tv Squawk Box CNBC April 14, 2016 6:00am-9:01am EDT
squa"squawk box" begins right n. live from new york, where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. take a look at the u.s. equity futures at this hour. they are flat, but this comes after stocks close the at their highest levels of the year yesterday. you saw a couple of days in a row of gains. the dow was up another 187 points yesterday. that was a gain of bett thbette 1%. again, things are flat right now. stocks were up overnight in asia after the hang seng and shanghai composite closed at a three-week high. a 3% gain in the japan's nikkei notched the highest close in three weeks. you'll see at least right now
the dax is up. it's up by about a quarter percentage point. if you want to check out crude oil prices today, yesterday giving back some ground. relatively flat right now. down by about 4 cents for wti. dropping slightly this morning as major producers down play the chances of an output these at this weekend's meeting. separately, the international energy agency cutting its estimates for global demand growth in 2016. >> and it is another busy day for economic data and earnings reports. we're going to have weekly jobless claim at 8:30 eastern time. expect it to hold steady. filings have been 300,000 for about 58 straight weeks now. also at 8:30, we're going to get the march consumer price index, headline cpi expected to tick up about 0.2% following a decline in february. now, atlanta fed president dennis lockhart is also speaking today. we're going to have to wait to see what he's got to say about all this. also, for earnings, look for results from bank of america,
blackrock, wells fargo, delta airlines, and pnc financial. all of that is coming up before the bell. in the meantime, full-time leaders from around the world are in washington today for the imf world bank spring meeting. sara eisen caught up with treasury secretary jack lew and asked him about the recent crackdown on inversions. >> i said several years ago the right way, the best way to do it is for legislation to be passed that would do serious, comprehensive business fax reform and shut down inversions once and for all. it's a complicated matter. you don't have infinite flexibili flexibility. we have worked and worked on it. this is the third action we've taken. each time we've slowed down the pipeline. each time i've said congress needs to act because we want to make sure that inversions are stopped. i think that it should have been no surprise to anyone that we were working on this because we've been working on it for a long time. >> you can catch the entire exclusive interview with
secretary jack lew later this morning on "squawk on the street." >> the whole approach and the language used there, it was problematic for me. instead of saying we want to, you know, comprehensive corporate tax reform to make assets want to stay here, he says, we're only corporate tax reform to shut down inversions, as a permanent way to shut down inversions. that's not the point. you don't want foreign companies being able to buy our companies on the cheap because they are able to make more money on it. in the process, inversions would stop because in a positive way, capital would want to stay in the united states, not just we're going to prohibit you, we're going to shut down you leaving, but we're going to make you want to stay. why can't you do it in a positive -- because they don't think that way in this administration. >> i would make a slightly different argument. the argument would be that they've talked quite often actually about wanting to have comprehensive tax reform.
their version of corporate tax reform is different than the republican's version of corporate tax reform. i think there's a fundamental issue. if both sides are never going to come together -- and we've been talking about this for years and years and years. >> there's a point made by the head of the ways and means committee yesterday. took reform comes along once in a generation. we don't want to tweak around the edges. what we'd like to do is make substantial changes. we'd like to see that idea pick up in washington. >> if you went back and designed a tax system from scratch -- >> it would not resemble this. >> what does it look like? >> where -- is it mostly from the individual? does it make sense to tax corporations? how should you tax corporations? if you can get the same amount of revenue or more and they can compete better globally, is there a different way? is there a consumption tax that
makes sense? it's only 10% of revenue. how do you replace that? >> in a perfect world, you may go to zero. you might go to zero and do it in other ways. >> yes, my son. i agree. >> but the spectrums with which people think about -- >> there are 27,000 people at a bernie sanders rally yesterday that think a perfect world can be created where there's just trees and fruit growing everywhere. >> their perfect world is different than your perfect world. >> unlimited food and unlimited education and everybody has everything they want and everyone lives happily ever after and no one has to work. there are people that believe in the perfect world now. >> i'm just suggesting the various perfect worlds out there are so hard to get to. >> and combine into one reality. >> if oil is over 40, i think we shouldn't even mention it. a lot of times we look at oil and reference to the stock market. >> but they've split. oil can come down and stocks can still rally.
>> how about an oil tax? make sure oil is always $80. standard. >> i think whenever people are doing well, there should be a windfall tax. whenever they're going bankrupt, we just let them go. when times are bad -- that's what we do right now. we do the windfall profit stocks. do we like it better when the oil companies are like, you know, having problems and not being able to pay their debt and affecting bank balance sheets in is that better, or do we like it better when they're making big profits and paying big taxes? i guess if they paid big taxes, we'd like it. >> well, you made the argument to me, and i don't know the answer -- i don't know where you come out on this one, actually. if you believe oil is low, it's somehow supposed to flow through to the rest of the world. that's what we thought. >> what is the two-day gain in this dull market? is it 350 points?
>> it was 180-something. >> funny the way that works. >> it's close to 2%. >> there was a guest on who said the market is tired, no more gains. i tweeted out, i'm writing that down. it was a guest on "squawk on the street." the guy liked the tweet and everything, but i said i'm going to remember it. it sounded like, you know what, you're probably going to be wrong. >> when you stick your neck out. >> say the gains have been had in this market. that's when it's ready. >> less than 100 points from 18,000 now. >> right. in geopolitical news, this was frightening to watch. everything is on video. is there anything not on video? madonna was the first person to say that. there's nothing worth doing if it's not on video. two russian war planes flew simulated attacks that passed right near a u.s.-guided missile destroyer in the baltic this week. the american ship tried to contact the russian aircraft on the radio, but they got no
response. one u.s. official said that they were the most aggressive interactions with the russian military in recent memory. the incident occurred in international waters. i can just tell you that i monitor both conservative and liberal blogs and websites. the conservatives immediately used this as a sort of proxy for the way putin views president obama. >> well, there was even some comments from the russians early this morning, saying, oh, what, they were bothered by this? it was some complete brush off of the concerns that were raised. >> if i were on the destroy and i saw that, i would be worried because you're a sitting duck. >> the united states' point was there could be a misunderstanding in a situation like this. we may decide to take them out before they get that close. >> so it's not a good idea. this is like a cold war -- you know, someone's got a finger on a button somewhere. >> it's an international spark.
>> in lighter sports news, the golden state warriors making history last night, beating the memphis grizzlies to smash the nba single-season wins reported set by michael jordan's chicago bulls. i saw some of this video. everything he throws -- i mean, the video we show, they're going to go in. still amazing. he's so far away. so far outside the three-point line when he's hitting a lot of these. they just all go in. anyway, that's 73 wins this season. only nine losses. steph curry leading his team and making history of his own. he drained his 400th three pointer of the regular season s first player ever to do that. i think it's way above the last record. at the same time in the nba last night, it's the end of an era in los angeles. kobe bryant playing his final game in a laker uniform. he scored 60 points in a victory against the utah jazz. >> what's funny -- the thing that had me cracking up all
night long is the fact i go through 20 years of everybody screaming to pass the ball. on the last night, they're like, don't pass it. this has been absolutely beautiful, you guys. i can't believe this comes to an end. you guys will always be in my heart. i sincerely, sincerely appreciate it. no words can describe how i feel about you guys. thank you, thank you from the bottom of my heart. god, i love you guys. >> third leading scorer in nba history. i mean, obviously going out when he doesn't have to go out. >> he's got it. >> over the top. >> he's 37. i thought he was maybe 40. >> it's a grind. >> it is. but as you said, he's still got it. >> i think he could get hired by a couple nba teams probably. >> it was amazing.
it's great. >> and we say we look up to them and everything. i think kobe made like $400 million over his career. i don't know if that includes endorsements. maybe it does. michael jordan is worth a billion dollars. >> more. >> the golden state warriors broke the bulls' record from '95, '96. >> i saw that. by the way d you read the "time" magazine interview with tiger woods? >> i won't. >> you won't read? >> it wasn't "time." oh, an interview with him. because he was on "sports illustrated." >> there's an amazing interview with him. >> the whole jordan spieth thing, i'm still sort of -- i feel scarred a little bit. i know he still feels it. masters titles are not easy to come by. >> in the meantime, let's talk about something else right now. u.s. regulators proposing a two-year ban for theranos founder elizabeth holmes from operating blood testing labs.
>> just the latest in this absolutely crazy story. this stems from yet another peace of great reporting from "the wall street journal". he uncovered a letter that the certains for medicare and medicaid services sent to theranos, saying they could impose these sanctions on theranos if they don't correct these measures. here's some of the letter from cms that the "wall street journal" obtained. this all stems from an audit of their california laboratory. so this has been the ongoing audit we've been hearing about for a while now. essentially theranos had ten days to respond or cms said it would impose these sanctions. i spoke with theranos yesterday. they confirmed they had received this letter. they had responded within the ten days. they really want to emphasize as of now, no sanctions are in place. they say this is all hypothetical. so how would this ban be imposed? it could all stem from a potential revocation of that california lab. if your revocation happens, that
means that the owners or operators of that lab get a ban for two years from owning or operating any labs. of course, that would then spread over to the arizona laboratory this theranos says does 90% of its business. this would kind of stretch across their business. >> how often does something like this happen? i mean, is this a really unusual circumstance to have the threat of sanctions like this put out, o is this more common place? >> people are telling me it is pretty rare. i was looking on cms's website. they do have several labs listed there with sanctions. it seems like a lab as big as this, as well-funded as this, this is surprising to people. people i'm talking with in the industry are just kind of rolling their eyes at this point. they're just saying, how can we trust this? >> how much cash do they have? how long -- >> it's a private company. we don't have that information. >> do we have any idea how long this soap opera can go on for? in a normal world, they would
effectively go out of business. >> i talked with them about investor base. they don't have to give us details. they said their original investor base hasn't changed at all. we've been trying to find out if people are trying to get out and sell on the secondary market. they say nothing has changed. as for how long they can keep operating, they say they have addressed these things and they're hopeful the sanctions won't be put in place. they say they do things other than just testing. they have r&d capabilitiecapabi. i don't know about the funding situation. that's the key question there. the other thing is they're offering these tests at such low prices. are they losing money on these tests? there's a lot of questions about their cash burn. >> okay. meg, thank you. >> thanks, guys. a couple other market metrics to tell you about this morning. first of all, check out the f h treasury market. you saw the ten-year sitting at its highest yield in just about two weeks. this morning the yield has pulled back slightly.
still sitting at 1.774%. >> in the morning we check these things out on the way in. have you looked at the german ten year? >> no, where is it? >> the ten year is 14 basis points. it just looks so weird. i looked at it twice. >> that explains our treasury. there's the bu nd. almost 15 basis points. >> almost 15. you give them your money, you'll get it back in ten years. you can buy like a soft drink. what would you buy that won't eat your insides out? you could buy some type of -- no red bull. that's caffeine. is there anything you can drink? water. you know what you can buy? metamucil. have you tried that? >> no. >> our producer recommended it. it's like tang. blue it does a bunch of really
good things. it monitors your sugar level. it keeps things in order, running smoothly. that's the drink. >> keeps the trains on time, so to speak. >> it's pc. >> gross but pc. we'll give you that. >> it's really not gross. it's like tang. >> no, what it does is a little gross. >> look, you know that everybody -- i mean, there's the children's book. >> i do. all right. let's take a look at what's been happening in the foreign exchange market. if you check out the dollar, the dollar is actually -- the dollar index was at its highest level yesterday in about a week. you can see the dollar is up against the euro once again today. 1.1259. dollar is down against the yen. gold was down about 1% yesterday. that ended a four-day winning streak.
one more check on the futures this morning. after two big days of gains with the market sitting at their highest closes of the year, you can see right now futures are relatively flat. dow is down by less than ten points. s&p futures down by about two points. the north america dasdaq off by. here on set, we have steve friedman from ubs wealth management. let's start things out, jeff, with you, and just talk about with marks sitting at their highs what you think happens next. >> i think the rally is a little extended here. i think in the longer term, we go higher, but we're 43 sessions into this buying stampede. it's pretty rare to get a buying stampede to go more than 30 sessions. so we're overbought on a short-term basis. i think any kind of pullback is going to be small. i think we make new highs in the months ahead. >> so you're a little nervous just about how long the streak is, but you don't think the gains are over for the longer
haul. >> i do not. i think stocks are in the sweet spot right here. i think gdp growth is going to reassert itself in the back half of this year. i think earnings, the revised lower estimates, i think earnings for this quarter are going to come in higher than most people expect. i think people remain underinvested. >> steve, one of the things we've seen is commodity prices have certainly rebounded. concerns about deflation are not nearly as rampant as they had been. what does that mean? do you agree with jeff at this point? do you think that the rally could be around for a little longer? >> i think if to you take the long view, there's still upside. i would be a bit concerned in the near term because i think some of the drivers that have been positive, the movement in the dollar and energy prices, some of those may be overextended. as they reverse somewhat, i think they could face some pressures. earnings season, it's going to be challenging. clearly expectations have come down a lot. >> i was going to say, jeff mentioned it has been -- the bar
has been lowered. >> on the macro side, i think you've had some good data out of china, the u.s. i think it's something we'd have to be patient about. you have to wait for these positive macro and fundamental drivers to unfold. >> if you've been waiting, you've missed this run over the last month or so. >> that's true. generally speaking, we're telling people to be slightly overweight stocks in the u.s. and europe. we're not expecting to just extrapolate the more recent gains. >> jeff, where do you think stocksi inin incould run for th? any year-end targets snmpkts i really don't do that. my father told me if you're directionally correct, you're ahead of the crowd. i think stocks will be higher at year end than they are now, and i think the economy will be stronger at year end than it is now. >> okay.
jeff, steve, thank you both for coming in today. >> you bet. coming up, prescription spending in the u.s. is expected to skyrocket over the next five years. details from a new study next. plus, if you've ever been frustrated by long lines at airport security, you're still flying commercial. no. you're not alone. i did that for you, andrew. >> thanks. >> one airline calling out the tsa for making people miss their nights. "squawk box" will be right back.
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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "squawk box." time for the executive edge. a new report is forecasting annual spending on prescription medicines in the u.s. will increase 22% over the next five years. health care information company ims health holdings predicts the spending will climb as high as $400 billion in 2020. the numbers take into account anticipated discounts, rebates, and other price concessions. is that -- that's 22% total, right? that's not 22% a year for five years. but that means they more than
double. i assume that's 22% total. i'm not sure that's that horrible, especially if it replaces or supplants chronic -- >> if it supplants chronic care. >> but 22 is not that much anyway if five years. what is that compounded at? >> adds up over five years. >> 2% or 3%. >> it's valuable. >> yeah, it's not awful if we make great strides, not just ways of protecting against generic competition with extended release version or something. >> exactly. >> let's talk about airlines this morning. american airlines is now calling out the tsa, saying the agency is not doing enough to make sure passengers make their flights. a spokesman from the airline calling check points nationwide unacceptable and the problem got exponentially worse the first three months of the year. during one week in march, lines cause the 6800 passengers to miss their flights.
>> we've been talking about this during the entire break. >> i'm a global entry person, which makes me a pre-check person, which means you fly through the line. >> but your whole family is. that's the key. i haven't done it because i fly with my kids, my husband, my parents, my in-laws. >> you didn't even have to apply for this because you're andrew ross sorkin. >> no, you have to apply. >> they don't just say, oh, look who's coming. >> no, but by the way, you i think have a united credit card, right? >> i do. >> i don't know what your credit cards are. >> so are you saying i can do this? >> do they pay for it? >> some will pay for it. american express platinum pays for it. there are other cards that pay for it. i probably save three, four hours, five hours a year not standing on line. thinking when you come back into the country with the passports, there's no line. you just go do it. >> you think tsa people in general are nice or not very nice? >> depends on where you are.
>> does it? >> yeah. >> because they do deal with the public. >> tough. >> we don't like being in line for like a half hour. they're in a line for like nine hours a day, dealing with people. >> and dealing with people who are angry and about to miss flights. >> a lot of them seem like they missed out on other law enforcement possibilities. they're just, hey, oh, hey! >> there's a guy at newark who watches us every day. >> is he a nice guy? >> he is. he's really nice. >> i try to be nice. >> it's a power thing. >> but i want them to be doing a good job and be vetting people. the problem is tsa is not properly staffed. there's a surge in traffic and air traffic this year, and it wasn't anticipated by the tsa. so there's a lot of slots that are empty. they're adding 200 people a week. that's not enough. when we come back this
morning, italy's finance minister is on a mission to tackle a looming banking crisis. the problem is that almost $400 billion of nonperforming loans are sitting on the italian banks' balance sheets. i think it's something like 360 billion euros. the finance minister is in town and joins us next here on the "squawk" set. as we head to a break, take a look at yesterday's s&p 500 winners and losers. the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris.
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welcome back to "squawk box." this is cnbc, first in business worldwide. we've been watching oil prices at this hour, and after a pullback yesterday, you'll see things are a little weaker this morning, but not by much. down another 4 cents to 41.62. you'll see this morning that things are relatively flat. dow futures are down by about six points. s&p futures off by two. nasdaq off by four. stocks closed at their highest levels all year yesterday. >> super volatile trading in italian banks. michelle caruso-cabrera joins us this morning. she has a special guest.
>> pier carlo padoan joins us here on set in the wake of an important week of italian banks. you have just worked out a new plan. >> yes, this is a plan that involves the italian banks and insurance company but also non-italian industry people. they're putting, on a voluntary basis, money in a fund which will work as a backup for recapitalization of some banks but also shake up the npl market, which has been sleeping for too long now. >> npl stands for nonperforming loans. italy has piles and piles, billions of them that clog up the italian banking system. one of the key questions, though, when it comes to those nonperforming loans, when they get transferred over to this new -- would you call it a bailout program, a fund? >> no, a vehicle. >> what price are they going to
get transferred at? if they're transferred a at price that investors are willing to buy them at, maybe the bank that sold them will have to take a big hit. >> well, the big thing about npl markets is they have a senior trench, which has much more market opportunities. to they want to kick off the market with some nuinitiative t generate a positive effect, which we expect will mobilize billions. >> there's a central bank involved in this correct? >> there is stake of a public development institution, but this is a private sector initiative and market base as far as rules of intervention are concerned. >> so rules of intervention are super important. in europe, when it comes to the competition commission, they're very concerned about whether or not there's ever going to be state aid.
investors know that if state aid is ever deemed to be involved, senior bondholders could take a hit. >> yes, of course, but in this case, there's no state aid. we are already in conversation, as usual, with the competition on a very open basis. there's no state aid involved. >> italy still has one major fundamental problem. it doesn't grow. you're at a gdp level below the 2008 level at this point. a lot of these problems would go away if the italian economy could grow. >> well, it's been growing now in 2015 after two years of deep recession. yes, we did have a deep recession. it took away ten gdp points. now we're growing again. we're going to be growing even faster this year and next year. it's not exceptional, but this is in line with the fact that the eurozone as a whole is not growing debt fast. >> if you go back, it may be growing right now. if you go back to 2004, it's still below those gdp rates too. >> it's a fact.
i cannot disagree with facts. >> we don't want you to feel bad about it. we just want to figure out why the whole eurozone grows so slowly. >> that's a good question. i have an answer, which is the following. contrary to what happened in the u.s. after the break yut of the financial crisis, the sequencing of policies in europe was different. rather than fixing the financial system, we fixed the public sector balance sheet first. this generated a negative impulse. we had a slower reaction to the crisis. here in the u.s., you first fixed the financial system and then looked at public finance. >> we could go back 40 years, though, and still find a great differential between u.s. growth rate and gdp growth in europe. what we're trying to get at is whether -- we have a socialist running for president right now, mr. minister. we have a lot of people think we've tended towards entitlement state solutions in this country. maybe that's partly responsible for our slowing growth. are a lot of the problems in the
eurozone because of these structural issues with labor and with too many giveaways, too much cradle to grave entitlement state programs? >> i agree fully with the fact that it's not just the financial crisis, but it's something that dates back much further. obstacles to growth, i call them. they have to do with structural impediments to growth, and the response to that, structural reform. this is exactly what the italian government has been doing and will continue to do. we have introduced a major labor market reform, which now opens up the labor market to young generations, opens up for open-ended contracts. therefore, productivity will increase. we're also changing the banking sector to structural reforms in addition to the measure we just discussed. civil justice, which is also another impediment to growth, and we're boosting investment, both private and public. >> because given the climate and the beauty and the food and the
wine and the people, if i had one place to start to try and build an economy and a place to live, i think i would probably pick italy. i don't know how that can get screwed up. >> you're very welcome to come back any time. >> it's my favorite place. you ought to just say, you know, just bring the tourists in, you ought to be growing at 8% a year. >> we're working on it. >> negative interest rates imposed by the ecb. you a fan? you supportive of that? is that a good idea? it's one of the things that's hamstringing the profitability of the banks. probably the last thing you need. >> well, the new monetary policy stance, which of course started also in the u.s. after the crisis and it's been introduced in the u.k. and japan, it was a necessary response to the crisis. the problem is we need to do something else. we need to use our fiscal policies better. we need to accelerate structural reforms. this is the way to take the pressure off monetary policy and therefore reset monetary policy
on a more normal stance, avoiding those negative rates. >> brexit? >> that's where i was going to go. >> go ahead, ask. >> no, all you need to do is say brexit. >> and the recent attack in brussels in the wake of france. to us in the united states, it looks like the eu faces an existential threat in a very large measure. does it? >> i agree there are major threats. brexit, you mentioned it. i would add terrorists but also the refugee crisis. these are europe-wide crises, and they require euro-wide responses. if brexit does happen, it will generate a long period of uncertainty because a legal dispute will start between the u.k. how do we disentangle many legal obligations? this will put an additional break to investment in europe, and this is not good. >> are you guys going to get it
right? you going to survive? >> we are going to survive to the extent that european policymakers realize we need european responses and we need long-term responses. there are national responses to the issue of migrants. there are european responses that can incorporate the benefits of having more people coming to work over the long term in europe. europe is an ageing society. we need young people to work and incorporate in our labor markets. this is the oo reason we need to reform the labor and welfare system. >> rome, such a great place. i worry it's top of the list for isis. this is going to be expensive to protect all the landmarks and the people. it's frightening right now. >> it is big pressure. it is demanding in terms of resources. we are stepping our efforts up. but let me add one point. there's one thing that my young boss, the prime minister, always says to me.
for one, we need to invest in cultural and education. the real problem is how to avoid these young people get attracted from terrorist ideas and eventually become active terrorists. this is the major threat for european societies and not just ya european societies. >> minister, thank you for joining us. we really appreciate it. >> my pleasure. >> michelle, thank you. by the way, folks, we should tell you about blackrock's earnings. they hit the wire as we were talking. the company came in with adjusted earnings of $4.25 a share. that's about 4 cents below what the street was expecting. revenue came in at $2.6 billion. that was below the $2.72 billion the street had been anticipating. >> both below last year. >> adjusted earnings per share were down 13% year over year. the company says that's because of a lower tax rate and one -tie nonoperating gain in the prior quarter. they did say market i provmts at the end of the first quarter had
a limited impact on base fees but will act as a tail wind in the second quarter. >> said the same thing affecting the entire money management industry is affecting them. lower performance fees. >> they did talk about that. this is primarily because the revenue and operating income was down 4% and 3% respectively year over year. primarily because, as you mentioned, joe, lower base fees and performance fees, despite positive organic growth. we do have larry fink, the chairman and ceo of blackrock, who's going to be joining us in just about 20 minutes' time. coming up, bank of america also expected to report in the next few minutes. we'll bring you the results as soon as they hit the tape. in the next hour, former treasury secretary larry summers joins us to talk about a lot of things. inversions, trade policy, a lot more. as we head to break, here's a quick check on what's happening in socialism land right now, in europe markets.
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welcome back. time now for the squawk planner. it is another busy day for economic data and earnings reports. here's what we have coming up. weekly jobless claims at 8:30 eastern time. expected to hold steady. filings have been about 300,000 for about 58 straight weeks now. also at 8:30, emergency consumer price index. headline cpi expected to tick up 0.2%. that's following a decline in february. also, atlanta fed president dennis lockhart is speaking today. people will be watching his words closely. and as for earnings, we're expecting bank of america results. we should get them any minute now. they should be crossing the tape quite soon. we'll also get news from wells for a low, delta indiairlines, pnc financial. that's today's squawk planner. separately, the cdc confirming
what has been suspected for months. becky, i know you care a lot about zika. infections during pregnancy officially now causing the birth defect microcephaly. the announcement comes as the white house is lobbying congress to grant nearly $1.9 billion in emergency funds to fight that virus. while we're on the topic of zika, we should also mention billionaire philanthropist bill gates spoke to cnbc's hadley gamble wednesday, addressing the fight against the zika virus. >> ideas about how can we use new tools to go after the mosquitos, that's one way to conquer these diseases, to go after the vector and reduce or eliminate the mosquito populations. our foundation has some tools which we will probably want to try because there won't be a vaccine, even in the best case, for several years here.
so there's a lot being looked at, but no, there's not a total solution to zika in the world. >> we should mention, gates adding the u.s. is playing a disproportionate role in moving to find a solution to combatting the virus. all right. bank of america is out. looks like the company came in with 21 cents a share. that was right in line with expectations. 19.7 billion in revenue was just below the 20.3 billion that the street had been expecting. if you break it down by business segment, they say their consumer banking loans were up 17.5 billion, deposits up 42.6 billion, brokerage assets up 7%. global banking loans were up 39.1 billion, deposits up 7.7 billion. some comments from brian moynahan, the ceo, who says that this quarter, they benefitted from good consumer and commercial banking activity. they say their business segments earned 4.5 billion, up 16% from
a year ago. they say it was partially offset by valuation adjustments from lower long-term interest rates and annual compensation expenses. did point out they were very volatile markets. again, if you look at that stock right now, looks like it's unchanged. the bid ask is right now straddling where it closed last night. >> i don't know a lot of this stuff. negative market related nii adjustments. the interest rate environment is so screwed up for all the banks at this point. the credit loss provision, 997 million. not even a billion dollars, where it used to run. noninterest income, $10.3 billion. the interest income, it's not easy, i don't think, for these guys. all right. big night in basketball. kobe bryant putting on a show in his last nba game after a 20-year hall of fame career. golden state making history,
breaking chicago's record for most games won in a season. joining us now is dan rubenstein, video host at "squawk box" nation. does that stand for "squawk box" nation? >> absolutely. it should. >> sb nation. >> yeah, how you feeling? >> i'm feeling good. how far would kobe have to go to be number two in total points? did he have that far to go? >> enough that it was probably not an issue. kareem just distanced himself so much because it seemed like he played for, i don't know, 35, 40 years, just sky hooking his way to legendary status. he had a ways to go. >> with 60 points a game, maybe not that long. >> if he's going 60, shooting 50 times a game, like he did last night, and was that just like the most kobe way to go out, shooting 50 times? >> and 37 years old. >> yep, 37 years old. he talked about not knowing if his legs were going to work after the game, which i think is fair. my legs barely worked watching it. >> none of us understand, really, what those guys are
doing. >> absolutely not, no. what they go through, especially what kobe goes through. there's been articles about going on 40-mile bike rides in the middle of the night in las vegas the night before training camp begins. >> run down the court and back begins. >> run up the court and down once and you realize you have to guard somebody three times faster than you. do it once and i'm going to rest after doing it once. do it for as long as those guys are. >> he was wearing ice bags on his legs the size of chrysler. >> so he can keep playing and any nba team would have him. >> just once a month. if he swoops in parachutes in with the mascot. >> is steph curry because he gets 50% more every time he shoots the ball will he pass kobe >> he could. especially his game beyond the arc. he was 50-40-90. 50% from the field.
when you see him launch a 35-footer, it's oh, my god is he going to make it? >> he has some kind of device. no there's something there. >> a magnet. >> lasers on his contact lens, like red -- i don't know. something like that. because that's just, it's inhuman. it's inhuman. >> you're buying early on steph curry. that's what i'm saying. >> this is not a fluke. we watch college hoops. we know how hard it is -- if you do 35%, 40% you'll win. >> could he do it for years and years like this or is it a tiger kind of thing? >> the great thing for him he has three-point shooters around him. in the nba he's on the same team. clay thompson is the guy separated 204 threes. >> jordan spieth? >> he hasn't been talking too
much. he reacted as well as he could. >> it's devastating. the greatest players in the world if you win three or four masters that's pretty good. and -- he would want more i'm sure. remember how great norman used to crumble. we talk about that all the time. the other guys, ricky fowler. >> it broke my heart. >> jason day. >> then he had to give the jacket. >> can you imagine the eyes on jordan spieth on 12 next year at the masters? ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
. coming up a very busy morning still to come right here on "squawk box". first blackrock chairman a ceo larry fink talking about earnings that just crossed. then former treasury secretary larry summers sounding off on trade policy and, yes, tax inversion and quarterly results from wells fargo as well. lots to talk about. "squawk" returns in just a moment. i could get used to this. now you can, with the luxuriously transformed 2016 lexus es and es hybrid. ♪
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on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business.
the man behind the world's largest investment firm is here, blackrock's larry fink joins us for a special interview. then former treasury secretary larry summers will drop in to talk inversions, trade and the state of the global economy. it's not a scene from a movie. russian jets give a u.s. destroyer a fly by that may have been too close for comfort. the second hour of "squawk box" begins right now. ♪ >> announcer: live from the beating heart of business, new york city, this is "squawk box". welcome back to "squawk box" here on cnbc, first in business worldwide. you need to do a sequel fairly
quickly or else it becomes a joke. like if we do the "squawk" sequel it has to look different. >> harrison ford pulled it off. >> i don't think he did. he looked ridiculous. >> i'm joe kernen along with becky quick and andrew ross sorkin. futures at this hour are basically flat. now up. we got about 350 points in the last two sessions. and we'll see what happens in europe. europe was a little weaker earlier. i think if oil falls below 40 i don't think the stock market cares what it does. until the dollar gets down to 108 -- the dollar it's all about earnings. all about earnings right now. jpmorgan looked pretty good yesterday. let's get you to some other key headlines. we do have two economic reports that are out just about 90 minutes from now. we get the march consumer price index and then the weekly report on first time jobless claims.
also the white house will be unveiling new offshore drilling rules today designed to try to prevents that kind of explosion that caused the bp disaster back in 2010. s&p has cut the corporate credit rating for valeant. june is the date the company had time to file. but, again, there has been some of its shareholders who have come and actually been pushing this issue pretty aggressively. bank of america out with its quarrel profit came in at 21 cents a share. a penny above estimates because overnight the estimates were changed from 20 cents to 21. revenue beating street forecast. bank's results were down from a year ago. part was because of a dropped in trading revenue and impact of lower interest rates was affecting all of the financials. blackrock is the world's largest investor. the company reported quarterly
profit of $4.25 a share for the latest quarter. four cents below what the street was expecting. and what the company is calling a challenging market environment. the company's co-founder and ceo larry fink joins us this morning. larry, great to see you this morning. we've heard time and time again about the challenging market environment out there. i know you said things improved towards the end of the first quarter and that should be a bit of a tail wind for the second quarter. >> it should be. if you think about what happened in the first quarter, the markets fell double digits. our average assets, $150 billion lower than $4.7 trillion at the end of the quarter. so you had that drag. when you have that type of volatility, you have uncertainty from our clients, clients are pulling back. as you know you had huge mutual fund outflow. we had $36 billion of inflows. >> isn't that like everything
else, you know, isn't that what you should care about? >> i think the two metrics you have to look at are organic growth and what are your margins. even with negativity our margin went up 40 basis points. >> you need to keep gathering? >> i think because there's no firm that has both beta and alpha and risk management and coming to us for solution and coming to us for different ideas. >> you're not bragging. >> i just give you facts. >> so, look the one area that drag your earnings that we had in terms of our hedge funds we had performance fee. so that's the biggest delta. take out performance fees which are considered one time fees our rug rate was actually higher, but the street was anticipating higher performance fees and that's where the miss was. >> in terms of those inflows, 24
billion of it came from ishares. >> yes. >> what does that tell you >> in ishares we had $27 billion net inflows in fixed income. $7 billion in net inflows in smart beta. we had $5 billion of outflow in equities and you add all that in and a few other areas. overall, you had predominantly a risk off trade. people who will be going equity, going to minimum volatility or fixed income. if you look at where the flows were at the second week of february outfloss in equities were much more severe. and so at the end, last six weeks you had many people rushing pack into the marketplace. what was rewarding for us we were number one in europe and united states in terms of flows and ishares. the other thing that differentiated us we had $11
billion in active floss in income. if you look at the mutual fund reports the industry had big outfloss and we differentiated not just in our etf products but other products. >> in january you told us you thought there would be more blood in the streets. we didn't bottom until february. when you look at the markets now what do you see? >> we never got the blood. >> we got 70% of the blood. >> we never do get it because it tries to go up before your own board. >> so i said we'll have that flushing. we didn't have all of it. by year end markets will be higher. i still believe markets will be higher than they are today. >> how much higher? >> you know, we have quite a few things in front of us to make that prediction. we have the issue brexit.
we have elections in japan. we have our own elections. >> what does the market do in a u.s. election year. >> does it depend if it's second term or first term. >> after we know who the democrat and republican candidate is you'll hear huge commentary from each candidate about fiscal reform. the major part of the ral write is when you start hearing governmental officials talking about -- >> if it's bernie sanders it's fiscal reform to a socialist economic model? that will be the reform. >> even if it's donald trump he'll talk about it. >> we will have larry summers on. he said the biggest threat to the united states and prosperity is donald trump, i guess because of trade. i know he's a democrat. i say the biggest athlete to the united states is bernie sanders. i know people hate trump. but seriously if you look hat
the two guys, at least one is a capitalist. can i ask you about interest rates. >> if i were changing -- >> do you think in hindsight that maybe they shouldn't have raised rates like you thought they should. >> no. >> not first time but for years maybe -- and the reason, let me load the question with one more thing. people think the globe is so weak in terms of growth that germany deserves 14 basis points on a ten year note. i don't know whether that's true. maybe central bankers in japan and europe and every one else they are trying these crazy things. maybe they are holding it down. >> i just wrote in my annual letter that i think negative interest rates are causing a slow down in the world. i believe -- first of all i think the central bankers have between most bold leaders in the world. we have become too dependent on central bankers.
we have not seen government reacting to . when you think about quantitative easing, it was supposed to be temporary healing process. i don't call seven years, eight years temporary any more. i believe the first few years of quantitative easing, low interest rates helped homeowners refinance. but in the seventh year i don't see how that has a positive impact on the economy. what we see, over 70% of our clients are retirement plans and insurance plans. our clients are in pain. our clients are very worried how they will meet their liabilities. i don't believe we have that narrative. i don't believe we're focusing on what negative interest rates are doing to savers. this will be the biggest crisis globally. so we believe what's necessary and i do believe you'll see it, i think you'll see abe try re-establish his economy, he's going to try to do more fiscal
reform. china since mid-february reducing their tax, they are doing some fiscal reforms. cameron or whoever is the new prime minister, if a brexit happens, you'll see fiscal policy reforms and here in the united states i'm confident we'll see fiscal reforms mostly for infrastructure. we need to find a way to create those jobs to iv%, 40% of people whether in spain, uk or united states that qe didn't help them. and those are the people that are voting for donald trump or bernie sanders. i think we have to focus on this. i think democracies in the world are being frayed by this. >> we have the notion that the fed can't be expected to break with the rest of the world. everyone is doing it. we got to do it. >> that's not the outcome. that's even a worse outcome. >> but if the fed doesn't -- >> if we don't have fiscal policy response by government
unfortunately we'll have low rates. >> can't wait for europe to get the right fiscal end. they will never do it. >> we've had industrialists come in here and say if fed raised rates it would be disastrous because of what it means for the dollar. >> totally agree. chairwoman yellen has basically pushed back their path of raising rates. i think that was another one of the reasons when the market started turning in mid-february and i do see that. but since she has elongated the path, we've had a much more stability the dollar actually has weakened with less pressure on china to devalue and so i actually believe the fundamentals are better today, but i don't believe we can have a path of raising rates too much. >> leadership has to come from the japanese and europeans who are at negative interest rates or can we push them along? they love for the dollar to be
stronger and for their currencies -- >> i believe it has to come from the major countries of the world. we need fiscal policy reform in china and japan. certainly in germany. germany has, you know, current account surplus, trade surplus. we're complaining about financial repression. every day there's a negative article by the ecb. they can fix it. i believe mario draghi is a bold leader of the world. i'm not in favor of negative interest rates, however the response has to come from government. it can't just be central bank. i believe, if we had this coordinated effort of more monetary fiscal policy stimulus and what i'm inferring we may need more raise the deficit for a while but we need to find a way to raise interest rates, allow the central banks to start taking the foot off the pedal and only policy response can be is through fiscal policy.
mostly through infrastructure creation. >> or some corporate tax cuts. >> i think the fiscal tax reform repatriation of money, coupled with using those, those revenues to build a public/private partnership in terms of infrastructure. we believe government only needs to put down maybe the first 20%. they can invest in the equity. all the insurance companies are dying for great infrastructure investing and debt. we can create a path where we can leverage the needs of america. >> hold that thought. we'll have a quick break and come back to this very conversation with blackrock's larry fifrpg right after the break. before we do that we should take a quick check on the markets. nothing has turned around. dow will open up eight points. bank of america reporting quarterly results.
great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "squawk box" this morning. first in business worldwide. larry fink is with us this morning on the day the company's first quarterly earnings were released. i want to ask you a different question. you mentioned hedge funds earlier and we talked about
fees. today the new york city employees retirement system apparently is planning to withdraw from the hedge fund world. they say the fees are too high. returns are not worth it. and you're seeing this play out -- this is just one example of many right now and what this signals. >> well, this is just one entity. unquestionably the hedge fund community has had reduced returns and in some cases negative returns and with high fees you're seeing a re-evaluation as to how you rea l reallocate your money. not all hedge funds are great. hedge funds are no different than baseball. baseball you have 1,000 players and generally 40 players that hit above .300 and rare for a player for seven, ten years to
hit .300 every year. year going through a rotation. i don't believe it's systemic. i believe through different financial instruments you can, you can replicate returns probably a little bit better. that's why more money is moving into etfs because you can just -- you can asset allocate using etfs and paying modest fees. blackrock had $1.5 billion in inflows in our businesses. so, we're not -- we're not seeing the outflows. >> the average baseball makes $4.4 million a year like the hedge fund losers still makes huge amounts of money, everybody across the board makes too much money. >> yes, bernie. >> do you see this as a top for hedge funds? is this possibly the worst time to be getting out, meaning -- are all these pension funds
getting out going to look back two, three, four years from now and say should have stayed. >> i think there was too much enthusiasm in the industry. i'm not saying it was a top. what i'm saying there's a reassessment. there are great investors still in the hedge fund space and many of them probably are not as good as we hoped. >> what do you make of the state of activism. the reason i ask is because you, blackrock have become activist like in certain instances in a way you haven't or you weren't several years ago meaning you'll take steps against management in ways that you haven't before. the other reason i ask is some people have said the true activist, or peak activism, meaning there's not that mean great ideas out there any more. a lot of the low-hanging fruit is finished with. >> well, we have not changed our stripes. we have been working with management teams and sometimes we may disagree and if it's so
egregious -- you're talking about that one instance in asia where we invested in one company and they wanted to change the whole company's business month daniel we objected to that. so that's -- >> the point i'm making it used to be that big players like t. rowe and others would check the box. whatever management said. you've talked -- >> larry has lectured against activists and now he's doing the same thing. he's lectured. it's do as i say not do as i do. >> more investors largely are now having a more active engagement which he wants to do. >> correct. >> what i'm saying hat does that do to the activism world then? >> if they have a good idea, focusing on the right target, they may prove that they are
correct. in many cases, as you said, there may not be as much low-hanging fruit. if that's the case because i'm not sure that's true, that mean companies are being managed better. okay. so i don't know what low-hanging fruit is in the activist vernacular. >> people are trying to stave off the activist. >> good government governance the improving. ceo and their boards dialogue is getting better. dialogue with all investors are better. i think we're raising the bar which is good. if that means less low-hanging fruit, i think we accomplish a lot. i'm not sure that's the case. >> different question. i want to ask you about inversions, the new inversion rules, what you make of them. i want to put this context around it which is to say the go to answer for everybody is let's reform corporate tax reform. assuming you can't do it, which
by the way, is the truth at this very moment. meaning you won't get that done in the next 365 days, just not going to happen. if you were running the treasury what would you do? >> i'm in favor of this punitive weird, at the drop of a hat change the rules. is this a good thing that jack lew did? >> i think they make their positions very clear. to me it was not a surprise what jack lew did or what the treasury did. >> would do you it that way? >> i'm not in that -- >> you might be. >> i'm not going. >> treasury secretary. you can never say never. >> can we move on? >> i'm just wondering. >> the merits of -- >> i believe -- i believe we should have been -- i think i was against how surprising it was done. i think there should have been an open dialogue, a narrative to
the businesses. i would have much rather had a dialogue treasury to the company and said, you know, before you consider this you need to think about it, we are going to attack this. so i wasn't surprised at what the u.s. treasury did. and i do believe we should be o focusing on turns. >> you western surprised but said you thought there should be a dialogue. >> the company was surprised or maybe the company -- i don't know what -- >> maybe they didn't think it would be retroactive. >> i actually believe that u.s. treasury made it very clear that they will do things to change -- >> sounds like they did exactly what you wanted. >> i didn't say what i wanted but i don't believe the market should have been surprised at what they did. >> at 7:00 when you were sitting down the bank of england put out a statement and left rates unchanged but raised concerns
about the risks of a potential brexit. what happens, in your opinion, if the brits vote to get out of the european union. >> if the vote was today i think a brexit would happen. many things could happen between now and june so i would not be saying it's going to happen. i'm just saying at this moment it's pretty negative. if a brexit happens it would be harmful for the uk economy. it would raise questions related to the viability of the eu. and quite frankly maybe it will for the germans to do fiscal policy because we need -- there's going to have to be more governmental response. as i said, i actually think this whole debate of brexit, the whole problem going on in spain, they really don't have a government system, what's happening here in the united states is the same phenomenon that there's a large component of these populations that feel
like they have been left behind. they have no hope for their children. at the same time, you know, we have 500,000 programming jobs available in the united states, you know, close to $100,000 a year in compensation. so what we have in many of these countries, we have a skill gap. and we need to find ways to, to overcome this fear with so many people and i do believe, getting become to my whole belief around infrastructure, we'll restabilize our economies. >> we'll talk to larry sirms in one question. living wills with the banks. if you were a board member of one of these big banks, there's safety in numbers because five people were called out -- five companies were called out, do you criticize the banks? do you criticize the government? >> well, fortunately i'm not involved in that. i don't focus on that. but when you have that large
percent of the banks failing, it's probably the failure on the teacher or the failure on the regulator. i don't think they are transparent enough for what they are looking for. these costs banks hundreds of millions of dollars in legal and accounting to come up with this and to say you did it poorly tells me the metrics weren't properly identified. i actually believe the fault rests more on regulators. they need to be identifying exactly what -- >> there's all sorts of political questions about too big to fail because you have it in the headlines. >> yes. i believe -- i believe our banking system has never been better, never been stronger. they are actually doing more for the community than they ever did before and they are unquestionably much safer. a living will is talk about okay if you're not safe, if you have structural problems how are we going to dissolve your institution. so i don't know the
peculiarities. >> larry thank you for joining us today. when we come back a farewell game for the ages. kobe bryant going out as a legend. we have the highlights of a the break. at 7:30 former treasury secretary larry summers will be here to sound off on the local economy. >> announcer: time now for aflac's trivia question. in what continent did the game dodgeball originate? the answer when cbs nbc's "squawk box" continues. aflac! like rising co-pays and deductibles... aflac! or help pay the mortgage? or child care? aflaaac! and everyday expenses? aflac! learn about one day pay at aflac.com/boat blurlbrlblrlbr!!!
>> announcer: now the answer to today's aflac trivia question. in what continent did the game dodgeball originate? the answer, africa. you learn something every day. welcome back everybody. among the stories front and center bank of england left key interest rates unchanged. perhaps greater note the bank also said so-called brexit would create uncertainty and hurt the economy in the short term. larry fink said if the vote was held today brexit would happen. and delta airlines reported earnings. it was two cents better than
expected. shares of delta are up by 1.25%. check out shares of chipotle. they are on the rise. jpmorgan stock upgrading the stock saying the negative impact of food safety concerns have bottomed out on its sales and chipotle is still a strong brand name. two russian war planes flew simulated attack passes near a u.s. guided missile destroyer in the baltic sea. american ship tried to contact the russian aircraft troon but got to response. one u.s. official said they were the most aggression interactions with trurn military in recent memory and occurred in international waters but creating quite the headline. fans at the staple center in l.a. saying good by to one of basketball's all time great. that was last night. in return kobe bryant put on one heck of a show. he scored 60 points in a
farewell performance for the ages before saying good-bye. >> it's funny, the thing that had me cracking up all night long was the fact that i go through 20 years of everybody screaming pass the ball and then last night they are like don't pass it. >> in other nba news the golden state warriors set that new nba record with their 73rd victory of the season. it was 21-point win over the memphis grizzlies and steph curry swept 46 as warriors finish the regular season at 73-9. that's one game better than the '9 '95-'96 chicago bulls. >> 403 three-pointers. never been done before. >> they never lost two games in a row all season. >> no.
that's true too. larry fink is gone. we have former treasury secretary larry summers kick being off the imf spring meeting with warning. joining us now from d.c. with more on the global economy, trade wars and political landscape is larry summers. charles elliot professor and president emeritus at harvard university. we've been saying we'll talk inversions but let's start with what we introed you on. i don't know faits new term you made what some are calling deferred deficits or something and that's where we think we're doing better by cutting deficits but in the meantime we left all these things undone and that affects our growth rate. we shouldn't feel so good cutting the deficits when we leave things undone. >> joe, the term was repressed deficits. and it's kind of like refresed
inflation. when you print too much money and have wage price controls you still have inflation you're just repressing it and it comes out another way. when you reduce the deficit but you do it by deferring all the maintenance by underfunding all the pensions by not paying adequately to maintain a reasonable civil service you're not really reducing the deficit, you're simply passing on debts in a different way and you're doing it in the wrong way because say what you will, the debt that we issue in the regular way compounds at a rate today under 2%. on the other hand when you defer maintenance for a generation, those costs compound far faster than 1%. look at laguardia airport, think about drinking the water in flint, michigan. think about the fact that one
study found it costs 40 cents for each american, equivalent of 40 cent tax on gasoline for each american to pay the extra auto repair bills because of the potholes on our roads. think about what we're doing at the state and local level with the deferring of pension liabilities by underfunding them and using the money that's coming in from today's workers to pay the last generation of retirees, leaving nothing in the cup board. i think we need to think about our fiscal health, you know, much more holistic way that recognizes that the worst and most toxic debts are the debts of underinvestment. i think if we do that, we can come together on an approach that both will get the economy moving in the short run. will expand its capacity in the
medium run. and will leave us in an ultimately better financial position in the long run. i was gratified to see that was the kind of thing imf was favoring. >> larry, does it affect the economic growth currently or is that a bill that we need that you're making a point we need to pay eventually but can actually refres current growth by doing it this way as well? >> joe, i think the failure to spend adequately is what's creating what's increasingly seeming like not just stagnation but secular stagnation in much of the industrial world. i mean, look at the fact that what markets are telling you is that nowhere in the industrial world is there an expectation that inflation is going to reach the 2% target over the next
decade. that's telling you that something is off and, you know, it's most basic introductory economic, when you got too little quantity and too little price that's because you got a problem on the demand side. if it were all a supply problem then we would be having higher prices and more inflation. that's the opposite of what we're having. >> larry, can you speak to what's going on in the democratic party? obviously bernie sanders is in new york. hillary clinton is in new york. a lot of comary about globalization, thing that you supported over the years, now the need for tariffs and commentary from bernie sanders talking about not just breaking up the banks but i'm sure you saw the "daily news" article it wasn't clear he knew how to break up the banks. >> well, look. i'm going to stay out of politics. i think the tpp is very much in america's interest.
it's in america's interest because our -- we don't have very many trade barriers that are substantial -- and other countries do. i think there are many people in both parties who are moving away from that and it's unfortunate. on the other hand, one understands why. i think we need a new generation of managed international integration agreements that are not primarily about the agenda of a set of multinational companies but in the stead give pride of place to issues like mobil capital escaping taxation and the kind of thing that's captured in the panama papers. give pride of place. to preventing races to the bottom. i think people's agenda has too often been an add on to a, to a
more purely commercial agenda. on balance these agreements were right but i think we can do much better agreements in the future and i think we'll find a new synthesis. >> as a former treasury man, i don't know if you saw the news about fannie mae and freddie mac, but some new documents disclosed in the past 24, 48 hours that showed treasury knew that fannie mae and freddie mac were actually going out with these remarkable profits and effectively swept those profits and of course there's this massive lawsuit going on about whether it was confisca torch ry. what do you think? >> i've not seen the latest set of stories. i can't comment on that at all. certainly going back a long ways now, to my time as treasury secretary, i thought the kind of arrangement they represented with very heavy leverage and
very close proximity to government and extensive lobbying, did bring the phrase crony capitalism to mind so i tried when i was in the treasury to express concern about where all that might lead. at the time the politics didn't permit it to, to go anywhere. and i would say what we're going to do about housing finance, joe, is surely an important residue of the financial crisis because where we are now is not a tenable long run place for the country to be. and i don't know where that -- i don't know where that's going to end up. a lot of people are thinking about it. but i would think whoever is in the treasury, that will be a big one going forward. >> mr. secretary, i prefer mr. president emeritus because i
like to emphasize the harvard connections you still have. so mr. president emeritus, thank you. appreciate your time today. >> joe, good to be with you. when we return we'll get street reaction to bank of america earnings. let's take a look at u.s. futures. dow turned positive after two days of strong gains. markets yesterday closed at their highest levels of the year. good. xerox real time analytics make transit systems run more smoothly... and morning chitchat... less interesting. transportation can work better. with xerox. thank you for calling. we'll be with you shortly. yeah right... xerox predictive analytics help companies provide a better and faster customer experience. hello mr. kent. can i rebook your flight? i'm here! customer care can work better. with xerox. wait i'm here! mr. kent?
i can't, coming up, you're not going believe this. you are not going believe this. we'll speak to an analyst about bank of america's earnings. financial sector overall. a programming note tomorrow starting at 8:00 a.m. eastern time presidential candidates senator ted cruz will be our special guest for an hour. that's exciting. >> and we're going biking and andrew has some weird shoes on.
welcome back, everybody. bank of america posting first quarter results just a short while ago beating estimates by one penny with a quarterly profit of 21 cents a share. we break down the numbers with david hilder. we knew banks would have a difficult quarter because of negative interest rates and because of the difficult market environment we saw earlier in the quarter. what jumps out at you from this
report? >> i tell you bank of america had a fine quarter and as you said just slightly ahead of expectations depending on how you look at the adjustments. i'd say b. a.'srevenues were not as much ahead of expectations as jpmorgan's were yesterday. but still a fine quarter. their investment banking fees were down 22% as you said, market activity was lower. that was pretty much in line with expectations. trading revenues at b of a were down 16% year-over-year. that was a little worse than hat jpmorgan reported yesterday. but still a good quarter in a tough market environment. bank of america also added to its reserves for energy loans about half a billion dollars, so, again, a little bit less than what jpmorgan did. but still i think they are well reserved given the quality of their portfolio. we also saw their net interest
income was up 5% year-over-year as partly because of the fed raising rates by 25 basis points in december and also because of good loan growth. >> do you buy the stocks -- >> yes i would. tangible book value on bank of america is $16.17. it's trading well below that. i think it's a great franchise that over the past five years brian moynihan and the team there have made more profitable largely by making it more efficient. >> david thank you for joining us today. when we return the co-founder of pelleton cycling and how he's disrupting the world of spin classes. skroo futures are stabilized. we saw the dow futures pick up ground. "squawk box" will be right back.
on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "squawk box". spinning disruptor peloton is attempting to shake up the way you cycle. the company uses subscription contend model. i want allows users to live stream spin classes in the comfort of their own home. joining us right now is the ceo, co-founder of this very innovative company. thank you for being here. more on the bike. this is your bike? >> this is it. >> instead of going to a cycle class or fly wheel class or what
have you i buy this bike. put it in my home and then on the screen i'm now patched into live classes. >> yes, exactly. >> how did you come up with this idea >> i'm a busy new yorker. we're a two income family. getting to these classes became harder and harder with young kids. we have two kids. their activities morning get them off to school. getting to the gym became harder. we said could we create a platform that would allow you to take those high intensity, high energy fun effective classes that you know cycling will provide. could you build a platform to allow to you do that at home your convenience, your time, your schedule, your own bike. we built what we believe is the best bike ever built. the tablet compute certificate a peloton computer. we wrote the software. we stream 12 hours of live classes from all over the world
and put all those classes into the cloud so we have 4,000 classes on demand of different styles, different lengths. >> i go on whenever i want but i can also be live and i can compete. i'm watching other people. >> that's right. not only do we bring the condoesn't your home we brought the community to your home. there are other people on their bikes. you can interact. >> there's a camera on this i see looking at me. i'm being filmed so i can talk to other people? >> exactly. your sbroirn los angeles. he's at 6:00 a.m. you're at 9:00 after work. you're both in the same live class. click on his name and pull him up on video chat. another immersive social thing so you don't feel alone in your basement. >> how much does this bike i'm now -- i'm wearing the shoes. it's your shoes. bike shoes. what does this whole get up
cost. >> just under $2,000, 19.95 and the contents costs $30 a month. >> do you make money on the bike. >> not much money on the bike. the business model is effectively a subscription digital content where we make money after the bike. you get bike. the bike feels like $6,000 or $7,000 bike. >> you're paying $30 a month but locked into a subscription. >> we say you're committed to a year. generally people buy the bike for the contend not buying it for the hardware. >> you what happens. these bikes become hangers for clothes for people's homes. >> that was the cliche nordic track example from the early '90s. to your point, our bikes 80% of them after a year are still being ridden on a weekly basis because this is different. >> i started taking rowing
classes. or treadmill? >> i love rowing. >> can do you that? >> not yet. >> do you wear the spandex at home. what about the padding. >> i'm an outdoor cyclist. i love wearing the pants. most women in particular don't do it. >> this is good or bad for men. there's a debate about biking for men. you know what i'm talking about. >> the reality these coaches will encourage you to get up out of the saddle so you get blood circulation. >> thank you. i would shake your hand but we're biking on tv. wells fargo is about to report. that's minutes away. thanks for being here.
earnings alert. new this morning bank of america beats the street. blackrock falls short. up next quarterly results from wells fargo. virtual reality hits home. ever wish you could picture a remodeling project before calling in the contractor? a night for the history books. golden state warriors breaking the record for the best nba season ever and kobe bryant
closes his storied 20 year career with the lakers scoring 60 points on 50 shot attempts. final hour of "squawk box" tips off right now. ♪ >> announcer: live from the most powerful city in the world, new york. this is "squawk box". kobe is an athlete but watching you on that bike he's got nothing on you. welcome back to "squawk box" here on c-nbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. two big economic reports about 30 minutes away. weekly jobless claims number one and consumer price index number two. futures right now have turned marginally positive as far as the dow, the s&p and nasdaq are both down. and in europe that's more of the same of what we've been watching
for most of the morning, sort of nothing very significant happening. up a little bit in germany, france and the ftse but italy and spain both down just freezing marktionally. among our top stories today the bank of england leaving rates unchanged. global oil great will ease. there there's deceleration. but there's rise in demands from india. at least after yesterday's declines they were earlier this morning oil prices continued to drop. at this point they have turned around. up by four cents to 41.80. financials are in focus. bank of america posting better than expected earnings and revenue. results were below a year ago and the impact of lower interest rates. that stock is down by ten cents.
>> wells fargo -- they always do better than expected, don't they? 99 cents very 97 estimate but the revenue number is better than expected as well. company reported 22.2 billion and the estimate was for 21.6. you know we've heard buffett so many times talk about just how well this bank has managed. >> yesterday jim cramer said this is a bank he's watching closely. >> more of a market. largest market cap i believe even though it doesn't have the most -- >> $247 billion. >> i don't think it has the most -- >> under assets. >> got the largest market gap and real quality name. we'll talk about wells fargo -- we'll talk with an analyst about wells fargo earnings. let's get to back to bank of america. wilbur frost has been on a conference call with the company
and he joins us now. >> reporter: you said at the top of the segment that bank of america beat on the revenue line. there's some debate whether they beat on the line or not. the key factor the epx was in line with expectations and those expectations the ones from earlier in the week before jpmorgan's beat and thus they didn't beat to the same extent. that's why we're seeing shares up a percent giving up that 3.5% move upwards they got yesterday in line with jpmorgan. traditional banking interest rates is pretty solid. 11% of loan growth, 6% of deposit growth. they said that overall view of the consumer is that it's slowly improving and pleased they were able to grow so slowly in that environment on the consumer areas. expense control was pretty good. this is an important area always for bank of america particularly in light of falling revenues this quarter. we're looking at operating expenses at 14.8 billion.
also a slight beat on non-interest competences down 6% within the consumer side. efficiency ratio improves. expenses pretty decent. in terms of energy provision and nonperforming loans not bad. significant numbers like jpmorgan yesterday but given this has been so pre-warned over this quarter nothing blow-out to worry about. energy making up $47 million out of a total of $997 mill of provisions. the investment bank week. m and a soft as jpmorgan was and guidance for m and a in that area of investment banking don't be soft on the call. trading area was where jpmorgan did surprise. they only fell 13% on the quarter. bank of america soft a little bit more than that. their equity performance not too bad but fixed interest and commodities and currencies was a little soft in that area. we're lotion about a percent of that 3.5% gains share price wise
as we saw yesterday. >> you mentioned there's confusion about the revenue line. revenue number i saw first was 19.7 million versus 23.7 billion. i saw a revenue number later 29 million. >> reporter: the bank says the apples to apples comparison was 29. so we still are going to get to the bottom of that one. as i said, the eps number is the key one. that was in line, but that was the pre-jpmorgan beat estimates. in the last 24 hours slight disappointment. >> thank you. >> in the meantime blackrock out with its results. earnings falling four cents short. revenue below forecasting what is a challenging market environment. blackrock did announce a 5% increase in quarterly dividend.
fjs a big driver. joining us now -- you know what they've done. cio of delta international group, over $5 billion in assets. you saw jps yesterday and wells today and bank of america. do you look at those earnings and say they are better than expected or look and say the world was sand bagged beforehand, applications were down and now we have this cloud of what fed will do with this living will situation? >> that's a good question. i think right now for the banking environment they are benefiting from the fact there's liquidity globally. yes they will sand bag but as well as that market conditions have really grown a liquidity
perspective. look at the period ahead global growth is improving. >> where are you on this. >> i guarantee 70% of companies will beat estimates. that's the benchmark people should go off. we lowered expectations dramatically. most companies will beat. that's hat we should be looking at. if it's more than 70% i would consider a good quarter and anything below 70 will be a bit disappointing. >> is that because companies lie to analysts or analysts are in on the game? >> i just think -- >> you raerd from david rubenstein the entire outlook has improved. >> look at where we were middle february. it was pretty dire ouook. so certainly gotten better and it's raised confidence in terms
of a ceo's expectations for earnings. >> do the companies sand bag or do the analysts just play along so the companies do better? what do you think? >> both. >> analysts don't think enough of themselves so they rely on the companies snoofrpry quarter they are like sheep never realized gosh i'm being played. you're probably right. >> what do you think it is? >> i think the analysts most of the time the analysts listen to what companies are telling them. there's not a huge amount. the company is sand bagging it. the analysts put in the number that the company guided it towards and the companies are sand bagging especially so in this environment when there's a lot of uncertainty. >> and we report they beat expectations. we're right. so we're all complicit. what do we do? >> nothing. >> no. i think you're on to something. >> 70%. that's a normal earnings season.
>> given this backdrop, what do you do? what do you with your money >> right now we're bullish on markets. global growth has momentum so it's improving. all of the leading indicators are consistent with that. pmi numbers are growing. many are in expansion territory. the combination of strong gbal growth and strong local liquidity results in higher markets. next couple of quarters looks very strong. >> joe made the argument things are very quiet. >> a lot of people coming in say it's a tired market no reason for to it go higher. >> they say it will hang. >> no impetus to go higher. when it's like that all of a sudden for no reason i want goes higher and you're not prepared for that. you're not in. that's usually the way it works. >> the way the market is people are quite short at the moment.
>> that's good too. >> people are short. if you start to see positive news. this quarterly report we're talking about the idea look the world is getting better because of the malaise we had in january and february and people were looking at dire conditions then. the dow has improved quite a lot not only in the u.s. where it's clearly improving but also around the world. >> where does the market spend year? >> i have no idea where it will be. the most compelling opportunity in my opinion is the commodity space. they are putting in a major bottom and with that emerging markets that depend on commodities are compelling. so instead of answering where the market will be at the end of the year the next couple of years emerging markets will out perform the s&p. >> thank you. when we return we'll get street reaction to quarterly results from wells fargo. later virtual reality as you have never seen it before. new technology that let's you test drive everything from
welcome back to box. financial meters from around the world are in washington for the imf spring meeting. we caught up with jack lew and asked about the recent crackdown on inversions. >> i said several years ago the right way, best way to do it is for legislation to be passed to do serious comprehensive business tax reform and shut down inversions once and for all. i also said we'll use whatever administrative authority we have and it's a complicated manner because you don't have infinite flexibility. we have worked and worked on it. is this third action we've and the. each time we slowed down the pipeline and each time i said congress needs to act because i want to make sure inversions are stopped. i think it should have been no surprise to anyone we were working on this because we've been working on it for a long time. >> you can catch the entire interview with secretary jack lew later this morning on "squawk on the street". wells fargo out with
quarterly results. david long joins us on the "squawk" news line. he's a senior research analyst at raymond james. we can talk about wells fargo david on an absolute level or relative to the two others that we've seen in jpmorgan and bank of america. how did wells fargo stack up? >> joe thanks for having me on your show. wells fargo, i'd say it's a decent quarter. jpmorgan was the bellwhether. i'll note the numbers include three cents in reserved build for its portfolio but a five sent game that may not be recurring. >> if the stock
uncharacteristically, people that bought it at any time in late 2015 or this year, they are under water. is at any time overall operating environment? is it the negative interest rates environment? is at any time tough trading? what is it that has people, you know, selling stock instead of buying it? >> sure. so the bank index is down 9% year-to-date. the s&p 500 is up 2%. so pretty much in line with the bank index. couple things weighing on wells and some of the other banks. one of them energy and the risk of the energy loan exposure to some of these banks and the interest rate backdrop. if you go back to december expectations were for four rate hikes in 2016. now we've gotten through the first few months of the year we're down to maybe expectations for two rate hikes this year and here at raymond james we've actually removed any rate hikes from our model this year. if we do get some anticipation
of higher rates in the fed moving whether in june or later in the year that will help the banks with their relative performance. >> we just had a conversation with someone who said every quarter when it's all said and done 70% of companies beat analysts expectations. we're trying to figure out whether the companies just deliberately give you guys body language or numbers to talk to you down in your numbers or not, or whether you do it on your own and the company really does beat. how does that all work, in your view and i know you can't speak for other analysts. but how do other companies beat. >> sure. i think in our case, you know, we take what the management teams say with a grain of salt. we do track different economic numbers and information from the federal reserve with their data
that comes out every friday afternoon and we have our own inputs we use to go with the guidance that we get from management teams. just because a management team says they will hit a certain earnings number doesn't mean we'll plug that into our number. >> i think you guys should start, get your number and then add 10% on just to do it. albeit you the companies get really mad because they won't be beating any more. the whole game will be up. then they won't talk to you. >> i like the philosophy. >> don't do that. they will cut you off. they like beating and manage expectations. maybe that's true. maybe you should do last year versus this year. >> expect the stock trades based off on whether or not -- >> people are listening to us. self-fulfilling opinion because of what we do. anyway. we can't solve all the world's problems right now, david. we have a socialist that might be president. anyway thank you.
>> thank you for having me. >> when we come back if you've ever been frustrated by long lines at airport security you are not alone. one airline is now calling out the tsa for making people miss their flights. we'll talk about that more when "squawk box" comes back. >> announcer: you're watching "squawk box" on cnbc, first in business worldwide.
welcome back, everybody. american airlines is calling out the tsa saying that the agency is not doing enough to ensure passengers make their flights. a spokesman from the airlines calling the lines at tsa checkpoints nationwide unacceptable. in some areas you have lines that can take half hour, hour, even people getting to the airport hour and a half ahead of time aren't getting through. the problem got worse during the first three months of the year. during one week in mid-march line delays caused 6800 feens mi -- passengers to miss their flights. there's a huge surge in passenger traffic that has not been kept up with in terms of bringing in new tsa agents. we should say airport security screening has been available for a few years but it's been limited to air travel. phil lebeau has more. >> reporter: you are talking
about long lines at airports. check it out here in denver. this is typical of most mornings here. people waiting to go through the tsa security. clear is a private company. you pay $179 a year and you have either fingerprint or iris identification. once you get that you have an expedited right to the front of the line. look what clear is doing. it's expanding beyond airports. in fact it has worked out agreements with five major league baseball teams. remember mlb this year is requiring metal detectors for everybody going into a stadium. there you have a choke point where stadiums are saying hey we want information come through. they have clear line at coors field where rockies play. people who go through the line they like it's expedited. >> sure beats having to wait in line and kind of come through the gates with the crowd and the new technology i saw today i like. >> much slower in the other
lines. i'm looking forward this on promotion nights because i'll be able to get in quicker and get a promotional item. >> so where is clear? it's only at 13 airports and some of the big one dose not have clear service at their airport yet. they have grown in the last couple of years. they have more than 500,000 members here in the u.s. growth up more than 200% in the last year. ceo believes this is just the beginning of expanding what clear can do. the ability to tap and go and have that predictable experience for fans into the stadium, teams and leagues want to bring that their fans. and then when you think of the power of the platform twin stadiums, you can tap and go to get into is the stadium then you can use it for payment, can you use it for food and beverage, concessions. it's really that key to your pricktionless experience. guys, that is the future of what clear is aiming for. put your fingers down, go right
through at the airport. in the future they believe whether at stadiums or big venues where a lot of people need to get into a particular building or some other venue they can expedite that and in the process because you are already in the system maybe have payments worked out for ordering concessions, et cetera. it's an interesting business plan. struggled a number of years ago but starting to pick up some momentum now especially with these professional teams implementing clear at their stadiums. >> is it faster than tsa pre-check if you're global entry and you get that access? >> reporter: i'll give you and example here. if you came in right now you go through here. you would be right there. that line you're seeing, that's tsa pre-check at denver. let's show you how long that line is. tsa precheck line is longer. yes it is faster. can you make the argument there's notes many clear members as people going through tsa so
therefore it's fast per. >> the other question, the security question which is to say what kind of background checks are they doing? how different are the checks what the government might do and could a bad guy, if you will try to take advantage of this and somehow get on a clear list, if you will and then do something -- >> reporter: two things. one is once you get clear you still need have tsa pre-check. that sends you to tsa pre-check where tsa security agent will screen you and if you don't have pre-check -- sorry guys -- if you don't have pre-check then you go through the regular tsa line. that's the blooper for the day. >> i heard they fondle people never fully -- wow. >> reporter: sorry guys. a misspeak early in the morning. >> cable. >> we appreciate the company. >> reese's peanuts.
>> that was mine. >> we got it for the blooper reel for the end of the year. we hope you make it through the tsa line. when we come back breaking economic news, weekly jobless claims. tomorrow ted cruz will join us for a very special hour of box starting at 8:00 a.m. starting tomorrow morning right here on "squawk". pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro.
welcome back to "squawk box". breaking news. march read on consumer price index and jobless. initial jobless claims they dropped 13,000 to 253,000 from a slightly revised 266. 2.17 on coning. cpi up one tenth less than two tenths expected. strip out food and energy one tenth less than two tenths expected. let's get into the meat. everybody wants to look at year-over-year core. it was at 2.3 which was the highest level since september of 2008. it backed off a bit to 2.2. now we've had a lot of 2.2 reads
but as i said that 2.3 last month does stand somewhat tall. no matter how you slice it unlike ppi and variances in terms of various forms of production through the tunnel, cpi is running a little hotter on some of the metrics and may be something to pay attention to if only get velocity and wages and growth up. i'm sure that pricing pressures wouldn't be far behind. rates reverse some of their glitter yesterday. maybe some of that was counter intuitive with stores risk on, risk off, foreign exchange but at the end of the day let's follow boons which made a reversal. looking to challenge '07 basis points lowest yield ever which was last april 2015. now they are getting ever closer 20 basis points. joe and the gang, back to you. steve liesman been reacting off camera the entire time. it sound like there's something interesting in this. >> grunting. first i want to say how much i like the tsa and all of the u.s.
customs guys. i think they are alter fix and great people. and joe, when i see your picture up on the wall i'll take it down. >> what your a smugler. >> i kiss up because i want to get through the line. i don't want any problems. so let's talk about cpi. some people have thought it was about to take off and you have had a rise up and you had yellen say that she's a little bit skeptical. some of that skepticism seems warranted. you have guys out there who insist we have this up with yard trend but don't expect to it be a straight line up. down a tick as rick said. core retail -- the headline rate 0.9% year-over-year. you had reversal in apparel went up one sixth went down this month. gasoline was down 13% now it's up 2.2. maybe a little bit more of that to come.
thing a lot of people are watching in the first is what's happening with rents and ownership. that's up 0.2% up over 3% year-over-year. that's driving it. why? because we had this shortage of housing out there in terms of rentals and that's driving up rents. the other thing i'm looking for medical care. again that eased off. up half a point last month now up just 0.1%. a lot of discussion about why medical care inflation has been lower year-over-year it's 3.3%. finally for andrew airline fares down 0.9%. we'll see how that works. >> airlines down just like tiny amount. >> 0.9. >> oil down 2.2. >> one has nothing to do with the other. >> you think they should. >> not if you want to make sure that you maximize profits for the future. it's like you allow starbucks to keep raising prices as coffee
prices. you understand he's running a business. >> joe would you concede the dpoent which an airline has to pass along lower energy prices is relative to the competitiveness of the market they operate in. >> you're talking about one thing in a vacuum. >> it's a big thing. it's a big thing for airlines. it's a big chunk for airlines. i just wonder -- >> it's the biggest piece. >> i wonder something with delta who i love. love delta. delta in new york now the way they control so much more of new york, how competitive is that market. >> how have margins increased given the drop in oil prices? where are they now. are they exorbutantally high. >> what you're getting at is unable to run airlines profitably. andrew shouldn't begrudge the
fact that they are making money. >> 10% to 11%. >> not only that no one wants to help the airlines when for 20 years they don't make money. then you want a rebate -- same with oil companies they want to do the windfall profits tax when oil companies do. when prices go down let them fail. it depends on how you feel. >> in this environment whether -- we know. because you heard from the fellow from virgin. you can't start a new competitive airline today -- that's what he said. this guy an entrepreneur in the airline business started virgin america. >> andrew that said there's plenty of research which shows all need is two. that between pepsi and coke you create a competitive market. as long as there's an alternative. the government needs to enact to make sure there's competition but not go further than that. >> other companies maybe their input costs aren't the same
percentage as airlines. sugar prices are down. soft drinks -- take input cost. anything that anything is made out of. when the commodity goes down a lot. you won't see a percentage drop. >> i am expecting it to go down relatively materially. you think somebody would try to gain some form of market share. >> year-over-year down 1.3%. >> when prices speck they didn't go up either. >> it's got to do -- >> hold on. they have studied this phenomenon. we talked about it before called the rocket and feather phenomenon. idea that prices go up like a rocket but fall like a feather. unable to prove it. and i think it has to do with the psychology of the way people see prices. you see them go up. you do not visually or feel them go down. >> to make one point on oil prices. when they went up most airlines
added something called an oil surcharge. >> it wasn't a 50% -- >> correct. the gas surcharge in many instances still exist today. >> shipping companies. >> let me talk to joe's point. but the question is how do you as a consumer arebitrage the price. there's convenience, the time of the thing the flight can you get enough price on a business class ticket. if you don't as a consumer arbitrage the price in the first instance the airline won't do it for you. >> okay. in the meantime we should tell you three big financial firms posted quarterly earning results. bank of america, wells fargo and blackrock all out with earnings. bank of america's earnings topping estimates. wells fargo beat on the top and bottom lines. blackrock fell short. larry fink joined us in the last hour to talk financials. >> if you think about what happened in the first quarter, the markets fell double digits.
our average assets in the quarter were $150 billion lower than 4.7 trillion at the end of the quarter. so you had that drag. you had -- when you have that type of volatility uncertainty from our clients, as you know you had huge mutual fund outflows as an industry and one of the key characteristics. >> we've been debating the accuracy because they keep beating. this seems like good news. it is really? we should tell you jpmorgan ceo jamie dimon watches the show. he said stop this. import two real numbers. two numbers this year versus last year. don't get involved with estimates. >> frankly that's how companies measure themselves. >> that's how companies measure themselves. the problem is the markets don't because they have these expectations. how do you do it? i agree. the question is how can we get
the entire marketplace to think that way. >> in a perfect world if you're basing the price of a stock on the future growth prospect, if that's how you're setting a multiple and declining year-over-year, stock probably shouldn't go up. >> the stock has had the problems already because the market is ahead of figuring these things out. >> i think that you can do both. if you operate -- if you got good management and perform better than your peers in a difficult environment and beat expectations that's good but look overall -- for the long term -- >> real numbers. >> for the long term you want a stock you buy you hope they grow earnings 10% a year, right. >> as you mentioned there will be difficult times. not as if the company is right in a vacuum. you're looking at up times and down times. >> oil stock doesn't go from 100 to zero when profits go to zero. anyway, coming up, virtual
welcome back to "squawk box". the cdc, this is, i think, did we not know about microenhe icm. cdc confirming what's been suspected for months and that is zika infection with that virus during pregnancy does indeed cause the birth defect microcephaly. the announcement comes as the white house is lobbying congress to grants nearly $1.9 billion to fight the virus. on a similar vein billionaire philanthropist bill gates addressing the fight against zika virus. speaking exclusively to us. >> ideas about how can we use
new tools to go after the mosquitos, that's one way to conquer these diseases to go after the vector, and reduce or eliminate the mosquito population. our foundation has some tools there which will, we will probably want to try because there won't be a vaccine even in the best case for several years here. and so there's a lot being looked at. no, there's not a total solution to zika in the world. >> gates adding usa is playing a disproportionate role in moving to find solutions combat the virus. virtual reality is offering shoppers the chance to experience products and services before they buy, bringing the test drive to everything from medical devices to home remodels. the ceo and co-founder of a company that's worked with companies as diverse as lowes,
toys "r" us to bring virtual reality into useful applications. thanks for being here today. we hear about virtual reality and for a long time seems like it's much more hype than reality and useful in a practical sort of way. so to speak. what can you tell us right now about the practical applications. >> sure. obviously gaming is a big market and that sort of leads the story. but what we're finding is that there are really practical applications for retailers and manufacturers for commerce and those are already happening today. for instance with our business, retailers and manufacturers spend billions in visual merchandising. samples, catalogs. video. show rooms. and so if you can virtualize that content, and replace a lot of that cost it's a very simple practical application. >> it makes sense in particular for a kitchen remodeling where
you'll spend a lot of money. choices are difficult. if you can put it together in a room, it makes you feel better about a $50,000 plus. >> it's all about confidence. and for a retailer manufacturer accelerating the sale and if can you be immersed in your experience and feel it emotionally and see it and more importantly see it in context the opportunity to see what your kitchen is going to look like in your actual kitchen can really sort of move the consumer to the final decision point. >> with toys "r" us what do you? >> toys "r" us we do a fun application using our products, a game during the holiday season. it was a way to actually engage kids with the physical product and create that connection that would drive them in the store and make the final purchase. >> we first heard from you from dan gilbert because thinks detroit ventures were the original backer. he talked to me about the context of using it in stadiums for games. how does that play snout >> sure. not only streaming the game, you
know, to a head set so you can be right there at center court but also applications like helping sponsors see what a particular space might look like if they want to spoirnt. same exact use case. how do i help people see it. >> is that a reality or how long before i can watch a game at home? >> we're talking a couple of years before it's en masse but you'll start to see early parts of that this year. >> what is the revenue perspective and the profit perspective when it comes to this? i know you're a privately held company. again so much what we've seen with virtual reality or augmented reality, things that sound pretty cool but distant. >> we're a practical enterprise type application. we charge a manufacturer or retailer to help set them up on a template and then we on board all their contents. we host all their 3-d models, representations of their products 3-d models in the cloud
and stream them to an application for ten user. we charge for a set up and subscription. it's not a long term revenue prospect or where we have to raise tons of money to be successful. it's a pragmatic step by step enterprise business. >> how much has this infiltrated. can i walk in any lowes and get this. >> they are in seven markets opinion 19 stores total. lowes incredibly initiativive. i've never seen a retailer sort of move this way before. and i've worked with many of them. it's worked well so far. and we're in the very early stages. we're in a testing period. >> what about in terms of additional funding. i know detroit ventures was your original backer but you did another round of funding where you raised $10 million. >> that's right. >> what it's like to go out and ask other people to invest. >> dan gilbert. you guys know dan well.
as much as we're inned in the investment, building a great company requires a great culture and he's a guru when it comes to building a great organization. that's a big part of our success. and impact. but we've had a lot of success. our space, as you mentioned is exciting. if we can combine being in that space with having a practical business model where we're driving real revenue we have a lot of interest. >> thanks for coming in today. when we return we'll talk to jim crime who are will join us from the new york stock exchange. tomorrow presidential candidate ted cruz is going to join us for a special hour starting at 8:00 a.m. eastern time. we got a lot of questions for him. back in a moment.
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the dollar actually has weakened with less pressure on china to devalue. and so, i actually believe the fundamentals are better today, but i don't believe we can have a path of raising rates too much precisely because of the dollar. >> that was blackrock ceo larry fink joining us earlier this morning. now let's get down to the new york stock exchange, where jim cramer joins us now. jim, you remember jim lang, "dating game." that was a couple of years ago. >> yeah. >> let's say, all right -- >> my time. >> the whole room was turned around. you couldn't see them. so, behind there, you've got jamie dimon, you've got john stumpf, and you've got brian moynihan. now, looking at the results of those three banks from the last couple of days, who do you want to take -- who do you want to hook up with out of those three companies, given what you saw? >> hook up with, kind of a loaded term there. but it would be jamie dimon,
because he seems to be less rate-dependent than the other two guys. >> so, that's the best -- that report was better than wells fargo or bank of america? >> yes, because they were able to make more money in this rate environment than the other guys can. and look, bank of america's ideally set up for more rate hikes. if we knew before rate hikes, then i would date brian moynihan. and i'd hook up with john stumpf. i have a man crush on the guy. >> instead of the three, let's throw in larry fink as the special bonus date. would blackrock be more -- would you rather buy that than the other three? >> no. i think larry fink's fabulous, but these companies -- look, you get four rate hikes, geez, bank of america's going to quadruple what makes and you'd be back at the $16 tangible book. wells fargo, stumpf is a terrific banker, but again, they need higher rates and jamie dimon didn't. and i think that's the tale of the tape. >> on "mad money" tonight, you'd say jpmorgan is the best of the
breed right now for buying right now? >> my charitable trust owns bank of america and wells fargo, but jpmorgan did better, they did. because they did not sit around and wait for higher rates. they've found more ways to make money. but look, i think it's just a fact of life. i mean, some banks are fabulous investments when rates go up, and some banks are not as good. but it turns out that jamie dimon doesn't matter where the rates went, and that was very impressive. very impressive. >> on jamie dimon, he e-mailed us earlier because we were talking about how banks have beat their estimates and whether the estimates were wrong, whether the analysts were wrong or the companies guided them too low to begin with. and he wrote in and he said, effectively, stop doing that, you know, just report the real numbers, report what this year was versus last year, and that's it. and i'm curious, as a market guy, whether you think that's the right way to do it? >> yeah, i do. i think that that really clarifies a lot of stuff. i mean, jpmorgan's more of a
growth stock than the other guys right now, and that's surprising, because remember, wells is the great growth stock of banks. but those stocks, wells and bank of america suffer from the comparison because those stocks were up very, very big. these are not bad quarters. that's the problem, they're not bad. it's just that when i see other companies report great quarters, i think you'll say, not bad's not good enough. but look, bank of america's doing fine, wells fargo's doing fine. if we were to get three rate increases, you would want to own them more than jpmorgan. that's just a fact of life. they're more levered. >> 350 in the last couple days, jim. the market has had it higher. >> this is a cat pill yeerpilla and they're doing terrible. >> see you, jim. when we come back, "stocks to watch" ahead of the opening bell. and a programming note for you -- presidential candidate ted cruz will join us for a special hour of "squawk box" tomorrow starting at 8:00 a.m. eastern time. stay tuned. you're watching cnbc, first in business worldwide. the first stock index was created over 100 years ago as a benchmark for average.
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is this really any better than the one you got last year? if we consolidate suppliers, what's the savings there? so should we go with the 467 horsepower? ...or is a 423 enough? good question. you ask a lot of good questions... i think we should move you into our new fund. sure... ok. but are you asking enough about how your wealth is managed? wealth management at charles schwab. welcome back to "squawk box," everybody. a couple of stocks on the move this morning. first up, disc drive make r seagate technology cut its profit for the recent quarter because of weaker demand in the enterprise segment. that stock is down over 12%.
>> we just watch the tape at the bottom. western digital also, western digital shares are also responding to that. what do you use the disc drive for now? i don't understand. no wonder their businesses are bad. >> no, hard drives. >> okay, yeah, forgot. floppy discs. >> "squawk on the street" begins right now. >> already had one accident. good thursday morning. welcome to "squawk on the street." i'm karl quintanilla with jim cramer and david faber at the new york stock exchange. news to start the hour, treasury secretary jack lew speaking to cnbc about the tax inversion crackdown and responding to companies' claims the new rules came as a shock. >> i think that it should have been no surprise to anyone that we were working on this because we've been working on it for a ng