Skip to main content

tv   Squawk on the Street  CNBC  September 21, 2016 9:00am-11:01am EDT

9:00 am
quick final check on the markets this morning. again, we have been looking at green arrows all morning. but the dow futures have moderated some of those gains. still up by about 53 points above fair value. s&p futures up by 4. thank you, brian, for being here. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ do you remember good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. fed day is here, the decision on rates, the press conference this afternoon. futures are up after minimal movement in stocks over the last couple of days. europe's in the green as global investors digest the bank of japan and their move to more finely control the yield curve. the yen has had quite a rise this morning. our road map begins with fed day, much-anticipated september
9:01 am
decision just hours away. will they or won't they hike? the ceo of mylan takes the hot seat on capitol hill today where she'll be grilled on the company's epipen price hikes. what to expect today and the highlights from yesterday's heated wells fargo hearing. shares of fed ex higher after better than expected earnings and raising their guidance. we'll take a look at what drove that quarter. first up, the bank of japan surprising the markets by introducing a zero rate target for its government 10-year bonds in an effort to stoke inflation. the boj saying it will purchase bonds if yields begin to rise, lend money at a fixed rate if yields move much lower. that all comes ahead of the fed's latest policy statement at 2:00 p.m. eastern time. fed chair janet yellen's news conference half an hour later. yen had a run and then the narrative began maybe this is an admission they've reached the logistical limits of accommodation. >> look, i find them flailing. i just find them -- look, they
9:02 am
surprised because they flail a different way than they were flailing before. let's just -- i like it because we're in football season. the nfl team, they don't have any talent, so they can shuffle the talent all they want. but in the end they don't have any talent. so they can put these guys as linebackers, no, make them as defensive backs, front line, corner, safety, in the end the dogs won't eat it. there's like nothing here. they need population growth, they need immigration, they need formulation to be able to merge a lot of companies to become more powerful. and all i see is just, okay, target this, target that. life's not that simple. i mean, you've got countries that are in growth mode where they're really being kept back by a government. here, a government's trying to do everything it can but the country's not in growth mode and it doesn't matter. they have a 53-man roster with no talent. >> right. they've had deflation for a long time. kuroda came in saying we're going to generate 2% inflation, that's been the goal for a number of years. they haven't met that goal.
9:03 am
>> no. >> they keep trying to come at it from different ways. whether it's buying every asset in sight or targeting the 10-year rate as opposed to shorter term. >> i think these are all instances, what do they want in the end, they want to take our market share. they want to stimulate -- go listen to a remarkable call last night the kb homes call. what are they talking about? they're talking about tremendous household creation, formation. >> sure. >> fed ex, go over that call with a fine tooth comb. the fed ex call by the way these were both incredible calls. but fed ex is talking about how there are 156 million unique addresses in the u.s.: great stat here. >> great stat. >> and what is it growing by each year? >> 2%.
9:04 am
>> 900,000 a year. so you've got formation of unique addresses growing at 900,000. i read this and i said halleluijah. this is what every other country wants. it's just natural growth. organic growth. not stimulated growth. not we'll target the yield curve or target the currency, no, they should target addresses in japan. >> unfortunately you can't trade demographics like you can carson. >> exactly. that's really what it comes down to. you can't make up the pure oxyg oxygenated growth, oxygen growth, that kb homes has where the growth in jobs in california is extraordinary. and you can't recreate the addresses we have. that's like three cheers for capitalism that call. >> so turning to the fed here, and see larry somers with a big tweet storm saying we should be overshooting 2% target. do you expect a dovish hike or a hawkish hold? >> i expect a very strong statement which says, listen,
9:05 am
guys, this is what we're going to do. we did it last year at this time, we're going to do it again. we got to raise rates by december unless there's some calamity. because there are too many companies themselves, not the aggregate data, the ism data is terrible, retail sales data is terrible, companies in the mall, unless they're saying, listen, we've looked at the earnings and maurice's and justice and ann taylor are bad, we're not going to raise rates. i mean, the aggregate data from individual companies does support the ability to raise rates in december, even as there's been no real increase in pay. they can do it, if they really want to, they can do it. i don't want the dollar to zoom. the euro is still very cheap, 15-year low. but i'm saying we can handle it. and there's plenty of stocks to buy whether it be visa, mastercard, paypal, fed ex, whether it be this amazing quarter from adobe that we got to talk about. >> we will. >> there's things to buy. i'm not going to say, listen,
9:06 am
our season is over. you know, we're 0-3 and never make the playoffs and do not if we get a strong statement. >> when somers says total hours worked is down over six months, inflation expectations are falling, economy's weaker than the last take. >> i'm with somers, but i'm saying we can handle it. i'm with somers. somers is -- look, i like somers, he's a bit of a bull -- it's not a china shop because china holds up much better than a lot of things he's a bull. we run ad all the time about dangerous alpha, paul singer. you know, sing, when you hear him, it's like, okay. i remember when i was growing up we had fallout shelters. i was jealous of all the people that had fallout shelters. i would say they have a place
9:07 am
under their house with cans. she said we don't have a basement. i want a basement. i want the cans. but there's another way to look at it is we didn't need the fallout shelter and we needed to put our heads in the cubbies which wouldn't do that much with an h-bomb situation. and i don't think it's represents the way it will be. >> a day after wells fargo's stumpf faced grilling on the hill. it's heather bresch's turn. the mylan ceo will testify before house oversight today as her company's under fire for hiking the price of the life saving allergy drug epipen. in her prepared testimony she says she wishes the company had better anticipated the magnitude of rising prices for some families. but says price and access exist in a balance and i believe we have struck that balance. that's coupled with a number of reports about her mom and mandating purchases in certain states, be a lot to talk about today. >> yeah. i think there's a great story
9:08 am
underneath here. which is that we're not going to be talking about john stumpf today. >> no. >> great for john. >> plenty of people are still speaking about stumpf. >> it's people at night. >> you're right. i met people for cocktails. >> yeah. people say stumpf -- >> people wanted to talk stumpf. i was at the conference yesterday. people wanted to talk stumpf. in particular they wanted to talk about elizabeth warren and stumpf. >> people liked her. >> for the first time i actually picked the phone up and did some reporting too and talking to people who run similar units at big banks. yeah. i don't know where you went there, jim. >> that's just showing off. jet black -- >> no, i can't get to jet black, not until december -- i'm sorry. >> can't you just use the watch? you got that thing. >> adam shefter told me to pick up dak prescott yesterday. right on the watch.
9:09 am
>> no, but guys, what they're talking about with stumpf is whether or not he can keep his job. the consensus now seems to be moving towards no. >> really? >> yes. >> or at least the chairmanship or the whole shebang? >> in speaking to people the questions, well, if customer complaints are a key thing here at a bank like wells, why wasn't there a review every month of those, or even employee complaints? if so, did you do a deep dive to understand what was going on? why did you have targets that conceivably were unachievable as opposed to targets that perhaps were? why is opening accounts the right incentive? why is that the incentive? starting to hear a lot more questions in terms of accountability, in terms of the decisions made over a long period of time at wells fargo while they knew this was going onto some extent and whether or not that is ultimately going to force this board's hand. >> there are two people who matter here, and neither is on the board. >> warren buffett.
9:10 am
>> and dick. if he were to come on and say, look, i don't like the term happened here though you could argue some of these were put in play, then i think he's gone. if warren buffett says he should go, then he's gone. that board itself i don't think there's anyone that would stand up to stumpf. elizabeth warren is not going to get a ceo removed. >> david mentions the exchange between stumpf and elizabeth warren. if you missed it yesterday, here's that sound. >> i'm not asking about regional managers, i'm not asking about branch managers. i'm asking if you have fired senior management? the people who actually led community banking division, who oversaw this fraud or the compliance division that was in charge of making sure the bank complied with the law? >> did you fire any of those people? >> no. >> no. okay. so you haven't resigned. you haven't returned a single nickel of your personal earnings. you haven't fired a single senior executive. instead, evidently your
9:11 am
definition of accountable is to push the blame to your low level employees who don't have the money for a fancy pr firm to defend themselves. it's gutless leadership. >> on the heels of that, today jpm takes it to a neutral on what they say are going to be increasing training costs, the prospect of going back through all those credit scores and making some of those people whole, who knows how. >> that i thought was overrated, the latter part. because i think they actually were very good at trying to figure out -- they have one pers person, two is bad. stumpf is an indefensible character in light of that testimony. do you want to come to his aid? i'm saying people are going to run. i am going to say something positive about it. they scrubbed it. there were too many accounts that were questionable. they were going to make restitutions. but the fact is under his breath
9:12 am
there was the name carrie tollston, she oversaw the division. >> he said we went in a different direction. why couldn't he have spoken more forcefully about that, i wonder? >> what is a clawback for? what is a clawback for? it's to make it so that the executives have to deal with some accountability. >> jim, when it comes to wells itself, nobody thinks that massive deposit base is at risk whatsoever. the only area is perhaps somebody opening a new account or going to think twice about doing it. >> wells is very powerful. look, i use wells. okay. >> so do i. >> they're my guy. i don't even know how to make it so they're not my guy. i wouldn't even know how to unwind that process. you get a rate hike today and people are going to be talking about mylan. epipen time you get a rate hike. you're going to say, wow, i can still get in wells because there was some discussion yesterday about gutless leadership.
9:13 am
warren buffett has to come out and say this is not the man in charge and they've got to change their practices and if practices were additive to 5 to 10 cents a share, which he would not say, it's a nasty situation. >> so you are calling for stumpf to be forced out? >> no, i'm saying if warren buffett said he should be forced out. i've been calling for clawbacks. i don't think he should make anything. say listen, give back my salary, we're going to give back every bit. that's what he has to do. and i think he should do it. and then we move forward. >> right. >> i just think he should do it. i think it's a smart thing to do. i mean, i mentioned, i asked him three times to do it. why don't you just give it up? give it up. carrie left in july after so many years, just claw it back. hey, these are really rich people. when you're really rich, you can give that money up. i'm not saying go to jail. do not pass go. i'm saying give up the $200. except it's more like $200 million. >> it is, that is exactly the
9:14 am
number warren cited at least. >> $200 million. there's a little room there, say listen, i want to set it up for community banks, we're a community banker, give $200 million back to the community. you know what would happen? the dialogue would change. it would. >> maybe. >> it's not like a save the whale situation with jamie. there's like people here. >> understood. >> because it's funny. live long and prosper. >> i got the "star trek" reference, the whale reference -- >> i thought that was good. >> i got the sea world reference, i got references you weren't even making. >> put in the ear wing in your ear, i had nightmares about that for months. >> did you? >> yeah, check off, check off. anyway. >> when we come back, european competition commissioner margrethe vestager talks about the apple, and sarah eisen has that first on cnbc coming up. also ahead, nba legend kareem
9:15 am
abdul-jabbar coming up, he's not pulling punches on certain issues in his new book. look at the premarket, s&p moved less than one point two days in a row for the first time since 2014. back in a minute. ♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade. bacteria can hide in food and make you ill. wow! announcer: but you can keep bacteria from ruining your day with 4 simple steps: clean, separate, cook, and chill. the roadchip to food safety starts at
9:16 am
9:17 am
9:18 am
welcome back. want to share some breaking news involving viacom, of course a company we follow closely here. certainly i have. in addition to cutting its dividend, the more important news this morning, and bear with me as i read through the press release that just came out, the company has ended the process of seeking minority investor in paramount pictures. that is not news if you've been watching us and our reporting on this. we told you weeks ago that that was not happening or going anywhere. more importantly though is specifics regarding what will happen in terms of new ceo tom dooley. he will stay on as the interim president and ceo through november 15th to allow the board to conduct an orderly succession process. this according to tom may having taken over for phillippe dauman.
9:19 am
sherri redstone says she's been energized by the passion and commitment put forward by the newly expanded board. they've added five members to that board and viacom's senior team. tom dooley, who is now stepping down again as of the 15th of november, say this was a difficult decision, has great admiration for the new board and feels they'll best be able to execute the company in the hands of a new president and ceo. certainly this raises some questions. i've actually made calls previously this morning but don't have insight at this point in terms of what viacom, whether or not mr. dooley is acting of his own volition or in part to clear the way for a potential successor. there have been any number of potential names out there, and a key question has been, well, could you attract somebody if in fact the strategy for the company also involved potentially examining the idea of merging with cbs. now, nobody expects that as a
9:20 am
near-term option. leslie moonves, cbs ceo also controlled by sumner redstone, national amusements, has made it clear a cbs deal is not something he sees as a possibility at this juncture at least saying most recently yesterday at goldman's conference that they're always potentially thinking about other assets but this is not something they need to do. but more importantly the question is for viacom's future, who is going to be the new ceo of this company in about a month and a half. and what candidates will they have to actually look at guys. we should also mention they did say that earnings per share for the fiscal fourth quarter are going to be in the range of 65 to 70 cents. the revision accounting for a programming impairment charge and filmed entertainment. reported earnings per share expected to be between 55 and 60
9:21 am
cents primarily reflecting severance expenses and the settlement agreement in part with phillippe dauman who got paid a big number on his way out. >> geez, the stock was initially up on this. there's nothing here that makes me excited about it. >> no, i'd love to get a sense as to who the potential candidates to replace mr. dooley are. you have a board by the way right now is a huge board because it includes board members who will be stepping off at the annual meeting a few months from now and additional five members added to the board. that's quite a big board you have at this point involving both the new and the old, but they got to figure out who their ceo's going to be. listen, there have been any number of potential candidates, tom stags. >> that would be a good move. >> former c.o.o. of disney. would he do it. you can come up with plenty of names. the question is who wants the job, who's interested in the job. and can you attract somebody if,
9:22 am
you know, you had this potential of selling the company to cbs in even a year or so. >> if they pay like they're paying these guys now, they'll attract anybody, right? >> maybe. >> i mean, geez, that's a get rich quick scheme you become ceo there. these guys are the highest paid ceos of the most underperforming companies. >> yeah. >> philippe dauman, i don't know, did well. >> there's also this interesting impairment charge of $115 million related to the expected performance of an unreleased film, again, highlighting the challenges they've had not just in tv but studio. >> at studio. paramount has been an underperformer for a very long time. >> they were hyping that slate a few months ago telling us how great it was going to be. saying the movie slates were going to be really bail them out. >> there are no shortages of challenges for viacom whether it's at the studio or of course
9:23 am
at the networks themselves. the idea also now is what's a must-carry in this emerging world of over the top choices or even the skinny bundle. what is a must-carry? and does viacom have any of them? >> i don't know. twitter seems to have more. >> twitter's got news. comcast has news. we'll talk about that after the bell. we'll get cramer's mad dash, opening bell in a couple minutes. one more look at the premarket, which is positive though a lot of uncertainty coming this afternoon on this fed day. we're back after a break. these goofy glasses. yeah. well, we gotta hand it to fedex. they've helped make our e-commerce so easy, and now we're getting all kinds of new customers. i know. can you believe we're getting orders from canada, ireland... this one's going to new zealand. new zealand? psst.
9:24 am
ah, false alarm. hey! you guys are gonna scare away the deer! idiots... providing global access for small business. fedex. we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley.
9:25 am
it's not just a car... it's your daily retreat. go ahead, spoil yourself. the es and es hybrid. this is the pursuit of perfection. busy wednesday shaping up. fed day, decision at 2:00. the bank of japan. mylan on the hill. futures are positive. the opening bell a few moments away.
9:26 am
new bikes aren't selling guys...
9:27 am
what are we gonna do? how about we pump more into promotions? ♪ nah. what else? what if we hire more sales reps? ♪ nah. what else? what if we digitize the whole supply chain? so people can customize their bike before they buy it. that worked better than expected. i'll dial it back. yeah, dial it back. just a little. live business, powered by sap. when you run live, you run simple.
9:28 am
there's no one road out there. no one surface... no one speed... no one way of driving on each and every road. but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in... and the road you're on. the 2016 c-class. lease the c300 for $369 a month at your local mercedes-benz dealer.
9:29 am
all right. cramer's mad dash. >> listen, i've got to tell you this adobe conference call was a validation of everything you hear about the cloud. now, when you hear oracle talk about the cloud, it sounds okay. ibm sounds interesting. the last salesforce quarter is all right. go to the ceo and listen to the adobe call. you're hearing 20% growth. get this, the creative cloud is growing. it's growing 39%. they've got growth i've never really heard for a major company, but 23 trillion data transactions handled this quarter for adobe. if you're doing something creative on the web. if you're a company trying to sell anything on the web, you are using adobe. and it's a cloud subscription business. the day when you thought of this company as acrobaacrobat, pleas minor. 23 trillion data transactions go through adobe.
9:30 am
this was a brilliant call. you know, yesterday on closing bell, i've got to tell you, it underplays how great this company is. that's why this stock is not done going up, not yet. >> guidance from adobe. let's get the opening bell and the s&p at the bottom of your screen. at the big board carelli go anywhere trust and fiserv celebrating its 30th listing anniversary. we're going to watch food stocks, specifically general mills, which does beat -- i'm sorry, beats by 3 cents, revenue in line, but a lot of rough macro commentary. >> they came out a couple weeks ago and were pretty abject they didn't have the horses when it came to yogurt. and the release comes out today and they don't have the horses because of yogurt. so there was really nothing, you know, that was traumatic about it. i will say that group has been
9:31 am
under tremendous pressure. ever since the july 7th moment in bonds, these stocks have all acted terribly with exception of proctor & gamble and little more of kraft heinz. and the second laydown was hershey, the walkaway. the only guy doing well in this business bgs because they keep acquiring companies and they have great dividend. that's a little company no one's thinking about. pinnacle foods also doing okay. but campbell's has been just terrible and kellogg's coming down and general mills part of that. it's the center of the store, once again, so hard to make money in the supermarket. frito-lay, hats off, pepsico still making a lot of money. a ton of money. because they do quick turn. that stuff doesn't last. frito-lay, in and out, on a sunday at my house, in and out. we go for the chips. >> looking at q-1 net sales cereal down four, yogurt down
9:32 am
15. >> it's funny because cereal they've had a real big turn there in cheerios of fruit and grain, which does matter. i was telling the ceo if you can come up with gluten free beer, he basically said beer's gluten. >> yes, it is. >> anyway, it's my dream. that would be my next big business. i see the way beer goes, doing some hosting last night, geez, people just drink beer. i can only imagine what the numbers would be if we had gluten free -- >> doesn't sound very good. >> oh, it has to be good tasting. >> yeah. >> like sam's up and down, upgrade, downgrade today. >> fed ex up 5%. that's going to be your highest since summer -- last summer. >> what a conference call. it deserves every bit of it. there's a moment in that conference call where they say, listen, we're hitting it out of the park. there was some news in the fed ex conference call. by the way, people who say
9:33 am
amazon's going to wipe this guy out, they need every truck they can get. fed ex is lacking capacity, that's pretty funny since there was a piece in major magazine, bloomberg, which i love, will amazon kill fed ex. amazon is driving fed ex. one of the great calls here, what is being shipped? televisions, mattresses and t m trampolines. >> trampolines? >> all the analogy being we are now shipping larger things. just when you thought amazon was done amazoning everything, they're after whole new large scale categories. >> you get one of those trampolines, don't tell your insurance carrier. they will cancel you. >> yes. >> is that true? >> yes. >> that's like putting a slide in your pool. >> you do not want to let them know. big injury -- cause of injury. >> that's a good takeaway from today's show. even more the dooley resignation. trampoline, dooley.
9:34 am
so cfo said we knocked the ball out of the park. 17th year of taking share. amazing quarter and that's not including the tnt additions. and they're raising price and it's sticking. raising price, raising volume. i love this business. someone said why aren't you doing this? said we're buying back our stock. it's very cheap. >> i think they're right. >> speaking of buybacks, we have microsoft $40 billion. target today 5 billion. that's in addition to microsoft div hike. >> i am really kind of astonished. this microsoft, again, this is a company that is doing such great things. you can at least answer me and tell me no, release me and tell me, no, you can't come on. answer my e-mail. >> answer is no. >> i would like a no. >> my name is, no. my number is, no. >> i say please come on the show. i want to like -- no, it would feel better than limbo. >> you've got to let it go.
9:35 am
>> i can't. let it go, let it go, i'm not even after iger. >> let it go, let it go. >> got it. although they are to be fair just renewing the previous buyback amount. and they have given no timeline. they keep buying back stock. and the dividend increase while at 8% is somewhat impressive is lower than it has been previously. >> oh, nitpicking. >> just saying. >> so where's that trampoline, dooley, microsoft, just trying to rank things. >> you're trying to rank my value ad this morning? >> were you going to rank t-mobile raising the numbers they signed up by didn't raise guidance. >> that was yesterday, right? yeah. >> and then highlighted today in the journal visa vis come cast and the prospect comcast could use a wireless partner and so could t-mobile. >> yeah, interesting yesterday brian roberts comments actually
9:36 am
led investors to sell t-mo and k saying would be a competitor in the short term. so that had an impact. we watched sprint shares reverse yesterday. >> right. >> we didn't get a lot of specifics. marcelo went on to the conference and gave some things he spoke to you and i about, jim. but when it comes to comcast, this is not new. in fact, if you go back to i think it was the end of july when we had of course our ceo on with us, comcast control cnbc and we asked him about the wireless control of the company, take a listen. >> we're not looking at an acquisition. and what we're focused on is really a bunch of ways to look at wireless. the first and foremost is we have more wi-fi hot spots than any company in america.
9:37 am
and we have the best wi-fi of any company in america. >> and there you have it. so we'll see. there has been no shortage of speculation that eventually there will be consolidation and if in fact comcast wants to get bigger in wireless, t-mo could be the name. if you're going to change the name of your administration, clinton or trump, more so perhaps trump, you could conceivably see a way for sprint and t-mo to try also. >> wow, that would be something. sprint and t-mo, at the top you got a couple guys -- >> but you have germans who might be willing to sell. >> some trash talking guys at the talk. odell beckham merging with josh norman, wow, that would be a team. crazy man, you idiot, what do you say? i mean, these guys don't really like each other? >> no. >> maybe it's just show. >> i'm not so sure. >> you can never really tell like off field what they would
9:38 am
be like. do they join each other for a beer? >> i don't think they do. >> no? >> i don't think they do. >> do you think the at&t and verizon guys go out to enjoy a cold glass of water together? >> maybe a cold glass of water. >> sparkling or flat, that would be the discussion between att and verizon. >> home depot is leading the dow along with microsoft up 83 points. bob pisani'sen the flo on the f bob. >> just talking to kareem here, he's going to be over in a bit. still a legend, kareem abdul-jabbar. did you see what happened in the nikkei overnight? you would think there was some announcement of a significant stimulus package over there. look at the nikkei, one of the best days it's had in a long time, but very little happened. didn't change rates, didn't increase qe, they are going to try to steepen the yield curve overall. if you look at what happened, particularly with japanese banks what the market is saying they're relieved that they decided not to do anything. they didn't decide to further
9:39 am
lower interest rates or go into negative territory. and there's a bit of a relief rally overall. look at what the japanese banks did, mizuho, all these guys up 3, 4, 5%, mitsubishi, sumitomo, not going into negative territory further helped out there. energy up as we have a little bit of a relief rally going in oil right now. materials, financial, tech, interest rate sensitive sectors like real estate investment trust, our new 11th sector down a bit today and a lot of debate about what the fed's going to do and market's position for no hike and a modestly hawkish statement not for anything more than that right now. that's what we're seeing right here. now, you guys were talking about microsoft. i think it is remarkable the amount of capital they are returning to shareholders. remember something, this $40 billion buyback, they had an old one. they're going to finish that. they're going to do thachlt the company has a $440 billion market cap, do this over four years you're talking about 10% of the company they're essentially buying back.
9:40 am
raising the dividend 8%. we've got a dividend yield of 2.7%. microsoft never was a big dividend payer, but in the last five or six years it has been because every year they've raised it. so this year 8.3% may not be a lot, but remember what has happened in the prior year, 16%, 10%, 21%, maybe 8.3 is not a lot this year, but remember they're also going out and buying linkedin for $25 billion. i think that's a major factor in why they didn't increase the dividend even more this year. there you see microsoft. only a couple dollars from the old 2000 highs. i think it was 59 and change as i recall. so they've got a good shot at hitting new highs. meantime, nasdaq, we have an ipo trading today, nine ipos this week, going to be a big one. trade desk, tech platform priced at the high end of the range. should open in about 45 minutes here. meantime, later today -- tonight, couple of big consumer names, e.l.f. beauty, a low cost cosmetic supplier will price here, trade here at the new york stock exchange tomorrow.
9:41 am
and valvoline, we all know them, operates lubricants, sells lubricants and operates quick lube change around the united states. very well known. they'll be pricing thursday night for friday here at the new york stock exchange. we've had a good year overall for some tech ipos, not a lot of ipos. kind of abysmal year, but those actually have gone public have done fairly well overall. and the numbers here have looked pretty good. so trading 78% above the ipo price those that did go public. and the average return has been 36% so far on the year. the tech ones are the ones that have done really well. take a look at acacia, twilio, twine, all those on the upside. we have a couple tech ipos later on this week. i'll talk about them tomorrow. right now the dow up 84 points. guys, back to you. bob, thanks so much. bob pisani. let's get to the bond pits. it's going to be a busy day for all of us in equities and income. rick santelli at the cme. >> hi, carl.
9:42 am
indeed a busy day though i'm still not sure why we need any of the traders. ministry of finance, the bank of japan just tell us where they want the markets because indeed they basically took out a hammer and nail and said they're going to fix the 10-year on their behalf. they're going to peg it close to zero. now, this is kind of like our old operation twist on steroids, but no matter how you slice it, boy, you can't take it away. the central bankers of the world really, really believe they know how to do all of this. and it's going to work out so well. how did it play out in the marketplace? look at a one-week of the following charts. one-week of our 10s, we're flirting with a ceiling of 170s and floor of 160s. look at bunds pretty much looks like a ceiling of zero. jgbs trying to make a ceiling of zeros. look at gilts, a lot softer than the rest. more like 80 basis point floor. but no denying the similarity on foreign exchange. i wonder if the japanese think
9:43 am
it's going to help exports. of course it is, whether you look at the dollar/yen, the euro/yen, the pound/yen, all starting in july. they look awfully similar. at least for now. because the dollar and the yen seem to have a mind of their own sometimes and we'll pay attention to our fed. but for now, equities flying and the yen falling. carl, back to you. >> all right. thank you so much, rick santelli. when we come back, a basketball hall of fame erica ream r karee abdul-jabbar out with a new book and join us live at post nine. meanwhile, dow up 78 points in advance of that fed decision just a few hours away. don't go away. ♪
9:44 am
♪ ♪
9:45 am
experience the thrill of the lexus is f sport. because the ultimate expression of power, is control. this is the pursuit of perfection.
9:46 am
from colin kaepernick to donald trump, writing on the wall is kareem abdul-jabbar's
9:47 am
new book discussing the growing unease over inequality in america today. joining us now is the author of that book as well as of course the nba's all-time leading scorer, kareem abdul-jabbar, nice to see you. >> nice to see you. >> thanks for coming down. why did you write the book, kareem? >> i'm really concerned about all the division that's taking root in america. i think that if we could get to a point where we can discuss these issues and try to figure out some solutions taking everybody's point of view into consideration, i think we could make a lot of progress. >> yeah. that's a hopeful thought, but one that seems to be further in the rearview mirror, i think many would say, given all the different ways people can access information these days. we talk about it a lot and hear only what they want to hear as opposed to differing opinions. >> well, it's essential that we have to -- that we get the opportunity to hear the other side and take advantage of that opportunity. if we can't hear the other side, we don't really get to
9:48 am
understand the blind spots in our own points of view. and i think that's what the guys that sat around at the continental convention, that's what they had to get over. you know, because everybody had their own idea about what our country should look like. and it took a long time to reach that compromise. >> one of the things that i liked about your book -- and you're a great hero though you played -- i'm a sixer fan. you killed us. systemically killed us. but you were very professional but wrote about athletes. so you must be somewhat elated teams all over the country are making statements. players all over the nfl are making statements that are really raising awareness. >> well, i think athletes have such a great access to the -- to our young people. i remember when i was a kid and all my heroes were sports guys. >> right. >> and i think that as an athlete you have a really special platform. and if they can use it for a
9:49 am
positive statement about what's going on, i think that's a good outcome. >> is it mufing the needle? i see a lot of discussion about things i normally wouldn't see if it weren't for colin kaepernick. guys are really embracing it. coaches aren't shutting it down. >> right. i had a meeting with pete carroll, out there with the seahawks. you know, we talked about what could be done and what made sense and what would be detrimental to the team. and i think they came away with a good idea they came out locked in arms and it made a good statement. >> where's the line between making a statement about how you feel about the country, the flag, what have you, the national anthem, and remembering that we're all trying to fix -- the country has always collectively worked to fix their problems. do you see how that's alienating to some? >> i don't think that should be alienating. we have to get used to talking to people that we don't necessarily share their views.
9:50 am
because until we understand their viewpoint, we can't reach a compromise. if you don't understand who you're talking to. so that takes some patience. it takes some -- you got to respectfully listen, and then you have to speak with some respect your point of view. and if we can do that, things get a chance to change. >> you've got some great suggestions. and one of them i was not a democratic suggestion. you went less regulation. and you made that number one and then you have minimum wage should go up, but that was an unusual stance. because i think you think regulation has stifled some entrepreneursh entrepreneurship. >> in a lot of ways it has. but sometimes regulation is necessary because some people there's no regulation, they just go out and do everything for their point of view and to enrich their pockets. >> are you -- the $15 minimum wage, are you surprised a lot of
9:51 am
companies are taking it upon themselves? this morning walmart just raised another $200 million. i mean, this is a company historically we didn't think was pro-worker, so to speak, but some of these companies are thinking it's just good business. starbucks. >> i think it is. because that way they'll encourage their employees to stick around. and it enables them to have some hope for their future. >> kareem, you of course many people know you and remember you as we all do as one of the greats of the nba, but you've been very busy since retirement. i mean, i've seen documentaries you've done, books you've written, childrens books too if i recall, you keep it going. >> right. >> is it sort of your focus to keep producing these kinds of things? >> well, i wanted to be a journalist when i was in high school. i always had an incentive to write. and i had this career in the nba that kind of got in the way of everything. >> right here at power memorial, right? not too far, at least.
9:52 am
that's no longer that school. >> no, i'm just picking up where i left off some 50 years ago, you know? >> i read an oral history of "airplane," a few months ago, where they talked about the idea that you didn't -- you weren't sold on the role, but you wanted to buy a rug, does that sound familiar? >> no, that was a bargaining point my agent used. wanted to get my price up a little bit. >> yeah. >> so said i was trying to buy a rug. it wasn't based on reality. >> worked out though. >> yes, it did. >> lived on. >> absolutely. >> you want to leave us with an optimistic note here? what has been the reaction so far to the book? i know it's very early days. >> i've been getting positive reactions from most people i encounter. they seem to think that we can get something done if we start talking to each other. and somebody told me to tell you booya. >> absolutely. there's a lot of comments here, one of the things, the ncaa, i mean, it's professional athletes
9:53 am
who paid nothing, coaches -- everybody makes money. this is something that's been going on. when is this going to change? >> oh, when people realize that these people are being exploited. >> yes. >> college athletes are being exploited. and nobody wants to talk about it. >> the fab five said it. the fab five was right. and i thought they were going to win. >> well, you know, they didn't have it altogether. >> well, that's another book perhaps, kareem. always a pleasure to see you. and thank you for stopping by. >> nice talking to you. >> nice talking to you as well. kareem abdul-jabbar. when we come back, stop trading with jim. dow's up 83. don't go away.
9:54 am
announcer: when they test you, stand firm and move only when you hear the seatbelt click that says they're buckled in for the drive. never give up till they buckle up.
9:55 am
keeping the power lines clear,my job to protect public safety, while also protecting the environment. the natural world is a beautiful thing, the work that we do helps us protect it. public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. we want to keep the power on for our customers. we want to keep our community safe. this is our community, this is where we live. we need to make sure that we have a beautiful place for our children to live. together, we're building a better california.
9:56 am
time for cramer and stop trading. >> i get a natural gas bill every day from rbn and october price $2.95 revised up 15 cents. if you got this move in natural gas, range resources, you would be just hand over fist taking capital oil gas. this is a big change. natural gas has been in the doldrums for a long time. if you saw this going up, it would be not a prelude to oil going up but put a bid under almost all the oil companies, and a lot of the drillers. this is really good news.
9:57 am
we've got the oil inventories at 10:30. might want to wait to see them. but natural gas is spiking. it's going to spike. and that's big. >> what's on mad tonight, jim? >> wow, we've got flex, which is doing some fantastic stuff as a manufacturer. brent saunders is going to explain how you pay -- talk about pricing. a series of acquisitions not very oriented to the way a mylan, tevo or valeant would work. >> good. i have some reporting i didn't get to on that. >> jim, see you tonight at 6:00 p.m. when we come back, sarah's interview with european competition commissioner margreth vestager from the boj to the apple tax penalty. dow up 85.
9:58 am
9:59 am
10:00 am
♪ this is going to be the best day of my life ♪ ♪ . good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with david faber at post nine of the new york stock exchange. sarah eisen will join us shortly. it is fed day.
10:01 am
s&p is moved less than a point for the past two days, but today a little more action. s&p up about 11 points. dow's up 90. well, our road map this morning starts with central banks in pfocus as the bank of japan announces a policy overhaul and the fed gets ready to release its own decision. drug price outrage as the ceo of mylan heads to capitol hill ready to face a grilling over that epipen price hike. we've got details. and our own sarah eisen sitting down with european commissioner for competition margreth vestager, her take on apple, meeting with treasury secretary jack lew, a lot more to talk about with her. overnight the bank of japan revamping monetary policy to now target short and long term rates to boost growth. meantime markets open in anticipation of the fed this afternoon 2:00 p.m. eastern time. the cme's fed watch tool suggesting only a 15% chance of a rate hike today. that compares with a 50% chance of a hike in december. joining us this morning paul
10:02 am
sheerd, standard & poors chief global economist joins us at post nine. >> hi, carl. >> you don't think this will happen today? >> i think it's fairly unlikely it will happen today. the fed fairly unprepared for the move and the bank of japan move overnight might be less reluctant. >> some try to argue it was brainard's speech that put the nail in the coffin, again, we'll see what happens this afternoon. but you haven't had a hike with a dissent, you have to go back to angel, i think it was argued this morning, you think that all fits. >> brainard is always governor and chair i think is having influence and i think that's a pretty strong statement her recent speech. and the last word we've really heard from the fed. so i think they're on hold. >> so if that's what you think they will do, what should they do? >> well, i've always been a little bit japan background originally and i've always been in the camp of these kind of conditions the risks are asymmetric. wait a little bit longer, figure out what kind of mode the
10:03 am
economy's really in. this is the point, carl, the fed is struggling with the model of the economy. it's not just the cycle but has the fundamental structure of the economy changed. if it has, they don't need to rush to raise interest rates. i want more information on that point. >> what does that mean the fundamental structure of the economy? >> really, david,
10:04 am
10:05 am
10:06 am
10:07 am
u.s. is still a large domestic economy. over the years we've seen the fed place more weight on international developments and the exchange rate. >> they're not going to worry as much about the dollar as some might argue. >> well, you may think that. and normally they didn't. but in this go around, they have been very, very specific about dollar-related strength or dollar strength causing weakness in the u.s. economy. and that's why, you know, basically since the last time they raised, they've been walking backwards primarily because of the dollar and international concerns. so we can't ignore that. >> we're going to find out a lot for in four hours. gentlemen, thank you very much. the woman who slapped apple with a record $14.5 billion back tax payment to ireland is in new york today. the euc enforcer is defending her position. we sat down with her this
10:08 am
morning in a first on cnbc interview and asked her if all of the backlash was worse than she expected. >> no. i think the push back is very much what we would think it would be. and part of the american, the u.s. side of the story i think comes from the fact that we have this third competition tool which is the ban of state aid. you don't have that in the states. obviously, i do understand that there are a number of things, concepts that are new and culture when it comes to taxation that is different. >> what about the number? let's start there maybe. that was shocking for many people, $14.5 billion u.s. dollars. tell me how you got to that number. >> well, the thing is that we never questioned how apple is organized. we do not question irs tax code. what we've been investigating are the two tax rulings allowing
10:09 am
apple to put the huge majority of the profits generated in europe into a head office with no employees, no premises, no real activities which means that only a tiny fraction of their profits generated in europe was. and i think basically the very large figure is just an illustration of a very successful, very big company. >> well, sarah is here. in fact, i'm looking at her right over there. she's going to join us with more from that interview. certainly a lot, carl, to talk to. the competition commissioner about not the least of which is also antitrust when you come into the m&a arena, monsanto bayer figures prominently into what will happen. >> google. >> google. it goes on and on. >> it does. we'll get more color from sarah and i imagine more of that interview later on this morning. when we come back, there's this epipen outrage, new pressures hit mylan's ceo heather bresch as she goes to capitol hill. we'll get some details on that. we're going to speak with
10:10 am
harvard business professor and former medtronic ceo bill george. a lot more "squawk on the street." dow's in a tight range up 81. yep. stirred it... mm-hmm. drowned it again... mm-hmm. and now just feel if it's cold. yeah. cool. [camera shutter clicks] [whistling a tune] smokey just gave me a bear hug. i know. i already posted it.
10:11 am
10:12 am
our partnership with habitat for humanity at pg&e, we believe solar should be accessible to everyone. allows us to provide the benefits of solar power to the types of customers who need it most. pg&e provided all of the homes here with solar panels. the solar savings can mean a lot, especially for low-income families. with the savings that i am getting from the solar panels, it's going to help me to have a better future for my children. to learn how you can save energy and money with solar, go to together, we're building a better california. mylan's ceo heather bresch has taken the hot seat on capitol hill today. the house oversight committee holding a hearing on the company's epipen drug price increases. meg tirrell is there and joins us with more on what to expect. >> hey, david, the hearing starts at 2:00 p.m.
10:13 am
they'll hear not just from mylan ceo heather bresch but also douglas throckmorton. they cite 17 price increases over ten years resulting to more than $600 for a two-pack. you can see here mylan stock just over the last year down 23% as all of this scrutiny has abointd e bounded. now, people are expecting questions as to what went into the price increases, who made the decisions, but also about access, patient access programs, the assistance they're giving to patients on the drug, as well as epipen in schools. there've been a lot of questions about that even just this week. also, the lack of competition. that for both mylan and the fda wondering how they can increase the competition on the market for epipen. and then finally, a lot of questions about medicare classifications. some charges that mylan misclassified epipen as a generic drug in order to get lower rebates they had to pay back to medicaid. heather bresch in testimony
10:14 am
said, quote, looking back i wish we had better anticipated for the growing number of patients who may have ended up paying the full wholesale acquisition price or more. we never intended this. kind of pointing fingers at the rest of the situation. wells fargo in a note anticipating what's going to go on at the hearing kind of pushing back and saying, well, maybe some players in the industry did also benefit. but if you look at mylan's specialty segment operating profit margin that has steadily increased as well. mylan benefitting from the price increases as well, david. >> that's a good chart to look at, meg. thank you. we'll be checking in of course with you later. meg tirrell. for more on what we can expect from today's hearing, let's bring in bill george, harvard business professor, former ceo of medtronic. bill, i don't know if you've had a chance to read her prepared testimony, but as meg referenced of course she's going to give the committee at least some insight into pharmaceutical pricing, talk about access. what's your take on how this goes? >> david, if yesterday's hearing
10:15 am
with john stumpf at wells fargo is any indication, she's in for a rough time and frankly she deserves this. she's led with her chin, saying i'm in business to make money. everybody knows that. come on. we don't make money in the epipen, no one believes that. but she's really tried to ob vi skate the issue be i taking away from the mainstream problem. she has to reduce prices, roll back prices to where they were a year ago, at least, like $450. i think she has to apologize. she's in the generic business, doesn't deal directly with consumers. epipen does deal directly with consumers and she's got consumer outrage and she's harming people. and when you do that, people get upset and the senate gets upset. there was a report out also, david, on her compensation where she's gone from 2.5 million to 19 million. but beyond that mylan top five executives the last five years have the second highest pay in the entire industry, only
10:16 am
regeneron's higher. she's way above where pfizer, merck and all these companies are, am jgen and they invent re drugs. mylan's never invented a real drug. i don't see how you can justify this. i think she's got to apologize and get out in front of the issue instead of being on the defensive and trying to blame everyone else. >> yeah, those price increases are hard not to look at and say wow look at that over the last few years. by the way, this was something many people were aware of, but it's interesting how it sort of took root from the consumer level, bill. you know, you ran a device maker, i'm just curious, she seems to be going to some length to explain, well, this is not just about a drug, it's about the device and the complexity of the device and people aren't taking that into account. any credence to that argument? >> well, of course they're complex. medtronic defib lri laters are extraordinarily complex. we had to reduce our own costs
10:17 am
internally. we had no price increases. we came out with models and more features that were more sophisticated we charged more for at medtronic. i'm not sure about the policies today, but i can tell you you don't take advantage of the consumer with rapid price increases like they have because you're going to get pushback. it's actually harming people. people aren't buying these pens and their kids going off to school and they have an flaktic shock, they may die. i think she's got to be a lot more emp thetic. she showed very little empathy here for the consumer. if i were the fda, frankly, with thro throckmorton sitting there, there's no way to say put a rush through and then see prices plummet and that's the best way to take care of it. >> that's really, bill, where the cases are sort of combined with wells fargo and mylan. wells fargo not a case of life or death, but still consumers are outraged. they got cheated.
10:18 am
and that's why these ceos are facing what is a very angry set of senator -- before these hearings. what's the tip? because john stumpf really seemed to stumble with that yesterday. >> he did actually try to apologize. and i think you've got to get out in front of it. i think you say, and john stumpf case or mylan's case, we're going to take the company apart top to bottom, change our procedures, we're going to make sure we're doing the right thing by our customers. we're going to audit. we're going to do close loop investigation. we're going to make absolutely certain that these kind of things never happen again. and frankly, we're not just blaming the people on the first line, we're going to take responsibility at very high levels in this company. and we're going to claw back compensation and do those kind of things. same with heather bresch, say i'm not making any money. come on, guys, she's making a lot of money. i think we have to deal with these issues to get out in front. if you're behind the eight ball with the congress, you're in trouble.
10:19 am
>> speaking of that, bill, yesterday you could sense the frustration from senators who are trying to reign in regulation telling stumpf, you are not helping our cause, right? you're uniting the committee in ways we haven't seen testimony do in a long time. i just wonder with wells yesterday and mylan today if that wave of regulation is truly heading back. >> yeah, i think that's a big concern. playing into a narrative here with the financial service institutions that were not doing the right thing by people and they want to regulate, regulate. same with the pharma companies. i tell you, bring on the quality companies could find price controls and other limitations on what they do. i don't advocate for that for one minute, but i tell you it could happen. if people don't restrain themselves, it's going to hurt everyone. that's the impact these events have particularly in political year where everything's in play. that's my big concern right now is that the quality companies are being in the pharmaceutical industry in the financial
10:20 am
service industry are really being hurt by these examples. and they're real life examples. i tell you, it's a rough season out there. i think people have got to get out in front of it and speak up. and the business community's been way too quiet about these things. i think they've got to get out in front and speak out on behalf of their customers and consumers in particular. >> bill, final question real quick, do you think stumpf keeps his job? >> i don't know. i think it's 50/50 right now. i think unless john does some very aggressive things, maybe the board forms a special committee in this case it's gone that far and brings in a special investigator and really reforms the place top to bottom. this is a quality bank. by the way, they didn't make any money by opening an account one day and close a few days next and maybe have a few fees. they just put too much pressure on their people. and i've always thought that wells fargo, it's my bank, one of the finest banks out there. i'm as shocked as anyone that
10:21 am
this happened. john's a quality guy. i had some empathy with him yesterday. so i think the jury's out on that. >> all right. bill george, as always appreciate your insights. thank you. >> thank you. when we return, take a look at shares of fed ex. they're soaring up nearly 6% after posting a strong earnings beat. plus, the fed's latest policy decision coming out at 2:00 p.m. we'll speak with former federal reserve governor mark olson about what to expect. stay tuned. you're watching "squawk on the street" with the dow up 80 points. announcer: don't let e. coli
10:22 am
mosh with your food. an estimated 3,000 americans die from a foodborne illness each year. so, always separate raw meat from vegetables. keep your family safe at when a moment turns romantic, why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.
10:23 am
stop taking cialis and get medical help right away. so i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices. the market's hot. sync your platform on any device with thinkorswim. only at td ameritrade.
10:24 am
check out shares of fed ex hitting a 13-month high here. the company beating the street reporting adjusted profit of $2.90 on sales of $14.7 billion. fed ex also raising full year earnings outlook. let's bring in bernstein vice president and senior analyst david vernon, also joining us barclays and senior equity analyst brandon oglinsky. gentlemen, thank you to you both. >> good morning. >> there's a bit of a difference of opinions, which we always like here. david, you are not overweight
10:25 am
the stock. you're a hold. >> that's right. >> you raised your price target. clearly investors like this quarter. >> i think the setup into the quarter was for a positive reaction to any kind of good news. there was a lot of skepticism about what would be in guidance, what would be out of guidance, a lot of confusion about what the benchmark was. i think this is a little bit of a relief rally. i think what keeps us less enthusiastic about the stock quite frankly longer term is the relatively low earnings quality, the business, the fact they continue to invest at above market rate to get kind of market levels of growth. the stock right now is trading on any cash based metric at a really stretch valuation. and we think it's going to be harder to get further multiple expansion into what is still a pretty weak outlook for cash flow growth. >> brandon, take the other side of that with your target which is above $200 a share. >> sarah, listen, at cross industrials we just don't have a lot of growth. what fed ex is doing here is converting the e-commerce market into earnings. they do generate $5.5 billion
10:26 am
from cash every year. and they're actually choosing to reinvest that in the business. they're driving higher incremental returns in the past two years which they arguably didn't do in the past decade. i think there's a lot of historical precedent here that says fed ex isn't focused on returns when in reality they've been driving growth. i think 8% volume growth versus their closest competitor 2% at u.p.s. translate into very robust earnings growth. this might be the cheapest large cap industrial stock outside maybe the airlines. >> wow, that's a big call. they're also integrating at&t. >> i think the long term guidance was positive. expecting core earnings of the business to be about $750 million. the street was kind of expecting around 650 so little bit from a longer term positive better than expected. on the point about valuation it could be as cheap as possible on p/e but probably 40, 50 times free cash twice the sort of average market rate. and the level of earnings growth
10:27 am
they're getting is actually consuming a huge amount of capital generated that we just don't think the company can sustain that level of investment over the next couple years. >> when did it stop being a proxy for global growth? or is it still? i don't know. have they made that divorce? >> e-commerce and business consumer packages are now roughly 40% to 50% of their business. i think it's going to be more so going forward given the fact at&t and the focus of integrating in europe is going to be to push more e-commerce on to the network. i think that's what's caught a lot of people by surprise here, carl. historically when industrial production is negative, fed ex earnings go down. they actually grew 17%, 18% last year. they're targeting 12% to 14% growth this year. i think that's a really profound statement that fed ex is a little bit decoupled now from industrials and is much more on the secular e-commerce growth where we're willing to capitalize amazon at almost an infinite multiple especially looking at cash flow. >> do you go along with that? >> look, i would say the
10:28 am
decoupling of fed ex and the multiple of global gdp really ended with the global financial crisis. we're no longer in a world where global trade grows at a multiple. it's a fraction. while e-commerce is driving the volume growth, i would actually argue that the earnings growth at fed ex right now is actually driven by the application of super normal rates of capital. they're investing in new aircraft, which is getting the margin. they're investing in tnt, which is buying a new business. they bought a number of different businesses in there, so they're deploying a huge amount of capital to get that growth. it's not fundamental though. it's not like there's material inflection in the profitability of the e-commerce business for fed ex that's driving this growth. the real key for long term investors, can they sustain this rate of capital investment. at this level of leverage and at the current projections of free cash flow, it's going to be hardhard er. >> one pushback is they are raising rates along with u.p.s., that should help fundamentals of business, which continues to be
10:29 am
a bigger and bigger deal with these companies whether they can keep up with it is the question. >> i think the issue of capital spending is one that deserves a little bit more debate. historically this company did spend a lot, they didn't get a lot of growth. and earnings expansion and margins were stagnant. what's happened in the last couple years the management team said, look, we have a good asset and ground in the u.s. we're going to put a lot of capital on the ground. i think it's very emblematic that amazon is going out and buying trucks and planes because we're at capacity. look at the post office, u.p.s., fed ex, we need that incremental capital to sustain growth. and we're getting 10% organic expansion in the business at arguably very good returns. and historically there's been a wide margin differential between fed ex and the u.p.s. if you look over the past few years, they're actually closing that package margin gap to u.p.s. i'd argue this is a good investment that the company is making. and as active money managers we need to find these value opportunities where you can start to compound those margins and that capital into future cash flow. it worked very well for the
10:30 am
railroads for a whole decade. >> good debate, guys, thank you very much on fed ex, david vernon and brandon oglenski. >> when we come back, more with sarah's interview with eu commissioner for competition margreth vestager. i am helping hospitals personalize treatments using billions of data points. and working with medtronic to predict the highs and lows of diabetes, hours in advance. and i am working with orreco to use biomarker data to boost the performance of athletes. hello, my name is watson. working together, we can outthink anything. hello, my name is watson.
10:31 am
with dand bold styling to to stay ahead of the curve... the lexus rx, rx hybrid and rx f sport. this is the rx, elevated. this is the pursuit of perfection.
10:32 am
good morning everyone. i'm sue herera. here is your cnbc news update at this hour. the u.s. sending two strategic bombers to south korea in a show of force to north korea following north korea's recent nuclear test. the b1b bombers flew over the air base 40 miles south of seoul. a chaotic scene in north carolina overnight after an african-american man was shot and killed in an officer-involved shooting. protesters starting fires on
10:33 am
interstate 85 shutting down that roadway. the crowd was disbursed but not before a handful of officers were injured. chipotle is making another push to convince people its food won't make them sick. it plans to run more newspaper and digital ads outlining the safety steps that it's taken since last year's e. coli outbreak. and apple unveiling a massive solar plant built in the arizona desert. it's a 300-acre 50-megawatt plant located just outside of phoenix. it will power the company's mesa data command center with the extra electricity going right back into the region's grid to power homes and businesses. and that's the news update this hour. let's send it over to jackie deangelis with the eia inventory report. >> good morning to you. this is a highly anticipated report, sue. actually, the department of energy confirming what we saw from the api last night. we got a drawdown in gasoline of 6.2 million barrels in the same range. and that was crude inventories. gasoline down 3.2 million. so you can see here that we were expecting to see builds this week, and we didn't get them.
10:34 am
now, prices did jump. session high in crude of $45.49, but coming right back to that $45 mark. it's sort of the equal librium point right now for this trade. this was a surprise because people were talking about this time of year demand sort of dropping off a little bit. but maybe that demand is picking up. and this isn't a week where we've had any kind of an interruption or a weather pattern that's been strange. this may be real demand. remember rbob gasoline trending up today with crude oil. that's because the colonial pipeline is set to restart operation, so getting a little more confidence into that trade. but it had come down so much yesterday that buyers are getting back in. market is a little attentive ahead of algeria next week. also remember the dollar right now is not supportive of the trade. we are bucking the trend. so that shows the strength to the upside, guys. >> we'll see what happens with that one after the fed this afternoon. jackie, thank you. europe has unleashed a fire storm of criticism for its ruling that apple must pay $14.5 billion in back taxes to
10:35 am
ireland. one of the main questions, why is the antitrust arm of the european commission in brussels getting involved in taxes? which is a state issue for the irish government. well, here's what antitrust commissioner margreth vestager who delivered that ruling says about that. listen. >> to some degree they're right, because we're not a tax authority. the treaty protects the national serenity when it comes to setting the level of corporate taxation. what we do is to enforce competition at all. and we have the merger control, as here in the u.s., we have the antitrust, as in the u.s. but then our founding fathers back in '58 they added a third tool, which is to make sure no government can give you an advantage, which is not available to your competitors, to other businesses. and it is this third tool that we've been using ever since '58 in order to make sure that we have fair competition in the
10:36 am
lower playing field. and any member state is obliged both to upheld their own legislation and the legislation that we have in common in this respect. >> but even the u.s. treasury has characterized this as overstepping for your department. >> well, if you look at our history, you would find that this is what we have been doing, so if there is something to characterize it, it will characterize what we've been doing back since '58. >> do you fear at all that the backlash from corporations could actually end up hurting the eu? that companies will reevaluate their business in europe because of the uncertainty with retro active tax policies and new business looking to invest won't come to europe? >> well, if you look at europe, you find a market of potential 500 million customers. very high quality r & d. highly skilled people. very good infrastructure. governments dedicated to proper
10:37 am
administration. so, you know, the reasons to do business in europe they're piling up. >> but this is a big uncertainty. >> well, if you pay your tax, you have no uncertainty. >> but that i had di pay their tax to a government which told them that's all they owed. >> but i think it was already back in 2003 in the records or accounts of apple noted that they paid less than the sort of official irish tax rate of 12.5%. and i think the takeaway is that europe is open for business. and we welcome anyone who wants to do business in europe be successful, attract customers. but europe is not open for tax evasion. >> i think that's been clear. what about the fact that there's already an international tax standard, the oecd? and they continue to work on this. ireland is very proudly in compliance with these rules. aren't you undermining the authority of an important global organization like that?
10:38 am
>> on the contrary. if there is one thing that i both personally but also the commission as such do admire, it's the work done by the oecd, because that is taxation. as i said, i'm not a tax authority. i never wanted to be one. and i am not. >> and not a tax lawyer. >> neither. >> which you've mentioned. >> no, but the thing is that what they're doing in the oecd to set standards, the very important product to avoid base erosion and to prevent profits from being shifted from one jurisdiction to another, i think that will set the global standard. and in europe we already started to implement this in order to make this the general rule in all member states as soon as possible. >> but the u.s. is now accusing you of going outside of that standard and sort of acting on your own, not in accordance with international standards. >> well, i think that the important thing here is to keep things apart.
10:39 am
we have, i think, basically a global tax alliance to change how taxation is done globally, to avoid tax havens, to make sure that companies actually contribute. and then we have competition. and we want fair competition in europe. we want everyone to have the possibility to have a fair chance of making it in the market. and for the stand alone business, the small businesses, it is very strange to see that what they have paid in taxes indirectly used to promote their competitors and give them a better deal than what is open to the small business, the stand alone business. >> uh-huh. i've also been following some of the political fallout in europe. it was interesting because i was in the uk during the week of brexit. and there was so much hatred and rejection of brussels, of the bureaucrats over there who are deciding our rules for us. they voted to leave. do you worry that this kind of decision could stoke that euro skepticism that we saw in the uk and places like ireland who
10:40 am
don't want to be governed by people that they did not elect? >> well, actually, what we see quite a lot is that people say, well, for once they do something useful. this is concrete. this is understandable. this is how things are supposed to be. not only most companies but all companies contribute with their fair share of taxes. i don't think there is anyone, or not a majority who want higher taxes, lower taxes, that's not the issue. they just want fair competition. because they find that some people are left out. they do not find that the market is fair and open. they find that all the benefits of free trade and globalization are for the selected few and not for everyone. so a lot of people see this as now they see me. >> right. the eu is working for the european taxpayer. >> that i as a citizen also have
10:41 am
a rightful expectation of fair play. >> which is actually one of the points that she gets criticized on, guys, that they are doing this with sort of a pop list air about it. look at what we did, we went after this huge corporation of apple. and on that note, i don't know if you saw 185 corporations in the business roundtable sent a letter to some of the european leaders asking them to intervene and turn back this decision by the commission. i talked to her about that. she said they don't have the power to do that. it's never been done before. in other words, countries going back. and then i asked, do you have germany's support on this? and she says yes. so that's not likely to happen. and there are questions about whether big business will continue to invest in europe with this kind of climate. >> certainly learning lessons along the way, that's for sure. incredibly important interview from sarah. meanwhile, it's turning into an interesting news day for apple. let's get to josh lipton with some breaking news. josh.
10:42 am
>> well, carl, these headlines just now dropping from the ft, coining apple is in talks with mclaren, reporting the iphone maker has approached mclaren group formula 1 team owner about potential acquisition. clearly this would be the biggest acquisition the ft notes since apple's acquisition of beats for $3 billion. perhaps another sign here of apple's ambitions in the car market. apple has never acknowledged publicly its aspirations in that market, but certainly the reporting would indicate that tim cook is at least exploring ideas of how to upend and redefine that $3.5 trillion market. we are also learning other reports recently what cook is thinking with that market, certainly "new york times" recently noted they're still redefining the strategy. the times noted they shut down certain parts of that effort and had laid off employees. but again, the headline here, carl, that apple is in talks
10:43 am
with luxury carmaker mclaren, back to you. >> already people talking about whether phil shiller owns mclaren, the fact other executives on the boards of ferrari, clearly the interest in apple and cars is acute. josh, we'll come back to you in a bit. josh lipton. it is d-day at the fed. we'll get insight from former fed reserve mark olson in a moment. dow remains in the green up 7 points. more ahead on "squawk on the street." stay with us. ♪ mapping the oceans. where we explore. protecting biodiversity. everywhere we work. defeating malaria. improving energy efficiency. developing more clean burning natural gas. my job?
10:44 am
my job at exxonmobil? turning algae into biofuels. reducing energy poverty in the developing world. making cars go further with less. fueling the global economy. and you thought we just made the gas. ♪ energy lives here. we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. now that fedex has helped us we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking.
10:45 am
very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job. what's that supposed to mean? fedex. helping small business simplify e-commerce. announcer: they'll test you. try to break your will. but however loud the loudness gets. however many cheese puffs may fly. you're the driver. the one in control. stand firm. just wait. [click] and move only when you hear the click that says they're buckled in for the drive. never give up till they buckle up.
10:46 am
let's get to the cme group and join rick santelli for the santelli exchange. good morning, rick. >> good morning, and thank you, david. i would like to welcome my guest former fed governor mark olson. mark, thanks for taking the time on this fed day. >> happy to be here, rick. >> now, before we get to what's coming, let's talk about what we've already witnessed. bank of japan, yield curve
10:47 am
control. your thoughts, mark olson. >> well, i think one of the things you have to keep in mind, rick, is that unlike the u.s. where we have a very balanced economy, the japanese are very export-dependent. so i think it's understandable why they would try to manage their yield curve in a completely different way than we do. now, it hasn't worked for them. and one of the things that the japanese have been slow to do is recognize some of the fundamental deficiencies in their overall economy. they haven't been able to balance their economy. so one of the ways they counter it is yield curve control. i don't agree with it, but i get it. i understand why they're doing it. >> so let me get this straight, what you see is that the real reforms that ought to be done in japan aren't being done, and the faux fix for that is to go on the output side and create the output they want thinking that's going to make the machine hum better, is that about the size
10:48 am
of it? >> you got exactly right. >> it sounds a lot like what europe's trying to do. and quite honestly, it sounds a lot like what our fed's trying to do. now, it may be semantic, let's look at what's coming ahead. the japanese are all about the export economy, but central bank policy is linking us all. there is policy contagion. so if japan is doing something that isn't a fix, it's a faux fix, it makes it to our central bank, the european central bank, mr. kearny in the uk, their markets get kind of polluted so they have to take action that in many ways is kind of a response to bad policy. is that anywhere near the mark in your mind? >> it is. but you have to sort them out a little bit. in the u.s., remember, we still have the 10-year t is about 1.7, which is pretty weak. but it's over double what it is in many of the european
10:49 am
countries. so their 10-year t is under a 1% yield. so there's a global liquidity trap that we're in, which is a real problem. and so it does seem to me that globally we ought to deal with that fundamental liquidity trap, but negative interest rates is not the way to go about it. that's never been successful. the one place where it was tried over a period of time unsuccessfully was japan. hopefully we won't have -- we won't try to go there. >> all right. you know, recently i had ira harrison, mark. and he basically said that, you know, stan fisher, vice chair's comments after draghi and before draghi, having cited our market participants to believe more on a tightening than probably in my opinion actually credited in fact. so my question to you is, does the fed have a communications issue? do all central banks have a communications issue with so many different fed or central
10:50 am
bank types that are able to grab a mike, but maybe most importantly if we see stan fisher talking hawkish, shouldn't he have an obligation to dissent? >> well, if you go back and lok at, for example, the minutes of the last meeting and also a lot of the conversation that came out of jackson hole, the fed is relooking at the whole relationship between monetary policy and the overall economy. we've had five years of the most expansive quantitative easing in history, and yet, which would have just made for rampant inflation, and inflation hasn't moved. so now they're looking at other tools and they're looking broadly at what is it that we don't know, that we don't understand about monetary policy. and i think what they're communicating to this point is that that lack of clear understanding. >> mark -- >> i think they're -- >> mark, i am going to have to interrupt you here. we'll take this on to
10:51 am
pro. we have breaking news. thank you, mark olson. david, right to you. >> thank you very much, rick santelli. wanted to share this news from the s.e.c. hedge fund manager leon cooperman, who runs omega advisors, one of the hedge funds of size out there, had success for many, many years. they're charging him with insider trading, generating substantial illicit profits, they say, from purchasing securities in atlas pipeline partners in advance of theical of sale of its gas processing city in elk city, oklahoma. the s.e.c. going on to say cooperman allegedly used his status as one of the company's largest shareholders to gain access to the executive and obtain confidential details about the sale of the substantial company asset. they say that omega advisors accumulating those securities despite explicitly agreeing not to use the material nonpublic information for trading purposes. and when apl publicly announced the asset sale, its stock price went up 31%.
10:52 am
hence, he benefited as a result of buying those securities with that information in hand. of course, a real blow to any hedge fund, if it gets charged by the s.e.c., not necessarily that it's going to be proved to be guilty, but a serious blow for omega. certainly many holders and funds that see it get charged by the s.e.c. choose to withdraw, and it can severely crimp your business, even if you fight the charges. >> meanwhile, the complaint filed in federal district court seeks disgorgement of ill-gotten gains, plus interest penalties and permanent injunctions against omega and cooperman as well as an officer and director bar against cooperman in terms of what the s.e.c. is after in this case. >> we knew that he received wells' notice. >> we did. >> we knew they were looking into this. it's still a wow headline, especially leon cooperman. he's known as one of the star hedge fund managers, runs at least a $5 billion fund.
10:53 am
>> it's been more than that at times. you know, known as a stock-picker, been around for a very long time and one of those guys that many people would have anticipated would have been doing this forever. he loves picking stocks. but this is a significant blow, again, typically for funds like this. he's been fighting it. my expectation would be that he will continue to, but the charges actually coming, as you point out, after that wells notice that we learned about some time back. meanwhile, a lot more ahead on "squawk on the street." stay with us. dow's up 66.
10:54 am
this car is traveling over 200 miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.
10:55 am
sharing a ten by ten room,ng threestruggling.nding, i rent this place and then i started home sharing. my roommates help out all the time. they are glad to meet the guests and that opportunity that airbnb has given me is such a priceless gift. i was able to take three months off to take car of my family during a family tragedy. the extra income that i get from airbnb has been a huge impact in my life.
10:56 am
the iconic conference presented by cnbc and inc kicking off tomorrow in boston. kate rogers joins us with more on what to expect. kate, good morning. >> reporter: hey, sarah. that's right, we take a look at hot start-ups in each city we visit. eall know there's an uberlike service for just about everything out there. this boston-based start-up has taken that concept and applied it to the world of hair and
10:57 am
makeup. need your hair or makeup done in a pinch? beauty link has you covered. the start-up will send a stylist to your home on demand to get the job done. but the company is more than just a blowout bar on wheels. >> we do ethnic styles. we also understand and are compassionate towards individuals that might not get the service right away. so our homebound and our wheelchairbound clients really focus in on us making them look beautiful and feel great. >> reporter: elysee got the idea after being inspired by her disabled sister. she grew up doing her sister's hair and saw the impact a canceled or missed appointment had on they are self-esteem. >> as she got older, canceled appointments ended up being like dreaded phone calls of tears, of can you come and do it for me? and it ended up being a little disheartening for me. but then i was also a leader of a meet-up group, and that was about 1,200 women that were also
10:58 am
looking for the same thing, and i found out my sister wasn't alone. >> reporter: currently, beauty link has thousands of clients in boston as well as atlanta and philadelphia. now the start-up is looking to bring ondemand stylists like lourdis here, to cities like washington, d.c. >> it is really about making a woman feel beautiful. it isn't a matter of where you are, where you're coming from, if you're in a wheelchair or not, but having that moment of making you feel beautiful is all worth it. it's transformative. >> reporter: beauty link says their focus on both diverse clients and those who might be disabled or homebound is what sets them apart from the competition. and guys, we are here in boston ahead of our final stop in the iconic tour for 2016. tomorrow, greg glassman, crossfit founder and john jacobs, the founder of the life is good company. don't want to miss it. back to you. >> kate rogers in boston ahead of iconic. carl, i will send it to you at this mini pre-fed rally and i'll
10:59 am
be joining you at the top of the hour with a little more sound from the eu's top antitrust cop. >> thank you. it is 8:00 a.m. at apple headquarters in cupertino, 11:00 a.m. on wall street and "squawk alley" is live. ♪ ♪ ♪ he was a hot-headed man, he was brutally handsome ♪ welcome to "squawk alley" for a wednesday morning. kayla tausche, jon fortt and carl quintanilla. a busy day, apple, of course. we'll get to tech news in a moment, but first the markets. dow is slowly gaining, 56 points
11:00 am
ahead of the fed decision this afternoon. we're going to watch that. apple news. according to "the ft," apple has approached british carmaker mclaren about a possible acquisition. apple reportedly considering a full takeover or strategic investment in the company. mclaren reportedly valued around $2 billion, which would be apple's largest purchase, as you probably know, since beats back in 2014. joining us this morning with more, ceo jason capital cancer, josh elman, a partner in greylock partners, joining us as well. good morning to both of you. we're all sort of digesting this now, jason. but what does it mean? does it add fear to the factor that they are truly serious about project tighten, or a car project? >> yeah, well, last week, we found out that project titan was being reorganized and that maybe they were changing their focus on becoming a provider of software and autopilot and that kind of stuff, so it felt a little bit weird. why can't they get a car out the do?


info Stream Only

Uploaded by TV Archive on