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tv   Squawk on the Street  CNBC  May 12, 2016 9:00am-11:01am EDT

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mantle to joe dimaggio or can he be just good enough? >> well, not good enough. one of the thing steve jobs said to tim cook is don't wake up every morning and say what would steve jobs do? >> on that note, thank you. "squawk on the street" is next. >> good thursday morning. welcome to "squawk on the street." the new york stock exchange, big morning taking shape. trump meets ryan, retail earnings, three fed speakers, brazil's senate backs impeachment, jobless claims at one-year high, futures in europe are solidly in the green. washington europe today. the iea watching a dramatic
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change in supply. >> reports that other companies are thinking about trying to acquire it, a possibility of a huge deal in agriculture and chemicals. >> gop leadership, paul ryan meeting with donald trump. trump has arrived at rnc headquarters for his key meeting with the house speaker as they work to find a way to unify around trump's candidacy. we go outside rnc headquarters where protesters are now gathering. good morning, john. >> reporter: good morning, carl. donald trump did arrive a few minutes. he was greeted by protesters. we have not soon paul ryan, though he is not known for being late. we would assume that meeting is now under way. it's an important meeting for
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donald trump to begin to unify this priority. senate majority leader mitch mcconnell has decided the best thing to do to protect his majority is to endorse donald trump. but paul ryan is a politician who has more of a commitment to particular ideas, particular political style than many other politicians and he has indicated, as he said last week, he's not quite ready. we don't expect a resolution of their differences today but the hope for the republican party is the beginning of a process that could begin to pull them together and be able to have a unified ticket this fall. we'll see if they can accomplish that, guys. >> john, those looking for a would-be endorsement today or clarity on a convention chair, will they be disappointed? >> i'd be very surprised if all that is worked out, as you indicated, paul ryan has said he would step aside as chairman of the republican convention, if donald trump wants him to. that was an indication that he
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wasn't going to try to make difficulty at the convention. i don't think that donald trump wants to ask him to step aside but i think this is the beginning of a process. after ryan meets with trump, you're going to have a meeting with mcconnell and a meeting with all of the republican leadership, a larger group of people. we're going to hear from paul ryan about 11:30 when he has a press conference and others will be coming out at different times for these meetings. we'll see what kind of vibe we get from that meeting. donald trump hasn't indicated an, sesive amount of interest in making peace. he was a little chippy after what ryan said last week. he said i'm not redd ready to t ryan's agenda either. >> we'll be coming back to you several times this morning outside of rnc headquartering in washington. 180 days, jim, until the election. >> i have to tell you that every day i keep waiting for something that will directly impact the stock market and they're so at
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30,000 feet still, it's difficult to try to come up with any sort of strategy in the interim, there is no strategy to deal with the earnings or perhaps some talk about fed. i need trump to say we're bringing back trump ties and i'm bringing back macy's. >> a day after macy's did miss, kohl's out is out with weaker than expected results. their guidance for the year on comps was flat to up one. so we're going to see some clarity on that on the call. >> railroad when kohl's was at 42, 43 and there was a rumor floating that it could get a takeout? it's a recognition that what you're dealing with is a declining industry. you may want to put it any way you want but to me all these
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places have a linen's and things. the last thing you want to do is put more debt on. the endless buying back of stock, that may not be the right thing to do. >> to your point, pending capital when your sales are potentially -- some of these companies can still generate a decent amount of cash. >> at the same time when you read the conference call for macy's, an excellent cfo is scratching her head. well, i'm not scratching my head. i'm buying from amazon. there is a tremendous disconnect about what these people are saying about these companies and what we all know as consumers. it's very painful to say we just spent a fortune on omni channel
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but we still can't beat amazon. >> particularly apparel. that's where it's really getting hurt. if you want to look at a walmart, 58% of which sales are grocery, it my not be quite as similar a comparison. >> earnings next week, depot, tjx, lowe's, target, gap. specialties on the way. >> i like some of those as a shopper at home depot last weekend. i'm a spring planter. you look at the stuff and you still can't imagine getting those big boy and beef steak tom eight -- tomatoes by mail. i wish lowe's had made acquisition in canada.
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i think next week's retail could be better. walmart problematic. walmart does at least have scale. i'm looking at it and saying that's a much more important week than i thought. walmart and home depot are about as big as we get. i'm not as concerned. home depot was down very badly. >> walmart reports they're looking the free two-day shipping. and cowen with this knows yesterday saying amazon will be the number one apparel retailer basically by the beginning of next year. >> you look at ralph lauren's numbers today and you see the retail business was pretty good. the whole sale business was not good. macy's. >> they sell, what, 8% -- >> macy's, that's where you buy the stuff. i keep emphasizing that this key
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to retail is the whole chain of marking up to then having to dump a tjx. tjx has a great business model. they got the fist full of dollars and a few dollars more when the retailers are struggling. people are shorting under armor. i don't like to make that comparison. i find that that's the fault of the retailer. tjx has a different business model, home depot has a different model. >> you saw claims this morning at 294. it's the biggest two-week rise in two years on claims. we've been talking about layoffs in this earnings season and then gas prices have made a big jump. do you think those two are going to weigh on the summer? >> i just think there's going to be a lot of layoffs in retail. we're dramatically overstored.
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you have to go back over the sports authority bankruptcy and rei. when you start closing stores, those people do not necessarily have a place to go. now, home depot does a lot of seasonal highi seasonal hiring. i'm trying to gauge my word because people are getting laid off and it's not like you want to say, hey, that means the quarter's going to be good. but there's real trouble in employment and they employ a lot of people. >> meanwhile, stocks are trying to bounce back after yesterday. bank of england stays pat but warns if the u.k. votes for brexit next month -- and dilma rousseff will be suspended for
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180 days during the impeachment trial. that will overlap with the olympics. >> brazil, it's been a fabulous rally in the face of nothing. and i just say, well, wait a second. you have a country, he says in the face of the political, you have a country that's been run into the ground by the politicians and you get new politicians in, things can happen. they sell a lot of stuff to china, a lot of raw goods, but this is a country when you listen to conference calls, this is a country in disarray. if you can get a legitimate leadership in there, then you can have a turn. i am not writing off brazil. i'm, st ecstatic brazil might ha government not unlike argentina.
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remember when they said he committed suicide with a machine gun in his back? that was a great cover story by the cia. i remember when they went capitalist. it's been one of the great economies ever. do not rule out if brazil goes honest capitalism, it can be a turn. it used to be the b in brick and then it became rick and then it became ick and now it's i. some of thieves countr these co look at venezuela, you look at the earnings from these consumer package goods and it's always that except for the money we just give away to venezuela and we don't get paid and sell, venezuela had a real government and not a failed state, these
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are somewhat wealthy countries. the cramers who went to brazil during world war i -- >> there's grease disparity, not that we don't have it in this country either. >> the olympics are not going to be so good and the government is terrible. places can't turn around instantly by government. latin american history, if you get the right government in there, you'd be surprised at the resourcefulness. the chilean model is extraordinary. >> shock doctrine. naomi klein. >> pinochet was a dictator. i'm not coming out for fascism here. >> like the way you're couching your views today. >> my father would say i can't believe it, they just
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nationalized anaconda! it's like "wall street" the movie. >> i'm okay. >> when we return, a lot more on today's movers including this big jump for monsanto. and ken rogoff on what's up on growth. more from "squawk on the street" at post 9 in a minute. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
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according to bloomberg, germany's buyer is exploring a potential bid for the seed company. reports suggested that basf could be mulling a bid for monsanto. i got nothing to confirm either one of those stories, nor whether there are actual talks taking place between monsanto and these two companies. i can tell you that back in march there were talks between basf with monsanto but that was focused on joint ventures, not a takeover. its strategy had been to try to
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acquire at what they believe is sort of the bottom of the cycle or a cycle that's about to turn up in agriculture as opposed to sell. but it's unclear where their shareholders at this point. by the way, if you were to apply that multiple to monsanto, you end up with a price at $145 a share. when you look at the potential synergies from such a deal, you do get a pretty big number. look at dow and dupont. 1.3 billion of synergies just in putting their agricultural businesses together, 8% of sales. you do the same at bayer and you
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can assume 1.5 billion. given the state of its balance sheet, some say it could be as much as 50/50 equity. this is all conj-- this is send monsanto stocks up this morning. >> you combine the two companies and you get the number one seed company. monsanto i think may actually
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need some scale. and this could do that. i think this makes sense. >> from an anti-trust perspective, it would not be -- it would not be an impediment to a deal. up never know these days with the anti-trust concerns we've seen and remember it's eu and here as well. there's a lot of opposition to monsanto and gmos in europe. hard to gauge those kinds of things. from strictly looking at the two businesses put together, the overlaps are not large enough to pose a real anti-trust impediment. >> when you talk with dupont and dow, they're so confident about that merger to create -- among three companies. when i saw office depot and staples get shot down, i came back and i've asked both ceos this several times how do you have expect to become the number one seed company? wouldn't the farmers fight you?
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they say the farmers like it. by the way, bacon at halliburton said the farmers would like it, which they didn't. i have no certainty you can make a combination in any industry right now. >> because of regs? >> i think this is the most active anti-trust department i have seen in maybe all the years i'm alive. >> a big piece in the times today about who merger-arbs are getting killed. and biggest m&as ever. >> and a number of the big ones. >> a college team that maybe had a player who was being paid. and they strip him of it. >> i focused on bayer because a lot of people don't believe basf would consider doing deal of this type. >> it's a very insular company.
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>> i no confirmation. the story itself is one of those that says they're thinking about it, they're exploring it, it doesn't man thiean they've actu reached out. >> does this come under of category of other news outlets that anybody can say anything? >> there does seem to be industrial logic here. >> we're still monitoring developments at the rnc. ryan is in the building, but we do not expect to see him as he heads to capitol hill. that press availability is at 11:30 a.m. eastern time.
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we have a little mad dash for this thursday. you have kellogg -- >> citi kellogg is a prime takeover. ken who runs general mills, i don't think he's ready to sell the company. he's a year older than i am. the reason that people can make these calls is because the kraft deals is now working. they cut costs and got the revenue lineup, 1%. you see it pulling through. the reason i don't like these calls is similar to the basf buyer because if nothing happens -- it's unusual where you have technologies where honey well goes down, stock goes
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up -- >> it's unusual for an analyst to come out and make a call look this on a takeout. there's still family in kellogg. and they seem to think cereal is turning. >> post cereals had a great quarter. quaker had a decent quarter for pepsico. i just want people to own these stocks on the fundamentals. if that's the case, kellogg is not doing as well as some of the others. so there's a lot of consolidation in the group. but do some homework before you decide, hey, i like kellogg. >> how about the thousand dollars price target for amazon. david feels a little 1999ish. >> just a couple of those stocks.
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that's about it. >> we have a lot more stocks to talk about. the opening bell coming your way in just a few minutes.
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you're watching cnbc "squawk on the street." the opening bell in just over 60 seconds. a lot of pots burning today. trump and ryan meeting in washington, d.c. three fed speakers are going to talk. brazil. and brexit, they say it's a problem and even talked the r word, the recession word right now. >> this is a level of uncertainty that comes right after the fed meeting that's going to put a lot of things on hold. talked about a lot but not by us. when i hear the recession word, never want to hear that. never. >> futures hanging in thanks in
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part to oil. non-opec production now down 700, not 800. >> and a let's watch siteone landscape supply celebrating an ipo. and ge is going to try to hang on to 30 today. >> i think they've turned the company around. a lot of people feel it stuck at 30, it's more an industrial company with a pretty good growth rate.
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honeywell's great rate should improve. ge's company to call it a sell right here after it's just about to lose that designation -- >> as a significantly important financial institution? >> i want to take the other side of that trade. >> jpmorgan did advise. so interesting. they're downgrading. they were key one on advising on the divestiture. >> i like the fact they were advising ge and -- >> and came out positive. >> i think they're wrong. they have every right to be wrong. where does it say in the constitution you can't make bad calls? >> it doesn't. >> why is ralph bucking the trend? >> in the retail sales number itself was very, very good. this new guy who is running it,
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can i just say that the new guy is getting a lot of -- i'm talking about stefan larson, came from old navy, came from h & m and they still had customers. that's saying something. they had living people. they were not actors buying things at the registers. they're trying to turn the attention to club monaco. i have a club monaco shirt packed in my bag and i like club monaco. so does my wife. she says you look good in club monaco. it a little anecdotal but club monaco is doing well. >> do you -- never mind. whenever i ask about club monaco, he said it's like club med. >> you want to sing the song? >> i went to club med. goldman sent me to club med at a tough time when my mom passed away. you should go to club med.
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>> the pundits saying the same thing, that no one will shop in department stores, no one is shopping in malls, they're only shopping off price. we heard the same thing in '08. they were wrong then and they'll be wrong this time. >> i think there is good employment growth. it has to do with a shift in the way people shop. it's the cell phone. remember, millennials doesnn't e shopping. there are some millennial outliers like my daughter but they don't shop. i'm just glad they didn't do
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that real estate transaction. >> they say they are still looking at a number of transactions and they point out the complexity of those transactions will take time. >> macy's is an institution but institutions need to reinvent. this 27% amazon growth is still just blowing people away. no one saw this. >> and more than half the actual sales growth in retail overall has been amazon's. >> i know. it's zero sum. i remember going to see borders ten years ago, i went to borders. and, you know, in ann arbor. they are great guys. you know what we did? we sat around. it was all the top executives and what we talked about was books, what books did we like? and amazon came up and it would be like, yeah, but you can't browse at amazon. you go to a book store, secular temple of learning. you go to borders lately? >> it sounds like kodak said no one is ever going to take a
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picture with their phone. >> i used to go to borders, get myself a starbucks, sit back, read a book. now i read the same chapter on amazon and if i like it, i order it. >> watching vashares of valiant >> how's that doing today? >> they're up 1% after starting down. yesterday it was down sharply again and nearing all-time lows, which is 2527. mr. papa doesn't seem to be getting a good reception. >> when you read the press reports, it was kind of, well, he doesn't really have a plan. but give him some credit, he
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just got there. but i thought that the article today in the journal about the fact that there has not been rollbacks yet, cleveland clinic, no rollback, what joe papa promised on "mad money" is there's going to be roll backs and that means there's going to be price degradation. i don't think people are ready for a big increase in research and development, big increase in r & d, cut the prices. i question that $2 billion cash flow. i question it. >> you do? >> yeah, i do. i do. >> jack in the box is up 12, as they come in with a nickel beat on 85 cents. >> i have to eat both crow and a jack burger. they said they didn't take share from chipotle. they guided down really hard and bead the guidance.
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i've been picking on them because they did terrible numbers last time but this is good. i always felt that the chain of tremendous possibility but i was wrong and now i -- i was right and then i was wrong and now i'm wrong again because i dug in my heels thinking that they really just had such a bad last quarter but they've come back. >> seeing some charts lately of a one-year shaq versus -- >> people thought that wendy's wasn't that good. maybe it's not invincible. seems invincible but maybe he's not. breakfast all day, total home run. we don't know. got to hear. >> we're going to go to john harwood, carl. >> john harwood is outside rnc headquarters. john? >> reporter: carl, i'm standing
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here with tom cole, who not on is a congressman from oklahoma, but a former executive director of the republican national committee, the building where this meeting with donald trump and paul ryan is taking place. what is the significance of donald trump come down to sit with reince priebus and paul ryan? >> i think it the beginning of the coming together. obviously we've had a contentious and volatile primary season but mr. trump has ee -- they'd like to have a working relationship with their nominee. >> how much doubt do you have about paul ryan eventually rhining up behind donald trump. >> i think to be able to work together. i'm not sure either would line up behind the other. they need each other to be
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successful in the fall. and i think they can help one another. but they clearly don't know one another yet and this is the open persian gulf evident to get to know one another and find out when there's common ground. the reality of the situation dictates they do work together and i hope they will. >> one more on something trump said yesterday, which was that he wasn't interested in the analytic, cate -- saying he's done it a different way and he can win the presidency a different way. can he? >> i think that effort is going to happen whether it happens in his campaign or happens through the republican national committee. he clearly brings things different to the campaign than a traditional candidate, for both good and ill. but that effort will kb on, regardless of whether it done in his campaign or in another fashion. >> thanks for being with us. >> you bet.
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>> thank you very much for that. we'll come back to you a little bit early on. i could want to address your it's almost to the intra day that it posted at in so-called august. >> i'm waiting for the downgrades. make no change. yesterday of the rumor that itunes is going to be changed. look, the stock has no momentum here. obviously people don't want to own it and -- but the analysts will have these soft buys. you need to see downgrade before this can stabilize. it just has to happen. you have to have be a lists come out. and it didn't have that. you only had one downgrade after that quarter. in order to get your footing, you've got to flush out the guys
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and they haven't taken that action. >> speaking of days after at least or flushing, disney is down a little bit but seems to be flat i don't knowing out. it less than half a. >> now when you miss the quarter again -- again, i stand by these because i'm taking that reverend -- i saw you talk about that, changing churches. >> disney and apple, i don't think harr going like get out of disney at 101 and get back out at 97. when you look at the long-term charts, you can't see those dips. they have no moj owe. >> just sayer look, you to beat.
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>> 27 yanks? is that what you mean? >> i said look, amazon is 27 yankees. how do you know? you weren't alive -- >> there's a thing called history. i did not see babe ruth play so maybe i can't make a judgment. and syndergaard, i saw his home two runs and his hair? if i had his hair, i wouldn't be here, i'll tell that you much. >> and if you were 6'6", 245. >> i'd be on the mound but for the phillies. >> that's 20 strikeouts. >> i mean, the history. twitter is so mean. >> they are mean. >> here's bob pisani on the floor. >> we're still waiting for it to open up two months after the markets bottomed. we have a very interesting ipo
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today. sout one. i know it doesn't sound very, sight bug they're pricing very well right now, right in the middle of the price range. this is in the middle of the do it yourself that they play off of. it's a big business overall, $16 billion in a year. they've got 1.5 billion, they're almost 10% of the whole history and they're growing organ cle so this seems to have what they're looking for, what a lot of people are looking for. i've clearly defined product. it profitable. it's growing and it has a reasonable valuation overall here. we seal a rare thing, a
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technica technical-we'll see how well this do but there's over 100 companies waiting to go public, crew and if i had to take one bet on one of them, i'll bet u.s. foods will go in the next few weeks. stick my neck out a little bit. sectors, mixed markets. . we have energy doing well. oil is on the up side. retail rebounding a little bit. materials and consumer staples on the up side. on the retail, you heard about controls here. we remember what they talked about that's not being changed and there you see kohl's down a bit here. i think it pretty clear what all the retail trends are.
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travel and restaurants is doing well over apparel. there is a clear shift to digital. value seem to be outperforming any kind of expensive bround brand names. so and i think a number of places have mentioned the higher costs for other may be eating into discretionary spending overall. so of course you had a very difficult key tail environment. the aboutest planned landscaping the, 4 to 27 after carl, back to you. >> thank you very much. let's get to the bonds with rick santelli as we're watching the claims come in.
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everybody is sightseeing to find out where it coming from. if we had had a 260 market, the market wouldn't have paid atengts. below 300 or even 280 gets the market condition. open $ chart up to february 1st. about's a lot of trade down at these levels. we did refrain from really testing do you like negative rates in investors don't like negative rates. i haven't met anybody that does. so there is just a charge, a herd mentality into these auctions. i don't expect to see any weakness in -- let look at the guild. this is february 1s, too. does it look any different than a ten-year? we don't have a brexit going
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you'd have see we've been talking a lot supply. they love corporates, too. positive yielding. it been a opinion this is very important to pay attention to do. on the dollar index, yesterday we broke the trend of six up trading days. today it looks like it's rum rumin -- look at the one week on the pound. that's the pound versus dollar. in about 60 minutes, we're going to talk to ken rohloff for an extended interview. he's the gentleman who whose research says big. >> we're keeping our eye on washington today.
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donald trump and speaker ryan meeting at rnc pecks. d dow on some 63 points. we're back after a break. 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 incredible bladder prthat lets from always discreeyou move like you mean it now comes with an incredible promise.
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walmart is planning to test free two-day shipping. it plans to test it around the country. >> i'm waiting for it. they're supposed to have these computer scientists doing things for them. >> using regional companies instead of fedex -- >> it has a great company. i'm not recommending the stock but you keep hoping -- i don't know i pull for this guy. >> what do you do with this
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stock, jim? i guess you say you're not recommending it. if you own it, you have the dividend. had you the big break. it's come back from that a little bit. >> you have to wait to see if they can do it. it's okay. maybe you have to pay 70 if they get it right. i think sometimes it pays to wait to see if they can pull it off. we can't swing at every pitch. can't do it. as much as it's exciting to see if they can do it. the market is up 69. don't go away. ♪ [crowd cheering]
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there's an interesting piece about piper today called palo alto. when you see anything negative on these companies highly valued. you noknow they're going to get hit. talks that are highly valued
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here are getting hurt unless they have an amazon niche. they're competitors to cyber security. witness the fire eye. wow. just be careful, if you're buying really expensive stocks and they don't have a proprietary thing when they're out on their own and not being challenged, analysts are coming for them. >> what's on "mad" tonight? >> supermarket wars. this is changing overnight. people are just flummoxed. i see crow, jack in the box up big. i liked it, didn't like it. they got the shorts and they did it right. good for them. >> any reason to think we're not going to keep chugging along between 2060 and 2080? >> no, i think that's fine. you have to watch the breakdown in apple, you have to watch perhaps does disney come down or
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stabilize. apple can't stabilize until people abandon ship. when the ones who have one foot out, when they get out, then you can say it's the end. just be cool. be cool. >> when we come back, goldman's chief equity strategist. plus the latest on the trump/ryan meeting going on. we got another one. i have an orc-o-gram for an "owen." 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. ♪ ♪ 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. ♪
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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...
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flip your way through your last 9 shows with the tap of a button. change the way you experience tv. xfinity x1. good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla. we have ge down grade, brexit and trump meeting ryan. oil has lost most of its gains.
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>> donald trump and paul ryan meeting with other members of the gop in washington as we speak. >> plus the retail wreck. one day after macy's triggered a sharp selloff in stocks, it is kohl's turn to worry investors. >> and oil in particular rallying. an interview with goldman as chief strategist david kostin on equities. >> paul ryan and donald trump are meeting this morning to try to unite the party. what's the update, john harwood? >> reporter: sara, you can hear the protesters on the issue of immigration behind me. they're a symbol of why this meeting needs to take place. donald trump has been a
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polarizing figure in this campaign. paul ryan is for immigration reform. he and donald trump don't agree on that and he's trying to figure out ways in this meeting with donald trump of trying to come to an accommodation on the kind of campaign republicans are going to run this year. there's a meeting not just with paul ryan by mitch mcconnell, other members of the congressional leadership. they're inside that rnc building behind us. there are multiple issues, not just in terms of tone and issues, but also fund-raising apparatus, the data gathering apparatus, all of the things that go with a successful political party's national campaign are trying to be worked out. we'll see when trump, ryan and others coming out of the meeting how it went. >> who has the leverage here? we've heard donald trump pretty much insinuate he's not changing his opinions to change the gop
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party elite, nor do the voters seem to think he has to. so is he walking in with the leverage? >> reporter: not necessarily. donald trump needs a very united republican party to win the election. in our polarized system, you've got to have overwhelming support from your party to win. on the other hand, donald trump has run as an outsider and there's a little friction that could be positive for him in saying i'm not part of the party establishment, i've got different ideas, if he can make that work without outright alienating a large chunk of the party and appealing to independents saying i'm different, i'm not part of the system, that potentially is working for him. >> retail stocks continue to
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struggle amidst a lackluster earnings market. david, good to you have back. >> nice to see you. >> the steph curry market? >> that's how i describe it. >> what does it mean? >> basically it's a tough market. 80% of fund managers are shelling the benchmark. it's been very difficult year to date. the bulk of the strategy relates to dividend, dividend yield, dividend growth and valuation. and then on the other extreme you have a couple of companies with an expansion in margin. that's how portfolio managers ought to be thinking about their construction of a portfolio. but the core of it, where you really generate the win is getting the dividends, the income. the market is close to a high. 2,100 is my top for the end of
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this year. we're running now at the 98th percentile. defense makes sense. >> the short cycle macro play where caterpillar was hot for ten minutes, that was a fluke? >> the economic data is suggesting things are only going at a modest level. the more domestic-focused companies ought to do better in this environment. the concern about protectionism would be benefiting companies facing from a revenue point of view as opposed to those exporting. there are different themes inside the market. it's been difficult. it's a frustration from a strategist and portfolio manager as well. >> department store specific or does it really tell you something about the u.s. consumer right now? >> it's also part of the shift in how consumers are spending their dollar.
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i think the idea of wage inflation is something we've been focused on. there are some companies benefiting from wage inflation and those that are more at risk. >> who are the beneficiaries? >> well week thi, we think -- t beneficiaries, if you will, will be from technology where labor costs are a relatively small portion of their sales as contrasted with consumer discretionary. if there's wage inflaegs, that would be hurting margins of those company ands that a risk for lower stock prices. >> when the main guy from goldman says we're at the 98 percentile on valuations for an average stock, i think that really stands out. explain what you mean by that. we're at the top of the valuation moves. it's huge. >> if you think about various valuation metrics, you can look
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at pe ratio, at price-to-book, you can look at enterprise value to ebidta. any of those metrics over the last 40 years, we are at the 98th percentile. >> right at the top of the envelope. >> the top of the range. the probability is you would get a low are evaluation. remember that your prove margins are also at second high levels. companies are already efficient. it probably plays into the hands of technology companies, which are the recipients of other there's been a discussion, i think u might have seen this paper from the dallas fed that came out as to whether the stock
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market actually accurately reflects what's going on in the economy. and the dallas work for example says three quarters of the economy are service orientated providers and yet over half of the market is in manufacturing. and therefore there's a skew. that even though the market may not make gains, the economy may be doing better and therefore the fed may hike rates. >> we can look at a lot of different ways to think about tackling that question. but the core of it is regardless of when the fed raises rates, whether the forward market is correct and it's maybe one hike? december, the idea of a dividend oriented field base strategy is important because we're starting at a high level of valuation. let's make the scenario the fed does not make then the yield will have outperformed. or if you take the other
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scenario, if the fed hikes two times, then the growth in those dividends ought to support performance. if you look at cisco, corning, discover, dividend growth and lower valuation, those stocks ought to do better. >> but does the docket reflikt the economy? ? not very accurately. 20. >> tors post. >> but on only 15 or 20% of companies actually quoted in the first place. >> it depends on the it's a big part of it. >> so we've established that you you're would a lot of hedge fund
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managers worry about an air pocket of liquidity. what's the probability that we see a large drop? >> the risk -- brexit, the uncertainty in terms of the electoral politics here domestically, you have earnings season coming up in the second quarter. remember we have margin compression this quarter, which was very significant. you very been so margin is a concern. on the other hand, the economy is still growing. that's a positive tail wind. you have loan demand. there's been some pockets of optimism. but not a lot. i think it reflecting in a very high level of value mark that's o obviously one issue on their
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so you have embassy and flows. unemployment rate is headed to 5%, maybe a little built lower. you have -- >> you didn't mention that oil is at the 20 is is if oil goes higherin -- >> my forecast a little bit higher by the end of this year. not significantly so. the valuation is a key starting point. the dividend swap market implies companies will be growing dividends less than 1% for the next decade. focusing on dividend growth is the strategy we're looking for. >> david kostin of goldman sacks. >> coming up, more on the
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trump/ryan meeting. larry kudlow will join us on set to break down some the intrigue. and then what has become another big story on wall street, the retail sector of course in disarray. macy's ld -- more coming up on the show. so doctors and hospitals can identify high-risk patients. like me... asthma... potential hospital visit. so now thanks to optum, this asthma thing's under control. gravity not so much. this is healthier, powered by optum. from health plans to providers to employers. we connect all parts of health care. healthier is here.
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man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time.
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man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems. mr. trump goes to
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washington. the presumptive presidential nominee meeting with the house speaker paul ryan in an effort to unite the party. joining us now cnbc senior contributor larry kudlow. larry, this is almost an historic moment. donald trump went into the meeting saying he'd like to do a deal. what do you think a likely deal will be? >> i think there's a bunch of issues here. i doubt if it's going to be 100% agreement. i think it's going to be 80% agreement. that's just a hunch on my part. both gentlemen would like to get together in the name of party unity, which is not inconsequential. but there's issues on tax reform, issues on immigration, issues on trade, issues about economic growth and issues about america's interests first. trum has his own agenda and he's been extremely sm --
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>> here's reince priebus tweeting just four minutes ago -- the meeting was great, it was a very positive step towards party unity. so when you say "common ground," what are we talking about? >> by the way, reince priebus has been great through this. we haven't seen a good rnc chairman in a long time. he's been great. >> not an easy job. >> where do we see ryan? ryan's a good friend of mine. i think they're going to have discussion about trade and try to reach common ground. that may be the single trickiest question. >> beyond immigration? >> i think they can reach common ground. ryan is not for deportation. mr. trump is but he's sort of backing off that. >> can i pick up that point? >> i think the border security
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they will reach accommodation on. how you do the details, that i don't know. >> let me pick up the point. there seems to have been a softening in the stance on muslims yesterday. he said this is just a suggestion and said he'd like to back off as soon as possible. for a lot of people this is clearly very important. >> i agree. i agree with that. by the way, i think they should have a blanket moratorium on new visas. like, the fbi has said we don't know who anybody is right now and they can come in through any areas. i think they'll reach some accommodation on that. here's the thing. the most important issue in this election is still the economy and the lack of economic growth and wages and jobs. mr. trump has a very good tax reform plan, particularly the corporate tax piece. as i said, it's being tweaked. he hasn't signed off on anything. don't get me wrong.
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steve moore and i are working with the tax foundation, we're going to get the deficit down to about 3 trillion from 10 and that's before the spending cuts. >> are you helping inform -- what is your relationship with the trump campaign here? >> as i said, the committee to unleash prosperity, we have been advising all the candidates. there's one left standing. when that one asks for help, we give it to him. i quickly save he has not signed off on any of it. we're making suggestions. ryan is an old time jack kemp, reagan, kudlow -- >> you said border security. a ban on muslims? >> i don't know. i think that -- >> except for london's mayor. >> i think new visas in its
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entirety is really the problem, according to the fbi director. how they get through that, i can't say. >> let me be clear. what you're suggesting, larry, is this the way out? they were saying i'm going to have a ban on new visas so the circle gets squared? >> this is important stuff. >> i've written this. it's all about isis. most of the muslim population in the united states is very pro america, but there is a horrible radical minority. let me just come back to trade. trump has in recent weeks and weeks and weeks stopped talking about a 45% tariff. haven't heard from him. in his foreign policy speech, he talked about negotiations with russia, by the way, but also with china and other country.
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i think that paul ryan has to understand that a pure free trade position doesn't work anymore because the chinese doesn't play by the rules and there have to be bilateral negotiations. forget about the wto. a strong leader like trump can do this. and i think paul ryan can live with that. and i think all these guys, just to back up for a minute, they want party unity and, secondly, the recent polls are huge. look, you just had the reuters poll saying it's even with hillary. before you had that you had the quinnipiac poll, swing states, florida, pennsylvania, ohio even. >> no doubt about that. >> those anti-trump people who are saying trump will cause a landslide against the gop have no evidence. these polls are saying it's going to be a close race, not a land slide and trump is in very good shape. >> that's one thing, larry. but you've been a big backer of
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ryan for years. so when e.j. writes how can you support trump and call yourself a principled conservative? >> i love e.j. but rarely do i agree with him. he's a very bright guy. low tax rates -- >> you just said free trade doesn't work anymore. >> fairer trade, free but fairer. you've got pockets in this country that have been damaged by some of the free trade deals. pockets. overall i'm a big free trader. it's worked. i don't want to end any of these agreements. all i want to do is negotiate through some difficult positions. trump's whole campaign was an appeal to the populist economics people who haven't got jobs or wages. he's not going to back off that nor should he. his other part, which ryan may have to swallow, donald ran against the republican establishment. i happen to agree with that.
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we talked about this. paul ryan is part of that establishment. they're going to have to make a common ground. that's just the way it is because trump's not going to give up his principles for this political deal. >> i hear you saying ryan's going to do the walking. trump's not going to do the walking. is that not fair? >> he needs a billion dollar from somebody. >> carl quintanilla is a great reporter. they're both going to have to do some walking. it's a natural trump constituency as long as they can sit down and hash things out. he's in a better position with the senate, which i think is pretty good. if mitt romney would just keep his yap shut for a change, who i adore, i love the guy personally, but he's becoming the howard stasin of the
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republican party, which is not a good place to be. >> when we come back, amazon replaces macy's as the top appar appar apparel retailer in the country. >> and get more of larry's take on what's to come as ryan is expected to speak in about an hour. back in a minute.
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when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. take a look at a live shot of the rnc in washington where donald trump and paul ryan have been meeting. >> the retail pain continues this morning, a day after stocks like macy's and michael koors saw double digits.
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>> comparable sales, that's the most wildly cited metric for retail health, fell 4%. that makes the biggest drops since 2009. analysts expected a slight gain. weather historically does impact this retailer more than some competitors, in part because it's an off mall department store. shops are have to go there purposely as opposed to a mall trip. now it's the flip, the kohl's says the warmer spring is hampering the sales of sales. there are other nonbelievers. you can see kohl's shares down almost 9%, about a seven-year low. ralph lauren did outperform the
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pack. comps in the quarter fell 5% but that's better than the drop that analysts were forecasting. the stock is losing steam. ralph lawyuren is in the proces of reorganizing. it's still slightly positive but a slide from this morning. following macy's earnings, terry lundgren did speak to women's wear daily saying things are different from 2008. the cfo said she wasn't sure what was different when asked that question on the call yesterday. the reaction from 2008 wasn't different, calling for an end to shopping as we've known it. >> will there soon be a new top apparel retailer? cowen put out a note saying amazon will replace macy's as the top apparel retailer by
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2017. david, good morning. >> how are you, sara? >> i'm good. i'm worried about this retail outlook. is the idea here that amazon is just eating everyone's lunch when it comes to apparel spending? >> well, they absolutely are. to make sure i clear it up, this note that we talk about, we put this note out really, it was july of 2015 that we really collaborated. it was john blackledge collaborating with our consumer team and they talked about amazon going after the likes of macy's, becoming the number one u.s. retailer in 2017. they're well on their way. it's clear. they were looking to take market share from 4% to 15% and they're g going aggressively after the like the target and walmart. amazon has been a major horse in this race. there's no sign of slowdown. it's a story we've been well behind and well in front of.
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>> it sounds very clear and it makes sense, especially as we see these retail numbers. the big risk with amazon is it has a history of squeezing profit margins, not exactly regarding profitability so it can invest in the long term, or is that completely different now that we've had a real good quarter and a few profitable quarters? >> you look at their north american e-commerce business, roughly about 20% of their overall revenue. in 2018 we're looking for their operating margins to double in 2018. i think to go to 8.5%and in '19 something like 9.5%. so a massive shift. that's going to move the needle for the stock. aws obviously significant lead over microsoft, significant lead over google. i mean, microsoft is something like 3.5, $4 billion. amazon is $10 billion, on the runway to $10 billion. all they can do is screw it up.
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fingers crossed they don't. they're in a tremendous lead. and on the consumer side it's amazing to see how aggressive they've been and how successful they've been really gaining market share here. >> they're not the on ones benefitting from department store woes. we talk about winners in fast fashion and off-price retailing as well. do you have any pick there is? >> it's interesting, the off-price gains report next week. we said this on fast the other night that you have wait until the end of this week and you go by the xrt for a trade because you can probably see a pop. next weeks numbers are expected to be decent to these offprice names. i stay away from these mall names. very difficult to gauge the direction in where nathey're gog to go. shopping trends have changed. online is in vogue. i'd stay clear away from the stores. >> there's one thing i find difficult about the call.
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there's no doubt that amazon has been very dominant in a lot of areas but the return rates for clothing apparel on line is 30% to 40%. in store it's more like 10% to 12%. that can be a huge problem when you're trying to make this a viable business going forward. fit, quality, that's key and it's hard to get online. do you think amazon can tackle that as soon as 2017. >> it's a lot of significant numbers. you're going to see them ramp this as far as market share dramatically. it was 4% to 14% this year or in 2017 and continue from there. so the answer is absolutely. you know, the margins can be significant. if you look -- as i mentioned, the operating margins for their north american e-commerce business, we're seeing and looking for them to program dramatically in '17/'18. >> it's a good discussion, guys. it's stunning to see amid the world of hurt that retail is in
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amazon up again today. david seaburg and courtney reagan. good morning, sue herrera. >> by a 55-22 vote, brazil's senate has voted to impeach dilma rousseff. she says she was elected by 54 million brazilians and the impeachment threatens voter sovereignty. we'll have more in a few minutes. >> and critics say -- >> the world health organization says pollution in cities around the world has been increasing since the last global study two years ago. it warns that pollution is responsible for 7 million premature deaths a year.
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and george zimmermann, the man who shot and killed black teen-ager trayvon martin will auction the gun he used and use some of the proceeds to challenge hillary clinton's gun control policies. the one-day auction is scheduled to begin in about half an hour with bidding set to start at $5,000. let's get back downtown. back to you. >> when we come back, a lot more on the trump/ryan meeting, apparently ending just a few moments ago. waiting for details from inside the rnc. we have three voting members of the fed on the tape and we'll talk about dilma rousseff in brazil in a minute. olay total effects
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let's get to the cme group in chicago. rick santelli. >> thank you very much, carl. ken rogoff, welcome to the santelli, change. i don't know if you'll be able to feel this but i'm giving you
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a fist pump right now! you've been on the bully pulpit for years with research with says when death goes up, growth most likely is going to suffer. can you fill us in on where we're at seven years after the crisis. >> when you look at the global debt situation and not just government debt, private debt, pension obligations, there's a big overhang. it's probably a worse problem in europe than it is in the united states. it's a really bad problem in japan. >> the recent mckenzie study has placed an increased amount of debt since the crisis somewhere around $57 trillion, $58 trillion. a lot of that is china. you mentioned japan.
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japan has so much debt out there. with respect to asia in general, how is this debt ever going to get paid back or does it matter? and is servicing it going to be a problem? rates can't stay low forever, ken. >> well, that's the question, rick. i think a lot of the market thinks rates will stay low forever, we'll never have inflation, the real interest rate, which is the interest rate minus the expected inflation rate, that's really low and they think that will stay that way forever. and it might but it's a risky position to be in. certainly a country like japan, which is basically paying nothing would be in a lot of trouble in global real interest rates went up. b we don't know when they went down and we don't know when they'll go up. >> we have three fed speakers out today. all three are voters. if you had a word of advice for the fed and i mean this in the most macro generic sense,
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normalizing rates seems to be in the hands in the central bank, is this a task too big? is normalizes rates going to take a runway of a decade or more? >> i don't think so. but it's very tricky because the big thing, rick, is we don't understand in the world why inflation's so low for so long when it rises, will it also be hard to get down? we don't understand that. and when i said we don't know why real interest rates have gone down, what i really mean to say is we have ten reasons. i think fear is a big reason why interest rates are so low. people are seeking safe assets. and the fed's been struggling with this. what is normal? and they're still struggling with it. i think they're going to unwind slowly but don't think it's going to take ten years. >> and my final question is it's campaign season. this going to be like the first presidential reality tv show in many ways and one of the big topics is anti-trade, kind of
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everybody hunkering down. how damaging could that be considering we have historic low rates virtually, we coming to what could be the end of a very long business cycle, all these balloons are up in the air. what about free trade taking it on the chin, sir? >> well, i think it would be a very bad thing for growth. i would much rather see, you know, changes in the tax system, changes in social benefit programs to help people who have been hurt. i think there's a lot of evidence that, you know, the early years of the 2000s did damage to that and we immediate to fix it. i don't think pulling back on free afraid is a way to fix it. it makes the pie smaller and makes it harder for us to have everyone better off. >> and we've been -- in cutting that smaller piece of pie into many more pieces, which is where we find ourselves today. ken rogoff, thank you for your
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time. simon hobbs, back to you. >> rick santelli and ken rogoff, thank you very. in the meantime, it's been a long time coming but now it is official, brazil's president dilma rousseff, suspended. rousseff speaking just moments ago while our chief correspondent joins us with the latest. she's still defiant, michelle. >> absolutely. these are live pictures coming in now. there are protesters for and against rouseoff because of the dramatic political events that have happened in the last 24 hours. she has handed over power to her former ally, this whatever a marathon 20-hour debate in brazil's senate. it started at 9 p.m. last night, ended this morning at 6 a.m.
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only 22 senators supported her. the vote was an intense moment for the country of brazil, protests in favor and against rousseff's impeachment occurred outside of parliament throughout the night. shortly after the vote ended, dilma rousseff denounced the vote as a coup. what was critical in this vote was the scale of her defeat, which foreshadows the next vote, post that trial, to permanently push her out was office, 54 senators or two-thirds need to vote to formally terminate her mandate. that to many seems like already a done deal based on the numbers that we saw here today. guys back to you. >> that story far from over.
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thank you very much, michelle. >> it's the battle for market cap or superiority. google due to it's a 35% run-up has now overtaken apple as the most valuable company in america. right now google's market cap around $499 billion versus the 497 there abouts billion for apple. an interesting turn of events here. apple has run into a bit of momentum slowing for them. google playing some real catch up here, overtaking them in terms of the overall market cap crown, sara. >> reversal of fortunes for sure. when we come back, we're still awaiting details from inside the rnc, after we learned from reince priebus, the chairman, that the meeting was great and a positive step toward unity. plus oil surging above $45 a barrel. it is back toward the flat line,
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still around 2016 highs. more on the commodity trade next. now what? how will you keep up with the new demands of today's digital economy? the fact is: some believe they won't need a traditional bank down the road, so at cognizant, we're helping banking and financial services companies think digital, be untraditional, and reimagine what the bank of the future can be. our clients can now leverage customer intelligence to predict their financial needs and provide more contextualized products and services. we're creating new platforms across channels so customers can effortlessly invest, borrow, lend, transact-wherever-whenever they choose. and we're digitizing the way banks run, driving efficiencies and delivering new value for their customers in return. digital works for banking and financial services. lets talk about how digital works for your business. ♪
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welcome back to "squawk on the street." stocks were positive, now turning to the down side, fractionally lower. holding on to some gains, the sector is standing out as one of the beckiig ones to the up side largely do to monsanto up on reports of a possible takeover. for the year the materials sector is up by about 7% overall. certainly a sector to focus on in today's trade, sara. back to you guys.
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>> thank you. we're keeping our eye on washington, d.c. that is the site of the republican national committee headquarters, the rnc, where donald trump, the presumptive republican nominee has been meeting this morning with paul ryan, republican house speaker. we know from the rnc chairman, reince priebus, who just tweeted it was a great meeting and step toward unity. >> makes you wonder if perhaps he's finished with priebus and then goes to one-on-one with ryan. that was quite soon that that meeting was over. it must be a series of meetings. >> we'll wait for word. we'll keep you posted. we're also keeping our eye on the price of oil, which continues to rise. wti crude above $46 a barrel. let's bring in the head of commodity strategies.
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harry, thank you for joining us. >> thank you. good morning. >> warning of a significant reduction, dramatic reduction in crude oil stocks by the end of the year. what is the importance of that message? >> yeah. i think the i.a. is basically reminding people there is going to be a rebalancing of the market over the course of the year. however, the pace of that rebalancing is in question. the figures showed some upward revisions to demand in the first kwaur b quarter but still remain stable through the year. if you look at the institutional forecast like those of the imf, they've been downgraded. so oil is not exactly out of the wood just yet. >> so they did mention a lot of the supply disruptions that we reported on over the last few days and weeks, including that from nigeria, libya, venezuela, kuwait, not to mention the wildfires in canada. can you just give us an update on which ones matter and what
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it's doing to production? >> yes, absolutely. i think you really nailed it. the bullish momentum in planned another. and the countries that you mentioned, the wildfires in canada and further deterioration in nigeria, and the compound of the statistics from the department of energy showing the u.s. crude stocks declining against expectations, and so disruptions in canada is important to the u.s., and a lot of the canadian oil is making its way down to mid-continent, and looking for further disruptions in nigeria, and removing some light supply are from ta that basin is going to disrupt brent. so the market is sort of forgetting about the broader fundamentals which show excess supply over demand. here in paribas we are concerned about that, because when the oil
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rises to $45 and above, you are throwing a lifeline to u.s. shale producerers, and everybody is expecting it to de-kline. if we don't get the expeck shun, we may be due for the correction in the summer. >> and overnight, we saw lynn energy filing for chapter 11 and we were expecting the bankru bankruptcies to come, but expecting the m&a activity to pick up, but is there a window there as the prices are rising the valuations are higher, and the big companies like exxon who have the cash are going to to be missing the window? >> well, you are making a really good point in terms of what is happen ing happening in the u.s. space, and yes, bankruptcies and lynn is the latest example, but there are going to be a lot of assets to take up, and we could expect m&a to pick up, and right now sh, in the credit lines, to oil companies, and from the spring
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to the autumn, and a much clearer idea of the cash and the leverage that the companies will have to pick up some of the et better assets out there, and probably by the end of may and early june. >> we will will see if it happens, and harry from bnp pp b paribras.
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for your portfolio? well, it depends which side of the aisle you are on. >> well, hillary clinton has a double-h digit lead over to the millionaire, but it a gap that is less when it comes to the millionaires, because 44% of them plan to vote for clinton in fall, and that compares to 31% for trum up. millionaires believe that hillary clinton would provide a good opportunity for investments, and only 31% for trump, but it is a 6-point
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spread, and the outlook is dependent on the politics much more so than the wealth levels. 82% of democrats believe hillary would be good for them compared to only 13% of republicans for a trump election. the outlook of the economy is going to be more gloomy for the republicans and 27% of republicans say that the economy will be weaker which compares to 9% for democrats. when asked who it would be better for the wealthy, millionaires say trump. of course, being endorsed by millionaires is not a big campaign boost in the populous season, but they are the biggest donor donors. 1 in 5 millionaires surveyed have given to a campaign, and much of that to the democrats. >> thank you, robert frank. we will be right back on that
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note with the latest from washington in a moment. ♪ amazing sleep stays with you all day and all night. sleep number beds with sleepiq technology give you the knowledge to adjust for the best sleep ever. it's the semi-annual sale! save $500 on the memorial day special edition mattress with sleepiq technology. know better sleep. only at a sleep number store. [martha and mildred are good to. go. here's your invoice, ladies. a few stops later, and it looks like big ollie is on the mend. it might not seem that glamorous having an old pickup truck for an office... or filling your days looking
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good morning. it is 11:00 a.m. in washington, d.c., and 11:00 a.m. on squawk
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street, and "squawk alley" is live. ♪ i say don't you know ♪ you say you don't know ♪ i say good thursday morning and welcome to squawk alley, jon fortt and kayla tausche along with karen swisher executive director at rico, and it is so nice ois to have you here. and in a few minutes paul ryan is fwgoing to talk about the meeting that he had with donald trump. and our john harwood is outsidef of the rnc headquarters in washington. hey, john. >> hey, carl. mr. trump has left the meeting and his motorcade left, and he smiled as he left, and we have not seen the members of the houseer or the membership walk out of this entrance at

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