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tv   Squawk on the Street  CNBC  April 18, 2016 9:00am-11:01am EDT

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we've seen. dow futures are down but only by about 58 points. the s&p futures are down by about 8 points. nasdaq off by 12.5. >> i don't want winter coming. >> no, but it's the winter's coming "game of thrones". >> i know. but yesterday did you see a tree or -- >> it was beautiful. it was beautiful. >> did you go to central park. >> and it's going to be 80 today. bye everybody. we'll see you tomorrow. right now it's time for "squawk on the street." good morning and welcome to "squawk on the street." i'm david faber along with jim cramer. and we are live from the new york stock exchange. carl has the day off today. let's get a look at crude oil where we start. wti down a little less than 4.5% this morning, brent about the same loss. take a look at futures and then we'll get to the european markets. we are looking for a down open here in the states, but not that bad overall. i'm told our charts are frozen, so take my word for it. europe was not quite as bad as
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people thought. the worst market overall was -- there, unfrozen that you can get a sense of things. there's a look at europe. again, the losses not particularly substantial given that move down in crude. in asia is where things were a bit tougher overnight, japan in particular with that stronger yen suffered a more than 3% decline. let's get back here and start with our road map. and where does it start? well, where you'd expect, oil prices are down after the failed doha deal. we're going to take you there live and bring you the latest. morgan stanley shares getting a boost from what was a better than expected quarter this morning, although not great. we'll give you everything you need to know about that report. and we are also live with pepsi's cfo, hugh johnston. we're going to talk about this company's earnings plus his new seat on twitter's board of directors. all right. let's start with oil. you were talking of course the squawk gang about it is it's the
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key to this market i'm going to say this morning. i'll ask you what the key is at 9:30 when we typically do that. i guess that would be -- although you weren't expecting from doha, didn't get anything from doha and what looked like a 6-plus percent decline in the very early going when futures opened this morning we're not down as much. >> no, what i did look at the last times oil fell 6% or more within a one or two day period and that day is always impactful for the s&p. if you look two weeks later, there is zero impact, no correlation whatsoever. so oil's trading that day is the key to that market. and then if oil goes up subsequent the market can go up. if oil goes down doesn't really impact the s&p much. interesting enough when you have these declines of this magnitude the stocks that have led us down are the airlines. as oil comes back up the airlines go up, which again is a little counterintuitive. so what i'm saying is those who trade off of oil do it as a day
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trade today because it will mean nothing by tomorrow. i looked at the last four since the peak in september of 2014. just literally sat down there in the kitchen and just looked at the ratio of where s&p was versus oil out two weeks, which i think should be your timeframe. and there's no correlation. none. i mean, s&p's back to exactly where it was two weeks later. but intraday s&p's always down. s&p has to go down today, but a down 6% is not very key number past today. so keep that in mind. and there's a reason -- there's a lot of reasons why but has to do with demand of oil picking up. >> specific to doha and we'll get a report from brian sullivan in a moment, but this strike in kuwait also seems to be having an impact in a different way because it's taking oil off the market. >> right. nigeria's got oil taken off too. russia really can't pump more. saudis have been pumping the same amount. it's not like they froze ahead, they've been doing 10-1, 10-3,
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10-1, 10-3 per month. could they go to 11-3? if they do that they are literally only doing a makeup for what the u.s. is losing. the u.s. decline is what's driving things here. and the u.s. decline has been very severe in the last three months. and it's going to be down a million barrels a day. remember we import. people think we don't import. we import -- we will be importing another million barrels at this time next year. and saudi arabia preserved that relationship so most of it will come from the saudis, not from the kuwaitis, not from venezuela, not from nigeria. this is a pure win. what the saudis are trying to figure out at what level are they still able to fund their obligations. >> yes. >> what level are they able to fund the yemen war and still wipe out u.s. production. and the answer is they've found it, it's between 33 and 40. >> it seems to. now they've already hit the public markets in the last 12 months. >> right. they need to raise a lot of money. >> and they can do that. there's also been talk about taking certain parts of saudi
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aramco public. there are so many different parts it's not clear what they would take if they chose to. >> no one thinks iran can pump out more than 1,000 barrels. let me give you the math, every 100,000 barrels we drop per day you're going to have oil go up by my correlations roughly about 50 cents. >> wow. >> yeah. we're really the swing beyond what anybody thinks. that's why the rig count has been a much better indicator. >> so another million barrels down from us is five bucks up in oil? >> yes. you know what we ought to do? >> no, tell me. >> rather than talk, i suggest we go right to doha. >> right to it? to the source? >> brian sullivan is there. >> it's amazing because you say there and it will come out here. >> i've learned tv. took me 20 years. >> it's taken a while. there he is looking very handsome and tough in his shirt there with the light streaming on him. brian sullivan is live in doha and he's got a lot more for us this morning. take it away, brian.
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>> you know, jim and david, i love what you guys are doing because you're ultimately talking about math. ultimately oil does come down to math. we'll get to that in a second. but let's talk about yesterday. what an amazing whirlwind and geopolitical intrigue filled day it was here in doha, qatar yesterday, because you had every range of emotion. in the morning reports out some kind of draft deal had already been agreed to. we talked to the ecuadoran minister about it, he said i like it, i'm going to sign it, saudis came in, big sbrouentour the delegates later went to visit the emir of qatar in his palace. came back got eerily quiet, not a lot of reports from the meeting room. then it turned serious. occasionally a minister come out, smiles turn to a grim face, and you could tell that maybe, maybe something was wrong. a lot of talk that the fight really began between russia and saudi arabia about the language of any deal specifically with
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regard to iran. then about 9:00 p.m. local time almost exactly 12 hours after the meeting began, it was over. we saw down the hallway the saudis kind of left in a hurry out of the back door. the qatari minister kind of holding a press conference. and you could see from the podium a couple more spots. we thought there'd be three or four ministers thereupon, it was just the qatar representative saying that they needed, quote, more time. who knows why. and he tried to make it sound like the fundamentals of the market were on their side as well. but there's no discounting it, folks, there was a lot of disappointment here yesterday. among some of the producers, venezuelas, ecuadors, nigerias of the world who need higher prices. and all this extra pumping could see prices fall. now, you referenced kuwait. perhaps nobody is luckier today than iran because of kuwait. massive oil strike could take a million to a million and a half barrels a day off the kuwaiti market. and here's where the math comes in to jim's point. we've seen the u.s. come down,
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kuwait's now going to come down. this provides iran a lot of cover to do what they want to do, which is kind of stick their thumb in saudi arabia's eye and increase oil output by a couple hundred thousand barrels a day, guys. they want to get back to 4 million barrels. all the talk was that yesterday saudi arabia wanted to put something in writing that would limit everybody's output including iran even though they were not here, but that some of the representatives according to the nigerian industry minister who i spoke with afterward said they simply did not feel comfortable for it. perhaps a win for iran. they got some support from other nations and they've got the cover to increase production. guys, i don't know how you feel. i'll send it back to you with a question. if we did not have the kuwaiti oil strike, we might see oil down 5% or 6%, i think the kuwait oil strike has put the battle of the bulls and the bears squarely in focus. so that's it from doha, we'll be here all day. i'll come back with a tan, well,
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my tan, it's actually red. back to you. >> all right. we'll watch that happen. with each successive report from brian. >> right here in my hand 76 issuances of equity by oil companies. 76. now, which is rather amazing. >> i want to mention we'll take a look at a partnership formed a million dollar private placement. i don't know if you include private placements on your sheet as well. >> no, i just do public deals. but shows you many of the oil companies are ready for this. the one to watch just so we know is ensco, if that deal holds up then you know that the decline in oil will not be that meaningful for the u.s., because that deal would just happen. and that was -- you know, you were talking about a deal where they did 57 million shares at 9 and a quarter. watch that. that is the key piece of business because that's the last one in. but 76 deals has really
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liquefied this group. so, again, the cushion is there. there's a cushion. and if you want to sell some of the banks off this, it's okay. but kuwait the fact that iran can pump like they can, the fact that saudis do not have the ability to immediately ramp to 11 million, the fact we are dropping by the month because there are only a few places where you can still make money. >> speaking of making money, it's not that difficult -- not that easy to make money in the capital markets these days. i want to get to morgan stanley's numbers. they reported that is the firm reported first quarter earnings 55 cents a share, that was ahead of wall street estimates despite what was a 54% decline in profits. revenue was in line amid weakness and trading in investment banking. ceo james gorman saying while he sees some signs of market recovery, global uncertainties continue to weigh on investor activity. the return on equity was 6.2%.
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>> i know. oh, my. >> however, m&a was very strong. of 25% completed deals they were number one. equity trading was solid at about i think 2.1 billion. that was up 15% quarter over quarter, down 9% year over year. global wealth management not too bad, revenues down 4% year over year. they also kept expenses down. i think their comp ratio was 37%. did have a drop overall in expenses. and they got a book value now of around 35.34 is what i'm looking at, jim. and the share count was down 2.4%. so some positives in there. they beat the estimate. the stock is looking up. you can see it less than 1%. but 6.2%, you can't live on a 6.2% world for too long. >> no, you can keep cutting expenses and the expensive cutting is very, very good. i was surprised at the m&a because haven't been that many deals but looks like they've
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done their share. di spa when you get off the desk you talk about the disparities, the tangible book value. >> yes. >> keith says it was a low quality meaning for citi they are 72% of -- the stock is 72% of the tangible book. tangible book is meant to be the cash on hands. basically what if you close the bank. >> what would be left. >> where would you be. >> i had a ramp up in capital at morgan stanley 30.44 is tangible book value. >> when i last saw this disparity i always mention cal fed and -- that's the last time i saw it. of course those went bust. these are not going to go bust, but the disparity is too great to be believed. it's either about the business is about to fall off a cliff or the market is just stupid. i haven't been able to figure it out. the market doesn't stay stupid for all that long. >> no, it doesn't. it can for periods of time. >> but these stocks have to start moving up.
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>> and proving the market -- okay. or else you're going to get worried. >> or else i think the book is not right. i hate to think after all the scrubbing that the book's not right. 6% return on equity. >> yeah. >> remember jamie diman said -- >> certainly hard to sustain since the crisis. >> i love talking with the music in the background. makes me feel like we're on 10-10 -- >> the typewriters too, right? >> yeah. >> we are going to a commercial. yeah. coming up, pepsico out with better than expected earnings. stock at an all-time high. we're going to talk with the company's cfo after this. it's more than a network and the cloud.
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pepsi was out with better than expected first kwartd e quarter earnings. the stock looked up, now it's actually looking down. so people still trying to figure it out. >> it was a better bottom line, lower costs though sales continue to get hit by the stronger u.s. dollar. they maintain their guidance for the year. and joining us now from his company's headquarters to discuss hugh johnson, the cfo of pepsico, member of cnbc's global
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council and newest member of twitter's board. good morning to you. >> good morning, sarah, nice to be with you all. >> nice to see you. i just mentioned the bottom line beat. good way to start off the year. some are wondering why you didn't raise your guidance given the dollar's been weakening and things are looking up from a cost perspective. >> sure. happy to talk a little bit about that. as you said in the quarter we delivered 3.5% revenue growth, so continuation of our ongoing trend. good strong revenue performance. in particular we saw strong performance in the u.s. as well as our everyday nutrition portfolio. in terms of the cost, cost management was excellent for the quarter. we saw both favorable commodities as well as the impact of our smart spending initiative. and that drove margins up significantly 165 basis points for the quarter. so a good start, but as we know the world is a volatile place. as you all report on cnbc every day. and that leads us to be cautious at this point in the year until
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we see more factors emerge. we thought the most prudent thing to do was to stick with the guidance we had published just a couple of months ago. >> as a global consumer company, can you give us a taste of what you're seeing economically? north america strong, but latin america, boy, more than 25% decline. i know venezuela was a big part of that. are you seeing any kind of stabilization in some of those emerging markets like russia, like brazil? >> yeah. let me do a quick walk around the world. as you said north america the consumer seems to continue to do quite well for us and i think for some other companies as well. i think the fact that we sell everyday pleasures makes consumers come to our category. the bellwether for me is convenience stores and convenience store business broadly was up about 5%. we gained a little bit of share in that environment. latin america's almost a tale of two cities. mexico continues to perform very well. brazil obviously facing its challenges. and venezuela we deconsolidated out of pepsico's operations, so that's not in our numbers going
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forward. from the standpoint of the rest of the world a hot spot obviously eastern europe, russian economy continues to be challenged. china relatively stable, india's doing quite well. and western europe is doing okay, but okay in a relatively low growth environment. so the net of it is outside the u.s. the world is certainly more challenging. our developing and emerging markets business was up 7%, which is a good solid number by any stretch -- by any metric that you would use. but we're cautious on outside the u.s. because the world is such a volatile place. >> hi, hugh. jim cramer. i know when pepsico reports they have a firm guide not raised those selling it are typically doing something stupid. but that's okay first amendment allows tremendously stupid trading. i've looked it over, totally on board. but i would like to point out the u.s., the war is over, coca-cola and pepsico the war is
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over. had you use spot pricing you would have gotten up but the real positives to me no more price war. and you wanted a just currency, you could have. but obviously you're waiting for more verification of that change in currencies for the dollar before you make your move. >> yeah. that's exactly right, jim. two points there. in terms of north american pricing, that environment remains very rational, very solid. obviously we only control -- we can control which is our own pricing, but our pricing up 2.5% as reported externally on the quarter overall lrb pricing was up 1.8%. so those are good solid numbers and numbers we'd be happy to see all year long. i do think the economic structure of the industry is such that it would logically lead to continued rational pricing in the marketplace. regarding currency you're absolutely right. spot rates have come down such that if i use those the numbers would be stronger in the balance of the year. we use a consensus rate.
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and as those two converge we'll see whether current spot is right or whether consensus is right to the degree that current spot is right obviously that's a tailwind for us. we do see the weakening of the dollar as potentially being a benefit to us in the balance of the year. >> let's go over that convenience store number because that's in focus. we've seen very little pickup anywhere in the whole food chain because of oil going down except for convenience stores. does that seem in sync? the extra pennies at the pump in sync with the convenience number? >> yeah, i think it really affects the consumer behavior truly at the pump. i heard some discussion earlier today on cnbc about consumers aren't spending back the oil dividend that they've all received. what we see in convenience store is in fact they are at least spending that little portion of it back. in terms of the behavior at the pump is going, pump gas and now because there's a few extra dollars in your pocket, go in and buy a little bit of a treat or a nutritious product.
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and as a result of that we're seeing benefit from it. in addition to that because of all the innovation we've done like mountain dew kick start, customers are tending to pick us more than other companies. >> before you go we have to ask you about your new appointment on the board of twitter. what's your diagnosis of the problem for that company? and how as a new board member do you plan to fix it? >> well, seeing how i haven't actually been to a board meeting yet, i think i better spend a little bit of time understanding the strategy more. here's what i would say on that. originally i was on the board of aol a couple of years ago and that got me interested in this area where brands advertising and digital technology converge and i think tim armstrong did a wonderful job managing that company. when the twitter opportunity came along this is now from a media perspective rather than a digital advertising perspective, what i learned there actually i think comes back nicely to pepsico. and hopefully with what i bring
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to the table in terms of my experiences i can help twitter have its best days in front of it. the one thing i will say is with a platform of 320 million users active on a monthly basis, that's a powerful media platform. and i think there's lots of potential in that business. >> all right. hugh, we know you just joined, signed on, thank you for joining us on pepsi results and of course as a new board member of twitter, guys. >> all right. and thank you. >> thanks for having me. >> sarah, see you in a little bit. up next cramer's mad dash as we countdown to the opening bell. (patrick 1) what's it like to be the boss of you?
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(patrick 2) 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, (vo) go national. go like a pro. (neighbor) yeah, so we're just bringing your son home. (dad) ah! greetings, neighbor. neighbor boy. he really loves our wireless directv receiver. (dad) he should know better. we're settlers. we settle for cable. but let us repay you for your troubles. fresh milk for the journey home? (neighbor) we live right there. (dad) salted meats? (neighbor) no thank you. (dad) hats then!
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(vo) don't be a settler, get a $100 reward card when you switch to directv. from icy ocean your wild-ckitchen counter. mon. when you cook with incredible make incredible meals. get your first two meals free at quite like the human foot. introducing the 255 horsepower lexus is 300 all-wheel-drive. with twenty-five percent more base horsepower. once driven, there's no going back. welcome back. home builder sentiment came out a bit earlier than expected.
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diana olick has the numbers. >> that's right. home builder sentiment at 58, that is unchanged in april compared to a month ago. and that's the third straight month of unchanged builders saying they are, quote, cautiously optimistic of the housing market this spring. but it's not a big move higher, which you might expect given the spring season. breaking down the three components of this index, sales expectations over the next six months rose one point to 62. buyer traffic up one point to 44, but current sales condition came down to 63. so they're seeing more traffic, they're seeing more interest, they're not seeing more signed contracts. now, as for regionally this is a three-month running average, all areas of the country have seen lower builder sentiment over the last three months on the average, northeast and west down two points, midwest and south down one point. again, home builders sentiment in april unchanged at 58. it's a little bit better than last year, 56 one year ago. back to you guys. >> thank you very much, diana olick. let's get to the mad dash now on a monday.
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oh, man, it's monday again, jim. got about, what, three and a half, four minutes before the opening bell. we'll take it right to the opening bell. >> sure. i think it's pertinent. sometimes we have companies ring the opening bell and it doesn't mean that much. rubbermaid that deal closed. >> it did. >> yes. i think you'll see mike poke -- >> jordan. >> yes. what i like about this deal is what i like a lot about pepsico. being able to take up more shelf space, a lot of rationalization. remember jordan had a huge number of brands. i think they're going to consolidate some of those brands and get rid of the brands -- some of them. this takeover allows a new ceo to pair back all the different things that aren't doing well. i'm not recommending this hard. i think this combination presents you a new way to play the houseware business other than home depot. >> getting out of the box we said, a bit of a baseball term, but they did not do a
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particularly good job. the stock was down but rebounded since. >> it did a terrible job. did a terrible job telling the story. i think i told the story better than they did. >> it happens often i've noticed. >> i have a narrative they don't embrace. the narrative is different because what you're saying is as terrific at martin franklin -- >> the man who built jordan. >> he's going to stay on, on the board, but you have to realize there's just a dispair in group of brands and you need to streamline it. but it's very hard for franklin to streamline it. franklin wants sto streamline every brand he has. i think newell, they can onshore, by the way means mexico, not the united states, and bring down costs. but in general both these companies are well run. just need some of the divisions to leave. but it presents them with the opportunity to say to home depot, not so fast. here's how we want to price it.
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said to walmart not so fast, we are many aisles in your stores so don't think you can roll us. that i like. i want power to the branded and not as much power to the big box. >> right. >> i think they can raise price. >> it will be interesting. of course again today is close of that deal -- >> it doesn't have much sponsorship. >> no. >> i think you're going to see a bunch of buys here because people are -- people want things to be in their home. there's a shortage of names to be able to play for the housing business. fortune brand, fortune home security, you just don't have enough. and this presents a new name like why people like tjx, home goods, this is a way to play housing recovery. and people looking and now they're going to have it. >> you hear the applause building here of course on this monday morning as we head into the open of trading a few
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seconds from now. you can take a look back at the realtime exchange. of course we are looking for lower open given the decline in wti and in brent. decline in oil prices as a result of no agreement reached in any meaningful way. here at the big board as we were just talking about that is newell brands, now the combined entity of newell rubber maid. we're going to talk to the ceo and asked him some of the questions you just raised. at the nasdaq sandy spring celebrating 20th listing anniversary. >> we would be quite remiss not to talk about hasbro. remarkable quarter not being brought down by oil. the disney tie in did work for them. there were a lot of people who felt "star wars" did not deliver for toys. bob iger was emphatic as he was about all the "star wars," it
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was doing fantastically well, naysayers have been proven wrong, shorts all over hasbro betting they did not have staying power with "star wars." that is clearly wrong. we always wanted to default to espn, how about defaulting to every movie that does well. "jungle book". >> the live action "jungle book". >> it worked. at some point do we decide the studios like we dealt with time warner should be able to trump any decline in espn, or are we always going to hold it against iger? i'm beginning to get sense we're holding it against iger too much. >> what does that mean? what does that mean? holding what against him? >> well, the idea that we can moored over the stock of disney by saying forget jungle book, forget "star wars," forget the next four releases, what matters is 2% decline we expect in espn over the next two years --
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>> i don't know a lot of people blame iger for it, it's just a natural extension of what's happening in that world. >> i want to de-personalize the situation. >> okay. the guy who's always pointing to the ceo and talking about these companies as though they're one person. >> i am saying perhaps even though there's turmoil at disney. that's another one. i'm saying disney gets too much scrutiny. and newell brands gets no scrutiny. disney gets a level of scrutiny i'm now saying i'm stepping back from because every one of these movies succeeds. >> at least it's a $160 billion company. yahoo gets more scrutiny and it's tiny. >> the scrutiny list, facebook, amazon, apple -- >> netflix scrutiny that is through the roof, yahoo, for whatever reason. ax out the alibaba stake no one will buy it based on they want to sell the core business for something you can read about endlessly in all sorts of publications, round one bids,
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looks like verizon -- >> yes. that's another thing a couple publications that just exist on constantly writing about what's going to happen with yahoo. >> yeah. >> i was with a group this weekend and what did they all read about the election? >> tell me. >>, that happens to be disney. does bob iger get any credit for that? no. so i am trying to step back from the personal and say that i think disney stock is a buy. >> there was an upgrade of disney similar reasoning to your own actually. >> i just think that they're -- >> the stock is up. probably on the box office from "the jungle book." and theme parks doing well. of course shanghai disney. you did have that very much unexpected change at the top with mr. stags leaving the company. >> don't really know what that was about. but i remember the days when we used to look at abc ratings every day and said, wow, abc sells disney. if you look back on that that was not a very smart strategy. >> it was not a tell, but espn i
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would argue is a bit more important than abc. def -- >> the espn, jhk, yes, all of them. it's still extraordinarily important. we are going to be focused on those numbers. >> i can't get us to maybe mitigate that focus by looking at the movie schedule. >> no, i think they proved they are extraordinarily capable of creating hit after hit after hit. >> but doesn't that matter? >> yes, it does matter. but some will argue it matters and it's already reflected. >> can unilever do that? how about colgate? >> what about colgate -- >> venezuela i did get venezuela oil pumping numbers and they are still pumping consistent. but slumberje pulling out.
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we didn't even talk about brazil. petrobas -- >> well, she's been impeached. now the senate will make a decision. and it is possible you will see -- >> she is regarded as a distinct negative for brazil. >> yes. >> and literally everyone else. remember what cruz's roommate said from princeton? >> yes. >> you can pick any man out of the phonebook -- my grandfather's brothers went to brazil. maybe i could pick them, but if you took a white pages and pointed to any name in the brazilian white pages, you would have a better head of state t n than -- >> even ted cruz is in there. >> i'm just saying, wow, that person's doing better. if you notice pet trobras is up >> the endemic corruption gone on in brazil is not just during
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her administration. >> it has that same taint. >> but you raise good points on venezuela potentially of a failed state. something geopolitically we have to worry about. brazil of course a far larger economy that's been suffering for quite some time now as a result of the decline in commodities, not just oil but we talk about iron ore for example. >> right. iron ore still up for the year. i see -- >> had a rough go. >> i'm talking about jersey and illinois but there were pension problems in brazil that seemed like they could bring someone down. i think when you look at latin america, latin america has to start getting better for everyone. and it's not -- you know, argentina's changed for the better. colombia's still very good. venezuela's off the face of the earth and brazil could be an important swing state. so let's stay focused on brazil if only just because so much business is done there. >> okay. as we might have expected of course energy names taking the brunt of any selling this morning. and some that have been up
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dramatically freeport we end up talking about a lot. it's been on the gainers list this morning as you might expect on the losers, down little less than 5% although not to take away from freeport which has come back dramatically. >> by the way gold stocks have been unbelievable performers. they continue to be downgraded. silver continues to be downgraded. the stocks are not obeying. by the way -- eagle been an incredible stock. silver wheaton has been a great stock. the analysts hate to skrup and they're being proven wrong. now we can sit here and debate negative rates and try to make money off of it and the difference is buy rand gold, it has continued to work. morgan stanley by the way giving up those gains in part because those gains are about expense control. >> yeah, the gains you said it. morgan stanley shares up 10 cents. little less than half of a percent. had looked a little bit more of
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a gain before we started trading this morning. return on equity 6.2%. we'll mention that any number of times. >> j.p. morgan -- >> that's just showing how difficult it is to operate in this environment for these banks particularly one where the capital markets certainly during the first two months of the year were horrible. >> it's important to point out well ahead of the government posse and still didn't matter. remember, they did a lot more to get out from under the government. they just saw it coming. i thought -- >> so much of it is global wealth management. >> in the end it's just not a great business anymore. geez, never like with that expense memo. you know, one of the things that moved pepsico believe it or not is they have 200,000-plus employees and they've cut back on travel. they're using more technology to cut back on travel, which is some of their expense control. all of these companies are trying to do more with less, dijtization, firing people, less expense just in terms of the
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luxury of working at these companies. i don't know if you would want -- every sport student coming out of school would much rather go to a facebook where they're building dorms for people who can't afford the $1.3 million starter homes in the bay area. >> yeah. but you're saying you think those -- >> the best and brightest. >> the best and brightest are more willing or more interested in going to a company like a facebook than they would be to a goldman sachs. >> yes. they would rather go than they would city and yet that's wrong. >> that's potentially a good thing, isn't snit. >> well, people want equity -- >> listen, plenty of smart guys on wall street sometimes too smart for their own good. do we really need them building difficult models, derivatives that are designed to -- >> no. >> -- destroy. >> there's a lot of businesses
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at these banks that are not doing that well, municipals not doing that well. you know, ipos. >> banking back to the basics. >> well, banking's become a very not nearly as lucrative thing. you would think that the hamptons prices would have come down by now. between global warming and banking fees. >> well, the seas haven't risen enough to really get to the shore there. >> but we refuse to buy a house because even though the science indicates blah, blah, blah. >> and enormous amount of money still being made even though not necessarily for the clients but hedge fund managers still certainly make significant sums. >> right. >> over time. >> right. but it's important to point out these places -- >> the performance overall doesn't outperform the s&p. private equities done perfectly well and you can still make quite a great living on wall street if you're any good at your job. >> right. i'm just saying the best and brightest really go west, not east. >> there's lots of east here. google, facebook, yeah, they're all here. >> well, they're here. they're putting in a new roasterie across.
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>> there's thousands and thousands of employees here. don't undersell new york city. just got the new campus opening up with cornell and roosevelt, we're going to have our share of computer science. >> ruin my thesis. >> my alma mater, what can i tell you? >> i had a fabulous thesis you shot down. that these unicorns if they ever -- people want equity, but you're right. if you're at goldman, you're doing okay. don't cry for me -- >> t row marking down a number of those positions of those unicorns. uber down 6% in terms of where they marked it. >> people feel that uber -- well, the lyft guys feel uber doesn't make any money per car. which is not a good way to do business. >> they say that about amazon. >> amazon web services brought services worth $100 billion. >> now you can buy the video service on its own. >> that's what i was -- that was my segue. thank you for biki ingpicking t >> you're so good. >> i'm trying to go across all areas. the funniest upgrades are the
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ones that involve china, cummings enjoyable global upgraded today by bank of america. these are stocks that have missed quarter, missed quarter and people saying you got to be in that group. got to be in the heavy equipment group. that's because once again the baltic freight business is up substantially, that's a marker for china. people who are short those stocks are doing quite poor. >> all right. let's get a look at the broader markets as well. bob pisani joins us on the floor. he's got more on what's moving this morning. >> good morning, happy monday everybody. of course to come to an agreement on the production in doha is affecting global markets. nikkei down about 3%, russia down 3%, little weakness in shanghai 67 shanghai. here in the u.s. energy stock but not as much as you might think only down 0.47%. maybe we are getting a little bit of decoupling, materials also a little weak, industrials, these are the groups you would
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anticipate would be affected by dollar moves, consumer discretionary is the strongest group among the ten here. among energy stocks the usual high beta names are moving more than the rest of the market. as you can see chesapeake, murphy, devon, those are high beta names. but nsco last week down. what happens to energy stocks from here on. with oil creeping slightly higher, you can issue more stop. you mentioned that ensco at 9 and a quarter, but remember you're issuing stock at half the price a year ago, that's a road to ruin eventually. everybody keeps talking about more m&a, but this thought of political risk, i don't see how lots of deals go through the obama white house. maybe after november you'll see m&a. not before that. at current prices there's nothing really cheap, the xop chrks is the oil and production etf everybody watches is up
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about 8%. that's handily outperforming the s&p 500 right now. it's only up about 2%. and everybody's modeling 2017 numbers. nobody's even using 2016. the p/e ratios are crazy in 2016. everybody's assuming oil's going to be $60 in 2017 and they got the numbers more in line with historical averages. we have the same problem with industrials. this week we turn from the banks towards industrials. i love when this happens because we'll get illinois tool works, textron and general electric and honeywell. they might have the chance of hitting new highs. but the positives right now are the lower dollar. that's definitely -- a big, big tailwind for the market overall. and let's worry about a u.s. and global recession. the negatives right now i think is very low at top and bottom line growth we're still talking 2% or 3%. not a lot there for a lot of these stocks. remember, they've already had those tailwind for lower fx and
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already had a nice move on the upside. remember they're not cheap here, 16 or 17 times forward earnings if you look at some of the negatives overall for the industrials right now here. and we've had a significant rally. so the xli is up 6%. that's the industrial one overall. if you look at the industrials here honhoneywell, caterpillar, illinois tool works, all strong. the ipo market continuing to do well after the positive bats rally ipo on friday. red rock resorts big casino operator, they're pricing 20 million shares 18 to 21, that will be next week and follows on several big ones following this week including mgm. guys, back to you. >> thanks, bob. i'm going to keep an eye on the mgm read. important for that company. let's head to the bond pits. rick santelli joins us from the cme group in chicago. rick. >> good morning, david. you know, central bank meeting's coming up. in particular markets may be focusing on the ecb meeting
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later in the week. and of course all the talk around the water coolers about doha and its failures, but at this point in time if you're looking at rates they really have been quite steady and quite a tight range. look at a one day of tens it looks like it's elevated until you pair it up with friday's action. and a year-to-date chart there's only one thing that you can truly look at and say, aha, and that is the double bottom holding in the mid 160s. and that is significant. we can't seem to get much above 180 on a closing yield basis, but then again much of the marketplace may be concentrated on what mario draghi's next performance may be. and many in the market believe not much of a new performance will come on wednesday. that could have a big effect. if we look at the yield curve particularly in the u.s. tens minus twos, it used to give us a glimpse into a lot of various aspects not the least of which what the next fed move might be. we can debate whether these
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signals mean anything anymore, but one thing for sure time line on the twos, hard to draw any conclusion from that activity of late. one week of bunds, we're close to mid teens, but it is not moving away. but many believe there's a lot of longs in this market looking for more negativity on the rate side. ten-year jgbs, look at this chart year-to-date. you know, still continuing to hover around minus 11, not going anywhere. volumes, trade by appointment but the market still seems to be rejecting negative rates. one week a dollar/yen look at the balance sheet. we can see it's back down to that 1.08 handle. that's weakness on the dollar. david, back to you. >> that's been the key. rick santelli, thank you. oil off the lows. let's get a look from jackie
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deangless. >> that's right. we did see a session low of $37.61, but now just trading under that $39 level. did this market get ahead of itself, ahead of this potential deal? yes, probably it did. obviously there were a lot of reasons that a deal couldn't get done. but there was the risk that you would see a surprise and that's why we were over $40 a barrel. but a lot of traders are still saying expect to be range bound here. they were saying this last week as well. the downside worst case scenario maybe $35 a barrel. if something else happens, the upside best case still probably 45 at this point. what we do know absent producer deal is that we still have a supply glut on our hands. so people are going to be focusing on the fundamentals as they probably should when it comes to the oil story. summer demand is certainly going to help a little bit, but it's not enough to clear out this glut. still some hope though, remember we have a june opec meeting on the table and i think that's what people are going to start to focus on. did these producers set the ground work for something to happen there? could the iranians come around
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at that point? back to you. >> thank you very much, jackie deangelis. >> down, i don't know what's keeping it up here. >> another 1.5%, down. >> yeah. odds favorite down. >> al ler gan not down ten, but it is early. >> it is early. early for newell rubber maid jordan, we're going to talk to michael polk. "squawk on the street" coming right back. i'm in vests and as a vested investor in vests, i invest with e*trade, where investors can investigate and invest in vests... or not in vests.
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that's why i'm here. can you... i can offer advice from the accumulated knowledge of other educators... that's wonderful but... i can tailor a curriculum for each student by cross-referencing aptitude, development, geography... sorry to interrupt. but i just have one question: how do i keep them quiet? (pause) watson? there is no known solution. trolling for a gig with can't blame you. it's a drone you control with your brain, which controls your thumbs, which control this joystick. no, i'm actually over at the ge booth. we're creating the operating system for industry. it's called predix. it's gonna change the way the world works. ok, i'm telling my brain to tell the drone to get you a copy of my resume. umm, maybe keep your hands on the controller. look out!! ohhhhhhhhhh... you know what, i'm just gonna email it to you. yeah that's probably safer. ok, cool. [so i use quickbooks and run mye entire business from the cloud.
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youto get the help you'refar looking for. that's why at xfinity we're opening up more stores closer to you. where you can use all of our latest products and technology. and find out how to get the most out of your service. so when you get home, all you have to do is enjoy it. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. all right. let's get to it. time for stop trading with jim. >> yeah, i think that people have to focus on that ensco like i mentioned. remember, 57 million shares done at 9 and a quarter on friday, we
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have opec meeting there is really no opec meeting with russia, it goes badly and look how that stock does. again, oil is good for that one day. and that's all. the fact that this stock is doing quite well and therefore the banks are doing quite well because they've done 76 deals tells me don't be as negative as you'd like to be. and watch the turn in the banks. they are so strong today because people are taking a closer look at how they did and they're liking the quarters and recognizing that the bank stocks are very inexpensive. >> good point book value to tangible book have to be realized one way or the other. >> i mean, look, you talk -- >> you also point out. i want to come back. the 76 offerings which i would not have expected -- and i've made the correlation to the past in the stress test allow banks to go out and issue exquity. it's been a similar positive here. almost all the stocks you're looking at on that list are up. >> 42% on the hess deal, 82 on the oasis deal.
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all the midstreams are up one, marathon up 70%. you know, people have to focus on these incredible gains. >> of course next time another company wants to do it. >> i mean ensco is saying come bring a deal. you do after market selling bring 100 shares. >> all right. before we go, what's on "mad" tonight? >> i'm doing destruction of the mall. the mall has gone away in four months time. >> i got to check that out. >> you might want to check that out. >> i'm going to check that out. >> happy anniversary to lisa. she doesn't watch the show but i throw it in that gratuitously unless one of her friends watch. they don't watch either. it is incredible vast waste land of everybody that doesn't watch the show, sometimes it breaks my heart. but happy anniversary. >> don't let it. >> don't it get to me?
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>> yes. we have john harwood and vice president biden coming up.
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good morning. welcome back to "squawk on the street." i'm sarah eisen with -- let's show you where markets stand coming off of a strong week for stocks. the dow is higher, not much. about 17 points. s&p 500 just flipped into positive territory. the nasdaq remains negative. but really fractional moves here on the major indices. crude remains the focus. wti down a little more than 3%. >> so no deal from the big oil meeting in doha over the weekend. oil as you saw there losing $40 a barrel. our own brian sullivan is not only live in doha, he's braving the sun. brian, over to you. >> all right, simon, thank you very much. yeah, the 18 nations that were accounted for here, 11 of the 13 opec members and seven other major oil producing nations including russia simply could not get a deal done. there was a lot of optimism in the morning. in fact, some talk, hey, it's
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going to be a quick and easy meeting, we'll be out by lunch, we'll have our oil freeze deal and that's that. nothing could have been further from the truth. 12 hours later no deal was reached. just minutes after the deal adjourned we sat down for the first interview with the energy minister for the nation of nigeria. and i asked him what happened. why didn't we get a deal? here's what he said, the deal changed from the previous night to the morning. listen. >> it was initial draft everybody had sort of seen and came to the meeting of the business of that draft. and there was little consensus around that. and this one there was a different draft. which tended to create a link to iran's compliance, you know, with the freeze -- >> and though iran was not here physically, they were really the story yesterday. it was saudi arabia, russia and
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iran being present. we continued our interview with the nigerian energy minister. and it wasn't just that the deal changed. let's go further into that link because many of the nations he said simply could not get on board with tying an output cut to iran. listen. >> in the absence of iran, unless iran could be obligated to go then it wasn't going to be effective. so we went back and forth. but it was clear that unless you had everybody in the ballpark, it doesn't matter agree. >> so, again, guys, not here physically. in fact, iran and libya the only two opec members who are not here, but their speck tor hung large over the meeting in fact casting the entire meeting out. because as you heard him say, if the rest of the group agreed to some output freeze deal, but they couldn't guarantee that iran would go forward with any deal or adhere to those cuts or at least a freeze, they felt that the deal would not be worth the paper that it was printed
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on. and indeed no paper was signed. the deal ended in no meeting. and we are seeing the price of oil fall today. back to you. >> yes, brian sullivan, thank you very much. live in doha for us today. for more analysis on what this means for the price of ill, let's bring in rbc capital markets global head of commodities strategy and the middle east expert, we should say. so, brian laid out some of the color behind why the deal fell apart. we should note that you actually predicted there would be no deal. >> yes. because the iranians were very clear they were not going to participate. and saudi arabia shifted their position the last couple of weeks. couple weeks ago the saudis said we're fine with the deal even if it doesn't involve iran. then saudi's deputy crown prince who really runs the entire country said, no, i'm not pulling back production if iran doesn't do it. so all of us have to freeze together. so unless iran changes their position or saudi change their position there was never going to be a deal. >> there's a long running history here between saudi arabia and iran and this rivalry. where does that put us this
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morning? because iran was never part of these negotiations. >> right. and i think what was so interesting was you had key countries in the gulf cooperation council, allies of saudi arabia, qatar, kuwait, uae all prepared to do the deal without iran. it was saudi who was the hold out. and saudi and iran have broken off diplomatic relations. they were fighting two proxy wars in yemen and syria. i think that was a cloud that hung over all the negotiations. you just can't get these two adversaries together. >> the other major event we should mention is the kuwaiti oil producer strike. >> yes. >> which is taking a lot of oil offline. wti is down 3%, a lot of people writing this morning it would be down a lot worse if not for that kuwait strike. >> we have 2 million kuwaiti barrels off the market right now. you have to watch a duration of this strike, but if it goes on that supply overhang is right out of the market. and one of the things we're really starting to see is as these producer countries face, we're seeing production come
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down. >> how long do you think this could go on for? >> well, my friends who cover kuwait say expectation is two weeks, but we'll know in the next couple days whether it becomes more generalized. populations do not like austerity measures. so the question is does it become a bigger revolt against these cutbacks. >> what about iran itself? could you just dig down on that for us? i mean, how able -- what is the state of the infrastructure in iran? how are they producing politically can they do deals like this? i mean there's more to their absence other than the fact the minister didn't want to go and didn't want to show up, the previous minister resigned, didn't he? >> i think the supreme minister is getting back to presanctions level, so we're not going to talk about cutting or freezing sanctions then we're back to 4 million barrels. now, the iranians can probably add 500,000 or 600,000 barrels of new production. but then they cap out and will need a new wave of investment. and the question is do energy companies want to invest in iran
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right now? there's still issues about residual sanctions and contract terms. >> does any of this change your view where production and prices are headed this year? >> we think if we just take a politically neutral view and just a natural rebalancing, you'll hit 50 by q-4 this year. but we're watching slightest disruptions because you start to see more crude coming off the market, that's a faster path to 50. >> helima, thank you. >> thank you. >> helima croft. >> i want to go to capitol hill, valeant was in danger potentially of being held in contempt for not appearing, eamon. >> he is on the hill and he will be testifying. we're told that was scheduled to start at 10:00 a.m. and our crew caught his entrance up on capitol hill, asked him a
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couple of questions as he went in. here's what he had to say. >> i'm with nbc, can we talk to you for just a moment, sir? are you confident about following the 10k this month? so that's michael pearson heading into the senate dirksen building where the deposition will take place this morning. we'll try to get more information about what he had to say, what the committee wanted to hear from him. as you guys know so much focus now on this question of pharmaceutical companies raising drug prices after they acquire new drugs and new products. senate aging committee wants some answers. >> that will be the guy to give them. thank you very much. let's check where we are in the markets at the moment. slightly higher overall. decent start to the week despite the fact of course oil is falling for the reasons we just discussed. thomas lee joins us from fund strakt global advisers, raymond james chief economist also here.
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scott, let's talk about oil then and gasoline prices and what it means for the economy. we were already going to start the summer driving season with gas prices at a 12-year low, presumably we stick out as things stand at the moment. >> well, normally gas prices are going to rise in the spring. they're still going to remain riel stifly low and still well below where they were a year ago. that's very helpful for the consumer, but we really haven't seen quite the boost that we might have expected in previous decades from the drop in oil. that may show up over time, but we think consumers are really stretched in a lot of different ways, been paying higher rents for example, higher health care costs, higher medical costs, out of pocket, those kind of things. we're still comfortable consumer will carry the day here. we have a lot of worries about what's going on with the rest of the world, but i think the fundamentals of the consumer sector are still pretty sound. >> tom, as far as earning season
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is concerned, you believe we're at an inflection point, people start to see earnings turn up in multinationals, financials and energy. does this news today that we have in the oil sector itself, does that change anything for you? >> no. in fact, i think it reinforces our thinking. you know, we've been arguing that supply/demand for oil doesn't explain oil bottoms. that really it's all about positioning and a way to gauge positioning is to look at how much extreme really hit an almost all-time high in february. energy multinationals, those three cohorts really represent the direction of where earnings will be. >> it's really interesting, tom, you haven't joined us for a while, i don't recall you joining us for a while. you were one of the big bulls out and about last year during 2015 suggesting the stock market could make great gains. it's interesting to see as your clients as you build the business you say the plurality of our clients falls into the
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spectrum of cautious to outright bearish. why is that? >> well, simon, it's been a very tough period. since may of last year we've had, you know, essentially what feels like a recession. and i think for all intents and purposes a bear market one client told us this was the worst patch in 30 years he's experienced. so i can see why it's left a lot of clients kind of confused and bearish, but look at high yield. high yield's having a great year. stocks always follow high yield. the year after high yield is a negative return year which is 2015, the s&p's almost always up double digits. so at the end of the day if someone's bearish, it's because they're trying to tell the market what to do. i think if you really look at what the market's telling us, i think it's telling us you need to be early cycle. >> how far do you think it could run, tom? >> again, i'll dismiss people who say the stock market is
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expensive because bull markets peak at 25 times. and we're roughly 15 times forward. so i wouldn't say it's out of the question to say the s&p's up double digits this year. >> scott, how do you square that view with the fact that we're not even set to see any growth, maybe 0.1% growth in the first quarter. and there are increasing questions in places of the economy like industrial production, factory orders that remain weak. >> well, certainly the first quarter is relatively soft. we saw that in some of the consumer spending numbers, industrial production declining obviously related to the energy exploration issue. we've had pretty soft first quarter numbers the last six years. they've been a lot weaker than average. and then you see a rebound. early indications we'll see a pickup in growth in the second quarter and beyond. but it may not be especially strong. one of the key issues not just in the u.s. and worldwide is this slowdown in productivity. and it's really unclear exactly
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what's going on, but you may still get the labor improving, the job market very strong, but the gdp numbers still relatively soft. in fact, the federal reserve now looks at 2% as being the long-term bogey. >> right. >> and as you look out over the next ten years, labor growth is going to be probably half a percent per year. so if productivity is one and a half, that gets you to 2%, but if productivity growth is only half a percent to a year that gives you 1%. that's a bit concern. >> of course. i mean, more immediately citi is amongst those that today have downgraded the gdp estimate 0.9% for the first quarter, 1.7% overall to the point that you're making. they're talking about political events both at home and abroad being clearly evident at risks to the downside. they also talk about one rate rise from the fed. they think now in september that may be delayed to december. where would you be on that?
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>> i think so. particularly if you look at the numbers last week with the softer inflation numbers, we saw correlation picking up in january and february, very mild in march, so looks like still relatively soft trend. so no real pressure, i think, from the hawks to raise rates. they've got plenty of time. this is going to be very gradual. in fact, more gradually gradual as you look ahead. when you look at the market in the first part of the year, it was really dominated by fear for the first six weeks. a lot of those fears have subsided but not necessarily gone away completely. >> we'll leave it there. have a great week. scott brown joins us from raymond james and thomas lee. coming up after the break, the new york primary is tomorrow. will donald trump sweep the empire state? ed conrad, former romney adviser
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and find out how to get the most out of your service. so when you get home, all you have to do is enjoy it. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. gop front-runner donald trump clearly looking for a big win when voters in new york head for the polls tomorrow. joining us now here at post nine, former romney campaign contributor and former bane capital founding partner ed conrad. good morning. >> good morning. >> thank you very much for coming in. >> sure. >> nbc's political unit
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suggesting tomorrow trump could take 85 of the 95 delegates. and then he would be very close, about 396 points from an uncontested convention. how should business feel about that? >> i think there's a slim probability the republicans are going to be elected president, so i think the uncertainty in the election's pretty much been taken out. it looks like it will be hillary clinton and a divided congress, according to online betting. and so i think there's a slim chance that we're going to deviate from that. so from a market perspective i think the market's fairly calm about what the result will be. >> the "the wall street journal" poll over the weekend suggested that around two-thirds of the party or two-thirds of gop members if there were to be a contested convention would like the nominee that has the most delegates at the start to win. in other words, donald trump. >> well, sure, i think it's going to look odd if donald trump gets very close to the number to the majority and doesn't win it. it will look like it was taken away from him. i think most people think there's probably not that much
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difference between trump and cruz in terms of probability of winning. i think that what you'd find is that most party elders, if that's the best way to put it, would probably rather lose with cruz as opposed to lose with trump, because i think trump will be more disruptive to the gop party. >> the most outspoken critic of trump from within the gop of course is romney. >> yes. >> what has he said to you about whether he's in play here or not? >> i don't think he thinks that he's in play. i think he's always believed that the delegates in the convention are more conservative than republicans are on average. and so they're more likely to swing towards a candidate like ted cruz than they would be to someone more moderate like mitt romney. so i think he thinks there's a slim chance that could happen at the convention. >> there are some headlines from the chinese finance minister calling trump an irrational tyke saying the u.s., quote, wouldn't be entitled to world leadership if he were to become president. how much of this is a threat? the global reaction to the
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potential president trump? >> well, i think he's been very tough on trade. obviously the chinese aren't going to like that because they run huge trade deficits with the united states. and trade has been very advantageous to them. i'm not surprised they're pushing back on trump. i think there's a slim chance trump could actually implement the kind of things he's talking about because they would never get through congress and he would need congressional support to do it. so i do think trump -- i'd say this, he has an important message which is resonating with voters. but he is a bad messenger in terms of delivering that message. it's a very volatile message that needs to be delivered careful carefully. he does not deliver that with any tact or care or minimizing the risk. so i think he unnecessarily disrupts world leaders in the market despite the fact that he has an important economic point to make. >> so what should business do here? what is happening behind the
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scenes? >> well, i think you have to look at what could the president do in a divided congress. so things that they could do, they can clamp down on regulation, for example. i think you should expect just a continuation in the epa, which will effect business. supreme court looks like it's going to go liberal. i would say it's going that way whether it was trump or hillary. i think it would be very different under cruz, but i think there's a slim chance cruz would be elected. another thing to look at would be the probability that you cut a spending deal, increase the social spending for an increase in military spending, the neo -- on the conservative side eager to cut that deal. hillary would cut that deal because she's more pro military than some of the other candidates. trump probably would cut that deal. cruz would never cut that deal. i think there's a slim chance he'll be in that position. >> there are voices within the conservative movement who think if trump does win the nomination and somebody from within the conservative side should stand as a third party, if only to show that you're active as a group of people and that perhaps the implications for capitol
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hill and voting in the senate isn't quite as dire. if that situation arose and trump were to get the nomination, would you advise romney to run as a third candidate? >> i think it would damage romney's position as an elder statesman. >> does that matter if it's in the national interest or in the interest of party? >> i do think mitt has a strong -- feels a strong moral responsibility. and that is what drove him to run for president. and i do think that he believes that trump would be damaging to the united states -- >> do you think he would vote for hillary clthen if trump is e nominee? >> i think he'd have a very, very tough time voting for hillary because he is underneath it all a conservative that believes the success of business and free markets are what is beneficial to the middle and working class of america. so i do think he would have a very difficult time pulling that lever. as i say i'm glad i'm in new york and my vote doesn't count. >> it does count. >> in the primary but not in the general election where the democrats are going to win by a mile. but i'd have a hard time myself
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pulling the lever for hillary. despite the fact that even though -- >> but you might, is that what you're saying? >> well, i'd certainly consider it, yes, because i think trump as a leader has proven to be -- an online betting 75% probability of winning. that was two weeks ago. in a matter of a week he knocked his probability of winning from 75% down to 50%. what kind of person has such a lack of internal control that they can't say the right things to maintain their position at 75%? you have to be -- everybody has to be somewhat concerned about that i would think. >> we could talk for hours, but we've run out of time. good to see you, sir. thank you for spending the time. ed conard, founding partner of bane capital. >> after the break, the ceo of newell rubbermaid michael polk is here at post nine as the deal closes today. it's reliable up. and multi-layered security.
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it's and as fans of ourselawesome tv! but it is going to take a total team effort to get through all these shows! now are you with me? three, two, one... watchathon! big is back. xfinity watchathon week now until april 24. the greatest collection of shows free with xfinity on demand. check out shares of consumer giant newell brands. that is the new name the consumer goods giant newell rubbermaid completing its
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acquisition on friday. shares up about 1.5% today. a $16 billion combined portfolio including brands like sharpie, coleman, crock pot. joining us at post nine fresh from ringing the opening bell is ceo mike polk. as companies shrinking to grow, make the case why bigger is better. >> sure. in our case scale is growth. it will double our presence in key strategic retailers, give us access to new markets in an accelerated way. and also by bringing the best of both companies' capabilities together, we have the opportunity to unlock upside for each of these great brands that you just mentioned. >> there's also the potential for cost synergies, which companies like to hear about. can you dive deeper into where
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that's going to come from? >> so the cost work we'll do both with the synergies and the work we have left to do in the legacy newell rubbermaid business is the fuel for growth. this work unlocks the fire power in the business that gives us the opportunity to invest in new capabilities and also support behind the brands. on the newell rubbermaid side we've doubled by working on our cost structure while simultaneously improving the margin structure of the business. >> i was looking back at the stock price since you announced the deal last year, it's been a bumpy ride. what investor concerns are you hearing and how are you answering that? >> the key concern is about whether this coming together whether there's any integration risk. the execution risk and the integration, because it is a big and broad portfolio. we've assembled a team of world class leaders, people that have lots of experience like myself in integrating companies. and i think that work will not be easy, but it will come through great leadership and through terrific execution on the part of the business unit
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leaders in the company. so we're quite confident that we'll be able to execute that work. and of course all of that work is designed to unlock the flexibility in our business to invest for growth. >> how should you be judged then? i mean, you bring up integration is always a concern. >> yep. >> and it should be in deals like this because it can be the number one reason for failure. how should we judge that you're succeeding? >> we should be judged on the growth trajectory in our business and the delivery of our commitments. so we've committed to deliver 500 million in synergies and another 300 million on the newell rubbermaid side. we should be judged on the health of the company, the employee engagement that comes after the integration's done. the vie bran si of our brands. we should be judged on a number of softer dimensions as well as the hard metrics. but it will be growth, earnings delivery, accretion delivery, cash delivery, paying down the debt. all of those hard metrics. >> what about the underperforming brands?
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how are you thinking about what choices you're going to make in terms of keeping some and getting rid of others? >> my energy's going to be focused on plussing up the w winning businesses. we have high businesses in yankee candle, high growth, high margin business, legacy writing portfolio, terrific opportunity in appliances and emerging marke markets. this portfolio is best positioned to win in households not just in the u.s. but around the world. so it's a very, very exciting set of opportunities. our focus will be on unlocking that growth potential. >> you always have a good insight into the u.s. consumer. >> sure. >> so where do things stand right now? what's your sense? >> look, i know there's a lot of concern out there and some of the metrics would suggest there are some underlying confidence issues in our consumers, but we're not seeing that. we've delivered 6.2% growth on newell rubbermaid, 5-5 on the jarden last year. among consumer goods companies the combination both companies entered the combination with great momentum and strength.
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those are pretty strong leading numbers particularly given the u.s. footprint of the combined company 70% the revenue is u.s. based. so despite modest gdp growth, both businesses are performing well. we don't see any indications of a slowdown in sellout, which is going to be the best measure of consumer involvement. >> all right. we'll leave it there on that optimistic note. >> great. >> mike polk, good to see you. the ceo of now newell brands. let's send it to sue herera with an update. >> good morning, here's what's happening at this hour. ecuador's president says 350 people have been killed so far as a result of the devastating earthquake that hit that country over the weekend. another 2,500 have been injured. much of the damage has been reported in port -- defense secretary ash carter arriving in baghdad to talk with iraqi leaders about beefing up iraqi forces working to retake the
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city of mosul. minutes ago he said the u.s. will send 200 more troops and apache helicopters to help in the fight against isis. the lower house in brazil's congress voting to impeach the president. a major blow to the long embattled leader. the measure now heads to the senate. amber heard, wife of actor johnny depp pleading guilty to providing false documents. a charge carries a maximum penalty of up to a year in jail and a fine of more than $7,500. we'll keep you posted on that one. that is the cnbc news update this hour. simon, back down to you. thank you very much, sue. carnival is threatening to postpone its historic cruise to cuba from miami. more on that coming up. and morgan stanley's profit falling 53% in the first quarter, trading revenue, fixed income in decline, what you need to know from that report straight ahead on cnbc. to warn of danger enough from virtually anywhere.
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morgan stanley reporting first quarter earnings that beat analyst expectations. the shares, let's call it flat on the day right now. they did see weakness of course at the pharma and trading revenue, tough markets overall of course in the first two months of the year. ubs director of equity research joins us now with more. brandon, i can't keep help but come back to that 6.2% return on equity and wonder how that's sustainable at all in this
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industry. >> yeah, no, it was a pretty weak return on equity. and of course the environment is pretty difficult. probably underearning at the moment especially given the fact it takes a while to reduce the equity base when they exit some of those businesses. should be a capital tailwind over the next several years, it will take time to unlock that and shrink the equity base to allow for higher. >> how do you approach a name like this? i mean, we're talking about tangible book value at over $30 a share. you know, m&a was good for them. equity trading was good. they had this huge global wealth management franchise, but at the same time they're looking at these big declines in fixed income currency and commodities. >> right. i mean, those other points that you make are really fair. and the reason if you want to own morgan stanley equities franchise is fantastic in wealth management and those two businesses work really well together. the major question is what's the
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new run rate for revenue for fick. what we heard today out of the conference call in the neighborhood of $4 billion revenue is the footprint that they're looking at in fick. if they can deliver on that, or even close to that, i think that you could see some substantial upside to earnings expectations especially if we can see the cost base come down. and they did a really, really good job of controlling cost this last quarter. >> right, if history is any guide their ability to actually succeed in fick is mixed at best, isn't it, brennan? >> yeah, fick has been a real problem here around the company. and i think that's what caused them to rethink things. i think there was a hope that we were dealing with some depressed levels and that things would come back. and what we've seen here over the last let's call it six months roughly is an elimination of that hope and a need to rejigger and reposition that
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business rather substantially. >> so they keep reducing expenses and comp, potentially. capital keeps building. but let's assume that they never quite get it together and fixed income currency and commodities what do you do with the stock? >> well, i think the idea we're seeing expenses get cut out of fick and them decide they want to reposition and make the footprint smaller, make it more of an electronic approach, i think that's a recognition to change the strategy in fick and the idea that you can't just wait for this to come back. and so to me when you think about right now we're in a transition period as they begin to adjust that strategy, reposition the franchise and then build it around the wealth management and equities business and shrink the capital out of fick. when you get that at the exit multiple there around probably next year, early next year, we'll have a good visibility, good line of sight into what that will be i think you'll have a higher return on equity profile. probably in the neighborhood of about 10%. and you're going to have a higher multiple given those
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lower capital intensity in that footprint of what's left. >> so you're supportive of the current strategy and that move as you say to sort of continue to kind of shrink it and keep its universe -- or get its universe even smaller. >> almost addition through subtraction. given the fact i estimate return on equity in that fick business is about 3%. and it's a big portion of capital. hard to have the whole firm roes look good when you're dealing with that kind of anchor. >> brennan, we appreciate your insights. thanks for joining us. >> thank you. >> brennan hawken, director of equities research. earnings moves we're watching this morning, pepsi. the company this morning beating wall street estimates on the bottom line thanks to stronger north american results for pepsi and frito-lay. but that strong u.s. dollar continues to eat into global sales. few highlights to mention and the report margins did exceed
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forecasts thanks to lower costs, organic revenue which is a good clean measure of sales rising 3.5%, and sales at convenience stores continue to shine thanks in part to cheaper gas prices, but it is those global pressures that are hurting. we talked to hugh johnston, the cfo of pepsi, about the mixed international picture right now. listen. >> north america, the consumer seems to continue to do quite well for us. and i think for some of their companies as well. i think the fact that we sell everyday pleasures makes consumers come to our category. the bellwether for me is convenience stores. and the convenience store business broadly was up about 5%. we gained a little bit of share in that environment. latin america's almost a tale of two cities. mexico continues to perform very well. brazil obviously facing its challenges. and venezuela we deconsolidated out of pepsico's operations. so that's not in our numbers going forward. from the standpoint of the rest of the world, a hot spot obviously eastern europe,
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russian economy continues to be challenged. china relatively stable, india's doing quite well. and western europe is doing okay, but okay in a relatively low growth environment. so the net of it is outside the u.s. the world is certainly more challenging. our developing and emerging markets business was up 7%, which is a good solid number by any stretch -- by any metric that you would use. but we're cautious on outside the u.s. because the world is such a volatile place. >> we talk a lot about the pressure on soda, it's in the headlines nearly daily, whether it's studies or taxes. pepsi emphasizing in this report soda now only makes up less than 25% of pepsi's total sales and colas in terms of numbers. overall flat sales in america, 2% volume growth worth noting because coca-cola is out with earnings on wednesday, that of course is the market leader in soda. there's been a lot of bullishness surrounding this
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company's plans regarding cost cuts and the dollar stopped strengthening. both coke and pepsi trading near record highs. their defensive stocks that pay out dividends and they're copting to manage financial structure in a sort of slow growth environment when it comes to packaged food and beverages. >> okay. let's check where we are with oil. big story of the day of course was the failure of that meeting in doha to come to any agreement on putting some pressure on supply moving forward. actually only now down as you can see climb back only down now $1.10. obviously a lot of that has to do with the saudi-iran politics which goes back decades. more on that ahead in the show. and coming up, the co-founder of palantir and co-founding partner joe lonsdale will join us live.
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once driven, there's no going back. carnival is threatening to postpone its historic cruise to cuba two weeks from today unless havana allows people to board in havana to travel on the vessel. a decades old military decree forbids those born on the island for traveling to and from the country by sea, only by air. following protests carnival is today unilaterally changing its booking system to accept applications from all travelers regardless of their country of origin and before the cuban government presumably changes the rules. in a letter to employees this morning, carnival's ceo arnold donald writes, as we continue our discussions with cuba and anticipation of fathom travelers being on equal footing with those traveling by air we are accepting bookings from all travelers including cuban born nationals. however, if cuba's decision is delayed beyond may 1, we will
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delay the start of our sailings. secretary of state john kerry of course weighted into the controversy last week saying the u.s. government would not condone policy of discrimination against cuban-americans. all right. it is time to go to the cme group. rick santelli has the santelli exchange. >> good morning, thank you, sarah. i'm a baseball fan. baseball has minor league, so players can kind of conform and make their case to be in the big show. so there's a lot of different jobs in the country and in the world where you spend apprentice periods to learn. but one thing i didn't know that's come out since merrick garland that there is a -- when there's a vacancy on the supreme court. so on the scotus blog, our guest wrote, according to the president judges and the desire
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for elevation to the supreme court. ryan, why don't you explain this dynamic that happens during vacancy periods with what you deem contender judges? >> sure. so we looked at judges who stand a reasonably good chance of being elevated to the supreme court. so if we look historically we've seen at least since the eisenhower administration that presidents have looked to sitting circuit court judges to try to elevate them. and these circuit court judges know that they're potentially under consideration, right? so what we wanted to do was look at those who are good contenders potentially and see if they change their behavior when the supreme court has a vacancy. and it turns out they do change their behavior pretty dramatically. >> now, ryan, is this a good thing, a bad thing or what does anyone expect of course is going to happen? it was shocking to me actually. >> yeah. no, it really is shocking. if you take a look for example at their proclivity to dissent,
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it's about 120% increase. the thing is they're doing this just to try to signal to the president, you know, you can rely on me. you know, you should pick me. and of course you should note that these are people who have already established their bona fides, right? they've already made the president's short list. in terms of whether it's a good or a bad thing, you know, i'm not going to comment on that other than to say it is a thing. you know, there are different ways you could look at this. on the one hand, you know, the rule of law and legal doctrine could fluctuate as a consequence of people trying to get elevated. on the other hand this could provoke them maybe to engage in maybe more democratic behavior. it really depends on your perspective. >> all right. i guess my final question in our final minute, ryan, is there's so many big issues that the country is nervous about with a 4-4 basically liberal conservative set up on the supreme court now. and your final answer, do we actually know more or less when this modification occurs for
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these vacancy contenders? >> well, do we know more or less about what the direction of the decision? >> yes, about the direction of their philosophy, yes. >> yeah. well, i would be very skeptical if i were looking at their behavior during these vacancy periods. it's them trying to engage in sort of hyper-partisan type behavior and i would discount their voting bee i hahavior. i would look at the track record they had and i would look at some of the behavior they have got during the vacancy periods but i would certainly discount it. >> ryan, thank you so much for what i consider a very revealing set of blog posts. thanks for being my guest today. >> very interesting. rick santelli, thank you very much. when we come back, john harwood sat down with vice president joe biden inside an amtrak car. what did they discuss? every insurance policy
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closing in on dow 18,000 as you can see, just now 42 points away. the last time we crossed that level was july 21. meantime, john harwood sat
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down with vice president joe biden in a rare interview on an amtrak. john is in d.c. with a sneak peek. welcome to the program. >> reporter: good morning. bernie sanders needs a political hail mary pass in the new york primary tomorrow. he's down double digits. he had a very rare political opportunity late last week. he went to the vatican to speak about his message and talk to the pope. when i sat down with vice president biden i asked him about just what the significance was of that trip. >> bernie is at the vatican today getting a talk on his message. should your fellow catholics look at that and say -- see that as a sign that the pope thinks he's on the side of the angels in this race? >> no. i know the pope as well as anybody. i'm probably the only guy that met with him three times. i was there when he was -- when he was elevated. i hofted him here. he spent a lot of personal time,
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an hour and a half with my family when my son beau died. i don't think that can be read that way at all. i was raised in a tradition of catholic social doctrine that is it's legitimate to look out for yourself but never at the direct expense of somebody else. it's legitimate to do well but never at the expense of not looking what's behind you. so i just think that bernie making the trip is a good thing, but to suggest that the pope would embrace bernie's policies, i don't think that's the case. i don't know. i doubt it very much. >> reporter: the pope himself echoed what joe biden said on the plane as he traveled back from greece. he said the meeting with bernie sanders was a common courtesy. to anybody who thought that was endorsement, they ought to see a psychiatrist. we will have all the rest of my interview with joe biden's
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speak-easy tomorrow beginning on "squawk box" and all day long. >> very quickly, i know you will play more sound, i remember when joe biden said he would not run for president at the end of last year. he did say that he was not going to remain silent. i'm just curious whether he made any remarks about some of the issues and some of the presidential candidates in this race. >> reporter: he absolutely did. he's not remaining silent. we talked about everything from the 1994 crime bill which he wrote, which has become a flash point in the race, to the current stalemate over the supreme court nomination of merrick garland rick santelli was talking about, then he talked about bernie's message and hillary clinton. we'll have it all tomorrow. >> looking forward to it. john harwood in washington. coming up, the interview you don't want to miss. we'll be right back. it's more than the cloud. it's security -
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we believe in the power of active management. anagement, we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management. good morning. it is 8:00 a.m. at yahoo! headquarters in california. 11:00 a.m. here on wall street. "squawk alley" is live.
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good monday morning. thanks for joining us here on "squawk alley." carl is out today. john ford is live in miami, florida. he will join us a little later on. with me at post nine for the hour, simon, good morning to you. also the co-founder of palantir, joe lonsdale. thanks for coming in this morning. appreciate it. first up, markets are mixed, dow just entered positive territory. big week for tech earnings with ibm and netflix set to report after the bell today. it's sure to be an interesting earnings call for


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