tv Squawk Box CNBC June 12, 2017 6:00am-9:01am EDT
sessions will be in the hot seat this week. he will testify about russian interference in the election it's monday, june 12, 2017 "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. things are down slightly dow futures down by about 38 points nasdaq off by 46 overnight in asia, the nikkei down by a half percentage point. the hang seng off by 1.25%, and the shanghai down by 0.6%. in europe in early trading, some
weakness there as well the dax and the cac are off by more than 1% the ftse off by 0.3% the ten-year note which was yielding 2.2% on friday, right now right at the same yield. 2.202% crude oil prices which have been under pressure lately. still below $46. $45.93 >> lots of stories to talk about. uber's board of directors vogting unanimously to adopt all the recommendations from a report stemming from sexual harassment at the company. this is the culmination of several months of investigations by former attorney general eric holder who was inviteded in to write the report the board suspected to discuss a leave of absence for travis kalanick but no word on that
yeet we'll talk more about uber's culture problems with jeffersonjefferso jeff sonnenfeld. puerto rico applying yesterday to become the 51st state. 23% of eligible voters participated in the vote we'll talk more about the vote and puerto rico's debt crisis at the bottom of the hour. and the monthly federal budget statement is out. tomorrow the producer price index, and day one of the fed meeting. on wednesday, look for retail sales, cpi, the fed statement and the latest economic projections and janet yellen's news conference. on thursday, import prices, the philly fed survey, and friday housing starts a lot to chew on. apple today was downgraded by mizuho from buy to neutral.
also lowering the price target from $160 to $150 a share. they say the stock outperformed this year and enthusiasm for a new iphone is captured in the share price. we have to do this facebook, apple, amazon, alphabet, no netflix, microsoft. so f.a.a.m., tesla that's the other one so three a's, an f, an m, and a t. so the name f.a.n.g. doesn't -- that's amazon. that doesn't include microsoft, calls google which is now alpha beth we need to update that it's important that was -- on friday, this was the story. that was a huge -- the dow was up, wasn't it? the nasdaq was down 2.5%
everybody says the market has been built on these five or six stocks >> you need more consonants. >> so i don't want to buy vowels, i want to buy consonants >> if you add up the market cap of facebook, apple, microsoft, amazon, you're up in the multi trillions, at least over $1 trillion >> if you add up the gains for the market -- >> when that cracks, is it a refreshing pause or -- >> or does another sector rotate in this has been an important part of the market's advance, up 16% since the election had a couple of -- when fundamentals match up, you get pacific crest and mizuho -- futures are down again this morning. a quick look at friday yeah the dow was up, then the nasdaq got crushed. strange. but the nasdaq had been -- >> had been outperforming to
that point >> the uber stuff, i don't know. >> what's happening there? >> eric holder is not the first guy i would have gotten to look at things. >> he's not. >> no. for some reason -- >> for political reasons >> his reign as attorney general, i don't have a great view of this not one for me to be biased about the last administration, but for some reason with the stuff that happened, i don't -- >> i think we heard on friday, 20 people fired. >> 40 people disciplined >> a couple more people may leave the company either today or tomorrow including one of travis's top lieutenants chief operating officer. we will see whether he does leave or not clearly pressure on him to resign >> oober pressure. >> is uber an adjective for a lot? >> yes >> the question is whether you
take three months off -- if you're travis cal ra nick alkalu take this leave of absence -- in truth, he's having a hard time for lots of reasons. his mother passed away killed in a terrible boating accident he's been spending a lot of time in los angeles if he were to take three months or more time off, you could reconstitute the culture of the company, then he comes back or not. i don't know >> he is the face of the company. the question becomes what is the company without him? >> i don't know. i would imagine the company would run every day in many ways you know, it is a -- it is a service. >> knowing about its operations in all these different countries, what happened in i
india? a rape so everything that happens with every driver in the world can come back to the senior management that will be very difficult to control -- >> that's the case with any multinational company. >> in this instance -- >> can't anyone drive for uber >> it wasn't the rape unto itself which was a terrible situation it was the fact that there was a senior executive who got ahold of medical records and other things it's unclear how you get those types of records do you have to -- instead of taking those records and handing them to a lawyer for the company, he's apparently walking around with them in a briefcase showing them to different people >> even if he handed them to a lawyer, it's how you got these >> that's up for debate. >> but also goes back to how businesses is conducted in other areas of the world >> the question is what is
normal -- >> in india there are privacy laws about some of this stuff. >> would you try to run this company so that nothing ever happens anywhere it would be hard >> it's not a question of whether anything happens -- >> i think it's how management responds in a situation like this is management responsible. >> it is an aggressive company >> as a startup you can understand as you get to be a big company s that still the right way to be running the company? >> internally travis kalanick thought one of his competitors created the rape thing as a ruse because he is such a competitive guy. in this business maybe you need to be that competitive >> it's also why the company got to be where it is at this point. the question is do you continue to run it that way >> going back to the technology stuff they did, where they're building these fake screens that they're showing regulators if you're in a certain market and you're not supposed to be in
that market -- some of that stuff -- >> i would be afraid if arianna was watching everything i did. reading the way the huffington post, their general perspective, i do a lot of stuff -- >> she is getting travis to meditate >> if you look at what -- read the huffington post and think those morals -- those will be applied to everything you want to do i wouldn't watch arianna watching me either speaking of politics, great segway kayla tausche is in washington this morning >> why because of attorney general jeff sessions >> jeff sessions told congress over the weekend he would be willing to testify in front of the senate about the election. kayla tausche has the top political stories.
>> would be the highest ranking current government serving official to testify in the probe. the offer comes after former fbi director jim comey eluded to classified facts that would make his continued engagement in a russian related investigation problematic. that's why jeff sessions volunteered to appear in front of a senate panel. it's not clear if it will be an open or closed appearance. the deputy attorney general will testify on the budget. yesterday chuck schumer said he wants the president to testify on this matter as the president himself suted he would be open to on friday >> the president said he would testify in front of the senate i assume you are all for that? >> i would like to invite the president to testify before the senate i think we could work out a way
it could be dignified, public, with questions, with leader mcconnell. we would have to consult with prosecutor mueller before doing it >> the investigation has the potential to overshadow many policy movements coming to bear this week. this will be a closely watched treasury report on financial reform out today the report reportedly will not recommend a modern day glass-steagall then the senate's healthcare tax. the status of financing for planned parenthood, which risks the votes of two key republican senators the calculation on whether to include that will fall to majority leader mitch mcconnell. yet the president in new jersey stumped for a congressman there, tom macarthur who came under fire for his role on healthcare
before resigning that role these are politically fraught issues, but even sobecky, has t potential to overshadow that >> we watched last week, for anybody who thought last week would come and go, this is foreshadowing that this will be around for a while >> yeah. there were a few key comments by the fbi director last week notably that one about sessions that made people currently in the administration scratch their head and say exactly what classified facts is he referring to perhaps some pressure on sessions to set the record straight for the senate panel. >> an interesting piece, wallace's piece, an interesting take -- i didn't see the whole testimony, but apparently trump said if some of my people were doing something, you have to investigate that i want to know about that.
that combined with comey telling him he wasn't the subject of the investigation, you put those things together, all you got left now is you have to try to do the obstruction thing, i guess. one thing seemed to be closed, the collusion thing involving the president but that opens up the other thing. >> that is one of the frustration of the president's supporters, if he were going to be cleared of the investigation any way, why get in the way of that happening that's something senator lindsey graham said over the weekend you did have preet bharara saying yesterday this there is a case for obstruction of justice. >> he's mad. bitter >> he is coming from a political position of his own. >> ryan saying supposed ly the
president will like greece after july 4th or something. right? did you read that? did he say that? >> i did not see though exact comments, but i did read those comments were made >> beautiful island. >> they are beautiful. a note out from greg valeer basically says the republican base will give the president until the august recess to get something done on his agenda at that point if they get to august and there's no movement on healthcare, tax reform, these linchpins of the campaign, people will come to the conclusion at that point it's impossible for him to govern >> the talk about the august recess going aaway, that's something the freedom caucus brought up last week and now there's something that that may actually happen. what do you hear about on that >> it's something they talked about in the past before when there are issues coming to a
head we know the set ceiling will be one of those issues around that time frame you do not want to have that political battle when you are trying to make proactive legislation happen you don't want to have a government shutdown be the only thing that you get done. we'll have to wait and see sometimes they talk about these things, they get there and feel there had been more progress made than they expected. there's always an opportunity to shorten the recess they could do a week or a couple weeks. i doubt that's a decision that will get made until the end. >> i guess that's a way of focusing people. >> i will not let -- if nothing gets done suddenly that's because of this russia thing the republicans in the house and senate do not need outside factors to not get anything done the intransigence we see from those clowns, i hate to say that, maybe it's just they're
fragmented, it's herding cats, but you don't need trump to be in trouble for those guys not to get something -- look at these guys they can't shoot straight. does this have to do with russia that they can't do anything? you have the moderates in the senate, the tea party on the other side the avenue whatever -- street -- >> there are a lot of them >> tuesday >> tuesday, whatever they need an excuse. no, no, we were going to do something. but this russia thing. they don't need an excuse to be useless. thank you. >> okay. >> the dow coming off a record close, but the nasdaq ended friday's session with a tech wreck. we have a suggestion here for facebook, apple, tesla, microsoft, amazon, netflix fat man. fat man. if you want to add alphabet,
afatman. did cramer really come up with f.a.n.g. >> he came up with candies >> i came up with the mother of all -- that was my thing i really didn't come up with that called down again today. this is an important thing to watch in the markets joining us now is chris zakarelli and kevin giddis the way i look at it, could this mean that we get a rotation to other sectors and an ongoing bull market or could this indicate come cracks in the bull market itself? >> you know, joe, i'm a bond guy. what we're watching is -- >> why are you on then you hear my intro? why -- you should have said i don't want to be on if we're going to talk about the nasdaq and the stock market you said this is not for me.
call somebody else >> it's been a long time we should spread the gospel of fixed income whenever we can >> okay. so sell me on investing on something at 2% that is the -- that the princip principle will. why invest in bonds? if you talk about munis, there's a taxable equivalent basis for buying 30-year, 20-year, 10-year aaa tax-free bonds the treasury market is different. this is where you are buying for safety or buying for liquidity as equities erode f they're about to or people are getting nervous, they're flocking in to the bond market because there just is not much inflation and we are not likely to see inflation until we see a pro growth initiative. the bond market is watching what's happening, taking the flows of money as they fall out of other sectors
there's still value in that market away from 2%. >> the one thing about bonds, if you thinks will stay relatively low, that's a back drop for that. chris, is this the beginnings of problems for the advance we've seen or is this just going to rotate banks were strong last week or do you detect they needed a breather? >> i think all those points were made the tech evaluations were relatively high. running ahead of the rest of the market it is time for sector rotation that's why i recommend looking at financials. price to book, 1.3 for the sector, versus the market around three times. finals look a lot cheaper. they will have tailwinds you'll have deregulation, lack of new regulations, eventually the pro growth policies will come through you will see tax reform at some
point, possibly down the line fl infrastructure spending. that should do well for rates being higher, credit quality maintaining and the cycle continuing that's my view on what to do at there point in the this point in the cycle. >> would you use this as a buying opportunity for these fat man stocks you didn't get into in the first place >> i think there's more room to run on the down side, but in general, yes if you get a pull back, i would be buying technology right now it's probably a tough time to do it. if you look at the companies, earnings are growing price attorneto earnings ratio . the last time it was like that is '92 but team are excited about the earnings prospects and what you have is a quality sector that may go on sale in the next
couple of weeks. >> how is the engineering school at cornell is it good >> not a bad school. yeah treated me pretty well >> what do you know about that engineering school >> those kids worked really hard >> much harder than you. >> much harder >> you have a degree in computer science. are you any good at this >> at the stock market >> yeah. >> i would like to think so. i started off in computer science, i got my cfa. >> a cfa >> yeah. so i try to use the two together >> you have a lot of money you invest your own money? >> i do i invest my own money along with the firm. >> have you done well? where do you live? >> i'm living north of charlotte in steph curry country >> oh. >> oh! he makes -- well, that -- it sounds like you're dock really well you can't hit three-pointers like that, right >> i did not
>> all right >> giddis, you crazy -- >> all day >> crazy things happen in china down crazy things happen in china town don't go down there. j.j.giddis >> i'm aware >> thank you chris and kevin it's monday. i think i'm still from the party breathing alcohol. >> margaritas? >> from friday night >> from friday night >> the liver -- >> have to drink water >> i did tried everything when we return, crude in focus bouncing back after a slide of more than 3% last week. we have an analyst who will join us next to talk about it
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let's look at what's happening with oil prices through some of these things wti up by 71 cents after a 3% selloff last week. joining us now is job kilduff, cnbc contributor we've been watching oil prices closely. what's been happening? signs of opec not working well together but also signs we will be pumping more and more and more what's the real reason >> it's that, our continued rise in the u.s. recount. other supply that keeps coming online the biggest problem with opec, there was an anti-climatic feeling after they renewed the deal to limit production, but only for nine months there was talk about 12 months there was talk about the market about giving production ceilings to nigeria and libya, which did not come to pass talks about deeper cuts.
didn't come to pass. you talk about whisper numbers -- >> that's what was propping things up? >> yeah. afrnlgts will t a lot of whisper talks, none of it came to bear. >> libyan and nigerian oil production has blown a hole in the market the u.s. recount keeps coming out. and other troubling things are in the market in terms of gasoline demand strangely in the u.s. has been very problematic we should have had a huge blockbuster week for memorial day. didn't get it. john, hold on. it says at 6:30 we will hear some stuff then it says you are welcomed to use this information now do you see that, sorkin? >> i did >> you going to wait i'm going wait for a second. >> all right >> i'll break the embargo. >> we're nice.
we do things by the -- >> john, tell us, again, what the fair price of oil is now with all these things, now that we sorted this out, if that was propping prices up, we're looking at 45 and change >> here's the divide in the market if you had some other bank analysts on, they'll tell you the market is balancing, that the production cuts are in the works and prices will be more towards 60 bucks for the end of the year heading into the winter season rather than where we are now in the low 40s i don't see this deal working. i don't see them cutting enough yet to balance things out. they never anticipate or didn't seem to anticipate the full impact of libya and nigeria getting their acts back together, particularly nigeria we talked about all the president had to do was pay off the folks in the southern part of the country who were blocking the oil. he did that. guess what oil is back on so we will grind lower here,
down towards 42, maybe the upper 30s. the market will force opec to react again. it's like a game of chicken. we get into the modes sometimes, both to the upside and now to the down side where we have to act. >> it seems what used to be range bound between 50 and 60, now it's more like 40 to 50? >> i would say that's right. >> john, thanks for bearing with us >> we want to break some news. this is big news we have been waiting for this news to happen, perhaps for some time people have been talking about it the breaking news is that jeffrey immelt, ceo and chairman of general electric will be stepping down. in his place, john flanry named new ceo of the company as of august 1, 2017 and will become the chairman of the company at the end of the year. this has been, dare i say, potentially a long time coming we have talked about the tre
ve travails of general electric it's stock, dare i say, has struggled for quite some time. even a ten-year chart, it's on a relative basis to what's happened in the s&p and dow jones clearly underperformed >> we'll go back and look at -- i think we can do 20 years i would like to do 2001, ge versus honeywell, ge versus united technologies. ge versus any company similar to it well chatted with a high multiple of 50 times earnings multiple in 1999 we used to say welch managed earnings he said i don't manage earnings, i manage the company but he always had a couple pennies in the draw that was consistent it's down from 60. welch had it above 60. it can't get out of 30
immelt tried everything. restructured this and that >> the last year has been particularly complicated in part because immelt had reached out at one point to nelson peltz, trying to put a good seal of approval on the company. and in fact to some degree it's backfired because they didn't hit the numbers. that infuriated the folks at trian, which then continued to put pressure on the company. they changed the way they were tying bonuses -- >> that doesn't do it either >> some 2001 we should do it came in the wreak befoeek before september 11th >> he weathered through that he weathered through the financial crisis what you saw was honeywell taking off after 2008. >> utx or and the rest of the market this may be one of the few companies that is still more
than 50% below its ighs. >> an ill-time move into energy. >> ill-time move out of nbc universal. >> ill-time move into subprime mo mortgage if you went back in hindsight and tried to buy high and sell low you could not do it more effectively. john flannery does run the healthcare piece of general electric there was a three-horse race going on behind the scenes the other person who could have been picked was jeffrey born ste bornstein, the cfo, who was liked by the trian people until they missed their numbers. and steve bultz was also considered a front-runner.
t then the question becomes do both of those gentlemen stay with company >> and lek trjust reading more o john, this is the statement from the company. he's a change agent. they saul him smacall him smartd that the turnaround of ge healthcare, organic revenue up 5%, margins 100 basis points what's happening with the stock. the stock looks like it's trading higher on the news >> you would think >> it had been relatively flat before thenys came out now up by 2.4% >> all right we are going to continue to dig into this. make some phone calls. >> it's writing that's been on the wall >> it has been on the wall we've talked about it several times now. jeffrey immelt -- >> he's been on. we interviewed him on squawk on
the street, at times he got in disagreements with faber, saying i'm the dividend man, i paid out a lot, but while ceo returned 143 billion to investors and dividends, more than the prior history of the company, but to long-term shareholders, in terms of your principle if you're down -- if you bought it at $6 in 2008 -- >> you've done well. >> if you held it any time prior to that -- >> they point through also under immelt saying ge nearly doubled its industrial profit and it was long tenure. >> i think jeffrey immelt is a good man just worth saying that i also think he was dealt a tough hand given when he got the company, where the stock was it is true from an operational
perspective he did well. >> he did everything right except the stock price on obama's council, china, eco imagination. everything that you wanted to do that would look good and you would say, wow, he's a great ceo. one of the first ceos after 9/11 to make a big commitment to help >> yes >> a lot of things but in terms of shareholder value and stock appreciation, just no sugar coating it >> it would have been hard to step into jack's shoes >> that happens with ceos a lot. people have come in to running -- you can't make that excuse when a company is up 300% and the other is down 50 -- >> as a shareholder, yes >> in terms of managing the company, trying to take it forward, making the right decisions, you would have to say -- even one of the first
purchases was way too much money at the wrong time. >> right >> the question i wonder about is this new ceo, when he comes in, does he keep the company as is does he break up the company >> he will buy back all the things >> no but there's real questions in terms of strategically how he thinks about the company and where he thinks it should go >> big news this morning more on that. coming up, much more on the shakeup after ge management. guru jeff sonnenfeld will join us as we head to break, here's a look at last week's winners and losers
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. good morning u.s. equity futures -- this mhor may be more interesting with the nasdaq after that drubbing on friday that's come back a little. still indicated down by p38 points weakness over in europe after what happened here on friday and the technology sector and the nasdaq we'll watch. important story today.
recapping the news that just broke. ge's jeff immelt stepping down as ceo john flannery will take on the ceo and chairman role. >> who is the chairman in the meantime >> immelt stays. puerto rico trying to become the 51st state joining us is hector negrone and leslie picker who is just back from san juan. a hardship duty. >> no complaints on my end >> let's talk about what happened over the weekend. >> they did decide en masse to become the 51st state. 97% of those who voted chose statehood. but only 23% of the registered voting population actually voted with the opposition parties, the nonstatehood parties, parties to
remain a commonwealth or independent, urging residents to avoid and boycott the elections. >> why does that matter? >> the boycott >> yes >> it challenges the legitimacy of the results from yesterday. what happens now is that the governor of puerto rico and elected officials in puerto rico have to take these results to congress, which in order to become a state, congress has to make by statute them the 51st state. so they need all of the fire power going into washington, it doesn't appear they have all of the necessary tools to make it a slam dunk. >> hector, if you're an investor what does it mean? >> it is further confirmation of the fact that the commonwealth to date acted quite poorly in regard to managing its fiscal condition, advancing its own economic growth and treating creditors in a way that doesn't draw sympathy. >> what should happen in.
>> they should get their house in order i'm a pro statehooder. i belive the citizens of puerto rico deserve american statehood as much as anybody else. they have to get their house in order before they can become ab addition aal liability so think about this election congress doesn't care. congress is exhausted from last year's efforts with respect to puerto rico and following through this year, continually mired in fiscal condition, they're not looking to extend anything on ireland, people don't seem to care either. a 23% turnout, with 90% of victory, that's something like putin would celebrate. so you need to is see the government get back to governing, get puerto rico back open for business. >> in terms of the bet on their debt, how do you handicap and how do you think about that and
how important is it for them to actually be granted statehood? >> it was never necessary to underwrite statehood as a prerequisition to participating in the meaningful marketplace or being a viable entity like a state. what they needed to do was avoid the self-inflicted damage of being irresponsible around expenses, not collecting their revenues, and not honoring their own constitution they themselves have gone rogue. think about where they were at beginning of the year. we had a new law, new governor, an opportunity for change. an opportunity to embrace correcting the mistakes of the past they have squandered it by increasing expenses, doing nothing but continuing to default and i'm happy now we're facing a judge
i'm glad as a creditor you have an adult in the room with rules to follow. >> we'll see later whether the adult in the room works. thank you. appreciate it. when we come back, a shakeup at general electric. jeff immelt stepping down as ceo. he will stay on as ceo through the end of the year, je jeff sonnenfeld will join us next. and later, an interview with michael evans from alibaba and later, steve wozniak u ll be joining us live. yoare watching "squawk box" on cnbc flexshares etfs are built around the way investors think. with objectives like building capital for the future, managing portfolio risk and liquidity and generating income. that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives,
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welcome back today's big corporate story just announced 15 minutes ago, we broke it on cnbc ge's ceo jeff immelt stepping down we want to brin in je jefjeff sonne jeff sonnenfeld. let's take a measure of the man, if you will, jeff. >> the one coming in or the one going out? jeff immelt was a fantastic
transformational leader. obviously there was no soaring stock price here but we could look at a lot of large industrial companies where it's taking a while for the company to catch up since they're not the new new thing. but the 2$260 billion worth of die vevestiture were handled, se major mergers that were well done the alston deal was fantastic. the divest titure of nbc and so other businesses, the repositioning of ge capital where they realized they need to be in businesses of leasing of industrial products and not all these scary insurance products jeff has an awful lot to be proud of in terms of repositioning. it was a well-handled succession there are some well known candidates, bob nardelli and jim
mcnerny. >> fast forward to today and john flannery and what you know about him and where you think the company goes from here >> i've got to say this is the model succession people will be speculating that this is trian i know factually began in 2011. they had criteria skechd out in 2012, 2013, i think they were taking a look at what the time line was going to be planning to announce it right around now this whole past year, 2016, just been grooming the final two, three candidates and this past friday, june 9th, when several ge board members that i was hoping were going to be at our june 9th summit with you andrew pulled out because they actually changed the date of the board meeting, i think it was in boston, to actually do the final vote on this and he's a great choice. we've had john flannery before when he -- back in 2009, he had just recently moved to india he spent about twelve years of his career outside of ge he got there i'd like to think that we introduced him, i think he did it on his own.
he closes multibillion dollar deal with reliance incredibly successful -- >> jeff -- look out two or three years from now and just tell me this, when you look at ge a couple years out under a john flannery, does ge look like it does today there's been speculation for quite some time that eventually ge spins off health care into one business, energy into -- you know that basically the ge that we know today doesn't exist. this industrial strategy that jeff immelt put together doesn't -- doesn't last. what do you think happens? and what do you know about john in terms of his thinking about that >> they've been going through divestitures since jack welch stepped in there the biggest thing he did was to sell off the biggest acquisition in question's his tremendous, and reginald jones's predecessor being haunted, your kid's turning around what you've created. they've always been morphing and changing reginald jones said i'm not going to comment, if he thinks it's the right time to sell it
it's a dandy time to sell it that's the way welch treated immelt whether or not there's natural synergy between health care and energy businesses i don't know i'm not equipped to see that but this has been an industrial conglomerate where they've had a lot of engineering talent that can rotate through and john flannery is the perfect example of it. he's been in every part of the business in addition to health care, heavy industry sectors and energy and he's had great successes everywhere and other parts of the world from argentina to india. it's extraordinary what that background has given him there's been never knorr more global and triumphantly global executive than this guy. i don't own ge now i will after this show if it's not too late because i have strong prospects -- >> so are you looking at that chart there jeff, you got a monitor? >> no, don't have a monitor but i know you're showing me stock and i can say -- >> no, jeff, hold on a second. just, we got -- we've got since
september 7th, 2001, honeywell is up 265% united technologies is up 256% ge is down 29% so you said other industrial companies, they've had a hard time coming, you know, with divestitures -- whatever you said but that's just the old expression that money talks, and what is it something -- or i don't know money walks -- >> it depends what the basis -- >> the basis is just holding the stock jeff and trying to make money for your retirement, for your family to try to, you know, to build wealth to try to, you know, take a company that has like welch did that was a dollar a share, and take it to $60 a share. not take it -- so i mean it's almost like i don't know it's great to be a figurehead of a company and -- >> jack welch is a terrific leader you can't diminish jack welch. jack welch could not do today what he did then there was magic with ge
capital -- >> well how did cody do it >> because -- >> how did united technologies do it with similar mix of assets >> coty came into a company that was in incredible disarray dave cody, there's no better industrial leader in the world than dave cody >> how about utx >> he had a very low base he was starting with and dave cody a great ge alum. there are great ge alums everywhere out there dave cody did a magnificent job however the base was pretty low. honeywell was -- remember when he was running that company and larry bossidy had difficult succession through all that? it was a mess back then. right now it's never been doing better and of course dave cody deserves a lot of credit. but it was in terrible shape when he stepped in there you have a ge, which was in pretty sturdy shape when he came in, however they had to divest the huge dead weight of these financial assets i know you own a lot of ge stock from your, you know -- >> i don't own any and i'm happy i don't. >> well didn't you have it through your employee --
>> i did i had it that's maybe part of the problem. >> you should have held onto it joe. >> i had options, too. you know >> you should listen to warren buffett when he's on the show. he tells you to buy low and sell when it's high hold onto it not sell when it's low you sold at the low -- >> i didn't sell anything. i didn't sell anything at the low, jeff, i sold it right where it is. i got it -- you don't have any idea about all of us here. but those -- >> those charts -- >> there's no way you can sugarcoat. you can talk until you're blue in the face but down 30% versus up 260%. for the thers, and repositioning things and selling things at the lows, and buying things at the highs, when it turns out it's just -- >> you know you take a look. it's hard to explain a stock market you know, here's 100 i don't know 60 billion dollars or so, $150 billion of shareholder dividends returned that's more than any ge ceo -- >> jeff we've got to go, but one quick question, steve bowles who
runs the energy business he was considered in contention among the three to run the company he is not obviously going to run the company. the cfo is being upgraded to a vice chairman role do you think bowles stays >> i hope he does. the pattern in ge in the past was these really great guys have a great buyout they leave and go somewhere else i hope he stays. this is a terrific board, by the way. it's a very large board. 18 people on the board they've been on top of this. and i know a lot of them have wanted him to stay this board you know, you've got to take a look at who's been a part of this decision. and there's no stronger board in corporate america. it's large >> jeff, we got to thank you for your perspective especially with this breaking news appreciate it very, very much we will see you very soon, sir >> thank you >> when we return, markets in focus. the dow coming off a record close but an apple downgrade putting some pressure on tech. we'll talk strategy after the break. and bring you more on this big news at general electric mr. immelt stepping down i think we should do that meeting tomorrow. well wait. what did you think about her? it's definitely a new idea,
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breaking news, jeff immelt stepping down as ceo of general electric we have the details and stock reaction straight ahead. plus, technology stocks under pressure what is behind the recent sell-off top rated analyst of rbc talks about the fang stocks. uber's calvin kalanick could face a bumpy ride with the board as the company takes action to review its policies and corporate cultures and the rising world of e-sports gamers get competitive and companies are taking notice. that story plus some big announcements from e-3 the second hour of "squawk box" begins right now
live from the beating heart of business, new york city, this is "squawk box." good morning, welcome back to "squawk box" right here on cnbc we're live at the nasdaq marketsite in times square i'm andrew ross sorkin along with becky quick and joe kernen the futures this morning take a quick look at what's going on. we will see whether -- well what happens to dow there dow looks like it would open off about 35 points, nasdaq off about 37 points, the s&p 500 off close to 5 points. the big breaking news just a half an hour ago broken right here on this network ge announcing a major management shake-up this morning. jeff immelt stepping down as ceo of general electric. he will remain chairman of the company through december john flannery, who runs the company's health care unit will replace him as ceo and chairman. becomes chairman at the end of the year current cfo jeff bornstein has been promoted to vice chair. this is a very big news. show you ge's stock this morning, we talked about how
much it struggled over the years. looking back to when jeffrey immelt started at the company. it is down over all that time relative to some of its competitors. but of course we've also talked about some of the mitigating factors, perhaps, around 9/11. and the engine business. we've also talked about what happened with ge capital during 2008 we talked about some of the missteps related to different acquisitions and divestitures including nbc universal and perhaps the mispricing there nonetheless, big news in corporate america today with jeffrey immelt stepping down this is something that they say has been in the works for quite some time. in terms of succession plan that they say started back in 2011. having said that we should say that nelson peltz the activist investor got into this company about a year and a half ago really to put a good stamp of approval on the company but has been relatively unhappy with the progression thus far so hard to say whether that hastened some of these moves today that we're hearing about. >> let's get you caught up on some of the other headlines this hour, as well.
uber's board of directors voting unanimously to adopt all recommendations from a report stemming from allegations of sexual harassment at the company. the report is the culmination of several months of investigation by former u.s. attorney general eric holder. a board representative said that the recommendations would be released to uber employees tomorrow it's unclear if any action will be taken against uber's ceo travis kalanick or any other executives but it is being reported that kalanick could take a three-month leave of absence it's a big week for economic data and of course for the fed as well. today the monthly federal budget statement. tomorrow the producer price index. and day one of the fed meetings. on wednesday we get the fed's latest policy announcement in janet yellen's news conference we'll also be getting retail sales and cpi. then on thursday, import prices, the philly fed survey and industrial production. on friday, it's housing starts and folks, for the second straight year, the pittsburgh penguins are stanley cup winners. they beat the nashville predators 2-0 in game six of the
stanley cup finals last night. penguins captain sidney crosby was named mvp of the finals. this is the fifth stanley cup victory for pittsburgh they're also the first team to win back-to-back titles since the detroit red wings did it back in the 1990s. stocks to watch today, apple downgraded from buy to neutral the firm also lowering its price target from 160 dollars to $150 a share. mizuho says the stock has outperformed this year and enthusiasm over an expected new iphone launch is fully captured at these levels. pretty soon you may be able to buy a car from amazon. the e-commerce giant has reportedly started hiring people to sell cars online in europe a german trade magazine reports that the company plans to run the business out of luxembourg, and is looking at britain as a possible test market we're going to speak to tech man list mark mahaney about apple and the fat man stocks and a fat man stocks >> you got to work that out.
amazon alphabet apple. netflix. >> you put microsoft in -- >> tesla and facebook >> and the recent sell-off that we've seen in tech on friday we'll see whether that continues today. looked like it was going to earlier today. >> i think a little bit, yeah. >> joining us right now is bob michel he is the chief investment officer and head of global fixed income strategy group at jpmorgan asset management. ed campbell is principal and portfolio manager at qma gentlemen, welcome to both of you. ed, why don't we start talking about what happened with technology on friday and whether you think this will carry over first of all do you believe the rally that's lifted these stocks and what do you think happens now? >> yeah, so we definitely saw some turmoil in tech on thursday and you know, in particular in the fang stocks. you know, it's been a very long time since we've seen pullback in stocks. and as you know these stocks,
broader tech sector up more than 20% this year and the fangs, some of them up more than 30%. this could be the spark that gets us to one of these 5% pullbacks that we haven't seen in awhile. >> is that a buying opportunity? or is that a reason to sit back and wait even longer >> i think that's a buying opportunity. i think the macro environment is still pretty benign, and the end of the business cycle is not near so, while we're cautious short-term because we have been waiting for a pullback like this, i think it's probably one you're going to want to be buying into. >> bob, part of the reason people say that when you see a 5% pullback like that, that it's a buying opportunity, when they look at fixed incomes, they see these incredibly pressured yields shocking when you realize that the fed may be raising interest rates later this week. >> right >> to see things like this happening in the treasury. >> well, i'm very anxious to see what the fed's going to do this week i think raising rates for the next couple years is the easiest thing they have to do. until they get to 2%, which is a
zero real yield, if they're targeting 2% inflation, monetary policy is still highly accommodative. i want to see what they're going to do to the balance sheet they're at 4.5 trillion. is the right level 2 trillion, 2.5 trillion, somewhere in between? because that's the liquidity rug that i think has been supporting the markets for a long time. >> so you think it could be an even bigger implication for the markets, as they start shrinking that >> i do. i want to see what the caps look like i want to see what their end target is. i want to see what the other central banks are doing. >> most people say 2.5 trillion is where they're targeting at this point >> okay -- >> run down 2 trillion dollars if they do that very gradually i guess the question is what implication will that mean as they're raising rates at the same time? >> i think they're smart to start now. and i think people do talk about there's a double impact of raising rates and letting the balance sheet run off. but they're doing it while the bank of japan, the bank of england, and the ecb are cushioning that.
they're all still printing money and buying bonds i think they're smart to get this under way now >> what will that mean if they do get things under way? when do you think the rest of the market kind of figures this out? if you think it's going to have big market implications, when does the stock market and the bond market kind of get to that realization? or is the bond market already there? >> the bond market is not there just yet the bond market is assuming that everything will happen seamlessly, that we'll raise rates every other meeting or so. that we'll start with -- >> i'd say the equity market's figuring that. >> yeah, so the bond markets will get there i don't know the right level i have a feeling that has more to do when the ecb starts its tape tering process. and then we'll see how far -- >> because that will be the global -- >> right >> so, ed, what do you think about that does it concern you? does it worry you? is that what you think eventually kills this rally? >> i don't think the fed necessarily kills this rally
as bob mentioned, you know, on a real basis, yields are still below zero and you know, the fed is tightening from very accommodative levels on the interest rate front we're of the view that yields should move toward 3 this year. they haven't gotten there. >> can you move towards 3? >> yeah. of course that was predicated more on the advancement of the trump agenda which seems to be bogged down in congress. so i think for now we're going to be stuck in the mid 2s. yields are too low where they are today but i don't know that they're going to move that much higher this year >> bob that's an interesting point, though. are yields at these low levels because of the economy or is this a reflection of just global central banks having so much liquidity out there and does the trump agenda -- will the trump agenda, if it gets passed, even have an answer >> it's got to be a couple things i think the optimism that trump would get through some fiscal stimulus has faded so, half of the sell-off in the
bond market has already been retraced it's true that the foreign flows whether it's qe or the reserve accumulation, people's bank of china is back in the markets, second reason. and then where is the inflation? the labor market does look tight but wage gains are not making those increases. it's difficult to find inflation, and that's supporting bond prices also at these levels >> we do get some inflation numbers this week. i guess we'll be watching those fairly closely both of you >> absolutely. >> very closely. >> and, ed, just in terms of what you will be doing in the meantime, if there's not a 5% pullback, would you tell people to invest at these levels or do you really need to wait for that 5% >> we started the year pretty bullish in risk assets with more sizable overweights than we have today. so i mean we've really been pulling back and getting more oriented towards benchmark positions in stocks. >> mm-hmm. >> i'll say one area of opportunity is moving money overseas maybe more toward europe and japan. where you know, if you look at the u.s. market, earnings are
above trend and overextended i think in europe and japan they're still more cyclical depressed so there's more room for stocks to run there. >> all right gentlemen, thank you both for coming in today. >> great, thank you. >> okay, still to come, we're going to talk about tech peck stocks taking a bit of a tumble what's driving the recent sell-off in the sector plus shares of general electric today are trieding higher this morning. dow component announcing a major leadership shake-up. ceo jeffrey immelt is on his way out. the full story still ahead you're watching "squawk box" right heren bc [vo] when it comes to investing,
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combined with the most wifi hotspots. it's a new kind of network. xfinity mobile. welcome back to "squawk box. the futures right now, indicated lower across the board down 40 now on the dow down 47 on the nasdaq. that has worsened considerably since the last time we looked. and, comes after a pretty tough session on friday in the nasdaq. quick look at general electric that will help the dow today at least if it opens where it is indicated up almost 4% on the news of the day. >> okay we have some geopolitical news to tell you about. south korea suspended deployment of a u.s. missile shield last week further complicating tension in the region. joining us now to talk american defense strategy in light of north korea and the threat there, recent developments in the gulf, the former commanding
officer of the "uss cole." good morning to you, sir >> good morning. >> when you go to sleep at night, and you think about the risks to our country, what are they >> the biggest risk right now are china, russia, and iran. those are the major countries that are disrupting the world through their activities clearly are russia in eastern europe, china with north korea and their support. iran through the entire middle east and the gulf. >> i'm surprised that north korea, though i know it's embodied to some degree in your china answer, is not on that list >> you're exactly right. i look at this point in time, given north korea's activities and what they continue to do with nuclear technology, especially with their continuing miniaturization program, when you look at it up to their ballistic missile program which is maturing in coordination with the iranians, china's the one that aids and abets them completely both through economic, industrial and financial support. and they're the ones that we
need to start looking at in order to get the north koreans under control. >> commander, what are we doing right? and i hate to focus on what we're doing wrong, but what we're doing wrong may be more important. >> well i think the things we're doing right is that we're starting to reprioritize for exam in foreign aid. when you look across the globe, we're beginning to say, okay, it's not necessarily a withdraw of foreign aid but it's a reprioritization are the american people getting the most bang for their buck when you've got a $20 trillion debt we have to reassess where we're spending money, and that, in fact, is furthering u.s. national security interests across the globe while many allies are concerned about this, i think the u.s. is still continuing to remain engaged around the world, which is good for us, and for them >> but when you -- let's just -- let's just go back and think about this for a second. when you think about the risks to the system, and specifically to us, is the -- is the diplomatic issue is that the problem?
there's been a big discussion about what should happen at the state department >> i think it's a perception issue. when you look at what the department of state is doing, for many years, we have had the ability as a nation, with the bounty of our country and the largest that we had in our budget to be able to give foreign aid out not necessarily with no strings attached but clearly with not some of the controls and accountability that we need to have in place these days we want to make sure that we remain engaged that we use that foreign aid for education programs for military officers, for weapons systems that the united states isn't using, that we can still sell to other countries, for development of other countries and how they exercise their military, their coast guards, to safe if guard their exclusive economic zones off of their coast to make sure that their resources aren't being pillaged by other nations like china throughout africa and we want to make sure that we continue to do that. and state department is that -- is that tip of the spear where they're out there. they are the primary department because you want to engage nations first and foremost diplomatically >> what do you make, though, of
what, you now, appears if you read some of these stories, to be almost a mini insurrection among many of the diplomats across the world >> i think it's more perception than it is reality they look at how the trump administration came in, what was said on the campaign trail, versus what the reality of it is that secretary of state tillerson, secretary mattis and the department of defense are doing along with mcmasters with the security council i think that we are -- we have a very robust policy that's in place. but you've got a lot of people, quite frankly, that are working to undermine it right now because they aren't really willing to take the time to peel it back and say, okay, we understand what's being said on twitter and other places, versus the reality of what's being executed with many of these nations. in engaging with them and in working to further u.s. interests across the globe >> okay, commander we're going to leave it there. we always appreciate your perspective. thanks so much for joining us this morning >> thank you my pleasure. >> you bet >> still to come more on this morning's breaking news at ge's
jeff immelt is stepping down as ceo. but up next, how much would you pay to have lunch with warren buffett? it's all for a good cause. we have the details right after the break. in the meantime check out the futures at this hour been under a little bit of pressure nasdaq is back down by about 48 points below fair value. dow futures down by 49, s&p futures down by 5.5. it's all yours. wow! record time. ♪ at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. ♪ 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
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welcome back to "squawk box" everyone an anonymous fan of warren buffett agreed to pay $2.7 million at an online charity auction to have lunch with the billionaire. the winning bid came in closi closing -- in the closing seconds of the five-day ebay auction which drew 41 bids before ending on friday night. it was lower than the record $3.5 million bid that was in the same auction back in 2012 and 2016 this money is going to go to a san francisco charity that provides food, health care services, and other services to the homeless the impoverished and people who are struggling with substance abuse. the successful bidder and up to seven friends will be able to dwien with duffate at a steaks now manhattan. buffett has held 18 annual auctions for glide racing about $26.3 million.
>> okay. let's talk bitcoin bitcoin bulls run wild as crypto currency surges above $3,000 before dropping in early trading this morning bitcoin traded above $3,000 for the first time on sunday continuing this year's massive surge and helped by increased demand from asia based investors. the digital currency has had a still ar year rising by more than 200% and easily outperforming the stock market bench marks like the s&p 500 preet bharara knows how james comey feels. he says before being fired president trump tried to cultivate a relationship with him. bharara says he met with him following the election and called him several times and what seemed to be several interactions to those comey testified last week in an interview yesterday on abc bharara also said there's absolutely evidence at this point to begin an obstruction of justice case against trump >> i think a lot of people will tell you that the president
himself sometimes makes accusations that turn out not to be true. i think he seems to have done that in a tweet this morning and when it comes down to who's telling the truth and who's not i think most people would side reason ply with james comey. >> bharara was fired by the white house along with 45 other u.s. attorneys even though he says he had assurances from president trump that he would stay in his job. coming up, rbc capital markets tech analyst mark mahaney tells us what's driving this tech sell-off tech out u.s. equity futures
breaking news this morning the big story broken right here on cnbc, ge's jeffrey immelt stepping down as ceo he will stay on as chairman of the board through december joining us right now to break it dawn on the "squawk" newsline analyst scott davis of barclays. you heard the news we tried to assess a couple of things one, how to consider jeffrey immelt's tenure as ge? and also, what's going to happen to ge under john flannery?
>> well, good morning, guys. this was -- this was an announcement we didn't really expect until the end of the year and quite frankly, we're happy to have it now ge needed a new messenger. it's jeff immelt has struggled to really connect with investors now for several years. the stock has lagged, as i'm sure your viewers are painfully aware. and so we're expecting fairly dramatic changes out of new ceo. what we'll get, we'll see. but we've been long calling for an at&t-style breakup of ge and we would expect a new ceo to seriously consider something down that path >> when you look at the timing of this, as you said, you were expecting it later in the year i think a number of shareholders were also expecting to the degree that something was going to happen, it would happen later in the year. how much of this do you put on pressure that came from shareholders, in particular trian and nelson peltz's group >> well it's hard to say certainly, you know, ge's --
ge's formal comment is that this was a decision that -- >> right >> -- the board had already made but, look, i mean the timing seems a little bit interesting i mean jeff immelt had a tough presentation a couple weeks ago, down at a big annual conference that he speaks at. shareholders were not happy. trian was certainly not happy with the results of the last several quarters, and so would i be surprised if we heard in hindsight this was pulled forward? no not at all >> and when you look back on jeffrey immelt's career, and tenure as the ceo of this company we've shown the stock chart, everyone knows what's happened to the stock, clearly underperforming materially, relative to its peers, relative to the market, how do you look at what took place over this aperiod? >> well, i think you know, it's been an unmitigated disaster for shareholders and you know, the question is, is that how much of that was jeff immelt's fault? i mean he was certainly handed a
portfolio that was overearning when he took the job in 2001 he's been nothing but bad luck starting with 9/11, you know, to start his career and then we had problems in insurance businesses after that. and then we had problems in the commercial paper markets, and the financial meltdown, in which he was overlevered into a major financial downturn on top of that m&a that really hasn't worked. a number of acquisitions that are questionable in that tenure. and so, you know, some will say that the -- you know, we won't know for another five years maybe whether some of the investments that he's made in things like digital, will redeem his career >> right >> but it's hard to look at the actual numbers and not feel pretty dire about it >> given what you know about john flannery, do you think he's the kind of guy who's going to keep this company together do you think he's going to say health care over here, energy over here, some of the other stuff, we'll break this whole thing up
>> i think he'll break it up >> you do? >> yes, i do now to what extent he'll break it up, we'll see it's hard to imagine that you can see synergies between health care and power generation, aircraft engines, and you know, he certainly has been running health care so he knows there's really no synergies there. so, you know -- >> that sounds like you're suggesting a potential spinoff, of ge health care which i've seen other places this morning >> absolutely. you know, and look flannery's a finance guy. he's a lifer finance guy he may be a lifer at ge but he's really a finance guy so i'd consider him as much of an outsider as you can get to being an insider and so, given the influence that a trian's going to have, given how unhappy some of the top shareholders are, i mean you could -- i mean, we're told that he's going to do a very quick and serious portfolio review >> right >> and if you're a new ceo and you come out of a portfolio review and you don't do anything that would be -- that would be a statement. >> we've seen that jeffrey
bornstein who was in the running perhaps to take the top job has been upgraded to vice chairman role the other name that was bandied about was steve bowles who runs the power business do you think he stays? >> well, shareholders really want bornstein to stay i mean, he's done a solid job as cfo and people connect with him. i would imagine if history is our guide that steve bowles will probably not stay. >> okay. okay it's an interesting one. we appreciate your time and perspective this morning thanks for calling in. >> you're quite welcome. >> you bet >> tech stocks were -- are right in the middle now of a minor beatdown minor at this point. why we need to talk about it sector dropping more than 2.5% on friday. and that we're saying here amid some profit taking so far that's exactly what it was. joining us now for more mark mahaney, lead internet analyst at rbc capital markets and in an ongoing upward trend like the sharp, quick corrections when it wasn't
specific to companies, it was just specific to the whole class of companies, and the air comes out quickly, but it's scary, and makes you wonder, usually that means it's going to continue and it's just a buying opportunity do you think that's the case or was a top made? >> i don't think this was a great buying opportunity their stocks as a group, those fang stocks, i call them p/e fang because i like to put priceline and expedia -- >> microsoft and apple and tesla maybe? >> maybe but you've got this sector that's up about 30% year to date and it trades off 3% in one day it doesn't strike me as a big buying opportunity i think the fundamentals are largely intact at least for the consumer internet names. there's no new development, no new regulatory pressure that would have caused the stocks to trade off. you've got a very crowded long trade. supported i think by fundamentals in the group. but every once in awhile you're going to get these kind of tradeoffs, and they may create great buying opportunities one day's trade doesn't do it. >> how did it happen, do you think, on friday
why does it spread to all the -- i mean they all go up together and they all come down to the. it's guys that have money in, and they get, you know, funds, and et cetera and they all get nervous at the same time >> joe, there's one quick backdrop here. the reason the stocks are so outperformed this year, last november, this stock, this group of stocks traded off pretty aggressively, 5% to 10% in the wake of the trump election and there was a belief at the time that you would see a growth reacceleration across the economy and so the scarcity value of these stocks was brought down then when it turned out that we weren't going to see any great quick growth initiatives then the scarcity value of the sector came back. i think that's the key backdrop for why they're up so much but if you take them back a year the outperformance is less severe >> hmm that's interesting so all of the talk about how this is a big bubble that's been building, you don't buy into that >> i don't buy that at all two key points here. we've had a really nice precious in facebook shares, really nice appreciation in google shares
and these things are training at 24 times gap earnings. that's a premium to the multiple that's a premium multiple to the market but keep in mind, facebook has grown revenue and earnings by 50% for 16 straight quarters that's four years. google has done it by -- has grown its revenue and earnings by 20% for almost 7 years. like that's unusual secular growth these are the pretty clear winners in the space i think moats around these businesses are 3wi8ding and valuations for those two names are very reasonable. >> let's talk about apple. there was a downgrade from mizuho today the second downgrade in ass many weeks saying the stock has gotten ahead of itself for the upgrade cycle this fall. >> i'm going to hold off on apple. i apologize. >> that's fair enough. >> but the other names, the stretch valuation names, netflix, amazon, you know, amazon now trades at around 18 times cash flow. it's actually one of the cheapest points you could buy amazon over the last ten years netflix is a stretch valuation,
it has been for a long time. we only see small single digit upside to the price target it's not one of our top picks here stepping back, top picks for us are facebook, which i still think gives you more than 20% upside between now and the end of the year, then google, then expedia. >> you're not a tops down guy. but, since these stocks so frequently are associated with this latest move up in equity prices, if there's a problem here, does the whole market need to worry, you think? >> given the consolidation of the group, given how big the market cap is, particularly of the -- >> huge. you're right >> yeah, it does -- >> add these eight stocks together i mean it's trillions. >> they've been leading the market up so they could easily lead it down absolutely there's -- you know, we -- we've had two rotations here at the end of last year we had a move away from scarcity value or high growth tech and then we've reversed course to that so, just as they -- we're at a point now where correction in those stocks would clearly bring the overall market down. absolutely >> yeah, and makes sense, too, that we've looked at a million
other reasons why, you know the fed, take your pick, on what was going to finally derail, you know, this market. and it would make sense if it was something that you can't even put your finger on just starts happening in the most extended group and then everybody takes a step back or maybe takes a breather for the summer or something. so i wonder if we get a 5% or 10%? >> i think that makes a lot of sense. it may be a good thing for this particular sector. i think valuations are reasonable there's no great dislocated large cap high quality tech stock in our view. or at least no high quality internet stock that's dislocated i can't tell you to back up the truck and i wouldn't tell you to back up the truck on a facebook. i think the risk reward is interesting but there's been more interesting entry points in the past >> okay, sorkin. so you're a figure right now, you're between philly and wilmington somewhere. and -- >> yeah. >> you're not even on the train. you're like alongside the track. >> i'm watching it >> you're alongside the track -- running, trying -- >> i'm on a bicycle. >> if it stops for whatever reason >> yeah. >> get on somewhere between because you're not getting on in
new work and penn circle -- >> i missed newark >> you missed philly >> back up >> you might get on between philly and delaware. but you know, at this point you're almost going to ride it all the way down to union station. in d.c >> then what do i do >> i don't know. where you going? you going down to washington >> i was just trying to get to d.c. >> trying to get to d.c. get on if you can. if it back up this time, get on. santoli. >> absolutely. the fundamentals are clear in this group there's ge claired winners when they back up, you get on the train's only move back a smidgen from the station >> right okay you promise? >> okay. >> call your boy santoli tell him 2316 that was a time to chase this market on the s&p if it gets back there, chase it this time. >> to his credit says that's the only story of his that you ever remember >> just so glaring when he was here, i knew it was going -- >> i'm going to -- thank you >> thank you, andrew >> appreciate it always good to see you we will get on -- we'll have to get on the train somewhere >> get on the train.
unless you want to walk. >> we don't know where the train's going right now. coming up the growing world of competitive gaming e-sports becoming much more organized and popular over the past couple years. companies taking notice. we've got that story after the break and in the next hour, michael evans is going to join us for a "squawk box" exclusive. we're going to ask him about the stock's rally climbing 60% over atnd l me jt year th a aotorinusa moment
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welcome back to "squawk box. the e-3 kicking off with video companies on a role. active igs vision shares up 68%. nintendo up, and ea up scorpio is expected to be the star of this year's e-3. today we're going to hear from sony and julia bore stin has more on the video game comeback. >> that's right, andrew. last night microsoft had a big event to unveil its top secret console which until now had been code named project scorpio it's the xbox 1x launches for $499 that's $100 more than the playstation 4 pro, though this xbox has better graphicses and
will work with xbox 360 and original xbox games. in contrast to sony's ps4 was just announced more than 1 million units sold of its vr headsets, microsoft didn't feature any vr last night. but with this console microsoft is hoping to reclaim some territory from sony's ps4 which is in the lead thanks to the advantage of multiplayer games and lower prices tonight, play station will unveil its new games, and vr tools but it's nlikely to reveal any new significant hardware now for gamemakers, active igs blizzard and take two will hear more about their new titles as well as the booming battleground of e-sports, competitive video game playing in april, video game sales saw two consecutive months of growth for the first time in a year and a half that was led by nintendo's new switch console then game sales turned negative in may on tough comparisons. we'll have to see whether this week's news will help turn things around.
coming up in "squawk alley" we'll be talking about the new console and the lineup so lots to watch for >> okay, julia, thank you. the next billion dollar venture for the video game industry might be e-sports. competitive tournaments among professional gamers, who rack up sponsorships, and play for prime. joining us chris grant editor in chief of polygon, the gaming website just launched three new e-sports platforms it's not -- is this new because it's sports? because gamers have gotten some sponsorships in the past, if you're -- people watch them play on the internet, too, right? >> it's not really new people have been playing competitive games for a long time i think what's changed and specifically has changed in north america and in the west is the platform to watch them you heard about things like competitive star craft in south korea for a long time. the advent of twitch, youtube gaming, live, we see a lot more
people being able to consume this stuff and watch it and enjoy it as a group, as a community. this stuff largely lives online. these communities have grown in the absence of media in the absence of broadcast. you know places like polygon, this is an opportunity for us to reach an audience that we are not reaching very well on our platform on our site. using the site as a way of talking directly to audiences who haven't really been addressed by the media >> i don't understand. how does this work can you just -- >> so, you know, the example, street fighter okay two people in arcade play games, the other person wins, if you can that consistently enough you can ladder up. what's been absent is the laddering, a professional organization to kind of oversee it and rank it then broadcasting it letting people see it and enjoy it -- >> the same thing that's happened with baseball or anything else where you've gotten higher and higher
salaries because you're finding better and better people >> yeah, i think in socases the was a question whether or not this was a still if these people were getting lucky. is there competitive ability is it sports is there an actual advantage players have and we've seen in certain games that there are better players. they can practice harder they can be better and so that opportunity -- >> age out their reflexes get worse as they get older and you're not going to win anymore >> yeah. just like it would be in traditional sports a certain point you might just not be as sharp anymore. do it -- >> or you're -- you know -- >> anti-coordination, your reflexes >> we tested this. there are people that are mention it matly better at it. there's a strange thing for me i am not good at it. but it is a strange thing to acknowledge that this is actually happening and then part of the thing and why professional sports organizations are so excited about e-sports, the average age
of a sports fan is getting older and e-sports the average age is very young you see a lot of investors coming from the traditional sports world excited about e-sports because they see a new, young audience >> how do you market to these people just the point that this all takes place outside the broadcast network, where there's not an advertising environment where all these things work? >> i think that's part of our opportunity. why we're launching these new sites. launching with advertisers like bud light. we have an audience that is hungry for this content. and the media, frankly, and advertisers, have been late to the party. the audience has been there for a long time. i think in some cases that means the audience is sometimes skeptical of advertisers in the media. but i think that it's been professionalized now you know, you talk about acti activeision blizzard has executives from fox news, espn, all running this thing and see a professionalization of these sports >> just looking at what we were showing with the guy down in the
right-hand corner of the screen kind of calling the shots and almost like mystery science theater with the guy turn around >> yeah the presentation of it, the guy in the corner usually have some somebody who is streaming but they're streaming a game on twitch one of the things about twitch, it's free. you can go watch it. it's not behind a pay wall you have audiences on their computer they play the game on the computer and you can switch to a tab and watch it on your computer there's a fluidity to it that's very natural for a younger audience and very easy to consume. these games are mostly free to play not all, overwash is a great example of a $60 game. they sold 30 million units in a year but most of these games are free to play. and low cost and you can play them yourself. one of the big differences between e sports and traditional sports, if you like football you probably don't play in the nfl or you probably don't even play a pickup game with your friends every day. if you like league of ledge ntds you're probably playing league of legends every single day.
so the way that the audience consumes it isn't just as a viewer, but as a consumer of the game itself. they watch the games, they play the games, they watch their favorite -- they watch their favorite athletes practice on twitch they go to forums, they go to websites like ours to read about it and there's a whole community system that revolves around this that doesn't usually revolves around e-sports writ large, it resolves around economic communities. if you like overwatch, you like overwatch. i think that's part of what the media has kind of failed to understand it doesn't match very easily the sport. it's a little bit different. and you don't consume it the same way a $300 million with bam tech to stream league of legends so i think there is some, again some professionalization happening here and some recognition that there's a lot of money to be made. >> chris, thanks for coming in today. >> thank you >> and we should note, nbc universal is an investor in box media which owns polygon
so if we want to be nice and make -- avail yourself >> it's in my contract i understand >> okay. >> when we return, stocks on the move ahead of the opening bell and then a "squawk box" exclusive. alibaba president michael evans will join us we will talk about the company's stock success and the opportunity for growth among e-commerce players quk x"ilbeig bk. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average?
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>> >> welcome back to "squawk box." uber's board voting to adopt all recommendations from a report from former attorney general eric holder stemming from allegations of sexual harassment at the company the board also reportedly considering a leave of absence for ceo travis kalanick. deidre joins us with more this morning. >> good morning, guys. this could be the biggest shake-up ever seen at uber the board met yesterday for hours to discuss that holder-led investigation, and it unanimously voted to adopt all recommendations and furthermore will be releasing thome employees tomorrow now one result could be a three-month leave of absence for ceo travis kalanick, and his right hand man and chief dealmaker at uber may resign as soon as this morning now if kalanick is out, the big question is, who would step in remember, guys, the company doesn't have much of a bench to choose from. after the stream of high profile departures over the last few months coo, cfo, general counsel, just
some of the empty positions at the top of uber's work chart at the moment now, leadership is an even bigger question if emile michael goes, as well. he has been critical to the company and helped to bring in some major funding but he's also been attached to some of uber's biggest controversies like the karaoke bar in seoul and the alleged sharing of medical records of a rape victim in india he would mark the biggest departure yet but uber has been making some very high profile additions. earlier this morning "the wall street journal" reporting that the company will add martello to the board and that would be the third big female hire in just a week >> deirdre, think you very much. when we come back we have more on the news of the morning general electric naming a new chairman and ceo we have the details after the break. plus, michael evans of alibaba and the company's stock performance and the future of e-commerce stick around we'll be right back
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the agenda, embattled ceo travis kalanick's future at the company. alibaba makes its pitch to the u.s. but first, a stop on "squawk box. an exclusive interview with the president of the world's largest e-commerce site as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. good morning and welcome back to "squawk box" here on cnbc live from the nasdaq marketsite in times square i'm joe kernen along with becky quick and andrew ross sorkin futures right now, the one we're watching, most closely, nasdaq now down 58 after a pretty big loss on friday a drubbing, 2.5% or so >> mark mahaney was here earlier and said the pullback he this is
an opportunity to buy. >> i'm thinking -- i don't think he said that is that what you took? i thought he -- he said -- and he said this is not much of a pullback yet >> no but -- >> eventually. >> but on some stocks. on some stocks like an amazon he said there hasn't been a cheaper interest point in ten years. >> that's true >> then we were talking about -- >> stocks individually >> yeah because he sort of said this is just the girng of what -- i don't know if you're rushing by the entire nasdaq at this point >> you can't look at it even as an entire class. facebook and amazon -- >> a heck of a run >> good points for both of them. >> scary quick question. >> he also said look the run is not so dramatic if you look over the last several years that they underperformed before that heading into it. it's not as much of a bubble as some people are making it look like >> all right, andrew this is you. >> more breaking news this morning. we talked about it earlier, we broke it right here on the air jeff immelt stepping down as ceo of general electric. he's going to remain chairman of the company through december john flannery of ge health care will replace him as ceo and
chairman current cfo jeff bornstein has been promoted to jies vice chair. we reached out to jack welch for a comment. he tells us, quote, jeff brought his best every day for 16 years. i wish him the very best in the many good years he has ahead and this is big news in corporate america this morning lots of questions now, of course, about what john flannery will do with the company whether he'll decide to ultimately break it up, the stock obviously up this morning, and of course the other big question is how this all happened what kind of pressure was on the board of ge. obviously peltz was there with trian and working behind the science on this, as well >> it's very interesting, in terms of what flannery made do, we did speak with an analyst who talked about some of the things that he might do like spinning off the health care division. >> right >> john flannery has been running and running very well. that's been speculated about quite a bit the idea that this is not necessarily something that has a lot in common or a
lot of synergy with some of the other areas, so maybe that would be an ipo or something that would be spun off. he is going to be doing -- look at the portfolio and so, we very likely will hear of something as soon as that -- >> what do they -- the company made -- you got to make it clear that breakups should not be part of this session at this point. i think -- breakups shouldn't be part of the discussion over the next few months. john will perform a focused review on all aspects of the company. continue to take actions that deliver value to ge shareholders his focus will be on execution and accountability both internally and externally short-term and long-term why would they want to shoot that down? >> why would you want to push back on that >> yes >> at this point >> on breakups -- >> why -- >> doesn't even talk about breakups we did talk about it a lot and then that came -- >> well that's the type of thing that moved the stock, too, if you're looking for -- >> wait a minute, broke up all kinds of stuff over the last ten years and it didn't move the
stock anywhere but sideways. you know, immelt just bought some stock like a month or two ago. remember again >> also change the comp plan back in march which was supposed to -- >> -- confidence that at about 28 he was buying the stock that it had come down for some reason so he put in another, bought another couple hundred thousand shares, i don't remember the exact number but we reported it, the ceo is buying stock, you know indicates -- >> thought that he was stepping down he wouldn't buy the stock >> no, i'm just saying -- >> if he was very smart he would have bought the stock -- >> tapped in to buy -- >> basically saying that they tried everything to try to get that thing moving, and never obviously never succeeded. >> fair enough >> yeah. >> all right let's tell you what else is happening at this hour puerto rico voting to become the 51st u.s. state. but experts say it is highly unlikely that the republican controlled u.s. congress would authorize it the vote was spearheaded by puerto rico's governor as he tries to save the island's economy which carries more than
73 billion dollars in debt only 23% of all eligible voters on the island took part in yesterday's elections. although 97% of them voted to make that statement happen low cost grocery store chain aldi is bulking up its presence in the u.s the german company says it will invest $3.4 billion to expand its store base to 2500 over the next five years. this could put pressure on other grossers likewalmart and kroger aldi already operating 1600 stores in the united states. and lyft has a new passenger. jaguar land rover. the automaker investing $25 million in lyft as part of its latest round of fund rising. jaguar land rover will provide a fleet of vehicles to lyft drivers and the companies will work together on self-driving cars >> let's talk alibaba. the world's largest e-commerce site taking the show on the road trying to connect u.s. small business owners with the growing chinese consumer joining news a cnbc exclusive michael evans, president of
alibaba. we're thrilled to have him here this morning >> good morning. >> we have a lot to talk about, both what you're doing here in the u.s. and how the stock just popped about a week ago on this new forecast which had people literally in the audience saying oh, wow, i don't know if you were there physically to see it. >> i was there physically to see it >> it was supposedly, i wish i was there to see it. he announced basically a new forecast up 10% or 10% from where it was going to be, right? and i heard there were gasps in the audience >> it wasn't a forecast. maggie wood the cfo gave revenue guidance at investor today investor day took place last thursday and friday two-day event called investor day. the new revenue guidance was 45% to 49% so it's not a forecast it's just guidance but, that was a full ten points higher than the average that the analysts forecast. so there were 350, 400 people in the audience, and there was a
noticeable gasp of, wow. and then some clapping and that clearly caught people by surprise. that was manifested later in the day when the stock started to trade. it obviously had a big up day on friday, we'll see how it goes today. >> before we get to what's going on in the u.s., which is really quite exciting to tell everybody about what's going to be happening later this year, tell us, though, what happened? meaning what happened in the business in the past month where the guidance could change so drastically? >> well, it's not what happened in the business over the last month. it's been what's been happening in the business over the last couple of years. this was alibaba's second investor today first one was a year ago and it's becoming very apparent to investors as they start to learn about everything that alibaba does that it is actually quite different than amazon, and facebook, and google it's probably a bit of all of those, and then some other things which are very specific to the company so i think after a day and a half of presentations by different senior management leaders, the three big takeaways
for most people were number one, the size of the china retail market, call it 4.8 trillion, almost the same size as the u.s., and the $500 million consumers on our platform. is a huge tailwind for the company in terms of its growth prospects. and i think people, you know, they need to be reminded of this it's not that the u.s. market, it's not the european market, this is principally driven by the china market today by the global markets in the future but the size of that retail market is something that continues to grow in an environment where people thought that china was slowing down dramatically >> even if china's slowing down it's still growing and that means that your platform will still grow to the point where you're going to be -- have axe to a larger retail environment in the united states in the next five years, right? >> look, in the next couple of years. just the 2020 we think the market will move in china from a $4.8 trillion to about $6.2 trillion
now that's not our estimate. that's third party research consultants who are looking at the growth in that market. other aspectsof the china market will slow down investment will slow down. enterprises will slow down but consume shun will continue to grow. they have $4 trillion of deposits so most of this consumption is nonleveraged it's not debt-fuelled consumption. it's drawdowns so that's the first issue. the second issue and this is really a product from the presentations that our management team made is that people are starting to understand the value of data these consumers produce an enormous amount of data. as do the millions of merchants on our platform and the combination of artificial intelligence and machine learning is empowering merchants to do more with those consumers, and very importantly personalizing consumption in a way that we can show things to consumers that they wouldn't have naturally looked at
how else does a consumer find what they want on a platform that has -- >> which amazon is very good at showing me things i never realized >> this is the value of big data and machine learning >> michael i want to talk about what you're doing here in the united states, because it's so exciting you're going to be doing it next month in the u.s., something that -- >> next week >> next week is it already next week? >> june 20th, 21st >> we are in june. i'm already thinking i'm in may so i apologize so this is coming up next week my apologies you know, this has been telegraphed to some degree by jack in an op-ed that he wrote back in 2015 in "the wall street journal" about what you wanted to do in the u.s., but then came to the fore to a large degree after he had a meeting with president donald trump earlier this -- or wouldn't have been actually -- late last year >> president-elect january 9th. >> january 9th so tell us what you're going to be doing >> well, we're going to be hosting a small business conference out in detroit, june 20th it 21st so next tuesday-wednesday.
>> right >> cnbc will be working with us on this. which we're very excited about >> david faber will be there >> david faber will be there and a whole team of folks to support this we're going to have about 3,000 smes attending which is substantially bigger than we had anticipated. jack will be there we'll have a whole team from alibaba and the purpose of the summit or the conference is to do two things. first of all, explain the china consumer opportunity to smes because most smes, and farmers or agricultural co-ops, they don't really understand. what the china opportunity is and why would they mostly selling in their own communities here in the u.s. the second function of the conference is basically to educate those smes how do you actually get onto a platform so that you can easily sell your products to a chinese consumer now the idea for this originated back in 2015, not in an op-ed but actually in a speech that
jack gave at the economic club of new york. you were actually there. and he talked there about our u.s. strategy, which is not to come and start selling products to american retail consumers, but to actually take retailers, and brands, and smes, put them on our platform to allow them to sell their products to the chinese consumer >> how much of what you sell on the platform right now is coming from american businesses >> we have thousands of american brands, and retailers, on our platform >> but is it 10% >> it's billions of dollars. we don't disclose those numbers. but it's billions of dollars of product every year we also have tens of thousands of small businesses that today u.s. small businesses that today are selling their products to chinese consumers. so this is a continuation of what jack talked about in 2015 yes, jack and i went to see president-elect trump at the time on january 9th. he said what are you guys doing? what is alibaba doing in the
united states? we said this is our strategy and our mission is to connect a million small businesses in the united states to chinese consumers. >> so have you been relieved that the rhetoric surrounding china from the white house has stepped down considerably? >> i think everybody's relieved. when the two largest economies in the world are not getting along, that's not good for us, it's not good for the u.s., it's not good for china it's not good for anybody. i think that things have progressed in a way, i think the xi/trump visit at mar-a-lago went very well 245i clearly spent some good time with each other and got to know each other both personally and to start to talk about some of the policy issues and i think that other things have probably eclipsed the china-u.s. relationship at the current time but we're hopeful that things will be constructive >> what is the perception of what's going on in our country and specifically what's happening in washington these days in china? >> you know, i think that you'd have to ask somebody in china that question. but i do think that there are a lot of other things going on in
china, and the rest of the world, that the chinese are directly involved in so you will have seen the conference, tense of thousands of people attended that. china is continuing to push to internationalize and to be more visible on the international stage. we're following that path in our globalization effort so i think that, you know, the relationship between china and the u.s. will continue to develop, and while things pro-occupy the u.s. in the short-term, i'm sure in the long-term they'll work well together >> you know, just a point on what you were talking about on taking flings small businesses here and selling it overseas how does it work just from the logistics perspective? if you're a farmer how do you get things, you know, before they die on the vine, how do you get them to china? how does the shipments work back and forth? >> becky, it's a great question. in isolation it's very, very difficult. but, at scale, and through aggregation, it's actually achievable >> like a farmer's co-op
>> washington state apples is a great example. we sold a million of them at singles day last year. we've also taken cherries from the pacific northwest and sold those to china i mean these are perishable items that spoil very quickly so if you don't have cold chain logistics it's very difficult to do live lobsters from alaska. these are things that people years ago thought how could that ever happen? how could you get a lobster to china in a quick enough time that it could still be alive answer is it's happening and the chinese have a huge demand for safe, reliable, high quality food not just seafood but also vegetables, fruit, et cetera >> what kind of investment does it take on your part to do this here in the u.s. meaning how many people are you going to have focused on this effort >> it's a very substantial effort because small businesses tens to be in ones and twos all over the place. >> right and how much hand holding is required i would imagine potentially more than sometimes working with a big multinational.
>> they don't have the resources. the multinational large brands have having said that, technology is a huge part of the solution. part in terms of connecting them to china, and the solutions for logistics, becky to your question, is absolutely critical familiarizing them with the process of actually trading, selling their products to another country, which involves currency and logistics, and payments and all these other things those are the areas that we have to help them and we're committed to doing >> michael we asked you already about the potential slowdown in china and obviously the consumer market is different than other potential slowdowns here but the other issue that people bring up is regulation. if there is a crackdown in regulation, if things change, how big of an issue is that for you? how do you -- >> regulation is always an issue in china regulation is always an issue everywhere in the world. i think if you look at our core strategy in addition to globalization, one of the things that we're doing is we're very focused on the rural areas of china. so we think of that as inclusive
and sustainable development of that domestic market as long as we continue to provide those types of services, and build our business within china, to serve consumers and merchants, the rural areas, and the urban areas, we think regulation is more likely to be supportive >> is there any branding piece consumer piece that you think has to happen here in the united states meaning focusing either on consumer in some way, potentially financially? i'm thinking of payments, for example? long-term? >> possibly. but i think -- as long as our core strategy is really to think about the retailers and the brands, and the small businesses taking their prauoducts to the chinese consumer we're not as worried about branding ourselves in the u.s. market we don't intend to be a competitor to the ebays and the amazon we don't intend to set up large operations here to participate in the domestic market >> and is that because you don't think there's as big a business opportunity? you've got to focus on the business opportunity in china?
is that because you think there are politics that might make that complicated >> well, worry about the politics we're conscious of the politics, but we're much more concerned about where are the biggest growth opportunities for us? and the biggest growth opportunities are in the largest population markets in the world. >> right >> the biggest product opportunities and the best merchants in the world are sitting in the developed markets. >> what about canada are you from canada? >> i am from canada. >> no kidding. and i say that, that's a good place to go. you don't have anything there. don't forget your home country >> we never forget our home country. canada has obviously a smaller number of small businesses, they have great brands and lots of fresh products >> where are you from? >> i'm from toronto. >> okay. >> mike evans, thank you for being here wish you lots of luck next week. here i am thinking we're in may. we're already in june. time is flying when you're having fun, write? >> it's the -- >> the 12th of june i'm still thinking we're in may.
anyway the conference is next week, it's in detroit. it's going to be awesome mike evans is going to be there, jack ma is going to be there >> the weather has felt very much like may all the way up to -- >> yesterday -- >> feel like it's april or march. >> okay. >> appreciate it >> thank you >> still ahead on "squawk box," tech gets slammed. apple among the names under pressure the iphone maker's cofounder steve woz knack will join us at 8:30 a.m. eastern time plus the road ahead for uber. changes could be coming, including a big shake-up all the way to the top we're going to talk about what's next for travis kalanick with ed lee and then later more on today's top corporate story. the shake-up at gaernl electric. jeff immelt stepping down. stay tuned you're watching "squawk box" on cnbc
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target to 160 to 150, and mizuho just points out stocks done great already because enthusiasm though at this point over the new iphone this fall is fully in the stock. sanofi and regeneron said their cholesterol drug had both diabetes and high cholesterol. the data was presented at the annual meeting of the american diabetes association and teeva pharmaceuticals looks to refresh the board following a series of acquisitions and delayed launches on its drug for multiple sclerosis is facing some generic competition >> when we come back we'll be talking to apple cofounder steve wozniak about the state of the technology industry and why he says tesla will be behind the next moon shot not apple coming up at 8:30.
tomorrow on "squawk box" the conversation you won't want to miss billionaire investor ron baron will be our guest at 7:00 a.m. eastern time. you are watching "squawk box" right here on cnbc and the wolf huffed and puffed... like you do sometimes, grandpa? well, when you have copd, it can be hard to breathe. it can be hard to get air out, which can make it hard to get air in. so i talked to my doctor. she said... symbicort could help you breathe better, starting within 5 minutes.
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spot at the weekend box office for the second straight weekend. the warner brothers movie brought in $57 million in north american theaters. lots of people talking about this film. my wife was going to go see it immediately and lots of -- >> of all of this superhero films, this one had the second least drop-off from week one to week two which is why some people are saying it's a phenomenon already >> pretty remarkable thing it was a disappointing open weekend for "the mummy" universal's reboot of the mummy franchise starg tom cruise but in $32 million although it was the top earner internationally bringing in $142 million including $52 million just in china alone. >> that's how you have to gate these things, i guess. >> internationally >> coming up jeff immelt stepping down at ge. we'll talk to an analyst about the shake-up right after the break. plus, innovators and investors gathering at this year's emerge conference in miami. apple co-founder steve wozniak is there he's going to join us live
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good morning welcome back to "squawk box" right here on nbc. we're live at the nasdaq marketsite and today's top story a ceo shake-up at general electric and it's a big one. jeff immelt is going to be stepping down after more than 15 years at the helm of that company. he's going to remain chairman of the company, that's going to take place through december. john flannery of ge health care an $18 billion unit will replace immelt as ceo. current cfo jeff bornstein has been promoted to vice chair and lots of people talking about this this morning. joseph >> we reached out to former general electric boss jack welch for a comment on the shake-up. he tells us in his words jeff brought his best every day for 16 years i wish him the very best in the many good years that he has ahead. joining us now on the "squawk" news line brian langenberg of langenberg and company how long you followed general electric brian
>> since jeff became the new ceo around 2001. >> all the way back to 2001. do you like the prospects for the company with this new gentleman? and does it have the right mix of assets now for the future to succeed? >> well, in the bigger scheme of things i was asked this question a few weeks ago. this is not going to be dramatic change john flannery is a career ge executive, comes from a finance deal background. this is really handing over the reins to somebody that's part of the existing strategy. there's no great change here in terms of the assets, i think they've got good assets to work with the focus will need to be and continue to need to be executing, you know, to get the growth out of the transaction and to frankly integrate all the acquisitions they've done over the years. >> there've been people that just in passing have told me that because they've got all these varied and sundry assets, whenever one -- one group comes
back there's always another one that seems to be entering in to a slowdown and it's been hard to, you know, they're never clicking on all cylinders and that's one of the problems with the performance in the stock and it's tough to have businesses that have completely different you know reasons for either going up or going down, it's tough to get them all going at the same time is that a fair criticism >> that's what people always like to say about diversified companies. it hasn't seemed to have hurt honeywell, or a whole host of other very well run organizations. has nothing to do with it. in fact, this is the most focused portfolio general electric has had in decades. when you look at energy and oil and gas broadly that's about close to two-thirds of the earnings power of the company. you throw in that, and aircraft engines, it's actually pretty focused company. >> what do you attribute the relative performance of general
electric versus what you mentioned, honeywell and united technology, was it the valuation of the stock when it was handed over to jeff immelt? or was it execution, or what was it >> well first of all,jeff was handed the keys to the car when the stock was at $60 >> yep >> and everything was working. and you don't fault him for that i would submit to you that if we were to make it a more fair benchmark and let's say then -- let's say earnings back then on normalized basis were $1.50 and let's say it should have been a $30, $35 stock if youlook over 15 years that' where you are. so you really have to grade him on that. >> he's going to finish this, so it's at $35. why doesn't it go up over 15 years, even if you take it at 35, why is it still below where it was it's the worst performing dow component out of all since gshs why? why? brian? >> simple. when you overpay for things at the peak of their cycle, then you don't fully integrate them,
and you keep changing direction, it hurts you and that's where they are. >> brian what i was going to ask you, apples to apples, since we're showing honeywell and united tech, i don't know if this is going to be fair or not to jeff immelt, synchrony financial is not included in this this was strib use the fardly to ge shareholders. if you were to look at all of the value created during this period, if you were to add in the dividends, i don't know if there's other units where there was a distribution or a piece where people -- >> good question good question. >> what would it look like on an apples to apples basis >> synchrony, let's call it $2 per general electric share so it's incrementally positive but in the big scheme of things does not change the overall picture also you did get some proceeds back which have been used to shrink the count >> yeah, but you know, it is what it is >> -- other businesseslike tha where shareholders received a piece of the action?
>> you mean other companies -- >> or general electric >> no. spun off like that >> no. >> okay, no. >> i was trying to be generous there. >> that's okay >> i thought maybe there was something out there that i'm missing. >> still 29. so you talk about overpaying for things and maybe not selling things for what they're worth either, selling it at the wrong point in the cycle >> they've tended to be good at selling assets >> i heard nbc was someone messaged me today that it was sold for less than net cash at nbc. >> i'd have to go back and check my notes the nbc deal was kind of complex. there are different ways to count those apples but in the broader scheme of things, it's more been about overpaying for european real estate peak of cycle overpaying for oil and gas assets like 2.5, 3 times revenue. i'm talking about prior to the
baker hughes deal. range of other things. all of a sudden not integrating. >> right loading up on credits before the financial crisis and then selling it at the low, too, someone wrote sent in someone who knows what they're talking about. >> well i would submit to you that actually financial services worked well from the time jack welch swapped in to that from nuclear power. up until the time it didn't. i mean they did a good job for a long time. and you know frankly when the financial crisis hit, it hit every financial. >> you were subprime in the uk, right? bought in to getting into that business in like 2006. it was almost a month before it hit the fan. that there was some acquisitions in subprime over in the uk >> yep >> right >> that is true. that is true and you know, it's not about any one deal but in the collective sense. now let's talk about going forward, okay? i had a hold on this stock for over two years today you have a little bit of a pop we think it's at a 28 to 23
dollar trading range when you talk about the numbers for this year, the guidance that they have out there, you need some pretty brave assumptions to hit the guidance we're looking at earnings up 30% in the second half of the year i would submit to you that it's going to take a lot to get there. so the stock doesn't hurt you here you get a dividend some day this will be a $40 stock. i just can't tell you what year. and no reason to think it's this year and then in the bigger scheme of things you know, john flannery's grown up inside the company, obviously he's done some things well but he's not really been a manufacturing sort, particularly at a time when i think companies that really take a holistic integrated approach to the businesses, and really think longer-term are going to do well and going to do better operationally. and strategically. so we've got questions here. it's going to be awhile to see how this plays out right now i still have it as a hold >> okay.
all right thanks, we'll talk to you later. thank you. >> all the best. >> leaders in technology, media and government are gathering in miami for the emerge america's summit conference. it connects innovators and our next guest falls into the innovator category we'd like to welcome apple co-founder steve wozniak who is the chief scientist at primary data thank you so much for being with us today >> glad to be here >> you're somebody who knows more than a thing or two about innovation and i wanted to get your take on some of these innovative companies that we talk about all the time the fang stocks which are shorthand not just for facebook, amazon, netflix, google, all of these companies that we think wow they're doing amazing things as somebody who knows about innovation, what do you think when you look at all these companies? >> i judge companies by products and how much i like them and how much they enhance my life and give me better life so all the
big companies, of course, you're sort of forced to acknowledge them and be aware of them. i'm not one of these people that tries to follow them every day to day to day. i never used apple's stock app once just for mental reasons i just don't want to go that way and have stress and worries in my life, just happiness. as far as all the companies you mentioned, i could probably go down the list and every one of them is doing things that are exciting me and they're all innovative and innovating. and please don't fall for misleading press stuff or headlines that say apple's not innovative the same day as that was reported by bloomberg news, i was on stage in front of thousands of people telling them what phony innovation is and what real innovation changes are like and apple all the positive examples so i don't know, you know, some of my friends, and my wife get very upset at misleading headlines. don't fall for it. let's talk about real innovation versus phony innovation. and just overall where do you
think we are in an innovative cycle. is there more innovation like we've been led to believe or not? >> yes oh, my gosh, there's huge amounts of innovation especially with internet of things. a lot of young people can come in and ask for the various smartphones, open up the world to a lot of younger people to kind of have a stab and get into the business world and find their way and be entrepreneurs as far as, you know, you can make a new version of something. make it a little fancier screen and make it do some funny tricks and i love to show these off and sometimes they're useful but real innovation is the things that change your life and how you lead your life and i look at things like, you know, touch i.d. that when apple put it on a phone everyone had to follow. and a simple tap to pay system with your phone or your watch, and apple led the way, and everybody else had to make their systems easy instead of hard so, i look at the things that make life easy also, looking into the future. and seeing the whole big picture, i look at tesla, and you know, apple's stuff is more
secret they might be doing equivalent things but tesla has electric cars oh, i'm hoping in the future we get rid of gas cars and just have electric cars just for cleanliness thinking, you know but also, the batteries are so important. and the factory to make the battery, the giga factory. and then we've got the power walls, with batteries to back up electricity. daytime and solar cells, and boring and hyperloops. this is all off in the future. very few companies really talk about that far in the future they're more focused on the mainstream of today. and there are a lot of people that are behind the future direction that elon musk is taking tesla in. >> very few companies are afforded the opportunity that someone like an elon musk or jeff bezos have been given with their shareholders to be a public company and saying we're looking at things way down the road that's part of the problem that some people have cited with being a public company these days but what do you think it takes to be able >> you get away with it when you're new
you get away with it when you're a new company. even for some while while you're a public new company you can look at google or alphabet as it's called today. you can look at them and say the same thing they have all of these different things that they've been investing in just last week we were talking about a couple of different things that they sold including some of the robotic arms maybe that's a nod towards being a public company that's not going to be able to be flooded innovative and testing quite as many things as they've been in the past what do you think? >> i think of course large companies, you know, are they actually creating the real, you know, software and products and all that or are they just pretty much buying the best that's out there and adapting it and it's hard to tell sometimes you go down and do everything from the ground up that's pretty rare >> steve when you started talking about true innovation and you mentioned some of apple's innovations like the touch i.d., things like that a lot of people look at the company and say for the next huge innovation that's got to be some sort of a device, some sort
of a hardware piece, that doesn't sound necessarily like what you're thinking it can be something that's a hardware or a hardware device or something that's just a change in the software? >> yeah, sure. the same day thatbloomburg sor of reported apple is not innovative, i was asked what are your favorite technology pieces of technology now, and i came up with two one was the -- low cost version of an all-electric lifestyle that can go anywhere and my other one was the apple watch. it just simple, so much a convenience in my life >> is that an apple watch that we just saw on your wrist? >> what? >> is that an apple watch? >> apple watch >> there it is right there on your wrist >> yeah. i like the avalon band you can slide it to any level so it's analog -- no. >> steve, in terms of your formula for happiness, you do have a very specific formula, don't you?
>> well, smiles minus frowns was my original formula when i was about 20 years old, do things that make you happy, a lot of entertainment, and create jokes. create humor everywhere you go. friends are created jokes for example and that makes you happy and avoid the frowns is something i've been very good at, which is don't be bothered when things don't go your way. just think out how to be constructive what can i do? my car got scratched or dented be constructive, it's going to be fixed don't waste your time blaming people and being all upset because those feelings destroy your psychology. >> great steve, it's been a pleasure speaking with you today. we would love to have you join us in new york the next time you're here. >> let's see, like tomorrow? >> any day any day you're here we'd love to have you >> i'm in new york tomorrow. but okay, thanks >> oh. great. we'll call you >> we'll see you tomorrow. >> we'll call you. thank you very much, steve wozniak. by the way, folks. don't miss full coverage of a merge on cnbc today.
this week. joining us right now is ed lee, recodes amanaging editor and also a cnbc contributor. set us straight. is this something that the board is thinking of making him take a three month leave or is this something he's wanting to do because of family issues >> it's definitely the board it's the board coupled with the holder report which is looking at not just sexual harassment allegations but the entire workplace culture. you know that travis is really, he's the one who's created that culture in a lot of ways and i think having him step aside even for a few months, i think the idea is that that might reset the company a little bit that's not a long-term solution by any means they have to work deeper to figure out how to really change the management and you know the direction of the company >> is it truly a three month leave where he would step right back in and pick up operations >> that's the question mark, right? because he along with a few of the other founders effectively control the company. so, if he decides after even a week or two or three months that you know what? i'm going to come back and be back in charge, it is up to him. the board can't entirely push
him aside. >> we just showed a couple of board members. apparently there are some factions that have emerged bill gurley on one side perhaps with david bonderman and then arianna huffington and garrett camp what's been a long time friend of travis' and cofounder of the company on the other >> that's the issue. garrett camp who is chairman and cofounder along with travis, the two of them if they align themselves, they effectively control everything now -- >> how much do they own between those two? >> it's not entirely clear what exactly the proportions are but together they would have controlled all of those. or effectively control the votes. and so therefore, it comes down to a relationship between travis and garrett camp as a chairman if that fractures and we're hearing through sources that it is -- it's being pressured anyway, that relationship, that could push travis out. or at least push him aside long enough that they could change management, change the leadership >> what does that look like? he leaves temporarily. >> right >> they install a temporary ceo?
a coo? a president? >> thetemporary ceo i think th most likely candidate if we're going to pick a name is going to be garrett camp who is the cofounder who is a current chairman that's not a long-term solution either a lot of these guys, they're not -- they're kind of amateur managers right? it's not stockedwith a whole lot of -- you don't have a bunch of jack welches there running around that could sort of step into the role. >> people could look at the facebook model and say you brought in sheryl sandberg >> and they are not close to finding her right now. >> is the idea this makes it easier to do that because there are people who would otherwise who looked at this job who don't want it because they are -- they're worried about the culture itself >> anyone who would want this job the rhesitation from source is you'd still be working under travis and if he's basically controlling everything you can't really effect change when zuckerberg brought sheryl sandberg in she had a lot of free rein to manage things -- >> although zuckerberg ultimately is the one who can decide who comes and goes. >> she really has a chairing relationship with him.
>> would have to be somebody that travis would want to work with, somebody that garrett would want to work with? >> exactly the thing is even if you push her off to the side for a few months there's no one in the current ranks who could really step into the role, who has the experience, who has the leadership capabilities to do that you have to find someone from m outside to do that. >> thank you for being here. great to see you. >> any time. when we come back, wll talk to jim cramer we'll get his take on the big story, jeffrey immelt stepping down experience the lexus rx with advanced safety standard. experience amazing.
let's get down to the new york stock exchange, jim cramer joins us now looking at the future, jim, ge is getting a point today be up about a dollar at this point, do you buy it for the long term in your view, do you think? >> yes, i think so i think that there are these businesses we're at a trough in terms of first quarter cash flow i know that the june 1, when jeff spoke at june 1 he did walk away from the $2 number next year the $2 number is vital to get the stock to go higher but fresh blood, take a look at it flannery is supposed to be a very, very tough guy doesn't appear on the surface but i think he's going to be evaluating everything. breakup off the table, but the analysis about how to execute
better, look, i think that what's going to happen is you look at the businesses you look at baker hughes which is about to close at the end of the month. make some new judgments about what the company looks like. i think that the company itself is valuable. >> jim, you said the breakup off the table? >> off the table. >> i know ge is saying it. but if you're doing a portfolio review, isn't it hard -- >> that's different. >> hard to walk away from that and do nothing >> some of the parts breakup would make it so you can't maintain the dividend. i think the dividend is sacrosaint right now i know there was talk -- i'm looking at the deutsche bank, they were very against it. deutsche bank has been adamant that maybe they're setting up for a cut of the dividend. i just think that's off the table too. i don't think this situation is nearly as dire do i think the situation is great, no. do i think they missed certain moves that united technology and particularly honeywell did, yes. can that change, yes.
>> what about a ge with someone like a baker hughes business >> i think that's reasonable baker hughes, fortunately they bought oil at the top of the cycle. but they did not cut and run at the bottom of the cycle. a lot of the oil -- if you lock at halle burton, you see an uptick there isn't any international deep water drilling yet but that's okay for ge they have a lot of exposure but it isn't going to determine how that division does look, i think it's a good time to buy i think the dividend is -- they're committed to the dividend i think you have the cash flow to make the dividend that's what they say you have other people like deutsche bank saying that's pretty fanciful and they're setting up for a dividend cut. ge has denied over and over again i. to go with what ge says on the dividend. i can't say you know what they're dissembling up there i think it's an inexpensive stock with a good dividend, but it needed a refresh. i like bornstein as the cfo.
he's done a good job jeff has been there for a long time i think it will be good. he is an insider, but he came from finance he did do a good job at health care and my friends who know him say he is a very tough guy maybe -- not an ambassador internal guy maybe that's what's needed right now. >> all right jim, see you in a few minutes. tomorrow on "squawk box" don't misour interview with hud secreta secretary ben carson "squawk box" will be right back. at fidelity, trades are now just $4.95.
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the biggest night in broadway lighting up the great white way with stars and smiles. kevin spacey hosted the tony awards best play went to "oslo. based on the true story of events leading up to the oslo peace accord the show has won best play usually get about 22% boosts in ticket sales following the tonys. best musical went to "dear evan hanson" about a teenage boy struggling to fit in the musical is scheduled to go on tour next year and joseph went to it first. >> yeah. >> it was amazing. transcendent. >> i followed you there.
>> i can't believe - >> most remarkable things. it moves you in a way -- >> it does it's transcendent. it's like art. people say things about art. really is it about art and transcendent but it is. >> i cried. >> you cried at finding dory. >> i did that as well. >> not quite transcendent. >> join us tomorrow. "squawk on the street" begins right now. ♪ is . good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber will join us in a moment we look at the reaction to jeff immelt leaving ge.