team, maybe a 511. Theres no draft choices in this business. This hedge fund issue, david, i thought that was supposed to be last time. The hedge funds caused a problem last time. Why dont we kick the hedge funds out . Tell me what thats all about . Its not that easy to get out of hedge funds as you might think. They are taking exposure to hedge funds down i think roughly 11 billion theyre taking it down rather significantly, but it does take time. Sometimes, jim, you cant just get out in one quarter. You may have quarterly liquidity but doesnt mean youll be able to get out all in one quarter, right . I guess thats part of the reason here. Well see what mr. Hancock has to say as to whether we can expect more, of course the hedge funds performed a bit better as so the overall market. Unless things change dramatically in those kinds of losses. Im sure hes got an excuse for it. Got an excuse for everything these days. I will tell you jay fishman who ran travelers and took that stock to where it has to go because hes one great executive, remember what kind was he in valeant . No. David, you know that the real greats, and im talking about the people at chub, and you know chub and his son they dont fool around with this stuff. No. It is a wellrun company. Theres no doubt about it. Obviously they had a huge deal last year they closed, right, jim . Theyre winners. I think hancocks got to show us something. Yeah. There are a lot of different businesses too, right . I mean its not just apples to apples with chub. No, but theres a way to run a company. Lets hear it. I mean, look, hancocks new. But i got to tell you i look at this number i expected better. That sounds like its going to be a good interview. When we come back look at cramers mad dash, count down to the opening bell, take another look at the premarket. Some weakness obviously. More squawk on the street from post nine at the nyse. Straight ahead the stars and marvels captain America Civil War chris evans and jeremy r renner will ring the the bell. Understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. speaking japanese oh watson, your japanese is very good. Thank you. speaking japanese exactly. I can understand nuance, context and idiom in seven languages to help companies all over the world with everything from retail solutions, to banking, to cyber security. speaking japanese seven minutes until the opening bell. Lets get cramers mad dash ahead of that. Clorox out today. Industrials ran for a while, talk about this roving bull market. Back yesterday colgate, another fabulous quarter for clorox. He was dealt a great hand because when mr. Canals, when he left, that last quarter got him out of venezuela. Venezuela stopped paying for everything. I mean venezuela is not really its a failed state. And they got out of it, so they have really good numbers. What im really impressed with is you got the 4 volume increase, cleaning sales really good, household sales really go good, burts bees really good. A fantastic manager. He understands how to get to millennial. He spends a fortune on facebook. He knows where people the millennial are thinking. And hes got them on their mind. This burts bees which initially i thought was an overpay really ramping. This is the kind of company you get that good dividend, you get the buyback, you get wellrun management. And you can sleep. Sleep at night. Forex is a 3 point impact. Right. You talked about level Playing Field. Its going to be good. A little of latin america which i dont really like. You had the peso go up. We do so much business with mexico, they need to get that to 15. Its like 18to1 . Dont i know i go to mexico are you kidding me this meal costs me 9 . This was 18 two years ago. While youre talking chris evans and Jeremy Renner have made their way to the floor of the nyse. Marvel a unit of disney. Yes. And this cast, Robert Downey jr. , scarlet johansson. Yeah, but espn lost somebody. Heres iron man making his way i dont know where our camera is, but theyre coming and theyll ring the opening bell. Well talk about that and impact on disney for sure when we come back. Dont go away. The call just came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Th