tv Squawk on the Street CNBC May 1, 2019 9:00am-11:00am EDT
going to do. they have a 10-year note at 2.5 and the job report do we really believe -- i don't know what to do with the adp jobs, right? >> the guys put it together saying it is a contrary indicator. >> we are so wrong we'll see all tomorrow, make sure you join us tomorrow, "squawk on the street" begins right now. good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with jim cramer and david faber is back at the stock exchange. fed decision is at 2:00. a lot of markets around the world is close for midday. our road map begins with the apple rally, iphone sales falter but services grown surprises tim cook remains optimistic on
china. >> stocks look to rally this morning on the first trading day of may inve >> facebook's privacy shift, facebook is rolling out its biggest facelift in five years a boost in wearables and up against guidance and the $75 billion buy back iphone sales continue to slump now only 53% of apple's revenue and down from two-thirds of its peak jim, you talked to jim cook last night? >> yes, better and better each month or week, it continues. china is looking good. i get to talk to tim alone it is a lot of fun we were puzzling over the notion of what a subscriber apple is worth now. i am trying to get these guys to
understand the narrative to get 20 times earnings, you have 390 million subscribers. how many subscription they have and you can take a look, they have 500 millions. it is a much better price. do you remember when everybody was angry that they stop talking about the number of assets if you are going to have a service screen that trumps your hand set numbers, that was trumped. we paid $10 a month about $6 billion for apple >> given the increase of service revenues and other things and wearables. >> you know what's interesting, the growth in the watch is huge. that's tim's innovation. right when they reported of the great numbers, people calling for tim cook's head. i didn't use that term last
night oh but i am using that term here. ill advised. some optimal thinking. >> so the katie huberty thesis playing out. at 20 times gives you what >> 279 >> katie is think is a brilliant person she's looking at the company, still. she's not going far enough you have to use the 2020 number where you have 500 million subs and you have to take a look what's the cause of acquisition of the subs. you have 99% customer satisfaction, you basically have a mode where you can run anything through it. look at the number for the watch. wipe up the watch industry except for movado. this stuff is way too cheap.
>> bernstein if china is not cold anymore, it is not exactly hot >> price cutting, acquisition is so low it is okay you can price cut. what's the lifetime value of someone who keeps paying or apple for all the different features to be added >> obviously, all your protection that you buy. these are things -- what tony is not looking at is the razor. tony is very high value. he's still a tech analyst. it is starting to make me thi think -- >> jim wants apple to be covered by staple, consumer product animal lils analysts >> you look at clorox, it is really disappointing
tim cook made it and sells it to 16 times earnings. you made that point many times, yes. >> you come back to clorox often. >> i say own it and don't trade it i believe that the stream of revenues that tim cook which by the way -- it is a lot better than wipes >> you talked about when you believe it would be multiple expansion of industry. it serve as higher multiple. >> it has not happened >> it used to be -- 9 to 16? >> yes some of the shorts arguing that 5g phone is not coming next
week >> that's the apple shorts they' they know this company bought at $12 billion with a stock of 1.67 how did the source do? we think 212.08. >> do you hear people say that what's with those people >> i can't speak with what's with a lot of people, jim, i can't. it is a big world and it is a lot of people. >> that's your answer? >> yeah, that's my answer, i am sticking it. >> you know some sort of crisis going on there and people got things wrong and trashing tim
cook and devices -- this is a short -- i am looking for my air pods i hate apple there is like apple all over them and then i don't like apple. they don't like the company or the product or even the stock. the run up this year they think is taking care of all of that, no that's not including a strong day today. >> it is an inexpensive stock. >> you keep on saying that 16, david, that's a multiple -- >> okay, fewer and fewer are you know -- iphone revenues. >> a year ago if we had said profit would be down 10 and revenue is down 5 and iphones would be down at 17, you may
agree we could have a problem. >> it is not an accurate picture. >> that makes all the difference in the world, i can look at my wrist and know the weather >> yesterday i was talking with my wife during the show, honey, i will call you back do you talk in your watch. >> i think the easiest thing, we need milk. what did the kids say? >> i use this -- david, this has changed my life. i got to get back to you >> i don't believe it. turning to hulu quick here subscribers of 3 million since we last heard. that's now over 28 million in the u.s. alone and laying out a slate of two originals including two marvel shows, we'll talk more and more guys about hulu in
a disney framework >> yes, we are particularly they bought back the stakes from at&t that was hulu itself, it was $15 billion. >> i am not sure where things stand in terms of comcast willingness or talks don't haves much to add but until disney fully controls hulu, there are certain contractional rights that comcast may preclude disney more aggressively right now it is a function of how much you are losing and if you are a partner, how much of the losses you are funding but, there is no doubt it is an porn component of their strategy and their international strategy >> how do you gauge that quote >> what do you mean?
>> what kind of numbers do you want this thing to get to? espn has got to 100 million and we start to see more and more how great it was worth and it peaked >> i don't know, part of it is also what is this world going to look like in a couple of years where people are deciding between so many different streaming service and subscription services that they can choose from and what they want to do yesterday i made wittman on it, too. the cats and birds wittman where is they want to charge people $4.99 a month for high quality and ten minutes of their phone where it is like chapter on a book there is another subscription that you want in addition to your netflix and hulu and disney plus and espn plus if you want to go there and your warner, are you going to do that one
>> the apple screen. >> eventually. comcast will be supported. there at least you won't have to pay for it conceivably >> i think you raise the fundamental issues which is that at a certain point, everything is driven out. this is beginning to be a race to the bottom i think where everybody has some sort of offering and no one is bundling all the offering together. >> there has been some talk of disney meeting, a couple of weeks back if you are subscriber -- >> nothing, right? >> nothing offered obviously this is a 50 plus. it is not the marketplace yet. >> one thing for certain, the core 500 channels that we don't watch, we don't go through there is a revolution against channel 38 and 79. >> i finally figured out like a
couple of channels on fios since we changed three years ago >> did you have the small bundle 50 bucks >> definitely. >> i hate the channel lineup there. it still does not make any sense. >> you speak from experience >> i am thinking of going all in on youtube tv. >> it is really good >> well, that's the only thing that's going good. >> back to that one. well, yeah, that was a great quarter. they told me it is a great quarter. >> i would like to hear that again. it sounded scripted. >> i was wishful >> people don't understand the genius olivia >> whoo-hoo. there is as look at alphabet trying to find some legs this morni morning. when we come back, what learn
from mark zuckerberg's keynote yesterday. s&p is having its best start to the year since '87 and the dow since '99. back in a moment i am an independent financial advisor. it's our name on the door. we are accountable to our clients everyday. we have the freedom to build a plan. a porfolio based specifically on their needs. we're fiduciaries, stewards of our clients' money. entrusted to do what's right. it's a mission. a guiding principle our firm lives by. charles schwab is proud to support more independent financial advisors and their clients than anyone else. visit findyourindependentadvisor.com feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow.
facebook is announcing complete new redesign. mark zuckerberg making a joke on privacy that did not land with the audience there >> i know that we don't exactly have the strongest reputation on privacy right now to put it lightly. but i am committed to doing well and starting a new chapter for our product. >> a lot to unpack was that supposed to get a laugh? >> wow jesus, really tone deaf. you know it is still dar darth vader. they still have not gotten their
practice back. lo >> it will take a while. >> one of this things i ngs i ag back, they're killing alphabet amazon is everyon better facebook has been doing quite well ester lauder is doing well >> it did say it was the most effective. >> you know it is interesting as later in the panel when it was talking about privacy and gdpr and obviously the european privacy standard they have a big business in germa germany. he says it has actually helped
their business and not hurt. >> really? >> the fear that everybody would opt out has not occurred and so you do wonder what may change the perception of downside for people who worry about -- the bigger guys know how to do it and the smaller guys don't it does not work to the advantage of what people thought. >> it has not resulted in masses and people actually leaving the platform >> intel made you feel like this whole data center cloud head peaked intel was wrong. this thing is accelerating i continue to think that this wholesale theme of these great companies getting more and more users. it is just the way of life
the way of life has changed so dramatically in terms of what people look at the way people purchase. >> there is lisa su tonight with jim. you are saying it is a habit that we developed quickly and it is hard to break >> walgreens number is up front. the front of the store is owned by these companies if you want the basics, you do not go to the store. it does not work you can go to etsy but you won't go to the store. it is down 3% or 4%. that's extraordinary that's what we are talking about. i made a point of never going to the store anyway >> we'll get cramer's mad dash
charlie victor there are two desk stars for business one is amazon. i have used it constantly. and theother desk star is bernie sanders if they are against you, you are dead cvs goes from being worried a.m.soa.m amazon, last night they reported good there better be sellers in this thing because a lot of people bought it in here. it has been in this purgatory for about three months they got a good yield and aetna is doing better and at the front of the store is doing okay people still hate it because they worry about medicare for all. if you ta i canke a longer term, i don't think it is going to happen because nancy pelosi does
not want it. >> he's still saying it can't happen it is really -- >> he's the man of ccvs. >> they took tobacco out by the way. >> there is some great analysts. i want to warn people again. there are a lot of hedge funds that got in here don't panic, it will subside the worse is over for cvs. it sells at nine times earnings. 8.5 times earnings >> that's where apple sold it. >> how did you guess when i told tim cook >> you got desk star and you told tim cook. >> he was in the call with me. it is time, guys, it is a subscription revenue story >> we got a lot more stocks to watch. we have the opening bell about 5.5 minutes away ayitus
live from the financial capit capital world. opening bell is minutes away adp, 275 beats the 180 estimate, prior was 129, jobs number on friday how does the fed balance that when the president is calling for qe 4 as he did yesterday >> 1% rate, no he's in a tough spot the president is allowed to say whatever he wants but he didn't know we have twitter the president's comment they need to tighten but then again they already tighten and did nine straight times. i had a terrific -- this is
about bar code >> you do this kind of different supply chain things that's so great. you can pay less and less and have fewer people working. the force technology is so in powell's favor here is the new forecast silicon valley is allowing you to light the fire people faster than they can be hired i love david going back to his amaz amazon dot i bet you half of that do not exist anymore. >> they'll say jobs are being added. robotics over the last four years -- >> and most of the buildings in the country majority is warehouse.
when you are bringing in any of these new systems, it means you can fire a lot of people that's not what they say >> in an aging population like we have. >> there is the opening bell s&p 500 for cnbc realtime exchange the big board, bbi, amd at the nasdaq celebrating its 50th anniversary. >> i know dr. su it is incredible that company has stick around for a long time. this is the best it has ever been >> lisa is going to sit down with jim tonight at "mad money," 6:00 p.m. eastern time nxpi, u.s. 1, price target 125 >> it is amazing their quarter
reported,iv reported, i was going to ask you david, is it time for broadcom to come back and buy nxp >> 127.50. that's not tradeable did it trade below e i think it may have. it works its way back. it was a good quarter. >> i think sky works solution will be good, they got 5g. gresi interesting time, the 5g s making a come back >> intel does not control the dialogue it is a tough time to be intel >> i know and you will talk to lisa su tonight
>> i know. one of the things that happens with swan was the cfo. i don't think -- i think they have trouble getting someone being the ceo. swan does not want the job >> not until he was given it, yes. >> there is a crisis in taiwan >> at one point swan says really amazing swan song. he says and we promise right now that we'll no longer hurt our customers. well, there is a high bar. we are not going to hurt our customers any longer okay, that's wow all right, we are not going to give people the norovirus anymore at chipotle. that was a call from hell and amd was called for heaven. we have not talked about a lot this week. mulvaney saying a couple of weeks we'll know one way or another. ft is the story of the white
house given in on cyber theft demands. we got any intel for us? >> we have not heard from peter navarro from china >> lighthizer is the main guy and i still sense that there is a some what different approach from mnuchin on one side and lighthizer on the other in terms of what they want to see they feel embolden by the gdp number and even larry kudlow, indicated perhaps it stiffens the backbone of the u.s. because it is hurting our economy or if it is not enough that would seem to put us in a position where we have to give on some of our demands. the question is political too. >> wilbur ross is on the tape this morning saying white house is pleased with the way tariff dynamic came out remember he came out with the soup can says who's going to
notice >> yeah. >> it is the same thing for months now you know that's positive if you want to deal with it they have to work out these very gritty things, 2025. by the way -- what if it is not military >> that's a big gift >> it is a big gift. >> look, i think that the president wants growth i did think that lighthizer cared more of defense issues or spying issues. >> and how to hold the chinese to whatever commitment they make do you believe the market is discounting the chance that you don't get a china deal on the new york return? >> no. not with boeing you got to go up and despite what we see and c catapul hanging in
>> if president trump walks away with it, we will that would be the thing that repeal the nasdaq. >> sure. >> i don't think it is expected at all which is not -- >> mnuchin constantly quoting things are great >> he had it over there the other day. >> yeah, he's like bill belichick. >> he is? >> jim yesterday talking about the things we wished he heard autoof t out of the call. >> i wish they had been more humble or learn to execute better or learn how to do the enterprise, they clearly have not.
i wish they figure out a way to temper expectations. i wish they knew their number were softer and they had to clean the site twitter did i wish they understood what the hell they are doing. >> it sounds like a hallmark card >> when you wish upon a death star yeah, i am sad to say this that company, they are so arrogant by the way, it is a great quarter. we had a great quarter well, no, currency >> i saw some tweaks to the product. they made some changes and it will all be fine >> never mind. >> i have no more wishes >> never mind. >> what bothers me about that when you go over the conference call, there are two different
worlds, the analysts saying i don't want to be that. and the response is always currency, jelly fish jelly fish -- >> that would have been more pertinent. >> you mentionede ester lauder. clorox is just -- this is like the kirkland brand which i find it to be superior. they're battling against fine housebreaks. where ester lauder and tom ford.
people pay so much for tom ford. >> they did. >> do you think tom ford is henry ford >> i know -- test a designer >> do you know who mac is? that's another brand that sells well >> i do know all that stuff is starting, she's good at the makeup stuff it is makeup, right? >> right >> jim >> i know what i am talking about. >> china and travel. >> that's what he does do you know he has this map. you can see they went to brazil and they brought it back to korea or they went to argentina. he has a flow of makeup that is kind of what norad used lid be .
>> they don't have games anymore. >> still glad they are around. >> i told you cvs. >> i am looking at 29.52 the list of the most recent list of year end target that i have it is going to put you above ups target and above bernstein at 29.50. hsbc, 29.50. people have to revise up we don't want -- >> this whole rally has been built on loss. i am so afraid that people are going to start saying apple and s&p 3,400. and then i keep on thinking about those numbers you said carl, which we are back to 1999 nasdaq if anyone remembers, if you remember 1999 in may, it was like wow, we are now beginning to really get going. we went on too fast.
>> i want this thing to slow down we need to have it slow down this is too fast got to catch our breath. >> um, want to talk a little chevron/occi >> 8% money. >> 8% money is really expensive. it is cash paid dividend of the $10 billion that occidental took in from warren buffett they did it quickly, very few investor can contend with and have few investor going to get 8% of money. it is 9% if they actually paid it in stock. it is a lot. you do have people looking at it and saying man, what's the capital for this company is going to look like when it is said and done. it counts as equity but he's priming other equity holder and getting ahead of them with 800
million. there is a dividend here it goes to people's investors and questions/concerns of how much occidental wants this asset and what they're willing to do to get it. the stock price held up pretty well it has been a week since we heard from occidental there made a huge decision with the ceo vickie hollub is coming to public with it once they do that. once anadarko says okay, this is superior proposal of the ones we currently have from chevron then you will get the four-day clock starting and chevron will have to make a decision to what it wants to do. yesterday i was talking at some length about not a lot of different thoughts that were coming out of this chevron campus indicated the idea of being discipline and gaifr some
senses to the background and previous transaction none of that means that mike wirth won't make a decision today. he has not made a decision >> really? >> really. >> i don't mean to imply yesterday. i know you said it is over i don't think it is over for him. >> well, conceivably what could make his mind changes and it is an asset that he wants to own. chevron have synergy that they have not talked about much >> much better than occi >> and another question is you do have some shareholders reported t-row which owns 2% of
occi as opposed to the offer they are making at this point. we talked about could they avoid a shareholder vote when i talked about the occi bid prior to it having been public what was offered when they lost the first time around, i pointed to anadarko lack of comfort with their ability to get a shareholder vote, what do the buffe buffett's money do for you it puts you in the position if you needed to to avoid the vote. it does seem strange mr. buffett would be in something that negate shareholder's democracy >> you know as people are starting to examine it, time goes by, and chevron wants it, too. occi is not giving it up here and let shareholders grinding through the issues in terms of what the balance sheet looks like and how much leverage they're going to have and
dividends and strategies in the premium when it comes to a lot of their experience have been central based platform and not as much in delaware. >> i love delaware >> and vickie hollub talks about them having, it is about enhancing their recovery >> chevrons wants real shell >> david, you took my breath away i thought this was stunning. >> well, it is not done until chevron is absolutely -- again, a lot of the conversation is price discipline, first year ceo, a lot of things would lead you to believe they do not want or will not compete. it does not mean that decision has been made. >> i know people feel so under managed that it is worth getting antoni into >> a lot of blows. >> not great
>> you look at pioneer, i put the two pioneers -- eog, too well run, can't make anymore money. dimon, the other faang and google is gone >> jim wer, we got to get going. we forgot to mention allergan. >> was that because the stocks have been doing so well? >> it was a joke >> guys, 29.50 just shy of it now is a new all time interday high let's get to bob pisani. >> because of the earnings situation. let's go through them quickly here several companies beaten and talk about cvs, human and mondelez, good numbers overall
collorox add a missed out there revenues is light for them as well they're trading down apple is the big mover and highest level since november i want to concentrate on the buy back situation for apple another buy back program they are the all time buy back monster. since 2013, they reduced their share count, their earnings are 20% better >> that would reduce shares outstanding by another 8%. they take the cake they are the all time buy back monster. ipos coming out there. very interesting this whole program beyond me of a lot of interests and questions about it trading for tomorrow at the nasdaq the protein comes from p's, beats providing the color on it. we'll see what it does
cosmetic surgeries and big interests in that over in china. it is all pricey at the nasdaq tonight for trading tomorrow finally, this is the first day, may 1st of the best six months strategy this is the most successful mechanical device discovered here at the stock trader allman nisan ac almanac. $10,000 invested since 1950 produces $4,000 in returns a loss in that 69-year period. from november 1st to april 20, invested $2 million. those are not typos. it is so amazing people have been studying for years trying to figure out why it happens
tradertalks @cnbc will give you some info. on it the out performance over may to october is notable >> back to you guys. >> bob pisani, adp under our belts this morning, we'll get ism soon let's get to the bond pits >> adp did a lot of things adp and the big report, you know they kind of rhyme but people are getting a bit excited but confused as it is showing us the strength that are reports of bls showing us something new chevron was responsive it flattens the curves a little bit on that number ponder why you can call employment lagging or something, strong jobs and stock market and mixed bag of fundamentals still make many nervous. look at a one week of tens
a different story. maybe the same story and a lot less responses to this morning's number, kind of hunkers down and waiting, at 2.5. all right, here is something interesting, this chart goes from the end of last year to mid march. now, look at that when we add in the rest, up until today it is completely under the first quarter basically up to mid march. that's very interesting technically and it is something you want to pay attention to especially should we retest the mid 250s, let's look at the two-week chart at the dollar index. it is treading water here and many more markets coming on later in the week, many things you will see that strength resurface in the dollar index. carl, jim, back to you >> thank you very much tomorrow do not miss an exclusive with michael corbat. he's going to join us on "squawk on the street. we are watching the list of the most valuable companies in the world.
one of the stories of the mo morning is whether apple can get above the trillion dollar market cap, needs to get 212,008. s&p 500, 2949. back in a moment small things. big things. too hard to do alone things. day after day, you need to get it all done. and here to listen and help you through it all is bank of america. with the expertise and know-how you need to reach that blissful state of done-ness. so let's get after it. ♪ everything is all right what would you like the power to do?® ♪ all right what would you like the power to do?®
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jim, what's on "mad" tonight? >> we have lisa su lisa su is about as good as it gets, guys tough. tough. >> amd only up 154% this year in the last 12 months. >> second rate company until she got there. >> we'll see you tonight a lot to work with today when we come back, the ceo of mondelez will sit down with us in a few moments re" wkn e "squa oth stetin a moment. don't go away.
exchange market, another high, 2952 and change as adp came in strong, 275. don't forget jobs number on friday a fed decision today at 2:00 eastern time even more data crossing the tape as we await april ism. to rick santelli. >> we're going to have our march construction spending, expecting a number around unchanged, disappointment, down .9%, do down .9% now, let's go down for ism april manufacturing. a miss here as well. 52.8 we're expecting a number that would be closer to 55, 52.8 is the weakest number this will take us back a bit here, 52 -- let's go through the
intern internals. employment, 52.4, down from 57.5 50 right on the nose for prices paid, down from 54.3 and that's an asterisk because, of course, on the second day of two-day fed meeting, we want to underscore prices paid as moving down, about ready to test the expansion/contraction line new orders, lost about 6 points from 57.4 to 51.7. so this tranche of numbers is definitely nothing to brag about, though still an expansionary mode for the institute for supply management data sara, back to you. >> not doing a whole lot to knock the market off the highs there. rick, thanks our road map for the hour starts with apple. surging this morning after reporting a strong beat. guidance and growing revenue outside of the iphone. >> it is decision day at the federal reserve as the president adds pressure, calling for a qe and rate cut
>> cannabis consolidation, curaleaf making a bet on marijuana oil. the chairman will join us to discuss that deal. let's talk about the numbers we just got, we'll start with apple. shares soaring on earnings beat posting the first back-to-back drop in quarterly sales and profit in more than two years. the company continues to move away from the iphone dependency with service revenues hitting another new high apple up more than 30% for the year you can see close to 21208 let's break down the numbers overall, your grade on the quarter, are we starting to overstand this story through a services lens? >> b plus quarter, maybe a minus. the service number was errific the guidance was terrific. it looks like the lights in china are back on for the
iphone and, yeah, the services is the narrative now. if you look at where we might be on services, not at fiscal year end, but calendar year end, maybe $50 billion in revenue squint a little bit, and at the end of calendar year, 2020, we're going to be closer to about 60 billion yeah, services is the narrative. iphone will generate a lot of cash if key markets aren't -- if they stabilize, if not collapsing, that's a positive there. again, b plus, maybe a minus >> laura, what is driving the services growth and specifically the margins, which i think are double margins of other apple products >> yes, so, i mean, i think the most important numbers for the quarter were the 950 million unique users, and then the lifetime value peruser is rising we love the fact that the ipad
revenue is up 22% and wearables up 50% because these add on products, that they're adding, like speakers and the wearables and the pods for your ears, all they do is increase the lifetime value peruser, what we call subscribers because the turn rate once you get into the ecosystem of apple is ten years. so we like numbers that bring more on ramps into the ecosystem, that 950 million unique users and then we really like things that keep them there. and get more money peruser that's how we look at revenue growth we love this 390 million paid subscribers, that's telling you there is a growing lifetime value per user. >> given what you just said, what is our tolerance for numbers like iphones down 17 can we do that quarter after quarter after quarter? what is the red line now >> because i think what is going
on is we're -- lawsuit loves diversification. we do not like single product companies. the fact that iphones did about $30 million of revenue and services did 11.5 billion of revenue means -- one is growing and one is shrinking -- it means pretty soon, three years from now, we'll have a 50/50 mix. wall street likes that kind of mix much better. we much would rather have dependence on three revenue streams, four, five. we don't like single revenue stream companies the fact that iphone is giving up its mix towards services and towards ipads or macs or wearables, we like that diversification of revenue dependence >> david, how key was the china improvement? tim cook telling josh lippen lin about the change in tone and the overall better environment. >> that was big news you think about the last data point on china was an absolute collapse and so it is coming
back, maybe not roaring back, but certainly maybe the bears were girding for maybe not bears, but investors were maybe girding themselves that china was still maybe just slowly on the mend so, again, incrementally, that's a positive -- that's a positive data point without question. >> david, what about the buyback? give me your sense there, 75 billion obviously, continue it buyback enormous amounts of stock, best use for capital or part of it >> right now, at the prices that they have been buying back, david, at those valuations, it is huge. i may not have these numbers, but just go back four years ago to the second quarter of 2015, the revenue number was about 58 billion, about the same. 2 billion more on net income and earnings per share that we just posted was a little bit better and the reason being is they shrunk the share count by 25%.
so i think most ceos, most c suites don't buy back stock smartly. when it is really cheap is when it is most accretive right now it is really accretive. i hope that's their primary motivation to spend that cash. if the stock would ever get a jim cramer type like 20 pe, maybe start -- maybe start looking at some other areas, but right now, i like the fact that tim and luka are swinginging. >> laura, what is the urgency on 5g phone can we wait a year and a half for that >> yeah, i think it is going to be three years and they refuse to talk about it i like the more -- the more the iphone falls by 17% of quarter and services grow by 16% of quarter, the more -- the less dependent this company becomes on a single product, which i think is good for the valuation multiple long-term the point i wanted to add to what david was just saying, building on that, we have $113
billion of cash on the books they're going to do 50 billion of free cash flow and said they want to have zero net cash over the next three years, which means we're going to have a floor under the stock of share repurchases, which means your upside/downside risk/reward is positive on apple. they're going to be in there buying shares out of the market, which i like a lot >> we just watched the market cap exceed a trillion again. it has been higher than that i remember 1.1 trillion prior to that swoon it took toward the end of last year david, we talk about this a lot, it never actually happens, but it is sort of part of the mosaic, the idea they might also do a larger deal, larger than the largest deal, which was just beats at a few billion dollars, do you think it is something they might consider and/or something that they should consider, particularly as it deals with their growing interest in providing content, for example? >> yeah, i think they should
again, let's talk about what currency they might have at their disposal, david. if we get pe nirvana and we get apple at a 25 times multiple, that's a very expensive currency now you consider maybe looking at a company like disney instead of -- that's a big if. that's a big if on the -- on the multiple the only way that you would maybe go for something like that is if you found that buying back a lot of stock was problematic or just wanted to make a big splash and really diversify away from the hardware side of the business i think you got to give apple credit they have been very disciplined not to do something of that size because i can't remember a year over the last four or five that a lot of folks have been begging for just something like that >> so, laura, we are approaching your strong buy recommendation price target of 225 here past a trillion dollars.
how do you think about the multiple and when it is sort of richly valued, what level? >> right, so we'll keep looking at actual users coming into the ecosystem, i like the idea of making a acquisition, disney makes sense. i think we're going to have headline noise and risks over the presidential election cycle where we are going to get calls for breaking up these faangs, large companies, especially at the trillion dollar level. i like the fact that apple is buying in shares because it keeps keeping it below the trillion dollar level. and therefore i think it would be very -- right now the regulators' eyes are on google and facebook, but risky business during the election cycle for them to make a large acquisition when there is calls to break up these big companies. so i would hope they would wait until we have another different sitting president before they made a decision like that, because i think politically it would be -- it would bring eyes to apple and whether that needs to be broken up too, which would be bad for shareholders.
>> laura, david, thank you as we continue to see it hold, trillion dollar market cap and obviously given it is a big piece of the overall index having an impact on the tape today. thank you very much. when we come back, more on big earnings movers of the morning including snackmaker mondelez beating the street last night. oreo cookie maker getting a boost from abroad. chairman and ceo dirk van de put is with us next. plus, d-day at the fed dick kacicovevh joins us don't go away. sir, you're a broker. what do you charge for online equity trades? uh, i'll look into it. (phone rings) lisa jones! lisa: (on phone) hey carl, what are you charging me
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increases in north america helped combat rising costs and decreasing volume. stock is higher, up almost 2%. joining us now, mondelez ceo dirk van de put. welcome back, dirk nice to see you. >> good to see you too thank you for having me again, sara >> so when i broke these numbers on "closing bell" last night, i basically said, you know, strong underlying quarter, but also really strong head wind on foreign exchange how would you characterize it? >> yes, yes. i would say we see very good what we call organic growth, which is the growth that the constant currency and driven by about 1% growth in developed
markets, but over 8% growth in our emerging markets and that's obviously our differentiating factor at the same time, we have some currency head winds this quarter, compared to last year's quarter. the dollar is stronger and so that -- that reflected in the reported results now, i would say we are differentiated because of our exposure to foreign markets over the long-term that will play into our advantage, but short-term you will have these quarters where the currency is really not in our favor. >> yeah. want to dig into that emerging markets number 8.5% growth there, what drove that is that an economic story or more strategic and what you're doing on the ground? >> yeah, no, no. i don't think that's an economic story, we see it across all our emerging markets, they all grew. i think it has to see with the fact that we are investing more,
we are investing in more communication in our brands, we are investing more in what we call route to market so our products are available in more stores. we are also innovating more. and overall that is creating a momentum in those markets. i mean, india is up mid -- sorry, double digit. china is up midsingle digit. russia is up, southeast asia, mexico, even brazil, which was a difficult factor for us. we see it across the board there is some countries in there where the economic situation is not so great, but we are in snacking we still have a lot of open space in those markets, so that's really what's driving our growth >> you know, we keep hearing the narrative on food companies that millennials don't want the packaged food brands of their parents, velveeta cheese, campbell's soup, and yet oreo cookies are growing double digits abroad and single digits in this country. how do you keep up the momentum
with an old brand like that? >> in fact oreo is one of the most loved brands for millennials and for generation z. and the reason that has come to be is the fact that we have evolved as a brand with the times. the purpose of the brand is to stay playful and it is a message about growing older but staying yourself and enjoying yourself, spending time with those who are close to you and at the same time, the consumer wants more and more different products they want different flavors, they want experiences with brands and we were able to, in oreo, to keep on having that connection with millennials and generation z and at the same time as you probably have seen, we do a lot of creative stuff as it relates to the product and that really seems to be working at moment and we're
happy. at the same time, the other big brand, which is cadbury also grew almost double digit in this quarter. it is also on a roll those are two biggest brands cadbury is more based on generosity, but that's also connecting really well with the younger generations and we're seeing the same effect there so i think for what you call old brands, it is possible to still connect to younger consumers, but you need to do it in line with what their expectations are. >> dirk, i think oreo is actually a really interesting business case study. it is playful as you say i was in the store the other day, i saw peanut butter filling, had never seen that before how you to decide which flavor is too far out on a limb and how do you manage the sort of supply chain interruption of infusing new flavors and all that complexity that brings to the manufacturing process? >> yes, yes, that's a good question when do you go too far, what is not acceptable
we do a lot of testing and try to hit it. last time we talket things like mango oreo or spicy chicken oreo or wasabi oreo in china, which seemed a little far out here but i think that's part of what we're trying to do we try to adapt to local consumer tastes. but the testing basically shows who the consumer likes and will there be enough interest in that product so that it has enough sales. it does -- we managed most of those flavors with what we call in and outs. it is not a permanent item it is not like we do peanut butter oregonbut butt butter, we will take it out and put another one in it is try to keep the supply chain complexity as limited as possible that's probably one of the biggest challenges that we face, but that's -- i think it is what is going to make consumer goods companies successful if you can manage that complexity, it is driven what i
call personalization, everybody wants what they prefer and they want it for them because that's where we are these days. if you can do that in a cost efficient way in your supply chain, that's how you are going to win in this new consumer world. >> i mean, clearly mondelez is very different than some of your competitors in that you purely focus on snacking and so internationally exposed, three-quarters of your business outside the u.s. do you think the market is at this point is giving you credit for that you have been running higher than the food peers but at a multiple less than other consumer staples >> i think they have been giving us credit, there is still some upside there i think what has happened to -- about two years ago, our growth was a bit lackluster and we have been saying we want to put consistent growth numbers, quarter after quarter, and we call that 3% plus is what you
should be able to count on us for. and now we had a number of quarters where we have been close to in this quarter and this quarter we beat it and we feel that the momentum is building, that we are entering into a virtual cycle i think as the market will see, that we can give that consistency in the delivery of our numbers, that's when i think we'll see a couple more turns on our multiple. >> dirk, we're going to talk about pot here in another segment. just wondering whether you've done any exploration into the cbd craze, waiting for the big food and beverage companies to get there. haven't seen it yet. >> no, we have been exploring it our view on it is that we have a number of family brands, oreo would be an example, so we feel a little bit hesitant about doing anything with cbd in family brands. but we have other brands or new
brands that we could do. we have been looking at it the space is not clear i think it is a bit clearer in nonfood products in food products, i'm hoping that the fda will bring some clarity in the coming months so we have been looking at it. we are also looking at what are the claimed benefits from cbd and, yes, we are getting ready, but obviously we want to stay within what is legal and play the right way. but i do think that cbd, which is the alternative of thc, which doesn't provide you the high and so on, but which has a number of interesting health benefits, i do think that that will be something that will enter the main food space in the not so far future >> so rated r oreos for munchies, maybe, in the future >> that i don't know yet >> dirk van de put. >> we'll see where it all is
heading. it is obvious that the edible space in the in depth universe will be interesting and somethinging in something to watch. >> we're watching. thank you very much, dirk. good to talk to you. >> thank you so much. as we go to break, keep an eye on shares of clorox. slumping down 4% missed on the top and the bottom lines. lowering its guidance, one of the worst performers on the s&p on a pretty good tape. s&p 2950 when we come back, the most valuable u.s. marijuana company, curaleaf, a $1 billion bet on cannabis oil we'll get details on that deal with the chairman. don't go away. you.
you inspired us to create internet that puts you in charge. that handles anything. that protects what's important. and reaches everywhere. this is beyond wifi. this is xfi. simple, easy, awesome. time for our etf spotlight a closer look at consumer staples, moving lower despite strong earnings from the likes of mondelez. just heard from dirk van de put and estee lauder shares are higher, this after it raised its outlook the company also very important
business in china and it was strong despite anticipating a slowdown in growth in that region just getting it done, particularly over there. clorox lower this after missing profits and also narrows the forecast. the stock is down. >> wasn't as severe this time around. >> was for me. >> you're an outlier, unfortunately. >> what sales they did have went to david's house. >> too late. >> when we come back, investors turning their focus to the fed as the central bank gets ready to re veal its latest interest rate decision. wells fargo, we'll be right back [leaf blower]
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good morning, everyone i'm sue herera here is your cnbc news update at this hour. a tragic situation overnight at the university of north carolina charlotte where a man with a pistol opened fire in a classroom, killing two people and wounding four others it was the last day of classes at the school. the suspect is in police custody. and in venezuela, president nicolas maduro managed to hang on to power in the wake of yesterday's major protests the trump administration immediately lent its support to the opposition maduro and the opposition put out competing video statements in the aftermath wikileaks co-founder julian assange sentenced by a london court to 50 weeks in jail. assange breached his bail conditions by taking refuge in the ecuadorian embassy in london seven years ago. his legal troubles, though, are not over assange still faces charges in the u.s. and possibly also in sweden staying in london, a high court has ruled against a
challenge to heathrow's third runway project campaigners had argued the runway would create a new airport and severely impact londoners. but the judges rejected those arguments. you are up to date that's the news update this hour back downtown. carl, back to you. >> all right, sue, thank you very much. just as the s&p sets a record high, noted venture capitalists making a big call on economic risks this is what he told our scott wapner yesterday on "the half". >> the odds there is a recession any more in any western country of the world is almost next to impossible now, save a complete financial externality we can't forecast central bankers have lost all intestinal fortitude to put a company through a recession becauses s iit is regeneratived useful the reality is that we're going to grow low single digits every year, which means no growth anywhere else, which means
you're better off buying equities and better off buying equities that are substantively ones that are sort of the deflationary type stocks, the tech stocks. >> so as the fed managed to stage almost -- eliminate recession risks, we'll hear from the fed chair this afternoon, powell speaks after the fed wraps up a two day meeting let's check in with dick kovacevich thank you for the time today >> thank you. >> it is always dangerous to say recession is next to impossible, even with the caveat of external negative externalities is it close to impossible? >> no, don't think it is close to impossible. i certainly don't see it in the foreseeable future but things can change and -- but i think the fed is making some mistakes that increases the possibility of a recession mainly their emphasis on using
whatever means they have available to get to 2% inflation. i think that's a huge mistake. i've been saying this for years. the average american wage earner has enjoyed a 2.9% increase in wages in the past year if you have 2% inflation, that means two-thirds of the wage increase is being eroded for no good reason that i can think of. i would rather have stable inflation, which has been the case at 1.5, 1.6, there is more money available for the average wage owner to support his family and so forth and so i think that policies should be they don't want inflation above 2%, but i don't think they should have an inflation goal of 2% now, if naturally it gets to 2%, i'm fine with that they should not be using artificial methods i also think their policies
increase income inequality one, because the inflation erodes 2% of the increases, but also because of low interest rates forever. the average american doesn't enjoy stock market returns and stock market increasing, you know, or consistently for record earnings, and their savings rate stays the same so i think if we allow the natural inflation to be closer to 1.5%, then you can have the two-thirds of the economy that is growing because of a consumer continue to increase, the economy will do better and i don't think there is any risk of -- it will reduce the risk of a recession. >> right there is a bunch of political factors at play as well. one theory going into the meeting, the decision this afternoon is that to get some cover on that front, maybe they let qt expire early, maybe june,
something like that. what do you think in. >> i don't -- i think they should allow the $3.9 trillion to run off in a normal fashion totally slow for many reasons, but one of them is let's assume we do go into a recession if you already have 3.9 trillion on the books and if you really believe qe helps, which i don't, but they do, are we going to go at 7 trillion or 8 trillion? again, i just don't understand what they're thinking. qe was supposed to be a temporary increase in their balance sheet because there was a recession. that's what it should be if our policies are such that we're growing at 3% plus, we should still continue the stimulus, it makes no sense. >> the president wants a resumption >> the president is wrong. >> you know -- >> not the first time. >> i think there is some drama
going into today, you know, as much as the fed is communicative and open and we get a news conference every single meeting and there are a million interviews of regional fed presidents, we have no idea what the fed's next move is going to be the market is increasingly pricing in a cut and economists are increasingly saying there is more of a risk for a rate hike, including goldman sachs, just this morning. so why is it so confusing? >> well, i think it is confusing because you do have the president talking and there is a difference of opinion of the probability of recession but if indeed we can grow the economy at 3% or more, around 3%, which i believe we can, then i think there is a greater probability that sometime in the next year there is an increase of -- in the rate, which is fine again, still, all time lows for a long period of time. i don't think -- >> you're in the fed hike camp
>> i'm in the fed hike camp because i believe we should be able to grow the economy by 3% or more. if we can't, i'm not in it and, you know, time will tell. it is all about economics in my opinion. not about political activity >> we have begun to see some manufacturing metrics roll over here chicago pmi yesterday was not good and we get the ism number today, prices paid 50, but we're back to 52.8. do you think europe is starting to infect on the manufacturing front? >> i think the biggest risk we have is that the international side of things do not improve. i think they are going to improve, but i think that's -- we get the international side improving, and given the strong growth that is recurring here in the united states, i think we're going to have rate increases in
the -- in the future, and also will help the economy perhaps to grow more than 3%. but europe is a real challenge we have brexit ahead of us there is a lot of issues over there. and it is a big part of the world, china is very dependent upon europe and its growth so they -- it hasn't been growing. even though we got a positive surprise yesterday. >> richard kovacevich, thank you for the time today we'll talk to you soon, see what the fed says when we get the decision 2:00 eastern time. >> thank you. up next, marijuana merger. why the most valuable u.s. pot company is betting big on can us about oil. the chairman of curaleaf joins us next. tomorrow on "squawk on the street," 9:00 a.m. eastern, don't miss citigroup ceo michael corbat we'll be right back. don't go away. demand a cfa charterholder.
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forget vaping. consolidation is the new cannabis trend companies seeking to capitalize on the growing u.s. market, a market which legif legalized, cl be worth $28 billion today, the biggest u.s. pot company curaleaf holdings announced a deal to buy a brand select and cura partners joining us, boris johnson. jordan, excuse me. there is a boris johnson you're boris jordan. nice to see you. >> good to be here. >> tell us what was the driving factor behind this deal. >> well, it is bringing together the two largest brands in the united states on the east coast. it is curaleaf on the west coast, it is select, select is the largest distributed wholesale brand in the country.
it is like buying coca-cola 30 years ago for a billion dollars. widely recognized, especially with the millennial community, the top rated brand in the country. and what we're doing now is allowing the select brand to have access to the east coast in a limited market licenses that we have on the east coast. and curaleaf will move to the west coast you're taking the two biggest brands in the country and you're putting them together in one company. the combined companies of market value of over $6.5 billion it will have 2018 revenues of $205 million, which makes it the largest revenue company in the world in cannabis. >> was this a response at all to the canopy growth acreage deal we saw recently? >> no, we have been working on this transaction for over a year so it is not really. and it is a different transaction. if that transaction was about a canadian company getting access to the u.s. market, this is about a u.s. company expanding its presence in the u.s. through buying that most recognized brand. >> is this a bet that we are going to see more legalization
in this country? >> i think the genie is out of the bottle it is over 90% polling on medical marijuana in the united states, over 65% polling on adult use. i think it is a matter of time given that we're going into the election comesing up, who knows whether it will happen this year or next year i think over the next sort of two to three years we should get legalization on cannabis. >> i've always been curious about cannabis oil, specifically, and how much flower you need to create a certain amount what is that manufacturing process like >> if you were to look at the cannabis market even five years ago, 95% of all sales in cannabis, the united states, or around the world, was in flower form >> that's black market, that's everything >> everything. if you look at it today, it is over 50% as cannabis oil so cannabis oil is definitely the dominant product today in the market people don't want to really smoke. there are some what we call, you know, cannabis enthusiasts that still smoke cannabis, but for the most part, particularly if you look at the younger
generations that are growing older, or new people that are coming into the market, they tend to veer towards cannabis oils and cannabis productsth th >> which allows them to vap them. >> which allows them to vap or to, for instance, there is tinctu tinctures, cooking oils, slow release pills but the oil is the base of making all the different products they make in cannabis. >> we're talking thc, not cbd. >> obviously in the case of p e curaleaf we do both. we have our cbd business derived from hemp and we distribute that in 47 states around the country now and we have the thc business which we sell in 15 states around the country and over a thousand stores around the country today. >> so you now are going to have -- are you going to try to consolidate the brands under one national brand or keep them separate >> we're separating because curaleaf, its roots are development in the medical business on the east coast and so it is more of a wellness brand today. and select, which will have its roots in the west coast, is more
of a lifestyle brand and so we're really going to try to focus curaleaf on wellness and focus select on adult use. >> what is the faster growing market >> so they're both, if you look at the two companies combined, their growth rates are over 200% a year now in revenue. both markets seem to be expanded i think what you're going to see, we have seen on the east coast, massachusetts makes a big step to go recreational. we have seen maine make a big step i think we'll see new jersey is talking about it, new york is talking about it. >> tame close and didn't happen. >> didn't happen i think the reason there is they got to sort out internally on the social justice issues, i think that's really the thing that is holding back and we're all for that and we want to find a solution for the states on the social >> others argue it is more about enforcement at a local level versus state law and nobody knows which law is taking over the other one, right definitely policy collision, right? >> policy. it is. one of the largest players in
the market, we put up a large lobbying operation around the country, in washington and the united states. i would argue in both new jersey and in new york i would say the social justice issue is preeminent. >> and the national issue, is it something we could conceivably expect to see? >> i think we'll see over five bills come out of the house this year i think that you'll probably get, you know, two or three of them that will hit the senate and then i think we have to wait and see what happens i think the senate is a more difficult issue than the house the house is going to force the senate on the issue. there is no question the house is going to come out with at least either the state's act or banking bill or what they call the safe act. we'll get at least three to five different bills out of the house. maybe three of them voted on the floor, coming out, going to the senate, and then i think we have to wait and see what mitch mcconnell does in the senate. >> in states where it has gone legal and we had this overhang of inventory, are your production cost goesing ing ts? >> on the west coast with no
limited license, on the east coast, a pound of cannabis sells for $6,000 a pound in oregon, it sells for almost, like, $100 a pound so you have a dramatic difference in two markets, but the retail price is pretty steady across the country. the retail price runs at around on the west coast around 2.5 to $3,000, even though the base price is much lower on the wholesale market. >> i'm curious about your own background and how you got into all of this from privatization of russian companies to renaissance capital and now to -- >> i was going to say, last time i was on the new york stock exchange floor, we took the first russian company public since the revolution, 1994, a big telecommunication company. took it public here. new york stock exchange floor. it has been a long path from there. i like -- i invest in a lot of emerging industries and emerging markets, big player in data centers after the dotcom bubble
blew, telecity in europe, i like this space, i like industries that are emerging, and have very high growth potential. >> think you'll be able to take this company public at the new york stock exchange one day? >> i think it is a fair bet this company will trade in the u.s. pretty soon. >> boris jordan, thank you very much, for joining us executive chairman of curaleaf time to go to jon fortt for a look at what's coming up on "squawk alley". >> akami higher, i want to talk about the security businesses rolling out. a lot of it has to do with over the top and streaming. with disney and apple, hulu, all set to launch more services, more streaming, is this a way to play it? we have the ceo coming up on "squawk alley. who says our bank isn't tech enough? everyone, look at your phones.
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. welcome back to "squawk on the street." i'm dominic chu. stocks are trading modestly higher trying to find some momentum after the s&p hit the intraday record in early trading. tech continues to lead the way higher on apple's upbeat outlook as you can see here. scroll down on one of the underperforming groups, that's material stocks, despite recent, decent gains to start the year the sector is trading 6% away from the 52-week high late in september. among the names dragging the sector lower, freeport, also
international paper and packaging corporation of america. but the worst performer is sealed air the bubble wrap manufacturer missed wall street forecasts on sales. watch the stock for sure i will send it back downtown to you guys at the new york stock exchange david, over to you. >> thank you, dominic chu. let's send it over to the cme group in chicago for the rick santelli. >> i like to welcome michael thanks for joining me today. let's get right into it. i've been reading a lot about insurance cuts does the fed really need to cut rates with interest rates rather tame, but certainly not acting as though they're not pegged about right, and inflation is low, but not real low. does the fed really need an insurance cut at this point, michael? >> i would say absolutely not. the economy has slowed from its very aggressive levels that we had in the third and fourth quarters of last year, but the
ism data is coming off the peaks, it's not clear that it's going to fall much further it's in expansionary territory and growth is solid and inflation low. it's not likely to keep going down everything looks good right now. insurance cut i think is not appropriate at the moment, but down the road, depending on how the economy behaves we'll see. for now i think everything is in good shape. >> you know, we've taken our eye off the crisis era ball and we're now more viewed into getting more normal with regard to monetary policy and our central bank let's change our focus again you know, quantitative easing, a lot of securities even though it's not as many as we did we have interest on reserves which by the way is 2.4% my question to you is, have we stopped paying attention to how odd that arrangement really is i mean, for people out there that are looking to borrow money, start a business, it certainly seems as though we've handicapped the banking system
by taking a lot of their seed corn, paying them 2.4% and taking it out of the game. your thought >> well, part of that is exactly true they pay an interest on reserves at a competitive rate, it keeps the extra reserves at the fed and not sloshing around the economy. so it doesn't fuel excess -- >> stop, mike. i want to interrupt you here if the president and kudlow and cramer and so many people think they have to ease because it's not white hot enough, wouldn't that be a good way to go dump some of those reserves into the system >> i think the level of interest rates is very important as opposed to the amount. i don't think most banks are talking about a shortage of capital, shortage of balance sheet to lend more money they don't have -- feel the inclination to lend more money because there's not enough demand at their price point to lend at this point in time the level of interest rates are quite reasonable levels in order to encourage financial and economic activity. >> my final question is, but there's a lot about what other
central banks are going to do. i do believe, if he was speaking, other central banks are our biggest risks. there is no way i can see to mitigate that from the viewpoint of the fed, is there. >> the u.s. is situated in global economy and the economy is not performing all that way these days and the other central banks have pivoted to an ease farther than the u.s. which has created a backdrop of a stronger dollar environment and a constraint on fed action >> excellent michael, always interesting to get your opinion, especially on this big fed day david faber, back to you >> my pleasure. >> thank you, rick santelli. last couple days to be able to find out what's coming up on "closing bell. i just had to wait anxiously by my tv screen. >> a good one, if you watched early in l.a. >> of course. >> chairman jeh powell to kick off the hour, the fed's interest rate decision, his news conference and a big panel to
react to the fed decision and talk to jim, fred, tom, meghan, jeffrey sherman, a mix of how to trade it and on the economics what to make of it and what on earth the fed's next move is going to be. are we going to get a clue from mr. powell today that's the question. >> we'll see you this afternoon, guys. >> see you then. >> when we come back apple setting its sights on services as iphone revenue continues to decline. shares are up and adding to their gains up better than 6%. a ilonoltrli dlars in market cap. "squawk alley" starts in three minutes.