tv Squawk on the Street CNBC April 12, 2016 9:00am-11:01am EDT
sixth book. the british surveillance and security service saw an early copy on the internet. it turns out it was a false alarm. the page was fake. >> nice to know our spying agencies are doing such a good job. >> thank you. >> thank you for being here. nice to have someone who wants to be here with us. >> i like it. >> join us tomorrow. "squawk on the street" is next. ♪ good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. stocks trying to find their legs after yesterday's downside reversal. only the dow remains positive for the year. as we open earnings season with alcoa and csx tonight. uk inflation firmer than expected.
oil, new highs for the year on brent as that doha meeting approaches this weekend. we begin with the markets and energy. oil with a year to date high. stock futures barely in the green. >> alcoa out with results. top line and outlook are dragging down the stock. >> and two big calls on starbucks and apple. one up. one down. more on those in a moment. some breaking news from the imf. downwardly revising its 2016 global growth forecast to 3.2 citing uncertainty and a recovery hampered by weaker demand. the imf sees global demand picking up to 3.5 for next year and forecasting the growth for the u.s. down 2.4. it believes long-term growth prospects are weaker, estimated to be only 2%. they've been a serial cutter in terms of global growth outlook. >> the imf has been saying no one should raise rates. they play a big role in yellen's
concern. more yellen than the rest of the people on the fed. the imf has been pretty right. when i saw this, we just saw this come over, i said -- i was hoping they would feel a bit more sanguine. more upbeat about china, about europe. i see some things happening in these places that are positives. but the imf does very, very good work. this is -- this weak demand story is not going away. and it's kind of contrary to what a lot of companies are saying. which is interesting. we'll talk about klaus kleinfeld later, but some companies are seeing demand pick up in latin america, certainly in china, in europe. it is a bit of a conundrum. i did not expect this. i thought they would be pretty much it remains, as opposed to it's getting weakerment. >> you have pmis on the manufacturing and services side. it's starting to tick up a bit. the question is whether that's a
real inflection point or not. >> i agree. i thought the imf would take into account the last six weeks of data, which have been pretty good. maybe they are just green chutes, maybe they can go away. the imf is more down beat than i expected. you're right. they've been more downbeat the whole way, but they've also been right. >> as we said, stocks are looking to recoup monday's losses as crude is higher. brent with the highest level so far this year on hopes that oil producers will agree to freeze output when they meet in doha on sunday. dallas fed president rob kaplan was on squawk this morning and believes the december fed rate hike was not a mistake. >> the move in december was the right move, but we'll have to be slow and patient. doesn't mean standing still. i think we'll make another move sometime in the not too distant future if gdp recovers in the way i expect. people should expect it to be a
slow, patient, gradual normalization. so, no, i don't think december was a mistake. >> getting seven fed speakers this week. three alone today. >> it is rather amazing to me that they all feel compelled to just reiterate or disagree. it's almost like, listen, you call them, they'll talk. you know, does any federal reserve guy say, listen, i want do an interview with you. he's like, no, i want to be quiet now. they make it more interesting for us. a little more punitive for the people at home trying to invest. i thought that was in sync with what yellen was saying. i hate the idea that every day we have to recalibrate. the imf data would indicate he will not get his gdp numbers, and saying gdp will not be strong. on a retail level, i can see that. retail is not that strong. >> yeah. >> disappointing.
>> retail overall. >> yeah. other than home depot, lowe's. >> that's been the case for a while, jim. i don't know what happened to that gasoline dividend, it didn't make its way into the malls. >> it didn't. i wonder whether people just -- that it kind of offset the healthcare premiums that went up. as soon as you say that people say that's a political comment. i'm getting from the guys who do taxation. i cover both of the companies that do tax planning, h & r block and intuit. it's an issue. it's not a break through issue. you have to get healthcare, healthcare has gone up. when you see unh -- i'm not trying to be too all over the place, when you see united health pulling out of exchanges, you realize there's not enough competition. whatever you saved at the pump you may be losing at healthcare when the rates went up. >> just in terms of covering. >> yeah.
that was for universal coverage. >> people say there are a number of expenses that are mandatory now, including your wireless phone bill which you didn't previous i will have. so that things are being applied there. it's still somewhat surprising. >> i think everyone was waiting for it. i know the credit card companies were surprised to see it happen. credit card companies kept thinking -- at the pump the fees were lower. but, yeah. it didn't come through other than perhaps maybe amazon. we don't know. >> yeah. yeah. amazon definitely. >> amazon definitely. amazon. didn't go to sears. >> no. apparently it didn't go to sears. nor to kmart. >> no. no. they must have had higher gasoline prices, those customers. >> always around six minutes past the hour is when we get our sears mention. >> i remember when we used to go to sears. you could buy a hammer at sear, return it a year later and they'd take it. unbelievable. i bought a chipper shredder at
sears and it was stolen. >> a what? >> i think i had a crisis of conscious. guys, send me a new one. it was stolen. >> what was stolen? >> chipper shredder. i got it after the movie "fargo." >> hopefully didn't use it for the same reason. >> taking care of your enemies. >> i don't know what you use. >> let's move to alcoa. jim and david have mentioned lowering the full-year outlook amid weaker aluminum prices and plans to cut up to 2,000 jobs. revenues missed. alcoa prepares to spin off its engineer products business. last night klaus kleinfeld spoke to jim. >> we will not make the number we had originally intended for this year, but we're working on t trying to get it up to the numbers that we said we would be. as you see, we are making progress. already compared to last year we are putting an expectation on
the second quarter. and you will see we are improving. >> lowering the outlook on aerospace, on ebita margin, on revenue and ad segment what do you think? >> i was disappointed. i know that a lot of the headlines are all that the price of aluminum caused the weakness. i will read something that i fou fou found, the 2016 revenue of 1 billion revised from 1.6 billion, ebita of 159 million to 170 million. they projected 350 million. this was the most major miss of the division. it was not the price of aluminum i was shocked at. aerospace, these were problems specific, but they did talk about model shifts at aerospace which would indicate you don't want to own any aerospace company. i don't think that's true. honeywell didn't talk about this. i know the company is splitting
up, but klaus was downbeat. downbeat about the world, a little imf-like, frankly. i finished it -- the release was late because of problems, the whole thing was a sub optimal situation. >> what, if anything, does it say did the broader marketplace and/or world? >> you know, klaus is sticking to the idea that there's still going to be a deficit in aluminum. he's sticking by that. saying how the chinese continue to produce aluminum. the party may not be as strong as you sometimes think. but what worried me about this was trucks. remember, aluminum goes into making trucks. the truck numbers were horrendous. i read this, i said you can't own cummins. you have to sell packard. you don't want to be in those. trucks were weaker than expected. aerospace, you might say maybe there's a shift. but that was a dramatic decline. this company, i thought, could
do about 6 billion in aerospace. i thought it might be the next precision cast parts. after i started reading the deck -- >> that's big. >> it's the biggest because they're splitting the company. i said you need aluminum to source. you need it like iron, they had a bit of a move. this was not a good quarter. not a good quarter. i know that they say it was a beat, but it was beaten from cost cuts, not from the top line. i've been willing to excuse a lot of what i've seen here. this took my breath away. >> so between alcoa and the imf, are you ready to say you overestimated the pace of the "recovery" this year? >> i'm ready for one of those seratonin antidepressants. i believe there's a bit of an outlyer.
i think the imf is consistently negative. but yes -- i could not feel good after the alcoa call. i'm thinking alcoa has specific problems. my discussion would have been aluminum is weaker, so you may not want the old alcoa, but it was blowout. it wasn't a blowout because they actually had real problems. this was an execution issue. okay? they failed to execute. i don't think in aerospace -- this is the first i heard about the big model changeover. they have much more than just the screws now. but this was a terrible execution quarter. i'm sorry. it just was. it was not what i thought. it was more execution than economic weakness other than trucks. >> what accounts for that? what accounts for that? >> i asked him, i said are you going to address rickson?
he said what makes you think i haven't? i don't want to work at firth rickson. i'm glad i work at cnbc and not firth rickson. >> more on alcoa and what klaus said when we get back. downgrades for lb, starbucks, avp and other consumer names. >> what a bummer. >> another look at the premarket. more "squawk on the street" from post nine in a minute. to the wo, you can fly across town in minutes or across the globe in under an hour. whole communities are living on mars and solar satellites provide earth with unlimited clean power. in less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. and if you thought that was amazing, you just wait. ♪
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starbucks moving lower in the premarket. deutch downgrading the chain from buy to hold citing lofty expectations, operational changes and a premium valuation. the firm saying it believes growth in profit and comps are fully priced into starbucks shares which are up 24% in the past 12 months. you have anything wrong with this? >> look, i find here's the problem with this kind of downgrade. you have to sell it. if you listen to it, it's hedge fundy, you have to sell it here, buy it back at 54, 55. i idea that its valuation is
stretched has do with a relative thing, they did introduce a new campaign today, based on dollars, not on visits. frankly when i read this, i get what he's trying to do. listen, you made a lot of money here. >> it's hard to criticize a downgrade like this. he's also -- his multiples are not particularly modest. he's at 17 times the next 12 months ebita, 30 months times the next 12 months, down from 19 and mid 30s. so they have a great growth rate. same-store sales numbers, amazing. we'll see if the guy is right. >> my travel trust owns it. >> he also has issue with the new domestic loyalty program. i'm not sure why. >> some people don't like that. they like the per visit loyalty program and not the dollar. that's a controversial move.
i do like that starbucks is a great company. if the stock gets hit to 54 or 55, you know, i know my travel trust will buy it. but when i read this -- david's right. this kind of downgrade i don't mind. it had a big run. if you -- >> and you had a buy-in. it's not like a -- >> value at 27. very good company. the stock has run. the risk here is can you get back in after you sell it? do you want the taxation? >> that's always the trouble. >> it does -- it's the latest in a series of downgrades for big cap names ahead of earnings, whether it's deutsche, facebook, this one, goinguggenheim on the banks. we're seeing it. >> i totally agree. the gloom is you have the banks that will have horrible quarters, then these stocks that are flying high. people say wait a second, the
average stock is valued way less. but the average stock is being pulled down by the banks. i understand it's a negative scenario. that's why i was trying to take a more positive view saying i don't know anyone who thinks this will be good earnings season. no guy says this will be the worst earnings in seven years. i say, wow what a visioner. so i say i want to temper my negativity as opposed to temper my enthusiasm. >> curb your enthusiasm -- >> no, negativity. >> i missed the show. >> the best. >> what are you looking at me like that for? >> i don't know. you always give me a look. >> i do. i do. you're not allowed to give me a return look. my role on the show is to give you a look. >> i thought i could try it. guess i can't. >> goldman has a note on apple today saying it's likely to be on the cusp of entering a cycle of earnings upgrades which will see street forecasts moving
higher for the first time in six months. the firm calls apple a convictionless buy. goldman also saying pent up demand for the iphone 7 is high based on its own survey of consumers, and it expects apple to get more share. comes in the face of this miserable pc shipment report from ibc, down 11.5. >> i think mac will not be affected by that. mac is the preferred way going to college. this goldman notice is interesting, not just because my travel trust is long into it. i'm more upbeat on apple than others. don't trade apple, own it. 44% of respondents intend to buy an iphone 7 this fall. yesterday we found out how the iphone 5 is doing better. this note is the beginning of what i think is a recognition that we have to look through this quarter. lowell mcadam from verizon said
this would happen. there is pent-up demand. look at multiple. talking about 11 times earnings. i don't know. i remain convinced this is one of the bargains in the market. but too many people talk ahead of the quarter. >> well, what carl mentioned in terms of those pc sales, i wond wonder hp inc. down 17.3% in the first quarter. dell, private company, up and actually has retaken some market share. >> michael's been kind of -- >> not sure what that is about. >> he's been kind of -- >> they're still in the process of completing the emc deal which will make him a public company again in a way. they'll have public filings because of that tracker. >> seagate was up yesterday because of that article.
intel said there would be a shortfall, but they never announced a shortfall, as opposed to juniper. i think the pcs are a diagnosis breed, except for mac. you want to be in the meg whitman hp. >> yes. >> we have to talk about some of this. >> the enterprises. >> i'm happy to discuss the sumner redstone situation with you any time. >> did you read the article? >> i did. i did. >> someone calling it like an old school "journal" leader. >> yeah. like the old days. >> they had a great lead, and then the rest was history. >> it was sad. >> we'll get you up to speed on this redstone piece along with a lot of other things and the opening bell. cramer's mad dash. another look at prthe premarket. i asked my dentist if an electric toothbrush was
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>> all right. a little joe jackson, a little mad dash as we head into a trading day for this tuesday. what is on your mind, my friend? >> i'm feeling defeated today. >> don't. why? >> our discussion with carl, i felt like -- it's true. there is negativity here. one of the things that makes me feel defeated is a downgrade of leslie wexler. the greatest retailer of our time. goldman goes from conviction buy -- not to buy, conviction buy, then buy. >> right. >> we kind of mean it. >> right. to a neutral.
>> oh. >> saying last week's victoria secret's reorganization will pressure near-term comps. they cut the price target. then you have that head & shoulders pattern that some of the technicians will see. i think this will have power. it already does. at a certain point i want to say look at what leslie wexler put together with bath and body works, you have a lot of n non amazonible brands. it's part of this mall concept you refer to i do want to buy here? let it come in, but i'm shocked that goldman decided off of this victoria's secret note, i thought leslie wexler making sense, momentum is gone. this is l brands. this is not sears, this is l brands, a really good company.
>> right before earnings season today, we have moves based on research. we have to pay attention whether it may or may not prove accurate. >> i thought this was an overreaction and then bounces back, but wow. >> i'm not encouraging anyone to listen to this, to sell it. but i'm chasing when they downgrade leslie wexler, they downgrad downgraded an icon. not icahn, but icon. >> i-ci-c-o-in.
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brands. oil year to date high. >> you're seeing -- everybody who bought secondaries like marathon or devon, they are the single best secondaries i have seen. a lot of people just feel we're seeing some good export numbers now from oil. >> chesapeake up sharply yesterday on the news. >> yes. kevin johnson used to run juniper. he now moves to be the number two at starbucks. so it's like the appointment of samara. the grim reaper keeps finding him wherever he goes. >> at the big board, it's i.c.e., interactive data and
blackrock. at the nasdaq, b.e. semiconductors. we mentioned juniper. they do guide q1 35 to 37. prior was 42 to 46. they are talking weak customer demand in tier 1 u.s. and emerging markets. >> juniper another time said during the john chambers era at cisco that they were doing poorly and citing some countries. it turned out they were losing business to cisco. i think chuck robbins is taking some share here. i don't think enterprise spending is that much weaker. broadcom is at a 52-week high.
younger people will spend on uber, on iphones, and on cosmetics, because the resolution on your screen is so high that you need to spray paint yourself before you leave the door. >> we talked about you and ulta on friday. on your theory that people are concerned about looking good all the time. >> you walk out your picture is being taken. i was in new orleans, 47 pictures were taken. i walk out, i threw some stuff on. just on my eye because of that operation last week. >> chesapeake, freeport, murphy, williams, all at the top of the list. >> secondary. secondary. >> we mentioned at the time they were occurring, it is reminiscent in many ways of what went on during the financial crisis, the bank's ability to recapitalize balance sheets after the equity offerings after
the stress test took place. here we don't have that kind of a report card, but it's been effective. if you bought those secondaries, you are very happy. not secondaries, primary offerings. >> right. the one i'm focused on is mro. i felt like if they did a deal, the deal came like a double. they did a deal, the story is great. if they didn't do a deal, the story's not good. that's what happened with the devon, with new field exploration. those deals work because these were binary situations. if they got the money in, they can pay the bills. if doha goes well, if you hear anything good, oil can go to 50. if you have disarray, you may see a pullback. >> what would good news out of doha sound like? meaning we have a number? >> yeah. this is it. i don't know how they do it.
iran doesn't want to play. it would be something like, listen -- the idea that we're going to -- that we'll continue to flood, they're all flooding. russia's full out. saudi's full out. all they have do is say we like this price. but i think there's still concern they didn't wipe out the u.s. shale producers. >> right. >> saudi arabia wanted to wipe out the shale producers. it also goes to the global forecast from the imf, whether it's russia, brazil, nigeria, countries not coming close to previous growth expectations because of the low price of oil. >> if i could shift gears for a minute, a name i don't think we mentioned on "squawk on the street." oxzif capital management. >> danny. >> stock down about 20% this morning. not a large market cap. this was once $20, $30 stock. remember all these asset managers that went public, rich pazini, oak tree, fortress
the first. >> figur. >> the news this morning is continued talks between the government and company about trying to deal with bribery allegations and maybe pleading to a criminal plea, about them paying off people in libya to take money. these things have performed terribly. och-ziff has not put up strong numbers. they're in the business of gathering assets, not putting out great performance. it hurts, when you agree to -- potentially agree to plead criminally, even in -- read the story. talks are ongoing. it's not great for your business. there are any number of people who may not want pension funds and the like who have -- restrictions. >> reminds me of the old e.f.
hutton. they made a settlement, suddenly you couldn't use them. this is a money manager. people will stick with danny och, because long-term he has done we he's a pretty good investor. >> he built a great business, mr. och. he's not make the investment decisions, though. >> we don't talk about that a lot. >> we don't. >> those are been terrible investments. xena. >> almost all of them. the wave that followed fortress. you can lump in a blackstone, kkr, all the private equity-led funds. they've done better. the pure asset managers, not so good. >> yeah. i'm just -- candidly i will -- rich pozino, old friend, danny oyh, old friend, but it's not about that. it's not about friends. >> so many others are trying to talk about it and think about it
before it went bad. >> there was an article today about third point insurers doing better. dan lobe has done better because of third point. i don't know. i want to see more. i think dan lobe made some fabulous investments. there's an overall gloom about money managers. it's part and parcel of the political environment. >> specific to these allege d briby allegations. the company has been saying it will be settled by the middle of this year or last year settled by year-end. we keep waiting. that guilty plea, to your point, for a felony could potentially have some sponsors say we can't play. >> that's true. i would point out yesterday the market opened up, then had a swoon. >> yeah. >> the market's up today. we struggle, i think, with reasons why it's up. i see these high profile downgrades like the l brands and
starbucks. they're not spilling over into a u.s. steel or a caterpillar. people like these bigger cap china names. i think starbucks down this much can show you how you can take away with the wave of a wand. an analyst can take away. >> watch luxury as well. lvmh numbers disappointing. tiffany has an investor day today. they have a deal to sell beginning in april one of the first times they've not sold direct, showing how important e-commerce is. even to the highest income. >> e-commerce, if you don't have an omni channel, you're hurting. >> target, which is now going down pretty much consistently, they had 36% growth. you know what's resonating
that's positive? the iran boeing one. >> i meant to mention that. >> klaus kleinfeld saying there's a changeover, he's not saying that aerospace is slowing. not saying that. which was a green light to buy honeywell. then this united technologies, which is now above -- >> above where it was when honeywell was trying to -- >> isn't that something? >> -- publicly push shareholders to get to talk. >> what does that say? >> i'm not sure. either there's an expectation and you keep a deal premium in there, or the fortunes of the company are improving. >> both those two guys look like winners now. united technologies is an amazing story that that stock has not stopped. it's creeping up every day. a lot of that is aerospace. these are big cap visible industrials doing well at a time
when retail's weaker and forget the banks. people hate the banks so much. they have been down so long, they're starting to look up to me. >> i know we mentioned juniper, which is down almost 9% on that pulling in guidance for the first quarter numbers. seems to have a read through to cisco a bit. >> you blame the stars or do you blame yourself. corning, goldman upgrades. that's saying the tv supply chain is approaching a bottom. i never thought that would happen. david, you buying an 80-incher? >> i haven't purchased new televisions in some time. since we moved. >> they've gotten cheap and light. you can actually pick them up. even the big ones. >> really? >> yes. >> maybe it's corning. i like that. i'm just seeing too many dominos. stocks up, guy downgrades it. just because it's up, don't downgrade. you know, that's the way it is
watch the airlines, watch the banks. those are the groups that now sell at incredibly cheap prices, but i'm seeing bloomberg again had a fantastic article about the exposure. some of the bank stos oil and gas. not good. >> not good. we're still waiting in a lot of ways, i think, for the banks to really apply the pressure. i know they have been to a certain extent but to pull some lines on some of these companies. there's always more flexibility than you may think for these companies. we mentioned the offerings of stock that some have been able to do to keep them looking good. >> how about the individuals that got loans? how are those going to -- >> individuals? >> private guys who got loans from banks who work at these oil companie companies. >> that's not going work out well for them. >> ill-advised. >> ill-advised. suboptimal, bad. >> if oil goes to 50, all negative bets could be cured.
then the oil companies can sell features, brick in money. airlines are start ing ing to e hedge. >> cisco dragging it down. we are up 43 points. let's get to mary thompson on the floor. good morning, mary. >> carl, markets are up now. the question is how long do we hold on to the gapeins. we've seen a pattern, early strength leading to a selloff late in the day. that pushed the s&p into negative ter foir fritory for yesterday, but it bounced back today. watching tech, that's an area of weakness. energy is moving higher because oil is higher hitting its best levels in 2016 ahead of that producer's meeting over the weekend. a lot of expectations, some action will be taken to rebalance the demand/supply picture in the oil markets. positive comments from chevron's
ceo saying the market appears to be rebalancing and news out of china that you're seeing strong demand for vehicles which will lead to stronger demand out of china. this group is gaining today. of course, as i mentioned, the tech stocks are the ones to watch. the nasdaq did pull back a bit. it has regained some strength in large part because of the disappointing forecast of junip juniper. concern about enterprise suspending keeping pressure on this group. materials is one area to watch. alcoa reporting after the bell. the flnumberings on the earning front, revenue weak, guidance weak. freeport was higher in the premarket. the commodities space in general looks better today. copper is moving higher. silver and gold as well. this despite the strength we're seeing in the dollar. that's giving a lift to freeport mcmorcmoran. we want to end with banks. a number of things impacting
this group. today they're benefiting from the rebound of the ten-year yield, though that's pulled back in the wake of the imf forecast which cut global growth by 0.2%. also concerns about their exposure into the energy patch. banks along with energy is one of the reasons we are seeing the markets higher. the dow right now at its best levels of day, up 58 points. >> mary, talk to you soon. let's get to rick santelli at the cme in chicago. good morning, rick. >> good morning, carl. we had a lot of settlements in the ten-year in the 170s really consolida consolidated. when you consider 160 is the close of the year, it starts to make sense. if you look at an intraday of tens, up three basis points. up three basis points pretty much on the entire curve. if you look at a one-week chart. you can see we have not gone anywhere. we have snugged up closer
towards the top of the range. year to date chart reveals february low yield on a closing basis of 1.66. i mentioned bunds, even though we were knocking on the door for an all-time low, whether it's italian banks trying to put together a fund, all the details are not in. it seems like hope springs eternal. maybe some of this will help in the short-term and it seems evident by a slight rise in rates. now, let's go to the epicenter of one of the most premiere charts in foreign exchange. the dollar/yen had seven days in a row doing better. closing higher against the dollar we could break that streak today. two-day of dollar/yen. yesterday's low yield, 107. today around the 108s. 180.46 last.
it 108.46 last. this is key in understanding that central bankers can plan, they can have policy, but in the end market logistics run supreme. carl, back to you. >> rick santelli, thank you. a lower global growth forecast from the imf, we'll have a live interview with its chief economist coming up. dow spiking to an early session high. up 88.
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dark urine or yellowing of skin or eyes. these could be signs of serious side effects. ask for the crestor $3 card. ask your doctor about crestor. welcome back. interesting "journal" story today on viacom and its former chairman, sumner redstone and his health. a long history of the relationship between philippe dauman and mr. redstone. indicating something we talked about here a number of times, which is the inability of mr. redstone to fully communicate.
the story itself seeming to indicate whether he was in favor of against the recent efforts by the company to raise outside capital to put a valuation on paramount. those efforts are continuing. people familiar with the situation tell me they're looking for an investment that could top as much as $1 billions that would have the effect of giving paramount itself a value of roughly $5 billion, spending most of their time looking in china for that investment. the story itself, shining light yet again on the health of mr. redstone, his ability to communicate his desires or whether or not he's truly competent. on that note i should mention reuters -- i have no idea if this is accurate -- saying talks to settle a lawsuit regarding his competency that were brought by his ex-girlfriend have stalled. that is a reuters story this morning. much of this goes back -- the
question of his competency goes back to whether or not those who are running his trust would take over, the seven trustees in terms of the decisionmaking of the 80% stake he owns, or the 80% voting control he has in cbs and viacom through his ownership of national amusements. >> this is a story where it does seem like -- it's like valeant. where is the governance? >> a lot of people asked that question when it comes to viacom, the board of directors in particular. mr. dauman is no longer his healthcare proxy. that's fallen to his daughter, shari redstone. i thought that was a strange state of affairs that the ceo of the company you own be your healthcare proxy. plenty of board members wonder where the governance has been. mr. dauman one of the highest paid ceos out there for quite a
few years. >> he's done quite well. the article reads like so many of these things that i'm seeing companies where it doesn't seem publicly traded companies where we don't know what's going on, some do. some don't. some have real insight. whatever happened to corporate disclosure where only a certain number of people knew, and they had to shut up. i'm continually -- i remember when they put in fd, the s.e.c. put in full -- >> fair disclosure. >> no one was supposed to know more than others. i look at valiant and wonder how some people knew more than other. i just want a level playing field. >> that's all you want. >> just a level playing field. okay in. >> hear you. >> doesn't seem like that much to ask. >> chuck rhodes. u.s. attorney in billions. not a good guy. sorry. i don't watch a lot of tv.
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time for cramer and stop trading. >> normally don't talk about technicals, bruce caman is saying freeport could break out. typically freeport is not one i want to talk about. copper breaking out. gold is strong. oil over 40. marathon was able to monetize some wyoming assets for almost $1 billion. this is freeport's time. if they were to go monetize they could get out of the woods here. that's saying something. holy cow, that has been one of the most black hole situations. so watch freeport. it breaks out like marathon, they do a deal, you eliminate a lot of the -- when i saw the wyoming assets for marathon, commanding a big price. people have to understand there are buyers when you want to sell oil or oil stock. copper is holding in.
randgold breaking out. freeport goes from short to long. isn't that something? >> interesting. >> whoa. >> got to have ice water in your veins. >> we'll see. >> yes, you do. >> a lot of debt on that balance sheet. but okay. >> listen, a lot of debt on valeant. >> 30 billion worth. >> are you going go to the herbalife movie? >> maybe. >> are you? >> i want to see the clooney movie first. >> what's on "mad" before we have to go. >> did you have to mention that? why do you do things like that. >> i'm sorry. >> george clooney plays you in the movies, that's good. >> fine. fine. glassdoor, this is a company that i didn't knowing all the people that work with me know. this is a linkedin. why did you mention that? >> i'm sorry. the herbalife documentary sounds fascinating. >> you're trying to digress. >> he's a hero in that movie. >> yeah, he looks better at the end than at the beginning. we'll see you tonight. when we come back, the chief
economist of the imf lowerg their global growth forecast. an exclusive with goldman's chief u.s. strategist, david kostin. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. plan your never tiring retiring retired tires retirement we believe in the power of active management.management,
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good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, simon hobbs, david faber. markets holding on to a 68-point gain, despite some downgrades from the imf, oil is helping out. brent with the highest level so far this year. >> we start with that news from d.c. on our road map. the imf cutting its global growth forecast once again. we'll have a first on cnbc interview with the imf's chief economist. >> and goldman sachs chief u.s. equities strategist, david kostin joins us live. find out where he thinks stocks are headed. also ahead in the show, coke and pepsi hitting all-time new highs this week. you should should you be buying these stocks? >> earnings season unofficially
kicks off, should investors be wary? joining us is david kostin. great to have you back. >> nice to see you. >> you've been not necessarily bullish on the year, but now you're not bullish on q1 either. why? >> a lot of issues will be impinging on the market. last night we officially kicked off the quarterly earnings season. the topic in focus for the next three weeks. a couple issues are in the front of investors minds. the first issue is the dollar. we have a stronger dollar from this year relative to the first quarter of last year. that will be a headwind, and a third of sales take place internationally. that will be a headwind in terms of measured level of ref nekn r. the second issue is oil prices. broadly across 2016 it will be a subject of discussion.
how do you measure profits of companies, whether it's adjusted or operating results. i think operating is more conservative and appropriate way to think about valuation. that goes to the heart of how we measure and think about the profits of energy companies. third is financials. you talked a lot about the issues of low volumes, the advisory business is difficult with regulatory agencies. those are three big issues. one on the dollar, one on energy, the third on financials. that will be a headwind for strong growth in profits. at the end of the day, you're looking at about $110 worth of earnings. let's remember that valuation in the market at 17 times earnings is at 95th percentile of historical valuation. so you have a fully valued market with modest earnings growth that leads to a market that will end around 2,100, about 50 points higher than
today. >> currency, are you suggesting the headwind will replicate next year? the bulls are saying it's a diminishing headwind. >> if you look at the dxy, it's been basically flat. the trade weighted dollar, which reflects the other countries with which the united states trades, that's a higher, about 9% higher is the average level of the dollar this year relative to a year ago. that's a head wind that will be enforced for this quarter when you see this results this year over last year. >> carl's question, we're coming off a quarter where the dollar had the weakest quarter in years. is it too soon to buy the multiple nationals with the thought that later in the year that will help a lot. >> i think it's a bit too early. one of the key issues, what's a scarce asset in the market is
margins. margins have been flat for five years across the s&p 500. so there's a few companies, google, you can think of visa, starbucks, think of bristol-myers, companies that are -- the goldman analysts are forecasting margin expansion by pore than 50 basis points this year and next year, that's a rarity in the market. >> can i ask about the banks? the interesting thing is the expectations on earnings growth from the analysts went to 0 to minus 7% in about a week. basically because of capital markets on two banks in particular according to s&p. the big question is how the banks will respond to earnings, whether they will bounce from here. if they don't, deutsche bank is suggesting share price movements we have usually indicate that you have a major turn in the default cycle coming. what view are you taking there? >> well, if we think about the business back drop, you have the u.s. economy still growing. it's not clear that it leads to
default cycle. focus specifically within the energy sector, some of the loan reserves being taken there. which is pretty significant. that is sort of one pocket of focus. the high yield market has gravitated towards that as an issue. broadly speaking, u.s. economy is growing. it's growing at somewhat less than 2% level right now. our forecast would be on average the economy will grow at 2% real gdp expansion. that's still positive. positive for revenues. companies with stronger balance sheets will do better. outperform those with weaker balance sheets. >> are you talking about the blanks? are we able to guide you into financials? >> financials is one of the biggest sectors -- >> that's why i'm asking. >> there's lots of headwinds there a more dovish fed is a more challenging environment for the financial stocks. a higher fed funds rate would be a positive for those sectors. at goldman sachs we're looking
for an increase of three hikes, in june, september and december. 25 basis hike per each meeting. >> pmis have shown a little improvement this year. imf doesn't buy it. what do you think? >> the business activity in the u.s. on the domestic side has been okay. more of the weakness is concentrated outside the united states. the broad u.s. matrix of the indicators and ism have shown strength. that's consistent with a -- profits are still growing modestly. that leads to a modest increase in the market which is the message to investors. good to see you. >> nice to see you. >> david kostin. the imf has revised its global economic outlook this morning cutting global growth to 3.2% this year from 3.4% in january. with us from washington is the chief economist with the imf, the author of this report.
welcome back to "squawk on the street." >> thank you. >> this is becoming a familiar pattern. the imf cutting global growth prospects. it feels like no matter how pessimistic you are, it's not enough. what changed in the last few months from january to now that made you more so. >> we've seen some loss of momentum in advanced economies, including the u.s. also japan. we're seen continuing headwinds in the emerging markets, particularly for commodity exporters. we had another bout of financial volatility in the begins of the year. markets have largely recovered that takes a toll as well. >> it might be somewhat surprising for people who follow commodity prices, oil prices have stabilized a bit. do you not see bottoming in the deep recessions of brazil or russia as result of what we've been seeing from commodities?
>> well, we do see further out in our forecast some restoration of growth in those countries, but they've also been stressed because of political pressures, geopolitical pressures, sanctions in the case of russia. if you go out to 2017, 2018, we do have improvement. >> you led the charge, you and christine lagarde on easing monetary policy, more coordinated monetary policy, keeping low and easy rates. cautioning that it's time to be graduate for the federal reserve. does that mean an interest rate hike from the fed in june would be too soon? >> the fed is, i think, in a useful way clearly taking great account of what's going on in the world economy and how that blows back to the united states.
we can't presuppose what conditions will look like in june. the fed is following a data dependent approach. they don't seem committed to any particular path of hikes. i think that's appropriate. >> so you won't say june. you did downgrade the u.s. economic outlook for this year. why did you do that if we are seeing signs of stabilization in manufacturing and housing and even consumption? all huge parts of the economy. >> we certainly saw some loss of momentum at the end of last year. that feeds through to the u.s. projections for the coming year. even though the dollar has come down some this year, it continues to take a toll on manufacturing, and on trade. we're seeing the effects of lower investment from the fall in oil prices. so those headwinds will continue for a little bit. >> maurice, congratulations on
the new job. can i ask you -- >> thank you very much. not so new anymore. >> i would really like your view on japan. the reason i'm asking you is because olivia blanchard has just given an interview to the daily telegraph many in which he suggested that japan is heading for a full blown sovereigncy crisis now with debt at 250% of gdp, and at the same time negative rates are masking what's going on there, and ultimately they may not be able to attract enough people to buy the debt. what's the view on tokyo? >> well, japan really has to do more in terms of structural policy. it has a narrow path to tread given the high level of debt. all of the three arrows have to be put into play. i agree with olivier that a lot of the burden has been put on
up monetary policy. the other components have to raise their game to get japan back to more stable growth to let it deal with its debt problem. ultimately the way it will handle the debt problem is by restoring faster growth. >> moving to the uk, you say the risk of brexit is real, and that it could do "severe regional and global damage." describe what you're so wore riffed about. are you talking about the fear of global recession if britain does vote to leave the eu? >> we don't see global recession, but we do foresee and are already experiencing in the uk the effects of uncertainty about the brexit vote, seeing a reaction in the foreign exchange market as well if britain were
to leave the eu, there would be a period of negotiation over that, lasting up to two years with incredible uncertainty about what the status of london would be in the european financial network what would happen to the eu's trading relationships. and a lot of countries not only in the eu and uk but also globally have built up their business models based on the assumption that it's a member of the eu. this would certainly be disruptive. would it be a huge effect to give us global recession? that i wouldn't hazard to predict that. >> thank you very much. just one of the risks in this report. maurice obstfeld setting the tone before a week of meetings. i'll sit down with christine
lagarde later this week, tim adams, former federal reserve chairman, alan greenspan. it's going to be a lot of good talk. >> for sara eisen, that's like as good as it gets in life. >> very excited. as much as i'll miss you guys here. up next, both coke and pepsi trading near all-time highs despite weakness in consumption in the soda space. is it all about the dividends? that when "squawk on the street" comes back.
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coke and pepsi are trading near all-time highs. will these beverage companies be able to sustain the momentum? let's bring in the senior beverage analyst from jpmorgan, and household products analyst from ubs. steven, how do you read the strength in beverage companies and other consumer staples now. is it a pessimistic view of the u.s. economy and market that investors are piling into the safe, boring dividend-paying slow-growing companies? >> i think as we heard in the last couple segments, we're living in a low-growth high-risk world. these stocks are not high growth but certainly lower risk. that explains a lot of the higher valuations in the group. i would also say as you look at coke and pepsi you have good fundamental trends. organic growth is solid. they both have great self-help
initiatives underway. so the margin expansion story, underlying growth story is compelling. the dividend yield is compelling. as you look forward, we're seeing a bit of easing in the fx environment, which i think in conjunction with the cost savings provides upside as you look across street estimates of 2%, 3% above on coke and pepsi looking at fiscal '16. >> i know you have a buy on both. john, you like pepsi, neutral on coke. the reason i framed the question that way is because i'm thinking maybe there's something more than it's a defensive environment for stocks. maybe these companies will have a great earnings season and a fundamental turnaround. costs are down. productivity savings, margins up, queu up, squeezing higher prices. how do you see it. >> i think that's correct. we like to say bad to less bad is better than good. so we see from coke and pepsi
that as the fx rolls over a lot of good things they've done over the past couple years will be apparent to investors. investors have ignored the stocks the past few years because fx hurt the underlying results. as the fx rolls off, earnings growth will accelerate. that's good news. our preference for pepsi is that coke's earnings will be down, pepsi's will be up. and pepsi will grow faster next year because coke is making difficult choices related to changing the bottling system. the underlying business will be better than it's been. >> how do you justify, steven, buying these stocks at a time where the bad news, the optics continues to deteriorate when it comes to drinking soda, from obesity concerns to taxes coming in the uk. all sorts of problems and we've seen it weigh on consumption, more than a decade down in the
country. how do you buy the stock with this news out there? >> yeah. the good thing is that the industry has come to accept that reality. you're not seeing either company chase volume. seeing both companies accept the lower volume trying to get people to pay more per package. so, what you see from coke, what you see from pepsi, smaller packages, higher price per package. the days of the 99 crept two liter in this country are going by the wayside. there is still good growth as you look across the portfolio globally. coke has expanded into other beverage types, there's still growth in soft drinks internationally. pepsi has a much more diversified portfolio, including in beverages with gatorade and a bigger juice and tea portfolio. as well as snacks which is the economic engine of pepsico. i think the carbonated volume decline trend is real, but
there's still revenue opportunities. as you look across the portfolio. there's great margin opportunities as they realize those revenues and push on the cost savings that we talked about earlier. >> wonder if there are m&a opportunities out there as well with these stocks doing so well and some of their smaller peers, competitors that are growing much faster and getting slammed, will we see some deals here. >> one thing we need to see, steve talked about this, coke's portfolio needs to change much more rapidly. you could see coke get more active there. we saw this when they took a stake in monster. they have moved away from m&a over the past couple of years, sort of coming out of the recession with the risk involved. there's more confidence in the business. earnings growth is better. i wouldn't be surprised if we saw a step up in m&a over the next year or so. >> we'll see what happens with earnings first. gentlemen, thank you.
deutsche bank announcing that it is freezing plans to create 250 new software development jobs in north carolina, specifically it says in response to the state's decision to enact anti-lgbt legislation. the ceo saying we take our commitment to building inclusive work environments seriously. we regret as a result of this legislation we're unwilling to include north carolina in our u.s. expansion plans for now. paypal has made a similar announcement on expansion and bruce springsteen and bryan adams have both canceled planned concerts in north carolina. the real power lies with bank of america that is head quartered there, of all those cos that signed, bank of america holds the power with its political funding. >> a huge employer in charlotte. when we come back, dallas fed president rob kaplan speaking out in an exclusive. what he had to say about the economy and a path to
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dallas fed president rob kaplan sitting down with an exclusive interview this morning with our senior economics reporter, steve liesman. >> rob kaplan took office in september, indicated he will be a patient policymaker. he sees the first quarter weak p weakness, expects the economy to rebound, but wants to see it first, simon. >> i want to see strong job numbers. we had a wide-ranging interview with mr. kaplan, we talked about energy loans, a big issue in the dallas district. he said that there will be
losses at the banks, but they will not be or creating systemic problems in the financial system. on building the wall, he was diplomatic, saying he didn't want to get into the politics of it. he said he wants to see a sensible way to deal with immigration. on too big to fail and neel kashkari, he said he does not see it as the biggest issue because there's been progress. and on inversion, he says he can understand why companies want to lower their tax burden and that we need comprehensive tax reform. he joined other central bankers around the world on calling for the fiscal side to step up and do more saying monetary policy has its limits, he wants the government to address some of the structural issues out there. finally, one more thing. noticed a big difference between rob kaplan and his predecessor, kaplan will wait to raise
interest rates, less concerned about inflation down the road. it's a change in the dynamic of the central bank to have a hawk like fisher replaced with a more moderate policymaker, rob cap lynn. simon? i'll take it, steve. thank you. robert kaplan with our steve liesman. straight ahead, are investors in asia worried about a trade war if donald trump gets elected? more on that when we come back. from bank of america to buy a new gym bag. before earning 1% cash back everywhere, every time and 2% back at the grocery store. even before he got 3% back on gas. kenny used his bankamericard cash rewards credit card to join the wednesday night league. because he loves to play hoops. not jump through them. that's the excitement of rewarding connections. apply online or at a bank of america near you. thank you. ordering chinese food is a very predictable experience.
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good morning, everyone, i'm sue herera. here is your cnbc news update. defense secretary ashton carter meeting with his indian counterpart in new delhi. his three-day visit seeks to advance a relatively new defense relationship with india that washington sees as a counterweight to the growing power of china. talks to settle a lawsuit regarding the confidencecy of sumner redstone brought by his ex-girlfriend apparently have stalled. that's first reported by the "l.a. times." it's not clear what caused the talks to break down. a preliminary settlement was reached last week and expected to go before a judge this week. and check out this video of a california road crumbling into a sewage line on monday. it's unknown what exactly caused the damage, but likely due to recent rains that sinkhole grew to about 20 feet deep. and an unbelievable event at
the detroit tigers baseball game yesterday. a fan in attend dance caught five foul balls. four during the game and one during batting practice. that's amazing. the fan gave all the balls away to kids. in case your wondering, he did sit behind home plate. that's the news update this hour. guys, i've never caught a foul ball no matter how many times i've been to the stadium. don't know if any of you have. what are the odds? >> i imagine if he catches like that, he has quite a few already. >> one would think. >> nice to see you. sue herera with the news update. donald trump may fill face a battle to secure his party's nomination but he's getting attention in china and throughout asia. why the interest? trump clearly has called for allowing japan and south korea to build their own nuclear weapons and, of course, he's proposed a 45% tariff on chinese goods. joining us at post nine to share his thoughts, former u.s.
ambassador to the asian development bank, curtis chen. of all the things you told our researchers, the things that stands out to me given the coverage we already have is how many people in asia have an understanding for donald trump and an admiration. talk us through that. >> you think about what donald trump is saying, in many ways it's anti-china. the story of asia now economically and geo politically is the rise of china we saw the g-7 release a statement which picked on china not by name but clearly about them and the south asia sea. >> is there a logic to what trump is saying here? >> logic, that's a bit of an extension, but clearly something is resonating, not just with people in america but also in asia. again, the story economically, politically is the rise of
china. >> so, talk us through then how you think this is likely to play out. let's leave the nuclear weapons to one side. that's a political discussion for another channel. as far as the tariffs are concerned, what do you think is likely to happen if he gets the gop nomination? do you see that? do the asians see that going through the political process? >> i think we have to recognize that asians are not paying so much attention day-to-day to our u.s. election. what they do see day-to-day is the presence of china, either through businesses or through their now military in the south china sea. i also, when i talk to asian leaders and business or government leaders, they are trying to understand our political system. they do recognize that what leaders might say to try to get the nomination may be different than what they actually do once elected. look at four leaders, two democratic front runners and the two republican front-runners, they're now all against the
transasia pacific transportation. >> separate issue, happening also right now the revelations from the panama papers have come out. several of the chinese elite have been mentioned. what will be the impact there? >> it's a constant battle in china in what people are reporting on. the censors in china are working overtime. it's not whether or not the accounts exist, because they may all be legal. it's about the hypocrisy of asian government leaders who say one thing, in this case the battle against corruption, and perhaps relatives are doing something else. >> is that going to play out in the public? >> it's continuing to play out in many ways. it's not just about the panama papers. if you follow social media you will see in china, social media will focus on kids of the leaders. we call them the princelings or the second generation who are
spending out of control. it's against really what the communists, the chinese leaders are all about. >> we've seen capital flow for the most recent month try to put a dam up there this expateiation of cash. do you think that will last? >> absolutely. the head of the imf when she talked about china said there's a bumpy road ahead for them. he would see people with money in china are picking out how to get that money out of china. >> meaning they'll buy anything. >> they're wise investors -- >> they will buy a home sight unseen. >> i don't know about that, but i just saw some data where china has overtaken the u.s. and singapore as the number one real estate investor in australia. >> fairness, many people are trying to get money out of this country as well. they do it through corporate inversions or tax evasion.
i guess the big thing from china since where we are in august is the view they're not going to rapidly de-value, which would de-base some competitors down there. have we got stabilization here? it wasn't so long ago that janet yellen was sitting there saying interest rates would not rise in this country because of the fears over china. >> the reality in china is in the u.s., monetary policy is not the solution to a country's economic woes. the reality with china, sometimes i don't know whether i should believe the data or not. what i see on the ground is different with what you read. >> the imf just upgrade the id forecast for china. 6.5% growth, instead of the 6.3% it was expecting. is that optimism justified? >> it goes back to the data. i think many nations would be happy with 6.5% growth. the asian development bank last week where i sat on the board
lowered the projections for china down. >> do you think this is the imf playing nice with china. >> having been on the board, the world bank, the imf, ultimately they are political organizations. there's a lot of forces we need to bank out. one thing we'll talk about this may is the china challenge. do people understand it? when i say to people, when they look to invest in asia, it's beyond china and india now. you have to look at southeast asia, the breadth of opportunities there. the story is china's rise but the rest of asia is also rising. >> good to see you, curtis. thank you for your time. >> thank you. oil remains a big story. highest in about three weeks. jackie deangelis has more on that. >> good morning to you. in fact, we keep taking another leg higher, over $41 a barrel now. highlights from interfax, a russian news agency saying the saudis and russians have agreed
or reached a consensus on production freeze. remember, this was something that the saudis said they wouldn't do unless the iranians were cooperating, too. we don't have more clarity on this. the source is interfax. we need to know more. it did push oil prices through the 200-day moving average. other reasons for the support we saw early on in the session, that china data out, the strong vehicle sales certainly one. relative dollar weakness continues. that is something to catch. oil field maintenance as well. i would say the api this afternoon. estimates are all across the board. we got a significant draw down last week. that popped oil prices up. seeing some people looking for a draw. some people looking for a build this week. it's a bit confusing. crossing 40 was a big mark, carl. we have some data generated by kenshow showing what happens. some of the energy stocks tend to perform well under the circumstances.
pioneer is one, halliburtohalli cabot and schlumberger. so interesting regarding this doha meeting, so many people had written this meeting off saying a consensus could never be reached. all the chatter and buzz and anticipation started to build this week. as we approach that meeting on sunday. interesting to get this headline out now. >> oh, yes, a lot riding on this weekend. are customers finally coming back to chipotle after the e. coli outbreak? "squawk on the street" will be right back with the dow up 40 points.
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welcome back. watching the tech sector this morning. the worst performing sector in the s&p 500. a lot of attention paid to this sector because it's the biggest in the s&p 500. it's being led to the down side by the likes of skyworks solutions, f5 networks, western digital down by 2% or so in early trading. lagging the most, shares of juniper networks off by 9% after the company warned first quarter results would be below expectations. the tech sector up by a half percent for the year and will be a focus for traders in the coming days. next week, ibm, intel, microsoft and others report. tech sector earnings expected to show a 5.5% decline, sara, from the same time last year. the yen is weakening for a change. let's get over to rick santelli with the santelli exchange. good morning, rick. >> good morning, sara. indeed, special guest this morning, the new case for gold, we have the author, author of
many books this one not only a good read, it's an easy read and an enlightening read. jim, thanks for taking the time this tuesday morning. >> good to be with you, rick. >> early in the book you say gold is not a commodity. gold is an investment. gold is not paper. i ask you, what is gold? >> it's very simple. gold is money. you know, one of the criticisms of gold, you hear from warren buffett, gold has no yield. it's not supposed to have yield. reach in your wallet, take out a dollar bill, hold it up. what's the yield? zero. people say i can put it in the bank and get some yield, now it's not money anymore anymore. money market funds can suspend redemption like a hedge fund, i'm not saying it's high risk or take your money out of the bank. but once you put your money in the money market fund, it's not
anymo anymore. >> we have been off the gold standard since, well, the last vestiges under nixon disappeared in '71. you say in some ways we're still on the gold standard, and your reference for this was kind of astonishing. you pointed to the over 110/1 leverage of the u.s. federal reserve's balance sheet. explain? >> well, if gold has no role in the u.s. monetary system, why does the u.s. have 800,000 tons, why does china acquire 300,000 tons, russia over 1,000 tons. if you look at fed's balance sheet, it's leveraged 113/1 with a big duration mismatch it looks like a bad hedge fund. they have a gold certificate from the treasury, they value it $42 an ounce. if you convert that into tons, market to market, low and behold
it's 13/1. gold keeps them solvent. if you didn't have the gold, occasionally they would be insolvent. gold plays a hidden role on the fed's balance sheet. nobody wants to talk about it, but it's right there. i mention this in chapter one. >> we only have 30 seconds left. i'll go fast. much of the world has negative rates already. the u.s., i'm not sure if we'll have it. the japanese investors are rejecting it. how does negative interest rate future potentially, what issues does it hold for the chshiny metal. >> as inflation comes down, you have to keep cutting the nominal rate to get to negative real rates. nail go negative in they have to they already have. negative real rates bullish for
gold. >> jim rickards, it's a pleasure. we'll have to have you back. we could go on and on about the precious medal. simon hobbs, back to you. though e. coli and other outbreaks are over for chipotle, shares are still down 40% since they first rocked the business. are the company's efforts to get people back into stores working? we have exclusive tech data next on cnbc.
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and what are you seeing? >> we are estimating a 29% decline when they announce their earnings for first quarter. they when through a series of events. e.coli. they completely cleared them and foot traffic is down about 23% so why 29% sales decline. they save it out on coupons and we're establishment and they're coming for that. >> it's interesting to see that you're able to make that calculation. what is the technology here? what are you got that enables you to do this? >> four square is a community about 50 million people around the world each month use our apps or our website and we're able to understand the shapes of businesses. over 85 million locations over 95 million businesses like this chipotle in downtown portland.
and we are able to detect it by the phone being in your purse or your backpack that lets us build traffic patterns for every major business in the world in the real economy and we're able to see trends year over year and that lets us understand as we did before what mcdonald's was going to see or what apple might see in terms of foot traffic from a new iphone app. >> so what you have is a sample of people that you can monitor and the question is if we're going to make perceptions about a public company is your sample representative of all the people that will go into a chipotle and buy or are they a particular type of customer that might be more affected by what's going on? i would argue they probably are. they're probably more logged on. >> our users might be more checked in so to speak but i think we are able to normalize our panel as i said about 15 billion people worldwide against us. census so we're able to make
adjustments as well. chipotle announced its sales for 10 of the last 12 weeks. in q-4 we saw our foot traffic down and chipotle down. our foot traffic core lates very tightly into sales because you're not going to get a burrito by e-commerce. you have to walk in. >> i'm curious in terms of foot traffic across burger chains because chipotle made news when it filed a trademark for better burger and we're in a moment of peak burger. is that still a growth category? >> well i think the healthier segments of the food industry have been growing faster than the standard segments for the last few years and we saw what's interesting for chipotle is is it too places like mcdonald's or starbucks or whole foods. one of the problem is 20% of their customers accounted for
50% of all store visits. they like the food with integrity message. those people were 50% more likely to stay away during the scare and 20% less likely to come back. so they have to recoop this relationship. >> this is a great sales pitch for the technology that you have. congratulations on being able to do that. what is the moat around what you do? how many other businesses can track people from their cell phones? as we move forward a lot of apps might do this and companies might be able to do it. it fits into the big data relationship. >> i think that's true. four square has a unique relationship with our users because we protect their privacy very tightly and we offer value. we're able to ping them when they sit down at a new restaurant and tell them what dish their friends recommend to order. we're able to tell them you have never been in this neighborhood before. >> but doesn't google have the same relationship with these
people? >> the two other companies would be facebook and google but i don't think either of those companies is focused like we are on serving industries like the hundred thousand app developers that help them understand how people move about the world or the big enterprises that use us for advertising solutions and the like. we're uniquely focused on the real world in a way that football and google probably aren't but at the same time we're also growing very fast in these kind of enterprise areas and data solution so we grew that about 170% last year and a number of hedge funds are customers of ours as well. >> it wasn't so long ago you were taking arial photos of peoplede of jcpenney. >> coming up squawk alley is live at facebook's developer conference in san francisco. what new products will be unveiled? you'll have to watch squawk alley. it's up next.
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