Transcripts For CNBC Squawk On The Street 20160622 : vimarsa

CNBC Squawk On The Street June 22, 2016

Ford. You got to try to figure out i know david is completely driven by this idea of the driverless car. Well, were going to be in one, but we wont be driving. Jim, were going to get a lot with you in a few moments. In the meantime stocks are up three or four sessions, but a lot of bets may be held today as we await the brexit vote tomorrow. Europe relatively steady, a lot of earnings to get to and by the way oil did reclaim 50. Road map begins with the countdown to brexit. Were live in london with the latest on which way it could go and how Global Markets are reacting. Teslas offering to buy solar city, the price tag about 2. 8 billion. Were going to get elon musks take on whats really behind this offer. And shares of fed ex sinking after earnings. Well break down the numbers you need to know. But first up ahead of tomorrows uk referendum on eu membership, a number of polls have the outcome as too close to call. Wall street will also focus on day two of fed chair yellens capitol hill testimony of the economy. Shell appear before the House Financial Services committee this time. Jim, a lot of discussion about more high cash balances, especially in uk mutual funds, 6 is going to be the highest since 2011. Some have said its almost irresponsible to make big bets with clients money ahead of tomorrow. Well, the only reason why i disagree with that analysis is because were always bound by the earnings per share and the future of earnings per share. And theres just not that Many Companies where youre just going to have to slice the earnings per share. Yes, its true, some maybe of the banks i would say if youre going to make a big bet on the banks, that could be fool hearted, but ive said that forever even in this election in this country a big bet on the banks might be fool hearted. A lot of other things i see trading, deago, anheuserbusch, these are not going to be the new bud inbev. I dont see these as names, we get the stocks and decide im scared to buy them, someone else is going to be bolder and buy them and do well. Huh. Socgen has a note today the rain could actually hurt the remain vote tomorrow. Is that going to be our existence for the next 36 hour sns. Its going to be their existence. Im trying to figure out how it impacts pfizer. If they want to get al roker in there figuring out the numbers, we can poll al roker, see what he says and also see how al roker bets to see if thats different from the way hes polled, or we can actually do the work and try to figure out whether fed ex is a buy or whether adobes a buy. But its so much more fun to do this british thing. I mean, to me its fun because you dont have to do any work. You can say, hey, you know, i dont know. But if youre on the adobe call last night youre not thinking, hey, i dont know, you have to figure out whether it was a good quarter or not. Were going to get to adobe, obviously, and a lot more. As far as yellen goes, jim, your temperature on what she said yesterday and whether you expect anything else different on the house side. Well, first shes got to cheer up. She brought me down. She had that down beat thing. You got to work on your posture. Ive had to work on that myself. Ive had a lot of people teach me how to do that. You cannot be leaning over and make the sad faces because its not a time for that. Our countrys doing better than everybody else. But she seemed very beleaguered. So maybe she gets a little Monster Energy today, numbers are going to be made and shes going to come in with a little more effervescence and feel a little better about ourselves. All right. Were going to see again her testimony begins 10 00 a. M. Eastern time of course after her testimony to the Senate Banking committee yesterday. Then theres tesla today offering to acquire solar city in the stock deal valued up to 2. 8 billion. Musk is the chairman largest shareholder of both companies and calling the combination a nobrainer. This is musk on last nights conference call. We think theres really a huge opportunity here to have a highly integrated Sustainable Energy company that answers the whole Sustainable Energy of power from storage to transport. As the company in his mind tries to go vertical, jim, this morning with analysts he said this is what the world needs. Zero doubt about the deal that arguably he should have done it sooner. Well, no, did it the right time because solarcity cratered because it had a hard quarter and no one really understood what it was. We talked about that on squawk on the street. I mean, the quarter was so bad the analysts themselves were in open rebellion. Is this a desperate act by him . I dont know, if you bought the stock tesla on the big underwriting, i think youre feeling a little betrayed. But musk is taking a longterm value. Hes thinking longterm, we got the batteries, get the solar from your roof, its going to charge your car, its got this great synergy. But in the meantime all i can say is solarcity would have gone even lower if he hadnt made this bid. Its not clear of course what the synergy is at least on the part of shareholders questioning the significant change in strategy. I would point out of course tesla shares have lost more in market value at least as we get started here this morning than the overall value its willing to pay for solarcity. You know, its interesting solarcity will have a special committee, but some people this morning or tesla shareholders tell me they wish teslas board of directors had its own special committee to decide whether it should actually do this. Mr. Musk has recused himself from the voting on it as a director of solarcity, as has antonio gracias. But the directorship of others and the potential conflicts are quite significant. The ceo and cofounder and peter, brothers, both musk cousins. John fishers fund is a spacex investor, of course another musk company. Jeffrey spacex investor, direct forat tesla prior to it having gone public. By the way, tesla did an offering six weeks ago. Those shareholders must not be particularly happy though one wonders whether he had any idea he was going to do this. Clearly the cost of capital will be improved for solarcity. Investors, jim and carl, wondering what exactly is the real strategy behind this other than bringing in a company that clearly is suffering right now and offering it some sort of a life preserver if you will. Right. But remember before we get too caught up in the conflicts, im sure musk say listen im losing a lot more on my tesla than i am solarcity. Obviously hes a person whos so rich and he did not buy on that 215 offering where it certainly doesnt seem like a nobrainer to those people. Those people if they didnt flip it when it ran up to 2. 23 feel very aggrieved. Is it a great idea to put this thing together . There are people who think anything elon musk does is brilliant. I come back and say the cars really good. And if you really like tesla, you should buy the car. If you want a solar panel on your house, solarcity gives you a good deal. But what that has to do with buying the stocks, i mean, its a nobrainer, you dont buy the stocks. I know. Listen, on the call he wouldnt give a lot of details in terms of synergy numbers. By the way there is going to be a vote it would seem of its subject to the approval of interested stockholders, so there will be an ability on the part of them to potentially vote this down. But something comes to mind here, jim, because we were trying to think, todd our executive producer and i were trying to think and i did come up with one similar in nature, freeportmacmoran, when they made that acquisition a number of years back of oil and gas assets of Plains Petroleum . That didnt work out particularly well. People question the strategy there and its kind of similar in some ways youd think. Well, you picked the worst deal of our era. And, yes, i mean there was family members involved, and that was terrible. I know there were family members aggrieved by that but they of course didnt work at the company so they knew better. That companys still trying to unravel itself after getting together this company i think is much more of a family affair. They dont necessarily disclose inlaws in those s. E. C. Filings, but this is one where everyone kind of felt after that solarcity quarter that theyre switching their methodology, maybe youre going to have to buy the panels, maybe they lease the panels, making money leasing f you buy they dont make that much, tax credits gone away, Utility Companies all against it, but musk has one thing going for it, david, millennials, they love it. They dont have enough money to buy stock because they owe so much debt on student loan. The milleninials champion this deal. I dont know when were populated on mars and nobody wants to go. The cars are great. I havent liked its a cult stock. What do you think . Dont you know what sustainability means . It means you can lose all the money you want as long as youre sustainable. Thats how these people think, carl. They dont think, well, you know, i want to put my kid through college, they want to put my kid through sustainability. I understand. But there was questions about to boost production and now its about the journal today why does the big cash burner buy the one that burns cash a little bit less. If it had been another company, jim, i think you might have given them a little more heat. But your point has repeatedly been the cult nature of the stock protects them. Well, go drive one and you want to own the stock except for the fact that the problem is stocks actually trade on earnings, they trade on fundamentals, but this is a cult stock. There will be people who say, listen, what are you talking about . You put the panel on, you charge your battery and its onestop shop, its like your own gas station but its sustainable and doesnt use fossil fuels. Like why are you guys giving this guy a hard time . Any time you give him a hard time, on twitter, visionary, visionary, visionary per share, i dont know, i mean, whats visionary per share, whats the press release per share . Maybe you like 17 times press release . I dont know. Yeah. I dont either. And a lot of people are wondering and again i would just point out the loss of market cap in tesla is equal to if not actually exceeding the overall value of the potential deal. They had to disclose this by the way because they were already a 13d filer. They had to let us know before they entered into the negotiations. On the call where people said didnt seem as prepared as they might have been, teslas ceo musk did say if were selling power walls and solar panels in the same footprint that were selling our model 3, then the same person and our costs of sales should drop in half or 30 or 40 , maybe thats some sort of synergy theyre talking about. Ongoing maintenance, he said, would be one point of contact, not two to three points. The cost of the system itself is lower because youre not duplicating hardware. It all makes a lot of sense, mr. Musk is quoted as saying, guys. 40 of solarcity sold short. People felt trajectory already down 60 . The trajectory was to take this thing so it was really questionable whether it had survivabilit survivability. And suddenly snatches the victory out of the jaws of defeat and he talks a big game. And i think that heres what i think were missing. The analysts who are working very closely with the banks that theyre at, they tend to like these deals. Musk does like a lot of financing. I am not saying by any means that they would be swayed by fees because we know better than that. But they seem to like a lot of the deals that musk does. Yeah. Well, again, it will come down to a shareholder vote it would seem of tesla shareholders if they even get that far, guys. And well see how they feel about it. That will be the ultimate decision here. Well, you got hurt if you bought on that secondary. And i think that people who bought at 2. 15 right now are probably feeling unless they have the car, you know, wow, i should have bought the car, not the stock. Jim, its good to see the west coast travel is not diminished your energy level today. A lot more with jim not one bit. When i get some sleep its going to be dynamite. When we come back, facebook pulling out all the stops to strike some live video deals. Also ahead, an exclusive with twitters adam bain, the coo from cannes lion. The dow up by about 42. More squawk on the street from post nine in a minute. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Fed ex posting Quarterly Results that beat estimates, but the Company Reported an overall loss due to pension costs and expenses associated with its recent acquisition of europes tnt express. Also says it plans to boost cap x by 6 in the current fiscal year, jim. But the midpoint of their guidance for the year is just below the streets 12. 17. Whatd you think . I liked the quarter a lot. They did lower the gross domestic product. Remember these guys always give a big view on the industrial side. But the consumer looks very strong. The ground plus business is plus 20 growth. Same day delivery in 24 markets, why do i mention this . They make a point that 95 of online commerce is still done by ups, fed ex and the u. S. Postal service, they make the point that the u. S. Postal service may not be doing as well as people think. In other words, this is not a mixed bag quarter the way citi said its a stock thats gone up a lot but doing so much right, i really think this was a good quarter 2. 7 billion repurchase, big increase in the dividend. Those who want to nitpick, i think youre nitpicking because the stock is up too much not because of anything they said because i liked what they said. Curious comments out of fred smith about brick and mortar versus ecommerce. You sort of know which side of the bread theirs is buttered, but he did say its going to be a long time before retail is threatened, he said. Millennia millennials, he says will still shop in stores. Hes so far from millennials, hes like 4x millennials, he was kind of split on that but i make the point fed ex isnt going to be counted out for online or ecommerce. I think the big downer he took down his Industrial Production number gdp growth in sync with the down beat janet yellen. Now shes like jdy, but i think those who dont like this quarter dont understand the way this company is which it does really well, tends to be conservative on the quarter and then blows people away again versus ups which has been stuck at the same price forever. Indeed. Says they dont they try not to maximize each segment margin each year. If we did that wed never be able to take advantage of the broad portfolio. Yeah. I mean, look, these guys are really good at what they do. And what they made me feel like is amazon isnt going to eat their lunch. I know that ups put in some packaging rules that made it so trucks arent just filled with nothing but amazon and a lot of air, but i will say that fed ex the margins were increasing, i like the fact they believe in their own stock. The analysts were very split on it. I think the analysts dont know what to do because the stocks up so much. But fed ex to me is not going to be ruined by amazon, not 24 cities theyre doing sameday delivery. It was a humble quarter by a humble group of operators but ill stand up for them and tell you they did a good job. All right. When we come back, jim, well get your mad dash from out west, count down to the opening bell, kbh, adobe and talk about mcdonalds downgrade today. Meanwhile sarah ieisen is live n london ahead of tomorrows uk referendum. Hi, carl, good morning. Today is the last day of campaigning for both sides. Love the british newspapers, big business mostly on the side for remaining in the eu. Heres the cover of the times, some major u. S. Companies, more than half in the ftse calling for a british people to vote in, meanwhile the tabloids, the queen graces the cover of the sun with some inside reported reasons about why the uk should vote to stay in europe. Clearly the royal family has been impartial in this vote. It gives you a sense of how all encompassing it is here. Things getting heated. You mentioned the betting odds versus the polls. The polls today showing a slight edge for leave, betting odds going up to 77 britain stays, market is following that with a pound at fivemonth high. Are they overestimating . We talked to a very well known Hedge Fund Manager here in the uk who says, yes, he has bearish take on europe and his economic case on why britain should vote out. Coming up in the next hour as well as the u. S. Impact, the truth about the u. S. Impact when it comes to the economy of the brexit vote. Thats all coming up in the next hour of squawk on the street. Well be right back. There are two billion people who dont have access to basic banking, but that is changing. At temenos, with the microsoft cloud, we can enable a banker to travel to the most remote locations with nothing but a phone and a tablet. Everywhere where theres a phone, you have a bank. Now a person is able to start a business, and employ somebody for the first time. 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Were going to do a Cross Country mad dash here. Lets get to it, jim of course in san francisco. But we are about, what, six minutes before the market opened. Where are we headed today, jim . To adobe. Now, adobes going to be down today. Why . Because the stock had run from the 70s back to the beginning of february after the disaster that was linkedin. Went downright along with them even though it h

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