tv Squawk on the Street CNBC April 9, 2014 9:00am-12:01pm EDT
like you heard ash williams say, it's really a situation where investors are moving out of mortgages into anything and the chinese said to me we'd rather own -- we have enough of your paper. we would like to own your real assets. >> pleasure to be here. >> thank you. >> join us tomorrow. "squawk on the street" is next. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. finally got that bounce in stocks yesterday and futures suggest it may hold, at least at the open. facebook is higher on some news, gm facing a big downgrade today. watch that ten-year. we'll get fed minutes this afternoon, mortgage apps and refis continue to get weaker and weaker. in europe, greece will return to the bond market tomorrow for the first time in four years. spanish italian bonds yielding
3.2%. our road map begins with a $7,000 fine, every single day, that's what gm is paying because the company still has not provided enough answers about its ignition switch recall. it's not the only bad headline for gm this morning. more on that. >> earnings season is officially under way after alcoa reported its results after the bell. what can the aluminum maker tell us about the rest of the quarter? we will have some answers. >> instead of running from facebook, companies are willing to pay a lot more to advertise on the social network. but is that good news for the company's stock? first up, though, some tough news for the auto sector. toyota recalling more than 6 million vehicles after uncovering five different faulting involving parts ranging from steering to seats and nhtsa fining gm $7,000 a day for missing last week's deadline to provide information about its recall for defective ignition switches. morgan stanley cutting gm to underweight today, $33 target, guys, and what is a tough note, talking about the capacity the
industry has added, currencies, auto financing, deflationary forces, saying there's a lot of work to do for these guys. >> you either believe in the cycle or you don't when you're on the call for alcoa it's clear that cycle is alive and well, that march was better than february, that february was not that bad. i think this is such a downbeat called. i have to disagree with it. it's too downbeat. you could say jim, charitable trust owns gm. i think it's an inexpensive stock. david kostin was on yesterday. i think he's remarkably good, i have to tell you -- some of the work he does is that -- hedge funds own gm. they own aig, there's a kiss of death thing here. you have to get the hedge funds out before gm goes higher. >> we talked a lot in the last couple weeks, hedge fund ownership the pain they've been suffering and look at names where they are heavy in the ownership because they have been taking gross exposure down as a result of losses in different parts of the portfolio and that means, obviously, taking leverage down but also just
taking the draw down so to speak, selling the stock. and you want to look at those names. others look at those names to short them. >> people shooting against the hedge funds. i talked last night on "mad money" about time warner and cbs. one point i hadn't read coatue's holdings, $7 billion to $5 billion. >> they're very well known. he's been on with us, somebody i know very well represented, tiger cub. >> tiger cub. >> has done an extraordinarily good job. but yesterday, coatue's letter, these letters by the way go around these days, do you remember in our day, a letter was something private between the hedge fund manager -- >> you got my worst letter ever and you called me. >> did i really? >> yes, you did and you said oh, my god, it's faber on the line. like mike wallace calling. faber on line one. >> i had a couple of those calls, i remember. nobody on the other end ever forgets them. >> it's true that letter that you got, how did you get it? well, you know, tnsa didn't get it and you got it.
>> everybody gets the letter. >> i knew tyicoatue was a tiger >> all i'm saying is yesterday at one point i turned to dave and said, do you think that cbs is down because of letterman? in the meantime no it's down because of a letter. a letter from a hedge fund and people -- i'm like, desperate, like last time i'm like maybe there are too many commercials. no. it's a hedge fund. >> do you believe in this morgan stanley fundamental analysis, though, that u.s. replacement cycles coming to an end, right, tesla is getting all the engineers, they're going to have to invest in a lot more cap ex to keep up. >> i don't believe it in at all. when you saw the inventory numbers, we're back to 65 days. that's -- we had 70s. i think we're seeing -- there's going to be 16, 17, the build will be fine. you know what, let me say that there's -- if you've been recommending gm, the pain is so great, it's almost like you just take that anvile and throw it away today. we used to call it at my old
hedge fund that you managed to come up with a bad letter, this is the maiden in the volcano. like karen cramer used to say i don't care we're throwing one of these stocks in the volcano. i can't take the pain. this is i can't take the pain call and you know what, sometimes those -- you have to go to the other side. other people that have come on the air and said they can't take the pain, it's lower. you have to take the other side of the people who can't take the pain. gm, i think that gm is a buy not a sell. >> i like it. now, of course, you're been a holder here through this. >> i've been wrong. hey, how about that. on twitter people are going to say, cramer, is an idiot. even he admits he's wrong. sometimes twitter is not the most accurate -- >> all three of us -- >> more or less the constant chorus, at least you get some people saying you're really brilliant. >> periodically. >> you got one of those. congratulations. >> i never have gotten one of those. >> he gets a couple of them. >> they feel down, bad for me after like five bad pieces including an attack on my restaurant, i get one guy that
says i like cramer, i don't think cramer is the devil, sign of 666, but i think that gm, i was wrong, because i didn't really anticipate what i think turned out to be the greatest debacle in auto history since the pinto, but at this point, let the hedge funds liquidate, throw the maiden in the volcano and move forward. >> talk about something you've been dead right on alcoa. reporting first quarter operating profits of 9 cents a share ahead of wall street estimates. revenue did come in shy of consensus. raising its aerospace growth outlook for the full year citing stronger demand for aircraft. here's what klaus cline felds told jim cramer last night on "mad money." >> i think hair row space is -- aerospace is ed dual and we're standing on multiple jewels, i could also talk about the coming back of the building and construction market that was in a big slump but coming back now. >> jewels.
sitting on some jewels. >> he didn't even talk about, you know -- yes, i like klaus cline felds, you make fun of me, used to be able to get your wedding dress -- >> can't return those. >> but yes, the larger people -- >> say yes to the smelter. >> you can't return those after they've been worn. a head's up at home. the boeing call was very importantp in in other words that's my take away on the unbelievable seven to eight, goes to 8 to 9%. if anyone listened to the last conference call you heard a gasp on the previous one because he put a bullet through the head of boeing in the last call. talking about an inventory correction. now boeing, this is going to be -- it was the beginning of the boeing decline, i'm predicting the beginning of the boeing advance, 2.1% increase, 5.7% increase in air bus and by the way, the truck call was the best call and he didn't even talk about it on the conference call.gigantic. heavy trucks expected to gain 5.9%. very important.
this is a -- i thought that they really delivered. by the way, the revenues were not weaker. take out 8 to 10% of the capacity same time you have a decline in the price of aluminum and you absolutely have to have a incline in revenue. >> any signs they missed on revenue that are out there you think are misleading? >> yes, absolutely. you have to do the numbers. you have to go back over the amount of closures and the price of aluminum. i'm getting heat, stock is down 15% since he came in and you're an idiot. i'm tired of idiot call. it's not a bad revenue quarter at all. >> that's good. >> and earnings per share did 9 cents instead of 5 cents and that's the downstream. a part which is taking share from steel and i like it very much. >> what happened? >> all right. >> we got a deal this morning. >> really? >> nothing -- mine $2.9 billion it appears procter & gamble is selling its iam's.
>> pet food? >> in the major markets for $2.9 billion in cash. >> who did they go to. >> mars pet care. mars. >> mars, the largest private companies in the world. hershey downgraded at goldman today. pinnacle foods run been an ex-mars guy. >> to ber shah. >> yeah. it's interesting, procter & gamble is trying to focus more on its core business so it is getting rid of its pet care business. mars pet care, most of us think of mars as a candy company, but their pet care company is good, employs more than 35,000 people across 50 countries and among their big brands are pedigree. they say adding iams and eukanuba will be a good fit for them and it's -- their vegs of making a better -- vision of making a better world for pets. >> huge growth business. >> it is. >> $50 billion industry. >> look, every time i want to get negative on the pet business
because zoatis, it's more broad, you come back and say yes, as bertha said, huge amount of money spent on this. procter & gamble, i've been waiting for the big restructuring since laughly came back. really rationalize the company, raise the dividend 7%. this is all good news for proctor because i think proctor needs to be a little more focused. by the way you get very good discount on proctor products. >> other large potential businesses out there from larger companies, navartis animal health for sale potentially. >> yes. >> and then, obviously, merck's consumer business. >> that's for sale. >> a lot of offers from i'm hearing. an active potential auction. could go for 11 to $12 billion. >> are you serious? >> bank kaiser the one i'm hearing on that. >> that's why the stock is, that's a great call by you. >> again just to this idea of the larger companies starting to
part with some of the assets they don't see as strategic. >> shoals too for merck have the consumer products business. b and g, small company, bgs, conference call recently, 4% yield, they have been moving very aggressively. there's a lot of companies that want this space. they want this space. >> meantime let's move to facebook. according to ad week this morning, brands are willing to pay more to advertise on the social network after their pages started reaching fewer fans with unpaid posts. facebook coo sheryl samberg on the "today" show asked about her future. >> you have, i guess, unloaded about half of yer facebook stock and some read the tea leaves and say is she planning to leave facebook soon. >> i'm glad you raised this. there's been confusion. a good chunk of what was sold was for taxes. there's confusion. i have plans to stay at facebook. i love my job. i love what we do every day to connect the world and being able to work on my personal time. >> you might be running for
political office? would you rule it out? would you run for political office? >> i'm not running for office. i really love my job an no plans to make any changes. >> would you rule it out? >> i have ruled it out. i don't think that's for me but i really believe in what i'm cog. >> moving the ball forward with savannah guthrie there. the ad week story pricing according to some ad buyers and partners up 10%. quarter on quarter from q4. >> yeah. my go-to guy there is robert from sun trust, put out a terrific piece talking about return on investment, ad revenue $2.17 billion, price increases of 80%. everyone should read his stuff. he's been so dead right. jordan rolharohan, first guy ou the bunker went over the top recommended facebook. pretty good call. i told you watch jordan he's been bloodied, they can come back and do the right thing. >> today the two-year anniversary of the purchase of instagram they bought for $1 billion at the time had 30
million users today 200 million users. >> and i got to tell you that people are going to -- not stop -- going to stop laughing soon. >> that's why they have the confidence to spend $19 billion what it could come to if all that deal comes through in terms of the restricted stock for what's app or $2 billion for a virtual reality gogel maker. >> place a lot of bets. microsoft placed no bets. >> right. >> i know. >> we've talked about it many times and i'll tell you keeping a lot of technology bankers very happy. >> well, how come their stocks aren't doing better? >> whose? >> the bankers? stocks are terrible. >> have they? >> you've taken a look at some of the prices. >> in the last day or two? morgan stanley, goldman sachs, those names? >> morgan stanley lost 10%. i regard that as consequence a.m. >> you have noticed the market has been tough lately, some tougher than others. >> when we come back, senator marco rubio will join us live. hear what he has to say about the economy and more.
we've been very clear in our conversations with our european friends that, you know, we think that particularly in surplus countries there is a need to boost demand. there is a demand problem in the world and there's a demand problem in europe. >> that was treasury secretary jack lew talking about earlier on "squawk." also out of europe jpmorgan's ceo jamie dimon tells the french newspaper european banks lag behind their u.s. counter parts and say profits may still vary for different kinds of reasons but if you look at the equity outstanding loans, debt capacity you would see the u.s. banking system is sound, it can do its growth, financing growth and employment, europe is not at that same stage. lew had tough words for china, exchange rates, good interview.
>> it was real good. a lot of things wrong right now. you can understand why interest rates are where they are, understand that the world is not that robust. klaus cline feld mentioned almost everything positive. what's the negative, nonresidential construction in europe. barry talked about moving aggressively into spain, italy, uk, his boots on the ground, i actually trust a little more than what policymakers say. >> interesting story in the times detailing what is a high rate of unemployment in the likes of a greece or spain or italy at 13% and the creation of the long-term unemployed, something we've been dealing with here and what that is structurally. >> we mentioned at the top of the show the greek ten years below six, when drogy said whatever it takes, it was 27.6. >> it was. >> now 5 and change. that's insane. >> a malcolm x moment.
>> it was. >> that's who first originated that phrase, malcolm x. i think drogy has done a remarkable job, i think that these bank are replenishing. we used to joke about you know what bank, i'm not going to say it, it's like a jeopardy question and your were king at jeopardy other than watson, there is a tremendous burgeoning move in the spanish banks and used to think they were the ones that were going to go under. the italian banks do not have necessarily the best balance sheets. we have to stop complaining. >> now a three-year budget approved by the cabinet. government functioning things going on. that's new. >> if you had you had gone back 2.5 years ago this would be fiction. >> if you bought up a portfolio of sovereign european debt allah jon corzine you might have been able to do well and hold it. that's the key hold it. not to buy it. you have to be able to hold it. >> jon, just to be clear, did not hold it at all.
>> no. >> jon -- >> selling is always the problem. >> my boss at the old squid, giant squid, goldman sachs, corzine did a little work for him, he's very nice by the way. david tepper was the nicest guy i've worked with before. >> he lectured me how not to hurt clients. i wish he were on "squawk" more or on our show. he was another guy you learned a lot besides corzine. >> absolutely. when he does speak it's generally news. >> he's so exciting. >> we'll get cramer's mad dash after the break, one more look at futures, don't go away.
all right. seven minutes, you know what day it is, i know you do. >> there you go with that hump day every week. >> never get tired of hump day. >> you don't. >> let's start off with isrg. >> severe disappointment last night. will the analysts back away? no. almost as if they pre-announce to the upside. i'm going with herb greenberg's reality check, he's going to be on cnbc i'm sure, saying there is a problem in demand here. it's not just a gap in the new product coming because we didn't know a couple weeks ago there was a new product coming. i think hospitals have spent enough on this stuff. and the razor blade model looks like the razor blades have decreased. i say stay away from isrg. it was up on the hype on the new
product. maybe, maybe demand has peaked. >> interesting. just like for razors, a lot of guys wearing beards. >> i still -- gillette, i still do the gillette. >> i know. >> i got them at harman, good price. >> one more we're looking at. >> once again, this is that budweiser am bev justice department. they buy corona extra and madela which happens to be the hottest selling beer. >> actually on the breweries too. >> and they announce again and it's even better. they raise -- this stock is still cheap. >> why? >> because they're talking about numbers that are so, so big, double digit growth, raising numbers, raising their range, david, this is a story that you always have to watch. >> this was the big winner from anheuser bush ma della, this was the winner. >> these guys are nice guys. it's terrific for them. >> upstate new york.
>> remember when they were just like a sleepy wine company and they didn't have money. >> wine in a box. >> those were the first few cnbc christmas parties back in the day as i remember, wine in a box in the hallway. >> goldman during the bad year we had our christmas party at the corner of 42nd -- >> it was all fun. young. >> la quinta to the ipo waters. we'll talk to the ceo of that chain after it opens for trading. the opening bell just a few minutes away. stay right here. "squawk on the street" is coming right back. right back. ♪
change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. you're watching cnbc "squawk on the street" live from the financial capital of the world. opening bell in about 90 seconds. you see the balcony, la quinta going public today, pricing its ipo at $17 a share. that was below the expected range of 18 to 21. offering values of the hotel chain at $2.1 billion and david, another big move for blackstone and the hotel space. >> the gentleman in the center
of -- maybe take it again, jon gray, who runs real estate at blackstone. real estate is bigger than private equity and so you've got to remember that when you talk about blackstone and all their -- they have a large asset management, of course, restructuring, but real estate is the biggest. don jay often talks about his successor at some point down the road to steven schwartzman. the fifth time he's rung the bell, so many different things going on blackstone during the course of the bell in terms of offerings. it's probably a record. >> jonathan, not all managers are created equal. this guy is a smart guy and done a lot of right things. >> buying stuff as they seemingly did at the top and yet being able to create multiple returns on it. la quinta one of them. hilton they did dwight well on, not as well as la quinta. >> one of the most important things, the range. this is the beginning of the closing of the window of the ipos which is very positive for existing stocks.
very positive. >> all right. >> good call too. >> again, the s&p managed to avoid four days down yesterday and the nasdaq recovers from those worst three days since 2011. there's the bell. look at the s&p at the top of your screen and la quinta, celebrating its ipo. we'll talk to the company's ceo in the next hour. over at the nasdaq, ikang health care celebrating its ipo. we'll speak to the ceo later in the program. eventually we won't say celebrating their ipo every morning at 9:30. >> this is the biggest week they're saying since 2006. coupons.com, down 31% in the after market, castlight down 55%, palocity, down 20%, qt holdings down 10%, amber road, this one is down 11% in the after market and border free is down 13% below where it came. these deals have been disasters if you buy them at the opening
price. disasters. >> that's true. >> that's the recap. >> yeah. >> disasters. thank you, renaissance for helping me on that. >> constellation reports tonight one of the big gainers today up 4% plus. some research on it too. >> constellation just blows away. a couple industries if you go over last night, i'm going to refer to alcoa, the beverage can is a major -- people are still drinking beer, okay, and drinking, would you get this call a beer can, bud lite, where you screw off the top. >> really? >> would you use that? would you put it back? >> no. once the beer is opened it's gone. it's essentially gone. >> is that innovation? i like the call. maybe you would use it like at a game, you would cap it and then uncap it but i don't know if there's call for that but klaus has invented it. >> innovation. innovation. >> yeah. >> i wanted to look at p&g, not moving that much on today's deal, selling obviously, iams,
couple other units as well to mars, one of the largest private companies in the country, $33 billion in sales. you know them as a candy company but they also have a large pet care business. interesting to note p&g, gjim, bought iams for $2.05 billion in 1999. >> proctor has made a lot of mistakes. >> not a good return. >> proctor has not distinguished itself. balance sheet, raises the dividend, does a buyback, travel test owns it, wouldn't back away from it from the world. remember, this company was in the abyss not that long ago. and it's really coming back. >> was it in the abyss? >> remember i told you about the disarray conference calls. >> you did. you were extraordinarily critical for some time and you did take the former ceo off your wall of shame. >> i did. i just think that proctor is still a great american company. i know that they got taken to the woodshed in emerging
markets. unilever really came after them. i think they're trying to get a little bit more aggressive. they -- it hasn't happened yet but they're paying you to wait. not a bad story that group by the way, the major drug stocks came down hard yesterday. another rotation yesterday. out of bristol-myers, out of eli lilly into the beginning of what i think will be a biotech move. there's a ton of biotech ipos coming. you have to be careful. >> hershey off more than 2%. this is going to take you back to basically early february prices as goldman takes it from hold to sell. >> their reasoning is not wrong. they are saying that stock is priced for perfection. it's been a remarkable performer. remember when hershey used to make everything in america and moved their manufacturing offshore and that's where their numbers came from. that's a downgrade that hurts because it had been the bellwether in the group, the one that people said yeah, listenen, this is what happens if you rationale production and take
sales up. that hurts. i like pinnacle foods run by a man who came from mars and has been a winner for yield and for price appreciation. >> auto companies, gm, ford, in the red on that downgrade out of morgan stanley. you mentioned they cut the rating on gm and their numbers on ford, although the ford focus out today as the best-selling car of all of 2013. 1, 09,000 focuses. >> i've been saying the ford is going to be stalled until europe turns around a little bit and latin america that's what's happening and now the guy doesn't like it? i don't know. to me, you sell this group at your own peril, honestly. this group has underperformed the market massively and i think you don't let them go here. magna was up great. big price target increase. a parts maker for the autos. like i said, alcoa very bullish. >> comcast in front of congress defending the plan to get together with time warner.
>> how many pages? the journal said it was like 600 pages. the times said like 150. can you resolve that for me? is that a split the difference? >> the key filing was 150 page one if that was enough for you. it will be interesting to see the arguments they make. it's not about the doj. simply very little you can say in terms of why competition would be affected since time warner cable and comcast don't compete with each other. it's the fcc that will have a greater sway here. they can take some so-called public interest at the fcc and certainly one of the focuses will be on market power, particularly as it relates to broadband. and the fact that this combined company will have control of as much as 40% of broadband in the country that's a lot. >> i didn't know that. >> that being said, some of the arguments that were made in the brief that you referred to are interesting because they may play into the hands of masasan at soft bank who continues to mount his charm offensive if and
when he ever does try to undertake a deal with t-mobile, namely being if you give me the scale i need, i will bring speeds to you the likes of which you've never seen. comcast seizing on some of that to say hey, we've been listening to massa talking about bringing 200ing mes into the home with a wireless broadband offering that i will be a competitor. there's lots of things coming. dish has a wireless offering, potentially broadband in nature. things are changing quickly. wireless speeds going up very fast or will conceivably if you listen to thes like of massa and therefore don't worry about market power with us. we have plenty of competition. that's what comcast will be arguing. >> verizon helps, doesn't it? just a juggernaut right now. >> fios obviously. that's not near nationwide. >> i say like, i totally get -- >> and google. >> david cohen's argument. i get it because i find that i
can get the services a lot of different ways over the top, i can get it on my phone. >> whoa. >> right now -- >> where you can get your broadband services in your various homes, who can you get your broadband services from? >> time warner, fios and. >> right now -- >> cable vision. >> in the markets -- >> within each of your different home markets who can you go to as a competitive threat to the current broadband provider? >> no. there isn't any. that's a quiz. >> thank you very much. >> who's bright? it's -- >> that's the point. >> to keep an eye on google and apple, rico with the story they both have considered making acquisition offers for square, the mobile payment company run by twitter co-founder jack dorsey, kayla tausche doing a good job reporting about the new revolving credit line they've gotten, rumors about them headed towards the private markets that's interesting. >> i think square should be
bought by starbucks and then starbucks breaks out its mobile processing payments plan. watch paypal. paypal, maybe this is one of carl icahn's -- they got to get more focused paypal. people encroaching on them quickly. >> do you think that if they were an independent company, they would be more aggressive not only defending their turf but expanding their market share. >> i had mallinckrodt on the other day, a different industry, lost in the shuffle of ka individualen. now mallinckrodt spins off, stock higher. why did mallinckrodt do it? the ceo says we didn't get the attention, kind of the love at a big company. i think paypal needs to have its butt kicked here. the way you do it, put it out there. >> so you're in favor of -- it's funny because, of course, we follow the icahn/donna who fight to personalize, ebay versus mr. icahn, evolved into this
important debate but nothing that had to do with separating paypal but having venture capitalists on public boards. >> i thought that was a shame. >> that's interesting but not about arguing one way or the other. ebay has been strong at firing back at mr. icahn including why they don't think it makes sense. he hasn't articulated the arguments since early on about why it would make sense to separate them. >> paypal, while doing okay, there's a lot of flux in that industry. i mean if verifone were to merge with starbucks, i know howard will e-mail me and say that's not what we're about, i understand, but in a dream world, opening the register is something that people want. they still call them registers. you need that mobile payments plan so when you go into the store, you're out immediately whether for the kayla tausche breakfast we references on twitter, panera needs this. i can't tell you how many
restaurants need protection between 11 and tk. >> chipotle. >> chipotle -- >> they're pretty good. >> amazing. >> never been. the lines too long. >> like that yogi berra line, nobody goes there anymore, too crowded. >> i do believe by the way, that when you look at the 9% comp numbers, that's because they're trying to deal and getting there. not because they're going to raise the price of gauc which they're not. they're eating the gauk apocalypse. >> dow up 53, s&p up 5 and the domino in the house. >> good morning. speaking of burritos a lot of la quinta burritos floating around here right now. trading right here, at least starting to trade trying to get an opening trade off. the indication is 16 on the bid, 17 on the offer. remember this offer priced at $17, already below the expected range. they were expecting 18 to 21 before. they sold more shares than they
initially indicated. the initial indication, 37.25 million shares, instead selling about 38.25 million shares. at this valuation if it does open up at 17, the value of the company is a little over $2 billion. now remember, this is a smaller mid--scale type hotel, hotel room rates in the new york area range from 75 to $175 for la quinta rooms and they operate about 800 properties throughout north america. what you're going to gauge here is an indication of whether or not there still is investor demand. with blackstone which is big private equity backer of this chain la quinta they've taken hilton worldwide and extended state of market in the past six months, both of those stocks extended stay and hilton are above their ipo price. the question becomes whether or not these guys can open up at 17 level or maybe better and then see what happens. remember, if you price at the lower end some traders expect maybe sometimes that allows some upside room for this stock to run a little to the upside. for right now looks as though
this could, again, just the initial indication, could open up slightly below that 17 mark. these traders here are still working out their orders. remember matching up, buy and sell limit orders until they can find an opening price that will clear most of those orders in the books. again david, we're still waiting. no indication just yet but again, 16 bids, 17 offered, sitting about 20 feet away from you, back to you. >> thanks very much. did want to come to one name, jim, we talked about earlier, a little surprise for you, something to come back to. in this case it's american airlines. 120 days since american or april 8th actually, so a day ago, 120 days since old amr equity holders received their distribution of new shares in american airlines and this is something that just never happens. i thought it was worth pointing out, which is if you hung around through bankruptcy with that bankrupt equity which typically almost always is a zero, you
actually made so much money, in fact, the current market cap accorded to that constituency is 17.5% more than the old amr ever had at its highs if you follow what i'm trying to say here. >> you made a fortune. >> $10.5 billion it's worth. >> the old bankrupt equity. simply worth mentioning given what's happened there. we talk often about the doj and what they did for airline shareholders there by agreeing to allow that deal to occur with relatively minimal divestitures after they challenged it with great fanfare only to cave. >> yeah. there's always been a political -- >> that stock has been up sharply. >> and it's not done. $6 earnings power. remember $18.7 billion profitability according to klaus last night on the alcoa call for airlines. can you imagine this renaissance in airlines. i like third best is united, second best is delta and then
american. of the nondiscounters. there's some discounters i like. >> the move took place right after bankruptcy. when was it? it was the emergence december 13th and this stock, i mean again, it was a bankrupt equity, not only recovery, recovery of thes like of which you've never seen. there's a recent -- >> have you flown -- >> i was talking about you got to go back. >> have you flown lately. >> i have. >> i purchased a ticket the other day from united states to italy, $6,000. >> right. >> $6,000. no competition to go to italy? $6,000. >> did you shop on-line or calling? >> i like priceline. i've been recommending the stock. i actually said listen i want to go to slovakia first. i got -- saved about $4,000. >> fly to slovakia. people don't go there as much as they should. >> i'll keep that in mind. to the bond pit, rick santelli at the cme group in chicago. rick? >> hi, david. well if you look at a two-day of
fives rates are back up. but we're testing levels we saw yesterday. and if you really want to know what's going on in the fixed income market, just think risk. look at the dow jones industrial average and still down what, about 115 points, from where it settled on the friday that we had the jobs report. it continues to be about risk and fixed income market, the yang or ying with regard to nervousness regarding the outlook of equities. how solid is the foundation? how much sand is in it? that's what we're trying to figure out. year to date chart of fives we're back under, said last year at 174, we're back under and actually our yield with regard to fives, if you want to see a lower one, look at spain. now you talk about fixed income, when i look at spain's yield i look at our yield i think it is a bit fixed. we'll talk about that on the santelli exchange today. two day of tens and the year to date, we never were in the black with regard to the ten-year which settled at 303, haven't seen anywhere near those yields
as you see on year to date. here's where it gets fascinating, year to date of five to tens on the spread, the same on five to 30s, the yield curves had dramatic flattening trying to steepen a bit. this is a small correction but we need to pay attention to it. foreign exchange when you think risk, let me think, it's got to be about the dollar yen. look what happened. we understand they had their half year fiscal half year at the end of march. we see their tax is alive and well and probably taking a pacman bite out of their economy. this is an important chart to pay attention to. i think the carry trade and risk is a driving force that we're going to have to digest and took its toll on the dollar index which is trading again down on the year. back to you, carl. >> good to have you back. rick santelli in chicago this morning. we are on ipo watch. how will la quinta open? we'll bring you the first trade and an interview with the ceo in just a moment. capital to make it happen?
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we have an opening trade on la quinta, down to 16.71, a decline of almost 2%, more than 38 million shares at a price of 17. they lowered the range, increased the distribution, jim. >> yep. >> and some unkind things being said about it. >> this is it. i think this is the window closing. we've had enough deals. these banks hers are trying to jam them in, the appetite is waning. people who paid up on the ipos when they come are down substantially. this has been a sucker play to pay up. this is the beginning. >> they did price it down a bit. of course remember it was expected might come above 17, at 17 about 12 times this year's eb da. you have decent growth into
2015. those not particularly positive on the company would say it's a small one brand niche limited service, others would say it has high free cash flow growth or generation i should say. trades, though, at a lower multiple than hyatt. i talked to one real estate investor who pointed that out to me and said i would rather own hyatt at this price, although free cash flow yield at 17 is about 7%, which isn't bad. >> right. hilton is like a good compare. i just think again, this is the ipo market on the wane and we see -- i have a list of the number of deals still to come and i i'm going to give you advice, stop it. don't play the game. >> is this the list right here? >> this is -- >> yeah. the list of deals on the way. >> yeah. >> do you think all of these will happen? >> no. well yes, they happen because people have to lose money. we're at that moment where the bankers call and says listen, joker, i gave you some palocity, while palocity is still up,
saying that, i gave you the great biotech ipos, you got -- it's time to pay the piper, come in and start buy something bad ones or going to get cut off. we're in the bad phase. bankers will say i happen that but i happened to be involved at one point and that's what happens. >> blackstone did not sell shares here. extended stay america and hilton worldwide coming from blackstone exits eventual exits from their large portfolio of real estate assets. >> i think king digital, rec ro pharma, these are all nurse at -- are all fail yours. i'm not owned by these guys. >> stop trading with jim in just a moment. take a closer look at your fidelity green line and you'll see just how much it has to offer, especially if you're thinking of moving an old 401(k) to a fidelity ira. it gives you a wide range of investment options...
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volatility. boeing, 10,675 plane, that's an 88 -- eight year backlog. you buy boeing. and then listen to this truck build, 35% increase in orders up to 90,000. just go buy packar, right off this call, boeing from 144 down to 124, packarnot that week, the truck bull market lives, aerospace bull market lives, go buy the stock. allegheny tech. you have to own titanium. >> okay. p tonight on "mad money." >> controversial stock, krispy kreme down a lot, answered the call about when i said listen i have to find out what's going on. they want to come on, magnum hunter, a stock misunderstood. big fines in ohio, mhr. we will stay tuned to find out if the bull market in oil and gas continues which i think is true. >> see you tonight, jim. >> great show, guys. fabulous show. >> always fun.
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welcome back to "squawk on the street." we're seconds away from a february read on wholesale inventories and sales. remember, still february so this data is really kind of the last of a litany of data that supposedly are going to have that weather impact. let's see what it looks like. we're up half of 1% on inventories that matches expectations. with regard to wholesale trade sales, they were up 0.7, a little lighter than expected. look at how it compares to january, up 0.5, on inventories, relates to 0.8 on january which started up 0.6 and down 1.8 on the sales side and that's versus originally released at 1.9. so the revisions are somewhat subtle, numbers somewhat close. i think when it comes to weather, we see manufacturing in autos and maybe planes were affected but seems the jobs
reports that we've seen continue to demonstrate whether it's weather or not, we're still a little light in the jobs category and the risk trade, well is advertised by the dollar/yen still seems to be ruling the roost. back to you. >> all right. rick, thank you so much. rick santelli in chicago with that data. speaking of all things economic, we start with a cnbc exclusive, treasury secretary jack lew speaking out about the state of the global economy and here in the u.s., our senior economics reporter steve liesman has highlights from his interview this morning. hey, steve. >> hey, carl. thanks very much. the treasury secretary in the exclusive interview with cnbc, which come ahead of the world bank imf meetings in washington, he had strong economic words for the rest of the world including china, jurp, japan and russia, but because of political deadlock in the u.s. had less he could offer in terms of concrete actions that could be taken here to boost growth. his most strident comments aimed at china where there's concern that depreciating yuan is
concern there is depreciating in bay jinx. -- beijing. >> if they want the rnb to be a world currency some day, want it to be a reserve currency some day, they need to demonstrate that. and from our perspective, it is something that is very important to preserving a level playing field for trade in the world. >> around the rest of the world he said europe risks deflation, should be doing more, not less. germany should take steps to increase demand. japan has yet to take actions on long-term reforms and worries about the near term with the recent tax increase. russia he said should take actions not to invite greater u.s. angions. lew suggested that president obama's economic proposal such as increased spending on roads and airports, might have to wait until after the u.s. elections. >> we have a plan to jump start spending on infrastructure. it would be to combine
infrastructure with business tax reform which would be a great thing for the economy and our business conditions. i haven't given up on that and i think -- >> it's an election year. seems almost no prospect of that happening. >> not everything gets done in the next six or nine months. >> lew pointed out u.s. growth is doing better than our trading partners. he said he's optimistic about passage of a highway bill and about immigration reform since he sees these as not strictly democratic or republican issues. there's a web exclusive on lew's thoughts on immigration reform that you can see only on cnbc.com. sara? >> all right. thanks very much, steve liesman. a timely interview given the imf is saying the u.s. is the driver of the global economy right now. stay on that theme and talk about the markets. stocks have had a rocky start in the second quarter but as earnings kick into high gear should you be rebalancing your portfolio into bonds. the director of global developed credit and founding partner of double line working with jeffery, good to have you here
in new york. >> thanks for having me. >> bonny, u.s. is in the driver's seat when it comes to global growth, the imf said it, treasury secretary jack lew said it, is it good enough, the u.s. economy, to drive the world economy and these stock markets even higher? >> that's a good question and i'm not so sure i'm feeling that same sentiment. i mean look here we are, the first quarter of the year, and bonds have outperformed stocks. who would have thought? you know, when jeffrey predicted the ten year at 3% going down to 2.5, people kind of snickered. what the bond market is telling us is that maybe growth isn't so rosy and with respect to the great rotation, i think it went in quite the opposite direction. what concerns us also, you know, stocks can stay healthy for a while, but certainly when you see companies start to ratchet down their earnings estimates like they have been, i think it's like the highest ratio of down to up readjustment since 197 6 or even started.
>> the second quarter since the financial crisis we're expecting negative growth in terms of earnings. >> that's concerning. >> when it comes to bonds, when it comes to the bond yields, 270 for the ten year what's it going to take to break out of the range, the weaker economy or talk from the federal reserve? >> you know, that's a good question. now that the fed has embarked on the whole tapering exercise it's kind of hard for them to say, oops, we're going to skip this month. i can definitely see them lessening the taper, depending on how things shake out in the economy, but certainly when you look at the employment statistics, it was kind of funny to me how the market reacted last week. they got a jobs number they thought was pretty good and they dug into it more and the quality of the jobs created wasn't that great. we can't blame the other poor economic statistics in the first quarter on the weather anymore. that seemed to really get the bond rally rolling and then you add in a little geopolitical risk via russia and ukraine and it gets worse.
>> people have been looking at the so-called death cross on the ten year. >> right. >> the intersection between the 50 and the 200, arguing that the push to lift yields higher is dissipating. do you agree? >> i agree. you know, jeffrey basically said last week that if we see the ten-year dip below 250, it could go back to maybe touch the lows. it's not the most likely scenario, but it's not impossible either. look we're in a brave new world. when you see the over valuation in a lot of asset categories, high yield debt, one of my sectors included -- >> tell me about high yield if i can stop you there. why do you think it's overvalued at this point, defaults at all-time lows and spreads decompressing. >> defaults are at all-time lows, running around 2% right now. typically is more like 4 to 5%. when you look at the low rate environment we've been in, it's almost like we've deferred to the default cycle. we're not going to skip it, but we've deferred it. a lot of my colleagues on the
street will tend to look in the rearview mirror to make predictions about the future. if you want to look at the low in spreads for high yield that occurred in june of '07 at 250 over. high yield spreads are about 350, 3600 over are they going to compress to 250? what people forget it's a much different environment and much different risk you're talking ate when the ten-year is at 5% versus 2.7. >> what's happening in europe? today over the next 24 hours, greece is apparently going to go back into the market at a yield below 6%. people will be almost speechless to see the italy and spain borrowing at the sort of interest rates that the u.s. government is borrowing at. what is going on there? is that just because the economic situation is so bad or is the ecb, is it artificially supporting a market? in other words, is there a bubble there that could unravel? >> that is a very good question. i'm not sure i have an answer, but i can certainly tell you
that when you see the euro countries with the same structural issues that haven't been rectified, borrowing at such low rates, it gives pause. i mean, greece defaulted on its debt, it's going to come to market at 6%. >> i guess you're not buying? >> no. you have mario draghi talking about instilling a qe program in europe at the same time the imf said today, you know, basically everything is great, no more chance for recession ever. >> could those prices plunge? is this a major risk for everybody now that it's got out of control and they could drop very suddenly and the ecb may not be able to support them? >> i think those markets are priced to perfection right now. assuming everything stays calm, should be okay, but when you look at the kind of geopolitical flare-ups, economic flare-ups what if draghi does start a qe program. he's been on record to say he's more likely to buy public than
private assets because he doesn't want to be seen as financing anyone's deficit. >> all right. well, timely to have you here, bonnie, as always. greece going to the market first time since 2010, how about that. bonny not a buyer. joining us from doubleline. >> it is estimated to be a $1.2 trillion problem, student loan debt has surpassed every other type of household debt excrept mortgage debt and a key economic issue for republicans and democrats. florida senator marco rubio will introduce a bill to broaden access to private investors for students to fund their higher education costs in exchange for a percentage of their future earnings. joining us this morning republican senator marco rubio joins us from the hill. great to have you back. good morning. >> good morning. thanks for having me. >> i want to talk about that bill. an interesting idea. we all remember you were one of the senators who questioned mary barra when on the hill from gm the other day, now news nhtsa is fining them a mere 7 grand a day for not answering their
questions. what's your thought on that? >> i think it's important we have certainty about what happened there and a process be set up not just for victims to be compensated but hold accountable those individuals if there were some in that corporation that allowed things to happen. i think there's disturbing evidence gm knew about the problem and decided as a business decision not to correct it because they felt it would cost too much money. that cost benefit analysis is something not tolerable. i think we should move on evidence and facts. i commend them for bringing in someone to oversee all of this and to conduct an internal investigation with regards to it but we're going to ultimately need answers sooner than later with regard to what occurred at gm. >> going to be an interesting one to watch and a story we're seeing the beginnings of. talk to me about student loan debt. we got some consumer credit numbers in the week and households are not spending on credit cards. it's about college costs driving this up. what's the solution? >> well first of all let me say i come at this from a personal
perspective. i owed over $100,000 the day i swore into the senate three years ago. so i'm keenly aware of and sensitive to it. at one point in my life the single highest expenditure in our personal budget. what's happening now is in the 21st century, all of the higher and middle-income jobs will require some level of higher education but it's become so expensive and so growing number of students are taking on student loan debt and when they graduate not making enough money to make the payments and it's deterring them or holding them back from starting a family, buying a home, getting on with their lives and limits flexibility in what jobs they can take or entrepreneurial activity. what other options to the student loans can we create? and here is an existing model that exists called income share agreements, a student goes to an investment group and says here's who i am, my resume, my transcripts, here's what i want to graduate in, will you invest in me? when i xwrauts i promise over a defined period of time to pay back a certain percentage of my
income. for the invest group they may make more money than they invested in the student. they may lose. that's the risk they take. for the student they may end up paying more than what they would have but may pay less. the bill is designed to create a legal framework so we can encourage more entities and investment groups to step into this field and help people with an alternative to the college loans we have. >> so the danger that a student graduates and changes fields, i don't know, remains unemployed for a long time, sort of the risk the invest has to deal with at the front end? >> that's no different than an investor that decides to invest in a company or idea and provide funding and capital for that to start up. not everyone i think is going to be an ideal candidate for this. my guess is that you will likely see this more often than not in a graduate level, people going into the stem fields or medicine or some other profession where there is certainty for the investor that person is going to find a job and make sufficient
money to make their payments. as i said like all investment decisions there is an element of risk here associated with it. but it creates an alternative to the traditional student loan system that we have in place which in my mind at its current pace is unsustainable in the long term. >> senator, isn't it more likely you're going to -- those investors will cream off the best every year and the rest will be left to flounder as they are and you will reduce mobility within the system if anything? >> i'm not sure that's the way it would play out. first i would say for what you describe as the best, the high gpa students and so forth, they're probably already disproportionately getting their share of scholarship and private funding for their education. second i think it will likely reward those who are going into fields that are highly compensated. and, in fact, will serve as an incentive for more students to graduate with degrees that are ultimately turned into employment. as opposed to large number of students now that are graduating in fields that don't lead to jobs. and that's a real problem in our
country as well. i have another bill that deals with that called right to know before you go, and what it says is that before a student takes on a student loan the institution has to tell them, here's how much graduates from our school with this degree can expect to make when they graduate so that students have -- can make an informed decision about whether taking out that loan is the right thing to do. >> well, we know it's bad today and for those of us with young kids inflating out 16, 15 years, i mean it's -- we're just getting started on this inflation regarding college costs. thanks so much for your time. we'll see you soon. >> thank you. >> marco rubio. >> all right. meanwhile want to check in on another ipo, the parade continues, ikang has opened at the nasdaq for trading and you can see, with a pop up 17.5%. this is a health care provider from china, the largest private operator of medical exam and disease screening centers, up sharply, priced at the high end of the range, that was 12 to 14, offering almost 11 million
shares, raising $153 million. turns out health care company in china is hot. ikang. >> we're monitoring the story, developing going on just outside of pittsburgh this morning, 20 people were stabbed inside classrooms and hallways at a high school. currently seven of the victims are suffering life threatening injuries. a suspect who is a student has been arrested according to local officials and we will continue to monitor that story this morning. we've been watching shares of la quinta open this morning, trading lower after pricing below expectations. ceo is going to join us on set after this break. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote.
hotel operator la quinta debuting on the big board. the trades sharing at $16.95. the original price range 18 to 21 but priced at 17. here is wayne goldberg the company's ceo. good morning. >> good morning. >> before we get into the pricing and controversy there, let's explain what's happened to the business since 2006. this is a very different la quinta to the one blackstone bought out effectively. >> yes. in 2006, we had 421 hotels. today we have 830 hotels -- 834 hotels in the united states and if you include our pipeline of 187 hotels, we're represented in every state in the continental united states, canada, mexico, honduras and colombia. >> priced in the mid scale up
toer which you believe is a growth area of the market. the other thing is you're very keen on technology as a differentiator to you. you gave out to data to people at the nyse this power bank. i don't know how relative that is. to you it's more about connectivity in the rooms. that's a differentiator. >> used to be about giving the guests all of the technology. today it's about giving the guests the capability of leveraging the technology that they're actually traveling with. we've been recognized as technology innovators in the last several years for some of our cloud based computing capabilities and we continue to deliver unique technology solutionings to our consumers. >> let's talk about the pricing. this is the third business that blackstone has bought to the -- brought to the market. you come into a crowded week, 14 u.s. listed ipos. ultimately you didn't get the price that you had anticipated. what happened? >> well, again, we had a little air pocket in the market this week. we -- this is a great brand,
this is a great company. we are excited about the quality of investors that have joined us and committed for the long term. this is about creating value for the long term for all of our employees, all of our shareholders, our sponsor, blackstone. blackstone has been a great partner for the last eight years and helped us grow this business. they remain committed and are significant investors today. >> to those who would be critical or not buying today, this would be their take, the company is sort of a small one brand niche with a limited service. how do you respond to that. >> first, being in the select or limited service segment doesn't mean you provide limited service. we've been recognized for service delivery, recognized for creative technological solution, recognized as one of the fastest growing, we've been recognized in many, many areas for our people, in dallas, many large markets. we feel great about this brand, great about this company and the long-term value we're going to
create for all of our shareholders. >> those who would be positive talk about your opportunities overseas and franchise business growing outside the u.s. do you see that as a potential. >> yes. we've seen very significant, very rapid growth in mexico, central and south america, again, our brand resonates, our brand translates. we've been operating in the border towns with mexico, for example, for over 40 years. it's a natural for us to enter those markets. we've been advertising in mexico for over 20 years and had an 800 number in mexico for over 20 years. again, our success in mexico is reflective in how quickly we've been able to distribute our product and we feel great about the outlook. >> how would you characterize your customer? your niche? is it middle income? >> yes. we have several different segmentations of customers, consumers. one thing that they all have in common and we focus on today is they all are optimists. while travel can be hectic they've -- >> hence the coloring, lots of
bright colors. before we let you go, you guys, the hotel industry, has a love/hate relationship with the on-line travel agencies. today an article in the journal that google will try to strengthen its direct relationship with you guys and to extend cut -- extent cut out the likes of priceline and kayak. how do you feel about that. >> we focus making sure our brand is distributed wherever our consumer is and we work very hard to transition the consumer to our proprietary channel which is lq.com. >> would it be cheaper to embed directly with google than go via an on-line travel agency and pay commissions? >> we focus on making sure our brand is reflective and available wherever the consumer may book, may be booking, and then we work to transition them to lq.com and we've seen significant growth in our program over the last number of years. >> it's always so great to see people transition a business to the market. congratulations on your ipo. >> thank you. >> wayne goldberg, the ceo of la quinta. >> thank you. >> up next on the show, the man tasked with saving detroit.
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the city of detroit has reached a settlement with bond insurers over the treatment of some bonds in the city's bankruptcy. the deal with these creditors, critical to the success of detroit's chapter 9 bankruptcy case. joining us now for a cnbc exclusive interview, kevyn orr, emergency manager for the city of detroit. we're surprised to see you here in new york. >> good morning, sara. >> not detroit. big day for you. >> it is. >> a critical step. >> yes, it is. >> talk about what it means, this deal reached this morning. >> great. we've been saying for some time we're trying to reach deals with our creditors, specifically the unsecured. on this one, the utgo unlimited tax obligation bonds frees up about $100 million for pensions and that's pretty good. >> still has to be approved by the bankruptcy court? >> absolutely. going to be part of our plan, yes. >> you expect that to happen? >> we lope that's going to happen. >> walk us through the terms of the deals, specifically the
unsecured creditors and what kind of cuts they're going to have to swallow? >> this class of creditors were supported by a millage, a dedicated revenue stream of about $388 million. we've agreed with them and couldn't get it otherwise without their agreement, they'll give us about 24% of that millage and they'll keep 76%, freeing up $100 million for our pensioners. >> how big of an obstacle was this in achieving your october deadline? >> it's been going on for some time. this helps us get forward. another component of the deal in bankruptcy is plan support, that they'll vote for our plan, so that's a good thing. >> $18 billion bankruptcy, of course, one of the largest municipal bankruptcies of all time. where are we on the road to re-emergens so to speak in terms of all the consti whensies you're dealing with including the unions? >> we have? mile posts we have to go through, disclosure hearing, confirmation hearing in july, end of july, july 27th and hope
to have an effective date some time in october. i said it's halftime, it's beginning of the third quarter now. with this settlement and hopefully the settlement that we have in front of the court this friday, the swap sfmettlement, will have a sufficient number of supporters to really push our plan forward. we're very optimistic. >> what about running the city itself and resizing, so to speak, the municipal work force for what is detroit today, which is certainly not what it was 20, 30 or 40 years ago? >> there's a long-term plan for that called detroit future cities and the new mayor and i have a power-sharing agreement more or less where he works to get the city running on time, we've got lights up, we're paying our bills on time, not bouncing paychecks, we're bringing down blythe, we have a blight plan, infrastructure improvement in place, buying new police cars and fire trucks, the city itself the central core downtown is thriving. another 130 miles of city we're huge, we're the size of boston,
new york, and san francisco all together. the city is going to take a period of time but we're getting at it right now. >> have you seen -- everybody wants to talk about ambulance response times. are those showing improvement? >> they are. fire response times, police response times, year over year crime rates are going down. i'm not going to say everything is perfect. all metropolitan centers and everything has problems. we're focusing on the simple things. if you pick up the phone and call we want the police to get in a reasonable period of time. one of the things i'm excited about our new garbage contract. never thought i would be excited about garbage in my life. we have an outsourcing for solid waste collection and recycling program city wide. we will clean up the city too. >> there have been controversial aspects of the bond negotiations, not creating -- not handling all pensioners alike, for instance, the retirees, the general employees, not getting as much as the firefighters and the police and
there are others. how do you respond to this co controversy that it sets a band precedent for the municipal bond market? >> the status, two things there, the status of treatment of pensers is a function of their own pension funds. police and fire have two separate funds. the police fund was funded a little better than the general retirement fund and all we're doing for benefits for those groups of retirees is reflecting how well they manage their funds in terms of the recovery they'll get now. >> there must be a tradeoff, paying 74 cents on the dollar today and further down the line? >> the reality 74 cents on the dollar paying today we couldn't get without the agreement of the bond holders. we get no cents on the dollar without their agreement. that's why this settlement is a little different. a lot of nuances people have to appreciate but as far as a broader bond market the second half of your question, i'm doing this job. i don't have any philosophical bit, no ideological perspective about the bond market. i'm dealing with a city that has
$1 billion in general revenue and $18 billion in debt and trying to do four things, put the city in position to deal with fundamental services, return the city to a sustainable footing, provide for pensioners, and get a solution that is agreeable to all parties. >> not going to be selling paintings out of the museum. >> i hope not. >> it is a great museum. >> it is a great museum. >> doing the job until september, correct? >> i can get fired at the end of september and trying to get out of there before that. >> do you think you will? >> if we keep going the way we're going and i implore all parties, specifically our labor parties, please come in and do deals. please come in and do deals. i do not want to do a cram down in this case. >> kevyn orr making his case an also a deal today on the detroit bankruptcy filing. good to see you. the emergency manager for the city of detroit. >> okay. let's hit the new york mercantile exchange. we have breaking news with jackie deangelis. >> mixed signal in the emergency pits impacting prices. oil prices are trading higher
today despite the fact that the department of energy just reported a 4 million barrel build in crude oil supplies, more than traders were expecting. they were looking for about 2.5 million barrels. what is keeping the price high right now? ongoing tensions in ukraine is what they're focusing on. also some chatter that there was libyan supply that was supposed to come back on-line, it might not come back on-line as quickly as possible and it's -- these geopolitical factors that traders are keying in on rather than the fundamental data. let me tell you this, what this report is showing us we are well supplied. refinery run rates decreasing because refineries are doing planned maintenance and unplanned maintenance, consumer demand is going down right now as well, that is seasonal and expected, but it's these geopolitical tensions rising these prices up. yesterday we popped more than 2% be hitting a one month high. wti 102, spot 47. back to you. >> thank you so much. when we come back another ipo,
the comcast/time warner merger hitting washington today. executives from both companies testifying before the senate judiciary committee. after filing that merger application with the fcc. our hampton pierson live in washington with more on that. hi, hampton. >> hi, carl. this is the first public hearing
since that $45 billion proposed merger of the number one and number two cable companies was announced back in february. right now, we've had initial presentations from right now as we speak, arthur mention, time warner cable's chief financial officers, preceded by david cohen from comcast, they are arguing that bigger is better in this case, merging the two large cable companies. time warner customers stand to get better and faster internet speed, better cable service, also that the two major companies do not directly compete in any major markets and in terms of the horizon out in the future, they now compete against competition from the internet and video markets from the likes of google, apple, et cetera. those are the core arguments made in their filings with the sec and justice department. on the other side, a host of public interest groups really concerned about the kind of market power this combined
entity would have on everything from basic cable service to content to distribution to rates, you name it, and that's really going to be the thrust of the hearing. we're just now getting into the question and answer session with senate judiciary chairman patrick leahy leading the questioning. first big public questioning on a controversial merger proposal. back to everybody. >> hampton, thank you for that. of course, comcast the parent company of cnbc and nbc universal, and despite all the headlines about them having an uphill battle that filing, guys, 175 pages, argues that they'll bring super fast speeds to u.s. households on wireless and there's still a lot of competition from web video companies and isps all over the place. >> and they talk about, of course, broadband which will be a particular area of focus and the fcc here is more important than perhaps the doj, the fcc with the public interest doctrine. they will make an argument about technology, having also increased speeds every year for the last 12 years when it comes
to broadband and to the home. and the exfunnity platform being a strong one. theirs is going to be we're going to make life better for consumers at home. >> i wonder how that's going to go down, the changing technology landscape, netflix, apple and amazon are all players and how much that will resonate whether they get it on capitol hill. >> does google's high speed broadband service impede comcast or help them with their argument? >> it helps them with their argument but it's in austin, kansas, not nationwide. >> but they're saying this is a threat to us? >> what they will say this is a potential ket tore to our broadband offering if google were to roll it out nationwide. the costs of doing that would be prohibitive even for google. they're making the argument on the side of wireless and something we've talked about that masa son was talking about, the speeds he would bring in which would be multiples of what
you're getting at home even though it would be wireless. >> variety says amazon streaming traffic has tripled in the past year but netflix still 20 times as big as amazon. >> 35% of all traffic, something like that. >> guys, we're up 47 on the dow. a market flash from seema moody. >> hey, a tough day for intuitive surgical, the stock taking a hit after the maker of the robotic surgery system said first quarter revenue declined about 24%. the company shipped 87 row the bots in first quarter compared to 164 a year earlier. the stock currently trading down by around 6.5%. last week the company announced that regulators cleared a new version of the robot sending its shares soaring. we see a lot of volatility in isrg. >> the robot roller coaster. straight ahead former congressman barney frank will be joining us live to weigh in on high frequency trading and what it means for the retail investor. you will not want to miss that
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one of the world's largest stock trading venues also known as a dark pool could be shutting down. the journal reporting that goldman sachs is thinking about closing its sigma x trading operations following glitches of its own and growing general criticism of dark pools and high frequency trading. the report amid a divided wall street over hft and the controversy generated by michael lewis's book "flash boys." weighing in on this is barney frank, former congressman from massachusetts, who was chairman of the house financial services committee and now a cnbc contributor. barney, welcome back to the network. >> thank you. >> do you welcome the idea that goldman could be shutting its dark pool? >> i don't know enough about the specifics. i think it is generally a good thing in that it shows a concern for balancing things and not
simply making the most money. i regret the fact, look, i haven't missed being the chairman because i've had a chance to relax, but i do regret the fact that the committee that i used to chair is not having extensive hearings on this. had i -- in fact, had we not lost the house in 2010, if i had been the chairman of my last two years, my agenda item was going to be looking at this whole question of how trades are conducted in the modern technology. and both this, the dark pool, and the quick trading, they raise -- they reflect a very central issue. obviously what the financial community does has benefit for the whole economy and the innovations have the promise to make it more efficient, but there are two questions that are raised by them. you know, first of all, it's the old question, who benefits? i think that there is a serious
question about whether very disproportionate share of any economic gain adheres to the people who are doing it and secondly, there is the question about the increased volatility and the increased possibility that this will cause some problems. people make mistakes. this magnifies the impact of a mistake. >> yet, you know, congressman, i mean you make the inference yourself, this controversy is five or six years old, it would seem almost random now to some people, given it's not that profitable anymore, suddenly because of one book on "60 minutes" all the regulators go after them and you see people exiting dark pools. you could sigh okay, at least the regulators are sensitive to public opinion but white seem an odd -- it would seem an odd way to run a financial system. >> first of all, michael lewis is not just one more book writer. you know, going back to his
first book and i think his book, "the big short" had enormous impact on me and others. you are talking about one of the most influential writers. if i were the financial community i would understand much of this is a sign there is still a lot of unhappiness with them, unease, i know politicians are not widely trusted by the public but if there is one group that may come in below politicians it's the people in the financial industry. i agree people shouldn't pile on and shouldn't come to premature conclusions. on the other hand with regard to goldman i'm not aware anybody was pushing them to do this. i have no idea what their reasoning was except that -- and i guess this would be the final thing about the regulators. the regulators, dark pools and high frequency trading, are the newer issue. one of the problems, one of the reasons we had a crisis is, there were innovations of 20 and 30 years ago of securitization and the financialization derivatives.
as a country we were way too slow in taking a look at those and making rules. we have just finished as a nation and as a governmen government, making rules for those innovations. i think that's part of the answer, that the regulators' attention was on the -- from dealing with the innovations from the 80s and 90s and it's appropriate to look at these now, not in the sense of panic. >> we did get information in the past week that the percentage of rules under dodd/frank that have been finalized is roughly half and i wonder all these years later if that timeline makes sense to you? >> i think it's pretty good. there's one reason they have been slowed down, two actually, the bank regulators are self-financed. they control the currency, federal deposit insurance corporation and the federal reserve have their own sources of funds generated by their activities. but the two agencies that got the newest, the biggest grant of new authority, mainly over
derivatives, were the commodities future trading commission and the securities and exchange commission. they are both dependent on congressional appropriations and my former colleagues on the republican side when they took over the house in 2011 frankly most of them didn't like the new regulation but they knew it was too popular to oppose, that's why they haven't tried to appeal the financial reform bill, the way they try to with health care, but much below the radar way, substantially reduce the budgets. the cftc and fcc have been hammered by inadequate budgets. that's another reason by the way why people don't -- see something they don't like, which is the settlements with companies which they don't have to admit their guilt. part of the problem is these agencies don't have the funds to carry on enough of those suits. the second thing is somewhat obscure. but you had a court in washington, d.c., the circuit court for d.c., which hears all these appeals, which had been very tough on the regulators and one of the central issues in this fight over the filibuster
which harry reid won for the about the is that obama has now gotten the chance to appoint new judges to the circuit court of appeals and i can tell you from talking to the regulators they were held back in some cases because of the perception that there was this very hostile court and kind of a double bind. they had to could more work to please this court but weren't given the funds to do it. the only thing i would say is this, i do not think anything has been a negative consequence. that is, no financial institution has said oh, those rules weren't adopted yet, i'll jump in. why would you start or -- some activity that was going to be terminated within two or three years? >> true enough. some, of course, have moved in advance. mr. frank, congressman, nice to see you again. thank you for your time. barney frank joining us there from washington. cnbc contributor. >> and people still like the beard. they really do. when we come back -- >> getting longer. >> there's a new massive security flaw that could leave more than half of the web at
the treasury yield at 2.70, dollar-yen stronger. it's time to get to rick santelli, and good to see you, rick. >> it's great to be back. and also great to have charles biederman as my guest today. thanks for taking the time, charles. >> good to see you. >> there's a lot of issues going on. when you look at spanish five-year, our five-year, boone relationships, but you have a wrinkle to throw in. it's not only baseball season. there's a seasonality with tax time and stocks. explain, please. >> well, i've been saying recently beware of the ides of april. and last april, 190 billion -- 189 billion was paid in taxes by individuals in april. and that was up from, like, $130 billion the prior year. this year, we're expecting
250 billion to be paid. and a lot of that money is probably still in stocks. so historically, the week before april 15th, which is next tuesday, the market's week, it's particularly weak when there's a huge gain. so one of the benefits of the wealth effect is we've had $500 billion more in taxable gains last year than we did two years before. now, most of that is capital -- >> so let me stop you right there, okay? so if i'm looking to take a new position in equities, and i want to be long, according to your scenario, when would be the optimum day to jump in? >> well, i plan on jumping in monday and tuesday. >> i gotcha. i gotcha. now, that, of course, isn't going to change all of the --
>> that's because there's a huge amount of i.r.a., 401(k) money, going into the market in april, after the tax payments are made. so you have a downturn before april 15th, and an upturn after. everything else being equal, which, of course, it never is but -- >> well, you know, being an interest rate guy first and foremost, so if i was looking to short interest rates, of course, i'd pay very close attention to that, because it's hard to ignore the notion that interest rates are correlating with the equities, when equities go down, interest rates seem to go down. do you have any thoughts on how a five-year in spain could be at the same price as a five-year in the u.s.? i mean, seriously. and i'm going to talk about that on the exchange today. >> well, next, you'll tell me greece was able to sell a bond at 6%. i mean, really? >> well, i tell you what, charles, either the "wall street journal" said because investor demand is surging. true or false in your opinion?
final word. true or false, it's investors clamoring for southern europe's paper? >> investors who don't believe there's any real risk as long as the qe is in place, they're buying. >> i gotcha. well, we're going to touch on that topic in about a half hour. charles, it's always a pleasure. thank you. "squawk on the street" gang, back to you. >> yeah, and good luck with the idea that the ecb will embark on qe. is jack dorsey scare a takeover target? find out which big players could be eyeing the company. and jeff steinberg will weigh in after this. e climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york.
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call or click to open your fidelity account today. >> announcer: welcome to "squawk on the street." here's what's happened so far -- >> there's other people that have come on air lately and said they can't take the pain. it looks like it's lower. you have to take the other side of the people who can't take the pain. gm. i think that gm's a buy, not a sell. [ bell sounds ] >> there's the bell. >> there's disturbing evidence there that gm knew about the problem and decided as a business decision not to correct it, because they felt it would cost too much money, and that kind of cost benefit analysis is not tolerable.
>> this is about creating the long-term value for all of our employees, shareholders, sponsor blackstone. it's been a great partner for the last eight years and helped us grow this business. >> we've been saying for sometime that we're trying to reach deals with our creditors, specifically the unsecured. so on this one, the utgo, unlimited tax obligation bond, frees up about $100 million. and that's pretty good. ♪ good wednesday morning. it's 11:00 a.m. on the east coast, 8:00 a.m. out west. here's what we're watching today. is jack dorsey's square a takeover target? we'll tell you which big name players could be eyeing the mobile payment provider. plus, two good pieces of news for facebook. one has to do with ads and the other concerns the future of coo sheryl sandberg. massive security bug threatening over half the internet, and your personal information could be at risk. tumblr's head of engineers will
tell you what you can do. >> what's the most important social network for teens? the answer may surprise you. that's coming up later this hour. joining u.s. for the "squawk feed," john steinberg, and cnbc contributor, and along with our own jon fortt. i know you guys are fired up about the topics. >> very much. >> first up, potential big news in the mobile payment business. we'll talk about this report, that square was considered by both apple and google as a takeover target. of course, kayla's been doing great reporting about revolving credit facilities, the notion they'll be headed to the public markets instead. i'll ask you first, kayla, what did you think of the story? >> it's interesting, because they obviously have a coveted technology, square does. people are asking what does the future look like? in the story over the weekend, i did include one detail what the banks have been considering, about a decade ago they had a structure with visa where they co-owned visa, and then took it public a couple of years later. but they basically had access to
visa's technology and their network. a lot of bank executives have been scratching their heads thinking, could we do something like this with square? square doesn't want to be owned by the banks, i should note, but that doesn't stop wall street from figuring out -- or trying to figure out what they could potentially do to monetize. and there's starbucks. howard schultz peculiarly stepped down from the board of square in october, and then has sort of recused himself from some day-to-day operations at starbucks because he wants to focus more on mobile. the big question he got on that call when he made that move, are you guys looking at an acquisition? he said there's no particular company we're looking at acquiring, but it's safe to say a lot of people want to see what starbucks can do this this space. you don't have apple or google, but a whole lot of people circling this technology. >> and the starbucks piece. i suspect he stepped down from the board potentially because of the partnership underperformed what people wanted it to do. it didn't lift up square wallet, which is platform from the phone, the usage adoption they wanted there ultimately.
and that's why i think it is a takeout target. if you look at itunes with 575 million people who have their credit cards in, ready to buy stuff on iphones, it makes so much more sense for square to get that growth through being an acquisition. >> the story is interesting, because it says dorsey was cool on the idea of getting acquired by google, partly because of the interactions that square had with google around -- i mean, that twitter had with google around potential acquisitions. but this apple idea, apple doesn't do really big acquisitions, and you have to think acquiring jack dorsey's company would come with some degree of risk. he's got a big personality. he's a big fan of steve jobs. he likes to be out there front and center. giving his take on technology. not exactly the typical apple executive under -- >> but you do a deal for 5 to 10 billion, 5 being the low end, put dorsey on the board, what zuckerberg did, and you're in mobile payments, which all of people want to be in. >> that's what i'm saying. i'm not sure if you are apple
you want jack dorsey on the board. >> why? because he's too much like the guy who used to run apple? >> there's similarities to john forstahl. >> he's already on the board of disney, too. >> absolutely. he would have to leave disney and go to apple, because we've seen how the dual board membership worked in the past. >> bob iger has figured it out. he's very much known by apple's board members, too. >> this shouldn't -- it shouldn't be a public company. the margins are not there. >> great parlor game, i tell you that. >> yeah. moving to facebook, according to ad week, more companies are willing than ever to pay more on the -- to advertise on the social network. ad prices up 10% across the board compared to the previous quarter. that's not the oebl good news for facebook today. on the "today" show this morning, sheryl sandberg gave her clearest indication yet that she's staying at the company for the long haul. take a listen. >> you have, i guess, unloaded about half of your facebook
stock, and some people read the tea leaves and say, is she planning to leave facebook soon? >> i'm glad you raised this, because there's been some confusion, a good chunk of what was sold was all for taxes. so there's just confusion on that. i have really plans to stay at facebook. i love my job. i love what we do every day to connect the world. and i love being able to work on my personal time. >> the other big rumor is running for political office. would you rule it out? >> i'm not running for office. i love my job, and i've no plans to make any changes. >> have you ruled it out? >> i have ruled it out. i don't think that's for me, but i do believe in what i'm doing. >> jon, you're a partner with facebook, and you e-mailed us five seconds. >> unequivocally she says she's staying at facebook. every partner, every investor, always says, oh, she's going to run for governor. sheryl is considered one of the best executives out there in technology. i would put her up there with eric schmidt. this is huge for the stock. this is huge for investors.
i am more confident than ever in the company knowing she has made this declaration. >> and facebook seemed to pop soon after that interview. it's up around 4% right now. i mean, look, i think that was our take when the speculation was out here. she's probably not doing this. the stock sale looks routine. of course, in politics, when people say they're not running, that means this next cycle, it doesn't mean ever. even if they say they're not running ever. remember hillary? >> i have to give her credit for actually coming out and saying it the way she did. she didn't try word parsing. it would be hard for her to back herself out of it. >> within the next five years. >> -- leave the door open to some extent, but says, i have ruled it out. >> yes. absolutely. and she explained that "lean in" she does in her personal time. another question people have, is it distracting her? she's absolutely focused on her business. >> those who don't know the company well, have been asking, what does she do? what has she brought? >> that sales force is exceptional. when i was at google, she was several levels above me.
ran the online sales organization. has an amazing lieutenant in david fischer. they'll do 11.3 billion this year, up from 7 billion and change the prior year. massive revenue growth. when you do an ebitda to ebitda adjusted growth, they trade at .3. google at .95. this is a great economics story. >> mark zuckerberg focused on the product, focused on engineering, i which he loves to do, and she can run it day to day. >> she's a builder of armies. >> -- ad week, 10% quarter on quarter? >> based on performance. he talked about roi of 3%. they've confined inventory to 5%. only 5% of what you'll see in the feed is going to be ads. it's performing. and it's better than having there just be tons of inventory worth nothing. >> you have to keep a good balance for consumers so they don't feel like they're getting overwhelmed by ads. can they hold at the 5% level for the long term? >> i don't know. it seems like they've been very good at reading the data and
getting the balance right. what they've been doing on mobile hasn't been driving people away. it's been raking in money. they're still very good at converting those ads. so right now, they're king of the hill. they have challengers coming up in pinterest and twitter. >> they will go through what they're seeing in the ad load. the 5% level was set based on testing. >> it took them a while to get there. >> first, it was terrible, and now really good. >> meantime, tv stations need to be more like netflix, so says kevin wheeler. wheeler said station owners need to look to the future online, or they may find themselves trampled. in the speech, wheeler said, quote, your content represents far moore than the potential for retransmission fees. it can be the basis for a fixed and mobile delivered cable-like service. interesting. got a regulator looking over corners, beyond corners, jon. >> my sense is, a lot of the
networks would love to charge seven bucks a month for their content. it's a matter of figuring out the transition to get there. i don't think they're closed to this idea. but there are some consumer implications along the way of everybody having to pay up for this. >> one of the most interesting things to me in this speech is he pointed to yahoo! at&t, and verizon as companies that have realized their old models don't work. >> right. >> started embracing something other than the status quo. are those three -- >> it's totally unfair. it's a totally unfair comment. i like to say, having worked a little in local at google, local takes the scale of the internet and demolishes it. everything you need lots of inventory to achieve, local takes that away. local only works when there's lots of rolled-up local, like yelp, like pandora. so to say to the station owners, you should go over the top with your local news, is hollow. especially when the fcc is taking away the ability to do sidecar deals. so work together to negotiate rates with the cable and satellite providers.
it's so hard to be small. >> you don't see any chance of it happening? >> no. who will want to watch -- even if you do watch over-the-top local news, how much revenue will they extract from that? >> i don't know. i went to a local news site yesterday, to try to watch a story, and there was a pay wall on the video. i didn't have an account, so i couldn't watch it. >> for a local station? >> could you authenticate? >> no. huh to sign up. >> that's the point. how much revenue can they make? this is the patch story. you know? it just doesn't work. >> you would know having that back ground. good to see you fired up today, john. >> glad to be here at post 9. up next, talking about a massive security flaw taking over the internet and a whopping 66% of the web could be at risk. so how can you make sure your personal information is protected? the vice president of engineering at tumblr is here with some answers. first, rick santelli, you are back from a couple days off. what are you watch sflg. >> i wish it was a couple days
off, because a couple of days on flat on my back. we'll talk about a lead-in in a story in the "wall street journal," how investors have been flocking to the southern european securities market to buy things like spanish five year. i think i'm going to contest that a bit. we're also going to talk about how it's impossible to figure out fair value in a world where there's only relative value, and even that is tenuous at best. all in about ten minutes. some financial guidanceneedd so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. [ male announcer ] when fixed income experts...
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welcome back to cnbc. i'm michelle caruso-cabrera. the greek debt, they're hoping to raise somewhere between 2 billion and 3 billion euros, and we're told by more than one source, demand stands at 11 billion euros, so multiple times oversubscribed. yields somewhere between 5.5 and 5.25. reuters is reporting something different. this can move around. u.s. books will close at the end of the day today, new york time. and there's probably going to be some availability to change tomorrow morning depending on what happens in europe. so why are we showing you the german bond at five years? if you want to buy one, look what you'll get paid when it comes to yield. if you're going to buy a greek
five-year bond, you'll get paid roughly 5%. this is denominated in euros. you'll also take currency risks beyond the other risks when buying greece. right now, greece, we approach a milestone moment for the country that hasn't been able to borrow for years, restructured two years ago. even though it's still one of the most indebted countries in the world, will be able to borrow, looks like tomorrow, with heavy, heavy investor demand from all over the world, certainly in the united states and europe, from what i understand. guys, back to you. >> michelle, very indicative of strong demand, especially for investors who remember when the yields just a couple of years ago more than doubled that. >> 27% at one point. it was crazy, right. big turnaround. >> yes, definitely. michelle, we know you'll bring us the latest as the fluid situation continues. thank you for that. we also want to take a look at the health care sector. the markets are up ahead of the fed minutes. the health care sector the biggest winner on the s&p today. seema has more. >> health care leading the sector higher.
the s&p 500 higher, led by the rebound of biotech stocks which have sold off in recent weeks. leading, regeneron and alvion. carl, back to you. >> thank you so much. a new bug is spreading aross the internet and could mean many of your passwords and data are available. it affects yahoo! to amazon. what can we do to protect ourselves? ken little is the vp for tumblr. he joins us to explain more about the bug. >> hi, thanks for having me. >> they're calling this the most dangerous bug out there. >> in the long while. it's a pretty expansive bug, a wide effect on the internet. >> what essentially will it do? it opens up your data, right, exposes your data potentially to others? >> absolutely. so the bug in essence is an access-control bug. what that means it allows anybody who knows about this
issue to access information on machines that are affected, that they simply should not have access to, and that can include sensitive information like passwords and user names and other types of data you consider protected. >> it doesn't leave much of a trace, right? >> no. >> it's not obvious it's there. >> right. not obvious people have tried to use it or taken data out of systems that are affected. >> so this is when people see https on their browser, they see the lock, they think that everything's encrypted, going back and forth. it's like a lock defect, right, in the way this was written on the server side, ne'er do wells can tell what you're communicating with the site, passwords? >> essentially, that's correct. it definitely is tied to the https that you see, the lock that you see, because the bug is an encryption library that's popular with many companies on the internet. but it isn't a bug in encryption. it's a bug with simply has
access. >> ken, we were talking during the break has this has to be fixed on a site-by-site basis. you said tumblr has moved to plug the gap. if companies can plug the gap, why didn't they spot it before the researchers? >> unfortunately, the bug has been out there in the wild for a long time, without being -- without being caught. once it was caught and once -- once it was announced early this week, all of the companies that were affected found out about it and started to take carest issues. >> i was talking to a security expert this morning who was saying no point in just changing your passwords right now, because you don't know if that particular site has patched the bug, if they haven't. even if they have and haven't issued new security certificates, anything you do can still be seen. is that the way you see it? >> that's true. if the company has not patched the library that's affected, then any password change you make, that password is just as vulnerable as the one you had before. once they've patched the library, you're pretty good to go to go ahead and change the password.
a rolling certificate key will take a couple of days and isn't something you need to wait on. >> why are tumblr and yahoo! more exposed to this than other sites like google? how does it decide who it will target? >> yeah. so the companies that are affected are -- there are large number of them on the internet. certainly not just tumblr and yahoo!. in particular, we value openness and transparency with our community, though. so we've been very vocal about it and getting out in front of it and making sure people know it's effective. >> if people are saying, like yourself, it doesn't really matter if you change your password if the site itself hasn't fixed it, what would you recommend consumers do in the meantime? a lot of people are saying, don't do any sort of commerce, banking transactions, any type of activity where you're worried about that information leaking out there. >> yeah. so i would say for the crucial companies that you interact with, have the most sensitive data on you, definitely make sure you are keeping up with their website, on their blogs, to see whether they were
affected at all. if they were, whether or not they patched. and then decide, you know, what risk you're willing to take. because it is possible that if they are affected, that someone is sort of watching that information flow that you don't necessarily want watching. especially now that it's so public. >> do we know much about the origin of the whole thing, wither it began? >> so this was very simply a bug that was written into the code. once it was found by security researchers, a patch was put in place and the public was notified. >> yeah. somebody writing the equivalent of a run-on sentence, right? >> yeah. >> ends up being a big security risk for the entire internet. >> good thing grammar isn't as dangerous as this is. thank you so much, ken. ken little, vice president of engineering over at tumblr. when we come back, the world of mobile payments is growing according to juniper. mobile payment transactions will reach $507 billion. about a 40% increase over last year. as the business grows, where do the banks factor in? we'll talk about that when we come back.
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welcome back to "squawk on the street." i'm seema mody with food for thought. we begin with proctor & gamble, selling its pet food business to mars for $2.9 billion. p&g currently trading higher. and hershey's sharing melting as goldman/sachs downgrades the stock saying the strong run is coming to an end. hershey still near the all-time high, trading at $98.93. carl, back to you. >> i'm take it from there, seema, thank you. thanks to companies like paypal, square, the market for electronic person-to-person payments has been one of the
fastest growth areas in mobile banking. it's also been one of the biggest disrupters to the traditional banking model. banks have been striking back. they formed clear exchange, the largest p2p network in the u.s. joining us is clear exchange's ceo and co-founder mike kennedy. mike, thank you for joining us this morning. >> thanks for having me. >> when this was founded in 2011, you hailed it as an innovative game changer, but to the naked eye, it's harder to see some of the effects of this. what products do banking customers use now that clear exchange is responsible for? >> it's a great question. we are a white label solution where we sit in the background and the banks brand it independently. so, for example, wells fargo has done transfers under sure pay. similarly, bank of america has it in their transfers. we'll be rolling out with additional banks such as capital one, jpmorgan chase, and others. >> for the first couple of years, it was a loosely
structured jv, no clear headquarters. you joined as ceo in september. i'm wondering what size staff you have, what sort of capital you're working with. and just how big this network is that maybe a lot of consumers don't know about. >> so we are based in san francisco, as you said, have about 35 employees. we see this as a huge market for us. there's $900 billion in person-to-person payments in the u.s. every year, most in cash and check, and that's what we're going after in terms of the size. >> but when you think about the actual number of customers, as some of the banks, you have bank of america, wells fargo, chase, these are some of the biggest financial institutions, and i saw a stat you guys have 90 -- access to 95 million customers' bank accounts through this system. what type of market do you have access to as clear exchange? are we talking $200 billion, $300 billion? >> it's a great question. as i said, one of the hard things to monetize or to size is the fact that a lot of these are in cash and check today. you know, the market is, as i
said, about 900 billion for p2p payments. we, as you mentioned, have over 95 -- i'm sorry, 95 million line banking customers, another 40 million mobile banking customers. and we think, through those, we can tackle a large portion of the $900 billion. >> mike, if i already use paypal or square, what's my incentive to switch over to a provider you use? i'm a bank of america customer, say. i have that option. why would i use you instead of the others? >> it boils down to customer experience and security. you're already going to your bank to conduct a lot of transactions. you're checking your balances there. paying your bills. you're moving money between your accounts. from the safety and security of bank of america's online banking, you can also send money to me by going to -- putting in my e-mail address, the dollar amount, and hitting send. from a security perspective, a lot of people know that the banks obviously already have your account information. your financial information. they don't want to go give that to another third party. so they go to their bank, put in
their online user name and password, and they're able to do the transaction there in a safe, secure way. >> what do you consider the biggest competitive threat at this point in the game to the big banks? we talk about square, we talk about paypal, vinmo, and a lot of start-ups in the space. and i'm wondering which of those do you see as viable competitors and how much of a threat you think the banks will end up posing to them? >> well, paypal's been around for a long time. they've had time in the market. i actually think that the biggest threat is cash and check. the biggest threat is people use cash and check today and making sure they can realize that this is an alternative. they can go to their banks to do this, and it's an easier way, a secure way. people aren't carrying checkbooks, they aren't carrying cash, but used to using those. awareness that this even exists is probably the biggest competitor we have. >> mike, i know that a lot of what you do is research and product building. is there anything in the
pipeline for any of these banks that you think we should be watching out for? >> so i can't talk about specifics, but i will say, you know, one of our focuses are about driving innovation and payments, and help to drive the innovation on behalf of the banks through the banks. so we've built the clear exchange platform so it can handle p2p payments and can handle things beyond that. it's very os tensible. in the future, you will see great things from us. >> still a little bit of a black box, mike. thank you for opening up what part of it you could today. mike kennedy, the ceo of clear exchange. >> thank you. >> all right. let's bring in simon hobbs to talk about the european close in about 45 seconds. simon? >> you will find it quite refreshing. green on the screen today across europe after two days of losses. we've been able to break away from that. decent gains on the other side of europe. clearly, a lot of the discussion is still about what is going to happen with the european central bank. will they move towards qe or not? some would say that maybe the germans have been signaling more of a reluctance recently, and certainly the swedish central bank didn't move on rates overnight.
they argued there that maybe growth would be enough to remove the deflationary pressures. so there you go. eventually, the close around europe. green across the board. it's interesting, some of the automotive stocks have done relatively well today. sanford bernstein is putting a buy recommendation on the likes of vw and porsche, and you can see those particular stocks are up 3% and 4% respectively. also, some of the homebuilders are doing well today in the u.k. deutsche bank suggesting that actually top picks would be these two, barrett and travis, and that perhaps we've overdone the view that the house builders in the u.k. were overextended on perhaps the fear that the bank of england would be raising rates anytime soon. but the big news, of course, coming out of the session now, and into tomorrow, is, as michelle caruso kah br-cabrera reporting, the debt markets in greece, and the suggestion from michelle there was strong demand on the five-year note, and perhaps they could raise 11 or
13 billion euros as a result of what's going on. i would say this is very much an outlier as far as a lot of what is going on in europe at the moment. 80% of greek debt is actually held by the institutions -- the ecb or the governments. they don't have redemptions in 2016. so it's a safe bond that's being written under english law so that there will be, guys, no fear of a haircut there. a lot is still the same in greece. today, there's a national strike in greece, still the germans are talking about the possibility of another bailout for greece further down the line. so when you see this moving through over the next 12 hours, let's not get too carried away. back to you. >> no, after a four-year exile, it says something about where we are right now in the trajectory of their economy. >> it says something really about where the greek debt situation is after so many haircuts, so much of it being held as a public debt and the fact that they actually don't need to come to the market, particularly over the next 18 months. i think that's -- i wouldn't say that this is a symbol of a major
rebound in europe, no. >> right. although you don't want to do it when you really, really need it. the point is to do it when you don't. >> also a story in "the journal" about how italian and spanish yields are near u.s. treasurys as the market starts to rebound as well. >> and the question is, is that overextended? a what happens if the ecb can't launch qe, because it can't find the instruments? >> we know rick will hit on that later this hour. >> yes. shares of toyota taking a hilt after the company announced the massive recall, over 6 million cars for a host of potential defects. this is the eighth major recall for toyota since '09. is it time to worry about quality at the automaker? more on that in a moment. [ male announcer ] legalzoom has helped start over 1 million businesses. if you have a business idea, we have a personalized legal solution that's right for you.
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roughly $800 million with u.s. bank regulator, this time over credit card practices. the shed lines say it involves fines and refunds to kreds credit card customers. bank of america not the first to run into problems over its credit card practices. recently, jpmorgan settled as well as three other banks in that space. you can see the shares have gone slightly more negative in today's trade. we want to get to the cme group, rick santelli standing by with the "santelli exchange." rick, we're glad you're feeling better. we know you wouldn't miss a
ten-day option. >> that's right, kelly. it's a wonderful day to be back. i have one question to ask, and i don't mean to be facetious. is europe's fixed income market fixed? and i don't mean fixed like michael lewis kind of fix, or fixed because it used to be broken, or maybe fixed because this is where you want it so we'll fix it right there. i don't know the answer. but let's look at some of the facts, please. if we look at a 20-year chart, 20-year chart of spanish fives versus u.s. fives, something jumps out at you, and that, of course, is the record breakneck pace that yields after the adjustment of the credit crisis came back in line. and the next chart is a ten-year chart of ten-year boones versus ten-year t notes, and the reason the two charts are interesting, because taken in contest, what we hear is that global fixed income investors just are enamored with southern europe's securities, and that's why this
move has occurred. and here's what i think. i think that, of course, there are some investors that have been involved, but for the most part, you have spanish banks that come in, and they buy the auctions. and they buy it with euros that are printed by the spanish central bank, and then the ecb comes in, and they basically give full credit lines with no haircut to those securities. and what it's created is this unique spiral. and maybe it's a good thing. maybe what was broke is fixed. but the problem then becomes, it's hard to trade on fair value. you then try to trade on relative value, which is kind of the trade that you want to pay most attention to, in my opinion, is boones versus tens. but ultimately, it's really margin value that's the story here. so what does it mean in english, santelli? i'll tell you what it means. that, in my opinion, it is almost virtually impossible to
see a huge run-up in u.s. rates. why? because are world investors truly going to pay up to a lower yield on a southern european economy than on a ten-year note, it doesn't make any sense. if the world stays as it is on this kind of weird-value trade, it will be a stopper for any significant increase in u.s. rates. so either u.s. rates have to come down, or europe's rates have to go up. there's no other way to explain it. carl, back to you. >> all right, rick, thanks a lot. rick santelli in chicago. on to toyota. the company announced it's recalling 6.4 million cars for a variety of problems spanning 30 different models. phil lebeau is live in chicago with more on that. phil, the stock price almost 52-week low today. >> yeah, it's getting a hit here. and that's because people are looking at this and they're saying, wow, this is a huge recall. second-largest ever for toyota. certainly the largest coming back in 2009 when there were, what, almost 10 million vehicles
recalled due to unintended acceleration concerns. let's run down exactly what we're looking at. there are a number of recalls involved here. two major ones. altogether, number of vehicles impacted, 6.76 million vehicles worldwide. 2.3 million of those in north america. we should point out, some of the vehicles are named in both recalls. that's why you see a number -- numbers that are flying out there right now in terms of total number. 27 models. the corolla, yiris, rav 4, and depending on the recall, we're talking about vehicles made between 2004 and 2013. so what are the recalls involving? well, toyota says there could potentially be faulty air bags, problems with the seat rails, or potentially the steering involved in some of the vehicles. but we should point out, toyota says there are no known accidents or deaths related to the recalls being announced today. toyota is trying to determine exactly what the repair-fix will be for the recalls.
remember, with a recall, you don't have to come out and announce the fix right away. you simply have to say there is a recall. we'll get in touch with you when the fix has been identified. again, the second-largest recall ever in toyota's history. carl, you mentioned the stock is trading close to a 52-week low, down more than 1.5% today. it really is starting to feel some pressure here as you -- it's almost down, what, 1.8%. also, i want to look at shares of general motors. there was a callout from morgan stanley basically saying we moved our position on gm to underweight, because there are a number of issues here, just headwinds that will clearly be coming into gm over the next several months, and as a result, they've moved it into an underweight position. an active day for the autos for sure. guys, back to you. >> thanks, phil, for watching that for us. we're also watching one of the big ipos this morning. shares of chinese health provider iking rallying, and now
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welcome back. we're seeing a bounce in the social names. facebook in particular was up 5% in a moment ago. of course, various stories in ad week about pricing strength going into the quarter. sheryl sandberg on the "today" show, more explicit than ever that she's not leaving the company, and not running for office.
there's been a lot of discussion about how many growth guys, kayla, are hiding in facebook because of the recent carnage. you don't see a move like that on this name very often. >> they say they're hiding in facebook, because facebook is actually profitable, it's actually shown quarter after quarter it has the earnings to support itself. some of the other names, they argue, like twitter maybe do not at this point. >> right. started the morning below 60, now 61.08. meantime, icane, the fastest growing private preventative health care market. lee jung joins us this morning. good morning to you. >> good morning. thanks for having me. >> pretty good action, priced at 14, high end of the range. as we saw, doing well this morning. walk us through what the environment is like in china regarding health services. you already serve basically three-quarters of the biggest chinese companies. >> yeah, the government want to provide universal health care system, but the focus for them
is really on the treatment. for ikang, it's on the preventative side. it's supplementary. >> what's driving it from sort of a fundamental demographic level? >> exactly. actually, right now, this market is underpenetrated, about roughly 19% of population come to medical examinations. first in japan. there's a growing awareness for the health condition, and more company willing to pay for this to keep employee healthy. >> lee, this is not the first time you've taken a company based in china public here. there, of course, is a lot of focus on ali baba and the high-profile decision it made to list in new york instead of hong kong.
walk us through the environment of going public in china, and what some of the challenges are and why you ultimately keep making this decision. >> well, for nasdaq is always on our top choice. it's innovation and technology. and that's what is ikang is looking, for innovation matters. for ikang, most of the business comes from medical examination services, but we want to be traditional kind of health care service company, and if we want to merge technology, i.t., and the latest discovery from lab, to bring to people's life. >> tell us about what's happened to health care costs in china, and how they compare to the increases that we're used to here in this country. >> yeah, compare to u.s., you know, it's about 18% gdp total health care. in china, only roughly 5% of gdp go to health care. and actually, people waiting to
spend more now to get healthy -- get a better life. so we are seeing the growth for health care faster than gdp growth in china. so actually, we think it's a good sign, because people willing to spend more for that. and as you all know, most of the common plans in china cover basic services. people willing to pay out of pocket to get additional services. >> finally, kayla sort of talked about, you know, your decision of where to list. why new york and why the nasdaq, given all the choices you must have had? >> yes, you know, as we just mentioned a while ago, i think nasdaq deliver good service, bringing more visibility for ikang. i spent seven years in the united states, and at graduate school at harvard university, so nasdaq is always on my top choice. also, previous company i founded called elan.com, one of the largest travel service company in china. that company is also listed on
nasdaq. so for me, nasdaq had to be home for me to come home, you know. >> yeah, sometimes it's what you know. lee, we'll watch it closely. thank you so much. >> thank you for having me with. >> lee zhang, ceo. laquinta ipo'ing, has made gains through the session, 1.66%. and ian read, the chairman and ceo of pfizer and incoming chairman of phrma, with us, and a very rare interview you don't want to miss, 11:40 a.m. coming up this hour, we're getting a look at new medicare data for the first time in 35 years, and some of the numbers aren't pretty. we'll explain more behind that in a moment. ♪
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we've been talking when the efforts to rein in fraud. authorities acknowledge it's a fraction of the total fraud, and even a smaller fraction of the $800 billion-plus in u.s. health care entitlements, most of which is billed legitimately. the centers for medicare and medicaid services is putting the data out there, doctor by doctor, for the first time in decades and jaws are dropping again. meet the top medicare billing doctor in the nation, according to several analyses of the data. west palm beach opthamologist salomon melg emn who billed $20 million in 2012. federal agents raided his office twice last year, but he's not been accused of anything and has denied doing anything wrong. so has his best pal in congress, senator robert menendez, has denied wrongdoing, but did reach out to an hhs friend. he says the billing was in accordance with the medicare
rules and stands by his record of improving vision and quality of life of patients around the world. these are gross billing amounts, not profits. the numbers for him and thousands and thousands of doctors nationwide are bound to generate lots of discussion and perhaps some reforms. carl? >> scott cohn, just celebrated 25 years on cnbc, started when he was 5. thanks, scott. >> thank you. let's send it over to seema mody for a quick market flash. >> check out the cool sector. ubs downgrading walter energy, alpha natural resources, to sell from neutral, citing lower commodity prices in the coal sector. ubs lowering the price target on alpha and arch coal from $3 to $5, and from $5 to $8 on walter. kayla. >> thank you so much, seema. coming up, what is the most important social network for teens in this country? the answer is important to your portfolio, and it's up next. it might surprise you.
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released its new teen survey. jon fortt joins us with more. what do we know? >> there's some data to put some behind impressions people might have. let's start off with social networking. how many teens would you think rate facebook as their number-one most important social network? >> close to last, right? >> well, 23%. >> 23? >> not that bad. what do you think is the most important, kayla? >> i would guess instagram. >> instagram, yeah. >> at 30%, yes. the spread not too bad, actually, when you think about it. seven-point spread, but makes zuckerberg look brilliant, snapping that up before facebook went public. they had data on phones and watches, iphone gaining share apparently from fall to spring, around the survey around 7.5,000 -- or 7,500 teens. 17% of teens eager to get an iwatch up from 12% six months ago.
so apple, some good news here, even though samsung's marketing suggests apple's for old people, teens still like it. >> i did a straw poll, much caller, two teenage cousins, and they said we like instagram because we don't have to listen to people's political views, we don't have to see what our parents are posting, and hang out with our friends and post pictures. fairly easy. >> i hear it's positive. clearly not as much snark as there are on some -- >> it's hard to take a snarky picture. >> right. >> yeah, absolutely. >> maybe that means it's just a platform that will always be popular with teenagers, and maybe as their tastes graduate, they will move on to facebook or twitter. what do you think? >> well, they will, i think -- facebook has become, for this generation, maybe a bit like e-mail was. i was talking to a parent who was saying, my teen says facebook's not going away. we need it. it's bedrock, but we like to play with the other stuff, too. we'll see what kind of staying power it has and whether
facebook can tweak itself, particularly with photos and video, to stay relevant. >> looking at the chart today, a 5% move on facebook. a lot of people taking refuge in it, having exited some other perhaps more volatile names, jon. >> absolutely. old folks like us trading facebook today, not a lot of teens accountable for that volume, i think. but still, you know, that's certainly a vote of confidence in sheryl sandberg and in this data we were talking about, showing they're able to make money. >> a lot of momentum behind facebook. jon, you posted a couple of days ago, "i never hear people talk about snapchat anymore," and jane wells said, talk to my kids. >> yeah, teens are still using it, particularly in high school. but they've got to expand beyond that. if they want to become a company, a phenomena, something more than a feature that's there to get acquired by somebody. whatsapp is very popular.
tomorrow, ian read, the incoming chairman of pharma, will be with us. it doesn't happen very often. we're glad to have him. coming up tomorrow on "squawk on the street." meantime, for the afternoon session, let's kick it off with wapner and "halftime." scott? >> carl, thank you so much. going for two in a row here. you have some people -- buyers are finally showing up. >> yeah, especially in some limited -- like facebook, because we were just saying. >> i was wondering if they would show up again. you guys have a great rest of the day. welcome to "halftime" show. here's what's in the playbook. small-cap swoon. is the worst performing major index this year about to turn, or burn? holy crop. why the next threat to the bull market could be in aisle three at your grocery store. the sysco kids. let's meet the starting lineup. it's great to see you, great to ve