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tv   Squawk on the Street  CNBC  April 25, 2016 9:00am-11:01am EDT

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i think they need a better name than 1 for 38. >> you could do 3%, 3% kasich or something if you wanted to. >> i don't know. i think it's not enough. i think needs a different name. >> trump really loves deals and hates them when other people make them. that's what we're seeing. >> ian bremmer, thank you very much for joining us. we'll see you tomorrow. "squawk on the street" begins now. good monday morning. welcome to "squawk on the street." jim cramer, di vang di vang and i'm carl quintanilla. big week ahead. busiest of fed meeting, primaries, gdp, premarket soft for the moment. oil is steady as the saudis disclose plans to take their state oil giant public. a road map begins with saudi arabia laying out its plan for economic reform and the global
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economies they're watching closely. we'll get you the latest from the crown prince and go live to saudi arabia. perrigo ceo joe papa is out, he's heading to valeant. and surprising sales number from the apple watch on its first birthday. we'll break those down and get a preview of apple's earnings tomorrow. the three major indices in the green for the month the dow leading the pack up. saudi arabia's cabinet approved a plan laying out economic reform priorities for the next decade and a half aiming to reduce the country's reliance on oil, a partial ipo of the state-owned oil company is part of that plan. the saudi deputy crown prince expects to be valued at more than $2 trillion. and then they argue by 2020, guys, country will not be as dependent on oil as it is today. >> i question the whole notion of dependence. because if you go over the
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slumberje quarter, talks about how they're really the only country that has swing capacity. no other country in the world has the ability to put out another 2 million barrels. so they may be dependent, but, boy, that's the kind of dependence i want. you know? wow. i wish we were all so dependent. >> i can't wait to read that s-4. >> the $2 trillion? >> yeah. i'd be curious to see how much they're going to divulge. might be the shortest s-4 you ever see. >> could be. >> we're saudi arabia. here. >> yeah, i don't think you're going to get -- how about governance? what's the governance over there? >> oh, it's going to be really strong. >> you've never seen governance like that. >> shareholder representation, is that what you're saying? >> i think there may be -- yeah, could be like the younger state. i read this deal i think fees, fees, fees. and you know what, the heck with disclosure. there's fees on the line. this could make everybody's quarter. so let's just join in, have no
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disclosure and make the quarter. that's what you think the bankers are saying or is that too cynical? >> no, that's exactly what will happen. none of the bankers are going to care about disclosure. >> no. >> i mean, you'll do what you have to do to meet the various filing requirements, i'm sure. >> right. >> but you'll have every single investment bank in town running after that thing like you've never seen them run. >> they'll have a board, annual meetings, things like that. >> yes. >> the crown prince on television over there and says the entire offer is about 5%, i think, of the holding company. and of course a series of subsidiaries below that. >> they can offer dividend. i mean, honestly, go back over their quarter you cannot believe versus what they say, i know they need to buy a lot more military, stuff, typically hardware from us. they have a bloated deficit
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because of the amazing social programs they have in terms of the cost. but they're rich. they are just so rich. and they control the price of oil. there was a piece in the "new york times" the other day said saudi arabia's strapped by the price of oil. they're setting the price of oil. if they're strapped, why don't they set a new price? they can 2013 million barrels a day. >> along with what we're able to take stock of in terms of earnings so far 167 s&p companies, 8 dow names, so far 80% beating on earnings per share, which is above what we thought certainly in the depths of the february lows. >> well, went over every major quarter last week. and there's a theme. the theme is firing people.
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trying to slim down. i think the jobless rates were incredible. lowest since '74. these people are getting hired somewhere. southwest and southeast housing is very strong, so people are being put to work there. but, wow, the level of layoffs at the major companies is rather extraordinary sfwl yeah, those thinking of halliburton delaying earnings to work out some of these issues. laid off q-1. >> norfolk southern, union pacific, these companies made their numbers, expenses down 13, what a quarter. >> intel, caterpillar. >> by the way today the journal had a piece on p&g and the 10 billion they're going to save and the question is how you get
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there because they haven't delineated it the way they had the last $10 billion saving program so to speak. that will result in potentially some jobs. >> caterpillar call was very good, talked about china being good. i went over that caterpillar call, at one point generally positive -- this is a quote from the call, europe is much more positive. even in france. they used that term, even in france. the market went down badly at 4:00 a.m. because there were some numbers out of germany saying the economy's weaker in april. no kidding, the dollar got weaker in april. and the dollar is so important on a head-to-head basis. and phillip's number disappointing. >> and microsoft, google, heading into facebook and apple this week. >> well, i think they've derisked facebook to some degree. i don't think facebook's going to be -- you know, it's very interesting there was a piece this morning by the sun king, bob peck over at suntrust
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talking about snapchat out of nowhere taking share. michael wolf, fantastic piece this morning in usa today, a must-read his thesis is tv is the new tv. but talking about the kind of ads that these guys get and how they're not the kind of ads, but google and facebook are getting the lion's share. seemed to be also a backhanded on twitter. >> there's a look. twitter's also reporting on tuesday. you can see along with apple. >> twitter and apple -- why does twitter report on a day when apple reports? >> remember, apple was going to report a different day but bill campbell pushed them to move it for a memorial service. >> i think that could be an interesting contrast twitter versus apple. not unlike last week your southwest airlines versus american and united. one point american's just saying, listen, we use mainframes -- mainframes? we can't change pricing. mainframes? >> what happened to the cloud? mainframes? >> you know what united put on jim whitehurst who used to be the ceo of delta who is the head
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of red hat which is uber cloud. >> yeah. >> uber cloud. >> but the american airlines and united conference calls were distinctly suboptimal. >> yes. let's move onto a fascinating story. of course it broke in part on friday, but it's been confirmed this morning. valeant saying it has named the former ceo of perrigo who resigned yesterday from that company, joe papa, as its new chairman and ceo. he'll succeed michael pearson, they say in early may. papa expected to join as i said in early may. at perrigo, the company's named john hendrickson to replace papa as ceo. they also interestingly approved the recommendation of the nominating governance committee to withdraw mr. mark cook's nomination for re-election to the board at the meeting. and they're separating the roles at perrigo of ceo and chairman and have elected lori -- sorry if i mispronounced your name to
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the chairman role. this is stunning for a number of reasons. not the least of which of course and i know you may have discussed in part on friday is mr. papa's decision to leave perrigo after that brutal fight to defend against mylan, which he successfully did so if you remember convincing his shareholders to actually take a big down trade as opposed to tendering into the mylan offer because the expect better times would be ahead. this is not the better times many expected and i think many of those fully expected mr. papa would be leading the charge -- >> leading, now he's leaving the charge. >> now you've also got, jim, a company that says its calendar year 2016 adjusted earnings per share will be between $8.20 and $8.60. they say the majority of this change in guidance over february 18th where they reported, where they gave us preliminary guidance is a result of a reduction in pricing
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expectations in their prescription segment due to industry and competitive pressures in the sector. >> yeah. this was a disaster this quarter. remember the bid for mylan was about -- there's a nice dispari disparity. not only that, but when i look at perrigo talk about a charge for omega. i went back and looked at the omega purchase. they're talking about a huge write down, $3.8 total billion for that deal and now i'm questioning what they bought with omega. >> well, that's why this mr. cook -- he was the guy who ran omega. and he's stepping down from the board of directors or is not being nominated. >> they've delivered no alpha with that omega. >> yeah. so there would seem to be something interesting going on there with omega and the lack of alpha and mr. -- again, i'm not
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c-o-u-c-k-e. >> if you go over the jnj conference call there's a moment where they talk about the share that's coming back from mcneil labs, and pediatric was about 70%. they used to have 70% pediatric share. we're talking about tylenol. now it's up to 46%. you see it going back up -- basically what i'm saying is perrigo not only blew it with this omega transaction, but jnj is coming back with a vengeance. amazing they came back given what happened here, and i am amazed that perrigo, papa is leaving now. the rejection of the mylon bid, this could be a wall of shame situation. mr. papa had been a regular guest at "mad money." >> he had been, i know. i'm just trying -- >> it's ill advised.
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it's ill advised. >> wa we haven't talked about is valeant, clear positive for this company. he's taking i would assume he'll only take office after they file their 10k which we're expecting on the 29th of april or prior to that. >> jim has spoken about it, but it was before david and i got to the set. >> let's understand this. here's a man who destroyed a huge amount of value by saying no to the bid. >> yeah, saying no to the bid. >> and he's a savior from valeant. wow. what a low bar. you know? low bar. i mean, he's not exactly alex. >> although you just said the fact they got someone -- >> the fact they got someone is a big deal. >> if you want to do the math at home it was $75 a share in cash and 2.3 shares of mylan for each perrigo share. that's a pretty easy calculation. what that would be worth to perrigo shareholders and what is
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going to be a sinking price because of the departure and the guidance apparently because of this omega purchase which was not a good one. and the gentleman who ran it and sold it to them is now off the board of directors. but valeant's up. and valeant probably should be up, jim, because they have succeeded mr. pearson with somebody who has been in the industry for a very long time. >> yeah, and joe built perrigo and did a great job. >> you used to be a fan of his. >> i was a huge fan. you know a huge fan because they made the knockoffs. they got walgreens, cvs, they had everybody. david, they had everybody. but then cold and flu season not that great, that knocks them down. okay. and also, i mean, this last quarter i think jnj coming back, all i'm saying was not the appropriate time to leave that company. >> the question is why would you? either because, a, you knew things were not going to be easy, which apparently seems to be the case. b, because you're getting so much money even though you are a
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wealthy man. >> right. but joe should be here right now. he should be in the imax seat right now. >> fund a foundation until forever -- >> joe should be right here in the imax seat. >> he should be. >> defending this. >> so what's the -- our friend spencer, zillow. >> i mean, really. i think you have to make room -- >> not in the greg hayes seat. >> ain't going to happen. i was a big fan of joe. i just think that this does change the dynamic. you know, when you reject the bid, your numbers aren't that good, you got the omega, it would have been just a fabulous, hey, see you later, perrigo, right? you can have it mylan and then come to valeant. >> i bet rob cory at mylan is wondering what went on here. >> he's a pleasant fellow. >> yes, he is a pleasant fellow actually.
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>> well, i just think it's poor timing. and i don't mean to be really down on the guy, but he leaves perrigo in less than optimal financial situation. >> from that perspective it is -- >> i feel like drinking that pepto-bismol that i buy that's not really pepto-bismol because it looks just like that. i would be chugging that if i was a perrigo shareholder. it's got the same colors and stuff. >> i think mr. coucke who is leaving the board probably is this morning. >> i do think jnj coming back is a major blow. anyway, omega, jnj saying no to the mylan bid. in other words, nasty. >> when we come back, it was a happy birthday for the apple watch. we're going to tell you why ahead of apple's earnings out tomorrow. look at the premarket as we kick off this busy earnings week from
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ahead of tomorrow's quarterly earnings from apple, the apple watch marked its first
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anniversary on sunday. and according to the journal analysts estimate about 12 million of the watches were sold in year one. that's compared with about 6 million iphones sold in that product's first year. so estimates of course, but outpacing the iphone's first year. and the ipod only did 600,000 units in year one. >> what's amazing to me is -- yes, i'm wearing mine. super clear. the batteries, i got to get the battery -- but the -- this was supposed to be a bust. those numbers do not indicate bust. and they can improve in multiple ways. there's a lot of chatter about how they are going to improve it. dti they do some wireless -- more wireless charge, but how can it be a failure if it's such a success and make it so it's not tied with the apple 5 next year, under what guise? only apple would it be regarded as a failure. >> sure. because of the size of the existing customer base. >> yeah. i mean, i just think the service
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revenue's great. i was trying to put together some numbers for prince being there, beyonce, i mean, apple has a lot of things that go right. but people are so critical. the watch is a success. you don't see my bright wing on. >> not today. i notice carl's wearing his which i have rarely seen sighting of. >> second wind. i'm definitely coming around to it again. >> i don't like that band -- i like that band. better band than yours. it's a nice band color. i mean, it's still black. yours is black, so i'm not really sure -- >> i'm married now so it doesn't play the role it used to have. >> right. what was that role? [ laughter ] >> i assume you expect version two to be -- >> and i'll get that too. >> you will? >> i'll immediately trade it in. i like this. i like fitbit too. people say you can have a fitbit. but it's not the same. this is different. i have the fashion statement band. i have a lot of information on this thing.
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i use it as an alarm clock. i wish i could -- don't have to -- you know, if you plug it in and you sleep with it and it's an alarm clock, then the wire -- >> listen, to the point there's been a lot of back and forth between you and i for a long time about this. but the point i think we both made is we have carved out this area and the ecosystem conceivably well broadened and deepened over time. and they will be there. >> cramer's shirt points out there were people thinking 40 million, 50 million, that's inconceivable. unless you wear two. i mean, that's crazy. i would be happy with this given the limitations of the watch as currently configured. >> as currently configured, but at some point it may be a self-sustaining device you don't need your phone with. that could be a different construct. >> look at the ipod. i remember when i had to go get the second ipod because my kids wanted a blue and wanted pink. who knows. >> yep. >> you know, but why write this off? i know the quarter's coming and
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everyone's already decided apple is, you know, nothing. >> i just want to know what you were getting on that before you were married? >> that was a joke. i was talking about like a younger guy might say, hey, listen, women are impressed. that's what it was about. no one's been impressed by me in a decade, partner. >> i know one. she still seems to like you. >> she doesn't watch the show though. it's our anniversary, you think she knows i said that? >> no. we'll get cramer's mad dash and look at the opening market. more "squawk on the street" from the nyse straight ahead. they say that in life,
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oh, man, it's monday. there's jim cramer. he's about to start his mad dash. >> david, the hedge funds have been fighting this caterpillar tooth and nail. but goldman today upgrades it from sell to hold. better tone china. i've gone over that conference call. i've urged people to listen to the conference call of cat because three times they said china was better. cat is seeing a gain from the recent improvement commodity prices and only going to get stronger, i think. and, you know, u.s. roller billing by the way is coming back. >> is it? >> the state budgets more flush, mentioned -- >> going to be a huge infrastructure program in this country. the likes of which we haven't seen since. >>izen -- eisenhower. >> yes. but it's china that's encouraging. and i urge people to recognize that this company has been down so long it looks up to me. the balance sheet is much better than expected.
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dividend's in tact, if china turns around, look out above. >> joy global you want to mention to. >> joy is same, problem is coal. coal if you listen to -- you know, coal is still going to be 32% of our baseline. it's still the baseline for a lot of different utilities. so what happens is base utility and it's coal, you can't get rid of coal as fast as people would like. even though coal numbers were so bad from railroads, export coal is bad, joy is last man standing. but coal's going away. don't forget that. our grandchildren not going to be coal based world. >> all right. we got the opening bell on this monday just a few minutes away. stay with us on "squawk on the street." a lot more coming up.
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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in 30 seconds. a big week of earnings is headed our way. it's the busiest of the season. in fact, thursday will be the single busiest day of the season with names like bristol myers,
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amazon,linkedin, you name it. >> yeah. remember linkedin caused the big february selloff. i saw workday downgrade today pacific crest, a lot of the high multiple stocks have been under pressure, a lot of the value stocks doing well, but that's off of oil. if oil keeps going higher we'll stick with that theme. i think that the high multiples, it's a bear market rotation and the money is flowing out of there and going to other areas, david. >> yeah. >> jim. >> this morning the big board global payments provider of electronic processing celebrating its 15th listing anniversary at the nasdaq united fire group doing the honors. we're going to have to juggle some central bank speak.
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the fed statement out wednesday. a lot of people wonder if they're going to talk more about a rebalancing of risks as opposed to downside risks. >> there's been some positive data certainly on job, but at the same time a lot of what's good in the economy that i've seen in the month of april, april better than march, has to do with a weaker dollar. so, i mean, they can certainly upset that balance. i know japan's trying to get the yen down. doing everything they can. boy, they bought a lot of stock there japanese government. whoa. >> chatter that they would buy even more. >> yeah. buy anything that's not nailed down. >> are they index or -- >> they'll buy real estate. whatever you got. they'll buy your apple watch if you want to put it on the secondary market sdpl they'll pay more than it's worth. >> probably. >> i mean, they pay more than it's worth for a lot of these companies. why don't we talk about what a joke this is? >> what? negative rates? >> let's just talk about our
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economy and our stock market for all of its flaws, at least the government isn't in there buying back stock and doing negative interest rates and there's a real honest market that has real price discovery. i mean, what's the real price of the japanese stocks? mitsubishi, i saw that down 40%. what are the buy orders like? hey, david, could you go in and take, i don't know, tokyo electric? i want you to take that up 10% today. would you argue with that order? >> i suppose. >> do you think there's much difference in buying treasuries? some would argue not that far afield, right? >> i think in the end that's a big liquid market and should be selling treasuries. >> what does the fed have on its balance sheet? $4 trillion? >> selling now, i've been urging the fed to do that. they say they can't do it, but they can do whatever they want. they're the fed for heaven sake. but i think the japanese buy orders, i mean, what are those stocks without the japanese government in there?
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what are their stocks worth? y idea? >> no. >> none. right? >> i don't know. >> does the government try to get better prices? no. they take up everything. i think it's insane, right? >> i know. >> speaking of things being taken down, vf corp downgraded today over bbnt. >> they're reporting soon. there's been a split. you know, underarmour had a great quarter. the shorts are fighting underarmour again. but lululemon had a great quarter, underarmour had a great quarter, i think a lot of people think -- face people. a lot of people feel that. i don't know. but that's been the chatter. and also they're in macy's a lot. and people feel macy's is under pressure. lululemon's up nicely from the call -- from the quarter. >> did you see curry's injury? >> i know. >> hurts. i saw mris today on a strained knee. >> a lot of people very focused on that mri.
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>> yeah, there are. >> you could go a lot of places with that north face thing. they've peaked. they've reached the summit. >> geez. >> keep going. >> well, k-2. >> yeah. >> taking it from base camp four down to base camp three -- oh, no -- >> they're running out of oxygen. >> yes. i like that. man, into thin air. >> hits very thin air. it's going to be a very hard climb from here. >> it's going to need a bunch of sherpas. >> need their pick axes. >> he's got a motif. >> yes. >> but i do think there are other plays, i was thinking about steph curry and thinking will plank go out there and give him a striker knee? you know who else needs it? kimberly clark a lot of things have to go right.
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>> also the resignation or lack of a nomination for a gentleman who sold them a company called omega who is no longer going to be on the board. the company issued guidance below previous guidance for 2016 citing pressure overall. in prescriptions i guess, jim. >> how can they not say that the jnj comeback is part of that? >> and just to point it out, 2.3 plus $75 gets you right around call it $186 a share based on where mylan was prior to the opening. so you can put that in some perspective. that's what it would be worth right now. $186 based on their stock price if they had taken the deal that
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mr. papa succeeded against heavy odds, really, to say no to. one of the more stunning things i've seen in m&a fights. >> a multi-year plan out meanwhile didn't know jnj was coming back taking that share, obviously didn't know about omega. what a great time to have sold. >> some may have been surprised. valeant up another 5% this morning as mr. papa takes over as the ceo in early may. michael pearson will step down as the long-time ceo of that company. a man who helped build it and then watched it lose a great deal of market value. >> it's interesting that joe maintains obviously his cred, street cred that moved valeant up. yet when i look at the tatters he left perrigo.
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>> really? that's what you call it? >> it raises eyebrows. my eyebrows are raised. >> they are? >> yeah. the decision for him to depart under what is probably a terrible moment for perrigo given the fact that much seems to have been reversed of late. that's tough. >> i'm sure a number of large shareholders are calling up mylan and saying any chance -- can we get another shot at that? how about bringing back that tender? please? >> i think they'd probably take a look at that omega deal with the impairment charges. >> yeah, if you're rob cory you're like, sure, how does 110 look? >> i don't know. but how does xerox look. >> i was just going to mention xerox. up by a penny although revenue was ahead. cutting guidance they say based on breakup expenses. >> okay. i do like the breakup. and i do think they're creating value. they're trying to do what's right. that's obviously carl icahn in there. >> yes, it is. >> treasury secretary icahn, right? >> they reached a settlement
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some time -- >> would be a queens government if trump wins? >> yeah, i think -- i know you got to go all queens. >> icahn, queens. >> icahn, i don't know who else we could get in there. jack lew is already the treasury secretary and he's from queens. i do not believe i would be associated with the trump campaign. >> degram. >> degram is not from queens, but he plays there. >> yeah, well that's enough to make it so he's in the cabinet. >> why not? >> yeah. secretary of fastballs. >> exactly. though we have another guy who has a faster fastball, sind gar, aka thor. >> he's supreme court. >> i like that. there's an open seat. >> yes, there is. >> by the way, the guy who -- well, justice scalia was also from queens. >> was he? >> yes. >> that's right. >> all right. now that we've gone through queens history a bit for you out there, i know so many of you are interested, let's move onto newspaper history. perhaps some being made this
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morning. the two companies in question are one in particular is very small, but it does not mean that it is not a significant company. tribune owns the likes of the "los angeles times," the chicago tribune, the orlando sentinel, the hartford current. its current market value not very large, in fact when you throw in debt it's still below $1 billion. but this morning it is in receipt from the bid of gannett. it is in receipt of a bid of $12.25 a share in cash from that company to acquire it. this made public this morning by gannett in what we typically call a bear hug after a series of letters, most of them coming from gannett, the first on the 12th of april and follow-up on the 18th and finally one on the 22nd saying, come on, guys, don't you want to talk to us? actually the tribune response was also on the 22nd saying give
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us a little more time. our shareholder meeting is june 2nd. by the way we're in the midst of a transformation right now. a gentleman by the name of mablg is the new chairman of the company, he bought let's call it little over $40 million worth of stock in february he paid $8.50 a share for that. he took over as chairman. he is i believe the single largest shareholder at tribune at roughly 17%. he is now above that of oak tree, the firm that took their equity ownership as a result of owning the bonds in what was once the bankrupt tribune, remember. and then it split into the broadcasting assets. they also by the way that part of tribune, tribune media also owns all the real estate. what you get with tribune is those aforementioned publications. much banded about with higher price tags than the market value of this company or total value of the company including its debt back when the likes of an eli brode talked about for "new
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york times" or whatever. this may end up being a fight. there's no clear path at the moment because the annual meeting is on the 2nd. they can't go after directors at this point, but they are certainly going out there because they did not seem they would get a fair hearing from tribune and perhaps were concerned that tribune given mr. far row's ownership, previous willingness to step up that perhaps something would be worked out between him and some other very wealthy people to try to take the thing private. that's speculation. what we do have though is a significant premium bid at 5.6 times estimated 2016 ebitda, jim. and that's not a bad multiple, at least given where things are right now. in an industry of course that we know has been in seminal decline for so long. i'm looking for a chart here, total revenues in this industry were $46 billion including digital and newspaper ad
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revenues. and now they're down to 19. >> you have to have scale to make it at all. this would create some powerhouse. this is big media. it would own the print business. >> yeah. >> of which, you know, there's still money to be made. but this sounds very hostile. i mean, like really bare knuckle hostile, doesn't it? >> well, i don't know. i mean, they came public with an offer because they were worried they wouldn't get an audience and perhaps something would be done away from them. it doesn't appear there are a lot of other potential buyers out there. this is an industry that is in some state of distress depending on how you want to define it. is the "new york times" in distress? not really but it's not in a great position to be able to go acquire given the state of its balance sheet. >> reports in "new york post" layoffs are coming to the times. memo to staff say iing the ad market is soft, in an election year? >> it's interesting in the release talk about gannett strategy to grow the usa today network. the network of the paper that
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is -- >> you mentioned earlier one of their columnists they put a lot of money behind these people. >> michael wolf had a fantastic column about the way tv has never really been supplanted and digital advertising is more direct oriented. i think this is really interesting because usa today has made a big comeback. in fairness, larry cramer, my friend -- >> he's on the board. >> interim ceo of the street and chairman but like i watch this usa today come back. i read it every day. >> for their part gannett saying there's no finance contingency or any significant overlapse. we'll see where it goes. but, again, small but not insignificant in terms of influence. these are still important newspapers. >> how do you say no to a $12.50 bid.
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>> they have transformation. new chairman, ceo, board, give us a chance. >> the mylan bid -- >> yes, it was transforming. >> i think they take the money and run. it's a tough business, this newspaper business, as i know from the philly.com days. geez, i remember when i was rejected by 52 newspapers. this is just -- >> ritter got smart and took the $60, that's the greatest deal they ever took. >> the ritter family, wow, smart guy. >> only three dow names in the green. microsoft among them. let's get to bob on the floor. good morning, bob. >> good morning, carl. we're not getting much help from anybody this morning even though oil is up, energy's not moving. asia didn't help and europe is down as well. take a look at some of the european names. doesn't matter what you look at, the banks, the conglomerates, siemens and autos all a little weak today. german sentiment numbers were a little disappointing. here in the u.s. oil's up but
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we're not getting any push from energy stocks. you can see they're weak there. tech's also weak again after notably weak close last week. materials, health care and financials, interesting financials don't have a little more of an oomph with the 10-year yield now at 1.90%. they usually get a little bit of a lift as the yield moves, but that's not really happening today. what's important is the rotation going on in the market. we talk about this at the end of last week. there's a lot of talk about big tech being weak, and that's certainly true. but it's not spreading to the rest of the market. in fact, what we're seeing is a broadening in the rotation out of technology into energy, healthcare, materials, and to a lesser extent even financial stocks. this is major sectors for the month. so you can certainly talk about the weakness in technology, and that's a source of concern. but when you get rotation like this, it's generally considered a healthy sign if you look at the s&p 500 year-to-date essentially since that mid february bottom let's not quibble about a few down days, we've essentially been straight up with only a week or so of
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sideways motion in between all that. so you can argue where it's technically a little bit on the stretch side, but the rotation makes the technicians very happen. particularly strong has been some of the sectors like materials. we never cared about any of those names like joy global. i mean, i know goldman up caterpillar and joy global today, but these names have had huge runs already. so material names are up enormous. u.s. steel, ak steel, look at these numbers for the year. this is mostly since yan when they bottomed. they bottomed before the rest of the market. bhp up. joy global may have been up by goldman, but they're a little late to the party. a lot of talk about iron ore prices going up and perceptions of greater demand in china and this is the china play very clearly making a move for u.s. stocks. finally, a third of the s&p 500 are going to be reporting this week. the good news is the declines in the estimates for the second quarter, which is what we care about are not as great as in prior quarters.
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expected to be down 3% but that's not that far from where it was a few weeks ago. we have a shot i'd say at 50% being positive ending the earnings recession, but that needs to stabilize very, very quick quickly. right now the dow down 76 points. back to you. >> bob, thank you. bob pisani. let's get to the bond pits this morning. rick santelli is at the cme in chicago. >> good morning, carl. no doubt about it treasury rates are breaking out. various commodities and crb index are breaking out. the stock market was, it seems like it's slowed down a bit, probably central banks. remember march madness? march madness is showing up in all these charts. look at the mid march high yields on all these charts. look at a march 1st of two-year, of five-year, of ten-year, now as you look at an intraday of bund notice we're getting ever closer to 30 basis points. look at its mid march madness. that high yield you see in the
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middle of march, that was 32 basis points. that's what you want to pay closest attention to. in terms of foreign exchange, we all know that has been the epicenter even though it keeps bumping against the edge of the pool no matter what currency you're looking at. intraday dollar index there is a bit of weakness. open that up to march 1st you can see that we have been definitely treading water, just walking along the bottom. you want to pay very close attention on the closing basis to that 94 level. carl, back to you. >> all right. rick, thank you very much. when we come back, the buzz continues surrounding beyonce's surprise online release of her new album. we'll have the lowdown on what she calls lemonade. meantime, as bob said, very quick action to the downside. dow is down 84. we're back after a break. the e-class has 11 intelligent
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i do not think that is a good idea.
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- omg. you are so funny. in the time it took me to type that, if i were driving 55 miles an hour, i'd have driven the length of a football field blindly. not funny at all. don't text and drive. the more you know. beyonce releasing her highly anticipated album lemonade this weekend with a one-hour companion film premiering on hbo. fans could initially only access her new music on streaming service tidal. but as of this morning lemonade is on sale itunes, amazon
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confirming it would sell both digital and physical versions of the album coming on the heels of prince and all the discussion there of property ownership, we're getting a better clue as to how this moves a title, an apple and even hbo. >> downloading prince last night and downloading beyonce, i mean, these are seminal. it's kind of like jungle book for disney. these things add up. i'm talking service revenue for apple here at the moment. i think service revenue is going to be very good. have you backed up your icloud? you know, you get charged for that. you'll have to. you lose your pictures. >> apple is getting a nice monthly fee from me without a doubt in all ways whether it's ordering photos or my kids. >> it's passive. >> it's on my credit card. >> i know. i don't look at it. it's like netflix -- actually more than netflix. up there with amazon prime for me. >> artists like beyonce can get
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paid. that's unfortunate, cd sales obviously gone. >> that's right. i don't know, i continue to think they own apple and yet to go through this trough, okay, it's a trough, and not a pig trough. that's a philadelphia access. how do you say trough? >> trough. >> trough. >> same way i say drawer. drawer. >> we will get stop trading with jim in just a moment. don't go away. neighbor boy. (neighbor) yeah, so we're just bringing your son home. 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! (vo) don't be a settler, get a $100 reward card when you switch to directv.
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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. time for cramer and stop trading. >> tough for deutsche bank. it really was disappointing. there are a lot of different price pressures in a lot of different countries. obviously latin america very tough. normally i would say go buy the stock, but it only yields about 2.9. let it go to 3. they have a great dividend policy. let it go to three and change. don't buy it here yet. it's too early. it was a disappointing quarter. what it says about proctor because proctor competes directly with kimberly. if there's price pressure in diapers, that is not going to be good for proctor.
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you know, versus unilever, there's a diaper price war. sounds like there's a diaper price war. and that could be meaningful. you're just nodding your head. when is the last time you bought a diaper? >> thankfully it's been a while. >> then you're not close to the market. >> him too now. >> worldwide diaper price war does not help margins. >> no. we'll get proctor in the morning. what's on mad tonight? >> richard gelfond. i'm going to ask him, disney, i think this is the new paradigm. they have five years worth of movies that will be good. >> we will see tonight, jim. i know. i know. 6:00 p.m. "mad money." when we come back, new home sales. don't go away. real is touching a ray. amazing is moving like one. real is making new friends.
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amazing is getting this close. real is an animal rescue. amazing is over twenty-seven thousand of them. there is only one place where real and amazing live. seaworld. real. amazing
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good monday morning. welcome to "squawk on the street." i'm carl quintanilla with sarah, david faber. we had some weakness in asia overnight. some macro misses in europe. little wariness ahead of the
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central bank earnings coming up late they are week. breaking news on new home sales. let's get to rick santelli in chicago. >> down 1.5%, now, that is a little misleading. the actual number was 511,000, that's seasonally adjusted and annualized on new homes but last month moved up from 512 to 519 which makes that the high read of the year. that was february. you can see where 511 fits in that's down 1.5%. just to give you context last year's final read was 540,000. now, for more granular context digging down on this number, let's head east. diana olick will give us more color on march new home sales. diana. >> well, rick, as you said we did see that revision higher in february. so you look at this, yes, it's a miss down 1.5%. we were looking up 1.6%. we were looking for 520,000, we got 519. not so far off. what i'm most interested in is the pricing here. the median sale price of a home
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sold in march was $288,000. that is down from $293, 400 a year ago and that's good news because we have seen really overheating prices in both the existing and the new home market. so it's good to see prices coming off a little bit. builders have been very, very stubborn about this saying that they don't have the margins to decrease prices. they're not building on the entry level, which is where we really need the supply. we have a 5.8 month supply at this current sales pace of new homes for sale. but we really do need to see more construction. we saw a drop in housing starts. but again, right along expectations. not a terrible number, not a great number, right in the middle. back to you guys. >> thank you very much, diana. meantime a huge week for the market, fed obviously and earnings from no less than one-third of the s&p 500. the broad market index itself dipping at the open after two consecutive weeks of gains up now almost 2% for the year and sitting just over 2% below its all-time high despite of course all that unnerving use that we
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got from big tech at the end of last week. quincy crosby market financial, and jeff from raymond james. thank you for joining us, guys. jeff, let's talk about amazon, exxon during the course of this week. where do you think that's likely to take us? >> well, there's been some high profile company misses, but on balance the word for this earnings season has been beat because as of last thursday 78.3% of the s&p 500 companies that have reported beat their lowered earnings expectations. >> does that not just mean that the earnings expectations were too pessimistic coming through? where does that in a practical sense lead us as investors? >> well, you know, becky asked me on february 5th what my proprietary model was suggesting, and i told her the market was according to the model was going to bottom next week. and it did it february 1 19.
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and we've played it pretty hard since then. but as we get towards the month of may, the market's internal energy is pretty much used up. so i'm more cautious right here than i have been for the past 50 sessions. i think earnings are going to come in better than the lowered expectations. so far this is the best beat rate since we've seen in the third quarter of '09. >> quincy, what about tech? how worried should we be that big tech is falling out of favor? given of course that it led so well last year and the fact that you're now reversing some of the fund flows there. >> well, absolutely. and one of the things we saw last week is that the market is not afraid of bringing down those companies that have not met on the top line. the market just went in and said, no, no, no. we're seeing industrials move in nicely. looks as if it wants to take the place of tech and leadership. but one thing that matters very much is the backdrop for the markets. has china stabilized even in the very, very short-term?
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is the dollar weaker? we're going to find out this week if the fed wants to keep that dollar weaker and can keep the dollar weaker in order to help that transition over to industrials. this looks like the transition we're seeing. >> jeff, before we talk inevitably about what the fed will do, you mentioned you were cautious. i'm sure the barron's survey over the weekend didn't escape you or senior money managers what they describe as least bullish results in 20 years. only 38% of bullish or very bullish down from 55. and what's interesting it's not that people are more pessimistic, jeff, is that the neutral opinion is exploding at the moment. >> yeah. i think that's a very good observation. and it actually we thought that the s&p -- and still do, is going to trade out to a new all-time high following the s&p total return index which traded to a new all-time high last week. so i still think there's some up time --
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>> excuse me, jeff. what is the logical connection between neutral positions or neutral views to the market going higher? explain that connection if you would. >> i think sentiment has remained very bleak despite this really sharp rally that we've seen. and i think that suggests that people are still going to commit to the upside before we get a short-term peak in the market. normally when you get a rally like this, sentiment, bullish sentiment, goes up. that hasn't happened in this current rally from february 11th lows. >> so sentiment is a factor, quincy. you also mentioned earlier that the fed would help set the stage for the near-term move in the market. is there really a lot of mystery going into this week's fed meeting? no press conference, yes statement. >> yes, absolutely. because the worries the fed itself engineered the backdrop that it wanted, right? now, as we always say when rates rise something always breaks. and you see the fed not seeing a
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rate hike until september perha perhaps, you look at what the economists are saying and there's a disconnect between the economists and market, they're thinking the fed may move a bit closer, a little bit more hawkish to set the stage for the possibility of a rate hike to give them two or maybe even three this year. >> so if you buy that, are you buying financials into the fed meeting? >> well, that's exactly right. this is why the market is going to be watching what they say and we'll see what the algorithms come in with. and financials have been moving higher on the back of yields rising. yields are rising despite the fact philadelphia fed was terrible, despite the fact that the first read of gdp for last quarter is going to be very, very weak. and yet we saw yields rise. that's telling you that the market thinks that the fed may open the door for a rate hike some time this summer or early, early fall. and therefore you've got to be prepared for it because the dollar also is going to set the stage for what we see going on.
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again, the fed is caught between a rock and a hard place. i think they want to raise rates, but the economic data here in america is not doing well. >> right. jeff, i think for many people given that fixed income is such a large market, the bigger question for many people for market sentiment given how committed they are and how overcommitted they are to low interest rates, it's whether or not if the fed does start raising rates more rapidly than people think you're going to get massive losses through fixed income. and that in itself will reverberate around for everybody else. where are you on that? >> i've said it on cnbc for weeks. i think if the fed does not raise interest rates this week, i don't think they will raise rates until after the presidential election. >> okay. it's a strong prediction. we'll leave it there. jeff saut joining us there, quincy krosby from prudential. coming up, president obama is in germany defending international trade deals and making a case for the
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transatlantic agreement with europe. tom donohue also in germany. we ask him which candidate would be best for trade and best for business? "squawk on the street" will be right back. and i know a thing or two about trading. so i trade with e*trade, where true traders trade on a trademarked trade platform that has all the... get off the computer traitor! i won't. (cannon sound) i won't. mary buys a little lamb. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of the at&t network, a network that senses and mitigates cyber threats,
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everyday of the year. my children and my family are on my mind when i'm working all the time. my neighbors are here, my friends and family live here, so it's important for me to respond as quickly as possible and get the power back on. it's an amazing feeling turning those lights back on. be informed about outages in your area. sign up for outage alerts at pge.com/outagealerts. together, we're building a better california. the big news this morning, ted cruz and john kasich teaming up in the latest effort to stop donald trump from becoming the republican presidential nominee. our john harwood joins us with more now in washington. will it work, john?
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>> i doubt it, sarah. look, john kasich and ted cruz have been going around the country trying to slow down donald trump for weeks now. they haven't had a lot of succe success. now they've decided it's time to shatter the glass on that fire extinguisher and try to team up to deny donald trump the 1237 he needs in terms of delegates for a first ballot nomination. here's a statement that ted cruz and john kasich both put out last night. they say cruz is going to concentrate on indiana, the upcoming primary, john kasich's going to concentrate on oregon and new mexico, try to have a pinser movement on donald trump. they hope their outside allies, the super pacs, will do the same thing. here's why that is necessary. take a look at this poll of pennsylvania republicans, nbc news/marist just came out over the weekend, donald trump has a very large lead over both ted cruz and john kasich. the danger for cruz and kasich is that this sends a signal to republican voters that donald trump doesn't even have a single
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viable candidate left. so this is a desperate move as donald trump has said, whether it's going to work it's quite doubtful, carl. >> all right. john, thank you very much for that. our john harwood in washington. the president is in hanover, germany. he's pushing for a trade deal by the end of the year as well as reforms in the banking system. take a listen. >> we need to keep implementing reforms to our banking and financial systems so that the excesses and abuses that triggered the financial crisis never happen again, but we can't do that individually nation by nation because finance now is transnational. it moves around too fast. if we're not coordinating between europe and the united states and asia, then it won't work. >> as we look toward tomorrow's primaries which candidates are best for trade in the financial system, joining us from hanover, germany, is thomas donohue, u.s. president chamber of commerce.
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president got blowback on his brexit comment in the uk. i wonder if this message is carrying more water. >> well, i think the president's message here in hanover on the trade issues here between the u.s. and the eu and some collateral discussion about the pacific agreement, which has already been negotiated, has been very well received. it is being matched by very strong comments by chancellor merkel. and i believe the business people that are visiting here from all over the world have seen this as particularly important for the u.s. and the eu who are both trying to strengthen their economies, put people to work and drive up economic growth. >> tom, you wrote last week it's no secret that trade is taking a beating at the hands of several major presidential candidates.
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which ones do you mean? >> well, first of all, let's look at why it happens. countries that economies are in trouble and that are involved in political races whether it's for president or for lower offices all watch the sentiment of folks in the community in terms of why don't they have jobs, why is the economy down. and it's very easy to blame trade. so i think it's equal opportunity blamers. you're hearing it from hillary clinton, you're hearing it from trump with a lot of excitement. you're hearing it from others -- you are hearing it from many of the 17 republican candidates. the bottom line though is after all of the elections are in place, the reality is that 95%
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of the people we want to sell something to don't live in the united states. and for us to walk away from the tpp or the t tip here with europe would be just about the dumbest economic decision that any president could take. and my view is after all the politics we're going to get down to a simple deal. and that is you need two votes plurality in the house and two votes plurality in the senate to do this. one vote to win and one vote in case somebody gets sick on the way to the vote. and everybody else can be excused. so you've got to cobble together enough votes just to win. we've done that many times on previous agreements that people were opposed to during a political process. >> so, tom, are you saying and let's just stick with the front-runners you have confidence that hillary clinton
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or donald trump if either were to be elected would support the free trade deal, the tpp with asia and with europe as well? >> my belief is that whoever runs -- moves into the white house goes through one of the most traumatic experiences that any leader can go through. whoen you learn what's going on around the world, when you learn what the challenges are facing our nation, when you learn what our risks are, when you can fully learn what our challenges are economically, when we look at all of the issues in front of us particularly the entitlement payments we're going to have to make in the years going forward, everybody who becomes president is going to look for ways to counteract those challenges and trade is one of them. >> mr. donohue, can i double back to what you believe is the long-term damage if any that is being done to the business community through trump and
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sanders at the moment. is there any stage in your conversation perhaps an evaluation as to whether there's a greater need to get out there and talk to people in the country that feel that they are unjust -- they feel they are unjust losers in what some call secular stagnation. is there a need to get out there and tell the story better? >> well, there is no question that we have an immediate problem. and the immediate problem is the elections in the house and the senate and the governors and so on. we don't want the difficult exchange between the representatives of both parties to negatively effect who's going to be elected to the members of the congress and the senate. going forward you're very much on target that we have to find more and more ways to explain to the american people what is -- why they don't have as many jobs as they want, why economic
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growth is slowing, who's responsible for that and what they have to do to fix it. and it's not all a matter of assuaging people and patting them on the shoulder and telling them everything's going to be fine. it's a matter of telling them why we have these problems, what we have to do to deal with them and what role they have to play. it's not what can the government do for me? it's what do we have to do together to fix the environment so that their children can have good jobs and so that their economy is going to go up in a way that will support their retirement. >> but, tom, in order to crystallize that message, do you guys have to convince manufacturers to raise wages here, to bring jobs back? or to make a bigger point of the bmw plants that are in south carolina, or is it a combination of all of those things? >> well, many people believe
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that any job that's not there anymore has gone to china or mexico. you're right that many jobs have gone to south carolinas and to texas and california. but the very, very important thing that we have to do is explain what's happened to the american manufacturing system. 40% of the jobs in the manufacturing have gone away because of information technology, robotics, process engineering and supply chain management. which leads us with people who don't have jobs and jobs for which we don't have people to run those now high-tech companies. we're going through a serious transition. if we decided not to go, we'd be very lonely because everybody else around the world is moving in that direction. and we have to do this to stay
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competitive. we will create lots and lots of new jobs. it's a part of the process. and we've got to get the people themselves in the process. our single biggest challenge right now is k through 12 education. we're leaving lots and lots of our students on the side for failure to be able to read and comprehend, to write, to count, to work in a social environment. we've got a real problem there. if we don't solve it, we're going to have more unemployment. >> obviously a theme that's going to run through the election all summer long. tom, thank you so much for joining us. safe travels home. thomas donohue, president and ceo of the u.s. chamber of commerce. thanks. ahead on the show, a shift in the ceo ranks sending valeant higher and perrigo tumbling. david will have all the latest. [ soft music ]
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e.t. phone home. when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. perrigo's joe papa's long-time ceo who successfully fought off a hostile takeover from mylan has resigned from that company and will become the new chairman and ceo of valeant, we learned this morning at least in a series of press releases.
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one from perrigo and one from valeant. mr. papa will take over in early may for michael pearson, of course, the current ceo and long-time ceo of valeant who has, well, presided over a very difficult period for that company. and also a difficult period for himself in terms of his health. it is helping valeant this morning, which is up let's call it three or -- well, you see it there little over 2%. was up on friday when we first heard the potential for this change. but the bigger story this morning appears to be that of perrigo where the departure of mr. papa has been joined with an announcement by the company that it will not meet its previous guidance for 2016. it now issues new guidance of between $8.20 and $8.60 a share in adjusted earnings for 2016. that is below what it had told us back in february that it would deliver for the year. it says it is due in part to
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reductions in pricing expectations for prescriptions and also weaker than expected performance within a couple of other sectors. there's also an interesting side story here involving the purchase of omega pharma back in march of last year. and that company's ceo at the time, mr. mark couecke i believe, although i'm not sure how to pronounce it, his name has been withdrawn from the board of directors by the nominating and governance committee of perrigo. and it does appear there are some issues with omega in terms of perrigo assessing whether and to what extent an impairment exists. and it says it will complete its assessment and determine any impairment by may 12th. that's when the company expects to file its earnings report. but overall perrigo shares down sharply on that reduced guidance on the departure of mr. papa, which many believe is curious to say the least. of course valeant certainly under severe pressure, but many
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believe or some believe certainly the assets there are beneficial and will be run to a far better extent than they have been previously by mr. papa who has long experience. at 60 years old though and given what appears to be significant wealth, one has to wonder what he's getting there. it will be interesting to see his compensation at valeant. and there were those on friday when this news first started to surface who wondered whether perrigo in part -- its future in part was going to be in some question. we seem to have gotten some answer to that, the growth having slowed dramatically. and just to refresh, mylan at the time had a tender offer for the company, which shareholders did not tend to the requisite amount of shares into and therefore mylan failed in its attempts, that was worth 2.3 mylan shares plus $75 in cash. current value let's call it $186 a share. those perrigo shareholders who decided to leave the company
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independent in part because they thought under the leadership of mr. papa he would be able to deliver greater shareholder value are wondering what in the world they were thinking. sarah, back to you. all right, david. coming up, what's the best bet in technology right now? potentially some opportunities, tech getting hit again on the back of a pretty sharp selloff on friday. we'll explore that question when "squawk on the street" comes right back. everhas a number.olicy but not every insurance company understands the life behind it.
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xfinity lets you download your shows from anywhere. i used to like that song. good morning everyone. i'm sue herera. and here is your cnbc news update this hour. president obama in germany announcing the deployment of up to 250 military personnel in syria, mostly special operations forces. it will bring the number of personnel there roughly 300. >> they're not going to be leading the fight on the ground. but they will be essential in providing the training and assisting local forces they continue to drive isil back. >> a car bomb exploding in a suburb of damascus at one of the
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holiest shiite shrines in syria. six people died in that blast. shiite fighters from lebanon, iraq and iran who have come to fight alongside the syrian government often say they are there to defend the shrine. the brussels train station closed after the terror attacks last month has reopened. officials say the bombings didn't cause any structural damage but destroyed the ticketing area between the street and the subway levels. and japanese online retail giant creating some buzz with a drone service they're launching next month. the delivery service will be the nation's first commercial use of drones. the company will roll out that service at a golf course. delivery initially will be free. that's the news update this hour. back to you, sarah. >> glad they're rolling it out at a golf course. >> fine if you want deliveries on a golf course. >> well why wouldn't you? >> not a good place to test out drones. thank you, sue. sue herera. >> sure. tech stocks getting slammed as earnings have kicked off.
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a lot more to come. ibm, microsoft, google all dipped sharply after results. our josh lipton is in san francisco with more on the move. morning, josh. >> morning, sarah. so far we know tech hasn't won over many fans during this reporting period. 21 tech companies in the s&p 500 that have reported saw earnings decline 12% year over year according to s&p capital iq. most have beaten estimates though we know estimates did decline during the quarter. in other words, they're clearing here a low hurdle. revenue basically flat down 0.9%. for some companies like ibm this is a story of transition, big blue did report and beat, but revenues slipped as new businesses like cloud and analytics aren't big enough yet to offset more mature business lines like services and hardware. another tech giant undergoing big changes intel, which is transitioning away from its core pc business. company lowered full year guidance and announced plans to layoff 12,000 people.
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new business opportunities also mean new competition. microsoft's cloud services are growing fast, but google is gunning for that same market with ceo saying business is strong. >> we had much deeper conversations than we've ever been before. we do think we are competitive across a range and areas where we view we'll be uniquely capable over time is because of a machine learning capabilities helping enterprises really understand their data. >> now, this week tech investors will have a lot more data to consider with a number of companies reporting results including facebook, twitter, apple and amazon. sarah, back to you. >> all right. thank you very much. josh lipton, you've given us a lot to discuss. let's dig deeper. our next guest says the best bet in tech for them is cloud computing. we welcome ken allen reporting manager with t row price.
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on that backdrop that josh laid out, do you lighten up after what we saw last week? or do you buy on the weakness ahead of big names like amazon, facebook and apple reporting this week? >> well, it's obviously been an up and down year so far in the market overall, but also especially within tech. and there's no time like earnings season to amplify what's already been a lot of volatility in the space. the way we look at it is very much stock specific. we saw interesting earnings reports and reactions last week from companies like ibm and microsoft and google. and i think there is some opportunity when some of the stocks sell off on investor reaction to earnings. as you mentioned there are some notable ones coming up this week including apple, amazon and linkedin. relative to the cloud comment you made, i think that while it's not a new trend, the magnitude of how significant cloud computing will be for the tech industry is very large. and i think that continues to provide opportunities looking
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forward. >> some of the themes you picked up on there and you mentioned specifically intel and microsoft, ibm also goes in that category. and that is these big cap tech stocks are transitioning themselves. and the new faster, sexier growing businesses like cloud and serve just aren't getting there fast enough to offset the weakness in pc. so what as an investor do you do? do you have to have a longer time horizon with these stocks? >> we do tend to take a longer time horizon. drilling in on specifically microsoft as one you mentioned has this transition ongoing. so it's not as obvious and easy to get one's arms around as is amazon web services, which basically entered the technology business as a cloud company. so microsoft has this massive premise software business that will over time transition to cloud. for me and to us what the most important question is is whether that transition will be successful. there are a lot of tactical things that go around it, but i
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think microsoft is giving a lot of reasons to believe it will succeed in that transition and will make microsoft a more valuable business and good stock from these levels. i think there's opportunity in the recent weakness. >> ken, just before we go on, can i ask you about the valuation of the private companies that you hold? we learned within the last couple of weeks that at the end of the first quarter you actually cut as an organization the valuation on 12 of the big companies waiting to come to market worth over $1 billion. uber down 6%, air bnb down 6% and you cut as an organization drop box by 16%. what happens moving forward? when you see microsoft or google behaving this way on the open market, is the temptation to cut those private valuations further? because presumably that's one of the things that you're looking at. >> you're right. one of the important inputs to that and it's a more complex equation than the public markets because in the public markets they're market to market every day. but we look at what's happening in the overall stock market, look at what's happening in companies similar to those
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companies. and we have a very rigorous approach to get to what we think is the right answer for what something is being or should be valued at at present. so the turbulence in the overall market with some of the higher growth tech stocks was impactful to that assessment earlier this year. a lot of stocks are ve bounded quite successfully. we focus on being more so than the public side and focus on being selective to what we think will be large companies over time. >> you will also be observing those companies like uber who is incentivizing people with paper stock. is it your belief people within those companies are reflecting valuations that you're putting on what you're holding? or is there in general a disconnect there? >> so on the private side as with tech broadly inclusive of the public markets, options and restricted stock are important ways to allow the employees
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incentives with what the overall company's missions are and their execution. so that's something that we look at. i think it's something that hopefully does make the alignment work well over time. and i think that companies are getting increasingly smart as investors tend to recently have started looking more at stock comp and that being a bigger factor to how people do valuation analysis. >> ken, back to your picks on earnings season. i find it interesting you like linkedin given last time it reported the stock tanked by 44%. were you not spooked by that? >> so the tanking of 45% can often lead to opportunities in companies that one believes in. and i think at least from these levels i do believe in linkedin. it is a company that has a lot of -- or stock that has a lot of controversy around it right now. and i think, again, there's opportunity in that. i think it's a unique combination of dominant internet platform, obviously on the business network side of things where it's just entirely
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unparalleled. and sass business which is a dominant business on that side with the talent solutions business. there are also good growth opportunities around that. so i think it's a really good growth story that has been kind of thrown out and that is causing opportunity right now. >> the other name i wanted to ask you about is facebook reporting on thursday. makes sense it was hit hard on the back of those google or alphabet results. obviously they also rely on advertisements and they compete with google. how as an investor do you separate the two? and are you a buyer of facebook into the quarter? >> i think there is a lot of overlap in similarity to google and facebook's end markets. but if you drill down just one level deeper, obviously facebook is on the social side which google doesn't participate much in. google's on very much the search side still as the dominant business for it. what will be interesting going forward is the overlap they'll have on video advertising. and that's really a focus we have in terms of who will likely have the upper hand there, but i think there's a lot of room for
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both to continue growing strongly as they take share from others online and especially from offline including television and newspapers. so i think both have good growth ahead. at these levels i would favor google on its recent pullback for its more attractive valuation. >> see what happens this week. ken, thank you. ken allen is a portfolio manager at t. roe price. coming up, quote, outdated and losing momentum in china. one billionaire entrepreneur is calling out apple. and coming up tomorrow here on "squawk on the street," we have a big interview for you, phil knight, the founder of nike, is speaking out for the very first time. he's releasing a memoir this week. and he speaks to us here. we'll be right back. don't go to paris.
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don't go to la. don't go to tokyo. live there. hey, welcome! come in, come in. when you airbnb, you have your own home. make your bed. cook. you know, the stuff you normally do. ♪ wherever you go... ♪ don't go there. ♪ live there. ♪ even if it's just for a night. ♪
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fortunately we've got some bad news, used car prices in america appear to be sliding. what's behind the drop?
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how far will it go? does it say something about the economy? find out at tradingnation.cnbc.com.
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a billionaire chinese internet entrepreneur and competitor to apple calling his big rival outdated among some of the fairly colorful descriptions at a conference in china. we're in beijing with that story. take it away. >> thanks so much, simon. well, yet another chinese tech company is setting its sights on apple. formerly known as l.e.t. tv is known here netflix of china for video streaming services. the founder is also branching out into other areas such as electric cars, drones and also smartphones. last week he unveiled a whole host of new phones including the
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lamax 2 which is flagship phone comes in at $390 and showcases the company's video streaming services. he said that apple's phones are outdated for the china market. this is what he had to say. >> translator: in china you can see that apple has already begun to lose the rapid sales growth momentum. one of the most porpt reasons is apple's innovation has become extremely slow. for example, a month ago the apple launched iphone se, this is a product with very low level technology. they launched it in order to grow their customer base, in order to increase their profit margin. >> and if that's not enough, jai said that the company is also going to challenge tesla. at the beijing auto show he unveiled an electric car that has some driverless features. and he said that this car is going to be just as technologically advanced as the
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tesla x. but it's going to eventually cost just about the sum of its parts. this is what he had to say. >> translator: in the next generation of mobile internet, a car is like a smartphone with four wheels. it's only a smart terminal compared with a smart tv or smartphone. the only difference is the situation it's used for. >> and jai talking up his products, but at the same time the car still isn't in the market. and of course the phone still lags behind some of its chinese rivals as well as apple, which is the leader still in china. back to you. >> ms. yoon, thank you very much. a lot of interest in that story. now let's get to chicago to the cme group. rick santelli has the santelli exchange as always. >> good morning, sarah. today we had the october -- october, the march read for new home sales, 511,000. that was four in a row over
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500,000. but remember, in the summer of '05 we reached 1.39 million. i'd like to welcome my housing guest mark hanson. mark, what did you think of today's number? and what do you think about housing in general? >> well, other than being, you know, 11,000 light of consensus 522,000, we've been at or below 500,000 new home sales for eight straight years, rick. it's like watching rocks grow. in the re-sale market on the other hand where you have all that unorthodox demand that comes through, you have sales that aren't off 60% from their prior peak. you have them to regain. but in the fundamental structure end user housing market which is the new home sales market they can't get going after trillions of fed capital and liquidity pumped into the system and trillions in debt loaded on to the system aimed largely at housing we can't get it going. and now, rick, prices are
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falling. if you take a look new home builder prices are down seven of the last ten months. this isn't nirvana. >> no, let me interrupt you there, mark. >> uh-huh. >> let me interrupt you a second. high end has been the rage for quite some time whether it was in silicon valley or new york. now, we all know that's slowing a bit. but the real key is will that set the stage for all the other areas of housing? your thoughts. >> well, slowing a bit is the understatement of the year. in areas like south florida, miami, we've seen supply absolutely surge and demand plummet. now prices are taking haircuts. beautiful condos are going for 30% off what they were a year ago. in san francisco, the heart of san francisco where the 30 to 40 something-year-old carpet baggers came in to make their fortune, who did make their fortune on paper, we're seeing condo supply surge and demand plunge. we're talking 70% increases in
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condo supply and 50% reductions in demand leading to 25% or 30% reduction in list prices of condos. and it's starting to infect the outlying areas like dade county and south florida. now the bay area. we're seeing the high end luxury in new york city doing the same. we have a tops down problem here that started not coincidentally when fed funds futures started pricing in four rate hikes in 2016, middle of last year. >> in the last 20 seconds that we have, mark, quickly, what i'd like to know is in general is this now going to bring down the renters market, which has been on fire in terms of year over year percentage gains? your final comment. >> it all depends where you go, but yeah, we're real negative apartment rates. largely because many of them followed the technology -- the
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start-up technology and bow technology sectors around the country and put up buildings and apartments there. and i think we're going to see vacancies start to rise. and condos planned for sale that can't sale come sell come on for rents further increasing supply against a backdrop of weakening demand. apartment rents come up once a year for renewed leases which is great on the way up but bad on the way down. >> mark, thank you. always a pleasure to see what you're thinking on housing. >> thanks, rick. down 124 points on the dow now. up next, life in the beijing auto show where the suv is making a big impact. man, i'm glad aflac pays cash. aflac!
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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. as you can see, we are down about three-quarters of 1% on the dow, down 134 points at this hour. the sell-off is picking up speed here. industrials are at the bottom of the heap along with energy companies, all major s&p groups in the red except for consumer staples. simon? meantime, the beijing auto show kicks off, big focus on suvs there as a source of growth
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in the world's largest car market. phil lebeau is live from beijing with the very latest. in many senses, phil, similarities with what's happening in china with this country. >> reporter: very much so. i said for years that when you come over to china, what you notice right away is that the chinese auto buyer is a lot like the american auto buyer and now that's really being seen in the way suvs are selling in this country. look at the sales between the u.s. and china overall this year. in the first quarter, china still outpacing the u.s., down from where it was last year but still over 6% sales growth for the year. suvs, that's what's driving sales in this country right now, up 42% overall, up 52% for the chinese brand suvs and they are making hay by pushing models that are lower priced than the gms, fords, mercedes models that are in this market. that's putting some pressure on those international competitors but when we caught up with the
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head of product development for gm, he said that the company is ready to adjust as it sees more competition on the lower end. >> there's big demand for suvs of lower price models but there's also high quality demand in real value in the features and connectivity we offer on our suvs. we are going to differentiate ourselves on quality and connectivity and reliability and durability and we will be competitive in the price part of it, too. >> reporter: this is a big deal for general motors, for ford, really for almost every automaker. think about this. in the first quarter, gm earned more than $500 million in china, on pace to earn more than $2 billion here this year. suvs are a big part of that. they are among the most profitable vehicles any automaker can sell. >> phil lebeau from beijing, thank you very much. let's send it over to jon fortt with a look at what's up next on "squawk alley." >> lot of pain in tech land
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after last year saw rough earnings for alphabet and microsoft take a look at go pro, not doing so well. hp enterprise as well. also looking ahead to apple earnings. will that difficult trend continue or perhaps will there be a silver lining? finally, lemonade out of lemons. beyonce has lemonade over the weekend. where the lessons for content and scarcity in all of that. that's coming up on "squawk alley." from bank of america to buy a new gym bag. before earning 1% cash back everywhere, every time and 2% back at the grocery store. even before he got 3% back on gas. kenny used his bankamericard cash rewards credit card to join the wednesday night league. because he loves to play hoops. not jump through them. that's the excitement of rewarding connections. apply online or at a bank of america near you.
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good morning. it is 8:00 a.m. in apple headquarters, 11:00 a.m. on wall street. "squawk alley" is live. ♪ i see it i want it ♪ ♪ i dream it i work hard i own it ♪ ♪ i go hard i go hard ♪ ♪ get what's mine i'm a star ♪ >> good monday morning. welcome to "squawk alley." this morning we welcome back
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roger mcnamee, co-founder of elevation partners. good morning. dow down about 1 th32. first up, it is a big week for tech earnings. apple and twitter report tomorrow. facebook on wednesday. amazon, linkedin on thursday. that's just to name a few. after disappointing numbers from microsoft and alphabet last week drove techs lower. is there cause for concern in tech? roger, i'm not asking that everything be amd but there aren't very many surprising to the upside. >> again, i think the surprise is the people weren't expecting this. technology is all about product cycles. at the scale of the industry today, in order to really move the needle you have to have something huge like smartphones but now that smartphones are mature, we are between major product cycles and you know, it's m v

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