Skip to main content

tv   Squawk Box  CNBC  May 5, 2016 6:00am-9:01am EDT

6:00 am
perfect margarita. it only has three ingredients. and i'll share that this morning at some point. you don't know. "squawk box" begins right now ♪ i'm still standing ♪ better than i ever did ♪ >> live, this is "squawk box." ♪ i'm still standing after all this time. >> good morning everyone. i'm becky quick. take a look at the u.s. equity futures a in the hour. you will see there are some green arrows. yesterday the dow was down almost twim digits after a 140 point loss the day before. this morning the dow up. s&p futures up over 8. the nasdaq finally indicated higher. it's been down something like 9 of the last 10 sessions thanks largely to apple shares, which have been down again and again and again something like 12 out of 14 sessions.
6:01 am
you can see? morning the nasdaq is indicated higher by about 22 points. nearing correction territory. wti trading up about 3%. a pop of $1.34 to $45.12. among the reasons for the surge in prices escalated fighting in libya that's disrupted production there. some canadian pipelines shut down as the precaution after a wild fire shut down the oil city of forth mcmurray in canada. weekly jobless claims forecast. james bullard is in southern california today to speak about the economy and monetary policy. and alibaba and merck reporting results before the opening bell
6:02 am
and also news corp, square and gopro after the close. and don't miss an exclusive interview with john williams. that happens this afternoon at 1:40 p.m. on power lunch. >> bullard an here a lot. >> he comes here a lot. >> if he wants to say something. >> he could some here and that's it. >> so many approximate of them the time that the if they really want to say something to us. come here and do it. else we're not going to cover it. fitbit first quarter profits fell. costs nearly tripled and --. expected to fall well short of analysts expectations. whole foods kept costs under control. also cut prices in the face of stiff competition in same store
6:03 am
sales fell a little more than analysts had forecast. cutting its full year outlook. stocks doing okay but kind of had a long fall. and i can't do it. used to call this yakky. i yas
6:04 am
>> and the media business. >> professionals. >> professionals. >> and now they are trying to sell subscription asks things. >> you have been on it? >> i've toyed around with it. yeah. we actually internally use it here at cnbc sometimes. >> here. >> yeah. >> we're a media organization. >> we are, yeah. >> kind of fringe. >> filled with professionals. >> filled with proflgss, yeah. >> april same store sales today. first out of the gate is cost ko. the wholesale warehouse april comps were flat. stock is down about 53 cents. >> tribune's publishing board unanimously rejects the takeover offer. tribune says it will proceed with the strategic plan to revive its print business. >> craziest thing i ever saw. sold this stake to this guy two
6:05 am
months ago at $8.40. they thought this was fair. and then they claim this is opportunistic. >> the more people want you the more you think you are worth. >> day also created like 20 million dollars out of ebitda out of nothing yesterday. all said it's either criminal or fantasy. there's something amiss over there. it just bugs me. >> produced lots of news from some of the world's best known henl fund managedge fund manage >> one of our historical sign post os after company in trouble is when numbers of senior people leave over a short period of time. tesla fits that bill. >> elon should just have a battery company. if he could create batteries that powered houses. if that happens it's truly transformational. it is very expensive. it is very volumal. so buy it at 200.
6:06 am
>> there is legitimate public policy concerns about any consolidation in healthcare given concerns in pharma and pricing. >> amazon, think about the long-term secular trends in its favor. first people want to buy more conveniently. that has immediate tail wind into the retail business which we think is going to be worth at least $10 billion in ten years. >> that game is over. >> people are trying to bottom fish in this game think hag the so stock is cheap but we think it is anything but cheap. >> i do have a real problem with apple in that steve jobs is the man. and what is their product cycle going forward. i this i apple is going to be diminishing in importance looking forward a generation. >> unbelievable. kate kelly joins us now with more. clokelly a lot of that was interesting. the tesla thing from chanos was
6:07 am
interesting. -- [inaudible] >> -- because of amazon web services the cloud unit. >> gundlach. start preparing for cloud services in the u.s. because president trump is going run up the debt. >> -- he's conservative. people asking afterwards is he endorsing him? >> -- when someone is a master of non consensus thinking looks at the conventional wisdom and says trump's gonna -- that got me interested. >> what was his theory behind it on why the conventional wisdom is all wrong on that. >> he wouldn't -- >> -- landslide -- [inaudible]. >> jeb bush just totally lacked organization and his campaign
6:08 am
slogan should have been wtf exclamation point. >> and the -- said get out of the market completely. >> -- [inaudible]. >> -- couple of hieghlights. a couple of huge movers from the morning session. kraton's polymers. a specialty chemical company, up 15% by the close of trading yesterday. here is what roczen had to say in summary. >> it is a specialty chemical company that trades as though it is a commodity company. it is our view that the stock is materially undervalued. we looked relative to his peers, relative to the market. and relative to our view of intrinsic value.
6:09 am
>> -- they were saying look this is a roll up strategy. we're concerned about the unfunded real estate loans and laid out his thesis and by close of day the stock was down 4% which was an improvement from the 13% or so it fell in the initial hour or so after the presentation. take a listen. >> at best for this bank they are not going to be able to sustain earnings growth and they are very much priced as the growth stock. and at worse we could see real funding pressures and pressure on the balance sheet as well. when real estate markets come off this period. >> if there was an overarching theme i felt a lot of people were talk akd commodity cycle and specifically oil and that drove these ideas. one recommended buying royal
6:10 am
dutch shell. he likes their lng business which they got as a result of the deal with bg. david einhorn. short caterpillar. not a new idea. >> how long has he had that? >> he basically thinks there is further down run. zach schreiber, he says short the saudi riyal. he thinks they are structurely insolvent to the tune of 5 trillion dollars. >> -- trying to sell a stake in the oil company. >> exactly becky. and he's using the -- valuation as the basis for his math. and jim chanos is short mtn
6:11 am
group. long story short, africa to him is a commodity story. those economies particularly. and this company is going to suffer as a result. >> that's interesting. because he's been playing commodity related shorts for a long time. >> absolutely. >> very early with caterpillar. always interesting to see how he has this theses of the commodity slowdown and looks down the road to find links. >> and africa has is a place that has to mine and drill commodities and sell them and used to depend on russia and cuba and now moved toe china and china is lowing to slow down which is going to hurt africa and then tellco and the impact there. i right. >> and people playing straight against china has a tough time with times because a big economy or big government controlled economy can do a lot things otherwise so it is always interesting to hear the macro pieces. >> this the morning there was a fund manager from cmtdy, which
6:12 am
is a commodity hedge fund and he said the lows are in in oil and he thid said i this i the collapses of the chinese economy has been put off a few weeks or few months but i'm sure you will hear it's coming in the afternoon. and he's absolutely right. and druckenmiller talked about the theme how the ease in money isn't working and corporate debt is squandered. >> and the last time 2005, it was on record about the financial crisis and it happened three years later. he's been on this thing. sent me some weird message the other day i didn't really understand but he definitely is thinking maybing it is coming to pass. >> can the gold is pretty much the only thing he likes. >> vale resorts, which actually took a hit because people were
6:13 am
confused what it was. >> i just hit up. >> right the -- >> it's gone from 30 to 140. >> there is nothing do with -- >> shareholders are not -- let me talk to him another. i'm not even addressing you. it has not getten the message yet that the world is ending. snow and flooding and people are going to be on the wheels going down on the rocks in vail. but that stock's done nothing but go up in the face of snow disappearing in the northern hemisphere. >> you know why the stock's gonna occupy though right? >> -- >> they made about a million acquisitions in the last five years. >> they are still in the ski business. >> they are still in the ski business but the reason the
6:14 am
stock is up ultimately is a function of current revenues and current profits. i'm just suggesting to you. >> so those might go away when there is to more snow. >> i'm -- [inaudible]. nobody is thinking the snow is going away in 20 years. >> they predicted it to be gone by now on the east coast. they did. five years ago. for children growing up you weren't going to know what it was take a look at what's going on this morning. the futures. dow looks it would open up about 60 point huer. the --. let's flip that board around. in europe overnight.
6:15 am
while everyone's been sleeping. sort of a mixed picture. everything is up marginally if not a little better than that. overnight in asia. markets in japan and south korea were closed for a public holiday but what you can see there is things again marginally up. and let's take a quick look at oil and the 10 year. wti crude at 44.77. up this morning but again down from, what is the high in the past week or two? 46? $47? and then the you look at the 10 year right now we're looking at 1.793. and finally gold which mr. druckenmiller would like everyone to get into immediately, as owe sell off all your stocks. flip it around. show everybody gold for one second if we could. thank you very much. there we have it.
6:16 am
$1278.30. the now and s&p on pace to post their second straight week of losses. the nasdaq falling for the ninth time in the last 10 days. nearing correction levels. joining us is richard steinberg. also with us is peter bookvar. we get to see you a lot. so hang on just for a second. rich, i want to know what you are going to do about all this and whether frankly you agree with mr. druckenmiller which is basically to sell everything immediately. >> that is just the -- i don't think you sell everything immediately at all. doug cass, a front of mine, says the market has no memory from day to day right now. and that is the market we're going to stay in right. now fear of missing the upside and the downside is going to
6:17 am
keep us in a short run andrew. the key will be when investors flip the switch to 2017 earnings. this year's earnings have come down from 120 bucks to about 118 in change. next year earnings appear too high about 135 dollars. so i think we have to see where trends continue but i think we're going to grind it out. there are some areas starting to concern us in overvaluation in the dividend space, which we invest in and our analysts are finding it harder to find names that make sense. but i think investors so you would just use their cash on pull backs to showily put money to work and not be in a huge rush. >> what does that mean in terms of now -- in terms of the trading range, is that a function of the election? a function of brexit? what is that? and exactly where would you put the money toe? >> i think that the range will
6:18 am
be until earnings start to come through into the second quarter. and where we are putting money now is even though you have had some disappointments in the large name, i think liquidity is going to be key going into the election, going into the fed decision so that you have the ability to maneuver. so we've been putting names in the top 25 names in the s&p even though there's been some disappointments. money in dividends. our value guys are starting to find more names in the bank sector. but that thesis is going to be really driven when the fed starts to flip the switch again and that is going to be a slow road. >> peter, your negativity is winning out right now. >> well i think we're at the end of a cycle. we're at the end of a profit margin expansion cycle. we are at the end of a multiple expansion cycle. we are at the end of this modern day monetary extremism cycle. we're at the end of an economic
6:19 am
cycle, a credit cycle. and in the context of markets that in my opinion are still very expensive. and i think that is what creates the danger in markets generally speaking. >> you may be right. the question is when? >> well that is obviously in this age of central bank activism -- >> and you have been thinking the this for some time. >> right. but every time we get a new step of monetary activism it continues to push out what i think will be inevitable. but i think the most noteworthy thing has been the pushback of the ecb and the bank of japan have done. the first sign that markets have gone continue -- contrato what central banks are started to achi
6:20 am
achief. when we come back the short sellers in attack mode. details from the report next and donald trump joins us. we have a lot of ground to cover this morning including his plan to win support from the gop establishment. "squawk box" will be right back. who are you? i'm vern, the orange money retirement rabbit from voya. orange money represents the money you put away for retirement. over time, your money could multiply. hello, all of you. get organized at voya.com.
6:21 am
6:22 am
6:23 am
his tesla motors posting a busted loss. giving a bullish guidance for production. moving its target up two years to half a million vehicles annually by 2018. earlier on cnbc famed short seller jim chanos elaborating on his short position in tesla. >> one historical sign post of a company in trouble is when numbers of senior people leave over a short period of time. tesla fits that bill. we have a chart we've got of senior executives of leaving tesla is a flood in the past few years. and that is not a good sign. a company that can't forecast
6:24 am
deliveries one quarter out and yet everybody is confident what they are going to make in 2020 or 2025. >> tesla ceo elon musk addressing the criticism on the conference call. >> convincing the nay sayers, i think that will be basically never. what i find ironic about is nay sayers is the very same people will transition from saying it was impossible to saying it was obvious. a ha ha ha. >> shares initially rose as much as 8% in after hours trading before pairing back gains. joining us is colin rush, a senior research analyst at oppenheimerer and thanks for coming in today. >> my pleasure. >> which side to you come down on? jim chanos makes some good points. two production and manufacturing guys leaving at the same time tesla is upping the production time. what do you think?
6:25 am
>> we're cautiously optimistic here. the company set an extremely high bar for them to reach. and elon did note on the conference call last night that some of o these production goals were aggressive and they wouldn't meet some of the deadlines they were setting for their own suppliers. and so as we look at this company they have set these extreme goals and gotten most of the way there over time. and that's been fluff to support the stock. we do think they are ramping at a rate that is going to demonstrate significant operating leverage and that is really what's at stake for this company right now. >> what do you mean specifically. >> as they ramp sales, they have set up enough infrastructure that they are going to see we see 15% increment operating margins. >> because they built the infrastructure ahead of time so they are ready. >> absolutely. going to have to continue to invest but not the same rate to date. >> why do you think the two executives left? is this an issue where they
6:26 am
didn't think they could meet that heightened time line. >> my sense after the call is they need to go into a higher volume manufacturing and needed to bring some additional talent in. think they have gotten pretty for a and they are going to make some impressive high hires. and they can do that. >> i it's amazing to see the number of consumers who are willing to put money down to reserve one of the model 3s coming out. that is something i've never seen with any auto maker before. and a lot of people say the cars are just amazing. you do think that the profitability is there. you would say cautiously optimistic. but do you tell people to buy it here? >> yeah i think the big overhang right now is on capital risk. they have accelerated ramp, they are going to need more capital. they talked about it. the question is when and how much to raise. and once you take the over hang there off the other next
6:27 am
question is substantial demand and execution. the folks bullish are going to give them the benefit of the doubt on the production ramp. >> do you look at any of the competitors? how far ahead of anybody else are these guys? who is the next guy behind them? and how far in terms of catching up? and can they? >> as we look at this, i think the bmw i3 is kind of a disappointment in my view. a glorified hatch back without a great range. so we're looking at mercedes and at this point at least two or three years behind on something affordable for folks. >> what about a latest announcement we just heard with fiat chrysler hooking one google too? that sounds like a different sort of collaboration. we haven't seen direct clapgs between a slk val guy and a
6:28 am
detroit guy. >> we a --. to see those two organizations try and work together i think will be an interesting experiment. but seeing success out of it from a product standpoint i guess i want to see the results before i get too scared about anything there. >> colin, thanks for coming in. >> thank you. >> it is smie owe righcinco de ? do we have anything planned at all in we have seen on twitter there was a margarita thing. >> you are the king of margarita. >> i am. i'm like paul mccartney. doesn't smoke pot anymore. he says if i want do anything i have a margarita and a glass of sha chardonnay. >> i feel like we did something once on cinco de mayo. might have gotten in trouble for -- >> it wasn't a safe zone. we were talking in relation to
6:29 am
something -- >> i -- >> i'm treading on thin ice here even mentioning margarita. can i just tell you. i three things. ounce lime juice. two ounces pure agave tequila and then agave nectar. no triple sec no kwan trio. >> we do frozen. >> stop the presses. likes the frozen. >> get me an umbrella. put nit theit in this there. makes it better. >> do you like getting caught in the rain? >> totally. >> i what's the next line of that? >> it's spin class on steroids.
6:30 am
figuratively i max is launching a super size -- it was --. 2014. >> and it said end of snow and a hundred years from now. that's what it said. but let's just read the article. and that's what it said. >> it said slowly going away though. >> slowly yes. >> and bobby kennedy said well why worry. bobby kennedy said no kids are going o have sleds anymore by 2011. and 2015 one of the biggest snow season os --. a look at yesterday's s&p 500 winners and losers ♪ we could have had it all ♪ falling in the deep ♪ ♪ i'm sorry for everything that i've done ♪ ♪ but when i call
6:31 am
♪ you've never seemed to be home ♪ ♪ at ally bank, no branches equals great rates. it's a fact. kind of like grandkids equals free tech support. oh, look at you, so great to see you! none of this works. come on in.
6:32 am
♪ ♪ (charge music) you wouldn't hire an organist without hearing them first. charge! so why would you invest without checking brokercheck? check your broker with brokercheck.
6:33 am
6:34 am
welcome back to "squawk box" this morning. time for the executive edge. and we're talking fitness this morning. a new way to super size your exercise routine. good morning. >> it is always new. it is always new andrew. this is imax. the latest in spinning. i've already been i think through the himalayas. the idea is you get to watch an imax movie you but got to work for it. this company is now entering the
6:35 am
very competitive fitness business and what they are offering is 50 minute classes, set up on the stage just like in the movie theater. of course the movie goes blank when i've got the gopro on. charging $34 a class. on sale right now, you can buy a package for $350. come on give me something here an the screen here to go with. you can pedal through a new york city scape. you can pedal through the hawaiian islands. and i guess the screen is having a problem. this is their first class. their first launch class. there we go. so we're pedaling through the snow. and again they are going there are $350 a month. so it is not exactly cheap. but in the boutique fitness world, you have to keep up. and two years in beta, they believe this is going to be the newest thing. if it works out here in brooklyn, they will very quick they tell me launch it across
6:36 am
the country. they do believe this is taking spinning to the new level. i got to say they told us when they were testing this they were concerned people might get nauseous or seasick. in a theater you are in a chair so it is not like you can fall out. but on a bike it is a different situation. i think we're climbing the mountains now. and we're going to be talking about it. back to you guys. >> thank you dianna. i don't know. maybe we should do this all together one day. >> under the desk for the entire three hours is this. >> i was thinking do the whole show on bikes. >> if you have ever run to a live shot. >> -- >> lost your breath it is a panic situation. you have to talk but you can't. and you make yourself and you
6:37 am
can actually phi teal like you are going to pass out. airlines have raised concerns that staffing level at airport check points are too low and the government is responding. the tsa will add airport staff and bomb sniffing dogs for summer. and ramp up enrollment efforts for pre screening programs. homeland security secretary jay johnson asked secretary to prove funds to cover officer overtime and meet critical short-term needs. you have to do it but you think about the actual -- what are the percentages of really at risk events? that it's just so frustrating. you are really just doing that -- if you don't do any type of profiling at all, if you are going to check the 90-year-old lady in the wheelchair and the 4-year-old kids and everybody gets equal checking, it is like a six sigma event.
6:38 am
like one in a billion -- >> -- if they check you out first you can go through the faster pre check. >> do you think the airlines should have to pay for this. >> they do. >> but in a more meaningful way than now. >> they do and if passengers too. if you look at the fees and -- we're paying for all of this. >> i think we're paying as taxpayers. if you look at the full cost relative to your ticket cost. >> as a consumer. i've been amazed if you sit down and break down the taxes and if you look at the prices on the ticket and break down the taxes it is pretty phenomenal. >> they always pass it along. that is the other thing that -- put all these things on business you don't really understand that it eventually gets to the person you are not trying to saddle with the expense. you know don't pass it along, bastards. >> when we come back, choice
6:39 am
hotel missing the quarter. the ceo joins us to talk about the quarter and the health of the hospitality business. stick around "squawk box" will be right back. ♪ 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, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t.
6:40 am
something we'll show you. through small things, big things, and spur of the moment things.
6:41 am
6:42 am
welcome back. choice hotels, one of the largest lomging companies with over 6400 hotels in 40 countries is out with results yesterday. missing earnings expectations, profit down 9% year over year. the economy metric, was up 1.2% in line with estimates. joining us with more is steven joyce, choice hotels international president and ceo and thanks for being here. >> thanks for having me. >> at lof people looked at rev par and said those are pretty good. >> we had one expenses, business development, the tax man hit us a little bit. and some investment we were making in future growth. but it was interesting because last year was such a strong
6:43 am
first quarter. it was double digits. and so this year coming out with that comparison a little tougher. as we get into the year. we're going to have a block buster summer. gas is down 70 cents a gallon. our customers view that as a raise. >> when is the most -- >> second and third quarter. the summer months. we do a lot of business travel as well. particularly with the new brands. we opened two in new york and just got written up as the best value in new york. but yeah t summer months are big for us. we represent the 99% and those folks are confident. they like the fact that they have got a job. they feel good about their employer. and they feel like i've got a lot more disposable income because i'm not playing nearly
6:44 am
as much for gasoline. and as a result our bookings plus our surveys of our kurps, they are going to hit the -- >> i love a company who can talk about the 99% is feeling great. you hear the turmoil in the election and how people don't think the economy is going well. how do you match it up? >> i actually think that is what somewhat impacted the first quarter. i think there is so much discussion of the world is ending in the pursuit of a nomination that i think it causes concern. and the market was volatile as well. i think that is part of it. and look, we knew we were going to have a -- not a block buster quarter because of how strong last year was. but even i was surprised by there was a little tentativism on folks. watching the market and watching the debates and going oh is it
6:45 am
really as bad as they say. and now they are going wait a minute, my company is doing well. i feel good about my job. i'm spending money and i'm taking my vacation this is summer. americans think that is a good-given right anyway. so we're look at what we think is going to be a very positive re of the year. >> that is great. and i understand every reason you see that. i guess when you hear about that you wonder what could change that environment. and i think travel in the united states will be great. particularly because a lot of americans don't want to go overseas after paris and after brussels but then you hear things like zika virus and things like don't travel in the u.s. >> which i think could be an issue. the government needs to get out in front of it. and i think people need to be made of ware of what the issues are. however we're not seeing that yet.
6:46 am
but yeah, barring something unforeseen we're going to have a great summer and a great year. and if we get that kind of interruption it is usually -- we're spread all over the place because we're so big. but it usually is more isolated. people tend to focus on okay i've hard i shouldn't go here. so you have a lot of the discussion the caribbean, which we're in. and you have a lot of discussion obviously this brazil. but we're not seeing any real impact of that yet. but we, as part of u.s. travel are encouraging the administration to push congress to spend the money to make sure that we are prepared to deal with it in the first place as opposed to waiting till later which is sort of where we are now. but our view is -- our view is we le l deal with that. we will make sure we know how to keep our guests safe. but at this point we haven't seen any real impact at all. >> thanks for coming? >> thanks for having me.
6:47 am
>> and come back. >> will do. merck reports 89 cent a share. 4 cents ahead of expect ed. looking for an adjusted forecast for the year. i don't see that yet. they are giving the regular earnings per share the gap w was --. i'm looking for the -- oh here it is. for adjusted they see 3.65 to 3.77 and 3.71 number. some of their best known drugs that you probably heard of like remicade, down 30%. so you figure that had to be, you know, competition from generics or patent expirations along with singulair. >> down three percent.
6:48 am
>> even in that horrific alglery season. >> flo nase. >> steroid -- >> worried i'm gonna get tested. i'm going to blame it on that. coming up. david katz, investment portfolio manager, his best picks in energy and technology that's next.
6:49 am
6:50 am
6:51 am
6:52 am
market volatility leaving investors searching for values. his ideas and picks, david katz, chief investment officer. we were talking off-camera. you're seeing movement in your stocks. you need movement to make any money, don't you? a little too much movement? >> this was too much. two in january went down sharply and rebounded sharply. we think they're on the mend right now and should move higher over the six to nine months. >> i was trying to get you to sell. no, i wasn't. i was like, devon. and you're actually making money now, aren't you? >> we are making money. it's been too wild a ride.
6:53 am
if you have a 12 to 18-month time it's fine. they've done a horrible job being a public company. they did a second offering that was dilutive at the 15-year lows. the assets are worth $50 to $60. we think the stock is going higher. >> you bought it higher? >> we think ultimately it will be a lot higher from now. if you don't have it, we think it's a very good entry point. >> you have had similar volatility in the other names? >> viacom has been a wild ride as you know. but the news on that has been much better lately. they are did the deal with dish. they're selling a minority interest in paramount. the earnings are okay. it's hit about 7 times earnings. pays a good yield. if you have that, it will be higher over the next six to 12 months. >> sorkin, you made a pretty good call on viacom. that was probably a year ago, wasn't it? >> yeah, but you won't remind
6:54 am
everybody of apple. >> no. >> you just did! >> viacom, didn't you -- >> i have been -- >> because they don't have the -- >> short -- i was short viacom. i don't know if i am anymore, though. >> because they didn't have the other things to offset -- >> because it's very -- when all the new carriage agreements come up it's difficult for them to get a deal. >> their content might not be superior to other content. you have been worried about sponge bob. >> yes. and nickelodeon. >> nick is on the mend now. >> it wasn't before. we think, from here -- >> shocked to come up with something that you had some insight. that's why i brought it up. >> well, thank you. >> not in reference with apple. >> always the other side. >> not in reference to apple. that was actually you may have been right about viacom. okay. next time i won't say it. >> thank you. >> gilliad is a biotech company. typically you're paying 15 to 25
6:55 am
for biotech companies. you get seven times earnings, great yield. great management team. they've been beaten up. we think it's a great stock to buy here. >> gilliad got thrown out because of all the, i guess, over-exuberance for the whole group, right, and gilliad followed everyone else down? >> they had eight quarters where they've beaten expectations significantly. this quarter they missed a little bit. they lowered guidance for the upcoming year. still earning $12. great business. great balance sheet. buying heaps of stock back. shelter oriented management. people are waiting for them to make an acquisition, they've been patient with that. other biotech prices are down now so they can buy a good property. >> it turned into a drug company. down from where it was and well over a hundred billion in market cap. >> whether it's a biotech or a dr
6:56 am
drug company, some of them are dull drug companies right now seven times earnings. >> all right, david. thank you. coming up, our news maker of the hour, presidential candidate donald trump will join us to talk about winning the hearts and minds of the gop establishment. and others. and a lot more. back in a moment. ♪ you wouldn't take medicine without checking the side effects. hey honey. huh. the good news is my hypertension is gone. so why would you invest without checking brokercheck?
6:57 am
check your broker with brokercheck. todd spaletto, president of the north face, we are working on the prototype to match customers to gear. watson, let's give it a try. say it's mid-june and i'm backpacking in yosemite. of our 353 jackets, i can recommend nine. watson, what if it rains? there is just a 3% chance of rain, so i recommend the breathable stretch fleece fuse form dolomiti jacket. a perfect choice watson. no wonder our customer loyalty numbers keep climbing. i believe we can do even better. i like the way you think. i believe we can do even better. i have an orc-o-gram we for an "owen."e. that's me. ♪ you should hire stacy drew. ♪ ♪ she wants to change the world with you. ♪ ♪ she can program jet engines to talk and such. ♪
6:58 am
♪ her biggest weakness is she cares too much. ♪ thank you. my friend really wants a job at ge. mine too. ♪ i'm a wise elf from a far off shire. ♪ and sanjay patel is who you should hire. ♪ thank you. seriously though, stacy went to a great school and she's really loyal. you should give her a shot. sanjay's a team player and uh...
6:59 am
trump in charge. the last man standing is taking the reins of the republican party. he joins us live this hour. from taxes, to potential running mates. nothing off the table. wildfire in canada. authorities in alberta declaring a state of emergency as flames rip through the canadian province. more than 80,000 residents
7:00 am
fleeing their homes. the blaze impacting oil prices, and we have the details straight ahead. tesla kicking into high gear, the automaker accelerating production but not everyone is sold on this story. a famed short seller jim chanos making a bold call against tesla. the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with rebecca quick and andrew ross sorkin. we're about 15 minutes away from our interview with donald trump. the likely republican nominee for president will join us to give us his take on the economy, on taxes on veep selection and much more. in the meantime let's check out the futures. which after a couple of rough sessions are indicated to open higher. europe was a little better
7:01 am
earlier. the s&p up 10. the dow jones indicated up about 74. nasdaq indicated up about 22. here is what's happening. dow component merck came in with quarterly profit of 89 cents a share beating the street's expectations by four cents. rev 30% drop in sales of the rheumatoid arthritis drug remicade as well as currency fluctuations. the stock is up to $55.25. yahoo last a 15-year partnership with at&t. it awarded the contract to a tiny company. yahoo retained sdaat&t's email hosting business. the labor department's weekly report on initial jobless claims comes at 8:30 eastern time. it's expected to though 260,000 new claims from last week, which would be up from 270,000 the
7:02 am
week before. got a number of hitting from alibaba. earnings per share of 302 renminbi. not dollars. shy of estimates, which was for 360. revenue, however, came in above analysts' estimates. like to know the revenue number. >> it's an increase of about 39% year over year. >> what's the actual number? what's it expressed in. >> rnb. it's looking like -- >> count the decimal places. >> 24 billion. >> yeah. that's -- that's a billion. okay. >> that computes -- is that 3 -- yeah. 3 billion? no. it's more than that. >> one key metric -- one key metric. gross merchandise volume on china retail sites was up 24%.
7:03 am
that stock, as you can -- kind of in the middle of its range, but it is up almost 4% on this news. shares of tesla moving higher after the company posted its first quarter results after the bell today. phil lebeau joins us to take us through those numbers. >> we won't talk about the earnings as much as the forecast. the earnings roughly in line with expectations. revenue coming in as expected at $1.6 billion. it's the production forecast that's getting all the attention this morning. tesla is now forecasting annual production of 500,000 vehicles by 2018. that is two years more aggressive or moving ahead two years the target of 500,000 in annual vehicle production. and this is driven primarily because of the strong demand for the model 3. remember, that's the mass-market $35,000 base-price electric car that the company plans to roll out by the end of 2017. they have almost 400,000 model 3
7:04 am
reservations right now. production is expected to start or at least the target is for it to start by july of 2017. oh, and if that 500,000 annual production target is not enough to get you thinking, this is elon musk last night talking about one million in annual production coming by 2020. >> that's my best guess. half million in 2018 and sort of roughly 50%-ish growth from there, then it's probably around a million in 2020. >> let's put that projection into perspective. in terms of annual deliveries, tesla right now is targeting annual deliveries this year of between 80,000 and 90,000. they'll have to really increase deliveries in the second half of this year in order to make the 80,000 target. you are looking at them essentially doing a fivefold increase over the next two years if they're going to get to
7:05 am
500,000 in production by 2018. maybe deliveries won't have to be 500,000 but it will have to be well into the 400,000 range. tesla shares will be under pressure today from the perspective of there is going to be a capital raise. whether it's debt and equity in some fashion. musk says that remains to be seen. they won't be cash flow positive this year. those are two factors weighing in on the stock. notes coming in from the analysts this morning. even those who were skeptical about the target are increasing price targets. they're saying they're going to raise price targets considerably given the forecast. >> that's what the street is keying off right now, phil. the stock is up 4% this morning. obviously looking at some of the analysts' reports and kind of following along with it. phil, thank you very much. >> you bet. with the jobs report just a day away investors will be
7:06 am
keying in on fed-speak today. st. louis fed president james bullard speaking this morning. and this afternoon san francisco fed president john williams enjoys the power lunch. bob dahl, great to see you. >> thanks, becky. >> we'll talk about the fed first and maybe earnings. the fed is a key. we just saw a lousy adp report yesterday. lowest in three years or something. a bad or good report on the jobs report what's the feeling? >> the adp report suggests not as good of a number as we have seen but it still won't be a bad number. we've spoiled with the 200,000 per month. my guess for this year as a whole is 175 per month. to me a 150 would not be disa disappointing at all.
7:07 am
>> on an economic respondefront >> the fed, they talk too much. in my opinion. they need to move rates higher. they want to, and if things are quiet overseas i think they will in june or july and then maybe again in december if the data is good enough. and i hope it is. that would be good news for everybody. >> janet yellen has been shockingly dovish. the last time she spoke. not much change from that with the last statement from the flmc. >> no question. part of what she is watching is what's happening around the world. other central banks are doing things to take the currency down. she doesn't want the dollar to resume the big upward move. it's behaving so far and she wants to make sure it stays the case. >> i agree world events are captivating this fed. maybe as a necessity. we've become a much more global place. if that's the case, can we almost take a june rate hike off the table because of the british
7:08 am
potential exit from the e.u. and wanting to see how the vote goes first? >> that could cause them to delay to july or later. my guess is we get to june and it's not that big of a deal. my guess is they say the devil we know or the devil we don't like the referendum last year. >> if the fed raises rates in july how does the market react? only a quarter, but relatively speaking with other central banks at negative interest rates, what does that mean? >> again, it's a whopping one half of one percent from 25 to 50, as you point out. a lot will depend on what happens with currencies. if currency behaves, the market will be fine. what it's signalling, becky, is the world is healing and doing a little bit better. >> do we eventually drag some of
7:09 am
the other central banks along with us if we start to raise rates? >> that would be good news. i think that will take a little more time. >> the currency markets. the central banks have been tied to all of this incredible volatility with the currency fluctuations and everything that happened in january and february, with concerns that our economy would not be strong enough to pull out of it. and the gdp read for the first quarter was pretty lousy. that may be enough to put some pause for the fed. >> it was if you really believe the 0.5%. we know the history in recent years. the bounce is coming in the second. i think in the second we get 2.5. maybe as much as 3. don't believe that either. we're stuck at the 1.5 to 2 where we've been for some times. >> talking about earnings. >> that's the key. >> not a great earnings season thus far. >> it will go in the history book of the worst. second quarter looks better. the key is the second half, becky, can we get improvement. three variables in my point of view.
7:10 am
the dollar, does it behave, not go back up. two, oil, does it not go back down. and three, i'll call it the isms and pmis, the manufacturing side of the economy, does it continue to show a little better news? >> if so, earnings will be okay in the second half. absent better earnings, hard to think we'll do anything but flap around and go nowhere. >> when i brought that earnings up with warren buffett he surprised me last week. he said we're not record levels so i don't know that -- i being him, he didn't know if we should expect much improvement from this point. >> you know, we're not going to get a ton of improvement. the easy -- in earnings improvement the easy money is in the rearview mirror. that doesn't mean we can't have a little better top-line growth leading to a little better bottom-line growth. it's not margins. margins are rich. can't go a whole lot higher. i agree with that. >> economic market question. we have donald trump coming up.
7:11 am
>> can't wait. >> in five minutes. >> what do you think you want to hear from him? >> i think we solve a lot of problems if we grow faster. 2.5 to 3 instead of 1.5 to 2. give me a half point from smart techs or half point from regulatory reform. the markets would love to hear that from donald trump. >> bob dole is not coming on the show today. >> got my pen. >> bob doll. >> bob dole is 92. bless him. i am glad you're here, bob. i'm kidding. couldn't get -- >> bob dole. bob is with us for the rest of the hour. >> i have a couple of questions if you have some time. coming up, presidential candidate donald trump joins us to talk about his economic plan for the country if he were to be elected president. one more corporate headline. go daddy reporting better than expected first quarter revenue.
7:12 am
attracting more customers and earning more per user. also raising the full-year guidance. "squawk box" will be right back. k and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪
7:13 am
7:14 am
. stocks to watch. fit bit. first quarter profit fell 70%. costs tripled but sales surged. the fitness band maker is raising its full-year outlook.
7:15 am
second quarter earnings forecast well short of expectations. whole foods reporting better than expected second quarter result. kept costs under control and cut prices in the face of stiff competition. though same-store sales fell more than forecast. company is also cutting its full-year outlook. iac interactive. first quarter profit falling sharply, though revenue rose 6%. and that beat forecasts. the internet conglomerate run by barry diller continues to seek deal-making opportunities for the home adviser business, a review site and for vimmio, the streaming service. nations retailers reporting sales today. costco says that april comps were flat. analysts had been looking for a slight increase and the stock is now down by just over 1.3%. okay. coming up, when we return, presidential candidate donald trump is going to join us. lots to talk to him about.
7:16 am
and of course. jim chanos saying china is the gift that keeps on giving. on the short side we speak to a fund manager who recently set up shop in shanghai and says that's not the case. dow opens up 62 points higher. nasdaq up 20 points and the s&p 500 up about 8 points. we'll be right back in just a moment.
7:17 am
7:18 am
7:19 am
welcome back. some canadian pipelines shut down as a precaution of a wildfire in the oil city of fort mcmurray in alberta. 80,000 people were evacuated and 16,000 structures were destroyed. firefighters are continuing to battle that blaze. it's actually having an effect
7:20 am
on crude, as we have been reporting this morning. >> crude oil prices have been up. >> up above 45 again. all right. the republican establishment said that he couldn't do it, but he did. real estate mogul donald trump on his way to securing the 1,237 delegates needed to win the gop nomination on the first ballot at this summer's republican convention. mr. trump joins us now on the squawk. newsline. good morning, mr. trump. >> good morning. how are you, joe? >> congrats. they said it couldn't be done and here we are. i know you've been peppered with vice president selection questions over the past couple of days. they're requisite, don. no way around it. i'll start differently. in your heart of hearts, do you think it will be someone from
7:21 am
the 16 fallen, from the probably not miss fiorina, i imagine but will it be from the group of people who also ran for president? >> well, i would say probably a 40% chance within the group. i've gotten to be friends with a lot of those people, and i guess perhaps enemies with a couple, but i've gotten to be friends with quite a few, and i would say there is a good 40% chance. >> even frenemies with a few i'm sure. >> yeah. >> that words becomes -- is it 2016 -- in 2016 that word gets used more and more. i also saw something, donald, that you said about john kasich which may or may not be what people were expecting. i didn't know you talked to him during all the breaks, during the debates, and had a very good relationship with him, because all is fair in love and war, as we know. and the rhetoric that gets thrown back and forth. but you actually made the comment that his -- your view of him has been rising in recent days as far as possibly selecting him. >> well, i have had a good
7:22 am
relationship with him, and i really get along with him pretty well. i would say probably it's unlikely that it will be john. i am not sure that john even wants it. but i think it's unlikely that it will be john, but his -- i do have a good view of him, and i do have a good opinion of him. but i -- i think it's probably unlikely. >> just to follow up on that point, though, the "new york times" said today in interviews with you you said you would probably choose a governor or congressman. do you think it's important that the person on the ticket with you have some experience as an elected official? >> i do because i am a business person. i have that covered. i have so many people who have endorsed me including your dear friend carl icahn and many others. i think we have that world covered. but the political world, though i have been in politics all my life in a different sense on the other side, i think having somebody who can get legislation through and help with that would be good. >> yeah.
7:23 am
>> it's like a 3d chess game, though. you're the final arbiter of what's going on. there are some who think you need to bone up on your conservative credentials. that's why i don't know whether kasich would be the one. then comes to mind maybe i'm sure ivanka suggested maybe a woman, and there are some very able and experienced republican women that could help the ticket, even -- or a latino woman, even, which would help you with women and latinos. so much to think about. you also mentioned you want someone who you have a lot of personal rapport with. >> i think that's necessary. always the first reason is if something should happen, somebody that can serve and serve well and be a great president. that's always -- you always start with that. after that it's really a question of rapport. i think rapport is very important. when president obama picked biden, to be honest, a lot of
7:24 am
people said what's he doing but they had a good rapport together and i guess they figured that out during the debates and biden had run and not done so well but they had a good rapport and seemed to get along well. there is something awfully important about that i think, i agree. >> mr. trump, wanted to ask you about immigration policy this morning. a new study or estimate that came out from the american action forum, a right-leaning policy institute based in d.c. saying that the immigration policy that you have been espousing could cost the federal government between $400 billion and $600 billion. it says it would shrink the labor force by 11 million workers, reduce real gdp by $1.6 trillion and take 20 years to complete. what do you make of that? >> well, i don't think they understand my immigration policy. i want people to come in, and we want people to come in even rapidly, but they have to come in through the system. they have to come in legally. these are the people, they've never -- i saw that report. they don't even have it right. they don't have it right.
7:25 am
so we want people to come in. we certainly don't want to shrink our economy. i think you folks know me very well for many years. we've been dealing for many years, usually on other subjects to be honest. now we're in the world of politics and the world of economies. and the big economies. but i am not a shrinker of economies. i am a grower of economies. but we dob wa want people to con legally and through a system. >> if the veep selection hadn't become front and center i guess our first question here is always about the economy, donald. >> yeah. >> i know you saw that gdp number. here we are, seven years into a recovery, and with the fed at zero and with every central bank in the world, you know, priming the pump, and we couldn't do any better than .5%. i saw some things about your first hundred days, some of the steps that you would take. what's the very first thing you would do to try to jump-start the economy, to get it above
7:26 am
stall speed? what's most important? >> well, joe, one thing i have to do, and i have to say it, and i think it will be tremendous for our country is we have to renegotiate our trade agreements. they're disastrous. we didn't use our best and finest. we didn't use the people who are on your show. we used people who are political hacks to make deals with china, to make deals with japan, to make deals with mexico, to make deals with these massive countries that, you know, we're frankly, when you discuss business transactions, they're very small by comparison to what you're talking about with trade agreements. we don't use our finest, our brightest business people to help us make these deals. and i want to renegotiate trade agreements. i think the trade agreements are a disaster for this country. >> you mentioned you would immediately roll back stome of the executive orders on immigration. what other executive orders would you roll back? there have been some -- nlrb,
7:27 am
epa, take your pick. >> one of the things we want to do, joe, is get rid of regulations. we have regulations that are -- it's interesting. more and more i hear it, when i am out making speeches and have these massive crowds as you probably noticed, 25,000 people. and sometimes at the end i will be signing autographs and meeting so many people, thousands and thousands of people, and the business people, people that are even inclined toward business, they talk about regulation more than they talk about taxes. one thing we'll do is lower taxes substantially. we're lowering the business tax, lowering the tax on individuals. we're the highest taxed nation in the world. we'll be lowering taxes. but joe, more than even taxes they talk about regulations. and it is -- it's terrible. i know from my businesses it's terrible but these people are affected even more than i am. it's incredible when i listen to the stories where people can't even open up small businesses. they have to go through all sorts of rules, regulations. 90% of which have no bearing on
7:28 am
what they do. so i think -- i think from the standpoint of your show and the people that watch your show, we're lowering taxes very substantially, and we're going to be getting rid of a tremendous amount of regulations. and also having to do with energy, it's -- it's so difficult for our country. i mean, it's so, so difficult. i believe in solar and i believe in all of the new forms that we are coming up with. i use solar. but it's about a 30-year payback, joe. it's not exactly something that people are going to be rushing out to buy, and they don't have it perfected. the strength is not there yet. we'll open up energy and get the miners back to work. we'll do a lot of things to spur the economy. >> bob doll has a question for you. >> hi, bob. >> hi, mr. trump. allowing you to put an exclamation point on all of that. seems to me that part of our problem is we're not growing fast enough and we'd solve a lot of problems if we could grow
7:29 am
faster. jobs. income inequality, et cetera. >> right. >> do you think regulatory reform can give us half a point of growth and maybe some smart tax reform another half and we'd grow 2.5 to 3 instead of 1.5 to 2? >> i do. basically gdp was essentially zero, okay. it's been that way. it's been very, very low for years now. and if china ever had that they would go into a massive depression. china, where they go down to 7%, and i watch your show all the time and i am seeing 7% and it's like everyone is going crazy. how could this be possible. other countries the same thing. here we have almost zero, slightly more than zero but basically i am sure it could even be less, you know, because how are they coming up with these numbers, these massive numbers? how are they doing it? so we have no growth. i think absolutely, dodd-frank has to be -- has to be either eliminated or changed greatly. i will tell you, i have so many
7:30 am
friends who are very good business people, and it's impossible for them to do business with the banks. the regulators are running the banks. and you'll have bankers that get big salaries and that are very capable and all of that, but they're not running the banks. the regulators are running the banks. you know that, bob. it's very tough for people to borrow money. they're petrified of making a loan to a really good business person who is going to pay it back, but there is that chance that maybe the loan won't be good someday, and therefore they don't get the money. so many people are calling me, can i help them with a bank. the banks are, you know -- i am not even blaming the bankers. i am blaming the fact that the regulations, the regulatory climate is so bad that the banks just aren't loaning to businesses. that's one of the reasons you have gdp there. that's one of the reasons we have no growth. >> mr. trump, on the tax front, given that you have championed the middle class in so many of your speeches, one of the critiques of the tax plan is
7:31 am
that 40% -- about 40% of the tax cuts end up going to the top 1% under the current plan, at least as i understand it. how do you square that? >> that's andrew. >> i will say this. i am not necessarily a huge fan of that. i am so much more into the middle class, who have just been absolutely forgotten in our country. you know, when you put out a tax plan, you are going to start negotiating. you don't say, okay, this is our tax plan, lots of luck, folks. there will be negotiation back and forth. and i can see that going up, to be honest with you. i know i am talking to your folks but in all fairness we are cutting. during a negotiation i could see that going up. i don't want middle to go up at all. but i could see that going up. and i think that probably will happen, because it's a cut for everybody. and, you know, the wealthy have done well. i am not complaining. i will tell you, this has been an unbelievable period of time for me.
7:32 am
it's been an unbelievable period of time for other people that i know that are very wealthy. it's, you know, but the middle class -- people haven't had a wage increase. one of the reasons i have 25,000 people showing up to hear me speak at one night -- and we turn away 15,000 people -- is because these workers, these incredible workers, these middle class -- many of them haven't had an effective wage increase in 20 years. and some of them are making less money, many of them are making less money now than they made 20 years ago and they're being taxed at a much higher rate and they're working much harder. it's supposed to be the opposite. you're getting older, you're supposed to be working a little bit less maybe. but these are people who work harder, they have two jobs in some cases and they're making less money than they made 20 years ago. that's why you're wondering what's going on and why they're not liking republicans or democrats. i mean, they're not liking either, to be honest with you. they don't like anybody.
7:33 am
they don't like conservatives. they don't like liberals. they're people who work very hard. you got a glimpse -- it was a famous clip where ted cruz went to a group of people who were trump supporters, and they were -- these were smart people, and i guess you saw the little debate they had on the street. >> yeah. >> these are people that have been, you know, they've been disenfranchised. they're smart. they're hard-working, but they've been disenfranchised. and that's what's going on. >> you know, mr. trump, you have hit the economic message very hard and very clearly. it's certainly something that has resonated with the voters. if i think of another candidate who has done the same it with be bernie sanders. i listened to bernie sanders this morning on npr. he says he is not getting out of the primary race until the last vote is counted. he said the reason for that is because he thinks he is a more potent candidate against you than hillary clinton is. who would you rather run against? hillary clinton or bernie sanders? >> well, the system is rigged against him 100%. the system was rigged against me. this wasn't supposed to happen.
7:34 am
the problem they had was that i was getting such massive victories, like in indiana, i won in a landslide. that wasn't supposed to happen. i was supposed to lose indiana. even if you look eight weeks ago and until i went there and started campaigning and, you know, telling people what it's all about. and having bobby knight didn't exactly hurt. >> and lou -- >> he was great. >> genius! >> katie from the purdue team. we had unbelievable support. lou was great. but bobby knight came back, and he came into a stadium with me. we had thousands and thousands of people. they went absolutely crazy for him. i mean, he was so great to me. he campaigned with me for days. i mean, he was an amazing guy. but we won in a landslide. and i want to tell you that it's -- it's incredible when you see the passion in this country. the people of the country are great. they've really had bad leadership. they've been misled so badly. the tax policy is wrong and
7:35 am
unfair. it's really unfair and we're going to straighten it out so everybody benefits. i mean, everybody should benefit. >> but would you rather run against bernie sanders or hillary clinton? >> well, i would rather run -- i don't think i want to say. i think that bernie can't make it so it's irrelevant because, again, she has got -- she was given superdelegates which is ridiculous. given by the bosses. so i won't be running against him. i think he would probably be somewhat easier. i mean, he is a socialist, perhaps slash communist. i think he is probably easier to beat. but i think she is -- i think she's going to be just fine. i probably -- i probably would rather run against her. i think it would be a more exciting race. >> she'll probably raise a billion dollars. i think in recent days you said it would be tough to self-fund your campaign. you're also -- to get a lot of these things through, mr. trump, you'll need to do all you can, i
7:36 am
think, to -- for republicans to hold the house and to hold the senate to get what you want to do through, through a friendly -- through a friendly congress. that means a lot of money raising. and you're going to be raising money from a lot of people that i don't know that you maybe haven't gotten along with for the first part of this campaign, a lot of the establishment republicans. how is that going to work? >> well, joe, you know, it's actually sort of a long answer because i really do have great relationships with so many people, especially the business people. and, you know, of course i went through a very rough primary where i was very harsh on some people, like jeb bush, and you know, you wonder why the bush family wants to sit it out. i was also harsh on his brother. his brother got us into the war on iraq, one of the worst decisions in the history of our country, and i said it loud and clear. it's a horrible decision that was made. when i hear that they're going to sit it out, i think, that's fine. i don't care if they sit it out. i have tremendous support. even politically so many people
7:37 am
are now coming out in support. we're going to have some people that aren't going to want to play the game, and it's okay. if they don't want to. i don't think it matters. you know, like, i learned yesterday, a couple people they don't want to endorse me. i say, it doesn't matter. in the primary i blew everyone away and i didn't have huge support. i am watching now hillary fighting bernie. this will go on for a long time. i was supposed to go out into july and everything collapsed on the other side and i ended up winning. long prior to what it was thought i would. so i am now watching her fight it out. she's going to win again because the system is rigged and he cannot win. unless she gets indicted which is a possibility but i think she is being protected by the democrats. i don't think she'll be indicted even though she should be. she should be because she is so guilty. other people, as you know, who did far less, have had their lives destroyed. she did as much as you can possibly do on that front, and
7:38 am
she will skate away with it. it's a disgrace, okay. but that's the only thing that's going to stop her, if the system is honest and if the democrats don't protect her. otherwise she is going to win the -- she is going to win the nomination over the next month or so because he can't win. it is such a crooked system. and again, she is fighting -- he is fighting crooked hillary. so whether i want to go against him or her, it doesn't matter. i will say this. she, i think, in a certain way, will be easier to beat because she has got so much baggage. >> mr. trump, just a strategy question for you in terms of how to approach hillary. there is a question -- hillary clinton, this is, a question totally about how you do it, if you get into a debate with her, how mean or nasty you can be, how perhaps presidential you need to act. how do you think about all that? >> well, you know, i had the debates, and i never debated professionally before. and a lot of these guys were
7:39 am
debate champions and all of that. that's why they're politicians. all talk, no action. i had the debates. and every single poll -- there are seven polls. they polled the debates. who won the debates. like drudge, a fantastic guy, by the way. drudge and "time" magazine and "slate." they have only polls. and every single -- i had 11 debates, and every single debate and every single poll, i won. in other words, every single poll had me winning every single debate. i sort of like debating, i have to be honest. i was on center stage on every debate, meaning i was the number one person. and i mean, for -- this is since like july. and after the debate started. i was on center stage. i don't mind the debates. i think the debates are a good thing. hillary is not a bad debater. i watched her. she is not a bad debater, but i think the debates will be positive for me. i sort of wish we had more than three. we have three. there are three scheduled.
7:40 am
i think we should perhaps have more than three if you want to know the truth, because there is a lot going on. >> getting back to try to figure out this global economy now. it seems like we're -- it's been something you have talked about a lot. it is more global. and maybe, as it's gotten more global, we haven't always gotten the best end of the deal. but you have made some comments about janet yellen. number one, do you think that she is not the right person right now for the job? would you not reappoint her? would you ask for her to step down? is there someone else who you think should be in there? do you think she should be raising rates now, not raising rates? what is she doing wrong? >> well, i have nothing against janet yellen whatsoever. i have -- i think she has been doing her job. and i have absolutely nothing against her. i don't know her. she is a very capable person. she has people who i know have high regard for her. but she is not a republican. she is not a person that, you know, when her time is up, i would most likely replace here
7:41 am
because of the fact that i think it would be appropriate. she is a low-interest-rate person. she has always been a low interest rate person. i must be honest. i am a low interest rate person. if we raise interest rates and if the dollar starts getting too strong, we're going to have some major problems. you look at what's happening with our trade. i mean, you look at what china is doing to their currency with de-valuations. they're killing us on trade. trade is the single -- and de-valuation. if you want to really take a hard look at what's going on, the de-valuation is the single greatest tool that these other countries are using to absolutely kill us, assuming they have capability, manufacturing capability, et cetera. and china is like a grand master. they are the grand master of all grand masters. and if we start raising rates, i have always been a low interest rate person. now, if inflation starts coming in and we don't see any signs of that, but inflation starts
7:42 am
coming in, that's a different story. then you have to go up and you have to slow things down. but right now i am for low interest rates, and i think we keep them low, and we have to compete. we have to compete in many ways. but when the dollar started going up recently, that was not -- you looked at what happened, and we're going to lose all our business. it's wonderful. it's a funny thing. i love the concept of a strong dollar. in many respects obviously i like a strong dollar. but when you look at the havoc that a strong dollar causes, and i can tell you i have friends in china. all they do is watch the dollar. they love to see it go up. they love to see that dollar go up. so actually, while there are benefits, it sounds better that have a strong dollar than in actuality it is. >> i agree with you, mr. trump. it's a huge dilemma that we face. >> tremendous dilemma. >> the problem becomes, low interest rates, part of the real thing we've seen is it's been a huge contributor to inequality
7:43 am
in society. if you want to look at why the middle class and the people who are less wealthy feel a lot worse off and the rich feel better off it's because of the low interest rate environment. how do you tackle that inequality in a low interest rate environment? >> before you get to inequality we have another problem with raising rates. we have $19 trillion of debt, right? it's going up to 21. we have numbers that are beyond belief. we're paying a very low interest rate. what happens if that interest rate goes two, three, four points up? we don't have a country. i mean, if you look at the numbers, they're staggering. i mean, we have a very low interest -- we have tremendous debt. tremendous. and it's at low interest rates, fortunately. if those rates went up two points, three points, five points, because you know, you have -- i was here during the jimmy carter days. >> right. >> when the prime rate went up to, what, 21 or 22%, becky,
7:44 am
right? >> right. >> i watched that whole deal. that was not a pleasant deal for a lot of people. as we had our beautiful prime deals. solid prime deals and all of a sudden we're paying 21% interest, right? i have seen what can happen. it's not a good picture. but what do we do with all of the money that we owe everybody when rates go up and now all of a sudden we have to borrow at two points more. one point more even is devastating. two, three, four, five points more. it's a real dilemma. we have to be very, very careful, and i am the king of debt. i do love debt. i love debt. i love playing with it. of course, now you are talking about, you know, you're talking about something that's very, very fragile. it has to be handled very, very carefully. >> mr. trump, the lead story in the "wall street journal" today is about 2017 and what kind of premium increases all of these private insurers are going to need after losing a lot of money in 2016 because of the
7:45 am
affordable care act. and it's kind of -- i guess it's not ironic. but 2017, first year the president is out of office is when the biggest increases are coming. i think people actually said 2017 would be a tough year. what's the first thing that you can do, without legislation, to -- in terms of the affordable care act and health care in the country? another first hundred days issue. would you immediately try to -- >> well, if you go back to when this was originally passed, i said whoever -- this was long before i thought about running for president. i said, 2016 and 2017 and particularly '17 is going to be a total disaster for our country because of the so-called affordable care act. obamacare. and it is a disaster. i have been saying it. i said, whoever is president is going to have a problem because the numbers are going to be staggering for -- not only for people and not only for insurance companies, for the country. look at the kind of numbers we're talking about for the country.
7:46 am
and the fact is you have to repeal and replace obamacare. the country cannot afford it. people cannot afford it. it's good for almost no one. and we have to -- we have to repeal it, and we have to replace it, and we have to get it -- we have to get better, frankly, we have to get better than what we have right now because what we have right now is not working. look at the premiums that people -- forget the insurance companies, the premiums are going up 25%, 35%, 45% and sometimes more than that. look at the deductible. the deductibles are going up to numbers that nobody can even believe. you have to almost die to be able to even use it. it's a use -- it's a horrible thing for the country. i hear from the insurance companies, and i certainly know from the people because they're -- their numbers are going up so high and so rapidly. it is a total failure. it is a disaster.
7:47 am
>> you talk about debt. you are to some degree the king of debt. you have also renegotiated debt terms over the years. do you think we need to pay a hundred cents on the dollar or are there ways we can renegotiate that? >> i have borrowed knowing you can pay back with discounts. i have done very well with debt. of course, i was swash buckling and it went well for me. debt was always interesting to me. now we're in a different situation with the country. i would borrow knowing that if the economy crashed you could make a deal. and if the economy was good, it was good. you can't lose. it's like making a deal before you go into a poker game and your odds are so much better. say it again. >> are you suggesting -- i understand you've done this in business deals, but are you suggesting we would negotiate with the u.s. credit in such a way? >> no. i think this. i think there are times for us to refinance. we refinance debt with longer term.
7:48 am
because we owe so much money. nobody talks about it. nobody talks about it until the bubble pops. and the bubble could pop. and it could pop. it could be ugly. you have seen it a couple of times but you haven't seen it as bad as it could be. i could see long-term renegotiations where we borrow long term at very low rates. frankly, we do need money to rebuild the infrastructure of our country. >> there is some precedence in the auto bailout. >> but let's be clear. you're not talking about renegotiating sovereign bonds that the u.s. has already issued? >> no. i don't want to renegotiate the bonds. i think you can do discounting, depending on where interest rates are. you can buy back. i'm not talking about with a renegotiation but you can buy back at discounts, do things with discounts. i am not even suggesting that we don't borrow at low rates long term. part of the problem is when the debt comes due, what happens if
7:49 am
the rates are high and we have no budget that can even conceivably take care of this. this is bigger than any line item. it's bigger than anything we can think of, the debt. if interest rates go up 1%, 1%, it's devastating. if they go up two or three or four percent, that's impossible. start figuring those numbers and put them onto your balance sheet and cost them out. and it would be devastating for our country. people would say where does it even come from. one of the reasons that i like rates staying low. but i would refinance debt. i think we should refinance longer-term debt. and you know, say what you like and we want to save, but we have to rebuild the infrastructure. we have spent $4 trillion in the middle east. and probably more than that. we have nothing for it. absolutely -- we didn't keep the oil. as i always said, keep the oil, keep the oil. we didn't keep the oil. we had $4 trillion plus dollars
7:50 am
spent in the middle east. yet our roadways are crumbling. our transportation systems are terrible. our airports are a disaster. you look at our bridges and our tunnels, they're unsafe and falling apart. we need infrastructure. and the beautiful part about infrastructure is it puts people to work. immediately puts people to work. it's got to be done properly and it's got to be done on time, on budget, you know, not these deals where you're building a bridge and it costs 15 times what it was supposed to cost. it has to be done properly and tight and good contracts and guarantees from good companies that there won't be any cost overruns. we need money for infrastructure. forget about the money for it. we have to fix our infrastructure. our country is falling apart, and we have spent all of this money in the middle east. and it's horrible. we'll build a school. there was a time we'd build a school in the middle east. they'd blow it up. we build another one. they blow it up. they replace it three or four times.
7:51 am
if we needed a school in brooklyn or oklahoma or someplace, we don't have the money for it. it's crazy. the way our country has been managed and run is criminal. >> mr. trump, on infrastructure, president obama along with a number of democrats talked a lot about infrastructure, taking advantage of the low interest rates that you talked about. most republicans, at least thus far, at least during the last term, have said no, they don't want to do it. >> look, i am an infrastructure person. i know about infrastructure like nobody that's ever run for office in the history of the presidency. if there is a strength with me. maybe my greatest strength is the economy, jobs and building. i know how to build! i know how to build quickly and on budget and all of that. and you know, i look at the way they give out their contracts for these jobs. it's -- it's just -- i mean, i know people they get a road contract and they end up going out and buying a mansion because they're going to make a fortune on it. it's ridiculous. there is so much waste, fraud
7:52 am
and abuse in our system. i will be able to stop it. nobody else even knows really what i am talking about, but i will be able to stop it. and i think it will be one of my strengths. i think the military will be my strength. speaking of the military, when they bid out, they bid out and it's so much politics in that. they bid out to companies that are politically connected and they get equipment that they don't even want. they want to get other equipment but that company -- it might make better equipment but the company isn't politically as astute and therefore they get the equipment that they don't even want. the whole thing is -- it's got to be -- it's got to be redone. and it -- it can be -- it could be such a beautiful picture, but we are really behind the eight-ball. but we do have to rebuild our infrastructure. and one of the things we should be doing and thinking about doing is buying back debt, really buying back debt, doing a great job with it, but we have to fund in some way the infrastructure. >> you -- this is an example, i
7:53 am
think, mr. trump. andrew pointed it out. this is not something that's front and center on a lot of far-right conservatives in terms of interest rates. you've never -- you haven't run this entire campaign based on currying favor with the establishment, with the base of the republican party. is this going to be -- you're not going to tack to the right to try to garner more -- i don't know -- more support from that part of the -- >> no. >> you're just -- >> i don't tack right or left. i tack what's right. and that's how i have won. i mean, you know, i have been quite far right on certain things. certain -- i hear i am a liberal on trade, right. >> right. >> that's what i am hearing. i don't know why because all i want to do is have really strong trade deals, already. and frankly, if people are going to be taking advantage of us like china does and like almost every country does -- i mean, every country, we have a $500 billion a year trade deficit
7:54 am
with china. how stupid is that. we have, you know, a massive trade deficit with japan. we have $58 billion deficit with mexico. with mexico! i mean, it's ridiculous. and they tell me i am somewhat liberal on trade. all i want to do is make deals that are fair deals. this has nothing to do with conservative. i would say i'm very conservative on trade. i am a free-market person, but our leaders don't have the capability to negotiate good deals. they negotiate terrible deals. i want to make great deals. we can't be totally free market if we don't have the proper deals. >> mm-hmm. >> we have to renegotiate our trade deals. our trade deals are killing this country. killing this country. >> the other thing i think of, watching both the contests on the democratic side and on the republican side, i wonder whether both you and secretary clinton are inoculated to some of the hardest criticism. i mean, in the general election you're not going to all of a sudden say something about, you
7:55 am
know, whether muslims can come in the country or about women. it's already been done. and it's like you have already been vetted almost. do you think -- sort of to the same extent with what bernie sanders has done to secretary clinton though not with the email issue. people question why did you take that off the table. >> he made a big mistake on the email issue. it's a big issue. >> he's still winning, without talking about that. do you think you learn more to attack her with from that primary campaign, or do you think you had 17 guys going after you. i bet you they have some sound bites ready to run. >> well, sure they do. and you know, it's -- hey, i have had now -- came out the other day -- 66,000 -- would you believe this -- 66,000 negative ads on me during the course of the. >> how much money? >> over $100 million. jeb bush and so many -- they
7:56 am
spent tens of millions of dollars on negative ads on me and i beat them in landslides. i hate to say this for your advertising agencies that are listening but it's almost -- and frankly for your different forms of media. it's almost saying like do ads have any impact. maybe because people know me so well they poo-pooed had, said forget it, we don't believe it. but even in indiana. i went to indiana, and i was there for a number of nights. all that was on television -- the only ads you would see are negative ads to trump. i won indiana in a landslide and won every single delegate. i won every district. i won the overall by a tremendous margin. and won every district. it's -- it's like unprecedented. and they spent millions of dollars of ads. i spent $900,000 on ads. they spent $10 million on ads, and other things, and i ended up winning. so joe, whatever it is -- i mean, i want to do the right
7:57 am
thing. i know the right thing in some cases isn't so popular. we have to make better trade deals. you know, i like free market. if we can do free market, that's fine, but we have to make better trade deals, because we can't continue to lose -- i don't call it a direct loss, but it's a loss in a certain way. we can't continue to have trade deficits with china of $500 billion a year. and we've had them for a long time. i mean, $200 billion, $300 billion. it keeps going up. we've rebuilt china. don't ever forget it. we have rebuilt -- when you see trains that go 250 miles an hour, you look at china, where they came from from 20 years ago and look at them now. somebody funded that. you know who it was? us. to a lesser extent europe and other, but the money they've taken out of this country is unbelievable. i don't blame china. i think it's gareat. the largest bank in the world is a tenant of mine in a manhattan building.
7:58 am
i have very good relationships with china. they know i'm right. i am not blaming china. i wish our people would think the same way. i blame our leadership. it's incompetent. we have incompetent leadership. i have all due -- i have great respect for china, mexico, for japan, for vietnam, which is hot as a pistol right now in terms of what they're taking from our ku country. i blame our leader shop. i don't blame those countries. we should be doing the same thing. >> you were talking about market a and advertising earlier. a headline from the rolling stones, the band, say they don't want you using their songs anymore during your speeches on the way in and out. what do you say to mick jagger about that? >> i have no problem with it. i didn't see that. i have no problem. i like mick jagger. i like their songs. you know, we use so many songs. we have the rights to use them. i always buy the rights. >> one more thing i want to ask
7:59 am
you that's interesting to a lot of people. have you seen, for your supreme court nominee, if you are president, people are pushing ted cruz. republicans have picked guys in the past -- you don't know where they're going to be on a lot of the issues. when a democrat picks a supreme court justice, you know that they're going down whatever the party line is. so i -- that's one guy, cruz, where i -- i don't know. i can't imagine him breaking with conservative orthodoxy. would he be a guy you might think about? >> he would certainly be liked by certain conservatives. ted has not been very well liked. one of the reasons i won is he did not have a lot of support with the senators and with all of the people that he worked with. i had more support than he did, and i am an outsider. so ted has not been that well liked. and i actually liked him. i got along great with him until the last month or two when we really went at it because it was the two of us essentially. >> right. >> but ted has not had great support from his fellow senators. he's had very little support.
8:00 am
jeff sessions of alabama backed me. a fantastic man, by the way. >> would he make a good veep? >> senator jeff? >> yes. >> i think he would make a good anything, if you want to know the truth. he is an unbelievable person. he is beloved in alabama. he is totally respected by every senator. and actually, i think he is the man that ted cruz respects the most in the united states senate. he talked about him all the time. then he came out and endorsed me. and i said, wow, that was great. >> it was amazing. i have heard you intimate that you might go into the convention with some, you know, already with a team selected for certain positions. could you tell us anything for sure at this point about, you know, whether there is chris christie as a.g. or giuliani as homeland security? >> i have had great support from rudy giuliani. i have had great support from
8:01 am
chris christie, dr. ben carson. you take somebody like jeff sessions, though i think he is very happy where he is. he is a very important senator. that's a very good position. it's hard to say leave the senate and do this, right, run an agency. but i have had great support from certain people, and i like that. rudy giuliani has been fantastic. newt gingrich has been amazingly supportive. >> yeah. >> he said it's the single greatest phenomenon in politics in his lifetime that he's ever seen, you know, what's happened here with this whole situation. and i don't know why. joe knows me well. joe, we like to win, right? we sort of expect to win. but you never know. but a lot of people have said that. it's a great phenomenon what's taking place. i don't see it that way, but a lot of people do. >> mr. trump, is there anyone who hasn't been a supporter who you just respect their stance on things? we talk about this in relationship to ceos and board
8:02 am
rooms all the time. you want people who push back who aren't necessarily yes men. are you people who covet who you think have expertise in certain areas that you'd like to get on board? >> i would say there are a number of people who were very negative to me who are now calling and saying i would love to come on the team. i said, becky, to one, how do you do that? this guy was so negative. you have no idea. he was on shows and would say the worst things. i was the devil. now he calls a couple days ago and says, don, i would love to be on your team. i actually asked him. how do you go from saying what you said -- how do you pivot? i would love to have you, i said. how do you make that pivot? he said no problem. he is a politician. i have to say before i get off, though, you mentioned supreme court. >> right. >> the single most important thing, perhaps, i mean, always the economy and jobs and all of that because we have to keep our country going, right, and
8:03 am
security, okay, let's say that tops everything. we need our military built up because our military is in -- it's very depleted. very depleted. scary thing. but the single most important thing right now, after those two subjects, is supreme court. and supreme court justices. and i will tell you that, if i don't win, you will have more of the people that have been put on over the last number of years, and we will have a supreme court that will change this country to a level like you have never seen. you will have bernie sanders types put on the supreme court. and this country will be a totally different country. this country will be argentina. this country will be something that is so different. it will be venezuela. you have no idea what's going on in the supreme court. when you look at the differences in decisions, when you look at the horrendous decisions being
8:04 am
made. and wanting to be made and will be made. now, the only thing holding them back is the fact that, you know, we lost a great justice recently, and -- but the only -- who has to be replaced. and you know, this president, whoever this president is, is going to be making perhaps as many as four and maybe even as many as five choices, picks, and if we don't pick the correct supreme court justices, this country is going to be forever changed. so when i hear all of these people saying, well, we're going to sit it out, i'm going to put on great conservative, smart, wonderful, respected judges. and i will tell you, if somebody isn't there to do that and to counter-balance what's going on, it's so important. and it's going to be a country that you won't recognize in ten years. >> well, i appreciate all your time today. as you do tack into the general
8:05 am
election, i think that, cnbc viewers will probably become more and more important for you to speak with rather than some more other maybe more general audiences in terms of fund-raising and everything else. one last thing. i know you have had trouble getting certain conservative groups. i've been told that the morristown bear school conservative club i've been informed is completely behind you, mr. trump. >> that's good. i have had a lot of support and growth. one club, the club for growth. >> one of those days was in in the last couple of days. not steven moore. >> mcintosh. >> it was the gentleman who showed up at mr. trump's office. >> they're not coming around. >> i didn't know who they were. the meeting was set up by a friend of mine. he said would you see them.
8:06 am
i said who are they. the guy asks me for a million dollars. i said what do you do? you can be rich but you don't throw money out of the window. i said write me a letter. he wrote me a letter asking for $1 million. i politely said no. i said no thank you. a couple weeks later they started doing massive negative ads on me. i said maybe i should have paid him the million dollars. we were in -- i will tell you it didn't matter. >> he told a slightly different story. we had him on the air. he said that you reached out to him saying you were thinking about funding him. that was the story when he was here. >> i never even heard of these people, okay. i'll send you a copy of his letter asking me for the extortion money. >> he admitted that he wrote the letter. he claimed it was after you offered to fund him. i am just telling you what he said on the air. >> he must absolutely be kidding, all right. i guess that's all he can say. hey, maybe i should have paid the money, i would have gotten positive instead of negative.
8:07 am
in the meantime they took hundreds of millions of dollars of negative ads and i still beat them. >> trump tuesday. a nice ring to it. >> you guys have been fantastic. i watch you all the time. it's an honor to do your show. and you know, when you're ready we'll do another one. >> excellent. >> it's been very interesting. >> thank you. thanks for all your time. >> thank you all very much. >> see you later. futures right now, take a look. up roughly 70 last time we saw. now up 65. the s&p up 9. nasdaq up about 21 points. moving on. sohn investment conference producing lots of news from some of the world's best-known hedge fund managers. kate kelly joins us now with the highlights. kate. >> hey, joe. a fascinating day yesterday. we talked about some of the picks that saw some after-market action in terms of what the market was doing after the presentations were made. one interesting thing, though, was the theme of group think, ideas brought up in the past
8:08 am
that a lot of funds piled into and in some cases they didn't work. valeant pharmaceuticals, which is down 84% in the past 12 months. that was touted by bill ackman who didn't present yesterday but attended. as a great long position a year ago. a lot of hedge funds piled into it. it's been somewhat disastrous. here is sound from jim chanos who was short it. >> valeant was genius at gaming the system. that game is over. and so the ability to hike prices on drugs for toe fungus to $8500 from $800 or, you know, compounds like that is over. and that's what i think people are -- they're looking in the rearview mirror here not understanding that this was financial engineering. this was not pharmaceutical development. >> one hedge fund that's sort of an annual presenter at sohn that had a tough 2015 as well as a rough start to the year, larry
8:09 am
robbins from glenview capital. larry is prone for being a particularly prescient health c care investor. his whole presentation was about i don't have any actionable ideas for you today but sometimes you have to hang in there. here is him elaborating on that. >> we tend to be a longer-term investor. there are periods and unfortunately we've sat through one between kind of august and the middle of february where being an investor was certainly muddied up by the choppiness of the macro factors. we first have to figure out is the basic investment thesis intact. if it is we have to hang on. >> robbins is not alone in terms of struggling to perform in 2016. point 72, the family office run by former hedge fund manager steve cohen. flat an being down 8%. dan lobes.
8:10 am
flat. einhorn up 3%. that's an exception rather than the rule. this will be something to watch going forward. people have come up with some single good ideas, but whether they can produce returns is another matter. >> kate. thank you. we have we should say our guest host for the hour made a lot of news yesterday. he was among the news makers at the sohn conference making a trillion dollar -- $3 trillion call, from what i understand, on amazon. joining us right now is mr. pally h palihapitiya. >> most people know by by my first name. chamath. >> you're the founder of the venture fund social capital. co-owner of the golden state warriors. you have to be a happy man. >> pretty excited. >> let's talk about amazon. $3 trillion. how do you get there?
8:11 am
make the case for us. >> so, being at sohn, one of the things that struck me is that a lot of people are trying to be right the next month or the next quarter. i understand why that is, the entire system is sort of structured for short-term profit-making. i think that's impossible. it's just really hard to not -- to be able to be that predictable and to have a crystal ball, that short of a time window out. i stepped back and said what are the broad, macro trends that we can basically rely on for five to ten-year periods. that's what we do when we make private investments. the case for amazon is two things. firstly, they have done an unbelievable job basically driving massive amounts of consumption. if you are a consumer, not just in the united states but now increasingly all over the world, and especially if you are a prime member, you are buying inordinate numbers of things every day. >> raise my hand. that is me. i couldn't believe it. we have to pay sales tax in new jersey for everything you buy online. pay it when you pay your taxes.
8:12 am
i added up my last year's amazon bill and was stunned. >> you're probably buying tens of hundreds of things. multiply that by the number of prime users who will exist over the next five to ten years. that is an enormous business. the second part, which is actually not as well understood is what aws is becoming. aws is now this like very simple infrastructure that everybody uses to build their company. it is literally a utility similar to electricity. and they price it in such a way where you get unbelievable amounts of value at increasingly cheaper and cheaper prices. >> the margins on that, yeah. >> the margins -- >> they did great this quarter. but people worried that business would be commodtized. >> to be blunt, i think that's a lot of non-technical people who don't understand what it is. two facts worth noting. over the last ten years since they've introduced aws they've cut prices roughly once every
8:13 am
two months. at the same time, just last year alone, 700 new features, 40% more than the year before that. so when you're doing those two things at the same time, what's happening is you're disrupting existing incumbents who have no ability to actually offer the same capability at the same price. >> so the argument that there is no mote on that business given that it could become a commodity utility. microsoft, google, others, you don't think can compete in a meaningful way? >> google cloud is the next most obvious competitor. they've done things around machine learning specifically. beyond machine learning, which is a small and specific application for only a small subset of companies, the broad based internet. fortune 500 companies. fortune 1 00. aws is a one-stop shop that nobody else gives you. microsoft is interesting but only to the extent you care
8:14 am
about the microsoft product stack. which less and less people care about. >> on the retail side, the capital intensive nature of what amazon is doing which is so different than alibaba. they don't want to own the shipping component. these guys ultimately might become fedex. is that a good or bad thing in terms of the use of capital? >> i think it's an incredible thing. that's the third part of the puzzle that's also not well understood. what jeff has done -- investors say give us back the money. we're better investors than you mr. and mrs. ceo. we'll allocate the capital. turns out in his case it's not close to true. he is one of the best single investors in the world right now. what he has done is he's taken that money and instead of giving it to us, he has invested in business lines that first drive down the cost for retail. so us as consumers, benefit from cheaper and cheaper prices. then he exposes those to other people, to third parties, so that they can use them.
8:15 am
that's the brilliance of what amazon is able to do. it's this virtuous cycle that allows retail to anoint services at scale and then he turns around and he gives those services to other consumers and businesses to use. it's really fascinating as a company. none of that was obvious even a few years ago. it's taken at least me all this time for the puzzle pieces to come together to see that this is just the beginning of a long-term secular tail wind for this company. >> chamath will be with us for the rest of the hour and the rest of the program. when we come back, though, the news makers keep coming this morning. up next, housing and urban development secretary julian castro joins us. here is what donald trump, the presumptive nominee told us about fed chair janet yellen and interest rates. >> when her time is up i would most likely replace her because of the fact that i think it
8:16 am
would be appropriate. she is a low interest rate person. she has always been a low interest rate person. i must be honest, i am a low interest rate person. if we raise interest rates and if the dollar starts getting too strong, we're going to have some very major problems.
8:17 am
what's going on here? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com.
8:18 am
8:19 am
if we start raising rates, i've always been a low interest rate person. now, if inflation starts coming in and we don't see any signs of that but inflation starts coming in, that's a different story. then you have to go up and you have to slow things down. but right now i am for low interest rates, and i think we keep them low and we have to compete. that was donald trump joining us in the last hour talking about the fed, the economy, and interest rates. rates, of course, are very important to the real estate market. let's bring in julian castro, secretary of u.s. department of housing and urban development. mr. secretary, thanks for being here today. >> great to be with you. >> you heard from donald trump just said about low interest rates. obviously that's been a huge fuel for the housing industry in our country. how do you feel about low rates? what do you think would happen to housing if rates went up significantly? >> there is no question that the last few years have offered great opportunity with low
8:20 am
interest rates. and fortunately what we're seeing is that more and more folks are being able to purchase a home. our housing market has gotten stronger and stronger. we're glad to see that because after the housing crisis that we experienced, what we've seen is that the home ownership rate has dipped to one of its lowest levels in almost five decades. so it's a good thing, of course, to have low interest rates. the other part of that, though is making sure that there is real opportunity for responsible families to get into a home. >> we have seen that there sa historic level of people in the united states who want to buy houses right now but we also know that supplies are down and we haven't seen the permits coming in that we might have expected at this point. is that creating a problem? >> you're right that we do have a challenge with supply. and the president has spoken in different ways to this. one of those is to ensure that,
8:21 am
at fha we are doing everything that we can to work with lenders and borrowers so responsible families can get into a home. also ensuring local regulation is sensible and done in a way that balances the need to create more supply out there. >> do you see this being a massive issue, or do you think that this is something that gets resolved relatively soon? >> my hope is that it will. and the trend is very good, though. it's been very strong over the last couple of years. we're glad to see that. the housing market, where it was just a few years ago and where it is today really is night and day. i think the piece of it that all of us have an interest in working on is to ensure that hard-working americans, folks who are responsible, can own a home. >> how do we do that without putting u.s. taxpayer dollars at risk? i ask this because freddy mac swung to a loss this week for
8:22 am
the second out of the last three quarters. it wasn't a big enough loss that will require a cash infusion from the taxpayers, but it also means they won't be sending a dividend check to the u.s. treasury. >> we can accomplish that by learning the lessons of the housing crisis and keeping in place important safeguards so that we don't slide back, but at the same time ensure that we have a credit access that is reasonable. i have said often that, if the story was a decade ago that it was too easy to get a home loan, the challenge for middle class, hard-working, responsible families is that, in the last couple of years it's actually been too difficult. and so we need to strike a strong balance between those two things. we can do that. and i am confident that, through good underwriting, through the reforms that have been made, that that will happen. >> how do you continue to guarantee that when you see things like the u.s. government trying to sue quicken loans? i was reading yesterday about how quicken loans is fighting
8:23 am
this. if you look back before the last collapse, quicken loans had the best record of loans that it was writing, had the best double-checking of any of the companies that were out there. they've said no, they're not going to pay billions of dollars in what they see as a shake-down fee. if you want to make sure that these companies are still loans, how do you do that when these are some of the exemplary loan companies that are now being held up by the u.s. government? >> i won't comment on ongoing litigation, but i'll say that is looking backward at what happened in the past. the opportunity that we have in front of us, particularly at fha, fha is under h.u.d. is to ensure that we work with lenders and borrowers to create opportunity for hard-working middle class families out there who are responsible and can get a loan and pay on it responsibly. fha business over the last
8:24 am
couple of years has been stronger than ever. i do think that there will be tremendous opportunity in the future, and we're very proud of the work that fha is doing. >> secretary castro, this a chamath. i have a question. what responsibility do you think the federal government has to fix some of the housing affordability issues and liveability issues of some of, you know, our most important cities like san francisco and new york? >> there is a role for the federal government to play. obviously there is a strong role for local government. i know as a former mayor that a lot of local regulation also impacts the opportunity for housing investment and supply. but president obama, in this fiscal year 2017 budget proposal has made an unprecedented request which, if granted by congress, and of course that's a big if, could have a profound impact on addressing issues of homelessness and affordability. and that was an $11 billion
8:25 am
request over the next 10 years so that we could invest in 550,000 housing choice vouchers and rapid re-housing assistance for families so that by 2020 we could effectively end family homelessness in the united states. on top of that, we've looked at creative ways to incentivize local communities to adopt strong local ordinances that incentivize housing supply. we call that our local housing incentives approach. and the thing is that, you know, this is not something that the federal government alone or local government alone or private industry alone can tackle. it's going to take all of us working together to create more supply and ultimately to get more housing opportunity out there to folks who need it. >> secretary castro, your name has been mention the frequently as a potential running mate for secretary hillary clinton. i know you won't comment directly on whether you've spoken with her about that or bring that in. but we spoke with donald trump
8:26 am
extensively this morning. i just wonder what you think her chances are against donald trump and how that debate and battle would carry out over the next several months. >> yeah. you know, i'll stick to h.u.d. business today and let the politics play itself out. >> all right. secretary castro, we thank you very much for your time today, sir. >> thanks for having me. >> okay. coming up when we return, breaking economic news. weekly jobless claims. as we head to a break, here is what donald trump told us in the last hour about regulation. >> it's terrible. i know from my business it's terrible, but these people are affected even more than i am. it's incredible, when i listen to the stories where people can't even open up small businesses. they have to go through all sorts of rules, regulations, 90% of which have no bearing on what they do. i think from the standpoint of your show and people who watch your show, we are lowering taxes
8:27 am
tremendously and we'll be getting rid of a tremendous amount of regulation.
8:28 am
8:29 am
seconds away from weekly jobless claims. about 30 seconds. futures right now indicated up 60 points on the dow. 8 or so on the s&p and nasdaq up 21. ten-year note right now, we used
8:30 am
to look at it a lot. 1.8%. which is higher than any place in europe, as if our debt isn't as -- we should be half of what their debt is but we're not. germany is what? under 30 basis points. last time i looked. rick santelli is at the cme with numbers. >> initial jobless claims for the current week dropped to -- excuse me, rallied up 274 this. . 274,000. we're up 17,000. that's a pretty big jump on any given week. to keep it in context, we've had weeks recently where we were below 250. something that hasn't happened since the early '70s. as important as this is, and i'm sure people will talk about this jump, i don't know what strategic benefits you get at this point if a jumped over 3 or if it was below 2.25, i would think those thresholds might be
8:31 am
something with a little more meat on the bone. we' we'll continue to monitor the kwee equities. the dax has had a rough time like all equity markets do with the currency volatility the way it is, but i am sure the whole world took a sigh of relief with your great interview. donald trump thinks a strong dollar is a real problem. i guess people who shop at walmart won't get those low prices for very much longer, huh? back to you. >> rick, thank you. our guest host is the first -- i want to do the last name. chamath. >> chamath is better. i'll stick to that. >> palihapitiya. >> i got that. i worked on that. palihapitiya. got that. it's all -- we were just off camera talking about a lot of macro stuff, yields and things like that. how much is that -- how much of it goes -- when you are thinking about something, how much of it
8:32 am
is macro and how much is individual? >> now that we invest sort of not just in private markets but public markets, i think about it a little bit. and the biggest problem is like the world is awash in money. when you take that and you take a situation where there is literally no yield available anywhere, we end up in this very difficult situation where assets that i would normally buy, so private company stocks, get massively overinflated. because there is the perception that yield exists there. that returns exist there. for me, just every model that i have ever used to figure out what a company is worth breaks. and you get new market entrants that you didn't even think existed. the sovereign funds come direct with really big checks. they write really big checks now because they have to, not because the company needs it or it justifies it but because they can't write anything under $100 million or $250 million. the few places where you can
8:33 am
generate meaningful returns, you have to be even more precise and you have to step across and over a lot of land mines. it's become really difficult. this environment makes it very, very difficult to price risk assets. >> you are smart. and you probably avoid most of the pitfalls but it sounds like you are describing an environment where less savvy or risk-oriented people are totally exposed. you are sounding kind of like druckenmiller. is it before something that's getting ready to happen? >> in a world like this, i think you have to be a good picker. you just have to. there is no excuse for fundamental due diligence and a deep bottom's up understanding of what you are buying? >> if only one out of ten things are okay. nine out of ten will blow up. >> joe, you're right. right now there is so much easy money. so many people with so much money are looking for returns
8:34 am
that there is, for everybody like me, who has predictably and frankly compounded extremely well, picking good companies, there is a whole bunch of other people that have not, but they still can aggregate large amounts of capital and they put it to work. they're going to put it to work in every second, third and fourth-year company. not the slacks of the world. then those companies will go bellyup and a lot of that value will evaporate. >> you think we are in a bubble environment, that this has been fueled by cheap money and excessive -- >> i wouldn't call it necessarily a bubble. i think this is a prolonged period of investment insanity. it behooves you, you need to be an unbelievably good picker in a time like this. >> can you speak to the political election, given that we just spent a lot of time with mr. trump this morning and how the valley sees all these issues? >> i'll tell you my personal story. i escaped a civil war.
8:35 am
i grew up in canada. on welfare. pulled myself up. went to college. came to the united states when i was 21 years old. and i think the last five years i probably have been a top ten taxpayer in california. so i mean, i am living out what i think a lot of people would love to live out. start at the bottom. and try to do something meaningful with one's life. so as a person, you know, what's troubling to me is just like this idea that -- >> bernie sanders? >> -- there are extremes on both sides that, frankly, don't believe that that's possible anymore. that's a little disconcerting. >> but you are a -- you have a lot of money, and you are a target, but you are a positive force for good in society in all ways in terms of paying taxes, in terms of everything you have done, from welfare to the fifth largest taxpayer in california. to be vilified, that's why i can't believe that there is traction. i wonder about what academics
8:36 am
are teaching our children for someone to be so popular -- >> i think what's really happening -- i learned this firsthand when i was at facebook. i think people want a better sense of equality. i think what people want to see is that there is a chance for everybody to run the race and to run the race reasonably fairley. i think right now what people feel is an asymmetry. >> why didn't you feel it? nothing held you back. what's holding back other people? >> i did, but you know what, i decided to grind. and i decided to not give up. >> so then is it the government's job to instill the grinding ethic in people or -- >> i think that it's -- it's our responsibility -- >> it can be done, though. >> i think it's our responsibility as citizens now to make sure that the systems that could hold other people back are fixed in a way so that they are more bottoms up. i'll give you an example. my father struggled with diabetes for 30 years. he ultimately died last year because of that disease. i say all the time, if i had not been in canada where we could
8:37 am
have access to universal health care, i wouldn't be here because i probably would have had to drop out of college. i would have had to support my two sisters and my mom. but i didn't have to because the government took care of us. that should not be an expectation. in the united states people like myself now can go actually solve and cure that disease. we should allocate capital to do that. when you do that, the next person that could be, me or somebody like me, has an ability to run a fair race. so i think what the time now should be is not about the extremism and the fear mongering. i think what it should be is a realization that there are a lot of really good people of every single persuasion and gender, et cetera, that just want to have a chance to run a fair race. and i think, frankly, when you look at the extremes of either donald trump or bernie sanders both in fact in many ways are saying the same thing. there is an inherent distrust of the system. i think that's a fair feeling for a lot of people to have. so a lot of what we do as investors, particularly my firm, social capital, is we are trying
8:38 am
to build the more democratic, bottoms up society. education, financial services, health care. we put three quarters of a billion dollars to work in businesses that if those things work create fundamental equality for a lot of people. >> as a country we have been trying to do this. we tried with fdr and lbj. we try and try. we try to balance it with the individualism and meritocracy that we have as well. we have seen the system of cradle-to-grave entitlements and what that does to the initiative and the gdp. everybody is worse off. we try to walk this line. but don't think we're not constantly trying to think of a more level playing field. >> i think the difference right now is that what we've seen as a massive schism between two cohorts of people. a great "new york times" article says there is always been a voting class and a donor class. those two things were roughly the same cohort of people for a
8:39 am
long time. now it's as far apart as it could be. the donor class like the kochs and everybody else who is voting for donald trump. that should say something to the people in positions of power today is that they want a different way for things to work. and the donor class is probably now completely, you know, dissonant from the people who do the hard work every day. i think we have to look at the emotion for what that is and continue to try. just because we've tried before and it doesn't work, you have to keep trying. >> i didn't get a chance to follow up before so i'm going to go back to what we were talking about. all this money. it's sloshing around. so companies look around. they don't want to buy something that's over valued. they have nothing better to do than buy their own stock. they may not be making a good decision either. that could be a problem. >> i have a simple rubric when i look at a company. one, is the ceo a psychopath.
8:40 am
will they survive. >> is there a test for that? how can you tell? >> you see it in their actions. the second is are they innovating, are they spending money. the third is how good are they at allocating capital. a tale of two companies. look at a company like amazon. an unbelievably maniacal ceo. he is a fantastic capital allocator and all he does is innovate. then you look at a company like, apple as an example. it's basically the exact opposite. $250 billion rotting on the balance sheet for years and years. they spend more on their building than they do an building a new product. that seems insane for a company that's basically innovated for 20 years. a they have a ceo that's unfortunately pretty lack luster. i saw him on "mad money." it was like human ambien. pretty boring. there is nothing vibrant there
8:41 am
that makes me want to work -- as a person that's worked for great leaders and is around a lot of great technology leaders, it would be very difficult for me to work for him. but i would work for jeff bezos in a heart beat. >> when everybody loved apple did you have the same feeling. >> i would have worked for steve jobs in a heart beat. >> the first thing for a ceo is find -- we're going to have a headline. find out whether the ceo you're investing in is a psychopath. we'll use that. that molds all the different media, doesn't it? >> it does. >> that will be very hit on. when we come back we'll have much more from our guest host today, chamath palihapitiya. he is also the co-owner of the golden state warriors. we'll talk sports, silicon valley and more. s stay tuned.
8:42 am
real is touching a ray. amazing is moving like one. real is making new friends. 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
8:43 am
8:44 am
when we come back, silicon valley titan scott mcnealy on his newest deal. that's next right here on "squawk box." ♪
8:45 am
8:46 am
8:47 am
realtime digital marketing company wayin buying british rival engaged sciences. scott mcnealy is the co-founder and chairman of wayin, as a former ceo of sun micro, and still single digit, aren't you, scott scott? >> sort of. >> you know what. you should start, because i need it reexplained to me every time too. i know there are viewers. what's wayin and how does it work? we are a digital marketing platform company, that's cloud based and we allow people to use social content to enhance their own content when they're out
8:48 am
trying to persuade, engage or motivate customers to do things. we've added with engaged sciences a whole bunch of new digital marketing features like auctions and sweepstakes and coupons and quizzes and other things so that we provide a complete digital platform on the cloud to allow you to automate your digital marketing efforts. >> you have had like 500 million people have done this, campaign entries? >> we have engaged one in 14 people out there. in the next year we think we'll have engaged up to 1 in 7. the network in the old days was the computer. now the databases is the -- is the gold mine out there and being able to capture geographic, psychographic, attitudinal and intentional kinds of data out there is the holy grail out there, being able to match buyers and sellers, the
8:49 am
problem with tv. >> sorry, scott. >> the problem with tv or print ads is you don't know who is watching it, when they are watching it and how they're impacted. people spend more time in front of a digital screen now worldwide than they do in front of the tv screen. i hate to tell a tv show that, but yet three-quarters of the spend on advertising is still in the old traditional print and media as opposed to digital. i think there is a big gap there that we'll take advantage of as people move to more digital advertising. you get a spreadsheet of who engaged, what they think and their profiles. >> you did a recent round, and it's good to be able to raise money. our guest host points out that there is a lot of money around and it's not necessarily going in places that it would normally go because there is so much. it's good for you, though, to be able to raise for wayin? what's it valued at given the latest round? >> it's hard to say. two private companies that game together. we'll let the market decide that
8:50 am
down the road. but we raised over $15 million, which is a nice position to be in. we have basically established ourselves as the largest independent full-service digital marketing company out there with lots of cash and it doesn't matter, out in california. i mean, our votes just sort of you, you know, the capitalist vote sort of goes down the drain here. but a lot of people are really -- if they have a choice between hillary -- i asked a very well known finance guy out here and i said, who are you going to vote for?
8:51 am
he said you know what? we know what hillary's all about, let's give donald a try. we may have to vote him out in four years but let's try something different. people are fed up on both sides of the aisle. >> i was trying to explain to someone yesterday, the base of the republicans are mad. you look at the 16 most qualified people who ran, the republicans around the country didn't like them and voted them out. why are republicans mad? are they mad because the current republicans compromised too much with the president or didn't compromise enough? i think it's all directed -- i think the actual anger is that the republicans couldn't stop obama from doing as much as he already did. i think that is what the anger is, which makes me think the ground swell is about too much government and too much redistribution. >> yeah, i think that's
8:52 am
accurate. i think there was one really focused capitalist in the group and one small government person in the group and neither of them, you know, got past 1% or 2%. that would be the libertarian perspective and the ex-ceo perspective. the only person i gave money to was carly. the worst ceo is a thousand times better than a politician. i believe the economic system what makes a country great and driving more and more to the monopolistic government is exactly the wrong thing to go do and we're hurdling towards a -- monopoly is the word in capitalism. if something's too big to fail, break it up. and if it's too important, don't let the government do it. >> it's in the much different
8:53 am
here, scott, in terms of wasted vote. we'll see this time, though, because trump's from new york. thank you and good luck. >> when we come back, a final thought from our guest host today. he made early investments and we'll get his call on the next big thing. not just because we're doers. because at sheraton, we're changing. big things. small things. spur of the moment things. ♪ changes you'll notice. wherever you are in the world.
8:54 am
changes you'll notice. whoa. what's going on here? oh hey allison. i'm val, the orange money retirement squirrel from voya. val from voya? yeah, val from voya. quick question, what are voya retirement squirrels doing in my house? we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? no, i'm more like a metaphor. okay, a spokes-metaphor. no, i'm... you're a spokes-metaphor. yeah. ok. see how voya can help you get organized at voya.com.
8:55 am
8:56 am
welcome back, everybody. our guest today is chamath palihapitiya. your skill set is identifying the next big thing in technology and finding it before a lot of other people do. what do you see right now? what is catching your attention? >> i think there's probably two things i would put out there, one more short term and one that's further away but frankly, too important to ignore. and all this automation and machine learning and a.i. that's going into just making your life much easier, whether it's how you interact with the amazon echo or whether it's what slack is doing with all of the bots within the slack messaging platform, you can use computer
8:57 am
al gore rhythms to learn. it's not clear to me what the big winner in that space looks like but the trail of bread crumbs in that direction is really exciting. >> i talked with a few technologists over the weekend about it and one of the preva prevailing thoughts they had is we've been trying to look at the wrong way, maybe we want it for what it was and don't gussie it up, remember, this is a computer we're talking to. >> you're exactly right. certain technologists want to believe this is the panacea to something very much bigger. for example, when you use the parking feature in your car and it can park your car for you, that's a.i. and machine learning. nobody wants to say that because they want some crazy convoluted
8:58 am
system that also then thinks for you and is your best friend -- >> and a woman that looks just like a woman. >> it's kind of ridiculous. >> but these expert systems, which is better language to you -- joe, you may not want to hear this, the bigger thing is we have crossed the rubicon on climate. >> .04, even though it's been 20 times higher in the past? >> we will not be able to take all the carbon that's in the air. >> it's .04% up from .03%. it's been 20 times greater during an ice age. >> in fairness, we have weather patterns we can't predict. >> we've always had weather patterns we can't predict. the amount of displacement, the water level rising, we are at the beginning of something we have to at least legitimately talk about. >> and you think it's caused by a . 0.1% of carbon --
8:59 am
>> whether it's solar panels, battery -- >> that's all assuming co2 is the control knob for global warming and climate. >> i think the question to maybe ask is what happens if we don't and it turns out to be right? >> i don't think that's the question. >> what happens if we build a really great clean infrastructure and it turns out -- >> everybody wants a clean infrastructure. everybody wants clean water, clean air, they don't want particulate pollution. whether co 2 -- >> i agree. focus on the fact that we want to live in an environment that's predictable, where you don't have copd, asthma, you don't have lead in the water. >> we've had 4 billion years of
9:00 am
unpredictable weather and that's going to continue. no one is going to harness the weather, chamath. >> a reader is asking anti-trust issues on amazon, do you think they'll ever be won? >> no. >> it's great having you here. >> psychopath. make sure you join us tomorrow. "squawk on the street" is next. >> good thursday morning. welcome to "squawk on the street." stocks coming off their worst two days and three months. europe's holding in, some marks there closed for the holidays. claims did pop a bit but the big story is oil moving hire on the wildfires in canada

168 Views

info Stream Only

Uploaded by TV Archive on