tv Squawk on the Street CNBC June 1, 2016 9:00am-11:01am EDT
>> important store -- >> of course. landsend billings missing -- joey -- >> you got ten seconds to bail yourself out. i don't think you can do it. >> that's true. it's been fun. thanks. >> you can do a lot in ten seconds. anyway, thank you for joining us today. thank you for being here. missed you yesterday. but we'll see you again soon. >> maybe tomorrow. >> maybe friday. is this me? make sure you join us tomorrow. "squawk on the street" is next. ♪ good morning and welcome to "squawk on the street." i'm david faber along with jim cramer, we're live from the new york stock exchange. you can see carl quintanilla at the code conference in california. and he's going to have more on that event in just a minute. let's give you a look at futures as we get the day started here on "squawk on the street." you can see we are headed for what looks to be a lower open. this of course after yesterday
we saw the major indexes all down. european markets, yeah, kind of a down show there too, as you might have expected. we'll call it what 1% more or less when you average it all together. as for ten-year note yield here in the states had a recent high yesterday i believe in yield 1.81. and there is all important crude and brent both below $50. let's get to our road map this morning. and it begins with jeff bezos making headlines at that code conference. we're going to have much more on his future at amazon, the retail stores, donald trump. yeah. plus a new month in the markets after that may rally. stocks as you saw starting in the red. and a deal this morning, not that large a deal but an interesting one, salesforce buying a software company $2.8 billion total price tag, had a lot of cash.
marc benioff going to join jim right here this morning. i will at least get to say hello to the bearded master, i'm hoping. let's get to carl in california at the code conference where jeff bezos was making some news, carl. >> you got that right, david. we love the code conference, quality conversation is fantastic. bezos did not disappoint. talked about amazon's business model, talked about why he's so committed to taking industry to outer space, talked about the promise of india, talked about artificial intelligence. here's a little taste of what bezos said basically regarding the four pillars around which he is now building the company. >> i think of them as little seeds we've planted. and we'll see will they turn into big trees? >> that's a good example. >> and amazon studios. i think amazon studios could turn into a fourth pillar. it's possible. what we're doing with alexa and
echo and natural language understanding and that evolves into an artificial intelligence agent. and i believe there will be a bunch of artificial intelligence agents in the world. a bit like apps and websites, they're going to be specialties. you may not ask the same a.i. for everything. some a.i.s may be better at certain things than others. and so you might -- i bet the average household will use a number of these. but i am being very sincere that those two seem very promising to me. >> i'll tell you, guys, we've been talking about a.i. sort of as a moon shot and we've heard similar things from companies like google at the i.o. conference, but this was very specific. 1,000 employees at amazon now committed to this. working on it for four years. with obviously very concrete examples of how this is going to eventually reach the consumer in alexa, in the amazon echo. really fascinating stuff.
we're witnessing a very large pivot here in technology, jim, i'm sure you'll agree. we'll get to the other topics bezos talked about later in the day including everything from ipos. that a.i. talking point has really stolen the headline. >> there's a reason i've been focused on it here in our conversations. we tend to kid, carl, sometimes about the machines taking over. but, jim, it's so interesting to hear bezos when he talks about a.i. particularly but also the other studios, the legs, we know they've done it before with amazon web services which was created within the company. initially serving the company and then of course spread to corporate clients and now an enormous business. they continue to innovate at that company at scale. >> right. now, demand weare acquired this morning by salesforce, their big initiative is a.i. they're trying to be predictive. i don't know how much is
algorithmic, if you like this, if you like crude you'll want to get long google. it's almost like that. but what's interesting is this knowledge of what you want before you want to know it, before you know it, before you even can understand it is very, very powerful. and to be able to into it what we like, can you imagine if amazon decided we're going to open a stock exchange, and we generally think if you like exxon, maybe you just bought 100 shares of chevron. why not? that is the analog. i mean, carl, this exchange idea on artificial intelligence clearly not just limited to merchandise. something brick and mortar, it can be in anything. >> absolutely. it's literally a universal technology. and it's being built on the building blocks that we sort of talk about every day. more pedestrian things, greater computing power, as you said better algorithms, all of this will funnel into that technology
that you want before you know it. >> carl, let's say you want a ticket to cleveland versus golden state. you know, i think they would know that you're a basketball fan because maybe they see that you belong to nba.com, and they would show you an array of tickets. and you would have it firsthand. and you wouldn't have to wait for stubhub. i want that. if they can -- if they know my brain and know i want to be at that game, whatever, i mean, what a great thing. i want that more than i realize. >> well, it certainly fits with bezos' overall strategic strategy, which is to not be afraid to fail, right? not be afraid to fail repeatedly over and over again because that tenth at-bat where you actually do hit the ball in his view is likely to be a very large run. >> yeah. and not to forget amazon studios which you also mentioned there. carl, what's the number? they're going to spend $4 billion or an enormous amount of money in content this year at
amazon. that's not insignificant. >> absolutely. as he said, i mean, sort of odd to hear jeff bezos say you win more golden globes, you sell more products. and just yesterday they renewed transparent, which did win the golden globe last year for a fourth season. so they are well ensconced in the hollywood game. and it's no longer an oddity to see bezos at some of these ceremonies where they're handing out artistic competitive awards. >> yeah, i want to check that number and make sure i'm right, but it's something like that. >> reed hoffman told me how he came of with nar kos, said a lot of people like the movie "scar face," a lot of people like "breaking bad." i happen to like about the nazis and japanese winning world war ii, because that was a great series i could see bezos sending me literally everything about what would have happened if the nazis had won, maybe what would have happened if they had had the bomb. i could see them talking about what would happen if the
japanese invaded california, there are books and movies i want to see because i watch that. right now i'm limited to, hey, the guy who bought the last days of berlin also bought the last days of tokyo. >> yep. >> but i want to know what i want before i've thought it out. >> a.i. is weave its way into our world in a much more significant way. sometimes i come back to the fact i think it was '97 or '98 big blue beat the reigning chess champion and said it would be 100 years before they could win and he beat the -- a.i. beat the raining champion a few couple months back. carl, i know you've got other things from bezos as well. not dealing with a.i. at all but dealing with politics. >> yeah, as you know it was a free ranging conversation and id dit turn to donald trump with whom bezos has had criticisms back and forth on twitter at least, and of course comes a day after trump's news conference in
which he went toe-to-toe with the political media. here's what bezos had to say about that. >> one thing that i think is not appropriate that donald trump is doing is, i think, working to freeze or chill the media that are examining him. you know, it's just a fact that we live in a world where half the population on this planet, if you criticize your leader, there's a good chance you'll go to jail or worse. and we live in this amazing democracy with amazing freedom of speech. and a presidential candidate should embrace that. they should say i'm running for president of the most important country in the world. i expect to be scrutinized. please examine me.
that's a very important cultural norm. and the cultural norms are without the cultural norms, the constitution is just a piece of paper. >> guys, a lot from bezos last night. and a lot still to come from the conference today and tomorrow. later on today we'll hear from mark fields of ford, we'll talk to jim ban kauf, bill gurley talk about private valuations and yuri milner. great couple of days. we can't wait to get started. >> thanks, carl. we'll be checking in with you of course through the broadcast. those are powerful words from bezos. toi i want to get to the broader markets. >> remember -- >> yeah? >> trump knows this is about media, knows public hate media and the media is bias so taking on the point of view of the
individual upset with the media. not the point of view of the first amendment. now, these are radical precepts he's doing, which is basically to say, listen, the first amendment is not what's at attack here. what i'm attacking are the people disliked by americans. it's a -- remember, he's about winning. i mean, can we never forget that? he's about winning. >> so is jeff bezos. >> he's about winning too. absolutely right. but he ain't running for president. >> no, he's not. at least not yet. we're going to take a break and then we're going to get to the broader markets. >> just started. >> we ate up 11 minutes talking about a lot of these things. >> that was not eating up. that was smart, good tv. >> you're right. i agree. >> why? because we didn't have jim pa palmer. >> coming up, you're going to hear about the cloud, we have a deal salesforce.com agrees to buy demandware, marc benioff going to join us for a live interview. also ahead you saw a rough start to the morning for the broader
markets. and look at those names both down nike, under armour, we'll tell you why. another look at futures. we've got, well, a lot more to get to here. with me and my colleague mr. cramer who's scowling. with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call
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ford is out with its auto sales figures for may. let's get to phil lebeau at hq with results. >> hi, david. weaker than expected. ford reporting a decline in may sales of 5.9%. the estimate from ed munds was decline of 2.9%. can't blame the f-series pickup truck up 9%. but this is the stat of the day, hope you're listening closely, car sales, and we're talking about the focus, the fusion, car sales, not overall vehicles sales but car sales down 25% last month at ford. that speaks to what we see with low gas prices and the cultural shift in this country toward suvs, crossovers, cars are just not in favor. guys, back to you. >> cultural shifts, thank you,
phil lebeau. >> could this be young people not driving cars? >> i heard cultural shifts from phil, you do wonder. >> no one can keep up. but the trucks, the f series is wonderful. that also helps it's a small business situation which may be doing better. we had marty on the other day and small business is not strong, but that's extraordinary. i mean, this comes back on the heels of when you're 17. how many minutes did you wait before you got your driver's license? >> right. >> now it's like, hey, how many minutes did you wait before you downloaded uber? >> i know. by the way you've already got it downloaded because you've been a teen potentially using it already, accustom to it, part of your life certainly in urban areas. depends on where you live. >> i took the f train yesterday. >> yes. >> got me where i wanted to go, much faster than uber. i guess that makes me an older person. >> they don't have that a lot of places, the subway. >> the f train? >> no. it's a particularly good line.
>> yeah, it is. >> a lot of people reading books on the f train. my line on the upper west side, not a lot of readers. >> play candy crush -- >> people playing candy crush. >> this is an extraordinary number. mark fields is going to be on talking to carl, i believe. >> yes, from code. >> that's a statistic that says, well, mark, you told me that maybe the p/e of your stock was too low. well, to have that kind of drop is kind of a caterpillar-esque or joy global. it's shocking. >> let's get to under armour and nike. under armour falling in the premarket, the company lowering full year guidance directly related to the liquidation of sports authority. remember, that had originally been thought to be a reorganization, but now it's liquidation. nike also moving lower, morgan stanley downgrades dow component to equal weight. had been overweight. morgan stanley saying the athletic apparel category weakening amid heightened competition potentially from the likes of under armour, both down
today, jim. is it an opportunity or something that warrants more attention? >> i think that under armour might be. some people say it's the worst chart in the book. under armour has steph curry. and in the morgan note they talk about 800 basis point takeaway from nike because of steph curry. anyone who watched the series knows that he is electric. and that is an endorsement business. but david, the sports authority really skunked a lot of people. there's a lot of inventory sent there. under armour had sent millions of dollars offin vep toir and obviously not going to get any -- very little back. but nike, morgan stanley talks about u.s. channel growth of minus 1%. this is a growth stock. and adidas is back. we had written off adidas. obviously under armour came out today and said, listen, we're still going to have fantastic numbers. kevin plank is a very difficult
opponent. but nike is the one that is down a lot. nike big dow stock. that's going to directly impact. >> yeah. on the other side of things michael kors puts up a good number. >> cuts numbers enough. i would say the billion dollar buyback and the extension to china getting that china franchise is very good. handbags have been strong. coach has been strong. coach numbers have been good. so there's various parts of apparel that are strong, but i am -- you know, pvh had a very good quarter. >> right. >> let's not forget that this sports authority when they decided to just close it, david, it was like linens and things. >> circuit city. >> here today, gone tomorrow. >> chapter 7, all the inventory gets sent back and that's the end of that, you're not coming back. >> yeah. dave's outdoor. remember dave's outdoor? >> vaguely. >> that was from the sopranos. >> oh, was it?
>> yes, it was. [ laughter ] i remember my father got a bust out, that's when they advance -- you advance credit. >> there's a lot of retailers we could go through. >> this was not a bust out. >> corvettes was a liquidation. >> wow, geez. >> remember that? >> one has the right to think retail is there forever. >> including amazon. you never know. >> well, first there's bricks and mortar falls before amazon. >> it does. you do wonder what the future holds. >> how much does he pay his workers this that assembly line? >> you mean in the warehouses? fulfillment centers? >> i got that from your piece. >> $13 an hour sometimes. >> but in rural area where there are no jobs created. >> eventually when we get to a.i. and those kinds of jobs and increases in robotics you wonder how many people will be in a fulfillment center. >> i know the music is on means we have to cut away, but toipt ask you when you sat down with
bezos for your special, was he -- >> he did not sit down. it's his right to refuse. >> oh, well, that's a horse of a different color. >> a regret i'll always have. hope he shares it. up next cramer's mad dash, countdown to the opening bell and another look at futures. we are set up for a lower open this morning. a lot more "squawk on the street" right ahead. a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars. but we saw an opportunity in sharing cars. so we moved fast and launched car2go in 29 cities, all around the world. doing that required dozens of data centers, designed for speed and performance. we built our business on the ibm cloud. because that's what the ibm cloud is built for. we built our business on the ibm cloud. you wouldn't take medicine without checking the side effects. hey honey.
about six or so minutes until we get an opening bell for this wednesday june 1st, beginning of a new month, jim. >> unbelievable. >> it is. summer is going by already. let's get to a whole foods in mad dash. >> okay. when that last quarter reported it was a definite uptick, but analysts chose to ignore it. credit suisse neutral to buy this 365 concept i think is going to be a win, it's a work in progress. they hired extension by the way which i think is doing a lot of interesting stuff in terms of customer relations. the comps are near bottom, they're cutting prices. and, david, fresh market, you know they went private, fareway struggling, sprouts did bargain with the devil, with amazon, i think you do that when you need help to grow. this one's back. and people forget that this was the premium retail for a long time. and do it private label, people trust private label, they do still have to have some streamlining of management because they still have very eclectic management.
>> this was once one of the great growth stocks for a period of time. you're saying it's back is a big deal, jim. >> i know. but i think that's taking on kroger, which i no longer am as game for, but they needed to see competition drop back. by the way, they can come in under trader joe's at 365. trader joe's does not have the broad array they have. this is where this company bought back about a billion dollars worth of stock. they knew, they knew -- people questioned that loading the balance sheet with debt, they had an understanding of their p p p prowe prowess, i think the stock is back and interesting i think you want to hold it. >> interesting call from jim cramer. we're going to talk about the sale of alibaba stock by sof bank. opening bell in about four minutes from now. at the marine mammal center, the environment is everything.
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you're watching cnbc's "squawk on the street." we're live from the financial capital of the world. the opening bell is going to ring. let's call it a minute from now. and when carl is -- well, he's still with us, but he's on the west coast. you know, i always like to ask you as we go back in time almost 20 years what the key to this market is, jim. >> well, i think i've got to tell you, david, when you see deals like salesforce what that tells me is that these consolidating, salesforce buying demand ware is about amazon, it's about fulfillment. this is about the recreation of retail. >> sometimes we talk about these companies we don't really explain what they do. can you explain what it does? >> when you're at a decker's and they don't have what's in stock, you can order online there and getd it. that's a demandwear. if you look at customers you would be shocked.
it's design within reach. it's so many different companies, and it's all about the same thing that bezos talks about, which is getting you what you want. but, david, that's where the strength comes from. the losers are the nikes of the world. >> right. thank you for doing that. demandwear deal is $2.8 million, i've been misquoting that. just heard opening bells here at the big board. the ew scripps company and the scripps national spelling bee champions. remember, we saw them last week, they tied over at the nasdaq linear technology, manufacturer of analog integrated circuits. we get right to show here. let's do it. earlier we heard from ford, now gm releasing may auto sales. back to phil at hq. >> not good numbers. gm reporting a decline of 18% last month, 18% drop in sales for general motors.
that was worse than expected. the edmunds.com estimate for a decline of 13.1%. keep in mind general motors has been pulling back on its fleet sales, whether it's to daily rental companies like a hertz or avis or whether it's to corporations. so that's certainly part of the decline, but you also have to wonder with their estimate for the industry monthly sales pace coming in at 17 million vehicles if that's correct, guys, this is going to renew chatter about whether or not we are in fact seeing the beginning of a slight decline from peak autos. again, gm coming in with sales down 18% last month. guys, back to you. >> thank you, phil. phil lebeau at hq. >> suvs in the lower price of gasoline changed things. >> suvs is obviously a much higher margin product. >> but, david, i have to ask, is gm a value trap at 30? remember we had all those very smart guys come in to gm, talk about all the cash it was generating? well, looks like the price to earnings multiples are shrinking
rather rapidly because maybe people feel we've seen the best numbers. if we've seen the best numbers, they're not as cheap as they seem right now. >> then you have people going out 10 and 15 years and doing cash flow on these automakers and talk about a world where autonomous vehicles start to really become a reality and fleets of these vehicles and the efficiency they'll bring and the fact you'll now have automobiles being used all the time, but what will it have an oppressing effect on auto sales. >> at the same time tesla up and you can't get a model 3, waiting list is forever. the $90,000 ones are hard to get. so you're talking about an interim of bridge car of tesla before we get to self-driving cars. >> right. >> gu -- lyft, gm saw that coming. >> this is a shift to your point earlier younger people perhaps not looking to buy that first
automobile, not as eager to do so because there are other options now to get around. particularly in urban areas. but that's always been the case in urban areas, but even suburban areas too now. >> this has been a great driver of the economy. i think that we have a lot of people say the fed must tighten, the fed should look at auto sales. >> 17 million is not bad. >> no, but i'm just saying you could make a case that something is worth discovering here. how much of it is switched to suvs, how much is frankly no secular decline in auto sales, in a country, david, where getting your car was a rite of passage. >> that's true. china now the largest market in the world they are moving faster than we are on autonomous driving. i can't tell you how many people are interested in this as an idea and focusing on it even as an investment idea right now. because it has so many implications. not that it's coming any time soon. it's not going to be here in the next few years.
semiautonomous cars, yes. >> semiautonomous is terrific for parallel parking. >> what does that mean for things like insurance rates? >> oh, you know -- >> you're a company that relies to a certain extent on a decent amount of revenue from insuring automobiles and accident rates start to plummet as a result of the rise of semiautonomous cars. >> they better, david, i remember the fatalities were coming back. why? because people are texting while driving. that's why -- i mean, semiautonomous you can text all you want, you can drive, this is like the millennials, let's just call them they are on the cell phone, david, talking to you while they play candy crush and they also check on what they think is the news, right, their news feed. their news feed is about mostly about endangered gorillas. i mean, honestly. when you look at the news feed of a younger person, it's not what we look at. >> no. >> they don't look at any of the stories, foreign policy story i think has very -- there's a
battle for fallujah, they think it's a movie with harrison ford. >> that's not good. don't depress me right now about our democracy, please? >> yeah, sorry. >> let's get back to market stuff. alibaba shares down about 3.6%. late in the day yesterday sofbank which owns 32% of alibaba, sometimes we forget how much stock that company owns of alibaba, they bought it for virtually nothing in the year 2000. but they announced the plan to sell let's call it almost $8 billion worth of that stock taking down from 32% to 28%, much of the sale taking place through the issuance of a convertible security that will convert when it terms out in three years into alibaba shares. thus providing still some upside for sofbank but protecting its downside. also getting the company, jim, to buy back $2 billion worth of stock. >> saw that. >> and then the alibaba partnership which includes sort of the 28 key executives at the company or people who help found
it are buying $400 million personally. and then you have a sovereign fund coming in from $500 million, add it all together $7.9 billion worth of stock, sofbank is sold. >> need the money to clean up balance sheet. >> de-lever. they want to go down to 3.3 times leverage ratio. where are they right now? 3.8. >> and yahoo trying to figure out tax implications while the clock ticks here. >> clock ticking on the yahoo deal. core business, we're in june, maybe by the end of this month, early july we'll know who the buyer is. >> right. and bob peck from suntrust coming up with various scenarios. "the wall street journal" scenario being the very least, verizon being the very high price. i got to tell you as yahoo's alibaba it's not the core business. >> no, and yahoo down by 1.75% because you've got that decline in alibaba.
sof bank is purely a balance sheet move. >> watching the interview carl was showing with bezos, it's one for one with netflix. immediately netflix just get hit, people say you've got a guy who can bid up the cost of film entertainment. these guys are the wall worlds are colliding. >> they are. i think around $4 billion in content cost for amazon, music and video, they said they'd ramp it up a billion a year so call it $4 billion this year. netflix is going to spend about $6 billion this year on original content, jim. >> they better do a lot of sign-ups because i got to tell you, david, if you have some failures, and they have not, you're going to run into situation again where they're spending far more than what they're taking in unless they raise prices somewhat steeply. >> all right. let's get to bp ob pisani on th floor. >> hello, david. decent may but starting stocks in the red today. some of the banks are weak here. you see the ten-year yield moving to the downside a little bit. normally that affect bank
stocks, energies, industrials, consumer staples defense only on the upside here. people trying to talk weaker economic numbers, but they're not that bad. take a look at overseas here in japan, abe in japan plans to delay the upcoming sales tax. that hurts the nikkei. shanghai, germany also down fractionally. some people talking slightly disappointing may manufacturing numbers, china 50.1, okay, that wasn't that bad. japan was a bit of a dis appo t disappointme disappointment. waiting for ism number to come out in the united states. will be out shortly here in the united states. a lot of people talked about the oecd, warned of a low growth trap here, 1.8% is estimate for gdp growth in the u.s. for 2016. so stuck in the mud is kind of where we are right now. jim talked about michael kors here, i want to point out they have a hard time figuring out where michael kors should be, you see they're having a very
tough time. and a lot of these luxury retailers, they're all over the place this year. korss is now up a little bit, but ralph lauren, tiffany, all having a tough time. we have a new ipo, and for those of you of a certain age, it's a new one, it's a well-known one and that's valvoline here, very famous oil manufacturer here, 930 locations around the united states here. valvoline is being spun out of ashland. we do not have any terms on that. we'll let you know what's going on with that. that will be trading here at the new york stock exchange. back to you guys. >> all right. thank you very much, bob pisani. i want to go over existing m&a situations in today's faber report. >> okay. >> start with monsanto, bayer and monsanto, there had been chatter around and number of reporting indicating the
companies have been involved in talks. they really haven't at this point. people close to the situation say they have yet to engage in meaningful dialogue, something they want to share with people at this point. doesn't mean they won't, but for now bayer is very much focused on getting his own stock price up. up today, going to be in boston, then in new york speaking to their investors because they've lost about $13 billion in market value since they first broached the idea of a deal to acquire monsanto, jim. so they're meeting with their investors. again, no meaningful dialogue at this point. people expect you will want to move as quickly as you can in getting a deal done, but most the people i'm speaking to who know what's going on say weeks, not days, in terms of that. moving on, sanofi-medivation. sanofi today is going to ask medivation for a record date to set a record date whereby shareholders will have to own the share by a certain date to vote or to act by written consent. if they ask for it they will today, that would mean that
medivation has ten days to respond and ten days from then to set the record date. so the latest would be the 21st of june. and then it begins, 60 days by which at any point sanofi will be able to deliver 50.1% of its shares if they get to that and say we want to call a special meeting to replace the board of directors. in some ways taking it out of the hands of medivation's board of directors. did want to just share that little update with people. >> okay. so this is -- we are going to be speaking to marc benioff and he makes a bid for demandware and he gets it. where is the $75 bid from sanofi -- from medivation without -- >> medivation says you want to talk to us you've got to do better than you are. and for its partis sanofi will talking to shareholders, the question is does medivation engage prior to them acting by written consent. now we know we're going to have a record date the latest would be june 21st we can game it out in terms of 60 days and when.
>> why don't they do what they did with regeneron? i don't understand this adversarial nature of a european company over here. >> well, we'll see. they are fairly adversarial. >> they certainly are. >> get to one more and then to rick santelli. e.t. and williams -- i've been covering this forever. reports that they've been in conversations that williams might consider instead of the $6 billion in cash taking a large slunk of equity though it made very little sense rather than owning e.t.e., they're not talking at all. >> they make up stuff? >> not at all. there have been no discussions. they have not been talking about recutting the deal in any way. they're going to meet in court in about 20 days from now in delaware. as of now that looks to be where the action is going to be, jim, as to whether that merger agreement's upheld and delaware forces ete to close or lets them out on that tax opinion. >> well, the stock going up as
long as oil was going up and now oil plateau at 50, way too much comes out. so that was a good opportunity to unload. >> yeah. >> i think. >> let's get to bonds. for that we check in with rick santelli at the cme group in chicago. >> thanks, david. you know, ten-year have been slipping and they're dramatically slipping today as we get ever closer to testing 180. remember the lows for the year in the high 160s. you see the two-day chart there back-to-back. if you look at a two-day bund very similar chart. let's open the chart up to march 1st as we begin our first day of june. you can really see how these moves develop. if you look at the ten-year, it certainly seems though we're just in this consolidation pattern. if we turn the corner, many technicians say the top on this move looks like it's in place as it moves lower towards the apex of that formation. bunds are the same but a lot less developed. their rates are just much more compressed. the dollar index has had marginal improvement over that time.
and of course as bob pisani was referencing regarding china, the currency issue there is rather important. the dollar now at the best level against chinese currency since january 14th of 2016, this year, so we want to monitor that. david faber, back to you. >> thank you very much, rick santelli. well, up next, we have salesforce's ceo marc benioff on his company's deal to acquire demandware, a 2.8 billion deal as demand ware shares up as you might expect sharply given the premium. "squawk on the street" back with benioff right after this.
salesforce announcing a deal this morning acquire demandware for $2.8 million. we're lucky enough, marc benioff, mr. salesforce, happens to be in new york. why do you need demandware given the fact i have seen your customer relations management and didn't seem you needed any help in retail? >> well, jim, i couldn't be more excited about this deal and i'll
tell you why, our customers are trying to connect with their customers in a whole new way, sales, service, marketing, analytics, apps, iot, all of those things we've talked about many times, now they want to create their own stores as well. online stores, physical stores, the commerce cloud, that's what we're going to create with demandware, it's going to be amazing. >> and yet on our last conference call and your interview you talked about the new extension of the fabulous work you were doing with amazon. i question whether amazon doesn't get cut out by this deal. >> well, i think that what you see is companies want to have that same one-to-one relationship with their customers that amazon does. and this is a huge motivation for every retailer in the world who doesn't want to be like amazon. of course salesforce also uses amazon's infrastructure. we love aws, we love jeff bezos. and we want to continue to emulate and be like them. >> so it's possible that a retailer like marks and spencer
can build a very similar site to amazon and tap into amazon web services and be able to be equal footing. >> well, the reason i bought demandware is we have a lot of common customers and i got an e-mail from milan -- >> i bought a jacket from them. >> beautiful stuff. a customer salesforce, a customer demandware, now they can have a common platform to manage all their customer information. i got another e-mail this morning from vitton, can be one customer solution to connect with customers in a whole new way. pretty cool. >> you paid a lot. is that because -- there's a very impression piece by piper jaffry yesterday recommending the stock. that's called timing. >> i did see that last night. >> good timing. >> yeah. >> they call it good sushi at a
good price. i think it's a fabulous price. but they talk about how adobe, ibm and oracle would also be interested in buying this besides you. >> this was a very competitive deal. >> so was there an election and we didn't know about it? >> well, these deals, the m&a season right now is the most intense, most exciting i have ever seen. i have never seen more deals and more things happening. we're not winning every deal. this is just a deal we're actually able to get done. we're excited that we can actually get demandware. and it's tough to get deals done in this environment because everybody's positioning for growth for next year. so i'm thrilled that we got demandware. >> okay. so people look at how much money you have, they don't understand the deferred revenue situation, they don't understand the cash flow situation. they understand you took a 7 cent hit to nongap. and we want to know why we should continue to pay the same amount for salesforce after we see that number cut. >> well, here we are we're raising guidance again for this year. we just raised on our last quarter by 80 million, here
we're now raising another 120 million. we are really well positioned for growth for the next two to three years. you can see that with the, you know, deferred revenue level as record level as you know. we had an unbelievable first quarter. we're just positioned for growth. i'll tell you why that's important. we're really coming to the end of the 2008 recovery cycle. >> yes. >> and every company, every ceo needs to be ready for really strong growth in 2017, 2018. and i don't think any company's more well prepared for strong growth than salesforce. >> okay. i saw demandware has decker's. i was at a decker's pop-up store, they didn't have certain inventory i wanted, they took out an ipad and be mine almost instantly. that must be demandware. >> and go into a louis vitton store, you want a briefcase, oh, here it is, take out their phone, that's salesforce, i saw you bought this, bought that, do you want to check out of the store just like you do at apple? oh, yeah, here you go, that's
demandware. demandware is now we're going to check you out and complete the transaction. >> i saw demandware is very early on in predictive sort. where are they really with predictive sort? because i figured this is what you would tell me artificial intelligence is here. >> this is what i think we should be talking a lot about, which is the next big wave of innovation in our industry. what have we talked about now for a decade? cloud, social, mobile, now we see the fourth major technology coming forth which is a.i. and a.i. is machine learning, data science, deep learning, you know, we have an incredible new product at salesforce called meta mind. if you have a stroke, god forbid, jim, and you need to go to the hospital and they know do you get the thrombosis drug or not, they can tell you on the spot if you need it or not because it's able to immediately look at your scan. and that's aimazing. artificial intelligence technology, you're going to see that in demandware, every part
of salesforce, through our whole industry. a.i. is the next big wave. >> well, we've been focusing on that with amazon, obviously focus on that with salesforce. marc benioff, thank you so much for being on the show. >> jim, great to be with you. >> all right. coming up, we're going to have more from carl at the code conference in california. in fact, he joins us right now. carl. >> david, the conference is going to shift into third gear. we're going to hear from jim bankoff of fox, mark fields of ford, bill gurley and yuri as the code conference continues live from palace verdes.
at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back. i'm eamon javers in washington where the department of treasury has just announced new measures to restrict north korea's access to the u.s. and global financial systems, specifically this is a notice of proposed rule making just out now from the financial crimes enforcement network prohibiting covered u.s. financial institutions from opening or maintaining correspondent accounts with north korean financial institutions. it also, david, prohibits the use of u.s. correspondent accounts to process transactions for north korean financial institutions. it's important and significant now because there's been some
reporting that tenuously links that bank of bangladesh hack to the north koreans. that's not been proven but there's at least speculation that's involved. interesting that this one, david, should come today. back over to you. >> yeah, thanks a lot, eamon javers, in d.c. jim, what do we got coming up on "mad money" tonight? >> palo alto, one of those high multiple stocks reported decent quarter but wasn't enough. we find this halving over and over again. workday, workday had a fine quarter. but wasn't enough. nothing's enough for certain people anymore, david. >> well, certain people, what does that mean? >> well, the growth guys they must have money coming out -- you know, one of the continual themes we talk about money is coming out of every fund. >> coming out of mutual funds, redemptions, hedge funds gotten ready for it, there's been a cycle, yeah. >> the area most hard hit i know marc benioff was saying this is where the growth is, but i got to tell you i am seeing over and over again a company like palo alto the p/e is being deflated rather rapidly. same thing with biotech. >> we'll see palo alto tonight
on mad. jim, see you back here tomorrow. >> this was fun. >> hope so. >> and amazon is the continual theme for everything. >> it is. interesting listening to bezos. more coming up from the code conference including vox ceo jim bankoff. "squawk on the street" back after this. one you got last yea? if we consolidate suppliers what's the savings there? so should we go with the 467 horsepower? or is a 423 enough? good question. you ask a lot of good questions... i think we should move you into our new fund. ok. sure. but are you asking enough about how your wealth is managed? wealth management, at charles schwab. & in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners
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good morning and welcome back to "squawk on the street." i'm simon hobbs with kayla tausche and david faber. carl quintanilla at the code conference in california. we'll get to him in a few moments time, but it's another soft opening here on the floor of the new york stock exchange down 110 points as you can see. a lot of concern about where we might go with interest rates. so a second soft day as now of course we enter june. >> and we do have breaking economic data at this hour. ism manufacturing for the month of may is out. rick santelli has that for us. rick. >> yes, indeed. and it's not good. start with the older number april construction spending dips down on a month over month down 1.8%. that's huge. we haven't been down 1.8% month over month since january of
2011, although there was a positive revision of 0.3 now standing at 1.5 for our last look. all right. let's get into ism, shall we? may number, the number is 51.3. now, 51.3 is definitely better than we anticipated. and it breaks the tie. over the last ten isms five have been under, five have been over. so finally we're doing more work in expansion naary mode. last time we were at 51.3, wasn't that long ago, march was 51.8. since it's employment week 49.2 versus 49.2, unchanged. so it's in contraction mode. and new orders at 55.7 is just a little bit light from our last look at 55.8. we're hovering at 181 in tens. haven't settled under 180 in tens since the 17th. so we'll call it two weeks and one day. simon, back to you. >> it may have something to do with brexit, but we'll come back
to that, rick. we have more breaking news from eamon javers now in washington. good morning, eamon. >> good morning, simon. cnbc has learned key house committee opened an investigation into the fed the handling of the $81 million heist and also the new york fed's oversight of the swift global bank messaging system. in this letter to the new york fed president that was sent yesterday, lamar smith, the chairman of the house science committee writes, in light of the recent cyber attacks on our global financial systems, the committee believes it is imperative to receive information from the new york fed about its response, its oversight of swift, the status of the investigation and any remedial steps taken to address vulnerabilities. the committee here in this letter obtained by cnbc is asking for all documents and communications referring or relating to the february 4th and 5th 2016 cyber attack involving the bank of bangladesh and also want all documents and communication related to security of the new york fed
swift system, documents and communications related to oversight, audits or investigative reports the new york fed has conducted related to swift's cyber security. they want all these documents, they say, in the letter by june 14th, simon. so this is a fairly expansive document request now from capitol hill to the new york fed to get to the bottom of what exactly is going on here in terms of this heist of $81 million and other cyber attack through the global financial system. i should also tell you separately reuters is reporting this morning that the u.s. federal reserve detected more than 50 cyber breaches between 2011 and 2015 with several incidents described internally as espionage according to fed reports reuters citing here from a freedom of information act request. reuters saying central bank staff suspected hackers or spies in many of the incidents. the records show the fed's computer systems play a critical role in global banking and discussions about monetary policy that drive financial markets, simon, back to you. >> thank you. meanwhile, let's get to our carl quintanilla who is out west
for a look at what's coming up at the code conference, which is now underway. good morning, carl. >> good morning, kayla. always one of our favorite assignments to come here to the beautiful shores of palace verdes. the lineup is remarkable this year as the tech world meets to talk about privacy, artificial intelligence, valuations. but so far jeff bezos did steal the show making headlines last night. he talked about the power of a.i. amazon's original content and the possibility of getting into wearables. take a listen. >> i think it's a super interesting market. i obviously can't talk about our future roadmap, but i do think that -- again, i think that's also in its infancy. i think you're going to see a bunch of different products be successful there, you know, with different functions. i don't think you've seen the tip of the iceberg yet. >> so is it something that amazon is exploring? >> not that i can talk to you
about. one of the whole -- you know, i think i would advise any entrepreneurs in the room, i think roadmap questions, product roadmap questions should generally be not answered. >> much to the chagrin of tech reporters everywhere, but clearly not ruling it out. bezos also asked about gawker and peter thiel and one of the few heavyweights to come out in apparent support of gawker. take a listen to that. >> you know, the old saying that -- you know, i think it's attributed to confucius, who knows if it's really confucius or not. but seek revenge and you should dig two graves, one for yourself. as a public figure, the best defense against -- again, i'm not going to get into any particular story. this is not about peter or gawker or any particular thing, but the best defense to a speech
that you don't like about yourself as a public figure is to develop a thick skin. it's really the only effective defense because you can't stop it. you know, you are going to be misunderstood. if you're doing anything interesting in the world, you're going to have critics. the only -- if you absolutely can't tolerate critics, then don't do anything new or interesting. >> interesting layer of conversation on all the things in tech we normally talk about at code. coming up we'll talk to jim bankoff of vox, we'll talk about the conference business, mark fields of ford will sit down and bill gurley and yuri milnor, talk about valuations, cash burn and more as our coverage starts here at code, which is just about getting started here 7:00 west coast time. guys. >> it's a feast of ideas. carl, thank you very much.
carl quintanilla there at the code conference. our next guest finds amazon more attractive than facebook, he says, over the long term. in fact, his fund holds no facebook stock whatsoever. josh spencer manages the t. row price. thank you for joining us. >> nice to be with you. >> would you say gold standard because a lot of what's going on is clearly controversial? >> i do agree. he's one of the key architects the fact we sit here today with two giant businesses, online retail business as well as the cloud computing business is a testament to bezos' perseverance and his foresight. i found his comments extremely interesting. and it's one of the key reasons i'm optimistic about amazon for the long run. >> i mean, i guess one of the problems that investors have -- let's take both of the examples that you put up there.
one that he would go so heavily into cloud computing and hosting for other businesses which obviously turned out to be hugely profitable and surprise many people a year or 18 months ago, and at the same time the streaming video would drive prime sales which as he put it last night would in turn drive shoe sales. as an investor it's not immediately obvious where the story ends what the narrative will be, what the product map if you like as he put it will eventually take investors. so how do we judge what's going on now? >> i agree. it's never immediately obvious. and what we have to do as tech investors is judge success over the long term. and amazon's built a long term track record of success and bezos because of his initiatives has earned the benefit of the doubt. we always have to keep stock price in mind and with stock prices having lifted i would say more attractive than it was a couple months ago, but over the long run i think amazon will
deliver very good success. >> do you worry about the tail risk of what may happen with donald trump? again, he reiterated last night that he thought it was inappropriate for trump to have made the criticisms that he has and that a president should better embrace free speech rather than attack the media. trump on the other hand has said or accused bezos of potentially evading taxes or using "the washington post" in an inappropriate way. now, if trump becomes president, is that a tail risk for investors there? >> i think bezos made some insightful comments around having a thick skin. and it's probably something he will have to develop. he's gotten some criticism over the years. the best way for him to deal with that is to continue building his business doing good things for consumers. and over the long run i think shareholders will benefit. >> josh, there are obviously days for amazon shareholders where it's better to take some money off the table and take those profits. the stock has not been for the faint of heart. it's been extremely volatile on
a quarterly basis, so what would you say to investors who see days where the stock is down 10, sometimes 20% about your long-term view? >> i think on those days it really does pay off to have the long-term view because it takes some conviction. as you know amazon never, even on those down days, it never seems to have great valuation support because a lot of its profits are still on the come because of the investments. but if you make the right long-term assessment, you can see that when the stock pulls back you have that conviction to add. we saw that just as recently as february. and i was adding to the stock aggressively in the fund that i manage at t.rowe price and it pays to do that over the long-term with this company. >> it's david faber, it's funny you're a global -- you don't own any facebook. are you not a believer in mark zuckerberg? >> i've often said is i don't
want to be seen as betting against mark zuckerberg. i do find it harder to see the future the way i can with amazon. i see two big runways with amazon. with facebook they're almost so dominant that now it's difficult to see what's the next leg of growth for them. i don't want to bet against mark, but it's a little bit less clear to me what the opportunity is to own the stock here. >> really? i mean, they haven't even begun to monetize whatsapp, moving in oculus and vr untapped area, i'm sure there are plenty of facebook bulls come back and say there are plenty of growth opportunities not to mention the continued penetration of the core business. >> i think there are plenty of ways for bulls to come at me, but we do have to make hard choices. i'm not yet convinced that virtual reality is going to be a big successful profit driver for anyone. but mark zuckerberg could prove me wrong. for the moment i see better opportunities elsewhere. amazon, tesla, other innovative companies. it's not so much taking
something away from facebook, it's just seeing opportunities elsewhere. >> you know, speaking of that, i noticed your number one holder or one of them is mxp semiconductors. sort of changing things a bit, but i'm curious a lot of talk about consolidation in that area. i don't know if that's part of the thesis as to why you own it, but i'm curious. >> i couldn't be more optimistic about that company. beyond cloud computing and the internet, one of the things that excites me most is technology content moving into new areas. things like industrial and automotive. and nxp along with the company free scale that they acquired is really a leader in selling chips into the automotive and industrial end markets. they have a fantastic cash flow performance and a really strategic set of assets between core nxp and this free scale business they have acquired. >> josh, one last question on tesla with elon musk of course speaking last night with the shareholders meeting. how concerned are you that the stock may be vulnerable if they don't hit their near-term
targets? >> this is a little bit like amazon. you have to do the long-term work and have a strong stomach. i'm not sure if they will hit those long-term targets. but i know they've already been far more successful than anyone could have ever imagined. i think the launch of the model three far exceeded anyone's expectations. and whether it's 500,000 cars in 2018 or if it's 425 or some number close, i think they're having a fantastic amount of success. and they've really got the automotive industry on its heels at a time of rapid change. >> good to see you, josh. thank you for your time, josh spencer joining us there from t.rowe price where he's of course a tech fund manager. when "squawk on the street" comes back, more from the code conference. carl sits down exclusively with vox chairman and ceo jim bankoff. more when we return. they found out who's been hacking into our network.
who? guess. i don't know, some kids in a basement? you watch too many movies. who? a small business in china. a business? they work nine to five. they take lunch hours. like a job? like a job. we tracked them. how did we do that? we have some new guys defending our network. new guys? well, they're not that new. they've been defending things for a long time. [ digital typewriting ] it's not just security. it's defense. bae systems.
>> i think there is a lot of optimism, but a lot of change, of course. the story of tech is a story of change. and it just always amazes me how things accelerate. we heard a great, great, i think iconic code conference moment last night. there were several. we had mark fields, we had the leader of the bill and linda gates foundation and jeff bezos carried us off talking about everything from artificial intelligence to space exploration. really an iconic moment from this iconic conference. and what struck me was just how when you think you couldn't get more advanced you realize you're really just in the beginning. and jeff really brought that home in a poignant way. >> the a.i. element, we've heard it from other companies at their own conferences. what's different this time? is it more concrete? is it more aspirational? what instruct you about last night's comments from bezos? >> it's certainly still aspirational. jeff made a good point. someone asked him, walt asked him are we in the first inning here and he said actually we're just kind of taking our practice
swings in a way. but you can start to see those practice swings. you can actually start to see we'll have elon musk here today and you can start to see rocket ships landing on drones and other consumer applications as well that are just starting to hit the market. so you can see that taste, the very beginning, and that inspires people to understand what the future could hold. >> as for vox we mentioned a year ago and sitting here talking about that deal in the late summer nbc took a stake in vox. >> that's right. >> you feel good about your timing on both of those things given where valuations have fluctuated? >> well, you know, we're always focused on growing the company and hopeful and faithful valuations will do what they do. i will say nbc has been a great partner of ours, not just because i'm on your air this morning, but many times you sign a major agreement, there's investment component and it's about the money and you say you're going to do stuff. in our case we're actually doing things together. we're doing big things in online advertising. we announced joint initiative called concert that's really
seeking to make online advertising good again, valuable premium, not annoying. and it's working really well. whether it's that or smaller things like american ninja warrior community for fans that we just launched together recently and everything in between. so it's been a great partnership with support from the top down. and we're looking forward to even doing more things. >> how far can it go, that relationship? could you see yourself programming an nbc channel? could you see nbc buying the whole thing? what's your appetite for something like that? >> well, we're going to take it one step at a time of course. i will say it's been great opportunity. and a fearlessness about exploring different avenues. having said that it's still a minority investment. and we have partnerships with a lot of different media companies. in fact, we recently announced our first television show with a&e networks show called fabulous that will focus on our curve ed brand. we're story tellers of course. we tell stories on snapchat, facebook and our own television
too. we have a unit called vox entertainment focused on telling longer form stories, television, talking to all the great o.t.t. platforms out there. we're going to program wherever their audience is but of course on nbc networks as well. >> there's this tension between traditional media companies and digital. we saw that in sort of the up fronts and new fronts each trying to claim more powerful stakes in audience delivery. and we see stories about revenue projections and buzz feed disappointing, although the company wouldn't agree. do you think we're overselling the promise of digital in any way? >> i look at the fundamentals and ask myself pretty basic questions. are more people engaging in digital or fewer? more. are they spending more time or less? are advertisers moving more budgets over? you know, these are clearly trends on our side. so as in any industry you're going to have companies stronger or weaker in a given quarter, companies well managed, et cetera. try to avoid the noise and look at the big signal that's coming.
and undeniably there's change afoot. not only for big established companies but for new companies like ours. this week we're focusing on facebook live where we're streaming a lot of -- well, sheryl sandberg here later at the code conference and stream her on facebook live. everyone should check that out. >> yes. >> cnbc will have content from the code conference too. i think the way consumers are interacting, it's just a great time to be a consumer the way you can consume content on any platform is just wonderful. >> finally, thiel-gawker, it sort of came into this conference almost as an aside, but it's like a bit of a maelstrom. bezos addressed it last night. what are people saying about it? >> well, we'll find out when nick from gawker takes our stage later on. but it's definitely a hot button topic here. you have people on both sides of the issue. as someone who runs a media company, i squarely fall into the camp that we have to be able to do our jobs. and gawker's always been known as pushing the envelope. gawker has been an inspiration
in that sense. but gawker has also come after companies like ours. so we understand that in order to be a successf fuful media coy you have to take chances and you have to be free with the first amendment to take those chances. so i think there's some interesting issues at stake and i look forward to hearing nick talk about it. >> sounds like you think bezos is lying about needing a thick skin is relevant. >> said some profound things not only about needing a thick skin, i think he had a key line about revenge which i tweeted out. someone who seeks revenge should plan on planting two graves. i thought that was profound. and also talked about the first amendment in the context of our political environment and how important it is to defend and protect the first amendment. clearly i think we all have a vested interest in seeing that happening. >> it's going to be an amazing couple days. good to have you onto kick it off. >> great coming out here. >> jim bankoff of vox, thanks. >> thank you very much, carl. without question it is the place to be. up next, more from the code
we are one hour into trading for the month of june, which is having a lackluster start so far thanks to weaker chinese manufacturing numbers that came out overnight. despite the fact we did get ism for the month of may here in the u.s. that was a touch higher just moments ago. with us now is j.p. morgan global strategist who joins us at post nine. ben, welcome. >> thank you. >> june has sort of a mixed bag in the markets. >> uh-huh. >> there has usually always been something in the month of june, whether it was a greek election or some other type of referendum. so should we be thinking of this june as more eventful or less eventful than the past? >> i think what we can say is that the balance of risks facing the economies and the u.s. economy and markets are a little more centered than they have been over the last few months. you have the u.s. economy which is accelerating in the current
quarter, again led by domestic demand and consumer. you have financial conditions which have generally eased. and so both of those are telling you that the downside risks that we've been facing in the last, you know, few months or a quarter have gone down a little bit. so if that's the good news, the bad news is that upside risks are also somewhat limited, right? in a world where earnings are a bit tepid, inflation is accelerating and the fed is going to move. and so where does that leave us? that leaves us with, you know, a continued low recession view on the u.s., low downside risk, expressing that as long credit and the equity complex that midling result kind of leaves us middle of the road place. we like the u.s. and europe. and we're still under weight emerging markets. >> shanghai down, europe down, flat for the u.s. is basically the new up. >> in some sense, yes. >> we had a mini tantrum in the month of may, when people were starting to wrap their heads around the idea that the fed
could move in june in just a couple weeks. >> yes. >> is that tantrum over? have they fully wrapped their heads around it? >> i'd say the market reaction overall tantrum notwithstanding has been stoic, not panic, in response to the fed. what's remarkable is that the range of possible options for the fed this year has come down dramatically. so we went into 2016, if you thought there'd be zero hikes on one hand, four hikes on the other, you'd find at least a mode of support. where are we right now? we're at a place where the fed's move barring some unforeseen shock once or twice, so the fact the markets have broadly digested that collapse of plausible outcomes i think is a positive sign that this might be a slightly more sustainable process than we had a few months ago. >> ben, let's talk about the brexit vote on june 23rd. >> yeah. >> i think most people looking at the polls and looking what the pound have done had assumed it would be a problem that went away. and that britain would vote to stay within the european union. then yesterday we got a poll that suddenly reversed that.
today we have a poll that says evenly split. and over the last hour and a half some big stocks in london have begun to behave in quite a strange way. it looks like people are dumping stocks internationally might be known. is this back on the agenda? if so is it a real problem for people in the united states? or as kayla suggests another european summer flare up that basically will amount to nothing. >> i think what happened over the last few weeks is that it had fallen off, so the remain vote gathering so much dominance that i think people discounted it a little too much. so now what we're seeing is that kind of remain vote dominance unwind a little bit the market reaction you expect in the pound and uk equities. so i think it's still marginally on their main side in terms of polling and, you know, i think there's also something to be said for the inner shl option wins. go into referendum 50/50,
typically -- >> you don't sound very worried about it, though. which is what i'm driving at. how worried should we be? >> we viewed as a risk gone away and come back not gotten any worse. >> ben, we thank you for coming in this morning. let's get a news update from sue herera. good morning, sue. >> good morning, simon. here's what's happening this hour. a french ship has picked up signals from what could be the egyptair plane that fell into the mediterranean sea may 19th. egypt's civil aviation ministry says the signals are presumed to be from either the plane's flight data or cockpit voice recorder. taliban gunmen stormed a court building in an eastern afghan province killing five people and a policeman. police attempted to diffuse an explosive packed vehicle near the courthouse. obama administration pressuring to make foods less salty in an effort to prevent thousands of deaths each year from heart disease and stroke. the guidelines are voluntary,
but the idea is to persuade companies and restaurants to take a more consistent approach. and big scare for passengers on a united airlines flight last night. take a look at that after several panels came loose and fell from the plane's ceiling. it happened after the plane bounced up and down while trying to land at newark airport. no injuries, thankfully, were reported. that's the news update this hour. kayla, back down to you. thank you, so much, sue herera. when we come back, is the future autonomous? the president and ceo of ford, mark fields, explains how self-driving cars are taking over. "squawk on the street" will be right back after a short break. i asked my dentist if an electric toothbrush was going to clean better than a manual. he said sure...but don't get just any one. get one inspired by dentists, with a round brush head.
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great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. welcome back to "squawk on the street." i'm carl quintanilla. our very own jon fortt sat down with a special guest here at the code conference, ford's president and ceo mark fields. jon joins us with more from that interview. >> carl, it's interesting. ford is at this point where they are facing a potential shift in the role of the car, but not
necessarily in the popularity of the car. one of the things that mark fields talked about was the possibility of car as a service. if people aren't buying cars as often, they'll still be using cars just as much if not more. so he's thinking about ways that ford can participate in that revenue and that profit down the line. we also talked about autonomous driving and some of those trends as well as ride sharing and how that might play out, especially because even if autonomous driving takes off huge, it's not going to be a dominant part of the existing fleet for a long time. listen to what he said. >> when you think about autonomous driving, the autonomous driving where the passenger doesn't ever have to be involved with the vehicle, you know, our view is probably an autonomous vehicle that can go in premapped areas of cities probably in the next four years or so, by the end of this decade. when you think of true autonomy,
where it matures to the point where you won't have to be able to take any control of the vehicle outside of premapped areas, you're talking probably 15, maybe 20 years. and then to your point it usually takes around 15 to 18 years to turn over the whole fleet of vehicles here in the u.s. so we're talking quite some time. >> so in a sense is the autonomous vehicle trend running into the ride sharing trend? sgluz because some of those very areas that would be premapped are the sorts of areas where people increasingly using ride sharing services, ride for hire services anyway. is it possible that the ubers, the lyfts, the didis of the world end up driving the autonomous driving trend if it happens in the near-term? >> absolutely. our view is when you look at the first applications of autonomous vehicles, they will probably be in ride sharing or what they call transportation as a service business where they're actually
traversing kind of, you know, urban areas that can be 3d mapped very precisely. and you can see that by the beginning of next decade where you could have those kind of things where it might manifest itself first, maybe four or five years from now where it will have a level of autonomy, there will be a driver there just in case to take control if anything goes wrong. but maybe a few years after that, you know, 2023, 2025, you won't need an emergency driver. >> some of ford's competitors have linked up with ride sharing companies. i asked him if they were to do that what exactly do they want out of such a partnership. here's what he said. >> the data is really important in terms of first that we protect that data for consumers but also at the same time what do we give back to them for sharing that data with us. but it's also around, you know, can we make a business? can we make money doing this? where is the value in that whole chain?
so those are the things we're thinking through. and as we've said, we talk with everyone. in the coming months and years you'll see our strategy roll out and what things we'll do on our own, but also who will partner with as well. >> carl, what we're seeing happening in cars slowly at the moment perhaps accelerating is somewhat we see happen in content in the social media era and internet era and what we've seen happen in cloud. people are using these things in more but in different ways. ford is trying to make sure they don't end up under the bus, so to speak. >> the bus they made as that happens. obviously we've seen the sell side try to put a number on widespread autonomous driving use would do to new auto sales. i've seen some statistics that argue the car that you and i own is actually used about 4% of the time, which is hugely inefficient. >> it's hugely inefficient. so that's part of what mark was talking about was there might be fewer cars purchased, but the cars that are used will be used more. so those companies, those
drivers might need to maintain the car more often, they might need to purchase new cars more often. so how does ford actually get more of a piece of that maintenance? we talked about the dealer network how they might participate in that. if ford can't get on the right side of that, then dealers could end up being an obstacle to that change. trying to figure out how to get them in on the game as he figures it out. >> not to mention some argue you don't want to be long parking garages, don't want to be long parking lots. a lot could be reconstituted for other things. has he put out any guidance on whether -- how vertical these automakers are going to be? can they do it alone or do they need a solid partner? >> i think he's trying to position the company to figure this out quickly by taking out a mobile technology unit to try to innovate faster. but at the same time you can tell he's dealing with this tension of they're making money off of the old way of doing things. he got a question yesterday about dealers, why are they pushing to make sure that uber has to go through dealer networks.
he said well the rules should be the same for everyone. if we got to follow these rules, they've got to follow these rules. they're having trouble disrupting themselves. >> interesting element of all the tech coverage we're going to be bringing you from code the next couple of days. later on today two very well known vcs, bill gurly a lley an yuri milner, an early investor in facebook, and not to mention nick milton talking about his rather blistering piece about twitter in vanity fair. that's in the next half hour or so. kayla. >> i know there's much more from code. we'll see you in just a few moments. when we come back, california republican congressman darrell issa will join us. his tsa screening solution that's ahead. you're watching cnbc, first in business worldwide.
tsa turning to temporary fixes over the holiday weekend to diffuse hefty security delays, at least at the country's biggest airports. bringing in staff from smaller cities, switching patrol officers to screening lines and paying more part-timers to come in, according to reports. but our next guest says that's not sustainable. only privatization will work longer term. we welcome to the program california republican congressman darrell issa joining us exclusively to explain. good morning to you, sir. >> good morning, simon. and thanks for covering this. you know, it's a grand experiment except there are 22 locations, including san francisco international airport one of the ten busiest, that already use, if you will, private screeners with the oversight of the department of homeland security.
the problem is that homeland security and tsa do not want to have that expanded even though it has lower turnover, higher reliability, faster, you know, screening through lines. there's nothing not to like about it. and yet congress has been trying to push tsa to accept applications for more cities. and they've been reticent to do it. and it's time they accept that. >> would you -- i mean, at least as far as this weekend went for those areas that are still wholly controlled by tsa, would you admit that there was a huge effort there and they appear to have got through the holiday weekend without major delays? >> well, if you weren't in sacramento you probably feel that way. if you were in sacramento just a hundred miles from san francisco, you had huge lines at a medium size airport where one of the largest did a much better job. there's no question at all that the problem with tsa is not that the men and women don't try.
it's that there's generally low, if you will, morale. there's more than 10% turnover. and by the testing of department of homeland security alone, 95 times out of 100 when they try to penetrate it with fake guns, knives and exclusives, they succeeded. so it's not even working well in spite of 42,000 government employees trying to do a good job. >> congressman, how much more expensive is it to have private security contractors in a large airport then to have this done by the tsa? >> it's actually less expensive. the independent, nonpartisan gao estimated a billion dollars cheaper if they were to implement these contractors. one of the reasons is contractors will use more, if you will, dual use individuals. they're more flexible. they'll have more part-timers. they don't necessarily pay less, but the screeners stay on
longer, less turnover. and as a result the studies show they're able to screen more people in less time. you go through security like the rest of us, what you see often is endlessly the people on the screening are in fact trainees, and they're constantly having to call a supervisor over to say what's this or do a secondary. as you work these things longer with lower turnover, you simply get better at knowing good versus bad items. >> why is it not possible for the tsa, for the federal workers to learn best practice? i see this weekend effectively for the first time ever they have a command center in washington for at least the major seven airports, and that appears from their point of view to be something of a breakthrough. why could they not go on an evolutionary pass that makes them as good as something in the private sector? why would there be an impediment to that? >> well, you know, einstein famously said if you keep doing the same thing over and over
again and expecting a different result, that's the definition of insanity. there were 22 privatized airports including san francisco, and they've outperformed the government ones for those 15 years. to assume that somehow they're going to change begs a couple of questions. one of this is, do you know that more than 10% of all the tsa employees are sitting in washington, d.c., they're basically headquarters people that keep coming up with new and innovative ideas that often don't work and ultimately have not given a better, faster system after 15 years of trying. but most concerning is tsa in their own inspections are penetrated 95 times out of 100. that's not an acceptable level of security. private security, lower turnover actually has a substantially better result. now, can they do better? yes, by the way, we're not talking about eliminating department of homeland security
oversight. what we're saying is let the government do that high level, that question of who is inspecting the inspectors, who's making sure the compliance, that's a good use for government. but having government simply do the mundane task of moving buckets -- empty buckets from one place to the other so you can put your shoes in it, that may not be what you might call a classic government job. it certainly is not a job that you or i would want to have as a career path of government service. >> let me ask you separately, sir, about where we are on the 2016 race and for drumds's relationship with the gop is now everybody's eyes ultimately turn to what is happening in california. we had mitch mcconnell on our breakfast show "squawk box" this morning who said about the relationship between republicans and donald trump. >> donald trump is not going to change what i think. he's not going to change the platform of the republican party, the views of the
republican party. i think we're much more likely to change him because if he is president, he's going to have to deal within sort of the right of center world, which is where most of us are. >> would you agree with mitch y mcconnell there, congressman, and do you see donald trump doing the walking here? many people would find that hard to believe. >> well, and you know, i don't want to say that the senate majority leader maybe spoke above his pay grade, because it is pretty high, but donald trump is now the leading voice of the republican party, and he has are received more votes from republicans around the country, and essentially than all others combin combined. and he is in fact a major voice. i think that senator mcconnell as the republican leader is a major voice, and paul ryan is a major voice. and so these voices will each speak slightly differently, but donald trump fits very well within the republican party based on the views on the second amendment, on freedom, on
business, on private enterprise. there are some differences, and those differences have usa exhausted back in 1992 h. ross p perot bolted the party because he didn't like daddy bush. and we are not anywhere near that, and so is ultimately going to be supporting donald trump as the nominee, and we are not seeing any real effort by main stream republicans, and so high r ranking republicans to bolt the party, and the opposite, and as people are finding ways to believe that we will work together, and we will blend our issues, and our beliefs with donald trump's and i believe that we will have a successful presidency, and one that could rival ronald reagan if we do it right. >> thank you, republican darrell
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. >> let's get to the cme group with our own rick san ttelli. >> and peter, my guest today, and going right to it. yes or no -- do you think that the next meeting not july, but june, do we have a over 50% chance of seeing the fed raise the the rates? >> no. >> and of course, it has been hot and walked back, but it is certainly seeming to me that the glide path to the reare cent data is detear yating and not all of the data point, but some of them, and what about your glide path, deteriorated over to the last eight weeks or so? >> well, it is lumpy, and retail sales are bet ter, and manufacturing is flatlining and the exports are sluggish, and so, if if you are looking at the data you would say, how can the
fed raise the interest rates, and if you look at the ta data you would say how can the fund rate be at 37 basis points? >> well, that is the quandary, and this conversation in certain ways reminds me of the brexit situation, the uk leaving the group, and i will tell you why, because there is a degree of control that never existed and it is status quo, and then any sort of change of the new status quo totally against history is frowned upon. when it comes to the brexit, i'd like to ask you point blank the if you don't mind, do you think that the uk ought to stay or leave? h your opinion? >> well, i think they -- well, i think they they should leave. they should be independent just like us, and renegotiate all of the trade agreements and the brexit is not for the uk, but it is the issue for the rest of europe, because other countries want to leave the eu, and opens up a whole pandora's box. >> great. now i happy to agree and since i asked you, i would tell you the same thing, and second half open in terms of europe, and the way
that the notion goes, the new static quo, and the new order and less control of course, and the citizens, and what they can vote for and how they are ruled in certain regards and how certain aspects and things like migration coming from brussels, and so my question to you is point blank, of course, when you unwind the thing, and it is status quo, there is unevenness to it, but is that as big of an issue as the members of the press and the uk are making it out to be and all of the sudden a recession, and is that a are response for the vote for brexit to leave sfg h >> n -- leaving? >> no, i acknowledge it is going to be a mess in the beginning when they have to renegotiate the trade with all of the countries, so a short-term disruption, but for the long-term disruption for the uk, nonevent, but it is more of an issue for the eurozone, and encouraging the other countries to want to leave if the uk
decides to leave themselves. >> peter, thank you. i really do think that the latest guardian shows that over 50% may want to leave, and other polls that show something different, but i think that our fed is going to be weighing in on this >> and that is why they are going to be waiting. >> thank you, sir. simon hobbs, back to you. that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate with pharmaceutical companies, and enhancing patient engagement with innovative platforms and solutions. our population's growing healthcare needs present growing opportunities for our clients: to advance the future of medicine with digital,
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