tv Squawk on the Street CNBC June 9, 2017 9:00am-11:01am EDT
lot of the turmoil has played out in terms of that surprise uk election. the results with the conservative party losing the majority. right now the pound is till still down by 1.7%. all right, andrew. that's it. good job this week. good job. becky, have a great weekend. >> see you on monday. >> i think we're all here on monday. >> thank you. "squawk on the street" is next. ♪ good friday morning. welcome to "squawk on the street" i'm carl quintanilla with jim cramer and david faber. two big clouds of uncertainty, the ongoing russian investigation in the u.s. and now theresa may trying to plow ahead with a minority government. the brexit talks will kick off in ten days. the oil as well.
rig count at 1:00 p.m. eastern time. our road map begins with a big set back for prime minister may. yesterday's snap election ending in the hung parliament. what does it mean for the looming brexit talks? >> plus, stock futures are pointing to new records as investors shake off that political turmoil in the uk and back here in washington, d.c. and complete vindication, that's the take away from the president on the testimony by comey but the reality may be a bit murkier. we'll talk about that. but first, the uk is the lead. may's conservative party lost the majority after the election. resulting in a hung parliament meaning no party has the 326 seats that are necessary for an outright majority. may had called for the snap election in the hope of strengthening her hand in brexit talks after her meeting with the queen, the prime minister spoke about forming a coalition government. >> what the country needs more than ever is certainty.
and having secured the largest number of votes and the greatest number of seats in the general election, it is clear that only the conservative and unionist party has the legitimacy and ability to provide that certainty by commanding a majority in the house of commons. >> she had repeatedly said if they lost six seats then corbyn would be prime minister and last night she lost 12. >> yeah, theresa may or may not be the prime minister. if you want certainty you won't get it from her reign. what i think is amazing is that the reaction here, interest rates going higher. not really necessarily one for one with her, but could be a continuation of the bank rally. i have to relate it to fact that i think that people just didn't seem to think outside of britain this is going matter. i find this to be astonishing.
i watch wilfred frost every minute, who called this exactly right and he it was a huge amount of credit. i got up in the middle of the night to see what would happen. and nothing. i mean, how could that be this is a major -- major gaffe by a -- you know, even just a year ago this was huge. it's in britain, it's not even hurting britain. by the way the pound we can say that's a big sell-off. i don't regard it as a huge sell-off given how seriously she botched this thing. honestly. >> i took a poll on twitter this morning. i said biggest unforced error -- firing comey or calling for snap, snap won 60-40. at least in my unscientific poll. >> you should have added the snap lockup that expires with the floating of the shares. those who own snap. i am astonished this does not play more of a role and i'm wondering if something has happened here. a big change in our markets. you often talk about the volatility and how frankly there
hasn't been much. i think that brexit and then the firing of comey, these have proven on the -- to be unbelievable buying opportunities. people are saying i'm not going to get trapped off of selling. >> it makes me wonder whether it's people at all. maybe it's machine. they don't give a darn about your elections. >> do you know -- >> they're looking at what's coming in -- >> -- more powerful than they ever been. the machines have taken over oil to the point that when that thing comes out at 10:30, 10:30 and a nanosecond, because they're close, dupont fabros -- >> one deal this morning. >> somehow this one, the algorithms say don't pay attention to britain. >> the turmoil in geopolitics is -- >> it's extraordinary. >> yes, it is. what accounts for it? because you -- i mean, clearly investors -- people are also
saying i'm just not -- it's not part of my landscape at this point. >> i don't even think it's complacency. i think it's a recognition that the s&p do not sell on this anymore. there's a core group of 35% who do absolutely nothing. no matter what. because their brain son automatic. they're in s&p funds. they do nothing. it's like they couldn't do -- they will not do anything because they have been taught not to do anything. >> reminds me out of a note out of goldman -- they call it faang. it's lower than the average utility or staple stock. >> is that not unbelievable? of course a spelling error we know. they could have used netflix or nvidia. i can't call gary anymore. >> you can't. >> but i feel like it is rather
extraordinary that there's -- you had that big day volatility that when you had the firing of comey. a lot of people came on air and said this is it, you have to go. and people have been fighting a rearguard ever since then to get back in the market. i think -- i mean i was on the panel earlier this week with someone who was talking about the basically the 35% of brain dead people that didn't use that -- didn't use that term, 35% of the people who would not sell in the event of a thermonuclear war. >> okay. you've got them and you've -- i don't know what -- the impassive funds. >> something changed since this year began with the algoes that used to be related to oil. that's no longer the case. the algoes related to the dollar that's no longer the case. it seems like other than in oil where the algoes are serious, that people are just saying let's evaluate this on the stock by stock basis. he does pham, you can do faang in there. i wish i were kidding.
nvidia will be up again today. i have a wrap on nvidia. i was thinking of changing my name to nvidia. >> would you change it to the dollar sign? >> why can't i be like -- the ceo, i e-mailed him i. thought it was -- >> it was that quick. >> maybe he's an algorithm masquerading as a man. >> he might be. >> jim, as for politics, i think it was march where you called the high water mark in nationalism. >> yeah. that's old. >> out of dutch election, then we had macron and now uk. >> why a squirrel finds a nut. i felt that the dutch election thoughed that -- showed that the dutch election even with the overtone of terrorism, nationalism peaked. why it peaked, people kind of said, you know what? we're -- this not the way that europe goes. it's not the -- italy is a
concern we don't talk about italy enough. because they could have an election, don't forget -- >> yeah. concern there. >> people think there was fascism in hungary, i was there a few years ago, i wouldn't go back because of what i'm hearing. budapest is in beautiful. but they're in jeopardy with the eu. you can't have a one party situation, because of the democracies. so people -- i don't want to get in trouble with hungary, it's a great country, but that's the only country that seems to have gone all in for nationalists. i wonder if that wasn't because that was the horrible scenes from the train stations in hungary and hungary has decided, look, we're not going to be that -- we're not going to be as cordial to immigrants. great country, i had the time of my life. but that's the only country that really went nationalistic in my book.
>> as for volatility, jim, even in the midst of comey yesterday fell below 10. which is the 16th time this year it's gone below 10 which is half of all the occurrences since 1990. >> it's amazing. i mean, i watch riveted like everyone else in this country and i said, okay, every time he used the word liar i figured maybe we'd get a shot down in the futures. what were the futures watching? i don't know snap? unbelievable. they were not related at all and then they started to go up. i heard this is because pence is coming in and there's a huge rally if he comes in and then the hearings end t futures come back down. like we're watching the hearings, but the market is watching facebook, amazon, netflix, nvidia, broadcom. the market is looking at a couple of stocks and clapping. i made the joke the other day,
the buyers of lam search they think it's an animal health care company. >> don't say that. that's reminiscent -- >> livestock -- >> that's reminiscent of the late '90s. >> that's how i feel. although they'll have a great earns per share. name me three companies that does great research with animals. >> the lambs, the poor lambs. >> they get arthritis, can't get up, that's the end. >> there's still lots of buzz surrounding comey's capitol hill testimony yesterday. nbc news justice correspondent pete williams has more. walk us through the landscape day after the fact. >> well, the president showed restraint yesterday probably abiding by the advice of his lawyer not to be tweeting during james comey's testimony which riveted the country, but trump said it was total vindication. now we understand that his lawyer intends to file two
complaints. one with the justice department inspector general and the other with the senate judiciary committee because they claim that he leaked confidential government documents, namely, his memo in which he described the meeting between himself and the president in which he claims the president asked him to drop the investigation into michael flynn. this was something that the lawyer yesterday sort of hinted at, saying that comey was a leaker. that it was improper. and also saying that the things that comey said at the hearing weren't true. there's been a bit of cherry picking here of course. his lawyer -- the president's lawyer basically said look at the things that comey said that we agree with. namely that three times he told the president he wasn't under investigation. but ignore the things that comey said that we disagree with. the president never asked him to drop the flynn investigation he said and that the president never demanded loyalty. never asked him for his loyalty. i don't know frankly what good it will do to ask the justice department inspector general to
look at this for the simple reason that james comey doesn't work for the justice department and didn't when he by his own admission yesterday sent a memo -- one of the memos he wrote after meeting with the president to a colombia university law professor who's a former federal prosecutor whom comey used to know in new york and asked him to get it out. he ended up telling a reporter from "the new york times" about it. then everybody found out about mr. comey's claim about this meeting with flynn. so that seems to be the latest development today. >> pete, what is the legal -- the read on the legality of leaking a memo that's not classified, that you wrote, while you were a private citizen? >> well, the only claim that could conceivably be made here is that it's a -- it violates executive privilege. but the problem with it is the white house knew comey was going to testify and chose not to assert the executive privilege. knowing that the barn door would be opened, no, you can't say
that, that puts them on a weaker position. you're right. i guess it qualifies as a leak. i'm not quite sure what a leak is although i spend a lot of time trying to get them. but i guess it just means anything that somebody tells you when the government isn't ready to say it or if it's classified or if it's investigative or any of those traditional things. this memo doesn't fit in any of those categories. i guess you could claim that because he wrote it when he was in the government it's still a government document and he shouldn't have had it at home. but how you ask the inspector general to do anything about that, the inspector general has no ability to force anyone to answer their questions if they don't work for the government. inspectors general in all the departments investigate people who work for the government, not people who didn't work for it. now their investigations call on them to do it. comey could say i'm not going to answer. remember he's already the subject of an ig investigation for the way he handled the
clinton e-mail issue. >> yeah. we just want to point out the clinton e-mail issue was another dazzler yesterday did you think that that could be -- you know, we're talking about what happened in that election. is that just one and done that you make that statement and then it all goes away? >> well, i thought the most interesting thing about it is, something we did not know, is that he considered calling for a special counsel because he thought the attorney general was so compromised by the meeting with the tarmac -- on the tarmac with president clinton. he says that she insisted she refer to the issue as a matter instead of an investigation. he thought that was a strange echo of the term that the clinton campaign was using so he says he thought for the sake of appearance he should call for a special counsel, but he didn't because he said i knew we were about to do end the investigation. i knew we wouldn't say there was a crime committed and to call for a special counsel it would
make people think aha, there's something there and he thought that was unfair. >> amazing. >> pete, we appreciate your insights today. good to see you. >> boy, that was -- >> pete williams in washington. >> he raised a number of points. again, i find listening to him, how can we -- how does it not impact the market? there are more investigations in the air with serious people. there is more -- let's just face it. everything you just heard says to me that tax agenda i mean honestly, can you possibly even raise an economic agenda when you're going to have many investigations, so many people in congress -- really consumed an preoccupied? >> jpm today reduces their estimate of the tax related stimulus in 2018 -- >> from 2018. >> from $200 billion. >> that's what this story is about for us and yet people do not seem to mind. it's extraordinary times.
>> when we come back, pandora getting some good news in the form of an investment. we'll explore what that means. take another look at the premarket this morning. more "squawk on the street" from post 9 in a minute. the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. at crowne plaza we know business travel isn't just business. there's this. 'a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.
welcome back. shares of pandora moving around a lot this morning after news we first brought you but of course it boons confirmed by the company, sirius xm making a $480 million investment in pandora. the company is also selling the ticket fly division for about $200 million so $680 million coming in to pandora. it may need all of it of course to continue to fund the buildout of the subscription service. but the bigger picture here of course is the back and forth between pandora and sirius that's been going on and on for months. it was a few months ago that we first reported that pandora was finally open to entertaining takeover offers. it employed center view, the investment bank in to see if there were any offers out there. the most likely buyer all along had been sirius. but the stock price itself did not help. a year ago this time, they might have been able to sell it for 15
bucks a share to sirius, that was no longer the case. despite the presence of significant shareholders and activist shareholders such as corvex. they were unable to come anywhere near a price like that for the company. which again, has been struggling to a certain extent as it has moved into the subscription based service. so a month ago, they signed up a deal to bring in as much as $200 million potentially in capital in the form of converting from kkr. that would have had an 8% coupon and a conversion price of $13.50. this morning $480 million from sirius, a lot more money, a 6% coupon, less there. but get this. the strike price, 10.50. it comes down by $3 a share. think of it percentage wise over one month. really kind of shocking when you think about it. other things to add here as well. sirius had offered i'm told by people familiar with the situation to buy all of the pandora. for $8 a share.
and was rejected of course as you might have expected. and hence, end understood with this -- ended up with this deal which includes three board seats, one of which is the chairmanship. the hope on the part of sirius, it is hoping to help to build toward a future that's not just about overinvesting they believe in the subscription business, but getting its ad business in the right place where i think the belief on the part of sirius is that's an underestimate there and there's poor capital allocation by this company. if you get sirius with three board seats out of i think what is it 3 of 9, including that chairmanship which is likely to be held by jim meyer or greg maffei, the current ceo of -- >> stand still? >> i don't know if there is a stand still. doesn't matter. >> why is this stock even up? >> i don't know. >> it should be down. >> possibly. >> this ends any possibility of a takeover.
this is it. >> well, sirius -- listen, sirius will try to have its board members including the chairmanship help to guide the company and put it on a better path. >> could be -- >> then let's assume that work and the stock price starts to move up, they can exercise, they will own as much as 20% of the company and then like sirius and liberty, like liberty likes do, then they have the option potentially of one point or down the road buying the company. but that not where they are right now. >> no. i was asked apple repeatedly to both buy sirius and pandora, game, set, match. this is a powerful combination. i think it's a brilliant move by maffei. >> yeah. they were waiting and waiting and waiting. >> so smart. >> finally getting this thing and investing at the level they did. i don't know for nothing. it's not as though they're taking risk.
$480 million. this is being paid in kind so it accretes up. there's some risk for them as well. but it's a typical liberty deal. >> well, risk is apple. apple music is so powerful. spotify is so powerful. >> spotify has 50 million subs growing the top line at 43%. >> spotify is almost a universe -- >> the story today is taylor swift's return to streaming with spotify. >> well, you know, echo. i mean this is -- this is a very, very contentious group of companies. apple, pandora, spotify. spotify is worth a huge amount of money. >> yes. when we come back we'll get cramer's "mad dash" and look at the premarket. as we weigh the fallout from the uk elections last night. we're back in a moment. , do you focus on today's headwinds? or plan for tomorrow? at kpmg, we believe success requires both.
with our broad range of services and industry expertise, kpmg can help you anticipate tomorrow and deliver today. kpmg. time's up, insufficient we're on prenatal care.es. and administrative paperwork... your days of drowning people are numbered. same goes for you, budget overruns. and rising costs, wipe that smile off your face. we're coming for you, too. for those who won't rest until the world is healthier, neither will we. optum. how well gets done.
finally. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.
hidden in every swing, every chip, and every putt, is data that can make the difference between winning and losing. the microsoft cloud helps the pga tour turn countless points of data into insights that transform their business and will enhance the game for players and fans. the microsoft cloud turns information into insight.
the opening bell is brought to you by brighthouse financial. established by metlife. >> we have a "mad dash." i'm dealing with some other e-mails. where are you headed on the "mad dash" on a friday? >> you know, david, as i -- in nvidia, i changed my name, it's my peloton handle. this morning, everybody has to raise the price target on nvidia, because they're outrunning everybody's price target -- a different reason from yesterday. this is about gaming. it's about twitch and switch. >> twitch and switch? >> twitch and switch. >> you don't know? >> i know what twitch is. twitch is by amazon. >> and switch is by nintendo. the switch is sold out.
it will be 15, 16 million units, you can't get one. it's the greatest video game of all time and it uses integra $40 ship, and it's sold out. that's why jensen wong is proving to be brilliant. that's why the stock went up again. twitch and switch. just like everyone steals faang from me, they'll be talking about it, will i get credit, will there be anything, no. you know this is the business -- >> you get credit from those who matter, don't worry. let's get to the s&p and on the big board, royalty trust manager ron hooper. d10, amateur athletic event, raising money for pediatric cancer research. and nvidia is going to be quickly your top s&p gainer. >> unbelievable. >> b of a goes to 185 -- 175 as well. >> it's a big one. look, i'm not -- all right.
ben styler did some work for me today. he said please don't quote me, but intel -- all right. just i'm trying to put some bones to this. intel in july was a dollar. and it was up 6500%. needless to say, if nvidia were to follow intel's path, it would go to 10500. is that ridiculous? remember meeting andy grove in 1980s. he was at that point we were talking about the ceo of intel. talking about how the 386, 486 pentium would create a new world. it would make it so your pc is more powerful than the ibm mainframe. the power would be as big as this. this would be the power of a mainframe right here in your pen. that was actually noiz who said that. people think this is the next
intel, a revolutionary chip that does more machine learning, gaming. do you know that one of the new nvidia chips put in a box is equal to 400 servers and that box comes out in the fall. one. equal to 400 servers. if you're into the data farm business, you want to stay in it. if one nvidia box is equal to 400 servers that takes up a lot of space. maybe you want to sell a data farm if you knew the nvidia chip is coming. david, have you heard about the m&a today? >> i have. i have. it would be a deal in which we're having a consolidation amongst those who are in the data center real estate business. >> but you wouldn't -- >> who knew? there's actually companies that are -- >> dupont -- >> data centers themselves which is really a real estate business, making it amenable to paul the servers in them. >> i have been recommending digital -- they're remarkable.
the best data farm. i have core site on tonight. now i'm going ask core site about the new chip. imagine one chip takes the place of 100 servers. not like the 386 which took the place of the ibm mainframe. >> it's 4.45 shares for every share of dupont fabros. this is what we're left with when it comes to m&a. metro areas that are expanding their hyper scale product offering and solidifying the blue chip customer base. this excites me. wow. >> you and me too. when we go to the dollar tree this weekend, we'll talk about the reality deal. we're in a different world. >> don't make me talk about this again. >> where we get all our data. this is the cloud. >> i'm aware of what it is i think it's sad days when we have to talk about a deal like this.
>> you think at pandora, we spent an hour on pandora. >> i know. you're right, i'm wrong. >> no it's okay. give me a hug. >> you're right. i'm wrong. >> i'm sorry m&a is on pace for the weakest year since '13. jpmorgan had three big deals fall apart this year because of tax uncertainty. that's no way to account for tax accounting. small business -- >> we were reading surveys about small businesses being frozen because of no -- they don't have to worry about tax reform. >> you have this situation as well where a seller is thinking, well, listen, my tax rate may come down markedly. there's still a chance. therefore, i have higher earnings. why am i going to sell to you now and you have buyers who aring, no -- who are saying, no it's not. we already think you may be overvalued where you are right now on the multiple basis. we're not going to pay a premium
for a tax reduction that we have no idea is going to come, hence, no deals. >> then we have rates going higher which makes the financials good, even though the financials have less work do because of no volatility. we know that hurts earnings and no m&a. that's usually profitable. >> no m&a. not much, except or the data centers. >> softbank buying boston dynamics. >> yes. robotics maker. >> a company that builds robotics that simulate human movement. >> i heard they have another division that does it. i always heard that's not a moneymaker. remember, ruth porat. that's how you got google and alphabet ruining the fang spelling. waymo is a $70 billion opportunity. by the way what chips are competing directly with google's chips on autonomous driving? what's my name? >> nvidia. >> thank you. >> you're welcome.
>> i just thought it was a trick question because that was an easy answer. >> you're on "jeopardy." >> can we talk about snap? it's down 3.5%. you mentioned it briefly. we got a downgrade. that had been previously a very supportive -- >> that got -- >> the analyst at citi, and you talked about the lockup of course. >> 940 -- >> a lot of concerns about advertisers and the audience that they're really reaching. >> yeah. >> in another what 60 day -- in another 60 day, 949 more shares is it ready for that i don't think so. this is a company that a lot of companies invested in '17. david, it does have a core loyalty among some subscribers, but the liquor issue keeps coming up. >> yeah. this idea that the audience there is below the legal drinking age and you have advertisers who are actually
using snap to target. that is at least the thesis being espoused by some who are short this stock as being another reason why you should -- >> there's a gang of shorts. there's a good article about all the shorting in retail. we haven't talked about nordstrom at all. there are some people who theorize that the nordstroms are sellers. like the belt family got out another a high multiple. >> so they come in -- >> sold to youth. >> talk about putting a group together, including their 30% equity ownership only to try to find another buyer? >> maybe not -- some people are saying they're sellers of their 30%. >> really? >> yes. yes. >> speaking of nordstrom and citi, citi yesterday on jwn -- we must be missing something. we -- what might make someone want to lever up to buy some of these names? talking about the challenges in retail.
>> there are several -- i'm told there are several companies that are serious about this, and that have kicked the tires and kind of like what they see. >> but they would roll in with the nordstrom family. they're not going to take them out. >> not all. >> it's still fairly early days. they want to move quickly on this. but a special committee of the board is set up. but they have their adviser, in terms of having that partner in private equity to both put in equity and then set -- then put together the financing for what would be a fairly large deal. they have some quick ways -- >> know that there have been some serious p/e firms that have visited and they like what they see. i know that from some of the reporting and that is -- so therefore, i think the likeliwood of a deal is much better than a lot of people seem to think in the papers. >> i wanted to -- well, let's do baba this morning as well. it's up another 2.5%. >> is that your name? >> it could be. >> alibaba, i'm nvidia.
can we get these legally changed? >> well, we'll look into it. alibaba following through -- >> i'm still staying carl. >> you can stay carl. did you ever -- >> alibaba, david, the price targets are again overrun by the common stock. >> yes. the growth rate of course for the top line coming up dramatically for the company. now, apparently part of this is due to the acquisition, although i want to look into that a little further. jack ma talking about different things, about how much more is to come for a company that already has a $367 billion market value. >> so the next three years our small target is go to 1 trillion u.s. dollars. 1 trillion u.s. dollars, nobody -- no company in the
whole world in the last 100 years people can't imagine any company can do it. we have to do in a very innovative way. >> he's talking about $1 trillion in gmv, not in market cap. >> right. that's important. >> but they're on their way. >> it was laid out to us, laid out the whole course. it was a rather extraordinary performance and when i left, i said this is going to be -- this is one of the greatest stocks in -- it still is it's not done. just like the amazon, it's not done. alibaba not done. >> jack ma made 2.8 billion on paper yesterday. today, stifel goes to 185 and gold goes to 179. >> i'm stunned. i was stunned by the -- i was stunned by when they raised that growth rate. i have not seen that growth -- a large cap raise its growth rate at that ferocity. it's just -- the velocity of selling there is extraordinary. >> yes.
i did want to hit toshiba's flash business. >> sure. >> you and i had an interchange after the broadcom call. i went back and looked, it's true. they did seem to down play the large acquisition. that said, my sources indicate that they are in fact right in there. that is broadcom trying to buy the flash business of toshiba. really all we're doing is breaking news. others who have reported on this, so i don't want to -- >> no, let's talk about this. >> but they are seen -- there's an interesting process going on in japan. you have the government -- the japanese government that sees it as a national champion. >> right. >> this flash business. they are trying to put together a group that includes potentially western digital, but others within the company that will essentially keep that business there and owned by or looked after by a japanese owner. >> absolutely. >> but they're coming in at a price point -- >> dramatically below -- >> what broadcom would be able
to play. goldman sachs is running a process in which it feels i am told that broadcom is the bring -- is the preferred buyer. >> supposed to be within the next ten days. >> but you have the japanese government running a separate process so it becomes uncertain where it all ends up. but there's no doubt they're in there, jim. i don't know why they said what they said on the call. it was somewhat misleading. >> i had western digital on "mad money." i felt quite confident they'd block anything but toshiba's attitude is that western digital bought sandisk and there was no deal to make it so sandisk was exclusive buyer. >> toshiba needs to raise as much money as they can to sell -- to deal with the liability from westinghouse. >> the liability from westinghouse is hurting a lot of companies including chicago bridge and iron. i think you're right. i think the ceo of broadcom is a
genius, he was trying to say listen we're interested in connectively. i think there's no way they're not in this after reading these articles. i think hocktan, i think he was saying i want connectivity and there's connectivity parts of toshiba. but this is going to be resolved in the next ten days. it's either $28 billion or 18. >> i don't know if it's 28. that's -- >> do you think apple -- i don't either. >> no. >> do you think alphabet is involved? >> not that i'm aware o. >> see, i think that broadcom, they need a p/e. the question -- >> well, broadcom can do it. >> they can do it without, but that balance sheet is going to be stretched because they finished -- >> he's not afraid. he's a man who's not afraid of leverage. >> no, he's no but western digital, they have a not a great balance sheet. >> but they're not in a position to do it on their own at all. >> this is one of the biggest deals and you have to eat your words about big m&a.
toshiba is in huge trouble. i'm glad you brought this up. a major deal. it will happen soon. >> meanwhile, the ten year deal and the index are at the highs of the month. no surprise that gold and jpm are leading the way. let's get to bob pisani. >> mixed open today. i want to show you what's going on in england. the uk benchmarks are sort of going in different directions. but the ftse 100 is up. most of the time when sterling goes down, they earn most of their revenues abroad so they do better on a weak sterling. if you look at the ftse 250 that's domestic focused, it's to the downside. a little bit of bifurcation if you're export oriented. these are most domestic companies. associated foods for example. they're all to the downside. that's because you underperform on the weaker pound. concerns about inflation, for example. then you look at the export
oriented companies. rolls royce, the big copper company. burberry the clothing company, they're all to the upside because they're export oriented. you see the differences here. banks are on the weak side. rbs. there's some concern that the labor party is taking a new approach to publicly owned companies. rbs is a big example. maybe having a consultation on breaking up the banks. you see royal bank of scotland to the downside. here i see vie very important sector developments. banks are having a good week. citigroup had a nine year high. the regionals are doing well. suntrust, a couple of reasons. we had the choice act pass yesterday. this's going to try to erase some of the dodd/frank rules passed in the house yesterday, uncertain in the senate. the yields had been moving to the upside. we saw heavy volume in some of
the treasury exchange traded funds. right across the yield curve. the one to three, the three to seven, are exchange traded funds. all had heavy volume in the last day and a half. a sign that people were getting out at least partially of the treasury trade. you heard jim talk about nvidia. bank of america, merrill lynch, changing the price target. look at the stocks this week. advanced micro spoke at the bank of america conference. they're up, nvidia to the upside. the energy group, a new 52 week low. there's the financial spdr by the way. 52 week low on the xle, the energy etf that we saw yesterday. we also saw energy stocks at new lows. a lot of the big names, they're up fractionally today. hess, transocean, all 52 week lows yesterday. there's no bounce in oil after
the tremendous drubbing that oil took the other day on the unexpected build-up in crude inventory. so three sectors, three different stories really in the markets. so slight bifurcation and the industrials up 55 points. carl, back to you. >> thank you for that. we mentioned bond yields. let's get to rick santelli in chicago. >> good morning. you know, the numbers aren't big, but they're important. especially when you're looking at the short end. the two year yields have come back to 134. when they were under 1.30 there were issues regarding the fed. we can argue why the fed will continue to raise rates or not, but the market is convinced that despite all the issues and the dovishness of the federal reserve or their commentary that the market and the yield curve are looking for more. if you look at one week of tens, clearly you see we're up. as everybody is talking about including carl. we close at 2.19 yesterday. so we're up three on the day,
but more important to me, we're only up one on the week from 2.21 to where we it is at 2.22. look at one week of bunds. that spread has changed. the ecb met yesterday. this will play through the system, but if you look at that spread it augers that we're going to continue to move together and maybe shrink some of this wideness that's developed since mario draghi and his press conference. everything uk today, considering the surprising number of seats that the prime minister walked away with. look at the two day of the pound. definitely some volatility there. but listen, you know, it isn't unreasonably huge. it was big. and put in perspective let's go back to the beginning of the month of june 2016 when you had the brexit vote. you could see the pound/dollar there. lately how it's been traded and in context with yesterday's move over the last couple of months. really the area that completely avoided any of the volatility
seen in fx, but it will catch up with the interest rate differential is the gilt. it's 1.03, not a huge move like the fx side even though they're tethered. look at one week of the dollar index, clear beneficiary, one week move, the dollar index is the one that's most technically significant and may have ramifications as it's now around 97.5 and seems to have locked in that kind of 96.5 low. carl, david, jim, back to you. >> rick, we'll talk to you if a bit. when we come back, strategist david rosenberg, we'll get his take on the markets and the fallout from the uk elections. the dow is up 61 points largely on the backs of some financials and tech. back in a minute. [vo] when it comes to investing,
looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock.
than 10%. we'll get "stop trading" with jim in a minute. sure we could travel, take it easy... but we've never been the type to just sit back... not when we've got so much more to give when you have the right financial advisor, life can be brilliant. ameriprise it's not just a car, (work sfx) it's your daily retreat. the es and es hybrid. lease the 2017 es 350 for $329 a month for 36 months. experience amazing at your lexus dealer.
we created the ripple: the doughnut in a doughnut in a doughnut. right away, it was a success. i mean, it really took off. what people don't know is that it all started with points from my chase ink card. i bought the ingredients, utensils, even custom donut cutters. wow! all with 80,000 points. what will you create with your points? learn more about the ink business preferred card.
>> there was a new company that came out, ipo. they only did billings growth of 26% which disappointed people. i have to point out that the sub revenue growth was much bigger. i'm not going to say yet it's an opportunity, but this is a very good company and people are reaching the opinion that the broth is finished but it's not over. >> what's tonight? >> okay. david, listen up. i have coresite realty. this is a company that is a data farm company because this happens to be the area that there's lot of m&a activity. i can't believe i'm lucky to have paul. data farming is much better than corn farming, soy. >> wow. >> you'd rather do data farming than any other kind of form farming ever. what's the key to good data farming? low cost electricity. they burn a lot of electricity.
>> that's fascinating. >> yeah. >> i love this industry. i have to tell you, it's been one of the best. the only reits that i have been recommending. out of shopping mall reits into data farm reits. it's true. >> i hear you. i know you have. rightly. so. >> jim, see you tonight. >> okay, buddy. it's going to be all right. >> "mad money" at 6:00 p.m. >> don't you worry, nvidia. when we return, more reaction to the uk election results that are taking a toll on the pound. meanwhile, the dow is up 72. ve , what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. see options data like never before. with thinkorswim only at td ameritrade.
♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. despite the uk election results last night, we bot the dollar index higher. the ten year yield, the highs for the month, financials and tech are leading the charge today and the vix below 10 once again. >> our road map for the hour begins with a hung parliament. british prime minister theresa may resisting those calls for her resignation as her
conservative party loses the majority in parliament. >> then after the choice act victory in the house the president breaks his silence on twitter following the comey testimony. we'll tell you how it all impacts the implementation of his agenda. finally, alibaba surging. sending shares up more than 13% yesterday. jack ma and joseph size speaking earlier. we'll wrap up what they said for you next. first up, to the cme. rick santelli be some wholesale trade data. >> so we replace the preliminary, and the preliminary number was down 0.3. the new and final read that replaces it is down 0.5. month over month down 0.5, you have to go to may of 2013 to find a weaker percentage. really quite shocking in a way.
it will have ramifications for updating gdp. look at the trade side of month over month it was down 0.4%. both numbers aren't terrific. i will say on the wholesale trade numbers that people are going to watch that. but it really is more of the inventory number. yields haven't moved much. dollar index having a big day. of course we want to continue to pay attention to how the pound volatility settles out. sara, back to you. >> yes t center of the action today. rick, thank you. that brings us to the top story. the conservative party losing the majority in parliament, leaving many to call for theresa may's resignation. wilfred frost has more. >> as you say, the leaders of the parties that came second, third and fourth have all attempted to call for theresa may to resign and indeed the leader of the liberal democrats attempt to put a stop to the
brexit talks beginning in ten days' time. but neither is going to happen. theresa may is back as prime minister. >> i will now form a government, a government that can provide certainty and lead britain forward at this critical time for our country. this government will guide the country through the crucial brexit talks that begin in just ten days. and to deliver on the will of the british people by taking the uni united kingdom out of the european union. >> so it's not whether or not brexit will happen or not, but really the realization of how much weaker their hand will be in ten days time. that might be why donald tusk is so keen to get the discussions started. he sent a letter prime minister theresa may an hour or so ago. they had a shared responsibility, an urgent task
to get started. he reiterated the march 2019 cutoff date. he even congratulated may on her reappointment. no doubt that line penned with a wry smile on his face. the bottom line is that theresa may is weaker, the uk is weaker, and the pound is weaker too. >> as it relates to the implications for these brexit negotiations, it's hard to understand what the terms hard brexit and soft brexit actually means. does it mean that it will go to the less harsh cutout of the single market which is what prime minister may was campaigning on. >> well, that's definitely a fair point, sara. i think it's important to note that the dup, the democratic and unionist party who will be working in a tacit coalition with, they have a softer start on brexit. they share the conservative economic policies, but they don't want such a hard brexit.
that will definitely play into the position of the government moving forward. so will the hard brexit being position being rejected by the electorate in this position. we see the pound fall off, therefore the weakness of the government having a bigger effect rather than the belief of seeing a softer brexit moving forward. i think the key thing is that brexit is really a big significant outcome either way. can they really now stay in the single market at all if they're going to pull out of freedom of movement. so that's the question mark of that and the bottom line is that the pound has fallen today. the stronger of the two outcomes is the weakness of the government. >> uncertainty lingers certainly for the politics there. thank you. for more on the market implications of this british election we are joined by gabriel santos and kathy lien at
bk asset management. it's shocking sort of to see the jux that poe -- juxtaposition between the markets and given the heightened foreign exchange volatility. how do you square the two? >> it doesn't look like that much has changed overnight in terms of the direction that the uk will be going in over the next few years. as we were just listening to, it does seem like we'll continue with the brexit path. negotiations will begin in a few days. it raises the tail risk both around the soft brexit and a disorderly brexit. but the base case is still the same here. and this is a direction which has an impact probably still in the uk economy but not so much in the global any. >> is that the message from the pound's nearly 2% slide today? it's only the worst drop since october, not a brexit type reaction. but still, you don't get 2% moves in a currency every day. >> yes, you're absolutely right. i think that it's poised for
more losses. i think right now we're about 100 points off of the low in sterling. i think it's simply consolidating its losses. this is strictly a relief rally on the hope we'll get a compromise solution maybe over the weekend as it goes to negotiations. but there's no question that the government is weakened and the economy is in flux. but if you take a step back, you look at, you know, really a good week for the pound, for the bank of england. lots of data. but the uk economy is on a lower path. the uk rates will be low for longer. data today involving industrial production was terrible and brexit basically means a situation where we'll have lower tax income as a result of, you know, lower net migration. all of that i think is going to add pressure in the currency. but as we just simply look at the political story, you know, when we get this official
coalition government announce in the way it's going to look, i think it will pave the way for a second round selling in sterling. so we're looking at the possibility of at least 1.25, maybe 1.24 because the eu knows her powers have been weakened in the negotiations. >> meanwhile, as we talk about equity reaction to -- i'm looking at the vix at 9 1/2 which sing the hoest since -- which i think is the lowest since 2006 is that bullish for equities? that depressed volatility? >> that's implied volatility. if we look at realized volatility or what we have been seeing in the markets over the past few months that's very, very low. i think we have to separate all of these political headlines or certain events like the uk election and brexit which is have an impact in the uk from the broader, much more positive stable economic story around the world. and that's what we believe is holding down both realized and
implied volatility is the fact that we have a much more stable growing global economy with the uk perhaps as an exception here. >> i hear that argument constantly, but when you have 2% moves in currency, it's not just today, 4 x volatility is through the roof, that impacts the economies. that's not helpful. it can often be pretty destructive. why isn't that reflected in the stocks? >> it's reflected in the view of the uk economy. the pound is the mechanism through which the soft and the hard brexit gets reflected. as you get a weaker and weaker pound, that will be less consumption and weaker growth. that's reflected in the weaker expectation of the uk growth but not global growth. it doesn't necessarily have an implication in the u.s. or the eurozone. >> does it have an implication for the euro itself, which is not reacting that sharply?
does this actually strengthen the euro cohesion and economic outlook? because it was a weak outlook on the uk? >> you can see from the price action across the markets including the u.s. dollar again that, you know, investors are really not worried about this. the euro is down a little bit, but i think it's more going to be a beneficiary of anti-sterling flows. i don't see too much on the lows. data in the eurozone has been good. we can see the other currencies benefit from this. but you take a step back, i think the market really -- the global market is not worried about this as the uk investors, you know, the uk markets are. and i think that's really the main take away which is that it's a concentrated story and that the main weakness will be in the uk assets. >> finally, guys, as we're talking s&p record high now. 2443. the dow is up 84. we mentioned earlier ten year
yield highs for june. we're going into the fed week. so having disposed of a few binary outcomes in the past week or so, what does next week lead us to? >> next week we'll get a lot of information. on wednesday we have the fed meeting and a lot of economic data being released for the u.s. retail sales, initial production. that will give us a good picture of the u.s. economy in the second quarter. i think that's most important for the u.s. equity market. we are expecting a fed rate hike. i think that's the base case here. >> what's interesting also financials have made a move higher, up 3% this week. they're outperformers having the best week in months. if this continues, does this offer new momentum to the record rally considering they have been such laggards over the past few months? >> we do think we'll see a shift beneath the surface in terms of the sectors leading and lagging. our general view is that the
cyclical sectors, financials will lead over the next few years. whereas the new defensive sectors which have done so well may start to lag behind. things like utilities and staples as well. >> yeah. 2.22 is the ten year. as long as that continues to tick up. >> as we expect. >> thank you very much. and kathy lien, thanks to you as well from bk asset management. following the testimony of former fbi director james comey yesterday, the house passing the choice act in a victory for the white house and for deregulation. our john harwood is in washington and has more on that. good morning. >> well, carl, you have had the president of the united states this morning tweeting in the wake of that comey testimony the fact that he felt he had been totally and completely vindicated. now, that's not what happened in the senate intelligence committee hearing, what you had was james comey, the former fbi director declaring over and over that the president was a liar who had fired him from the fbi
in order to influence the russia investigation. now, republican senators did not question comey's integrity. instead, they tried to cast what comey had said in a favorable light for the white house as when jim risch, the senator from idaho, noted that comey had only said that the president indicated i hope you let the flynn investigation go. then they had this exchange. >> i took it as a direction. i mean this is the president of the united states with me alone saying i hope this. i took it as this is what he wants me to do. not -- i didn't obey that but that's the way it took it. >> you may have took it -- but that's not what he said. >> correct. >> he said i hope. >> correct. >> you don't know of anyone who has been charged with hoping something. >> i don't as it is i sit here. >> the president's lawyer marc kasowitz said that the president had not told james comey to end the flynn investigation. he also i said that the
president had not said that i need loyalty. but he did say that the president expects loyalty. >> the office of the president is entitled to expect loyalty from those who are serving the administration. it is overwhelmingly clear that there have been and continue to be those in government who are actively attempting to undermine this administration with selective and illegal leaks of classified information. >> now, james comey affirmatived in his testimony that he had leaked information from his meetings with president trump to trigger a special counsel. he succeeded in that and now the president, though he was affirmed by comey yesterday he had been told repeatedly by the fbi director he was not personally under investigation, he may now be under investigation as james comey indicated yesterday for
obstruction of justice by robert mueller. we have to see where that goes. >> all right. john, thank you for that what a week it's been. john harwood in washington. for more out of the news in washington and the impact on the markets we bring in brian gardner, senior washington analyst. happy friday to you. >> happy friday. >> the markets are not rattled by the open warfare by comey on the white house. why not? >> i don't get the disconnect to be honest with you, carl. i think yesterday was generally a bad day for the future of policy. especially tax policy. we'll talk about financials in a second, but tax policy yesterday took a hit because yesterday's hearing didn't resolve anything. these investigations are going to go on. they're going to consume copious bands of -- amounts of bandwidth so washington is preoccupied with them. they're not going to be spending time on tax legislation.
i think tax legislation has a pulse, but i think it's getting more and more crowded out so i think it was a bad day for the prospect of tax reform. >> sanford said that legislative bodies can be side tracked by this and then paul ryan said we can walk and chew gum at the same time. which is true? >> they're both true. i don't think they're exclusive of each other. i think the speaker is trying to put the best spin on. this they can walk and chew gum at the same time. but i think -- i'd feel a little bit more comfortable if i saw more evidence out of the congress. so far they haven't been able to. it's a new environment. very unorthodox environment. i think they need to put up a couple of small wins to get some confidence in order to move tax legislation. i don't have anything specific in mind, but to see that they can walk and chew gum at the same time. i think that the speaker's really trying to rally his
troops is my best guess. >> well, brian, let's assume as you say -- this unusual environment that we find ourselves in. let's look at the calendar and let's just make some guesses here. or you make them, i'll listen. because we also have repeal and replace still. we have the senate dealing with that. in terms of the aca, which many of us believe needs to go prior to tax reform if you're going to do reconciliation off the fiscal '17 budget with that and then fiscal '18 reconciliation with tax reform. where do we end up on this calendar as you look at it, given the environment you're discussing? >> so the senate majority leader wants health care resovld by tend of the month. let's say it doesn't get done for the sake of argument. and then the congress moves on to tax legislation. i think the house ways and means, senate finance, they need to get them through the committee stage of the process by august. because when we come back --
when congress comes back after labor day, you have the debt ceiling to deal with we don't know what will happen over the summer in terms of other confirmation hearings. there have been rumors for months of a pending supreme court -- another supreme court vacancy. who knows? let's just for the sake of argument say there's another one. well, that's going to take up more time in the senate. i think the next eight weeks are kind of critical, not to get it through the floor of the house, through through floor of the senate, but at the committee level investors shown watching to see what the -- should be watching to see what the committees can get done in terms of advancing tax legislation. >> so what's the latest? in other words, we have the midterms. are we talking -- still hope first quarter of next year is still an opportunity for action on these kinds of things? >> yes. i think the first quarter is open as long as substantial groundwork has been accomplished. as long as there is a bill
through at least one of the chambers by january 1, 2018, and that leaves the first quarter to get it through the second chamber, reconciles and differences and get it all wrapped up with a bow, i kind of look at memorial day as a pretty important cutoff. if a tax bill is not finished on the president's desk by memorial day 2018, boy, i just think that the chances of it being completed before the midterm elections fall precipitously. >> brian, we'll see what happens in the next year, literally, minus a couple of weeks. brian gardner, thanks so much. >> thanks. when we come back, the ceo of citi national russell goldsmith is here with the trump administration agenda. but next, alibaba forecasting an enormous jump in revenues for 2018. the latest from day two of their investor presentation. the stock on a roll once again.
stay with us. ♪ say carl, we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab. ♪ ♪ welcome to holiday inn! ♪ ♪ thank you! ♪ ♪ wait, i have something for you! ♪ ♪ making every stay a special stay. holiday inn, smiles ahead. whether for big meetings or little getaways, member always save more at holidayinn.com
welcome back. after months of back and forth, we did get news from pandora this morning confirming that sirius radio has made a $480 million investment in the company. this of course follows our reports many months ago that pandora was open to having discussions with any potential suitors for the entire company.
always thought to be number one on that list was sirius. and there were discussions that went on and off and on and off all of this time during which pandora stock price started to decline as it moved more -- as it moved towards the subscription service which it is now unveiled. and its efforts toward building that subscription service. the announcement this morn, $408 million in a convertible that will pay a 6% coupon that is going to be paid in kind so it will accrete up. the actual ownership. roughly equating to the 20% stake in pandora for sirius. the conversion price -- $10.50 a share. so decent amount away from where the current stock price is, though this is a stock that was not long ago above that price and not that long ago pandora had negotiated a deal with kkr, the private equity firm, to invest as much as $200 million in the company at an 8% coupon,
at a $13.50 strike price on that convert. that will go away. kkr for its effort gets $22 million again for its efforts and simply being willing to invest that. as for sirius, well, what it gets is three board seats including the chairmanship of the company. unclear who will fill that role by those familiar with the situation. it will be either jim meyer or greg maffei, the ceo of liberty media. either one of the two gentlemen is expected to become the chairman of pandora. they have a lot to deal with. an underinvestment in the advertising business. too much spent on the subscription business and overall, some would say a poor capital allocation including some acquisitions one of which they're selling today, ticket fly for $200 million. that's not what they had paid originally for that the back and forth between sirius and pandora as i reported earlier, sirius
had offered i am told only 8 bucks a share. but let's put that in some perspective. what i'm also told is that sirius had indicated a higher number and then after conducting due diligence had told pandora, you know what, we're not going to be able to get above 8. it simply indicated we can't get there and hence they moved on the discussions that culminated with the $480 million investment. it is a lot of money with a company that with a $2 billion market value. wow, they dropped that strike base three bucks, but given the overall size, pandora is saying, really when you look at it from the black shoals model perspective it's not more than a 5% overall reduction in the deal we had in place with kkr. sara, we hope that ends it. >> what are they after?
>> they love the free business. they have liked the free business, what's given them pause is the move into subscription. we'll see the different changes that will be made now that they have three board seats. carl? >> well, between that and taylor swift and the apple -- i mean, the new -- >> no more bad blood. >> what a week it has been for digital entertainment. the dow is up 103. record highs for the dow, the s&p and the nasdaq and the vix at an 11 year low. back after a minute. [vo] when it comes to investing,
looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock.
dow's up 105. got record highs across the board. when we come back we'll talk to jim stewart about the markets and his piece in "the times" about broadway tickets. later, we'll talk about dodd/frank, regulatory burdens on u.s. businesses and more. back in a minute. we should do tt meeting tomorrow. well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks
make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies lead with digital. the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc.
here's your cnbc news update. north korea says it has tested a new type of cruise missile that could strike u.s. and south korean warships at will if they're attacked. this is an apparent reference to those detected by seoul on thursday. the state leader said that leader jong un observed the launches. there was tributes paid to the twin attacks that killed 17 and injured more than 50 on wednesday. mourners chanted slogans against america, israel and the ruling saudi family. jurors at bill cosby's trial are expected to continue to hear exert excerpts from his 2005 deposition. it includes an exchange that cosby acknowledges using quaaludes in pursuit of women for sex. taylor swift says starting today her music will return to the music streaming sites like
spotify. she said it's to celebrate her album "1989" selling 10 million copies worldwide. that's the news update at this hour. david, back to you. >> thank you very much, sue. a consumer protection aimed at retirement advisers is set to go into effect today. the labor department is expected to make changes later. this comes after the passage of the reform roll back bill in the house. our kayla tausche is joining us on the set. >> we have learned the only constant in this world is change and for retirement advisers they're affected by the fiduciary role. as of today they have to abide by the spirit of this rule. for large brokerages they have made changes. merrill lynch gave customers a chance to migrate to the different platform or pay a fee. and wells fargo slimmed down the products it sells and ubs is
trying to eliminate this conflict. for smaller broker dealers like amerideals, they will see meaningful changes and some independent firms have frozen client assets while the rule is under review. if you're a client you're only affected if your 401(k) is managed by a commission based adviser or invested in commission based products. money managers have already asked many customers to opt back into the accounts to ensure that you want to be in it. the obama administration says it saves americans $17 billion in losses that they would have seen otherwise based on the commission based products but the rule will likely change again. the labor department is still reviewing it, but it has 38 vacancies, many of which are political appointments. second, asset managers are traditionally regulated by the s.e.c. and that agency will likely want a say in how this is written and enforced. then the other wild card. how congress tackles large scale
financial reform. the choice act that david mentioned that was passed by the house, it repeals the fiduciary rule altogether, but the banking committee expected to change that. other changes my sources expect, more favorable treatment of the cfpb, more favorable treatment of the stress test and more scrutiny for bigger banks and being favorable for the smaller banks. the president just tweeted about this a couple of minutes ago. he congratulated chairman hensarling of the financial committee, growth, but it faces long odds in the senate. >> back on twitter, quite active. we still need that legislative agenda. for more, please stay on us. we'll talk about what it means for banks. we are joined right now by russell goldsmith, city national bank chairman and ceo. you have $40 million in deposits, largely based in l.a. do you think there's a chance that the choice act gets through
the senate? >> i hope there will be something that gets through senate. i don't think it will look anything close to what the choice act is. i think as you heard from your kbw guest it will take a while. it's stacked up like over -- like planes over jfk to get to this. i think it's time to take a fresh look at dodd/frank. seem glad to see the house act and kind of get the debate started because for seven years we have piled on a lot of rules and regulations. and it needs to be re-examined. >> what sort of priorities within the framework of a choice act or a dereg of dodd/frank are most important to you and banks like yours? >> i think what's happened is the pendulum has swung very far toward restrictioning -- restricting what banks can do and how dodd/frank has been looked at restricts what the banks can or should do.
i think there's good things in dodd/frank. then there are some things in the choice act that aren't so good. buried in there is an exemption for pay day lenders. i don't know why we want to suddenly deregulate the pay day lenders. i think the structure is unlike anything else in the government. taking a look at the structure, seven years, a huge bill, hundreds of regulations. it's time to really say wait a minute. what's the impact here? is it restricting banks and what's it doing pushing things out of the regulated banking sector that are unregulated and i think nobody has really thoughtfully examined that. so i think seven years later it's a good time to review the whole thing. >> there's this expectation that washington will still have a very heavy hand over the largest banks but there seems to be a sweet spot for companies with between 10 and $50 billion in assets. you're one of them. are you operating with an assumption there's a ton of
regulation lifted off the way you operate or wait and see what comes out? >> you clearly want to wait and see. city nation's a $45 billion bank, but because we're owned by rbc which is one of the safest, biggest, strongest banks in the world we get treated as a larger bank than we actually are. but i have been a proponent for a long time that mid sized bank real i don't need to be treated like that. rbc is not a sifi so i think staggering your level of regulation makes a lot of sense. but you have to look at not just side, you have to look at risk, look at activities at what banks are doing. >> what is something you're not doing because you're regulate right now that you would do if something changed? >> you know, there are some what we view as totally prudent loans that we would be making that we're not making because the regulatory framework has tightened around those loans. it's not necessarily required by dodd/frank.
some of this is how the regulators have implemented what they think the spirit of dodd/frank is. i think that's worth a conversation and an open review. >> those loans you're not doing at the margin, are you not doing them because of the credit score or the size of the loan, what about them is suddenly not amicable? >> you know, bankers have to grade their loan and take reserves against them based on that grade. i think what we have seen, which is not explicit in dodd/frank is that the standards that banks are being held to are tougher than five years ago. i think giving banks like city national, we have been profitable every quarter for 23 years. we never did sub prime mortgages, we never sold toxic securities. our parent rbc has a similar track record of great integrity. i think when you've got a lot of capital, and you're not losing money, you're -- >> but is it because you're catering a lot toward hollywood? you're known as the banker to the stars.
that hasn't been exactly recession prone. >> well, believe me, you can lose as david can tell you, you can lose a lot of money in hollywood. >> david, is that true? >> you k. >> we have been lending to hollywood for over 60 years an that's only a quarter of city national. we're up and down california, here in new york. in fact, we're expanding. we're in minneapolis, washington. so we do a lot with small business and all kinds of americans. but i think when banks are managed prudently, they could have a little more room to foster job growth and businesses and the environment in washington in the last seven years has been to tighten i think a little bit too much. >> russell, real quick on that broader view that you just discussed in terms of small business, are things looking fairly good. how would you compare to environments in the past? >> well, i think there's -- there was a burst of optimism by a lot of business people after
the election and now there's a lot of uncertainty. i talked to a lot of clients here in new york, san diego, other places and people are confused. well, are the rules going to change, is there going to be a tax reform? all sorts of things. the big issue in california and here in new york is this proposal to eliminate the deduction for state and federal taxes which i think when you consider that new york and california. that's where most of the job creation is happening in america, that's an ugly threat to not just the economies or the states, the economies of the country. it goes at the issue of fairness. in these states like california and new york where we're based we're subsidizing the rest of the country. the myth is it's the other way around, but it's not. there's a growing sense of what is washington going to do? >> we have a treasury secretary who hails from banking --
>> but is not in favor of the deregulation in the state and local -- >> well, i know steve, we competed when he was out in l.a. i think it's great to have a treasury secretary who does understand banking. i see they nominate joe ottington to be the comptroller of the currency. i think it's very promising to have people who understand banks and will understand the subtleties of how you strike a balance. i'm not saying swing the pendulum way back to the right. just let's get back to kind of a more balanced view. the economy is doing fairly well. the banks are more capitalized than they ever were. it's a time when banks can help the economy grow more and create more jobs with a little more room from washington. i know that steven mnuchin understands that. >> russell goldsmith, thank you for coming in. >> great to be with you. >> city national banks chairman and ceo and thanks to kayla tausche as well.
when we come back, jim stewart will talk about the effect on the unlikely industry. the vix hit 9.37. it's the lowest since 1993. back after a break. when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions, by sensing cyber-attacks in near real time and automatically deploying countermeasures. keeping the world of business connected and protected. that's the power of and.
welcome back to "squawk on the street." rick santelli here with my last guest of the week. ira harris. so ira, everybody wants to talk about the vote yesterday and it's important. but you say the biggest event of the week was? >> the ecb. >> i happen to agree. what did you hear mario draghi, whether it was the statement or the press conference, what did you hear what made you put it up to the top of the charts? >> he was phenomenally dovish.
everyone was looking for a type of normalization. that's what they were selling to the market. a couple of days earlier i said you won't hear that. he throws out the boogie man of the inflation energy and then the big part is they're not shrinking that balance sheet. it's only going to grow. >> not bigger than ours. >> because if you listen to what he talked about, he has to grow that balance sheet. because by growing that balance sheet he's going to get what george soros and others that europe needs by creating a euro bond. the bigger the balance sheet the greater the probability of a euro bond. >> now, let's get to the brass tacks. you say that's the biggest event of this week. you know what i say is the biggest issue over the next handful of years? global central bank balance sheets. i think that the balance sheets become a subsidy. listen, our fed -- is talking about it. i'm glad. i think this is a much more
difficult issue to navigate with respect to thousand market reacts. >> absolutely. all the others will wait for the fed to see how they extricate themselves. well, japan started earlier, because they were playing around with this. but nothing to the magnitude of what the fed started and then of course in july of 2012 the ecb comes aboard and then starts on with, you know -- but it all mimics it. so the exit strategy. let's take that off the table, mario the magician not going to let that happen. >> not in japan either -- >> so they'll watch the fed. the fed if you really read what they have said this is going to be a six to ten year process anyways. about extricating -- and shrinking the balance sheet. >> another item that's important. you know, one of the main foundations, pillars of all policy is they want to get some inflation. >> right. >> it's going to start on the wage side. japan, the u.s., tight labor markets. lowest unemployment rate in japan in i don't know how long.
you continue to say we're not going to see it. wage pressures, why? >> because nehru for me is jacket. nehru is india. for the fed it's nonaccelerated rate of inflation. money is global, and labor is global. look, when europe -- under schrader when he started the harts 4 why did the unions acquiesce tock freezing the wages? because eastern europe is coming on board. >> this is huge, because all the models continue to point to you get that unemployment rate you get the wage pressure. >> the fed's model is just wrong. it's wrong. >> and that is an issue. balance sheets are the issue. listen, "squawk box" will return after a short break. the new guy? what new guy? i hired some help. he really knows his wine. this is the new guy? hello, my name is watson.
demand. broadway theater ticketing turning to the model. our next guest takes a deep dive into dynamic "new york times" columnist jim stewart who says he's done in counter-programming. >> if you ever have weeks like that when you just feel like you need a break? >> every week. >> so i've decided i'm going to see a show, escapist. the rest of the day i'll obsess with political and economic news. >> you've been able to find opportunities that sound other-worldly. >> i was amazed. all the headlines record prices, "hamilton" tickets $850 "hello dolly" almost $800, so i thought i want to be bette midly. wednesday night, the top price was at $1,500 a ticket. no, i mean, i would like to see
it, but then i started diving more deeply into the online reselling sites and some other services that have sprung up online and i was amassed at the bargains. i ended up seeing "groundhog day" which has been nominated for best musical and best actor, and a website had seats for that night at $50. so i went, and i loved it. it was a fabulous escapist evening. >> what is the economics lesson here about dynamic pricing, which is being used, as carl mentioned, including i just learned the yankees tickets this year. >> it's spreading everywhere. i think virtually every highly differentiated products for which there's sometimes surges of demand you'll see prices fluctuating to reflect that, which wasn't really possible in the old world of where we didn't know constant pricing. amazon has contributed to this.
the airlines started this. i think people have gotten used to that. there are a lot of variables that lead to different prices. i think it's a shock. a lot of complaints about saying they're gouging us nobody should have to pay that kind of money to go to broadway, but let's face it economists point out to me, that's what pricing is all about. it's a way of allocates scarce resources. if you can come up with a fairer way than charging high prices, by mea guest. the proveway shows will also have in lotteries, but good luck getting a ticket to "hamilton" putting yourself in the lottery every night. what about surge pricing on uber? does it create outrage in some situations? >> i think there are areas where you have legitimate concerns. i think uber has acknowledged
this, after a catastrophic event or something, it really sticks in people's craw, oh, my god to get out of a disaster area you're going to have to pay an arm and a leg. that doesn't seem fair. people have said there are certain basic rights. to charge whatever the market will bear is just not the best way to allocate those resources, but for purely discretionary items. designers clothes, sporting events, theater tickets, it really does seem -- it's a very efficient way to allocate a scarce resource. what i discovered, the flip side, if you don't have to see the hottest show at the hottest time of year with the biggest star, the flip side is they'll slash prices to get you in the seat. if you're willing to wait until the last minute, there are some amazing bargains out there. >> a fascinating look at the business that doesn't have its pricing reinvented. >> you're a capitalist?
is that the upshot? >> i guess so. everybody claims to be a capitalist, but then when they suddenly see capitalist in action, they say that's not fair, but we live in a capitalist world and i think it is an efficient way of allocating a scarce radio source. that was a nice distraction. as we head to break, let's check in the markets, record highs are back again for the s&p and for the nasdaq. the dow for its part is up 99 points. it's being helped a lot by goldman sachs and jpmorgan. financials have made a strong comeback this week. more "squawk on the street" after this. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms
where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock.