tv Squawk on the Street CNBC May 3, 2016 9:00am-11:01am EDT
an unbelievably great job of integrating aol and giving us space to operate but bringing us scale. >> right. >> we've done ten major deals since the verizon deal, m&a and partnerships overall. so we had our best quarter ever q1. >> tim armstrong, thank you. >> great to have you. >> if you do your 11th deal with yahoo, please come back on that morning. >> only if joe fixes his tie. because we have to have -- >> it's a joker tie. you can't do it either. i'm going to work on a -- >> tim armstrong, thank you very much. >> join us tomorrow. "squawk on the street" is next. good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is in los angeles at the milken institute global conference. a lot more from david in a moment. meanwhile, sullen may continues to live up to its name. europe getting hit by a weak uk pmi and the dollar at a
15-month low. australia cutting rates, auto sales on the way. roadmap begins with tim cook. he joined jim on "mad money" last night covered everything from innovation to china to revenue to the company's value. global data driving futures. we'll tell you what to expect on wall street today. and shares of aig down in the premarket after earnings. peter hancock will join us live. first up, tim cook defending app apple's latest results and the stock mired in a slump. he was on with "mad money" last night. >> if you talk about macroheadwinds, difficult compares dominant. >> yeah. >> currency, no new iteration yet. if you're going to be opportunistic wouldn't you say let all the hedge funds blow it out and then we'll make a statement? >> well, opportunistic to me means you buy it when you think the company's undervalued. we believe the company's undervalued. >> all right. i got to get your thoughts on
what he said and whether it changed your view in any way, whether it should change other people's views. >> i think if you want to take a longer term view, it should change your view. the reason is because the company will not look like it looks now. the company will be a service revenue company within an installed device base. the motto of all these usually the m.o. is razor, razor blade. that's what's happening. they backed spoo that, that wasn't the intent, but over and over again cook is talking about the icloud photo backup, music, just really looking at this device and thinking it's hardware. and that's a mistake, because the fees that you pay are not going to be unlike netflix, unlike costco, amazon prime and then apple fees. so the idea that there's no revenue generated from the ecosystem is going to prove wrong, app store. i think that's the way you want to look at it. if you look at it as a device company, you should sell it. the fact is what he's referring to as the buyback, look, we see
it undervalued. if you see it as a hand set companies and get out before it hits 60, but he doesn't view it like that and he's got a lot of fire power and take the other side of the trade. >> cook went into some depth on this exact point on service revenue. take a listen to this. >> services now is the second largest revenue segment at apple. it was for last quarter, it was for the first half of the year as far as that goes. and so last quarter we were at 6 billion, up 20%. it's a fast growing. and you look at what it is, it's things like the app store. you go and you buy apps far after the sale. you might subscribe to apple music. you might use apple pay. you might buy songs. you might rent movies. and so it's all of these things. and it really adds up. >> now -- >> and that of course is based on how many people are using our devices, how many devices are
out there. and there's over a billion devices in use. this is huge. >> yeah. look, i think what he's focused on is the quality of the product, 95% customer satisfaction so the ecosystem's going to stay and be passed onto kids. we talk about hewlett packard, intel, microsoft, companies that have lost their way in terms of very low multiple and broke down. he said, look, no one really liked the product. the product, the product, the revenue stream that comes with the product. these are the constants that he sees, but when you look at the conference calls -- and they don't care about the product. we were talking about everyone's on their apple telling customers they should sell apple and yet you try to take their apple away they would kill you. just the irony but it's not the numbers, the numbers look bad because the numbers for the next three months are supposed to be bad. he told you that. they will be bad.
they should downgrade, get out of our stock, so to speak, is what tim cook is saying. and i think that's a natural. when people say i didn't hear innovation, he said over and over again, if i told you innovation, you lose the drama. this is a surprise stock. talking about the watch, carl icahn said you'd sell 20 million and instead you sold one-third of that. he says we never said 20 million. who said 20 million? >> apple is a company where they're not going to telegraph their moon shots in a way google or facebook will and does. >> no. they never have. as we know things are in secrecy. everything covered when anybody goes to the headquarters some of the new stuff is all covered over. but, jim, i think you're making important point here, but i have to wonder is this move to have people focusing on services a move of necessity, or was it part of a long-held plan? and regardless, when you talk about a company that is then
relying on recurring cash flow stream, which is a positive in a lot of ways and not as much on device sales and on the choppiness there, and not as much necessarily on growth from those sales any longer, how do you go about valuing it? what does it look like -- what's it peer group look like? >> well, look, this is the issue. a lot of people feel it's just a dodge. out of nowhere we're talking service revenue. i pressed him in the previous quarter why don't you talk more about service revenue. now obviously i'm just one of the many people that talks to them. i think what happened is service revenue surfaced as being much larger as more devices were sold. there's always been a component for service, it was never that big. because of the amortization, you understanding the accounting, it doesn't look nearly as good as the actual -- the actual spreadout because you just can't book subscription the same way. but i would say, david, whether they backed into it, whether you believe it or not, what you're going to see in the next quarter
is the service revenue's going to go up even as the device sale slows down. and that's going to show you it's not ios. >> right. >> and i think that's what they're banking on. now, did they count on banking, last year you saw this great spike in device and it was on steroids and they show you if you smooth it out it's not as bad. there is slowdown around the world. the device category is slowing, but they talk about india, they talk about china still middle classification, talk about new devices going to blow you away. but i think people who hate it are still going to hate it. after watching the interview going to say, wow, they're going to say, oh, give me a break. it's a device company. it's hewlett packard. and i think that's a mistake. i think that's a very short-term way to look at it. and that gets you out at 92 and back in at 83. i don't know. where there's yield support and buyback support, but this is is truly one of those stories where you believe they know how to innovate or you sell. you don't hold.
sell. >> so you are prepared for more skepticism and more selling? >> these analysts have these $170 price targets and they got buys on it. they look like fools, go into the research department, you better downgrade. we haven't had an up day. when you do an up day that gives them a chance to be able to say it was a great run. those are two different worlds. there's the world of people who actually believe in the device. and there's a great contrast here. this is not blackberry, this is not something that hewlett packard put out and they never did. the reason this is so important is because people are willing to pay because they like the device. they're willing to pay for these little things. and they could become big things. apple may have backed into it, they might have lucked out. but to dismiss it is to look at the company and just say it's this thing. and when another guy -- you
know, when chow mi comes out with something or white box chinese, it's going out -- >> wouldn't you agree his china call is fraught with some risk? >> absolutely. they're still not willing to say that communist country, the committee, the agency that stopped it is the agency of all media. we don't have an agency of all media. we forget that it's a communist country. and it's not like, well, hold on, wait a second, call up the minister of justice and straighten this out. so there's risk there. they refuted the risk that i staid #said the white box is taking over, they're talking switching from android. also talking about this idea that it doesn't have to grow right now just to switch from android means a lot. and the fact india's going to have more people than china in the course of the next five years and they're going to be able to dominate china -- actually six years, and -- dominate india because india is bringing in a new lte system.
in the meantime you have to go through the valley shadow death. and people fear evil. >> you make it sound so dramatic. >> it is a drama story, believe me. >> we're going to hear a lot more about what tim told jim last night. meanwhile futures are sharply lower. stocks poised to erase most of monday's gains. data out of china showing factory activity did detract in april for the 14th consecutive month. and in australia central bank surprises by cutting to a record low of 1.75. first rate cut there of the year. the yen at an 18-month high. more discussion about whether kuroda is playing this whole game wrong. >> all i think about the ceo from ford give us a level playing field we'll take the lion's share. we are reacting to the pajamas traders, i'm saying what's bad for japan is good for the u.s. what's bad for europe in terms of the euro is good for the u.s.
and yet if you look at their markets, those markets trade down as they should because they're going to begin to lose share. benz is going to lose share, bmw, honda, toyota, that's really important for our economy. so what's bad for them, why their markets are going down is good for us. but these futures traders don't look at it like that. do you think they know companies? they say oh, down, down, down. they wouldn't know a company if it dropped on their head. so nissan, okay, they miss. so the japanese companies will miss. that's good for ford and gm. see, ford and gm are american companies. >> yep. >> europe in that obviously is a translation, so again they win. but we should stop looking at what's bad for the goose is bad for the gander. >> pfizer today, david, raises its guide for the full year in part on this lightning dollar burden. >> yeah, although the quarter itself was a decent quarter. yeah, we're going to see the stock up this morning.
listen, they are still reeling as you know from the decision on the part of the treasury to target their deal specifically, as we can say. not treasury. to put an end to it of course. that being the allergan transaction. decent quarter from pfizer. stock up rather sharply this morning, guys, which is certainly good news. and it hasn't really moved appreciably. the name really has gotten crushed since then of course, jim, you know has been allergan after that deal fell apart. >> yeah. i have very little faith that they'll make the quarter just because people don't like it right now. so whatever number they print. and that's because the type of deal has to close. >> when we come back, guys, big quarterly miss for aig. stocks lower in the premarket. we'll talk to peter hancock. and these auto sales are about to come in big. that's coming up after the break. don't go away.
utilities, especially at ford. the f series up 12.6% last month. remember, we're finally getting that full year rotation in terms of sales and production of the f series with both plants now up at full capacity. and the car sales as it has been for all automakers people are just moving away from cars down 11.5% last month. guys, we get gm numbers in about 15 minutes. >> all right. phil, thank you very much. we'll be watching that. trying to get back to this 17.3 number for the year after march was weak. >> be cautious again. people have to understand that latin america right now is terrible for these guys. you can look at the united states and make a decision, you're going to get the decision wrong. auto nation and car max give you more of a sense of what is happening in the u.s. besides these. but i just really want to urge people these are inexpensive stocks and if you think the dollar trajectory is going to continue against the yen and euro, you're going to regret you sold these stocks on these figures.
>> aig, adjusted quartly profit well below forecast by a dollar. company hurt by weak hedge fund returns. we'll talk to peter hancock later this hour, but in the meantime, david, your thoughts on the quarter. >> listen, they're trying to do the right things. you've got john paulson and carl icahn joining the board of directors of course after settling what was going to potentially be a very distracting and long proxy fight for board seats on the part of mr. icahn. and you've got hedge fund losses. now no surprise to us, right, guys, it was a tough quarter. but you do forget for aig this happened last quarter also. and it adds up. what are we talking $537 million loss in market value of its hedge fund holdings. and that of course resulting to a certain extent in some of the missed here for the company, but we'll have to talk with mr. hancock and sort of see what he can cite as some of the key reasons why he believes they're on the right track. return on equity at least, jim,
a little better than what we saw with most of the banks out there. not saying much, but i guess it's something. >> yeah. look, it was a so-so quarter. i look at travelers. they are such better companies. honestly, yeah, i'm happy to speak to this gentleman that's the ceo, but this aig is not really as great a company as people think. there are some possibilities here, but when i look at chub i think, wow, what a better company at aig. these are just night and day. aig is never going to make the playoffs looking like this. this is a 6-10 team, maybe a 5-11. there's no draft choices in this business. this hedge fund issue, david, i thought that was supposed to be last time. the hedge funds caused a problem last time. why don't we kick the hedge funds out? tell me what that's all about? >> it's not that easy to get out of hedge funds as you might think. they are taking exposure to hedge funds down i think roughly $11 billion they're taking it down rather significantly, but it does take time.
sometimes, jim, you can't just get out in one quarter. you may have quarterly liquidity but doesn't mean you'll be able to get out all in one quarter, right? i guess that's part of the reason here. we'll see what mr. hancock has to say as to whether we can expect more, of course the hedge funds performed a bit better as so the overall market. unless things change dramatically in those kinds of losses. >> i'm sure he's got an excuse for it. got an excuse for everything these days. i will tell you jay fishman who ran travelers and took that stock to where it has to go because he's one great executive, remember what kind -- was he in valeant? no. david, you know that the real greats, and i'm talking about the people at chub, and you know chub and his son they don't fool around with this stuff.
>> no. it is a well-run company. there's no doubt about it. obviously they had a huge deal last year they closed, right, jim? >> they're winners. i think hancock's got to show us something. >> yeah. there are a lot of different businesses too, right? i mean it's not just apples to apples with chub. >> no, but there's a way to run a company. let's hear it. i mean, look, hancock's new. but i got to tell you i look at this number i expected better. >> that sounds like it's going to be a good interview. when we come back look at cramer's mad dash, count down to the opening bell, take another look at the premarket. some weakness obviously. more "squawk on the street" from post nine at the nyse. straight ahead the stars and marvels captain america civil war chris evans and jeremy r renner will ring the the bell. understands the life behind it. those who have served our nation. have earned the very best service in return.
seven minutes until the opening bell. let's get cramer's mad dash ahead of that. clorox out today. >> industrials ran for a while, talk about this roving bull market. back yesterday colgate, another fabulous quarter for clorox. he was dealt a great hand because when mr. canals, when he left, that last quarter got him out of venezuela. venezuela stopped paying for everything. i mean venezuela is not really -- it's a failed state. and they got out of it, so they have really good numbers. what i'm really impressed with is you got the 4% volume increase, cleaning sales really good, household sales really
go good, burt's bees really good. a fantastic manager. he understands how to get to millennial. he spends a fortune on facebook. he knows where people the millennial are thinking. and he's got them on their mind. this burt's bees which initially i thought was an overpay really ramping. this is the kind of company you get that good dividend, you get the buyback, you get well-run management. and you can sleep. sleep at night. >> forex is a 3 point impact. >> right. >> you talked about level playing field. >> it's going to be good. a little of latin america which i don't really like. you had the peso go up. we do so much business with mexico, they need to get that to 15. it's like 18-to-1? don't i know i go to mexico are you kidding me this meal costs me $9?
this was $18 two years ago. >> while you're talking chris evans and jeremy renner have made their way to the floor of the nyse. marvel a unit of disney. >> yes. >> and this cast, robert downey jr., scarlet johansson. >> yeah, but espn lost somebody. >> here's iron man making his way -- i don't know where our camera is, but they're coming and they'll ring the opening bell. we'll talk about that and impact on disney for sure when we come back. don't go away.
the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.
you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in 90 seconds as chris evans and jeremy renner are with tom farley on the nyse podium doing the honors today. it occurs to me, jim, this is likely to dominate the box office. "jungle book" has been having a nice couple weeks, finding dory
doesn't get a lot of attention. >> no, it doesn't. you mentioned that because you're talking about maybe five years worth of movies. i think a lot of people feel every movie is one off. what disney has done is make it so it's not one off. so you may think that espn, which by the way i think the app has hurt it. the espn app is so good. we got to start thinking about this thing as not just ten pole movie but consistent movie, movie, movie, franchise, franchise, franchise, so that makes it so the stock is worth a little more than you think or if it sells off you want to buy it. look at this. we're all going to see it. >> meanwhile it's a busy day of news. a lot of earnings coming in. indiana primary, some of the betting markets now have trump around mid 90% likelihood of getting the nomination. >> it's funny, the best politics stuff other than new york magazine is 538. again, it's an espn product. and they have an analysis of
indiana that is brilliant about antibiotic lincoln's father. i urge people to go to 538 because it's politically neutral. and amazing analysis. >> yeah, we're waiting more auto sales. we'll get some fed speak today. and then as we said at the big board chris evans and jeremy renner celebrating the release of "captain america civil war" at the nasdaq. first multifamily investor celebrating its 30th listing anniversary. we touched on pfizer, but 67 cents beats 55. >> yeah. >> made a product revenue up 23. before we do that let's get numbers from phil lebeau. we've gotten ford. now it's gm's turn. >> carl, general motors coming in weaker than expected for april auto sales, decline of 3.5%, the estimate from ed munds was decline of 2.3%. little weaker, not a huge deal. two pieces of information from the sales release that are worth noting. first of all gm's day supply in
terms of its inventory anywhere in the 60 to 70 day supply, it's at 71 day supply. not a huge inventory and gm is estimating that the sales pace for the month of april for the industry overall will be 17.6 million. if that's correct, guys, that will alleviate a lot of the concerns we heard last month when the sales rate was 16 points. you put those two months together you're looking at a sales rate probably around 17.3, 17.35, somewhere in that range which is roughly in line with what people have been expecting this year. >> phil, thank you very much for that. 17.6 would be a number, jim, especially coming off of last year. >> yeah. there was the piece the other day about the way to look at the auto companies as being trucks and autos. you know, i spent some time with the f-150, sales are extraordinary, they make a huge amount of money on these, it's not just the sales but it's also the mix. the mix is very good.
international getting better and better, i think, because again, the dollar getting so weak versus these currencies. look, do you love the stocks? every time the stock goes up there's some analyst that downgrades. they're inexpensive. do i have a catalyst? do i think this time next year -- the comparison's going to get easy because of the dollar. >> it's a week of strategic alternatives. we talked about gnc yesterday. aeropostale report -- now viogen spinning off hemophilia business. >> i think there was hope candidly that they would sell it. the hemophilia business is going to be very tough, i believe, because biomarin perhaps has a cure for hemophilia and there are not a lot of people in the study, but last week on "mad money" the last thing i would want to be in is hemophilia if they have a miracle cure. not that dumb for biogen.
you have to hope they have other things. alzheimer's it's been a disappointment, sold a lot higher, kept some. wish we hadn't. maybe it comes back when people realize they have something alzheimer's. >> what did you think of einhorn and yelp? >> yelp is just -- i know the company. i know of course from the point of view of restaurant, and it is a company that cost a lot to advertise with. you really need to scale. i'm going to say it's a junkier site than it used to be. i think it got hurt by a google algorithm that made it so it was less looked up. i think it's been a natural for yahoo to buy and yahoo never bought it. it would have terrific for yahoo. sometimes you see these things, yahoo, just go buy it. you get that earnings stream. now i feel apple should go buy it. just kidding.
apple -- by the way, the apple -- if apple acts better it's because the se might be better, the new small form factor. >> yes. >> because the kids in our country they want the power, but they don't like the size. apparently it's aspirational in china. it may surprise. my daughter said, hey, dad, i have the se, it's fabulous. of course meaning i just bought the se for her. you ever see those bills that your kids -- you don't have that yet. wait until you get the family plan for everything and you're like, wow, my family is really fully invested in apple. >> david, i'd love to gel yot y take on einhorn at large especially when we get near the season delivering alpha this summer. >> that's right. good promo there, carl, well done on your part. i assume we'll hear a lot more about delivering alpha as we get closer to that in september. listen, we all know hedge fund performances have been less than stellar certainly among bigger guys and guys that have long-term track records that are very impressive. i would point out something to
keep in mind when we talk about long-term track records for some of these guys, they almost always seem to have done better when they were far smaller than when they got larger. it's been atypical that large funds have been able to outperform the market. though not all of them have certainly lagged. guys, i did want to get to side hedge funds, another area of course m&a. we do have a deal this morning that at least is worth mentioning and taking a look at both companies, quintiles and merger of equals more or less a split board. i think ims will own 51.8% of the company. you can see, jim, this is not being taken particularly well right now by the marketplace. 7.2 billion in combined revenues. i think a decent number in terms of ebitda. and they're talking about savings right off the bat as you
might anticipate. pardon me as i look at my phone to get some of the specifics. that's not how you draw it up on paper, at least, when you imagine bringing an m.o.e. to the marketplace. >> no, tom pike has been on "mad money," i don't know, since the company came public. i feel like ilt had a great quarter today and the stock would have been up nicely had they not done a deal. i like the combination from the point of view of being 30,000 feet that their soup to nuts for a drug company, but, david, this is remarkable hatred for this deal before people really think about it. because tom pike is not going to want to ruin the stock. it was kind of an okay ipo and quarter after quarter after quarter they've delivered. i don't know, it's not like they're just throwing away money, but people are saying, look, it's just not a great combination. but i think the data of what sells combined with the contract research organization
distinguishes quintiles as being more than phase three i thought it added value but right now i'm completely in the wrong. wow. geez. people hate it. >> yeah. we'll see. i mean, as we've said a lot of the same factors that brought us record numbers of deals and volume in 2015 had been in place. but one difference has been the reception in the marketplace. whether it be to this merger of equals or even when we're seeing as we more often do strategic player by yet another player has been less than stellar, jim. certainly something to keep in mind because it's something ceos see as well. >> totally. totally. it's just a, wow, i was looking at the quarter. be up a lot if they hadn't done this. let's not forget also oil is control and oil's bad today. so oil sweep -- >> yeah. we busted through yesterday's lows. you worried about may at all? i know it's been a session -- >> well, i just think we know
that the day after warren buffett it's been a markets up 0.5 and gave that back quickly and here we go giving up the buffett rally. >> with that a lot of weak breath today. let's get to bob pisani on the floor. >> good morning, guys. china currency issues, a little bit of central bank issues with the australians making some moves there. australia's market rallied overnight. if they had a cut there in the rates. i think the important thing is let's start with china and what's going on over there. the pmi numbers, both private as well as public ones, the government sponsored numbers were a bit below expectations. while hong kong the hang sang was weak, interesting china up on that news. remember friday the president came out and basically talked up the stock market, talked they were promoting healthy developments of the stock market, they were closed yesterday so reopened to the upside and most people are attributing the presidents talking up the markets to the reason we're up today. i think the most important thing
today is currencies. i don't normally get traders talking about the dollar index, but therapy overnight, stock traders, and we're at a new 52-week low in the dollar index. that's playing a bit of havoc in europe here. you can see the german -- in fact all of the stock markets over in europe are down 1.2% right now and germany a little more, little less spain and italy a little more. we also on top of the euro strength had some disappointing earnings with some really key players, particularly the banks. so commerce bank was a little disappointing. ubs was a little disappointing. commerzbank half what it was last year and not optimistic about full year outlook here. lufthansa said they may have to cut capacity as well. bmw looked pretty good. i think bmw is down because the overall market is down. they reaffirmed their targets for the full year and had record sales overall. so bmw's numbers were not that bad. but here in the u.s. you can see
the follow through on disappointment on banks in europe. banks are down here, that's the s&p bank etf, consumer discretionary weak and very defensive tone to the market as health care stocks and utilities are leading. banks by the way have done very well. i mean overall they weathered the earnings reports very well. most of them are up in the mid single digits for the quarter. bank of america, citi group, little bit of downside play here today, even regionals down 1 to 2%. clorox, jim had a comment on that i completely agree with him, the reason clorox does so well in these environments is it's boring and it's slow and steady. look at these earnings. every year you're talking roughly 5, 6, 7% somewhere in that increases. they increase numbers here for 2016, so those numbers are going to go up even more. the analysts haven't done that today. if you want to complain about clorox, it's on the expensive side 24 times forward earnings but no one seems to mind as they keep increasing the numbers every single year. right now the dow down 137
points giving away all the gains from yesterday. carl, back to you. >> thank you very much, bob pisani. let's get to the bond pits. rick santelli at the cme in chicago. good morning, rick. >> good morning, carl. you know, i've used this analogy before, but markets are really starting to move here. now, it's the roller coaster effect. we're getting a wild ride on the beginning of intraday type trading, but the realish shup is how it closes. look at a one-week of tens. slipped back under 180, we haven't closed under 180 in two weeks, two weeks ago we were around 178, 179 close. so you want to watch this. and it isn't just us. all fixed income markets have taken a drop in yields and a jump in price. lots affects, of course what we see some rate cutting on the globe. so look at a one-week of bunds. boy, it's hard to tell who's leading, but boy did they shave a quick ten basis points. look at the ten-year gilt in the uk. look at april 1st start to the
japanese tenure, the jgb, it traded around minus 4 during the bank of japan meeting, now it's going back negative into the teens. so we really need to pay attention. and all of that of course going on i told you these foreign exchange issues were going to push into the markets in a big way. everybody wanted a weaker dollar, was going to be great. be careful what you wish for. look at one-week of the dollar index. look at one week of the dollar/yen. now 105 handle and it's happened fast and furious. and of course as we get ever closer to 116 look at a one-week of the euro versus the dollar. i know europe has its issues with lack of inflation because of course they concentrate more on talking about that than trying to figure out a way to actually find some reform and growth. carl, back to you. >> rick, thanks very much. we'll come back to you a little later on. when we come back, aig's peter hancock shares of his company falling on the latest results. standing by the post here at the nyse. in the meantime, dow down 126. s&p down 15. don't go away.
trolling for a gig with braindrone? 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.
aig out with results this morning. the insurer falling short of expectations adjusted quarterly profit of 65 cents. seeing shortfall on income from underwriting and investments. aig ceo peter hancock is here with us onset in a first on cnbc interview along with david who's back in l.a. david, take it away. >> all right, thanks, carl. i'll start off. peter, of course apologize for not being there in person, but jim and carl certainly have plenty of questions for you as well. i'll start off on hedge funds certainly because it does seem to be creating a lot of noise, so to speak, in your quarter. you're reducing your exposure to hedge funds. why is it taking so long? and why do you seemingly seem to be suffering such significant losses? did you guys just pick a bunch of terrible hedge funds? >> well, these hedge funds are about 11 billion in total at the end of last year out of a total investment portfolio of about 350 billion, so a relatively modest portion, but more volatile than the other more
defensive investments. and over the last 20 years that we've been invested in this asset class have done really well for us. but it's our belief going forward it's going to be much less attractive. that's why the end of december we announced and put notice in to redeem a large portion and will be exiting more than half our hedge fund investments. but it takes time to exit because of the lockup periods of these funds. so it's not like a mutual fund where you get out overnight. but it's part of our strategy to shift the risk of aig away from investment risk to our core competence, which is insurance risk. because we are aiming to deploy our capital in the ways in which our clients value it most, which is dealing with difficult insurance risks. >> right. and, peter to that point and to the larger picture of course at aig, in late january you announced a series of moves let's call it in terms of sort
of re-evaluating and re-apportioning within the company itself. what evidence can you cite from the current quarter that shows you're making progress on the various goals that you laid out in late january? recognizing it's not that long ago. >> so we laid out a plan to improve the operating margin as measured by accident your loss ratio, the amount you pay in claims as a proportion of the premium you get in. over the next two years to improve it from 66 to 60. and we were able to deliver 1.7 points out of that 6-point improvement in the first quarter. so we think we're off to a great start in the commercial underwriting margin improvement. and on the expense side we're pleased we've been able to reduce general operating expenses by 5% year on year, part of our overall journey to
remove about 1.6 billion of gross expense over the next two years. and the final piece is doing it with more capital efficiency. and we were able to return $4 billion of capital to shareholders in the first quarter. and that is out of our target of more than $25 billion over the next five years on top of the 12 we returned last year. so i think we're making great progress on improving operating margins, improving capital efficiency and expenses. so i'm actually pleased with this first quarter. it's a good foundation for the next few quarters. >> well, peter, you continue to buy back stock, and i think we all kind of say that's terrific. 1.4 billion shares down to 1.15 billion shares in the last three years. stock's done nothing. why is that the right action? sometimes the dogs won't eat the
food. how about we give a dividend that is bigger make it more than 2.3 and make it so aig is a company that i'd buy and put away? because these buybacks are like are you kidding me, i'm getting tired of them. >> well, we certainly think that dividend is an important part of our capital return story. we raised the dividend last year. we have a dividend yield that's sort of very much in the pack now, but we think that while our stock trades at a discount intrinsic value and also to book value, we think the buyback route is the right way for the time being. but we're not wedded to it. and we certainly believe in the long-term sustainable earnings as we shift our mix of earnings to the more sustainable underwriting earnings as opposed to overreliance on investment income. >> i've talked before, i totally get it. your tangible book value it makes sense. every dollar you buy is the right thing to do. but what i'm saying when i say the dogs won't eat it, it's just like the market is not going to give you credit for that.
so i'm trying to figure out what the market -- if you made an acquisition would they give you credit for it? a lot of companies are faced with this notion that it's just gospel they should buy back stock. it's gospel. and yet it hasn't worked for a lot of companies. >> well, i think there are a lot of short-term factors that affect the stock price. and i think our job is really to deal with the fundamentals that will lead to long-term sustainable growth and repeatable earnings. and we believe our intrinsic value will also reflect that. so we focus on what we can control. and that's about doing for our clients what they value most. and investing in technology, investing in ananalytics, investing in people that can really be the consul at a timive risk experts that can help our clients avoid the kinds of risk that insurance companies are uniquely positioned to manage. >> speaking of things you can't exactly control, i know you took a question on metlife and their success so far in non-bank
status, what does it mean for you? >> our status as a nonbank sifi so far has not affected in any way our ability to return our plans including returning capital. we're watching it closely. we reduce the leverage of the company and our exposure to derivatives and our exposure to variable annuities to levels which are very modest by any comparative measure. but we frankly until the rules are written don't view the sifi status as a major strategic question yet. but certainly this metlife ruling gives us interesting options down the road should it change. >> david. >> and, peter, finally, don paulson and representative of carl icahn of course slated to join the board of directors. how would you characterize their addition at this point? is it going to create friction on that board, or do you think
given your -- i would assume you've already been interacting with him that it will be a smooth transition? >> to be clear they haven't joined the board yet. that will be at the next board meeting, but we certainly have stepped up the level of interaction and transparency. i'm happy to say with a greater engagement we're finding a lot of common ground. and i think with a large holding in aig stock, they're totally aligned with whatever it takes to improve the long-term value of this company, which is all about improving operating margins, being more capital efficient and focusing this company where it can win. >> peter, it's good to have you. welcome, thanks so much. >> good to see you again. >> peter hancock aig. >> thank you. >> dow now down 169. we'll get stop trading with jim after a break. hey, jesse. who are you? i'm vern, the orange money retirement rabbit from voya.
vern from voya? yep, vern from voya. why are you orange? that's a little weird. really? that's the weird part in this scenario? look, orange money represents the money you put away for retirement. save a little here and there, and over time, your money could multiply. see? ah, ok. so, why are you orange? funny. see how voya can help you get organized at voya.com. ♪jake reese, "day to feel alive"♪
we forgotten about the fact amazon was killing everybody. but today oil's down. and when oil's down, people just say the economy can't be good and they don't want to own apparel. but vf is having a much better quarter. weissman really delivered. >> crude back to 44. what's on mad tonight? >> well, we've got more tim cook. remember, watch the new iteration i'm excited about, not focused on, t.j. rodgers. we have to find out what the heck happened there. >> i think most people understand what you said -- >> and then blackhawk. i'm tired of the disappointment. just like with peter hancock, i'm getting tired of stocks going down. and i want to find out what's going on. >> jim, we will see you tonight. what a week you've had already. "mad money" tonight 6:00 p.m. eastern. dow down 160. we're back in a minute.
good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with sarah at post nine of the new york stock exchange. david faber joins us for day two of milken in l.a. simon hobbs on assignment. take a look at the markets, selling continues on this second trading day of may. dow's down 170. oil not helping as it works its way back to 44. we're watching that. >> our roadmap begins with our exclusive interview with apple ceo tim cook. what he told our very own jim cramer on "mad money" as he tries to ease investor worries, especially about that slowdown in china. apple's former ceo john sculley weighs in. >> weak chie that data putting u.s. markets in the red today. but are the worries overblown? martin skre shkreli heading back to court today. coming up later on, sprint
posting wider than expected loss. stock is up this morning and marcelo claure will join us in a few moments. apple bouncing back after the tech giant reported its first ever quarterly decline in iphone sales last week. in our exclusive with our own jim cramer, tim cook defended the company against claims that their best days are behind them. >> i couldn't disagree more. >> okay. here's what i see, the smartphone market, eventually everyone in the world will have a smartphone, penetration today is in the 40s, long way to go. emerging markets like india, we've got great innovation in the pipeline from new iphones that will incent you and other people that have iphones today to upgrade to new iphones. >> i will need something else? because i don't think -- >> you will need something else. >> but i can't think of anything else i will need. >> but we're going to give you things that you can't live
without that you just don't know you need today. >> okay. >> that has always been the objective of apple is to do things that really enrich people's lives, that you look back on and you wonder how did i live without this. >> tim cook also went onto discuss china's impact on sales and short-term strategy there. >> here's what we see going on in china in the short-term. in the short-term the iphone upgrade rate affects all countries including china. the great thing is the switcher rate in china is huge. 40% up over the first half of last year, the first half of this year, this is huge. these are people switching from android smartphones to iphone in china. economy clearly not as strong as it was a year ago. softening. currency weakening. and so you've got a confluence of items in there, some that are apple specific like the upgrade
thing we talked about, some things that are more general that affect everyone. however, here's the way i look at it. >> okay. >> two years ago we had enormous sal sales. and last year we did even better, 80% better. so we grew 80% over the previous year. this year in constant currency in mainland china we were down 7. so if you look at it on a two-year basis, apple grew 70% in china. it's hard pressed to say those aren't good results. >> okay. >> let's bring in dan rosen, former ceo at yahoo and just bought easy bib and john sculley, gentlemen, thanks for coming in. >> thanks for having me. >> there's this widening view, dan, whether or not they are a hardware maker and we're beholden to the cycle or whether they're going to make a killing in services down the road.
what do you encourage people to believe? >> first of all they're a phenomenal company and i think some of the numbers are amazing $10 billion in profit, $53 billion last year. put all that aside the difficulty that i imagine is they really are a hardware company in terms of the phone. we don't -- we take the software for granted. that's why. and the challenges in some of the countries they have to go into outside the u.s. no way in india is going to pay this amount of money for a phone. it's just not their economy. it's not the way it works. they don't pay a lot of money for these things. in china even though the middle class may be getting bigger, they've got headwinds of just chinese culture. when i was at yahoo and we did the alibaba deal, we did it basically because we had failed seven times because the chinese government was not going to allow a u.s. company to be successful. companies like nike have been able to do it. apple has been successful more than most, however local competitors, the price is particularly high. and there isn't a lot of reason to upgrade the phone anymore
versus what it was when you first got it. so i just see headwinds -- >> it sound like you're agreeing with carl icahn who says he's out of the stock because he says he's worried about the chinese government letting them do business there. >> well, i don't know that i would put myself in the same discussion with carl icahn, but what i'm saying is if you just think about the chinese market. very few u.s. companies have been successful over the long-term there without headwinds. i mean, they turned off their services. they turned off ibooks, they turned off itunes. it's not by accident they do it. if you're banking on china as a u.s. company, it can happen and it has happened more for apple than almost anybody else, but it's not going to be easy. it's going to be choppy. i think it's another indication of it when the chinese government turned their stuff off. >> john cook argues that the middle classification is happening over the long-term at rates we don't even understand. is he wrong? >> well, what i think about,
carl, is that silicon valley is often able to pull the genie out of the bottle. and i think while i'm not on the advisory apple, i have no inside information, i'm a big tim cook fan. and i believe that this new era of what is called bots, smart assistant messaging, it was discussed in some detail by mark zuckerberg when he talked about facebook m. apple's in the perfect position to take the strong position it has with apps, with app store, with itune songs, with siri and begin to introduce smart assistant messaging. maybe it could be done even as soon as with the new iphone 7. the reality is that smart assistant messaging is a new pivot in the industry that is going to fundamentally add a new purpose for a great product like iphone or other smartphones. >> but it's also going to be part of whatsapp.
the question is what's the younger generation going to use as its communications products and its bots. facebook users numbers are extraordinary. the apple services, i pay for the apple services and they're very good. you don't pay for it because you want it, you pay for it because they don't give you enough storage, because you have too much video or other things from other people. again, it's not an innovation, it's a necessary thing. >> so do you agree with the critics, dan, that apple has lost its innovation edge when they point to iterative iphone devices, new ones like the se? >> i would bet on apple to be the most innovative company on the planet, google, apple, facebook, these companies are extraordinary. what i would say is when i happen to agree, they want to give you things you didn't know you need and didn't know you wanted, it's hard to know since we don't know what they are and we don't know we need them, we don't know how to make that bet yet. >> right. >> i think we need to see them first. i think the wats was something
that was neat and technology's awesome but it's not that important. >> the other thing, john, you know, apple has always coveted that element of surprise. it goes back to one more thing. people love that drama. but then, you know, google's talking about 20 years out. zuckerberg's talking about long-term strategic goals that are 20 years out. that's not apple's style. does it need to be? >> well, that's a really good question. i think that it was unfortunate for apple that mark zuckerberg came out with a very clear, exciting vision for facebook just two weeks ago what it was going to be by 2026. and apple itself never talks about it. i want to go back to the smart assistant messaging. apple is in a place that can differentiate. apple is not a company that invents technology, integrates it into the best quality experience. and i believe that they are still well poised to do far more with their services and they can do it relatively easily and relatively quickly if they seize the early momentum with bots.
bots are small subsystems that are little pieces of software that link together embedded apps. it was really started by we chat in china, facebook realized they were behind the curve. they introduced facebook m. they've got 800 million users, but the reality is apple is in a very good position to be able to pivot and to be able to integrate that into the next generation iphone. so i'm still very bullish on apple. >> so my question to you, john, is that a long-term story or short-term story? because views diverge on apple when you're talking about the timeframe. >> well, i think that the iphone as tim cook has pointed out still has a long way to go. the challenge is that other people's hardware like the new samsung 7 is a really good product in hardware. so apple's got to show, you know, more and more reasons why its integration, its experience while it may not be inventing
new technology that it can adapt technology. remember back when everybody had an mp3 player and then apple reinvented the experience with the ipod and itunes? apple can do that again, but i have no inside information but the sweet spot is around bots. bots is the next really big thing. >> i like your specificity, john. if he's right, dan, whose expense is that? search, google? >> no one's going to pay for a bot. they're going to be free from everybody. i don't know how it helps them financially. >> you might stick with siri as opposed to clicking through the internet. >> sure, but if it becomes ubiquitous. this is always the concern, if it becomes ubiquitous, if you can talk into any device and it's good, what do you care whose device you're talking into? if you're using whatsapp or facebook messenger and that's what a person is used to, are they going to switch necessarily so siri? i don't know. i think john is correct that apple can do more things than almost anybody can and has a proven history, i don't know if
it's a financial differentiator. but to your question, the one that concerns is google. >> yeah, and the observation i would make is that apple doesn't have to be the first. it doesn't have to charge for bots. what apple has to do is it's got to make the integrated experience of smart bots which is done better in an integrated way that people say this is what the iphone does that's distinctive in terms of the experience. not the innovation of the technology, the experience. and they don't need to charge for it because people get their value in apple by the hardware. it's still a hardware company as we all know. >> well, shorter term coming off of one of the worst losing streaks in 18 years it's good to see both of you guys. thank you so much talking apple today. >> thank you, carl. meantime, martin shkreli is back in court today, following criminal charges he defrauded investors. our own meg terrell is in brooklyn in front of the federal
courthouse with more. haven't seen any tweets this morning yet, meg. >> reporter: not this morning yet, sarah, but some tweets last night. martin shkreli did arrive here at federal court in brooklyn for what is largely expected to be a procedural hearing. he was arrested in december and charged with seven counts of securities fraud as well as conspiracy to commit security fraud and conspiracy to commit wire fraud. he's been out on a $5 million bail. none of these charges relate to his now infamous acquisition of a drug and raise the price. this has to do with the capital and health care as well as his previous biotech company. essentially he defrauded investors in his hedge understood. as you mention no tweets this morning. there was one last night always taking to social media martin shkreli tweeting last night some people are traveling more than five hours to see him in court in the morning. thanks for all the support, he says, it means a lot to me.
so we'll be heading into the hearing right after this and bring you more headlines. carl, back to you. >> thank you very much, our meg tirriel. shares of sprint on the rise after company reported a gain in postpaid net subs. both more than verizon and at&t for the first time on record. but ceo in hot water after calling its competitor inappropriate names, some argue. coming up after the break, the ceo of sprint marcelo claure will join us. dow down almost 200 points as the selling continues this week. back in a moment. [vet] two yearly physicals down. martha and mildred are good to go. here's your invoice, ladies. a few stops later, and it looks like big ollie is on the mend. it might not seem that glamorous having an old pickup truck for an office... or filling your days looking down the south end of a heifer, but...i wouldn't have it any other way.
man 2: four tours. woman: you worked with computers? man 2: that's classified, ma'am. man 1: but you're job was network security? man 2: that's classified, sir. woman: let's cut to the chase, here... man 1: what's you're assessment of our security? man 2: [ gasps ] porous. woman: porous? man 2: the old solutions aren't working. man 2: the world has changed. man 1: meaning? man 2: it's not just security. it's defense. it's not just security. it's defense. bae systems.
welcome back to "squawk on the street." i'm david faber in l.a. at the milken institute. sprint reported first quarter and full year 2015 results for the fourth quarter the company reported net operating revenue of $8.1 billion, net income of $8 million and adjusted ebitda of $2.2 billion. joining us first on cnbc is sprint's president and ceo marcelo claure. he joins us from kansas. nice to have you as always, mr. claure. let me start with the fourth quarter of course. your cost cutting was said to be by many impressive and led to an ebitda number that was above those who followed the company had anticipated. but there are as always questions. let me start with one from citi this morning and their note. they questioned whether or not sprint is moving to cut costs for efficiency or migrating to cut costs to pursue survival and
is willing to reduce its top line growth aspirations as a result. what's your answer? >> no, not at all. i mean, when we said this from the beginning that in order for us to be profitable we had to take some extreme cost cutting. but this cost cutting has proven to be very positive. i mean, i think the best way to look at this is for the first time in over nine years we generate positive operating income of $310 million. to put matters clearly, sprint has not generated positive operating income in the last nine years. and we're able to do this. we're not cutting costs for survival, we're cutting costs to be a little more efficient. at the same time we've also announced that we plan to open thousands of more new stores. and we continue to invest in our network, so not at all interest of cutting costs. it was a company that in my opinion had too much costs and finally we're starting to become a more lean competitor and one that i think is moving in the right direction in the transformation that we set up for sprint. >> right, but given the
constraints that you're under and you're obviously focused on cutting costs. again, i would reference the citi note this morning. they note that network cap x of $3 billion for fiscal year '16, which will end in march of '17, is below the perceptions at least that they had of roughly $5 billion, and raises questions over the ability to adequately invest in the network, differentiate service performance and of course most importantly attract customers. can you do everything you need to do to get bigger in terms of customers, mr. claure, while you obviously are so focused on cutting costs? >> so let's talk about customers. i mean, for the first time in sprint's history in the fourth quarter we beat both at&t and verizon in that enhancing customers. if you look at the power and size of both at&t and verizon, the fact we were able to surpass them for the first time in history they'll see people are coming to sprint and they're liking what they're seeing in
terms of the performance and network and services we're offering them. spending $3 billion, yes, we are spending $3 billion in our network. we know how to do it more efficient than anybody else. and the reason why we're going to be able to offer a competitive differentiating advantage is we have more spectrum than any other carrier in the world. we have over 200 megahertz of spectrum and therefore spectrum means more capacity and more speed. if you look at the latest neilson rankings, sprint network is the fastest in america, not us saying but that is neilson saying we like that for the fact for the first time in history we beat at&t and verizon in attracting new customers. and we do plan to continue to invest in order to enhance the experience we offer to sprint customers. >> right, but you know, $3 billion in network cap x, i mean, it's a large number, but given the environment you're operating in it may not be that
large. you just said you can be more efficient in spending than the other carriers, why? what is it that you know that they don't? >> no, what happens is in the last two years we did our big share of spending. we did what was called a network vision, repair and replace. the next phase we're doing is we're basically dense fiing our network and we plan to add tens of thousands of structures throughout the country in order for us to continually intensify our network. we can do that with spending $3 billion. our network is performing better than ever. we're spending less capital than we had before. i guess when you're a company that have less money you're taught to be a lot more efficient and not necessarily outsource employment of network, we're doing it ourselves and more efficient than we've ever done before. >> right. >> i think the important thing is i think the best way to measure us is churn. our customers coming are staying. if you follow earnings we basically reported the lowest
churn in sprint's history. we're deploying network more efficient, our customers are staying and we're adding new customers. >> although i see some notes here from jeffrey's it's all about expectations. somewhere anticipating a lot larger number, did you miss internally in what you'd hoped to add in terms of postpaid? >> no, not at all. i mean, the fact we were three consecutive quarters of being net positive and the fact at&t and verizon were negative, we think we did quite well. look at spent over competitors and we beat them both, i'm very happy where we are today. got to put things in perspective, a year ago sprint was losie ining 1.5 million han customers. we turned around and added a difference of 2 million customers. i'm thrilled and all my employees are happy, we're able
to beat our own internal expectations and we plan to continue to grow this year. >> yeah, and the stock of course was responding positively. finally though, mr. claure, i mean, it is very tough competition. the one name you didn't mention was t-mobile. we had john legere on last week throwing bombs, dumb and dumber and had different names for you. do they represent a competitive challenge that you're able to really take on? >> i think mobile has done an exceptional job, to be quite honest they have proven this can be done. they are doing a really good job of attracting new customers. we've surpassed at&t and verizon, t-mobile is the next one. they're in our line of sight. and the one we're going after now is t mobile. now, to give full credit they've done an outstanding job of finding customers. and now they're number one in adds, we're number two, verizon number three and at&t number four. so now we're going to try to go beat t-mobile. that's a new goal we have set up for our team. >> we always appreciate you coming on and updating us on
your progress. marcelo claure, the ceo of sprint, as always, appreciate you're joining us. >> thank you, david. all right, david, thanks. see you in a bit. all eyes on indiana. the primary today, what to watch next, plus we're keeping our eye on this market slide this morning. stocks are giving back yesterday's gains and even more with the dow now down 180 points. the s&p 500 dough a percent is looking at its worst day since early april. we'll be right back. ♪ bend me shape me, any way you want me as long as you love me, it's alright bend me shape me, any way you want me...
shape the best sleep of your life. sleep number beds with sleepiq technology adjust any way you want it. the bed that moves you. only at a sleep number store. here at the td ameritrade they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.
when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. nchs worst day for the s&p since april 7th as it's down to 2061. in the midst of all that look particularly hard at twitter today. down 3%. this is a new all-time low. fell below $14 earlier this morning. currently at 14.02. indiana primaries are underway. hillary clinton and donald trump leading the polls. let's send it out to john harwood on what to expect. what will you be watching for today, john? >> today's the day donald trump hopes he can finally break the back of his opposition for the republican nomination. he campaigned in inn ip last night as feisty and confident as ever. but ted cruz is still insisting
indiana voters can help him and other republicans keep donald trump from getting the 1237 delegates he needs. >> the entire country is depending on the state of india indiana. >> i think he's crazy. honestly, i think he's crazy. lying ted does not have the temperament to do this. he's choking like a dog because he's losing so badly. we have to put him away tomorrow. folks, we got to get out and vote. >> here's what the polls say about the chances of putting him away tomorrow. the nbc news/"the wall street journal"/marist poll showed donald trump ahead 49 to 34 over ted cruz. that is a comfortable margin. look at the national numbers from the nbc news/survey monkey poll, they show donald trump is extending his lead that suggests the opposition is collapsing. he's at 56% nationally and then look on the democratic side
hillary clinton with a narrow lead in indiana. she's got a 14-point lead nationally over bernie sanders. we'll wait for the votes tonight like your november matchup is going to be donald trump and hillary clinton and that, guys, is going to be one nasty campaign. >> and something we're going to talk a lot more about in the days and weeks to come. john, thanks so much. our john harwood. some weak china data worrying investors today, as you can probably tell. meanwhile, the imf warning of a bumpy economic rebalancing in that country. we're going to talk twith the dw down 160. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess.
side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card
shia cleric. j and j ordered to pay $55 million after a woman says the company's talc powder led to her cancer. $50 million in impugntive damages. jnj says it will appeal. a baby rescued from a building that collapsed in nairobi, kenya, three and a half days ago. the baby had no physical injuries, amazingly, and being treated for dehydration. the death toll from the collapsed building now stands at 23 with 93 people still missing. the hip hop musical hamilton has been nominated for a record 16 tony awards. the show was singled out in every category of the theater making. in a few categories performers from the show will faceoff against another, and the awards will be broadcast on june 12th. hottest ticket in town. that's the cnbc news update this hour. back to you guys downtown. oh, yes. worth the eight-month wait i had
to wait for getting tickets to see it. >> i'm on that list too. >> aren't we all. sue, thank you. >> sure. let's take a check on markets. we're monitoring et selloff for you stocks in the red following weak data in china, commodities under pressure as well as the u.s. dollar. how should investors be weighing all of these concerns? here with us at post nine is bonnie baja. great to see you again. >> good to see you too. >> so what is this all about? is this the yen's fault? >> you know, it's the yen's fault. it's china's fault. the manufacturing numbers came out a little weaker than expected. and, again, i think the markets were so surprised by the announcement of negative rate policy in january which they've had to backtrack from, it's really bucked conventional wisdom. you would have thought that the currency would have taken a nose dive. it's rallied as has their bond market. so we're in this interesting time in the markets where you really can't predict what the outcomes are going to be. >> goldman has a good note on
that today. they say if you really want to have unconventional policy work, you have to convince the markets your tenacity, right? and asking for patience is not the way to do that. >> well, asking people to destroy capital purposefully is not the way to do that either. i mean, come on. it's not a tenable situation. and perversely -- look, quantitative easing, negative rates, negative rates is the ultimate attempt at, you know, societal manipulation. and in japan i think the savings rates actually gone up because there's such uncertainty about what life is like with this kind of economic policy. >> i mean, the way it sort of resonates here is it feeds into broader concerns that central banks just are out of ammunition and the more they do the more they just make things worse. is that really what's going on here? >> well, i don't know if making things worse would be the way i would put it, but i think it's -- it's making capital markets a lot more disturbed. i mean, look, back in the good
old days the value of an asset was based on the cash flows it would produce. now asset values are being determined by central banks. that's probably not what people had in mind. >> what does it mean for this central bank? we've got a jobs report on friday. fed's already signalled it's pretty cautious here. so does that matter, the report? >> you know, it's interesting because the fed as you know has a dual mandate price stability and full employment. and what is also sort of coming into focus in the markets is gdp growth and jobs growth have really been at odds. if you just look at jobs growth, everything is great. but that half a percent gdp print in the first quarter was abysmal. at this point i really have to question if the bureau of labor statistics should be rethinking how they calculate that jobs report. is it catching the gig economy? is it catching the fact that, you know, millennial don't necessarily have 9:00 to 5:00 jobs anymore or even one part-time job. >> why is it the jobs number
faulty and not the gdp number? or are they both troublesome? >> well, they both could be trouble, but i think i have more confidence in the gdp number just because it's born out by gdp across the globe. i mean, the eu just lowered their growth rate again this morning. it's more in sync, and it's more easily explainable by the demographic profiles in the developed world and other factors. >> a lot of bulls at least on equities are taking some solace out of the dollar at a 15-month low today. >> right. >> is that going to help add multinationals here? what does it mean for us? >> well, certainly it's going to help a lot of the s&p 500 companies, especially food and beverage, consumer products. so many of their sales occur overseas. and when the dollar was stronger last year at times their earnings really suffered. >> so given all of these concerns and your view is similar to your boss's view with
the doom and gloom and the fact central banks are going to be on hold. >> right. >> what are you actually doing about it? are you guys buying treasuries? >> we have added to our treasury position. we're being much more conservative. we have cut back our risk assets in high yield corporate bonds and bank loans. we're very defensive at this point. >> are you buying apple bonds? are they still the gold standard given the stock market selloff of apple? >> the guys on the desk are going to love this. we had a debate about this last week. apple may have seen its peak. >> the stock or the bonds? >> the bonds. i mean, apple stock is not my daily work, the bonds have been a good performer but certainly trees don't grow to the sky. >> always good to have you here. bo bonnie baha. meg tirrell has breaking news on the mart ii iin shkreli hearing. a superseding indictment of
mr. shkreli and lawyer saying they essentially may add more charges to the seven counts they've already charged him with of securities fraud and other things. these new charges may include more counts of securities fraud although they say if they're going to file them, they will probably do it within the next month. they have also said they've scheduled the next court appearance for june 6th. and if they have filed these new charges by then, that will be an arraignment. otherwise just another status hearing. they've already turned over a lot of the evidence affiliated with this. so now we are just waiting to hear whether there will actually be more charges against martin shkreli here, guys. any minute now they should be coming out of the brooklyn courthouse behind me. back to you. >> all right. we'll continue to check back in with you. meg, thanks for the update. at the same time we have toyota auto sales coming out. let's send it to phil lebeau in chicago. phil. >> sarah, a little lower than expected from toyota last month. increase in sales of 3.8%. the edmunds.com estimate was increase of 4.8%. we have all the major automakers in now. what we're waiting on in the next few hours the sales rate
for the month of april. most believe it will be in the range between 17.1 and 17.3 million though there are a few saying it could be even higher than that. back to you. >> all right. a series of disappointments today. phil, thank you very much. when we come back after the break, more of jim's interview with apple's tim cook telling cnbc the company's always looking to buy more companies. who may be right for acquisition? we'll talk about that with one of our sharks in just a moment. dow's down 188. don't go away.
...that, you have to rinse it first baked-on? it's never gonna work.alfredo. dish issues? cascade platinum... powers... through... your toughest stuck-on food. so let your dishwasher be the dishwasher. e? told you it would work. cascade. apple ceo tim cook joining cnbc's "mad money" last night. here's what he had to say about what their future acquisitions look like? >> could it come in services? yes, and we've bought some companies to help us in services.
but it can also come in a number of other areas. we're fairly aquiztive. >> right. >> we haven't acquired a very large company yet. but we've acquired a lot of companies. we generally acquire a company every three to four weeks on average. and so it's a rare month that there's not a company being bought. we typically buy for technology and really great people. >> right. >> but, you know, we'll see. we're always looking. >> robert is the ca "shark tank host. your industry is really cyber security. what kind of companies are right for awick sigcquisitions for ap? >> i think you'll see get into connected companies for the home, i think we're going to see an apple car, i was at the pebble beach concourse this year. i met a lot of designers and they're working with apple. so i think we're going to see a lot of different consumer
products. >> well, apple has certainly been acquisition. >> i think you might see that change. it costs about a billion dollars to produce a new vehicle today. who else in the world has that kind of money sitting around except apple? >> does it matter to you whether or not they are vertical in cars, whether they make the whole thing or whether they're a partner with somebody else, a big three -- >> i don't see them partnering. i think apple is a dominant brand and i think they want to push their brand in the consumer space. the magic of apple is the brand. and i think whatever they do they wapt to control that. >> just on general technology and m&a, i mean, we were talking about the nasdaq now down eight of the last nine sessions. misfire on earnings. do you think this whole tech slump is going to make the environment for m&a more attractive where bigger cash rich companies like apple are going to take advantage? >> absolutely. i mean, we see this right now. you're going to see a lot of
money from the east. you're going to see people from europe. i mean, the tech companies are downright now, but the earnings are going to get better, i believe, over the next couple of quarters. and the enterprise market is still very strong both for enterprise and for security. >> i was talking to jon fortt about what's hot, where the money is going. and he was saying that there is this narrative right now that it's all about cloud, and not so much about devices. >> well, look what happened with amazon. amazon for the first time made -- well, i guess the second quarter made some money. aws is the biggest cloud company. they have more capacity than the other three companies combined. and you're going to see that continue. the cloud is everything. the cloud is like a bunny. you leave it alone, it multiplies sfwl there's like ten bunnies. a lot of people expect apple to do something in health. i mean, they already have some capability with the watch. >> right. >> but the argument's been made that's just a taste of what's coming. do you think that's true? >> i do. i think the iwatch is an amazing device. and i think it connects you to
your records, it connects you to data in a way you couldn't imagine before. and to your point with the cloud, people are going to want to access their medical records. i want to go to any doctor and i want to be able to access my records safely, securely and on a consumer device. >> i'm looking at some data sort of on a related note from dow jones industrial average venture source which recently showed funding for start-ups broadly fell 25% from q4, largest drop since the dot com bust. are you seeing that kind of sluggish activity? >> we are. but it's interesting, it's not that there's a lack of money. when the internet buzz happened it's because people didn't have anymore money to invest, the big funds. today the problem is there's no exit plan. so you have all these funds who've been selling to each other driving the valuations up. how do they get out of the market? look at secure works went public recently. the stock's gone nowhere. so where's the exit plan for a lot of these companies? >> so what changes that? >> i think you need the markets to come back. i think we're just in a very negative, pessimistic view.
the earnings are down. i think it's going to take a little bit of time. we need some of these tech companies to go public. the young entrepreneurs today don't dream about this. i mean, when i was younger i dreamt about taking a company public. today people don't have that dream anymore. >> yeah. i mean, ken langon would argue going public now was not what it was like when you and i were young, right? regulatory hurdles, capital markets, media works a lot different now. it's harder to be a public company. >> it's hard to be a public company because of compliance issues. one of the programs we work with is we work with a company called deluxe corporation. we're giving away half a million dollars to two towns that are finalists. people can go online and they can vote for this, but that is the spirit of entrepreneurism in america is these little towns. going public is a lot of work today. >> i'm glad you brought up the spirit of entrepreneurism.
it is small business week, which is another reason we're happy to talk to you. >> yeah. >> but we are getting word there's a lot of pessimism. the small business index, which we've been citing the nfib at a two-month low. there are concerns about the election and some of the election policies out there on taxes and health care. what's your read of it? >> i think it's temporary. this is still the best time in history to start a business. and the only security you have in life is yourself. you know, i would say to people the best investment you can make is actually not the stock market, it's in your own education, in yourself. and starting a business it's the easiest and best time to do that. and we're seeing that across america. we're seeing that in little towns where people want to start. they want to create a great future for themselves. the election isn't helping things. there's a lot of confusion with the election. i think that's really hurting the market. >> it's got to be adding to the uncertainty on hiring and spending and all sorts of plans. >> who knows what's going to happen with taxes, who knows what's going to happen with trump, with hillary. uncertainty is bad for small business.
>> robert, we'll leave it there. thank you. >> thank you very much. >> good to see you. we were just talking about tim cook, of course. it was a star-studded event last night at the met gala where apple was a big sponsor. cook joined by the co-chair of the night. the theme was fashion in an age of technology and no shortage of tech execs in attendance. elon musk seen here. and uber ceo travis kalanick who arrived at the event of course in an uber. along with all the stars, taylor swift, katy perry, madonna, emma watson. >> you're forgetting the best dressed. claire danes lighting up. if the theme was fashion in technology, that dress killed it. taylor swift did pretty well as well. everything was silver and everything was metallic, which is i guess how the fashion world interprets technology. coming up on squawk alley, the co-head of investment
let's get to the cme group with rick santelli and the san tell ly exchange. hello, rick. >> hi, carl. i'd like to welcome in my guest jim paulsen, and thank you for taking the time this morning. >> you bet, rick. thanks for having me. >> and it is fair to say, jim, you are bullish, and write some good pieces, and some things to worry about for the most thing bullish, and you are believing another stab at the highs on the eq equity side. so my question is, is the weaker dollar one of the big reason, and have we gotten too much of what we wished for and it seems that the fwliter associated with the reare bound of the stocks in january which is many ways was a weaker dollar related to tissues, be all of the sudden, it does not seem to be working. thoughts? >> well, i think that what is interesting to me, rick, about the dollar is that most people look at what is driving it is the policy differential between the united states and everywhere
else, and i believe it is about the growth differential, and so you have have to explain why is the dollar coming off right now? it is certainly not that the policy differential is getting closure, but it is suggesting that while the u.s. has been weakening a little bit, the rest of the world is picking up. ultimately i think that is a good thing to the extent that we will get better data abroad, even, and i think that the u.s. will pick back up again, too, we will get excited if all of the economic boats from china and europe and here lift at the same time, it could cause a stock market to make a new highs before the year is out. i real areally think that tlar is scaring the investors, but i am not sure that the dollar should be. >> and i agree with everything that you have said. so my next question is that when the dollar was strong, the multi nationals were squawking and the weather excuse for many quarters. and now, isn't that going to be the case for europe or for japan. in other words, if they are getting some data that is better, and i agree in europe
particularly in spain not so much japan, but aren't their currencies strengthening going to hurt the export business come rain or come shine, it is something that seems to be a lot more impervious to various dynamics where maybe the uptick in the general economy may be due to the glitter waved around by mario draghi and company. >> well, ultimately, it is, and a stronger euro and stronger yen is going to have a influence down the road, but the thing that is driving those immediately is better economic growth. so we could have a period where there is better growth in the international regions, and ultimately as we get into the later this year, and next year, we may see the negative impact on the economies of the strong yen and the strong euro for example, but right now, if we are getting evidence, rick of the global synchronized pop in growth, i think that you will bring the investors back into the market, and get a sense that the bull is resuming. i am not sure that it is, but we
may peak out and have another sell-off before the year is out, and get excited and head up to 2200 on the s&p 500. >> jim, thank you for your observations. always interesting. sarah, back to you. >> always interesting. thank you, rick. now, over the jon fortt for what is coming up on "squawk alley." good morning, jon. >> of course, we will talk apple after jim's interview with tim cook yesterday, and that stock defied the market drop, and the nasdaq drop this morning. also, david solomon the cohead of investment banking at goldman sachs to talk about the market, and finally the major indices down, and the dow almost 200 points, and the s&p is down more than a percent, and what is driving that? all of that and more coming up on "squawk alley." but you see, with the help of her
anything worth pursuing hard work and a plan. at baird, we approach your wealth management strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird. adp employment data and where the jobs are, and will seasonal hires add to the strength of the nation's economic picture? "squawk box" tomorrow on cnbc. good morning it is 8:00 a.m. in apple headquarters in couper tee -- cupertino, and 11:00 a.m. on "squawk alley."
♪ hamilton, america sings for you ♪ ♪ do they know what you overcame ♪ ♪ do they know that you will overcame a world ♪ ♪ and the world will never be the same ♪ >> our congratulations to "hamilt "hamilton" a record 16 tony nominations today. good tuesday morning. welcome to squawk alley, and kayla is out, but jon fortt and myself at post 9 with the dow down 400 point, and so later we will talk to jay conn calcaneus and more about why this market is moving and why. over to you, bob. >> well, the sectors down here, and the sector leaderships are the ones getting hit. and the big movers are energy, financial, mater a